Pursuant
to Rule 424(b)(3)
Registration
No. 333-150556
DATED
MAY 17, 2010
PROSPECTUS
POWER
EFFICIENCY CORPORATION
58,071,092
SHARES OF COMMON STOCK
This
prospectus relates to 58,071,092 shares of our common stock that may be sold
from time to time by the Selling Stockholders listed under the caption "Selling
Stockholders". We will not receive any of the proceeds from the sale of the
common stock sold. The Selling Stockholders may sell those shares from time to
time in the public securities market. The Selling Stockholders may determine the
prices at which they will sell the common stock, which prices may be at market
prices prevailing at the time of such sale or some other price. See "Plan of
Distribution".
Our
common stock is traded on the National Association of Securities Dealers Over
The Counter Bulletin Board (the "OTC Bulletin Board") under the symbol "PEFF."
On April 27, 2010, the closing bid price of our common stock as reported on the
OTC Bulletin Board was $0.26.
THE
SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. IT IS
LIKELY THAT THE COMMON STOCK WILL BE SUBJECT TO "PENNY STOCK" RULES, WHICH
GENERALLY REQUIRE THAT A BROKER OR DEALER APPROVE A PERSON'S ACCOUNT FOR
TRANSACTIONS IN PENNY STOCK AND THE BROKER OR DEALER RECEIVE FROM THE INVESTOR A
WRITTEN AGREEMENT TO THE TRANSACTIONS SETTING FORTH THE IDENTITY AND QUANTITY OF
THE PENNY STOCKS TO BE PURCHASED BEFORE A TRADE INVOLVING A PENNY STOCK IS
EXECUTED. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date
of this Prospectus is May 17, 2010
TABLE OF
CONTENTS
|
|
Page
|
ABOUT
THIS PROSPECTUS
|
|
1
|
PROSPECTUS
SUMMARY
|
|
1
|
THE
OFFERINGS
|
|
1
|
THE
COMPANY
|
|
3
|
RISK
FACTORS
|
|
5
|
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
|
|
10
|
USE
OF PROCEEDS
|
|
11
|
PRICE
RANGE OF COMMON STOCK
|
|
11
|
DIVIDEND
POLICY
|
|
11
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|
|
12
|
BUSINESS
|
|
19
|
MANAGEMENT
|
|
26
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
|
33
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
|
|
35
|
SELLING
STOCKHOLDERS
|
|
36
|
DESCRIPTION
OF SECURITIES
|
|
53
|
PLAN
OF DISTRIBUTION
|
|
56
|
LEGAL
MATTERS
|
|
58
|
EXPERTS
|
|
58
|
WHERE
YOU CAN FIND MORE INFORMATION
|
|
59
|
FINANCIAL
STATEMENTS
|
|
F-1
|
ABOUT
THIS PROSPECTUS
This
prospectus is part of a post-effective amendment to a registration statement we
have filed with the SEC. Under this registration process, the selling
stockholders referred to in this prospectus may offer and sell from time to time
up to 24,702,117 currently outstanding shares of our common stock, 7,890,000
shares of our common stock issuable upon the conversion of the Company’s Series
B Preferred Stock, 17,927,997 shares of our common stock issuable upon the
exercise of warrants outstanding at an weighted average exercise price of $0.47
per share and held by the selling stockholders as of the date of this prospectus
and 7,550,978 shares of our common stock issuable upon the exercise of options
and warrants issued to employees, consultants, vendors and
noteholders.
This
prospectus does not cover the issuance of any shares of common stock by us, and
we will not receive any of the proceeds from any sale of shares by the selling
stockholders. We have agreed to pay all expenses incurred in connection with the
registration of the shares of common stock covered by this registration
statement.
Information
about the selling stockholders may change over time. Any changed information
given to us by the selling stockholders will be set forth in a prospectus
supplement if and when necessary. Further, in some cases, the selling
stockholders will also be required to provide a prospectus supplement containing
specific information about the terms on which they are offering and selling our
common stock. If a prospectus supplement is provided and the description of the
offering in the prospectus supplement varies from the information in this
prospectus, you should rely on the information in the prospectus
supplement.
PROSPECTUS
SUMMARY
This
section highlights selected information only and may not contain all of the
information that may be important to you. Please read this entire prospectus
before making your investment decision. This summary, including the summary
financial information, is qualified in its entirety by the more detailed
information appearing elsewhere in this prospectus. Throughout this prospectus,
when we refer to “Power Efficiency” or the “Company” or when we speak of
ourselves generally, we are referring to Power Efficiency Corporation unless the
context indicates otherwise or as otherwise noted.
THE
OFFERINGS
On
January 21, 2008, Power Efficiency Corporation issued an aggregate of 140,000
units, each unit consisting of one share of the Company’s Series B Preferred
Stock, par value $.001 per share, and a warrant to purchase 50 shares of the
Company’s common stock, receiving aggregate consideration of $7,000,000, which
included $5,150,000 of cash and the cancellation of $1,850,000 of debt. The
Series B Preferred Stock and warrants issued in the offering are convertible or
exercisable, as applicable, into an aggregate of up to 18,360,000 shares of the
Company’s common stock, of which 13,885,000 shares are being registered on this
registration statement.
Each
share of Series B Preferred Stock is initially convertible into 100 shares of
the Company’s common stock, subject to adjustment under certain circumstances.
The Series B Preferred Stock is convertible at the option of the holder at any
time. The Series B Preferred Stock is also subject to mandatory conversion in
the event the average closing price of the Company’s common stock for any ten
day period equals or exceeds $1.00 per share, such conversion to be effective on
the trading day immediately following such ten day period. The Series B
Preferred Stock has an 8% dividend, payable annually in cash or stock, at the
discretion of the Company’s Board of Directors. Each warrant is exercisable for
up to 50 shares of common stock at an exercise price of $0.60 per share and
expires five years from the date of issuance.
