Attached files
file | filename |
---|---|
EX-21 - Arista Power, Inc. | v162525_ex21.htm |
EX-23.1 - Arista Power, Inc. | v162525_ex23-1.htm |
As
filed with the Securities and Exchange Commission on October 9, 2009
Registration
No. 333-157304
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 8 to
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WINDTAMER
CORPORATION
(Exact
name of registrant as specified in its charter)
New
York
|
3510
|
16-1610794
|
(State
or other jurisdiction
|
(Primary
Standard Industrial
|
(I.R.S.
Employer
|
of
incorporation or organization)
|
Classification
Code Number)
|
Identification
Number)
|
6053
Ely Avenue
Livonia,
New York 14487
Telephone:
(585) 346-6442
(Address,
including zip code, and telephone number, including area code, of registrant's
principal executive offices)
Gerald
E. Brock
Chief
Executive Officer
WindTamer
Corporation
6053
Ely Avenue
Livonia,
New York 14487
Telephone:
(585) 346-6442
Facsimile:
(585) 346-3062
With
a copy to:
Woods
Oviatt Gilman LLP
2
State Street
700
Crossroads Building
Rochester,
New York 14614
Attention:
Gregory W. Gribben, Esq.
Telephone:
(585) 987-2800
Facsimile:
(585) 454-3968
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
Approximate
date of commencement of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
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.
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨ (Do
not check if a smaller reporting company)
|
Smaller
reporting company x
|
CALCULATION
OF REGISTRATION FEE
Title of each class of securities to be registered
|
Amount to
be
Registered
|
Proposed maximum
offering price per
share (1)
|
Proposed
maximum
aggregate offering
price (1)
|
Amount of
Registration
fee
|
||||||||||||
Common
Stock $.0001 par value
|
9,500,000
|
$
|
1.00
|
$
|
9,500,000
|
$
|
530.10
|
|||||||||
Total
|
$
|
530.10
|
(1) The
price provided is the price at which the selling stockholders will sell the
offered securities until the Company’s common stock is quoted on the OTC
Bulletin Board. Thereafter, the selling stockholders will sell at the
prevailing market price or privately negotiated prices.
THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION
8(A), MAY DETERMINE.
The
information in this prospectus is not complete and may be changed. The Selling
Stockholders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and neither we nor the Selling
Stockholders are soliciting any offer to buy these securities in any
jurisdiction where the offer or sale is not permitted.
October
9, 2009
PROSPECTUS
(SUBJECT TO COMPLETION)
WINDTAMER
CORPORATION
Shares
of Common Stock
This
prospectus relates to the resale of up to 9,500,000 shares of common stock held
by the selling stockholders. The selling stockholders listed on page 24 may sell
the shares from time to time.
There is
no public trading market for our common stock. A registered broker-dealer has
filed a Form 211 with the Financial Institution Regulatory Authority on our
behalf that would permit our common stock to be quoted for trading on the OTCBB,
but we cannot be sure that such an effort will be successful.
The
selling stockholders will sell the common stock registered hereunder at a price
of $1.00 per share until our common stock is quoted on the OTC Bulletin
Board. Thereafter, the selling stockholders will sell at prevailing
market prices or privately negotiated prices. The price of $1.00 is
the last price at which the Company’s common stock was sold in the private
placement ended July 14, 2009, completed pursuant to Section 3(b) and Rule 505
of Regulation D thereunder, as more fully described in the section entitled
“Recent Transactions Affecting Equity” below.
THESE
SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. PLEASE REFER TO
"RISK FACTORS" BEGINNING ON PAGE 2.
Our
principal executive offices are located at 6053 Ely Avenue, Livonia, New York.
Our phone number is (585) 346-6442.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED ANY OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date
of this prospectus is [____] , 2009.
TABLE
OF CONTENTS
PROSPECTUS
SUMMARY
|
1
|
|
RISK
FACTORS
|
2
|
|
USE
OF PROCEEDS
|
8
|
|
DILUTION
|
8
|
|
PRICE
RANGE OF COMMON STOCK
|
8
|
|
DIVIDEND
POLICY
|
8
|
|
COMPANY
OPERATIONS
|
9
|
|
RECENT
TRANSACTIONS AFFECTING EQUITY
|
11
|
|
BUSINESS
|
12
|
|
LEGAL
PROCEEDINGS
|
18
|
|
OUR
MANAGEMENT
|
18
|
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
21
|
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
22
|
|
SELLING
STOCKHOLDERS
|
23
|
|
PLAN
OF DISTRIBUTION
|
27
|
|
SHARES
ELIGIBLE FOR RESALE
|
28
|
|
DESCRIPTION
OF SECURITIES
|
28
|
|
LEGAL
MATTERS
|
30
|
|
EXPERTS
|
30
|
|
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
|
30
|
YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THOSE
DOCUMENTS TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED
WHERE IT IS LEGAL TO SELL THESE SECURITIES.
PROSPECTUS
SUMMARY
You
should read this Prospectus Summary together with the more detailed information
contained in this prospectus, including the risk factors and financial
statements and the notes to the financial statements. This prospectus contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those discussed in the forward-looking
statements. Factors that might cause such a difference include those discussed
in the Risk Factors section and elsewhere in this prospectus.
From
inception (March 30, 2001), through June 30, 2009 the Company had incurred
development stage losses of $2,872,083 and a stockholders' deficit of
approximately $64,142. During the period from inception through June 30, 2009,
the Company had negative cash flows from operations of $1,473,773. The auditors
report for the fiscal year ended December 31, 2008 is qualified as to the
Company's ability to continue as a going concern. Management estimates the
Company needs between at least $1.5 million and $2.5 million of additional
capital from the anticipated commencement of sales of its products or additional
financing to sustain it operations over the next 12 months.
COMPANY
OVERVIEW
We are an
independent developer of wind turbine technology. We have developed a new type
of wind turbine called the "Wind Tamer™." Our patented technology is new to the
wind turbine industry. Based on the results of our testing and publicly
available data of conventional wind turbine technology, we believe that our
technology is a more efficient way to harness wind energy than currently used in
the industry and will allow us to offer a product that will allow wind energy to
better compete with other forms of energy in power generation. We plan to
develop our product for use in power generation in the residential, commercial,
governmental, industrial, recreational, portable and low-head hydro renewable
energy markets and transportation markets. We intend to market our technology
worldwide through manufacturing, distribution and licensing
arrangements.
We were
incorporated in New York on March 30, 2001, under the name Future Energy
Solutions, Inc. In November 2008, we changed our name to WindTamer Corporation.
Our founder, Gerald E. Brock, invented the "Wind Tamer™" wind turbine in 2002.
In December 2003, Mr. Brock was issued a patent for the Wind Tamer turbine
technology, which was assigned to us. We also have five patent applications
pending in the U.S. related to the original patented technology. We plan to seek
international patent protection for our technology.
Since
2002, we have produced numerous working prototypes of the Wind Tamer turbine
utilizing our patented technology and have collected a variety of test data
related to the performance of the machine. To date, we have focused on research
and development of our patented technology and production of Wind Tamer
prototypes. We have not yet begun large scale manufacturing of the machine.
We are continually working to improve on our technology
We have
begun working with component manufacturers to build our first production
models. We intend to begin working with distributors for the Wind
Tamer for domestic sale and to license our technology for manufacture and
distribution overseas. We have begun manufacturing
production models and we have begun sales efforts, but have yet not consummated
any sales. We plan to continue our selling efforts. Once we have started sales,
we plan to pursue licensing opportunities later in 2009. At this
time, however, we have no definitive distribution or licensing agreements or
arrangements to do so and there can be no assurance that we will be able to
enter into successful arrangements by that time or at all.
THE
OFFERING
Common
stock offered
Up to
9,500,000 shares of common stock to be sold by the selling
shareholders.
Common
Stock to be outstanding after this offering
Approximately
98,341,000 shares of common stock. This does not include an aggregate of
approximately 6,600,000 shares that are reserved for issuance pursuant to
outstanding employee stock options, or future awards under our equity incentive
plan, and 15,340,000 reserved for issuance pursuant to outstanding consultant
stock options outside of the plan.
Use
of proceeds
We will
not receive any proceeds from the sale of the common stock included in this
offering.
1
Risk
Factors
An
investment in our common stock is subject to significant risks. You should
carefully consider the information set forth in the "Risk Factors" section of
this prospectus as well as other information set forth in this prospectus,
including our financial statements and related notes.
Dividend
policy
We do not
expect to pay dividends on our common stock in the foreseeable future. We
anticipate that all future earnings, if any, generated from operations will be
retained to develop and expand our business.
Plan
of Distribution
There is
no public trading market for our common stock. A registered broker-dealer has
filed a Form 211 with the Financial Institution Regulatory Authority on our
behalf that would permit our common stock to be quoted for trading on the OTCBB,
but we cannot be sure that such an effort will be successful. The
shares of common stock offered for resale may be sold by the selling
shareholders pursuant to this prospectus in the manner described under "Plan of
Distribution."
We have
applied for trademarks on certain marks which relate to our products. This
prospectus also contains product names, trade names and trademarks of ours as
well as those of other organizations. All other brand names and trademarks
appearing in this prospectus are the property of their respective
holders.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
In
addition to the other information contained in this prospectus, investors should
carefully consider the risk factors disclosed in this prospectus in evaluating
an investment in our common stock. All statements contained in this prospectus,
other than statements of historical facts, that address future activities,
events or developments are “forward-looking statements.”
These
forward-looking statements include, but are not limited to, statements relating
to our anticipated financial performance, business prospects, new developments,
new merchandising strategies and similar matters, and/or statements preceded by,
followed by or that include the words “believes,” “could,” “expects,”
“anticipates,” “estimates,” “intends,” “plans,” “projects,” “seeks,” or similar
expressions. We have based these forward-looking statements on certain
assumptions and analyses made by us in light of our experience and on our
assessment of historical trends, current conditions, expectations, and
projections about expected future developments and events, as well as on other
factors we believe are appropriate under the circumstances and other information
currently available to us. These forward-looking statements are subject to
risks, uncertainties and assumptions, including those described under the
heading “Risk Factors,” that may affect the operations, performance, development
and results of our business. You are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date stated, or if
no date is stated, as of the date hereof.
Although
we believe that the expectations reflected in the forward-looking statements
contained herein and in such incorporated documents are reasonable, there can be
no assurance that such expectations or any of the forward-looking statements
will prove to be correct, and actual results could differ materially from those
projected or assumed in the forward-looking statements. Our future financial
condition and results of operations, as well as any forward-looking statements,
are subject to inherent risks and uncertainties, including but not limited to
the risk factors set forth below and for the reasons described elsewhere in
this prospectus. All forward-looking statements and reasons why results may
differ included in this prospectus are made as of the date hereof, and we assume
no obligation to update any such forward-looking statement or reason why actual
results might differ. All of the forward-looking statements made in this
prospectus are qualified by these cautionary statements.
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below before deciding to purchase shares
of our common stock. If any of the events, contingencies, circumstances or
conditions described in the risks below actually occurs, our business, financial
condition or results of operations could be seriously harmed. The trading price
of our common stock could, in turn, decline, and you could lose all or part of
your investment.
2
Risk
Factors Concerning Our Business and Operations
We
have a limited operating history, which may make it difficult for investors to
predict future performance based on current operations.
We have
limited operating history upon which investors may base an evaluation of our
potential future performance. We have had no significant revenues to date. As a
result, there can be no assurance that we will be able to develop consistent
revenue sources, or that our operations will be profitable. Our prospects must
be considered in light of the risks, expense and difficulties frequently
encountered by companies in early stage of development.
Any
forecasts we make about our operations, including, without limitation, when we
will begin sales and plans for fundraising, may prove to be
inaccurate. For instance, we planned to begin sales of our products
in the first half of 2009 but did not meet that goal as we continued to refine
the development of our production models. We commenced our selling
efforts in the late third quarter of 2009, but have not yet consummated any
sales. We plan to continue our selling efforts and we expect to consummate sales
in the fourth quarter of 2009, although there can be no assurance that we will
be successful in meeting this target. Additionally, we had planned on raising
$20 million in a private placement, but we later determined to cease raising
funds in that private placement after raising only $741,000. We
stopped raising funds after raising only $741,000 because we reassessed our cash
needs and also determined that the appropriate focus of our executive management
should be on product development rather than fundraising, and further concluded
that it was not in the best interests of the Company to raise more than $741,000
at this time.
We must,
among other things, determine appropriate risks, rewards and level of investment
in each project, respond to economic and market variables outside of our
control, respond to competitive developments and continue to attract, retain and
motivate qualified employees. There can be no assurance that we will be
successful in meeting these challenges and addressing such risks and the failure
to do so could have a materially adverse effect on our business, results of
operations and financial condition.
We
will need additional capital to sustain our operations and may seek further
financing to accelerate our growth, which we may not be able to obtain on
acceptable terms. If we are unable to raise additional capital, as needed, the
future growth of our business and operations would be severely
limited.
A
limiting factor on our growth, including our ability to enter our proposed
markets, attract customers, and deliver our product in the targeted electrical
power production markets, is our limited capitalization compared to other
companies in the industry.
We will
need additional capital to bring our operations to a sustainable level over the
next twelve months. We raised $741,000 in our recent private
placement completed July 14, 2009 and received $833,000 in early July 2008 from
the exercise of stock options by certain optionholders. After
consideration of our then-current financial situation and the appropriate focus
of our executive management on product development rather than fundraising, it
was determined that no further funds were required to be raised at that
time. However, if we are unable to generate any additional needed
capital from our planned operations, we will need to seek additional
financing. We may also seek additional financing to accelerate our
growth. If we raise additional funds through the issuance of equity
or convertible debt securities, the percentage ownership of the Company held by
existing shareholders will be reduced and our shareholders may experience
significant dilution. In addition, new securities may contain rights,
preferences or privileges that are senior to those of our common stock. If we
raise additional capital through issuance of debt, this will result in increased
interest expense. There can be no assurance that acceptable financing
necessary to further implement our plan of operation can be obtained on suitable
terms, if at all. Our ability to develop our business could suffer if we are
unable to raise additional funds on acceptable terms, which would have the
effect of limiting our ability to increase our revenues or possibly attain
profitable operations in the future.
The
auditors report for the fiscal years ended December 31, 2008 and 2007 is
qualified as to the Company's ability to continue as a going
concern.
Due
to the uncertainty of our ability to meet our current operating and capital
expenses, in their report on our audited annual financial statements as of and
for the years ended December 31, 2008 and 2007, our independent auditors
included an explanatory paragraph regarding concerns about our ability to
continue as a going concern. We are a development stage company and
have had no significant revenues to date. The lack of sales and
recurring losses from operations raise substantial doubt about our ability to
continue as a going concern. The presence of the going concern
explanatory paragraph may have an adverse impact on the relationships we are
developing and plan to develop with third parties as we launch the
commercialization of our products and could make it challenging and difficult
for us to raise additional financing, especially during the current global
financial crisis all of which could have a material adverse impact on our
business and prospects and result in a complete loss of your
investment.
3
We
depend on our founder and will need to attract and retain key management and
employees to grow our business and manage our growth.
Our
future success is largely dependent upon our founder, Gerald Brock. The loss of
Mr. Brock through injury, illness or death could result in the investment of
significant time and resources for replacing him. At this time we have no key
person life insurance for Mr. Brock. The loss of Mr. Brock’s services would very
likely have a serious impact and adverse effect on our business, financial
condition and results of operations, and an investment in our
stock.
There is
also no assurance that as we grow, we can successfully manage our growth or that
we can attract the new talent that will be necessary to run the Company at a
high level. We presently have only 4 employees. In order to grow as contemplated
in our business plan, we must recruit and retain additional qualified
senior-management personnel. Our failure to manage our growth could adversely
affect our planned business. Competition is intense for highly skilled personnel
in our industry and, accordingly, no assurance can be given that we will be able
to hire or retain sufficient competent personnel or successfully manage our
growth.
We
depend on outside consultants with whom we do not have agreements which could
have an adverse effect on our business if they were to discontinue providing
services.
We are a
development stage company and have only 4 employees. We have utilized
the services of outside consultants to assist in developing and implementing our
business plan and operations. These consultants have assisted us
primarily with the assembly, construction and design of Wind Tamer turbine
prototypes and production models, and component parts related thereto, the
development and planning of manufacturing and distribution logistics and
strategy, and advice and assistance on our management structure, business
development and product marketing strategy. We do not have long-term
agreements with them to perform services for us and they could stop providing
services for us at any time. As a result, if several of these
consultants were to discontinue providing services for us before we are able to
hire additional full-time employees or make arrangements with additional
consultants, it would have an adverse effect on our business.
Our
Chief Operating Officer recently resigned, which could have a material adverse
affect on our business.
Our prior
Chief Operating Officer, John Schwartz, resigned from his position at the
Company on August 21, 2009. Mr. Schwartz’s workload is being
reallocated among our current employees as we seek a replacement for Mr.
Schwartz. However, we have only four employees to perform the duties
previously fulfilled by Mr. Schwartz. Having such a limited number of
employees may make it more difficult for the Company to perform the duties
previously performed by Mr. Schwartz. There can be no assurance that
any or all of such duties will be performed to the extent previously performed
by Mr. Schwartz or performed at all, which may have a material adverse affect on
our business.
We
face competition from several sources, which may make it more difficult to
introduce Wind Tamer into the electrical power generation market.
The power
generation and renewable energy markets in which we plan to compete are rapidly
evolving and intensely competitive. We face formidable competition from
traditional and well-capitalized fossil-fueled generator manufacturers and
distributors as well as from established conventional wind turbine manufacturers
and distributors. These competitors include market-specific retailers and
specialty retailers. Many of these competitors have longer operating histories,
large customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than we have. They may be able to
operate with a lower cost structure, and may be able to adopt aggressive pricing
policies that make it difficult for us to penetrate our target markets.
Competitors in both the traditionally powered generator markets, including
fossil-fueled generators, and the conventional wind turbine powered generator
markets also may be able to devote far greater resources to technology
development and marketing than we can.
We
may not be successful in developing and sustaining the alliances necessary for
the successful penetration of our target markets.
Our
business plan contemplates that we establish and sustain relationships with
manufacturers or third-party wholesalers or retailers for the production and
marketing of Wind Tamer. We have begun establishing manufacturing relationships
and we are pursuing relationships to market our products. There can
be no assurance that we will be successful in developing or sustaining the
necessary relationships. If we are not successful in securing or sustaining
these critical alliances on reasonable terms, we may not generate sufficient
revenue to conduct our operation or become profitable.
4
Our
agreement with an early stage company for the order of some of our initial
turbines contains uncertainty regarding an exclusivity provision which could
have an adverse effect on our growth and development, and we could be deemed in
breach of the agreement and required to return payments made to us.
We have
entered into an agreement with an early stage company which plans to offer
WindTamer turbines to its customers, to produce a 15kWh prototype wind turbine
unit. The agreement also calls for the order of 1,000 turbines from
us and provides the customer with an exclusive right to purchase from us all
15kWh and larger wind turbines for wind farms and industrial uses and
development for an undefined period. The agreement contemplated the
15kWh prototype would be delivered by May 30, 2009, but we have not yet
delivered the 15kWh prototype. In April 2009 we also granted the
customer an option for 60 days to enter into an exclusive license agreement with
us for 50 years for the sale of our 15 kWh wind turbines and larger upon the
payment of a $6.0 million license fee. The option was subject to extension if
our due diligence provided to them was not reasonably acceptable. Alternative
Wind Resources, LLC paid a $10,000 fee for the option but has not paid the
$6.0 million license fee. We received a letter from the customer dated September
10, 2009 purporting to terminate the agreement based on our failure to deliver
the prototype, and the option based on the failure to provide due diligence, and
demanding the return of $60,000 provided to the Company. Specifically, section 4
of the option agreement required that the Company provide Alternative Wind
Resources, LLC with documentation on our fluid driven vacuum enhanced
generator patent (United States Patent No. 6655907, issued December 2, 2003),
information about our patent applications, and evidence that WindTamer has
the authority to grant such exclusive rights to Alternative Wind Resources,
LLC. The Company provided copies of our patent for that subject
matter as well as patent pending applications. The Company believes
that it has complied with these provisions of the agreement and intends to
dispute Alternative Wind Resources, LLC’s claims that it did not provide such
information. The Company plans to proceed to terminate the agreements
and to dispute these requests although there can be no assurance that it
will be successful. If we are not successful in disputing the claims we may be
required to return the $60,000 in payments which could have a material adverse
effect on our capital plans over the next twelve months, and could require
that we raise additional capital sooner than planned if we are not able to
generate sufficient capital from operations.
If the
agreement or option is not ultimately deemed terminated, the exclusivity
provision could limit our ability to expand our customer base in these markets
in the future which also could have an adverse effect on our growth and
development.
If
we are unable to adopt or incorporate technological advances into our products,
our proposed business could become uncompetitive or obsolete and we may not be
able to effectively compete with the alternative products.
We expect
that technological advances in the processes and procedures for harnessing wind
energy will continue to occur. As a result, there are risks that alternative
products to the Wind Tamer could be developed for generating electricity. These
advances could also allow our competitors to produce wind turbines with better
efficiency and at a lower cost than us. In addition, processes and methods for
harnessing renewable energy are also continually under development. If we are
unable to adopt or incorporate technological advances, our wind turbines could
be less efficient than methods developed by our competitors, which could cause
our business to be uncompetitive.
If
we fail to protect our intellectual property, our planned business could be
adversely affected.
Our
viability will depend on our ability to develop and maintain the proprietary
aspects of our technology to distinguish our product from our competitors’
products and services. To protect our proprietary technology, we rely primarily
on a combination of confidentiality procedures, copyright, trademark and patent
laws.
We hold a
United States patent for the design of our Wind Tamer power generator wind
turbine. We also have five pending patent applications related to the original
technology and for which we plan to make foreign filings. In addition, we are
developing a number of new innovations for which we intend to file patent
applications. No assurance can be given that any of these patents will afford
meaningful protection against a competitor or that any patent application will
be issued. Patent applications filed in foreign countries are subject to laws,
rules, regulations and procedures that differ from those of the United States,
and thus there can be no assurance that foreign patent applications related to
United States patents will issue. If these foreign patent applications issue,
some foreign countries provide significantly less patent protection than the
United States. The status of patents involves complex legal and factual
questions and the breadth of claims issued is uncertain. Accordingly, there can
be no assurance that our patents, and any patents that may be issued to us in
the future, will afford protection against competitors with similar technology.
No assurance can be given that patents issued to us will not be infringed upon
or designed around by others or that others will not obtain patents that we
would need to license or design around. We are not aware of any
infringement by us or broad claims against which we may infringe. However, if
such an infringement claim is brought against our technology and is successful,
such claimants could require us to obtain licenses and there can be no
assurance that any necessary licenses would be available on reasonable terms, if
at all.
Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt
to copy aspects of our products or obtain and use information that we regard as
proprietary. Unauthorized use of our proprietary technology could harm our
business. Litigation to protect our intellectual property rights can be costly
and time-consuming to prosecute, and there can be no assurance that we will be
able to enforce our rights or prevent other parties from developing similar
technology or designing around our intellectual property.
Although
we believe that our technology does not and will not infringe upon the patents
or violate the proprietary rights of others, it is possible such infringement or
violation has occurred or may occur which could have a material adverse effect
on our business.
Our
planned business will be heavily reliant upon patented and patentable technology
for wind turbine power generators and related intellectual property. In the
event that products we sell are deemed to infringe upon the patents or
proprietary rights of others, we could be required to modify our products or
obtain a license for the manufacture and/or sale of such products. In such
event, there can be no assurance that we would be able to do so in a timely
manner, upon acceptable terms and conditions, or at all, and the failure to do
any of the foregoing could have a material adverse effect upon our business.
Moreover, there can be no assurance that we will have the financial or other
resources necessary to enforce or defend a patent infringement or proprietary
rights violation action. In addition, if our products or proposed products are
deemed to infringe or likely to infringe upon the patents or proprietary rights
of others, we could be subject to injunctive relief and, under certain
circumstances, become liable for damages, which could also have a material
adverse effect on our business.
5
If
our products and technology do not achieve market acceptance, we may not
generate sufficient revenue to conduct our operations or become
profitable.
We are a
development stage company and have generated no significant revenues to date.
Although we have patented the technology used in the Wind Tamer, we have just
begun attempts to market our products. We cannot assure you that a sufficient
number of customers will purchase our products. The failure of the Wind Tamer or
other products we develop to be accepted in the commercial marketplace would
have a material adverse effect on our business. Our technology and products may
not compete with conventional wind turbines and other technologies, including
fossil-fueled generators, on the basis of performance and cost or to achieve
market acceptance. This failure to compete could also have a material adverse
effect on our business. As a result, the value of your investment
could be significantly reduced or completely lost.
The
expiration or cancellation of federal tax benefits and state regulatory benefits
for renewable energy generation would adversely affect our
development.
Financial
incentives to purchasers of our wind turbines will be helpful in our development
and growth. In its Small Wind Turbine Global Market Study, the
American Wind Energy Association in June 2008 concluded that the single most
effective driver for the wind power industry has been, and continues to be,
financial incentive programs offered by select states. A small number of states
have reduced their incentive levels on a per-project basis in order to cut costs
while assisting the same (or larger) amount of consumers, while other states
have increased their incentive programs with funds from the American Recovery
and Reinvestment Act passed in February 2009. The state incentive
programs are supplemented by additional federal support for the wind power
industry. For instance, there is a Federal Investment Tax Credit of
30% for the purchase and installation of qualifying small wind electric
systems. This credit is currently scheduled to expire on December 31,
2016. Additionally, there is a Federal Production Tax Credit, which provides a
$.021 per kWh benefit for the first 10 years of facilities operation which is
currently set to expire on December 31, 2013. These credits can help
make wind turbines more attractive than other power generation
products. States offering financial incentives include, for instance,
New York State which currently offers cash rebates that range from $2,400 to
$150,000 for installation of small-wind energy turbines depending on the size
and location. This rebate is scheduled to expire on December 31,
2009. Other specific state incentive programs include: a 100% personal property
tax exemption for eligible properties in Michigan which is currently set to
expire December 31, 2012; a rebate program in California for wind systems
up to 50kW with an incentive of $2.50/W for the first 7.5 kW
and $1.50/W for increments between 7.5 kW and 30
kW which currently has no expiration date; and a 15% personal tax
credit for taxpayers with renewable energy systems installed at their primary
residence in Massachusetts which currently has no expiration
date.
Since we
have only just begun to market our products and have a limited operating
history, we cannot be sure that these incentives will help our products compete
with other power generation products. As a result, there can be no assurance
that they will be helpful. Additionally, if these incentives or similar
incentives in one or more states or the federal government are repealed, reduced
or not renewed, demand for our products and future development efforts would be
adversely affected. Furthermore, the current economic crisis could make the
repeal, reduction, or non-renewal of these incentives by certain states or the
federal government more likely.
Deteriorative
changes in the currently reported condition of the small wind energy industry
market would adversely affect our development.
Several
factors have helped the renewable energy markets, including the small wind
energy markets. These factors include, policy support from the state
and federal legislatures, rising and volatile prices of conventional
electricity, consumer education, and an increased public concern for
environmental issues which favor continued development. There can be
no assurance that these conditions will continue to exist throughout our
development and continued operation. As a result, it is possible that
these conditions could deteriorate or worsen in a manner that would adversely
affect demand for our planned products and future development
efforts. Furthermore, the current economic crisis could make the
deterioration of the conditions of the small wind energy industry market more
likely.
6
We
will initially rely on independent manufacturers and suppliers for our products
which could delay our progress and later cause delay and damage customer
relationships.
We plan
to target power generator manufacturers and wholesalers to form alliances for
the mass production and distribution of our products. We currently have no large
scale manufacturing capabilities. If we are unable to reach satisfactory
arrangements to begin building our products, our business could be adversely
affected. Furthermore, once we enter into such relationships, we may not have
long-term written agreements with any third-party manufacturers or suppliers. At
this time we have no such long-term written agreements. As a result,
any of these manufacturers or suppliers could unilaterally terminate their
relationships with us at any time. Establishing relationships with new
manufacturers would require a significant amount of time and would cause us to
incur delays and additional expenses, which would also adversely affect our
business and results of operations.
In
addition, a manufacturer’s failure to ship products to us in a timely manner or
to meet the required quality standards could cause us to miss the delivery date
requirements for customers for those items. This, in turn, may cause customers
to cancel orders, refuse to accept deliveries or demand reduced prices. This
could adversely affect our business and results of operations.
