U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission file number 000-24455
TORVEC, INC.
(Name of Small Business Issuer in its charter)
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NEW YORK
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16-1509512 |
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(State or other jurisdiction of
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I R S Employer Identification No. |
incorporation or organization) |
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1999 Mount Read Blvd. |
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Building 3 |
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Rochester, New York
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14615 |
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(Address of principal executive offices)
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(Zip Code) |
Issuers Telephone Number, including Area Code: (585) 254-1100
Securities registered pursuant to Section 12(b) of the Exchange Act:
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Name of each exchange on |
Title of each class
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which registered |
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Securities registered pursuant to Section 12(g) of the Exchange Act:
$.01 par value common voting stock
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes o No þ
NoteChecking the box above will not relieve any registrant required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by checkmark if disclosure of delinquent filers in response to Item 405 of Regulation S-K
(229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ |
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(Do not check if a smaller reporting company) |
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Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No þ
State the aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was last sold, or the
average bid and asked price of such common equity, as of the last business day of the registrants
most recently completed second fiscal quarter. $ 9,835,710
State the number of shares outstanding of each of the issuers classes of common equity, as of
March 30, 201036,480,367
TORVEC, INC. AND SUBSIDIARIES
(A Development Stage Company)
TABLE OF CONTENTS
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PART I
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Item 1. |
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DESCRIPTION OF BUSINESS |
(a) History and Development of Our Inventions
Torvec, Inc. was incorporated as a New York business corporation on September 25, 1996. Upon
its incorporation, the company acquired numerous patents, inventions and know-how created for more
than fifty years by Vernon E. Gleasman and his sons, James and Keith Gleasman, a family with more
than fifty years experience in the automotive industry. Upon its incorporation, the company
commenced the development of its full terrain vehicle (FTV®) the merger of the speed
and handling of a truck with the full terrain capability of a tracked vehicle. Through the ongoing
creation, development and improvement of its FTV, the company created the following inventions
relating to six distinct fields of automotive and related technology. Each of the following has
individual commercial potential:
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Iso-torque® differential; |
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infinitely variable transmissions (IVT) for diesel and gasoline engines; |
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steering drive and suspension system for tracked vehicles; |
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high speed, steel-reinforced rubber tracks; |
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hydraulic pump and motor; |
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constant velocity joint mechanism. |
As a family, the Gleasmans manufactured, operated and sold their own innovative products for
the thirty years prior to the companys incorporation. The Gleasmans knowledge of the automotive
industry and its trends was the basis of the invention of the companys FTV. The Gleasmans
creativity, experience and expertise have been recognized worldwide in particular, Vernon E.
Gleasman was the recipient of the Society of Automotive Engineers 1983 Schwitzer Award for the
most innovative new product at the Indianapolis 500 and the 2001 Distinguished Inventor of the Year
Award granted by the Rochester Intellectual Property Law Association. In addition Vernon Gleasman
was nominated for the Lemelson-MIT prize, one of, if not the, most prestigious engineering awards
in the world. After a long and productive life, Vernon Gleasman passed away on November 19, 2004 at
age 92.
At the present time, management believes there is no worldwide, patented tracked vehicle with
the high speed (highway driving speeds) and handling characteristics of the companys FTV. To
facilitate the development of the FTV the company had to resolve numerous engineering hurdles and
the companys success in so resolving these engineering problems led to the inventions described
above. The companys first generation FTV prototype was completed in February, 1999 and was
initially showcased to the public in early spring, 1999. We have continued to improve the FTV since
its introduction in the spring of 1999.
The company and its wholly-owned subsidiaries rely on the full-time services of Keith E.
Gleasman, its president, a staff of six highly qualified engineers and technicians and an
administrative staff consisting of two full-time consultants. The company also retains a full-time
chief of security. James Y. Gleasman served as the companys chief executive officer and interim
chief financial officer from August, 2005 through his retirement effective March 14, 2010.
(b) Our Automotive Properties
The following is an overview of our automotive technologies:
(1) Full Terrain Vehicle (FTV®)
Historically, wheeled trucks and cars have been able to travel at high speeds on prepared
roads and are easy to drive and steer. However, wheeled trucks and cars have lacked the ability to
traverse truly difficult terrain. On the other hand, tracked vehicles have the ability to traverse
truly difficult terrain but are difficult to steer precisely, are cumbersome to drive and are
limited to relatively low speeds even on prepared roads.
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The companys production-ready full terrain vehicle is a new type of vehicle which management
believes combines the high speed capabilities of trucks and cars with the high traction
capabilities of tracked vehicles. The FTV incorporates two company inventions the steering drive
and suspension system for tracked vehicles and high speed steel-reinforced rubber tracks. The
company tested the FTVs functionality and durability over the five years ending in October, 2008
at its facilities in Rochester, New York and over an eight month period ending in June, 2009, the
United States Air Force tested the vehicle at Tyndale Air Force Base, Panama City, Florida.
Based upon these tests, the company believes it has shown that the FTV is relatively easy to
drive and steers as easily as a car and that it has shown that this tracked vehicle can traverse
most terrains, with driving speeds of up to 40-50 miles per hour being attainable on pavement and
other relatively flat surfaces. The company also believes that it has shown that the FTV is
environmentally sensitive due to its low ground pressure of approximately 2 pounds per square inch.
The FTV does not damage paved road surfaces, leave ruts or cause potholes on unpaved surfaces. In
comparison, a person displaces approximately 5 to 7 pounds per square inch. The FTV is able to
perform as it does because of its unique steering mechanism, which is protected by several U.S.,
European and Asian patents. This steer-drive mechanism can best be described in engineering terms
as a hydro-mechanical steering mechanism. The mechanical portion is manufactured from
conventional, high volume gearing, while the hydro portion is provided by a hydraulic pump and
motor.
(2) IsoTorque® Differential
In 1951, Vernon E. Gleasman invented the dual-drive differential (the Torsen®).
For the next thirty years, Vernon Gleasman and his sons manufactured and marketed this
differential for the military, for incorporation in high performance cars, off road cars and 4x4
trucks. In 1982 the Gleasman family sold the Torsen differential to the unrelated Gleason
Corporation.
The company has been working with a number of Nissan-sponsored race car teams. The
IsoTorque has proven to operate in the manner the company anticipatedit has, in the companys
opinion, shown itself to be an extremely reliable and efficient differential.
Reliablethe race cars have used the IsoTorque differential for a complete racing season with no
failures compared to conventional limited-slip differentials which experience failure after a
few races. Efficientthe IsoTorque-equipped cars improved the lap times of
non-Isotorque-equipped cars by one (1) to two (2) seconds per lap. In addition, according to the
race car drivers, the handling and safety of the vehicle was greatly improved.
Interest in the IsoTorque differential has spread to several domestic automotive and truck
companies.
(3) Infinitely Variable Transmission Hydraulic Pump/Motor
The company variously has developed three distinct generations of infinitely variable
transmissions (IVTs) for diesel and gasoline engines, namely, the first generation, hydro
mechanical transmission configured for our Dodge Ram diesel 4x4, including an all-hydraulic
variation configured for gasoline engines (2003, 2004 ) a second generation, modular, hydro
mechanical transmission configured for both gasoline and diesel engines ( 2005 ) and the third
generation, single hydraulic unit configured for both diesel and gasoline engines (2006). Each
transmission provides an uninterrupted drive through an infinite number of speed ratios, allowing
ideal torque flow to propel the vehicle while permitting the engine to run at optimum efficiency.
The company believes that the next generation of diesel engines with state-of-the-art electronics
will allow interfacing and provide the necessary mechanisms to adequately control the infinitely
variable transmission. Industry data has shown that the use of continuously variable and infinitely
variable transmissions improves the fuel efficiency of all engines (gas/diesel), thus leading to
reduced pollution. The company believes its testing has proven that its infinitely variable
transmission will permit automotive diesel/gasoline engines to operate at ideal combustion rates
which will reduce pollution and provide improved fuel economy while operating.
In addition to having the potential of reducing diesel particulates and nitrogen-oxide, the
companys transmissions are less complicated and have approximately 2/3 fewer parts when compared
to a conventional four or five speed automatic transmission, making it smaller in size and lighter
in weight. The companys transmissions, which the company believes will be simpler and less
expensive to manufacture than conventional transmissions, should provide the automotive industry
with a higher performing product at a lower manufacturing cost.
We began testing our IVT technology in March, 2008 using industry-accepted and EPA-sanctioned
procedures. We have run identical side-by-side comparisons of the IVT to a four-speed automatic
transmission utilizing the EPA-sanctioned New York City cycle test. The companys IVT consistently achieved an approximate
20% gain in fuel economy as well as a dramatic reduction in particulates using filtered paper on
the exhaust outlet.
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Our testing uses a torque-load cell between the engine and the transmission, the most accurate
and latest computer software and hardware, Maxx fuel-flow meters accurate to one-tenth of one
percent and a Mustang chassis dynamometer to collect extremely accurate and repeatable data.
(4) Constant Velocity Joint Mechanism
Present day constant velocity joint technology was developed over eighty years ago and has
remained virtually the same with a few minor improvements. Existing constant velocity joints
function by allowing hardened steel balls to slide in hardened, steel curved tracks. This design
creates an inherent lubrication problem as the balls move through their cycle. An additional,
inherent weakness of this design is that torque is transferred by balls in a concentrated sliding
contact point. Traditional constant velocity joint technology, therefore, requires tailor-made high
pressure lubrication and extremely tight tolerances to function properly. Further, conventional
constant velocity joint technology requires extensive, very accurate grinding on all surfaces,
including the inner and outer raceways, i.e. the curved tracks. The ball cage must be spherically
ground, both inside and outside. This grinding is done with ball grinders which lose tolerance very
quickly, thus necessitating constant replacement. The ground surfaces are very hard and require a
precision surface finish such that the hardened metal balls will fit exactly.
Our first rendition of the constant velocity joint uses gears rather than sliding balls to
function. The gears have line contact, spreading the load over a long line, creating a rolling
motion that is approximately 98% efficient. The companys constant velocity joint, therefore, does
not require high pressure lubrication and requires only conventional automotive tolerances to
function. In addition, the company constant velocity joint design eliminates the need for extensive
grinding, including the need for ball grinders.
We have continued development of our constant velocity joint technology in order to reduce
complexity and manufacturing cost and improve functionality and efficiency. In this next
generation version of the technology, we have retained our patented spherical gear design but have
replaced the outer gear teeth with hardened steel balls while eliminating the expensive curved ball
tracks and the internal steel cage. The balls now sit in a pocket and during operation perform a
rolling rather than a sliding motion. The balls are the functional equivalent of a bearing which
provides long life, greater efficiency and because it is relatively inexpensive to drill and size
the holes for the steel balls, reduces overall manufacturing costs.
Management believes that we have significant competitive advantages consisting of less weight,
less cost and greater efficiencies.
On December 12, 2007, the company granted High Density Poweretrain, Inc. of Waterford,
Michigan (HDP) an exclusive, worldwide license to incorporate the companys constant velocity
joint technology in HDPs family of highly-powered, multifueled, fuel efficient, light weight, cost
effective internal combustion engines. In consideration for the grant of the license, the company
will receive annual royalties equal to 5% of annual gross revenues generated by the sale of HDPs
multifuel engines, including all sublicense of such technology. There are no minimum royalty
payments and the grant does not affect the companys ability to commercialize its constant velocity
joint technology in any other field and/or application. At December 31, 2009, the company had not
earned any royalties under this agreement.
(c) Current Status of Product Development
A complete discussion concerning the current status of product development, including a
description of current projects, is found under the caption Management Discussion & Analysis of
Financial Condition and Results of Operations.
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(d) Partnership with Rochester Institute of Technology
On July 31, 2009, the company and Rochester Institute of Technology (RIT) agreed to the
establishment of a Safety and Efficiency in Automobiles Laboratory (SEAL) at RIT to explore the
synergies that can be created by the mutual cooperation between the company, its management and its
personnel and RIT, its faculty, staff and students towards development of advanced automotive and
related energy technologies, including enhancing manufacturing efficiencies for their production.
The initial goals of SEAL are:
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to provide RITs faculty, staff, and students with the opportunity to
participate in the ongoing refinement and enhancement of advanced automotive and
related energy technologies designed for specific applications to the world-wide
automotive and related energy industries; |
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to provide RITs students with cooperative educational opportunities
with a view to future employment; through joint research, to further refine the
companys advanced automotive and related energy technologies, including product
evaluation and testing to improve the production and manufacturing of such
technologies; |
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to jointly obtain grants and other forms of governmental and
nongovernmental research funding in order to implement the purposes of SEAL and
advance research in the industry of automotive and related industries; |
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to establish SEAL as a leader in the technological and manufacturing
applications of advanced automotive and related energy technologies including the
development of new and increased employment opportunities in the automotive and
related energy industries. |
In order to implement the purposes and goals of SEAL, the company and RIT have agreed to:
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affirmatively work to provide each others faculty, staff, students,
and personnel with access to the companys advanced automotive and related energy
technologies, technical know-how, including Torvec personnel, offices and testing
facilities, and RITs facilities and laboratories pursuant to other mutually
agreeable contracts and/or sponsored research agreements between the company and
RIT as applicable; |
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affirmatively work to engage each others faculty, staff, students, and
personnel in opportunities through SEAL for refinement, evaluation and testing
advanced automotive and related energy technologies, including designing, testing
and evaluating such technologies (including the companys) for possible production
pursuant to other mutually agreeable contracts and/or sponsored research agreements
between the company and RIT as applicable; |
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affirmatively participate in establishing educational and training
programs for RIT personnel, including when and where appropriate, designing and
creating cooperative educational and employment opportunities for RITs students in
the fields of advanced automotive and related energy technologies; |
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affirmatively participate in jointly approved efforts to obtain
governmental and nongovernmental funding to provide financial support for the
purposes and programs of SEAL, including the prompt completion of any written
proposals, required business plans, budgets and similar submissions and
statements-of-work in pursuit of research, academic development, and business
goals; |
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affirmatively seek to engage additional automotive and relate energy
companies and organizations in the purposes and programs of SEAL. |
The company and the Center for Integrated Manufacturing Studies at RIT entered into an agreement in
October, 2009 to enable Torvec to test its constant velocity joint technology for the worldwide
mining industry under SEALs auspices. To accomplish this goal, the company entered into an
agreement on November 11, 2009 with Eastern Mining & Industrial Supply, Inc. of Chapmanville, West
Virginia.
(e) Competition, Industry and Market Acceptance
The company believes that its automotive technology is superior to similar products
manufactured in the worldwide automotive industry and in many instances represents a true paradigm
shift with respect to presently known technology. However, through December 31, 2009, the company
has not generated significant revenues from operations. It has taken the company time (due to both
cash-flow restraints existing from time to time and the increasing demand on the part of the
industry for production-ready prototypes) to develop its products so that each automotive product
is ready for commercialization and production-ready.
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Beginning in 2006, the company initiated a series of programs designed to demonstrate its
FTV®®, IsoTorque® differential, infinitely variable transmission and constant
velocity joint to representatives of multiple domestic and foreign automobile manufacturers and
first-tier suppliers to the automotive industry.
The companys ability to generate revenue and become profitable is considerably dependent upon
acceptance by automotive manufacturers and/or first-tier suppliers of the technical superiority of
the companys products, their generally lower manufacturing costs, their generally lighter weight
and beneficial impact upon the competitive, worldwide demand for raw materials and their
environmentally-friendly attributes. The automotive industry, however, has committed substantial
resources to product systems utilizing old technology as well as to new product systems (e.g.
hybrids) which the industry believes may fulfill its short and long term needs. In addition, the
industry historically has been characterized by a resistance to embracing new technologies from
sources outside of the industrys own research and development units (the not invented here
syndrome).
Essentially, the market for all of the companys automotive technologies, except for the
FTV®, is occupied by competing products manufactured and/or utilized by the very
manufacturers and/or first tier suppliers which the company is attempting to attract. Thus,
management is challenged to demonstrate that the companys automotive technologies will result in a
greater market share for the acquiring and/or licensing manufacturer and/or first-tier supplier, if
not initially, then over a finite period of years (generally, in no case greater than the existing
or expected patent protection for the technologies). Such demonstration, including significantly
the expected revenues and profits to be achieved by virtue of such increased market share, becomes
the basis for an evaluation of the companys automotive technologies with such evaluation designed
to generate a fair and adequate price for such technologies.
As the result of its initiatives commencing in 2006 and more fully implemented since 2007, the
company is currently engaged in a number of projects with domestic and foreign enterprises,
including General Motors, Ford Motor Company, Hyundai, Tesla as well as the United States Air
Force, with respect to its FTV and IsoTorque® differential technology. The company
believes that the projects will become revenue-producing and involve tailor-making design-specific
applications of these technologies for the end-users specifications.
The companys FTV® is a unique vehicle which has no direct, market competitor.
Managements opinion with respect to the uniqueness of the FTV was confirmed by the United States
Air Force purchase of an FTV prototype on a sole source basis in the fall of 2008.
The companys FTV can traverse road and off-road conditions, especially in the target market
countries of Asia, Africa, Central and South America, which cannot be traversed by 4X4s at all.
Secondly, no other comparable tracked vehicle can match the FTVs speed (50-60mph) under normal
road conditions. Consequently, at present, there is no identifiable category of vehicle that
encompasses all of the capabilities of the FTV. The market for such a vehicle is, in a sense,
wide-open and will be a composite of vehicles whose purpose is the transportation of people and
goods in areas where highway infrastructure is poor or even nonexistent, vehicles for agricultural
use that will eventually replace tractors and other traditional farm vehicles, vehicles for
exploration, search, rescue and other emergencies as well as vehicles for military purposes. The
challenge with respect to the profitable commercialization of the FTV is to demonstrate to
potential buyers and/or licensees the FTVs potential positive socioeconomic impact, on a year
around basis, upon the communities in which it is introduced.
North American markets for the FTV include forestry, farming and ranching, mining,
environmental protection, fire and rescue, border patrol, pipeline inspection, oil and gas
exploration, construction, transportation and recreation.
The company faces a variety of risks inherent in perfecting its automotive technologies to
production-ready models and in attempting to commercialize these technologies to generate revenues
and profits. Management discusses below certain significant factors that could adversely affect the
company and its prospects. Other factors may exist that the company cannot anticipate or that the
company does not consider significant based upon information currently available. Additionally,
because of the following risks and uncertainties, as well as other factors that could affect the
companys financial condition, the companys past financial performance should not be considered as
an indicator of future performance.
(1) The company has limited operating history, has not generated significant revenues since
its founding in 1996 and may have to sell shares of its common and if possible convertible
Preferred stock to continue and/or expand business operations.
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(2) The companys ability to generate significant revenue and sustainable profits is dependent
upon its ability to demonstrate the technological superiority of its automotive technologies, their
lower manufacturing costs, generally fewer parts and lighter weight, greater affinity for
environmentally-sound applications and their beneficial impact upon the worldwide consumption of
increasingly-scarce raw materials to an automotive industry that is heavily invested in
conventional technologies and resistant to new technology unless developed by the auto companies
themselves.
(3) The only market for the companys automotive products is an automotive industry that, due
to the economic downturn in 2008-2009, curtailed research and development expenditures, experienced
significant management and corporate reorganization and delayed new product development. Such
circumstances have delayed the companys ongoing projects with the industry and may continue to
delay them in the immediate and foreseeable future.
(4) In the event the company were unable to sell and/or license any of its automotive
technologies to one or more automotive companies, first-tier suppliers, government agencies and/or
the U.S. military, the company may have to embark upon the commercialization of one or more of its
technologies itself, a situation which would require considerably more capital, personnel,
regulatory compliance, time and other resources than is presently available to the company.
(5) The companys common stock is traded on the over-the-counter bulletin board (OTCBB), an
electronic inter-dealer quotation system, and is not listed for trading on any domestic or foreign
securities exchange, including the National Association of Securities Dealers, Inc. (NASD).
Consequently, the company is not required to meet certain quantitative and qualitative listing
standards established by such exchanges for the protection of investors.
(6) The market for the companys common stock is extremely limited, meaning that at any time
and from time to time, there may not be enough sellers in the market to fill purchase orders and/or
enough buyers in the market to fill sell orders for transactions where a given price is stipulated
(i.e. limit orders). Such orders, therefore, may expire unfilled.
(7) The companys common stock is volatile, meaning that purchase and/or sell orders for a
numerically small number of shares (e.g. 500) may have a disproportionate positive or negative
impact on the trading price at any time during any given trading day but especially, during the
first and the last half-hour of trading.
(8) The market for the companys common stock is disproportionately influenced by market
makers (i.e. broker/dealers) who agree to buy a limited number of the companys common shares [e.g.
500 share blocks] during the course of a given trading day at various specified prices [ the
bid]) who may negatively affect the trading price by periodically lowering the bid for the
companys common stock without regard to company performance and/or disclosure of material events
regarding the companys activities.
(9) The price of the companys common stock may be negatively influenced by significant
sell-side pressure initiated by short sellers of the companys stock. Short selling is simply
selling a security that is not owned by the seller at the time of the sale. Short selling is
generally accomplished by the investor borrowing the shares from an otherwise non-selling
shareholder. The short sellers profit is made when he purchases the number of shares borrowed at a
price lower than the price at which he sold the borrowed shares.
(10) Unless the trading price for the companys common stock is $5.00 or more, the stock
constitutes penny stock requiring broker/dealers to determine whether the companys stock is a
suitable investment for his customer, requiring disclosure to the customer of certain bids,
offers and quotations at least two days before executing a transaction and additionally requiring
the broker/dealer to deliver certain information regarding the risks generally associated with
penny stocks (e.g. lack of liquidity, volatility and the potential that the investor will lose his
entire investment) at least two days prior to executing a penny stock transaction. These
requirements may reduce the number of individuals who otherwise may purchase the companys common
stock in the open market.
(11) The company utilizes its common stock to pay various consultants for services rendered to
the company. Such shares are issued in accordance with invoices submitted by such consultants
and/or agreements entered into by the company and the consultant. Such shares have been registered
by the company with the Securities and Exchange Commission so that they can be sold immediately by
such consultants in open market transactions. The issuance of such shares is dilutive to the common
shareholders. In addition, the immediate sale of such shares by such consultants may have an
adverse impact upon the trading price of the companys common stock.
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Item 1B. |
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UNRESOLVED STAFF COMMENTS |
Not Applicable.
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Since September 14, 2007, the company has occupied facilities located at 1999 Mount Read
Blvd., Rochester, New York. The facility consists of approximately 13,650 sq. ft., with executive
and engineer offices, conference room, clean room, manufacturing and assembly space, automotive
bays, dynamometer and lift facilities and approximately thirty acres of land suitable for vehicle
testing and demonstration. On April 29, 2008, the company executed a five-year lease for the
premises (with a December 1, 2007 lease commencement date) provide for rent to be paid at a rate of
$5,687 per month ($68,244 per annum) and in addition, for the payment of the companys
proportionate share of yearly real estate taxes and yearly common area operating costs. Under the
lease, monthly rental payments commenced June 1, 2008. The lease contains three 5-year renewal
options and grants an option to the company to lease up to an additional 7,000 sq. ft. of adjacent
manufacturing and assembly space.
Rental payments and certain other payments due to the landlord is to be paid in common shares
of the company, based upon the closing price per share on the 15th day of the calendar
month immediately prior to the date any installment payment of monthly rent or other payment is due
landlord.
The company believes that, given its present circumstances, the facilities located at Mount
Read Blvd. are sufficient to meet the companys anticipated plant requirements for the next twelve
months. This situation could change if the company was to receive one or more orders requiring
volume production of one or more of its technologies and the company were to elect to fill any such
orders itself. In addition, this situation could change if the companys planned entry into the C-5
and C-6 Corvette aftermarket in 2010 blossoms to significant orders faster than currently
anticipated. See Management Discussion and Analysis.
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Item 3. |
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LEGAL PROCEEDINGS |
(1) |
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On March 6, 2009, the company settled, at no cost, a litigation
commenced by the company in September, 2005 against a management
consulting firm. The company had challenged the validity of consulting
agreements alleged to have been executed between the parties in June,
2004 and April, 2005 as being null and void. In accordance with the
terms of the settlement agreement, the parties released one another
from all claims and counterclaims against each other and terminated
any and all obligations emanating out of their relationship with each
other, including any and all obligations under the purported
agreements. |
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On October 8, 2007, the controlling persons of the companys
majority-owned subsidiary, Ice Surface Development, Inc. filed for
arbitration of certain agreements they had with Ice Surface, claiming
Ice Surface owed compensation to them for past services. On October
19, 2007, these same parties commenced a derivative action in Federal
District Court for the Western District of New York challenging the
companys assignment of its ice technology license in June, 2007 on
the grounds the assignment was made for inadequate consideration.
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On June 27, 2008, the Federal District Court dismissed, with
prejudice, the derivative action as being without merit and, in the
same action, affirmed that such persons had been fully paid for any
services rendered by them to Ice Surface Development. As a consequence
of the District Courts decision, these individuals withdrew their
arbitration claims on August 18, 2008. |
|
(3) |
|
On October 31, 2008, the company commenced an action in New York
Supreme Court, County of New York, Commercial Division against Ice
Engineering, LLC seeking the total balance owed by Ice Engineering to
the company pursuant to an assignment agreement entered into by the
parties, effective June 15, 2007, whereby the company assigned all of
its rights and interest in an ice technology license granted by
Dartmouth College to Ice Engineering in exchange for a 2.8% royalty
interest and a cash reimbursement of $3,500,000. The suit was
commenced after the company had been paid approximately $800,000. |
|
|
|
On January 27, 2010, the company and Ice Engineering settled this
litigation. Under the settlement agreement, the companys assignment
of the ice technology license is made permanent; the company elected
to forego its right to royalties and agreed to receive $1,100,000,
with $300,000 paid to the company by Ice Engineering on January 27,
2010 and $800,000 paid to the company by Ice Engineering by February
26, 2010. |
9
|
|
|
Item 4. |
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
There were no matters submitted to the companys shareholders during the fourth quarter of the
year ending December 31, 2009.
Subsequent Event
The annual meeting of the companys common shareholders was held on January 28, 2010. At the
meeting, at which a quorum of the requisite number of common shares under the companys bylaws for
the conduct of business was present either in person or by proxy (30,912,267 common shares out of
35,817,422 common shares outstanding on the record date), the following items were voted on by the
shareholders with the following results:
|
|
|
|
|
|
|
|
|
Election of Directors |
|
For |
|
|
Withheld |
|
Daniel R. Bickel |
|
|
18,341,133 |
|
|
|
1,203,016 |
|
William W. Destler |
|
|
18,483,783 |
|
|
|
981,506 |
|
Herbert H. Dobbs |
|
|
18,341,133 |
|
|
|
1,124,156 |
|
Asher J. Flaum |
|
|
18,372,768 |
|
|
|
1,092,521 |
|
James Y. Gleasman** |
|
|
17,941,754 |
|
|
|
1,523,535 |
|
Keith E. Gleasman |
|
|
18,258,946 |
|
|
|
1,206,343 |
|
Joseph B. Rizzo |
|
|
18,372,373 |
|
|
|
1,092,916 |
|
Gary A. Siconolfi |
|
|
18,400,816 |
|
|
|
1,064,473 |
|
2. |
|
Ratification of the appointment of Eisner LLP by the Audit Committee of
the board of directors as the Independent Registered Public Accounting
Firm of the company for its year ending December 31, 2009. |
|
|
|
|
|
|
|
|
|
For |
|
Against |
|
|
Abstained |
|
|
|
|
|
|
|
|
|
|
29,139,372 |
|
|
1,481,916 |
|
|
|
290,979 |
|
The number of broker non-votes was 11,446,978. Broker non-votes occur when common shares
are held in street name (i.e. the shares are registered in the name of the broker, not the
shareholder who is the beneficial owner) and the broker does not vote such shares in the absence of
the beneficial owners instructions. The ratification of the audit committees appointment of
Eisner LLP as the companys Independent Registered Public Accounting Firm for the year ended
December 31, 2009 is considered a routine matter upon which brokers voted without instructions
from beneficial owners. On the other hand, beginning with the companys annual meeting held on
January 28, 2010 and for future annual meetings, the election of directors is considered a
non-routine matter upon which brokers will not vote without specific instructions.
|
|
|
** |
|
James Y. Gleasman retired from the board of directors, effective March 14, 2010. |
|
|
|
Item 5. |
|
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES |
(a) Market Information
Effective September 23, 1998, the companys $.01 par value common stock, as a class, was
registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934.
As a result, shares of the companys common stock which had been owned for one year or more became
eligible for trading on the over-the-counter bulletin board maintained by the National Association
of Securities Dealers, Inc. on December 22, 1998 (NASD). The companys stock began trading on
January 21, 1999 at $12.00 per share. The company has approximately 20 market makers for its common
stock.
The companys stock is traded on the over-the-counter bulletin board (OTCBB). The OTCBB is an
electronic inter-dealer quotation system that displays real-time quotes, last-sale prices and
volume information for shares of over-the-counter companies which file current financial reports
with the Securities and Exchange Commission or, if applicable, such companies banking or insurance
regulators. The NASD oversees the OTCBB.
10
The following table presents the range of high and low closing prices for the companys $.01
par value common stock for each quarter during its last two calendar years. The source of the high
and low closing price information is the OTCBB. The market represented by the OTCBB is extremely
limited, is heavily influenced by market makers and the price for our common stock quoted on the
OTCBB is not necessarily a reliable indication of the value of our common stock. The company also
believes that the price of its common stock is significantly impacted by short-selling. Quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.
|
|
|
|
|
|
|
|
|
2009 |
|
High |
|
|
Low |
|
1st Quarter |
|
$ |
1.65 |
|
|
$ |
0.70 |
|
2nd Quarter |
|
$ |
0.90 |
|
|
$ |
0.52 |
|
3rd Quarter |
|
$ |
1.05 |
|
|
$ |
0.51 |
|
4th Quarter |
|
$ |
0.79 |
|
|
$ |
0.40 |
|
|
|
|
|
|
|
|
|
|
2008 |
|
High |
|
|
Low |
|
1st Quarter |
|
$ |
3.14 |
|
|
$ |
2.32 |
|
2nd Quarter |
|
$ |
2.85 |
|
|
$ |
2.02 |
|
3rd Quarter |
|
$ |
2.40 |
|
|
$ |
1.35 |
|
4th Quarter |
|
$ |
1.80 |
|
|
$ |
.60 |
|
(b) Holders of Common Stock
As of December 31, 2009, the company had approximately 300 shareholders of record and an
estimated 3,400 beneficial owners of its common stock. As of December 31, 2009, the company had
35,811,192 common shares issued and outstanding.
(c) Dividend Policy on Common Stock
The company has not paid any dividends on its common stock since its inception. The
declaration or payment of dividends, if any, on the companys common stock is within the discretion
of the board of directors and will depend upon the companys earnings, capital requirements,
financial condition and other relevant factors. Given the companys current financial condition,
the board of directors does not intend to declare or pay any dividends on its common stock and
intends to retain any earnings to finance the growth of the company. In the event the company
generates revenues as the result of one of more commercial transactions, the board intends to seek
every opportunity to be in a position to declare dividends.
The payment of dividends on the companys common stock is limited by provisions of the New
York Business Corporation Law which permits the payment of dividends only if after the dividends
are paid, a companys net assets are at least equal to its stated capital. Payment of dividends on
the companys common stock is also subordinated to the requirement that the company pay all current
and accumulated dividends on its Class A and Class B Preferred Shares prior to the payment of any
dividends on its common stock.
11
(d) Securities Authorized for Issuance under Equity Compensation Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities |
|
|
|
|
|
|
|
|
|
to be issued upon |
|
|
Weighted average |
|
|
|
|
|
|
exercise of |
|
|
exercise price of |
|
|
Number of securities |
|
|
|
outstanding options, |
|
|
outstanding options, |
|
|
remaining available |
|
|
|
warrants and rights |
|
|
warrants and rights |
|
|
for future issuance |
|
Plan Category |
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans
approved by security
holders |
|
|
641,848 |
(1) |
|
$ |
4.79 |
|
|
None (1) |
Equity compensation plans
not approved by security
holders |
|
|
1,229,500 |
(4) |
|
$ |
3.83 |
|
|
None (2)-(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,871,348 |
(4) |
|
$ |
4.18 |
|
|
None (1)-(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents number of common stock options outstanding. The companys stock option plan was terminated
effective May 28, 2008 as to future grants under the plan. |
|
(2) |
|
The company granted 125,000 common stock warrants to a consultant in connection with a non-exclusive
financial consulting agreement dated February 11, 1997. The warrants are only exercisable if and when the
company has an initial public offering of its common stock. |
|
(3) |
|
The company has granted 123,500 common stock warrants to its nonmanagement directors under its nonmanagement
directors plan. 69,000 warrants have been exercised through December 31, 2009. The plan was modified on
October 13, 2006 so that compensation for services rendered by directors was paid in shares of common stock. |
|
(4) |
|
The company has granted an aggregate 1,589,583 common stock warrants which the company has issued to a
number of business, engineering, financial, governmental affairs and technical consultants in connection
with its operations. 539,583 warrants have been exercised or have been cancelled or expired by their terms
through December 31, 2009. See footnote H [10] to the companys financial statements. |
(e) Class A Preferred Stock
On August 30, 2000, the company amended its certificate of incorporation to permit the company
to issue up to 100,000,000 shares of $.01 par value preferred stock. Under the amendment, the board
of directors has the authority to allocate these shares into as many separate classes of preferred
as it deems appropriate and with respect to each class, designate the number of preferred shares
issuable and the relative rights, preferences, seniority with respect to other classes and to the
companys common stock and any limitations and/or restrictions that may be applicable without
obtaining shareholder approval.
