UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2009
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission File No. 000-24455
TORVEC, INC.
(Exact name of registrant as specified 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
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incorporation or organization)
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Identification No.)
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1999 Mt. Read Blvd. Building 3, Rochester, New York 14615
(Address of principal executive offices and Zip Code)
(585) 254-1100
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark 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 (1) 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 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 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
þ
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest
practicable date:
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Class
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Number of Shares Outstanding at
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Common Stock, $.01 par value
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May 11, 2009
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33,514,486
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TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
INDEX
2
PART I FINANCIAL INFORMATION
Item 1.
FINANCIAL STATEMENTS
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Condensed Consolidated Balance Sheets
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March 31, 2009
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December 31, 2008
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(Unaudited)
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ASSETS
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Current assets:
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Cash
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$
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124,000
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$
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304,000
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Accounts Receivable
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175,000
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Prepaid expenses and other receivables
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102,000
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102,000
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Total current assets
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401,000
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406,000
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Property and Equipment:
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Office equipment
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68,000
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68,000
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Shop equipment
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139,000
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139,000
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Leasehold improvements
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213,000
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213,000
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Transportation equipment
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106,000
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106,000
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526,000
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526,000
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Less accumulated depreciation and amortization
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(253,000
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)
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(237,000
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)
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Net property and equipment
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273,000
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289,000
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Total Assets
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$
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674,000
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$
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695,000
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LIABILITIES
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Current liabilities:
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Notes payable, current portion
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$
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15,000
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$
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15,000
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Accounts payable and Accrued Liabilities
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241,000
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177,000
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Deferred Compensation and Other
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948,000
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755,000
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Total current liabilities
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1,204,000
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947,000
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Deferred revenue
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800,000
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800,000
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Deferred rent expense
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36,000
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39,000
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Notes payable, net of current portion
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25,000
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29,000
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Total liabilities
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2,065,000
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1,815,000
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Commitments and contingencies
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STOCKHOLDERS CAPITAL DEFICIT
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Preferred stock, $.01 par value, 100,000,000 shares authorized
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3,300,000 designated as Class A, convertible Non-voting,
cumulative dividend $.40 per share, per annum, March 31,
2009 and December 31, 2008: 707,101 shares issued and
outstanding (liquidation preference $3,930,912 and
$3,858,015, respectively)
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300,000 designated as Class B, convertible Non-voting,
cumulative dividend $.50 per share, per annum, March 31, 2009
and December 31, 2008: 97,500 shares issued and outstanding
(liquidation preference $372,477 and $360,339, respectively)
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8,000
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8,000
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Common stock, $.01 par value, 400,000,000 shares authorized,
33,248,816 and 32,811,422 issued and outstanding, at March
31, 2009 and December 31, 2008, respectively
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332,000
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328,000
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Additional paid-in capital
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48,909,000
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48,485,000
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Deficit accumulated during the development stage
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(50,640,000
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)
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(49,941,000
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)
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Total Torvec, Inc. Stockholders Capital Deficit
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(1,391,000
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)
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(1,120,000
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)
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Noncontrolling Interest of Subsidiary
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Total Stockholders Capital Deficit
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(1,391,000
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)
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(1,120,000
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)
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Total Liabilities and Stockholders Capital Deficit
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$
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674,000
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$
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695,000
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See notes to condensed consolidated financial statements.
3
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Condensed Consolidated Statements of Operations
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Three Months
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Three Months
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ended
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ended
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September 25, 1996
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March 31,
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March 31,
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(Inception) through
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2009
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2008
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March 31, 2009
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Revenue
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$
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175,000
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$
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15,000
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$
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422,000
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Cost of Goods Sold
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90,000
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5,000
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315,000
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Gross Profit
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85,000
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10,000
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107,000
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Costs and expenses
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Research and development
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133,000
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148,000
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15,468,000
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General and administrative
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651,000
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1,047,000
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37,627,000
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Asset Impairment
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1,071,000
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Loss from operations
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(699,000
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)
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(1,185,000
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)
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(54,059,000
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)
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Other Income
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1,000
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260,000
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Loss before Reversal of Liability and tax benefit
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(699,000
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)
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(1,184,000
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)
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(53,799,000
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)
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Reversal of liability on cancellation of debt
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1,541,000
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Net Loss Before Income Tax Provision
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(699,000
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)
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(1,184,000
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)
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(52,258,000
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)
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Income Tax Benefit
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346,000
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Net Loss
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(699,000
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)
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(1,184,000
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)
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(51,912,000
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)
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Less: Net loss attributable to the
Noncontrolling interest in subsidiary
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1,272,000
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Net Loss attributable to Torvec, Inc.
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$
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(699,000
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)
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$
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(1,184,000
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)
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$
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(50,640,000
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)
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Preferred stock beneficial conversion feature
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763,000
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Preferred stock dividend
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83,000
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83,000
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1,259,000
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Net Loss attributable to Torvec, Inc. common stockholders
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$
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(782,000
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)
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$
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(1,267,000
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)
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$
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(52,662,000
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)
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Basic and Diluted net loss per share attributable Torvec, Inc. common stockholders
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(0.02
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)
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(0.04
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)
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Weighted average number of shares of
Common stock, Basic and Diluted
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32,982,000
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31,783,000
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See notes to condensed consolidated financial statements.
