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 June 30, 2010
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
(State or other jurisdiction of
incorporation or organization)
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16-1509512
(I.R.S. Employer 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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Number of Shares Outstanding at
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Class
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July 31, 2010
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Common Stock, $.01 par value
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37,518,441
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TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
INDEX
2
PART I FINANCIAL INFORMATION
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Item 1.
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FINANCIAL STATEMENTS
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TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Condensed Consolidated Balance Sheets
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June 30, 2010
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December 31, 2009
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(Unaudited)
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ASSETS
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Current assets:
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Cash
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$
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444,000
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$
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41,000
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Prepaid expenses and other receivables
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8,000
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111,000
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Total current assets
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452,000
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152,000
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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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142,000
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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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64,000
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106,000
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487,000
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526,000
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Less accumulated depreciation and amortization
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(285,000
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)
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(299,000
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)
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Net property and equipment
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202,000
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227,000
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Total Assets
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$
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654,000
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$
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379,000
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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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3,000
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$
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20,000
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Accounts payable
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193,000
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255,000
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Accrued liabilities
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406,000
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451,000
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Due to related party
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11,000
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22,000
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Deferred income
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28,000
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828,000
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Total current liabilities
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641,000
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1,576,000
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Deferred rent expense
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24,000
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29,000
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Notes payable, net of current portion
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9,000
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Total liabilities
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$
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665,000
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$
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1,614,000
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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, Non-voting, convertible, cumulative dividend $.40 per share, per annum, June 30, 2010 and December 31, 2009: 630,851 and 655,851
shares issued and outstanding, respectively (liquidation preference $3,806,316 and $3,841,491, respectively)
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300,000 designated as Class B, Non-voting, convertible, cumulative dividend $.50 per share, per annum, June 30, 2010 and December 31, 2009: 77,500 and 77,500
shares issued and outstanding, respectively (liquidation preference $572,170 and $552,795, respectively)
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7,000
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7,000
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Common stock, $.01 par value, 405,000,000 shares authorized, 37,268,150 and 35,811,192 issued and outstanding, at June 30, 2010 and December 31, 2009, respectively
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373,000
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358,000
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Additional paid-in capital
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52,408,000
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51,613,000
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Deficit accumulated during the development stage
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(52,799,000
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)
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(53,213,000
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)
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Total Torvec, Inc. Stockholders Capital Deficit
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(11,000
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)
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(1,235,000
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)
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Noncontrolling Interest of Subsidiary
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Total Stockholders Capital Deficit
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(11,000
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)
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(1,235,000
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)
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Total Liabilities and Stockholders Capital Deficit
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$
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654,000
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$
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379,000
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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
(Unaudited)
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Three
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Three
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September 25,
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Months
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Months
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Six Months
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Six Months
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1996 (Inception)
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ended June
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ended June
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ended June
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ended June
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through June
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30, 2010
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30, 2009
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30, 2010
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30, 2009
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30, 2010
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Revenue
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$
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$
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$
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$
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175,000
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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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315,000
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Gross Profit
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85,000
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107,000
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Costs and expenses
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Research and development
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67,000
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96,000
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168,000
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229,000
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16,023,000
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General and administrative
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599,000
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834,000
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1,347,000
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1,485,000
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41,200,000
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Asset impairments
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1,071,000
|
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Loss from operations
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$
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(666,000
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)
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$
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(930,000
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)
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$
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(1,515,000
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)
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$
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(1,629,000
|
)
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$
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(58,187,000
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)
|
Reversal of liability on cancellation of debt
|
|
|
|
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|
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1,541,000
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Other Income
|
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29,000
|
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1,929,000
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|
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2,189,000
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(Loss) Income Before Income Tax Benefits
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$
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(637,000
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)
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$
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(930,000
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)
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$
|
414,000
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$
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(1,629,000
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)
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$
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(54,457,000
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)
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Income tax benefits
|
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386,000
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Net (Loss) Income
|
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$
|
(637,000
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)
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|
$
|
(930,000
|
)
|
|
$
|
414,000
|
|
|
$
|
(1,629,000
|
)
|
|
$
|
(54,071,000
|
)
|
|
|
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|
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(Loss) Income: Net loss attributable to non-controlling interest in subsidiary
|
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|
|
|
|
|
|
|
|
|
|
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|
|
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1,272,000
|
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|
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Net (Loss) Income attributable to Torvec, Inc
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|
$
|
(637,000
|
)
|
|
$
|
(930,000
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)
|
|
$
|
414,000
|
|
|
$
|
(1,629,000
|
)
|
|
$
|
(52,799,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
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Preferred stock beneficial conversion feature
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
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|
763,000
|
|
Preferred stock dividends
|
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|
55,000
|
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|
78,000
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|
130,000
|
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161,000
|
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1,535,000
|
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|
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|
|
|
|
|
|
|
|
|
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Net (Loss) Income attributable to common stockholders
|
|
$
|
(692,000
|
)
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|
$
|
(1,008,000
|
)
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|
$
|
284,,000
|
|
|
$
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(1,790,000
|
)
|
|
$
|
(55,097,000
|
)
|
|
|
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|
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Basic and Diluted Net (Loss) Income attributable to common stock per share
|
|
|
(0.02
|
)
|
|
|
(0.03
|
)
|
|
|
0.01
|
|
|
|
(0.05
|
)
|
|
|
|
|
|
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|
Weighted average number of shares of
|
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|
|
|
|
|
|
|
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Common stock, Basic
|
|
|
36,888,000
|
|
|
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33,635,000
|
|
|
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36,530,000
|
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|
|
33,308,000
|
|
|
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|
Common stock , Diluted
|
|
|
36,888,000
|
|
|
|
33,635,000
|
|
|
|
36,601,000
|
|
|
|
33,308,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
4
TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 25,
|
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|
|
|
|
|
|
|
|
|
|
1996
|
|
|
|
|
|
|
|
|
|
|
|
(Inception)
|
|
|
|
Six months Ended
|
|
|
Through
|
|
|
|
June 30,
|
|
|
June 30,
|
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|
|
2010
|
|
|
2009
|
|
|
2010
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
414,000
|
|
|
$
|
(1,629,000
|
)
|
|
$
|
(54,071,000
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
28,000
|
|
|
|
33,000
|
|
|
|
2,540,000
|
|
Change in accrued taxes
|
|
|
90,000
|
|
|
|
|
|
|
|
267,000
|
|
Loss on impairment of license
|
|
|
|
|
|
|
|
|
|
|
1,071,000
|
|
Impairment of goodwill
|
|
|
|
|
|
|
|
|
|
|
19,000
|
|
Gain on sale of fixed assets
|
|
|
(27,000
|
)
|
|
|
|
|
|
|
(37,000
|
)
|
Compensation expense attributable to common stock in subsidiary
|
|
|
|
|
|
|
|
|
|
|
619,000
|
|
Common stock issued for services
|
|
|
331,000
|
|
|
|
756,000
|
|
|
|
14,843,000
|
|
Warrants issued for services
|
|
|
45,000
|
|
|
|
|
|
|
|
294,000
|
|
Shares issued for future consulting services
|
|
|
|
|
|
|
|
|
|
|
103,000
|
|
Stockholder contribution of services
|
|
|
211,000
|
|
|
|
|
|
|
|
3,820,000
|
|
Gain on cancellation of debt
|
|
|
|
|
|
|
|
|
|
|
(1,541,000
|
)
|
Contribution to capital, Ford Truck
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
Common Stock issued in connection with Commercializing Event
|
|
|
13,000
|
|
|
|
14,000
|
|
|
|
63,000
|
|
Cancellation of trust shares at trust termination
|
|
|
(45,000
|
)
|
|
|
|
|
|
|
(45,000
|
)
|
Gain on sale of Ice Engineering license
|
|
|
(1,900,000
|
)
|
|
|
|
|
|
|
(1,900,000
|
)
|
Compensatory common stock, options and warrants
|
|
|
110,000
|
|
|
|
|
|
|
|
17,986,000
|
|
Changes in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other receivables
|
|
|
103,000
|
|
|
|
17,000
|
|
|
|
153,000
|
|
Deferred revenue
|
|
|
|
|
|
|
|
|
|
|
(63,000
|
)
|
Deferred rent
|
|
|
(5,000
|
)
|
|
|
(5,000
|
)
|
|
|
24,000
|
|
Accounts payable and accrued expenses
|
|
|
(162,000
|
)
|
|
|
198,000
|
|
|
|
4,082,000
|
|
Deferred compensation
|
|
|
|
|
|
|
374,000
|
|
|
|
|
|
Due to a related party
|
|
|
(11,000
|
)
|
|
|
|
|
|
|
11,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(805,000
|
)
|
|
|
(242,000
|
)
|
|
|
(11,746,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(3,000
|
)
|
|
|
|
|
|
|
(363,000
|
)
|
Cost of acquisition
|
|
|
|
|
|
|
|
|
|
|
(16,000
|
)
|
Proceeds from sale of license
|
|
|
1,100,000
|
|
|
|
|
|
|
|
1,900,000
|
|
Proceeds from sale of fixed asset
|
|
|
27,000
|
|
|
|
|
|
|
|
37,000
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
1,124,000
|
|
|
|
|
|
|
|
1,558,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from sales of common stock and upon exercise of options and warrants
|
|
|
110,000
|
|
|
|
70,000
|
|
|
|
7,144,000
|
|
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
|
|
|
(26,000
|
)
|
|
|
(8,000
|
)
|
|
|
(106,000
|
)
|
Proceeds from stockholders loan and advances
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
Repayment of stockholders loan and advances
|
|
|
|
|
|
|
|
|
|
|
(147,000
|
)
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
(365,000
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
84,000
|
|
|
|
62,000
|
|
|
|
10,632,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
|
|
|
403,000
|
|
|
|
(180,000
|
)
|
|
|
444,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
41,000
|
|
|
|
304,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
444,000
|
|
|
$
|
124,000
|
|
|
$
|
444,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
1,000
|
|
|
$
|
2,000
|
|
|
$
|
28,000
|
|
Income Tax Paid
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
Non cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for acquisition of leasehold improvements
|
|
|
|
|
|
|
|
|
|
|
166,000
|
|
Issuance of common stock in settlement of payables
|
|
|
35,000
|
|
|
|
62,000
|
|
|
|
156,000
|
|
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 noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
232,000
|
|
Shares issued for future consulting services
|
|
|
|
|
|
|
|
|
|
|
103,000
|
|
Issuance of common stock for a finders 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
|
|
Issuance of common stock as payment for Preferred A and B dividends
|
|
|
46,000
|
|
|
|
|
|
|
|
123,000
|
|
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 and six month periods ended June
30, 2010 and 2009 and the period from September 25, 1996 (inception) through June 30, 2010 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 and six month periods ended June 30, 2010 and 2009 and since
inception. The results are not necessarily indicative of results to be expected for the entire
year. Certain amounts in the prior year consolidated financial statements have been reclassified
to conform to current year presentation.