In March, 2002, the companys board designated the first series of preferred shares, namely
Class A Preferred. The relative rights, preferences and limitations of the Class A Preferred are as
follows:
A. |
|
Number of Shares |
|
|
|
The number of Class A Preferred initially authorized is 3,300,000 Class A Preferred. The initial number authorized shall be increased as required to provide Class A Preferred for payment of dividends as described in
Section B, distribution to holders in accordance with Section C and as described in Section F. |
|
B. |
|
Dividends |
|
(i) |
|
So long as any Class A Preferred is outstanding, the holders of the Class A Preferred will be entitled to receive cumulative preferential dividends in the amount of $.40 per share of
Class A Preferred for each annual dividend period. The annual dividend period shall commence on the first day of each March and shall end on the last day of the immediately succeeding
February, which February date is referred to as the Dividend Accrual Date. |
|
|
(ii) |
|
When and as declared by the board, dividends payable on the Class A Preferred will be paid in cash out of any funds legally available for the payment of dividends or, in the discretion of
the board, will be paid in Class A Preferred at a rate of 1 share of Class A Preferred for each $4.00 of dividends. No fractions of Class A Preferred shall issue. The Company shall pay
cash in lieu of paying fractions of Class A Preferred on a pro rata basis. |
|
|
(iii) |
|
Dividends shall be cumulative from the date of issuance of each share of Class A Preferred, whether or not declared and whether or not, in any annual dividend period(s), there are net
profits or net assets of the Company legally available for the payment of dividends. |
|
|
(iv) |
|
Accumulated and unpaid dividends on the Class A Preferred will not bear interest. |
12
|
(v) |
|
So long as any Class A Preferred is outstanding, the Company may not declare or pay any dividend, make any distribution, or fund, set aside or make monies available for a sinking fund for
the purchase or redemption of, any shares or stock of the Company ranking junior to the Class A Preferred with respect to the payment of dividends, including the $.01 par value common
stock of the Company (Junior Stock), unless all dividends in respect of the Class A Preferred for all past annual dividend periods have been paid and such dividends for the current
annual dividend period have been paid or declared and duly provided for. Subject to the foregoing, and not otherwise, the dividends (payable in cash, stock or otherwise) as may be
determined by the board, may be declared and paid on any Junior Stock from time to time out of any funds legally available therefore, and the Class A Preferred will be entitled to
participate in any such dividends, whether payable in cash, stock or otherwise on a pro rata basis. |
|
(i) |
|
In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Class A Preferred then outstanding are entitled to be paid out
of the assets of the Company available for distribution to its shareholders, whether such assets are capital, surplus or earnings, before any payment or declaration and setting apart for
payment of any amount in respect of any shares of any Junior Stock with respect to the payment of dividends or distribution of assets on liquidation, dissolution or winding up of the
Company, all accumulated and unpaid dividends (including a prorated dividend from the last Dividend Accrual Date) in respect of any liquidation, dissolution or winding up consummated
except that, notwithstanding the provisions of Section B(ii), all of such accumulated and unpaid dividends will be paid in Class A Preferred at a rate of 1 share of Class A Preferred for
each $4.00 of dividends. No fractions of Class A Preferred shall issue. The Company shall pay cash in lieu of paying fractions of Class A Preferred on a pro rata basis. |
|
|
(ii) |
|
The Class A Preferred will be entitled to participate on a pro rata basis in any distribution of assets as may be made or paid on Junior Stock upon the liquidation, dissolution or winding
up of the Company. |
|
|
(iii) |
|
A consolidation or merger of the Company with or into any other corporation or corporations or any other legal entity will not be deemed to constitute a liquidation, dissolution or winding
up of the Company as those terms are used in this Section C. |
|
(i) |
|
The Company may, in the absolute discretion of its board, redeem at any time and from time to time from any source of funds legally available any and all of the Class A Preferred at the
Redemption Price. |
|
|
(ii) |
|
For each redemption, the Redemption Price for each share of Class A Preferred shall be equal to amount paid per share of Class A Preferred payable in cash, plus an amount payable (not
withstanding the provisions of Section B (ii)) in cash equal to the sum of all accumulated unpaid dividends per share of Class A Preferred (including a prorated annual dividend from the
last Dividend Accrual Date) to the respective date for each redemption on which the Company shall redeem any shares of Class A Preferred (the Redemption Date). |
|
|
(iii) |
|
In the event of redemption of only a portion of the then outstanding Class A Preferred, the Company will affect the redemption pro rata according to the number shares held by each holder
of Class A Preferred. |
|
|
(iv) |
|
At least 20 days and not more than 60 days prior to the date fixed by the board for any redemption of Class A Preferred, written notice (the Redemption Notice) will be mailed, postage
prepaid, to each holder of record of the Class A Preferred at his or her post office address last shown on the records of the Company. The Redemption Notice will state: |
|
|
|
Whether all or less than all of the outstanding Class A Preferred is to be redeemed and the
total number of shares of Class A Preferred being redeemed; |
|
|
|
|
the number of shares of Class A Preferred held by the holder that the Company intends to redeem; |
|
|
|
|
the Redemption Date and Redemption Price; and |
|
|
|
|
that the holder is to surrender to the Company, in the manner and at the place designated in
Section D(v), his or her certificate or certificates representing the number of shares of
Class A Preferred to be redeemed. |
|
(v) |
|
On or before the date fixed for redemption, each holder of Class A Preferred must surrender the certificate or certificates representing the number of
shares of Class A Preferred to the Company, accompanied by instruments of transfer satisfactory to the Company and sufficient to transfer the Class A
Preferred being redeemed to the Company free and clear of any adverse interest, at the place designated in the Redemption Notice. The Redemption Price for
the number of shares of Class A Preferred redeemed will be payable in cash on the Redemption Date to the person whose name appears on the certificate(s) as
the owner of such certificate(s) as of the date of the Redemption Notice. In the event that less than all of the shares of Class A Preferred represented by
any certificate(s) are redeemed, a new certificate will issued by the Company representing the unredeemed Class A Preferred to the same record owner. |
13
|
(vi) |
|
As promptly as practicable after surrender of the certificate(s) representing the redeemed Class A Preferred, the Company will pay the Redemption Price to
the record holder of the redeemed Class A Preferred. |
|
|
(vii) |
|
Unless the Company defaults in the payment in full of the Redemption Price, the obligation of the Company to pay dividends on the Class A Preferred
redeemed shall cease on the Redemption Date, and the holders of the Class A Preferred redeemed will cease to have any further rights with respect to such
redeemed Class A Preferred on the Redemption Date, other than to receive the Redemption Price. |
|
|
(viii) |
|
The holders of the Class A Preferred have no right to seek or to compel redemption of the Class A Preferred. |
E. |
|
Voting Rights The holders of Class A Preferred are not be entitled to vote in any and all elections of directors and with respect to any and all other matters as to which the vote or consent of shareholders of the Company shall
be required or taken. |
|
F. |
|
Conversion Privilege |
|
(i) |
|
The holders of the Class A Preferred have the right, at each holders option but subject to board approval in each case, to convert each share of Class A
Preferred into 1 fully paid and nonassessable share of the $.01 par value common stock of the Company (Common Share) without payment of any conversion
price or other consideration. Such 1 for 1 rate of conversion is subject to adjustment as set forth in F(x). |
|
|
(ii) |
|
The Conversion Privilege set forth in this Section F may not be exercised by the holder of Class A Preferred until 1 year shall have elapsed from the issue
date of the Class A Preferred held by such holder and may not be exercised if the board shall not have approved the actual exercise of such Conversion
Privilege by such holder of Class A Preferred. Such approval shall not be unreasonably withheld. Upon receipt of the Notice of Conversion described in
Section F(iii) below and the boards approval of such conversion, the Company shall give a Notice of Approval to the holder within 48 hours of the receipt
of the Notice of Conversion that the exercise of the Conversion Privilege by such holder is approved. |
|
|
(iii) |
|
In order to exercise the Conversion Privilege, the holder
of Class A Preferred must give written notice to the
Company that the holder elects to covert the number of
shares of Class A Preferred as specified in the Notice of
Conversion. The Notice of Conversion will also state the
name(s) and address (es) in which the certificate(s) for
Common Shares issuable upon the conversion are to be
issued. Upon receipt of the Companys Notice of Approval,
the holder of the Class A Preferred must surrender the
certificate(s) representing the number of shares of Class A
Preferred being converted to the Company, accompanied by
instruments of transfer satisfactory to the Company and
sufficient to transfer the Class A Preferred being
converted to the Company free and clear of any adverse
interest at the office maintained for such purpose by the
Company. As promptly as practicable after the surrender of
the certificate(s) representing the number of shares of
Class A Preferred converted, the Company will issue and
deliver to the holder, or to such other person designated
by the holders written order, a certificate(s) for the
number of full Common Shares issuable upon the conversion
of the Class A Preferred in accordance with the provisions
of this Section F(iii). |
|
|
(iv) |
|
The Conversion Privilege may be exercised
in whole or in part and, if exercised in
part, a certificate(s) will be issued for
the remaining number of Class A Preferred
in any case in which fewer than all of the
Class A Preferred represented by a
certificate(s) are converted to the same
record holder of Class A Preferred
converted. |
|
|
(v) |
|
Each conversion will be deemed to have been
effective immediately prior to the close of
business on the date on which the Class A
Preferred will have been so surrendered as
provided in Section F(iii) (the Conversion
Date) and the person(s) in whose name(s)
any certificate(s) for Common Shares will
be issuable upon the conversion will be
deemed to have become the holder(s) of
record of the Common Shares on the
Conversion Date. Effective as of the
Conversion Date, the Company will have no
obligation to pay dividends on the Class A
Preferred converted provided that effective
as of the Conversion Date, the Company
shall pay all accumulated and unpaid
dividends (including the prorated dividend
from the last Dividend Accrual Date) on the
Class A Preferred converted, payable in the
discretion of the Board, in cash out of any
funds legally available for payment of such
dividends or in Class A Preferred. |
14
|
(vi) |
|
The Conversion Privilege shall terminate
with respect to Class A Preferred called
for redemption by the mailing of a
Redemption Notice described in
Section D(iv) on the close of business on
the date immediately preceding the
Redemption Date. |
|
|
(vii) |
|
Notwithstanding the requirement for board
approval and the 1 year limit set forth in
Section F(ii), in case of any consolidation
or merger to which the Company is a party
other than a merger or consolidation in
which the Company is the surviving
corporation or in case of any sale or
conveyance to another corporation of all or
substantially all of the assets of the
Company or in the case of any statutory
exchange of securities representing an
excess of 50% of the total outstanding
securities of the Company with another
corporation (including any exchange
effected in connection with a merger of a
third corporation into the Company), the
holders of Class A Preferred then
outstanding will have the right to convert
the Class A Preferred into the kind and
amount of securities, cash or other
property which the holder would have owned
or have been entitled to receive
immediately after the consolidation,
merger, statutory exchange, sale or
conveyance, had the Class A Preferred been
converted immediately prior to the
effective date of the consolidation,
merger, statutory exchange, sale or
conveyance as the case may be. |
|
|
(viii) |
|
Notwithstanding the 1 year holding period
set forth in Section F(ii), in the event
the highest bid price for the Companys
$.01 par value common stock quoted on any
exchange, automated quotation system or the
OTC Bulletin Board on which such stock is
actively traded is $20 or more on 5
consecutive trading days, the holders of
Class A Preferred shall have the right to
convert such Class A Preferred upon Board
approval. |
|
|
(ix) |
|
Common Shares delivered upon conversion of
Class A Preferred will be, upon delivery,
validly issued, fully paid and
nonassessable, free of all liens and
charges and not subject to any preemptive
rights. |
|
|
|
Declares a dividend, or makes a distribution, on
shares of its $.01 par value common stock in shares of
its $.01 par value common stock; or |
|
|
|
|
Subdivides its outstanding shares of its $.01 par
value common stock into a greater number of shares of
its $.01 par value common stock; or |
|
|
|
|
Combines its outstanding shares of its $.01 par value
common stock into a smaller number of shares of $.01
par value common stock, the number of Common Shares
issuable upon the conversion of the Class A Preferred
shall be adjusted at the time of the record date for
the dividend or distribution or the effective date of
the subdivision or a combination so that after such
record or effective date, the holder of Class A
Preferred will be entitled to receive the same
percentage of ownership of the Companys $.01 par
value common stock as such holder would have been
entitled to receive immediately prior to such record
or effective date. |
Since its designation in March, 2002, the company has sold an aggregate 765,512 shares of
Class A Preferred for proceeds of $3,062,048. No shares of Class A Preferred were sold during the
years ended December 31, 2009 and 2008.
Since its designation in March, 2002, Class A Preferred shareholders have converted an
aggregate 124,605 Class A Preferred into the companys common stock (on a one to one basis) through
December 31, 2009, with 51,250 Class A Preferred converted in the year ending December 31, 2009.
Upon conversion, converting Class A Preferred shareholders are entitled to receive, in
accordance with the terms of the Class A Preferred, dividends payable either in cash or in Class A
Preferred shares calculated to the rate of 10 percent per annum.
At times, the board of the company may elect to settle the dividends through the issuance of
common stock in lieu of cash. The amount of common stock shares issued is based on the market
price of the stock of the company at the time of the conversion.
Through December 31, 2009, an aggregate Class A Preferred dividend amounting to $59,775 was
settled through the issuance of 14,944 Class A Preferred shares of the Company. For the year ended
December 31, 2009, the company settled Class A Preferred dividends amounting to $52,801 through the
issuance of 65,965 shares of common stock.
At December 31, 2009, dividends payable upon conversion of 655,851 outstanding shares of Class
A Preferred amounted to approximately $1,218,000.
15
(f) Class B Preferred Stock
On October 19, 2004, the company incorporated Iso-Torque Corporation in order to commercialize
its Iso-Torque® differential technology.
In September, 2004, the company created a new series of preferred stockClass B Non-Voting,
Cumulative Convertible Preferred Stock (Class B Preferred) to fund the business operations of
Iso-Torque Corporation.
The designation, relative rights, preferences and limitations of the Class B Preferred, as
fixed by the board of directors, are as follows:
|
A. |
|
Three hundred thousand (300,000) authorized preferred shares of the par value of
$.01 each as fixed by the board of directors, , shall be issued in and as a series
to be designated Class B Non-Voting Cumulative Convertible Preferred Shares, $.01
par value. Said series is hereinafter called Class B Preferred Shares. The term
preferred shares as used herein shall include all 100,000,000 of the preferred
shares, $.01 par value authorized by the Certificate of Incorporation of the
Corporation of which Class B Preferred Shares is the second series. |
|
B. |
|
(1) |
|
So long as any Class B Preferred are outstanding, the holders of the Class B
Preferred will be entitled to receive cumulative preferential dividends in the
amount of $.50 per share of Class B Preferred and no more for each annual dividend
period. The annual dividend period shall commence on the first day of each September
and shall end on the last day of the immediately succeeding August, which August
date is referred to as the Dividend Accrual Date. |
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(2) |
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When and as declared by the board, dividends payable on the Class B Preferred
will be paid in cash out of any funds legally available for the payment of dividends
or, in the discretion of the board, will be paid in Class B Preferred at a rate of 1
share of Class B Preferred for each $5.00 of dividends. No fractions of Class B
Preferred shall be issued. The Corporation shall pay cash in lieu of paying
fractions of Class B Preferred on a pro rata basis. |
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(3) |
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Dividends shall be cumulative from the date of issuance of each share of Class B
Preferred, whether or not declared and whether or not, in any annual dividend
period(s), there are net profits or net assets of the Corporation legally available
for the payment of dividends. |
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(4) |
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Accumulated and unpaid dividends on the Class B Preferred will not bear interest. |
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(5) |
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So long as any shares of Class B Preferred are outstanding, the Corporation may
not declare or pay any dividend, make any distribution, or fund, set aside or make
monies available for a sinking fund for the purchase or redemption of any shares or
stock of the Corporation ranking junior to the Class B Preferred with respect to the
payment of dividends, including the $.01 par value common stock of the company, for
all past annual dividend periods have been paid and such dividends for the current
annual dividend period have been paid or declared and duly provided for. Subject to
the foregoing, and not otherwise, the dividends (payable in cash, stock or
otherwise) as may be determined by the Board, may be declared and paid on any Junior
Stock from time to time out of any funds legally available therefore, and the
Class B Preferred will be entitled to participate in any such dividends, whether
payable in cash, stock or otherwise, on a pro rata basis. |
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C. |
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The Class B Preferred shall rank junior and be classified as Junior Stock with
respect to the Corporations Class A Preferred Shares in all respects. |
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D. |
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(1) |
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In the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of Class B Preferred then outstanding
are entitled to be paid out of the assets of the Corporation available for
distribution to its shareholders, whether such assets are capital, surplus or
earnings, before any payment or declaration and setting apart for payment of any
amount in respect of any shares of any Junior stock with respect to the payment of
dividends or distribution of assets on liquidation, dissolution or winding up of the
Corporation, all accumulated and unpaid dividends (including a prorated dividend
from the last Dividend Accrual Date) in respect of any liquidation, dissolution or
winding up consummated except that, notwithstanding the provisions of Section B(2),
all of such accumulated and unpaid dividends will be paid in shares of Class B
Preferred at a rate of 1 share of Class B Preferred for each $5.00 of dividends. No
fractions of Class B Preferred shall be issued. The Corporation shall pay cash in
lieu of paying fractions of Class B Preferred on a pro rata basis. (2) The Class B
Preferred will be entitled to participate on a pro rata basis in any distribution of
assets as may be made or paid on Junior Stock upon the liquidation, dissolution or
winding up of the Corporation. |
16
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E. |
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(1) |
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The Corporation may in the absolute discretion of its board, redeem at any time
and from time to time from any source of funds legally available any and all of the
Class B Preferred at the Redemption Price. |
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(2) |
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For each redemption, the Redemption Price for each share of Class B Preferred
shall be equal to the sum of $5.00 per share of Class B Preferred, payable in cash,
plus an amount payable (not withstanding the provisions of Section B(2) in cash
equal to the sum of all accumulated unpaid dividends per share of Class B Preferred
(including a prorated annual dividend from the last Dividend Accrual Date) to the
respective date for each redemption on which the Corporation shall redeem any shares
of Class B Preferred (the Redemption Date). |
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(3) |
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In the event of a redemption of only a portion of the then
outstanding Class B Preferred, the Corporation will affect the
redemption pro rata according to the number shares held by each holder
of Class B Preferred. |
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(4) |
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Unless the Corporation defaults in the payment in full of the
Redemption Price, the obligation of the Corporation to pay dividends
on the Class B Preferred redeemed shall cease on the Redemption Date,
and the holders of the Class B Preferred redeemed will cease to have
any further rights with respect to such redeemed Class B Preferred on
the Redemption Date, other than to receive the Redemption Price. |
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(5) |
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The holders of the Class B Preferred have no right to seek or to
compel redemption of the Class B Preferred. |
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F. |
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The holders of Class B Preferred are not entitled to vote in any and
all elections of directors and with respect to any and all other
matters as to which the vote or consent of shareholders of the
Corporation shall be required or taken. |
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G. |
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(1) |
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The holders of the Class B Preferred have the right, at each
holders option but subject to board approval in each case, to
(i) convert each share of Class B Preferred into 1 fully paid and
nonassessable share of the $.01 par value common stock of the
Corporation (Torvec Common) without payment of any conversion price
or other consideration; and to (ii) convert each share of Class B
Preferred into 1 fully paid and nonassessable share of the $.01 par
value common stock of Iso-Torque Corporation (Iso-Torque Common)
without payment of any conversion price or other consideration upon
the happening of any of the following events: |
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(a) |
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the effectiveness of a registration statement as filed with the
Securities and Exchange Commission pursuant to and under the Securities Act of
1933 with respect to an initial public offering of Iso-Torque Common; or |
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(b) |
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the effectiveness of a registration statement as filed with the
Securities and Exchange Commission pursuant to and under the Securities Exchange
Act of 1934 with respect to an initial trading of Iso-Torque Common on a
national exchange, the NASDAQ or the OTCBB; or |
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(c) |
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notwithstanding the 1 year holding period set forth in
Section G(2) the execution of a definitive agreement for the sale, transfer
and/or exchange of all of the issued and outstanding Iso-Torque Common to a
third party purchaser of such stock or by any of a business combination of
Iso-Torque Corporation with an unrelated entity, other than a merger or
consolidation in which Iso-Torque Corporation is the surviving corporation. |
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(2) |
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The Conversion Privilege set forth in this Section G may not be exercised by the holder
of Class B Preferred until 1 year shall have elapsed from the issue date of the Class B
Preferred held by such holder and may not be exercised if the board shall not have
approved the actual exercise of such Conversion Privilege by such holder of Class B
Preferred. Such approval shall not be unreasonably withheld. Upon receipt of the Notice
of Conversion and the boards approval of such conversion, the Corporation shall give a
Notice of Approval to the holder within 48 hours of the receipt of the Notice of
Conversion that the exercise of the Conversion Privilege by such holder is approved. |
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(3) |
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The Conversion Privilege may be exercised in whole or in part and, if exercised in part,
a certificate(s) will be issued for the remaining Class B Preferred in any case in
which fewer than all of the Class B Preferred represented by a certificate(s) are
converted to the same record holder of Class B Preferred converted. |
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(4) |
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Each conversion will be deemed to have been effective immediately prior to the close of
business on the date on which the Class B Preferred will have been so surrendered (the
Conversion Date) and the person(s) in whose name(s) any certificate(s) for Torvec
Common or Iso-Torque Common will be issuable upon the conversion will be deemed to have
become the holder(s) of record of the Torvec Common or Iso-Torque Common on the
Conversion Date. Effective as of the Conversion Date, the Corporation will have no
obligation to pay dividends on the Class B Preferred converted provided that effective
as of the Conversion Date, the Corporation shall pay all accumulated and unpaid
dividends (including the prorated dividend from the last Dividend Accrual Date) on the
Class B Preferred converted, payable in the discretion of the board, in cash out of any
funds legally available for payment of such dividends or in shares of Class B
Preferred. |
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(5) |
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The Conversion Privilege shall terminate with respect to Class B Preferred called for
redemption by the mailing of a Redemption Notice on the close of business on the date
immediately preceding the Redemption Date. |
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(6) |
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Notwithstanding the requirement for board approval and the 1 year limit set forth in
Section G(2), in case of any consolidation or merger to which the Corporation is a
party other than a merger or consolidation in which the Corporation is the surviving
corporation or in case of any sale or conveyance to another corporation of all or
substantially all of the assets of the Corporation or in the case of any statutory
exchange of securities representing an excess of 50% of the total outstanding
securities of the Corporation with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Corporation), the holders
of Class B Preferred then outstanding will have the right to convert the Class B
Preferred into the kind and amount of securities, cash or other property which the
holder would have owned or have been entitled to receive immediately after the
consolidation, merger, statutory exchange, sale or conveyance, had the Class B
Preferred been converted immediately prior to the effective date of the consolidation,
merger, statutory exchange, sale or conveyance as the case may be. |
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(7) |
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Notwithstanding the 1 year holding period set forth in Section G(2), in the event the
highest bid price for the Corporations $.01 par value common stock quoted on any
exchange, automated quotation system or the OTC Bulletin Board on which such stock is
actively traded is $20 or more on 5 consecutive trading days, the holders of Class B
Preferred shall have the right to convert such Class B Preferred upon board approval
for such conversion period. |
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(8) |
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Torvec Common or Iso-Torque Common delivered upon conversion of Class B Preferred will
be, upon delivery, validly issued, fully paid and nonassessable, free of all liens and
charges and not subject to any preemptive rights. |
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(9) |
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In case the Corporation |
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(a) |
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declares a dividend, or makes a distribution, on shares of its $.01 par value
common stock in shares of its $.01 par value common stock; or |
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(b) |
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subdivides its outstanding shares of its $.01 par value common stock into a
greater number of shares of its $.01 par value common stock; or |
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(c) |
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combines its outstanding shares of its $.01 par value common stock into a smaller
number of shares of $.01 par value common stock, the number of Torvec Common
issuable upon the conversion of the Class B Preferred shall be adjusted at the
time of the record date for the dividend or distribution or the effective date
of the subdivision or a combination so that after such record or effective date,
each holder of Class B Preferred will be entitled to receive the same percentage
of ownership of the Corporations $.01 par value common stock as such holder
would have been entitled to receive immediately prior to such record or
effective date. |
Since its designation in September, 2004, the company has sold an aggregate 97,500 Class B
Preferred in a number of private placements for proceeds of approximately $487,500. No Class B
Preferred was sold during the years ending December 31, 2009 and 2008.
Since its designation, Class B Preferred shareholders have converted an aggregate 20,000 Class
B Preferred into the companys common stock (on a one to one basis) through December 31, 2009, with
20,000 Class B Preferred converted in the year ending December 31, 2009.
Upon conversion, converting Class B Preferred shareholders are entitled to receive, in
accordance with the terms of the Class B Preferred, dividends payable, in the discretion of the
board of directors, either in cash or in Class B Preferred shares calculated at the rate of 10
percent per annum. Through December 31, 2009, no Class B Preferred shares have been issued to
converting Class B Preferred shareholders as a dividend.
Depending upon the companys cash position, the company from time to time may request that a
converting preferred shareholder receiving dividends in cash consent to receive shares of
restricted common stock in lieu thereof. In 2009, the company issued 30,103 restricted common
shares to a converting preferred shareholder in payment of dividends amounted to $24,082, based on
the market value of the Companys stock at the time of conversion.
At December 31, 2009, dividends payable upon the conversion of 77,500 outstanding shares of
Class B Preferred amounted to approximately $166,000.
18
(g) Reports to Shareholders
The company furnishes its shareholders with an annual report containing audited financial
statements and such other periodic reports as the company may determine to be appropriate or as may
be required by law. The company complies with periodic reporting, proxy solicitation and certain
other requirements of the Securities Exchange Act of 1934.
(h) Transfer Agent and Registrar
Continental Stock Transfer & Trust Company has been appointed as the companys Transfer Agent
and Registrar for its common stock and for its preferred stock.
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Item 6. |
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SELECTED FINANCIAL DATA |
As a smaller reporting company, we are not required to include information otherwise required
by this item.
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Item 7. |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS |
(a) Overall Business Strategy
From its inception in 1996, the companys overall business plan has been to design, develop,
build and commercialize its FTV® worldwide, especially in the Asian, African, South and
Central American and Eastern European markets. In addressing issues and solving problems
encountered in the design and development of the FTV, the company designed and developed a number
of automotive drive-line technologiesi.e. the companys hydraulic pump/motor system, infinitely
variable transmissions, Iso-Torque® differential and constant velocity joint technology.
The FTV® has been developed and is ready for commercialization. In addition, each
of the companys other automotive technologies has been developed and are ready for
commercialization either independently on a stand-alone basis or as incorporated into the
companys FTV.
In present circumstances, the company intends to produce, market and distribute FTVs by
entering into a joint venture relationship with an automotive manufacturer. The company intends to
incorporate its drive-line technologies into the FTV to enhance its marketability and value. The
company also intends to license and/or enter into supply contracts with automotive manufacturers,
military contractors, tier-one suppliers and possibly end-users for its drive-line technologies
independent of their utilization in the FTV.
(b) Current Status of Business Plan and Ongoing Projects
The companys plan of operation for the year ending December 31, 2010 is as follows:
1) to explore with the U.S. Air Force the military and commercial potential of the companys
FTV® as an Advanced Combat Firefighting Vehicle capable of unprecedented speed and maneuverability
with diverse applications for
use in the most extreme and rugged terrain. The company has redelivered the FTV to the Air Force
after making modifications to the vehicle based upon the Air Forces recommendations which
maximized its combat firefighting capabilities, including its robotic and autonomous potential. The
company anticipates that ongoing and future discussions with the Air Force will crystallize the
direction of the Air Forces Advanced Combat Firefighting Vehicle program and the companys
participation in such program.
2) based in part upon results of the companys discussions with the Air Force, to explore
interest in the FTV among other branches of the U.S. military, the Department of Homeland Security,
FEMA, the U.S. Forestry Service, as well as state and municipal governmental units for boarder
patrol, off-highway emergencies, federal and state conservation and drug-enforcement efforts and,
as a fast, highly maneuverable vehicle for combat and non-combat uses;
19
3) to ship Isotorque® differentials to General Motors and Ford Motor Company for performance
evaluation by such companies for their front-wheel drive vehicle platforms, to interface with such
companies in their evaluations, to furnish additional IsoTorque differentials to such companies for
additional evaluation and to engage such companies in discussions with respect to the general
utilization by such companies of Torvecs Isotorque differential technology;
4) to interface with General Motors with respect to the performance evaluation by GM of the
IsoTorque differential shipped to it in early January, 2010 as installed in GMs Cadillac CTS ( and
perhaps in a new vehicle platform under consideration by GM), to furnish additional rear-wheel
drive Isotorque differentials to GM for additional evaluation in the Cadillac CTS and to engage GM
in discussions concerning the utilization of Torvecs Isotorque differential technology for its
rear-wheel drive automotive and truck fleets;
5) to ship IsoTorque differentials to Hyundai for installation and performance evaluation in
its Genesis Coupe and to Tesla for installation and performance evaluation in its Roadster, to
interface with both companies in their evaluations, to furnish additional IsoTorque differentials
to such companies for additional evaluation and to engage such companies in discussions with
respect to the general utilization by such companies of Torvecs IsoTorque differential technology;
6) to enter the differential aftermarket by manufacturing, marketing and distributing
IsoTorque differentials for Corvette C-5 and C-6 cars as well as for the SMS 620 Camaro sports car
based upon managements research that approximately 380,000 Corvette C-5 and C-6 cars have been
produced since 1997 and up to 80,000 current-generation Camaros were produced and sold in 2009;
7) to build, test and evaluate the companys constant velocity joint technology as
specifically-designed for use in the worldwide mining industry in cooperation with Eastern Mining &
Industrial Supply, Inc. of Chapmanville, West Virginia. This program will be conducted in
partnership with the Center for Integrated Manufacturing Studies located on the campus of Rochester
Institute of Technology and is funded, in part, by a grant from the New York State Office of
Science, Technology and Academic Research (NYSTAR). The program will be conducted under the overall
umbrella of the companys partnership with Rochester Institute of Technology known as the Safety
and Efficiency in Automobiles Laboratory (SEAL) created by agreement between the company and RIT in
July, 2009;
8) to expand the manufacturing, marketing, distribution and commercializing programs
undertaken by SEAL by attracting federal, state and local governmental funding for such programs
and by increasing the number of private-sector partners participating in SEALs projects;
9) to continue to explore the interest of a major international truck manufacturer in the
redesign of the axle used by it in order to integrate Torvecs IsoTorque differential technology in
its fleet of heavy-duty trucks.
In addition to the activities to be undertaken by the company to implement its plan of
operation detailed immediately above, the company from time to time receives indications of
interest in its technologies from additional sources which lead to projects and developments not
specified in the plan. Information regarding the company and all of its automotive inventions,
including regular updates on technological and business developments, can be found on the companys
website, www.torvec.com.
(c) Company Expenses
The net loss for the year ended December 31, 2009 was $3,272,000 as compared to the year ended
December 31, 2008 net loss of $1,683,000. The increase in the net loss of $1,589,000 is principally
related to the prior year gain on a settlement of debt of $1,541,000 and the receipts of state tax
credits of $346,000.
Research and development expenses for the year ended December 31, 2009 amounted to $520,000 as
compared to $535,000 for the year ended December 31, 2008. This decrease of $15,000 is principally
attributable to the companys
decreased emphasis on research and development and increased efforts to sell products and
place the technology in production.
General and administrative expenses for the year ended December 31, 2009 amounted to
$2,877,000 as compared to $3,165,000 for the year ended December 31, 2008. This decrease amounted
to $288,000 and is principally due to the decrease in professional and consulting expenses. The
decrease is due in large part to the companys response to the difficulties in cash flow.
20
(d) Liquidity and Capital Resources
The companys business activities during its fiscal year ended December 31, 2009 were funded
principally through:
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cash on hand at December 31, 2008, amounted to approximately $300,00
and mostly due to the receipt in the fourth quarter of 2008 of
approximately $280,000 representing New York State corporate income
tax refunds for credits allocable to certain research and development
expenses incurred by the company in the years 2005-2007; |
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the sale during the year 2009 of approximately 551,483 shares of the
companys common stock for approximately $335,000 in gross proceeds; |
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the receipt of approximately $175,000 from the National Aeronautics
and Space Administration in payment for delivery of seven infinitely
variable transmissions to
NASA. |
During the fiscal year ended December 31, 2009 and 2008, the company issued 2,243,305 and
1,000,348 common shares to business consultants under its business consultants stock plan in
exchange for ongoing corporate legal services, internal accounting services, business advisory
services as well as legal fees and associated expenses for ongoing patent work and litigation. As
of December 31, 2009 and 2008 there are 1,409,982 and 3,653,278 shares available for future
issuances under the plan.
Effective January 1, 2008, the board of directors instituted a compensation plan for James and
Keith Gleasman by which the company would compensate each of them for services performed and
inventions and know-how transferred to the company at the rate of $300,000 per year. Actual payment
of this compensation, or any portion thereof, was conditioned upon a board of director
determination that the company had the requisite cash, after the complete funding of all ongoing
company projects, to make payment.
Since the company did not have the requisite cash available to pay the Gleasmans compensation
under this arrangement from January 1, 2008 through August 17, 2009, the date on which each of the
Gleasmans waived all of his rights and interest in and to the board-created compensation plan,
including all of his rights and interest in and to the amount(s) under the plan accrued to such
date. As a result of such waiver, of the $942,000 amount accrued under the plan at June 30, 2009,
namely $900,000 was reclassified to equity as a contribution of services and $42,000 accrued under
the plan for payroll taxes was recorded as a reduction to general and administrative expenses in
the quarter ended June 30, 2009.
For periods for which there is no compensation plan, the company is required to record the
estimated value of each of the Gleasmans services rendered to the company (estimated at $300,000
each per annum) as a contribution of services under generally accepted accounting principles
applicable to the company and is required under the same accounting principles to allocate the
amount of such contribution between research and development expenses on the one hand and general
and administrative on the other hand. For the year ended December 31, 2009, the company recorded
$100,000 to research and development expense and $200,000 to general and administrative expense,
based upon managements estimate.
Effective March 14, 2010, James Gleasman retired as the companys chief executive officer and
interim chief financial officer.
For the period from September 1996 (inception) through December 31, 2009, the company has
accumulated a deficit of $53,213,000 and at December 31, 2009 has a working capital deficit of
$1,424,000 and stockholders capital deficit of $1,235,000. The company has been dependent
upon equity financing and advances from stockholders to meet its obligations and sustain
operations. Management believes that based upon its current cash
position, its budget for its business operations and collectability of its receivables in
the ordinary course of business and the settlement of its litigation in January 2010 (proceeds
of $1,100,000), the company will be able to continue operations through December 31, 2010.
However, if its cash projections are less than expected, the Company may need to downsize
operations, incur debt or raise additional capital. There can be no assurance, however, that
the Company will be successful in raising additional capital or incur debt when needed on
terms acceptable to the Company.
At
December 31, 2009, the company had current liabilities
(excluding deferred income) amounted to $748,000.
21
(e) Critical Accounting Policies
Revenue Recognition
The companys terms provided that customers are obligated to pay for products sold to them
within a specified number of days from the date that title to the products is transferred to the
customer. The companys standard terms are typically net 30 days. The company recognizes revenue
when transfer of title occurs and risk of ownership passes to a customer at the time of shipment or
delivery, depending on the terms of the agreement with a particular customer. The sale price of the
companys products is substantially fixed or determinable at the date of the sale based upon
purchase orders generated by a customer and accepted by the company. To the extent that
collectability of the receivable is not assured, the company follows the cost recovery approach.
Accordingly, amounts collected will be accounted for as a reduction of costs.
Share-based Payments
The company accounts for the settlement of its commission arrangements to non-employee
consultants, directors, executives and certain administrative personnel with the issuance of its
business consulting shares under ASC 505 (Previously known as FASB Statement 123® Share Based
Payment), provided that there are sufficient shares available under the business consulting plan.
Under ASC 505, the company measures commission arrangements at the fair value of the equity
instruments issued. In the event that there are insufficient shares available to settle the
obligation, the company will follow the provisions of ASC 815-40 (Previously known as: EITF 00-19
Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock). Under ASC 815-40, the company will record a liability instrument for the
resulting changes in fair value from the date due to the end of each reporting period until such
liability is satisfied.
Recently Issued Accounting Principles
In June 2009, the FASB issued under ASC Topic 105 which establishes the Accounting Standards
Codification (ASC; the Codification) as the source of authoritative accounting principles
recognized by the FASB to be applied to nongovernmental entities in the preparation of financial
statements in conformity with accounting principles generally accepted in the United States of
America (GAAP). ASC Topic 105 is effective for financial statements issued for interim and annual
periods ending after September 15, 2009. Rules and interpretative releases of the Securities and
Exchange Commission (SEC) under federal securities laws are authoritative GAAP for SEC
Registrants. Upon adoption of this guidance under ASC Topic 105, the Codification superseded all
then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC
accounting literature not included in the Codification became non-authoritative.
In December 2007, the FASB issued ASC 805 (Prior authoritative literature: SFAS No. 141
(revised 2007), Business Combinations, which replaces FASB Statement No. 141). ASC 805-10
establishes principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed, any non controlling
interest in the acquiree and the goodwill acquired. The Statement also establishes disclosure
requirements which will enable users to evaluate the nature and financial effects of the business
combination. ASC 805-10 will change how business combinations are accounted for and will impact
financial statements both on the acquisition date and in subsequent periods. In April 2009, the
FASB issued ASC 805-10-05 (Previously known as: Statement No. 141(R)-1 Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arises from Contingencies). For
business combinations, the standard requires the acquirer to recognize at fair value an asset
acquired or liability assumed from a contingency if the acquisition date fair value can be
determined during the measurement period. The adoption of FASB ASC 805-10 did not have an impact on
the Companys financial position and results of operations although it may have a material impact
on accounting for business combinations in the future which can not currently be determined.
In December, 2007, the FASB issued ASC 810 (Previously known as: FASB Statement No. 160,
Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51). The
standard changes the accounting for noncontrolling (minority) interests in consolidated financial
statements including the requirements to classify noncontrolling interests as a component of
consolidated stockholders equity, and replace references minority interest with noncontrolling
interests. ASC 810 also requires the amount of consolidated net loss attributable to the parent and
the noncontrolling interest be clearly identified and presented on the face of the consolidated
statements of operations and gain or loss on the deconsolidation of the subsidiaries be measured at
fair value. The presentation and disclosure requirement of ASC were applied retrospectively.
22
In 2008, the FASB issued ASC 815 (Previously known as: EITF 07-05, Determining whether an
Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock). ASC 815 provides guidance on
determining what types of instruments or embedded features in an instrument held by a reporting
entity can be considered indexed to its own stock for the purpose of evaluating the first criteria
of the scope exception in ASC 810-10-15 (Prior authoritative literature: paragraph 11(a) of SFAS
133). The adoption of ASC 815 effective January 1, 2009 did not have any impact on the Companys
financial statements.
In April 2009, the FASB issued ASC 825 (Previously known as: FASB Staff Position No. FAS
107-1) and ASC 270 (Prior authoritative literature: APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments,) which requires disclosures about fair value of financial instruments
for interim reporting periods of publicly traded companies as well as in annual financial
statements. This Staff Position is effective for interim reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15, 2009. The Company adopted
this pronouncement as of July 1, 2009 and it did not have a material impact on the financial
statements.
In May 2009, the FASB issued ASC 855 (SFAS No. 165), Subsequent Events which establishes
general standards for accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued. In February 2010, FASB issued ASU 2010-09
Subsequent Event (Topic 855) Amendments to Certain Recognition and Disclosure Requirements. ASU
2010-09 removes the requirement for an SEC filer to disclose a date in both issued and revised
financial statements. All of the amendments in ASU 2010-09 are effective upon issuance of the final
ASU, except for the use of the issued date for conduit debt obligors.
(f) Impact of Inflation
Inflation has not had a significant impact on the companys operations to date and management
is currently unable to determine the extent inflation may impact the companys operations during
its fiscal year ending December 31, 2009.
(g) Quarterly Fluctuations
As of December 31, 2009 and 2008, the company had not engaged in substantial revenue producing
operations. Once the company actually commences significant revenue producing operations, the
companys operating results may fluctuate significantly from period to period as a result of a
variety of factors, including purchasing patterns of consumers, the length of the companys sales
cycle to key customers and distributors, the timing of the introduction of new products and product
enhancements by the company and its competitors, technological factors, variations in sales by
product and distribution channel, product returns, and competitive pricing. Consequently, once the
company actually commences significant revenue producing operations, the companys product revenues
may vary significantly by quarter and the companys operating results may experience significant
fluctuations.
|
|
|
Item 7A. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
As a smaller reporting company, we are not required to include information otherwise required
by this item.
23
|
|
|
Item 8. |
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Contents
Financial Statements
|
|
|
|
|
|
|
Page |
|
|
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|
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|
|
F-2 |
|
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|
|
F-3 |
|
|
|
|
|
|
|
|
|
F-4 |
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|
|
|
|
|
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|
F-5 - F-12 |
|
|
|
|
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|
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|
|
F-13 |
|
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|
|
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|
|
|
|
F-14 - F-34 |
|
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Torvec, Inc.