Risk
Factors Concerning Investment In Our Company
There
is currently no public market for our shares, and if an active market does not
develop, investors may have difficulty selling their shares.
There is
currently no public trading market for our common stock. A registered
broker-dealer has filed a Form 211 with the Financial Industry Regulatory
Authority on our behalf that would permit our common stock to be quoted for
trading on the OTCBB. However, the filing of the Form 211 does not
guarantee that our common stock will be quoted on the OTCBB, and we cannot
be sure that such an effort will be successful. If and when our stock does begin
trading, we cannot predict the extent to which investor interest in the Company
will lead to the development of an active trading market or how liquid that
trading market might become. If a trading market does not develop or is not
sustained, it may be difficult for investors to sell shares of our common stock
at a price that is attractive. As a result, an investment in our common stock
may be illiquid and investors may not be able to liquidate their investment
readily or at all when they desire to sell.
Our
common stock is deemed to be a “Penny Stock,” which may make it more difficult
for investors to sell their shares due to suitability requirements.
The SEC
has adopted regulations that define a “penny stock,” generally, to be an equity
security that has a market price of less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to specific exemptions. This
designation requires any broker or dealer selling our securities to disclose
certain information concerning the transaction, obtain a written agreement from
the purchaser and determine that the purchaser is reasonably suitable to
purchase the securities. These rules may restrict the ability of brokers or
dealers to sell our common stock and may affect the ability of shareholders to
sell their shares.
There
is limited liquidity in our shares.
The
market price of our common stock may fluctuate significantly in response to
factors, some of which are beyond our control. These factors
include:
·
|
the announcement of new products
or product enhancements by us or our
competitors;
|
·
|
developments concerning
intellectual property rights and regulatory approvals relating to Wind
Tamer;
|
·
|
quarterly variations in our
results or the results of our
competitors;
|
·
|
developments in our industry and
target markets;
|
·
|
general market conditions and
other factors, including factors unrelated to our own operating
performance.
|
Recently,
the stock market in general has experienced extreme price and volume
fluctuations. Continued market fluctuations could result in extreme volatility
in the price of shares of our common stock, which could cause a decline in the
value of our shares. Price volatility may be worse if trading volume of our
common stock is low.
We
may issue additional shares of common stock in the future, which could cause
dilution to all shareholders.
We have a
large amount of authorized but unissued common stock which our Board of
Directors may issue without stockholder approval. We will need
additional capital to bring our operations to a sustainable level over the next
twelve months, and may seek this capital in the form of equity
financing. We may also seek to raise additional equity capital in the
future to fund business alliances, develop new prototypes, and grow our
manufacturing and sales capabilities organically or otherwise. Any issuance of
additional shares of our common stock will dilute the percentage ownership
interest of all shareholders and may dilute the book value per share of our
common stock.
7
We
are controlled by a principal stockholder who may exert significant control over
us and our significant corporate decisions in a manner adverse to your personal
investment objectives, which could depress the market value of our
stock.
Gerald E.
Brock, our Chief Executive Officer, is the largest beneficial owner of our
stock. Through his personal holdings and shares over which he is deemed to have
beneficial ownership, he beneficially owned approximately 50.7% of our
outstanding shares as of September 30, 2009. Through this beneficial ownership,
Mr. Brock can significantly influence the election or removal of our directors
and the outcome of all matters submitted to a vote of our stockholders,
including amendments to our certificate of incorporation and bylaws and approval
of mergers or sales of substantially all of our assets. The interest of our
principal stockholder may conflict with interests of other stockholders. This
concentration of ownership may also harm the market price of our common stock
by, among other things:
•
|
delaying, deferring or preventing
a change in control of our
company;
|
•
|
impeding a merger, consolidation,
takeover or other business combination involving our
company;
|
•
|
causing us to enter into
transactions or agreements that are not in the best interests of all of
our stockholders; or
|
•
|
discouraging a potential acquirer
from making a tender offer or otherwise attempting to obtain control of
our company.
|
Our
Restated Certificate of Incorporation and the New York Business Corporation Law
contain provisions that could discourage a takeover that shareholders may
consider favorable.
Our basic
corporate documents and the New York Business Corporation Law contain provisions
and authorized but unissued shares that might enable our management to resist a
takeover. These provisions might discourage, delay or prevent a change in
control of the Company or a change in our management.
Our
Restated Certificate of Incorporation provides for a classified Board of
Directors, with each class of directors subject to re-election every three
years. This classified board, will have the effect of making it more difficult
for third parties to insert their representatives on our Board of Directors and
gain control of the Company.
The
Restated Certificate of Incorporation also provides that neither the Company’s
Bylaws nor Certificate of Incorporation provisions addressing, among other
provisions, the Classified Board of Directors or removal of directors, may be
amended, altered, or repealed by shareholders unless approved by an affirmative
vote of in excess of 66 2/3% of the shares of Common Stock that are issued and
outstanding at the time of any such proposed amendment, alteration, or attempt
to repeal. As such, it is unlikely that the above-described provisions contained
in the Restated Certificate of Incorporation will be amended, altered, or
repealed.
Under our
Restated Certificate of Incorporation, our Board of Directors also has the
power, without shareholders’ approval, to designate the terms of one or more
series of preferred stock and issue shares of preferred stock which could be
issued as a defensive measure in response to a takeover, such as issuing
preferred stock with greater voting rights than the common stock. In
doing so our Board of Directors may determine, with respect to any series of
preferred shares, the terms and rights of that series, including the designation
of the series, the number of shares of the series, the dividend rights,
conversion rights, voting rights, and the rights and terms of redemption and
liquidation preferences, which could have preferences and priority over holders
of our common stock with respect to these rights.
In
addition, our Board of Directors may authorize the issuance of a substantial
number of authorized but unissued shares of common stock, approximately
402,000,000 common shares, without action by our shareholders. The
issuance of this substantial number of additional common shares may be used as
an anti-takeover device without further action on the part of the
shareholders. Such issuance may dilute the voting power of existing
holders of common shares.
These
provisions and our authorized but unissued shares could discourage proxy
contests and make it more difficult for you and other shareholders to elect
directors and take other corporate actions, and could limit the price that
investors might be willing to pay in the future for shares of our common stock,
or discourage transactions that shareholders may consider
favorable.
If
we fail to maintain an effective system of disclosure controls and procedures,
we may not be able to accurately report information required to be disclosed by
the Company under the Securities Exchange Act of 1934, as amended. As a result,
current and potential shareholders could lose confidence in our public
reporting, which could have a negative impact on our stock
price.
Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002, we are required to include in
our Quarterly Reports on Form 10-Q and our Annual Report on Form 10-K our
assessment of the effectiveness of our disclosure controls and procedures.
Our Chief Executive Officer and Chief Financial Officer has determined that our
disclosure controls and procedures were ineffective as of June 30, 2009.
The ineffectiveness of our disclosure controls and procedures related to the
Company's failure to timely disclose a material agreement. If we cannot
adequately maintain the effectiveness of our disclosure controls and procedures,
current and potential shareholders could lose confidence in our public reporting
and we may be subject to liability and/or sanctions or investigation by
regulatory authorities, such as the Securities and Exchange Commission, either
of which could adversely affect our financial results and the market price of
our common stock.
USE
OF PROCEEDS
The
selling shareholders will receive the proceeds from the resale of the shares of
common stock. We will not receive any proceeds from the resale of the shares of
common stock by the selling shareholders.
DILUTION
Dilution
represents the difference between the offering price of the shares of common
stock and the net tangible book value per share of common stock immediately
after completion of the offering. The shares of common stock offered
hereunder will be sold by the selling stockholders at a price of $1.00 per share
until the Company’s common stock is quoted on the OTC Bulletin
Board. Thereafter the selling stockholders will sell at prevailing
market prices. The net tangible book value per share of the Company’s
common stock prior to the offering hereunder is $0.01 per share, and after
computation of the offering hereunder will be $0.01 per share, determined by
dividing the net tangible book value (tangible assets minus liabilities) by the
number of shares of common stock outstanding. This calculation assumes
98,341,000 shares outstanding after the exercise of stock options to purchase
16.6 million shares.
PRICE
RANGE OF COMMON STOCK
There is
no public trading market for our common stock. A registered broker-dealer has
filed a Form 211 with the Financial Institution Regulatory Authority on our
behalf that would permit our common stock to be quoted for trading on the OTCBB,
but we cannot be sure that such an effort will be successful.
As of
September 30, 2009 (unaudited), we had 98,341,000 shares of common stock issued
and outstanding. Of those shares, 49,490,000 shares are held by Gerald Brock,
our Chief Executive Officer, Chief Financial Officer, and a Director.
As of
September 30, 2009 (unaudited), there were 167 holders of record of our common
stock.
DIVIDEND
POLICY
We have
never paid cash dividends on our common stock and do not anticipate that we will
pay dividends in the foreseeable future. We intend to use any future earnings
primarily for the expansion of our business. Any future determination as to the
payment of dividends will be subject to applicable limitations, will be at the
discretion of our Board of Directors and will depend on our results of
operations, financial condition, capital requirements and other factors deemed
relevant by our Board of Directors.
8
COMPANY
OPERATIONS
The
following discussion should be read in conjunction with the historical financial
statements and the related notes and the other financial information included
elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of any number of factors, including those set forth under
“Risk Factors” and under other captions contained elsewhere in this
prospectus.
Overview
We are a
development-stage company that plans to provide wind powered generators for the
production of electrical power. We plan to market the generators for use in
residential and commercial electrical power production.
We were
formed in 2001. To date our operations have consisted of research and
development activities. We have had no significant revenues to date.
During this time we have focused on research and development of our patented
technology and production of Wind Tamer prototypes. We have collected a variety
of test data related to the performance of the machine. We have not yet
begun large-scale manufacturing of the machine or marketing it to
customers.
In the
future, we intend to develop Wind Tamer units of several sizes and capabilities
for the residential, commercial, industrial, recreational, portable and low-head
hydro renewable energy markets and transportation markets. We believe
our wind turbine technology will reduce the costs and increase the efficiency of
wind turbine electrical production and ultimately replace conventional wind
turbine technology. We also believe that our current Wind Tamer turbines are
competitive with fossil-fueled generators, opening up new markets for the
machine.
On
November 25, 2008, we effected a 20-for-1 split of our outstanding shares of
common stock resulting in there then being approximately 79,640,000 common
shares outstanding. In addition, the Company’s authorized shares were increased
to 500,000,000 common shares, and 5,000,000 preferred shares. The shares of
preferred stock are undesignated “blank check” shares. All share and per share
amounts have been retroactively restated for the stock split.
Financial
Operations
The
Company expects to incur substantial additional costs, including costs related
to ongoing research and development activities. We have utilized the proceeds
raised from our private placements conducted in 2008 and 2009 to sustain our
operations and produce our Wind Tamer prototype units. Our future
cash requirements will depend on many factors, including continued progress in
our research and development programs, the costs involved in filing, prosecuting
and enforcing patents, competing technological and market development and the
cost of product commercialization. We do not expect to generate a positive cash
flow from operations at least until the commercial launch of our first products,
which started in the late third quarter of 2009, and possibly later if we are
unable to establish satisfactory manufacturing and distribution
relationships, or our products are not initially accepted by the market.
Accordingly, we may require additional external financing to sustain our
operations if we cannot achieve positive cash flow from our anticipated
operations. Additionally, even if we are able to achieve positive
cash flow from operations following the initial launch of our planned products
we may continue to seek to raise additional capital to accelerate the growth of
our planned operations or build on our manufacturing and distribution
infrastructure. Success in our future operations is subject to a number of
technical and business risks, including our continued ability to obtain future
funding, satisfactory product development, and market acceptance for our
products as further described above under the heading “Risk Factors.”
Results
of Operations
Three
Month and Six Month Periods Ended June 30, 2009 Compared
to Three Month and Six Month Periods Ended June 30, 2008
We did
not generate any revenue for the three or six month periods ended June 30, 2009
and 2008.
Our
operating expenses for the three months ended June 30, 2009 were $826,133 as
compared to the $182,481 for the three months ended June 30,
2008. Our operating expenses for the six months ended June 30, 2009
were $1,640,534 as compared to $300,944 for the six months ended June 30, 2008,
and $2,872,275 since inception. The increase in operating
expenses from the first quarter of 2008 to the same period in 2009 was due to
the increase in operating activities in 2009 as compared to 2008, as we begin to
build our first production models and prepare our operations to begin our first
sales. Our operating expenses have consisted primarily of
compensation, consulting fees and research and development expenses. These
operating expenses included selling, general and administrative expenses, or
SG&A expenses, for the three months ended June 30, 2009 of $547,122 as
compared to $104,933 for the three months ended June 30, 2008. Our
SG&A expenses for the six months ended June 30, 2009 were $1,249,261 as
compared to $180,961 for the six months ended June 30, 2008, and $2,185,549
since inception. The increase in operating
expenses, and SG&A expenses, in 2009 over the same periods in 2008 was
comprised primarily of compensation and professional fees, including stock-based
compensation expense for employees and consultants of $300,483 and $750,022 in
the three and six months ended June 30, 2009, respectively, compared to no
stock-based compensation expenses in the first half of 2008. We
incurred net losses of $826,133 and $182,481, for the three months ended June
30, 2009 and 2008, respectively, $1,640,534 and $300,944 for the six months
ended June 30, 2009 and 2008, respectively and $2,872,083, cumulative since
inception.
Fiscal
Year Ended December 31, 2008 Compared to Fiscal Year Ended December 31,
2007
We did
not generate any revenue for the fiscal years ended December 31, 2008 or
December 31, 2007.
9
We had no
revenues for the fiscal years ended December 31, 2008, or 2007. Our
operating expenses have consisted primarily of officer compensation, consulting
fees and research and development expenses. Operating expenses for the fiscal
year ended December 31, 2008 were $1,139,806 and $ 26,467 for the
comparable period in 2007 and $1,231,741 since inception through December 31,
2008. The increase in operating expenses was due to the increase in operating
activities in 2008, utilizing the proceeds of our private placement completed in
July 2008. Our SG&A expenses include costs associated with
finance, accounting, administrative, legal, professional fees, marketing
expenses, and other administrative costs. In addition, we have incurred expenses
through the use of consultants and other outsourced service providers to take
advantage of specialized knowledge and capabilities that we required for short
durations of time to avoid unnecessary hiring of full-time staff. These
consulting services, provided over the last half of 2008, included assistance
with our business plan, assistance in setting up our operations for product
assembly and sales and assistance in setting up our management structure and
business development product marketing and publicity strategies. The
Company incurred net losses of $1,139,806 and $26,467 for the fiscal years ended
December 31, 2008 and 2007, respectively, and $2,872,083 cumulative since
inception.
During
the next twelve months, we expect to take the following steps in connection with
the further development of our business and the implementation of our plan of
operations:
We have
begun working with component manufacturers to build our first production
models. We intend to begin working with distributors for the Wind
Tamer for domestic sale and to license our technology for manufacture and
distribution overseas. We initially plan to begin to market units
from 1.8 to 15 kilowatts for residential, commercial and industrial use. We have
begun manufacturing production models and we have begun sales efforts, but have
not yet consummated any sales. Once we have started sales, we plan to pursue
licensing opportunities later in 2009. At this time, however, we have
no definitive distribution or licensing agreements or arrangements to do so and
there can be no assurance that we will be able to enter into successful
arrangements by that time or at all.
We have
utilized the proceeds we raised from our private placements conducted in 2008
and 2009 to implement our business plan and build prototypes of our WindTamer
units. We plan to utilize these remaining proceeds in the manufacture
and commercialization of our products and technology. We will also
have to expand our management team and sales and marketing team to accommodate
our growth and expansion. We anticipate having products ready for market in 2009
but cannot be sure that this will be the case. We plan to hire approximately 25
to 50 persons over the next 12 months in the areas of sales, administration,
engineering and product assembly. During this period we plan to outsource
manufacturing function to local manufacturers to begin sales which we believe
will demonstrate commercial application of our planned products.
In March
2009, we entered into an agreement with Alternative Wind Resources, LLC to
produce a 15kWh prototype wind turbine unit by May 30, 2009 in which
it agreed to reimburse us for engineering and materials costs for
development of this larger prototype unit. The customer also agreed
to provide the Company with a purchase order for one thousand (1,000) 15kWh
units within one year after delivery of the prototype. The agreement also grants
Alternative Wind Resources, LLC the exclusive right to purchase all 15kWh and
larger wind turbine units for wind farm and industrial uses and development. The
customer provided a $50,000 deposit for the orders, but has not yet provided,
and may never provide, the purchase order. We have not yet delivered
the 15kWh prototype required under the agreement. In April 2009 we also
granted the customer an option for 60 days to enter into an exclusive license
agreement with us for 50 years for the sale of our 15 kWh wind turbines and
larger upon the payment of $6.0 million license fee. The option was subject to
extension if our due diligence provided to them was not reasonably acceptable.
Alternative Wind Resources, LLC paid a $10,000 fee for the option, but never
paid the $6.0 million license fee. Alternative Wind Resources, LLC, sent us a
letter dated September 10, 2009 purporting to terminate the agreement and option
and demanding return of the $60,000 paid under these agreements for the failure
to deliver a prototype and the failure to provide due diligence
requested under the option. Specifically, section 4 of the
option agreement required that the Company provide Alternative Wind Resources,
LLC with documentation on our fluid driven vacuum enhanced generator
patent (United States Patent No. 6655907, issued December 2, 2003), information
about our patent applications, and evidence that WindTamer has the authority to
grant such exclusive rights to Alternative Wind Resources, LLC. The
Company provided copies of our patent for that subject matter as well as patent
pending applications. The Company believes that it has complied with
these provisions of the agreement and intends to dispute Alternative Wind
Resources, LLC’s claims that it did not provide such information. We
plan to proceed with termination of the agreement and option and also dispute
these claims for payment although there can be no assurance that we will be
successful. If we are not successful, the claim for $60,000 could
have a material adverse effect on our capital plans over the next twelve
months and could require that we raise additional capital sooner than planned,
if we are not able to generate sufficient capital from operations.
There can be no assurance that our management will be successful
in completing our product development programs, implementing the corporate
infrastructure to support operations at the levels called for by our business
plan, conclude a successful sales and marketing plan with third parties to
attain significant market penetration or that we will generate sufficient
revenues to meet our expenses or to achieve or maintain profitability.
Liquidity
and Capital Resources
As of
June 30, 2009, we had a negative working capital of $122,816 as compared to
$171,038 of working capital as of December 31, 2008. The decrease in working
capital is attributed to the use of capital in the development of our production
models and related expenses during the first half of 2009, offset by the net
proceeds of $619,656 received in our private placement of common stock between
February and June 30, 2009. After June 30, 2009, we received approximately
$938,000 of additional capital in the completion of that private placement, as
well as proceeds from the exercise of certain consultant stock
options. Our principal source of liquidity has been from our
founder, and proceeds of $977,000 from a private placement of our common stock
completed in 2008 and approximately $1.6 million of proceeds from two private
placements conducted in 2009. Our founder, Mr. Brock, worked at the Company for
a substantially reduced salary during 2007 which helped our liquidity and
capital resources. No capital contribution was made in connection
with these services. Additionally, Mr. Brock paid expenses on behalf of the
Company and made cash contributions totaling $23,500 from 2002 to 2003 which
were treated as additional paid in capital.
We have
begun implementing our plan of operation with the design and development of
prototypes for our planned products. We have also begun establishing
relationships with third party manufacturers to be ready for the planned launch
of commercialization of our products. We plan to launch the
commercialization of our planned products in the third quarter of
2009. We believe that we will need additional capital to launch the
commercialization of our planned products and meet anticipated demand over the
next twelve months. We raised approximately $1.6 million in private
equity financing in 2009. We believe that we will need approximately
$1.5 to $2.5 million of additional capital over the next twelve months for
commercialization of our products and technology needed to bring our business to
a level to be able to sustain positive cash flow from operations. If we are
unable to generate this amount from our planned operations, we will need to seek
additional financing. We may also seek additional financing to build
internal manufacturing capacity. We believe that we will need
approximately $6.0 to $7.0 million to do so. The common stock sold
in the private placement financings will not be and has not been
registered under the Securities Act of 1933, as amended, or the Securities Act,
and may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements. There can be no
assurance that we will be successful in raising any needed amounts on these
terms for these uses or that these amounts will be sufficient for our
plans. This disclosure relating to our equity financing from private
sources does not constitute an offer to sell or the solicitation of an offer to
buy any of our securities, and is made only as required under applicable law and
related reporting requirements, and as permitted under Rule 135c under the
Securities Act.
There can
be no assurance that any revenues from these planned operations will be
sufficient to satisfy all of our cash requirements and implement our plan of
operations for the next twelve month period. In such event, we may
need to raise additional capital through debt or equity financing. Additionally,
even if we are able to achieve cash flow operations following the initial launch
of our planned products we may seek to raise additional capital to accelerate
the growth of our planned operations or build on our manufacturing and
distribution infrastructure.
10
Due to
the uncertainty of our ability to meet our current operating and capital
expenses, in their report on our audited annual financial statements as of and
for the years ended December 31, 2008 and 2007, our independent auditors
included an explanatory paragraph regarding concerns about our ability to
continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that led to this disclosure by our
independent auditors. There is substantial doubt about our ability to continue
as a going concern as the continuation and expansion of our business is
dependent upon obtaining further financing, successful and sufficient market
acceptance of our products, and, finally, achieving a profitable level of
operations.
The
issuance of additional equity securities by us may result in a significant
dilution in the equity interests of our current shareholders. Obtaining
commercial loans, assuming those loans would be available, will increase our
liabilities and future cash commitments. There is no assurance that we will be
able to obtain further funds required for our continued operations or that
additional financing will be available to us when needed or, if available, that
it can be obtained on commercially reasonable terms. If we are not able to
obtain the additional financing on a timely basis, we will not be able to meet
our other obligations as they become due and we will be forced to scale down or
perhaps even cease our operations. Furthermore, our ability to raise additional
capital may be made more difficult by the global financial crisis.
Off-Balance
Sheet Arrangements
We have
no significant off-balance sheet arrangements that have, or are reasonably
likely to have, a current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources that is material to
shareholders.
Critical
Accounting Policies
Management’s
discussion and analysis of our financial condition and results of operations is
based upon our financial statements, which have been prepared in accordance with
the rules and regulations of the Securities and Exchange Commission. The
preparation of these financial statements requires management to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and liabilities. We
evaluate these estimates, including those related to bad debts, inventories,
intangible assets, income taxes, and contingencies and litigation, on an ongoing
basis. We base these estimates on historical experiences and on various other
assumptions that we believe are reasonable under the circumstances. These
assumptions form our basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.
We
believe the following critical accounting policies and the related estimates and
assumptions discussed below are among those most important to an understanding
of our financial statements.
Stock
Based Compensation
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
123R, Share-Based
Payment (“SFAS No. 123R”). SFAS No. 123R establishes standards
for the accounting for transactions in which an entity exchanges its equity
instruments for goods or services. It also addresses transactions in
which an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity’s equity instruments or that may be
settled by the issuance of those equity instruments. SFAS No. 123R
focuses primarily on accounting for transactions in which an entity obtains
employee services in share-based payment transactions. SFAS No. 123R
requires that the compensation cost relating to share-based payment transactions
be recognized in the financial statements. That cost will be measured
based on the fair value of the equity or liability instruments
issued.
The
Company’s accounting policy for equity instruments issued to consultants and
vendors in exchange for goods and services follows the provisions of EITF 96-18,
“Accounting for Equity Instruments That are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services” and EITF 00-18,
“Accounting Recognition for Certain Transactions Involving Equity Instruments
Granted to Other Than Employees.” The measurement date for the fair
value of the equity instruments issued is determined at the earlier of
(i) the date at which a commitment for performance by the consultant or
vendor is reached or (ii) the date at which the consultant or vendor’s
performance is complete. In the case of equity instruments issued to
consultants, the fair value of the equity instrument is recognized over the term
of the consulting agreement. Stock-based compensation related to
non-employees is accounted for based on the fair value of the related stock or
options or the fair value of the services, which ever is more readily
determinable in accordance with SFAS 123(R).
Management
has valued the options at their date of grant utilizing the Black-Scholes Option
Pricing Model. Since there is not a public market for the Company
shares, the fair value of the underlying shares was determined based on recent
transactions by the Company to sell shares to third parties. Further,
the excepted volatility was calculated using the historical volatility of a
similar public entity in the alternative electricity industry in accordance with
Question 6 of SAB Topic 14.D.1. In making this determination and
finding another similar company, the Company considered the industry, stage of
life cycle, size and financial leverage of such other entities. Based
on the development stage of the Company, similar companies with enough
historical data are not available. The Company was able to find
one entity that met the industry criterion and as a result has based its
expected volatility off this company’s historical stock prices for a period
similar to the expected term of the option. The company used is
larger and at a later stage in its life cycle. Our actual volatility
could vary from the estimate used based on this company, which could have a
material impact on future results of operations. The risk-free
interest rate is based on the implied yield available on U.S. Treasury issues
with an equivalent term approximating the expected life of the options depending
on the date of the grant and expected life of the options. The
expected life of options used was based on the contractual life of the option
granted. The Company determined the expected dividend rate based on
the assumption and expectation that earnings generated from operations are not
expected to be adequate to allow for the payment of dividends in the near
future.
RECENT
TRANSACTIONS AFFECTING EQUITY
During
the quarter ended December 31, 2008, we issued 1,100,000 shares of common stock
in private transactions under our 2008 Equity Incentive Plan. These transactions
are comprised of the following: On November 6, 2008, we issued
100,000 shares of restricted common stock to John Schwartz, under a consulting
agreement with the Company and under our 2008 Equity Incentive Plan. On December
22, 2008, the Company issued to each of Ronald J. Reding and Bruce C. Caruana,
consultants to the Company, 200,000 shares of our common stock at a price of
$0.05 per share pursuant to options exercised by them under our 2008 Equity
Incentive Plan. On December 31, 2008 we issued to Mr. Schwartz an additional
600,000 shares upon the vesting of additional shares under the November 6, 2008
stock award.
Through
the date hereof in 2009, we issued 17,701,000 shares of common stock in private
transactions. These transactions are comprised of the
following: On January 27, 2009, we issued to Mr. Schwartz an
additional 300,000 shares upon the vesting of additional shares under the
November 6, 2008 stock award. Between February 2 and July 14, 2009,
the Company issued 741,000 shares of common stock to forty-eight purchasers in
connection with a private placement of the Company’s common
stock. The shares were sold at a price of $1.00 per share for
aggregate proceeds of $741,000. On July 15, 2009,
we issued 16,660,000 shares of common stock to the selling shareholders listed
in this prospectus, upon the exercise of vested stock options, at the exercise
price of $0.05 per share, for total proceeds of $833,000.
11
BUSINESS
Company
Overview
We are an
independent developer of wind turbine technology. We have developed a new type
of wind turbine called the “Wind Tamer™” Our patented technology is new to the
wind turbine industry. We believe that our technology is a more efficient way to
harness wind energy than currently used in the industry and will allow us to
offer a product that will allow wind energy to better compete with other forms
of energy in power generation. We plan to develop our product for use in power
generation in the residential, commercial, governmental, industrial,
recreational, portable and low-head hydro renewable energy markets and
transportation markets. We intend to market our technology worldwide through
manufacturing, distribution and licensing arrangements.
We were
incorporated in New York on March 30, 2001, under the name Future Energy
Solutions, Inc. In November 2008, we changed our name to WindTamer Corporation.
Our founder, Gerald E. Brock, invented the “Wind Tamer™” wind turbine in 2002.
In December 2003, Mr. Brock was issued a patent for the Wind Tamer turbine
technology, which was assigned to us. During this time Mr. Brock was also
working in his existing contracting business. In 2007, he left his
contracting business to focus entirely on work with WindTamer and
commercialization of the product. We also have five patent applications
pending in the U.S. related to the original patented technology. We plan to seek
international patent protection for our technology.
Since
2002, we have produced numerous working prototypes of the Wind Tamer turbine
utilizing our patented technology and have collected a variety of test data
related to the performance of the machine. To date, we have focused on research
and development of our patented technology and production of Wind Tamer
prototypes. We have not yet begun large scale manufacturing of the machine or
large scale marketing it to customers. We are continually working to
improve on our technology.