Torvec, Inc. (the company) was incorporated as a New York State business corporation in
September 1996. The company, which has not had any significant revenue producing operations and 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, is refining 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.
For the period from September 1996 (inception) through June 30, 2010, the company has accumulated a
deficit of $52,799,000, and at June 30, 2010 has a working capital deficit of $189,000 and
stockholders capital deficit of $11,000. The company has been dependent upon equity financing and
advances from stockholders to meet its obligations and sustain operations. The companys efforts
are principally devoted to the ongoing refining of its technologies and commercializing its
products. Management believes that based upon its current cash position and its projected cash
flows from its business operations, the company will be able to meet its anticipated cash
requirements through June 30, 2011. However, if adequate funds are not available, the company may
need to downsize operations, incur debt or raise additional capital. There can be no assurance that
the company will be successful in raising additional capital or incur debt when needed on terms
acceptable to the company. These conditions indicate that we may not be able to continue
operations as a going concern as we may be unable to generate the funds necessary to pay our
obligations in the ordinary course of business. The accompanying 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
The financial statements include the accounts of the company, its majority-owned inactive
subsidiary, Ice Surface Development, Inc. (56% owned at June 30, 2010 and 2009), 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.
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 determining the useful lives of its fixed assets and the future
realizable value of such assets. The financial statements contain an estimate for a potential
payroll tax liability. These estimates are subject to a high degree of judgment and potential
change. Actual results could differ from those estimates.
[4]
|
|
Income (Loss) per Common Share:
|
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 260-10
(Previously known as: FASB Statement 128, Earnings Per Share) requires the presentation of basic
earnings per share, which is based on common stock outstanding, and dilutive earnings per share,
which gives effect to options, warrants and convertible securities in periods when they are
dilutive. For the three and six month periods ended June 30, 2010 and 2009 the company excluded
2,572,949 and 2,516,449, and 2,505,699 and 2,516,449 potential common shares, respectively,
relating to convertible preferred stock outstanding, options and warrants from its diluted net loss
per common share calculation because they are anti-dilutive. The Company also excluded 625,000
warrants at June 30, 2010 and 2009 as the conditions for their vesting were not yet satisfied.
6
The company accounts for income taxes using the asset and liability method described in FASB ASC
740-10 (Previously known as: FASB Statement 109, Accounting for Income Taxes,) which requires
recording of 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 FASB ASC 740-10 (Previously known as: FASB
interpretation No. 48 Accounting for Uncertainty in Income Taxes, an interpretation of FASB
Statement 109) on January 1, 2008. As a result of the implementation of FASB ASC 740-10, we
recognized no adjustment for uncertain tax positions. As of June 30, 2010, 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 2007 through 2009 remain open to
examination by the federal and states tax jurisdictions to which we are subject.
[6]
|
|
Fair Value of Financial Instruments:
|
The carrying amount of cash, accounts payable and accrued expenses approximates their fair value
due to the short maturity of those instruments. The carrying amount of the notes payable is
considered to approximate their fair value.
[7]
|
|
Stock-Based Compensation
|
The companys Stock Option Plan was terminated as of May 27, 2008 as to the grant of additional
options. 641,848 previously issued and outstanding options remain exercisable in accordance with
the terms of the options.
ASC 718-10 requires all share-based payments to employees, including grants of employee stock
options, to be recognized as compensation expense over the service period (generally the vesting
period) in the consolidated financial statements based on their fair values on the grant date. The
impact of forfeitures that may occur prior to vesting is also estimated and considered in the
amount recognized. In addition, the realization of tax benefits in excess of amounts recognized for
financial reporting purposes will be recognized as a financing activity in accordance with ASC
718-10.
No tax benefits were attributed to the stock-based compensation expense because a valuation
allowance was maintained for substantially all net deferred tax assets. We elected to adopt the
alternative method of calculating the historical pool of windfall tax benefits as permitted by ASC
718-10-65 (Prior authoritative literature: FASB Staff Position (FSP) No. SFAS 123(R)-c, Transition
Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.) This is a
simplified method to determine the pool of windfall tax benefits that is used in determining the
tax effects of stock compensation in the results of operations and cash flow reporting for awards
that were outstanding as of the adoption of ASC 718-10.
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.
[9]
|
|
Recent Accounting Pronouncements:
|
In May 2009, the FASB issued new accounting guidance that establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. In February 2010, the FASB amended
the guidance and removed the contradictions between the requirements of U.S. generally accepted
accounting principles U.S. GAAP (GAAP) and the Securities Exchange Commission (SEC) filing
rules. As a result, public companies will no longer have to disclose the date of evaluation of
subsequent events in both issued and revised financial statements.
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 was to be paid at the rate of $300,000 per quarter
commencing March 1, 2008, less approximately $91,000 in fees payable to
Dartmouth College accrued through June 14, 2007 to be deducted from the first
quarterly reimbursement amount. The company received the first installment of
$209,000 due March 1, 2008 on April 3, 2008 and did not receive any other
installments.
7
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 the assignment agreement.
On January 27, 2010, the company and Ice Engineering
settled this litigation. Under the settlement agreement,
the companys assignment of the ice technology license is
made permanent. The company elected to forego its right to
royalties and agreed to receive $1,100,000, with $300,000
paid to the company by Ice Engineering on January 27, 2010
and $800,000 paid to the company by Ice Engineering on
February 26, 2010.
The company recognized in the first quarter the $1,100,000
received in 2010 in regard to the settlement of the
litigation. The company also recognized in the first
quarter the $800,000 previously recorded as deferred
income in connection with the original contract for the
license (See Note G).