We have audited the accompanying consolidated balance sheets of Torvec, Inc. (a development stage
company) and its subsidiaries as of December 31, 2009 and 2008, and the related consolidated
statements of operations and cash flows for each of the years in the two-year period ended December
31, 2009 and for the period from September 25, 1996 (inception) through December 31, 2009 and
changes in stockholders equity (capital deficit) for each of the periods from September 25, 1996
(inception) through December 31, 2009. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement. We
were not engaged to perform an audit of the Companys internal control over financial reporting.
Our audits include consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provides a
reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in all material respects,
the consolidated financial position of Torvec, Inc. and subsidiaries as of December 31, 2009 and
2008, and the consolidated results of their operations and their consolidated cash flows for each
of the years in the two-year period ended December 31, 2009 and for the period from September 25,
1996 (inception) through December 31, 2009, in conformity with accounting principles generally
accepted in the United States.
As
described in Note B [11] to the Consolidated Financial
Statements, effective January 1, 2009, the Company adopted accounting guidance for
the presentation and disclosures involving non-controlling interests.
/s/ EISNER LLP
New York, New York
March 30, 2010
F-2
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Balance Sheets
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
41,000 |
|
|
$ |
304,000 |
|
Prepaid expenses and other receivable |
|
|
111,000 |
|
|
|
102,000 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
152,000 |
|
|
|
406,000 |
|
|
|
|
|
|
|
|
Property and Equipment: |
|
|
|
|
|
|
|
|
Office equipment |
|
|
68,000 |
|
|
|
68,000 |
|
Shop equipment |
|
|
139,000 |
|
|
|
139,000 |
|
Leasehold improvements |
|
|
213,000 |
|
|
|
213,000 |
|
Transportation equipment |
|
|
106,000 |
|
|
|
106,000 |
|
|
|
|
|
|
|
|
|
|
|
526,000 |
|
|
|
526,000 |
|
Less accumulated depreciation and amortization |
|
|
299,000 |
|
|
|
237,000 |
|
|
|
|
|
|
|
|
Net property and equipment |
|
|
227,000 |
|
|
|
289,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
379,000 |
|
|
$ |
695,000 |
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Notes payable current |
|
$ |
20,000 |
|
|
$ |
15,000 |
|
Accounts payable |
|
|
255,000 |
|
|
|
177,000 |
|
Accrued liabilities |
|
|
451,000 |
|
|
|
755,000 |
|
Due to related party |
|
|
22,000 |
|
|
|
|
|
Deferred income |
|
|
828,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,576,000 |
|
|
|
947,000 |
|
|
|
|
|
|
|
|
|
|
Deferred rent expense |
|
|
29,000 |
|
|
|
39,000 |
|
Deferred income |
|
|
|
|
|
|
800,000 |
|
Notes payable long term |
|
|
9,000 |
|
|
|
29,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,614,000 |
|
|
|
1,815,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments, contingencies and other matters [Note I] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS CAPITAL DEFICIT |
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value, 100,000,000 shares
authorized 3,300,000 designated as Class A,
non-voting, convertible, cumulative dividend $.40
per share, per annum, 2009 and 2008: 655,851 and
707,101 shares issued and outstanding, respectively,
(liquidation preference 2009: $3,841,491 and 2008: $3,858,015) 300,000 designated as Class B,
non-voting, convertible, cumulative dividend $.50
per share, per annum, 2009 and 2008: 77,500 and
97,500 shares issued and outstanding, respectively,
(liquidation preference 2009: $552,795 and 2008: $634,497) |
|
|
7,000 |
|
|
|
8,000 |
|
Common stock, $.01 par value, 400,000,000 shares
authorized, 35,811,192 and 32,811,422 issued and
outstanding at December 31, 2009 and 2008,
respectively |
|
|
358,000 |
|
|
|
328,000 |
|
Additional paid-in capital |
|
|
51,613,000 |
|
|
|
48,485,000 |
|
Deficit accumulated during the development stage |
|
|
(53,213,000 |
) |
|
|
(49,941,000 |
) |
|
|
|
|
|
|
|
Total Torvec, Inc. Capital Deficit |
|
|
(1,235,000 |
) |
|
|
(1,120,000 |
) |
Non-controlling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital Deficit |
|
|
(1,235,000 |
) |
|
|
(1,120,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liability and Stockholders Capital Deficit |
|
$ |
379,000 |
|
|
$ |
695,000 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
F-3
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 25, |
|
|
|
|
|
|
|
|
|
|
|
1996 |
|
|
|
|
|
|
|
|
|
|
|
(Inception) |
|
|
|
Year Ended |
|
|
Through |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
175,000 |
|
|
$ |
121,000 |
|
|
$ |
422,000 |
|
Cost of goods sold |
|
|
90,000 |
|
|
|
105,000 |
|
|
|
315,000 |
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
85,000 |
|
|
|
16,000 |
|
|
|
107,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
520,000 |
|
|
|
535,000 |
|
|
|
15,855,000 |
|
General and administrative |
|
|
2,877,000 |
|
|
|
3,165,000 |
|
|
|
39,853,000 |
|
Asset impairment |
|
|
|
|
|
|
|
|
|
|
1,071,000 |
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(3,312,000 |
) |
|
|
(3,684,000 |
) |
|
|
(56,672,000 |
) |
Other income |
|
|
|
|
|
|
114,000 |
|
|
|
260,000 |
|
|
|
|
|
|
|
|
|
|
|
Loss
before reversal of liability and tax benefit |
|
|
(3,312,000 |
) |
|
|
(3,570,000 |
) |
|
|
(56,412,000 |
) |
Reversal of liability on cancellation of debt |
|
|
|
|
|
|
1,541,000 |
|
|
|
1,541,000 |
|
|
|
|
|
|
|
|
|
|
|
Net loss before income tax benefit |
|
|
(3,312,000 |
) |
|
|
(2,029,000 |
) |
|
|
(54,871,000 |
) |
Income tax benefit |
|
|
40,000 |
|
|
|
346,000 |
|
|
|
386,000 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(3,272,000 |
) |
|
|
(1,683,000 |
) |
|
|
(54,485,000 |
) |
Net loss attributable to non-controlling interests in
consolidated subsidiary |
|
|
|
|
|
|
|
|
|
|
1,272,000 |
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Torvec, Inc. |
|
|
(3,272,000 |
) |
|
|
(1,683,000 |
) |
|
|
(53,213,000 |
) |
Preferred stock beneficial conversion feature |
|
|
|
|
|
|
|
|
|
|
763,000 |
|
Preferred stock dividend |
|
|
229,000 |
|
|
|
307,000 |
|
|
|
1,405,000 |
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Torvec, Inc. common stockholders |
|
$ |
(3,501,000 |
) |
|
$ |
(1,990,000 |
) |
|
$ |
(55,381,000 |
) |
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss attributable to Torvec, Inc. common
stockholders per share |
|
$ |
(0.10 |
) |
|
$ |
(0.06 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of Torvec, Inc.
common stock basic and diluted |
|
|
34,035,000 |
|
|
|
32,196,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
F-4
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statements of Changes in Stockholders Equity (Capital Deficit)
For the Period from September 25, 1996 (Inception) through December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned |
|
|
Accumulated |
|
|
|
|
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Due |
|
|
Compensatory |
|
|
During the |
|
|
Total |
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
From |
|
|
Stock and |
|
|
Development |
|
|
Stockholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stockholders |
|
|
Options |
|
|
Stage |
|
|
Equity |
|
Issuance of shares
to founders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,464,400 |
|
|
$ |
165,000 |
|
|
$ |
(165,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0 |
|
Issuance of stock
for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,535,600 |
|
|
|
25,000 |
|
|
|
381,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
406,000 |
|
Sale of common
stock November
($1.50 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,600 |
|
|
|
1,000 |
|
|
|
96,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,000 |
|
Sale of common
stock December
($1.50 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
156,201 |
|
|
|
1,000 |
|
|
|
233,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234,000 |
|
Distribution to
founders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,000 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(489,000 |
) |
|
|
(489,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,220,801 |
|
|
|
192,000 |
|
|
|
518,000 |
|
|
|
|
|
|
|
|
|
|
|
(489,000 |
) |
|
|
221,000 |
|
Issuance of
compensatory stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000 |
|
|
|
10,000 |
|
|
|
1,490,000 |
|
|
|
|
|
|
$ |
(1,500,000 |
) |
|
|
|
|
|
|
0 |
|
Issuance of stock
for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000 |
|
|
|
|
|
|
|
18,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000 |
|
Sale of common
stock January
($1.50 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,266 |
|
|
|
1,000 |
|
|
|
86,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,000 |
|
Sale of common
stock February
($1.50 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,361 |
|
|
|
1,000 |
|
|
|
112,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,000 |
|
Sale of common
stock May ($1.50
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
|
|
|
|
45,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
Issuance of stock
for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
6,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000 |
|
Sale of common
stock June ($3.00
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,166 |
|
|
|
1,000 |
|
|
|
219,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
220,000 |
|
Sale of common
stock July ($3.00
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,335 |
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
Sale of common
stock August
($3.00 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,567 |
|
|
|
1,000 |
|
|
|
181,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
182,000 |
|
Sale of common
stock September
($3.00 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
Sale of common
stock October
($3.00 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000 |
|
|
|
|
|
|
|
21,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,000 |
|
Sale of common
stock November
($3.00 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
Sale of common
stock December
($3.00 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
1,000 |
|
|
|
299,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
Issuance of
compensatory
options to
consultants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234,000 |
|
|
|
|
|
|
|
(234,000 |
) |
|
|
|
|
|
|
0 |
|
Compensatory stock
and options earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
451,000 |
|
|
|
|
|
|
|
451,000 |
|
Distributions to
founders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(338,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(338,000 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(922,000 |
) |
|
|
(922,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,672,496 |
|
|
|
207,000 |
|
|
|
2,991,000 |
|
|
|
|
|
|
|
(1,283,000 |
) |
|
|
(1,411,000 |
) |
|
|
504,000 |
|
Issuance of stock
for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
|
|
|
|
3,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000 |
|
Sale of common
stock May 11 to
September 20 ($5.00
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112,620 |
|
|
|
1,000 |
|
|
|
562,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
563,000 |
|
Sale of common
stock
September 21 to
December 31 ($10.00
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,500 |
|
|
|
|
|
|
|
255,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255,000 |
|
Costs of offering |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60,000 |
) |
Compensatory stock
and options earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
578,000 |
|
|
|
|
|
|
|
578,000 |
|
Contribution of
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,122,000 |
) |
|
|
(2,122,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,811,616 |
|
|
|
208,000 |
|
|
|
3,766,000 |
|
|
|
|
|
|
|
(705,000 |
) |
|
|
(3,533,000 |
) |
|
|
(264,000 |
) |
Issuance of stock
for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,351 |
|
|
|
|
|
|
|
327,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
327,000 |
|
Sale of common
stock January 1
to August 9 ($10.00
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,670 |
|
|
|
1,000 |
|
|
|
806,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
807,000 |
|
Sale of common
stock August 10
to November 30
($5.00 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,500 |
|
|
|
1,000 |
|
|
|
422,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
423,000 |
|
Issuance of
compensatory
options to
consultants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,780,000 |
|
|
|
|
|
|
|
(2,780,000 |
) |
|
|
|
|
|
|
0 |
|
Common stock
issued- exercise of
options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,000 |
|
|
|
|
|
|
|
105,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,000 |
|
Compensatory stock
and options earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,050,000 |
|
|
|
|
|
|
|
3,050,000 |
|
Contribution of
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,788,000 |
) |
|
|
(4,788,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,043,137 |
|
|
$ |
210,000 |
|
|
|
8,221,000 |
|
|
|
|
|
|
$ |
(435,000 |
) |
|
|
(8,321,000 |
) |
|
|
(325,000 |
) |
See notes to consolidated financial statements
F-5
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statements of Changes in Stockholders Equity (Capital Deficit)
For the Period from September 25, 1996 (Inception) through December 31, 2009
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned |
|
|
Accumulated |
|
|
|
|
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Due |
|
|
Compensatory |
|
|
During the |
|
|
Total |
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
From |
|
|
Stock and |
|
|
Development |
|
|
Stockholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stockholders |
|
|
Options |
|
|
Stage |
|
|
Equity |
|
Issuance of stock for
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196,259 |
|
|
$ |
2,000 |
|
|
$ |
838,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
840,000 |
|
Sale of common stock
March 29 ($4.51 per
share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,321 |
|
|
|
|
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
Sale of common stock
June 23 ($3.50 per
share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
1,000 |
|
|
|
349,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,000 |
|
Acquisition of Ice
Surface Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,068,354 |
|
|
|
11,000 |
|
|
|
3,394,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,405,000 |
|
Proceeds from exercise
of put option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,735 |
|
|
|
1,000 |
|
|
|
108,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,000 |
|
Compensatory stock and
options earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
435,000 |
|
|
|
|
|
|
|
435,000 |
|
Contribution of
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(2,374,000 |
) |
|
|
(2,374,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31,
2000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,488,806 |
|
|
|
225,000 |
|
|
|
13,125,000 |
|
|
|
|
|
|
|
0 |
|
|
|
(10,695,000 |
) |
|
|
2,655,000 |
|
Issuance of stock for
liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126,667 |
|
|
|
1,000 |
|
|
|
664,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
665,000 |
|
Issuance of stock for
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
361,100 |
|
|
|
4,000 |
|
|
|
1,007,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,011,000 |
|
Issuance of option to
consultant for
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
398,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
398,000 |
|
Proceeds from exercise
of put option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,910 |
|
|
|
1,000 |
|
|
|
323,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
324,000 |
|
Contribution of
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,871,000 |
) |
|
|
(3,871,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31,
2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,078,483 |
|
|
|
231,000 |
|
|
|
15,532,000 |
|
|
|
|
|
|
|
0 |
|
|
|
(14,566,000 |
) |
|
|
1,197,000 |
|
Exercise of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,448 |
|
|
|
1,000 |
|
|
|
126,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127,000 |
|
Exercise of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
|
3,000 |
|
|
|
72,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
Loss on sale of
minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(232,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(232,000 |
) |
Sale of preferred
stock and warrant |
|
|
38,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142,000 |
|
Issuance of stock for
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,001,454 |
|
|
|
10,000 |
|
|
|
1,224,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,234,000 |
|
Issuance of options in
settlement of
liabilities and
consulting fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
653,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
653,000 |
|
Issuance of warrants
to chairman |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
690,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
690,000 |
|
Proceeds from exercise
of put option ($.90
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
440,000 |
|
|
|
5,000 |
|
|
|
391,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
396,000 |
|
Common stock issued in
exchange for loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,461 |
|
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
Sale of common stock
July ($1.45 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,897 |
|
|
|
|
|
|
|
68,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,000 |
|
Sale of common stock
August ($1.42 per
share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
211,265 |
|
|
|
2,000 |
|
|
|
298,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
Sale of common stock
September ($1.42 per
share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140,845 |
|
|
|
1,000 |
|
|
|
199,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
Sale of common stock
December ($.91 per
share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,890 |
|
|
|
1,000 |
|
|
|
99,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
Contribution of
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
Issuance of warrant
for financial services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000 |
|
Warrant issued in lieu
of compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
633,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
633,000 |
|
Issuance of shares in
settlement of
liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190,965 |
|
|
|
2,000 |
|
|
|
267,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
269,000 |
|
Compensatory stock
options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,000 |
|
Employees/Stockholders
Contribution of
services in subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
519,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
519,000 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,577,000 |
) |
|
|
(4,577,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31,
2002 |
|
|
38,500 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
25,629,708 |
|
|
$ |
256,000 |
|
|
$ |
20,786,000 |
|
|
|
|
|
|
$ |
0 |
|
|
$ |
(19,143,000 |
) |
|
$ |
1,899,000 |
|
See notes to consolidated financial statements
F-6
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statements of Changes in Stockholders Equity (Capital Deficit)
For the Period from September 25, 1996 (Inception) through December 31, 2009
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned |
|
|
Accumulated |
|
|
|
|
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Due |
|
|
Compensatory |
|
|
During the |
|
|
Total |
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
From |
|
|
Stock and |
|
|
Development |
|
|
Stockholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stockholders |
|
|
Options |
|
|
Stage |
|
|
Equity |
|
Sale of Common Stock March
($0.90 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111,112 |
|
|
|
1,000 |
|
|
$ |
99,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
100,000 |
|
Sale of Common Stock June
(0.80 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
|
3,000 |
|
|
|
197,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
Sale of Common Stock
September ($2.50 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000 |
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
Advance settled with Common
Stock October ($2.50 per
share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
Exercise of warrant for common
stock (December $0.50 per
share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
|
2,000 |
|
|
|
123,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000 |
|
Issuance of stock for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
753,824 |
|
|
|
8,000 |
|
|
|
842,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
850,000 |
|
Exercise of Warrants for $.01
per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,000 |
|
|
|
1,000 |
|
|
|
(1,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of Warrants for $.01
per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
1,000 |
|
|
|
(1,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of Warrants for $.01
per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of Warrants for $.01
per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless exercise of put option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
654,432 |
|
|
|
7,000 |
|
|
|
(7,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of Class A Preferred
Stock September ($4.00 per
share) |
|
|
5,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,000 |
|
Sale of Class A Preferred
Stock December ($4.00 per
share) |
|
|
10,112 |
|
|
$ |
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,000 |
|
Issuance of option for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,000 |
|
Issuance of options in
settlement of liabilities and
consulting fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
265,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
265,000 |
|
Contribution of services in
subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173,000 |
|
Adjustment for equity
issuances of subsidiary common
stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79,000 |
|
Class A Preferred stock issued |
|
|
2,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000 |
|
NET LOSS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,927,000 |
) |
|
|
(2,927,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2003 |
|
|
56,492 |
|
|
$ |
1,000 |
|
|
|
|
|
|
|
|
|
|
|
27,858,256 |
|
|
$ |
279,000 |
|
|
$ |
22,717,000 |
|
|
|
|
|
|
|
|
|
|
$ |
(22,070,000 |
) |
|
$ |
927,000 |
|
See notes to consolidated financial statements
F-7
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statements of Changes in Stockholders Equity (Capital Deficit)
For the Period from September 25, 1996 (Inception) through December 31, 2009
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned |
|
|
Accumulated |
|
|
|
|
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Due |
|
|
Compensatory |
|
|
During the |
|
|
Total |
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
From |
|
|
Stock and |
|
|
Development |
|
|
Stockholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stockholders |
|
|
Options |
|
|
Stage |
|
|
Equity |
|
Sale of Common
Stock June, 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
$ |
1,000 |
|
|
$ |
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
301,000 |
|
Issuance of common
stock for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
469,883 |
|
|
|
4,000 |
|
|
|
2,348,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,352,000 |
|
Sale of Class A
Preferred Stock
($4.00 per share)
March |
|
|
203,117 |
|
|
$ |
2,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
820,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
822,000 |
|
Sale of Class A
Preferred Stock
($4.00 per share)
April |
|
|
32,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,000 |
|
Conversion of
Preferred Stock
Class A |
|
|
(41,050 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Dividend
Class A
attributable to
converted shares |
|
|
8,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of Class B
Preferred Stock
($5.00 per share)
September |
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
Sale of Class B
Preferred Stock
($5.00 per share)
October |
|
|
|
|
|
|
|
|
|
|
22,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,000 |
|
Contribution of
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,000 |
|
Exercise of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
268,865 |
|
|
|
3,000 |
|
|
|
(2,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
Exercise of
consultants
warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
345,600 |
|
|
|
3,000 |
|
|
|
|
|
|
|
(3,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
warrants for
consulting services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,794,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,794,000 |
|
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,805,000 |
) |
|
|
(9,805,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2004 |
|
|
259,243 |
|
|
$ |
3,000 |
|
|
|
42,500 |
|
|
|
|
|
|
|
29,043,654 |
|
|
$ |
290,000 |
|
|
$ |
32,761,000 |
|
|
$ |
(3,000 |
) |
|
|
|
|
|
$ |
(31,875,000 |
) |
|
$ |
1,176,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
F-8
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statements of Changes in Stockholders Equity (Capital Deficit)
For the Period from September 25, 1996 (Inception) through December 31, 2009
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned |
|
|
Accumulated |
|
|
|
|
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Due |
|
|
Compensatory |
|
|
During the |
|
|
Total |
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
From |
|
|
Stock and |
|
|
Development |
|
|
Stockholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stockholders |
|
|
Options |
|
|
Stage |
|
|
Equity |
|
Issuance of common
stock for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
786,309 |
|
|
$ |
8,000 |
|
|
$ |
1,771,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,779,000 |
|
Sale of Class A
Preferred Stock ($4.00
per share) March |
|
|
47,500 |
|
|
$ |
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190,000 |
|
Sale of Class A
Preferred Stock ($4.00
per share) April/May |
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000 |
|
Sale of Class A
Preferred Stock ($4.00
per share) |
|
|
92,500 |
|
|
$ |
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
369,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
370,000 |
|
Sale of Class A
Preferred Stock ($4.00
per share)
October/November |
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000 |
|
Contribution of services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
Issuance of options for
consulting services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
247,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
247,000 |
|
Exercise of consultants
warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
161,000 |
|
|
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
Issuance of warrants
for consulting services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,261,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,261,000 |
|
Issuance of shares for
debt repayment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,667 |
|
|
|
|
|
|
|
28,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000 |
|
Shares issued for
future consulting
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
|
103,000 |
|
|
|
|
|
|
|
(103,000 |
) |
|
|
|
|
|
|
|
|
Receipt for common
stock par stock value
for amounts paid in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,000 |
) |
|
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclass of due from
Stockholder to other
receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,445,000 |
) |
|
|
(5,445,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2005 |
|
|
459,243 |
|
|
$ |
5,000 |
|
|
|
42,500 |
|
|
|
|
|
|
|
30,052,630 |
|
|
$ |
300,000 |
|
|
$ |
37,267,000 |
|
|
$ |
|
|
|
$ |
(103,000 |
) |
|
$ |
(37,320,000 |
) |
|
$ |
149,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
F-9
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statements of Changes in Stockholders Equity (Capital Deficit)
For the Period from September 25, 1996 (Inception) through December 31, 2009
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned |
|
|
Accumulated |
|
|
|
|
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Due |
|
|
Compensatory |
|
|
During the |
|
|
Total |
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
From |
|
|
Stock and |
|
|
Development |
|
|
Stockholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stockholders |
|
|
Options |
|
|
Stage |
|
|
Equity |
|
Issuance of common
stock for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
375,230 |
|
|
$ |
5,000 |
|
|
$ |
799,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
804,000 |
|
Sale of Class A
Preferred Stock
($4.00 per share)
January and
March 2006 |
|
|
58,250 |
|
|
$ |
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
232,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233,000 |
|
Sale of Class A
Preferred Stock
($4.00 per share)
May 2006 |
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
Sale of Class A
Preferred Stock
($4.00 per share)
July and
August 2006 |
|
|
78,750 |
|
|
$ |
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
314,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
315,000 |
|
Sale of Class A
Preferred Stock
($4.00 per share)
October and
November 2006 |
|
|
111,250 |
|
|
$ |
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
444,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
445,000 |
|
Sale of Class B
Preferred Stock
($5.00 per share) |
|
|
|
|
|
|
|
|
|
|
55,000 |
|
|
$ |
1,000 |
|
|
|
|
|
|
|
|
|
|
|
274,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275,000 |
|
Contribution of
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
Exercise of
consultants
warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
680,932 |
|
|
$ |
7,000 |
|
|
|
3,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
Issuance of
warrants for
consulting services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,614,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,614,000 |
|
Shares issued for
consulting services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,000 |
|
|
$ |
1,000 |
|
|
|
420,000 |
|
|
|
|
|
|
|
103,000 |
|
|
|
|
|
|
|
524,000 |
|
Issuance of Common
Stock to Placement
agent for finders
fee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,727,000 |
) |
|
|
(7,727,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2006 |
|
|
732,493 |
|
|
$ |
8,000 |
|
|
|
97,500 |
|
|
$ |
1,000 |
|
|
|
31,307,792 |
|
|
$ |
313,000 |
|
|
$ |
43,767,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
(45,047,000 |
) |
|
$ |
(958,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
F-10
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statements of Changes in Stockholders Equity (Capital Deficit)
For the Period from September 25, 1996 (Inception) through December 31, 2009
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned |
|
|
Accumulated |
|
|
Total |
|
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Due |
|
|
Compensatory |
|
|
During the |
|
|
Stockholders |
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
From |
|
|
Stock and |
|
|
Development |
|
|
Equity |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stockholders |
|
|
Options |
|
|
Stage |
|
|
(Capital Deficit) |
|
Contribution of
services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
Exercise of Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,250 |
|
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
Shares Issued for
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
302,003 |
|
|
|
2,000 |
|
|
|
1,190,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,192,000 |
|
Warrants Issued for
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
650,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
650,000 |
|
Stock Issued for
Purchase of
Variable Gear, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
19,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,000 |
|
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,211,000 |
) |
|
|
(3,211,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2007 |
|
|
732,493 |
|
|
$ |
8,000 |
|
|
|
97,500 |
|
|
$ |
1,000 |
|
|
|
31,640,045 |
|
|
$ |
316,000 |
|
|
$ |
45,926,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
(48,258,000 |
) |
|
$ |
(2,007,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned |
|
|
Accumulated |
|
|
Total |
|
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Due |
|
|
Compensatory |
|
|
During the |
|
|
Stockholders |
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
From |
|
|
Stock and |
|
|
Development |
|
|
Equity |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stockholders |
|
|
Options |
|
|
Stage |
|
|
(Capital Deficit) |
|
Conversion |
|
|
(32,305 |
) |
|
|
(1,000 |
) |
|
|
|
|
|
|
|
|
|
|
32,305 |
|
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued for
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
875,390 |
|
|
|
7,000 |
|
|
|
1,730,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,737,000 |
|
Shares Issued as
Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147,757 |
|
|
|
3,000 |
|
|
|
331,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
334,000 |
|
Dividend |
|
|
6,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Common
Stock June
($2.75 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,364 |
|
|
|
1,000 |
|
|
|
99,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
Issuance of Common
Stock September
($1.50 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
Issuance of Common
Stock October
($1.50 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
|
|
|
|
|
|
68,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,000 |
|
Warrants Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants Issued for
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
249,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
249,000 |
|
Shares Issued for
Commercializing
Event |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,061 |
|
|
|
|
|
|
|
36,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,000 |
|
Contributed Capital
Ford Truck |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000 |
|
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,683,000 |
) |
|
|
(1,683,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2008 |
|
|
707,101 |
|
|
$ |
7,000 |
|
|
|
97,500 |
|
|
$ |
1,000 |
|
|
|
32,811,422 |
|
|
$ |
328,000 |
|
|
$ |
48,485,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
(49,941,000 |
) |
|
$ |
(1,120,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
F-11
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statements of Changes in Stockholders Equity (Capital Deficit)
For the Period from September 25, 1996 (Inception) through December 31, 2009
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned |
|
|
Accumulated |
|
|
|
|
|
|
Total |
|
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Due |
|
|
Compensatory |
|
|
During the |
|
|
Non- |
|
|
Stockholders |
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
From |
|
|
Stock and |
|
|
Development |
|
|
controlling |
|
|
Equity |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stockholders |
|
|
Options |
|
|
Stage |
|
|
Interest |
|
|
(Capital Deficit) |
|
Conversion
Preferred A |
|
|
(51,250 |
) |
|
|
(1,000 |
) |
|
|
|
|
|
|
|
|
|
|
51,250 |
|
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of
Preferred A
Dividend in Common
Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,965 |
|
|
|
1,000 |
|
|
|
(1,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
Preferred B |
|
|
|
|
|
|
|
|
|
|
(20,000 |
) |
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of
Preferred B
Dividend in Common
Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Shares Issued for
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,861,475 |
|
|
|
18,000 |
|
|
|
1,281,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,299,000 |
|
Shares Issued as
Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
377,152 |
|
|
|
4,000 |
|
|
|
286,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
290,000 |
|
Issuance of common
stock April ($0.78
per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,103 |
|
|
|
1,000 |
|
|
|
49,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
Issuance of common
stock June ($0.67
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
Issuance of common
stock July ($0.60
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,665 |
|
|
|
1,000 |
|
|
|
51,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,000 |
|
Issuance of common
stock July ($0.51
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,216 |
|
|
|
1,000 |
|
|
|
19,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
Issuance of common
stock July ($0.76
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,200 |
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
Issuance of common
stock August ($0.60
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
Issuance of common
stock August ($0.72
per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,961 |
|
|
|
1,000 |
|
|
|
29,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
Issuance of common
stock September
($0.70 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,142 |
|
|
|
|
|
|
|
12,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000 |
|
Issuance of common
stock September
($0.77 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,944 |
|
|
|
|
|
|
|
6,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000 |
|
Issuance of common
stock October
($0.52 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
192,308 |
|
|
|
2,000 |
|
|
|
98,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
Issuance of common
stock October
($0.63 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
13,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000 |
|
Issuance of common
stock December
($0.40 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,944 |
|
|
|
|
|
|
|
7,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000 |
|
Warrants Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
restricted share
for services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,173 |
|
|
|
|
|
|
|
19,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,000 |
|
Shares Issued for
Commercializing
Event |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,669 |
|
|
|
|
|
|
|
14,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000 |
|
Contributed Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,200,000 |
|
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,272,000 |
) |
|
|
|
|
|
|
(3,272,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2009 |
|
|
655,851 |
|
|
$ |
6,000 |
|
|
|
77,500 |
|
|
$ |
1,000 |
|
|
|
35,811,192 |
|
|
$ |
358,000 |
|
|
$ |
51,613,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
(53,213,000 |
) |
|
$ |
0 |
|
|
$ |
(1,235,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
F-12
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 25, |
|
|
|
|
|
|
|
|
|
|
|
1996 |
|
|
|
|
|
|
|
|
|
|
|
(Inception) |
|
|
|
Year Ended |
|
|
Through |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,272,000 |
) |
|
$ |
(1,683,000 |
) |
|
$ |
(53,213,000 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss attributable to non-controlling interests in consolidated subsidiary |
|
|
|
|
|
|
|
|
|
|
(1,272,000 |
) |
Depreciation and amortization |
|
|
62,000 |
|
|
|
67,000 |
|
|
|
2,512,000 |
|
Change in Accrued Payroll Taxes |
|
|
68,000 |
|
|
|
109,000 |
|
|
|
177,000 |
|
Loss on impairment |
|
|
|
|
|
|
|
|
|
|
1,071,000 |
|
Impairment of goodwill |
|
|
|
|
|
|
|
|
|
|
19,000 |
|
Gain on sale of fixed assets |
|
|
|
|
|
|
|
|
|
|
(10,000 |
) |
Compensation expense attributable to common stock in Subsidiary |
|
|
|
|
|
|
|
|
|
|
619,000 |
|
Common stock issued for services |
|
|
1,318,000 |
|
|
|
1,498,000 |
|
|
|
14,512,000 |
|
Warrants issued for services |
|
|
|
|
|
|
249,000 |
|
|
|
249,000 |
|
Shares Issued for future consulting services |
|
|
|
|
|
|
|
|
|
|
103,000 |
|
Contribution to Capital, Ford Truck |
|
|
|
|
|
|
16,000 |
|
|
|
16,000 |
|
Stockholder contribution of services |
|
|
1,200,000 |
|
|
|
|
|
|
|
3,609,000 |
|
Common stock issued in connection with commercializing event planning |
|
|
14,000 |
|
|
|
36,000 |
|
|
|
50,000 |
|
Reversal of Liability |
|
|
|
|
|
|
(1,541,000 |
) |
|
|
(1,541,000 |
) |
Compensatory common stock |
|
|
290,000 |
|
|
|
334,000 |
|
|
|
17,876,000 |
|
Changes to: |
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other receivables |
|
|
(9,000 |
) |
|
|
(59,000 |
) |
|
|
50,000 |
|
Deferred revenue |
|
|
28,000 |
|
|
|
209,000 |
|
|
|
737,000 |
|
Deferred rent expense |
|
|
(10,000 |
) |
|
|
39,000 |
|
|
|
29,000 |
|
Accounts payable and accrued expenses |
|
|
306,000 |
|
|
|
65,000 |
|
|
|
4,244,000 |
|
Due to related party |
|
|
22,000 |
|
|
|
|
|
|
|
22,000 |
|
Deferred Compensation and Other |
|
|
(600,000 |
) |
|
|
600,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(583,000 |
) |
|
|
(61,000 |
) |
|
|
(10,141,000 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of equipment |
|
|
|
|
|
|
(11,000 |
) |
|
|
(360,000 |
) |
Cost of acquisition |
|
|
|
|
|
|
|
|
|
|
(16,000 |
) |
Proceeds from sale of fixed asset |
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
|
|
|
|
(11,000 |
) |
|
|
(366,000 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from sales of common stock and upon exercise of options and warrants |
|
|
335,000 |
|
|
|
198,000 |
|
|
|
7,034,000 |
|
Net proceeds from sales of preferred stock |
|
|
|
|
|
|
|
|
|
|
3,537,000 |
|
Net proceeds from sale of subsidiary stock |
|
|
|
|
|
|
|
|
|
|
234,000 |
|
Proceeds from loan |
|
|
|
|
|
|
|
|
|
|
85,000 |
|
Repayment of loan |
|
|
(15,000 |
) |
|
|
(14,000 |
) |
|
|
(80,000 |
) |
Proceeds from loan |
|
|
|
|
|
|
|
|
|
|
250,000 |
|
Repayment of officer loan |
|
|
|
|
|
|
|
|
|
|
(147,000 |
) |
Distributions |
|
|
|
|
|
|
|
|
|
|
(365,000 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
320,000 |
|
|
|
184,000 |
|
|
|
10,548,000 |
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(263,000 |
) |
|
|
112,000 |
|
|
|
41,000 |
|
Cash and cash equivalents at beginning of period |
|
|
304,000 |
|
|
|
192,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
41,000 |
|
|
$ |
304,000 |
|
|
$ |
41,000 |
|
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for license |
|
$ |
|
|
|
$ |
|
|
|
$ |
3,405,000 |
|
Issuance of common stock, warrant and options in settlement of liabilities,
except notes payable |
|
|
|
|
|
|
|
|
|
|
2,907,000 |
|
Notes payable exchanged for common stock |
|
|
|
|
|
|
|
|
|
|
50,000 |
|
Loss on exchange of minority interest |
|
|
|
|
|
|
|
|
|
|
232,000 |
|
Advance settled with common stock |
|
|
|
|
|
|
|
|
|
|
25,000 |
|
Preferred dividends paid in preferred stock |
|
|
|
|
|
|
7,000 |
|
|
|
39,000 |
|
Shares issued for future consulting services |
|
|
|
|
|
|
|
|
|
|
103,000 |
|
Issuance of common stock for a finders fee |
|
|
|
|
|
|
|
|
|
|
225,000 |
|
Advance from stockholder |
|
|
|
|
|
|
|
|
|
|
250,000 |
|
Issuance of common stock, leasehold improvement |
|
|
|
|
|
|
64,000 |
|
|
|
166,000 |
|
Shares issued for acquisition of Variable Gear |
|
|
|
|
|
|
|
|
|
|
19,000 |
|
Contribution of FTV Ford Truck |
|
|
|
|
|
|
16,000 |
|
|
|
16,000 |
|
ICE payable netted against receivable |
|
|
|
|
|
|
91,000 |
|
|
|
91,000 |
|
Common stock issued in settlement of director fee payable |
|
|
63,000 |
|
|
|
58,000 |
|
|
|
121,000 |
|
Common stock issued in settlement of Patent expense |
|
|
|
|
|
|
117,000 |
|
|
|
117,000 |
|
Issuance of common stock as payment for Preferred A and B dividends |
|
|
76,883 |
|
|
|
|
|
|
|
76,683 |
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
3,000 |
|
|
|
4,000 |
|
|
|
27,000 |
|
Taxes |
|
|
|
|
|
|
|
|
|
|
1,000 |
|
See notes to consolidated financial statements
F-13
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2009
Note A The Company and Basis of Presentation
Torvec, Inc. (the company) was incorporated as a New York State business corporation in September
1996. The company, which is in the development stage, has developed technology for use in
automotive applications. In September, 1996, the company acquired numerous patents, inventions and
know-how (the technology) contributed by Vernon E. Gleasman, James Y. Gleasman and Keith E.
Gleasman (theGleasmans). The company has developed, designed and intends to commercialize its
infinitely variable transmissions, its pumps/motors, its IsoTorque®
differential, its constant velocity joint and the substructure and components of its full terrain
vehicle. As consideration for this contributed technology, the company issued 16,474,400 shares of
common stock and paid $365,000 to the Gleasmans. In September, 1996, the company issued an
additional 2,535,000 shares of common stock (valued at $406,000) to individuals as consideration
for the cost of services and facilities provided by them in assisting with the development of the
technology.
On November 29, 2000, the company acquired Ice Surface Development, Inc. (Ice) which had been
incorporated in May 2000 for 1,068,354 shares of common stock valued at approximately $3,405,000.
The acquisition was accounted for under the purchase method. On March 31, 2002, the company granted
to three former officers of the company 28% of Ice in exchange for previously granted fully vested
options. The exchange was valued at $618,000 and the carrying portion of the companys investment
deemed sold of $850,000 is reflected as a reduction of additional paid-in capital in capital
deficit.
Effective June 15, 2007, Ice Surface Development assigned the license to an unrelated company, Ice
Engineering, LLC, in exchange for Ice Engineerings agreement to pay the shareholders of Ice
Surface Development an annual royalty equal to 5% of the annual gross revenues generated by the
license and its agreement to assume the obligations to Dartmouth College under the license. See
Note C.