On
November 30, 2006, January 19, 2007, March 2, 2007, March 7,
2007, March 30, 2007 and March 31, 2007, the Company issued and sold
an aggregate of 14,116,680 shares of its common stock, $2,000,000 in promissory
notes and 9,558,340 common stock purchase warrants in a private offering of
equity and debt for an aggregate of $6,235,000 in cash, cancellation of
indebtedness and in lieu of compensation owed to certain employees, officers and
directors of the Company. The per share purchase price of the common stock was
$0.30. The warrants have a per share exercise price of $0.40 and expire five
years from the date of issuance. The $6,235,000 investment consisted of $400,000
from the cancellation of indebtedness, approximately $50,000 in lieu of
compensation owed to certain employees, officers and directors of the Company,
and approximately $5,785,000 in new cash. Of the aggregate 23,675,020
shares of issued Company common stock and shares of common stock issuable upon
the exercise of warrants, 20,686,422 shares are being registered on this
registration statement.
In June,
July and August of 2005, we conducted a private offering of our common stock and
warrants. We offered up to 50 units, at $50,000 each, to individuals or entities
who qualified as "accredited investors" as defined in Rule 501 of Regulation D
promulgated under the Securities Act. Each such unit consisted of (a) 250,000
shares of common stock and (b) a warrant to purchase prior to the fifth
(5th) anniversary following the closing 125,000 shares of common stock, at an
exercise price of $0.40. The placement closed on August 31, 2005 with the
Company receiving gross proceeds of $2,900,000, and resulted in an aggregate of
24,350,001 shares of Company common stock being issued or reserved for issuance
upon the exercise of warrants, of which 15,696,591 shares are being registered
on this registration statement.
The
Company is also registering an aggregate of 7,803,079 shares of Company common
stock issuable upon the issuance of warrants and non-qualified options issued to
employees, consultants and vendors on this registration
statement.
THE
COMPANY
Our
Business
Power
Efficiency produces products that reduce energy costs in specific commercial
applications, utilizing patented improvements upon motor controller technologies
developed by National Aeronautics Space Administration (“NASA”), as well as
technologies based solely on the Company’s inventions. The Company has branded
these collective patented and patent pending technologies as E-SAVE Technology® and has a
trademark on this name. Our products are solid-state motor controllers which
reduce the amount of power consumed by alternating current (AC) induction motors
operating at constant speeds and under variable loads. Our products were
previously marketed as the Performance Controller and the Power Genius, but have
recently been re-branded as Motor Efficiency Controllers (“MEC”). The MEC
reduces energy consumption on electrical equipment by electronically sensing and
controlling the amount of energy the motor consumes on certain applications. The
energy savings can range up to 35%, while the life of the motor is extended
because of both the reduced motor operating temperatures and the reduced
mechanical stress provided by its “soft start” technology. The efficiency of the
MEC has been tested by Excel Energy, Nevada Power Company and other utilities,
and independent third parties, with positive results.
We market
our products directly under the brand name MEC, and through other companies
under names such as Power Commander® and EcoStar®. Customers include large
elevator and escalator manufacturers such as Otis Elevator Co. (a subsidiary of
United Technologies, Inc.) and KONE Inc, as well as many industrial companies in
plastics, mining, manufacturing and other industries
There are
over one billion AC motors in operation in the U.S. alone. Alternating current
induction motors are commonly found in industrial and commercial facilities
throughout the world. Customers for the MEC are typically in a high
electricity cost environment, may have local utility or governmental incentives
to save energy, have energy usage as a significant operating cost, use constant
speed induction motors that are lightly or cyclically loaded, and have motors
that run continuously or have frequent on/off cycles. This customer
base represents a market which includes target sectors such as elevators,
escalators, granulators, crushers, grinders, conveyors and other industrial
applications.
We are
focused on creating distribution channels to take advantage of opportunities
given the current conditions in the energy market and how our product meets
these needs. Management believes this multi-channel distribution strategy, if
successful, will allow Power Efficiency to achieve sustainable revenue
growth.
Highlights
Demonstrated Energy Savings -
Over 1,000 units have been installed at facilities throughout the U.S.
[update] The products have demonstrated the ability to reduce the
energy consumption of AC induction motors, by up to 35% in appropriate
applications.
Extensive Engineering - Our
products incorporate trade secret and engineering know-how, which we believe
enables them to operate effectively over a broad range of
conditions.
Large Potential Market - A
study for the United States Department of Energy estimates that motor driven
systems consume 64% of all the electricity used in the U.S. manufacturing sector
alone. Based on our own in-house testing, our product can save up to 35% of the
energy consumed by electric AC induction motors in lightly loaded applications.
These applications include most motors that work at constant speed but are
variably loaded, such as the AC motors found on many elevators, escalators,
granulators, saw mills, stamping presses and other manufacturing
equipment. The U.S. Department of Energy studies have found that
nearly half the motors in the manufacturing sector are operating in a lightly
loaded condition.
Proprietary Technology – Our
products incorporate patented and patent-pending technologies and other trade
secrets. We have on approved patent and three patents
pending.
New Products - We have
developed and received certifications for digital versions of our products from
22 to 380 amps from Underwriter Laboratories, Inc. (“UL”), Conformity European
(“CE”), and the Canadian Standards Association (“CSA”). We have also
developed a product for small motors such as those found in residential and
light commercial equipment and appliances.
Limited Competition - We are
not aware of any products on the market today that have been certified by CE,
CSA, and UL, and offer the same energy-saving and soft start characteristics as
our products, and we have proven to save energy in independent
tests.
International Distribution -
International markets, such as those in Europe and Asia, often have higher
prices for electricity than in the U.S. Therefore, we believe international
markets provide a significant opportunity in the future.