NOTE D Related Party Transactions
[1]
|
|
Effective January 1, 2008, the board of directors instituted a compensation plan for James and Keith Gleasman by which the company would compensate each of them for services performed and inventions
and know-how transferred at the rate of $300,000 per year. Actual payment under the plan was conditioned upon a board determination that the company had the requisite cash, after the
complete funding of all ongoing projects, to make payment.
|
|
|
The company did not have the requisite cash available to pay the Gleasmans compensation under this arrangement from January 1, 2008 through August 17, 2009, the date on which each of the Gleasmans
waived all rights and interest in and to the board-created compensation plan, including all rights and interest in and to the amount(s) under the plan accrued to such date. As a result of such
waiver, of the $942,000 accrued under the plan at August 17, 2009, $900,000 was reclassified to equity as a contribution of services and $42,000 accrued under the plan for payroll taxes was recorded
as a reduction to general and administrative expenses.
|
|
|
For periods for which there is no compensation plan in effect for the Gleasmans, the company is required to record the estimated value of each of the Gleasmans services rendered to the company
(estimated at $300,000 each per annum) as a contribution of services under generally accepted accounting principles applicable to the company and is required under the same accounting guidance to
allocate the amount of such contribution between research and development expenses on the one hand and general and administrative expenses on the other hand. For the three and six month period ended
June 30, 2010, the company recorded $50,000 and $75,000 to research and development expense and $86,000 and $136,000 to general and administrative expense, respectively, based upon managements
estimate. For the three and six month period ended June 30, 2009, the company recorded $50,000 and $100,000 to research and development expense and $100,000 and $200,000 to general and
administrative expense, respectively, based upon managements estimate of the Gleasmans time allocation.
|
|
|
Effective March 14, 2010, James Gleasman retired as the companys chief executive officer, interim chief financial officer and as a member of the board of directors. Mr. Gleasman died on May 29, 2010.
|
|
|
During the year ended December 31, 2009, James Gleasman advanced the company $22,000. The outstanding balance as of June 30, 2010 is $11,000.
|
[2]
|
|
During the three month periods ended June 30, 2010 and 2009, the company incurred an expense of $25,350 for each period to a member of the Gleasman family for administrative, technological and
engineering consulting services. During the six month periods ended June 30, 2010 and 2009, the company incurred an expense of $37,050 and $50,700, respectively, to the same person. The related
payments consisted of cash of $25,350 and $0 for the three month periods ended June 30, 2010 and 2009, respectively, with the balance paid in business consulting common shares. For the six month
periods ended June 30, 2010 and 2009, the related payments consisted of cash of $33,150 and $0, respectively, with the balance paid in business consulting shares.
|
[3]
|
|
During the three month periods ended June 30, 2010 and 2009, the company incurred an expense of $23,270 for each period to a family member of its general counsel for engineering services rendered to
the company. During the six month periods ended June 30, 2010 and 2009, the company incurred an expense of $41,170 and 46,540, respectively, to the same person. The related payments consisted of
cash of $23,270 and $0 for the three month periods ended June 30, 2010 and 2009, respectively, with the balance paid in business consulting common shares. For the six month periods ended June 30,
2010 and 2009, the related payments consisted of cash of $30,430 and $0, respectively, with the balance paid in business consulting shares.
|
[4]
|
|
On September 14, 2007, the company moved its executive offices and engineering operations from Pittsford and Webster, New York to a Rochester, New York facility, which includes both manufacturing and
executive office space. 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 for these premises and such lease was executed on April 29, 2008. (See Note F 2).
|
|
|
In February 2010, the company made a one-time payment in shares for payments of additional rent. The company charged approximately $20,000 to general and administrative expense.
|
8
NOTE E Stockholders Capital Deficit
|
|
During the three and six month periods ended June 30, 2010, the company sold 350,167 and 360,167
restricted common shares for proceeds of $105,050 and $110,050, respectively, to accredited
investors in a series of private placements.
|
|
|
During the three and six month periods ended June 30, 2009, the company sold 64,103 restricted
common shares for proceeds of $50,000 to accredited investors in a series of private placements.
|
|
|
For the three and six month periods ended June 30, 2010, the company issued 0 and 22,756
restricted common shares to an accounting firm in partial payment for services rendered in the
amount of $9,785. For the three and six month periods ended June 30, 2009, the company issued
5,000 restricted common shares to an accounting firm in partial payment for services rendered in
the amount of $4,000.
|
[2]
|
|
Class A Preferred stock:
|
|
|
In January 2002, the company authorized the sale of up to 3,300,000 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.
|
|
|
Since its designation, the company has sold an aggregate 765,512 Class A Preferred shares for
aggregate proceeds of $3,062,048. 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 June 30, 2010.
|
|
|
Since its designation, Class A Preferred holders have converted an
aggregate 146,000 Class A Preferred shares into the companys common
stock on a one for one basis through June 30, 2010. For the three and six
month periods ended June 30, 2010, 25,000 Class A Preferred shares were
converted. For the three and six month periods ended June 30, 2009,
51,250 Class A Preferred shares were converted.
|
|
|
Upon conversion, Class A Preferred shareholders are entitled to receive,
in accordance with the terms of the Class A Preferred, dividends payable
either in cash or in Class A Preferred shares, at discretion of the board
of directors, calculated at the rate of 10 percent per annum. At times,
the companys board may elect to settle dividends through the issuance of
common stock in lieu of cash. The number of common shares issued is based
on the market price of such stock at the time of conversion. Class A
Preferred shares paid as dividends do not participate in cumulative
dividend rights.
|
|
|
Through June 30, 2010, an aggregate of $164,993 dividends have been paid
on the Class A Preferred by the issuance of 16,389 Class A Preferred shares and 77,499 common shares. 11,534 common shares were isssued as
dividends in the three and six month periods ended June 30, 2010. 65,965
common shares were issued as dividends in the three and six month
periods ended June 30, 2009.
|
|
|
At both June 30, 2010 and 2009, dividends payable upon conversion of
619,512 outstanding shares of Class A Preferred amounted to approximately
$1,283,000 and $1,114,000, respectively. Through June 30, 2010, the
company has issued 11,339 Class A Preferred shares as dividends which are
excluded from the accumulated dividend payable.
|
[3]
|
|
Class B Preferred stock:
|
|
|
On October 21, 2004, the company authorized the sale of up to 300,000 shares of its Class B
Non-Voting Cumulative Convertible Preferred Stock (Class B Preferred) 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. Since its designation, the company has sold an aggregate 97,500 Class B
Preferred in a number of private placements for proceeds of approximately
$487,500.
|
|
|
Since its designation, 20,000 Class B Preferred have been converted on a
one for one basis into 20,000 shares of common stock. For the three and
six months ended June 30, 2010 and 2009, no Class B Preferred were
converted.
|
|
|
Upon conversion, Class B Preferred shareholders are entitled to receive, in accordance with the
terms of the Class B Preferred, dividends payable either in cash or in Class B Preferred shares,
at the discretion of the board of directors, calculated at the rate of 10 percent per annum. At
times, the companys board may elect to settle dividends through the issuance of common stock in
lieu of cash. The number of common shares issued is based on the market price of such stock at
the time of conversion. Class B Preferred shares paid as dividends do not participate in
cumulative dividend rights.
|
9
|
|
Through June 30, 2010, aggregate $24,082 dividends have been paid on the Class B Preferred
by the issuance of 30,103 common shares. No dividends were paid in the three and six month
periods ended June 30, 2010 and 2009.
|
|
|
At June 30, 2010 and 2009, dividends payable upon the conversion of 77,500 shares of Class B
Preferred outstanding amounted to approximately $185,000 and $146,000, 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.
|
|
|
The following table represents information relating to stock options outstanding at June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding and Exercisable
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
Exercise
|
|
|
Remaining Life
|
|
|
Intrinsic
|
|
Shares
|
|
Price
|
|
|
in Years
|
|
|
Value
|
|
641,848
|
|
|
4.79
|
|
|
|
3.22
|
|
|
$
|
0
|
|
|
|
By its terms, the companys Option Plan terminated as to the grant of future options on May 27,
2008. Consequently, no additional stock options will be granted under the Option Plan, although
outstanding options remain available for exercise in accordance with their terms. No options
were exercised for the three and six month periods ended June 30, 2010 and 2009.
|
|
|
As of June 30, 2010, the company did not have any unrecognized stock compensation related to
unvested awards.
|
[5]
|
|
Business Consultants Stock Plan:
|
|
|
For the three month periods ended June 30, 2010 and 2009, the company issued 443,400 and 506,998
common shares to business consultants under the Business Consultants Stock Plan and charged
$169,000 and $401,000 to operations in connection with these share issuances. For the six month
periods ended June 30, 2010 and 2009, the company issued 1,075,819 and 944,392 common shares to
business consultants under the Plan and charged operations $463,000 and $770,000 in connection
with these services including stock issued in connection with commercializing events. 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.