For the period from September 1996 (inception) through December 31, 2009, the company has
accumulated a deficit of $53,213,000, and at December 31, 2009 has a working capital deficit of
$1,424,000 and stockholders capital deficit of $1,235,000. The company has been dependent upon
equity financing and advances from stockholders to meet its obligations and sustain operations. The
companys efforts have been principally devoted to the development of its technologies and
commercializing its products. Management believes that based upon its current cash position, its
budget for its business operations through December 31, 2010 and collectability of its receivables
in the ordinary course of business and the settlement of its litigation in January 2010 (proceeds
of $1,100,000), the company will be able to continue operations through December 31, 2010. However,
if its cash projections are less than expected, the Company may need to downsize operations, incur
debt or raise additional capital. There can be no assurance, however, that the Company will be
successful in raising additional capital or incur debt when needed on terms acceptable to the
Company.
The companys ability to continue as a going concern is ultimately dependent upon achieving
profitable operations and generating sufficient cash flows from operations to continue to meet its
future obligations.
Note B Summary of Significant Accounting Policies
[1] Consolidation:
The financial statements include the accounts of the company, its majority-owned subsidiary,
Ice Surface Development, Inc. (56% owned at December 31, 2009 and 2008), and its wholly-owned
subsidiaries Iso-Torque Corporation, IVT Diesel Corp. and Variable Gear LLC. Effective January
1, 2009, the Company adopted the accounting guidance in connection with the presentation of
non-controlling interests in Ice Surface Development Inc. All material intercompany transactions
and account balances have been eliminated in consolidation.
[2] Cash and Cash Equivalents
Cash and cash equivalents include time deposits, certificates of deposit, and all highly
liquid debt instruments with original maturities of three months or less. The company maintains
cash and cash equivalents at financial institutions which periodically may exceed federally
insured amounts.
F-14
[3] Property and Equipment:
Equipment, including a prototype vehicle, is stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated useful lives of the
assets which range from three to seven years. Leasehold improvements are being amortized over
shorter of lease term or useful life.
[4] Research and Development and Patents:
Research and development costs and patent expenses are charged to operations as incurred.
Research and development includes amortization of the Ice technology, purchase of parts,
depreciation and consulting services. Depreciation expense in each of the years ended December
31, 2009 and 2008 that was charged to research and development was $19,000 and $67,000
respectively.
Patent costs for the year ended December 31, 2009 and 2008 amounted to $300,000 and
$114,000, respectively, and are included General and Administrative expenses.
[5] License:
The company follows ASC 300-10-35, Accounting for the Impairment or Disposal of Long-Lived
Assets. Whenever events or circumstances indicate, the companys long-lived assets, including
intangible assets with finite useful lives, are tested for impairment by using the estimated
future cash flows directly associated with, and that are expected to arise as a direct result of,
the use of the assets. If the carrying amount exceeds the estimated undiscounted cash flows, an
impairment may be indicated. The carrying amount is then compared to the estimated discounted
cash flows, and if there is an excess, such amount is recorded as an impairment.
In accordance with ASC 300-10-35, management determined that events and circumstances
indicated that the carrying amount of the license for the companys Ice technology exceeded the
estimated undiscounted cash flows to be generated by the license. Based upon such determination,
management compared the carrying amount of the license as of December 31, 2006 to the estimated
discounted cash flows to be generated by the license and recorded such excess as an impairment.
Management has concluded that the carrying amount of its Dartmouth College license as of December
31, 2006 ($1,071,000) was impaired in accordance with ASC 300-10-35. (See Note C.)
Effective June 15, 2007, the company assigned the license to Ice Engineering, LLC in
exchange for Ice Engineerings agreement to pay the shareholders of the companys majority-owned
subsidiary, Ice Surface Development, Inc., an annual royalty equal to 5% of the annual gross
revenues generated by the license and its agreement to assume all of the obligations to Dartmouth
College under the license. (See Note C.)
[6] Use of Estimates:
The preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and expenses during
the reporting period. Such estimates are used in valuing the useful lives of its intangible
assets and the future realizable value of such assets. These estimates are subject to a high
degree of judgment and potential change. Actual results could differ from those estimates.
[7] Loss per Common Share:
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC)
260-10 ( Previously known as: FASB Statement 128, Earnings Per Share) requires the
presentation of basic earnings per share, which is based on common stock outstanding, and
dilutive earnings per share, which gives effect to options, warrants and convertible
securities in periods when they are dilutive. At December 31, 2009 and 2008, the company
excluded 2,503,949 and 3,098,899 potential common shares, respectively, relating to
convertible preferred stock outstanding, options and warrants from its diluted net loss per
common share calculation because they are anti-dilutive. The company also excluded 625,000
warrants at December 31, 2009 and 2008 as the conditions for their vesting were not yet
satisfied.
F-15
[8] Fair Value of Financial Instruments:
The carrying amount of cash, prepaid expenses, accounts payable, and accrued expenses
approximates their fair value due to the short maturity of those instruments.
[9] Stock-based Compensation:
The Stock Options Plan was terminated as of May 27, 2008 as to the grant of additional
options. 641,848 previously issued and outstanding options remain exercisable in accordance with
the terms of the options.
Effective January 1, 2006, we adopted ASC 718-10 and ASC 505-50 (Previously known as: FASB
Statement 123(R) Share Based Payment.) We elected to use the modified prospective transition
method; therefore, prior period results were not restated. Prior to the adoption of SFAS 123(R),
stock-based compensation expense related to stock options was not recognized in the results of
operations if the exercise price was at least equal to the market value of the common stock on
the grant date, in accordance with Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees.
ASC 718-10 requires all share-based payments to employees, including grants of employee
stock options, to be recognized as compensation expense over the service period (generally the
vesting period) in the consolidated financial statements based on their fair values on the grant
date. Under the modified prospective method, awards that were granted, modified, or settled on
or after January 1, 2006 are measured and accounted for in accordance with ASC 718-10. Unvested
equity-classified awards that were granted prior to January 1, 2006 will continue to be
accounted for in accordance with ASC 718-10, except that the grant date fair value of all awards
are recognized in the results of operations over the remaining vesting periods. The impact of
forfeitures that may occur prior to vesting is also estimated and considered in the amount
recognized. In addition, the realization of tax benefits in excess of amounts recognized for
financial reporting purposes will be recognized as a financing activity in accordance with ASC
718-10.
No tax benefits were attributed to the stock-based compensation expense because a valuation
allowance was maintained for substantially all net deferred tax assets. We elected to adopt the
alternative method of calculating the historical pool of windfall tax benefits as permitted by
ASC 718-10-65 (Previously known as: FASB Staff Position (FSP) No. SFAS 123(R)-c, Transition
Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.) This is a
simplified method to determine the pool of windfall tax benefits that is used in determining the
tax effects of stock compensation in the results of operations and cash flow reporting for
awards that were outstanding as of the adoption of ASC 718-10.
[10] Revenue Recognition:
The companys terms provided that customers are obligated to pay for products sold to
them within a specified number of days from the date that title to the products is
transferred to the customers. The companys standard terms are typically net 30 days. The
company recognizes revenue when transfer of title occurs, risk of ownership passes to a
customer at the time of shipment or delivery depending on the terms of the agreement with a
particular customer and collection is reasonably assured. The sale price of the companys
products is substantially fixed and determinable at the date of the sale based upon purchase
orders generated by a customer and accepted by the company.
[11] Recent Accounting Pronouncements:
In June 2009, the FASB issued under ASC Topic 105 which establishes the Accounting Standards
Codification (ASC; the Codification) as the source of authoritative accounting
principles recognized by the FASB to be applied to nongovernmental entities in the
preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America (GAAP). ASC Topic 105 is effective for financial
statements issued for interim and annual periods ending after September 15, 2009. Rules and
interpretative releases of the Securities and Exchange Commission (SEC) under federal
securities laws are authoritative GAAP for SEC Registrants. Upon adoption of this guidance
under ASC Topic 105, the Codification superseded all then-existing non-SEC accounting and
reporting standards. All other non-grandfathered non-SEC accounting literature not included
in the Codification became non-authoritative.
F-16
In December 2007, the FASB issued ASC 805 (Prior authoritative literature: SFAS No. 141
(revised 2007), Business Combinations, which replaces FASB Statement No. 141). ASC 805-10
establishes principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed, any non
controlling interest in the acquiree and the goodwill acquired. The Statement also
establishes disclosure requirements which will enable users to evaluate the nature and
financial effects of the business combination. ASC 805-10 will change how business
combinations are accounted for and will impact financial statements both on the acquisition
date and in subsequent periods. In April 2009, the FASB issued ASC 805-10-05 (Previously
known as: Statement No. 141(R)-1 Accounting for Assets Acquired and Liabilities Assumed in
a Business Combination That Arises from Contingencies). For business combinations, the
standard requires the acquirer to recognize at fair value an asset acquired or liability
assumed from a contingency if the acquisition date fair value can be determined during the
measurement period. The adoption of FASB ASC 805-10 did not have an impact on the Companys
financial position and results of operations although it may have a material impact on
accounting for business combinations in the future which can not currently be determined.
In December, 2007, the FASB issued ASC 810 (Previously known as: FASB Statement No. 160,
Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No.
51). The standard changes the accounting for noncontrolling (minority) interests in
consolidated financial statements including the requirements to classify noncontrolling
interests as a component of consolidated stockholders equity, and replace references
minority interest with noncontrolling interests. ASC 810 also requires the amount of
consolidated net loss attributable to the parent and the noncontrolling interest be clearly
identified and presented on the face of the consolidated statements of operations and gain
or loss on the deconsolidation of the subsidiaries be measured at fair value. The
presentation and disclosure requirement of ASC were applied retrospectively.
In 2008, the FASB issued ASC 815 (Previously known as: EITF 07-05, Determining whether an
Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock). ASC 815 provides
guidance on determining what types of instruments or embedded features in an instrument held
by a reporting entity can be considered indexed to its own stock for the purpose of
evaluating the first criteria of the scope exception in ASC 810-10-15 (Prior authoritative
literature: paragraph 11(a) of SFAS 133). The adoption of ASC 815 effective January 1, 2009
did not have any impact on the Companys financial statements.
In April 2009, the FASB issued ASC 825 (Previously known as: FASB Staff Position No. FAS
107-1) and ASC 270 (Prior authoritative literature: APB 28-1, Interim Disclosures about
Fair Value of Financial Instruments,) which requires disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies as well as
in annual financial statements. This Staff Position is effective for interim reporting
periods ending after June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009. The Company adopted this pronouncement as of July 1, 2009 and it did not
have a material impact on the financial statements.
In May 2009, the FASB issued ASC 855 (SFAS No. 165), Subsequent Events which establishes
general standards for accounting for and disclosure of events that occur after the balance
sheet date but before financial statements are issued. In February 2010, FASB issued ASU
2010-09 Subsequent Event (Topic 855) Amendments to Certain Recognition and Disclosure
Requirements. ASU 2010-09 removes the requirement for an SEC filer to disclose a date in
both issued and revised financial statements. All of the amendments in ASU 2010-09 are
effective upon issuance of the final ASU, except for the use of the issued date for conduit
debt obligors.
NOTE C LICENSE FROM THE TRUSTEES OF DARTMOUTH COLLEGE
On November 28, 2000, the companys majority-owned subsidiary, Ice Surface Development LLC entered
into a 20-year exclusive license with the Trustees of Dartmouth College for land-based applications
to a novel ice adhesion modification system developed by Dr. Victor Petrenko at Dartmouths Thayer
School of Engineering. Under the license agreement the company made a single payment of $140,000 in
2000 for sponsored research. The license agreement provided for a royalty of 3.5% based on the
value of net sales of licensed product with minimum annual payments of $10,000 for the first two
years, $15,000 for the third year and $25,000 per year through 2021. In addition, the agreement
provided for the payment of 50% of sub-license fee income.
Expense relating to the license agreement totaled $160,000 for the fiscal years 2005 through 2007.
While in managements opinion, the carrying value of the license had been impaired as of and for
the year ended December 31, 2006, the companys obligations under the license remained in effect.
Effective June 15, 2007, Ice Surface assigned the license to an unrelated company, Ice Engineering,
LLC in exchange for Ice Engineerings agreement to pay the shareholders of Ice Surface an annual
royalty equal to 5% of the annual gross revenues generated by the license and its agreement to
assume the obligations to Dartmouth under the license.
F-17
Separately, Ice Engineering, LLC agreed to reimburse approximately $3,500,000 of acquisition and
maintenance costs expended by the company in connection with the ice technology. Pursuant to the
reimbursement agreement, the company received $500,000 on June 15, 2007. Under the license
assignment agreement, the $3,000,000 balance is to be paid at the rate of $300,000 per quarter
commencing March 1, 2008, less approximately $91,000 in fees payable to Dartmouth College accrued
through June 14, 2007 to be deducted from the first quarterly reimbursement amount. The company
received the first installment of $209,000 due March 1, 2008 on April 3, 2008 and did not receive
the balance of the installments.
On October 31, 2008, the company commenced an action in New York Supreme Court, County of New York,
Commercial Division against Ice Engineering, LLC seeking the total balance owed by Ice Engineering
to the company pursuant to the assignment agreement.
On January 27, 2010, the company and Ice Engineering settled this litigation. Under the settlement
agreement, the companys assignment of the ice technology license is made permanent; the company
elected to forego its right to royalties and agreed to receive $1,100,000, with $300,000 paid to
the company by Ice Engineering on January 27, 2010 and $800,000 paid to the company by Ice
Engineering by February 26, 2010.
The company has accounted for the receipt of the reimbursement proceeds as a recovery of costs
since such amounts represent an initial payment and is subject to additional installments and when
payments received exceed the cost accumulated, revenue will be recorded under the cost recovery
approach to the extent that the proceeds exceed the basis.
The company will recognize in the first quarter 2010 the $1,100,000 received in 2010 in regard the
settlement of the litigation. The company will also recognize in 2010 the $800,000 previously
recorded as deferred income in connection with the original contract for the license. The company
has concluded that the settlement of the outstanding litigation was a subsequent event that will be
recognized in the first quarter of 2010.
NOTE D RELATED PARTY TRANSACTIONS
[1] Effective January 1, 2008, the board of directors instituted a
compensation plan for James and Keith Gleasman by which the
company would compensate each of them for services performed and
inventions and know-how transferred to the company at the rate of
$300,000 per year. Actual payment of this compensation, or any
portion thereof, was conditioned upon a board of director
determination that the company had the requisite cash, after the
complete funding of all ongoing company projects, to make
payment.
The company did not have the requisite cash available to pay the
Gleasmans compensation under this arrangement from January 1,
2008 through August 17, 2009, the date on which each of the
Gleasmans waived all of his rights and interest in and to the
board-created compensation plan, including all of his rights and
interest in and to the amount(s) under the plan accrued to such
date. As a result of such waiver, of the $942,000 accrued under
the plan at June 30, 2009, $900,000 was reclassified to equity as
a contribution of services and $42,000 accrued under the plan for
payroll taxes was recorded as a reduction to general and
administrative expenses in the quarter ended June 30, 2009.
For periods for which there is no compensation plan, the company
is required to record the estimated value of each of the
Gleasmans services rendered to the company (estimated at
$300,000 each per annum) as a contribution of services under
generally accepted accounting principles applicable to the
company and is required under the same accounting principles to
allocate the amount of such contribution between research and
development expenses on the one hand and general and
administrative on the other hand. For the year ended December 31,
2009, the company recorded $100,000 to research and development
expense and $200,000 to general and administrative expense, based
upon managements estimate.
Effective March 14, 2010, James Gleasman retired as the companys
chief executive officer, interim chief financial officer and as a
member of the board of directors.
During the year ended December 31, 2009, James Gleasman loaned
the company $22,000 for compensation to the engineers. The
related party loan as of December 31, 2009 is $22,000.
[2] During the years ended December 31, 2009 and 2008, the company
paid in business consultant common shares or cash $94,700 and
$93,600 respectively, to a member of the Gleasman family for
administrative, technological and engineering consulting
services. Management believes this compensation is reasonable.
F-18
[3] During the years ended December 31, 2009 and 2008, the company
paid in business consultant common shares or cash $87,700 and
$91,290 to a family member of its general counsel for engineering
services rendered to the company. Management believes this
compensation is reasonable.
[4] On September 14, 2007, the company moved its executive offices
from Pittsford, New York to Rochester, New York, which includes
both a manufacturing and executive office facility. The Rochester
facility is owned by a partnership, in which Asher J. Flaum, a
company director is a partner. On April 28, 2008, the companys
board of directors approved the terms of a lease and such lease
was executed on April 29, 2008. (See Note I 3).
[5] On June 29, 2000, the company granted an exclusive world-wide
license of all its automotive technologies to Variable Gear, LLC
for the aeronautical and marine markets for $150,000 cash. The
company recorded the receipt of the $150,000 as deferred revenue
to be recognized when all conditions for earning such fees are
complete. At the time of its formation and through June 6, 2007
when his interest was purchased, Robert C. Horton, a company
shareholder, owned 51% of Variable Gear, LLC. On June 6, 2007,
the company purchased Mr. Hortons entire interest in Variable
Gear for 5,000 shares of common stock valued at $19,250. The
company recognized the deferred revenue of $150,000 as other
income and recorded an impairment of the goodwill of $19,250,
since there were no operations of the entity since inception.
[6] On August 18, 2006, the company granted 400,000 nonqualified
common stock warrants valued at approximately $1,237,000 to a
director of the company for consulting services. The warrants are
immediately exercisable at $3.27 per common share for a period of
ten years.
[7] On June 19, 2006, the company awarded an aggregate 360,000
nonqualified common stock warrants with no expiration date,
valued at approximately $629,000 to a director for additional
services rendered by such director as chairman of the boards
executive committee during 2006.
[8] On April 28, 2008, the board of directors approved a one-time
payment to its chairman of the governance and compensation
committee of $46,000 for special services rendered in connection
with required compliance under the Sarbanes-Oxley Act. This
amount was paid by the issuance of 19,167 common shares valued as
of the closing price on April 28, 2008. The company charged
$46,000 to operations in connection with such services.
NOTE E INCOME TAXES
The Company accounts for income taxes using the asset and liability method, the objective of which
is to establish deferred tax assets and liabilities for the temporary differences between the
financial reporting and the tax bases of the Companys assets and liabilities at enacted tax rates
expected to be in effect when such amounts are realized or settled. A valuation allowance related
to deferred tax assets is recorded when it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
At December 31, 2009, we have approximately $26,049,000 of net operating loss carryforwards to
offset future taxable income, expiring 2010 through 2027, and $19,932,000 of certain operating
expenses which have been deferred as start up costs under Section 195 of the Internal Revenue Code
for federal income tax purposes, subject to limitations for alternative minimum tax. Start-up
costs are amortized over 15 years.
The difference between income taxes at the statutory federal income tax rate and income taxes
reported in the statements of operations are attributable to the following:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Income tax benefit at the federal statutory rate |
|
|
(1,087,000 |
) |
|
|
(729,000 |
) |
State income taxes, net of effect on federal taxes |
|
|
(103,000 |
) |
|
|
(176,000 |
) |
Reversal of ICE liability |
|
|
|
|
|
|
(524,000 |
) |
New York State tax credit |
|
|
14,000 |
|
|
|
117,000 |
|
Refundable tax credits |
|
|
(40,000 |
) |
|
|
(346,000 |
) |
Contribution of capital shareholders services |
|
|
408,000 |
|
|
|
|
|
Other |
|
|
|
|
|
|
(7,000 |
) |
Increase in valuation allowance |
|
|
768,000 |
|
|
|
1,319,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income tax |
|
|
(40,000 |
) |
|
|
(346,000 |
) |
|
|
|
|
|
|
|
F-19
The deferred tax asset at December 31, 2009 and 2008 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Net operating loss carryforward |
|
$ |
10,145,000 |
|
|
$ |
8,843,000 |
|
|
|
|
|
|
|
|
|
|
Deferred start up costs |
|
|
7,829,000 |
|
|
|
8,434,000 |
|
Stock-based compensation |
|
|
342,000 |
|
|
|
342,000 |
|
Other |
|
|
126,000 |
|
|
|
56,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,442,000 |
|
|
|
17,675,000 |
|
Less: Valuation allowance |
|
|
(18,442,000 |
) |
|
|
(17,675,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
The
Company has revised its deferred tax assets for the year ended
December 31, 2008 to conform to the as filed tax return.
The change in the valuation allowance from December 31, 2008 to December 31, 2009 amounted to
approximately $767,000. The Company had provided a valuation allowance of 100% of the net deferred
tax asset related to the operating loss carryforwards.
Based upon the change in ownership rules under section 382 of the Internal Revenue Code of 1986, if
in the future the Company issues common stock or additional equity instruments convertible in
common shares which result in an ownership change exceeding the 50% limitation threshold imposed by
that section, all of the Companys net operating loss carry forwards may be significantly limited
as to the amount of use in any particular year.
The Company recognizes interest and penalties related to uncertain tax positions in general and
administrative expense. As of December 31, 2009, the Company has no unrecognized tax benefit,
including interest and penalties.
NOTE F ACCRUED LIABILITIES
At December 31, 2009 and 2008, accrued liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Accrued Compensation |
|
$ |
|
|
|
$ |
600,000 |
|
Accrued Payroll Tax Payable |
|
|
315,000 |
|
|
|
155,000 |
|
Accrued Legal |
|
|
124,000 |
|
|
|
|
|
Other |
|
|
12,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
451,000 |
|
|
$ |
755,000 |
|
|
|
|
|
|
|
|
NOTE G NOTE PAYABLE
During the year ended December 31, 2005, the company financed a vehicle to be used with
its prototype technology and pledged the vehicle as collateral for this loan. The loan in the
amount of $24,000 is paid in monthly installments of $479 consisting of principal and interest
at 6.59% per annum through December 2010.
During year ended December 31, 2006, the company refinanced two vehicles and pledged the vehicles
as collateral for the loan. The loan in the amount of $56,174 is paid in monthly installments of
$1,201 consisting of principal and interest at 10.3% per annum through August 2011.
The following represents the required minimum payments for each of the loans:
|
|
|
|
|
Period Ending |
|
|
|
|
December 31, |
|
|
|
|
2010 |
|
$ |
22,000 |
|
2011 |
|
|
10,000 |
|
|
|
|
|
Total Minimum payments |
|
|
32,000 |
|
Less-amount representing interest |
|
|
3,000 |
|
|
|
|
|
|
|
|
29,000 |
|
Less-Current Maturities |
|
|
20,000 |
|
|
|
|
|
Long Term Portion |
|
$ |
9,000 |
|
|
|
|
|
F-20
Note H Stockholders Equity (Capital Deficit)
[1] Private Placement Common Stock:
The company received net proceeds of $550,000, $1,230,000 (of which $507,000 was received from the
Gleasman family), $758,000, $1,068,000 and $331,000 from private placements of its common stock for
the years ended December 31, 2000, 1999, 1998 and 1997 and for the period ended December 31, 1996,
respectively.
During 2002, the company sold 508,897 common shares for net proceeds of approximately $668,000.
In 2003, an existing stockholder purchased 361,112 common shares for $300,000 and was paid 70,000
common shares at market value on the date of issuance (valued at $158,000) for consulting services
and rent for the companys use of a facility and technicians. The company also sold an additional
8,000 common shares to an unrelated party for $20,000.
In 2004, the same existing stockholder purchased 60,000 common shares for $301,000 and was paid
35,000 common shares at market value on the date of issuance(valued at $194,000) as rent for use by
the company of a facility and technicians.
In 2005, this stockholder was paid 90,000 common shares at market value on the date of issuance
(valued at $259,000) for consulting services rendered to the company.
In 2008, the company sold 101,364 shares of common stock to accredited investors for proceeds of
approximately $198,000.
In 2009, the company sold 551,483 shares of common stock to accredited investors for proceeds of
approximately $335,000.
[2] Class A Preferred Stock:
In January 2002, the company authorized the sale of up to 2,000,000 shares of its Class A
Non-Voting Cumulative Convertible Preferred Stock (Class A Preferred). Each share of Class A
Preferred is convertible into one share of voting common stock and entitles the holder to
dividends, at $.40 per share per annum. The holder has the right to convert after one year subject
to board approval into one share of common stock of the Company. The Company may, in the absolute
discretion of its board, redeem at any time and from time to time from any source of funds legally
available any and all of the Class A Preferred at the Redemption Price.
In the event of any liquidation, dissolution or winding up of the company, whether voluntary
or involuntary, the holders of Class A Preferred Shares then outstanding are entitled to be paid
out of the assets of the company available for distribution to its stockholders, whether such
assets are capital, surplus or earnings, before any payment or declaration and setting apart for
payment of any amount in respect of any shares of any junior stock. All of such accumulated and
unpaid dividends will be paid in Class A Preferred Shares at a rate of 1 Class A Preferred Share
for each $4.00 of dividends. No fractions of Class A Preferred Shares shall issue. The company
shall pay cash in lieu of paying fractions of Class A Preferred Shares on a pro rata basis.
The Class A Preferred Shares will be entitled to participate on a pro rata basis in any
distribution of assets as may be made or paid on Junior Stock upon the liquidation, dissolution or
winding up of the company.
A consolidation or merger of the company with or into any other corporation or corporations or
any other legal entity will not be deemed to constitute a liquidation, dissolution or winding up of
the company.
In connection with the 2002 offering of Class A Preferred, the company granted the placement
agent 5,000 Class A Warrants, exercisable for five years at an exercise price of $1.52 per share
into common stock. Such warrants were treated as a cost of the offering. Also, the placement agent
was granted 10,000 warrants for providing certain financial analysis for the company. The warrants
are immediately exercisable at $.30 per share for five years. The warrant contains a cashless
exercise feature. The company valued the warrant at $8,000 using the Black-Scholes option-pricing
model and charged operations.
F-21
The company also granted to these investors 2,500 Class A Warrants, exercisable for five years
at an exercise price of $0.01 per share. On July 8, August 14, September 11, 2003 and August 4,
2006, the company issued 2,500, 7,480, 1,200 and 2,500 common shares, respectively, to the
placement agent upon the exercise of warrants issued in connection with this offering.
Since its designation in March, 2002, the company has sold an aggregate 765,512 shares of
Class A Preferred for proceeds of $3,062,048. No shares of Class A Preferred were sold during the
years ended December 31, 2009 and 2008.
Since its designation in March, 2002, Class A Preferred shareholders have converted an
aggregate 124,605 Class A Preferred into the companys common stock (on a one to one basis) through
December 31, 2009, with 51,250 Class A Preferred converted in the year ending December 31, 2009.
Upon conversion, converting Class A Preferred shareholders are entitled to receive, in
accordance with the terms of the Class A Preferred, dividends payable either in cash or in Class A
Preferred shares calculated to the rate of 10 percent per annum.
At times, the Board of the Company may elect to settle the dividends through the issuance of
Common Stock in lieu of cash. The amount of Common Stock shares issued is based on the market price
of the stock of the Company at the time of the conversion.
Through December 31, 2008, an aggregate Class A Preferred dividend amounted to $59,775 was
settled through the issuance of 14,944 preferred Class A shares of the Company. For the year ended
December 31, 2009, the Company settled Class A dividends amounted to $52,801 through the issuance
of 65,965 shares of Common Stock.
At December 31, 2009 dividends payable upon conversion of 655,851 outstanding shares of Class
A Preferred amounted to approximately $1,218,000.
[3] Class B Preferred Stock:
On October 21, 2004, the company authorized the sale of up to 300,000 shares of its Class
B Non-Voting Cumulative Convertible Preferred Stock (Class B Preferred). Each share of Class B
Preferred pays cumulative dividends at $.50 per share per annum and is convertible into either one
share of the companys common stock or one share of the common stock of the companys subsidiary,
IsoTorque Corporation. The holder has the right to convert after one year, subject to board
approval. The Company may, in the absolute discretion of its board, redeem at any time at the
redemption price equal to the amount paid per share in cash plus any accumulated unpaid dividends.
In the event of any liquidation, dissolution or winding up of the company, whether voluntary
or involuntary, the holders of Class B Preferred Shares then outstanding are entitled to be paid
out of the assets of the company available for distribution to its shareholders, whether such
assets are capital, surplus or earnings, before any payment or declaration and setting apart for
payment of any amount in respect of any shares of any junior stock. All of such accumulated and
unpaid dividends will be paid in Class B Preferred Shares at a rate of 1 Class B Preferred Share
for each $5.00 of dividends. No fractions of Class B Preferred Shares shall be issued. The company
shall pay cash in lieu of paying fractions of Class B Preferred Shares on a pro rata basis. Class
B Preferred shares rank junior and is classified as junior stock with respect to the Companys
Class A Preferred shares.
The Class B Preferred Shares will be entitled to participate on a pro rata basis in any
distribution of assets as may be made or paid on junior stock upon the liquidation, dissolution or
winding up of the company.
Since its designation in 2004, the company has sold an aggregate 97,500 Class B Preferred in a
number of private placements for proceeds of approximately $487,500. No Class B Preferred was sold
during the years ending December 31, 2009 and 2008.
During the year ended December 31, 2009, Class B Preferred shareholders converted an aggregate
20,000 Class B Preferred into the companys common stock. There was no conversion prior to 2009.
Upon conversion, converting Class B Preferred shareholders are entitled to receive, in
accordance with the terms of the Class B Preferred, dividends payable, in the discretion of the
board of directors, either in cash or in Class B Preferred shares calculated at the rate of 10
percent per annum. Through December 31, 2009, no Class B Preferred shares have been issued to
converting Class B Preferred shareholders as a dividend.
F-22
Depending upon the companys cash position, the company from time to time may request that a
converting preferred shareholder receiving dividends in cash consent to receive shares of
restricted common stock in lieu thereof. In 2009, the company issued 30,103 restricted common
shares to a converting preferred shareholder in payment of dividends amounting to $24,082, based on
the market price of the Companys stock at the time of issuance.
At December 31, 2009, dividends payable upon the conversion of 77,500 shares of Class B
Preferred outstanding amounted to approximately $166,000.
[4] Initial Public Offering Consultant:
In February, 1997, the company entered into a three-year agreement with an IPO consulting
firm (IPO Consultant) to arrange for an initial public offering of the companys common stock
and to provide financial advisory services. In consideration, the company issued an aggregate
1,000,000 restricted common shares to five principals of the IPO Consultant for an aggregate
$50. In addition, the company granted an aggregate 500,000 warrants to the same principals. Such
warrants were only exercisable in the event the company conducted an initial public offering for
its common stock. In such event, the warrants were exercisable for a term of five years after
the IPO and were exercisable at the per share public offering exercise price (unless during the
warrant term after the IPO, at least 50% of the companys assets were acquired by a third party
in which case the exercise price was $1.50 per share).
In February, 1999, the company entered into a one-year consulting agreement directly with two of
the former principals of the IPO Consultant to provide financial advisory services. In
connection with this agreement, the company and the two former principals agreed to convert the
375,000 warrants they owned into 375,000 common stock purchase options exercisable immediately
through February, 2004 at $5.00 per common share. The company valued these options at $2,780,000
using the Black-Scholes option-pricing model with the following weighted average assumptions for
the year ended December 31, 1999: risk free interest rate of 5%, dividend yield of 0%,
volatility of 40% and expected life of the options granted of 5 years. These options were
charged to operations over the term of the consulting agreement. In February, 1999, 21,000 of
these options were exercised for proceeds of $105,000. The term of the remaining 354,000 options
expired in February, 2004. As of December 31, 2009, none of the warrants are exercisable.
[5] Common Stock Subject to Resale Guarantee:
During 2002, the company issued 190,695 common shares to former officers and certain
minority shareholders of Ice in exchange for approximately $269,000 owed to them. If, on the
sale of the shares, the amount realized is less than $269,000, additional shares are required to
be issued and if the amount is greater than $269,000, the excess is to be paid to the company.
During 2002, all of such shares were sold for proceeds of approximately $269,000.
[6] Stock-Option Plan:
In December 1997, the Board of Directors of the company approved a Stock Option Plan (the
Plan) which provides for the granting of up to 2,000,000 shares of common stock, pursuant to
which officers, directors, key employees and key consultants/advisors are eligible to receive
incentive, nonstatutory or reload stock options ratified by the shareholders on May 28, 1998.
Options granted under the Plan are exercisable for a period of up to 10 years from date of grant
at an exercise price which is not less than the fair value on date of grant, except that the
exercise period of options granted to a stockholder owning more than 10% of the outstanding
capital stock may not exceed five years and their exercise price may not be less than 110% of the
fair value of the common stock at date of grant. Options may vest over five years.
In 1997, in connection with certain consulting agreements (see Note D [1]), the company
granted an aggregate 75,000 nonqualified options at an exercise price of $5.00 per common
share. The options vested at a rate of 20% per annum and were exercisable through November 30,
2007. The company valued these options using the Black-Scholes option-pricing method. The fair
value of these options was expensed over the term of the consulting agreements. The options
expired on November 30, 2007 and were not replaced.
In 1998, the company granted three directors an aggregate 380,000 options under the Option
Plan, all exercisable immediately at $5.00 per common share. These options expired on January
1, 2007. In 2001, the company granted 100,000 options to an officer in his capacity as a
consultant under the Option Plan exercisable immediately at $5.00
per common share and with a ten years term. In connection with this grant, the company
recorded a stock compensation charge of $398,000.
F-23
In 2002, in connection with the consulting agreements described in Note D [1], the company
granted an aggregate 727,047 options under the Option Plan, all exercisable immediately at
$5.00 per common share. The options were granted in payment of an aggregate $653,000 owed
under the consulting agreements. These options expired on September 30, 2007 and were not
replaced.
In 2003, in connection with the same consulting agreements, the company granted 166,848
options under the Option Plan, all exercisable immediately at $5.00 per common share.
The options were granted in payment of an aggregate $265,000 owed under the consulting
agreements. These options expire on December 22, 2013.
In 2003, the company granted an aggregate 225,000 options under the Option Plan to three
directors, all immediately exercisable at $5.00 per common share. These options expire on
October 15, 2013.
In 2003, the company granted 50,000 options to a consultant under the Option Plan, immediately
exercisable at $2.26 per common share. In connection with this grant, the company recorded a
stock compensation charge of $46,000. These options expire on May 20, 2013.
In 2005, the company granted 100,000 options to a consultant under the Option Plan,
immediately exercisable at $5.00 per common share. In connection with this grant, the company
recorded a stock compensation charge of $247,000 allocated to research and development. These
options expire on June 30, 2015.
By its terms, the companys Option Plan terminated as to the grant of future options on May
27, 2008. Consequently, no additional stock options will be granted under the Option Plan,
although outstanding options remain available for exercise in accordance with their terms. No
options were granted, expired, or exercised during the years ended December 31, 2009 and 2008.
The following table represents information relating to stock options outstanding at December 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding and Exercisable |
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|
Average |
|
|
Average |
|
|
Aggregate |
|
|
|
Exercise |
|
|
Remaining Life |
|
|
Intrinsic |
|
Shares |
|
Price |
|
|
in Years |
|
|
Value |
|
641,848 |
|
4.79 |
|
|
3.75 |
|
|
$0 |
|
As of December 31, 2009, the company did not have any unrecognized stock compensation related to
unvested awards.
[7] Business Consultants Stock Plan:
In June, 1999, the company adopted the Business Consultants Stock Plan (the Stock Plan).
The Plan, as amended, provides for the issuance of up to 10,000,000 common shares to be awarded
from time to time to consultants in exchange for business, financial, legal, accounting,
engineering, research and development, technical, governmental relations and other similar
services.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares Issued to Business |
|
|
|
|
|
|
|
For the year ended |
|
Consultants and Other Third Parties |
|
|
Amount Charged to |
|
|
|
|
December 31, |
|
in Exchange for Services |
|
|
Operations |
|
|
Note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2,243,296 |
|
|
$ |
1,603,000 |
|
|
|
|
|
2008 |
|
|
1,000,348 |
|
|
$ |
2,040,000 |
|
|
|
|
|
2007 |
|
|
359,432 |
|
|
$ |
1,245,000 |
|
|
|
|
|
2006 |
|
|
983,230 |
|
|
$ |
1,861,000 |
|
|
|
A |
|
2005 |
|
|
836,309 |
|
|
$ |
1,874,000 |
|
|
|
|
|
2004 |
|
|
469,883 |
|
|
$ |
2,352,000 |
|
|
|
|
|
2003 |
|
|
738,184 |
|
|
$ |
832,000 |
|
|
|
|
|
2002 |
|
|
1,057,455 |
|
|
$ |
1,036,000 |
|
|
|
B |
|
2001 |
|
|
361,100 |
|
|
$ |
1,011,000 |
|
|
|
|
|
2000 |
|
|
196,259 |
|
|
$ |
840,000 |
|
|
|
|
|
1999 |
|
|
45,351 |
|
|
$ |
327,000 |
|
|
|
|
|
|
|
|
A- |
|
Includes 448,000 business consulting shares issued upon exercise of warrants at a value of
approximately $629,000. |
|
B- |
|
Includes 190,965 issued in settlement of amounts owed at a approximate value of $269,000
(see Note H[10]) |
F-24
At December 31, 2009, 1,409,982 business consultant common shares were available for future
issuance under the business consultants stock plan.
[8] Nonmanagement Directors Plan:
On October 1, 2004, the board of directors approved a Nonmanagement Directors Plan
pursuant to which each nonmanagement director is entitled to receive, if certain conditions
are met, on an annual basis for services rendered as a director, warrants to purchase 12,000
shares of the companys common stock at $.01 per share. In addition, the chairman of the
audit committee is entitled to receive, on an annual basis for services rendered as
chairman, additional warrants for 5,000 shares of the companys common stock at $.01 per
share.
