Attached files
file | filename |
---|---|
EX-24 - POWER OF ATTORNEY - Arista Power, Inc. | f10k2009ex24_windtamer.htm |
EX-21 - SUBSIDIARIES OF REGISTRANT - Arista Power, Inc. | f10k2009ex21_windtamer.htm |
EX-32.1 - CERTIFICATION - Arista Power, Inc. | f10k2009ex32i_windtamer.htm |
EX-31.1 - CERTIFICATION - Arista Power, Inc. | f10k2009ex31i_windtamer.htm |
EX-23.1 - CONSENT OF EFP ROTENBERG, LLP - Arista Power, Inc. | f10k2009ex23i_windtamer.htm |
EX-3.4 - AMENDED AND RESTATED BY-LAWS - Arista Power, Inc. | f10k2009ex3iv_windtamer.htm |
EX-3.2 - AMENDED AND RESTATED BY-LAWS - Arista Power, Inc. | f10k2009ex3ii_windtamer.htm |
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-K
x
|
Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
|
For
the Fiscal Year Ended December 31, 2009
OR
¨
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
|
For the Transition Period from to |
Commission File
Number: 001-53510
WindTamer
Corporation
(Exact
Name of Registrant as Specified in its Charter)
New
York
|
16-1610794
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(I.R.S.
Employer
Identification
No.)
|
|
156
Court Street
Suite
# 7
Geneseo,
New York
|
14454
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(Registrant’s
Telephone Number, Including Area Code)
(585)
243-4040
(Former
name, former address and former fiscal year, if changed since last
report)
6053
Ely Avenue
Livonia,
New York 14487
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, Par Value $0.0001
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes oNo x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange
Act. Yes o No
x
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past
90 days. Yes x No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes ¨
No ¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. x
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 ¨ | Smaller reporting company x |
(Do not check if a
smaller reporting company)
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes
¨
No x
As of
June 30, 2009, the aggregate market value of the registrant's common stock held
by non-affiliates of the registrant was $28,622,000, based on the closing sale
price of $1.00 per share as of the end of the last business day of the
registrant's most recently completed second fiscal quarter. No public market for
the registrant's stock existed as of June 30, 2009. The aggregate
market value reported herein is based upon the sale of 636,000 shares of common
stock of the Company between the dates of February 2, 2009 and June 30, 2009, at
a price of $1.00 per share, pursuant to a private placement conducted by
registrant in reliance upon an exemption from registration under Section 3(b) of
the Securities Act of 1933 and Rule 505 of Regulation D thereunder.
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
Class
|
Outstanding
at February 28, 2010
|
|
Common
Stock, $.0001 par value per share
|
115,457,848
shares
|
DOCUMENTS
INCORPORATED BY REFERENCE
Document
|
Parts
into Which Incorporated
|
|
Proxy
Statement for the Annual Meeting of
Shareholders
to be held in 2010 (Proxy Statement)
|
Part III
(Items
10, 11, 12, 13 and 14)
|
TABLE OF CONTENTS
Page | |||
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PART I
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Item 1.
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1 | |
Item 1A.
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8 | |
Item 2.
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16 | |
Item 3.
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17 | |
Item 4.
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17 | |
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PART II
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||
Item 5.
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17 | |
Item 7.
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18 | |
Item 8. | Financial Statements and Supplementary Data | 23 | |
Item 9.
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23 | |
Item 9A(T).
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23 | |
Item 9B.
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25 | |
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PART III
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Item 10.
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26 | |
Item 11.
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26 | |
Item 12.
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26 | |
Item 13.
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26 | |
Item 14.
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26 | |
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PART IV
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Item 15.
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26 |
Business
|
Company
Overview
We have
developed a new technology that we are using in our “WindTamer™” wind
turbine. 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. We are in
the initial stages of marketing and selling our product to generate power in the
residential, commercial, governmental, industrial, recreational, and portable
markets. In the future, we plan to develop our technology for sale in
the low-head hydro 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 “WindTamer™” wind turbine in 2002. In
December 2003, Mr. Brock was issued a patent for the WindTamer turbine
technology, which was assigned to us. In 2007, Mr. Brock began to focus entirely
on WindTamer and commercialization of the technology. In January 2010, we were
issued a patent that protects the ornamental design of the Company's wind
turbine diffuser. We have also filed four additional utility patent applications
that we believe improve upon our technology, all of which are currently pending.
We are seeking international patent protection for our technology.
Since
2002, we have produced numerous working prototypes of WindTamer turbines and
have collected a variety of data related to the performance of the machine. From
2002 until the fourth quarter of 2009, we focused primarily on research and
development of our technology and production and testing of WindTamer turbine
prototypes. In the fourth quarter of 2009, we began selling our turbines with
limited marketing efforts, and are gradually increasing our sales and marketing
efforts. We started to install turbines in the first quarter of 2010 that we
sold in 2009. We have not yet begun large scale manufacturing of our turbines or
large scale marketing of them to customers, although we expect to commence both
in 2010. We are continually working to improve on our technology.
We
currently work with third-party suppliers to provide us with the components for
us to assemble our turbines. We continue to refine our manufacturing
requirements. We do not have any manufacturing or supply contracts and this
could hinder our development if suppliers cease to do business with us or are
unable to meet our demand. See “Risk Factors - We are initially relying on
independent manufacturers and suppliers for our products which could delay our
progress and later cause delay and damage customer
relationships.”
In
February 2010 we entered into agreements with three distributors for domestic
distribution of our products. We expect to enter into agreements with
additional distributors for domestic distribution of our products in 2010 and
beyond. We plan to license our technology for manufacture and
distribution internationally. At this time, however, we have no
definitive 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 and
renewable energy markets. We believe that our turbines will be sold to generate
energy in the residential, commercial, governmental, industrial, recreational,
and portable markets. We plan to do this by, among other things:
•
|
Developing
manufacturing capacity to facilitate mass production of our wind turbines
to be sold in U.S. and strategic alliances for the manufacture and sale to
foreign markets;
|
|
•
|
Developing
a sales force both organically and through strategic marketing and
distribution alliances;
|
•
|
Enhancing
the design, functionality, reliability, safety and cost effectiveness of
our patented technology; and
|
|
•
|
Establishing
joint ventures, strategic alliances, working participations, licensing,
and/or royalty agreements with third parties to augment our manufacturing
and marketing efforts worldwide.
|
1
In 2010,
we intend to phase out our reliance on subcontractors and third parties for
certain aspects of the production of our turbines, and bring certain parts of
our domestic production in-house. We do not expect to manufacture our
turbines for international delivery, but instead plan on entering into licensing
agreements to sell our products in a particular territory.
We have
done extensive testing on the performance and efficiency of WindTamer turbines.
We believe the data from this testing show the superiority of our product when
compared to other currently available wind turbine technologies. 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 wind turbine technology and have four pending utility patent
applications.
WindTamer
turbines can be installed in a variety of ways, including, among others, mounted
on poles, mounted on rooftops, mounted on parking lot light poles and mounted on
a mobile trailer. We have initially introduced WindTamer
turbines that range in size from 1.0 to 3.5 kilowatts for commercial,
industrial, governmental and residential use. Larger turbines, including
a 15kw turbine, are currently under development.
We
believe that the political climate for the sale of WindTamer turbines is
beneficial. The energy that people utilize, how that energy is produced, and the
by-products of producing that energy are topics in political forums around the
world. The greater use of wind power in lieu of generators that use fossil fuels
to generate power will reduce harmful emissions such as carbon dioxide and
sulfur dioxide.
Industry
Overview
The use
of renewable energy technologies has grown rapidly during the past several
years. Climate change concerns coupled with high energy prices are factors that
are 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 renewable energy. These renewable energy resources include wind,
solar, geothermal heat, tides and biofuels. As a result, we believe there is a
demand for machines and processes that can deliver renewable energy at rates
that are competitive or 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 approximately 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 the
AWEA Small Wind Turbine Global Market Study, year ended 2008, published by the
AWEA in June 2009, 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 of 1 – 10kWh in capacity constitute
the fastest growing market segment. 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 the federal government and select
states, which include, among others, New York, California, Michigan, and
Massachusetts. There can be no assurance that these incentives or market
conditions will continue, and the failure to do so would have a material adverse
affect on our 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 '"
In
February 2010 the Small Wind Certification Council, or SWCC, began accepting
certification applications 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. There can be no assurance,
however, that our products will receive SWCC certification. 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.
2
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.
Turbines
with a capacity to generate 10 kWh of electricity are often used to power single
homes or farms in remote or off-grid locations. In our efficiency testing we
have found that WindTamer turbines have 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.
The cost
of wind turbines can typically 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, through
the Energy Research and Development Authority can subsidize up to 50%
of a project's cost for commercial and industrial
users.
Our
Products and Technology
Using our
patented technology, we have developed the WindTamer wind
turbines. Based on our testing data, we believe that our WindTamer
turbines extrapolate a higher amount of usable electricity from the wind’s
kinetic energy as compared to similar-sized conventional wind turbine technology
currently available, including other diffuser augmented wind turbine technology
(see description below in the section titled “Our Technology”), 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).
WindTamer
We
believe that the appeal of WindTamer rests, in part, with its simplicity. 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 turbines typically
stand 20 to 60 off the ground in stand-alone applications 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. WindTamer turbines weigh approximately 100 to 1,000 pounds
depending on size and power capacity. WindTamer turbines operate with minimal
noise or vibration. The design of our units provides for UV-ray and weather
protection based on testing in different seasonal condition. We believe that
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.
We
believe we will need to continue research and development to improve upon our
technology, as is common with many other technologies. We will also
need to continue to develop our manufacturing and assembly base and sales and
distribution resources and networks to continue the commercialization of our
products. We have begun to manufacture turbines for power capacities
from 1.0kWh to 3.5 kWh. We are marketing and selling these models for
use in the commercial, governmental, industrial, residential and recreational
markets.
Our
Technology
WindTamer
turbines are what are 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. Our
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 WindTamer’s rotor aiding the push of the wind
which existing DAWT technology does not provide. We believe that our 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
similar or larger size.