4
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Condensed Consolidated Statements of Cash Flows
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September 25,
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Three months Ended
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1996 (Inception)
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March 31,
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Through
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2009
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2008
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March 31, 2009
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Cash flows from operating activities:
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|
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|
|
|
|
|
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|
|
|
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Net loss
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$
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(699,000
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)
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$
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(1,184,000
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)
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$
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(50,640,000
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)
|
Adjustments to reconcile net loss to net cash used in operating activities:
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|
|
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Loss attributable to noncontrolling interest in consolidated subsidiary
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|
|
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(1,272,000
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)
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Accrued Payroll Taxes
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|
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|
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109,000
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Depreciation and amortization
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16,000
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18,000
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2,466,000
|
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Loss on impairment of license
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1,071,000
|
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Impairment of goodwill
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19,000
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Gain on sale of fixed assets
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(10,000
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)
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Compensation expense attributable to common stock in Subsidiary
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|
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619,000
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Common stock issued for services
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366,000
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538,000
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13,502,000
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Shares issued for future consulting services
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|
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103,000
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Stockholder contribution of services
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|
|
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|
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|
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2,409,000
|
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Gain on cancellation of debt
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|
|
|
|
|
|
|
|
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(1,541,000
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)
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Contribution to Capital, Ford Truck
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|
|
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|
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16,000
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Common Stock Issued in connection with Commercializing Event
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|
|
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36,000
|
|
Compensatory common stock, options and warrants
|
|
|
|
|
|
|
249,000
|
|
|
|
17,835,000
|
|
Changes in:
|
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|
|
|
|
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|
|
|
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|
|
Accounts receivable
|
|
|
(175,000
|
)
|
|
|
(300,000
|
)
|
|
|
(175,000
|
)
|
Prepaid expenses and other receivables
|
|
|
|
|
|
|
(46,000
|
)
|
|
|
59,000
|
|
Deferred Revenue
|
|
|
|
|
|
|
(26,000
|
)
|
|
|
709,000
|
|
Deferred rent
|
|
|
(3,000
|
)
|
|
|
33,000
|
|
|
|
36,000
|
|
Accounts payable and accrued expenses
|
|
|
319,000
|
|
|
|
201,000
|
|
|
|
4,315,000
|
|
Deferred Compensation and Other
|
|
|
|
|
|
|
398,000
|
|
|
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(176,000
|
)
|
|
|
(119,000
|
)
|
|
|
(9,734,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
(8,000
|
)
|
|
|
(360,000
|
)
|
Cost of acquisition
|
|
|
|
|
|
|
|
|
|
|
(16,000
|
)
|
Proceeds from sale of fixed asset
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(8,000
|
)
|
|
|
(366,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from sales of common stock and upon exercise of options and warrants
|
|
|
|
|
|
|
|
|
|
|
6,699,000
|
|
Net proceeds from sales of preferred stock
|
|
|
|
|
|
|
|
|
|
|
3,537,000
|
|
Net proceeds from sale of subsidiary stock
|
|
|
|
|
|
|
|
|
|
|
234,000
|
|
Proceeds from long term borrowings
|
|
|
|
|
|
|
|
|
|
|
85,000
|
|
Repayments of long term debt
|
|
|
(4,000
|
)
|
|
|
(2,000
|
)
|
|
|
(69,000
|
)
|
Proceeds from stockholders loan and advances
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
Repayment of stockholders loan and advances
|
|
|
|
|
|
|
|
|
|
|
(147,000
|
)
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
(365,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(4,000
|
)
|
|
|
(2,000
|
)
|
|
|
10,224,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
(180,000
|
)
|
|
|
(129,000
|
)
|
|
|
124,000
|
|
Cash at beginning of period
|
|
|
304,000
|
|
|
|
192,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
124,000
|
|
|
$
|
63,000
|
|
|
$
|
124,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
1,000
|
|
|
$
|
2,000
|
|
|
$
|
25,000
|
|
Income Tax Paid
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,000
|
|
Non cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for acquisition leasehold improvements
|
|
$
|
|
|
|
$
|
61,000
|
|
|
$
|
166,000
|
|
Issuance of common stock in settlement of payables
|
|
|
62,000
|
|
|
|
64,000
|
|
|
|
148,000
|
|
Preferred stock issued in payment of dividend
|
|
|
|
|
|
|
|
|
|
|
39,000
|
|
Shares issued for acquisition of Variable Gear
|
|
|
|
|
|
|
|
|
|
|
19,000
|
|
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
|
|
Advance settled with common stock
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
Loss on exchange of minority interest
|
|
|
|
|
|
|
|
|
|
|
232,000
|
|
Shares issued for future consulting services
|
|
|
|
|
|
|
|
|
|
|
103,000
|
|
Issuance of common stock for a finder fee
|
|
|
|
|
|
|
|
|
|
|
225,000
|
|
Advance from stockholder
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
Contribution of FTV Ford Truck
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
ICE payable netted against receivable
|
|
|
|
|
|
|
|
|
|
|
91,000
|
|
Common stock issued in settlement of payable
|
|
|
|
|
|
|
|
|
|
|
58,000
|
|
Common stock issued in settlement of Patent expense
|
|
|
|
|
|
|
|
|
|
|
117,000
|
|
See notes to condensed consolidated financial statements.
5
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Notes to Condensed Consolidated Financial Statements
NOTE A The Company and Basis of Presentation
The interim information contained herein with respect to the three month periods ended March 31,
2009 and 2008 and the period from September 25, 1996 (inception) through March 31, 2009 has not
been audited but was prepared in conformity with generally accepted accounting principles for
interim financial information and instructions for Form 10-Q. Accordingly, the condensed
consolidated financial statements do not include all information and footnotes required by
generally accepted accounting principles for financial statements. Included are ordinary
adjustments which in the opinion of management are necessary for a fair presentation of the
financial information for the three month periods ended March 31, 2009 and 2008 and since
inception. The results are not necessarily indicative of results to be expected for the entire
year.
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 contributed by Vernon E. Gleasman, James Y. Gleasman and Keith E.
Gleasman (the Gleasmans). 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.
The companys financial statements have been prepared assuming that it will continue as a going
concern. For the period from September 1996 (inception) through March 31, 2009, the company has
accumulated a deficit of $50,640,000, and at March 31, 2009 has a working capital deficit of
$803,000 and a stockholders deficit of $1,391,000. 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 March 31, 2010 and collectability of its
receivables in the ordinary course of business; the company will not be able to meet its
anticipated cash requirements through March 31, 2010.
6
The company is actively seeking additional sources of capital. There can be no assurance that
the company will be able to raise sufficient capital on acceptable terms. Without sufficient
additional capital or long term debt and ultimately profitable operating results, the company
will not be able to continue as a going concern. The accompanying condensed consolidated
financial statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
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
March 31, 2009 and 2008), and its wholly-owned subsidiaries Iso-Torque
Corporation, IVT Diesel Corp. and Variable Gear LLC. 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.
|
|
[3]
|
|
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 fixed 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.
|
|
[4]
|
|
Loss per Common Share:
|
|
|
|
Statement of Financial Accounting Standards (SFAS) No. 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. For the
three month periods ended March 31, 2009 and 2008, the company
excluded 2,587,699 and 3,107,649 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.
|
7
[5]
|
|
Income Taxes:
|
|
|
|
The company accounts for income taxes using the asset and liability
method described in SFAS No. 109, Accounting for Income Taxes, 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. We adopted the provisions of Financial
Accounting Standards Board interpretation No. 48 Accounting for
Uncertainty in Income Taxes (FIN 48) an interpretation of FASB
Statement No. 109 (SFAS 109) on January 1, 2008As a result of the
implementation of FIN 48, we recognized no adjustment for uncertain
tax provisions. At the adoption date of January 1, 2008, we had a
deferred tax asset which was fully reserved by a valuation allowance
to reduce the deferred tax asset to the amount that more likely than
not to be realized. We recognize interest and penalties related to
uncertain tax positions in general and administrative expense. As of March 31, 2009, we have not
recognized an increase or decrease to reserves for uncertain tax
positions nor have we accrued interest and penalties related to
uncertain tax positions. The tax years 2006 2008 remain open to
examination by the major tax jurisdictions to which we are subject.
|
|
[6]
|
|
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.
|
|
[7]
|
|
Stock-based Compensation:
|
|
|
|
In December 1997, the Board of Directors of the
company approved a Stock Option Plan (the Plan)
which provided for the grant of up to 2,000,000 shares
of common stock, pursuant to which officers,
directors, key employees and key consultants/advisors
were eligible to receive incentive, nonstatutory or
reload stock options. The Plan was terminated as of
May 27, 2008 as to the grant of additional options.
641,848 previously granted and outstanding options
remain exercisable in accordance with the terms of the
options.
|
|
|
|
Effective January 1, 2006, we adopted Statement of
Financial Accounting Standards (SFAS) No. 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.
|
|
|
|
SFAS 123R requires all share-based payments to
employees, including grants of employee stock options,
to be recognized as compensation expense over the
requisite service period (generally the vesting
period) in the financial statements based on their
fair values. Under the modified prospective transition
method, awards that were granted, modified, or settled
on or after January 1, 2006 are measured and accounted
for in accordance with SFAS 123(R). Unvested
equity-classified awards that were granted prior to
January 1, 2006 will continue to be accounted for in
accordance with SFAS 123, 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 SFAS 123(R).
|
|
|
|
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 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
SFAS 123(R).
|
|
[8]
|
|
Revenue Recognition:
|
|
|
|
The companys terms provide 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.
|
8
[9]
|
|
Recent Accounting Pronouncements:
|
|
|
|
In December 2007, the FASB issued SFAS No. 141 (revised 2007),
Business Combinations, which replaces FASB Statement No. 141. SFAS
141(R) 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. SFAS 141(R) will
change how business combinations are accounted for and will impact
financial statements both on the acquisition date and in subsequent
periods. The adoption of SFAS No. 141(R) 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 April 2009, the FASB issued FSP 141(R)-1 Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arises
from Contigencies (SFAS 141(R)-1). 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.