For the year ending December 31, 2006, the company granted 26,500 warrants under the
Nonmanagement Directors Plan and recorded a charge of approximately $48,000 to general and
administrative expenses representing the fair value for such warrants in 2006. During 2006,
a number of directors exercised 42,000 warrants granted to them under the Nonmanagement
Directors Plan.
Due to changes made to the Nonmanagement Directors Plan described below, the company
did not issue any warrants under the plan for the years ended December 31, 2008 and 2007. No
previously issued warrants were exercised during the year ended December 31, 2008 and 6,000
warrants were exercised during the year ended December 31, 2007.
On October 10, 2007, the Nonmanagement Directors Plan was modified, effective July 1, 2007,
to increase the fees payable to the companys nonmanagement directors. As adjusted, each
nonmanagement director (a total of 4 persons) would receive $26,460 for board and committee
service per annum. The chairman of the audit committee would receive an additional $12,600
per annum and the chairman of the nominating committee would receive an additional $5,355
per annum.
The Nonmanagement Directors Plan was also modified to provide that the chairman of the
board, chairman of the executive committee and chairman of the governance and compensation
committee, one person, will be paid an aggregate $110,000 per annum for all services
rendered by him as a director and in such capacities. This proposal was made in the light of
the risks associated with the positions he has undertaken as well as the fact that he is and
has been since the summer of 2005, serving the company in these positions on a full-time
basis. The proposal was also made in recognition of the fact that the services required to
be performed by the chairman of the boards executive committee and of its governance and
compensation committee have expanded both in responsibilities covered and time expended. The
effective date for these adjustments to the plan was July 1, 2007.
On April 28, 2008, the plan was again modified to increase the compensation of the person
serving as chairman of the board, chairman of the executive committee, chairman of the
governance and compensation committee (one person) to $125,000 per annum.
During the years ended December 31, 2009 and 2008, the company issued 377,152 and 112,253
common shares under the Business Consultants Plan to satisfy payables for services rendered
by the companys nonmanagement directors in their capacity as directors and recorded a
charge of $290,000 (including $63,000 which were accrued at December 31, 2008) and $250,000
for such years.
On April 28, 2008, the board of directors approved a one-time payment to its chairman of the
governance and compensation committee of $46,000 for special services rendered in connection
with required compliance under the Sarbanes-Oxley Act. This amount was paid by the issuance
of 19,167 common shares under the Business Consultants Plan valued as of the closing price
on April 28, 2008. The company charged $46,000 to operations in connection with such
services.
F-25
[9] Restricted Shares Issued for Services and Rent:
During 1998, the company granted 1,000 restricted common shares, valued at $3.00 per share,
for services provided. During 1997, the company granted 12,000 and 2,000 restricted common
shares for services provided. The company valued the shares at their fair value of $1.50 and
$3.00 per share, respectively. During 2003 and 2002, 15,640 and 134,964 restricted common
shares were issued for services aggregating approximately $18,000 and $198,000 respectively.
During 2005 and 2004, 100,000 and 35,000 restricted common shares were issued for services
and rent aggregating approximately $259,500 and $194,000. During the year ended December 31,
2007, no restricted common shares were issued.
For the years ended December 31, 2009 and 2008, the company issued 46,346 and 69,722 shares,
respectively, for internal accounting and financial consulting services valued at
approximately $36,000 and $104,000, respectively, of which 25,173 and 34,861 shares
respectively were restricted common shares valued at approximately $19,000 and $52,000,
respectively. Non-restricted shares were issued under the Business Consultant Plan.
[10] Business, Financial and Engineering Consultants:
In 2005, the Company issued 18,000 warrants to certain consultants, with an exercise price
of $0.01 and valued at approximately $43,000. During the year ended December 31, 2005,
3,000 of these warrants were exercised for proceeds of $3.00. None of the remaining
warrants were exercised during the years ended December 31, 2008 and 2009.
During the year ended December 31, 2005, the company issued 210,000 warrants valued at
approximately $377,000 to certain engineering consultants, immediately exercisable over a
ten year term at an exercise price of $5.00 per common share. The engineering consultants
holding 150,000 of these warrants agreed to cancel them in the fourth quarter of 2007 in
exchange for their participation in the companys 2007 Commercializing Event Plan. Note H
[15].
In connection with its business and financial operations for the year ended December 31,
2006, the company issued 91,583 warrants valued at approximately $167,000 to a number of
business and financial consultants. Such warrants are immediately exercisable at $.01 per
common share, each with a ten year term. During the year ended December 31, 2006, 91,083 of
these warrants were exercised for proceeds of $910 and the remaining 500 warrants were
exercised during the year ended December 31, 2007 for proceeds of $5.00.
In 2006, the company issued 30,000 warrants valued at approximately $168,000 immediately
exercisable over a ten year term at $5.00 per common share to certain design engineers. None
of these warrants were exercised during the years ended December 31, 2009 and 2008.
The company issued 400,000 warrants valued at approximately $1,237,000 to a business
consultant on August 18, 2006, immediately exercisable over a ten year term at an exercise
price of $3.27 per common share. On November 21, 2006, the company issued 200,000 warrants
valued at approximately $948,000 in connection with the engagement of a governmental affairs
consultant, immediately exercisable over a ten year term at an exercise price of $3.75 per
common share. None of these warrants were exercised during the years ended December 31, 2009
and 2008.
During the year ended December 31, 2006, the company issued 295,000 warrants to certain
engineering consultants, exercisable over a ten year term at an exercise price of $5.00 per
common share but only if the company were to consummate a commercializing event involving a
transaction or series of transactions which results in the sale, license or other technology
transfer of one or more of its technologies to a third party for value. These warrants are
contingent upon an event occurring in the future and the company will fair value these
warrants when the contingency is resolved. The engineering consultants holding 295,000 of
these warrants agreed to cancel them in the fourth quarter of 2007 in exchange for their
participation in the companys 2007 Commercializing Event Plan. Note H [15].
In 2007, the company issued 50,000 warrants, valued at approximately $249,000, immediately
exercisable for ten years at an exercise price of $5.00 per common share upon the happening
of a commercializing event. The warrants were issued to a consultant who assisted the
company to potentially place its products in various state school bus programs. None of
these warrants were exercised during the years ending December 31, 2009 and 2008.
In 2007, the company issued 100,000 warrants, valued at approximately $401,000, immediately
exercisable for ten years at an exercise price of $5.00 per common share to engineering
consultants. None of these warrants were exercised during the years ending December 31, 2009
and 2008.
In 2008, the company issued 195,000 warrants, valued at approximately $249,000, immediately
exercisable for ten years at an exercise price of $5.00 per common share to engineering
consultants. None of these warrants were exercised during the years December 31, 2009 and
2008.
F-26
The company fair valued the warrants issued using the Black-Scholes model with the following
assumptions:
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2008 |
|
Dividend yield |
|
|
0.0 |
% |
Expected volatility |
|
|
0.55 |
% |
Risk free interest rate |
|
|
2.89 |
% |
Expected Life |
|
|
8.83 years |
|
In 2009, the company did not issue any warrants. In 2009, 12,500 common stock warrants were
exercised for proceeds of $125. (See Note (H [12]).
[11] Equity Funding Commitment:
On September 5, 2000, the company entered into an agreement with Swartz Private Equity,LLC
(Swartz) pursuant to which Swartz granted the company a $50,000,000, three-year equity funding
commitment. The agreement provided that, from time to time, at the companys request, Swartz would
purchase from the company that number of common shares equal to 15% of the number of shares traded
in the market in the 20 business days occurring after the date of the requested purchase. The
purchase price was the lesser of 91% of the average market price during that 20 day period or the
average market price less $.20. As a commitment fee, the company granted Swartz a commitment
warrant to purchase, in the aggregate, 960,101 common shares at a price which equaled the lowest
closing price of the company common stock during the five trading days ending on each six-month
anniversary of the warrant issue date.
During 2002, 76,456 commitment warrants were exercised for proceeds of approximately $60,000.
During 2003, Swartz exercised the remaining 883,645 commitment warrants in a cashless exercise
transaction, receiving 647,270 common shares.
Swartz was also issued a warrant to purchase one share of the companys common stock for every ten
shares it purchased from the company under the agreement. During 2002, 47,992 of such warrants were
exercised for proceeds of approximately $67,000. In 2003, Swartz exercised the balance of its
purchase warrants (9,875) in a cashless exercise transaction, receiving 7,162 common shares.
The agreement with Swartz terminated on September 5, 2003.
F-27
[12] Warrants:
As of December 31, 2009, outstanding warrants to acquire shares of the companys common stock
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Number of |
|
Exercise |
|
|
|
|
|
Warrants |
|
|
Warrants |
|
Price |
|
|
Expiration |
|
|
Outstanding |
|
|
Exercisable |
|
|
|
(a) |
|
|
(a) |
|
|
125,000 |
(a) |
|
|
|
|
$ |
.75 |
|
None |
|
|
|
500,000 |
(b) |
|
|
|
|
$ |
.01 |
|
None |
|
|
|
54,500 |
(c) |
|
|
54,500 |
|
$ |
.01-5.00 |
|
None |
|
|
|
39,000 |
(d) |
|
|
39,000 |
|
$ |
5.00 |
|
|
2015 |
|
|
|
255,000 |
(e) |
|
|
255,000 |
|
$ |
.01 |
|
None |
|
|
|
6,000 |
(f) |
|
|
6,000 |
|
$ |
.01 |
|
None |
|
|
|
3,750 |
(g) |
|
|
3,750 |
|
$ |
1.00 |
|
None |
|
|
|
20,500 |
(h) |
|
|
20,500 |
|
$ |
3.27 |
|
|
2016 |
|
|
|
400,000 |
(i) |
|
|
400,000 |
|
$ |
3.75 |
|
|
2016 |
|
|
|
200,000 |
(j) |
|
|
200,000 |
|
$ |
5.00 |
|
|
2017 |
|
|
|
50,000 |
(k) |
|
|
50,000 |
|
$ |
5.00 |
|
|
2017 |
|
|
|
100,000 |
(l) |
|
|
100,000 |
|
|
|
|
(a) |
|
Exercisable only if the company has an IPO and exercisable at the
IPO price five years from IPO. Through the year ended December
31, 2009, the company has not conducted an IPO. |
|
(b) |
|
On April 15, 2002, the company issued 1,000,000 warrants to
purchase common stock at prices ranging from $.30 to $.75 to its
then chairman of the board of directors and chief executive
officer. Of the total warrants, 250,000 were exercisable at $.30,
and 250,000 were exercisable at $.50 on the date the then board
elected the executive to the board and named him chief executive
officer. During the year ended December 31, 2002, 250,000
warrants were exercised for $.30 per share, resulting in proceeds
of $75,000. During the year ended December 31, 2003, 250,000
warrants were exercised for $.50 per share, resulting in proceeds
of $125,000. The remaining 500,000 warrants are exercisable upon
the execution of the company of a binding agreement for the sale,
transfer, license or assignment for value of any and/or all of
its companys automotive technology at $.75 per share. The
company will record a charge representing the fair value of the
warrants when the warrants become exercisable. |
|
(c) |
|
The company has issued an aggregate 123,500 warrants at an
exercise price of $0.01 to its nonmanagement directors for
services rendered to the board under its Nonmanagement Directors
Stock Plan prior to its amendment on October 13, 2006. No further
warrants are issuable under the Plan as modified by the board of
directors on October 13, 2006 (See Note E [8]). An aggregate
69,000 warrants have been exercised for approximately $630 of
proceeds, with 6,000 warrants exercised during the year ended
December 31, 2008 for proceeds of $60. No warrants were exercised
during the year ended December 31, 2009. |
|
(d) |
|
In 2005, the company issued 12,000 warrants to a consultant,
immediately exercisable at $0.01 per common share. During 2005,
3,000 warrants were exercised for proceeds of $30. In 2006, the
company issued 30,000 warrants to consultants exercisable
immediately for a ten year term at $5.00 per common share. None
of these warrants were exercised during the years ended December
31, 2009 and 2008. |
|
(e) |
|
During 2005, the company issued 210,000 warrants to certain
engineering and administrative consultants, exercisable
immediately for a ten year term at $5.00 per common share. During
2006, the company issued 295,000 warrants to certain engineering
consultants exercisable over a ten year term at $5.00 per common
share, but only exercisable if the company sells, licenses or
otherwise transfers one or more technologies for value. The
engineering consultants holding 445,000 of these warrants agreed
to cancel them in the fourth quarter of 2008 in exchange for
their participation in the companys Commercializing Event Plan.
On March 28, 2008, the company issued an aggregate 195,000
warrants exercisable until 2016 at $5.00 per common shares to two
consultants who elected not to participate in the companys 2007
Commercializing Event Plan. The company recorded a charge of
$249,000 to general and administrative expense. None of these
warrants were exercised during the years ended December 31, 2009
and 2008. |
F-28
|
|
|
(f) |
|
During 2005, the company issued 6,000 warrants to a consultant,
exercisable immediately for a five year term at $0.01 per common
share. None of these warrants have been exercised through
December 31, 2009. |
|
(g) |
|
During 2005, the company issued 62,500 warrants to investors in
connection with their purchase of 62,500 Class A Preferred,
immediately exercisable at $.01 per common share. During 2006,
the company issued 135,849 warrants to investors along with their
purchase 162,000 Class A Preferred and 20,000 Class B Preferred,
all immediately exercisable at $.01 per common share. At December
31, 2008 an aggregate 182,099 of these warrants have been
exercised for proceeds of approximately $1,258. On July 31, 2009,
an additional 12,500 warrants were exercised for 12,500 common
shares. No additional warrants were issued in the years ended
December 31, 2009 and 2008. |
|
(h) |
|
During 2006, one investor purchased 20,500 warrants immediately
exercisable immediately for a five year term at $1.00 per common
share for a purchase price of $2,000. None of these warrants have
been exercised through December 31, 2009. |
|
(i) |
|
During 2006, the company issued 400,000 warrants immediately
exercisable for ten years at an exercise price of $3.27 per
common share to a business consultant. None of these warrants
have been exercised through December 31, 2009. |
|
(j) |
|
During 2006, the company issued 200,000 warrants immediately
exercisable for ten years at an exercise price of $3.75 per
common share to a former governmental affairs consultant. None of
these warrants have been exercised through December 31, 2009. |
|
(k) |
|
During 2007, the company issued 50,000 warrants exercisable for
ten years at $5.00 per common share upon the happening of a
commercializing event. The warrants were issued to a consultant
who assisted the company to potentially place its products in
various state school bus programs. The company recorded a charge
of $249,000 to general and administrative expenses. None of these
warrants have been exercised through December 31, 2009. |
|
(l) |
|
During 2007, the company issued 100,000 warrants immediately
exercisable for ten years at an exercise price of $5.00 per
common share to two engineering consultants in connection with
the companys engagement to furnish constant velocity joints to a
military contractor. The company recorded a charge of $401,000 to
general and administrative expenses. None of these warrants have
been exercised through December 31, 2009. |
The following summarizes the activity of the companys outstanding warrants for the years
ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Price |
|
|
Term |
|
|
Value |
|
Outstanding at January 1, |
|
|
1,766,250 |
|
|
$ |
2.82 |
|
|
|
7.60 years |
|
|
$ |
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(12,500 |
) |
|
|
0.01 |
|
|
|
|
|
|
|
|
|
Canceled or expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, |
|
|
1,753,750 |
|
|
$ |
2.84 |
|
|
|
6.65 years |
|
|
$ |
38,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, |
|
|
1,128,750 |
|
|
$ |
3.77 |
|
|
|
6.65 years |
|
|
$ |
38,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-29
[13] Issuance of Stock and Warrants to Subsidiary:
In 2003, the companys majority-owned subsidiary, Ice Surface
Development, Inc. issued 308,041 shares of its common stock at a
price of $.76 per share and realized aggregate proceeds of
$234,000 in a private placement. These issuances reduced the
companys interest in Ice from 72% to approximately 69.26%.
Based upon the companys accounting policy, the change in the
companys proportionate share of Ices equity resulting from the
additional equity raised by the subsidiary is accounted for as a
capital transaction.
In connection with the private placement, Ice issued 53,948
warrants to the placement agent immediately exercisable at $.76
per common share through June 9, 2007. In addition, 50,000
warrants were issued by Ice to a consultant immediately
exercisable at $.76 per common share through June 9, 2007. In
connection with the issuance of these warrants, a compensation
charge of $36,000 was recognized.
These warrants were cancelled effective June 7, 2007 upon the
adoption by Ices shareholders of a Plan for the Complete
Liquidation and Dissolution of Ice.
[14] Shares Issued for Consulting Services:
On September 17, 2005, certain consultants created a trust to enable them to sell business
consultants shares issued to them by the company under their consultant agreements. The company
issues business consultant common shares to the trust from time to time, contingent on the
performance of services by the consultants under such consulting agreements. The company fair
values the shares issued to the trust using the closing market price on the date immediately prior
to the date of issuance. Amounts in excess of the consulting invoices are classified as shares
issued for consulting services in stockholders (capital deficit) equity.
During the year ended December 31, 2008, the company issued an aggregate 373,295 business
consultant common shares with an aggregate value when issued of $716,998 to satisfy the payment of
invoices submitted by the consultants for services rendered. During the year ended December 31,
2008, the trustee sold 328,779 business consultants common shares for aggregate proceeds of
approximately $597,119 and distributed the proceeds from the trust to the consultants in payment of
invoices submitted by the consultants.
During the year ended December 31, 2009, the company issued an aggregate 899,271 business
consultant common shares with an aggregate value when issued of $610,000 to satisfy the payment of
invoices submitted by the consultants for services rendered. During the year ended December 31,
2009, the trustee sold 770,720 business consultants common shares for aggregate proceeds of
approximately $536,100 and distributed the proceeds from the trust to the consultants in payment of
invoices submitted by the consultants.
The companys payment obligations with respect to the consultant agreements are met once it has
issued shares to the trust in accordance with directives received from the consultants and the
consultants, not the company, bear the risk of loss in the event the proceeds of stock sales by the
trustee are less than the value of the stock contributed to the trust by the company on the date of
contribution.
[15] Commercializing Event Plan:
On October 13, 2006, the board of directors adopted a Commercializing Event Plan (2006 Event Plan)
designed to reward the companys directors, executives and certain administrative personnel for the
successful completion of one or more commercializing events. No payments were made under the 2006
Event Plan and the 2006 Event Plan was terminated on October 31, 2007.
On October 31, 2007, the board of directors terminated the Event Plan and approved a new 2007
Commercializing Event Plan (the 2007 Event Plan), effective October 10, 2007. The 2007 Event Plan
provides that upon the happening of any commercializing event, each of the directors and officers
of Torvec as well as certain management personnel shall be entitled to share equally in 6% of the
gross amounts derived or to be derived from the transaction and/or transactions constituting a
commercializing event. Upon the happening of any commercializing event, each of the companys
engineering and security consultants shall be entitled to share equally in 2% of the gross amounts
derived and/or to be derived from the transaction and/or transactions constituting a
commercializing event.
In order to actually receive payment under the 2007 Event Plan, each participant must be both a)
employed by, a consultant to or associated with the company and b) judged to be in good standing
with the company at the time of any and all such payments, all as determined by the board of
directors as of the date of the boards authorization of payments to be made.
F-30
For purposes of the 2007 Event Plan, a commercializing event shall consist in any completed
transaction, or series of completed transactions, regardless of form, structure or size and/or
dollar amount by which the company and/or its shareholders derive or are expected to derive dollars
from a public or private source which the board, in its judgment, deems significant under the terms
of the transaction and/or the terms of any agreement or working arrangement entered into by the
company. Payments to be made to participants with respect to each given commercializing event shall
be made in full upon the finalization of the commercializing event even if the company is to be
paid in installments or some other type of arrangement actually deferring the receipt of cash.
Where payments are to be made pursuant to an arrangement, such as a license or supply contract,
where the aggregate consideration to be received by the company as the result of the
commercializing event is not stated, the aggregate dollar-value ascribed to the license, supply
contract or similar instrument based upon an estimate of the total dollars to be received over the
term of the instrument shall be utilized for purposes of fixing the gross dollars to be derived
from the commercializing event.
The 2007 Event Plant specifically provides that the participants in the commercializing event plan
shall be entitled to receive payments as described in the plan regardless of the number of
commercializing events, in the aggregate or with respect to any given technology.
On March 28, 2008 the board of directors approved amendments to the 2007 Event Plan recommended by
the governance and compensation committee to clarify that:
|
(a) |
|
for purposes of the good standing requirement, all participants are considered to be in good
standing unless a unanimous vote of the board of directors determines otherwise. In making this
determination, the board is required to consider whether a person has engaged in conduct which has
significantly harmed the company and to consider that any material violation of the companys Code
of Conduct shall constitute prima facie evidence that the company has been harmed; |
|
|
(b) |
|
participants shall be entitled to payment even though the participant is not actively engaged as a
consultant to or employee of the company if the reason for not being so engaged is due to death,
disability from accident, disease or similar circumstance beyond the participants control or is on
a leave of absence approved by an authorized officer; |
|
|
(c) |
|
the plan shall terminate no earlier than October 10, 2017 but that subject to such condition, the
plan may be terminated by the board of directors in its sole direction; |
|
|
(d) |
|
the benefits provided by the plan may not be reduced during its term as to amount, time, method,
manner of payment and/or any other material condition; |
|
|
(e) |
|
distributions under the plan shall be made on a commercializing event by commercializing event basis. |
The company issued an aggregate 12,061 common shares with a value upon issuance of $36,000 to
participants under the 2007 Event Plan for the year ended December 31, 2008 for commercializing
events occurring during the year 2008.
The company issued an aggregate 4,669 common shares with a value upon issuance of $14,000 to
participants under the 2007 Event Plan for the year ended December 31, 2009 for commercializing
events occurring during the year 2009.
The company accounts for the settlement of its commission arrangements to non-employee consultants,
directors, executives and certain administrative personnel with the issuance of its business
consulting shares under ASC 505 (Previously known as :FASB Statement 123® Share Based Payment),
provided that there are sufficient shares available under the business consulting plan. Under ASC
505, the company measures commission arrangements at the fair value of the equity instruments
issued. In the event that there are insufficient shares available to settle the obligation, the
company will follow the provisions of ASC 815 (Previously known as: EITF 00-19 Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock).
Under ASC 815, the company will record a liability instrument for the resulting changes in fair
value from the date due to the end of each reporting period until such liability is satisfied.
F-31
In 2007, certain engineering consultants agreed to cancel 445,000 warrants issued in 2005 and 2006
in exchange for their participation in the 2007 Event Plan. The exchange of the warrants for the
participation rights in a commercializing event did not result in an accounting charge. The
warrants at the date of the exchange were considered to have no value because the underlying
condition for vesting the warrants was not satisfied. The company determined that the fair value of
the rights to be de minimis at the date of the exchange based upon managements estimate. [Note H
[10]]
On March 28, 2008, the board of directors approved the grant of an aggregate 195,000 common stock
warrants exercisable until December 1, 2016 at $5.00 per share to two engineer consultants in lieu
of their participation in the 2007 Event Plan. The company valued the warrants at $249,000 using
the following Black-Scholes option/pricing model and charged operations.
December 31, 2008
Black-Scholes Inputs
|
|
|
|
|
Term |
|
|
8.84 years |
|
Expected forfeiture rate |
|
|
0 |
% |
Risk-free rate |
|
|
2.89 |
% |
Volatility |
|
|
0.55 |
|
Dividend yield |
|
|
0 |
% |
F-32
Note I Commitments and Other Matters
[1] Variable Gear, LLC:
Under the operating agreement of Variable Gear, LLC, the company was required to purchase the 51%
membership interest it did not own in such entity by January 1, 2007 at the then fair market value
as defined. Since inception, Variable Gear generated no revenues, incurred no expenses and had no
operations. On June 3, 2007, the company and the 51% owner agreed that his entire membership
interest would be purchased in exchange for 5,000 common shares of the company, valued at the close
of trading on such date ($19,250 based upon a $3.85 per common share close). The transaction was
finalized on June 6, 2007.
The company has recorded the purchase of the membership interest as additional goodwill. The
company also recorded the deferred revenue of $150,000 as other income at June 30, 2007 because all
of the companys obligations regarding this payment have been met. Since there are no operations of
the Variable Gear entity since inception, the company has concluded that there is no future benefit
to the purchased interest and has impaired the goodwill and recorded a charge of $19,000 at June
30, 2007.
[2] Leases:
The company leases a facility located at 1999 Mount Read Blvd., Rochester, New York. On April 29,
2008, the company executed a five-year lease for the premises (with a December 1, 2007 lease
commencement date) providing for rent to be paid at a rate of $5,687 per month ($68,244 per annum)
and in addition, for the payment of the companys proportionate share of yearly real estate taxes
and yearly common area operating costs.
Under the lease, monthly rental payments commenced June 1, 2008. The lease contains three 5-year
renewal options and grants an option to the company to lease additional adjacent manufacturing and
assembly space.
Rental payments and certain other payments due to the landlord is to be paid in common shares of
the company, based upon the closing price per share on the 15th day of the
calendar month immediately prior to the date any installment payment of monthly rent or other
payment is due landlord.
Rent expense for the years ended December 31, 2009 and 2008 was $58,500 and $58,500 respectively.
Note J Management Agreement
On February 20, 2004 the company entered into an agreement with a management firm to develop and
implement a business plan to commercialize its full terrain vehicle. In June, 2004, the company
engaged three members of the management firm as the companys chief executive officer, chief
financial officer and chairman of its board of directors. In June, 2004 and in April, 2005, the
company and the management firm purported to execute agreements reflecting the company-related
capacities of the management firms three members and reflecting the management firms
reorganization, respectively.
No compensation was paid to the management firm by the company during the years ended December 31,
2009 and 2008. See Note K describing the companys litigation with this management firm and the
settlement thereof.
Note K Litigation
(1) On March 6, 2009, the company settled litigation commenced by the
company in September, 2005 against a management consulting firm. The
company had challenged the validity of consulting agreements alleged
to have been executed between the parties in June, 2004 and April,
2005 as being null and void. In accordance with the terms of the
settlement agreement, the parties released one another from all claims
and counterclaims against each other and terminated any and all
obligations emanating out of their relationship with each other,
including any and all obligations under the purported agreements.
(2) On October 8, 2005, the controlling persons of the companys
majority-owned subsidiary, Ice Surface Development, Inc. filed
for arbitration of certain agreements they had with Ice Surface,
claiming Ice Surface owed compensation to them for past services.
On October 19, 2007, these same parties commenced a derivative
action in Federal District Court for the Western District of New
York challenging the companys assignment of its ice technology
license in June, 2007 on the grounds the assignment was made for
inadequate consideration.
On June 27, 2008, the Federal District Court dismissed, with
prejudice, the derivative action as being without merit and, in
the same action, affirmed that such persons had been fully paid
for any services rendered by them to Ice Surface Development. As
a consequence of the District Courts decision, these individuals
withdrew their arbitration claims on August 18, 2008.
F-33
(3) On October 31, 2008, the company commenced an action in New York
Supreme Court, County of New York, Commercial Division against
Ice Engineering, LLC seeking the total balance owed by Ice
Engineering to the company pursuant to an assignment agreement
entered into by the parties, effective June 15, 2007, whereby the
company assigned all of its rights and interest in an ice
technology license granted by Dartmouth College to Ice
Engineering in exchange for a 2.8% royalty interest and a cash
reimbursement of $3,500,000. The suit was commenced after the
company had been paid approximately $800,000 in reimbursement
monies.
On January 27, 2010, the company and Ice Engineering settled this
litigation. Under the settlement agreement, the companys
assignment of the ice technology license is made permanent; the
company elected to forego its right to royalties and agreed to
receive $1,100,000, with $300,000 paid to the company by Ice
Engineering on January 27, 2010 and $800,000 paid to the company
by Ice Engineering by February 26, 2010. (See Note C).
Note L Royalty Agreement
On December 12, 2007, the company granted High Density Poweretrain, Inc. of Waterford, Michigan
(HDP) an exclusive, worldwide license to incorporate the companys constant velocity joint
technology in HDPs family of highly-powered, multifueled, fuel efficient, light weight, cost
effective internal combustion engines. In consideration for the grant of the license, the company
will receive annual royalties equal to 5% of annual gross revenues generated by the sale of HDPs
multifuel engines, including all sublicense of such technology. There are no minimum royalty
payments and the grant does not affect the companys ability to commercialize its constant velocity
joint technology in any other field and/or application. For the years ended December 31, 2009 and
2008, the company did not receive any royalties under this agreement.
Note M Subsequent Events
(1) On January 27, 2010, the company and Ice Engineering LLC settled their litigation with respect
to an assignment agreement entered into on June 15, 2007 pursuant to which the company assigned its
ice technology license to Ice Engineering for a 2.8% royalty and $3,500,000 in reimbursement monies
for amounts previously expended by the company to acquire and maintain the license. The company
previously had received $800,000. Under the settlement agreement, the company elected to forego its
right to royalties and agreed to receive $1,100,000, with $300,000 paid to the company by Ice
Engineering on January 27, 2010 and the final $800,000 paid to the company by Ice Engineering
by February 26, 2010.
(2) On January 26, 2010, the company received approximately $103,000 in New York State corporate
income tax refundable credits attributable to research and development expenses incurred by the
company for the year ended December 31, 2008.
(3) On February 17, 2010, the company issued a warrant to a financial consultant exercisable for
ten-years at $2.50 per common share for 100,000 shares of the companys $.01 par value common
stock.
(4) On February 18, 2010, the board of directors modified the 2007 Event Plan by adjusting the
formula for determining the number of common shares issuable under the plan for commercializing
events not involving the complete sale of the company and/or its assets. Prior to the boards
modification, the denominator for determining the number of common shares was fixed at $3.00 a
share, regardless of the trading price of the companys common stock from time to time. As
modified, the denominator shall equal the price of the companys common stock using the two hundred
day moving average of closing prices for such common stock ending thirty (30) days immediately
prior to the announcement date of a commercializing event.
(5) On February 18, 2010, the board of directors dissolved the Executive Committee established by
the board in July, 2005 due to changed circumstances and created a Projects and Finance Committee
composed of management and
engineer consultants with certain powers and authority delegated to such committee with regards to
budget and technology project management.
(6) On February 18, 2010, the board of directors approved increasing the consultant fee paid
to its chairman of the board to $175,000 per annum, retroactive to January 1, 2010. Such consultant
fee is payable in business consultant shares of the companys common stock.
(7) On February 18, 2010, the board of directors approved increasing the consultant fee paid to its
general counsel to $225,000 per annum, retroactive to January 1, 2010. Such consultant fee is
payable in business consultants
shares of the companys common stock.
(8) Effective March 14, 2010, James Y. Gleasman retired as a director and as the companys chief
executive officer and interim chief financial officer.
(9) On
March 23, 2010, the board of directors approved the increase of
number of common shares reserved for issuance under the Companys
Business Consultants Stock Plan by 5,000,000 common shares.
F-34
|
|
|
Item 9. |
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None
|
|
|
Item 9A |
|
CONTROLS and PROCEDURES |
Keith E.
Gleasman, as of December 31, 2009, the companys President
and interim Chief
Financial Officer, respectively, has informed the board of directors that, based upon his
evaluation of the companys disclosure controls and procedures as of the end of the period covered
by this annual report (Form 10-K), such disclosure control and
procedures were not effective to ensure
that information required to be disclosed by the company in the reports it submits under the
Securities Exchange Act of 1934, as amended, is accumulated and communicated to management
(including the chief executive officer and interim chief financial officer) as appropriate to allow
timely decisions regarding required disclosure.
REPORT ON MANAGEMENTS ASSESSMENT OF INTERNAL CONTROL OVER
FINANCIAL REPORTING
Management of the company is responsible for establishing and maintaining an adequate system of
internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f)
promulgated under the Securities Exchange Act of 1934, as amended. The companys internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of the companys consolidated financial statements. Our
internal control over financial reporting is supported by a program of appropriate reviews by
management, written policies and guidelines, careful selection and training of qualified personnel,
and a written code of conduct adopted by our companys board of directors, applicable to all
company directors and all officers, consultants and employees of our company.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements and even when determined to be effective, can only provide reasonable
assurance with respect to financial statement preparation and presentation. Also, projections or
any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate. The audit committee of our companys board of directors meets with the
companys independent registered public accounting firm, management, and periodically to discuss internal control over financial reporting, auditing and financial reporting
matters. The audit committee reviews with the companys independent registered public accountants
the scope and the results of the audit effort. The audit committee also meets periodically with
such accountants and the companys chief internal accountant without management present to ensure
that the independent registered public accountants and the companys chief internal accountant
have free access to the audit committee. The audit committees report can be found in the
definitive proxy statement issued in connection with the companys 2009 annual meeting of
shareholders.
Management assessed the effectiveness of the companys internal control over financial reporting as
of December 31, 2009. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal ControlIntegrated
Framework. Based upon our assessment, management concluded that as of December 31, 2009 internal
control over financial reporting were not effective.
Our Audit Committee was advised by
Eisner LLP, our independent registered public accounting firm, that during
their performance of audit procedures for 2009, Eisner LLP identified material
weaknesses as defined in Public Company Accounting Oversight Board Standard
No. 5 in our internal control over financial reporting.
Based on our evaluation, our management
concluded that there are material weaknesses in our internal control over
financial reporting. The material weaknesses identified did not result in the
restatement of any previously reported financial statements nor does management
believe that it had any effect on the accuracy of the Company’s financial
statements for the current reporting period. A material weakness is a
deficiency, or a combination of control deficiencies, in internal control over
financial reporting such that there is a reasonable possibility that a material
misstatement of the Company’s annual or interim financial statements will
not be prevented or detected on a timely basis.
The material
weaknesses relate to the a) preparation of the income tax disclosures
including the
related components of our deferred tax assets, b) accounting for equity
transactions, resulting in the Company providing price protection to
consultants which is inconsistent with its disclosed policy and c)
preparation of financial statements and related footnotes and
financial data provided to the Company’s independent registered public accounting
firm in connection with the annual audit. While we engage outside consultants
to assist us in preparing our tax provision, our financial
statements and related disclosures; we did not have proper review controls to
monitor such processes
We intend to take
appropriate and reasonable steps to make the necessary improvements to
remediate the material weaknesses. We intend to consider the results of our
remediation efforts and related testing as part of our fiscal 2010 assessment
of the effectiveness of our internal control over financial reporting.
24
Management,
with the participation of the Companys President and interim Chief
Financial Officer, has concluded that there were no changes in the companys internal control over
financial reporting that occurred during the fourth quarter that has materially affected, or is
materially likely to materially affect, the companys internal control over financial reporting.
This annual report does not include an attestation report of the companys independent registered
public accounting firm regarding internal control over financial reporting. Managements report was
not subject to attestation by the companys independent registered public accounting firm pursuant
to temporary rules of the Securities and Exchange Commission that permit the company to provide
only managements report in this annual report.
This report shall not be deemed to be
filed for purposes of Section 18 of the Securities Exchange Act of 1934,
or otherwise subject to the liabilities of that section, and is not
incorporated by reference into any filing of the Company, whether made before
or after the date hereof, regardless of any general incorporation language in
such filing.
|
|
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Item 9B. |
|
OTHER INFORMATION |
None
PART III
|
|
|
Item 10. |
|
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT |
(a) Identification of Directors, Executive Officers And Consultants
The following table sets forth certain information about the current directors and executive
officers of the company as of December 31, 2009:
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Date of Election or |
|
Director |
|
Principal Occupation |
|
|
Age |
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|
Designation** |
|
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Gary A. Siconolfi |
|
Chairman of the Board |
|
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59 |
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|
10/31/02 |
|
325 VanVoorhis Avenue |
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Rochester, NY 14617 (1) |
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James Y. Gleasman+++ |
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Chief Executive Officer, |
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69 |
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02/20/98 |
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987 Elmwood Avenue |
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Interim Chief Financial |
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Brighton, New York 14618 (2) |
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Officer, Director |
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Keith E. Gleasman |
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President, Director |
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63 |
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09/26/96 |
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11 McCoordwoods Drive |
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Fairport, NY 14450 (3) |
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Herbert H. Dobbs |
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Secretary, Director |
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79 |
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02/20/98 |
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448 West Maryknoll Road |
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Rochester Hills, MI 48309 (4) |
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Daniel R. Bickel |
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Certified Public Accountant, |
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62 |
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10/31/02 |
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39 Whippletree Road |
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Director |
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Fairport, New York 14450 (5) |
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Asher J. Flaum |
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Real Estate Developer, Director |
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30 |
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10/10/08 |
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49 Sunrise Park
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Pittsford, New York 14534 (6) |
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Joseph B. Rizzo |
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Attorney, Director |
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45 |
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9/9/05 |
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39 State Street, Suite 700 |
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Rochester, New York 14614 (7) |
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William W. Destler, Ph.D. |
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College President, Director |
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63 |
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9/15/09 |
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One Lomb Memorial Drive |
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Rochester, New York 14623 |
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** |
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Changes in Control To the best knowledge of the companys management, there are no present arrangements or pledges of the
companys common stock which may result in a change of control of
the company. Under the companys bylaws, the members of the board
of directors serve until the next annual meeting of shareholders
and until their successors have been elected or appointed and
shall have qualified, or until their prior resignation or
termination. All directors were reelected to the board at the
annual meeting of shareholders held on January 28, 2010.