3
We
continue to build and test new prototypes and perform additional research and
development to further improve our patented technology. During this
testing, the Company found that the WindTamer turbine outperformed several of
the top selling conventional wind turbines, all of which were two to ten times
larger in size than WindTamer. WindTamer produced several times the electrical
output of similar sized conventional wind turbines without many of the problems
associated with such conventional wind turbines. 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
also filed four additional utility patent applications that we believe improve
upon our wind turbine technology, all of which are currently
pending. 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
compete directly against 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. These companies are manufacturers of large wind turbines. We expect
that the larger-capacity versions of the WindTamer turbines will not only
compete with these companies, but can also be used as a complement to these
larger turbines in wind farm applications.
The small
wind turbine market consists of many manufacturers. 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, FloDesign, WePower, Helix
Wind, Urban Green Energy, Raum Energy, Kestrel, Proven Energy, Endurance Wind
Power and Venetera Energy.
Competitive
Advantages
We
believe that the WindTamer turbine has several competitive advantages over
conventional wind turbines and other energy sources for power
generators.
·
|
More Cost Effective than
Existing Conventional Wind Turbines. We believe that our WindTamer
turbines are more cost-effective than existing conventional wind turbines,
resulting in a shorter payback period. In addition, we expect
annual maintenance for the WindTamer turbine to be significantly less than
conventional turbines.
|
·
|
Quiet Operation.
WindTamer turbines operate quietly even under the heaviest of electrical
loads. Conventional wind turbines and traditional fuel operated generators
can be very noisy.
|
·
|
Point of Consumption
Application. The WindTamer turbine can be used as a point of
consumption machine by being placed in very close proximity to where
electricity is needed. 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 typically 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 WindTamer
turbines can be placed on top of or adjacent to commercial buildings or
residential homes.
|
4
·
|
Government Support. We
believe that the availability of government tax 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 up
to 50% of a project's cost for commercial and industrial
users. These tax credits can help make wind turbines more
attractive than other power generation products. One of our
challenges will be to obtain approvals from these government authorities
so that purchasers of our products can qualify for these incentives, to
the extent required. Since we have only just begun to
manufacture and sell our initial products, and have a limited operating
history, we cannot be sure that our products will qualify for these
incentives. 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, reduced 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.”
|
·
|
Easy
Installation. Installation of WindTamer turbine is
relatively easy, particularly when compared to installation of
conventional wind turbines. A typical installation can be
completed in two to three days. During the installation of our
first sales, we discovered that the permitting process for our WindTamer
units is generally quick and acceptable to local building inspectors and
town boards. We have approached and received approval from more
than 10 town boards for the installation of our WindTamer
turbines.
|
·
|
Works at Various Weather
Conditions. Conventional wind turbines automatically shut down by
means of furl or feathering when wind speeds exceed approximately 25 to 35
miles per hour. WindTamer turbines have been tested at speeds
in excess of 75 miles per hour without shutting down and without incurring
any damage. During research and development, WindTamer turbines were left
exposed to a wide variety of weather conditions, including snow and ice
storms along the Canadian border, for a continuous period of two years
with no maintenance issues. The rotor blades are protected from the
weather and UV rays, which often contribute to the demise of conventional
wind turbines shortening the life of the generator and rotor
blades.
|
·
|
Safety. WindTamer
turbines pose virtually no safety risks as the rotor blades are housed.
Unlike conventional wind turbines, 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
WindTamer turbines because the rotor blades are housed. When conventional
wind turbines are idle, ice can accumulate on the blades and be thrown
when the turbines engage, causing 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. Due to our turbines’ design, birds and bats do not fly
into WindTamer turbines.
|
·
|
Lower to the
Ground. WindTamer turbines are typically mounted on
poles that are half as high as other turbines' poles. WindTamer
pole-mounted turbines are installed on a pole that is typically 30 feet to
60 feet in height, depending on the size of the turbine being installed,
as compared to poles that are typically 120 feet for a comparable
conventional turbine. We are able to use shorter poles because
our turbines' efficiency is superior to other turbines, and therefore we
do not require the higher winds that exist at higher elevations to produce
power. WindTamer turbines can be installed at the higher elevations if the
customer elects to capture the higher wind speeds to generate more
power.
|
5
Additional
Vertical Markets
We have
received substantial interest in our turbines, including the under-development,
larger 172GT-15000 unit, from various entities that we did not originally
include as target markets. However, we have since become more aware of the
potential high demand for, as well as the variety of applications of, our
turbines in these additional vertical markets.
·
|
Landfills; Airports;
|
·
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Schools
and Universities;
|
·
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Mobile
Unit Opportunities; and
|
·
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Rooftop and Lighting Pole
Applications.
|
We have
discovered there is the potential for many ancillary sales when selling our
turbines, including selling service contracts, applying custom color or graphics
to a unit, offering long term warranties, offering various types of wind
studies, and supplying a range of options in storage
batteries.
Domestically,
we are utilizing distributors to maximize our sales, as well as employing our
own sales staff. We are fulfilling sales orders by initially
arranging for the manufacture of our turbines via third parties and, eventually,
we plan to manufacture via our in-house manufacturing. We do not expect to
manufacture our turbines for international delivery, but instead plan on
entering into licensing agreements for the right to manufacture and sell our
products in a particular territory.
Customers
While we
believe there will be wide application for our products, we have initially focused
selling our turbines domestically for residential, commercial and governmental
customers. Our initial customers have been in the residential and light
commercial markets, although we are in negotiations for larger orders in the
governmental, industrial and recreational markets. We plan to work
with larger customers for wind farm applications. In the second half of 2010 and
beyond, we plan to seek licensing arrangements with international
customers.
Intellectual
Property
Patents
WindTamer
turbines are a Diffuser-Augmented Wind Turbine, or DAWT. We have developed our
turbines using our patented technology, “Fluid Driven Vacuum Enhanced Generator”
(U.S. Patent No. 6,655,907). This patent was issued in December 2003, was
assigned to the Company and expires in 2022.
We also
own U.S. Patent No. D608,736 entitled "Diffuser for a Wind Turbine," which
issued in January 2010. This patent protects the ornamental design of
the Company's wind turbine diffuser. This patent will expire in
2024. We have also filed corresponding design patent applications in
Mexico and Canada, both of which are currently pending.
We have
also filed four additional utility patent applications that we believe improve
upon our wind turbine technology, all of which are currently
pending. One of the pending patent applications has been filed under
the International Patent Cooperation Treaty (PCT) which 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 WindTamer™ and Hydro Tamer™, and the
slogan WindTamer Bringing Wind Power Down to
Earth™ including the design of that slogan. We have pending trademark
applications for each of these trademarks in the U.S. Also, the marks
WindTamer™ and Hydro Tamer™ have pending trademark applications in Canada.
Further, the marks WindTamer™ and the slogan WindTamer Bringing Wind Power Down to
Earth™ have pending trademark applications in Mexico. We plan to use
these trademarks in marketing our products.
6
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
WindTamer 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 WindTamer turbine.
However, it is possible that zoning approvals for end users could delay
implementation for purchasers of our products. For instance, in late 2009 we
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.
Several
states offer financial incentives to purchasers of small wind powered systems.
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 WindTamer turbine and related components. We plan to continue to
focus our resources to enhance the design and performance of our technology, and
to develop our larger 7.5 kWh and 15kWh turbines. Research and
development expenses for the fiscal years ended December 31, 2009 and 2008 and
since inception through December 31, 2009, were $828,724, $249,171 and
$1,124,177, respectively.
Employees
We
currently have fifteen full-time employees and six part-time
employees. As we further develop and market WindTamer, we will need
to hire additional employees. 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.
Office
and Facilities
Our
executive offices are located at 156 Court Street, Geneseo, New York
14454. At this location we lease offices and a warehouse containing a
total of 4,300 square feet of space. We utilize this space to
assemble our WindTamer turbines. In the second half of 2010 we intend
to move into a larger facility to expand our manufacturing capacity and to bring
certain parts of our domestic production in-house.
7
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.
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, 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 had only limited sales to date. We plan to continue our selling
efforts, although there can be no assurance that we will be successful in
expanding our sales. Additionally, we had planned on raising $20 million in a
private placement in 2009, 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 that 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 approximately $2.6 million in equity
capital during 2009. However, if we are unable to generate any
additional needed capital from our 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 by incurring 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.
8
The
auditors report for the fiscal years ended December 31, 2009 and 2008 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, 2009 and 2008, 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.
Our
future success depends on our founder and other key executives and our ability
to attract, retain and motivate qualified personnel.
Our
future success is largely dependent upon our founder, Gerald Brock, and the
other principal members of our executive team including, without limitation, our
President William Schmitz. The unexpected loss of the services of any
of these persons might impede the achievement of our research, development and
commercialization objectives and have a serious impact and adverse effect on our
business, financial condition and results of operations, and an investment in
our stock. Recruiting and retaining qualified management, sales,
marketing, and other personnel and consultants will also be critical to our
success. We may not be able to attract and retain these personnel and
consultants on acceptable terms. We do not maintain "key person" insurance on
any of our employees.
We
may not be able to effectively manage our growth, expand our production
capabilities or improve our operational, financial and management information
systems, which would impair our results of operations.
If we are
successful in executing our business plan, we will experience growth in our
business that could place a significant strain on our business operations,
management and other resources. We intend to phase out our reliance
on subcontractors and third parties for certain aspects of the production of our
turbines, and bring certain parts of our domestic production
in-house. As a result, our ability to manage our growth will require
us to expand our production capabilities, continue to improve our operational,
financial and management information systems, and to motivate and effectively
manage our employees. We cannot provide assurance that we will be able to expand
our production capabilities effectively or at all, that our systems, procedures
and controls or financial resources will be adequate, or that our management
will keep pace with this growth. We cannot provide assurance that our
management will be able to manage this growth effectively.
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 21 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 WindTamer
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 agreements
with them to perform services for us and they could stop providing services for
us at any time. As a result, if any or 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.
9
We
face competition from several sources, which may make it more difficult to
introduce WindTamer turbines into the electrical power generation
market.