SFAS 141(R)-1 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008,
with early adoption prohibited. As such, the company is required to
adopt these provisions at the beginning of the fiscal year January 1,
2009. SFAS 141(R)-1 will be applied prospectively for acquisitions in
2009 or thereafter.
|
|
|
|
In December 2008, the FASB issued Statement No. 160, Noncontrolling
Interests in Consolidated Financial Statements, an amendment of ARB
No. 51 (SFAS 160). 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.
Additionally, SFAS 160 revises the accounting for both increases and
decreases in a parents controlling ownership interest. The company
has adopted the standard as of January 1, 2009. The adoption of SFAS
160 did not have a significant impact on the companys financial
position.
|
|
|
|
In June 2008, the FASB Task Force reached a consensus-for-exposure
that an entity should determine whether an equity-linked financial
instrument (or embedded feature) is indexed to its own stock first by
evaluating the instruments contingent exercise provisions, if any,
and then by evaluating the instruments settlement provisions. Issue
No. 07-5 (EITF 07-5), Determining Whether an Instrument (or Embedded
Feature) Is Indexed to an Entitys Own Stock. Paragraph 11(a) of FAS
133 specifies that a contract issued or held by the reporting entity
that is both (a) indexed to its own stock and (b) classified in
stockholders equity in its statement of financial position shall not
be considered a derivative financial instrument for purposes of
applying that Statement. If a freestanding financial instrument (for
example, a stock purchase warrant) meets the scope exception in
paragraph 11(a) of FAS 133, it is classified as an equity instrument
and is not accounted for as a derivative instrument. The adoption of
EITF 07-5 did not have a significant impact on the companys
financial position.
|
|
|
|
In May 2008, FASB issued FAS No. 162, The Hierarchy of Generally
Accepted Accounting Principles (FAS 162). This statement documents
the hierarchy of the various sources of accounting principles and the
framework for selecting the principles used in preparing financial
statements. FAS 162 is effective 60 days following the Securities and
Exchange Commissions approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting Principles.
FAS 162 did not have a material impact on the Companys financial
statements.
|
|
|
|
In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and
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 does not expect the adoption of this accounting pronouncement
to have a material impact on the financial statements.
|
9
NOTE C License from the Trustees of Dartmouth College
On November 28, 2000, the companys majority-owned subsidiary, Ice Surface Development LLC
(ICE Surface) 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.
Effective June 15, 2007, Ice Surface assigned the license to an unrelated company, Ice
Engineering, LLC (Ice Engineering) 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.
Separately, Ice Engineering, 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 has not received any
other installments due since that date.
On October 31, 2008, the company commenced an action in New York State Supreme Court, County
of New York, Commercial Division against Ice Engineering, seeking the total balance owed by
Ice Engineering to the company pursuant to an agreement entered into by the parties, effective
June 15, 2007, namely, $2,700,000. Ice Engineering has counterclaimed for the $800,000 paid
under the agreement thus far, alleging that the company failed to deliver certain business
information to Ice Engineering as called for under the agreement. On April 14, 2009, the
Court denied the companys motion for summary judgment without prejudice to re-file and
ordered the parties to proceed with discovery.
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.
NOTE D Related Party Transactions
[1]
|
|
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 (Note H [6]). These options
expired on November 30, 2007. For the years ended December 31,2003,
2002, 2001, 2000,1999, 1998 and 1997, the company incurred expenses
amounting to approximately $450,000, $450,000, $450,000, $522,000,
$528,000, $528,000 and $45,000, respectively, in connection with these
agreements (which were extended for an additional three years,
effective December 1, 2000, and amended to provide that compensation
was payable, in the board of directors discretion, in common stock,
cash or a combination).
|
|
|
|
During 2001, the company issued 126,667 common shares under the
agreements for approximately $665,000 of accrued consulting fees.
|
10
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
(see Note H [6]). These options expired unexercised on September 30,
2007.
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 was not renewed.
Commencing January 1, 2004, each of the Gleasmans agreed to provide
consulting services and assign new patents, existing patent
improvements and all know-how in connection with all of their
inventions to the company. In addition, Keith Gleasman agreed to
continue as President and James Gleasman agreed to serve as the
companys chief executive officer and interim chief financial officer.
During the year ended December 31, 2007, the company did not pay the
Gleasmans any consulting fees for their services. The company recorded
approximately $300,000, for the year ended December 31, 2007, for the
estimated value of these services based upon the compensation payable
under the previous consulting agreements.
On March 28, 2008 the board of directors approved the governance and
compensation committees recommendation that, effective January 1,
2008, each of the Gleasmans be compensated at the rate of $300,000 per
year. Such amount is payable in cash. No payment of all or any portion
of the Gleasmans compensation shall be paid unless and until the
company shall have the requisite cash available. The determination of
the availability of the requisite amount of cash shall be made by the
board of directors in the light of approved-budgets, existing and
anticipated capital requirements and existing and estimated cash
flows. Unpaid amounts are accumulated and carry over from one year to
the next. No amount was paid to either of the Gleasmans under this
compensation arrangement during the year ended December 31, 2008. The
amount of unpaid compensation accrued as of December 31, 2008 and
March 31, 2009 is $600,000 and $750,000, respectively.
Since the company did not have the requisite cash available to pay the
Gleasmans compensation under this arrangement with the company for
the three month periods ended March 31, 2009 and 2008, the company
accrued an aggregate $163,000 of compensation expense, including
$13,000 of payroll taxes for both periods and recorded the
compensation expense of $50,000 to research and development and
$100,000 to general and administrative expense based upon managements
estimate.
[2]
|
|
During the three month periods ended March 31, 2009 and 2008, the
company paid $25,350 for both periods to a member of the Gleasman
family for administrative, technological and engineering consulting
services. Management believes this compensation is reasonable.
|
[3]
|
|
During the three month periods ended March 31, 2009 and 2008, the
company paid $23,270 for both periods 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 4).
|
11
[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 for $19,250. During the year ended December 31, 2007, 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. 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 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 Stockholders Equity (Capital Deficit)
[1]
|
|
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) at $4.00 per share. 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.
The company has sold an aggregate 780,456 Class A Preferred for
aggregate proceeds of $3,062,046. The company has issued an aggregate
198,349 common stock warrants in connection with the sale of Class A
Preferred to the holders of the Class A Preferred, all exercisable
over a 10 year period at $.01 per common share. 182,099 of these
warrants have been exercised through March 31, 2009.
The company did not sell any Class A Preferred or issue any warrants
during the three month periods ended March 31, 2009 and 2008.
From April 19, 2004 through March 31, 2009, six Class A Preferred
holders have converted an aggregate 73,355 Class A Preferred
(including 14,944 Class A issued as dividends) into an equal number of
common shares. For the three month period ended March 31, 2009, no
Class A Preferred were converted. For the three month period ended
March 31, 2008, 25,000 Class A Preferred were converted.
From September 2004 through March 31, 2009, an aggregate 14,944
Class A Preferred have been issued as dividends.
At March 31, 2009 and 2008, Class A Preferred dividends in arrears
amounted to approximately $1,100,000 and $819,000, respectively.