|
|
|
On March 23, 2010, the board of directors approved an increase in the number of common shares
reserved for issuance under the companys Business Consultants Stock Plan by 5,000,000 common shares. These shares were registered under the Securities Act of 1933 by the filing of a
registration statement on Form S-8 with the Securities and Exchange Commission which became
effective on April 1, 2010.
|
|
|
On May 24, 2010, 88,857 unallocated business consultant shares were returned by the
consultants trust to the company for cancellation on the companys stock record books. The
company credited the fair value of the shares to general and administrative expense for
approximately $45,000. The related liability was satisfied through cash payments.
|
|
|
As of June 30, 2010, 5,423,020 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 and six month periods ended June 30, 2010 and
2009. No previously issued warrants were exercised during the three and six month periods ended
June 30, 2010 and 2009.
|
10
|
|
On October 10, 2007, the Nonmanagement Directors Plan was modified to (1) eliminate the
issuance of warrants and replace the payment with either cash or common shares, at the
discretion of the board of directors, and (2) increase the fees payable to the companys
nonmanagement directors. As adjusted, each nonmanagment director (a total of 4 persons) would
receive $26,460 for board and committee service per annum. The chairman of the audit committee
would receive an additional $12,600 per annum and the chairman of the nominating committee would
receive an additional $5,355 per annum.
|
|
|
The Nonmanagement Directors Plan was also modified to provide that the chairman of the board,
chairman of the executive committee and chairman of the governance and compensation committee,
one person, will be paid an aggregate $110,000 per annum for all services rendered by him as a
director and in such capacities. The effective date for these adjustments to the plan was
July 1, 2007.
|
|
|
On April 28, 2008, the plan was again modified to increase the compensation of the person
serving as chairman of the board, chairman of the executive committee, chairman of the
governance and compensation committee (one person) to $125,000 per annum.
|
|
|
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.
|
|
|
For the three month periods ended June 30, 2010 and 2009, the company issued 182,400 and 93,885
common shares under the plan to satisfy the payables for services rendered by the Companys
non-management directors with a value of $68,000 and $62,000 for such periods, respectively.
$45,000 and $41,000 were charged to operations for the three month periods ended June 30, 2010
and 2009, and $23,000 and $21,000 were a settlement of fees payable as of March 31, 2010 and
2009, respectively.
|
|
|
For the six month periods ended June 30, 2010 and 2009, the company issued 345,939 and 165,875
common shares under the plan to satisfy the payables for services rendered by the Companys
non-management directors with a value of $144,000 and $124,000 for such periods, respectively.
$109,000 and $62,000 were charged to operations for the six month periods ended June 30, 2010
and 2009, and $35,000 and $62,000 were a settlement of fees payable as of December 31, 2009 and
2008, respectively.
|
[7]
|
|
Business, Financial and Engineering Consultants:
|
|
|
Through June 30, 2010, the company has issued 1,689,583 common stock warrants to various
business, financial and engineering consultants, of which 94,583 have been exercised for
proceeds of $918 and 445,000 cancelled in exchange for the participation of certain engineers in
the companys 2008 Commercializing Event Plan. (Note E [10]).
|
|
|
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 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.
|
|
|
On February 17, 2010, the company issued 100,000 common stock warrants vesting immediately and
exercisable for ten years at an exercise price of $2.50 per common share to an adviser. The
company recorded a charge of $45,000 to general and administrative expenses using the
Black-Scholes inputs to calculate the value of the warrants. None of these warrants have been
exercised through June 30, 2010 (Note E [8(m)]).
|
|
|
As of June 30, 2010, outstanding warrants to acquire shares of the companys common stock are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
Exercise
|
|
|
|
|
Shares
|
|
|
Shares
|
|
Price
|
|
|
Expiration
|
|
Outstanding
|
|
|
Exercisable
|
|
|
|
(a)
|
|
|
(a)
|
|
125,000
|
(a)
|
|
|
|
|
$
|
.75
|
|
|
None
|
|
|
500,000
|
(b)
|
|
|
|
|
$
|
.01
|
|
|
2015/2016
|
|
|
54,500
|
(c)
|
|
|
54,500
|
|
$
|
.01-5.00
|
|
|
2010/2016
|
|
|
39,000
|
(d)
|
|
|
39,000
|
|
$
|
5.00
|
|
|
2015
|
|
|
255,000
|
(e)
|
|
|
255,000
|
|
$
|
.01
|
|
|
2010
|
|
|
0
|
(f)
|
|
Exercised
|
|
$
|
.01
|
|
|
2011
|
|
|
3,750
|
(g)
|
|
|
3,750
|
|
$
|
1.00
|
|
|
2011
|
|
|
20,500
|
(h)
|
|
|
20,500
|
|
$
|
3.27
|
|
|
2016
|
|
|
400,000
|
(i)
|
|
|
400,000
|
|
$
|
3.75
|
|
|
2016
|
|
|
200,000
|
(j)
|
|
|
200,000
|
|
$
|
5.00
|
|
|
2017
|
|
|
50,000
|
(k)
|
|
|
50,000
|
|
$
|
5.00
|
|
|
2017
|
|
|
100,000
|
(l)
|
|
|
100,000
|
|
$
|
2.50
|
|
|
2017
|
|
|
100,000
|
(m)
|
|
|
100,000
|
|
|
|
|
(a)
|
|
Exercisable only if the company has an IPO and exercisable at the IPO price five years from IPO. Through
the quarter ended June 30, 2010, the company has not conducted an IPO.
|
11
|
|
|
(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 by the company of a binding agreement for the sale,
transfer, license or assignment for value of any and/or all of
its companys automotive technology at $.75 per share. The
company will record a charge representing the fair value of the
warrants when the warrants become exercisable.
|
|
(c)
|
|
The company has issued an aggregate 123,500 warrants at an
exercise price of $0.01 to its nonmanagement directors for
services rendered to the board under its Nonmanagement Directors
Stock Plan prior to its amendment on October 13, 2006. No further
warrants are issuable under the Plan as modified by the board of
directors on October 13, 2006 (See Note E [6]). An aggregate
69,000 warrants have been exercised for approximately $630 in
proceeds. No warrants were exercised during the three and six
month periods ended June 30, 2010.
|
|
(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. None
of these warrants were exercised during the three and six month
periods ended June 30, 2010 and 2009.
|
|
(e)
|
|
During 2005, the company issued 210,000 warrants to certain
engineering and administrative consultants, exercisable
immediately for a ten year term at $5.00 per common share. During
2006, the company issued 295,000 warrants to certain engineering
consultants exercisable over a ten year term at $5.00 per common
share, but only exercisable if the company sells, licenses or
otherwise transfers one or more technologies for value. The
engineering consultants holding 445,000 of these warrants agreed
to cancel them in the fourth quarter of 2008 in exchange for
their participation in the companys Commercializing Event Plan.
On March 28, 2008, the company issued an aggregate 195,000
warrants exercisable until 2016 at $5.00 per common share to two
consultants 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. None of these
warrants were exercised during the three and six month periods
ended June 30, 2010 and 2009.
|
|
(f)
|
|
During 2005, the company issued 6,000 warrants to a
consultant, exercisable immediately for a five year term at .01
per common share. All 6,000 warrants were exercised on a cashless
basis on May 3, 2010.
|
|
(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 of 162,000 Class A Preferred and 20,000 Class B
Preferred, all immediately exercisable at $.01 per common share.