The power
generation and renewable energy markets in which we compete are rapidly evolving
and intensely competitive. We face formidable competition from traditional and
well-capitalized fossil-fueled generator manufacturers and distributors, from
established conventional wind turbine manufacturers and distributors as well as
from other providers of renewable energy. 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 the traditionally powered generator markets,
including fossil-fueled generators, the conventional wind turbine powered
generator markets and other renewable energy 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
third-party distributors or retailers for the production and marketing of
WindTamer turbines. We have begun establishing relationships to distribute and
market our products. There can be no assurance that we will be
successful in developing or sustaining the necessary relationships, or that
these relationships will prove to be successful in selling our products. 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.
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.
In March
2009 we entered into an agreement with an early stage company, Alternative Wind
Resources, LLC, to produce a 15kWh prototype wind turbine unit. The
agreement also called for the order of 1,000 turbines from us and provided
Alternative Wind Resources 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 did not deliver the 15kWh
prototype. In April 2009 we also granted Alternative Wind Resources
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 paid a $10,000 fee for the option but did not pay the $6.0
million license fee. We received a letter from Alternative Wind Resources dated
September 10, 2009 terminating 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 previously paid to the Company. The Company
believes that it has complied with the provisions of the agreement and intends
to dispute Alternative Wind Resources’ claims that it did not provide such
information. The Company has confirmed the termination of the
agreements and has disputed 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. As of December 31, 2009, the $60,000 is included in
accounts payable and accrued expenses on the Company's balance
sheet.
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.
10
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 WindTamer turbines 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 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 WindTamer wind turbine and a patent
that protects the ornamental design of the Company's wind turbine diffuser. We
also have four 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.
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 have
the financial or other resources to enforce our rights or 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
business will be heavily reliant upon patented and patentable technology for
wind turbines and related intellectual property. We are not aware of any
infringement by us or broad claims against which we may infringe. 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.
If
our products and technology do not achieve market acceptance, we may not
generate sufficient revenue to conduct our operations or become
profitable.
11
We are a
development stage company and have generated no significant revenues to date.
Although we have patented the technology used in WindTamer turbines, we have
just begun attempts to market and sell our products. We cannot assure you that a
sufficient number of customers will purchase our products. The failure of
WindTamer turbines 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 well against 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 effectively 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 the federal government and 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 for wind on
December 31, 2012. These credits can help make wind turbines more
attractive than other power generation products.
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 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 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.
We
are initially relying on independent manufacturers and suppliers for our
products which could delay our progress and later cause delay and damage
customer relationships.
We
currently use third party manufacturers and suppliers for the development of our
products. Although we plan to develop our own manufacturing
operations for certain aspects of our domestic production, we currently have no
large scale manufacturing capabilities. If we are unable to maintain
satisfactory arrangements for 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, which
could adversely affect our ability to produce our products. 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.
12
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, and
could result in a negative customer satisfaction that could negatively impact
our future sales. This could adversely affect our business and results of
operations.
We
are developing larger turbines for sale, which we may not be able to design,
which may not be marketable and which we may not be able to properly
manufacture.
We
believe that there is a substantial market for our larger turbines, including
our currently under development 15kw turbine. Although we have
done significant research and development, including computer modeling, of our
larger turbines, we have not designed, built and tested a turbine larger than
our 3.5kw turbine. As a result, there can be no assurance that the
larger turbines will provide the same or similar efficiency levels as our
smaller turbines, and therefore the larger turbines may produce less energy than
projected making them less attractive to potential purchasers.
In
addition, the design and development of our larger turbines is costly, and we
may not be able to fully fund for this design, development and
testing. We are currently in negotiations with third parties to pay
for some or all of the design, development and testing of these larger turbines,
but there can be no assurances that such negotiations will be
successful. If we are not successful in designing, developing and
testing our larger turbines, we will not be able to execute on our business plan
which could have a negative affect on our results of operations and your
investment.
Further,
assuming we can successfully design, develop and test our larger turbines,
manufacturing these larger turbines will be expensive and may require skills
that we do not possess. The larger turbines that are currently under
development are significantly larger than our current turbines, and the
manufacturing, assembly and installation procedures are likely to be different
than those associated with our current smaller turbines. If we
are not able to properly manufacture, assemble and install the larger turbines,
or arrange for such, then we will not be able to execute on our business plan
which could have a negative affect on our results of operations and your
investment
We
provide a warranty for our turbines, which may result in us providing
significant customer support, maintenance and repairs at significant cost to us
without corresponding revenue, which could have a materially negative impact on
our financial condition and results of operations.
We offer
a standard warranty for our turbines and offer certain customers an extended
warranty for an additional fee. In the future, we plan to offer
service contracts to certain customers. Although we do not
expect our turbines to require significant maintenance, there can no assurances
that such will prove to be correct during the term of the warranty or extended
warranty. If some or all of our turbines require repairs or
maintenance, we may be required to spend significant time, money and other
resources repairing or maintaining the turbines at significant cost to us
without generating any additional revenue for us. We do not currently
reserve funds on our balance sheet to fund servicing our warranty obligations,
if any. Servicing our warranties could result in significant funds
and resources being expended by us, which could have a materially negative
effect on our financial condition, results of operations and your
investment.
RISK
FACTORS CONCERNING INVESTMENT IN OUR COMPANY
There
is currently a limited public market for our shares, and if an active market
does not develop, investors may have difficulty selling their
shares.
There is
currently only a limited public trading market for our common
stock. 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 an active 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 or at all. 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.
13
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;
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·
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developments
concerning intellectual property rights and regulatory approvals relating
to WindTamer;
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·
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quarterly
variations in our results or the results of our
competitors;
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·
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developments
in our industry and target markets;
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·
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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.
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 Chairman, Chief Executive Officer and Chief Financial 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 43.3% of our outstanding shares as of February 28, 2010. 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:
•
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delaying,
deferring or preventing a change in control of our
company;
|
•
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impeding
a merger, consolidation, takeover or other business combination involving
our company;
|
•
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causing
us to enter into transactions or agreements that are not in the best
interests of all of our stockholders;
or
|
•
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discouraging
a potential acquirer from making a tender offer or otherwise attempting to
obtain control of our company.
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14
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
384,000,000 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.
We
have determined that our internal control over financial reporting and
disclosure controls and procedures were ineffective, which, if not remedied,
could have an adverse effect on our business and our stock price.
We are required to design and maintain
an adequate system of internal control over financial reporting and assess and
report on such internal control structure annually. Additionally, we
must also maintain adequate disclosure controls and procedures and 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. In making these assessments, our Chief Executive Officer and
Chief Financial Officer has determined that our internal control over financial
reporting and disclosure controls and procedures were ineffective as of December
31, 2009. The ineffectiveness of our internal control over financial
reporting related to: 1) an insufficient complement of qualified accounting
personnel and controls in order to assure adequate segregation of duties; 2) a
general lack of formally documented comprehensive entity level controls; and, 3)
incomplete documentation and application of general computer control policies
and procedures associated with information technology systems used for financial
reporting. The ineffectiveness of our disclosure controls and
procedures related to the Company's failure to timely disclose a material
agreement.
15
We are implementing measures to
remediate these deficiencies, as described further below under Item 9A(T)
"Controls and Procedures." There can be no assurance that our efforts
will be successful. If we fail to maintain adequate internal controls
and disclosure controls and procedures, including any failure to implement
required new or improved controls, or we encounter difficulties in their
implementation, our business and operating results could be
harmed. Current and potential shareholders could also 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.
CAUTIONARY
STATEMENT
CONCERNING
FORWARD-LOOKING INFORMATION
In
addition to the other information contained in this report, investors should
carefully consider the risk factors disclosed in this report in evaluating an
investment in our common stock. All statements contained in this report, 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
report. All forward-looking statements and reasons why results may differ
included in this report 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 report
are qualified by these cautionary statements.
Access
to SEC Filings
Interested
readers can access the Company’s Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, current reports on Form 8-K, and any amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, through the
U.S. Securities and Exchange Commission’s website at www.sec.gov . These
reports can be accessed free of charge.
Properties
|
Our
corporate headquarters are located at 156 Court Street, Geneseo, New York
14454. At this location we lease offices and a warehouse containing a
total of 4,300 square feet of space. We utilize this space to
assemble our WindTamer turbines. The sublease is for a two year term
from November 1, 2009 through October 31, 2011, with a monthly rent of
$1,400. We own or lease no other real estate.
16
We
believe that we will need to lease or acquire additional properties during the
second half of 2010 when we anticipate our operations to grow. This includes our plan to
move into a larger facility for manufacturing capacity to bring certain parts of
our domestic production in-house.
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 Annual Report on
Form 10-K we are not a party to any material pending legal
proceedings.
Submission
Of Matters To A Vote Of Security
Holders.
|
None.
PART II
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
|
Common
Stock
Our
common stock is quoted on the OTC Bulletin Board (the "OTCBB") under the symbol
WNDT. The common stock was first approved for quotation on the OTCBB
on November 16, 2009, and no bid quotations were reported prior to fourth
quarter of 2009. The quarterly high and low bid prices as reported by
the OTCBB between November 16, 2009 and December 31, 2009 were $2.60 and $.40,
respectively. These quotations reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not necessarily represent actual
transactions.
At
February 28, 2010, we had 118 holders of record. We believe that the
number of beneficial owners of our common stock on that date was substantially
greater.
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.
Equity
Compensation Plan Information
Information
about our equity compensation plans at December 31, 2009 is as
follows:
Number of securities
to be
issued
upon
exercise of outstanding
options, warrants & rights
|
Weighted average
exercise
price of
outstanding options,
warrants &
rights
|
Number
of securities
remaining available for
future
issuance under
equity compensation plans
(excluding(a))
|
||||||||||
Plan
Category
|
(a)
|
(b)
|
(c)
|
|||||||||
Equity
compensation plans approved by stockholders
|
||||||||||||
Stock
Options (1)
|
4,661,667
|
$
|
.72
|
|||||||||
Restricted
Stock Award (2)
|
25,000
|
|||||||||||
4,686,667
|
0
(3)
|
|||||||||||
Equity
compensation plans not approved by stockholders (3)
|
0
|
$
|
0
|
0
|
||||||||
Total
|
4,686,667
|
$
|
.72
|
0
(3)
|
17
(1)
|
Consists
of the 2008 Equity Incentive Plan, which permits the award of stock
options, restricted stock and various other stock-based
awards.
|
(2)
|
The
restricted stock award does not have an exercise price and vested January
5, 2010 upon the achievement of performance
targets.
|
(3)
|
On
December 30, 2009, the Company's Board of Directors approved, subject to
shareholder approval, an amendment to the 2008 Equity Incentive Plan to
increase the number of shares of Common Stock available for awards from
8,000,000 shares to 16,000,000 shares. The Company plans to
present the proposal for shareholder approval at its Annual Meeting of
Shareholders in April 2010.
|
Recent
Sales of Unregistered Securities
On
December 21, 2009, the Company issued 91,000 shares of common stock in a private
placement to O'Connell Electric Company, Inc., in exchange for electrical
contracting services for a purchase price of $91,000. The transaction was exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
or the Securities Act. The shares were issued in a transaction not
involving a public offering. The purchaser is an accredited investor
as defined under the Securities Act, was 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 are restricted from resale and were acquired for investment
purposes only.
