The ica-atom-vmserver-1.2.0 should be a directory. What OS are you using? What tool are you using to unpack the tarball?
It sounds to me as if you've managed to decompress the tarball, but it hasn't been fully untarred/unzipped yet. I've downloaded the appliance myself to test it out, and found the same behaviour as you - the solution for me was simply to unzip the resulting file again.
I am a Windows user at home, and I use an open source utility called PeaZip to manage compressed files. (http://peazip.sourceforge.net/
Using this, I simply right clicked on the .tgz-1 file, and used PeaZip to "open as archive" - it then unzipped the tgz-1 file for me, and I get the expected folder. From there, you should be able to follow the steps on our website, located here: https://www.ica-atom.org/doc/Virtual_appliance
Hope that helps!