Through December 31, 2009, an aggregate 194,599 of these warrants
have been exercised for proceeds of approximately $1, 383. No
additional warrants were exercised in the three and six month
periods ended June 30, 2010.
|
|
(h)
|
|
During 2006, one investor purchased 20,500 warrants
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 June 30, 2010.
|
|
(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 June 30, 2010.
|
|
(j)
|
|
During 2006, the company issued 200,000 warrants immediately
exercisable for ten years at an exercise price of $3.75 per
common share to a former governmental affairs consultant. None of
these warrants have been exercised through June 30, 2010.
|
|
(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 June 30, 2010.
|
|
(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 June 30, 2010.
|
|
(m)
|
|
On February 17, 2010, the company issued 100,000 common stock
warrants exercisable for ten years at an exercise price of $2.50
per common share to an adviser. The company recorded a charge of
$45,000 to general and administrative expenses using the
Black-Scholes inputs shown below to calculate the value of the
warrants. None of these warrants have been exercised through
June 30, 2010.
|
12
For the Six Months Ended
June 30, 2010
Black-Scholes Assumptions
|
|
|
|
|
Term
|
|
10.00 years
|
|
Expected forfeiture rate
|
|
|
-0-
|
%
|
Risk-free rate
|
|
|
3.74
|
%
|
Volatility
|
|
|
122.25
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
|
|
The following summarizes the activity of the companys outstanding warrants for the six month
period ended June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Warrants
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Outstanding at January 1, 2010
|
|
|
1,753,750
|
|
|
$
|
2.84
|
|
|
6.65 years
|
|
|
$
|
|
|
Granted
|
|
|
100,000
|
|
|
|
2.50
|
|
|
9.77 years
|
|
|
|
|
|
Exercised
|
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled or expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2010
|
|
|
1,847,750
|
|
|
$
|
2.83
|
|
|
6.47 years
|
|
|
$
|
22,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2010
|
|
|
1,222,750
|
|
|
$
|
3.68
|
|
|
6.47 years
|
|
|
$
|
22,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[9]
|
|
Shares Issued to Trust 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
values the shares issued to the trust using the closing market price on the date immediately
prior to the date of issuance.
|
|
|
During the three and six month periods ended June 30, 2010, the company issued 0 and 104,167
business consultants shares of common stock valued at $0 and $50,000, respectively, to the
trust to satisfy the payment of invoices submitted by the consultants for services rendered
during such periods. In May, 2010, the consultants elected to terminate the trust and on May
24, 2010, 88,857 business consulting shares which were unallocated with respect to the payment
of invoices as of the termination were returned to the company and cancelled on the companys
record books. The related liability was satisfied through cash payments.
|
|
|
During the three and six month periods ended June 30, 2009, the company issued 188,500 and
331,055 business consultants shares of common stock valued at $143,700 and $281,150,
respectively, to the trust to satisfy the payment of invoices submitted by the consultants for
services rendered during such periods.
|
[10]
|
|
Commercializing Event Plan:
|
|
|
On October 13, 2006, the board of directors adopted a Commercializing Event Plan (2006 Event
Plan) designed to reward the companys directors, executives and certain administrative
personnel for the successful completion of one or more commercializing events. No payments were
made under the 2006 Event Plan and the 2006 Event Plan was terminated on October 31, 2007.
|
|
|
On October 31, 2007, the board of directors 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. The plan provides for
payment to be made with the issuance of common shares.
|
|
|
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.
|
|
|
During the three and six month periods ended June 30, 2010, the company issued 0 and 32,077
common shares under the 2007 Event Plan and recorded charges of $0 and $13,000, respectively.
For the three and six month periods ended June 30, 2009, the company issued 4,669 common shares
under the 2007 Event Plan and recorded charges of $14,000.
|
13
|
|
The company accounts for the settlement of its commission arrangements to non-employee
consultants, directors, executives and certain administrative personnel with the issuance of
its business consulting shares under ASC 505-50 (Previously known as: FASB Statement 123(R)
Share Based Payment), provided that there are sufficient shares under the business
consultants plan. Under ASC 505-50, the company measures commission arrangements at the fair
value of the equity instruments issued. In the event that there are insufficient shares
available to settle the obligation, the company will follow the provisions of FASB ASC 815-40
(Prior authoritative literature: EITF 00-19 Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Companys Own Stock). Under ASC 815-40, the company
will record a liability instrument for the resulting changes in fair value from the date due to
the end of each reporting period until such liability is satisfied.
|
|
|
In 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 (Note: E [8]).
|
|
|
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 2007 Event Plan. The company valued the
warrants at $249,000 using the Black-Scholes option/pricing model and charged operations.
|
NOTE F Commitments and Other Matters
[1]
|
|
Consulting Agreements:
|
|
|
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 in securing an
agreed-upon level of governmental and /or private funding, the companys monthly obligation is
limited to $4,000. On February 19, 2010, the agreement with the consulting firm was renewed for
an additional six months under the same terms. As of June 30, 2010, no funding had been
obtained under the extended agreement and as a result, the companys monthly obligation under
the extended agreement is $4,000. Payments to the consultant firm are charged to operations.
This agreement will terminate by its terms on August 19, 2010.
|
|
|
The company leases a facility located at 1999 Mount Read Blvd., Rochester, New York. On
April 29, 2008, the company executed a five-year lease for the premises (with a December 1,
2007 lease commencement date) which provides for rent to be paid at a rate of $5,687 per month
($68,244 per annum) and in addition, for the payment of the companys proportionate share of
yearly real estate taxes and yearly common area operating costs.
|
|
|
Rental payments and certain other payments due to the landlord may 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 and six months ended June 30, 2010 and 2009 was $15,000 and $29,600
and $15,000 and $30,000, respectively. For the three and six months period ended June 30, 2010,
the company issued 54,787 and 103,974 business consultant common shares in payment for rent.
For the three and six months ended June 30, 2009, the company issued 53,655 and 83,680 business
consultant common shares in payment for rent.
|
NOTE G Litigation
On October 31, 2008, the company commenced an action in New York Supreme Court, County of New York,
Commercial Division against Ice Engineering, LLC seeking the total balance owed by Ice Engineering
to the company pursuant to an assignment agreement entered into by the parties, effective June 15,
2007, whereby the company assigned all of its rights and interest in an ice technology license
granted by Dartmouth College to Ice Engineering in exchange for a 2.8% royalty interest and a cash
reimbursement of $3,500,000. The suit was commenced after the company had been paid approximately
$800,000 in reimbursement monies.
On January 27, 2010, the company and Ice Engineering settled this litigation. Under the settlement
agreement, the companys assignment of the ice technology license is made permanent; the company
elected to forego its right to royalties and will receive $1,100,000 in reimbursement monies, with
$300,000 being paid to the company by Ice Engineering on January 27, 2010 and $800,000 being paid
to the company by Ice Engineering by February 26, 2010. The company received the entire $1,100,000
due under the settlement agreement by the due dates specified in the settlement agreement.
The recovery of $1,100,000 received during January and February 2010 has been recorded as other
income during the quarter ended March 31, 2010. The $800,000 received in 2007 and 2008 has
previously been recorded as deferred income and, upon settlement of this litigation, has been
reflected as other income during the quarter ended March 31, 2010.
14
NOTE H Royalty Agreement
On December 12, 2007, the company granted High Density Powertrain, 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 June 30, 2010, the company had not
received any royalties under this agreement.
NOTE I Subsequent Events
(1) On July 19, 2010, the company received a net $57,000, after payment of $3,000 in legal
expenses, in connection with a Securities Purchase Agreement for the issuance of a Convertible Note
in the principal amount of $60,000 due and payable on April 2, 2011, with interest payable at the
rate of 8% per annum.
The outstanding Note principal and all interest accrued thereon can be converted, in whole or in
part, into the companys common stock at the election of the Holder from time to time beginning 180
days after the July 2, 2010 issue date. The conversion price is equal to 58% of the average of the
three lowest closing bid prices of the companys common stock during a 10 day trading period
immediately prior to the date the Holders conversion notice is sent to the company.
The company may prepay the principal amount of the Note and all accrued interest at any time
beginning on the July 2, 2010 issue date and expiring 180 days thereafter. In the event the company
elects to prepay within the first 90 days, the repayment amount is 150% of the $60,000 principal
amount and outstanding accrued interest and if between the 91
st
and 180
th
day, the repayment amount is 175% of the $60,000 principal amount and outstanding accrued interest.
In the event of default, the amount of principal and interest not paid when due bears interest at
the rate of 22% per annum and the Note becomes immediately due and payable.
The Note agreement contains covenants requiring the Holders written consent for certain activities
not in existence or not committed to by the company on the date of issuance as follows: common
stock dividend distributions in cash or shares, stock repurchases, borrowings, sale of
significantly all assets, certain advances and loans in excess of $100,000 and certain guarantees
with respect to third-party liabilities.
(2) Effective July 1, 2010, the company engaged the services of a consulting firm to provide
expertise in local, state
and federal governmental relations, to advise the company with respect to media relations, business
development and in negotiating with industry representatives. The company has agreed to pay the
consultant an annual retainer
of $48,000 to be paid in quarterly installments of $12,000 beginning July 1, 2010. The agreement is
for a one year term.
(3) Effective July 1, 2010, the company engaged a consultant to provide the company with assistance
in the development of strategic plans, financial modeling, licensing agreements, partnership
agreements and general funding opportunities. The company has agreed to pay the consultant an
annual retainer equal to $34,500 to be paid in quarterly installments of $8,625 beginning July 1,
2010. The company also agreed to pay the consultant a commission equal to 4% of the value received
by the company from third parties introduced by or through the auspices of the consultant. The
agreement is for a two year term.