On
February 3, 2010, the Company issued 71,428 shares of common stock in a private
placement to WOG Holdings, LLC, in exchange for legal services rendered in 2009
for a purchase price of $50,000. The transaction was exempt from registration
under Section 4(2) of the Securities Act. The shares were issued in a
transaction not involving a public offering. The purchaser is an
accredited investor as defined under the Securities Act, was 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 are restricted from resale and were
acquired for investment purposes only.
The
securities sold in the above-referenced transactions have not been registered
under the Securities Act and may not be offered or sold in the United States
absent registration or an applicable exemption from registration
requirements.
Issuer Repurchases of Equity
Securities
We did
not make any repurchases of our common stock during the fourth quarter of fiscal
2009.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
|
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 Annual Report on Form 10-K. 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 Annual
Report on Form 10-K.
18
Overview
We are a
development-stage company that has developed a new type of wind turbine, based
on our patented technology. We believe that our patented technology
enables our turbines to harness wind energy more efficiently than other turbines
currently available in the market, thereby enabling our turbines to provide more
energy than other comparably sized and priced turbines.
We were
formed in 2001 and received our first patent in 2003. From 2003 through the
third quarter of 2009, we focused virtually all of our resources on research and
development, including the testing of multiple prototypes. We have
collected a variety of test data related to the performance of the
machine. During the fourth quarter of 2009, we began hiring our
experienced management team as we expanded our efforts from research and
development to also include sales, marketing, operations and related
efforts. We have had no significant revenues to date. In
the fourth quarter of 2009, we began selling our turbines, with installations of
turbines beginning in the first quarter of 2010. We have not yet
begun large-scale manufacturing.
We are
seeking to market our products in the residential, commercial, governmental,
industrial, recreational, and portable markets. In the future, we intend to
develop WindTamer turbines of several sizes and capabilities for the low-head
hydro renewable energy and transportation markets. Our initial
customers have purchased our smaller turbines in the residential and light
commercial markets. We are targeting customers for substantially
larger orders in the governmental, industrial and recreational
markets.
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 expanding our operations to meet our anticipated growth and 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 WindTamer prototype turbines. Our future cash
requirements will depend on many factors, including our level and types of sales
and the timing and progress of those efforts, 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
arrangements, or our products are not initially accepted by the market.
This will be affected to a large extent to our ability to secure multi-unit
orders from larger commercial customers who we have begun
targeting.
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 products we may
continue to seek to raise additional capital to accelerate the growth of our
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
Fiscal
Year Ended December 31, 2009 Compared to Fiscal Year Ended December 31,
2008
We had no
revenues for the fiscal years ended December 31, 2009, or 2008, or since
inception.
19
Operating
expenses for the fiscal year ended December 31, 2009, or fiscal 2009, were
$2,824,440 and $1,139,806 for the fiscal year ended December 31, 2008, or fiscal
2008, and $4,056,181 since inception through December 31, 2009. The increase in
operating expenses was due to the increase in operating activities in fiscal
2009 as we began to
build our first production models and prepare our operations to begin our first
sales.
Our
operating expenses have consisted primarily of officer compensation, consulting
fees and research and development expenses. The increase in operating expenses
in fiscal 2009 included an increase in research and development expenses of
$579,553 and an increase in Selling, general and administrative expenses, or
SG&A expenses, of $1,105,081 as compared to fiscal 2008. This increase
in research and development expenses was comprised primarily of labor and
materials for the construction, testing and refinement of our production models.
This increase in SG&A expenses was comprised primarily of compensation and
professional fees, including stock-based compensation expense for employees and
consultants of $1,011,030 and $407,752 in fiscal 2009 and 2008,
respectively.
The
Company incurred net losses of $2,823,052 and $1,139,806 for fiscal 2009 and
2008, respectively, and $4,054,601 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
initially introduced WindTamer turbines from 1.0 to 3.5 kilowatts for
commercial, industrial, governmental and residential use. Larger
turbines, including a 15kw turbine, are currently under development. We have not
yet begun large scale manufacturing of our turbines or large scale marketing of
them to customers, although we expect to commence both in 2010. We have begun
working with distributors for WindTamer turbines for domestic sale. We
plan to pursue licensing opportunities later in 2010. At this time,
however, we have no definitive 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
turbines. 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 began taking orders for our first sales in late 2009
and made our first deliveries in January 2010. We plan to hire approximately 25
to 50 persons over the next 12 months in the areas of sales, administration,
engineering and product assembly. We have outsourced our manufacturing function
to local manufacturers to begin sales but during 2010 we intend to phase out our
reliance on subcontractors and third parties for certain aspects of production,
and bring certain parts of our domestic production in-house.
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 Company has
demanded $77,413.30 as reimbursement for engineering and materials costs,
which has not been paid to date. 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 granted 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 did not provide the purchase order. We
did not deliver 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 terminating 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 has disputed Alternative Wind Resources, LLC’s
claims that it did not provide such information. We have confirmed the
termination of the agreement and option and also disputed 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. As of December 31, 2009, the $60,000 is included in
accounts payable and accrued expenses on the Company's balance
sheet.
20
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
December 31, 2009, we had a working capital of $742,964 as compared to $171,038
of working capital as of December 31, 2008. The increase in working capital is
attributed to proceeds of approximately $816,000 received in our private
placement of common stock as well as proceeds of approximately $1,600,000 from
the exercise of certain consultant stock options in July and November 2009,
offset by the use of capital in the development of our production models and
related expenses during fiscal 2009. 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 the proceeds from two private placements
conducted in 2009.
We
launched the commercialization of our products in the third quarter of 2009 with sales and
installations of turbines beginning in the first quarter of 2010. We
believe that we will need additional capital to meet anticipated demand for our
products over the next twelve months. We raised approximately $2.6 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 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 operations,
we will need to seek additional financing. We have outsourced our
manufacturing function to local manufacturers to begin sales but during 2010 we
intend to phase out our reliance on subcontractors and third parties for
production, and bring certain parts of our domestic production
in-house. We may also seek additional financing for our plans to
build internal manufacturing capacity. We believe that we would need
approximately $6.0 to $7.0 million to do so. 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.
There can
be no assurance that any revenues from our 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 from operations we may seek to raise additional
capital to accelerate the growth of our operations or build on our manufacturing
and distribution infrastructure.
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, 2009 and 2008, 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.
21
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.
On
September 30, 2009, the Company adopted changes issued by the Financial
Accounting Standards Board (“FASB”) to the authoritative hierarchy of
GAAP. These changes establish the FASB Accounting Standards
CodificationTM
(“Codification”) as the source of authoritative accounting principles recognized
by the FASB to be applied by nongovernmental entities in the preparation of
financial statements in conformity with GAAP. Rules and interpretive releases of
the Securities and Exchange Commission (SEC) under authority of federal
securities laws are also sources of authoritative GAAP for SEC
registrants. The FASB will no longer issue new standards in the form of
Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts;
instead the FASB will issue Accounting Standards Updates. Accounting Standards
Updates will not be authoritative in their own right as they will only serve to
update the Codification. These changes and the Codification itself do not change
GAAP. Other than the manner in which new accounting guidance is
referenced, the adoption of these changes had no impact on the Financial
Statements.
Stock
Based Compensation
In
December 2004, FASB issued SFAS No. 123R, Share-Based Payment (“SFAS
No. 123R”), now ASC 718. ASC 718 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. ASC 718 focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. ASC 718 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,” now ASC 505 and
EITF 00-18, “Accounting Recognition for Certain Transactions Involving Equity
Instruments Granted to Other Than Employees,” now ASC 505. 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), now ASC 718.
22
Management
has valued the options at their date of grant utilizing the Black-Scholes Option
Pricing Model. Prior to there being 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. Since the Company's stock started trading on the OTCBB, the
closing price on the day prior to the grant date has been used. 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, ASC 718. 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.
Financial
Statements and Supplementary Data
|
The
financial statements required hereby begin on page F-1 of this
report.
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
There has
been no change of accountants nor any disagreements with accountants on any
matter of accounting principles or practices of financial statement disclosure
required to be reported under this item.
Item 9A(T).
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures
The
Company’s management has established disclosure controls and procedures designed
to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) is recorded, processed, summarized and reported
within time periods specified in the SEC rules and forms. Such disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is accumulated and
communicated to the Company’s management to allow timely decisions regarding
required disclosure.
Based on
the evaluation of the effectiveness of our disclosure controls and procedures,
our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) were not effective as of December 31, 2009. This
conclusion is based on the Company’s failure to timely disclose as a material
agreement the Option Agreement between the Company and Alternative Wind
Resources, LLC, dated April 29, 2009 and due to the material weaknesses in our
internal control over financial reporting discussed further below under
"Management’s Report on Internal Control Over Financial Reporting."
We are
committed to improving our disclosure controls and procedures. As
part of this commitment, we have taken steps to improve our disclosure controls
and procedures. These steps include: (i) updating our disclosure
controls and procedures to require that all agreements entered into by the
Company be provided to multiple individuals within the management team for
evaluation; (ii) requiring that management confer with the Company’s
23
legal
counsel and independent auditors when questions as to the materiality of
disclosure requirements for agreements arise; and (iii) providing additional
education to the management team regarding the Company’s reporting requirements
and obligations. They also include the steps we plan to take to
remediate the material weaknesses in our internal control over financial
reporting discussed further below under "Plan for Remediation of Material
Weaknesses."