12
[2]
|
|
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) at $5.00 per share.
Each share of Class B Preferred pays cumulative dividends at $.50 per share per annum and is
convertible into either one share of voting common stock of the company or one share of
common stock of Iso-Torque Corporation under certain circumstances. The holder has the right
to convert after one year subject to Board approval.
The company has sold an aggregate 97,500 Class B Preferred for aggregate proceeds of $487,500.
During the three month periods ended March 31, 2009 and 2008, the company did not sell any
Class B Preferred. No Class B Preferred have been converted into common stock through March
31, 2009.
At March 31, 2009 and 2008, Class B Preferred dividends in arrears amounted to approximately
$159,000 and $111,000, respectively.
In December, 1997, the board of directors adopted and on May 28, 1998, the companys
shareholders ratified the creation of a Stock Option Plan (the Option Plan) which provides
for the grant of up to 2,000,000 common stock options to officers, directors and consultants
who are eligible to receive incentive, nonqualified or reload stock options. Options granted
under the Option Plan are exercisable for a period of up to ten years from the date of grant
at an exercise price which is not less than the per share trading price of the underlying
common stock on the date of grant, except that the exercise period for options granted to a
greater than 10% shareholder may not exceed five years and the exercise price may not be less
than 110% of such trading price per share on the date of grant.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Month Periods Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Exercise
|
|
|
Intrinsic
|
|
|
|
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
Value
|
|
|
Shares
|
|
|
Price
|
|
Outstanding at beginning of period
|
|
|
641,848
|
|
|
$
|
4.70
|
|
|
|
|
|
|
|
1,021,848
|
|
|
$
|
4.77
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(380,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period
|
|
|
641,848
|
|
|
|
4.70
|
|
|
$
|
|
|
|
|
641,848
|
|
|
|
4.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at end of period
|
|
|
641,848
|
|
|
|
4.70
|
|
|
$
|
|
|
|
|
641,848
|
|
|
|
4.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Vested and Expected to Vest
|
|
|
641,848
|
|
|
|
4.70
|
|
|
$
|
|
|
|
|
641,848
|
|
|
|
4.70
|
|
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.
13
The following table represents information relating to stock options outstanding at March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
Options
|
|
Exercise
|
|
|
Remaining
|
|
|
Option
|
|
Outstanding
|
|
Price
|
|
|
Life in Years
|
|
|
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
641,848
|
|
$
|
4.70
|
|
|
|
4.56
|
|
|
|
641,848
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2009, the company did not have any unrecognized stock compensation related to unvested awards.
[5]
|
|
Business Consultants Stock Plan:
|
For the three month periods ended March 31, 2009 and 2008, the company issued 348,424 and 211,834 common shares to business
consultants under the Business Consultants Stock Plan and charged approximately $350,000 and $538,000 to operations in connection
with these share issuances. Share issuances are valued generally on the date immediately prior to the date of issuance, except for
shares issued to pay invoices which are valued as of the invoice date and except for shares issued under the Nonmanagement Directors
Plan which are valued as of the end of each month effective February 17, 2009. As of March 31, 2009, 3,215,884 shares are available
for future issuances under the Business Consultants Stock Plan.
[6]
|
|
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.
Due to changes made to the Nonmanagement Directors Plan described below, the company did not issue any warrants under the plan for
the three month periods ended March 31, 2009 and 2008. No previously issued warrants were exercised during the three month periods
ended March 31, 2009 and 2008.
On October 10, 2007, the Nonmanagement Directors Plan was modified to increase the fees payable to the companys nonmanagement
directors. As adjusted, each nonmanagment director (a total of 5 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.
14
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 three month period ended March 31, 2009 and 2008, the
company issued 42,897 and 18,855 common shares under the plan to
satisfy December 31, 2008 and 2007 payables in the amount of $62,201
and $58,449, respectively. As a result of an amendment to the plan on
February 17, 2009, payments to nonmanagement directors
are made monthly, effective for payments made for periods after
December 31, 2008. During the three month period ended March 31, 2009,
the company issued 46,073 common shares under the plan to satisfy
liability incurred for January and February, 2009 in the amount of
$41,466. As of April, 2009, the company issued 25,917 common shares
under the plan to satisfy payables due March 31 2009 of $20,734.
[7]
|
|
Business, Financial and Engineering Consultants:
|
Through March 31, 2009, the company has issued 1,376,583 common stock
warrants to various business, financial and engineering consultants,
of which 91,583 have been exercised for proceeds of $915 and 445,000
cancelled in exchange for the participation of certain engineers in
the companys 2008 Commercializing Event Plan. (Note E [11]).
On March 28, 2008, the board approved the issuance of an aggregate
195,000 warrants, immediately exercisable at $5.00 per common share
until 2016, to two engineering consultants who elected not to
participate in the companys 2008 Commercializing Event Plan. The
company recorded a charge in the amount of $249,000 to general and
administrative expense.
For the three month period ended March 31, 2009, there were no shares
issued under the Commercializing Event Plan.
As of March 31, 2009, outstanding warrants to acquire shares of the companys common stock are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Exercise
|
|
|
|
|
Shares
|
|
Price
|
|
|
Expiration
|
|
Exercisable
|
|
|
(a
|
)
|
|
|
(a)
|
|
125,000
|
(a)
|
$
|
.75
|
|
|
None
|
|
|
500,000
|
(b)
|
$
|
.01
|
|
|
None
|
|
|
54,500
|
(c)
|
$
|
.01
|
|
|
None
|
|
|
39,000
|
(d)
|
$
|
5.00
|
|
|
2015
|
|
|
255,000
|
(e)
|
$
|
.01
|
|
|
None
|
|
|
6,000
|
(f)
|
$
|
.01
|
|
|
None
|
|
|
16,250
|
(g)
|
$
|
1.00
|
|
|
None
|
|
|
20,500
|
(h)
|
$
|
3.27
|
|
|
2016
|
|
|
400,000
|
(i)
|
$
|
3.75
|
|
|
2016
|
|
|
200,000
|
(j)
|
$
|
5.00
|
|
|
2017
|
|
|
50,000
|
(k)
|
$
|
5.00
|
|
|
2017
|
|
|
100,000
|
(l)
|
|
|
|
(a)
|
|
Exercisable only if the company has an IPO and exercisable at the IPO price five years from IPO. Through the quarter March 31, 2009, the company
has not conducted an IPO.
|
15
|
|
|
(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 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 [6]). An
aggregate 69,000 warrants have been exercised
for approximately $630 of proceeds, with
6,000 warrants exercised during the second
quarter of 2008 for proceeds of $60. No
warrants were exercised during the three
month period ended March 31, 2009.
|
|
(d)
|
|
In 2005, the company issued 12,000 warrants
to a consultant, immediately exercisable at .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.
|
|
(e)
|
|
During 2005, the company issued 210,000 warrants to certain
engineering 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 engineers who elected not
to participate in the companys 2008 Commercializing Event
Plan. The company recorded a charge of $249,000 to general
and administrative expense.
|
|
(f)
|
|
During 2005, the company issued 6,000 warrants to a
consultant, exercisable immediately for a five year term at .01 per common share. None of these warrants have been
exercised through March 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. No additional warrants were issued in
the three month period ended March 31, 2009.
|
|
(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 March 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 March 31, 2009.
|
16
|
|
|
(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 its governmental affairs consultant. None of these warrants
have been exercised through March 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 March 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 March 31, 2009.