A
detailed description of our business strategy is provided under the heading
“Business” below.
Our
headquarters is located at 3960 Howard Hughes Parkway, Suite 460, Las Vegas, NV
89169, and our telephone number is 702-697-0377.
Selling
Stockholders
The
shares of common stock covered by this prospectus that are being offered by the
selling stockholders consist of up to 58,071,092 shares issued or to be issued
(the "Securities") to the selling stockholders within 60 days of the date
hereof. The full name, address and control persons of the selling stockholders
are set forth beginning on page 36 of this prospectus.
RISK
FACTORS
An
investment in the Company’s common stock involves a high degree of risk. You
should carefully consider the risks below, together with the other information
contained in this prospectus, before you decide to purchase the shares offered
hereby. If any of the following risks occur, our business, results of operations
and financial condition could be harmed, the trading price of our common stock
could decline, and you could lose all or part of your investment. The risks and
uncertainties described below are intended to be the material risks that are
specific to us and to our industry. New risk factors emerge from time to time
and it is not possible for us to predict all such risk factors, nor can we
assess the impact of all such risk factors on our business or the extent to
which any factor, or combination of factors, may cause future actual results to
differ materially from those contained in any historical or forward-looking
statements.
RISKS
RELATED TO OUR BUSINESS
Unless
We Achieve Profitability and Related Positive Cash Flow, We May Not Be Able To
Continue Operations, And Our Auditors Have Questioned Our Ability To Continue As
A "Going Concern".
The
Company has suffered recurring losses from operations, and experienced a
deficiency of cash of approximately $3,000,000 and $3,100,000 from operations
for the years ended December 31, 2009 and 2008, respectively. For the
years ended December 31, 2009 and December 31, 2008, we had net losses of
$4,168,708 and $3,948,204, respectively. In our Auditors’ Report
dated March 31, 2010 on our December 31, 2009 financial statements included
in this report, our auditors have stated that these factors raise substantial
doubt about our ability to continue as a “going concern”. Our
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amount of
liabilities that might be necessary should we be unable to continue in
existence. The Company’s continuation as a “going concern” is
dependent upon achieving profitable operations and related positive cash flow
and satisfying our immediate cash needs by external financing until we are
profitable. Our plans to achieve profitability include developing new
products, obtaining new customers and increasing sales to existing customers.
We are seeking to raise additional capital through equity issuance, debt
financing and other types of financing, but we cannot guarantee that sufficient
capital will be raised.
We
Have A Limited Operating History, Have Experienced Recurring Losses And Have
Limited Revenue.
To date,
and due principally to a lack of working capital, our operations have been
limited in scale. Although we have an arrangement with an outsourced production
facility to manufacture our products, have established relationships with
suppliers, and have received contracts for our products, we may experience
difficulties in production scale-up, product distribution, and obtaining and
maintaining working capital until such time as our operations have been
scaled-up to acceptable commercial levels. We have not had a
profitable quarter in the past three years and we cannot guarantee we will ever
operate profitably. In addition, we have limited revenue. For the year ended
December 31, 2009, our total revenues were $283,990, and for the year ended
December 31, 2008, our total revenues were $480,513.
We
Do Not Have A Bank Line Of Credit.
At the
present time, we do not have a bank line of credit, which further restricts our
financial flexibility.
We
Will Require Additional Funds To Meet Our Cash Operating Expenses And Achieve
Our Current Business Strategy.
The
Company continues to have limited working capital and will be dependent upon
additional financing to meet capital needs and repay outstanding debt. We cannot
guarantee additional financing will be available on acceptable terms, if at all.
We also need additional financing to raise the capital required to fully
implement our business plan. Our current operating expense level is
approximately $250,000 to $300,000 per month. Management is seeking
to raise additional capital through equity issuance, debt financing or other
types of financing. However, there are no assurances that sufficient
capital will be raised.
When our
operations require additional financing, if we are unable to obtain it on
reasonable terms, we would be forced to restructure, file for bankruptcy or
cease operations, any of which could cause you to lose all or part of your
investment in us.
Our
Management Group Owns Or Controls A Significant Number Of The Outstanding Shares
Of Our Common Stock And Will Continue To Have Significant Ownership Of Our
Voting Securities For The Foreseeable Future.
As of the
date of this report, management controls approximately twenty-one percent (21%)
of our issued and outstanding Common Stock and voting equivalents.
Additionally, Summit Energy Ventures,
LLC (“Summit”) owns eleven percent (11%) of our common stock and voting
equivalents, which is included in the above number. Summit is controlled by
Steven Strasser, our Chairman and CEO, and he has the right to vote all shares
owned by Summit. BJ Lackland, our CFO, owns a minority equity interest in
Summit. As a result, these persons will have the ability, acting as a
group, to greatly influence our affairs and business, including the election of
directors and, subject to certain limitations, approval or preclusion of
fundamental corporate transactions. This concentration of ownership of our
common stock may:
|
·
|
delay or prevent a change in the
control;
|
|
·
|
impede a merger, consolidation,
takeover, or other transaction involving the Company;
or
|
|
·
|
discourage a potential acquirer
from making a tender offer or otherwise attempting to obtain control of
the Company.
|
The
relationships between Summit and our executive officers are discussed in more
detail under “Certain Relationships And Related Party Transactions”
herein.
Our
Business Depends Upon The Maintenance Of Our Proprietary Technology, And We
Rely, In Part, On Contractual Provisions To Protect Our Trade Secrets And
Proprietary Knowledge.
The
Company depends upon its proprietary technology, relying principally upon trade
secret and patent law to protect this technology. The Company also
regularly enters into confidentiality agreements with key employees,
customers, potential customers, and vendors and limits access to and
distribution of trade secrets and other proprietary information. However, these
measures may not be adequate to prevent misappropriation of our
technology. Additionally, our competitors may independently develop
technologies substantially equivalent or superior to our technology. In
addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as the laws of the United States. We also are subject
to the risk of adverse claims and litigation alleging infringement of
intellectual property rights of others.