We will
continue to monitor and evaluate the effectiveness of our disclosure
controls and procedures and our internal controls over financial reporting on an
ongoing basis and are committed to taking further action and implementing
additional enhancements or improvements, as necessary and as funds
allow. There can be no assurance, however, that our disclosure
controls and procedures will detect or uncover all failures of persons within
the Company to disclose material information otherwise required to be set forth
in our periodic reports. There are inherent limitations to the effectiveness of
any system of disclosure controls and procedures, including the possibility of
human error and the circumvention or overriding of the controls and procedures.
Accordingly, even effective disclosure controls and procedures can only provide
reasonable, not absolute, assurance of achieving their control
objectives.
Management’s
Report on Internal Control Over Financial Reporting
A
company’s internal control over financial reporting is a process designed by, or
under the supervision of, a public company’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the
board of directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles (“GAAP”) including those policies and procedures
that: (i) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the assets of
the company, (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with GAAP,
and that receipts and expenditures are being made only in accordance with
authorizations of management and directors of the company, and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that could have a
material effect on the financial statements.
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Our
management, under the supervision of and with the participation of our Chief
Executive Officer and Chief Financial Officer, has assessed the effectiveness of
our internal control over financial reporting as of December 31, 2009. In making
this assessment, our management used the criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
A
material weakness is a control deficiency, or combination of control
deficiencies, such that there is a reasonable possibility that a material
misstatement of the annual or interim financial statements will not be prevented
or detected on a timely basis. In connection with management’s assessment of our
internal control over financial reporting described above, management has
identified the following material weaknesses in the Company’s internal control
over financial reporting as of December 31, 2009:
·
|
We
were ineffective in maintaining a sufficient complement of qualified
accounting personnel and controls in order to assure adequate segregation
of duties. Currently, all aspects of our financial reporting process are
performed by a single individual with limited segregation of duties and
limited secondary review, including but not limited to access to the
underlying accounting records and systems and the ability to post and
record journal entries. Further, in certain instances where the review is
performed there is no adequate documentation of the review. This creates
certain incompatible duties and a lack of review over the financial
reporting process that would likely fail to detect errors in spreadsheets,
calculations, or assumptions used to compile the financial statements and
related disclosures included in SEC filings. As a result of the above,
there is a lack of segregated duties in the following business processes:
payroll, treasury and accounts payable. Specifically, we
determined that because of the latter situations, our controls over the
preparation, review and monitoring of the financial statements were
ineffective to provide reasonable assurance that financial disclosures
agreed to appropriate supporting detail, calculations or other
documents.
|
24
·
|
We
have a general lack of formally documented comprehensive entity level
controls. These controls include a process for anonymously reporting
potential code of conduct violations without fear of retribution and a
lack of a formal audit committee and audit committee
charter.
|
·
|
Our
documentation and application of general computer control policies and
procedures associated with information technology systems used for
financial reporting are incomplete to the level necessary to reasonably
assure the financial statements and related disclosures are complete and
accurate.
|
As a
result of the material weaknesses described above, our management concluded that
as of December 31, 2009, we did not maintain effective internal control over
financial reporting based on the criteria established in Internal
Control—Integrated Framework issued by the COSO.
This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only Management’s report
in this annual report.
Plan
for Remediation of Material Weaknesses
In
response to the identified material weaknesses, management, with oversight from
the Company’s Board of Directors or its audit committee, when formed, plans to
improve our control environment and to remedy the identified material weaknesses
by adding qualified resources to implement, maintain and monitor the required
internal controls over the financial reporting process. These ongoing efforts
are focused on (i) hiring additional qualified resources to provide for
reasonable and necessary segregation of duties to allow for the compilation,
review and analysis of complete financial reporting in a timely manner, (ii)
establishing a formal audit committee with a charter, (iii) developing a
sufficient code of conduct including a process for anonymously reporting
potential code of conduct violations without fear of retribution, and
(iv) the issuance of general computer control policies and procedures
associated with information technology systems used for financial reporting to
the level necessary to reasonably assure the financial statements and related
disclosures are complete and accurate.
Notwithstanding
the material weaknesses discussed above, management believes that the financial
statements included in this report present fairly, in all material respects, our
financial position, results of operations, and cash flows for the periods
presented in accordance with U.S. generally accepted accounting
principles.
Changes
in Internal Control Over Financial Reporting
There was
no change in the Company’s internal control over financial reporting that
occurred during the quarter ended December 31, 2009 that has materially
affected, or is likely to materially affect, the Company’s internal control over
financial reporting.
Item 9B.
|
Other
Information
|
On March
10, 2010, the Board of Directors of WindTamer Corporation amended its Bylaws at
section 1.4 to permit mailing shareholders' meeting notices by third class mail,
effective March 10, 2010, to reduce expenses associated with such meetings.
Previously, the notices were required to be mailed by first class mail. A copy
of the Bylaws, as amended, is attached hereto as Exhibit 3.2. The text of the
amendment is attached hereto as Exhibit 3.4.
25
PART III
Item 10.
|
Directors
and Executive Officers of the Registrant, and Corporate
Governance
|
The
information required by this item is incorporated by reference to the Company’s
Proxy Statement for the 2010 Annual Meeting of Shareholders.
Item 11.
|
Executive
Compensation
|
The
information required by this item is incorporated by reference to the Company’s
Proxy Statement for the 2010 Annual Meeting of Shareholders.
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
The
information required by this item is incorporated by reference to the Company’s
Proxy Statement for the 2010 Annual Meeting of Shareholders.
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The
information required by this item is incorporated by reference to the Company’s
Proxy Statement for the 2010 Annual Meeting of Shareholders.
Item 14.
|
Principal
Accounting Fees and Services
|
The
information required by this item is incorporated by reference to the Company’s
Proxy Statement for the 2010 Annual Meeting of Shareholders.
PART IV
Item 15.
|
Exhibits,
Financial Statements Schedules
|
(a)
|
The
following documents are filed as part of this
report:
|
(1)
|
The
following financial statements beginning at
page F-1:
|
1.
|
Reports
of Independent Registered Public Accounting Firm — EFP Rotenberg
LLP
|
2.
|
Balance
Sheets
|
3.
|
Statements
of Operations
|
4.
|
Statements
of Stockholders’ Equity
|
5.
|
Statements
of Cash Flows
|
6.
|
Notes
to Financial Statements
|
(3)
|
Exhibits.
|
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)).
|
26
3.2
|
Amended
and Restated By-Laws of WindTamer Corporation, dated March 10,
2010.
|
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)).
|
3.4 | Text of the amendment to the Amended and Restated Bylaws of WindTamer Corporation effectiveMarch 10, 2010. |
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)).
|
10.1
|
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)).
|
10.2
|
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)).
|
10.3
|
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)).
|
10.4
|
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)).
|
10.5
|
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)).*
|
10.6
|
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)). *
|
10.7
|
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)).
|
10.8
|
Form
of WindTamer Corporation Stock Award Agreement under 2008 Equity Incentive
Plan (incorporated by reference herein to Exhibit 10.2 to the Current
Report on Form 8-K filed by WindTamer Corporation dated December 17, 2009
(File No. 000-53510)).*
|
10.9
|
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)).
|
27
10.10
|
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)).
|
10.11
|
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)).
|
10.12
|
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)).
|
10.13
|
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)).
|
10.14
|
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)).
|
10.15
|
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)).
|
10.16
|
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)).
|
10.17
|
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)).
|
10.18
|
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)).
|
10.19
|
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)).
|
10.20
|
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)).
|
10.21
|
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)).
|
10.22
|
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)).
|
28
10.23
|
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)). *
|
10.24
|
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)).
|
10.25
|
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)).
|
10.26
|
Employment
Agreement between WindTamer Corporation and William Schmitz, dated as of
November 15, 2009 (incorporated by reference herein to Exhibit 10.1 to the
Current Report on Form 8-K filed by WindTamer Corporation dated November
16, 2009 (File No. 000-53510)).*
|
10.27
|
Stock
Option Agreement between WindTamer Corporation and William Schmitz, dated
as of November 15, 2009 (incorporated by reference herein to Exhibit 10.2
to the Current Report on Form 8-K filed by WindTamer Corporation dated
November 16, 2009 (File No.
000-53510)).*
|
10.28
|
Subscription
Agreement between WindTamer Corporation and William Schmitz, dated
November 14, 2009 (incorporated by reference herein to Exhibit 10.3 to the
Current Report on Form 8-K filed by WindTamer Corporation dated November
16, 2009 (File No. 000-53510)).
|
10.29
|
Revised
Agreement for Limited Research between WindTamer Corporation and Clarkson
University dated November 30, 2009 (incorporated by reference herein to
Exhibit 10.1 to the Current Report on Form 8-K filed by WindTamer
Corporation dated November 30, 2009 (File No.
000-53510)).
|
10.30
|
Employment
Agreement between WindTamer Corporation and Mark Matthews, dated as of
December 17, 2009 (incorporated by reference herein to Exhibit 10.1 to the
Current Report on Form 8-K filed by WindTamer Corporation dated December
17, 2009 (File No. 000-53510)).*
|
10.31
|
Employment
Agreement between WindTamer Corporation and Adeeb Saba, dated as of
December 28, 2009 (incorporated by reference herein to Exhibit 10.1 to the
Current Report on Form 8-K filed by WindTamer Corporation dated December
29, 2009 (File No. 000-53510)).*
|
10.32
|
WindTamer
Corporation Non-Employee Director Compensation Plan. (incorporated by
reference herein to Exhibit 10.2 to the Current Report on Form 8-K filed
by WindTamer Corporation dated January 4, 2010 (File No.
000-53510)).*
|
10.33
|
Employment
Agreement between WindTamer Corporation and Molly Hedges, dated as of
March 1, 2010 (incorporated by reference herein to Exhibit 10.1 to the
Current Report on Form 8-K filed by WindTamer Corporation dated March 1,
2010 (File No. 000-53510)).*
|
21 | Subsidiaries of Registrant |
23.1 | Consent of EFP Rotenberg, LLP |
24
|
Power
of Attorney
|
31.1
|
Certification
of Gerald E. Brock pursuant to Rule 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
29
*
|
Management
contract or compensatory plan or
arrangement.
|
30
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WINDTAMER
CORPORATION
|
|||
Date:
March 11, 2010
|
By:
|
/s/ GERALD E. BROCK | |
Gerald E. Brock | |||
Chief Executive Officer | |||
Pursuant
to the requirements of the Securities and Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the date indicated.