|
The following summarizes the activity of the companys outstanding warrants for the three month
periods ended March 31, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Warrants
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Outstanding at January 1, 2009
|
|
|
1,766,250
|
|
|
$
|
4.25
|
|
|
4.13 years
|
|
$
|
1,063,043
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled or expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2009
|
|
|
1,766,250
|
|
|
$
|
4.25
|
|
|
4.13 years
|
|
$
|
534,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2009
|
|
|
1,141,250
|
|
|
$
|
5.68
|
|
|
3.70 years
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Outstanding at January 1, 2008
|
|
|
2,084,950
|
|
|
$
|
2.59
|
|
|
4.90 years
|
|
$
|
3,072,861
|
|
Granted
|
|
|
195,000
|
|
|
$
|
5.00
|
|
|
8.84 years
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled or expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008
|
|
|
2,279,950
|
|
|
$
|
3.30
|
|
|
4.86 years
|
|
$
|
2,343,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2008
|
|
|
1,654,950
|
|
|
$
|
3.92
|
|
|
4.63 years
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[9]
|
|
Issuance of Stock and Warrants by Subsidiary:
|
|
|
|
In 2003, the company majority-owned subsidiary, Ice Surface issued 308,041 of its common stock at $.76 per share realizing aggregate proceeds of $234,000 in a private placement. These issuances reduced
the companys interest in Ice Surface from 72% to approximately 69.26%. Based on the companys accounting policy, the change in the companys proportionate share of Ice Surfaces equity resulting from
the additional equity raised by the subsidiary is accounted for as a capital transaction.
|
17
|
|
In connection with the private placement, Ice Surface issued 53,948
warrants to the placement agent immediately exercisable at $.76 per
common share through June 9, 2008. In addition, 50,000 warrants were
issued by Ice Surface to a consultant immediately exercisable at $.76
per common share through June 9, 2008. 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 Ice Surfaces shareholders of a Plan for the complete
liquidation and dissolution.
|
|
[10]
|
|
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 consultant 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.
|
|
|
|
The company issued an aggregate 373,295 business consultants shares
valued at an aggregate $716,998 to the trust to satisfy the payment
of invoices submitted by the consultants for services rendered for
the year ended December 31, 2008. The trustee sold an aggregate
328,779 business consultants shares for aggregate proceeds of
$597,119 during the year ended December 31, 2008 and distributed the
proceeds from the trust to the consultants in payment of invoices
submitted by the consultants.
|
|
|
|
During the three month periods ended March 31, 2009 and 2008, the
company issued 142,555 and 60,000 business consultants shares valued
at $137,450 and $165,000, respectively, to the trust to satisfy the
payment of invoices submitted by the consultants for services
rendered during such periods. During the three month periods ended
March 31, 2009 and 2008, the trustee sold 109,236 and 52,659 business
consultant shares and distributed $112,436 and $158,034 in 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.
|
|
[11]
|
|
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 terminated
the 2006 Event Plan and adopted a new 2007
Commercializing Event Plan (the 2007 Event
Plan). The 2007 Event Plan provides that
upon the happening of any commercializing
event, each of the directors and executive
officers of the company as well as certain
management personnel shall be entitled to
share equally in 6% of the gross amount
derived or to be derived from the
commercializing event transaction(s).
Similarly, certain of the companys
engineers are entitled to share equally in
2% of such gross amount.
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|
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|
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 payment is made, all as determined
by the board as of the date of the boards
authorization of payments to be made.
|
|
|
|
No payments were made under the 2007 Event Plan for the three months
ended March 31, 2009. For the three months ended March 31, 2008,
3,648 business consultant shares were issued under the 2007 Event
Plan.
|
18
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 SFAS 123(R)
Share Based Payment, provided that there are sufficient shares under the
business consultants plan. Under SFAS 123(R), 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 EITF 00-19 Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Companys Own
Stock. Under EITF 00-19, 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 the fourth quarter of 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 commercialization 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 on 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 engineering consultants in lieu of their participation in the 2008
Event Plan. The company valued the warrants at $249,000 using the Black-Scholes
option/pricing model and charged operations.
March 31, 2008
Black-Scholes Inputs
|
|
|
|
|
Term
|
|
8.84 years
|
Risk-free rate
|
|
|
2.89
|
%
|
Volatility
|
|
|
0.55
|
|
Dividend yield
|
|
|
0.0
|
%
|
NOTE F Commitments and Other Matters
[1]
|
|
Consulting Agreements:
|
On June 30, 2005, the company entered into a non-exclusive two year consulting agreement
for engineering design services. As part of the agreement, the company granted 100,000
stock options under its 1998 Stock Option Plan to acquire common shares. The option vested
immediately and has a term of ten years. The exercise price for the option is $5.00 per
share. The company valued the options at $247,000 using the Black-Scholes option/pricing
model and charged operations. This agreement was terminated in the third quarter of 2005,
although the options were not cancelled and remain outstanding for their term.
Beginning in 2005, the company entered into non-exclusive consulting agreements with
various engineering consultants. Under the terms of the consulting agreements, the company
will pay the amount of invoices submitted by the engineering consultants for services
rendered, with such payment to be made, at the companys discretion, in cash, business
consultants stock or a combination thereof. In addition, in 2005, the company issued the
engineers an aggregate 210,000 warrants exercisable immediately over a ten year term at
$5.00 per common share. The company valued the warrants at $377,000 using the Black-Scholes
option/pricing model and charged operations. 150,000 of these warrants were cancelled by
the holders during the fourth quarter of 2007 in exchange for the holders participation in
the companys 2007 Commercializing Event Plan. See Note E [11].
19
During the year ended December 31, 2006, the company issued 295,000 warrants exercisable
immediately for ten years at $5.00 per common share to various engineering consultants. The
company valued the warrants at $1,441,000 using the Black-Scholes option/pricing model and
charged operations. All of these warrants were cancelled by the holders during the fourth
quarter of 2007 in exchange for the holders participation in the companys 2007
Commercializing Event Plan. See Note E [11].
During the year ended December 31, 2006, the company issued 200,000 common stock warrants
in connection with its engagement of a governmental affairs consultant. The warrants are
immediately excisable over a ten year term with an exercise price of $3.75 per common share
and were valued at $948,165 using the Black-Scholes pricing model.
On February 6, 2009, the company signed a consulting agreement with a strategic
planning, government relations, marketing and public relations firm to render consulting
services for a one year period. Under the agreement, the company is obligated to pay the
consulting firm $20,000 per month, except that, until the consultant has assisted the
company secure an agreed-upon level of governmental and /or private funding, the companys
monthly obligation is limited to $4,000. As of March 31, 2009 no funding was secured as
such, the Companys monthly obligation is $4,000.
No additional securities were issued under new and/or existing consulting agreements during
the three month period ended March 31, 2009 and no outstanding securities issued under
these consulting agreements were exercised during the three month period ended March 31,
2009.
The company leases a facility 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) which provides for rent to
be paid at a rate of $5,687.00 per month ($68,244.00 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.
Rent expense for the three month periods ended March 31, 2009 and 2008 was $14,600 and
$13,500 respectively.
20
Note G 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.
In September, 2005, the company commenced litigation challenging the validity of the June,
2004 and April, 2005 agreements. On March 6, 2009, the company and the management firm
executed a Settlement Agreement and Release pursuant to which any and all claims and
counterclaims the parties had or may have had arising out of or related to their
relationship, arrangement or services provided one to the other were resolved and released
and any and all obligations between and among them, specifically including the contested
agreements, were terminated effective December 31, 2008.