In the
late Fall of 2008, we began working with component manufacturers to build
our first production models. We intend to begin working with
distributors for the Wind Tamer for domestic sale and to license our technology
for manufacture and distribution overseas. Since November 2008, we have been in
preliminary discussions with distributor networks/candidates about domestic
distribution of our products. Completion of these arrangements has
been subject to completion of manufacturing logistics for our initial production
models and finding a proper fit for our manufacturing
requirements. We continue to refine our manufacturing
requirements. We have begun manufacturing production models and we
have begun sales efforts, but have not yet consummated any sales. We do not have
any manufacturing or supply contracts and this could hinder our
development if suppliers cease to do business with us. See “Risk
Factors - We will initially
rely on independent manufacturers and suppliers for our products which could
delay our progress and later cause delay and damage customer
relationships. ” Once we have started sales, we plan to pursue licensing
opportunities later in 2009. At this time, however, we have no
definitive distribution or licensing agreements or arrangements to do so and
there can be no assurance that we will be able to enter into successful
arrangements by that time or at all.
Business
Strategy
We intend
to use our proprietary technology to become a leader in wind turbine technology
and renewable energy markets. We intend to enter the global residential,
commercial, governmental, industrial, recreational, portable and low-head hydro
renewable energy markets to sell and license our products and achieve
profitability and self-sustaining growth. We plan to do this by:
|
•
|
Developing manufacturing
alliances and infrastructure to facilitate mass production of wind
turbines to be marketed in U.S. and foreign
markets;
|
|
•
|
Developing a sales force both
organically and through strategic marketing
alliances;
|
|
•
|
Enhancing the design,
functionality, reliability, safety and cost effectiveness of our patented
technology and prototype
machines;
|
|
•
|
Establishing joint ventures,
strategic alliances, working participations, licensing, and/or royalty
agreements with venture partners to augment our manufacturing and
marketing efforts worldwide;
and
|
|
•
|
Seeking the endorsement of
environmental groups to highlight the importance of our product as a
viable alternative to fossil fuels as a means to generate
power.
|
We plan
to target power generator distributors and manufacturers to form alliances for
the mass production and distribution of our products. We are currently in
negotiations with numerous domestic and international companies with
advertising, sales support, manufacturing, installation and servicing
capabilities. The companies with whom we have spoken work with generators
currently fueled by diesel, natural gas, propane and gasoline. We believe our
technology will be able to fit within their current structures and work with
current off-the-shelf generators. We may also look to these potential partners
to provide existing infrastructure in the areas of marketing, customers,
installation and service for us to leverage in developing and growing our
business.
12
As we
develop these strategic alliances, we also plan to organically develop our sales
and marketing staff and efforts. We are currently working with a consultant to
publicize our corporate developments and strategic alliances to develop and grow
our visibility in the marketplace when we are ready to begin doing so. We also
plan to develop informational brochures that describe our product and technology
to distribute to our targeted customers. After initially outsourcing
manufacturing capabilities we may also work to develop in-house manufacturing,
distribution and sales infrastructure while at the same time pursuing licensing
arrangements and strategic business alliances with dealerships, manufacturers,
distributors and service providers located in the U.S. and abroad to maximize
market penetration.
We have
done extensive testing on the performance and efficiency of the Wind Tamer. We
believe the data from this testing show the superiority of our product to
currently available wind turbine technology. For instance, our testing shows
that a 1.5 kWh WindTamer unit start up wind speed is 1.5 mph, as compared to the
conventional (three-blade) 1.5 kWh wind turbine which has a start up wind speed
of 8 to 10 mph. Additionally, conventional wind turbines start
shutting down, or furling out of the wind, at approximately 35
mph. However, our testing showed that our 1.5 kWh wind turbine
continued to make power at speeds in excess of 75 mph. We intend to
continue to enhance and improve the design and performance of our product and
technology. We are currently pursuing further patents that we believe improve
upon our design and have filed five pending patent applications.
Potential
applications of Wind Tamer include stand-alone residential, roof mount
residential, stand alone commercial, roof-mount commercial, stand alone
industrial, roof-mount industrial, boat–dock and RV applications, low-head
hydro, portable, transportation and back-up power sourcing. We plan on initially
introducing Wind Tamer units from 1.8 to 15 kilowatts for commercial, industrial
and residential use.
We
believe that environmental groups will embrace and endorse Wind Tamer, and we
intend to aggressively pursue endorsements from such groups. The political
climate for the introduction of Wind Tamer is beneficial as well. The energy we
utilize, how that energy is produced, and the by-products of producing that
energy are main topics in political forums around the world. The greater use of
wind power generally, including the Wind Tamer, in lieu of generators that use
fossil fuels to generate power will eliminate harmful emissions such as carbon
dioxide and sulfur dioxide. The burning of coal in power plants results in the
release of billions of tons of carbon dioxide into the atmosphere each year in
the U.S. alone.
Industry
Overview
The use
of renewable energy technologies has grown rapidly during the past several
years. Some 65 countries now have targets for their own renewable energy usage,
and have enacted wide-ranging public policies to promote the use of renewable
energy. Climate change concerns coupled with high energy prices are driving
increasing growth in the renewable energy industries. Investment capital flowing
into renewable energy reached US$17 billion in 2008. This has been due to, among
other things, significant increases in commodity fuel prices, increased
environmental awareness and political and social movement towards greater use of
clean energy. These renewable energy resources include, wind, sunlight,
geothermal heat, tides and biofuels. As a result, we believe there is a demand
for new proven machines and processes that can deliver renewable energy at rates
that are superior to those currently being offered by competing
technologies.
As of
December 2008, worldwide wind farm capacity was approximately 120,000 megawatts
(MW), and wind power produced some 1.3% of U.S. electricity consumption. The
U.S. is an important growth area for wind power. The latest American Wind Energy
Association, or AWEA, figures show that installed U.S. wind power capacity has
reached 28,200 MW which is enough to serve seven million average households. In
2008, 98% of new capacity added through global wind turbine sales was generated
by only eight turbine manufacturing companies: GE Energy, Vestas, Gamesa,
Acciona WP, Mitsubishi, Clipper, Suzlon, and Siemens. GE Energy has installed
over 8,400 wind turbines to date.
According
to the AWEA Small Wind Turbine Global Market Study, year ending 2008, published
by the AWEA in June 2009, over the next five years the U.S. market is predicted
to grow beyond the estimated 14% - 25% annual growth the industry has seen over
the past decade. The AWEA estimates that 74 companies based in the U.S.
manufacture, or plan to manufacture, small wind turbines. According to AWEA,
grid-connected, residential-scale systems 1 – 10kWh in capacity constitute the
fastest growing market segment. Federal tax credits could help accelerate this
growth. The AWEA study concludes that the single most effective
driver for the wind power industry has been, and continues to be, financial
incentive programs offered by select states, which include, among others, New
York, California, Michigan, and Massachusetts. The wind power industry pointed
to the success of the solar photovoltaic (PV) industry’s federal investment tax
credit which has resulted in 40% - 55% annual growth since the credit’s 2005
enactment, in successfully advocating for the same federal-level credit for the
wind power industry. There can be no assurance that these incentives
or market condition will continue, and the failure to do so would have a
material adverse affect on our planned business. See "Risk Factors
– ' The expiration
or cancellation of federal tax benefits and state regulatory benefits for
renewable energy generation would adversely affect our development ' and
'Deteriorative changes in the
currently reported condition of the small wind energy industry market would
adversely affect our development '"
According
to the AWEA, during 2009 the Small Wind Certification Council or SWCC will begin
to certify small wind systems to a performance, safety, reliability, and sound
standard created by AWEA. Several states have indicated that they will require
turbines to be SWCC-certified in order to be eligible for their incentive
programs. We believe that this certification process will benefit our
marketing efforts as we believe, based on our testing, that our Wind Tamer units
will perform very well in comparison to other turbines currently being
manufactured. There can be no assurance however that our products will receive
SWCC certification if and when it is implemented. If we do not receive SWCC
certification for our products, purchasers of our turbines may not be eligible
for incentive programs in states which require the certification for such
programs.
13
Over 300
wind turbine models (in various stages of development) exist worldwide, of which
100 are engineered by U.S. companies. Manufacturing costs vary widely dependent
upon many factors as discussed in the AWEA study. These factors include the
availability of state incentives, average annual wind speeds, rising global
prices for raw materials such as aluminum, copper and steel, operations and
maintenance costs, and permitting costs.
According
to the AWEA, interest has increased in installing small wind turbines in urban
environments, on rooftops, as opposed to an acre or more of unobstructed land.
The American Planning Association, local and national media, and numerous green
building organizations are taking an interest in this application type as a way
to generate renewable, on-site electricity for city buildings. The Wind Tamer
units are specifically designed for such applications, and are well-positioned
to capitalize on this market segment. In 2008, approximately 200 units were sold
for urban or rooftop purposes, representing approximately 1% of the available
U.S. market for such applications. While we believe there will be wide
application for our products, we plan to initially focus in the area of
stand-alone generators for residential, commercial and governmental
customers.
Turbines
with a capacity to generate 10 kWh of electricity typically are used to power
single homes or farms in remote or off-grid locations. In our efficiency testing
we have found that Wind Tamer has the ability to generate power at both lower
and higher wind speeds than conventional three-bladed or helix-shape blade wind
turbines. Based on this testing, we believe that our smaller capacity generators
may be able to fill the need provided by 10 kWh wind turbines today. According
to the U.S. Department of Energy, a small wind-powered electric generator can
reduce a homeowner’s electric bills by 50% to 90%. The AWEA Small Wind Global Market Study,
year ending 2008 , finds that 10,386 small wind turbines were sold in the
US in 2008. Based on this study we believe there are millions of homes,
particularly those located in remote locations, that could benefit from the
installation of small wind turbine powered generators.
The cost
of wind turbines can be offset by available federal and state tax credits and
cash rebates. For instance, there is a federal Investment Tax Credit
of 30% for qualifying installations of wind energy systems currently scheduled
to expire in 2016. Additionally, New York State has a cash rebate
available for the installation of eligible wind turbines that ranges from $2,400
to $150,000 depending on the size and location of the wind turbine
system. This particular incentive is scheduled to expire December 31,
2009.
Our
Products and Technology
With our
patented technology we have developed the Wind Tamer wind
turbine. Based on our preliminary testing data with similarly-sized
conventional turbines, our patented process allows for extrapolation of a higher
efficiency of usable electricity from the wind’s kinetic energy as compared to
similar-sized conventional wind turbine technology, such as other diffuser
augmented wind turbine technology (see description below in the section titled
“Diffuser Augmented Wind Turbine Technology” (“DAWT”)), or helical horizontal (a
twisted blade rotation in the shape of a helix) or vertical wind turbine
technology (a three bladed set up that stands vertical and rotates perpendicular
to the wind).
Wind
Tamer
We
believe that the appeal of Wind Tamer will rest with its simplicity. The unit
stands 10 to 16 feet off the ground in stand-alone applications. It resembles a
sleek jet engine in appearance, rather than the conventional wind turbine with
long blades. As the result of this design, we believe it poses little or no
threat to birds, pets or the environment. The units stand 10 to 16 feet off the
ground and require only 10 square feet of land or roof-top surface area to
mount. Conventional wind turbines require 120-foot towers weighing upwards of
1,500 pounds, with a generator weighing 1,200 pounds set atop the tower and
copper wires to transmit power from the generator to the ground add another 200
pounds. We expect Wind Tamer turbines to weigh approximately 100 to 1,000 pounds
depending on size and power capacity. The Wind Tamer operates with minimal noise
or vibration. The design of our units provides for UV-ray and weather protection
based on testing in different seasonal condition. These features allow for
reduced maintenance costs and increased longevity compared to conventional wind
turbines, which are bare blades exposed to the elements and have more moving
parts. Therefore, we believe that the Wind Tamer will lend itself to not only
commercial and industrial use, but also residential use.
We
believe we will need to continue research and development to improve upon our
technology, as is common with many other technologies. We do not
believe there are material developmental hurdles to
commercialization. However, we are still finalizing our manufacturing
and assembly base and will need to further develop our sales and distribution
resources and networks to begin commercialization which we are presently
pursuing. We have begun to manufacture production models for power
capacities from 1.5kWh to 5 kWh. We are continuing to work on the
specifications for these models before we plan to start marketing for
sale. We plan to target these models for commercial, industrial and
residential use.
14
Diffuser
Augmented Wind Turbine Technology (DAWT)
The Wind
Tamer turbine is what is known as a Diffuser Augmented Wind Turbine, or DAWT. We
believe our patented technology, known as “Fluid-Driven Vacuum Enhanced
Generator,” improves upon the existing DAWT technology. This
technology consists of a fluid-driven power generator having a turbine with
several vanes, an exhaust chamber, a device for directing a first fluid towards
the vanes of the turbine, a device for directing a second fluid through the
generator housing assembly without contacting said turbine, a device for
combining the first fluid and the second fluid in an exhaust chamber, and a
device for creating a vacuum in the exhaust chamber. The technology utilizes two
vacuums pulling the wind through Wind Tamer’s rotor aiding the push of the wind
which existing DAWT technology does not provide. This technology allows for
several times the extracted usable electrical energy from the wind’s kinetic
energy than is provided by conventional and helical wind turbines of much larger
size.
We
continue to build and test new prototypes and perform additional research and
development to further perfect our patented technology. During this testing, the
Company found that the Wind Tamer turbine outperformed several of the top
selling conventional wind turbines, all of which were two to ten times larger in
size than Wind Tamer. Wind Tamer produced several times the electrical output of
similar sized conventional wind turbines without any of the problems associated
with such conventional wind turbines. During testing, Wind Tamer, while
operating under 1, 2, 3, and 4 ohm loads, took an off-the-shelf conventional
wind turbine generator to its designed limit.
Another
important discovery was made at the time of testing. The generator, while
operating under the aforementioned loads, was cool to the touch. There was no
heat build up. The cooling effect was the result of the static pressure behind
the rotor being eliminated through Wind Tamer’s patented process. A cool
operating generator is a more efficient operating generator. These preliminary
tests showed that the combination of less heat loss and more electrical power
enhances the longevity of the generator, providing a competitive advantage for
Wind Tamer over existing wind turbine technology. We have not found any material
negative results in the testing of our current prototypes we are using for our
production models. However, we are continuing to test and may find material
negative results in the future. Additionally, there can be no assurance that
technological developments by others will not show material negative results in
our performance. See “Risk Factors — If we are unable to adopt or
incorporate technological advances into our products, our proposed
business could become uncompetitive or obsolete and we may not be able
to effectively compete with the alternative products .”
We have
applied for five additional patents in the U.S., three of which are designed to
enhance Wind Tamer’s performance. One of the pending patent
applications has been filed under the International Patent Cooperation
Treaty, or PCT, which, if granted, provides additional time to file for patent
protection for our technology in one or more PCT member countries. This is part
of our plan to expand our patent protection beyond the U.S. by filing patent
applications in Europe and other foreign jurisdictions.
Competition
We will
compete directly with companies that manufacture and sell conventional wind
turbines and helical wind turbines, and also with those that manufacture and
sell generators powered by diesel, natural gas, propane and gasoline. Sales of
conventional wind turbines and helical wind turbines make up a very small
fraction of the U.S. market for generators, and are sold predominately outside
the U.S. According to the AWEA, in 2008, 98% of new capacity added through
global wind turbine sales was generated by only eight turbine manufacturing
companies: GE Energy, Vestas, Gamesa, Acciona WP, Mitsubishi, Clipper, Suzlon,
and Siemens. Bergey WindPower Co., based in Norman, Oklahoma, is one of the
world’s leading suppliers of small wind turbines. Bergey WindPower Co. has
installations in all 50 states and more than 100 countries, and an international
network of about 500 dealers. There are several other suppliers of small wind
turbines in the U.S that are focused on the residential and small business
markets with whom we will compete, including but not limited to, Southwest
Energy, Mariah Power and FloDesign.
Competitive
Advantages
The Wind
Tamer turbine has several distinct advantages over both conventional wind
turbines and other energy sources for power generators. Wind Tamer resembles a
sleek jet engine in appearance. We believe that it is the first wind turbine
machine that can be safely placed on residential, commercial or industrial
rooftops due to its design, which eliminates vibration and noise. There are
millions of roof tops on commercial and industrial buildings with the
infrastructure already in place, where Wind Tamer can be placed to harness wind
energy.
More Cost Effective than
Conventional Wind Turbines . The Wind Tamer has the potential to be
cost-effective. Conventional 10 kilowatt wind turbine devices capable of
providing electrical power to a typical home can cost $60,000 to $100,000
installed. Under current production levels, this would mean an approximate
20-year payback for customers. We believe that Wind Tamer will cost
approximately $50,000 - $60,000, installed, and we believe it will have a
5-year payback period. Unlike coal, oil and other traditional energy sources,
the Wind Tamer turbine emits no pollutants and we believe has no negative
effects on the environment. Annual maintenance for a conventional wind turbine
is $500 - $1,000, while annual maintenance for the Wind Tamer should be
minimal.
15
Made from Conventional
Materials. A Wind Tamer turbine can be manufactured from conventional
materials such as fiberglass, glass-reinforced plastic, carbon fiber, or
aluminum. Thus, it is manufacturer friendly, with no exotic materials or exotic
parts needed. This will facilitate its development and make it easier to locate
and acquire raw materials for its construction and to mass produce. The size of
the unit can be tailored and specifically manufactured to order for different
applications. We have no arrangements with suppliers at this time, but we
believe based on flexibility in use of materials and our discussions with
potential suppliers, that we will be able to acquire the necessary material when
we begin manufacturing our planned products.
Government Support. We
believe that the availability of government credits for purchasers of wind
turbines may be helpful to us in competing with generators powered by other
energy sources. For example, the federal government provides a tax credit
for 30% of expenditures to install wind energy equipment up to 100 kilowatts and
a production tax credit which provides a $.021 per kWh benefit for the first 10
years of facilities operation. States offering financial incentives
include, for instance, New York State which through
the Energy Research and Development Authority now subsidizes 50% of
the cost for residential users and 70% for commercial users. New York
State also currently offers cash rebates that range from $2,400 to $150,000 for
installation of small-wind energy turbines depending on the size and
location. Other specific state incentive programs include: a 100%
personal property tax exemption for eligible properties in Michigan; a rebate
program in California for wind systems up to 50kW with an incentive of $2.50/W
for the first 7.5 kW and $1.50/W for increments between 7.5 kW and 30 kW;
and a 15% personal tax credit for taxpayers with renewable energy systems
installed at their primary residence in Massachusetts. These
credits can help make wind turbines more attractive than other power generation
products. Since we have only just begun to manufacture our initial
products, and have a limited operating history we cannot be sure that this will
be the case for our products. As a result, there can be no assurance that these
financial incentives will help to make our products competitive with other
energy sources. Additionally, if these incentives or similar incentives in other
states are repealed or not renewed, demand for our products and future
development efforts would be adversely effected. See “ Risk Factors – The expiration or
cancellation of federal tax benefits and state regulatory benefits for renewable
energy generation would adversely affect our development .”
Simple Implementation.
Implementation of the unit for use is very simple. Wind Tamer’s electrical leads
from the generator hook directly into a conversion box that is approximately 4”
thick by 16” high that plugs directly in to a standard wall
receptacle.
Works at Various Weather
Conditions. Conventional wind turbines automatically shut down when wind
speeds exceed approximately 35 miles per hour. Conventional wind turbines shut
down by means of furl or feathering, and are at the mercy of wind events that
often leave them damaged or found on the ground after a high wind event. Wind
Tamer has been tested at speeds in excess of 75 miles per hour without shutting
down. During the testing process, Wind Tamer was left exposed to a wide variety
of weather conditions (including snow) for a continuous period of one year with
no maintenance issues. The rotor blades are protected from the weather and UV
rays. UV rays and weather are often the demise of conventional wind turbines
shortening the life of the generator and rotor blades. Conventional generators
have vent holes in their casing for cooling purposes, and in many cases water
gets inside the generator and freezes. When the wind picks up the generator’s
magnets and windings are destroyed by the ice that has formed within the
generator.
Point of Consumption
Application. Wind Tamer is a point of consumption machine, and can be
placed in close proximity to where electricity is needed in stand-alone or
roof-mount applications. Conventional wind turbines cannot be roof mounted due
to vibration and noise inherent in their operation, and are often placed
hundreds of feet, or more, from the point of consumption. Conventional wind
turbines require an acre of land with guide-wired towers 120 feet high, and
several hundred feet of transmission lines along roads and access avenues to the
tower, while we are designing Wind Tamer to be placed on top of or adjacent to
commercial buildings or residential homes.
Safety Maximized. We believe
that the Wind Tamer poses virtually no safety risks as the rotor blades are
housed. Unlike conventional wind turbines, we believe that there is no risk of
rotor blade throw. Conventional wind turbines can throw rotor blades, and
certain large wind turbines have been documented to throw a rotor blade a
quarter mile from the turbine. In addition, there is no danger of ice build-up
with Wind Tamer as the rotor blades are housed. When conventional wind turbines
are idle, ice build-ups regularly occur and ice is thrown when the turbines
engage. This causes potential health hazards to persons or animals during cold
weather operation. Conventional wind turbine rotor blades are exposed and
operate in open air presenting a hazard to birds. Wind farms must be situated in
areas where the wind blows fairly constantly. Such locations are often prime
migratory routes for birds. Scientists estimate that as many as 44,000 birds
have been killed over the past two decades by conventional wind turbines in the
Altamont Pass east of San Francisco. An estimated 50 golden eagles are killed
each year at this site.
Silent Operation. Wind Tamer
operates virtually silent even under the heaviest of electrical loads.
Conventional wind turbines and traditional fuel operated generators are very
noisy. Conventional wind turbines are often required to be taken down by
municipalities as a result of exceeding legally acceptable noise
ordinances.
Minimal Maintenance. Wind
Tamer requires minimal maintenance, usually just a sight check. If maintenance
is required, the units are easily accessible since they are relatively low to
the ground. Conventional wind turbines require on-going maintenance. In most
cases, the towers have to be lowered during maintenance. Average annual
maintenance costs of $500 to $1,000 are often required for conventional wind
turbines in the 10 kilowatt range that powers a moderate sized
home.
Customers
We
believe there will be wide application for our products. Although we plan to
initially focus in the area of stand-alone generators to commercial, industrial,
governmental and residential consumers, we will work with larger customers for
wind farm applications to the extent those opportunities arise. We plan to sell
or license our products to wholesalers who operate in these markets. The
companies with whom we have spoken work with generators currently fueled by
diesel, natural gas, propane and gasoline. We believe our technology will be
able to fit within their current structures and work with current off-the-shelf
generators. They can also provide existing infrastructure in the areas of
manufacturing, marketing, distribution, customers, installation and service for
us to leverage in developing and growing our business. Potential applications of
Wind Tamer include stand-alone residential, roof mount residential, stand-alone
commercial, roof-mount commercial, stand-alone industrial, roof-mount
industrial, boat – dock and RV applications, low-head hydro, portable,
transportation and back-up power sourcing. We plan on initially introducing Wind
Tamer units from 1.8 to 15 kilowatts for commercial, industrial and residential
use.
16
Intellectual
Property
Patents
The Wind
Tamer turbine is what is known as a Diffuser-Augmented Wind Turbine, or DAWT. We
have developed this with our patented technology, “Fluid-Driven Vacuum-Enhanced
Generator” (U.S. Patent No. 6,655,907). Mr. Brock was issued this patent in
December 2003 and has assigned it to the Company. This patent expires in
2022. This patented technology is directed to a fluid-driven power
generator having a turbine with several vanes, an exhaust chamber, a device for
directing a first fluid towards the vanes of the turbine, a device for directing
a second fluid through the generator housing assembly without contacting said
turbine, a device for combining the first fluid and the second fluid in an
exhaust chamber, and a device for creating a vacuum in the exhaust chamber. The
technology utilizes two vacuums pulling the wind through WindTamer’s rotor
aiding the push of the wind. This technology allows for several times the
extracted usable electrical energy from the wind’s kinetic energy than is
provided by conventional and helical wind turbines of much larger
size.
We have
also applied for five additional patents, three of these applications improve
upon our wind turbine technology. One of the applications relates to the
ornamental design of the turbine. One of the pending patent applications has
been filed under the International Patent Cooperation Treaty (PCT) which, if
granted, provides additional time to file for patent protection for our
technology in one or more PCT member countries.
Trademarks
We regard
our proprietary rights as valuable assets that are important to our competitive
advantage. Our trademarks include the names Wind Tamer™ and Hydro Tamer™, the
design of the turbine logo, the slogan Wind Tamer Bringing Wind Power Down to
Earth ™ and the design of that slogan. We have pending trademark
applications for each of these trademarks in the U.S. Also, the marks Wind
Tamer™ and Hyrdo Tamer™ have pending trademark applications in Canada. We plan
to use these trademarks in marketing our products.
Government
Regulation
Due to
their size and noise, among other things, conventional wind turbines can require
extensive government approvals for installation, including zoning and related
type matters. Private use of electric power generation equipment in the U.S.
generally requires meeting applicable municipal building and electrical codes,
and installation by persons who are licensed or certified to install such
equipment. Installation can also require significant land for
installation, up to a requirement of an acre of land. This adds significant cost
for a customer or business to install.
Based on
its size and relative quiet operation, we believe that installation of a Wind
Tamer turbine has fewer such requirements. While zoning laws vary according to
jurisdiction, we believe in many instances no zoning approval would be required
for residential or commercial installation of a Wind Tamer turbine. However, it
is possible that zoning approvals for end users could delay implementation for
purchasers of our planned products. For instance, we recently arranged with the
Town of Perry, New York, to install one of our 3.5 kWh wind turbines at the
Perry/Warsaw Airport in Perry, New York to assist in our continuing testing and
to provide auxiliary power for the airport. The town obtained a local
county building permit and Federal Aviation Administration, or FAA, approval for
installation of the structure on the airport premises. The building
permit and FAA approval process took approximately five months. We
plan to install the wind turbine over the next few weeks.
Several
states offer financial incentives to purchasers of small wind powered systems.
When and if the SWCC’s certification process is implemented, some of these
states have indicated that receipt of financial incentives available to
purchasers of wind powered systems will be dependent upon the purchased system
receiving certification from the SWCC.
Research
and Development
Our
research and development activities have focused on developing, improving, and
testing our DAWT technology and Wind Tamer turbine and related components. We
plan to continue to dedicate our expenditures in the areas of base research for
equipment design and enhance our technology. Research and development expenses
for the fiscal years ended December 31, 2008 and 2007 and since inception
through December 31, 2008, were $249,171, $6,000 and $295,453, respectively.
During each of the last two years our founder Mr. Brock spent over 1,000 hours
on research and development activities.
Employees
We
currently have three full-time employees and one part-time
employee. These include our President, Chief Executive Officer and
acting Chief Financial Officer, Gerald Brock, and Amy Brock, who performs
day-to-day clerical and administrative duties as required for the Company, and
is our corporate secretary. We plan to hire approximately 25 to 50 additional
employees over the next 12 months in the areas of sales, administration,
engineering and product assembly. As we further develop and market Wind Tamer,
we will need to hire additional employees.
17
Office
and Facilities
Our
executive offices are located at 6053 Ely Avenue, Livonia, New York 14487, the
principal residence of Mr. Brock, owned solely by him in his individual capacity
and in which the Company has no interest. Our telephone number at that address
is 585-346-6442, and our facsimile number is 585-346-3062. We also lease a
warehouse containing 4,300 square feet of space in Geneseo, New
York. We plan to utilize this space to begin assembly of our Wind
Tamer turbines.
LEGAL
PROCEEDINGS
From time
to time we are involved with legal proceedings, claims and litigation arising in
the ordinary course of business. As of the date of this Prospectus we are not a
party to any material pending legal proceedings.
OUR
MANAGEMENT
Executive
Officers and Directors
As
provided in our Certificate of Incorporation, the initial classification of our
Board of Directors occurred at our annual meeting of shareholders on June 2,
2009, where each director was elected to a class, to serve until the expiration
of his or her term and until such director’s successor is elected and qualified.
Officers are elected and serve at the pleasure of the board of
directors.
Our
officers and directors, and their ages, as well as the class and term of each
respective director as initially classified, are as follows:
Name
|
Age
|
Title
|
Class
|
Term
|
||||
Gerald
E. Brock
|
60
|
Chief
Executive Officer, Acting Chief Financial Officer &
Director
|
III
|
3 Years
|
||||
Eugene
R. Henn
|
63
|
Director
|
I
|
1
Year
|
||||
Anthony
C. Romano, Jr.
|
57
|
Director
|
I
|
1
Year
|
||||
George
Naselaris
|
68
|
Director
|
II
|
2
Years
|
The
principal occupation, title, and business experience of our executive officers
and directors during the last five years, including the names and locations of
employers, are indicated below.