Signature
|
Title
|
Date
|
||
/s/
GERALD E. BROCK
|
Chief
Executive Officer, Chief Financial Officer and Chairman
|
March
11, 2010
|
||
Gerald
E. Brock
|
(Principal Executive, Financial and Accounting Officer) | |||
/s/ JOHN P. BLAKE
|
Director
|
March
11, 2010
|
||
John
P. Blake
|
||||
/s/
STEVEN DINUNZIO
|
Director
|
March
11, 2010
|
||
Steven
DiNunzio
|
||||
/s/
EUGENE R. HENN
|
Director
|
March
11, 2010
|
||
Eugene
R. Henn
|
||||
/s/
GEORGE
NASELARIS
|
Director
|
March
11, 2010
|
||
George
Naselaris
|
||||
/s/
ANTHONY C. ROMANO, JR.
|
Director
|
March
11, 2010
|
||
Anthony
C. Romano, Jr.
|
/s/
WILLIAM A.
SCHMITZ
|
Director,
President
|
March
11, 2010
|
||
William
A. Schmitz
|
31
WINDTAMER
CORPORATION
Index
to Financial Statements
Financial
Statements
Report of Independent Registered
Public Accounting Firm
|
|
F-2
|
Balance
Sheets as of December 31, 2009 and 2008
|
|
F-3
|
Statements
of Operations for the years ended December 31, 2009 and 2008 and for the
period from inception
|
|
F-4
|
Statements
of Cash Flows for the years ended December 31, 2009 and 2008 and for the
period from inception
|
|
F-5
|
Statement
of Stockholders’ Equity since inception through December 31,
2009
|
|
F-6
|
Notes
to Financial Statements
|
|
F-8
|
|
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of WindTamer Corporation
156 Court
Street
Geneseo,
NY 14454
As
successor by merger, effective October 1, 2009, to the registered public
accounting firm Rotenberg & Co., LLP, we have audited the accompanying
balance sheets of WindTamer Corporation as of December 31, 2009 and 2008, and
the related statements of operations, stockholders' equity, and cash flows for
each of the years in the two-year period ended December 31, 2009 and for the
period from date of inception (March 30, 2001) through
December 31, 2009. 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.
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, 2009 and 2008, and the results of its operations and its cash flows
for each of the years in the two-year period ended December 31, 2009 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/ EFP Rotenberg, LLP
EFP
Rotenberg, LLP
Rochester,
New York
March 11,
2010
F-2
WINDTAMER
CORPORATION
(A
Development Stage Company)
Balance
Sheets
|
||||||||
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 1,027,977 | $ | 204,771 | ||||
Prepaid
expenses and other current assets
|
37,448 | 8,739 | ||||||
Inventory
|
94,601 | 0 | ||||||
Total
current assets
|
1,160,026 | 213,510 | ||||||
Intangible
assets, net
|
37,277 | 20,987 | ||||||
Property
and equipment, net
|
175,109 | 14,689 | ||||||
Total
assets
|
$ | 1,372,412 | $ | 249,186 | ||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$ | 322,062 | $ | 42,472 | ||||
Customer
deposits
|
95,000 | 0 | ||||||
Total
current liabilities
|
417,062 | 42,472 | ||||||
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;
|
||||||||
115,297,000
and 80,640,000 shares issued and outstanding
|
||||||||
respectively
|
11,530 | 8,064 | ||||||
Additional
paid-in capital
|
4,998,421 | 1,430,199 | ||||||
Deficit
accumulated during development stage
|
(4,054,601 | ) | (1,231,549 | ) | ||||
Total
stockholders' equity
|
955,350 | 206,714 | ||||||
Total
liabilities and stockholders' equity
|
$ | 1,372,412 | $ | 249,186 |
The
accompanying notes are an integral part of the financial
statements.
F-3
WINDTAMER
CORPORATION
(A
Development Stage Company)
Statements
of Operations
|
||||||||||||
Year
Ended
December
31,
2009
|
Year
Ended
December
31,
2008
|
Period
from Date
of
Inception
(March
30, 2001)
through
December
31, 2009
|
||||||||||
Research
and development expenses
|
$ | 828,724 | $ | 249,171 | $ | 1,124,177 | ||||||
Selling,
general and administrative expenses
|
1,995,716 | 890,635 | 2,932,004 | |||||||||
Total
expenses
|
2,824,440 | 1,139,806 | 4,056,181 | |||||||||
Loss
from operations
|
(2,824,440 | ) | (1,139,806 | ) | (4,056,181 | ) | ||||||
Non-operating
revenue
|
||||||||||||
Interest
income
|
1,388 | 0 | 1,580 | |||||||||
Net
loss before income taxes
|
(2,823,052 | ) | (1,139,806 | ) | (4,054,601 | ) | ||||||
Income
taxes
|
0 | 0 | 0 | |||||||||
Net
loss
|
$ | (2,823,052 | ) | $ | (1,139,806 | ) | $ | (4,054,601 | ) | |||
Net
loss per common share - basic and diluted
|
$ | (0.03 | ) | $ | (0.02 | ) | $ | (0.06 | ) | |||
Weighted
average number of common
shares
outstanding - basic and diluted
|
||||||||||||
93,393,000 | 73,206,667 | 65,347,008 | ||||||||||
The
accompanying notes are an integral part of the financial
statements.
F-4
WINDTAMER
CORPORATION
(A
Development Stage Company)
Statements
of Cash Flows
|
||||||||||||
Year
Ended
December
31,
2009
|
Year
Ended
December
31,
2008
|
Period
from Date
of
Inception
(March
30, 2001)
through
December
31, 2009
|
||||||||||
Operating
activities
|
||||||||||||
Net
loss
|
$ | (2,823,052 | ) | $ | (1,139,806 | ) | $ | (4,054,601 | ) | |||
Adjustments
to reconcile net loss to net
|
||||||||||||
cash used in operating activities: | ||||||||||||
Amortization
and depreciation expense
|
15,133 | 2,473 | 18,318 | |||||||||
Stock-based
compensation
|
1,011,030 | 407,752 | 1,421,785 | |||||||||
Stock
issued for services
|
91,000 | 91,000 | ||||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Increase
in prepaid expenses and other current assets
|
(28,709 | ) | (8,739 | ) | (37,448 | ) | ||||||
Increase
in inventory
|
(94,601 | ) | 0 | (94,601 | ) | |||||||
Increase
in trade accounts payable and accrued expenses
|
279,590 | 38,600 | 322,062 | |||||||||
Increase
in customer deposits
|
95,000 | 0 | 95,000 | |||||||||
Net
cash used in operating activities
|
(1,454,609 | ) | (699,720 | ) | (2,238,485 | ) | ||||||
Investing
Activities
|
||||||||||||
Acquisition
of property and equipment
|
(174,849 | ) | (16,220 | ) | (191,317 | ) | ||||||
Acquisition
of intangible assets
|
(16,994 | ) | (10,441 | ) | (39,387 | ) | ||||||
Net
cash used in investing activities
|
(191,843 | ) | (26,661 | ) | (230,704 | ) | ||||||
Financing
activities
|
||||||||||||
Proceeds
from issuance of common stock
|
816,002 | 907,000 | 1,866,510 | |||||||||
Stock
offering expenses paid
|
(16,344 | ) | (26,258 | ) | (59,344 | ) | ||||||
Proceeds
from exercise of stock options
|
1,670,000 | 20,000 | 1,690,000 | |||||||||
Net
cash provided by financing activities
|
2,469,658 | 900,742 | 3,497,166 | |||||||||
Increase
(decrease) in cash
|
823,206 | 174,361 | 1,027,977 | |||||||||
Cash
- beginning
|
204,771 | 30,410 | 0 | |||||||||
Cash
- ending
|
$ | 1,027,977 | $ | 204,771 | $ | 1,027,977 | ||||||
Supplemental
Information:
|
||||||||||||
Income Taxes Paid | $ | 0 | $ | 0 | $ | 0 | ||||||
Interest Paid | $ | 1,120 | $ | 975 | $ | 2,095 |
F-5
WINDTAMER
CORPORATION
(A
Development Stage Company)
Statements
of Stockholders' Equity
From
Inception through December 31, 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
|
||||||||||||||||||||||
Issuanceof
common stock in exchangefor 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 | ||||||||||||||||||||
F-6
Issuance
of common stock for services
|
91,000 | 9 | 90,991 | 91,000 | ||||||||||||||||||||||||
Issuance
of common stock for cash
|
866,000 | 87 | 815,915 | 816,002 | ||||||||||||||||||||||||
Offering
costs
|
(16,344 | ) | (16,344 | ) | ||||||||||||||||||||||||
Stock
option expense
|
702,280 | 702,280 | ||||||||||||||||||||||||||
Issuance
of common stock under stock award agreement
|
300,000 | 30 | 308,720 | 308,750 | ||||||||||||||||||||||||
Stock
options exercised
|
33,400,000 | 3,340 | 1,666,660 | 1,670,000 | ||||||||||||||||||||||||
Net
loss for 2009
|
(2,823,052 | ) | (2,823,052 | ) | ||||||||||||||||||||||||
Balance,
December 31, 2009
|
0 | $ | - | 115,297,000 | $ | 11,530 | $ | 4,998,421 | $ | (4,054,601 | ) | $ | 955,350 | |||||||||||||||
The
accompanying notes are an integral part of the financial
statements.
F-7
Note
1 – Description of the 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.
Method
of Accounting
The
accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
(“GAAP”). WindTamer Corporation maintains its books and prepares its
financial statements on the accrual basis of accounting.
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. Accordingly, the financial statements of the Company have
been prepared in accordance with the accounting and reporting principles
prescribed by Accounting Standards Codification (ASC) 915, “Development Stage
Entities”.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP 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.