No amount was paid to the management firm by the company during the three month periods
ended March 31, 2009 and 2008.
NOTE H Litigation
On October 31, 2008, the company commenced an action in New York State Supreme
Court, County of New York, Commercial Division against Ice Engineering, seeking
the total balance owed by Ice Engineering to the company pursuant to an
agreement entered into by the parties, effective June 15, 2007, namely,
$2,700,000. Under the agreement, in connection with Torvecs assignment of the
ice technology license, Ice Engineering agreed to reimburse Torvec for
approximately $3,500,000 the company previously had expended acquiring and
maintaining the license. Ice Engineering has paid approximately $800,000 but is
in arrears with respect to installments due June 1, 2008, September 1, 2008 and
December 1, 2008 and apparently has repudiated its remaining payment
obligations under the agreement. Ice Engineering has counterclaimed for the
$800,000 paid under the agreement thus far, alleging that the company failed to
deliver certain business information to Ice Engineering as called for under
the agreement.
On April 14, 2009, the Court denied the companys motion for summary judgment
without prejudice to re-file and ordered the parties to proceed with discovery.
NOTE I 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. At
March 31, 2009, the company did not receive any royalties under this agreement.
NOTE J Accounts Receivable
On March 29, 2009, the company shipped seven infinitely variable transmissions
to the National Aeronautics and Space Administration (NASA) for use in the
next-generation lunar rover. The company invoiced NASA an aggregate $175,000
for these transmissions and received payment in full from NASA on April 27,
2009.
21
Item 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PLAN OF OPERATION
|
(a)
|
|
Overall Business Strategy
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|
|
|
|
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)
|
|
2009 Plan of Operation
|
|
|
|
|
The companys plan of operation during the year ending December 31, 2009 is as follows:
|
|
|
|
|
1) to continue working with the U.S. Air Force to create an Advanced Combat Firefighting
Vehicle capable of unprecedented speed, maneuverability with diverse applications for use
in the most extreme and rugged terrain. The company has delivered an FTV
®
to the Air Force
in December 2008 to maximize the FTVs combat firefighting capabilities, including its
robotic and autonomous potential, at Tyndale Air Force Base in Florida;
|
|
|
|
|
2) to build a second generation FTV based upon the Air Forces recommendations for
delivery to the Air Force for integration in its Advanced Combat FirefightingVehicle
Program;
|
|
|
|
|
3) 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, in acquiring design-specific FTVs for boarder patrol, off-highway
emergencies, as an environmentally-friendly vehicle for federal and state conservation and
drug-enforcement efforts and, as a fast, highly maneuverable vehicle for combat and
non-combat uses;
|
22
|
|
|
4) to explore the interest of a foreign truck manufacturer in licensing the rights to
produce and market the FTV worldwide;
|
|
|
|
|
5) to build an IsoTorque
®
differential for evaluation by a major American automotive
manufacturer for integration in its front-wheel drive vehicles. Previously, in 2008, the
manufacturer had evaluated the IsoTorque differential in its rear-wheel drive vehicles;
|
|
|
|
|
6) to redesign the axle used by a major international truck manufacturer to enable the
manufacturer to integrate the companys IsoTorque technology in its fleet of heavy-duty
trucks.
|
|
|
|
|
During the first quarter of 2009, the company shipped seven design-specific infinitely
variable transmissions to the National Aeronautics and Space Administration for use in that
agencys lunar rover in connection with NASAs program titled Americas return to the
moon. The company anticipates that it will continue to work in 2009 with NASA as an
official drive-line consultant to the lunar rover project.
|
|
|
|
|
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)
|
|
Ice Technology License
|
|
|
|
|
Through June 14, 2007, the company held a license to ice technology granted by the Trustees
of Dartmouth College. This license was held through the companys majority-owned
subsidiary, Ice Surface Development, Inc. The license required the company to pay Dartmouth
College a royalty of 3.5% of the net sales of licensed product with minimum annual payments
of $25,000 through 2021. In addition, the license provided for the payment of 50% of
sub-license fee income.
|
|
|
|
|
Since its acquisition of the ice technology license, the company worked with the
technologys inventor, Dr. Victor Petrenko at Dartmouths Thayer School of Engineering, to
refine the various methods of deicing and used its best efforts to sublicense such
technology to one or more domestic and/or foreign glass manufacturers, automotive companies
and other potential end-users. A considerable amount of additional development work was
performed at the Dartmouth Colleges Center for Ice Technology on the colleges campus,
which work was supervised by Dr. Petrenko.
|
|
|
|
|
In December, 2006, the company was informed by Dr. Petrenko that while the physics
underlying the ice technology is still valid and the technology remains promising, he could
not estimate a time frame when the technology would be mature enough for automotive
commercialization.
|
|
|
|
|
Given Dr. Petrenkos assessment with respect to the ice technology, management concluded
that the carrying amount of the ice technology license as of December 31, 2007 ($1,071,000)
exceeded the estimated cash flows the company reasonably expected to receive and,
therefore, determined the full amount of such excess should be recorded as an impairment in
accordance with SFAS No. 144 as of and for the year ended December 31, 2006.
|
|
|
|
|
During 2007, the company and Dr. Petrenko discussed the terms and conditions under which
the company would accept Dr. Petrenkos offer to purchase the license from the company.
Effective June 15, 2007, the company assigned all of its rights, title and interest in and
to the license to Dr. Petrenkos company (Ice Engineering, LLC) in exchange for an
agreement by Ice Engineering to pay the shareholders of Ice Surface Development a royalty
equal to 5% of the gross revenues generated by the license and the assumption of the
companys obligations to Dartmouth College under the license.
|
23
|
|
|
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.
|
|
|
|
|
Ice Engineering has paid approximately $800,000 under the assignment
agreement but is in arrears with respect to quarterly installments due
beginning June 1, 2008 and has repudiated its payment obligations
under the agreement.
|
|
|
|
|
On October 31, 2008, the company commenced an action in New York State
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 agreement, namely, $2,700,000. Ice
Engineering has counterclaimed for the $800,000 paid under the
agreement thus far, alleging that the company failed to deliver
certain business information to Ice Engineering as called for under
the agreement.
|
|
|
|
|
The company filed a motion for summary judgment with respect to its
claims and on April 14, 2009, the Court denied the motion without
prejudice which means that the company can re-file the motion after
discovery has been completed. The parties are proceeding with
discovery.
|
|
|
|
|
The company has accounted for the receipt of reimbursement proceeds as
a recovery of its cost 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.
|
|
|
(d)
|
|
Results of Operations
|
|
|
|
|
The net loss for the three month period ended March 31, 2009 was
$699,000 as compared to the three month period ended March 31, 2008 of
a net loss of $1,184,000. The decrease in the net loss of $485,000 is
principally related to the decrease by approximately $220,000 in
professional fees for both legal and accounting services in the
current year as compared to the prior year for the same period . In
addition the stock based compensation decreased by $421,000 in current
period as compared to the prior year period. The increase in gross
profit by $75,000 is related to the companys small quantity sales of
products to various end users.
|
|
|
|
|
Research and development expenses for the three month period ended
March 31, 2009 amounted to $133,000 as compared to $148,000 for the
three month period ended March 31, 2008. The decrease of $15,000 in
the three month comparative is due to decreased cost associated with
commercializing our technologies.
|
|
|
|
|
General and administrative expense for the three month period ended
March 31, 2009 amounted to $651,000 compared to $1,047,000 for the
three month period ended March 31, 2008. This decrease of $396,000 in
the three month comparative is due to the decrease in professional
fees, as mentioned above and the decrease in stock based compensation
of approximately $300,000 as compared to the prior year for the same
period.