Confidentiality
agreements to which we are party may be breached, and we may not have adequate
remedies for any breach. Our trade secrets may also be known without breach of
such agreements or may be independently developed by competitors. Our inability
to maintain the proprietary nature of our technology and processes could allow
our competitors to limit or eliminate any competitive advantages we may
have.
We
Are Dependent On Third-Party Suppliers.
Although
we believe most of the key components required for the production of our
products are currently available in sufficient production quantities from
multiple sources, they may not remain so readily available. It is possible that
other components required in the future may necessitate custom fabrication in
accordance with specifications developed or to be developed by us. Also, in the
event that we, or our contract manufacturer, as applicable, are unable to
develop or acquire components in a timely fashion, our ability to achieve
production yields, revenues and net income can be expected to be adversely
affected. Additionally, we are dependent on Sanmina-Sci to
manufacture our higher volume products. While we believe we would be
successful in finding alternative manufacturers should this manufacturer not be
available to manufacture our product, it could take substantial time and effort
to locate such alternatives and, depending on the timing of the loss of
Sanmina-Sci, could result in disruption in delivery schedules and harm to our
clients, our reputation and future prospects.
We
Are Developing And Commercializing New Energy Saving Technologies And
Products Which Will Involve Uncertainty And Risks Related To Product Development
And Market Acceptance.
Our
success is dependent, to a large degree, upon our ability to fully develop and
commercialize our technology and gain industry acceptance of our products based
upon our technology and its perceived competitive
advantages. Accordingly, our prospects must be considered in light of
the risks, expenses and difficulties frequently encountered in connection with
the establishment of a new business in a highly competitive industry,
characterized by frequent new product introductions. We anticipate that we will
incur substantial expense in connection with the development and testing of our
proposed products and expect these expenses to result in continuing and
significant losses until such time, if ever, that we are able to achieve
adequate levels of sales or license revenues.
We
Have Limited Experience in Direct Sales.
Our
products have been distributed primarily through OEMs. We have recently begun
pursuing an expanded distribution strategy designed to reduce our reliance on
OEMs. Pursuant to this strategy, we are increasing our direct sales efforts into
new markets. Our future growth and profitability will depend upon the successful
development of business relationships with additional OEMs, growth in direct
sales, and sales through select resellers and reps to penetrate the market with
our products.
We
Currently Depend On A Small Number Of Customers And Expect To Continue To Do
So.
The
Company currently does business with approximately 20 customers. Of this number,
four customers accounted for approximately 71% of our gross revenues in
2009. We are, and may continue to be, dependent upon a small number
of customers. Accordingly, the loss of one or more of these customers is likely
to have a material adverse effect on our business.
Most
Of Our Current And Potential Competitors Have Greater Name Recognition,
Financial, Technical And Marketing Resources, And More Extensive Customer Bases
And Industry Relationships Than We Do, All Of Which Could Be Leveraged To Gain
Market Share To Our Detriment, Particularly In An Environment Of Rapid
Technological Change.
We
compete against a number of companies in the electric motor energy savings
market, many of which have longer operating histories, established markets and
far greater financial, advertising, research and development, manufacturing,
marketing, personnel and other resources than we currently have or may
reasonably expect to have in the foreseeable future. This competition may have
an adverse effect on our ability to expand our operations or operate profitably.
The motor control industry is also highly competitive and characterized by rapid
technological change. Our future performance will depend in large part upon our
ability to become and remain competitive and to develop, manufacture and market
acceptable products in these markets. Competitive pressures may necessitate
price reductions, which can adversely affect revenues and profits. If we are not
competitive in our ongoing research and development efforts, our products may
become obsolete, or be priced above competitive levels. However, management
believes, based upon their performance and price, our products are attractive to
customers. We cannot guarantee that competitors will not introduce comparable or
technologically superior products, which are priced more favorably than our
products.
Changes
In Retail Energy Prices Could Affect Our Business.
We have
found that a customer’s decision to purchase an MEC (or similar product) is
primarily driven by the payback on the investment resulting from the increased
energy savings. Although management believes that current retail
energy prices support an attractive return on investment for our products, the
future retail price of electrical energy may not remain at such levels, and
price fluctuations reducing energy expense could adversely affect product
demand.
Loss
Of Key Personnel Could Have Significant Adverse Consequences.
We
currently depend on the services of Steve Strasser, and BJ Lackland, our Chief
Executive Officer and Chief Financial Officer, respectively. The loss of the
services of either of these persons could have an adverse effect on our
business. As discussed under “Management”, we have entered into long-term
employment contracts with Messrs. Strasser and Lackland, but such contracts do
not guarantee they will remain with us.
We
Do Not Have “Key Man” Life Insurance.
The
Company presently does not have any key man life insurance policies. As soon as
practicable following the commencement of profitable operations (which may never
occur), we intend to purchase key man life insurance on the life of our
principal executive officer, Steven Strasser. Upon purchase of such insurance,
we intend to pay the premiums and be the sole beneficiary. The lack of such
insurance may have a material adverse effect upon our business.
Delaware
Law Limits The Liability Of Our Directors.
Pursuant
to our Certificate of Incorporation, the Company’s directors are not liable to
us or our stockholders for monetary damages for breach of fiduciary duty, except
for liability in connection with a breach of the duty of loyalty, for acts or
omissions not in good faith or which involved intentional misconduct or a
knowing violation of law for dividend payments or stock repurchases illegal
under Delaware law or any transaction in which a director has derived an
improper personal benefit.
Potential
Product Liability Claims May Not Be Fully Covered By Insurance.