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+++ |
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Effective March 14, 2010, James Y. Gleasman retired as a member of
the board of directors and as the companys chief executive
officer and interim chief financial officer. |
25
(b) Business Experience
(1) |
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Mr. Siconolfi was the owner and general manager of Panorama Dodge, Inc., Penfield, New York from 1984-1995 and of Panorama Collision, Inc., East Rochester, New
York from 1989-1995. He started and managed a highly successful auto/truck dealership and collision business, building the business to annual sales of $20 million,
with 5 departments and 65 employees. |
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Prior to opening the dealership and collision business, Mr. Siconolfi acquired an excellent foundation in the automotive business, working in sales, sales
management and general management at Vanderstyne Ford, Schrieber Buick, Judge Motor Corporation and Meisenzahl Auto Parts, all in the Rochester area. He has
completed 100+ programs sponsored by Chrysler Corporation, Ford Motor Company and General Motors in fields such as management, sales management, sales, customer
relations, human resources and service training. He earned numerous awards given by these companies. |
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A very active participant in his community, Mr. Siconolfi is currently involved in commercial real estate. |
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(2) |
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James Y. Gleasman has been a director and consultant of the company since its inception. His business background includes the following: |
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Life-long entrepreneur. |
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Skilled in management, finance, strategic planning, organizing and marketing. |
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Principal inventor of the infinitely variable transmissions (IVT); co-inventor
of several other patented inventions. |
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Established manufacturing of the Torsen® differential in Argentina, Brazil, etc. |
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Former principal with two companies formerly owned by the Gleasman family. |
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Set business strategies for small companies dealings with large companies. |
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Joint venture partner with Clayton Brokerage Co. of St. Louis, MO. |
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Owned financial-consulting business. |
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Negotiated with numerous Asian Corporations (including Mitsubishi and Mitsui). |
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Educated in Asian philosophy, business practices and culture. |
26
(3) |
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Keith E. Gleasman is co-inventor with
Vernon E. Gleasman on all Torvec
patents. Mr. Gleasmans strengths
include his extensive marketing and
sales executive experience, in addition
to his design and development knowledge.
His particular expertise has been in the
area of defining and demonstrating the
products to persons within all levels of
the automotive industry, race crew
members, educators and students. |
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As former Vice President of Sales for the unrelated Gleason
Corporation (Power Systems Division), designed and conducted seminars
on vehicle driveline systems for engineers at the U.S. army tank
automotive command. |
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Designed a complete nationwide after-market program for the Torsen
differential, which included trade show participation for the largest
after-market shows in the U.S., SCORE and SEMA. |
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Extensive after-market experience including pricing, distribution,
sales catalogs, promotions, trade show booths designs and vehicle
sponsorships. |
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Responsible for over 300 articles in trade magazines highlighting the
Torsen differential (e.g., Popular Science, Auto Week, Motor Trend,
Off-Road, and Four Wheeler). |
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Designed FTV vehicle (from concept to assembly). |
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Assisted in developing engineering and manufacturing procedures for
the Torsen differential and for all of the Torvec products. |
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Instructed race teams on use of the Torsen differential (Indy cars,
Formula 1, SCCA Trans-Am, IMSA, GTO, GTU, GT-1, NASCAR, truck pullers
and off-road racers). |
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Has been trained for up-to-date manufacturing techniques such as NWH,
statistical process control and MRP II. |
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Mr. Gleasman has extensive
technical and practical experience,
covering all aspect of the
companys products such as,
promotion, engineering and
manufacturing. |
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(4) |
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Dr. Dobbs, Ph.D., P.E., has worked
at every level from design engineer
to technical director of an Army
Major Commodity Command at the
two-star level. He has worked as a
hands-on engineer and scientist in
industry and government, commanded
field units, managed Army R & D
programs and laboratories and
currently has his own practice as a
consultant engineer. His broad
background has helped guide the
companys growth and development. |
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During his career he has: |
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Worked as a manufacturing engineer. |
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Worked as a design engineer in the aircraft and missile industry. |
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Managed Army laboratories as a captain, lieutenant colonel and colonel. |
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Organized, implemented and operated the theater-wide Red Ball Express quick
response supply system in Vietnam to get disabled weapons and other critical
equipment repaired and back into combat as rapidly as possible. |
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Done basic research on multi-phase turbulent fluid dynamics supporting
development of the gas turbine primary power system now used in the M1 Abrams
Main Battle Tank (MBT). |
27
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Managed advanced development of the laser guided 155mm-artillery shell now
known as the Copperhead. |
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Served in Taiwan as a member of the U.S. Military Assistance Advisory Group
(MAAG) working with the Republic of China Army General Staff. |
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Served as liaison officer between the Army and Air Force for development of
the laser seeker for the Hellfire missile. |
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Guided development of a new family of tactical vehicles for the Army,
including the High Mobility Multipurpose Wheeled Vehicle (HMMWV) now known as
the Hummer, which uses the Torsen® differential. |
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Served as Technical Director of U.S. Army Tank-automotive Command* (TACOM),
which then employed some 6,400 people and is responsible for all support of
U.S. military ground vehicles (a fleet of 440,000) from development to
ultimate disposal with a budget of nearly $10 billion a year. He was also
responsible for negotiation and management of military automotive R&D
agreements with the French and German Ministries of Defense. |
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* |
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Now the U.S. Army Tank-Armaments Command. |
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At the end of 1985, Herbert H. Dobbs left government service and started his own consulting
practice and began working with the Gleasmans to develop and market Vernon Gleasmans and
Torvecs inventions. Herbert H. Dobbs holds a Ph.D. in Mechanical Engineering from the
University of Michigan and is a registered professional engineer in Michigan. He holds
several patents of his own and, among many affiliations, is a member of SAE, ASME, NSPE,
AAAS, Sigma XI, AUSA, NDIA and the U.S. Army Science Board. The last named organization is a
small group of senior technical and managerial people chosen from industry and academia to
provide direct advice to the Secretary of the Army, the Chief of Staff, and the Department
of the Army concerning issues of policy, budgets, doctrine, organization, training and
technology. |
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(5) |
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Daniel R. Bickel is a partner in the accounting firm of Bickel & Dewar, C.P.A.s, an
accounting firm providing a variety of accounting services to small to medium sized
business. The services provided include audits, reviews, compilations, business and personal
consulting, business acquisition and sale assistance and income tax preparation. Mr. Bickel
is a graduate of the Rochester Institute of Technology. He has been licensed in New York
State as a certified public accountant for almost 30 years and is a member of the American
Institute of Certified Public Accountants and the New York State Society of Certified Public
Accountants. He has served as an officer and director of numerous non-profit and civic
organizations. |
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(6) |
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Asher J. Flaum is President of Flaum Management Co., Inc., a full service real estate
company that owns and manages a portfolio of several million square feet of commercial real
estate including retail, office, industrial, development projects as well as provides
complete real estate brokerage services through its real estate brokerage division. Through
his active involvement with Flaum Management, Mr. Flaum focuses on real property management,
development, acquisitions and finance, leasing and brokerage services. He has participated
in multiple real estate transactions involving Fortune 500, national and regional companies.
A licensed real estate broker, Mr. Flaum is a member of the International Council of
Shopping Centers (ICSC) and a member of the New York State Commercial Association of
Realtors (NYSCAR). Mr. Flaum, who has a B.S. degree from Syracuse University, serves on the
board of directors and finance committee of the Jewish Community Federation and on the board
of directors of Constellation Brands Marvin Sands Performing Arts Center (CMAC). |
28
(7) |
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Joseph B. Rizzo, Partner and Head of the Litigation Department of the law firm of Gallo &
Iacovangelo, LLP, was born January 17, 1965, in Buffalo, New York. Graduated from Pittsford
Mendon High School, 1982; State University of New York at Buffalo, B.A., English, 1986;
State University of New York at Buffalo, School of Law, Juris Doctor, 1989. Admitted to
practice law in the State of New York, 1990. Associate Attorney with the law firm of Speyer
& Perlberg, New York, New York, 1989 to 1995. Joined law firm of Gallo & Iacovangelo, LLP,
Rochester, New York in 1995 and became a Partner and Head of the firms Litigation
Department, 1997 to present. Mr. Rizzo is a published legal commentator and a lecturer for
the New York State Bar Association. He is a member of the New York State Bar Association and
the National Crime Victims Bar Association. Appears in the Strathmores Whos Who
2005-2006 Edition for outstanding leadership and achievement in the practice of law. |
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(8) |
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Dr. William W. Destler became president of Rochester Institute of Technology on July 1, 2007. |
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He is the ninth president in the universitys 178-year history. He was formerly senior vice
president for academic affairs and provost of the University of Maryland at College Park. At
RIT, Dr. Destler is responsible for one of the nations leading career-oriented universities
with 16,450-students from all 50 states and more than 100 foreign countries, 2,800 faculty
and staff, an annual operating budget of more than $492 million, and an endowment of more
than $600 million. The university has one of the oldest and largest cooperative education
programs in the country. |
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Dr. Destler serves on the American Council on Educations Commission on Effective Leadership
and is a board member for the National Institute of Aerospace Foundation. He is a member of
the board of directors for New Yorks Commission on Independent Colleges and Universities.
He also serves on community boards in Rochester: Rochester General Health System, Greater
Rochester Enterprise, Rochester Business Alliance, Golisano Family Foundation and High Tech
of Rochester, and Torvec Inc. |
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Prior to RIT, Dr. Destler spent more than 30 years at the University of Maryland, rising
from the ranks of research associate and assistant professor of electrical engineering to
senior vice president and provost. At Maryland, he also served as electrical engineering
department chair, dean of the A. James Clark School of Engineering, interim vice president
for university advancement, vice president for research, and dean of the graduate school. |
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As engineering school dean, Dr. Destler created the Gemstone Program, a multidisciplinary
four-year research program for undergraduate honors students of all majors in which teams of
students design, direct and conduct research exploring the interdependence of science and
technology with society. During his term as graduate school dean, student applications
increased by more than 20 percent and research funding rose by more than 30 percent. While
interim vice president for advancement, Dr. Destler was credited with securing a $25 million
gift from Comcast Corp. for naming rights supporting the construction of the Comcast Center
sports arena. As senior vice president for academic affairs, retention increased and the
graduation rate rose from 62 percent to 80 percent over five years. Other achievements at
Maryland include leading a faculty team in the creation of a cross-disciplinary masters
degree program in telecommunications; originating the Hinman CEOs Program, a living-learning
entrepreneurship initiative for undergraduate students; and involvement in the Presidents
Promise, an outside-the-classroom experiential program for freshmen. |
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Dr. Destler is an international authority on high-power microwave sources and advanced
accelerator concepts. He is best known for his pioneering work in the collective
acceleration of heavy ions, achieving the highest energies to date by this method, and for
his development of large orbit microwave devices, including large orbit gyrotrons and
rotating beam free electron lasers. He has consulted for government agencies and private
firms, received more than $40 million in grants and contracts, published more than 200
journal articles and book chapters, and presented many papers. Dr. Destler has also directed
18 masters and doctoral student theses and earned awards for his teaching.
Dr. Destler earned a bachelors degree from Stevens Institute of Technology and a Ph.D. from
Cornell University. Both degrees were in the field of applied physics. |
29
(c) Relationships; Agreements
Keith E. and James Y. Gleasman are brothers. There are no other family relationships among any of
the directors or executive officers of the company. There are no agreements or arrangements for the
nomination or the appointment of any persons to the board of directors.
(d) Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors, our executive officers
and persons who own more than 10% of our common stock to file initial reports of ownership (Form 3)
and reports of changes in ownership of our common stock (Forms 4 and 5) with the Securities and
Exchange Commission. These persons are required by SEC regulations to furnish us with copies of all
section 16(a) reports they file.
To the best of the companys knowledge, based upon its review of all of the copies of Forms 3, 4
and 5 received by it, the company believes that to the extent such forms were required to be filed,
such forms were timely filed by the current directors and executive officers pursuant to section 16
of the Securities Exchange Act of 1934, and that no current director or executive officer required
to file such forms failed to either file them or file them in timely fashion.
(e) Corporate Governance, Code of Ethics, Director Independence
Role of the Board of Directors
All corporate authority resides in the board of directors as the representative of the
shareholders. The board has delegated authority to management to implement Torvecs mission of
maximizing long-term shareholder value, while adhering to the laws of the jurisdictions where we
operate and at all times observing the highest ethical standards.
Such delegated authority includes the authorization and approval of company projects and programs,
the establishment of budgets for such projects and for the company as a whole, the mandate to
engage in and implement fund-raising programs as well as the authority to hire consultants and
employees and, except where explicitly retain by the board, the authority to terminate their
services. The board retains responsibility to recommend candidates to the shareholders for election
to the Board of Directors. The board retains responsibility for selection and evaluation of the
chief executive officer, determination of senior management compensation, final approval of the
annual budget, assurance of adequate systems, procedures and internal controls, as well as
assisting in the preparation and approval of strategic plans. Additionally, the board provides
advice and counsel to senior management on a regular basis.
All major decisions are considered by the board as a whole; however, the board has chosen to
exercise certain of its responsibilities through committees of the board. The board has established
three standing committees an Audit Committee, a Nominating Committee, and a Governance and
Compensation Committee. On July 8, 2005, the board temporarily created an Executive Committee,
composed of a majority of its members and granted to it the full authority of the board, in
accordance with and subject to the provisions of section 712 of the New York Business Corporation
Law. On February 18, 2010, the board terminated the Executive Committee and created a Technology
and Projects Committee with authority to oversee and coordinate all of the companys programs and
projects, establish and monitor budgets and expenditures for their execution and establish
priorities for their completion.
It is the companys policy that all directors attend the annual shareholders meeting. All persons
who were directors on the date of the annual meeting of shareholders meeting held on January 28,
2010 attended such meeting except that Gary Siconolfi was absent due to illness.
30
Operation of the Board and Its Committees
The companys common stock is traded on the over-the-counter bulletin board, an electronic
inter-dealer quotation system that displays real-time quotes, last-sale prices and volume
information. While the bulletin board is owned by the National Association of Securities Dealers,
Inc., the companys common stock is not listed for trading on the NASDAQ system or any stock
exchange.
Despite the companys common stock not being so listed, the board has voluntarily adopted and
implemented the NASDs listed company rules regulating the composition and operation of the board
and its committees as in effect from time to time since the companys common stock began trading in
January, 1999.
The board of directors of the company met and/or took official action eleven (11) times during the
year from January 1, 2009 through December 31, 2009. During this period, each incumbent director
attended, either in person or by telephonic conference as permitted by the companys Bylaws,
approximately 100% of the total number of meetings held during the period for which he was a
director and approximately 100% of the total number of meetings of the committees of the board on
which he served during the period for which he was a member of such committee(s).
Director Independence
Under NASDs rules applicable to listed companies, a majority of the board must be independent.
This requirement means that a majority of the companys board must be composed of persons who are
not executive officers or employees of the company or who have a relationship with the company
which, in the boards opinion, would interfere with the exercise of independent judgment in
carrying out his responsibilities as a director. In addition, a director can not be considered
independent if he is compensated by the company for any reason other than for service rendered as a
member of the board and/or its committees.
Based upon these independence standards and all of the relevant facts and circumstances, the board
determined that Daniel R. Bickel, William W. Destler, Herbert H. Dobbs, Asher J. Flaum, Joseph B.
Rizzo and Gary A. Siconolfi (constituting 6 members of an 8 person board) are independent. In
making this determination, the board noted that none of these directors is an executive officer or
employee of the company and that each is compensated by the company under its Nonmanagement
Directors Plan and Commercializing Event Plan solely for service as members of the board and its
committees. The board considered that while Mr. Rizzo is a partner in a law firm that has been
engaged in representing the company in certain litigation during the past three years, such
relationship does not impair his independence since the amount of fees paid by the company in any
one year during such period did not exceed the greater of $200,000 or 5% of such law firms gross
revenues. The board considered that while Asher J. Flaum is an affiliate of the companys landlord,
1999 Mt. Read Blvd, LLC., such relationship does not impair his independence since the amount of
fees paid by the company in any one year since the inception of the lease (April, 2008 to December
31, 2009) does not exceed the greater of $200,000 or 5% of such landlords gross revenues during
such period.
Code of Ethics/Committee Charters
The board has adopted, implemented and published on the companys website (www.torvec.com) the
companys code of business conduct which applies to all members of the Board, all executive and
financial officers and all employees and consultants of the company, its divisions and its
subsidiaries. The code mandates that all company personnel observe the highest standards of
business and personal conduct in the performance of their duties and responsibilities, especially
in dealing with other company personnel, our shareholders, the general public, the business
community, customers, suppliers, and governmental authorities. It addresses conflicts of interest,
corporate opportunities, confidentiality, fair dealing, protection and proper use of corporate
assets, compliance with laws, rules and regulations and requires the reporting of any illegal or
unethical behavior.
We require our employees, our officers and directors to talk to supervisors, managers or other
appropriate personnel to report and discuss any known or suspected unethical, illegal or criminal
activity involving the company and/or its employees. We have established a compliance network which
allows employees, officers and directors to anonymously report any known or suspected violation of
policies and rules set forth in the code of business conduct.
Waivers or amendments of the codes provisions are generally not permitted, may be granted only by
the board of directors, and if granted, will be disclosed promptly by the company by posting the
waiver or amendment on the companys website and by filing a current report ( Form 8-K) with the
Securities and Exchange Commission. There were no waivers of the code during the year ended
December 31, 2009.
31
The board has also adopted, implemented and posted on the companys website the companys financial
integrity and compliance program. The program mandates that the companys results of operations and
financial position must be recorded in accordance with the requirements of law and generally
accepted accounting principles and that all books, records and accounts must be maintained in
reasonable detail so that they accurately and fairly reflect the business transactions and
disposition of assets of the company. The written policy requires all personnel responsible for the
preparation of financial information to ensure that the companys financial policies and internal
control procedures are followed and holds each person involved in creating, processing and
recording financial information accountable for the integrity of the financial reporting process.
The program establishes a network for the receipt, retention, and treatment of complaints received
by the company regarding accounting, internal accounting controls or auditing matters and provides
for the submission (including the confidential anonymous submission) by company personnel of any
concerns they might have regarding questionable accounting or auditing practices.
On November 9, 2004, the board adopted a statement of corporate governance principles which
establishes policies governing the role of the board of directors, its relationship to management,
qualifications of directors, independence of directors, the size of the board and selection
process, board committees, independence of committee members, meetings of independent directors,
shareholder communications, board and committee agendas, ethics and conflicts of interest,
reporting and access to advisers. The statement can be found on the companys website and was
attached to the proxy statement filed in connection with the annual meeting of shareholders in
January, 2005.
The board adopted an Audit Committee charter delineating the composition and the responsibilities
of the Audit Committee which became effective on April 17, 2000. The charter was revised by the
board on January 15, 2003 to further delineate the Committees responsibilities and authority in
accordance with provisions of the Sarbanes-Oxley Act of 2002. The charter is on the companys
website at www.torvec.com. It was filed as an appendix to the proxy statements distributed to
shareholders in connection with the 2003 and 2006 annual meetings.
On November 9, 2004, the board adopted a Nominating Committee charter, a copy of which was attached
to the companys proxy statement filed in connection with the annual meeting of shareholders held
in January, 2005. The Nominating Committee charter is on the companys website at www.torvec.com.
Policy/Procedure for Review/ Approval of Related Party Transactions
Business transactions between Torvec and its officers or directors, including companies in which a
director or officer (or an immediate family member) has a substantial ownership interest or a
company where such director or officer (or an immediate family member) serves as an executive
officer (related party transactions) are not prohibited. In fact, certain related party
transactions can be beneficial to the company and to its shareholders.
It is important, however, to ensure that any related party transactions are beneficial to the
company. Accordingly, any related party transaction, regardless of amount, is submitted to the
Governance and Compensation Committee in advance for review and approval. All existing related
party transactions are reviewed at least annually by the Governance and Compensation Committee. All
related party transactions are reviewed by the companys general counsel to determine the
appropriateness of each related party transaction. The Committee may, at its discretion, consult
with outside legal counsel.
No related party transaction may be approved by the Committee if such transaction, regardless of
its benefit to the company, would violate the companys written code of business conduct, its
written financial integrity and compliance program and/or its statement of corporate governance
principles.
Any director or officer with an interest in a related party transaction is expected to recluse
himself from considering the matter and voting upon it. In all cases, a director or officer with an
interest in a related party transaction may not attempt to influence company personnel in making
any decision with respect to the transaction.
32
Executive Sessions of Independent Directors
The companys independent directors meet in executive session without management or non-independent
directors present. Currently, Gary A. Siconolfi presides at all executive sessions of the
independent directors.
Committees of the Board
The Audit Committee
Number of Members: 3
Members:
Daniel R. Bickel (Chair)
Herbert H. Dobbs
Gary A. Siconolfi
Number of Meetings in 2009: 4
Functions:
The primary function of the Audit Committee as stated in its charter is to assist the board of
directors in fulfilling its oversight responsibilities relating to monitoring the quality,
reliability and integrity of the companys external financial reporting process, the adequacy of
the companys internal controls particularly with respect to the companys compliance with legal
and regulatory requirements and corporate policy, and the independence and performance of the
companys registered public accounting firm who is ultimately accountable and must report directly
to the Audit Committee. More specifically, the Audit Committee is directly responsible for:
the appointment, compensation, retention and oversight of the work of
the independent, registered public accounting firm engaged (including the resolution
of disagreements between management and the auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work or performing
other audit, review or attest services;
the pre-approval of all auditing and legally permissible non-auditing
services to be performed by the companys independent, registered public accounting
firm;
the disclosure by the company of all pre-approved non-audit services in
periodic reports filed by the company with the Securities and Exchange Commission;
the disclosure by the company of the number and name(s) of each Audit
Committee member who is an audit committee financial expert as defined by the
charter in accordance with rules promulgated by the Securities and Exchange
Commission;
the establishment of internal procedures for complaints concerning the
companys accounting, internal accounting controls or auditing matters;
the review of internal controls, accounting practices, and financial
reporting, including the results of the annual audit and the review of the interim
financial statements with management and the independent, registered public
accounting firm;
the engagement of independent counsel and advisors as it determines
necessary to carry out its duties and the funding therefore.
33
All members of the Audit Committee are independent as independence is defined in Rule 4200(a)(15)
of the National Association of Securities Dealers, Inc. listing standards and as defined by Rule
10A-3(b)(1)(ii) promulgated by the Securities and Exchange Commission. Daniel R. Bickel has been
appointed the Audit Committees financial expert as defined by the Audit Committees charter in
accordance with rules promulgated by the Securities and Exchange Commission.
The Nominating Committee
Number of Members: 3
Members:
Joseph B. Rizzo (Chair)
Daniel R. Bickel
Gary A. Siconolfi
Number of Meetings in 2009: 2
Functions:
As specified in its charter, the purpose of the Nominating Committee is to identify, consider and
recommend qualified individuals to the Board for election as directors, including the slate of
directors that the board proposes for election by shareholders at the annual meeting. The charter
sets forth the following policy and procedures with respect to the consideration of any director
candidates recommended by security holders:
Shareholders wishing to directly nominate candidates for election to the board of directors
at an annual meeting must do so by giving notice in writing to the chairman of the
Nominating Committee, Torvec, Inc., Mount Read Industrial Facility, 1999 Mount Read Blvd.,
Rochester, New York 14615. The notice with respect to any annual meeting must be delivered
to the chairman not less than 120 days prior to the first anniversary of the preceding
years annual meeting. The notice shall set forth (a) the name and address of the
shareholder who intends to make the nomination; (b) the name, age, business address and
residence address of each nominee; (c) the principal occupation or employment of each
nominee; (d) the class and number of shares of Torvec securities which are beneficially
owned by each nominee and by the nominating shareholder; (e) any other information
concerning the nominee that must be disclosed in nominee and proxy solicitations pursuant to
Regulation 14A of the Securities Exchange Act of 1934; and (f) the executed consent of each
nominee to serve as a director of Torvec if elected.
Nominations submitted in accordance with the foregoing procedure will be considered and voted upon
by the Nominating Committee. Any shareholder nominee recommended by the Committee and proposed by
the board for election at the next annual meeting of shareholders shall be included in the
companys proxy statement for such annual meeting.
The Nominating Committee charter also sets forth the qualifications and a specific description of
skills that members of the board of the company should possess, regardless of by whom nominated:
In recommending candidates, the Committee shall consider the candidates mix of skills,
experience with businesses and other organizations of comparable size, reputation,
background and time availability (in light of anticipated needs), the interplay of the
candidates experience with the experience of other board members, the extent to which the
candidate would be a desirable addition to the board and any committees of the board and any
other factors the Committee deems appropriate. At a minimum, the Committee shall address the
following skill sets in evaluating director candidates: accounting or finance, business or
management experience, industry knowledge, customer base experience or perspective,
international marketing and business experience, strategic planning and leadership
experience.
34
Directors should possess the highest personal and professional ethics, integrity and values,
and be committed to representing the long-term interest of the shareholders. They must also
have an inquisitive and objective perspective, practical wisdom and mature judgment. The
board should represent diverse experience at policy making levels in business, government,
education and technology, and in areas that are relevant to the companys worldwide
activities.
Directors must be willing to devote sufficient time to carrying out their duties and
responsibilities effectively, and should be committed to serve on the board for an extended
period of time. Directors should consider offering their resignation in the event that
significant change in their personal circumstances, including their health, family
responsibilities, or a change in their principal job responsibilities, would preclude them
from devoting sufficient time to carrying out their responsibilities effectively.
The board does not believe that arbitrary term limits on director service are appropriate,
nor does it believe that directors should expect to be renominated automatically. The
contribution of each member as a member of a committee or the board shall be evaluated each
year by the Committee before his renomination is recommended to the board.
Each of member of the Nominating Committee is an independent director as defined by Rule
10A-3(b)(1)(ii) promulgated by the Securities and Exchange Commission and as defined by Rule
4200(a)(15) of the National Association of Securities Dealers, Inc.
The Governance and Compensation Committee
Number of Members: 3
Members:
Gary A. Siconolfi (Chair)
Daniel R. Bickel
Joseph B. Rizzo
Number of Meetings in 2009: 2
Functions:
The purpose of the Governance and Compensation Committee is to regularly monitor the effectiveness
of managements policies and decisions including the execution of the companys strategies in order
to insure that the company represents the shareholders interests, including optimizing long term
as well as short term financial returns. The Committee develops and recommends to the board
corporate governance principles and guidelines and reviews the charter and composition of each
committee of the board and makes recommendations to the board for the adoption of or revisions to
committee charters, the creation of additional committees or the elimination of committees.
The Committee also:
(1) establishes and reviews the overall executive compensation philosophy and strategy of the
company and oversees the companys various compensation programs and plans.
(2) reviews and makes recommendations to the board of directors on employment and business
consultants compensation policies, forms and levels of annual compensation, including specifically,
the performance and level of annual compensation of the executive officers and top management
personnel of the company;
(3) specifically reviews the annual compensation of the chief executive officer in the light of
established goals and objectives and based upon such evaluation, makes specific recommendations to
the board regarding such compensation;
35
(4) reviews and makes recommendations to the board on the operation, performance and administration
of the companys employee benefit plans, including the companys Business Consultants Stock Plan,
the Nonmanagement Directors Plan and Commercializing Event Plan.
All members of the Committee are independent within the meaning of Rule 10A-3(b) (1)(ii) and Rule
4200(a)(15) promulgated by the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc. respectively.
The Executive Committee
Number of Members: 5
Members:
Gary A. Siconolfi (Chair)
Daniel R. Bickel
Herbert H. Dobbs
James Y. Gleasman
Keith E. Gleasman
Number of Meetings in 2009: None
Functions
On July 8, 2005, the board of directors created an Executive Committee. The members of the
committee constitute a majority of the companys board, and is composed of 2 of the companys
founders who have guided the company from inception, a long-term advisor to the Gleasman family and
the company, especially on military matters (Dr. Dobbs), and an individual who was nominated and
elected for the express purpose of representing the interests of all of the companys shareholders,
including its minority shareholders (Mr. Siconolfi).
As permitted by section 712 of the New York Business Corporation Law and the companys Bylaws, the
Executive Committee has and may exercise all of the powers and authority of the board (including
but not limited to engaging such attorneys and advisors on terms determined by the Executive
Committee, including the payment of retainers, fees and expenses of such advisors, with such
reasonable retainers, fees and expenses of such advisors to be paid by the company), provided,
however, that the Executive Committee does not have the authority to:
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(i) |
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submit matters requiring shareholder approval under the Business
Corporation Law ; |
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fill vacancies in the board of directors or in any committee; |
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(iii) |
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fix compensation of the directors for serving on the board of directors or on any committee; |
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(iv) |
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amend or repeal the companys Bylaws; or |
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(v) |
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amend or repeal any resolution of the board which by its terms is not
amenable or repealable. |
On February 18, 2010, the board of directors dissolved the Executive Committee established by the
board in July, 2005 due to changed circumstances and created a Projects and Finance Committee
composed of management and engineer consultants with the following powers and authority delegated
to such committee:
a) to prepare and submit to the board for its approval, an annual budget for each fiscal year no
later than December 31 of the previous fiscal year, provided that the committee shall have been
deemed to have fulfilled this requirement for the 2010 fiscal year by the presentation of the 2010
budget submitted for approval at this meeting;
36
b) to prepare and submit to the board for its approval a specific list of technology projects
the company intends to accomplish for each fiscal year no later than December 31 of the previous
fiscal year in accordance with the annual budget described above, provided that the committee shall
have been deemed to have fulfilled this requirement for the 2010 fiscal year by the presentation of
the 2010 project list submitted for approval at this meeting;
c) to oversee and monitor the accomplishment of the technology projects approved annually by
the board, including for this purpose, the specific mandate that all company expenditures during
each fiscal year shall be expended solely for the enumerated projects annually approved by the
board in accordance with the budget annually approved by the board;
d) to designate at least one of its members with the authority and responsibility to approve all
company purchase orders provided that any such approval shall be limited to purchase orders issued
in connection with the technology projects annually approved by the board in accordance with the
board approved annual budget;
e) to make recommendations to the board from time to time during the course of each fiscal year
with respect to the continuation, amendment of, adjustment to or termination of any board-approved
technology project due to the initiation of an additional or substitute technology project,
economic conditions, unforeseen events or other circumstances, including all recommendations as to
the nature and scope of each project, the timing with respect a projects completion, the
deliverables associated with each project and the dollars to be allocated to each project within
the companys overall annual budget;
f) to consider and make recommendations to the board with respect to additional or substitute
technology projects during the course of each fiscal year if deemed appropriate for the success of
the companys commercialization efforts;
g) to designate at least one of its members with the authority and responsibility to approve
the actual payment of all company payables incurred in connection with the implementation of each
of the board approved technology projects in accordance with each annually board approved budget;
h) to mandate that no purchase order may be issued nor expenditure approved for payment unless
such purchase order and/or expenditure pertains only to those technology projects approved by the
board in accordance with the board approved annual budget, provided that the committee shall have
the authority to recommend that additional projects or substitute projects be considered by the
board for its approval during the course of any fiscal year if deemed appropriate for the success
of the companys commercializing efforts.
Compensation Committee Interlocks and Insider Participation
The Governance and Compensation Committee is composed of Gary A. Siconolfi, Daniel R. Bickel and
Herbert H. Dobbs. None of these persons is a current or former employee of the company. Herbert H.
Dobbs currently serves as a director and as the companys secretary and Gary A. Siconolfi is
currently chairman of the board of directors and a former secretary. None of these individuals
serves as a member of the board of directors or as an executive officer of any company which
provides services to the company.
37
Shareholder Communications
We encourage all shareholders to communicate with management and with our directors, including our
independent directors. Any shareholder wishing to communicate directly with management should
e-mail or address regular mail to:
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Officer |
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Mailing Address |
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E-mail |
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James Y. Gleasman+++
Chief Executive Officer,
Interim Chief Financial Officer
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Torvec, Inc.
Mt. Read Industrial Facility
1999 Mt. Read Blvd.
Rochester, New York 14615
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jgleasman@torvec.com |
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+++ Retired from such
positions, effective
March 14, 2010 |
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Keith E. Gleasman
President
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Torvec, Inc.
Mt. Read Industrial Facility
1999 Mt. Read Blvd.
Rochester, New York 14615
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kgleasman@torvec.com |
Any shareholder wishing to communicate directly with any of our independent directors should e-mail
him as follows:
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Herbert H. Dobbs
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dr.hh.dobbs@earthlink.net |
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Joseph Rizzo
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josephrizzo@gallolaw.com |
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Daniel R. Bickel
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dbickel@frontiernet.net |
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Gary A. Siconolfi
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gary1015@rochester.rr.com |
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Asher J. Flaum
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aflaum@flaummgt.com |
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William W. Destler
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wwdpro@rit.edu |
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Regular mail may be addressed to:
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Torvec Independent Directors
c/o Torvec, Inc. |
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Mt. Read Industrial Facility
1999 Mt. Read Blvd.
Rochester, New York 14615 |
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Attention: Gary A. Siconolfi |
38
Sarbanes-Oxley Compliance
The Sarbanes-Oxley Act of 2002 was enacted on July 30, 2002. The statute addresses, among other
issues, corporate governance, auditing and accounting, executive compensation and enhanced and
timely disclosure of corporate information. On November 4, 2003, the National Association of
Securities Dealers, Inc. adopted final NASD Rules addressing corporate governance, director
independence and corporate accountability. The NASD has amended these Rules from time to time.
The companys board of directors has acted to strengthen and improve its already strong corporate
governance policies and practices as a result of the Act and Rules. A summary of formal policies
the board has adopted to comply with Sarbanes-Oxley, the NASD Rules and to enhance shareholder
confidence in the company and its management is found under the caption Corporate Governance, Code
of Ethics, Director Independence.
A majority of the members of the companys board of directors and of its executive committee are
independent within the meaning of Rule 10A-3(b)(1)(ii) promulgated by the Securities and Exchange
Commission and Rule 4200 (a) (15) promulgated by the National Association of Securities Dealers,
Inc.
39
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Item 11. |
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EXECUTIVE COMPENSATION |
(a) Compensation Discussion and Analysis
The company is a development stage company which means that the company has not generated
significant revenues on an ongoing basis. Since its inception in September, 1996, the companys
principal business activity has consisted of research, development and patenting its automotive
technologies worldwide. Since inception through December 31, 2009, the company has relied primarily
on monies generated by the sale of its common and Preferred equity to sustain its business. During
2008 and 2009, the company generated limited revenues from the sale of certain of its products. The
board of directors has adopted and has consistently followed a policy to expend the proceeds of
equity sales and any revenues generated by the sale of its products directly on the costs and
expenses associated with the actual development and manufacture of its products (including the
development of prototypes, pre-production and production-ready models, and the leasing of research
and testing facilities).
Current Compensation Philosophy
In the light of the above described facts and circumstances, the board has developed a current
compensation philosophy based upon the following elements:
Effective January 1, 2008, the board of directors instituted a compensation plan for James and
Keith Gleasman by which the company would compensate each of them for services performed and
inventions and know-how transferred to the company at the rate of $300,000 per year. Actual payment
of this compensation, or any portion thereof, was conditioned upon a board of director
determination that the company had the requisite cash, after the complete funding of all ongoing
company projects, to make payment.
The company did not have the requisite cash available to pay the Gleasmans compensation under
this arrangement from January 1, 2008 through August 17, 2009. On this date, each of the Gleasmans
waived all of his rights and interest in and to the board-created compensation plan, including all
of his rights and interest in and to the amount(s) under the plan accrued to such date. As a result
of such waiver, of the $942,000 amount accrued under the plan at June 30, 2009, namely $900,000 was
reclassified to equity as a contribution of services and $42,000 accrued under the plan for payroll
taxes was recorded as a reduction to general and administrative expenses in the quarter ended June
30, 2009.
For periods for which there is no compensation plan, the company recorded the estimated value of
each of the Gleasmans services rendered to the company as a contribution of services (estimated at
$300,000 each per annum) under generally accepted accounting principles applicable to the company
and is required under the same accounting principles to allocate the amount of such contribution
between research and development expenses on the one hand and general and administrative on the
other hand. For the year ended December 31, 2009, the company recorded $200,000 to research and
development expense and $400,000 to general and administrative expense, based upon managements
estimate.
Current compensation payable for services rendered by individuals, including engineering,
business consulting, legal and patent services, as well as for services rendered by non-executive
management and the companys nonmanagement directors, is to be paid to the extent feasible pursuant
to the companys business consultants stock plan. The company has registered common shares
issuable under the plan so that nonaffiliates are able to sell such shares immediately and
affiliates are able to sell such shares without regard to the restricted stock provisions of Rule
144 promulgated by the Securities and Exchange Commission;
the number of common shares to be issued in satisfaction of consultants invoices is to be
calculated as of the date of the invoice or, in the case of retainer agreements, on the date(s)
specified in the retainer agreement(s). With respect to calculating the number of shares to be
issued under the Nonmanagement Directors Plan and to the companys general counsel, the number of
shares is to be calculated based upon the closing price of the companys $.01 par value common
stock on the last trading day of each calendar month immediately preceding the date of payment;
all of the policies described above were adopted by the board of directors upon the
recommendation of the Governance and Compensation Committee, a committee composed of independent
directors. The specific annual rates of current compensation payable to each of the individuals is
set by this committee and is commensurate with the level of current compensation payable for the
services rendered by persons in the capacities indicated in the greater metropolitan Rochester, New
York region.
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* |
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with respect to the compensation policies described above, effective March 14, 2010, James Y.