Gerald E. Brock currently
serves and has served as our Chief Executive Officer, acting Chief Financial
Officer since inception in 2001. Mr. Brock is also chairman of our Board of
Directors. Until October 2007, when he left to focus on the Company, Mr. Brock
was the sole owner of Brock Acoustical, Inc., a contractor specializing in
medical and dental office construction and other commercial construction, for
over twenty-five years.
Eugene Richard Henn is a
director of the Company, elected in October 2008. Mr. Henn has served as
President of Better Light & Power, a DBA of Prosperity Lighting Supply,
Inc., since 1992. The principal business of Prosperity Lighting Supply, Inc. for
many years was sales and distribution of commercial-industrial lighting,
specializing in energy-saving and full-spectrum lighting. Prosperity Lighting’s
business has evolved and now consists nearly entirely of generator sales and
distribution.
George Naselaris is a
director of the Company, elected in November 2008. Mr. Naselaris has been the
owner of the Duchess Restaurant in Penfield, New York for over 40 years, a full
service family restaurant.
Anthony C. Romano, Jr. is a
director of the Company, elected in October 2008. Mr. Romano has served as Vice
President of Equipment for Johnson and Lund Co., Inc. (“Johnson and Lund”) since
2001. Johnson and Lund supplies merchandise, equipment and design services to
the dental profession.
18
Board
Committees
The Board
of Directors does not have a standing audit, nominating or compensation
committee (or other committees differently designed and performing similar
functions). Instead, our entire Board of Directors performs the functions
traditionally discharged by those committees.
Executive
Officer Compensation
The
following table sets forth, for the last two fiscal years, the dollar value of
all cash and noncash compensation earned by the person who was our chief
executive officer (our “Named Executive Officer”).
Summary
Compensation Table
Year
|
||||||||||||||||||||||||||||
Name and
|
Ended
|
Stock
|
Option
|
All other
|
||||||||||||||||||||||||
Principal
|
December
|
Salary
|
Bonus
|
Awards
|
Awards
|
compensation
|
||||||||||||||||||||||
Position
|
31
|
($)
|
($)
|
($)
|
($)
|
($)
|
Total ($)
|
|||||||||||||||||||||
Gerald
Brock,
|
||||||||||||||||||||||||||||
Chief
Executive Officer,
|
||||||||||||||||||||||||||||
acting
Chief Financial
|
2008
|
191,856
|
-
|
-
|
-
|
-
|
191,856
|
|||||||||||||||||||||
Officer
|
2007
|
19,800
|
-
|
-
|
-
|
-
|
19,800
|
Mr. Brock
did not receive any equity incentive awards during the fiscal years ended
December 31, 2008 and 2007.
We do not
have any plans that provide for the payment of any retirement benefits to Mr.
Brock.
John
Schwartz was elected as Chief Operating Officer on March 10,
2009. Prior to this appointment, Mr. Schwartz, was a consultant to
the Company since January 2008, assisting the Company with marketing and
operational matters under a Consulting Agreement dated October 30,
2008. Mr. Schwartz resigned from his position as Chief Operating
Officer effective August 21, 2009. Since his appointment, and to the
date of his resignation, Mr. Schwartz earned a salary of $41,891.
As part
of his consulting arrangement with the Company, Mr. Schwartz received $75,000 in
consulting fees in 2008 and 2009, which includes his stock compensation during
2008. He also received an additional 300,000 shares of common stock
upon the vesting in 2009 of a portion of a prior stock award granted in November
2008. On December 30, 2008, the vesting criteria for this final tranche of his
stock award was amended. The performance criteria was changed from
assisting us with obtaining a bank credit facility to assisting in presentations
and meetings with potential customers. The change was made because
the Board decided that it wanted him to focus instead on assistance preparing
presentations for and meeting with potential customers and purchases of the
Company’s products instead of seeking a commercial line of
credit. The total stock award, which completely vested as of January
27, 2009, was for 1,000,000 shares of the Company’s common stock under the
Company 2008 Equity Incentive Plan. In February 2009, Mr. Schwartz
was also granted a stock option to purchase 1,000,000 shares at $1.00 per share
under the 2008 Equity Incentive Plan. At the time of his resignation, Mr.
Schwartz was vested in 50% of the stock option award. Under the terms
of his stock option award agreement, he has 120 days from the effective date of
his resignation to exercise those vested stock options. After that time, the
unexercised stock options will expire. The unvested stock options under the
stock option award agreement were forfeited due to his resignation. Mr. Schwartz
is no longer an employee or officer of, or consultant to, the
Company.
On July
15, 2009, the Company entered into an employment agreement with Mr. Brock,
effective July 14, 2009, pursuant to which he will continue to serve as Chief
Executive Officer of the Company.
Among
other things, the employment agreement provides for an initial three (3) year
employment term, which term automatically renews for successive one (1) year
terms unless terminated by Mr. Brock or the Company. Mr. Brock’s base
compensation will be $192,540 per year, and he shall be eligible for a bonus at
the discretion of the Board of Directors of the Company to be paid solely out of
positive EBITDA. Mr. Brock is subject to a non-competition covenant
during the term of his employment and for a period of two (2) years
thereafter. Upon termination of Mr. Brock’s employment for any
reason, he is entitled to receive all unpaid salary, earned bonuses, vacation
and other accrued benefits through the date of termination. If Mr.
Brock’s employment is terminated without “Good Cause” (as defined in the
employment agreement), he is also entitled to severance payments in the amount
of six (6) months salary and payment of health insurance premiums for Mr. Brock
and his family.
Compensation
of Directors
The
following table sets forth, for the last fiscal year, the dollar value of all
cash and noncash compensation earned by nonemployee members of our Board of
Directors for 2008.
DIRECTOR COMPENSATION
|
|||||||||||||||||
Name
|
Fees
Earned
or Paid
in Cash
|
Stock
Awards
|
Option
Awards
(1)
|
Non-Equity
Incentive Plan
Compensation
|
Nonqualified
Deferred
Compensation
Earnings
|
All Other
Compensation
|
Total
|
||||||||||
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|||||||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
||||||||||
Eugene
R. Henn
|
|
757
|
(2)
|
757
|
|||||||||||||
George
Naselaris
|
378
|
(2)
|
378
|
||||||||||||||
Anthony
C. Romano, Jr.
|
757
|
(2)
|
757
|
1. Based
upon the dollar amount recognized for financial statement reporting purposes
with respect to the fiscal year in accordance with the Financial Accounting
Standards Board (“FASB”) Statement of Financial Accounting Standard (“FAS”) No.
123R.
2. Each
non-employee director had outstanding at fiscal year end 200,000 options to
purchase common stock for exercise at $0.05 per share pursuant to a plan adopted
by the Board of Directors to compensate non-employee directors. Under the plan,
non-employee directors will receive options to purchase 200,000 shares of Common
Stock under our Equity Incentive Plan on January 5 th of each
year. In October 2008, Eugene Richard Henn and Anthony C. Romano, Jr., were, and
in November 2008, George Naselaris was, granted options to purchase 200,000
shares each at an exercise price of $.05 per share upon their election to the
Board of Directors. They will not be eligible to receive an additional option
grant in January 2009. The options will vest in full on the first anniversary of
the grant. The grant will be pro-rated for directors who are appointed on a date
other than January 1 of any fiscal year.
19
Director
Independence
At this
time, we are not subject to the requirements of a national securities exchange
or an inter-dealer quotation system with respect to the need to have a majority
of our directors as independent. In the absence of such requirements, we have
elected to use the definition established by the Nasdaq independence rule which
defines an independent director as a person other than an officer or employee of
us or our subsidiaries or any other individual having a relationship, which in
the opinion of our board of directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. The
definition further provides that the following relationships are considered bars
to independence regardless of the board’s determination: Employment by the
company; employment of the director or a family member by us or any parent or
subsidiary of ours at any time thereof during the past three years, other than
family members in non-executive officer positions; $100,000 compensation;
acceptance by the director or a family member of any compensation from us or any
parent or subsidiary in excess of $100,000 during any twelve month period within
three years of the independence determination; auditor affiliation; or a
director or a family member of the director, being a partner of our outside
auditor or having been a partner or employee of our outside auditor who worked
on our audit, during the past three years. Based on the foregoing definition,
Eugene Henn, George Naselaris, and Anthony Romano are independent directors.
Gerald Brock would not be considered independent under the applicable Nasdaq
standards for independence for service on the Board or a committee. The Board of
Directors does not have a standing audit, nominating or compensation committee
(or other committees differently designed and performing similar functions).
Instead, our entire Board of Directors performs the functions traditionally
discharged by those committees. If we had such committees, Messrs.
Henn, Naselaris and Romano would satisfy the Nasdaq independence standards for
service on such committees.
Pension
and Deferred Compensation Plans
The
Company has no pension or deferred compensation plans for any employees,
executives or directors. The Company does allow employees to contribute to a
401K plan which all employees are eligible to participate in, however the
Company provides no match funding to such plan.
Long-Term
Stock Incentive Plan
We have a
2008 Equity Incentive Plan, under which we have presently reserved 6,600,000
shares of common stock for issuance upon the exercise of outstanding awards and
future issuances. Our shareholders approved our 2008 Equity Incentive Plan by a
majority written consent on November 21, 2008. The plan provides for grants of
incentive stock options, nonqualified stock options, stock appreciation rights,
stock awards and cash awards to our key employees and consultants.
With
respect to our current plan, the compensation committee of the Board of
Directors administers and interprets our current plan. The exercise price of
common stock underlying an option may be greater, less than or equal to fair
market value. However, the exercise price of an incentive stock option must be
equal to or greater than the fair market value of a share of common stock on the
date such incentive stock option is granted. The maximum term of an option is 10
years from the date of grant. In the event of a dissolution, liquidation or
change in control transaction, the Company can, in its discretion, (i) provide
for the assumption or substitution of, or adjustment to, each outstanding award;
(ii) accelerate the vesting of options and terminate any restrictions on stock
awards; or (iii) provide for termination of awards as a result of the change in
control on such terms and conditions as it deems appropriate, including
providing for the cancellation of awards for a cash or other payment to the
award holder. The purpose of the 2008 Equity Incentive Plan is to
promote our long-term growth and profitability by providing key people with
incentives to improve stockholder value and contribute to our growth and
financial success and by enabling us to attract, retain and reward the best
available people.
The
maximum number of shares of common stock that we may issue with respect to
awards under the 2008 Equity Incentive Plan is 8,000,000 shares, of which
1,000,000 shares of common stock are available for the grant of incentive based
options. If any award, or portion of an award, under the 2008 Equity
Incentive Plan expires or terminates unexercised, becomes unexercisable or is
forfeited or otherwise terminated, surrendered or canceled as to any shares, or
if any shares of common stock are surrendered to us in connection with any award
(whether or not such surrendered shares were acquired pursuant to any award), or
if any shares are withheld by us, the shares subject to such award and the
surrendered or withheld shares will thereafter be available for further awards
under the 2008 Equity Incentive Plan.
The 2008
Equity Incentive Plan is administered by our Board of Directors or by a
committee or committees as the Board of Directors may appoint from time to time.
The administrator has full power and authority to take all actions necessary to
carry out the purpose and intent of the 2008 Equity Incentive Plan, including,
but not limited to, the authority to: (i) determine who is eligible for awards,
and the time or times at which such awards will be granted; (ii) determine the
types of awards to be granted; (iii) determine the number of shares covered by
or used for reference purposes for each award; (iv) impose such terms,
limitations, restrictions and conditions upon any such award as the
administrator deems appropriate; (v) modify, amend, extend or renew outstanding
awards, or accept the surrender of outstanding awards and substitute new awards
(provided however, that, except as noted below, any modification that would
materially adversely affect any outstanding award may not be made without the
consent of the holder); (vi) accelerate or otherwise change the time in which an
award may be exercised or becomes payable and to waive or accelerate the lapse,
in whole or in part, of any restriction or condition with respect to such award,
including, but not limited to, any restriction or condition with respect to the
vesting or exercisability of an award following termination of any grantee’s
employment or consulting relationship; and (vii) establish objectives and
conditions, if any, for earning awards and determining whether awards will be
paid after the end of a performance period.
20
In the
event of changes in our common stock by reason of any stock dividend, split-up,
recapitalization, merger, consolidation, business combination or exchange of
shares and the like, the administrator may make adjustments to the number and
kind of shares reserved for issuance or with respect to which awards may be
granted under the 2008 Equity Incentive Plan, in the aggregate or per individual
per year, and to the number, kind and price of shares covered by outstanding
award.
Without
the consent of holders of awards, the administrator in its discretion is
authorized to make adjustments in the terms and conditions of, and the criteria
included in, awards in recognition of unusual or nonrecurring events affecting
us, or our financial statements or those of any of our affiliates, or of changes
in applicable laws, regulations, or accounting principles, whenever the
administrator determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the 2008 Equity Incentive Plan.
Participation
in the 2008 Equity Incentive Plan will be open to all of our employees,
officers, directors and other individuals providing bona fide services to us or
any of our affiliates, as the administrator may select from time to time. All
non-employee directors and employees will be eligible to participate in the 2008
Equity Incentive Plan.
The 2008
Equity Incentive Plan allows for the grant of stock options, stock appreciation
rights, stock awards and cash awards. The administrator may grant these awards
separately or in tandem with other awards. The administrator will also determine
the prices, expiration dates and other material conditions governing the
exercise of the awards. We, or any of our affiliates, may make or guarantee
loans to assist grantees in exercising awards and satisfying any withholding tax
obligations arising from awards.
Because
participation and the types of awards available for grant under the 2008 Equity
Incentive Plan are subject to the discretion of the administrator, the benefits
or amounts that any participant or groups of participants may receive if the
2008 Equity Incentive Plan is approved are not currently
determinable.
Our Board
of Directors may terminate, amend or modify all or any provision of the 2008
Equity Incentive Plan at any time, subject to the approval of the stockholders
of the Company as required by law.
Lock-Up
Agreements
On July
10, 2009, we entered into lock-up agreements with each of our executive officers
and directors, Gerald Brock, Eugene Henn, George Naselaris, and Anthony C.
Romano, Jr., and with, Jesse Brock, a former consultant and son of Gerald Brock,
and also with John Schwartz, former Chief Operating Officer. Under
these lock-up agreements, the individuals have agreed that, generally,
commencing on the date that our common stock begins trading on any of the OTC
Bulletin Board, an over-the-counter market, any national securities exchange or
quotation service or otherwise, and until twelve months from such date, they
will not directly or indirectly, offer, sell, contract to sell, pledge, grant
any option to purchase, make any short sale or otherwise dispose of any shares
of common stock, or securities convertible into or exchangeable or exercisable
for any shares of common stock. The lock-up agreement for Gerald
Brock provides a longer lock-up period of eighteen months from such effective
date. The lock-up agreement for John Schwartz provides for the
ability to make limited sales during the lock-up period such that he may,
subject to our Insider Trading Policy, sell (1) shares up to $50,000
in gross proceeds between the six-month and nine-month anniversaries of the
effective date but in no event more than 50,000 shares, and (2) shares up to
$50,000 in gross proceeds between the nine-month and twelve-month anniversaries
of the effective date but in no event more than 50,000 of the
shares. The lock-up agreement with Jesse Brock restricts the
sale of 20,000 shares acquired before, and shares acquired after July 7, 2009,
not underlying current options. It permits limited sales, subject to
our Insider Trading Policy, up to the greater of $250,000 in gross proceeds and
250,000 shares for each of the six month periods following the six month
anniversary of the effective date and the twelve month anniversary following the
effective date.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of September 30, 2009, the name, address, and
stockholdings of each person who owns of record, or was known by us to own
beneficially, 5% or more of our common stock currently issued and outstanding;
the name and stockholdings of each director; and the stockholdings of all
executive officers and directors as a group. Unless otherwise indicated, all
shares consist of common stock, and all such shares are owned beneficially and
of record by the named person or group:
Amount and Nature of
|
||||||||
Name and Address of Beneficial Owner
|
Beneficial Ownership¹
|
Percent of Class¹
|
||||||
Directors
and Executive Officers
|
||||||||
Gerald
E. Brock, CEO & Director 2,
4
|
50,290,000 | 50.7 | % | |||||
Eugene
R. Henn
|
184,000 | * | ||||||
Anthony
C. Romano, Jr.
|
200,000 | * | ||||||
George
Naselaris
|
0 | 0.0 | % | |||||
All
Executive Officers and Directors of WindTamer Corporation as a
Group
|
50,674,000 | 50.9 | % | |||||
Beneficial
Owners of 5% or More
|
||||||||
Charles
LaLoggia 3,
4
|
7,330,000 | 7.3 | % |
* less
than 1% of the outstanding shares of common stock.
1. The
calculations for these columns are based upon 98,341,000 shares of common stock
issued and outstanding on September 30, 2009, plus the number of shares of
common stock deemed outstanding pursuant to SEC Rule 13d-3(d)(1). Shares of
common stock subject to options exercisable within 60 days of September 30, 2009
are deemed outstanding for purposes of computing the percentage of the person
holding such option but are not deemed outstanding for computing the percentage
of any other person.
21
2.
Presently reported ownership includes an aggregate of 440,000 shares held by Mr.
Brock’s wife and daughter and an aggregate of 800,000 shares underlying options
held by his wife and daughter.
3.
Presently reported ownership includes 2,670,000 shares issuable under options
exercisable within 60 days of September 30, 2009 held by Mr. LaLoggia.
4. Mr.
Brock’s address is 6053 Ely Avenue, Livonia, New York 14487; and Mr. LaLoggia’s
address is 457 Park Avenue, Rochester, New York, 14607.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
On
November 18, 2008, the Board of Directors granted stock options under the
Company’s 2008 Equity Incentive Plan to the wife of Mr. Brock, Lucinda Brock,
and his two children, Jesse Brock and Amy Brock. On November 25,
2008, the Board of Directors granted stock options under the Company’s 2008
Equity Incentive Plan to Mr. Brock’s brother, Richard Brock. Each had provided
services to the Company during 2008. Each option grant was to purchase 400,000
shares of common stock at a price of $.05 per share. The value of
each respective grant of stock options to Mr. Brock’s relatives was
$5,040. Lucinda Brock served as the Company’s corporate secretary
through October 2008 providing administrative and clerical services through July
2008. She earned salaries of $1,800 and $27,252 in 2007 and 2008,
respectively. Jesse Brock served as a consultant to the Company from
2007 to July 2008 and also assisted in building prototypes through July
2008. He earned salaries of $6,000 and $51,670 in 2007 and 2008,
respectively. Amy Brock has served as corporate secretary since
October 24, 2008 and earned $15,792 for her services in 2008. Richard
Brock assisted the Company by aiding in various prototype production tasks,
including purchasing supplies for prototype assembly and assisting Mr. Brock in
his performance of research and development activities during 2008. Richard
Brock and Richard Brock's company, R.B. Brock Construction, were paid a total of
$22,250 for those consulting services rendered in 2008.
For the
current fiscal year as of September 30, 2009, Amy Brock earned a salary of
$ 31,801. As
of September 30, 2009, R.B. Brock Construction was paid $79,400 for consulting
services rendered in 2009, in connection with production model development,
assembly, and installation.
John
Schwartz was elected Chief Operating Officer of the Company on March 10, 2009.
He resigned from that position effective August 21, 2009. Prior to his election
as Chief Operating Officer, he acted as a consultant to the Company under a
consulting agreement dated October 30, 2008. Mr. Schwartz was
retained as a consultant to the Company due to his expertise in business
management and operations in connection with manufacturing and machining
operations. His services were primarily: review and analysis of operations and
operational structure and strategies; development of turbine manufacturing,
supply and assembly logistics; the preparation of alternative energy state grant
applications; and assistance in presentations and meetings with potential
customers. Under this agreement Mr. Schwartz received $75,000 in consulting fees
in 2008 and 2009, which includes $35,000 expensed as stock compensation during
2008. He also received an additional 300,000 shares of common stock
upon the vesting of a portion of the prior award in 2009 for which the Company
recognized $300,000 of stock-based compensation expense. The total
stock award, which completely vested as of January 27, 2009, was for 1,000,000
shares of the Company’s common stock under the Company 2008 Equity Incentive
Plan. In February 2009, Mr. Schwartz was also granted a stock option
to purchase 1,000,000 shares at $1.00 per share under the 2008 Equity Incentive
Plan. At the time of his resignation, Mr. Schwartz was vested in 50% of the
stock option award. Under the terms of his stock option award
agreement, he has 120 days from the effective date of his resignation to
exercise those vested stock options. After that time, the unexercised stock
options will expire. The unvested stock options under the stock option award
agreement were forfeited due to his resignation.
On July
10, 2008, we entered into a stock option agreement with Charles LaLoggia, in
connection with the expectation that he would provide consulting
services to the Company. Since this time Mr. LaLoggia has provided consulting
services to the Company involving advice and assistance on its management
structure and business development and developing a product marketing strategy
and publicity strategy. He has also assisted the Company in locating
auditing services, legal services, and assistance in locating financial market
professionals to assist the Company. The consulting arrangement does
not have a specific term but the Company anticipates through the grant of
this equity incentive that Mr. LaLoggia will be incentivized to perform and will
perform services over the term of the option. However, the option agreement does
not include any requirements or conditions for him to perform such services and,
to the extent that any such services were expected or otherwise, the
Company acknowledges that it has received all of the consideration bargained for
in the option agreement. Mr. LaLoggia continues to provide consulting
services to us. The option agreement with Mr. LaLoggia covered
3,340,000 shares of common stock with an exercise price of $0.05 per share and a
term of three years. The underlying agreement provides registration
rights with respect to the underlying shares. The agreement also
provides a confidentiality agreement in favor of the Company, and an agreement
to assign any intellectual property developed while providing consulting
services to the Company. The confidentiality and intellectual
property assignment provisions survive any termination of services or exercise
or termination of the options. On July 11, 2008, Mr. LaLoggia acquired 1,660,000
shares of common stock from the Company in the Company's Rule 504 private
placement for $83,000. On November 18, 2008, the Company entered into
an option agreement with Mr. LaLoggia to acquire 3,330,000 shares at $.05 per
share in connection with his consulting services and has a term of three years.
This agreement has similar terms to the July 10, 2008 option agreement,
including the grant of options based upon the expectation of him providing
future services. The option agreement does not include any requirements or
conditions for him to perform such services and, to the extent that any
such services were expected or otherwise, the Company acknowledges that it
has received all of the consideration bargained for in the option agreement. As
a result of the securities acquired in these transactions, Mr. LaLoggia
beneficially owns in excess of 5% of our outstanding shares. On July
15, 2009, Mr. LaLoggia acquired 3,000,000 shares of our common stock upon the
exercise of the above-described stock options.
22
On
February 12, 2009, the Company entered into a consulting agreement with Patricia
Cole, a licensed real estate agent and the sister of Gerald Brock, Chief
Executive Officer and Chairman of the Company, to assist the Company in locating
potential wind turbine sties for lease or purchase by the Company or purchasers
of the Company’s products. The Consulting Agreement had a term of one
year, and Ms. Cole was to be compensated $5,000 per month during each month of
the term when services were performed. No services were ever
performed by Ms. Cole pursuant to the Consulting Agreement, and no payments were
made to Ms. Cole by the Company. On April 24, 2009, the Company
entered into a termination and release agreement with Ms. Cole. The
Termination and Release terminated the Consulting Agreement and provided a full
release by Ms. Cole of the Company for any liability with respect to the
Consulting Agreement. No payment was made or is due to Ms. Cole in
connection with the Termination and Release.
On
February 25, 2009, Gerald Brock, our Chief Executive Officer, and John Schwartz,
then a consultant and now former Chief Operating Officer, entered a Memorandum
of Understanding with George Cary and Mario Pirrello, each one-half owners of
Alternative Wind Resources, LLC. The recitals to the memorandum
indicated that Mr. Brock and Mr. Schwartz desired to become equal members in
Alternative Wind Resources, LLC with Messrs. Cary and Pirrello. The
terms of the Memorandum of Understanding also provided that Mr. Brock and Mr.
Schwartz were to assist Alternative Wind Resources, LLC in entering into an
exclusive agreement with the Company, and that Mr. Cary and Mr. Pirrello would
enter into a Non-Disclosure and Non-Compete Agreement with Alternative Wind
Resources, LLC and the Company. We are not a party to the Memorandum
of Understanding. It is the position of the parties to the Memorandum
of Understanding and the Company that the Memorandum of Understanding was a
non-binding document. At the request of the Company, and in
connection with its disclosure controls and procedures, the parties to the
Memorandum of Understanding provided an acknowledgement dated August 5, 2009
that neither Mr. Brock nor Mr. Schwartz has acquired, held or had the right to
acquire, any interest in Alternative Wind Resources. On March 7, 2009, the
Company entered into an agreement with Alternative Wind Resources, LLC to
produce a 15kWh prototype wind turbine unit by May 30,
2009. Alternative Wind Resources, LLC agreed to reimburse us for
engineering and materials costs and to provide us with a purchase order for one
thousand (1,000) 15kWh units within one year after delivery of the
prototype. The agreement also grants Alternative Wind Resources, LLC
the exclusive right to purchase all 15kWh and larger wind turbine units for wind
farm and industrial uses and development. We have also not yet
delivered the 15kWh prototype required under the agreement. The price and
terms for the order are still to be determined by the parties. The
terms of the March 7, 2009 Agreement with Alternative Wind Resources is
described in further detail on page 10 above under the heading “Company
Operations - Results of Operations.” On April 29, 2009, we also granted an
option to Alternative Wind Resources, LLC, to enter into an exclusive license
agreement with us for 50 years for the sale of our 15 kWh and larger wind
turbines upon the payment of a $6.0 million license fee. The option
was subject to extension if our due diligence provided to them was not
reasonably acceptable. Alternative Wind Resources, LLC paid a $10,000
fee for the option but Alternative Wind Resources never paid the $6.0 million
license fee. On September 10, 2009 the Company received a letter from
Alternative Wind Resources, LLC purporting to terminate the agreement and
option, and requesting the return of $60,000 paid in connection with those
agreements for the failure to deliver a prototype and the failure to provide due
diligence requested under the option. Specifically,
section 4 of the option agreement required that the Company provide Alternative
Wind Resources, LLC with documentation on our fluid driven vacuum enhanced
generator patent (United States Patent No. 6655907, issued December 2, 2003),
information about our patent applications, and evidence that WindTamer has the
authority to grant such exclusive rights to Alternative Wind Resources,
LLC. The Company provided copies of our patent for that subject
matter as well as patent pending applications. The Company believes
that it has complied with these provisions of the agreement and intends to
dispute Alternative Wind Resources, LLC’s claims that it did not provide such
information. We plan to proceed with termination of the agreement and
option and also dispute these claims for payment although there can be no
assurance that we will be successful.
On July
15, 2009, the Company entered into an employment agreement with Gerald Brock,
Chief Executive Officer and Chairman of the Company, on the terms described on
page 19 above under the heading “Summary Compensation Table.”
SELLING
STOCKHOLDERS
The
following table sets forth information regarding the beneficial ownership of
shares of common stock by the selling shareholders as of the date of this
prospectus, and the number of shares of common stock covered by this prospectus.
Except as otherwise noted below, none of the selling shareholders has held any
position or office, or has had any other material relationship with us or any of
our affiliates within the past three years. None of the selling stockholders are
broker-dealers or affiliates of a broker-dealer. All the shares covered by this
prospectus have been issued to the selling stockholders and were done so upon
the exercise of stock options granted to the selling stockholders or their
respective assignees. The respective stock option agreements contain
registration rights pursuant to which we have registered the shares for resale
under this prospectus.
The
number of shares of common stock that may be actually sold by each selling
stockholder will be determined by such selling stockholder. Because certain
selling stockholders may purchase all, some or none of the shares of common
stock which can be purchased under their respective remaining options and each
selling stockholder may sell all, some or none of the shares of common stock
which each holds, and because the offering contemplated by this prospectus is
not currently being underwritten, no estimate can be given as to the number of
shares of common stock that will be held by the selling shareholders upon
termination of the offering. The information set forth in the following table
regarding the beneficial ownership after resale of the shares is based on the
basis that each selling stockholder will sell all of the shares of common stock
owned by that selling stockholder and covered by this
prospectus.