The
Company may be subject to potential product liability claims that could, in the
absence of sufficient insurance coverage, have a material adverse impact on us.
Presently, we have general liability coverage that includes product liability up
to $2,000,000 and umbrella liability up to $4,000,000. Any large product
liability suits occurring early in our growth may significantly and adversely
affect our ability to expand the market for our products.
RISKS
RELATED TO OUR COMMON STOCK AND CAPITAL STRUCTURE
Trading
In Our Common Stock Over The Last 12 Months Has Been Limited, So Investors May
Not Be Able To Sell As Many Of Their Shares As They Want At Prevailing
Prices.
Prices of
our common stock are quoted on the OTC Bulletin Board. Approximately 26,000
shares were traded on an average daily trading basis for the 12 months ended
December 31, 2009. If limited trading in our common stock continues,
it may be difficult for shareholders to sell their shares. Also, the sale of a
large block of our common stock could depress the market price to a greater
degree than a company that typically has a higher volume of trading of its
securities.
The
Limited Public Trading Market May Cause Volatility In Our Stock
Price.
The
Company’s common stock is currently quoted on a limited basis on the OTC
Bulletin Board under the symbol “PEFF”. The quotation of our common stock on the
OTC Bulletin Board does not assure that a meaningful, consistent and liquid
trading market exists at all times, and in recent years such market has
experienced extreme price and volume fluctuations that have particularly
affected the market prices of many smaller companies like us. Our common stock
is thus subject to this volatility. Sales of substantial amounts of our common
stock, or the perception that such sales might occur, could adversely affect
prevailing market prices of our common stock.
An
Active And Visible Trading Market For Our Common Stock May Not
Develop.
The
market for our common stock may become inactive in the future. In the absence of
an active trading market:
|
·
|
Investors may have difficulty
buying and selling or obtaining market
quotations;
|
|
·
|
Market visibility for our common
stock may be limited; and
|
|
·
|
A lack of visibility for our
common stock may have a depressive effect on the market price for our
common stock.
|
The OTC
Bulletin Board is an inter-dealer, over-the-counter market that provides
significantly less liquidity than NASDAQ, and quotes for stocks included on the
OTC Bulletin Board are not listed in the financial sections of newspapers, as
are those for the NASDAQ Stock Market. The trading price of the common stock is
expected to be subject to significant fluctuations in response to variations in
quarterly operating results, changes in analysts’ earnings estimates,
announcements of innovations by the Company or its competitors, general
conditions in the industry in which we operate and other factors. These
fluctuations, as well as general economic and market conditions, may have a
material or adverse effect on the market price of our common
stock.
Penny
Stock Regulations May Impose Certain Restrictions On Marketability Of Our
Securities.
The SEC
has adopted regulations which generally define a “penny stock” to be any 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 certain exceptions. As a result, our common
stock is subject to rules that impose additional requirements on broker-dealers
who sell such securities to persons other than established customers and
accredited investors (generally those with net worth in excess of $1,000,000 or
annual income exceeding $200,000, or $300,000 together with their spouse). For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of such securities and have received
the purchaser’s written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a risk disclosure
document relating to the penny stock market. The broker-dealer must also
disclose the commission payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the broker-dealer
is the sole market maker, the broker-dealer must disclose this fact and the
broker-dealer’s presumed control over the market. Finally, monthly statements
must be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. Consequently, the
“penny stock” rules may restrict the ability of broker-dealers to sell the
Company’s securities and may affect the ability of investors to sell the
Company’s securities in the secondary market and the price at which such
purchasers can sell any such securities.
Stockholders
should be aware that, according to the Commission, the market for penny stocks
has suffered in recent years from patterns of fraud and abuse. Such patterns
include:
|
·
|
Control of the market for the
security by one or a few broker-dealers that are often related to the
promoter or issuer;
|
|
·
|
Manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases;
|
|
·
|
"Boiler room" practices involving
high pressure sales tactics and unrealistic price projections by
inexperienced sales persons;
|
|
·
|
Excessive and undisclosed bid-ask
differentials and markups by selling broker-dealers;
and
|
|
·
|
The wholesale dumping of the same
securities by promoters and broker-dealers after prices have been
manipulated to a desired level, along with the inevitable collapse of
those prices with consequent investor
losses.
|
The
Company’s management is aware of the abuses that have occurred historically in
the penny stock market.
We
May Never Pay Cash Dividends On Our Common Stock.
We have
not paid or declared any dividends on our common stock and do not anticipate
paying or declaring any cash dividends on our common stock in the foreseeable
future.
Sales
Of Common Stock Under Rule 144 May Adversely Affect The Market Price Of Our
Common Stock.
Possible Resales under Rule
144. Of the 45,077,984 shares of the Company’s common stock
outstanding on the date of this report, 33,547,157 shares are freely trading in
the market place (the “Free Trading Shares”). The Free Trading Shares are
comprised mostly of shares (1) originally issued in private offerings of common
stock from June through March 2007, that were later registered in the Company’s
S-1 Registration Statement (the “Registration Statement”), declared effective on
October 10, 2008 and (2) shares originally issued in transactions exempt from
registration under the Securities Act.
The
remaining 11,530,827 shares of our common stock outstanding are restricted
securities as defined in Rule 144 and under certain circumstances may be resold
without registration pursuant to Rule 144. These shares include the
9,968,910 shares held by Summit and Steven Strasser in the aggregate, and
1,561,917 shares held by directors and insiders.
In
addition, the Company had approximately 31,447,563 common stock purchase
warrants outstanding and approximately 16,197,396 common stock options
outstanding as of the date of this report, including the warrants issued in
connection with the private offer and sale of preferred stock units in 2008 and
2009 (See Note 15 to the Financial Statements). The shares issuable
on exercise of the options and warrants may, under certain circumstances, be
available for public sale in the open market under the Registration Statement or
pursuant to Rule 144, subject to certain limitations.