Gleasman retired as the companys chief executive officer and interim chief financial officer. |
40
Long-Term Compensation Philosophy
The core of the boards long-term compensation philosophy is based upon its realization that the
companys shareholders will be rewarded only by a business transaction involving the
commercialization of one or more of the companys automotive technologies. This means that the
company sells, licenses, enters into supply contracts, receives purchase orders and/or enters into
any other arrangement for any of the companys technologies in a manner designed to generate
revenue for the company. This can also mean that the company itself is acquired in a business
combination such that the companys shareholders will receive cash, the buyers stock or a
combination of cash and purchaser stock.
The board concluded that while directors, officers and key management personnel should be provided
with a long-term financial incentive to commercialize the companys technologies, such incentive
should be provided only upon a commercializing event which benefits the companys shareholders. The
board also concluded that such incentive should be directly proportional to the dollar amount of
gross revenue expected to be generated by the commercializing event.
To accomplish this goal, the board adopted a commercializing event plan designed to reward the
companys directors, executive officers and specified management and engineering personnel for the
successful completion of one or more commercializing events. Under the plan, business consultants
shares will be issued to participants in the plan if and only if a revenue-producing business
transaction is consummated.
The commercializing event plan (2007 Event Plan) provides as follows:
Participants
All directors, executive officers, management and engineering personnel engaged by the company.
Any other individual recommended by the Governance Committee and approved by the board of directors
from time to time.
Effective Date of 2007 Event Plan
October 10, 2007
Salient Terms of the 2007 Event Plan
Upon the happening of any commercializing event, each of the directors, executive officers and
specified management personnel are entitled to share equally in 6% of the gross revenues derived or
to be derived from the transaction and/or transactions constituting a commercializing event. Upon
the happening of any commercializing event, each of the specified engineering consultants shall be
entitled to share equally in 2% of the gross revenues derived and/or to be derived from the
transaction and/or transactions constituting a commercializing event.
The amount payable to each individual who was a participant in the 2007 Event Plan as of the 2007
Event Plans effective date, October 10, 2007, shall be paid in business consulting shares of the
company at a rate of $3.00 per share, the closing price of the companys common stock on the OTCBB
on such date. This means, by way of illustration, that for each $1,000,000 or proportionate amount
thereof in gross revenue generated by a commercializing event, each individual who was a director,
officer or specified management participant as of October 10, 2007 shall be entitled to receive
2,222 business consulting shares ($1,000,000 multiplied by .06 divided by nine participants divided
by $3.00). Each specified engineering participant as of October 10, 2007 shall be entitled to
receive 1,667 business consulting shares ($1,000,000 multiplied by .02 divided by four participants
divided by $3.00).
Additional individuals may be added to the 2007 Event Plan from time to time, either at the 6%
management level or at the 2% engineering level. With respect to each additional individual,
however, the actual number of shares issuable as the result of any commercializing event shall be
calculated based upon the closing price of the companys common stock on the OTCBB (or if the
companys shares are listed on an exchange, including NASDAQ, on such exchange) on the date the
individual becomes a participant in the 2007 Event Plan. In no event, however, may the calculation
be based upon a rate which is less than $3.00 per share.
41
In order to actually receive payment under the 2007 Event Plan, each participant must be both a)
employed by, a consultant to or associated with Torvec and b) judged to be in good standing with
the company at the time of any and all such payments, all as determined by the board of directors as of the date of the Boards
authorization of payments to be made under the 2007 Event Plan.
For purposes of the 2007 Event Plan, a commercializing event shall consist in any completed
transaction, or series of completed transactions, regardless of form, structure or size and/or
dollar amount by which the company and/or its shareholders derive or are expected to derive dollars
from a public or private source which the board, in its judgment, deems significant under the terms
of the transaction and/or the terms of any agreement or working arrangement entered into by the
company. Payments to be made to participants with respect to each given commercializing event shall
be made in full upon the finalization of the commercializing event even if the company is to be
paid in installments or some other type of arrangement actually deferring the receipt of cash.
Where payments are to be made pursuant to an arrangement, such as a license or supply contract,
where the aggregate consideration to be received by the company as the result of the
commercializing event is not stated, the aggregate dollar-value ascribed to the license, supply
contract or similar instrument based upon an estimate of the total dollars to be received over the
term of the instrument shall be utilized for purposes of fixing the gross dollars to be derived
from the commercializing event.
Participants in the 2007 Event Plan shall be entitled to receive payments regardless of the number
of commercializing events with respect to each individual piece of technology.
On March 28, 2008 the board of directors approved amendments to the 2007 Event Plan recommended by
the Governance and Compensation committee to clarify that:
1) for purposes of the good standing requirement, all participants are considered to be in good
standing unless a unanimous vote of the board of directors determines otherwise. In making this
determination, the board is required to consider whether a person has engaged in conduct which has
significantly harmed the company and to consider that any material violation of the companys Code
of Conduct shall constitute prima facie evidence that the company has been harmed;
2) participants shall be entitled to payment even though the participant is not actively engaged as
a consultant to or employee of the company if the reason for not being so engaged is due to death,
disability from accident, disease or similar circumstance beyond the participants control or is on
a leave of absence approved by an authorized officer;
3) the 2007 Event Plan shall terminate no earlier than October 10, 2017 but that subject to such
condition, the 2007 Event Plan may be terminated by the board of directors in its sole direction;
4) the benefits provided by the 2007 Event Plan may not be reduced during its term as to
amount, time, method, manner of payment and/or any other material condition;
5) distributions under the 2007 Event Plan shall be made on a commercializing event by
commercializing event basis;
6) if the entire company is acquired in a transaction where Torvecs common shareholders receive
shares issued by the acquiring company, the number of shares distributable to the participants in
the 2007 Event Plan shall be calculated based upon the greater of $3.00 or trading price of the
acquiring company on the date the acquisition is announced publically.
On February 18, 2010, the board of directors modified the 2007 Event Plan by adjusting the formula
for determining the number of common shares issuable under the plan for commercializing events not
involving the complete sale of the company and/or its assets. Prior to the boards modification,
the denominator for determining the number of common shares was fixed at $3.00 a share, regardless
of the trading price of the companys common stock from time to time. As modified, the denominator
shall equal the price of the companys common stock using the two hundred day moving average of
closing prices for such common stock ending thirty (30) days immediately prior to the announcement
date of a commercializing event
The company issued an aggregate 12,061 common shares with a value upon issuance of $36,000 to
participants under the 2007 Event Plan for the year ended December 31, 2008 for commercializing
events occurring during the year 2008.
The company issued an aggregate 4,669 common shares with a value upon issuance of $14,000 to
participants under the 2007 Event Plan for the year ended December 31, 2009 for commercializing
events occurring during the year 2009.
42
The company accounts for the settlement of its commission arrangements to non-employee consultants,
directors, executives and certain administrative personnel with the issuance of its business
consulting shares under ASC 505-50 (Previously known as FASB Statement 123® Share Based Payment),
provided that there are
sufficient shares available under the business consulting plan. Under ASC 505-50, the company
measures commission arrangements at the fair value of the equity instruments issued. In the event
that there are insufficient shares available to settle the obligation, the company will follow the
provisions of ASC 815-40 (Previously known as: EITF 00-19 Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Companys Own Stock). Under ASC 815-40, the
company will record a liability instrument for the resulting changes in fair value from the date
due to the end of each reporting period until such liability is satisfied.
In 2007, certain engineering consultants agreed to cancel 445,000 warrants issued in 2005 and 2006
in exchange for their participation in the 2007 Event Plan. The exchange of the warrants for the
participation rights in a commercializing event did not result in an accounting charge. The
warrants at the date of the exchange were considered to have no value because the underlying
condition for vesting the warrants was not satisfied. The company determined that the fair value of
the rights to be de minimis at the date of the exchange based upon managements estimate.
On March 28, 2008, the board of directors approved the grant of an aggregate 195,000 common stock
warrants exercisable until December 1, 2016 at $5.00 per share to two engineer consultants in lieu
of their participation in the 2007 Event Plan. The company valued the warrants at $249,000 using
the Black-Scholes option/pricing model and charged operations.
43
SUMMARY COMPENSATION TABLE FOR YEARS
ENDED DECEMBER 31, 2007, 2008 and 2009
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Pension Value |
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Non- |
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Equity |
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Deferred |
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All |
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Name and |
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Stock |
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Compensation |
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Other |
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Principal |
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|
|
Salary |
|
|
Bonus |
|
|
Awards |
|
|
Awards |
|
|
Plan Compensation |
|
|
Earnings |
|
|
Compensation |
|
|
Total |
|
Position |
|
Year |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
(a) |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
|
(f) |
|
|
(g) |
|
|
(h) |
|
|
(i) |
|
|
(j) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith E. Gleasman, |
|
|
07 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
President(1) |
|
|
08 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
3,014 |
(4) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
(4) |
|
|
|
09 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
1,167 |
(4) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
|
|
|
|
1,167 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Y. Gleasman, |
|
|
07 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Chief Executive |
|
|
08 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
3,014 |
(4) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
3,014 |
(4) |
Officer, Interim |
|
|
09 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
1,167 |
(4) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
|
|
|
|
1,167 |
(4) |
Chief Financial Officer(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard B. Sullivan |
|
|
07 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
129,500 |
|
|
$ |
129,000 |
|
General Counsel(3) |
|
|
08 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
3,014 |
(4) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
144,000 |
|
|
$ |
144,000 |
(4) |
|
|
|
09 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
1,167 |
(4) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
160,417 |
|
|
|
161,584 |
|
|
|
|
(1) |
|
Mr. Keith E. Gleasman served as president for the years ended December 31, 2007, 2008 and 2009. For the year ended December 31, 2008, Mr. Gleasman was paid 1,005 business consultants shares and for the year ended December 31, 2009,
Mr. Gleasman was paid 389 business consultants share, all under the companys commercializing event plan. At issuance, such shares had a value of $3,014 and $1,167, respectively. |
|
|
|
Under compensation plan established for Mr. Gleasman by the board of directors, effective January 1, 2008, Mr. Gleasmans annual compensation is $300,000, payable only if the company has sufficient cash to pay all or any portion of
such amount. The company did not have cash to pay such compensation for the years ended December 31, 2009, 2008 and 2007. On August 17, 2009, Mr. Gleasman waived all of his rights and interest in and to the board-created
compensation plan, including all of his rights and interest in and to the amount(s) under the plan accrued to such date. |
|
(2) |
|
Mr. James Y. Gleasman served as chief executive officer and interim chief financial officer for the years ended December 31, 2007, 2008 and 2009. For the year ended December 31, 2008, Mr. Gleasman was paid 1,005 business
consultants shares and for the year ended December 31, 2009, Mr. Gleasman was paid 389 business consultants share, all under the companys commercializing event plan. At issuance, such shares had a value of $3,014 and $1,167,
respectively. |
|
|
|
Under a compensation plan established for Mr. Gleasman by the board of directors, effective January 1, 2008, Mr. Gleasmans annual compensation is $300,000, payable only if the company has sufficient cash to pay all or any portion
of such amount. The company did not have cash to pay such compensation for the years ended December 31, 2009, 2008 and 2007. On August 17, 2009, Mr. Gleasman waived all of his rights and interest in and to the board-created
compensation plan, including all of his rights and interest in and to the amount(s) under the plan accrued to such date. |
|
|
|
James Y. Gleasman retired as the companys chief executive officer and interim chief financial officer effective March 14, 2010. |
|
(3) |
|
Mr. Sullivan served as the companys general counsel for the years ended December 31, 2007, 2008 and 2009. He is paid a consulting fee monthly in business consultants stock based upon the closing price of the companys common stock as of the last
day of the previous month. The amount of Mr. Sullivans consulting fee is determined by the board of directors from time to time. As a participant in the companys commercializing event plan, for the year ended December 31, 2008, Mr. Sullivan was
paid 1,005 business consultants shares and for the year ended December 31, 2009, Mr. Sullivan was paid 389 business consultants shares, all under the companys commercializing event plan. At issuance, such shares had a value of $3,014 and $1,167,
respectively. On February 18, 2010, the board of directors approved increasing the consultant fee paid to its general counsel to $225,000 per annum, retroactive to January 1, 2010. Such consultant fee is payable in business consultants shares of
the companys common stock. |
|
(4) |
|
Represents payments made in accordance with companys commercializing event plan during years ended December 31, 2009 and 2008. |
44
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Award |
|
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of |
|
|
Unearned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
|
|
|
|
|
|
|
|
|
Number |
|
|
Shares |
|
|
Shares, |
|
|
Equity Incentive |
|
|
|
Number of |
|
|
Number of |
|
|
Number |
|
|
|
|
|
|
|
|
|
|
of Shares |
|
|
or Units |
|
|
Units or |
|
|
Plan Awards: |
|
|
|
Securities |
|
|
Securities |
|
|
of Securities |
|
|
|
|
|
|
|
|
|
|
or Units of |
|
|
of Stock |
|
|
Other |
|
|
Market or Payout |
|
|
|
Underlying |
|
|
Underlying |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
That |
|
|
Rights |
|
|
Value of Unearned |
|
|
|
Unexercised |
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
|
|
|
|
That Have |
|
|
Have |
|
|
That Have |
|
|
Shares, Units or |
|
|
|
Options |
|
|
Options |
|
|
Unearned |
|
|
Exercise |
|
|
Option |
|
|
Not |
|
|
Not |
|
|
Not |
|
|
Other Rights That |
|
|
|
(#) |
|
|
(#) |
|
|
Options |
|
|
Price |
|
|
Expiration |
|
|
Vested |
|
|
Vested |
|
|
Vested |
|
|
have Not Vested |
|
Name |
|
Exercisable |
|
|
Unexercisable |
|
|
(#) |
|
|
($) |
|
|
Date |
|
|
(#) |
|
|
($) |
|
|
(#) |
|
|
($) |
|
(a) |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
|
(f) |
|
|
(g) |
|
|
(h) |
|
|
(i) |
|
|
(j) |
|
James Y. Gleasman |
|
|
39,575 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
5.00 |
|
|
|
2013 |
(1) |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith E. Gleasman |
|
|
31,818 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
5.00 |
|
|
|
2013 |
(2) |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
|
(1) |
|
39,575 common stock purchase options exercisable for ten years at $5.00 per common share expire on December 21, 2013. |
|
(2) |
|
31,818 common stock purchase options exercisable for ten years at $5.00 per common share expire on December 21, 2013. |
45
DIRECTOR COMPENSATION FOR THE YEAR ENDED DECEMBER 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension |
|
|
|
|
|
|
|
|
|
Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and |
|
|
|
|
|
|
|
|
|
Earned or |
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
Nonqualified |
|
|
|
|
|
|
|
|
|
Paid in |
|
|
Stock |
|
|
Option |
|
|
Incentive Plan |
|
|
Deferred |
|
|
All Other |
|
|
|
|
|
|
Cash |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Compensation |
|
|
Compensation |
|
|
Total |
|
Name |
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
Earnings |
|
|
($) |
|
|
($) |
|
(a) |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
|
(f) |
|
|
(g) |
|
|
(h) |
|
Daniel R. Bickel (1) |
|
$ |
0 |
|
|
|
40,227 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
40,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Herbert H. Dobbs (2) |
|
$ |
0 |
|
|
|
27,627 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
27,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph B. Rizzo (3) |
|
$ |
0 |
|
|
|
32,982 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
32,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary A. Siconolfi (4) |
|
$ |
0 |
|
|
|
126,167 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
126,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asher J. Flaum(5) |
|
$ |
0 |
|
|
|
27,627 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
27,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
Destler(6) |
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
(1) |
|
Daniel R. Bickel was paid $26,460 in business consultants shares for services rendered during 2009 as a director and $12,600 in business consultants shares for services rendered in
2009 as chairman of the companys audit committee. In 2009, he was paid 389 common shares with a value at issuance of $1,167 under the companys commercializing event plan. |
|
(2) |
|
Herbert H. Dobbs was paid $26,460 in business consultants shares for
services rendered during 2009 as a director. In 2009, he was paid 389
common shares with a value at issuance of $1,167 under the companys
commercializing event plan. |
|
(3) |
|
Joseph B. Rizzo was paid $26,460 in business consultants shares for
services rendered during 2009 as a director and $5,355 in business
consultants shares for services rendered in 2009 as chairman of the
companys nominating committee. In 2009, he was paid 389 common shares
with a value at issuance of $1,167 under the companys commercializing
event plan. |
|
(4) |
|
Gary A. Siconolfi was paid $125,000 in business consultants shares for
services rendered during 2009 as a director, chairman of the board,
chairman of the companys executive committee and chairman of the
company governance and compensation committee. In 2009, he was paid
389 common shares with a value at issuance of $1,167 under the
companys commercializing event plan. On February 18, 2010, the board
of directors approved increasing the consultant fee paid to its
chairman of the board to $175,000 per annum, retroactive to January 1,
2010. Such consultant fee is payable in business consultant shares of
the companys common stock. |
|
(5) |
|
Asher J. Flaum was paid $26,460 in business consultants shares for services rendered in 2009 as a director. In 2009, he was paid 389
common shares with a value at issuance of $1,167 under the companys
commercializing event plan. |
|
(6) |
|
William Destler has agreed to serve as a director without compensation. |
46
(a) Discussion of Director Compensation
1) Participation in the Nonmanagement Directors Plan
At its meeting held on October 19, 2004, the board adopted a Nonmanagement Directors Plan for
directors who are not employees, consultants or part of management for services exclusively
rendered by them as directors, including services rendered as chairman of the companys standing
committees.
As originally adopted and as in force through July 1, 2006, the plan provided that nonmanagement
directors who have been board members for at least one full year and have attended, in person or by
telephonic conference as permitted by our by-laws, at least 75% of both board meetings and meetings
of committees of which they are a member were entitled to receive on a yearly basis, warrants to
purchase up to 12,000 common shares at a purchase price of $.01 per share. The warrants were issued
quarterly on a pro rata basis and were issued contingently in anticipation of a directors
satisfactory completion of one year of service and/or 75% of board/committee meetings. The warrant
term was for a period of ten years. In addition, the chairman of the audit committee was entitled
to earn as payment for services on such committee 5,000 warrants per year, payable quarterly.
On October 13, 2006, the board modified the plan to provide that, effective for periods commencing
on and after July 1, 2006, a stipulated sum per annum should be paid to each nonmanagement director
solely for his service as a director, with the amount of such payment determined by the board from
time to time, based upon such considerations as risk, number of meetings, monitoring and reviewing
company compliance with the Sarbanes-Oxley Act as well as all other applicable local, state,
national and international rules and regulations, development and implementation of policies,
including establishing and reviewing executive compensation, longevity, 24-hour a day availability,
as well as oversight of managements pursuit of one or more commercializing events for the
companys technologies. Until adjusted in accordance with such factors, the board determined that
each nonmanagement director shall be paid $25,200 per annum exclusively for board and committee
service, payable pro rata on a quarterly basis, provided each such director shall have attended,
either in person or via telephonic conference, 75% of the meetings of the board and of the
committee(s) of which he is a member, such attendance measured on an annual basis. Such amount
shall be paid either in cash, business consultants stock or a combination of both and is payable to
a newly elected director on a prospective basis upon his election as a director.
At the same meeting, the board also determined that a stipulated sum per annum should be paid to
those nonmanagement directors serving as chairman of the board, chairman of the executive
committee, chairman of the audit committee, chairman of the nominating committee and chairman of
the compensation and governance committee, exclusively for service rendered in such capacities.
Until further adjusted, the board determined that the chairman of the board shall be paid $7,500
per annum, the chairman of the executive committee shall be paid $12,000 per annum, the chairman of
the audit committee shall be paid $12,000 per annum, the chairman of the nominating committee shall
be paid $5,100 per annum and the chairman of the governance and compensation committee shall be
paid $5,100 per annum. Such amounts are to be paid pro rata on a quarterly basis with payments made
in cash, business consultants stock or a combination of both and is payable to a newly elected
chairman on a prospective basis upon his election as chairman. With respect to amounts payable to
chairmen for calendar 2006, such amounts shall be payable retroactively to January 1, 2006(except
for the audit committee chairman who has received payment for the six month period ended June 30,
2006).
Each unexercised, nonmanagement director warrant outstanding as of October 13, 2006 was amended to
provide that such warrants may be exercised only upon the happening of the earlier to occur of the
following events: death or disability of the director, termination of his service as a director,
change in control of the company or the sale, license or other commercial transfer of a substantial
amount of the companys assets, all of such terms to be interpreted in accordance with the
provisions of section 409A of the Internal Revenue Code of 1986 and the regulations promulgated
thereunder.
On October 10, 2007, the governance and compensation committee recommended and on October 31, 2007,
the Board of Directors approved amendments to the Nonmanagement Directors Plan, effective for the
quarter commencing July 1, 2007 and for all subsequent quarters commencing thereafter.
The first amendment provided for an across the board increase of 5% per annum to the amounts
payable for board service and an additional across the board increase of 5% per annum for service
as chairman of the committees enumerated. Thus, under the first amendment, each director would
receive $26,460 for board and committee service per annum. The chairman of the audit committee
would receive an additional $13,125 per annum and the chairman of the nominating committee would
receive an additional $5,355 per annum.
In recognition of the circumstance that the chairman of the board, chairman of the governance and
compensation committee and the chairman of the executive committee is the same individual, the
value of such service performed by such individual and the fact that the time expended by such
individual in service to the company in each of these positions has expanded greatly as the result
of the Sarbanes-Oxley Act, the Board approved an increase in the fee payable to such person to
$125,000 per annum.
47
Daniel R. Bickel, Herbert H. Dobbs, Joseph B. Rizzo, Gary A. Siconolfi and David M. Flaum until his
resignation on October 10, 2008 were each eligible to participate in the Nonmanagement Directors
Plan in 2008. As a result of his election to the board on October 10, 2008, Asher J. Flaum became
eligible to participate in the plan.
As a result of his election to the board on September 15, 2009, William W. Destler became eligible
to participate in the plan. Dr. Destler voluntarily has waived his right to receive benefits under
the plan.
Keith E. Gleasman and James Y. Gleasman were not eligible to participate since they are executive
officers of the company. James Y. Gleasman retired as a member of the board of directors and as the
companys chief executive officer and interim chief financial officer effective March 14, 2010.
2) Participation in 1998 Stock Option Plan
On December 1, 1997, the companys board of directors adopted the companys 1998 Stock Option Plan
pursuant to which officers, directors, key employees and/or consultants of the company may be
granted incentive stock options and/or non-qualified stock options to purchase up to an aggregate
1998 Stock Option Plan. On December 17, 1998, the company registered the shares reserved for
issuance under the 1998 Stock Option Plan under the Securities Act of 1933.
of 2,000,000 shares of the companys common stock. On May 27, 1998, the companys shareholders
approved the With respect to incentive stock options, the Stock Option Plan provided that the
exercise price of each such option must be at least equal to 100% of the fair market value of the
common stock on the date that such option is granted (110% of fair market value in the case of
shareholders who, at the time the option is granted, own more than 10% of the total outstanding
common stock), and required that all such options have an expiration date not later than the date
which is one day before the tenth anniversary of the date of the grant of such options (or the
fifth anniversary of the date of grant in the case of 10% shareholders). However, in the event that
the option holder ceases to be an employee of the company, such option holders incentive options
immediately terminate. Pursuant to the provisions of the Stock Option Plan, the aggregate fair
market value, determined as of the date(s) of grant, for which incentive stock options are first
exercisable by an option holder during any one calendar year cannot exceed $100,000.
With respect to non-qualified stock options, the Stock Option permitted the exercise price to be
less than the fair market value of the common stock on the date the option is granted and permitted
Board discretion with respect to the establishment of the terms of such options. Unless the Board
otherwise determined, in the event that the option holder ceases to be an employee of the company,
such option holders non-qualified options immediately terminate.
As of December 31, 2009, current and former officers and directors held 396,393 common stock
options, exercisable until 2013 at $5.00 per share.
The Stock Option Plan terminated on May 27, 2009. Consequently, no new options will be granted
under the Stock Option Plan although 641,848 outstanding options remain exercisable in accordance
with their terms.
|
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Item 12. |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED SHAREHOLDER MATTERS |
Security Ownership Common Stock
The following table presents information concerning the beneficial ownership of the shares of our
common stock as of December 31, 2009 by:
|
|
each person who is known by us to beneficially own more than 5% of our common stock; |
|
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each of our directors; |
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|
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each of our named executive officers; and |
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all of our directors and executive officers as a group. |
48
The number and percentage of shares beneficially owned are based on 35,808,312 shares of common
stock outstanding as of December 31, 2009. Beneficial ownership is determined under rules
promulgated by the Securities and Exchange Commission. Shares of common stock subject to options
that are exercisable on December 31, 2009 or exercisable within 60 days thereafter are deemed to be
outstanding and beneficially owned by the person holding the options for the purpose of calculating
the number of shares beneficially owned and the percentage ownership of that person, but are not
deemed to be outstanding for the purpose of calculating the percentage ownership of any other
person. Except as indicated in the footnotes to this table, these persons have sole voting and
investment power with respect to all shares of our common stock shown as beneficially owned by
them.
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Number of |
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|
Percent of |
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Name and Address of |
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Shares |
|
|
Shares |
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Beneficial Owner |
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Owned |
|
|
Owned |
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Margaret F. Gleasman
|
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2,310,314 |
(1) |
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6.5 |
% |
11 Pond View Drive
Pittsford, NY 14534 |
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|
(1) |
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Includes 95,455 common shares which may be purchased through the exercise of a ten year option granted on January 5, 2004 all exercisable at $5.00 per common share. |
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Number of |
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|
Percent of |
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Name and Address of |
|
|
|
|
|
Shares |
|
|
Shares |
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Beneficial Owner |
|
Position |
|
|
Owned |
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|
Owned |
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Gary A. Siconolfi
|
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Chairman of the Board |
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405,498 |
(1) |
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1.14 |
% |
325 VanVoorhis Avenue
Rochester, New York
14617 |
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James Y. Gleasman+++
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Chief Executive Officer, Interim |
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5,884,013 |
(2) |
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15.37 |
% |
11 Pond View Drive
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Chief Financial Officer, Director |
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|
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|
Pittsford, New York
14534 |
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|
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Keith E. Gleasman
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President |
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9,328,273 |
(3) |
|
|
23.34 |
% |
11 Pond View Drive
|
|
Director |
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|
|
|
|
|
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|
Pittsford, New York
14534 |
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|
|
|
|
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Herbert H. Dobbs
|
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Secretary |
|
|
397,469 |
|
|
|
1.12 |
% |
48 West Maryknoll Road
|
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Director |
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|
|
|
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|
Rochester Hills, Mich.
48309 |
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|
|
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Daniel R. Bickel
|
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Director |
|
|
135,723 |
(4) |
|
less than 1% |
39 Whippletree Road
Fairport, New York
14450 |
|
|
|
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|
|
|
|
|
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Joseph B. Rizzo
|
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Director |
|
|
12,004 |
|
|
less than 1% |
39 State Street, Suite 700
Rochester, New York
14614 |
|
|
|
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|
|
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Asher J. Flaum
|
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Director |
|
|
441,211 |
(5) |
|
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1.23 |
% |
39 State Street
Rochester, New York
14614 |
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|
|
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William W. Destler
|
|
|
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20,000 |
|
|
Less than 1% |
One Lomb Memorial Drive
Rochester, New York 14623 |
|
|
|
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|
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All Directors and Executive
Officers as a Group |
|
|
|
|
|
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13,518,693 |
(6) |
|
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(1) |
|
Includes 100,000 common shares which may be purchased through the
exercise of a ten year option granted on October 15, 2003, exercisable
at $5.00 per share. |
|
(2) |
|
Includes 39,575 common shares which may be purchased through the
exercise of a ten year option granted on January 5, 2004, exercisable
at $5.00 per share. Includes 1,400,000 common shares held by the
Vernon E. Gleasman Grandchildrens Trust and 1,400,000 common shares
held by the Margaret F. Gleasman Grandchildrens Trust of which
Mr. Gleasman is co-trustee. Mr. Gleasman retired, effective March 14,
2010, as a director and as the companys chief executive officer and
interim chief financial officer. PLS. NOTE ADDITION |
49
|
|
|
(3) |
|
Includes 31, 818 common shares which may be purchased through the
exercise of a ten year option granted on December 22, 2003 exercisable
at 5.00 per share. Includes 30, 000 common shares owned by
Mr. Gleasmans son. Includes 1,400,000 common shares held by the
Vernon E. Gleasman Grandchildrens Trust and 1,400,000 common shares
held by the Margaret F. Gleasman Grandchildrens Trust of which
Mr. Gleasman is co-trustee. Includes 1,666,666 shares held by the
James Y. Gleasman Childrens Trust of which Mr. Gleasman is
co-trustee. |
|
(4) |
|
Includes 25,000 common shares which may be purchased through the
exercise of a ten year option granted on October 15, 2003, exercisable
at $5.00 per share. Includes 29,750 common shares which may be
purchased at $.01 per common share through the exercise of warrants
issued under the Nonmanagement Directors Plan. |
|
(5) |
|
Includes 400,000 common shares which may be purchased through the
exercise of ten year warrants exercisable at $3.27 per common share.
Mr. Flaums shares and warrants are owned directly by a company of
which Mr. Flaum is a principal. |
|
(6) |
|
Includes an aggregate 196,393 common shares which may be purchased
through the exercise of options, all of which are exercisable at $5.00
per share; 1,400,000 common shares held by the Vernon E. Gleasman
Grandchildrens Trust; 1,400,000 common shares held by the Margaret F.
Gleasman Grandchildrens Trust; and 1,666,666 common shares held by
the James Y. Gleasman Childrens Trust. Includes 29,750 common stock
warrants issued under the Nonmanagement Directors Plan exercisable at
$.01 per common share. Includes 400,000 common stock warrants
exercisable at $3.27 per common share. Includes 30,000 common shares
owned by Keith E. Gleasmans son. The 2,800,000 common shares owned by
the Vernon and Margaret Gleasman Grandchildrens Trusts are counted
only once for this calculation. |
Security Ownership Preferred Stock
No director, executive officer and/or 5% shareholder owns any of our Class A Preferred.
Mrs. Margaret F. Gleasman, an owner of more than 5% of the companys common stock, owns 5,000
Class B Preferred.
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Item 13. |
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
Certain Transactions
(1) |
|
During the ten plus years prior to the incorporation of the company,
Vernon E., Keith E. and James Y. Gleasman invented and patented
numerous improvements relating to drive mechanisms for tracked
vehicles, transmissions, hydraulic pumps/motors, a unique form of
gearing, universal joints, and constant velocity joints as disclosed
in such patents. Upon the companys incorporation, the Gleasmans
assigned all of their right, title and interest to and in such
inventions and patents to the company in exchange for the issuance of
16,464,400 shares of the companys common stock and the agreement of
the company to pay the Gleasmans the sum of $365,000 for expenditures
in the development of these inventions and products, the Gleasmans
having agreed to waive and release the company from payment of any
other expenses that they had incurred in the development of these
inventions and products. The board of directors of the company
concluded that the value of the inventions, patents and patent
applications assigned to the company, as well as the value of the
services rendered, had a value in excess of the par value of the
number of shares transferred to the assignors and service providers,
respectively. Shares issued are fully paid and nonassessable. |
|
(2) |
|
On December 1, 1997, the company entered into three-year consulting
agreements with Vernon, Keith and James Gleasman (major stockholders,
directors and officers) whereby each was obligated to provide services
to the company in exchange for compensation of $12,500 each per month.
In 1997 the company granted each Vernon, Keith and James Gleasman
25,000 nonqualified common stock options, exercisable immediately at
$5.00 per common share for ten years. |
|
|
|
During 2001, the company issued 126,667 common shares under these
agreements for approximately $665,000 of accrued consulting fees. |
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|
On September 30, 2002, the company granted 727,047 nonqualified common
stock options, all exercisable immediately at $5.00 per common share,
in settlement of approximately $653,000 of accrued consulting fees
under these agreements. These options expired September 30, 2007 and
were not replaced. |
|
|
|
On December 23, 2003, the company granted 166,848 nonqualified common
stock options exercisable Immediately at $5.00 per common share, in
settlement under the agreements for accrued consulting fees of
approximately $265,000. These options are exercisable for ten years. |
|
|
|
The companys consulting agreements with Vernon, Keith and James
Gleasman expired on December 1, 2003 and were not renewed. |
50
(3) |
|
Effective January 1, 2008, the board of directors instituted a
compensation plan for James and Keith Gleasman by which the company
would compensate each of them for services performed and inventions
and know-how transferred to the company at the rate of $300,000 per
year. Actual payment of this compensation, or any portion thereof,
was conditioned upon a board of director determination that the
company had the requisite cash, after the complete funding of all
ongoing company projects, to make payment. |
|
|
|
The company did not have the requisite cash available to pay the
Gleasmans compensation under this arrangement from January 1, 2008
through August 17, 2009, the date on which each of the Gleasmans
waived all of his rights and interest in and to the board-created
compensation plan, including all of his rights and interest in and to
the amount(s) under the plan accrued to such date. As a result of
such waiver, of the $942,000 amount accrued under the plan at June
30, 2009, $900,000 was reclassified to equity as a contribution of
services and $42,000 accrued under the plan for payroll taxes was
recorded as a reduction to general and administrative expenses in the
quarter ended June 30, 2009. |
|
|
|
For periods for which there is no compensation plan, the company is
required to record the estimated value of each of the Gleasmans
services rendered to the company (estimated at $300,000 each per
annum) as a contribution of services under generally accepted
accounting principles applicable to the company and is required under
the same accounting principles to allocate the amount of such
contribution between research and development expenses on the one
hand and general and administrative on the other hand. For the year
ended December 31, 2009, the company recorded $200,000 to research
and development expense and $400,000 to general and administrative
expense, based upon managements estimate. |
|
|
|
Mr. James Y. Gleasman retired as the companys chief executive
officer, interim chief financial officer and member of the board of
directors effective March 14, 2010. |
|
(4) |
|
During the years ended December 31, 2009 and 2008,
the company paid in business consultant common shares
or cash $94,700 and $93,600 respectively, to a member
of the Gleasman family for administrative,
technological and engineering consulting services.
Management believes this compensation is reasonable. |
|
(5) |
|
During the years ended December 31, 2009 and 2008,
the company paid in business consultant common shares
or cash $87,700 and $91,290 to a family member of its
general counsel for engineering services rendered to
the company. Management believes this compensation is
reasonable. |
|
(6) |
|
On September 14, 2007, the company moved its
executive offices from Pittsford, New York to
Rochester, New York, which includes both a
manufacturing and executive office facility. The
Rochester facility is owned by a partnership, in
which Asher J. Flaum, a company director is a
partner. On April 28, 2008, the companys board of
directors approved the terms of a lease and such
lease was executed on April 29, 2008. |
|
(7) |
|
On June 29, 2000, the company granted an exclusive
world-wide license of all its automotive technologies
to Variable Gear, LLC for the aeronautical and marine
markets for $150,000 cash. The company recorded the
receipt of the $150,000 as deferred revenue to be
recognized when all conditions for earning such fees
are complete. At the time of its formation and
through June 6, 2007 when his interest was purchased,
Robert C. Horton, a company shareholder, owned 51% of
Variable Gear, LLC. On June 6, 2007, the company
purchased Mr. Hortons entire interest in Variable
Gear for 5,000 shares of common stock for $19,250.
The company recognized the deferred revenue of
$150,000 as other income and recorded an impairment
of the goodwill of $19,250, since there were no
operations of the entity since inception. |
|
(8) |
|
During the year ended December 2005, the company
issued 90,000 common shares as rent for the companys
use of a facility owned by a stockholder valued at
approximately $259,000 based upon the fair market
value of the common stock on the date of issuance.
This arrangement terminated effective February 28,
2006 when the company moved to a new facility. |
51
(9) |
|
During the year ended December 31, 2005, the company
incurred approximately $298,000 for non-legal
consulting services provided to the company by one of
its outside counsel. This arrangement terminated on
December 16, 2005. |
|
(10) |
|
On August 18, 2006, the company granted 400,000
nonqualified common stock warrants valued at
approximately $1,237,000 to a company one member of
which is a director. The warrants are immediately
exercisable at $3.27 per common share for a period of
ten years. |
|
(11) |
|
On June 19, 2006, the company awarded an aggregate
360,000 nonqualified common stock warrants valued at
approximately $629,000 to a director for additional
services rendered by such director as chairman of the
boards executive committee during 2006. |
|
(12) |
|
On August 17, 2005, the company repaid $28,000
indebtedness to a stockholder by issuing 11,667
restricted common shares, such number of shares based
upon the closing price of the companys common stock
on August 16, 2005. |
|
(13) |
|
On April 28, 2008, the board of directors approved a
one-time payment to its chairman of the governance
and compensation committee of $46,000 for special
services rendered in connection with required
compliance under the Sarbanes-Oxley Act. This amount
was paid by the issuance of 19,167 common shares
valued as of the closing price on April 28, 2008. The
company charged $46,000 to operations in connection
with such services. |
Other than as described herein, there have been no material transactions, series of similar
transactions or currently proposed transactions to which the company was or is a party, in which
the amount invested exceeds $120,000 and in which any director or executive officer, or any
security holder who is known to the company to own of record or beneficially more than five percent
of the companys common stock, or any member of the immediate family of any of the foregoing
persons, had a material interest.
Director Independence
See Item 12 of this annual report for a discussion regarding the independence of our directors
under standards set forth by the Securities and Exchange Commission and by the National Association
of Securities Dealers, Inc.