23
Selling Shareholder Name
|
Common Stock
Beneficially
Owned Prior to
Offering
|
Number of Shares Offered
for Security Holder’s
Account
|
Shares Beneficially
Owned After
Offering
|
Resulting Ownership
Percentage 1
|
||||||||||||
400
Terry Inc.
|
3,732,000
|
2,3,4
|
1,650,000
|
2,082,000
|
2.1
|
%
|
||||||||||
500
Sofia Inc.
|
3,732,000
|
2,3,5
|
1,650,000
|
2,082,000
|
2.1
|
%
|
||||||||||
300
Ioannis Inc.
|
3,732,000
|
2,3,6
|
1,650,000
|
2,082,000
|
2.1
|
%
|
||||||||||
200
Anastasios Inc.
|
3,732,000
|
2,3,7
|
1,650,000
|
2,082,000
|
2.1
|
%
|
||||||||||
100
Demetrios Inc.
|
3,732,000
|
2,3,8
|
1,650,000
|
2,082,000
|
2.1
|
%
|
||||||||||
111
EJH, Inc.
|
920,000
|
2,9,10
|
300,000
|
620,000
|
*
|
%
|
||||||||||
609
MTH, Inc.
|
4,070,000
|
2,9,11,15
|
250,000
|
3,820,000
|
3.9
|
%
|
||||||||||
10
EJH, Inc.
|
3,340,000
|
2,9,12
|
200,000
|
3,140,000
|
3.1
|
%
|
||||||||||
Charles
LaLoggia
|
7,330,000
|
2,13,15
|
250,000
|
7,080,000
|
7.0
|
%
|
||||||||||
April
Wayenberg
|
1,000,000
|
2,14
|
250,000
|
750,000
|
*
|
%
|
||||||||||
TOTAL
|
35,320,000
|
9,500,000
|
25,820,000
|
22.7
|
%
|
* Less
than 1% of the outstanding shares of common stock.
1. The
calculations for these columns are based upon 98,341,000 shares of common stock
issued and outstanding on September 30, 2009, plus the number of shares of
common stock deemed outstanding pursuant to SEC Rule 13d-3(d)(1). Shares of
common stock subject to options exercisable within 60 days of September 30,
2009, are deemed outstanding for purposes of computing the percentage of the
person holding such option but are not deemed outstanding for computing the
percentage of any other person.
2. These
shares beneficially owned include outstanding shares being registered for resale
hereunder, other shares presently underlying vested stock options and other
shares acquired in the private placement described in footnote 15 below. With
respect to the shares presently underlying vested stock options, each of the
stock options has an exercise price of $0.05 per share. The options
provide for adjustment in the exercise price and number of shares issuable upon
exercise of the options in the event of a stock split or other
recapitalization. The options do not provide for net or cashless
exercise. The underlying agreements each provide registration
rights to the holders with respect to the underlying shares. The
agreements also provide a confidentiality agreement by the consultants in favor
of the Company, and an agreement to assign any intellectual property developed
while providing consulting services to the Company. The
confidentiality and intellectual property assignment provisions survive any
termination of services or exercise or termination of the options.
3. These
shares were either acquired upon the exercise of stock options, or are presently
are underlying stock options assigned by Peter Kolokouris on November 25, 2008
under three stock option agreements between Mr. Kolokouris and the Company dated
July 10, 2008, and two dated November 18, 2008. The stock options
were granted based on the expectation that, as an incentive equity instrument,
he would render future consulting services to the Company. However, the option
agreements do not contain a requirement for him to do so and the Company
acknowledges that, to the extent that any such services were expected or
otherwise, it has received all of the consideration bargained for in the option
agreements. The stock options were assigned as gifts for estate planning
purposes in the following amounts and have the following expiration dates:
No. of
|
Expiration
|
||||
Name
|
Shares
|
Date
|
|||
400
Terry Inc.
|
664,000
|
7/10/11
|
|||
668,000
|
11/18/11
|
||||
2,400,000
|
11/18/09
|
||||
500
Sofia Inc.
|
664,000
|
7/10/11
|
|||
668,000
|
11/18/11
|
||||
2,400,000
|
11/18/09
|
||||
300
Ioannis Inc.
|
664,000
|
7/10/11
|
|||
668,000
|
11/18/11
|
||||
2,400,000
|
11/18/09
|
||||
200
Anastasios Inc.
|
664,000
|
7/10/11
|
|||
668,000
|
11/18/11
|
||||
2,400,000
|
11/18/09
|
||||
100
Demetrios Inc.
|
664,000
|
7/10/11
|
|||
668,000
|
11/18/11
|
||||
2,400,000
|
11/18/09
|
Mr.
Kolokouris has acted as a consultant to the Company since July
2008. During this time Mr. Kolokouris has provided consulting
services involving advice and assistance on its management structure and
business development, engineering and product design, and developing a product
marketing strategy and publicity strategy. The service in connection
with the publicity strategy was to advise the Company to focus on product
development and not publicity. He has also assisted the Company in
locating auditing services and legal services. The consulting
arrangement does not have a specific term. The Company did not
provide any other form of compensation to Mr. Kolokouris or these selling
stockholders in exchange for these consulting services.
24
4. Beneficial
ownership of these shares is held by Terry Bechakas, who exercises sole voting
and dispositive powers of these shares as the sole shareholder of 400 Terry
Inc. Beneficial ownership includes 1,732,000 shares underlying
options to purchase common stock on the terms described in notes 2 and 3 to this
"Selling Stockholders" table. Mr. Bechakas is the son-in-law of Peter
Kolokouris, married to Mr. Kolokouris’ daughter, Helen Bechakas, and neither
reside in his household.
5. Beneficial
ownership of these shares is held by Sofia Kolokouris, who exercises sole voting
and dispositive powers of these shares as the sole shareholder of 500 Sofia Inc.
Beneficial ownership includes 1,732,000 shares underlying options to purchase
common stock on the terms described in notes 2 and 3 to this "Selling
Stockholders" table. Ms. Kolokouris is the daughter of Peter Kolokouris, and
does not reside in his household.
6. Beneficial
ownership of these shares is held by Ioannis Kolokouris, who exercises sole
voting and dispositive powers of these shares as the sole shareholder of 300
Ioannis Inc. Beneficial ownership includes 1,732,000 shares
underlying options to purchase common stock on the terms described in notes 2
and 3 to this "Selling Stockholders" table. Mr. Kolokouris is the son
of Peter Kolokouris, and does not reside in his household.
7. Beneficial
ownership of these shares is held by Anastasios Kolokouris, who exercises sole
voting and dispositive powers of these shares as the sole shareholder of 200
Anastasios Inc. Beneficial ownership includes 1,732,000 shares
underlying options to purchase common stock on the terms described in notes 2
and 3 to this "Selling Stockholders" table. Mr. Kolokouris is the son of Peter
Kolokouris, and does not reside in his household.
8. Beneficial
ownership of these shares is held by Demitrios Kolokouris, who exercises sole
voting and dispositive powers of these shares as the sole shareholder of 100
Demetrios Inc. Beneficial ownership includes 1,732,000 shares
underlying options to purchase common stock on the terms described in notes 2
and 3 to this "Selling Stockholders" table. Mr. Kolokouris is the son
of Peter Kolokouris, and does not reside in his household.
9. Includes
shares underlying stock options assigned by Michael T. Hughes on November 3 or
November 25, 2008 under two stock option agreements between Mr. Hughes and the
Company dated July 10, 2008 and November 18, 2008. The stock options were
granted based on the expectation that, as an incentive equity instrument, he
would render future consulting services to the Company. However, the option
agreements do not contain a requirement for him to do so and the Company
acknowledges that, to the extent that any such services were expected or
otherwise, it has received all of the consideration bargained for in the option
agreements. The stock options assigned were in the following amounts and have
the following expiration dates:
No. of
|
Expiration
|
||||
Name
|
Shares
|
Date
|
|||
111
EJH, Inc.
|
920,000
|
11/18/11
|
|||
609
MTH Inc.
|
2,410,000
|
11/18/11
|
|||
10
EJH Inc.
|
3,340,000
|
7/10/11
|
Mr.
Hughes has acted as consultant to the Company since July 2008. During
this time Mr. Hughes has provided consulting services involving advice and
assistance on its management structure and business development and developing a
product marketing strategy and publicity strategy. The service in
connection with the publicity strategy, was to advise the Company to focus on
product development and not publicity. He has also assisted the
Company in locating auditing services, legal services and
insurance. The consulting arrangement does not have a specific
term. The Company did not provide any other form of compensation to
Mr. Hughes or these selling stockholders in exchange for these consulting
services.
10. Beneficial
ownership of these shares is held by Edward Hughes, Jr., who exercises sole
voting and dispositive powers of these shares as the sole shareholder of 111
EJH, Inc. Beneficial ownership includes 460,000 shares underlying
options to purchase common stock on the terms described in notes 2 and 9 to this
"Selling Stockholders" table. Mr. Hughes is the brother of Michael T. Hughes,
and does not reside in his household.
11. Beneficial
ownership includes 1,660,000 shares held by Michael T. Hughes, who exercises
sole voting and dispositive powers of these shares as the sole shareholder of
609 MTH, Inc., and 410,000 shares underlying options to purchase common stock
held by 609 MTH, Inc., on the terms described in notes 2 and 9 to this "Selling
Stockholders" table.
12. Beneficial
ownership of these shares is held by Edward Hughes, Sr., who exercises sole
voting and dispositive powers of these shares as the sole shareholder of 10 EJH,
Inc. Beneficial ownership includes 3,140,000 shares underlying options to
purchase common stock on the terms described in notes 2 and 9 to this "Selling
Stockholders" table. Mr. Hughes is the father of Michael T. Hughes, and does not
reside in his household.
25
13. Beneficial
ownership includes 2,670,000 shares underlying options to purchase common stock
on the terms described in note 2 to this "Selling Stockholders" table and this
note. These stock options are under two stock option agreements between by Mr.
LaLoggia and the Company dated July 10, 2008 and November 18, 2008.
The stock options were granted based upon the expectation that, as an incentive
equity instrument, he would render future consulting services to the Company.
However, the option agreements do not contain a requirement for him to do so and
the Company acknowledges that, to the extent that any such services were
expected or otherwise, it has received all of the consideration bargained
for in the option agreements. The stock options are in the following
original amounts, in addition to the 1,000,000 shares assigned to Ms. Wayenberg
as indicated in note 14 to this "Selling Stockholders" table, and
have the following expiration dates:
No. of
|
Expiration
|
|||
Shares
|
Date
|
|||
2,340,000
|
7/10/11
|
|||
3,330,000
|
11/18/11
|
Mr.
LaLoggia has acted as consultant to the Company since July
2008. During this time Mr. LaLoggia has provided consulting services
involving advice and assistance on its management structure and business
development and developing a product marketing strategy and publicity
strategy. The service in connection with the publicity strategy was
to advise the Company to focus on product development and not publicity. He has
also assisted the Company in locating auditing services and legal
services. He also provided an introduction for the Company to an investment
banker contact, which investment banker independently introduced the Company to
a potential sponsoring market-maker for its securities. However, none
of Mr. LaLoggia, the investment banker or the market-maker received any
compensation in connection with such referrals, and such introductions were made
solely based on personal relationships. The consulting arrangement does
not have a specific term. The Company did not provide any other form
of compensation to Mr. LaLoggia in exchange for these consulting
services.
14. These
shares were issued upon the exercise of a stock option assigned by Mr. LaLoggia
on November 3, 2008 and are under a stock option agreement between Mr. LaLoggia
and the Company dated July 10, 2008 on the terms described in notes 2 and 13 to
this "Selling Stockholders" table. The stock options expire on July
10, 2011. Ms. Wayenberg does not reside with Mr.
LaLoggia.
15. Messrs.
Hughes and LaLoggia each acquired 1,660,000 shares of common stock from the
Company on July 11, 2008 for $.05 per share in the Company’s Rule 504 private
placement in the first half of 2008, as follows:
Transaction Date
|
Common Stock
Outstanding Prior to
July 11, 2008
|
Common Stock
Outstanding Prior to
July 11, 2008
Transaction Held by
Persons other than
Affiliates and Selling
Stockholders
|
Shares Purchased by
Selling Stockholders
|
Percentage of Shares
Purchased by Selling
Stockholders Relative
Shares Held by Other
than Affiliates and
Selling Stockholder
Prior to the Transaction
|
||||||||||||
July
11, 2008
|
72,680,000
|
12,800,000
|
3,320,000
|
27.0
|
%
|
These
shares are still beneficially owned by Messrs. Hughes and LaLoggia and are not
included in this prospectus.
26
PLAN
OF DISTRIBUTION
We are
registering for resale by the selling shareholders and certain transferees a
total of up to 9,500,000 shares of common stock. We will not receive any of the
proceeds from the sale by the selling shareholders of the shares of common
stock. We will bear all fees and expenses incident to our obligation to register
the shares of common stock. If the shares of common stock are sold through
broker-dealers or agents, the selling stockholder will be responsible for any
compensation to such broker-dealers or agents.
The
selling shareholders will sell the common stock registered hereunder at a price
of $1.00 per share until the Company’s common stock is quoted on the OTC
Bulletin Board. Thereafter, the selling stockholders will sell at
prevailing market prices or privately negotiated prices. The price of
$1.00 is the last price at which the Company’s common stock was sold in the
private placement ended July 14, 2009, completed pursuant to Section 3(b) and
Rule 505 of Regulation D thereunder, as more fully described in the section on
page 11 entitled “Recent Transactions Affecting Equity.”
The
selling shareholders may pledge or grant a security interest in some or all of
the shares of common stock owned by them and, if they default in the performance
of their secured obligations, the pledgees or secured parties may offer and sell
the shares of common stock from time to time pursuant to this
prospectus.
The
selling shareholders also may transfer and donate the shares of common stock in
other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The
selling shareholders will sell their shares of common stock subject to the
following:
1. all or
a portion of the shares of common stock beneficially owned by the selling
shareholders or their respective pledgees, donees, transferees or successors in
interest, may be sold on the OTC Bulletin Board Market, any national securities
exchange or quotation service on which the shares of our common stock may be
listed or quoted at the time of sale, in the over-the-counter market, in
privately negotiated transactions, through the writing of options, whether such
options are listed on an options exchange or otherwise, short sales or in a
combination of such transactions;
2. each
sale may be made at market prices prevailing at the time of such sale, at
negotiated prices, at fixed prices, or at varying prices determined at the time
of sale;
3. some
or all of the shares of common stock may be sold through one or more
broker-dealers or agents and may involve crosses, block transactions, or hedging
transactions. The selling shareholders may enter into hedging transactions with
broker-dealers or agents, which may in turn engage in short sales of the common
stock in the course of hedging in positions they assume. The selling
shareholders may also sell shares of common stock short and deliver shares of
common stock to close out short positions, or loan or pledge shares of common
stock to broker-dealers or agent that in turn may sell such shares;
and
4. in
connection with such sales through one or more broker-dealers or agents, such
broker-dealers or agents may receive compensation in the form of discounts,
concessions or commissions from the selling shareholders and may receive
commissions from the purchasers of the shares of common stock for whom they act
as broker-dealer or agent or to whom they sell as principal (which discounts,
concessions or commissions as to particular broker-dealers or agents may be in
excess of those customary in the types of transactions involved). Any
broker-dealer or agent participating in any such sale may be deemed to be an
“underwriter” within the meaning of the Securities Act and will be required to
deliver a copy of this prospectus to any person who purchases any share of
common stock from or through such broker-dealer or agent. We have been advised
that, as of the date hereof, none of the selling shareholders have made any
arrangements with any broker-dealer or agent for the sale of their shares of
common stock.
The
selling shareholders and any broker-dealer participating in the distribution of
the shares of common stock may be deemed to be “underwriters.” In addition, any
shares of common stock covered by this prospectus which qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
prospectus.
If
required at the time a particular offering of the shares of common stock is
made, a prospectus supplement or, if appropriate, a post-effective amendment to
the shelf registration statement of which this prospectus is a part, will be
distributed which will set forth the aggregate amount of shares of common stock
being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholder and any discounts,
commissions or concessions allowed or re-allowed or paid to
broker-dealers.
27
Under the
securities laws of some states, the shares of common stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
some states the shares of common stock may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with. There can be no
assurance that any selling stockholder will sell any or all of the shares of
common stock registered pursuant to the shelf registration statement, of which
this prospectus forms a part.
The
selling shareholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, or the Exchange Act, and the rules and regulations there under,
including, without limitation, Regulation M of the Exchange Act, which may limit
the timing of purchases and sales of any of the shares of common stock by the
selling shareholders and any other participating person. Regulation M may also
restrict the ability of any person engaged in the distribution of the shares of
common stock to engage in market-making activities with respect to the shares of
common stock. All of the foregoing may affect the marketability of the shares of
common stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.
We will
bear all expenses of the registration of the shares of common stock including,
without limitation, Securities and Exchange Commission filing fees and expenses
of compliance with state securities or “blue sky” laws. The selling shareholders
will pay all underwriting discounts and selling commissions and expenses,
brokerage fees and transfer taxes, as well as the fees and disbursements of
counsel to and experts for the selling shareholders, if any. Once
sold under this shelf registration statement, of which this prospectus forms a
part, the shares of common stock will be freely tradable in the hands of persons
other than our affiliates.
SHARES
ELIGIBLE FOR RESALE
Upon
completion of the offering, assuming the offering were completed as of September
30, 2009, 39,687,000 of our outstanding shares, including those to be sold in
the offering, will be freely tradable in the public market without restriction
under the Securities Act. These include 30,187,000 shares held by
persons who are not affiliates of the Company, not subject to lock-ups and who
have held the shares for at least 6 months, and 9,500,000 shares covered by this
prospectus which are eligible for resale pursuant to this Registration Statement
going effective. Additionally, 49,874,000 shares held by our
“affiliates,” as that term is defined in Rule 144 under the Securities Act, plus
an additional 220,000 shares held by our Chief Executive Officer's son, Jesse
Brock, and an additional 1,000,000 shares held by our former Chief Operating
Officer, John Schwartz, are subject to lock-up agreements which, generally,
restrict the sale of these shares for periods of from twelve to eighteen months
after our shares begin trading on the public market. See "Our
Management – Lock-Up Agreements." Thereafter, the shares may be sold
pursuant to the volume and manner limitations of Rule 144. 7,560,000
of our outstanding shares, held by non-affiliates, are “restricted,” as that
term is defined in Rule 144 under the Securities Act, and may be sold in the
public market only if they are registered or if they qualify for an exemption
from registration, such as the exemption afforded by Rule 144 after satisfying
the applicable holding period and other requirements of the
rule. Additionally, we plan to file a Registration Statement on Form
S-8 to cover the issuance of approximately 6,600,000 shares of our common stock
reserved for issuance under outstanding or future awards under our 2008 Equity
Incentive Plan.
DESCRIPTION
OF SECURITIES
Common
Stock
As of
September 30, 2009, we had 98,341,000 shares of common stock issued and
outstanding. The holders of common stock are entitled to one vote per share on
each matter submitted to a vote at any meeting of shareholders. Holders of
common stock do not have cumulative voting rights, and therefore, a majority of
the outstanding shares voting at a meeting of shareholders is able to elect the
entire board of directors, and if they do so, minority shareholders would not be
able to elect any members to the board of directors. Our bylaws provide that a
majority of our issued and outstanding shares constitutes a quorum for
shareholders’ meetings, except with respect to certain matters for which a
greater percentage quorum is required by statute.
Our
shareholders have no preemptive rights to acquire additional shares of common
stock or other securities. Our common stock is not subject to redemption and
carries no subscription or conversion rights. In the event of our liquidation,
the shares of common stock are entitled to share equally in corporate assets
after satisfaction of all liabilities and the payment of any liquidation
preferences.
Holders
of common stock are entitled to receive such dividends as the board of directors
may from time to time declare out of funds legally available for the payment of
dividends. We seek growth and expansion of our business through the reinvestment
of profits, if any, and do not anticipate that we will pay dividends on the
common stock in the foreseeable future.
28
As of
the date of this filing, we have 18,910,000 shares of common stock reserved for
issuance on exercise of outstanding options and warrants, which includes
15,340,000 shares underlying remaining stock options held by the selling
stockholders under this prospectus and 3,420,000 shares represented by
outstanding awards under our 2008 Equity Incentive Plan. We also have
an additional 3,180,000 shares of common stock remaining available for future
awards under our 2008 Equity Incentive Plan.
The board
of directors has authority to authorize the offer and sale of additional
securities without the vote of or notice to existing shareholders, and it is
likely that additional securities will be issued to provide future financing.
The issuance of additional securities could dilute the percentage interest and
per share book value of existing shareholders.
Preferred
Stock
Under our
Certificate of Incorporation, our board of directors is authorized, without
shareholder action, to issue up to 5,000,000 shares of preferred stock in one or
more series and to fix the number of shares and rights, preferences, and
limitations of each series. Among the specific matters that may be determined by
the board of directors are the dividend rate, the redemption price, if any,
conversion rights, if any, the amount payable in the event of our voluntary
liquidation or dissolution, and voting rights, if any. If we offer preferred
stock, the specific designations and rights will be described in an amended
Certificate of Incorporation.
Anti-Takeover
Effects of Certain Provisions
Certain
provisions of the New York Business Corporation Law, our Certificate of
Incorporation, and our Amended and Restated By-Laws, may have the effect of
delaying, deferring or discouraging another party from acquiring control of
us.
New
York Law
We are
subject to Section 912 of the New York Business Corporation Law, which
regulates, subject to some exceptions, acquisitions of New York corporations. In
general, Section 912 prohibits us from engaging in a “business combination” with
an “interested shareholder” for a period of five years following the date the
person becomes an interested shareholder, unless:
·
|
our
Board of Directors approved the business combination or the transaction in
which the person became an interested shareholder prior to the date the
person attained this status;
|
·
|
the
holders of a majority of our outstanding voting stock not beneficially
owned by such interested shareholder approved such business combination at
a meeting called for such purpose no earlier than five years after such
interested shareholder attained his status;
or
|
·
|
the
business combination meets certain valuation
requirements.
|
Section
912 defines a “business combination” to include, among others:
·
|
any
merger or consolidation involving us and the interested
shareholder;
|
·
|
any
sale, lease, exchange, mortgage, pledge, transfer or other disposition to
the interested shareholder of 10% or more of our
assets;
|
·
|
the
issuance or transfer by us of 5% or more of our outstanding stock to the
interested shareholder, subject to certain
exceptions;
|
·
|
the
adoption of any plan or proposal for our liquidation or dissolution
pursuant to any agreement with the interested
shareholder;
|
·
|
any
transaction involving us that has the effect of increasing the
proportionate share of our stock owned by the interested shareholder;
and
|
·
|
the
receipt by the interested shareholder of the benefit of any loans,
advances, guarantees, pledges, or other financial benefits provided by or
through us.
|
In
general, Section 912 defines an “interested shareholder” as any shareholder who
beneficially owns, directly or indirectly, 20% or more of the outstanding voting
stock of a corporation or who is an affiliate or associate of such corporation
and at any time within the five-year period prior to the time of determination
of interested shareholder status did own 20% or more of the then outstanding
voting stock of the corporation.
Classified
Board of Directors
Our
Restated Certificate of Incorporation divides our board of directors into three
classes. Therefore, the terms of office of the directors elected and
initially classified at our annual meeting held on June 2, 2009 are as follows:
that of the first class shall expire at the first succeeding annual meeting of
shareholders; the second class at the second succeeding annual meeting; and the
third class at the third succeeding annual meeting. At each annual meeting
thereafter, directors to replace those whose terms expire at such annual meeting
shall be elected to three-year terms. Our Restated Certificate of
Incorporation and By-Laws provide that directors may be removed only for cause
and only by the affirmative vote of in excess of 66 2/3% of the issued and
outstanding shares of our common stock.
29
Amendments
to Certificate of Incorporation
Our
certificate of incorporation requires that any proposed amendment to the
provisions of our certificate of incorporation relating to the de-classification
of directors, the removal of directors for cause, or the exculpation of
directors for liability to the Corporation or the shareholders, be approved by
an affirmative vote of in excess of 66 2/3% of the issued and outstanding shares
of Common Stock entitled to vote thereon at the time of any such proposed
amendment.
Amendments
to By-Laws
Our
By-Laws, as amended, require the affirmative vote of in excess of 66 2/3% of the
issued and outstanding shares entitled to vote thereon or the affirmative vote
of a majority of the Board of Directors to amend or repeal By-Laws governing the
manner of conducting shareholder meetings, advance notice procedures to be
followed by shareholders who desire to bring business before any annual meeting,
advance notice procedures for nominating candidates for election to our Board of
Directors, and procedures for increasing or decreasing the number of directors,
filling vacancies on the Board of Directors, and removing
directors.
LEGAL
MATTERS
The
validity of the common stock we are offering pursuant to this prospectus will be
passed upon by Woods Oviatt Gilman LLP, outside counsel to the
Company. Woods Oviatt Gilman LLP does not beneficially own any of our
common stock.
EXPERTS
The
financial statements and schedules included in this prospectus and elsewhere in
the registration statement have been audited or reviewed by Rotenberg & Co.,
LLP, which was succeeded by merger by EFP Rotenberg, LLP effective October 1,
2009, as our independent registered public accounting firm, and such financial
statements and schedules are included in reliance upon the authority of said
firms as experts in giving said reports. EFP Rotenberg, LLP does not
beneficially own any of our common stock.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We are
subject to the information requirements of the Securities Exchange Act of 1934,
as amended. In accordance with the Exchange Act, we file reports, proxy
statements and other information with the Securities and Exchange Commission.
Our reports, proxy statements and other information filed with the SEC may be
inspected and copied at the public reference facilities maintained by the SEC at
100 F Street N.E. Washington DC 20549. Copies of such material also may be
obtained at prescribed rates from the Public Reference Branch of the Commission
at 100 F Street N.E. Washington DC 20549. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. The SEC maintains a web
site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC.
You may
request a copy of these filings, at no cost by writing or telephoning us at the
following address:
WindTamer
Corporation
6053 Ely
Avenue
Livonia,
New York 14487
(585)
346-6442
Attention:
Corporate Secretary
We have
filed with the SEC a registration statement on Form S-1, including
exhibits, under the Securities Act with respect to the common stock to be sold
in this offering. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information in the
registration statement or the exhibits. You should rely only on the information
provided in this prospectus or any prospectus supplement and the registration
statement. We have not authorized anyone else to provide you with different
information. The selling security holders will not make an offer of the shares
of our common stock in any state where the offer is not permitted. You should
not assume that the information in this prospectus or any prospectus supplement
is accurate as of any date other than the date on the front of those
documents.
30
WindTamer
Corporation
Index
to Financial Statements
Financial
Statement
Report
of Independent Registered Public Accounting Firm
|
F-2 | |||
Balance
Sheets as of December 31, 2008
|
F-3 | |||
Statements
of Operations for the years ended December 31, 2008 and 2007 and for the
period from inception
|
F-4 | |||
Statements
of Cash Flows for the years ended December 31, 2008 and 2007 and for the
period from inception
|
F-5 | |||
Statement
of Stockholders’ Equity since inception through December 31,
2008
|
F-6 | |||
Notes
to Financial Statements
|
F-7 | |||
Condensed
Balance Sheets as of June 30, 2009 (unaudited) and December 31,
2008
|
F-14 | |||
Unaudited
Condensed Statements of Operations for the Three Months and Six Months
Ended June 30, 2009 and 2008, and the Period from Date of Inception (March
30, 2001) through June 30, 2009
|
F-15 | |||
Unaudited
Condensed Statements of Cash Flows for the Six Months Ended June 30, 2009
and 2008, and the Period from Date of Inception (March 30, 2001) through
June 30, 2009
|
F-16 | |||
Unaudited Statement
of Stockholders' Equity from inception through June 30,
2009
|
F-17 | |||
Notes
to Unaudited Condensed Financial Statements
|
F-18 |
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of
WindTamer
Corporation (formerly Future Energy Solutions, Inc.)