In
general, pursuant to Rule 144, after satisfying a six month holding period: (i)
affiliated stockholder (or stockholders whose shares are aggregated) may, under
certain circumstances, sell within any three month period a number of securities
which does not exceed the greater of 1% of the then outstanding shares of common
stock or the average weekly trading volume of the class during the four calendar
weeks prior to such sale and (ii) non-affiliated stockholders may sell without
such limitations, provided we are current in our public reporting
obligations. Rule 144 also permits the sale of securities by
non-affiliates that have satisfied a one year holding period without any
limitation or restriction. Any substantial sale of the common stock
pursuant to Rule 144 may have an adverse effect on the market price of the
Company’s shares.
Exercise
Of Outstanding Options And Warrants Will Dilute Ownership Of Outstanding
Shares.
As of the
date of this report, the Company has reserved 71,429 shares of common stock for
issuance upon exercise of stock options or similar awards which may be granted
pursuant to the 1994 Plan, of which no options are
outstanding. Furthermore, we have reserved 25,000,000 shares of our
common stock for issuance upon exercise of stock options or similar awards which
may be granted pursuant to the 2000 Plan, of which options to purchase an
aggregate of 16,197,396 shares are outstanding. The outstanding options under
the 2000 Plan have a weighted average exercise price of $0.35. As of the date of
this report, we have issued warrants exercisable for 31,447,563 shares of common
stock to financial consultants, investors, former employees and other business
partners, having a weighted average exercise price of $0.43 and expiring on
various dates from February 2010 to February 2015. Exercise of these options and
warrants in the future will reduce the percentage of common stock held by the
public stockholders. Furthermore, the terms on which we could obtain additional
capital during the life of the options and warrants may be adversely affected,
and it should be expected that the holders of the options and warrants would
exercise them at a time when we would be able to obtain equity capital on terms
more favorable than those provided for by such options and
warrants.
Our
Issuance Of “Blank Check” Preferred Stock Could Adversely Affect Our Common
Stockholders.
The
Company’s Certificate of Incorporation authorizes the issuance of “blank check”
preferred stock with such designations, rights and preferences as may be
determined from time to time by the board of directors. Accordingly, our Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividends, liquidation, conversion, voting or other rights that could
adversely affect the relative voting power or other rights of the holders of our
common stock. In the event of issuance, the preferred stock could be used as a
method of discouraging, delaying or preventing a change in control of the
Company, which could have the effect of discouraging bids for the Company and
thereby prevent stockholders from receiving the maximum value for their
shares. From August 12, 2009, through February 24, 2010, the Company
sold 23,375 shares if its Series C preferred stock and 34,625 shares of its
Series C-1 preferred stock in private offerings of units (See Note 15 to the
Financial Statements).
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus, including the sections entitled "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," contains forward-looking statements.
These statements relate to future events, our future financial performance,
growth of our target market and related worldwide markets, future demand for our
products, retail electrical energy demand and prices and similar expectations.
These statements involve known and unknown risks, uncertainties and other
factors that may cause our actual results, levels of activity, performance or
achievements to differ materially from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking
statements. You can identify forward-looking statements by terminology such as
"may," "will," "should," "expects," "intends," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," "continues" or the negative of
these terms or other comparable terminology. These risks and other factors
include those listed under "Risk Factors" and elsewhere in this prospectus.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. You should not place undue reliance on
any forward-looking statements as they reflect our management's view only as of
the date of this prospectus. We will not update any forward-looking statements
to reflect events or circumstances that occur after the date on which such
statement is made.
This
prospectus contains statistical data that we obtained from industry sources.
These sources generally indicate that they have obtained their information from
sources believed to be reliable, but do not guarantee the accuracy or
completeness of the information. Although we believe that the industry sources
are reliable, we have not independently verified their data.
USE
OF PROCEEDS
We will
not receive any of the proceeds from the sale of the shares of common stock by
the Selling Stockholders. If and when the warrants held by Selling Stockholders
are exercised, we will receive the proceeds from the exercise of those warrants.
If all of these warrants are exercised in full, we will receive approximately
$10,000,000, which we intend to use for working capital and other general
corporate purposes.
We
anticipate we will need at least $250,000 to $300,000 per month to continue our
current operations, not including non-cash expenses and payments to certain
creditors, including accrued expenses. As discussed in "Risk Factors" above, we
will need to make payments toward accrued liabilities out of our cash flow for
the foreseeable future. Overall, our satisfaction of our cash requirements
depends on our ability to raise money from external financing sources and to
generate future sales.
PRICE
RANGE OF COMMON STOCK
The
Company’s common stock is thinly traded on the National Association of
Securities Dealers’ Over the Counter Bulletin Board (“OTCBB”) under the symbol
“PEFF”.
The
following table sets forth the high and low bid information for periods in the
three month period ended March 31, 2010 and the two twelve month periods ended
December 31, 2009 and December 31, 2008.
Three
months Ended March 31, 2010
|
|
High
|
|
|
Low
|
|
January
1, 2010 — March 31, 2010
|
|
$
|
0.32
|
|
|
$
|
0.20
|
|
Twelve
months Ended December 31, 2009
|
|
High
|
|
|
Low
|
|
October
1, 2009 — December 31, 2009
|
|
$
|
0.45
|
|
|
$
|
0.20
|
|
July
1, 2009 — September 30, 2009
|
|
|
0.25
|
|
|
|
0.11
|
|
April
1, 2009 — June 30, 2009
|
|
|
0.30
|
|
|
|
0.12
|
|
January
1, 2009 — March 31, 2009
|
|
|
0.30
|
|
|
|
0.08
|
|
Twelve
months Ended December 31, 2008
|
|
High
|
|
|
Low
|
|
October
1, 2008 — December 31, 2008
|
|
$
|
0.25
|
|
|
$
|
0.08
|
|
July
1, 2008 — September 30, 2008
|
|
|
0.32
|
|
|
|
0.19
|
|
April
1, 2008 — June 30, 2008
|
|
|
0.39
|
|
|
|
0.26
|
|
January
1, 2008 — March 31, 2008
|
|
|
0.55
|
|
|
|
0.26
|
|
As of
April 27, 2010 there were 168 stockholders of record of the Company’s common
stock.