|
24
|
(f)
|
|
Liquidity and Capital Resources
|
|
|
|
|
The companys business activities during the three month period ended
March 31, 2009 were funded principally through the receipt in the
fourth quarter of 2008 of approximately $280,000 representing New York
State corporation income tax refundable credits allocable to certain
research and development expenses incurred in the years 2005-2007.
|
|
|
|
|
For the three month periods ended March 31, 2009 and 2008, the company issued 437,394 and
230,689 common shares to business consultants under the Business Consultants Stock Plan in
exchange for ongoing business advisory services, engineering services, legal fees, including
patent services, internal accounting services and other corporate services. As of March 31,
2009, 3,215,884 shares are available for future issuances under the Business Consultants Stock
Plan.
|
|
|
|
|
On March 28, 2008 the board of directors approved the governance and compensation committees
recommendation that, effective January 1, 2008, each of the Gleasmans be compensated at the
rate of $300,000 per year. Such amount is payable in cash. No payment of all or any portion of
the Gleasmans compensation shall be paid unless and until the company shall have the requisite
cash available. The determination of the availability of the requisite amount of cash shall be
made by the board of directors in the light of approved-budgets, existing and anticipated
capital requirements and existing and estimated cash flows. Unpaid amounts are accumulated and
carry over from one year to the next. No amount was paid to either of the Gleasmans under this
compensation arrangement during the three month periods ended March 31, 2009 and 2008. The
amount of cumulative unpaid compensation accrued as of March 31, 2009 is $786,000, including
accrued payroll taxes of $36,000.
|
|
|
|
|
At March 31, 2009, the companys cash position was $124,000 and the company had a working
capital deficit of $803,000.. The companys cash position at anytime during the nine month
periods ended March 31, 2009 was dependent upon its success in selling its preferred stock, the
receipt of reimbursement monies with respect to its ice technology license and revenues
generated by the sale of its products. Since our inception, we have incurred significant
operating and net losses and have not generated positive cash flows from operations. The
balance of cash and cash equivalents as of March 31, 2009 will not sufficient to meet our
anticipated cash requirements through March 31, 2010, based on our present plan of operation.
As a result, we are seeking to raise additional capital. Additional capital may not be
available on acceptable terms or at all. Equity financings may be dilutive to existing
stockholders. If we are unable to obtain sufficient capital as and when needed, we may be
forced to delay, scale back or eliminate some or all of our operations including our research
and development programs and commercialization plans, and/or license to third parties certain
products or technologies that we would otherwise seek to commercialize independently. Our
ability to continue is dependent on obtaining additional long-term financing and ultimately
achieving profitable operating results. Please see Note A of our condensed consolidated
financial statements for the three months ended March 31, 2010. Unless we are able to obtain
financing and ultimately achieve profitability we will not be able to continue as a going
concern.
|
At March 31, 2009, the company had accounts payable, accrued expenses, and deferred
compensation and other expenses totaling $1,204,000 (of which $786,000 is attributed to the
Gleasmans unpaid but accrued compensation).
25
|
(g)
|
|
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 customers. 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 and determinable at
the date of the sale based upon purchase orders generated by a
customer and accepted by the company.
|
|
|
|
|
In December 2008, the FASB issued Statement No. 160, Noncontrolling
Interests in Consolidated Financial Statements, an amendment of ARB
No. 51 (SFAS 160). 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 the
elimination of minority interest accounting in results of operations
with earnings attributable to noncontrolling interests reported as
part of consolidated earnings. Additionally, SFAS 160 revises the
accounting for both increases and decreases in a parents controlling
ownership interest. The company has adopted the standard as of
January 1, 2009. The adoption of SFAS 160 did not have a significant
impact on the companys financial position.
|
|
|
|
|
In March 2008, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 161,
Disclosures about Derivative Instruments and Hedging Activities-an
amendment of FASB Statement No. 133.
SFAS 161 requires enhanced
disclosures about an entitys derivative and hedging activities. SFAS
161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008 with early
application encouraged. As such, the Company is required to adopt
these provisions at the beginning of the fiscal year ended
December 31, 2009. in review of SFAS 161, the Company has determined
that it is not applicable and will have no effect to its consolidated
financial statements.
|
26
|
|
|
In May 2008, the FASB issued Statement of Financial Accounting
Standards No. 162 (SFAS 162), The Hierarchy of Generally Accepted
Accounting Principles. SFAS 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities
that are presented in conformity with U.S. GAAP. SFAS 162 will become
effective 60 days following the SECs approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, The Meaning
of Present Fairly in Conformity With Generally Accepted Accounting
Principles. This statement is not expected to result in a change in
our current practice.
|
|
|
|
|
In June 2008, the FASB Task Force reached a consensus-for-exposure
that an entity should determine whether an equity-linked financial
instrument (or embedded feature) is indexed to its own stock first by
evaluating the instruments contingent exercise provisions, if any,
and then by evaluating the instruments settlement provisions. Issue
No. 07-5 (EITF 07-5), Determining Whether an Instrument (or Embedded
Feature) Is Indexed to an Entitys Own Stock. Paragraph 11(a) of FAS
133 specifies that a contract issued or held by the reporting entity
that is both (a) indexed to its own stock and (b) classified in
stockholders equity in its statement of financial position shall not
be considered a derivative financial instrument for purposes of
applying that Statement. If a freestanding financial instrument (for
example, a stock purchase warrant) meets the scope exception in
paragraph 11(a) of FAS 133, it is classified as an equity instrument
and is not accounted for as a derivative instrument. The adoption of
EITF 07-5 did not have a significant impact on the companys
financial position.
|
|
|
|
|
In May 2008, FASB issued FAS No. 162, The Hierarchy of Generally
Accepted Accounting Principles (FAS 162). This statement documents
the hierarchy of the various sources of accounting principles and the
framework for selecting the principles used in preparing financial
statements. FAS 162 is effective 60 days following the Securities and
Exchange Commissions approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting Principles.
FAS 162 did not have a material impact on the Companys financial
statements.
|
|
|
|
|
In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and
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 does not expect the adoption of this accounting pronouncement
to have a material impact on the financial statements.
|
|
|
(h)
|
|
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 the three month
period ended March 31, 2009.
|
|
|
(i)
|
|
Quarterly Fluctuations
|
|
|
|
|
As of March 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.
|
27
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
Item 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The company maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed by the company in reports it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized, and reported on a timely basis
and that such information is accumulated and communicated to management, including the chief
executive officer and the chief financial officer, as appropriate, to allow for timely decisions
regarding required disclosure.
The companys management, including the chief executive officer and interim chief financial
officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(e) of the Exchange Act) as of March 31, 2009 pursuant to Rule 13a-15(b)
under the Exchange Act and has concluded that our disclosure controls and procedures were effective
as of March 31, 2009.
Changes in Internal Control Over Financial Reporting
The companys management, with the participation of the companys chief executive officer and
interim chief financial officer, has concluded that there were no changes in the companys internal
control over financial reporting that occurred during the quarter ended March 31, 2009 that has
materially affected, or is reasonably likely to materially affect, the companys internal control
over financial reporting.
28
PART II OTHER INFORMATION
Item 1.