(4) On July 16, 2010, Asher J. Flaum, a director of Torvec, Inc. purchased 40,000 restricted
common shares of the company for $16,400.
15
|
|
|
Item 2.
|
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
(a)
|
|
Overall Business Strategy
|
|
|
From its inception in 1996, the companys overall business plan has been to design, develop,
build and commercialize its automotive technologies, including its hydraulic pump/motor system,
infinitely variable transmissions, Iso-Torque
®
differential, constant velocity joint
technology and full terrain vehicle.
|
|
|
As a result of its development efforts, three of the companys technologies are ready for
immediate production and commercialization on a design-specific basis:
|
IsoTorque
®
Differential
Full Terrain Vehicle
®
Infinity Variable Transmission
|
|
In managements opinion, each of these products represents technological breakthroughs that
ultimately benefit both the end user and the environment.
|
|
|
The companys current focus is to take its products to the market as swiftly as possible, to
maximize return on its technologies. Towards this end, Torvec has created products and developed
specific marketing strategies for each product. Each product has an immediate niche/custom
market component and a mass market component, in order to fully capitalize on its technological
innovations.
|
|
|
Torvec is currently seeking to ally itself with one or more strategic partners in terms of
capital infusion and/or manufacturing /distribution capabilities to penetrate each defined
product market as expeditiously as possible for all parties involved.
|
|
|
Our IsoTorque Differential is an evolution in differential design, allowing for maximum traction
without interfering with differentiation, resulting in improved performance, handling and
safety. Evaluations by four separate racing teams have all shown a reduction in lap times by one
second per lap with installation of the IsoTorque. The IsoTorque differential allows for optimal
utilization of engine power by perfecting balancing the torque to each wheel according to the
amount of traction under each wheel.
|
|
|
The Full Terrain Vehicle (FTV
®
) is an environmentally sensitive tracked vehicle that is capable
of achieving speeds up to 60 mph, while maintaining the high traction and load capability of a
tracked vehicle. This makes the FTV ideally suited for off-road application in the military, aid
relief, agriculture, utilities, forestry, fire & rescue, and construction industries, among
others.
|
|
|
The FTV has both off-and-on highway capabilities with rubber tracks that do not damage paved
highways. The vehicles light weight yields light track pressure (less than 3.0 PSI when fully
loaded) thus avoiding soil erosion and compaction. It allows for driver-friendly operation
through the use of a steering wheel. The vehicle is maneuverable, pivoting 360° on its center.
Traction surpasses that of a 4WD on any terrain, and the patented Steer-Drive is not used in any
other track vehicle (most others employ either traditional skid steering or hydrostatics).
|
|
|
Torvec delivered the FTV to Tyndale Air Force base in Florida on February 9, 2010 with the
vehicle meeting all specifications to serve as the USAFs Advance Combat Firefighting Vehicle
Platform.
|
|
|
Infinity Variable Transmission
|
|
|
Torvecs primary foray into green technology is its Infinity Variable Transmission (IVT). In
its most recent testing in a Dodge ram
3
/
4
ton truck, Torvec obtained gains of 17% in fuel economy
compared to a 4 speed automatic in the New York City Cycle EPA test. Emission data has also been
collected comparing the IVT to the stock automatic transmission demonstrating a steep drop in
hydrocarbon emissions, as well as drops in carbon dioxide, free carbon, and nitrogen oxide
emissions.
|
16
(b)
|
|
Results of Operations
|
|
|
The company did not generate revenue in the three and six month period ended June 30, 2010.
Revenue net of cost of goods sold for the three and six month period ended June 30, 2009 was $0
and $85,000, respectively. The revenue generated was due to a sale of a prototype , which was a
non recurring event. Other income for the three and six month period ended June 30, 2010 was
$29,000 and $1,929,000, respectively. This was due to the sale of assets and the settlement of
license litigation, respectively. There was $0 of other income for the comparative prior three
and six month periods ended June 30, 2009.
|
|
|
Research and development expenses for the three month period ended June 30, 2010 amounted to
$67,000 as compared to $96,000 for the three month period ended June 30, 2009. Research and
development expenses for the six month period ended June 30, 2010 amounted to $168,000 as
compared to $229,000 for the six month period ended June 30, 2009. The decrease of $29,000 and
$61,000 in the three and six month comparative is due to decreased cost associated with the
allocation of the companys technology expenses. Expenses are generally directly attributable to
a project and there has been a decrease in the research and development of projects. The company
policy is to allocate a portion of the Gleasmans contributed services to research and
development. Management expects research and development to continue in this trend of decrease
expense in comparison to prior periods due to the emphasis on commercialization.
|
|
|
General and administrative expense for the three month period ended June 30, 2010 amounted to
$599,000 compared to $834,000 for the three month period ended June 30, 2009. General and
administrative expenses for the six month period ended June 30, 2010 amounted to $1,347,000 as
compared to $1,485,000 for the six month period ended June 30, 2009. This decrease of $235,000
and $138,000 in the three and six month comparative is due, in large part, to the decreased
spending on consulting services.
|
|
|
The net loss for the three month period ended June 30, 2010 was $637,000 as compared to the three
month period ended June 30, 2009 of a net loss of $930,000. The net income for the six month
period ended June 30, 2010 was $414,000 as compared to a net loss of $1,629,000 for the six month
period ended June 30, 2009. The three month period comparative decrease of net loss of $293,000
is due to a decrease in expenses. Research and development expense decreased by $29,000 due to
the position left vacant by Jim Gleasman and the general and administrative expense decreased by
$235,000 largely due to the decrease in professional and consulting expenses. The six month
period result was a net income of $414,000 compared to a net loss of $1,629,000 for the six month
period ended June 30, 2009, principally related to the gain on sale of Ice Engineer of $1,900,000
during the first quarter of fiscal 2010.
|
(c)
|
|
Liquidity and Capital Resources
|
|
|
The companys business activities during the six month periods ended June 30, 2010 were funded
principally through the receipt of $1,100,000 in settlement of litigation with Ice Engineering,
LLC, the receipt of approximately $103,000 representing New York State corporation income tax
refundable credits, recognized in prior years, allocable to certain research and development
expenses incurred in the 2008 tax year, and the receipt of approximately $110,000 from the sale
of approximately 360,167 restricted common shares to accredited investors.
|
|
|
For the six month periods ended June 30, 2010 and 2009, net cash used in operating activities
$805,000 and $242,000, respectively. The increase of $563,000 was due in large part to the
availability of cash to pay consultants instead of payment in the issuance of common shares.
|
|
|
For the six month periods ended June 30, 2010 and 2009, cash provided by investing activities
amounted to $1,124,000 and $0, respectively. This increase was due to the receipt of $1,100,000
in settlement of litigation with Ice Engineering LLC.
|
|
|
For the six month periods ended June 30, 2010 and 2009, cash provided by financing activities
amounted to $84,000 and $62,000, respectively. This increase was due in large part to higher
sales of common stock.
|
|
|
For the six month period ended June 30, 2010, the company issued 1,075,819 and 944,392 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 June 30, 2010, 5,423,020
shares are available for future issuances under the Business Consultants Stock Plan.
|
|
|
Effective January 1, 2008, the board of directors instituted a compensation plan for James and
Keith Gleasman by which the company would compensate each of them for services performed and
inventions and know-how transferred at the rate of $300,000 per year. Actual payment under the
plan was conditioned upon a board determination that the company had the requisite cash, after
the complete funding of all ongoing projects, to make payment.
|
|
|
The company did not have the requisite cash available to pay the Gleasmans compensation under
this arrangement from January 1, 2008 through August 17, 2009, the date on which each of the
Gleasmans waived all rights and interest in and to the board-created compensation plan,
including all rights and interest in and to the amount(s) under the plan accrued to such date.