DIVIDEND
POLICY
We have
never declared or paid cash dividends on our capital stock and have no present
intention of paying cash dividends in the foreseeable future. Payment of future
dividends, if any, will be at the discretion of our Board of Directors and will
depend on our financial condition, results of operations, capital requirements
and such other factors as the Board of Directors deems relevant. It is the
intention and present policy of our board to retain all earnings to provide for
our future growth.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The
following discussion should be read in conjunction with our financial statements
and the related notes included elsewhere in this prospectus. In addition to
historical information, this discussion includes forward-looking information
that involves risks and assumptions which could cause actual results to differ
materially from management's expectations. See "Special Note Regarding
Forward-Looking Statements" on page 10 of this prospectus.
OVERVIEW
The
Company generates revenues from a single business segment: the design,
development, marketing and sale of proprietary energy efficiency technologies
and products for electric motors. The Company’s products, called
Motor Efficiency Controllers (“MEC”), save up to 35 percent of the electricity
used by a motor in appropriate applications. The Company’s patented
technology platform, called E-Save Technology®, saves energy when a constant
speed alternating current induction motor is operating in a lightly loaded
condition. Target applications for the Company’s three-phase MECs
include escalators, MG set elevators, grinders, crushers, saws, stamping
presses, and many other types of industrial equipment. The Company
has also developed a single-phase MEC targeted at smaller motors, such as those
found in clothes washers, dryers, and other appliances and light commercial
equipment. The Company has one existing patent and three patents
pending on E-Save Technology®.
Analog
Three-phase MEC
The
Company began generating revenues from sales of its patented analog three-phase
MEC line of motor controllers in the late 1990’s. The Company sold
this product through the second quarter of 2009.
Digital
Three-phase MEC
In 2005,
the Company began development of a digital version of its three-phase MEC so
that the product would be capable of high volume sales through existing
distribution channels for motor controls. The digital version is much
smaller in size and easier to install than the analog product, is driven by a
powerful microprocessor and digital signal processor. The digital MEC is a
complete motor control device, meaning is can start, stop, soft start and
protect a motor, and is therefore capable of replacing standard motor starters
and soft starts that do not save energy. The product can be installed by OEMs at
their factories or it can be retrofitted on to existing equipment.
In 2008,
the Company launched limited sales of the digital three-phase MEC and initiated
testing if the digital product by several OEMs, primarily in the
elevator/escalator industry. In the summer of 2009, the Company
announced its first OEM agreements and that it had received Underwriters’
Laboratories (“UL”) certification on a full line of the Company’s digital
three-phase products. UL certification enables the Company to sell
its digital three-phase products to industrial markets. The Company
is developing a network of independent sales representatives to penetrate the
industrial markets.
Digital
Single-phase MEC
In 2006,
the Company began development on its digital single-phase
product. The digital single phase MEC is targeted at appliances, such
as clothes washers and dryers. The Company has one patent pending on
its digital single-phase MEC.
Capitalization
As of
December 31, 2009, the Company had total stockholders’ equity of $801,642
primarily due to (i) the Company’s sale of 30,250 shares of Series C and Series
C-1 Convertible Preferred Stock in a private offering in December of 2009, (ii)
the Company’s sale of 140,000 shares of Series B Convertible Preferred Stock in
a private offering from October of 2007 through January of 2008, (iii) the
Company’s sale of 12,950,016 shares of common stock in a private stock offering
from November of 2006 through March of 2007, (iv) the Company’s sale of
14,500,000 shares of common stock in a private stock offering in July and August
of 2005, (v) the Company’s sale of 2,346,233 shares of Series A-1 Convertible
Preferred stock to Summit Energy Ventures, LLC in June of 2002 and (vi) the
conversion of notes payable of approximately $1,047,000 into 982,504 shares of
Series A-1 Convertible Preferred Stock in October of 2003. All of the
Company’s Series A-1 Convertible Preferred Stock was converted into the
Company’s common stock in 2005.
Because
of the nature of our business, the Company makes significant investments in
research and development for new products and enhancements to existing
products. Historically, the Company has funded its research and
development efforts through cash flow primarily generated from debt and equity
financings. Management anticipates that future expenditures in
research and development will continue at current levels.
The
Company’s results of operations for the year ended December 31, 2009 were marked
by a significant decrease in revenues and an increase in losses from operations
that are more fully discussed in the following section “Results of Operations
for the Years Ended December 31, 2009 and 2008”. Sales cycles for our
products are generally lengthy and can range from less than a month to well over
one year, depending on customer profile. Larger OEM deals and sales
to larger end users generally take a longer period of time, whereas sales
through channel partners may be closed within a few weeks. Because of
the complexity of this sales process, a number of factors that are beyond the
control of the Company can delay the closing of transactions.