Legal Proceedings
(1)
|
|
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.
|
|
|
|
In September, 2005, the company commenced litigation challenging the
validity of the June, 2004 and April, 2005 agreements. On March 6,
2009, the company and the management firm executed a Settlement
Agreement and Release pursuant to which any and all claims and
counterclaims the parties had or may have had arising out of or
related to their relationship, arrangement or services provided one
to the other were resolved and released and any and all obligations
between and among them, specifically including the contested
agreements, were terminated effective December 31, 2008.
|
|
(2)
|
|
On October 31, 2008, the company commenced an action in New York
State 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 agreement entered into by
the parties, effective June 15, 2007, namely, $2,700,000. Under the
agreement, in connection with Torvecs assignment of the ice
technology license, Ice Engineering agreed to reimburse Torvec for
approximately $3,500,000 the company previously had expended
acquiring and maintaining the license. Ice Engineering has paid
approximately $800,000 but is in arrears with respect to installments
due June 1, 2008, September 1, 2008 and December 1, 2008 and
apparently has repudiated its remaining payment obligations under the
agreement. Ice Engineering has counterclaimed for the $800,000 paid
under the agreement thus far, alleging that the company failed to
deliver certain business information to Ice Engineering as called
for under the agreement.
|
|
|
|
The company filed a motion for summary judgment with respect to its
claims and on April 14, 2009, the Court denied the motion without
prejudice which means that the company can re-file the motion after
discovery has been completed. The parties are proceeding with
discovery.
|
Item 1A.
Risk Factors
There have been no significant changes to the risk factors facing the company as disclosed in the
companys Form 10-K for the year ended December 31, 2008, except as set forth in Part II, Item 1,
Legal Proceedings.
29
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3.
Defaults Upon Senior Securities
None
Item 4.
Submission of Matters to a Vote of Security Holders
None
Item 5.
Other Information
None.
Item 6.
Exhibits
Exhibits as required by Item 601 of Regulation S-K, as applicable, are attached to this quarterly
report (Form 10-Q). 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.
(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.
|
(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;
|
|
|
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;
|
|
|
3.3
|
|
Certificate of Correction dated
March 22, 2002, incorporated by
reference to Form 10-KSB filed for
fiscal year ended December 31, 2002;
|
|
|
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;
|
|
|
3.5
|
|
Certification 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
March 31, 2004.
|
|
|
3.6
|
|
Certificate of Amendment to the
Certificate of Incorporation dated
January 26, 2008 increasing the
authorized common shares from
40,000,000 to 400,000,000 common
shares, incorporated by reference to
annual report
(Form 10-K)
filed for
the calendar year ended December 31,
2006.
|
(4)
|
|
Instruments defining the rights of holders including indentures
|
None
30
(9)
|
|
Voting Trust Agreement
|
None
|
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;
|
|
|
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;
|
|
|
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,
2,500,000 and 5,000,000 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,
April 20, 2004 and October 13, 2006,
respectively;
|
|
|
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 March 31,
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 March 31,
2000;
|
|
|
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;
|
|
|
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;
|
|
|
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;
|
|
|
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;
|
|
|
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;
|
|
|
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;
|
|
|
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;
|
31
|
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 March 31, 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 March 31, 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 March 31, 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 March 31, 2001;
|
|
|
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 March 31, 2001;
|
|
|
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;
|
|
|
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;
|
|
|
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 March 31, 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 March 31, 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 March 31, 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 March 31,
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 March 31, 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;
|
32
|
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 March 31, 2005,
incorporated by reference to Form 10-QSB filed for fiscal quarter
ended March 31, 2005;
|
|
|
10.37
|
|
Option Agreement between Matthew R. Wrona and Torvec, Inc. dated
March 31, 2005, incorporated by reference to Form 10-QSB filed for
fiscal quarter ended March 31, 2005;
|
|
|
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 March 31, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 2005;
|
|
|
10.43
|
|
Consultant Agreement with Steven Urbanik, dated October 1, 2005,
incorporated by reference to Form 10-QSB filed for fiscal quarter
ended March 31, 2005;
|
|
|
10.44
|
|
Consultant Agreement with Kiwee Johnson, dated March 31, 2005,
incorporated by reference to Form 10-QSB filed for fiscal quarter
ended March 31, 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 March 31, 2005.
|
|
|
10.46
|
|
Minutes of meeting Board of Directors Torvec, Inc., held October 19,
2004, creating the non-management directors plan, incorporated by
reference to Form 10-KSB filed for the fiscal year ended December
31, 2006.
|
33
|
10.47
|
|
Excerpts from minutes of the
meeting of Board of Directors
Torvec, Inc., adopting
changes to the non-management
directors plan creating, a
commercialized event plan,
approving an increase in
shares to be issued under
business consulting plan and
adopting recommendation that
shareholders increase number
of authorized common shares
from 40,000,000 to
400,000,000 common shares,
incorporated by reference to
Form 8-K filed on October 16,
2006.
|
|
|
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 Form 8-K
filed on June 20, 2006;
|
|
|
10.49
|
|
Letter agreement with
American Continental Group,
LLC, executed on October 22,
2006, incorporated by
reference to Form 8-K filed
on 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 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 directing the
return to the company of a
$250,000 (less administrative
fee) undertaking deposited
with the Monroe County
Treasurer in connection with
the same litigation,
incorporated by reference to
Form 10-Q filed for the
quarter ended March 31, 2008;
|
|
|
10.52
|
|
License Assignment and
Transfer Agreement by and
between Ice Engineering, LLC
and Torvec, Inc. made
effective June 15, 2008
assigning license granted by
Dartmouth College with
respect to ice technology
from Torvec to Ice
Engineering, incorporated by
reference to Form 8-K filed
on July 18, 2008.
|
|
|
10.53
|
|
License Agreement by and
between High Density
Powertrain and Torvec, Inc.
dated December 12, 2008,
incorporated by reference to
current report (Form 8-K)
filed December 14, 2008;
|
|
|
10.54
|
|
Consulting Agreement by and
between Clifford Carlson and
Torvec, Inc. dated
December 12, 2008,
incorporated by reference to
current report (Form 8-K)
filed December 14, 2008;
|
|
|
10.55
|
|
Minutes of meeting of
Governance and Compensation
Committee dated February 19,
2008 establishing
compensation for the
companys president and chief
executive officer and
amending the companys
commercializing event plan,
incorporated by reference to
annual report (Form 10-K)
filed for year ended December
31, 2007;
|
|
|
10.56
|
|
Consulting Agreement by and
between Capital Campaigns,
Inc. and Torvec, Inc., dated
February 6, 2009,
incorporated by reference to
annual report (Form 10-K)
filed for the year ended
December 31, 2008;
|
|
|
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,
incorporated by reference to
annual report (Form 10-K)
filed for the year ended
December 31,2008;
|
(11)
|
|
Statement regarding computation of per share earnings (loss)
|
Not applicable
(14)
|
|
Code of Ethics
|
|
(16)
|
|
Letter on change in certifying accountant
|
None
34
(18)
|
|
Letter regarding 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
|
|
(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
35
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: May 15, 2009
|
By:
|
/s/ James Y. Gleasman
|
|
|
|
James Y. Gleasman, Chief Executive Officer
|
|
36
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: May 15, 2009
|
By:
|
/s/ James Y. Gleasman
|
|
|
|
James Y. Gleasman, Chief Executive Officer and
|
|
|
|
Interim Chief Financial Officer
|
|
37
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
|
|
|
|
(31.1
|
)
|
|
Rule 13(a)-14(a)/15(d)-14(a) Certifications
|
|
|
|
|
|
|
(32
|
)
|
|
Section 1350 Certifications
|
38
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