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|
Item 14. |
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Principal Accountant Fees and Services
Audit Fees
Eisner LLP served as the companys independent registered public accounting firm for the years
ended December 31, 2009 and 2008. The aggregate amount the company paid for professional services
rendered by Eisner LLP for the audit of the companys annual consolidated financial statements included in the companys annual report on
Form 10-K, for the review of the companys consolidated financial statements included in the
companys quarterly reports on Form 10-Q, and for services normally provided in connection with
statutory and regulatory filings or engagements for each of those two years was:
|
|
|
|
|
|
2009 |
|
2008 |
|
$147,000 |
|
$120,000 |
|
Audit-Related Fees
The Company did not engage Eisner LLP for any audit related fees for the years ended December 31,
2009 and 2008.
Tax Fees
The company did not engage Eisner LLP for any tax services for the years ended December 31, 2009
and 2008.
All Other Fees
The company did not engage Eisner LLP for any other services for the years ended December 31, 2009
and 2008.
52
Total Fees
The company paid incurred a total of $147,000 for the year ended December 31, 2009 in audit fees,
compared to approximately $120,000 in 2008. The shareholders approved the Audit Committees
appointment of Eisner LLP as the companys independent registered public accounting firm for the
year ended December 31, 2009 at the annual meeting of shareholders held on January 28, 2010.
Pre-Approval of Policies and Procedures
Article II of our Audit Committee Charter, as amended, specifically provides that the Audit
Committee must pre-approve all auditing and legally permissible non-auditing services to be
performed by the companys registered public accounting firm. In accordance with such mandate, at a
meeting held on January 15, 2003, the Audit Committee established a set of procedures governing the
pre-approval process. Under the procedure, for each fiscal year, the Committee first shall
determine the general nature and scope of the audit, audit-related, tax and other legally
permissible non-audit services to be performed by the companys registered accounting firm. Prior
to the performance of any services, the Committee shall require such firm to submit to the
Committee one or more engagement letter(s) delineating specific audit, audit-related, tax and other
legally permissible non-audit services to be rendered (together with a schedule of fees with
respect to each of such services). Upon receipt of such engagement letter(s), the Committee shall
review and approve such engagement letter(s) in advance of the performance of any such services,
including the specific advance approval of fees in connection with each of such services. Upon
approval and execution of each of such engagement letter(s) by the Committee, the registered public
accounting firm shall perform such pre-approved services in accordance with the terms and
conditions of each engagement letter and shall not engage in any other services unless each of said
services, if any, shall have been specifically approved (including the specific approval of all
fees associated therewith) by the Audit Committee in advance of the rendering any such service.
Audit -Committee Approval
The Audit Committee pre-approved 100% of the services rendered by Eisner LLP in accordance with
such Committees Pre-Approval Policies and Procedures.
|
|
|
Item 15. |
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
(a) Exhibits
The following Exhibits, as applicable, are attached to this Annual Report (Form 10-K). The
Exhibit Index is found on the page immediately succeeding the signature page and the Exhibits
follow on the pages immediately succeeding the Exhibit Index.
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(2) |
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Plan of acquisition, reorganization, arrangement, liquidation, or succession |
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2.1
|
|
Agreement and Plan of Merger, dated November 29, 2000 by and among
Torvec Subsidiary Corporation, Torvec, Inc., UTEK Corporation and ICE
Surface Development, Inc. incorporated by reference to Form 8-K filed
November 30, 2000 and Form 8K/A filed February 12, 2001. |
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(3) |
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Articles of Incorporation, By-laws |
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3.1
|
|
Certificate of Incorporation, incorporated by reference to Form
10-SB/A , Registration Statement, registering Companys $.01 par value
common stock under section 12(g) of the Securities Exchange Act of
1934; |
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3.2
|
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Certificate of Amendment to the Certificate of Incorporation dated
August 30, 2000, incorporated by reference to Form SB-2 filed
October 19, 2000; |
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3.3
|
|
Certificate of Correction dated March 22, 2002, incorporated by
reference to Form 10-KSB filed for fiscal year ended December 31,
2002; |
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3.4
|
|
By-laws, as amended by shareholders on January 24, 2002, incorporated
by reference to Form 10-KSB filed for fiscal year ended December 31,
2002; |
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3.5
|
|
Certificate of Amendment to the Certificate of Incorporation dated
October 21, 2004 setting forth terms and conditions of Class B
Preferred, incorporated by reference to Form 10-QSB filed for fiscal
quarter ended September 30, 2004. |
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3.6
|
|
Certificate of Amendment to the Certificate of Incorporation dated
January 26, 2007 increasing authorized common shares from 40,000,000
to 400,000,000. |
|
|
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|
|
|
(4) |
|
Instruments defining the rights of holders including indentures |
|
|
|
|
|
|
|
|
|
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|
None |
|
|
|
|
|
|
|
(9) |
|
Voting Trust Agreement |
|
|
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|
|
|
|
|
|
|
|
None |
53
|
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|
(10) |
|
Material Contracts |
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
The Companys 1998 Stock Option Plan and
related Stock Options Agreements,
incorporated by reference to Form S-8,
Registration Statement, registering 2,000,000
shares of the Companys $.01 par value common
stock reserved for issuance thereunder,
effective December 17, 1998; |
|
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|
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|
|
|
|
|
|
|
10.3
|
|
The Companys Business Consultants Stock
Plan, incorporated by reference to Form S-8,
Registration Statement, registering 200,000
shares of the Companys $.01 par value common
stock reserved for issuance thereunder,
effective June 11, 1999, as amended by
reference to Form S-8 Registration Statements
registering an additional 200,000, 200,000,
100,000, 800,000, 250,000, 250,000, 350,000,
250,000, and 2,500,000 shares of the
Companys $.01 par value common stock
reserved for issuance thereunder, effective
October 5, 2000, November 7, 2001,
December 21, 2001, February 1, 2002,
November 12, 2002, January 22, 2003, May 23,
2003, November 26, 2003, and April 20, 2004
respectively; |
|
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|
10.4
|
|
Termination of Neri Service and Space
Agreement dated August 31, 1999, incorporated
by reference to Form 10-QSB filed for the
quarter ended September 30, 1999; |
|
|
|
|
|
|
|
|
|
|
|
10.5
|
|
Operating Agreement of Variable Gear, LLC
dated June 28, 2000, incorporated by
reference to Form 10-QSB filed for the
quarter ended June 30, 2000; |
|
|
|
|
|
|
|
|
|
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|
10.6
|
|
License Agreement between Torvec, Inc. and
Variable Gear, LLC dated June 28, 2000,
incorporated by reference to Form SB-2 filed
October 19, 2000; |
|
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|
|
|
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|
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|
10.7
|
|
Investment Agreement with Swartz Private
Equity, LLC dated September 5, 2000, together
with attachments thereto, incorporated by
reference to Form 8-K filed October 2, 2000; |
|
|
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|
|
|
|
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|
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|
10.8
|
|
Extension of and Amendment to Consulting
Agreement with James A. Gleasman,
incorporated by reference to Form 10-KSB
filed for the fiscal year ended December 31,
2000; |
|
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|
|
|
|
|
|
|
|
10.9
|
|
Extension of and Amendment to Consulting
Agreement with Keith E. Gleasman,
incorporated by reference to Form 10-KSB
filed for the fiscal year ended December 31,
2000; |
|
|
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|
|
|
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|
|
|
|
10.10
|
|
Extension of and Amendment to Consulting
Agreement with Vernon E. Gleasman,
incorporated by reference to Form 10-KSB
filed for the fiscal year ended December 31,
2000; |
|
|
|
|
|
|
|
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|
|
|
10.11
|
|
Option and Consulting Agreement with Marquis
Capital, LLC dated February 10, 1999,
incorporated by reference to Form 10-QSB
filed for quarter ended March 31, 2001; |
|
|
|
|
|
|
|
|
|
|
|
10.12
|
|
Option and Consulting Agreement with PMC
Direct Corp., dated February 10, 1999,
incorporated by reference to Form 10-QSB
filed for quarter ended March 31, 2001; |
|
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|
|
|
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|
|
|
10.13
|
|
Investment Banking Services Agreement with
Swartz Institutional Finance (Dunwoody
Brokerage Services, Inc.) dated December 8,
2000, incorporated by reference to Form
10-QSB filed for quarter ended March 31,
2001; |
|
|
|
|
|
|
|
|
|
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|
10.14
|
|
Employment Agreement with Michael Martindale,
Chief Executive Officer, dated August 1,
2001, incorporated by reference to Form
10-QSB filed for fiscal quarter ended
September 30, 2001; |
|
|
|
|
|
|
|
|
|
|
|
10.15
|
|
Employment Agreement with Jacob H. Brooks,
Chief Operating Officer, dated August 1,
2001, incorporated by reference to Form
10-QSB filed for fiscal quarter ended
September 30, 2001; |
|
|
|
|
|
|
|
|
|
|
|
10.16
|
|
Employment Agreement with David K. Marshall,
Vice-President of Manufacturing, dated
September 1, 2001, incorporated by reference
to Form 10-QSB filed for fiscal quarter ended
September 30, 2001; |
|
|
|
|
|
|
|
|
|
|
|
10.17
|
|
Investment Banking Services Agreement with Swartz
Institutional Finance (Dunwoody Brokerage Services, Inc.), as
amended, dated October 23, 2001, incorporated by reference to
Form 10-QSB filed for fiscal quarter ended September 30,
2001; |
54
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|
10.18
|
|
Stock Option Agreement with Samuel Bronsky, Chief Financial and Accounting Officer, dated
August 28, 2001, incorporated by reference to Form 10-QSB filed for fiscal quarter ended
September 30, 2001; |
|
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|
|
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|
10.19
|
|
Pittsford Capital Group, LLC Agreement dated January 30, 2002, incorporated by reference to
Form 10-KSB filed for fiscal year ended December 31, 2001; |
|
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|
|
|
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|
|
|
10.20
|
|
Gleasman-Steenburgh Indemnification Agreement dated April 9, 2002, incorporated by reference
to Form 10-KSB filed for fiscal year ended December 31, 2001; |
|
|
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|
|
|
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|
|
|
|
10.21
|
|
Series B Warrant dated April 10, 2002, incorporated by reference to Form 10-KSB filed for
fiscal year ended December 31, 2001; |
|
|
|
|
|
|
|
|
|
|
|
10.22
|
|
Billow Butler & Company, LLC investment banking engagement letter dated October 1, 2003,
incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2003; |
|
|
|
|
|
|
|
|
|
|
|
10.23
|
|
Letter of Acknowledgement and Agreement with U.S. Environmental Protection Agency dated
February 4, 2004, incorporated by reference to Form 10-KSB filed for fiscal year ended
December 31, 2003; |
|
|
|
|
|
|
|
|
|
|
|
10.24
|
|
Letter Agreement with CXO on the GO, L.L.C. dated February 20, 2004, incorporated by reference
to Form 10-KSB filed for fiscal year ended December 31, 2003; |
|
|
|
|
|
|
|
|
|
|
|
10.25
|
|
Letter Amendment with CXO on the GO, L.L.C. dated February 23, 2004, incorporated by reference
to Form 10-KSB filed for fiscal year ended December 31, 2003; |
|
|
|
|
|
|
|
|
|
|
|
10.26
|
|
Lease Agreement for premises at Powder Mills Office Park, 1169 Pittsford-Victor Road,
Suite 125, Pittsford, New York 14534, dated July 16, 2004; incorporated by reference to Form
10-QSB filed for fiscal quarter ended June 30, 2004; |
|
|
|
|
|
|
|
|
|
|
|
10.27
|
|
Lease Agreement for testing facility and Mustang dynamometer, dated July 21, 2004;
incorporated by reference to Form 10-QSB filed for fiscal quarter ended June 30, 2004; |
|
|
|
|
|
|
|
|
|
|
|
10.28
|
|
Advisory Agreement with PNB Consulting, LLC, 970 Peachtree Industrial Blvd., Suite 303,
Suwanee, Georgia 30024; incorporated by reference to Form 10-QSB filed for fiscal quarter
ended June 30, 2004; |
|
|
|
|
|
|
|
|
|
|
|
10.29
|
|
Agreement between Torvec and ZT Technologies, Inc. dated July 21, 2004, incorporated by
reference to Form 10-QSB filed for fiscal quarter ended September 30, 2004; |
|
|
|
|
|
|
|
|
|
|
|
10.30
|
|
Assignment and Assumption of Lease between William J. Green and Ronald J. Green and Torvec,
Inc. effective as of December 31, 2004, incorporated by reference to Form 10-KSB filed for
fiscal year ended December 31,2004; |
|
|
|
|
|
|
|
|
|
|
|
10.31
|
|
Bill of Sale between Dynamx, Inc. and Torvec, Inc. for equipment and machinery, incorporated
by reference to Form 10-KSB filed for fiscal year ended December 31, 2004; |
|
|
|
|
|
|
|
|
|
|
|
10.32
|
|
Lease and Services Agreement between Robert C. Horton as Landlord and Torvec, Inc. as Tenant
dated March 18, 2005, incorporated by reference to Form 10-KSB filed for fiscal year ended
December 31, 2004; |
|
|
|
|
|
|
|
|
|
|
|
10.33
|
|
Settlement Agreement and Mutual Release between Torvec, Inc. and ZT Technologies, Inc. dated
March 29, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended
March 31, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.34
|
|
Advisory Agreement between Robert C. Horton and Torvec, Inc. dated February 15, 2005,
incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.35
|
|
Lease and Services Agreement between Dennis J. Trask as Landlord and Torvec, Inc. as Tenant
dated April 18, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended
March 31, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.36
|
|
Consulting Agreement with Matthew R. Wrona, dated June 30, 2005, incorporated by reference to
Form 10-QSB filed for fiscal quarter ended June 30, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.37
|
|
Option Agreement between Matthew R. Wrona and Torvec, Inc. dated June 30, 2005, incorporated
by reference to Form 10-QSB filed for fiscal quarter ended June 30, 2005; |
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.38
|
|
Trust Agreement between Matthew R. Wrona, Donald Gabel, Lawrence Clark, Steven Urbanik, Floyd
G. Cady,Jr., and Michael Pomponi as Grantors and Richard B. Sullivan as Trustee, dated
September 22, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended
September 30, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.39
|
|
Consultant Agreement with Floyd G. Cady, Jr., dated October 1, 2005, incorporated by reference
to Form 10-QSB filed for fiscal quarter ended September 30, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.40
|
|
Consultant Agreement with Lawrence W. Clark, dated October 1, 2005, incorporated by reference
to Form 10-QSB filed for fiscal quarter ended September 30, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.41
|
|
Consultant Agreement with Donald W. Gabel, dated October 1, 2005, incorporated by reference to
Form 10-QSB filed for fiscal quarter ended September 30, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.42
|
|
Consultant Agreement with Michael A. Pomponi, dated October 1, 2005, incorporated by reference
to Form 10-QSB filed for fiscal quarter ended September 30, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.43
|
|
Consultant Agreement with Steven Urbanik, dated October 1, 2005, incorporated by reference to
Form 10-QSB filed for fiscal quarter ended September 30, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.44
|
|
Consultant Agreement with Kiwee Johnson, dated September 30, 2005, incorporated by reference
to Form 10-QSB filed for fiscal quarter ended September 30, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.45
|
|
Confidentiality Agreement with Joseph B. Rizzo, dated October 24, 2005, incorporated by
reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.46
|
|
Minutes of meeting Board of Directors Torvec, Inc., held October 19, 2004 Incorporated by
reference to annual report (Form 10-KSB) filed for the year ended December 31, 2005; |
|
|
|
|
|
|
|
|
|
|
|
10.47
|
|
Minutes of meeting of Board of Directors dated October 13, 2006 creating the Commercializing
Event Plan, modifying the Nonmanagement Directors Plan. increasing the number of authorized
shares to be issued under Business Consultants Plan and recommending shareholder approval of
increase in number of authorized common shares from 40,000,000 to 400,000,000; |
|
|
|
|
|
|
|
|
|
|
|
10.48
|
|
Order of Supreme Court of the State of New York with respect to litigation between the company
and a management consulting firm incorporated by reference to Current Report (Form 8-K) filed
on June 20, 2006; |
|
|
|
|
|
|
|
|
|
|
|
10.49
|
|
Agreement with American Continental Group, LLC dated October 27, 2006 incorporated by
reference to Current Report (Form 8-K) filed October 30, 2006; |
|
|
|
|
|
|
|
|
|
|
|
10.50
|
|
New York State School Bus Proposal incorporated by reference to Form 10-Q filed for quarter
ended March 31, 2006; |
|
|
|
|
|
|
|
|
|
|
|
10.51
|
|
Order of Supreme Court of the State of New York directing the Monroe County, New York Clerk to
release back to the company 40,000 common shares and 245,000 common stock warrants issued to a
management consulting firm with which the company is in litigation and held in escrow by such
Clerk by virtue of a previous court order and which order directed the return to the company
of a $250,000 (less administrative fee) undertaking deposited with the Monroe County, New York
Treasurer in connection with the same litigation, incorporated by reference to quarterly
report (Form 10-Q) filed for the quarter ended March 31, 2007; |
|
|
|
|
|
|
|
|
|
|
|
10.52
|
|
License Assignment and Transfer Agreement by and between Ice Engineering, LLC and Torvec, LLC
made effective June 15, 2007 assigning license granted by Dartmouth College with respect to
ice technology from Torvec to Ice Engineering, incorporated by reference to current report
(Form 8-K) filed July 18, 2007; |
|
|
|
|
|
|
|
|
|
|
|
10.53
|
|
License Agreement by and between High Density Powertrain and Torvec, Inc. dated December 12,
2007, incorporated by reference to current report (Form 8-K) filed December 14, 2007; |
|
|
|
|
|
|
|
|
|
|
|
10.54
|
|
Consulting Agreement by and between Clifford Carlson and Torvec, Inc. dated December 12, 2007,
incorporated by reference to current report (Form 8-K) filed December 14, 2007; |
|
|
|
|
|
|
|
|
|
|
|
10.55
|
|
Minutes of meeting of Governance and Compensation Committee dated February 19, 2007
establishing compensation for the companys president and chief executive officer and amending
the companys commercializing event plan; |
|
|
|
|
|
|
|
|
|
|
|
10.56
|
|
Consulting Agreement by and between Capital Campaigns, Inc. and Torvec, dated February 6, 2009; |
|
|
|
|
|
|
|
|
|
|
|
10.57
|
|
Settlement and Release Agreement by and between CXO on the GO of Delaware LLC, et. al. and
Torvec, Inc. et.al. dated March 6, 2009; |
56
|
|
|
|
|
|
|
(11) |
|
Statement re computation of per share earnings (loss) |
|
|
|
|
|
|
|
|
|
|
|
Not applicable |
|
|
|
|
|
|
|
(14) |
|
Code of Ethics |
|
|
|
|
|
|
|
(16) |
|
Letter on change in certifying accountant |
|
|
|
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
(18) |
|
Letter re change in accounting principles |
|
|
|
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
(20) |
|
Other documents or statements to security holders |
|
|
|
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
(21) |
|
Subsidiaries of the registrant |
|
|
|
|
|
|
|
|
|
|
|
Ice Surface Development, Inc. (New York)
Iso-Torque Corporation (New York)
IVT Diesel Corp. (New York)
Variable Gear, LLC (New York) |
|
|
|
|
|
|
|
(22) |
|
Published report regarding matters submitted to vote of security holders |
|
|
|
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
(23) |
|
Consents of experts and counsel |
|
|
|
|
|
|
|
(23.1) |
|
Eisner LLP Consent |
|
|
|
|
|
|
|
(24) |
|
Power of attorney |
|
|
|
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
(31.1) |
|
Rule 13(a)-14(a)/15(d)-14(a) Certifications |
|
|
|
|
|
|
|
(32) |
|
Section 1350 Certifications |
|
|
|
|
|
|
|
(99) |
|
Additional exhibits |
|
|
|
|
|
|
|
|
|
|
|
None |
57
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
TORVEC, INC.
|
|
Date: March 31, 2010 |
By: |
/s/ James Y. Gleasman
|
|
|
|
James Y. Gleasman, |
|
|
|
Chief Executive Officer |
|
In accordance with the Exchange Act, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
|
|
|
|
|
|
|
Dated: March 31, 2010
|
|
By:
|
|
/s/ James Y. Gleasman
James Y. Gleasman,
Chief Executive Officer,
Interim Chief Financial Officer and Director
|
|
|
|
|
|
|
|
|
|
Dated: March 31, 2010
|
|
By:
|
|
/s/ Keith E. Gleasman
Keith E. Gleasman,
President and Director
|
|
|
|
|
|
|
|
|
|
Dated: March 31, 2010
|
|
By:
|
|
/s/ Herbert H. Dobbs
Herbert H. Dobbs,
Secretary and Director
|
|
|
|
|
|
|
|
|
|
Dated: March 31, 2010
|
|
By:
|
|
/s/ Daniel R. Bickel
Daniel R. Bickel,
Director
|
|
|
|
|
|
|
|
|
|
Dated: March 31, 2010
|
|
By:
|
|
/s/ Joseph R.Rizzo
Joseph R. Rizzo,
Director
|
|
|
|
|
|
|
|
|
|
Dated: March 31, 2010
|
|
By:
|
|
/s/ Asher J. Flaum
Asher J. Flaum,
Director
|
|
|
|
|
|
|
|
|
|
Dated: March 31, 2010
|
|
By:
|
|
/s/ Gary A. Siconolfi
Gary A. Siconolfi,
Director
|
|
|
|
|
|
|
|
|
|
Dated: March 31, 2010
|
|
By:
|
|
/s/ William W. Destler
William W. Destler
Director
|
|
|
58
EXHIBIT INDEX
|
|
|
|
|
|
|
|
|
EXHIBIT |
|
|
|
|
|
PAGE |
(2) |
|
Plan of acquisition, reorganization, arrangement, liquidation, or succession |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Agreement and Plan of Merger,
dated November 29, 2000 by and
among Torvec Subsidiary
Corporation, Torvec, Inc., UTEK
Corporation and ICE Surface
Development, Inc. incorporated
by reference to Form 8-K filed
November 30, 2000 and Form 8K/A
filed February 12, 2001.
|
|
N/A |
|
|
|
|
|
|
|
|
|
(3) |
|
Articles of Incorporation, By-laws |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
Certificate of Incorporation,
incorporated by reference to
Form 10-SB/A, Registration
Statement, registering
Companys $.01 par value common
stock under section 12(g) of
the Securities Exchange Act of
1934;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
Certificate of Amendment to the
Certificate of Incorporation
dated August 30, 2000,
incorporated by reference to
Form SB-2 filed October 19,
2000;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3
|
|
Certificate of Correction dated
March 22, 2002, incorporated by
reference to Form 10-KSB filed
for fiscal year ended
December 31, 2002;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.4
|
|
By-laws, as amended by
shareholders on January 24,
2002, incorporated by reference
to Form 10-KSB filed for fiscal
year ended December 31, 2002;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.5
|
|
Certificate of Amendment to the
Certificate of Incorporation
dated October 21, 2004 setting
forth terms and conditions of
Class B Preferred, incorporated
by reference to Form 10-QSB
filed for fiscal quarter ended
September 30, 2004.
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.6
|
|
Certificate of Amendment to the
Certificate of Incorporation
dated January 26, 2007
increasing authorized common
shares from 40,000,000 to
400,000,000.
|
|
N/A |
|
|
|
|
|
|
|
|
|
(4) |
|
Instruments defining the rights of holders including indentures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None |
|
N/A |
|
|
|
|
|
|
|
|
|
(9) |
|
Voting Trust Agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None |
|
N/A |
|
|
|
|
|
|
|
|
|
(10) |
|
Material Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
Certain Employment Agreements,
Consulting Agreements, certain
assignments of patents, patent
properties, technology and
know-how to the Company, Neri
Service and Space Agreement and
Ford Motor Company Agreement
and Extension of Term, all
incorporated by reference to
Form 10-SB/A, Registration
Statement, registering
Companys $.01 par value common
stock under section 12(g) of
the Securities Exchange Act of
1934;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
The Companys 1998 Stock Option
Plan and related Stock Options
Agreements, incorporated by
reference to Form S-8,
Registration Statement,
registering 2,000,000 shares of
the Companys $.01 par value
common stock reserved for
issuance thereunder, effective
December 17, 1998;
|
|
N/A |
59
|
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|
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|
|
|
EXHIBIT |
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|
|
|
|
PAGE |
|
|
|
|
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|
|
|
|
|
|
|
|
10.3
|
|
The Companys Business
Consultants Stock Plan,
incorporated by reference to
Form S-8, Registration
Statement, registering 200,000
shares of the Companys $.01
par value
common stock reserved for
issuance thereunder, effective
June 11, 1999 as amended by
reference to Form S-8
Registration Statement
registering an additional
200,000, 200,000, 100,000,
800,000, 250,000, 250,000,
350,000, 250,000 and 2,500,000
shares of the Companys $.01
par value common stock reserved
for issuance thereunder,
effective October 5, 2000,
November 7, 2001, December 21,
2001, February 1, 2002,
November 12, 2002, January 22,
2003, May 23, 2003,
November 26, 2003 and April 20,
2004 respectively;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.4
|
|
Termination of Neri Service and
Space Agreement dated
August 31, 1999, incorporated
by reference to Form 10-QSB
filed for the quarter ended
September 30, 1999;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.5
|
|
Operating Agreement of Variable
Gear, LLC dated June 28, 2000,
incorporated by reference to
Form 10-QSB filed for the
quarter ended June 30, 2000;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.6
|
|
License Agreement between
Torvec, Inc. and Variable Gear,
LLC dated June 28, 2000,
incorporated by reference to
Form SB-2 filed October 19,
2000; |
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.7
|
|
Investment Agreement with
Swartz Private Equity, LLC
dated September 5, 2000,
together with attachments
thereto, incorporated by
reference to Form 8-K filed
October 2, 2000; |
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.8
|
|
Extension of and Amendment to
Consulting Agreement with James
A. Gleasman, incorporated by
reference to Form 10-KSB filed
for the fiscal year ended
December 31, 2000; |
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.9
|
|
Extension of and Amendment to
Consulting Agreement with Keith
E. Gleasman, incorporated by
reference to Form 10-KSB filed
for the fiscal year ended
December 31, 2000;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.10
|
|
Extension of and Amendment to
Consulting Agreement with
Vernon E. Gleasman,
incorporated by reference to
Form 10-KSB filed for the
fiscal year ended December 31,
2000;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.11
|
|
Option and Consulting Agreement
with Marquis Capital, LLC dated
February 10, 1999, incorporated
by reference to Form 10-QSB
filed for quarter ended
March 31, 2001;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.12
|
|
Option and Consulting Agreement
with PMC Direct Corp., dated
February 10, 1999, incorporated
by reference to Form 10-QSB
filed for quarter ended
March 31, 2001;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.13
|
|
Investment Banking Services
Agreement with Swartz
Institutional Finance (Dunwoody
Brokerage Services, Inc.) dated
December 8, 2000, incorporated
by reference to Form 10-QSB
filed for quarter ended
March 31, 2001;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.14
|
|
Employment Agreement with
Michael Martindale, Chief
Executive Officer, dated
August 1, 2001, incorporated by
reference to Form 10-QSB filed
for fiscal quarter ended
September 30, 2001;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.15
|
|
Employment Agreement with Jacob
H. Brooks, Chief Operating
Officer, dated August 1, 2001,
incorporated by reference to
Form 10-QSB filed for fiscal
quarter ended September 30,
2001;
|
|
N/A |
60
|
|
|
|
|
|
|
|
|
EXHIBIT |
|
|
|
|
|
PAGE |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.16
|
|
Employment Agreement with David
K. Marshall, Vice-President of
Manufacturing, dated
September 1, 2001, incorporated
by reference to Form 10-QSB
filed for fiscal quarter ended
September 30, 2001;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.17
|
|
Investment Banking Services
Agreement with Swartz
Institutional Finance (Dunwoody
Brokerage Services, Inc.), as
amended, dated October 23,
2001, incorporated by reference
to Form 10-QSB filed for fiscal
quarter ended September 30,
2001;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.18
|
|
Stock Option Agreement with
Samuel Bronsky, Chief Financial
and Accounting Officer, dated
August 28, 2001, incorporated
by reference to Form 10-QSB
filed for fiscal quarter ended
September 30, 2001;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.19
|
|
Pittsford Capital Group, LLC
Agreement dated January 30,
2002, incorporated by reference
to Form 10-KSB filed for fiscal
year ended December 31, 2001;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.20
|
|
Gleasman-Steenburgh
Indemnification Agreement dated
April 9, 2002, incorporated by
reference to Form 10-KSB filed
for fiscal year ended
December 31, 2001;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.21
|
|
Series B Warrant dated
April 10, 2002, incorporated by
reference to Form 10-KSB filed
for fiscal year ended
December 31, 2001;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.22
|
|
Billow Butler & Company, LLC
investment banking engagement
letter dated October 1, 2003,
incorporated by reference to
Form 10-QSB filed for fiscal
quarter ended September 30,
2003;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.23
|
|
Letter of Acknowledgement and
Agreement with U.S.
Environmental Protection Agency
dated February 4, 2004,
incorporated by reference to
Form 10-KSB filed for fiscal
year ended December 31, 2003;
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.24
|
|
Letter Agreement with CXO on
the GO, L.L.C. dated
February 20, 2004, incorporated
by reference to Form 10-KSB
filed for fiscal year ended
December 31, 2003;
|
|
N/A |
61
|
|
|
|
|
|
|
EXHIBIT |
|
|
|
|
|
PAGE |
|
|
|
|
|
|
|
|
|
10.25
|
|
Letter Amendment with CXO on the GO,
L.L.C. dated February 23, 2004,
incorporated by reference to
Form 10-KSB filed for fiscal year
ended December 31, 2003;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.26
|
|
Lease Agreement for premises at
Powder Mills Office Park, 1169
Pittsford-Victor Road, Suite 125,
Pittsford, New York 14534, dated
July 16, 2004, incorporated by
reference to Form 10-QSB filed for
fiscal quarter ended June 30, 2004;;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.27
|
|
Lease Agreement for testing facility
and Mustang dynamometer, dated
July 21, 2004; incorporated by
reference to Form 10-QSB filed for
fiscal quarter ended June 30, 2004;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.28
|
|
Advisory Agreement with PNB
Consulting, LLC, 970 Peachtree
Industrial Blvd., Suite 303,
Suwanee, Georgia 30024; incorporated
by reference to Form 10-QSB filed
for fiscal quarter ended June 30,
2004;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.29
|
|
Agreement between Torvec and ZT
Technologies, Inc. dated July 21,
2004, incorporated by reference to
Form 10-QSB filed for fiscal quarter
ended September 30, 2004;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.30
|
|
Assignment and Assumption of Lease
between William J. Green and Ronald
J. Green and Torvec, Inc. effective
as of December 31, 2004,
incorporated by reference to
Form 10-KSB filed for fiscal year
ended December 31, 2004;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.31
|
|
Bill of Sale between Dynamx, Inc.
and Torvec, Inc. for equipment and
machinery, incorporated by reference
to Form 10-KSB filed for fiscal year
ended December 31, 2004;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.32
|
|
Lease and Services Agreement between
Robert C. Horton as Landlord and
Torvec, Inc. as Tenant dated
March 18, 2005, incorporated by
reference to Form 10-KSB filed for
fiscal year ended December 31, 2004;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.33
|
|
Settlement Agreement and Mutual
Release between Torvec, Inc. and ZT
Technologies, Inc. dated March 29,
2005, incorporated by reference to
Form 10-QSB filed for fiscal quarter
ended March 31, 2005;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.34
|
|
Advisory Agreement between Robert C.
Horton and Torvec, Inc. dated
February 15, 2005, incorporated by
reference to Form 10-QSB filed for
fiscal quarter ended March 31, 2005;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.35
|
|
Lease and Services Agreement between
Dennis J. Trask as Landlord and
Torvec, Inc. as Tenant dated
April 18, 2005, incorporated by
reference to Form 10-QSB filed for
fiscal quarter ended March 31, 2005;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.36
|
|
Consulting Agreement with Matthew R.
Wrona, dated June 30, 2005,
incorporated by reference to
Form 10-QSB filed for fiscal quarter
ended June 30, 2005;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.37
|
|
Option Agreement between Matthew R.
Wrona and Torvec, Inc. dated
June 30, 2005, incorporated by
reference to Form 10-QSB filed for
fiscal quarter ended June 30, 2005;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.38
|
|
Trust Agreement between Matthew R.
Wrona, Donald Gabel, Lawrence Clark,
Steve Urbanik, Floyd G. Cady, Jr.
and Michael Pomponi as Grantors and
Richard B. Sullivan as Trustee,
dated September 22, 2005,
incorporated by reference to
Form 10-QSB filed for fiscal quarter
ended September 30, 2005;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.39
|
|
Consultant Agreement with Floyd G.
Cady, Jr., dated October 1, 2005,
incorporated by reference to
Form 10-QSB filed for fiscal quarter
ended September 30, 2005;
|
|
N/A |
62
|
|
|
|
|
|
|
EXHIBIT |
|
|
|
|
|
PAGE |
|
|
|
|
|
|
|
|
|
10.40
|
|
Consultant Agreement with Lawrence
W. Clark, dated October 1, 2005,
incorporated by reference to
Form 10-QSB filed for fiscal quarter
ended September 30, 2005;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.41
|
|
Consultant Agreement with Donald W.
Gabel, dated October 1, 2005,
incorporated by reference to
Form 10-QSB filed for fiscal quarter
ended September 30, 2005;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.42
|
|
Consultant Agreement with Michael A.
Pomponi, dated October 1, 2005,
incorporated by reference to
Form 10-QSB filed for fiscal quarter ended September 30, 2005;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.44
|
|
Consultant Agreement with Kiwee
Johnson, dated September 30, 2005,
incorporated by reference to
Form 10-QSB filed for fiscal quarter
ended September 30, 2005;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.45
|
|
Confidentiality Agreement with
Joseph B. Rizzo, dated October 24,
2005, incorporated by reference to
Form 10-QSB filed for fiscal quarter
ended September 30, 2005;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.46
|
|
Minutes of meeting Board of
Directors Torvec, Inc., held
October 19, 2004 incorporated by
reference to annual report
(Form 10-KSB) filed for the year
ended December 31, 2005;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.47
|
|
Minutes of meeting of Board of
Directors dated October 13, 2006
creating the Commercializing Event
Plan, modifying the Nonmanagement
Directors Plan. increasing the
number of authorized shares to be
issued under Business Consultants
Plan and recommending shareholder
approval of increase in number of
authorized common shares from
40,000,000 to 400,000,000;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.48
|
|
Order of Supreme Court of the State
of New York with respect to
litigation between the company and a
management consulting firm
incorporated by reference to Current
Report (Form 8-K) filed on June 20,
2006;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.49
|
|
Agreement with American Continental
Group, LLC dated October 27, 2006
incorporated by reference to Current
Report (Form 8-K) filed October 30,
2006;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.50
|
|
New York State School Bus Proposal
incorporated by reference to
Quarterly Report (Form 10-Q) filed
March 31, 2006; |
|
|
|
|
|
|
|
|
|
|
|
10.51
|
|
Order of Supreme Court of the State
of New York directing the Monroe
County, New York Clerk to release
back to the company 40,000 common
shares and 245,000 common stock
warrants issued to a management
consulting firm with which the
company is in litigation and held in
escrow by such Clerk by virtue of a
previous court order and which order
directed the return to the company
of a $250,000 (less administrative
fee) undertaking deposited with the
Monroe County, New York Treasurer in
connection with the same litigation,
incorporated by reference to
quarterly report (Form 10-Q) filed
for the quarter ended March 31,
2007;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.52
|
|
License Assignment and Transfer
Agreement by and between Ice
Engineering, LLC and Torvec, LLC
made effective June 15, 2007
assigning license granted by
Dartmouth College with respect to
ice technology from Torvec to Ice
Engineering, incorporated by
reference to current report
(Form 8-K) filed July 18, 2007;
|
|
N/A |
|
|
|
|
|
|
|
|
|
10.53
|
|
License Agreement by and between
High Density Powertrain and Torvec,
Inc. dated December 12, 2007,
incorporated by reference to current
report (Form 8-K) filed December 14,
2007;
|
|
N/A |
63
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT |
|
|
|
|
|
PAGE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.54
|
|
Consulting Agreement by
and between Clifford
Carlson and Torvec, Inc.
dated December 12, 2007,
incorporated by reference
to current report
(Form 8-K) filed
December 14, 2007;
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.55
|
|
Minutes of meeting of
Governance and
Compensation Committee
dated February 19, 2007
establishing compensation
for the companys
president and chief
executive officer and
amending the companys
commercializing event
plan;
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.56
|
|
Consulting Agreement by
and between Capital
Campaigns,Inc. and
Torvec, Inc., dated
February 6, 2009;
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.57
|
|
Settlement and Release
Agreement by and between
CXO on the GO of
Delaware,LLC,et. al. and
Torvec, Inc. et. al.,
dated March 6, 2009;
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not applicable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14) |
|
Code of Ethics |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
(16) |
|
Letter on change in certifying accountant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18) |
|
Letter re change in accounting principles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20) |
|
Other documents or statements to security holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21) |
|
Subsidiaries of the registrant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ice Surface Development, Inc. (New York) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iso-Torque Corporation (New York) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IVT Diesel Corp. (New York) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable Gear, LLC (New York) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22) |
|
Published report regarding matters submitted to vote of security holders None |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23) |
|
Consents of experts and counsel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23.1) |
|
Eisner LLP Consent |
|
|
65 |
|
|
|
|
|
|
|
|
|
|
|
(24) |
|
Power of attorney |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31.1) |
|
Rule 13(a)-14(a)/15(d)-14(a) Certifications |
|
|
66 |
|
|
|
|
|
|
|
|
|
|
|
(32) |
|
Section 1350 Certifications |
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
(99) |
|
Additional exhibits |
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
None |
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|
64