We have
audited the accompanying balance sheets of WindTamer Corporation (formerly
Future Energy Solutions, Inc.) as of December 31, 2008 and 2007, and the related
statements of operations, stockholders' equity, and cash flows for the years
then ended, and for the period from date of inception (March 30, 2001) through
December 31, 2008. WindTamer Corporation's management is responsible for these
financial statements. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As
discussed in the restatement paragraph within Note 1 to the financial
statements, WindTamer Corporation has adjusted its previously issued 2008
financial statements to revise the classification of functional expenses on the
statements of operations and certain footnote disclosures as required by
accounting principles generally accepted in the United States of
America.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of WindTamer Corporation as of
December 31, 2008 and 2007, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended, and for the
period from date of inception (March 30, 2001) through December 31, 2008, in
conformity with accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company's significant operating losses raise substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/
Rotenberg & Co., LLP
|
|
Rochester,
New York
|
|
February
13, 2009, except for Note 1,
|
|
as
to which the date is May 1, 2009
|
F-2
WINDTAMER
CORPORATION
formerly
Future Energy Solutions, Inc.
(A
Development Stage Company)
Balance
Sheets
December
31, 2008 and December 31, 2007
|
Year Ended
|
|
|
Year Ended
|
|
|||
|
|
December 31,
|
|
|
December 31,
|
|||
2008
|
2007
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
|
$
|
204,771
|
$
|
30,410
|
||||
Prepaid
expenses
|
6,789
|
0
|
||||||
Security
deposits
|
1,950
|
0
|
||||||
Total
current assets
|
213,510
|
30,410
|
||||||
Fixed
assets
|
||||||||
Intangible
assets
|
||||||||
Patent
|
17,868
|
11,952
|
||||||
Trademark
|
4,525
|
0
|
||||||
Less
accumulated amortization
|
(1,406
|
)
|
(703
|
)
|
||||
Total
intangible assets
|
20,987
|
11,249
|
||||||
Property
and equipment
|
||||||||
Equipment
|
10,268
|
248
|
||||||
Furniture
and fixtures
|
6,200
|
0
|
||||||
Less
accumulated depreciation
|
(1,779
|
)
|
(9
|
)
|
||||
Total
property and equipment
|
14,689
|
239
|
||||||
Total
fixed assets
|
35,676
|
11,488
|
||||||
Total
assets
|
$
|
249,186
|
$
|
41,898
|
||||
LIABILITIES
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$
|
33,296
|
$
|
3,872
|
||||
Payroll
liabilities
|
9,176
|
0
|
||||||
Total
current liabilities
|
42,472
|
3,872
|
||||||
Stockholders’
equity
|
||||||||
Preferred
stock, 5,000,000 shares authorized, $.0001 par value; none issued or
outstanding
|
0
|
0
|
||||||
Common
stock, 500,000,000 shares authorized, $0.0001 par value; 80,640,000 and
61,400,000 shares issued and
outstanding respectively
|
8,064
|
6,140
|
||||||
Additional
paid-in capital
|
1,430,199
|
123,629
|
||||||
Deficit
accumulated during development stage
|
(1,231,549
|
)
|
(91,743
|
)
|
||||
Total
stockholders’ equity
|
206,714
|
38,026
|
||||||
Total
liabilities and stockholders’ equity
|
$
|
249,186
|
$
|
41,898
|
The
accompanying notes are an integral part of the financial
statements.
F-3
WINDTAMER
CORPORATION
formerly
Future Energy Solutions, Inc.
(A
Development Stage Company)
Statements
of Operations
For
the Years Ended December 31, 2008 and December 31, 2007
and
For the Period Since Inception
Period from Date
|
||||||||||||
|
of Inception
|
|||||||||||
|
Year Ended
|
Year Ended
|
(March 30, 2001)
|
|||||||||
|
December 31,
|
December 31,
|
through
|
|||||||||
|
2008
|
2007
|
December 31, 2008
|
|||||||||
Research
and development expenses:
|
||||||||||||
Officer
compensation
|
$
|
94,113
|
$
|
6,000
|
$
|
100,113
|
||||||
Payroll
taxes
|
4,527
|
0
|
4,527
|
|||||||||
Other
research and development
|
150,531
|
0
|
190,813
|
|||||||||
Total
research and development expenses
|
249,171
|
6,000
|
295,453
|
|||||||||
Selling,
general and administrative expenses:
|
||||||||||||
Advertising
and promotion
|
34,584
|
0
|
34,584
|
|||||||||
Amortization
|
703
|
703
|
1,406
|
|||||||||
Automobile
expense
|
11,521
|
357
|
11,878
|
|||||||||
Bank
charges
|
38
|
0
|
38
|
|||||||||
Depreciation
|
1,770
|
9
|
1,779
|
|||||||||
Director
fees
|
1,892
|
0
|
1,892
|
|||||||||
Donations
|
620
|
0
|
620
|
|||||||||
Dues
and subscriptions
|
300
|
0
|
300
|
|||||||||
Employee
benefits
|
9,157
|
0
|
9,157
|
|||||||||
Insurance
|
6,076
|
0
|
6,076
|
|||||||||
Interest
and penalties
|
975
|
0
|
975
|
|||||||||
Labor
|
3,200
|
0
|
3,780
|
|||||||||
Meals
and entertainment
|
2,730
|
0
|
2,730
|
|||||||||
Office
supplies
|
5,742
|
1,107
|
6,859
|
|||||||||
Officer
compensation
|
176,666
|
13,800
|
190,466
|
|||||||||
Payroll
|
16,624
|
0
|
16,624
|
|||||||||
Payroll
taxes
|
14,197
|
0
|
14,197
|
|||||||||
Postage
and delivery
|
1,837
|
0
|
1,837
|
|||||||||
Professional
fees:
|
||||||||||||
Accounting
|
32,651
|
500
|
33,151
|
|||||||||
Auditing
|
15,000
|
0
|
15,000
|
|||||||||
Consulting
|
447,885
|
0
|
447,885
|
|||||||||
Legal
fees
|
69,578
|
3,727
|
97,183
|
|||||||||
Other
|
3,554
|
0
|
3,554
|
|||||||||
Rent
- equipment
|
21,921
|
0
|
21,921
|
|||||||||
Rent
- occupancy
|
1,400
|
0
|
1,400
|
|||||||||
State
franchise tax
|
25
|
113
|
856
|
|||||||||
Supplies
|
1,637
|
0
|
1,637
|
|||||||||
Telephone
|
2,354
|
151
|
2,505
|
|||||||||
Travel
|
5,750
|
0
|
5,750
|
|||||||||
Utilities
|
248
|
0
|
248
|
|||||||||
Total
selling, general and administrative expenses
|
890,635
|
20,467
|
936,288
|
|||||||||
Total
expenses
|
1,139,806
|
26,467
|
1,231,741
|
|||||||||
Loss
from operations
|
(1,139,806
|
)
|
(26,467
|
)
|
(1,231,741
|
)
|
||||||
Non-operating
revenue
|
||||||||||||
Interest
|
0
|
0
|
192
|
|||||||||
Net
loss before income taxes
|
(1,139,806
|
)
|
(26,467
|
)
|
(1,231,549
|
)
|
||||||
Income
taxes
|
0
|
0
|
0
|
|||||||||
Net
loss
|
$
|
(1,139,806
|
)
|
$
|
(26,467
|
)
|
$
|
(1,231,549
|
)
|
|||
Net
loss per common share - basic and diluted
|
$
|
(0.02
|
)
|
$
|
(0.00
|
)
|
$
|
(0.02
|
)
|
|||
Weighted average number of
common shares
outstanding - basic and diluted
|
73,206,667
|
60,116,667
|
61,728,171
|
The
accompanying notes are an integral part of the financial
statements.
F-4
WINDTAMER
CORPORATION
formerly
Future Energy Solutions, Inc.
(A
Development Stage Company)
Statements
of Cash Flows
For
the Years Ended December 31, 2008 and December 31, 2007
and
For the Period Since Inception through December 31, 2008
|
|
|
|
|
Period from Date
|
|
||||||
|
|
|
|
|
|
of Inception
|
|
|||||
|
|
Year Ended
|
|
|
Year Ended
|
|
|
(March 30, 2001)
|
|
|||
|
|
December 31,
|
|
|
December 31,
|
|
|
through
|
|
|||
|
|
2008
|
|
|
2007
|
|
|
December 31, 2008
|
||||
Operating
activities
|
||||||||||||
Net
loss
|
$
|
(1,139,806
|
)
|
$
|
(26,467
|
)
|
$
|
(1,231,549
|
)
|
|||
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
||||||||||||
Amortization
expense
|
703
|
703
|
1,406
|
|||||||||
Depreciation
expense
|
1,770
|
9
|
1,779
|
|||||||||
Services
received in exchange for common stock
|
0
|
0
|
3,000
|
|||||||||
Stock-based
consulting costs and director fees
|
407,752
|
0
|
407,752
|
|||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Increase
in prepaid expenses
|
(6,789
|
)
|
0
|
(6,789
|
)
|
|||||||
Increase
in security deposits
|
(1,950
|
)
|
0
|
(1,950
|
)
|
|||||||
Increase
in accounts payable
|
29,424
|
3,154
|
33,296
|
|||||||||
Increase
in payroll liabilities
|
9,176
|
0
|
9,176
|
|||||||||
Net
cash used in operating activities
|
(699,720
|
)
|
(22,601
|
)
|
(783,879
|
)
|
||||||
Investing
Activities
|
||||||||||||
Acquisition
of fixed assets
|
(16,220
|
)
|
(248
|
)
|
(16,468
|
)
|
||||||
Increase
in intangible assets
|
(10,441
|
)
|
0
|
(22,393
|
)
|
|||||||
Net
cash used in investing activities
|
(26,661
|
)
|
(248
|
)
|
(38,861
|
)
|
||||||
Financing
activities
|
||||||||||||
Proceeds
from issuance of common stock
|
907,000
|
70,000
|
1,027,000
|
|||||||||
Proceeds
from exercise of stock options
|
20,000
|
0
|
20,000
|
|||||||||
Expenses
paid by shareholder
|
0
|
0
|
23,510
|
|||||||||
Cash
paid for services related to offering
|
(26,258
|
)
|
(16,741
|
)
|
(42,999
|
)
|
||||||
Net
cash provided by financing activities
|
900,742
|
53,259
|
1,027,511
|
|||||||||
Increase
in cash
|
174,361
|
30,410
|
204,771
|
|||||||||
Cash
– beginning
|
30,410
|
0
|
0
|
|||||||||
Cash
– ending
|
$
|
204,771
|
$
|
30,410
|
$
|
204,771
|
||||||
Supplemental
Information:
|
||||||||||||
Income
Taxes Paid
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||
Interest
Paid
|
$
|
975
|
$
|
0
|
$
|
975
|
The
accompanying notes are an integral part of the financial
statements.
F-5
WINDTAMER
CORPORATION
formerly
Future Energy Solutions, Inc.
(A
Development Stage Company)
Statements
of Stockholders’ Equity
Since
Inception through December 31, 2008
Treasury Stock
|
Common Stock
|
Additional
|
Deficit
Accumulated
During the
|
Total
|
||||||||||||||||||||||||
Number
of Shares
|
Par
Value
|
Number
of Shares
|
Par
Value
|
Paid-In
Capital
|
Development
Stage
|
Stockholders’
Equity
|
||||||||||||||||||||||
Issuance
of common stock in exchange for services
|
60,000,000
|
6,000
|
(3,000
|
)
|
3,000
|
|||||||||||||||||||||||
Net
loss for the period from March 30, 2001 through December 31,
2001
|
(3,100
|
)
|
(3,100
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2001
|
0
|
0
|
60,000,000
|
6,000
|
(3,000
|
)
|
(3,100
|
)
|
(100
|
)
|
||||||||||||||||||
Expenses
paid by shareholder
|
20,000
|
20,000
|
||||||||||||||||||||||||||
Issuance
of common stock for cash
|
93,320
|
9
|
49,991
|
50,000
|
||||||||||||||||||||||||
Net
loss for 2002
|
(61,348
|
)
|
(61,348
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2002
|
0
|
0
|
60,093,320
|
6,009
|
66,991
|
(64,448
|
)
|
8,552
|
||||||||||||||||||||
Expenses
paid by shareholder
|
3,510
|
3,510
|
||||||||||||||||||||||||||
Treasury
stock received at no cost
|
93,320
|
0
|
||||||||||||||||||||||||||
Retirement
of treasury stock
|
(93,320
|
)
|
(93,320
|
)
|
(9
|
)
|
9
|
0
|
||||||||||||||||||||
Net
loss for 2003
|
(428
|
)
|
(428
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2003
|
0
|
0
|
60,000,000
|
6,000
|
70,510
|
(64,876
|
)
|
11,634
|
||||||||||||||||||||
Net
loss for 2004
|
(140
|
)
|
(140
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2004
|
0
|
0
|
60,000,000
|
6,000
|
70,510
|
(65,016
|
)
|
11,494
|
||||||||||||||||||||
Net
loss for 2005
|
(130
|
)
|
(130
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2005
|
0
|
0
|
60,000,000
|
6,000
|
70,510
|
(65,146
|
)
|
11,364
|
||||||||||||||||||||
Net
loss for 2006
|
(130
|
)
|
(130
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2006
|
0
|
0
|
60,000,000
|
6,000
|
70,510
|
(65,276
|
)
|
11,234
|
||||||||||||||||||||
Issuance
of common stock for cash
|
1,400,000
|
140
|
69,860
|
70,000
|
||||||||||||||||||||||||
Offering
costs paid by Company
|
(16,741
|
)
|
(16,741
|
)
|
||||||||||||||||||||||||
Net
loss for 2007
|
(26,467
|
)
|
(26,467
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2007
|
0
|
0
|
61,400,000
|
6,140
|
123,629
|
(91,743
|
)
|
38,026
|
||||||||||||||||||||
Issuance
of common stock for cash
|
18,140,000
|
1,814
|
905,186
|
907,000
|
||||||||||||||||||||||||
Issuance
of common stock under stock award agreement
|
700,000
|
70
|
34,930
|
35,000
|
||||||||||||||||||||||||
Offering
costs paid by Company
|
(26,258
|
)
|
(26,258
|
)
|
||||||||||||||||||||||||
Stock
option expense
|
372,752
|
372,752
|
||||||||||||||||||||||||||
Issuance
of stock under stock options
|
400,000
|
40
|
19,960
|
20,000
|
||||||||||||||||||||||||
Net
loss for 2008
|
(1,139,806
|
)
|
(1,139,806
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2008
|
0
|
0
|
80,640,000
|
8,064
|
1,430,199
|
(1,231,549
|
)
|
206,714
|
F-6
WINDTAMER
CORPORATION
formerly
Future Energy Solutions, Inc.
(A
Development Stage Company)
Notes
To The Financial Statements
Years
Ended December 31, 2008 and December 31, 2007
Note
1 – Summary of Significant Accounting Policies
The
financial statements and notes are representations of the Company’s management,
which is responsible for their integrity and objectivity. These
accounting policies conform to accounting principles generally accepted in the
United States of America and have been consistently applied in the preparation
of the financial statements.
Method
of Accounting
WindTamer
Corporation maintains its books and prepares its financial statements on the
accrual basis of accounting.
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. WindTamer Corporation maintains cash and cash equivalents at
financial institutions which periodically may exceed federally insured
limits.
Fixed
Assets
Fixed
assets are recorded at cost. Depreciation is computed using
accelerated methods over the estimated useful lives which range from 5 to 7
years. Expenditures for renewals and betterments are
capitalized. Expenditures for minor items, repairs and maintenance
are charged to operations as incurred. Any gain or loss upon sale or
retirement due to obsolescence is reflected in the operating results in the
period the event takes place.
Impairment
of Long-Lived Assets
The
Company accounts for long-lived assets in accordance with the provisions of SFAS
No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets . This statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net undiscounted cash flows expected to be generated by the
asset including its ultimate disposition. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Fair value is determined based on discounted cash flows or
appraised values, depending on the nature of the assets. During the
years ending December 31, 2008 and 2007, no impairment was considered
necessary.
Use
of Estimates
The
preparation of financial statements in conformity with 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 revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Income
Taxes
No income
taxes have been incurred from inception through 2008. The Company
accounts for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes”, using the asset and liability
approach, which requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax basis of such assets and
liabilities. This method utilizes enacted statutory tax rates in
effect for the year in which the temporary differences are expected to reverse
and gives immediate effect to changes in income tax rates upon
enactment. Deferred assets are recognized, net of any valuation
allowance, for temporary differences and net operating loss and tax credit carry
forwards. Deferred income tax expense represents the change in net
deferred assets and liability balances.
F-7
WINDTAMER
CORPORATION
formerly
Future Energy Solutions, Inc.
(A
Development Stage Company)
Notes
To The Financial Statements
Years
Ended December 31, 2008 and December 31, 2007
Stock-Based
Compensation
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
123R, Share-Based
Payment (“SFAS No. 123R”). SFAS No. 123R establishes standards
for the accounting for transactions in which an entity exchanges its equity
instruments for goods or services. It also addresses transactions in
which an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity’s equity instruments or that may be
settled by the issuance of those equity instruments. SFAS No. 123R
focuses primarily on accounting for transactions in which an entity obtains
employee services in share-based payment transactions. SFAS No. 123R
requires that the compensation cost relating to share-based payment transactions
be recognized in the financial statements. That cost will be measured
based on the fair value of the equity or liability instruments
issued.
The
Company’s accounting policy for equity instruments issued to consultants and
vendors in exchange for goods and services follows the provisions of EITF 96-18,
“Accounting for Equity Instruments That are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services” and EITF 00-18,
“Accounting Recognition for Certain Transactions Involving Equity Instruments
Granted to Other Than Employees.” The measurement date for the fair
value of the equity instruments issued is determined at the earlier of
(i) the date at which a commitment for performance by the consultant or
vendor is reached or (ii) the date at which the consultant or vendor’s
performance is complete. In the case of equity instruments issued to
consultants, the fair value of the equity instrument is recognized over the term
of the consulting agreement. Stock-based compensation related to
non-employees is accounted for based on the fair value of the related stock or
options or the fair value of the services, which ever is more readily
determinable in accordance with SFAS 123(R).
Recent
Pronouncements
WindTamer
Corporation does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the results of operations,
financial position, or cash flow.
Development
Stage
WindTamer
Corporation has operated as a development stage enterprise since its inception
by devoting substantially all of its efforts to planning, raising capital,
research and development, and developing markets for its
products. Accordingly, the financial statements of the Company have
been prepared in accordance with the accounting and reporting principles
prescribed by SFAS No. 7, “Accounting and Reporting by Development Stage
Enterprises,” issued by FASB.
Basic
and Diluted Loss Per Share
The
Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128 “Earnings per Share” (“SFAS 128”), which requires the
presentation of basic and diluted earnings per share. Basic earnings
per share reflects the actual weighted average of shares issued and outstanding
during the period. Diluted earnings per share are computed including
the number of additional shares that would have been outstanding if dilutive
potential shares had been issued. In a loss year, the calculation for basic and
diluted earnings per share is considered to be the same, as the impact of
potential common shares is anti-dilutive.
During
the year ended December 31, 2008, there were no instruments outstanding that
could potentially be dilutive because the exercise price for all stock options
was equal to the fair market value of the stock. There were no
potentially dilutive instruments outstanding prior to January 1,
2008.
Restatement
Subsequent
to the original issuance of the financial statements it was determined that
certain disclosures required by accounting principles generally accepted in the
United States (GAAP) were omitted. These financial statements have
been restated to present the expenses on the statement of operations by their
functional category, as well as add and revise certain footnote disclosures
required by GAAP. The footnote disclosures restatements made are as
follows:
Ø
|
Note 1 was restated to include
accounting policies related to fixed assets and impairment of long-lived
assets, as well as modify and expand the accounting policy related to
stock-based compensation and loss per
share.
|
Ø
|
Note 8 was restated to include
all stock-based compensation disclosures required by FAS
123R.
|
Ø
|
Note 9 was restated to include
the accounting policy related to the consulting agreement, as well as the
impact of the agreement on the financial
statements.
|
Ø
|
Note 11 was added to present the
income tax related disclosures required by FAS 109 and FIN
48.
|
There
were no changes to the balance sheet, earnings, statement of cash flows, or
equity of the company as a result of these restatements. The
financial statements have not been updated to reflect subsequent events since
the date of the original issuance of the financial statements.
Note
2 – Going Concern
The
financial statements have been prepared assuming that WindTamer Corporation will
continue as a going concern. The Company is in a development stage
and has had no revenue. The lack of sales and recurring losses from
operations raise substantial doubt about the Company’s ability to continue as a
going concern. Continuation of the Company is dependent on achieving
sufficiently profitable operations and may require additional
financing. The Company plans to launch the commercialization of its
planned products utilizing its current working capital, and by outsourcing
manufacturing and marketing through regional distributors in 2009. It
is also seeking additional equity financing from private sources to provide
working capital. There can be no assurance that any revenues from
these planned operations or proceeds from its planned equity financing will be
sufficient. In the event it is not sufficient, the Company would need
to seek other sources of capital. There can be no assurance that the
Company will be successful in raising additional capital when it is
required.
F-8
WINDTAMER
CORPORATION
formerly
Future Energy Solutions, Inc.
(A
Development Stage Company)
Notes
To The Financial Statements
Years
Ended December 31, 2008 and December 31, 2007
Note
3 – Organization
WindTamer
Corporation was incorporated on March 30, 2001 in the State of New York as
Future Energy Solutions, Inc. During 2008, the officers of the
Company consisted of Gerald Brock and Lucinda Brock, a married couple, and Jesse
Brock, their son. As of October 30, 2008, Lucinda Brock and Jesse
Brock are no longer officers of the Company. In October 2008, Mr.
Brock’s daughter, Amy Brock, was appointed Corporate Secretary.
The
Company increased the size of its Board of Directors to three on October 25,
2008. Eugene Richard Henn and Anthony C. Romano, Jr. were appointed
to the newly created directorships. On November 24, 2008, the Company
increased the size of its Board of Directors to four and appointed George
Naselaris to the newly created directorship.
Note
4 – Intangible Assets
WindTamer
Corporation obtained a United States patent for its fluid-driven vacuum-enhanced
electrical generator on December 2, 2003. The costs associated with
obtaining the patent were incurred in 2002 and 2003. These costs,
totaling $11,952, were capitalized and are being amortized on a straight-line
basis over the estimated useful life of 17 years beginning on January 1, 2007,
the date the patent was place in service.
The
Company applied for a United States patent for its inlet wind suppressor
assembly on January 16, 2008. The costs associated with this patent
through December 31, 2008 total $5,916. These costs were capitalized
and will be amortized on a straight-line basis over the estimated useful life of
17 years beginning when the patent is obtained.
The
Company applied for several trademarks during 2008. Costs associated
with these trademarks through December 31, 2008 were $4,525. These
costs were capitalized and will be amortized on a straight-line basis over the
estimated useful life of 15 years beginning when the trademarks are
finalized.
Amortization
expense for each of the next five years is estimated to be $1,400 or less,
assuming no major additional costs occur that require amortization of intangible
assets.
Note
5 – Research and Development Costs
All costs
related to research and development are expensed when
incurred. Research and development costs consist of expenses to
develop prototypes. Specifically, these costs consist of engineering
fees, labor and manufacturing, materials, and generators.
Note
6 – Capitalization
WindTamer
Corporation has the authority to issue 500 million shares of Common Stock at par
value of $.0001 per share. The holders of shares of common stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of the stockholders.
F-9
WINDTAMER
CORPORATION
formerly
Future Energy Solutions, Inc.
(A
Development Stage Company)
Notes
To The Financial Statements
Years
Ended December 31, 2008 and December 31, 2007
The costs
associated with the stock offering, totaling $26,258 for 2008 and $16,741 for
2007, were treated as a reduction to Additional Paid-In
Capital. Additional costs will likely be incurred pertaining to the
stock offering.
Note
7 – Stock Split and Change in Par Value
On
December 7, 2007 the Company effected a 428.57-to-1 stock split. On
that date, the Company reduced the par value of common stock from $.01 to $.001
per share. All references to the number of common shares, as well as
per-share data in the accompanying financial statements, have been adjusted to
reflect the stock split and change in par value retroactively. As a
result of the stock split and change in par value, common stock increased and
additional paid-in capital decreased by $2,930.
On
November 25, 2008, the Company effected a 20-for-1 split of its outstanding
shares of common stock, resulting in there then being approximately 79,640,000
common shares outstanding, and reduced the par value of its stock from $.001 to
$.0001 per share. In addition, the Company’s authorized shares were
increased to 500 million common shares and 5 million preferred
shares. The shares of preferred stock are undesignated “blank check”
shares. References to share amounts in these financial statements and
notes have been adjusted to reflect the November 25, 2008 stock
split.
Note
8 – Stock Based Compensation
The
Company has established the “2008 Equity Incentive Plan” which is a shareholder
approved plan that permits the granting of share options and shares to
employees, directors and consultants. The Company believes that such
awards better align the interests of the employees and consultants with those of
the Company’s shareholders. The 2008 Equity Incentive Plan provides
for the issuance of up to 8,000,000 shares of common stock of which 1,000,000
shares are available for grant as Incentive Stock Options. The
exercise price for options awarded is 100% of the fair market value of the
common stock on the day of grant. The options generally vest either
immediately on the date of grant or 1 year from the date of grant.
For the
year ended December 31, 2008, the Company recorded compensation costs for
options and shares granted under the plan amounting to
$407,752. There were no stock options or shares granted or
outstanding prior to January 1, 2008, therefore no compensation expense was
recorded in 2007. The impact of this expense was to increase basic
and diluted net loss per share from $.01 to $.02 for the year ended December 31,
2008. A deduction is not allowed for income tax purposes until
nonqualified options are exercised. The amount of this deduction will be the
difference between the fair value of the Company’s common stock and the exercise
price at the date of exercise. Accordingly, there is a deferred tax asset
recorded for the tax effect of the financial statement expense recorded. The tax
effect of the income tax deduction in excess of the financial statement expense,
if any, will be recorded as an increase to additional paid-in
capital. No tax deduction is allowed for ISO’s. Accordingly no
deferred tax asset is recorded for GAAP expense related to these
options.
Management
has valued the options at their date of grant utilizing the Black Scholes Option
Pricing Model. Since there is not a public market for the Company
shares, the fair value of the underlying shares was determined based on recent
transactions by the Company to sell shares to third parties. Further,
the excepted volatility was calculated using the historical volatility of a
similar public entity in the alternative electricity industry in accordance with
Question 6 of SAB Topic 14.D.1. In making this determination and
finding another similar company, the Company considered the industry, stage of
life cycle, size and financial leverage of such other entities. Based
on the development stage of the Company, similar companies with enough
historical data are not available. The Company was able to find
one entity that met the industry criterion and as a result has based its
expected volatility off this Company’s historical stock prices for a period
similar to the expected term of the option. The risk-free interest
rate is based on the implied yield available on U.S. Treasury issues with an
equivalent term approximating the expected life of the options depending on the
date of the grant and expected life of the options. The expected life
of options used was based on the contractual life of the option
granted. The Company determined the expected dividend rate based on
the assumption and expectation that earnings generated from operations are not
expected to be adequate to allow for the payment of dividends in the near
future. The following weighted-average assumptions were utilized in
the fair value calculations for options granted:
Year
Ended
December
31, 2008
|
||||
Expected
dividend yield
|
0
|
%
|
||
Expected
stock price volatility
|
35.21
|
%
|
||
Risk-free
interest rate
|
1.1
|
%
|
||
Expected
life of options
|
2.4 Years
|
The
Company has granted stock options to consultants, advisors and directors in the
following grants:
Date of
|
Shares
|
Exercise
|
Shares Outstanding
|
Expiration
|
Vesting
|
|||||||
Grant
|
Granted
|
Price
|
as of 12/31/08
|
Date
|
Date
|
|||||||
07/10/08
|
10,000,000
|
$ |
.05
|
10,000,000
|
07/10/11
|
07/10/08
|
||||||
10/28/08
|
400,000
|
.05
|
400,000
|
10/28/18
|
10/28/09
|
|||||||
11/18/08
|
11,200,000
|
.05
|
11,200,000
|
11/18/11
|
11/18/08
|
|||||||
11/18/08
|
12,000,000
|
.05
|
12,000,000
|
11/18/09
|
11/18/08
|
|||||||
11/24/08
|
200,000
|
.05
|
200,000
|
11/24/18
|
11/24/09
|
|||||||
11/25/08
|
400,000
|
.05
|
400,000
|
11/25/11
|
11/25/08
|
|||||||
12/16/08
|
400,000
|
.05
|
0
|
12/16/11
|
12/16/08
|
|||||||
Total
|
|
34,200,000
|
F-10
WINDTAMER
CORPORATION
formerly
Future Energy Solutions, Inc.