Cash
and Cash Equivalents
For
financial statement presentation purposes, the Company considers all short-term,
highly liquid investments with original maturities of three months or less to be
cash and cash equivalents. The Company maintains its cash and cash
equivalents in bank deposit accounts, which at times may exceed federally
insured limits. The Company believes it is not exposed to any significant
credit risk as a result of any non-performance by the financial
institutions.
Inventory
Inventory
consists primarily of parts and subassemblies for wind turbines and is stated at
the lower of cost or market value. The Company capitalizes applicable
direct and indirect costs incurred in the Company’s manufacturing operations to
bring its products to a sellable state. As of December 31, 2009,
inventory consists of raw materials amounting to $21,594 and work-in-process
amounting to $73,007.
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 year ended December 31, 2009, approximately $37,000
of leasehold improvements are included in operating expenses costs incurred
prior to the execution of a signed lease. 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.
Intangible
Assets
F-8
Intangible
assets consist of costs associated with the application and acquisition of the
Company’s patents and trademarks. Patent application costs are capitalized and
amortized over the estimated useful life of the patent, which generally
approximates its legal life.
Impairment
of Long-Lived Assets
Long-lived
assets are 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 ended December
31, 2009 and 2008, no impairment was considered necessary.
Fair
Value of Financial Instruments
The
carrying amount of cash, accounts payable and accrued expenses are reasonable
estimates of their fair value due to their short maturity.
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 sale price to be paid by the customer is fixed
or determinable; and (4) the collection of the sale price is reasonably assured.
Amounts billed and/or collected prior to satisfying our revenue recognition
policy are reflected as customer deposits.
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.
Stock-Based
Compensation
The
Company accounts for stock option awards granted under the Company’s Equity
Incentive Plans in accordance with ASC 718. Under ASC 718, compensation expense
related to stock-based payments are recorded over the requisite service period
based on the grant date fair value of the awards. Compensation previously
recorded for unvested stock options that are forfeited is reversed upon
forfeiture. The Company uses the Black-Scholes option pricing model for
determining the estimated fair value for stock-based awards. The Black-Scholes
model requires the use of assumptions which determine the fair value of
stock-based awards, including the option’s expected term and the price
volatility of the underlying stock.
The
Company’s accounting policy for equity instruments issued to consultants and
vendors in exchange for goods and services follows the provisions of ASC
505-50. Accordingly, 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.
Income
Taxes
The
Company accounts 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-9
Basic
and Diluted Loss 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
December 31, 2009, there were 4,661,667 stock options outstanding that could
dilute future earnings.
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current year
presentation.
Recent
Pronouncements
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) , now Accounting Standards Codification (ASC) 105, to become the
source of authoritative U.S. generally accepted accounting principles (“GAAP”)
recognized by the FASB to be applied by nongovernmental entities. Rules and
interpretive releases of the Securities and Exchange Commission (SEC) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. The FASB will no longer issue new standards in the form of
Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts;
instead the FASB will issue Accounting Standards Updates. Accounting Standards
Updates will not be authoritative in their own right as they will only serve to
update the Codification. These changes and the Codification itself do not change
GAAP. ASC 105 is effective for financial statements issued for interim and
annual periods ending after September 15, 2009 and first adopted in the
quarterly financial statements for the period ended September 30,
2009. Other than the manner in which new accounting guidance is
referenced, the adoption of these changes had no impact on the Financial
Statements.
In
May 2009, the FASB issued Statement No. 165, Subsequent Events (“FAS
165”), now ASC 855. The provisions of ASC 855 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 ASC 855 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.
Note
2 - Going Concern
The
financial statements have been prepared assuming that the Company will continue
as a going concern. The Company is in a development stage and has recognized no
revenue as of December 31, 2009. 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, that began in
2007, in which it raised gross proceeds of $977,000 and during 2009 the Company
conducted a private placement, which resulted in proceeds of $816,000 as of
December 31, 2009. Exercises of stock option awards resulted in
additional proceeds of $1,670,000 for the year ended December 31, 2009. The
Company plans to continue the launch of the commercialization of its products
utilizing its current working capital and future financing proceeds, if
necessary, and by outsourcing the manufacturing function and working with
regional distributors during 2010. 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.
F-10
Note
3 – Long-lived Assets
The
following table summarizes the Company’s long-lived assets as of December
31:
2009
|
2008
|
|||||||
Property
and equipment
|
||||||||
Equipment
|
44,360 | 10,268 | ||||||
Leasehold
Improvements
|
76,213 | 0 | ||||||
Furniture
and fixtures
|
30,436 | 6,200 | ||||||
Software
|
40,308 | 0 | ||||||
Total
property and equipment before accumulated depreciation
|
191,317 | 16,468 | ||||||
Less
accumulated depreciation
|
(16,208 | ) | (1,779 | ) | ||||
Total
property and equipment
|
175,109 | 14,689 | ||||||
Intangible
assets
|
||||||||
Patents
|
34,862 | 17,868 | ||||||
Trademark
|
4,525 | 4,525 | ||||||
Total
intangible assets before accumulated amortization
|
39,387 | 22,393 | ||||||
Less
accumulated amortization
|
(2,110 | ) | (1,406 | ) | ||||
Total
intangible assets
|
37,277 | 20,987 |
Amortization
of intangible assets is expected to amount to less than $1,000 per year for each
of the next five years.
Note
4 – Stockholders’ Equity
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. 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 these stock
splits.
During
the year ended December 31, 2007, the Company sold 1,400,000 shares of common
stock for a price of $0.05, resulting in net proceeds of $53,259 after $16,741
of related costs associated with the private placement that were treated as a
reduction to Additional Paid-In Capital.
During
the year ended December 31, 2008, the Company sold 18,140,000 shares of common
stock for a price of $0.05, resulting in net proceeds of $880,742 after $26,258
of related costs associated with the private placement that were treated as a
reduction to Additional Paid-In Capital. During 2008 the Company
issued 400,000 shares of common stock in connection with stock option awards
exercised for a price of $0.05 per share that resulted in proceeds of
$20,000. In addition, during 2008 the Company issued 1,000,000 shares
of restricted common stock under a consulting agreement with the Company
and under the 2008 Equity Incentive Plan, of which 700,000 vested in 2008 and
300,000 vested in 2009 (see Note 6).
F-11
During
the year ended December 31, 2009, the Company sold 741,000 shares of common
stock for a price of $1.00 per share and 125,000 shares for a price of $0.60,
resulting in net proceeds of $799,658 after $16,344 of related costs associated
with the private placement that were treated as a reduction to Additional
Paid-In Capital. In addition, 33,400,000 stock option awards were
exercised for a price of $0.05 per share that resulted in proceeds of $1,670,000
during the year ended December 31, 2009 and 91,000 shares were issued in
exchange for services provided by a vendor amounting to $91,000.
Note
5 – 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 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 to 3 years from the
date of grant. On December 30, 2009, the Board of Directors approved
an amendment to increase the number of shares available for award under the plan
from 8,000,000 to 16,000,000. The Company plans to present the
amendment for shareholder approval at its Annual Meeting of Shareholders in
April 2010.
For the
year ended December 31, 2009, the Company recorded compensation costs for
options and shares granted under the plan amounting to $1,011,031 ($407,753 –
2008). The impact of this expense was to increase basic and diluted
net loss per share from $.02 to $.03 for the year ended December 31, 2009
($.01 to $.02 -
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 incentive stock options
(ISO). 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. Prior to the fourth quarter of 2009, there was not a
public market for the Company shares. Accordingly, the fair value of
the underlying shares was determined based on recent transactions by the Company
to sell shares to third parties and other factors determined by management to be
relevant to the valuation of such shares. Beginning in the fourth
quarter of 2009, the Company’s quoted price on the OTCBB was used to value the
underlying shares. 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
|
Year
Ended
|
|||
December 31, 2009
|
December 31, 2008
|
|||
Expected
dividend yield
|
0%
|
|
0%
|
|
Expected
stock price volatility
|
40
- 50%
|
|
35.21%
|
|
Risk-free
interest rate
|
1.14
– 3.85%
|
|
1.1%
|
|
Expected
life of options
|
3
- 10 Years
|
2.4
Years
|
F-12
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
|
5,086,667 | $ | .89 | |||||||||||||
Options
exercised during 2009
|
(33,400,000 | ) | $ | .05 | ||||||||||||
Options
forfeited during 2009
|
(1,225,000 | ) | $ | 1.00 | ||||||||||||
Outstanding
at December 31, 2009
|
4,661,667 | $ | .72 | 7.8 years | $ | 557,333 | ||||||||||
Exercisable
at December 31, 2009
|
1,550,000 | $ | .49 | 5.6 years | $ | 496,000 |
The
weighted average fair value of options granted during the year ended December
31, 2009 was approximately $.46 ($0.01- 2008). The total fair value
of shares that vested during the year ended December 31, 2009 was $554,320
($370,860 - 2008).
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 | $ | 0.05 | |||||
Non-vested
granted – year ended December 31, 2009
|
25,000 | $ | 0.45 | |||||
Vested
|
(300,000 | ) | $ | 0.05 | ||||
Non-vested
at December 31, 2009
|
25,000 | $ | 0.45 |
As of
December 31, 2009, the unrecognized compensation cost related to non-vested
share based compensation arrangements granted under the plan was approximately
$1,258,593. These costs are expected to be recognized over a weighted
average period of 1.26 years.
Note
6 – 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 paid $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
valued the stock on each vesting date using the fair market value of the common
stock. The fair value of the equity instrument is recognized as an
expense over the period the related service is performed. 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
year ended December 31, 2009. Based on information received after the
purported vesting dates of the award, the Company does not believe that the
individual has satisfied the vesting criteria for the issuance of said
shares.
During
2009, this individual was appointed the Chief Operating Officer and awarded an
option to purchase 1,000,000 shares of common stock at $1.00 per share under the
2008 Equity Incentive Plan. These options are included in the Stock
Based Compensation footnote above. Later in 2009, this individual
resigned from his position and as an employee of the Company. He was
vested in 50% of the stock option award. Under the terms of the stock option
award agreement all vested stock options were forfeited since he did not
exercise those stock options within 120 days from the effective date of his
resignation. The unvested stock options under the stock option award were
forfeited due to his resignation. As a result, $164,400 of previously recorded
stock based compensation related to the stock options was reversed.