As a result of such waiver, of the $942,000 accrued under the plan at August 17, 2009, $900,000
was reclassified to equity as a contribution of services and $42,000 accrued under the plan for
payroll taxes was recorded as a reduction to general and administrative expenses.
|
|
|
For periods for which there is no compensation plan in effect for the Gleasmans, the company is
required to record the estimated value of each of the Gleasmans services rendered to the company
(estimated at $300,000 each per annum) as a contribution of services under generally accepted
accounting principles applicable to the company and is required under the same accounting
principles to allocate the amount of such contribution between research and development expenses
on the one hand and general and administrative expenses on the other hand.
|
17
|
|
Effective March 14, 2010, James Gleasman retired as the companys chief executive
officer, interim chief financial officer and as a member of the board of directors. Mr. Gleasman
passed away on May 29, 2010.
|
|
|
For the three and six month period ended June 30, 2010, the company recorded $25,000 and $75,000
to research and development expense and $50,000 and $136,000 to general and administrative
expense, based upon managements estimate of the Gleasmans time allocation.
|
|
|
For the period from September 1996 (inception) through June 30, 2010, the company has
accumulated a deficit of $52,799,000, and at June 30, 2010 has a working capital deficit of
$189,000 and stockholders capital deficit of $11,000. The company has been dependent upon
equity financing and advances from stockholders to meet its obligations and sustain operations.
The companys efforts are principally devoted to the ongoing refining of its technologies and
commercializing its products. Management believes that based upon its current cash position and
its projected cash flows from its business operations, the company will be able to meet its
anticipated cash requirements through June 30, 2011. However, if adequate funds are not
available, the company may need to downsize operations, incur debt or raise additional capital.
There can be no assurance that the company will be successful in raising additional capital or
incur debt when needed on terms acceptable to the company. These conditions indicate that we may
not be able to continue operations as a going concern as we may be unable to generate the funds
necessary to pay our obligations in the ordinary course of business. The accompanying 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.
|
(d)
|
|
Critical Accounting Policies
|
|
|
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. To the
extent that collectability of the receivable is not assured, the company follows the cost
recovery approach. Accordingly, amounts collected will be accounted for as a reduction of costs.
|
|
|
The company accounts for the settlement of its commission arrangements to non-employee
consultants, directors, executives and certain administrative personnel with the issuance of its
business consulting shares under ASC 505 (Previously known as FASB Statement 123
®
Share Based Payment), provided that there are sufficient shares available under the business
consulting plan. Under ASC 505, the company measures commission arrangements at the fair value
of the equity instruments issued. In the event that there are insufficient shares available to
settle the obligation, the company will follow the provisions of ASC 815-40 (Previously known
as: EITF 00-19 Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Companys Own Stock). Under ASC 815-40, the company will record a liability
instrument for the resulting changes in fair value from the date due to the end of each
reporting period until such liability is satisfied.
|
|
|
Recent Accounting Pronouncements:
|
|
|
See Note B [9] of the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1
herein for a discussion of the impact of the recent accounting standards
|
|
|
The extent inflation has impacted the companys operations during the three and six month
periods ended June 30, 2010, has been determined by management not to have been significant.
|
(f)
|
|
Quarterly Fluctuations
|
|
|
As of June 30, 2010 and 2009, the company had not engaged in substantial revenue producing
operations. Once the company actually commences significant revenue producing operations, the
companys operating results may fluctuate significantly from period to period as a result of a
variety of factors, including purchasing patterns of consumers, the length of the companys
sales cycle to key customers and distributors, the timing of the introduction of new products
and product enhancements by the company and its competitors, technological factors, variations
in sales by product and distribution channel, product returns, and competitive pricing.
Consequently, once the company actually commences significant revenue producing operations, the
companys product revenues may vary significantly by quarter and the companys operating results
may experience significant fluctuations.
|
|
|
|
Item 3.
|
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Not Applicable
18
|
|
|
Item 4.
|
|
CONTROLS AND PROCEDURES
|
Disclosure controls and procedures
Evaluation of Disclosure Controls and Procedures
Our management evaluated, with the participation of our President and Interim Chief Financial
Officer, the effectiveness of our disclosure controls and procedures as of the end of the period
covered by this Form 10-Q. Based on this evaluation and the identification of the material
weaknesses in our internal control over financial reporting described below, our President and
interim Chief Financial Officer have concluded, as of June 30, 2010, that our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the Exchange Act)), as of the end of such period, are not effective to ensure
that information required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. Other than the remediation efforts described
thereafter, there have been no significant changes in our internal controls over financial
reporting during the second quarter ended June 30, 2010 that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial reporting. Below, we
have described the material weaknesses that were identified for the year ended December 31, 2009
and the current status of managements remediation efforts.
Managements Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements in accordance with GAAP. Because
of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to
the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management has conducted, with the participation of our President and our interim Chief Financial
Officer, an assessment of the effectiveness, of our internal control over financial reporting as of
June 30, 2010. Managements assessment of internal control over financial reporting was conducted
using the criteria in
Internal Control over Financial Reporting Guidance for Smaller Public
Companies
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on the evaluation, our management concluded that there are material weaknesses in our
internal control over financial reporting. The material weaknesses identified did not result in the
restatement of any previously reported financial statements nor does management believe that it had
any effect on the accuracy of the Companys financial statements for the current reporting period.
A material weakness is a deficiency, or a combination of control deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a material misstatement
of the Companys annual or interim financial statements will not be prevented or detected on a
timely basis. We identified the following material weaknesses in our internal control over
financial reporting as of December 31, 2009:
The material weaknesses relate to the a) preparation of the income tax disclosures and the related
components of our deferred tax assets, b) accounting for equity transactions and c) the preparation
of financial statements and footnotes and financial data provided to the Companys registered
public accounting firm in connection with the annual audit. While we engage outside consultants to
assist us in preparing our tax provision and tax returns, our financial statements and related
disclosures, we did not have proper review controls to monitor outside consultants. We have not
implemented an effective review process for accounting for income taxes, which could lead to errors
in computation and disclosures. The Company does not have technical expertise in financial
reporting to monitor work performed by outside consultants.
We have taken appropriate and reasonable steps to make the necessary improvements to remediate the
material weaknesses. We intend to consider the results of our remediation efforts and related
testing as part of our fiscal 2010 assessment of the effectiveness of our internal control over
financial reporting.
Remediation of Material Weaknesses in Internal Control over Financial Reporting
We are in the process of implementing remediation efforts with respect to the material weaknesses
noted above as follows:
|
a)
|
|
Income Tax Disclosures Management is in the process of working with the consultant to
increase the amount of oversight in regard to the tax disclosure and the related components.
|
|
b)
|
|
Accounting for Equity Transactions The internal control has been modified so that price
protection is no longer being provided to the companys consultants. The Compensation and
Governance Committee has reviewed this policy and it is managements assessment that this
material weakness has been resolved.
|
|
c)
|
|
Preparation of the Financial Statements Management is in the process of working with the
consultant to increase the amount of oversight in regard to financial statement preparation.
Additional consulting services are now being provided and the Company has engaged as a
consultant an individual with over ten years experience as a chief financial officer of a
public company to oversee financial statement preparation.
|
We believe the foregoing efforts will enable us to improve our internal control over financial
reporting. Management is committed to continuing efforts aimed at improving the design adequacy and
operational effectiveness of its system of internal controls. The remediation efforts noted above
will be subject to our internal control assessment, testing and evaluation process.
19
PART II OTHER INFORMATION
|
|
|
Item 1.
|
|
Legal Proceedings
|
On October 31, 2008, the company commenced an action in New York Supreme Court, County of New York,
Commercial Division against Ice Engineering, LLC seeking the total balance owed by Ice Engineering
to the company pursuant to an assignment agreement entered into by the parties, effective June 15,
2007, whereby the company assigned all of its rights and interest in an ice technology license
granted by Dartmouth College to Ice Engineering in exchange for a 2.8% royalty interest and a cash
reimbursement of $3,500,000. The suit was commenced after the company had been paid approximately
$800,000 in reimbursement monies.
On January 27, 2010, the company and Ice Engineering settled this litigation. Under the settlement
agreement, the companys assignment of the ice technology license is made permanent; the company
elected to forego its right to royalties and will receive $1,100,000 in reimbursement monies, with
$300,000 being paid to the company by Ice Engineering on January 27, 2010 and $800,000 being paid
to the company by Ice Engineering by February 26, 2010. The company received the entire $1,100,000
due under the settlement agreement by the due dates specified in the settlement agreement.
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, 2009.
|
|
|
Item 2.
|
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
During the three and six month periods ended June 30, 2010, the company sold 350,167 and 360,167
restricted common shares for proceeds of $105,050 and $110,050, respectively, in a private
placement.
The investors in each of these transactions are qualified accredited investors within the meaning
of regulation D promulgated under the Securities Act of 1933 and the company is therefore relying
on section 4(2) of said Act as a transaction by an issuer not involving a public offering.
|
|
|
Item 3.
|
|
Defaults Upon Senior Securities
|
None.
|
|
|
Item 4.
|
|
Submission of Matters to a Vote of Security Holders
|
None.
|
|
|
Item 5.
|
|
Other Information
|
None.