(A
Development Stage Company)
Notes
To The Financial Statements
Years
Ended December 31, 2008 and December 31, 2007
The
following table summarizes the status of the Company’s aggregate stock options
granted under the incentive stock option plan:
Number
|
Weighted
|
||||||||||||
of Shares
|
Average
|
Weighted
|
|||||||||||
Remaining
|
Intrinsic
|
Average
|
Aggregate
|
||||||||||
Subject to Exercise
|
Options
|
Price
|
Life (Years)
|
Value
|
|||||||||
Outstanding
as of December 31, 2007
|
-
|
$
|
-
|
||||||||||
Granted
– 2008
|
34,600,000
|
$
|
.05
|
||||||||||
Forfeited
– 2008
|
-
|
$
|
-
|
||||||||||
Exercised
– 2008
|
(400,000
|
)
|
$
|
.05
|
|||||||||
Outstanding
as of December 31, 2008
|
34,200,000
|
$ |
.05
|
2.20
|
$ | - | |||||||
Exercisable
as of December 31, 2008
|
33,600,000
|
$
|
.05
|
2.06
|
$
|
-
|
The
weighted-average grant date fair value of options granted during the year ended
December 31, 2008 was $.01. The total intrinsic value of options exercised
during the year ended December 31, 2008 was $ 0.
The
following table summarizes the status of the Company’s aggregate non-vested
shares granted under the 2008 Equity Incentive Plan (See Note 9):
Number of
Non-vested
Shares
Subject to
Options
|
Weighted-
Average
Grant-Date
Fair Value
|
|||||||
Non-vested
as of December 31, 2007
|
0 | $ | ||||||
Non-vested
granted — year ended December 31, 2008
|
1,000,000 | $ | .05 | |||||
Vested — year
ended December 31, 2008
|
700,000 | $ | .05 | |||||
Forfeited — year
ended December 31, 2008
|
0 | $ | ||||||
Non-vested
as of December 31, 2008
|
300,000 | $ | .05 |
As of December 31, 2008, the unrecognized compensation cost related to non-vested share based compensation arrangements granted under the plan that was approximately $27,000. These costs are expected to be recognized during 2009. The total fair value of options and shares vested during the year period ended December 31, 2008 was $405,860.
Note
9 – Consulting Agreement
In
October 2008, the Company entered into an agreement with an individual to
provide management consulting services through September 30, 2009. As
compensation, the Company will pay $1,000 for each full week during the
term. The Company also entered into a Stock Award Agreement with this
individual on the same date. He will receive one million shares of
common stock vesting according to a schedule. The Company issued
100,000 shares of common stock to him upon signing the consulting agreement and
600,000 shares subsequently vested prior to December 31, 2008 upon the
satisfaction of other performance criteria. The Company is valuing
the stock on each vesting date using the fair market value of the common stock
of $.05 in accordance with EITF 96-18. The fair value of the equity
instrument is recognized over the period the related service is performed in
accordance to EITF 00-18. During the year ended December 31, 2008,
the Company recognized $35,000 of stock based compensation related to this
award. See note 8 for the aggregate non-vested shares reconciliation
and the unrecognized compensation cost related to the non-vested share based
compensation arrangements.
F-11
Note
10 – Sublease Agreement
On
December 1, 2008, the Company entered into a sublease agreement with Athletica,
Inc. to lease a manufacturing facility. The term of the lease is from
December 1, 2008 through February 28, 2009, after which the lease is expected to
continue on a month-to-month basis. Monthly rent of $1,400 is due on
the first day of each month beginning December 1, 2008. A security
deposit of $1,400 was also paid in 2008.
Note
11 - Income Taxes
Following
is a summary of the components giving rise to the income tax provision (benefit)
for the years ended December 31:
2008
|
2007
|
Inception
|
||||||||||
Current
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Deferred
|
(438,907
|
)
|
(10,587
|
)
|
(475,604
|
)
|
||||||
Less
increase in allowance
|
438,907
|
10,587
|
475,604
|
|||||||||
Net
deferred
|
-
|
-
|
-
|
|||||||||
Total
income tax provisions (benefit)
|
$
|
-
|
$
|
-
|
$
|
-
|
Individual
components of the deferred tax asset are as follows as of December
31,:
2008
|
2007
|
|||||||
Net
operating loss carry forwards
|
$
|
287,512
|
$
|
16,930
|
||||
Stock
based compensation
|
147,021
|
-
|
||||||
Depreciation
and amortization
|
41,071
|
19,767
|
||||||
Total
|
475,604
|
36,697
|
||||||
Less
valuation allowance
|
(475,604
|
)
|
(36,697
|
)
|
||||
Net
deferred tax assets
|
$
|
-
|
$
|
-
|
The
Company has approximately $810,000 of net operating loss carryforwards (“NOL’s”)
available to reduce future taxable income. These carryforwards expire
at various dates through 2028. A portion of the net operating loss
carryforward amounting to approximately $35,000, relates to tax deductions for
stock awards vested, which are not included in the determination of the deferred
tax assets above and will be recognized in accordance with SFAS 123(R) when
realized for tax purposes. Due to the uncertainty as to the Company’s
ability to generate sufficient taxable income in the future and utilize the
NOL’s before they expire, the Company has recorded a valuation allowance to
offset the deferred tax assets.
The
differences between the United States statutory federal income tax rate and the
effective income tax rate in the accompanying consolidated statements of
operations are as follows:
2008
|
2007
|
Inception
|
||||||||||
Statutory
United States federal rate
|
(34
|
)%
|
(34
|
)%
|
(34
|
)%
|
||||||
State
income taxes net of federal benefit
|
(6
|
)
|
(6
|
)
|
(6
|
)
|
||||||
Permanent
differences
|
1
|
-
|
-
|
|||||||||
Change
in valuation reserves
|
39
|
40
|
40
|
|||||||||
Effective
tax rate
|
-
|
%
|
-
|
%
|
-
|
%
|
In
July 2006, the FASB released Interpretation No. 48, “Accounting for Uncertainty
in Income Taxes – an Interpretation of FASB Statement 109”
(“FIN48”). Effective for fiscal years beginning after December 15,
2006, FIN48 provides guidance on the financial statement recognition and
measurement for income tax positions that we have taken or expect to take in our
income tax returns. It also provides related guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. We adopted the provisions of FIN48 on
January 1, 2007. The adoption did not have a material impact on the
Company’s consolidated results of operations and financial position, and
therefore, the Company did not have any adjustment to the January 1, 2007
beginning balance of retained earnings. In addition, the Company did
not have any material unrecognized tax benefits at December 31, 2007 or
2008.
F-12
The
Company recognizes interest and penalties related to unrecognized tax benefits
in general and administrative expense. During the years ended December 31, 2008
the Company recognized no material interest and penalties.
The
Company files income tax returns in the U.S. federal jurisdiction and applicable
states. The tax years 2001 -2008 remain open to examination by major taxing
jurisdictions to which the Company is subject.
Note
12 – Subsequent Events
The
Company commenced a $20 million private placement of common stock at $1 per
share in January 2009. Since December 31, 2008 and through February
13, 2009, the Company raised an additional $70,000 through the issuance of
70,000 shares of common stock of the Company.
On
February 10, 2009, the Company granted stock options to purchase one million
shares of its common stock to a consultant. The stock options have a
contractual life of ten years from the date of the grant. The
consultant became vested in 50% of the options on June 30, 2009 and will become
vested in the remaining 50% on September 30, 2009.
In
accordance with a Stock Award Agreement the Company entered into with a
consultant in November 2008, the Company issued the final 300,000 shares of
common stock to him upon meeting performance criteria on January 27,
2009.
In
February 2009, the Company entered into a consulting agreement with an
individual. As compensation for the performance of services, the
Company will pay $5,000 per month for each full month during the term of this
agreement.
F-13
WINDTAMER
CORPORATION
(A
Development Stage Company)
Balance
Sheets
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
|
(unaudited)
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
|
$
|
65,386
|
$
|
204,771
|
||||
Stock
subscriptions receivable
|
50,000
|
0
|
||||||
Prepaid
expenses and other current assets
|
15,983
|
8,739
|
||||||
Total
current assets
|
131,369
|
213,510
|
||||||
Long-lived
assets
|
||||||||
Intangible
assets
|
||||||||
Patent
|
23,168
|
17,868
|
||||||
Trademark
|
4,525
|
4,525
|
||||||
Less
accumulated amortization
|
(1,758
|
)
|
(1,406
|
)
|
||||
Total
intangible assets
|
25,935
|
20,987
|
||||||
Property
and equipment
|
||||||||
Equipment
|
19,006
|
10,268
|
||||||
Furniture
and fixtures
|
12,880
|
6,200
|
||||||
Software
|
7,365
|
0
|
||||||
Less
accumulated depreciation
|
(6,512
|
)
|
(1,779
|
)
|
||||
Total
property and equipment
|
32,739
|
14,689
|
||||||
Total
long-lived assets
|
58,674
|
35,676
|
||||||
Total
assets
|
$
|
190,043
|
$
|
249,186
|
||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$
|
187,590
|
$
|
33,296
|
||||
Customer
deposits
|
60,000
|
0
|
||||||
Payroll
liabilities
|
6,595
|
9,176
|
||||||
Total
current liabilities
|
254,185
|
42,472
|
||||||
Commitments
and Contingencies
|
0
|
0
|
||||||
Stockholders'
equity
|
||||||||
Preferred
stock, 5,000,000 shares authorized, $.0001 par value; none issued or
outstanding
|
0
|
0
|
||||||
Common
stock, 500,000,000 shares authorized, $0.0001 par value; 81,576,000 and
80,590,000 shares issued and outstanding respectively
|
8,158
|
8,064
|
||||||
Additional
paid-in capital
|
2,799,783
|
1,430,199
|
||||||
Deficit
accumulated during development stage
|
(2,872,083
|
)
|
(1,231,549
|
)
|
||||
Total
stockholders' equity
|
(64,142
|
)
|
206,714
|
|||||
Total
liabilities and stockholders' equity
|
$
|
190,043
|
$
|
249,186
|
The
accompanying notes are an integral part of the financial
statements.
F-14
WINDTAMER
CORPORATION
(A
Development Stage Company)
Statements
of Operations (unaudited)
Period from Date
|
||||||||||||||||||||
of Inception
|
||||||||||||||||||||
Three Months Ended
|
Three Months Ended
|
Six Months Ended
|
Six Months Ended
|
(March 30, 2001)
|
||||||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
through
|
||||||||||||||||
2009
|
2008
|
2009
|
2008
|
June 30, 2009
|
||||||||||||||||
Research
and development expenses:
|
||||||||||||||||||||
Compensation
and payroll taxes
|
41,520 | 26,301 | 67,097 | 52,602 | 171,737 | |||||||||||||||
Other
research and development
|
237,491 | 51,247 | 324,176 | 67,381 | 514,989 | |||||||||||||||
Total
research and development expenses
|
279,011 | 77,548 | 391,273 | 119,983 | 686,726 | |||||||||||||||
Selling,
general and administrative expenses:
|
||||||||||||||||||||
Advertising,
promotion and travel
|
34,257 | 15,576 | 52,293 | 17,963 | 107,854 | |||||||||||||||
Amortization
and depreciation
|
2,600 | 535 | 5,085 | 1,069 | 8,270 | |||||||||||||||
Insurance
|
2,733 | 0 | 5,466 | 502 | 11,542 | |||||||||||||||
Interest
and penalties
|
0 | 975 | 1,000 | 975 | 1,975 | |||||||||||||||
Office
expense
|
6,907 | 2,675 | 9,708 | 4,873 | 20,379 | |||||||||||||||
Compensation
and payroll taxes
|
358,244 | 65,870 | 554,468 | 130,289 | 790,585 | |||||||||||||||
Professional
fees
|
102,351 | 12,800 | 518,654 | 18,000 | 1,115,427 | |||||||||||||||
Public
company expense
|
21,130 | 0 | 30,655 | 0 | 30,655 | |||||||||||||||
Rent
- equipment
|
7,235 | 6,000 | 7,235 | 6,000 | 29,156 | |||||||||||||||
Occupancy
expense
|
8,856 | 0 | 55,571 | 0 | 56,971 | |||||||||||||||
State
franchise tax
|
17 | 0 | 326 | 0 | 1,182 | |||||||||||||||
Utilities
|
2,792 | 502 | 8,800 | 1,290 | 11,553 | |||||||||||||||
Total
selling, general and administrative expenses
|
547,122 | 104,933 | 1,249,261 | 180,961 | 2,185,549 | |||||||||||||||
Total
expenses
|
826,133 | 182,481 | 1,640,534 | 300,944 | 2,872,275 | |||||||||||||||
Loss
from operations
|
(826,133 | ) | (182,481 | ) | (1,640,534 | ) | (300,944 | ) | (2,872,275 | ) | ||||||||||
Non-operating
revenue
|
||||||||||||||||||||
Interest
|
0 | 0 | 0 | 0 | 192 | |||||||||||||||
Net
loss before income taxes
|
(826,133 | ) | (182,481 | ) | (1,640,534 | ) | (300,944 | ) | (2,872,083 | ) | ||||||||||
Income
taxes
|
0 | 0 | 0 | 0 | 0 | |||||||||||||||
Net
loss
|
$ | (826,133 | ) | $ | (182,481 | ) | $ | (1,640,534 | ) | $ | (300,944 | ) | (2,872,083 | ) | ||||||
Net
loss per common share - basic and diluted
|
$ | (0.01 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.00 | ) | (0.05 | ) | ||||||
Weighted
average number of common shares outstanding - basic and
diluted
|
81,542,667 | 66,490,000 | 81,364,833 | 64,546,667 | 62,918,272 |
The
accompanying notes are an integral part of the financial
statements.
F-15
WINDTAMER
CORPORATION
(A
Development Stage Company)
Statements
of Cash Flows (unaudited)
Period from
Date
|
||||||||||||
of Inception
|
||||||||||||
Six Months Ended
|
Six Months Ended
|
(March 30,
2001)
|
||||||||||
June 30,
|
June 30,
|
through
|
||||||||||
2009
|
2008
|
June 30, 2009
|
||||||||||
Operating
activities
|
||||||||||||
Net
loss
|
$
|
(1,640,534
|
)
|
$
|
(300,944
|
)
|
$
|
(2,872,083
|
))
|
|||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Amortization
and depreciation expense
|
5,085
|
1,069
|
8,270
|
|||||||||
Stock-based
compensation
|
750,022
|
0
|
1,160,774
|
|||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Increase
in prepaid expenses and other current assets
|
(7,244
|
)
|
(3,000
|
)
|
(15,983
|
)
|
||||||
Customer
deposits
|
60,000
|
0
|
60,000
|
|||||||||
Increase
in trade accounts payable
|
145,358
|
69,369
|
178,654
|
|||||||||
Increase
(decrease) in payroll liabilities
|
(2,581
|
)
|
0
|
6,595
|
||||||||
Net
cash used in operating activities
|
(689,894
|
)
|
(233,506
|
)
|
(1,473,773
|
)
|
||||||
Investing
Activities
|
||||||||||||
Acquisition
of fixed assets
|
(22,783
|
)
|
(4,575
|
)
|
(39,251
|
)
|
||||||
Acquisition
of intangible assets
|
(5,300
|
)
|
(11,300
|
)
|
(27,693
|
)
|
||||||
Net
cash used in investing activities
|
(28,083
|
)
|
(15,875
|
)
|
(66,944
|
)
|
||||||
Financing
activities
|
||||||||||||
Proceeds
from issuance of common stock
|
586,000
|
444,000
|
1,636,510
|
|||||||||
Proceeds
from exercise of stock options
|
0
|
0
|
20,000
|
|||||||||
Stock
offering expenses paid
|
(7,408
|
)
|
(1,799
|
)
|
(50,407
|
)
|
||||||
Net
cash provided by financing activities
|
578,592
|
442,201
|
1,606,103
|
|||||||||
Increase
(decrease) in cash
|
(139,385
|
)
|
192,820
|
65,386
|
||||||||
Cash
- beginning
|
204,771
|
30,410
|
0
|
|||||||||
Cash
- ending
|
$
|
65,386
|
$
|
223,230
|
$
|
65,386
|
||||||
Supplemental
Information:
|
||||||||||||
Income
Taxes Paid
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||
Interest
Paid
|
$
|
0
|
$
|
0
|
$
|
975
|
||||||
Non-cash
investing and financing transactions
|
||||||||||||
Increase
in stock subscriptions receivable
|
$
|
50,000
|
$
|
0
|
$
|
50,000
|
||||||
Stock
offering expenses included in accounts payable
|
$
|
8,936
|
$
|
0
|
$
|
8,936
|
The
accompanying notes are an integral part of the financial
statements.
F-16
WINDTAMER
CORPORATION
(A
Development Stage Company)
Statements
of Stockholders' Equity (unaudited)
From
Inception through June 30, 2009
Treasury Stock
|
Common Stock
|
Deficit
Accumulated
|
||||||||||||||||||||||||||
Number
of Shares
|
Par
Value
|
Number of
Shares
|
Par Value
|
Additional
Paid-In
Capital
|
During the
Development
Stage
|
Total
Stockholders'
Equity
|
||||||||||||||||||||||
Issuance
of common stock in exchange for services
|
60,000,000
|
6,000
|
(3,000
|
)
|
3,000
|
|||||||||||||||||||||||
Net
loss for the period from March 30 through December 31,
2001
|
(3,100
|
)
|
(3,100
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2001
|
0
|
0
|
60,000,000
|
6,000
|
(3,000
|
)
|
(3,100
|
)
|
(100
|
)
|
||||||||||||||||||
Expenses
paid by shareholder
|
20,000
|
20,000
|
||||||||||||||||||||||||||
Issuance
of common stock for cash
|
93,320
|
9
|
49,991
|
50,000
|
||||||||||||||||||||||||
Net
loss for 2002
|
(61,348
|
)
|
(61,348
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2002
|
0
|
0
|
60,093,320
|
6,009
|
66,991
|
(64,448
|
)
|
8,552
|
||||||||||||||||||||
Expenses
paid by shareholder
|
3,510
|
3,510
|
||||||||||||||||||||||||||
Treasury
stock received at no cost
|
93,320
|
0
|
||||||||||||||||||||||||||
Retirement
of treasury stock
|
(93,320
|
)
|
(93,320
|
)
|
(9
|
)
|
9
|
0
|
||||||||||||||||||||
Net
loss for 2003
|
(428
|
)
|
(428
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2003
|
0
|
0
|
60,000,000
|
6,000
|
70,510
|
(64,876
|
)
|
11,634
|
||||||||||||||||||||
Net
loss for 2004
|
(140
|
)
|
(140
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2004
|
0
|
0
|
60,000,000
|
6,000
|
70,510
|
(65,016
|
)
|
11,494
|
||||||||||||||||||||
Net
loss for 2005
|
(130
|
)
|
(130
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2005
|
0
|
0
|
60,000,000
|
6,000
|
70,510
|
(65,146
|
)
|
11,364
|
||||||||||||||||||||
Net
loss for 2006
|
(130
|
)
|
(130
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2006
|
0
|
0
|
60,000,000
|
6,000
|
70,510
|
(65,276
|
)
|
11,234
|
||||||||||||||||||||
Issuance
of common stock for cash
|
1,400,000
|
140
|
69,860
|
70,000
|
||||||||||||||||||||||||
Offering
costs
|
(16,741
|
)
|
(16,741
|
)
|
||||||||||||||||||||||||
Net
loss for 2007
|
(26,467
|
)
|
(26,467
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2007
|
0
|
0
|
61,400,000
|
6,140
|
123,629
|
(91,743
|
)
|
38,026
|
||||||||||||||||||||
Issuance
of common stock for cash
|
18,140,000
|
1,814
|
905,186
|
907,000
|
||||||||||||||||||||||||
Issuance
of common stock under stock award agreement
|
700,000
|
70
|
34,930
|
35,000
|
||||||||||||||||||||||||
Offering
costs
|
(26,258
|
)
|
(26,258
|
)
|
||||||||||||||||||||||||
Stock
option expense
|
372,752
|
372,752
|
||||||||||||||||||||||||||
Issuance
of stock under stock options
|
400,000
|
40
|
19,960
|
20,000
|
||||||||||||||||||||||||
Net
loss for 2008
|
(1,139,806
|
)
|
(1,139,806
|
)
|
||||||||||||||||||||||||
Balance,
December 31, 2008
|
0
|
0
|
80,640,000
|
8,064
|
1,430,199
|
(1,231,549
|
)
|
206,714
|
||||||||||||||||||||
Issuance
of common stock for cash
|
636,000
|
64
|
635,936
|
636,000
|
||||||||||||||||||||||||
Offering
costs
|
(16,344
|
)
|
(16,344
|
)
|
||||||||||||||||||||||||
Stock
option expense
|
450,022
|
450,022
|
||||||||||||||||||||||||||
Issuance
of common stock under stock award agreement
|
300,000
|
30
|
299,970
|
300,000
|
||||||||||||||||||||||||
Net
loss for the period from January 1 through June 30, 2009
|
(1,640,534
|
)
|
(1,640,534
|
)
|
||||||||||||||||||||||||
Balance,
June 30, 2009
|
0
|
0
|
81,576,000
|
8,158
|
2,799,783
|
(2,872,083
|
)
|
(64,142
|
)
|
The
accompanying notes are an integral part of the financial
statements.
F-17
WINDTAMER
CORPORATION
(A
Development Stage Company)
Notes
To The Financial Statements
Six-Month
Period Ended June 30, 2009
(Unaudited)
Note
1 – Description of Business and Summary of Significant Accounting
Policies
Description
of Business
WindTamer
Corporation (the Company) was incorporated on March 30, 2001 in the State of New
York as Future Energy Solutions, Inc. and in November 2008 changed its name to
WindTamer Corporation. The Company is an independent developer of
wind turbine technology to harness wind as a source of power
generation. The Company has operated as a development stage
enterprise since its inception by devoting substantially all of its efforts to
planning, raising capital, research and development, and developing markets for
its products.
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and with the instructions to
Form 10-Q. Accordingly, they do not include all of the information
required by GAAP for complete annual financial statement
presentation.
In the
opinion of management, all adjustments (consisting only of normal and recurring
adjustments) necessary for a fair presentation of the results of operations have
been included in the accompanying unaudited condensed financial
statements. Operating results for the six-month period ended June 30,
2009, are not necessarily indicative of the results to be expected for other
interim periods or the full fiscal year. These financial statements
should be read in conjunction with the consolidated financial statements and
accompanying notes contained in the WindTamer Corporation Form 10-K/A for the
fiscal year ended December 31, 2008.
Use
of Estimates
The
preparation of financial statements in conformity with 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 revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Fixed
Assets
Fixed
assets are recorded at cost. Depreciation is computed using
accelerated methods over the shorter of the estimated useful lives or the
related lease for leasehold improvements. Leasehold improvements for space
leased on a month-to-month basis are expensed when incurred. For the
six-month period ended June 30, 2009, approximately $37,000 of leasehold
improvements are included in operating expenses. Expenditures for
renewals and betterments are capitalized. Expenditures for minor
items, repairs and maintenance are charged to operations as incurred. Any
gain or loss upon sale or retirement due to obsolescence is reflected in the
operating results in the period the event takes place.
Revenue
Recognition
Revenue
is recognized when all of the following conditions are
satisfied: (1) there is persuasive evidence of an arrangement;
(2) the service or product has been provided to the customer; (3) the amount of
fees to be paid by the customer is fixed or determinable; and (4) the collection
of our fees is reasonably assured. Amounts billed and/or collected
prior to satisfying our revenue recognition policy are reflected as customer
deposits.
Basic
and Diluted Loss Per Share
The
Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128 “Earnings per Share” (“SFAS 128”), which requires the
presentation of basic and diluted earnings per share. Basic earnings
per share reflects the actual weighted average of shares issued and outstanding
during the period. Diluted earnings per share are computed including
the number of additional shares that would have been outstanding if dilutive
potential shares had been issued. In a loss year, the calculation for basic and
diluted earnings per share is considered to be the same, as the impact of
potential common shares is anti-dilutive.
As of
June 30, 2009, there were 35,220,000 stock options outstanding that could dilute
future earnings.
F-18
WINDTAMER
CORPORATION
(A
Development Stage Company)
Notes
To The Financial Statements
Six-Month
Period Ended June 30, 2009
(Unaudited)
Recent
Accounting Pronouncements
In
April 2009, the FASB staff issued FSP No. FAS 107-1 and APB 28-1,
Interim Disclosures about Fair Value of Financial Instruments (“FSP No. FAS
107-1 and APB 28-1”). This FSP amends FASB Statement No. 107, Disclosures
about Fair Value of Financial Instruments, to require disclosures about fair
value of financial instruments in interim financial statements as well as in
annual financial statements. This FSP also amends Accounting Principles Board
Opinion No. 28, Interim Financial Reporting, to require these disclosures
in all interim financial statements. The provisions of FSP No. FAS
107-1 and APB 28-1 became effective on April 1, 2009, are being applied
prospectively beginning in the second quarter of 2009 and did not have a
material impact on the Company’s consolidated financial statements. See
“Fair Value of Financial Instruments” included in “Note 1 for the related
disclosure.
In
May 2009, the FASB issued Statement No. 165, Subsequent Events (“FAS
165”). The provisions of FAS 165 set forth the period after the balance sheet
date during which management of a reporting entity should evaluate events or
transactions that may have occurred for potential recognition or disclosure in
the financial statements, the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements and the disclosures that an entity should make about events
or transactions that occurred after the balance sheet date. The provisions of
FAS 165 became effective for the Company on April 1, 2009, are being
applied prospectively beginning in the second quarter of 2009 and did not have a
material impact on the Company’s consolidated financial statements.
In June
2009, the FASB issued Statement of Financial Accounting Standard (SFAS)
No. 168, The FASB Accounting Standard Codification and the Hierarchy of the
Generally Accepted Accounting Principles — a replacement of SFAS No. 162
(SFAS 168), to become the source of authoritative U.S. generally accepted
accounting principles (“GAAP”) recognized by the FASB to be applied by
nongovernmental entities. SFAS 168 is effective for financial statements issued
for interim and annual periods ending after September 15, 2009. We do not
believe the adoption of SFAS 168 will have a material impact on our consolidated
financial statements.
Fair
Value of Financial Instruments
The
carrying amount of cash stock subscriptions receivable, accounts payable,
customer deposits and accrued expenses are reasonable estimates of their fair
value due to their short maturity.
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current year
presentation.
Note
2 - Going Concern
The
financial statements have been prepared assuming that WindTamer Corporation will
continue as a going concern. The Company is in a development stage
and has had no revenue. The lack of sales and recurring losses from
operations raise substantial doubt about the Company’s ability to continue as a
going concern. Continuation of the Company is dependent on achieving
sufficiently profitable operations and additional financing. The
Company completed a private placement of its common stock in July 2008 in which
it raised gross proceeds of $977,000 and in the first and second quarters of
2009 the Company conducted a private placement, which resulted in proceeds of
$636,000 as of June 30, 2009. The Company plans to launch the
commercialization of its products utilizing its current working capital, future
private placement proceeds, if necessary, and by outsourcing the manufacturing
function and working with regional distributors during 2009. There
can be no assurance that any revenue from operations will be
sufficient. In the event it is not sufficient, the Company will need
to raise additional capital. There can be no assurance that the
Company will be successful in raising additional capital.
Note
3 – Stockholders’ Equity
During
the six months ended June 30, 2009, the Company sold 636,000 shares of common
stock for a price of $1 per share, resulting in net proceeds of $619,656 after
$16,344 of related costs associated with the private placement that were treated
as a reduction to Additional Paid-In Capital. The subscription
receivable of $50,000 related to a 2009 sale of shares was collected during July
2009.
F-19
WINDTAMER
CORPORATION
(A
Development Stage Company)
Notes
To The Financial Statements
Six-Month
Period Ended June 30, 2009
(Unaudited)
During
the six months ended June 30, 2009, 300,000 shares vested, which were issued in
accordance with the consulting agreement discussed further in Note
5.
Note
4 – Stock Option Grants
For the
six months ended June 30, 2009, the Company recorded compensation costs for
options and shares granted amounting to $750,022. The impact of this
expense was to increase basic and diluted net loss per share from $.01 to $.02
for the six months ended June 30, 2009.