F-13
Note
7 – Related Party Transactions
Certain
services were provided to the Company by immediate family members of an officer
/ shareholder of the Company. These services relate to inventory
production, leasehold improvements, research and development efforts and
administrative wages and amounted to $238,095 for the year ended December 31,
2009, $95,546 for the year ended December 31, 2008, and $333,641 since
inception. As of December 31, 2009 $60,496 ($0-2008) was owed to
these related parties and included in accounts payable.
Note
8 – Commitments and Contingencies
Employment
agreements
As of
December 31, 2009, the Company has entered into employment agreements with
various members of management. These employment agreements have three
year terms with the option to extend employment for a fourth year, expiring at
various dates from July 14, 2012 to December 28, 2012. Annual
compensation required under these agreements include base salary aggregating
approximately $800,000, as well as annual bonuses based on achieving certain
performance milestones. All of these agreements contain severance
provisions in the event of termination of the employee without cause that
require continued payment of the annual salary through the term of the agreement
but for a minimum period of at least two years.
Operating
lease
On August
20, 2009, the Company entered into a lease for its current office space in
Geneseo, New York requiring monthly rental payment of $1,400, which
commenced on November 1, 2009 and expire October 31, 2011 with a two year
renewal option. Future commitments by year under this lease are as
follows:
Year
|
Rental Commitment
|
2010
|
$16,800
|
2011
|
$14,000
|
Warranty
During
the year ended December 31, 2009, the Company entered into a number of sales
orders for wind turbine units. These sales orders required certain
deposits of the agreed-upon purchase price upon acceptance of the sales
order. The advance payments received as of December 31, 2009 total
$95,000 and have been included in customer
deposits. The sales orders included product warranties;
however, based on the lack of operating history, the Company is unable to
reasonably determine an estimate of this liability.
State
refundable credit
The
Company filed its 2008 New York State corporate income tax return during July
2009, and anticipates a refund upon approval by state tax authorities in the
amount of $31,217, related to tax credits for being a Qualified Emerging
Technology Company (QETC). The Company expects to claim approximately $132,000
in tax credits with its 2009 New York State corporate income tax return to be
filed in 2010. Such refunds will be recognized when received by the
Company.
Other
matters
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 Company has demanded $77,413.30 as
reimbursement for engineering and materials costs, which has not been paid to
date. AWR also agreed to provide the Company
F-14
with a
purchase order for one thousand (1,000) 15kWh units within one year after
delivery of the prototype. As of December 31, 2009 the prototype has not been
completed or delivered to AWR. AWR provided a $50,000 deposit for the
orders, but never provided the purchase order. The agreement also
granted 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 AWR 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 AWR by the Company was not reasonably acceptable. AWR paid a $10,000 fee for
the option. The payments from AWR, aggregating $60,000 are included in accounts
payable and accrued expenses in the accompanying balance sheet. On
September 10, 2009, the Company received a letter from counsel to AWR
terminating the March 2009 agreement and the April 2009 option described above
and demanding the return of $60,000 provided to the Company.
Note
9 - Income Taxes
Following
is a summary of the components giving rise to the income tax provision (benefit)
for the periods ended December 31:
Year
ended
2009
|
Year
ended
2008
|
Period
from
Inception
through
12/31/2009
|
||||||||||
Current
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Deferred
|
(822,792
|
)
|
(438,907
|
)
|
(1,298,396
|
)
|
||||||
Less
increase in allowance
|
822,792
|
438,907
|
1,298,396
|
|||||||||
Net
deferred
|
-
|
-
|
-
|
|||||||||
Total
income tax provisions (benefit)
|
$
|
-
|
$
|
-
|
$
|
-
|
Individual
components of the deferred tax asset are as follows as of December
31,:
Year
ended
2009
|
Year
ended
2008
|
|||||||
Net
operating loss carryforwards
|
$
|
734,185
|
$
|
287,512
|
||||
Stock
based compensation
|
278,969
|
147,021
|
||||||
Depreciation
and amortization
|
284,421
|
41,071
|
||||||
Other
|
|
820
|
-
|
|||||
Total
|
1,298,396
|
475,604
|
||||||
Less
valuation allowance
|
(1,298,396
|
)
|
(475,604
|
)
|
||||
Net
deferred tax assets
|
$
|
-
|
$
|
-
|
The
Company has approximately $2,235,000 of net operating loss carryforwards
(“NOLs”) available to reduce future taxable income. These
carryforwards expire at various dates through 2029. A portion of the
net operating loss carryforward amounting to approximately $335,000, 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 ASC 718 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 NOLs before they expire, the Company has recorded a
valuation allowance to offset the deferred tax assets.
F-15
Internal Revenue Code Section 382 (“Section 382”) imposes limitations on the availability of a company’s net operating losses and other corporate tax attributes as ownership changes occur. As a result of the transactions discussed in Note 4, a Section 382 ownership change is expected and a study will be required to determine the date of the ownership change. The amount of the Company’s net operating losses and other tax attributes incurred prior to the ownership change may be limited based on the value of ownership change. A full valuation allowance has been established for the gross deferred tax asset related to the net operating losses and other corporate tax attributes available. Accordingly, any limitation resulting from Section 382 application is not expected to have a material effect on the balance sheet or statements of operations of the Company.
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:
Period
from
Inception
|
||||||||||||
Year
ended
2009
|
Year
ended
2008
|
through
12/31/2009
|
||||||||||
Statutory
United States federal rate
|
(34)%
|
|
(34)%
|
|
(34)%
|
|
||||||
State
income taxes net of federal benefit
|
(5)
|
|
(6)
|
|
(6)
|
|
||||||
Permanent
differences
|
-
|
-
|
-
|
|||||||||
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”), now ASC
740. 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, 2008 or 2009.
The
Company recognizes interest and penalties related to unrecognized tax benefits
in general and administrative expense. During the year ended December 31, 2009
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 2006 -2009 remain open to examination by major taxing
jurisdictions to which the Company is subject.
Note
10 – Subsequent Events –
In
January 2010 the Company issued 135,849 shares as satisfaction of
liabilities, amounting to $98,086 of which 50,620 shares were issued to a
related party as satisfaction of $40,496 of liabilities.
In
December 2009 the Company issued 25,000 restricted shares of common stock under
a Stock Award Agreement to an employee of the Company. In January
2010 the restrictions were satisfied according to the terms of the
Agreement.
F-16
3)
Exhibits.
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 March 10,
2010.
|
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)).
|
3.4 | Text of the amendment to the Amended and Restated Bylaws of WindTamer Corporation effectiveMarch 10, 2010. |
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)).
|
10.1
|
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)).
|
10.2
|
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)).
|
10.3
|
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)).
|
10.4
|
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)).
|
10.5
|
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)).*
|
10.6
|
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)). *
|
10.7
|
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)).
|
10.8
|
Form
of WindTamer Corporation Stock Award Agreement under 2008 Equity Incentive
Plan (incorporated by reference herein to Exhibit 10.2 to the Current
Report on Form 8-K filed by WindTamer Corporation dated December 17, 2009
(File No. 000-53510)).*
|
10.9
|
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)).
|
10.10
|
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)).
|
10.11
|
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)).
|
10.12
|
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)).
|
10.13
|
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)).
|
10.14
|
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)).
|
10.15
|
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)).
|
10.16
|
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)).
|
10.17
|
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)).
|
10.18
|
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)).
|
10.19
|
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)).
|
10.20
|
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)).
|
10.21
|
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)).
|
10.22
|
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)).
|
10.23
|
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)). *
|
10.24
|
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)).
|
10.25
|
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)).
|
10.26
|
Employment
Agreement between WindTamer Corporation and William Schmitz, dated as of
November 15, 2009 (incorporated by reference herein to Exhibit 10.1 to the
Current Report on Form 8-K filed by WindTamer Corporation dated November
16, 2009 (File No. 000-53510)).*
|
10.27
|
Stock
Option Agreement between WindTamer Corporation and William Schmitz, dated
as of November 15, 2009 (incorporated by reference herein to Exhibit 10.2
to the Current Report on Form 8-K filed by WindTamer Corporation dated
November 16, 2009 (File No.
000-53510)).*
|
10.28
|
Subscription
Agreement between WindTamer Corporation and William Schmitz, dated
November 14, 2009 (incorporated by reference herein to Exhibit 10.3 to the
Current Report on Form 8-K filed by WindTamer Corporation dated November
16, 2009 (File No. 000-53510)).
|
10.29
|
Revised
Agreement for Limited Research between WindTamer Corporation and Clarkson
University dated November 30, 2009 (incorporated by reference herein to
Exhibit 10.1 to the Current Report on Form 8-K filed by WindTamer
Corporation dated November 30, 2009 (File No.
000-53510)).
|
10.30
|
Employment
Agreement between WindTamer Corporation and Mark Matthews, dated as of
December 17, 2009 (incorporated by reference herein to Exhibit 10.1 to the
Current Report on Form 8-K filed by WindTamer Corporation dated December
17, 2009 (File No. 000-53510)).*
|
10.31
|
Employment
Agreement between WindTamer Corporation and Adeeb Saba, dated as of
December 28, 2009 (incorporated by reference herein to Exhibit 10.1 to the
Current Report on Form 8-K filed by WindTamer Corporation dated December
29, 2009 (File No. 000-53510)).*
|
10.32
|
WindTamer
Corporation Non-Employee Director Compensation Plan. (incorporated by
reference herein to Exhibit 10.2 to the Current Report on Form 8-K filed
by WindTamer Corporation dated January 4, 2010 (File No.
000-53510)).*
|
10.33
|
Employment
Agreement between WindTamer Corporation and Molly Hedges, dated as of
March 1, 2010 (incorporated by reference herein to Exhibit 10.1 to the
Current Report on Form 8-K filed by WindTamer Corporation dated March 1,
2010 (File No. 000-53510)).*
|
21 | Subsidiaries of Registrant |
23.1 | Consent of EFP Rotenberg, LLP |
24
|
Power
of Attorney
|
31.1
|
Certification
of Gerald E. Brock pursuant to Rule 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
*
|
Management
contract or compensatory plan or
arrangement.
|