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.
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(2) Plan of acquisition, reorganization, arrangement, liquidation, or succession
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2.1
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|
Agreement and Plan of Merger, dated November 29, 2000 by and among Torvec Subsidiary Corporation, Torvec, Inc., UTEK Corporation and ICE Surface
Development, Inc. incorporated by reference to Form 8-K filed November 30, 2000 and Form 8K/A filed February 12, 2001.
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(3) Articles of Incorporation, By-laws
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3.1
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Certificate of Incorporation, incorporated by reference to Form 10-SB/A , Registration Statement, registering Companys $.01 par value common
stock under section 12(g) of the Securities Exchange Act of 1934;
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3.2
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Certificate of Amendment to the Certificate of Incorporation dated August 30, 2000, incorporated by reference to Form SB-2 filed October 19, 2000;
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3.3
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Certificate of Correction dated March 22, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2002;
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3.4
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By-laws, as amended by shareholders on January 24, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2002;
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3.5
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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.
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20
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3.6
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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.
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(4) Instruments defining the rights of holders including indentures
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None.
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(9) Voting Trust Agreement
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None.
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(10) Material Contracts
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10.1
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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;
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10.2
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The Companys 1998 Stock Option Plan and related Stock Options Agreements, incorporated by reference to Form S-8, Registration Statement,
registering 2,000,000 shares of the Companys $.01 par value common stock reserved for issuance thereunder, effective December 17, 1998;
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10.3
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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, 5,000,000 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, October 13, 2006 and April 1, 2010,
respectively.
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10.4
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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;
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10.5
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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;
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10.6
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License Agreement between Torvec, Inc. and Variable Gear, LLC dated June 28, 2000, incorporated by reference to Form SB-2 filed October 19, 2000;
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10.7
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Investment Agreement with Swartz Private Equity, LLC dated September 5, 2000, together with attachments thereto, incorporated by reference to Form
8-K filed October 2, 2000;
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10.8
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Extension of and Amendment to Consulting Agreement with James A. Gleasman, incorporated by reference to Form 10-KSB filed for the fiscal year
ended December 31, 2000;
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10.9
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Extension of and Amendment to Consulting Agreement with Keith E. Gleasman, incorporated by reference to Form 10-KSB filed for the fiscal year
ended December 31, 2000;
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10.10
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Extension of and Amendment to Consulting Agreement with Vernon E. Gleasman, incorporated by reference to Form 10-KSB filed for the fiscal year
ended December 31, 2000;
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10.11
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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;
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10.12
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Option and Consulting Agreement with PMC Direct Corp., dated February 10, 1999, incorporated by reference to Form 10-QSB filed for quarter ended
March 31, 2001;
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10.13
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Investment Banking Services Agreement with Swartz Institutional Finance (Dunwoody Brokerage Services, Inc.) dated December 8, 2000, incorporated
by reference to Form 10-QSB filed for quarter ended March 31, 2001;
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10.14
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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;
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10.15
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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;
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10.16
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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;
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10.17
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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;
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10.18
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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;
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21
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10.19
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Pittsford Capital Group, LLC Agreement dated January 30, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31,
2001;
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10.20
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Gleasman-Steenburgh Indemnification Agreement dated April 9, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December
31, 2001;
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10.21
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Series B Warrant dated April 10, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2001;
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10.22
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|
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;
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10.23
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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;
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10.24
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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;
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10.25
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|
|
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;
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10.26
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|
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;
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10.27
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|
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;
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10.28
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|
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;
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10.29
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|
|
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;
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10.30
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|
|
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;
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10.31
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|
|
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;
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|
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|
|
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;
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|
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|
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;
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|
|
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;
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|
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|
|
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;
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|
|
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;
|
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|
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|
|
|
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|
|
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;
|
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|
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|
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|
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;
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|
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|
|
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;
|
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|
|
|
|
|
|
|
|
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;
|
22
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|
|
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|
|
|
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;
|
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|
|
|
|
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|
|
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;
|
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|
|
|
|
|
|
|
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;
|
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|
|
|
|
|
|
|
|
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;
|
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|
|
|
|
|
|
|
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.
|
|
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|
|
|
|
|
|
|
|
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.
|
|
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|
|
|
|
|
|
|
|
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.
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|
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|
|
|
|
|
|
|
|
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;
|
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|
|
|
|
|
|
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;
|
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|
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|
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|
|
10.50
|
|
|
New York State School Bus Proposal incorporated by reference to Form 10-Q filed for quarter ended March 31, 2006;
|
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|
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|
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;
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|
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|
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|
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|
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.
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|
|
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;
|
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|
|
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|
|
|
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;
|
|
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|
|
|
|
|
|
|
|
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;
|
|
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|
|
|
|
|
|
|
|
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;
|
|
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|
|
|
|
|
|
|
|
10.58
|
|
|
Memorandum of Understanding between Rochester Institute of Technology and Torvec, inc. dated as of July 31,2010, incorporated by reference to
current report (Form 8-K) filed August 6, 2009;
|
|
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|
|
|
|
|
|
|
|
10.59
|
|
|
Prototype Agreement between Eastern Mining & Industrial Supply and Torvec, Inc. dated as of November 11, 2009, incorporated by reference to
current report (Form 8-K) filed November 18, 2009;
|
|
|
|
|
|
|
|
|
|
|
10.60
|
|
|
Agreement between Rochester Institute of Technologys Center for Integrated Manufacturing Studies and Torvec, inc. dated as of October 6, 2009,
incorporated by reference to current report (Form 8-K) filed November 18, 2009;
|
|
|
|
|
|
|
|
|
|
|
10.61
|
|
|
Resignation letter of James Y. Gleasman as chief executive officer, interim chief financial officer and director dated March 5, 2010, incorporated
by reference to current report (Form 8-K) filed March 5, 2010;
|
23
|
|
|
|
|
|
|
|
|
|
10.62
|
|
|
Corporate Sponsorship Agreement between Phoenix Performance, Inc. and Torvec, inc. dated as of May 18, 2010, incorporated by reference to current
report (Form 8-K) filed May 26, 2010;
|
|
|
|
|
|
|
|
|
|
|
10.63
|
|
|
Operating Agreement of Torvec-China, LLC dated as of June 11, 2010, incorporated by reference to current report (Form 8-K) filed June 16, 2010;
|
|
|
|
|
|
|
|
|
|
|
10.64
|
|
|
Exclusive Marketing Agreement between Torvec, inc. and Torvec-China, LLC dated as of June 11, 2010, incorporated by reference to current report
(Form 8-K) filed June 16, 2010;
|
|
|
|
|
|
|
|
|
|
|
10.65
|
|
|
Sales and Marketing Agreement between Torvec-China, LLC and Across-China (USA), Inc. dated as of June 11, 2010, incorporated by reference to
current report (Form 8-K) filed June 16, 2010;
|
|
|
|
|
|
|
|
|
|
|
10.66
|
|
|
Convertible Promissory Note issued by Torvec, Inc. to Asher Enterprises, Inc. dated as of July 2, 2010, incorporated by reference to current
report (Form 8-K) filed July 20, 2010;
|
|
|
|
|
|
|
|
|
|
|
10.67
|
|
|
Securities Purchase Agreement between Asher Enterprises, Inc. and Torvec, Inc. dated as of July 2, 2010, incorporated by reference to current
report (Form 8-K) filed July 20, 2010;
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
Statement regarding computation of per share earnings (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not applicable
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
Code of Ethics
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
Letter on change in certifying accountant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
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|
|
|
|
IVT Diesel Corp. (New York)
|
|
|
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|
|
Variable Gear, LLC (New York)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Torvec-China, 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
|
24
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.
|
|
|
|
|
Date: August 13, 2010
|
TORVEC, INC.
|
|
|
By:
|
/s/ Keith E. Gleasman
|
|
|
|
Keith E. Gleasman, President and
|
|
|
|
Interim Chief Financial Officer
|
|
In accordance with the Exchange Act, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
|
|
|
|
|
Dated: August 13, 2010
|
By:
|
/s/ Keith E. Gleasman
|
|
|
|
Keith E. Gleasman, President and
|
|
|
|
Interim Chief Financial Officer
|
|
EXHIBIT INDEX
|
|
|
|
|
|
(31.1
|
)
|
|
Rule 13(a)-14(a)/15(d)-14(a) Certifications
|
|
|
|
|
|
|
(32
|
)
|
|
Section 1350 Certifications
|
25
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