Management
has valued the options at their date of grant utilizing the Black-Scholes Option
Pricing Model. The following weighted-average assumptions were
utilized in the fair value calculations for options granted:
Six Months Ended
|
Six Months Ended
|
|||||||
June 30, 2009
|
June 30, 2008
|
|||||||
Expected
dividend yield
|
0 | % | N/A | |||||
Expected
stock price volatility
|
40% - 50 | % | N/A | |||||
Risk-free
interest rate
|
1.46 - 2.90 | % | N/A | |||||
Expected
life of options
|
3 -
10 years
|
N/A |
The
following table summarizes the status of the Company’s aggregate stock options
granted:
Number of
Shares
Remaining
Options
|
Weighted
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
||||||||||
Outstanding
at January 1, 2009
|
34,200,000 | $ | .05 |
|
|||||||||
|
|
||||||||||||
Options
granted
|
1,020,000 | $ | 1.00 |
|
|||||||||
|
|||||||||||||
Outstanding
at June 30, 2009
|
35,220,000 | $ | .08 |
1.9
years
|
$ | 32,490,000 | |||||||
|
|||||||||||||
Exercisable
at June 30, 2009
|
34,110,000 | $ | .06 |
1.7
years
|
$ | 31,920,000 |
The
weighted average fair value of options granted during the six months ended June
30, 2009 was approximately $.54. No options were exercised during the
six months ended June 30, 2009.
The
following table summarizes the status of the Company’s aggregate non-vested
shares granted:
Non-vested Shares
|
Number of
Non-vested
Shares
|
Weighted Average
Fair Value
at Grant Date
|
||||||
Non-vested
at December 31, 2008
|
300,000 | $ | .05 | |||||
Vested
|
(300,000 | ) | $ | 1.00 | ||||
Non-vested
at June 30, 2009
|
0 | - |
As of
June 30, 2009, the unrecognized compensation cost related to non-vested share
based compensation arrangements granted under the plan was approximately
$116,706. These costs are expected to be recognized during
2009.
F-20
WINDTAMER
CORPORATION
(A
Development Stage Company)
Notes
To The Financial Statements
Six-Month
Period Ended June 30, 2009
(Unaudited)
Note
5 – Consulting Agreement
In
October 2008, the Company entered into an agreement with an individual to
provide management consulting services through September 30, 2009. As
compensation, the Company would pay $1,000 for each full week during the
term. The Company also entered into a Stock Award Agreement with this
individual on the same date. The consultant received one million
shares of common stock, vesting according to a schedule. The Company
is valuing the stock on each vesting date using the fair market value of the
common stock in accordance with EITF 96-18. The fair value of the
equity instrument is recognized as an expense over the period the related
service is performed in accordance to EITF 00-18. The Company issued
100,000 shares of common stock to the consultant upon signing the consulting
agreement and 600,000 shares vested from the date of the agreement to December
31, 2008 upon the satisfaction of other performance criteria. During
the year ended December 31, 2008, the Company recognized $35,000 of stock based
compensation related to this award. The Company issued the final
300,000 shares of common stock to the consultant upon meeting performance
criteria in the first quarter of 2009 and recognized $300,000 of stock based
compensation during the six months ended June 30, 2009.
Note
6 – Related Party Transactions
Certain
services were provided to the Company by immediate family members of an officer/
shareholder of the Company. These services amounted to $102,471 for
the six months ended June 30, 2009.
Note
7 – Commitments and Contingencies
The
Company entered into an agreement with Alternative Wind Resources, LLC ("AWR")
to produce a 15kWh prototype wind turbine unit by May 30, 2009 in which AWR
agreed to reimburse the Company for engineering and materials costs for
development of this larger prototype unit. The customer also agreed
to provide the Company with a purchase order for one thousand (1,000) 15kWh
units within one year after delivery of the prototype. As of June 30, 2009 the
prototype has not been completed or delivered to AWR. The customer
provided a $50,000 deposit for the orders, but has not yet provided, and may
never provide, the purchase order. The agreement also grants AWR the
exclusive right to purchase all 15kWh and larger wind turbine units for wind
farm and industrial uses and development. On April 29, 2009 the
Company also granted the customer an option for 60 days to enter into an
exclusive license agreement with the Company for 50 years for the sale of the
Company’s
15kWh wind turbines and larger upon the payment of a $6.0 million license
fee. The option was subject to extension if the due diligence
provided to the customer by the Company was not reasonably acceptable. AWR
paid a $10,000 fee for the option. The payment from AWR, aggregating
$60,000 have been included in customer deposits.
The
Company filed its New York State corporate income tax return during July 2009,
and anticipates a refund in the amount of $31,217 upon approval by state tax
authorities. This refund will be recorded when received by the
Company.
Note
8 – Subsequent Events
In July
2009 the Company completed the private placement of its common stock commenced
in the first quarter of 2009, in which it raised additional proceeds of
$105,000, after June 30, 2009.
In July
2009 the Company granted 535,000 and 315,000 stock option awards to consultants
and employees respectively. All options have an exercise price of
$1.00 and are set to vest in one year and expire in five years.
Stock
option award grantees exercised 16,660,000 options during July
2009. The exercise price for all options exercised was $0.05
resulting in proceeds of $833,000.
On August 20, 2009, the Company entered into a lease for its
current office space in Geneseo, New York for $1,400 per month which will
commence on November 1, 2009 and is scheduled to expire October 31, 2011.
On August 21, 2009 Chief Operating Officer John Schwartz resigned
from his position and as an employee of the Company. Mr. Schwartz held an
option to purchase 1,000,000 shares of common stock at $1.00 per share under the
2008 Equity Incentive Plan. At the time of his resignation, Mr. Schwartz
was vested in 50% of the stock option award. Under the terms of the stock
option award agreement, he has 120 days from the effective date of his
resignation to exercise those vested stock options. After that time, the
unexercised options will expire. The unvested stock options under the
stock option award were forfeited due to his resignation.
On September 10, 2009, the Company received a letter from counsel
to AWR purporting to terminate the March 2009 agreement and the April 2009
option described above in Note 7, and demanding the return of $60,000 provided
to the Company.
These
financial statements have not been updated for subsequent events occurring after
September 16, 2009 which is the date these financial statements were available
to be issued.
Note
9 - Restatement
Subsequent
to the original issuance of the financial statements it was determined that
disclosures related to the AWR contract were not fully presented. These
financial statements have been restated to properly present the terms and manner
of the AWR payment.
There
were no changes to the balance sheet, earnings, statement of cash flows, or
equity of the company as a result of these restatements.
THE
END
F-21
9,500,000
Shares of Common Stock
WINDTAMER
CORPORATION
PROSPECTUS
The date
of this Prospectus is _____________, 2009
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution
The
following sets forth the estimated expenses payable in connection with the
preparation and filing of this Registration Statement:
Securities
and Exchange Commission Registration Fee
|
$
|
530.10
|
||
Accounting
Fees and Expenses
|
$
|
32,978.00
|
||
Legal
Fees and Expenses
|
$
|
91,103.00
|
||
Printing
and Miscellaneous Expenses
|
$
|
8,837.00
|
||
Total
|
$
|
133,448.10
|
Item
14. Indemnification of Directors and Officers
Our
Amended and Restated Bylaws, provide that we will, to the fullest extent
permitted by the New York Business Corporation Law, – hereinafter referred to as
the “NYBCL” – indemnify all persons whom we have the power to indemnify from and
against all expenses, liabilities, or other matters.
Paragraph
9 of the Company’s Certificate of Incorporation, as amended, provides in part as
follows:
“A
director of the Corporation shall not be liable to the Corporation or its
shareholders for damages for any breach of duty in such capacity except for: (i)
liability if a judgment or other final adjudication adverse to a director
establishes that his or her acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law or that the director
personally gained a financial profit or other advantage to which he or she was
not legally entitled or that the director’s acts violated BCL Section 719; or
(ii) liability for any act or omission prior to the adoption of this
provision.”
Section
719 of the NYBCL provides that a director may be liable for voting or concurring
in the following corporate actions; (a) an illegal dividend; (b) a repurchase of
stock not authorized by New York law; (c) the distribution of assets to
shareholders in a dissolution without adequately providing for known liabilities
of the corporation; and (d) a loan to any director unless the loan is authorized
by a vote of shareholders.
Section
721 of the NYBCL provides that, in addition to indemnification
provided in Article 7 of the NYBCL, a corporation may indemnify a director or
officer by a provision contained in the certificate of incorporation or bylaws
or by a duly authorized resolution of its shareowners or directors or by
agreement, provided that no indemnification may be made to or on behalf of any
director or officer if a judgment or other final adjudication adverse to the
director or officer establishes that his acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled.
Section
722(a) of the NYBCL provides that a corporation may indemnify a director or
officer made, or threatened to be made, a party to any action other than a
derivative action, whether civil or criminal, against judgments, fines, amounts
paid in settlement and reasonable expenses actually and necessarily incurred as
a result of such action, if such director or officer acted, in good faith, for a
purpose which he reasonably believed to be in, or not opposed to, the best
interests of the corporation and, in criminal actions or proceedings, in
addition, had no reasonable cause to believe that his conduct was
unlawful.
Section
722(c) of the NYBCL provides that a corporation may indemnify a director or
officer, made or threatened to be made a party in a derivative action, against
amounts paid in settlement and reasonable expenses actually and necessarily
incurred by him in connection with the defense or settlement of such action, or
in connection with an appeal therein if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or not opposed to,
the best interests of the corporation, except that no indemnification will be
available under Section 722(c) of the NYBCL in respect of (1) a threatened or
pending action which is settled or otherwise disposed of, or (2) any claim as to
which such director or officer shall have been adjudged liable to the
corporation, unless and only to the extent that the court in which the action
was brought, or, if no action was brought, any court of competent jurisdiction,
determines upon application, that, in view of all the circumstances of the case,
the director or officer is fairly and reasonably entitled to indemnity for such
portion of the settlement amount and expenses as the court deems
proper.
II-1
Section
723 of the NYBCL specifies the manner in which payment of indemnification under
Section 722 of the NYBCL or indemnification permitted under Section 721 of the
NYBCL may be authorized by the corporation. It provides that indemnification by
a corporation is mandatory in any case in which the director or officer has been
successful, whether on the merits or otherwise, in defending an action. In the
event that the director or officer has not been successful or the action is
settled, indemnification must be authorized by the appropriate corporate action
as set forth in Section 723.
Section
724 of the NYBCL provides that, upon application by a director or officer,
indemnification may be awarded by a court to the extent authorized under Section
722 and Section 723 of the NYBCL. Section 725 of the NYBCL contains certain
other miscellaneous provisions affecting the indemnification of directors and
officers.
Section
726 of the NYBCL authorizes a corporation to purchase and maintain insurance to
indemnify (1) a corporation for any obligation that it incurs as a result of the
indemnification of directors and officers under the provisions of Article 7 of
the NYBCL, (2) directors and officers in instances in which they may be
indemnified by a corporation under the provisions of Article 7 of the NYBCL, and
(3) directors and officers in instances in which they may not otherwise be
indemnified by a corporation under such section, provided the contract of
insurance covering such directors and officers provides, in a manner acceptable
to the New York State Superintendent of Insurance, for a retention amount and
for co-insurance.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, and controlling persons pursuant to the
foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission, such indemnification is contrary to public
policy as expressed in the Securities Act of 1933, and therefore, is
unenforceable.
Item
15. Recent Sales of Unregistered Securities During the Past 3 Years
From
December 2007 through July 2008, we conducted a private placement of 19,540,000
shares of our common stock to approximately 90 investors at a price of $0.05 per
share for a total consideration of $977,000 (after giving effect to our 20-for-1
stock split on November 25, 2008). The private offering was made in reliance on
the exemption from registration provided in Section 3(b) of the Securities Act
of 1933 (“Securities Act”) and Rule 504 of Regulation D thereunder. No
commission or other remuneration was paid in connection with such transactions,
and no underwriter participated. All the investors were previously known to Mr.
Brock and/or service providers to the Company. The shares sold in the offering
are restricted from resale and purchased for investment purposes
only.
On
November 6, 2008, we issued 100,000 shares of restricted common stock to John
Schwartz, under a consulting agreement with the Company and under our 2008
Equity Incentive Plan upon the vesting of a portion of a stock award
dated November 6, 2008. Mr. Schwartz was retained as a consultant to
the Company due to his expertise in business management and operations in
connection with manufacturing and machining operations. His services
were primarily: review and analysis of operations and operational structure and
strategies; development of turbine manufacturing, supply and assembly logistics;
the preparation of alternative energy state grant applications; and assistance
in presentations and meetings with potential customers. On December 31, 2008 and
January 27, 2009, we issued to Mr. Schwartz an additional 600,000 and 300,000
shares, respectively upon the vesting of additional shares under the November 6,
2008 stock award. The issuances of the shares are exempt under SEC Rule 701, as
a contract relating to compensation. The shares issued are restricted from
resale and were acquired for investment purposes only.
In July
2008 and November 2008, we granted options to purchase a total of 32,000,000
shares of our common stock at $.05 per share to three consultants, Michael
Hughes, Peter Kolokouris and Charles LaLoggia. To the extent these
option grants constituted a sale of securities, the transactions were exempt
from registration under Sections 4(2) and 4(6) of the Securities
Act. The options were granted in transactions not involving a public
offering and only to accredited investors. These consultants are
accredited investors under the Securities Act, were knowledgeable about the
Company’s operations and financial condition and had access to such information.
The transactions did not involve any form of general solicitation. The options
are restricted from resale and were acquired for investment purposes
only. The options were granted as incentive for the consultants to
continue to provide services to the Company in the future, although they have no
obligation to do so.
On
December 22, 2008, the Company issued to each of Ronald J. Reding and Bruce C.
Caruana, consultants to the Company, 200,000 shares of our common stock at a
price of $0.05 per share pursuant to options exercised by them under our 2008
Equity Incentive Plan. Messrs. Reding and Caruana provided consulting services
to the Company in connection with the development and manufacturing of wind
turbine prototypes and logistics related thereto from May 2008 to the
present. They are principals in a company named Breed Enterprises,
Inc., a machine tooling shop. The shares were issued in transactions
not involving a public offering and exempt from registration pursuant to Section
4(2) of the Securities Act of 1933. The purchasers are accredited investors
under the Securities Act, were knowledgeable about the Company’s operations and
financial condition and had access to such information. The sales did not
involve any form of general solicitation. The shares issued are restricted from
resale and were acquired for investment purposes only.
Between
February 2 and July 14, 2009, the Company issued 741,000 shares of common stock
to forty-eight purchasers in connection with a private placement of the
Company’s common stock. The shares were sold at a price of $1.00 per
share for aggregate proceeds of $741,000. The shares of our common
stock issued in the private placement, were exempt from registration under the
Securities Act pursuant to Section 3(b) and Rule 505 of Regulation D
thereunder. Fifteen of the purchasers were accredited investors
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act. No more than thirty-five of the purchasers were
non-accredited. The shares issued are restricted from resale and were
acquired for investment purposes only. The sales did not involve any
form of general solicitation.
On July
15, 2009, we issued 16,660,000 shares of common stock to the selling
shareholders listed in this prospectus, upon the exercise of vested stock
options, at the exercise price of $0.05 per share, for total proceeds of
$833,000. The transactions were exempt from registration under
Sections 4(2) and 4(6) of the Securities Act. The shares were issued
in transactions not involving a public offering and only to accredited
investors. These option holders consultants are accredited investors
under the Securities Act, were knowledgeable about the Company’s operations and
financial condition and had access to such information. The transactions did not
involve any form of general solicitation. The shares issued upon exercise of the
options are restricted from resale and were acquired for investment purposes
only.
II-2
The
following documents are filed as part of this report:
(a)
|
The
following financial statements beginning at page
F-1:
|
1.
|
Reports
of Independent Registered Public Accounting Firm — Rotenberg & Co.,
LLP
|
|
2.
|
Balance
Sheets
|
|
3.
|
Statements
of Operations
|
|
4.
|
Statements
of Stockholders’ Equity
|
|
5.
|
Statements
of Cash Flows
|
|
6.
|
Notes
to Financial Statements
|
(c) Exhibits.
Upon written or oral request, we shall provide, at no cost, each person,
including any beneficial owner, to whom a prospectus is delivered, a copy of any
and all of the reports or documents that are herein incorporated by reference,
that are contained in the registration statement but not delivered herewith.
Such a request shall be made to WindTamer Corporation, 6053 Ely Avenue, Livonia,
New York 14487, Attention: Corporate Secretary.
Exhibit
Number
|
Title
of Document
|
|
3.1
|
Restated
Certificate of Incorporation of WindTamer Corporation, dated November 25,
2008 (incorporated herein by reference to Exhibit 3.1 to the Registration
Statement on Form 10 of WindTamer Corporation dated November 26, 2008
(File No. 000-53510)).
|
|
3.2
|
Amended
and Restated By-Laws of WindTamer Corporation, dated October 28, 2008
(incorporated herein by reference to Exhibit 3.2 to the Registration
Statement on Form 10 of WindTamer Corporation dated November 26, 2008
(File No. 000-53510)).
|
|
3.3
|
Certificate
of Correction of the Restated Certificate of Incorporation (Incorporated
herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of
WindTamer Corporation dated April 30, 2009 (File No.
000-53510)).
|
|
4.1
|
Specimen
Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the
Registration Statement on Form 10 of WindTamer Corporation dated November
26, 2008 (File No. 000-53510)).
|
|
5.1
|
Legal
Opinion of Woods Oviatt Gilman LLP (incorporated herein by reference to
Exhibit 5.1 to the Registration Statement on Form S-1 of WindTamer
Corporation dated July 16, 2009 (File No. 333-157304)).
|
|
10.1
|
Form
of July 10, 2008 Stock Option Agreement with Consultants, as amended
November 19, 2008 (incorporated herein by reference to Exhibit 10.1 to the
Registration Statement on Form 10 of WindTamer Corporation dated November
26, 2008 (File No. 000-53510)).
|
|
10.2
|
*
|
WindTamer
Corporation 2008 Equity Incentive Plan (incorporated herein by reference
to Exhibit 10.2 to the Registration Statement on Form 10 of WindTamer
Corporation dated November 26, 2008 (File No.
000-53510)).
|
10.3
|
Consulting
Agreement between WindTamer Corporation and John Schwartz, dated October
30, 2008 (incorporated herein by reference to Exhibit 10.3 to the
Registration Statement on Form 10 of WindTamer Corporation dated November
26, 2008 (File No. 000-53510)).
|
|
10.4
|
Stock
Award Agreement between WindTamer Corporation and John Schwartz, dated
November 6, 2008, as amended, December 30, 2008 (incorporated herein by
reference to Exhibit 10.4 to the Annual Report on Form 10-K of WindTamer
Corporation dated February 13, 2009 (File No.
000-53510)).
|
II-3
10.5
|
*
|
Form
of Stock Option Agreement with Non-Employee Directors under 2008 Equity
Incentive Plan (incorporated herein by reference to Exhibit 10.5 to the
Registration Statement on Form 10 of WindTamer Corporation dated November
26, 2008 (File No. 000-53510)).
|
10.6
|
Form
of November 18, 2008 Stock Option Agreement with Consultants (incorporated
by reference herein to Exhibit 10.6 to the Registration Statement on Form
S-1 of WindTamer Corporation dated October 1, 2009 (File No.
333-157304)).
|
|
10.7
|
Patent
Assignment dated June 4, 2002 by and between Gerald E. Brock et al., and
Future Energy Solutions Inc. (n/k/a WindTamer Corporation)
(incorporated herein by reference to Exhibit 10.7 to the Annual Report on
Form 10-K/A of WindTamer Corporation dated March 30, 2009 (File No.
000-53510)).
|
|
10.8
|
Agreement
between Alternative Wind Resources, LLC and WindTamer Corporation, dated
March 7, 2009 (incorporated by reference to Exhibit 10-1 of the Current
Report on Form 8-K filed by WindTamer Corporation dated March 12, 2009
(File No. 000-53510)).
|
|
10.9
|
Form
of Assignment of Stock Options Agreement dated November 2008, by and
between certain non-employee consultants of WindTamer Corporation and the
certain assignees (incorporated by reference herein to Exhibit 10.9 to the
Registration Statement on Form S-1 of WindTamer Corporation dated May 4,
2009 (File No. 333-157304)).
|
|
10.10
|
Agreement
for Limited Research by and between Clarkson University and Future Energy
Systems, Inc. (n/k/a WindTamer Corporation) dated July 1, 2008
(incorporated by reference herein to Exhibit 10.10 to the Registration
Statement on Form S-1 of WindTamer Corporation dated July 16, 2009 (File
No. 333-157304)).
|
|
10.11
|
Agreement
for Limited Research by and between Clarkson University and Future Energy
Systems, Inc. (n/k/a WindTamer Corporation) dated January 15, 2009
(incorporated by reference herein to Exhibit 10.11 to the Registration
Statement on Form S-1 of WindTamer Corporation dated July 16, 2009 (File
No. 333-157304)).
|
|
10.12
|
Consulting
Agreement between WindTamer Corporation and Patricia Cole dated February
12, 2009 (incorporated herein by reference to Exhibit 10.1 of the
Current Report on Form 8-K filed by WindTamer Corporation dated April 30,
2009 (File No. 000-53510)).
|
|
10.13
|
Termination
and Release between WindTamer Corporation and Patricia Cole dated April
24, 2009 (incorporated herein by reference to Exhibit 10.2 of the
Current Report on Form 8-K filed by WindTamer Corporation dated April
30, 2009 (File No. 000-53510)).
|
|
10.14
|
Agreement
for Limited Research by and between Clarkson University and WindTamer
Corporation dated May 18, 2009 (incorporated herein by reference to
Exhibit 10.1 of the Current Report on Form 8-K filed by WindTamer
Corporation dated May 22, 2009 (File No. 000-53510)).
|
|
10.15
|
Form
of WindTamer Corporation Stock Option Award Agreement with
employees/consultants under 2008 Equity Incentive Plan (incorporated by
reference herein to Exhibit 10.15 to the Registration Statement on Form
S-1 of WindTamer Corporation dated July 16, 2009 (File No.
333-157304)).
|
|
10.17
|
Form
of Lock-Up Agreement with Eugene R. Henn, George Naselaris, and Anthony C.
Romano Jr., each dated as of July 10, 2009 (incorporated herein by
reference to Exhibit 10.1 of the Current Report on Form 8-K
filed by WindTamer Corporation dated July 15, 2009 (File No.
000-53510)).
|
|
10.17
|
Lock-Up
Agreement with Gerald E. Brock dated as of July 10, 2009 (incorporated
herein by reference to Exhibit 10.2 of the Current Report
on Form 8-K filed by WindTamer Corporation dated July 16, 2009 (File
No. 000-53510)).
|
|
10.18
|
Lock-Up
Agreement with John Schwartz dated as of July 10, 2009 (incorporated
herein by reference to Exhibit 10.3 of the Current Report
on Form 8-K filed by WindTamer Corporation dated July 16, 2009 (File
No. 000-53510)).
|
|
10.19
|
Lock-Up
Agreement with Jesse Brock dated as of July 10, 2009 (incorporated herein
by reference to Exhibit 10.4 of the Current Report on Form 8-K
filed by WindTamer Corporation dated July 16, 2009 (File No.
000-53510)).
|
|
10.20
|
*
|
Employment
Agreement between WindTamer Corporation and Gerald Brock effective as of
July 14, 2009 (incorporated herein by reference to Exhibit 10.1 of
the Current Report on Form 8-K filed by WindTamer Corporation dated July
16, 2009 (File No.
000-53510)).
|
II-4
10.21
|
Option
Agreement entered into as of July 10, 2008 by and among Future Energy
Solutions, Inc. (n/k/a WindTamer Corporation) and each of Peter
Kolokouris, Michael Hughes, and Charles LaLoggia (incorporated by
reference herein to Exhibit 10.21 to the Registration Statement on Form
S-1 of WindTamer Corporation dated July 16, 2009 (File No.
333-157304)).
|
|
10.22
|
Agreement
for Limited Research between WindTamer Corporation and Clarkson University
dated August 18, 2009 (incorporated by reference herein to Exhibit 10.1 to
the Current Report on Form 8-K filed by WindTamer Corporation dated August
21, 2009 (File No. 000-53510)).
|
|
10.23
|
Lease
Agreement between WindTamer Corporation and Court Street Complex, LLC
dated August 20, 2009 (incorporated by reference herein to Exhibit 10.2 to
the Current Report on Form 8-K filed by WindTamer Corporation dated August
21, 2009 (File No. 000-53510)).
|
|
10.24
|
Option Agreement between WindTamer Corporation and Alternative Wind Resources, LLC, dated April 29, 2009 (incorporated by reference herein to Exhibit 10.24 to the Registration Statement on Form S-1 of WindTamer Corporation dated September 16, 2009 (File No. 333-157304)). | |
21
|
|
Subsidiaries
of Registrant
|
23.1
|
|
Consent
of EFP Rotenberg, LLP
|
23.2
|
Consent
of Woods Oviatt Gilman LLP (contained in Exhibit 5.1).
|
|
24
|
|
Power
of Attorney (incorporated by reference herein to Exhibit 24 to the
Registration Statement on Form S-1 of WindTamer Corporation dated March
30, 2009 (File No.
333-157304)).
|
* Management
contract or compensatory plan or arrangement.
The
public may read and copy and materials we file with the SEC at the SEC's Public
Reference Room at 100 F Street, N.E., Washington, DC 20549. The public may also
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800- SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The URL for the SEC
site is www.sec.gov
.
Item
17. Undertakings.
(a) The
undersigned registrant hereby undertakes:
1. to
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i. to
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
ii. to
reflect in the prospectus any facts or events arising after the effective date
of this registration statement (or the most recent post-effective amendment
hereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) promulgated under the Securities Act of 1933
if, in the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in this Registration Statement;
iii. to
include any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change to
such information in this Registration Statement;
Provided,
however, That:
A.
Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if this
Registration Statement is on Form S-8, and the information required to be
included in a post-effective amendment by those paragraphs is contained in
reports filed with or furnished to the Commission by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement; and
B.
Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if
this Registration Statement is on Form S-3 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this Registration Statement, or is
contained in a form of prospectus filed pursuant to Rule 424(b) that is part of
this Registration Statement.
C.
Provided
further, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if this
Registration Statement is for an offering of asset-backed securities on Form S-1
or Form S-3, and the information to be included in a post-effective amendment is
provided pursuant to Item 1100(c) of Regulation AB.
II-5
3. to
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
4. That,
for the purpose of determining liability under the Securities Act of 1933 to any
purchaser:
(i) If
the registration is relying on Rule 430B:
(A) Each
prospectus filed pursuant to Rule 424(b)(3) shall be deemed to be part of the
registration statement as of the date the prospectus was deemed part of and
included in this Registration Statement; and
(B) Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as
part of a registration statement in reliance on Rule 430B relating to an
offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of
providing the information required by section 10(a) of the Securities Act shall
be deemed to be part of and included in the registration statement as of the
earlier of the date such form of prospectus is first used after effectiveness or
the date of the first contract of sale of securities in the offering described
in the prospectus. As provided in Rule 430B, for liability purposes of the
issuer and any person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement to the
securities in the registration statement to which that prospectus relates, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such effective date, supersede or
modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such effective date; or
(ii) If
the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness.
Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that was
part of the registration statement or made in any such document immediately
prior to such date of first use.
5.
That, for the purpose of
determining liability of the registrant under the Securities Act of 1933 to any
purchaser in the initial distribution of the securities:
The
undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
i.
|
Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
|
ii.
|
Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
|
|
iii.
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
|
iv.
|
Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
|
. 6.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of each issue.
II-6
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Livonia, State of New
York, on the 9th day of
October, 2009.
WINDTAMER
CORPORATION
|
||
By:
|
/s/
Gerald E. Brock
|
|
Gerald
E. Brock
|
||
Chief Executive
Officer
|
Pursuant
to the requirements of the Securities Act, this registration statement has been
signed by the following persons in the capacities and on the date
indicated.
Signature
|
Title
|
Date
|
||
/s/ Gerald E. Brock
|
Chief Executive Officer, Chief Financial Officer
and Chairman
|
|
October
9, 2009
|
|
Gerald
E. Brock
|
(principal executive officer and principal financial
and accounting officer) |
|||
*
|
Director
|
October
9, 2009
|
||
Eugene
R. Henn
|
||||
*
|
Director
|
October
9, 2009
|
||
George
Naselaris
|
||||
*
|
Director
|
October
9, 2009
|
||
Anthony
C. Romano, Jr.
|
||||
* By: /s/ Gerald E. Brock
|
||||
Gerald
E Brock, Attorney-in-fact
|
II-7