RESULTS
OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
The
following table sets forth certain line items in our condensed statement of
operations as a percentage of total revenues for the periods
indicated:
|
|
Year Ended
December 31,
2009
|
|
|
Year Ended
December 31,
2008
|
|
Revenues
|
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost
of revenues
|
|
|
78.8 |
|
|
|
82.8 |
|
Gross
profit
|
|
|
21.2 |
|
|
|
17.2 |
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
933.0 |
|
|
|
631.1 |
|
Research
and development
|
|
|
335.6 |
|
|
|
211.5 |
|
Depreciation
and amortization
|
|
|
23.4 |
|
|
|
15.5 |
|
Total
expenses
|
|
|
1,292.1 |
|
|
|
858.1 |
|
Loss
from operations
|
|
|
(1,270.9 |
) |
|
|
(840.9 |
) |
Other
income
|
|
|
(175.6 |
) |
|
|
21.8 |
|
Provision
for taxes
|
|
|
(21.4 |
) |
|
|
(2.6 |
) |
Net
loss
|
|
|
(1,467.9 |
) |
|
|
(821.7 |
) |
Dividends
paid or payable on Series B, Series C and Series C-1 Preferred
Stock
|
|
|
447.5 |
|
|
|
113.6 |
|
Net
loss attributable to common shareholders
|
|
|
(1,915.5 |
) |
|
|
(935.3 |
) |
REVENUES
Revenues
for the year ended December 31, 2009, were approximately $284,000 compared to
approximately $481,000 for the year ended December 31, 2008, a decrease of
$197,000 or 41%. This decrease is mainly attributable to a decrease
in sales in the elevator and escalator market during the year ended December 31,
2009. Specifically, escalator manufacturer and service provider sales fell to
approximately $183,000 for the year ended December 31, 2009, from $363,000 for
the year ended December 31, 2008. Sales of the analog product to one
escalator manufacturer and service provider, which is one of the Company’s
largest customers, slowed very significantly during this period in anticipation
of release of their private label version of our digital product. The
digital product has been tested and approved for use on a retrofit and OEM basis
by this customer, and a supply agreement was signed during the second quarter of
2009, and the customer’s private label version of our digital product was
launched at the end of the second quarter of 2009. The digital
product offers greater features and functionality compared to the analog
product, making it more attractive as an OEM product. Furthermore,
industrial sales fell to approximately $78,000 for the year ended December 31,
2009, from approximately $118,000 for the year ended December 31,
2008. Sales of the Company’s single-phase product, which is for use
on small appliances, totaled approximately $23,000 for the year ended December
31, 2009. There were no comparable sales of the single-phase product
in 2008. For the year ended December 31, 2009, industrial and other
sales, of which all but one sale consisted of digital units, were approximately
27% of total revenues, escalator and elevator sales, which consisted of a mix of
digital units and analog units, were approximately 65% of total revenues, and
sales of our single-phase product were approximately 8% of total
revenues. For the year ended December 31, 2008, industrial and other
sales, which consisted of a mix of digital units and analog units, were
approximately 21% of total revenues, and escalator and elevator sales, which
consisted mostly of analog units, were approximately 79% of total
revenues.
COST
OF REVENUES
Cost of
revenues for the year ended December 31, 2009 were approximately $224,000
compared to approximately $398,000 for the year ended December 31, 2008, a
decrease of $174,000, or 44%. This decrease is mainly attributable to
a decrease in sales in both the elevator and escalator and the industrial
markets during the year ended December 31, 2009. Also, the Company
recorded an inventory obsolescence charge of approximately $41,000 during the
year ended December 31, 2008 and no comparable charge was recorded during the
year ended December 31, 2009. As a percentage of sales, total cost of
revenues decreased to approximately 79% for the year ended December 31, 2009,
compared to approximately 82% for the year ended December 31,
2008. The decrease in the costs as a percentage of sales was
primarily due to the Company increasing its prices on certain units, which
resulted in higher margins during the year ended December 31, 2009, and an
increase in the sale of digital units, which have higher average margins than
analog units, as well as no inventory obsolescence charges during
2009.
GROSS
PROFIT
Gross
profit for the year ended December 31, 2009 was approximately $60,000 compared
to approximately $83,000 for the year ended December 31, 2008, resulting in a
decrease of $23,000 or 28%. This decrease is mainly attributable to a decrease
in sales in both the elevator and escalator and the industrial markets during
the year ended December 31, 2009, partially offset by the inventory obsolescence
charge recorded by the Company during the year ended December 31, 2008, as
described above. As a percentage of revenue, gross profit increased to
approximately 21% for the year ended December 31, 2009, compared to
approximately 17% for the year ended December 31, 2008.
OPERATING
EXPENSES
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses were approximately $2,650,000 for the year
ended December 31, 2009, compared to approximately $3,033,000 for the year ended
December 31, 2008, a decrease of $383,000 or 13%. The decrease in selling,
general and administrative expenses compared to the prior year was primarily due
to a decrease in travel expenses, consulting fees, and a decrease in stock based
compensation costs related to FASB ASC 718 (SFAS 123(R)). These
decreases were partially offset by increases in legal and professional fees,
related to the Company’s patent attorneys and litigation (see Item 3 – Legal
Proceedings), and a change in the Company’s independent registered accounting
firm.
Research
and Development Expenses
Research
and development expenses were $953,000 for the year ended December 31, 2009
compared to approximately $1,016,000 for the year ended December 31, 2008, a
decrease of $63,000 or 6%. This decrease is mainly attributable to a decrease in
the Company’s product development and certification costs related to the
Company’s digital controller for both its single-phase and three-phase products
during the year ended December 31, 2009.
Change
in Fair Value of Warrant Liability
Warrants
issued in connection with a private offering of the Company’s common stock
completed on July 8, 2005 and August 31, 2005 are being accounted for as
liabilities in accordance with FASB ASC 820-10, Fair Value Measurements and
Disclosures (Prior
authoritative literature: FASB EITF 07-5, Determining Whether
an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF
07-5”), issued January 2009), based on an analysis of the terms and
conditions of the warrant agreements.
As a
result, the fair value of these warrants (five year warrants to purchase up to
5,696,591 shares of the Company’s common stock at an exercise price of $0.44 per
share), amounting to $381,856 as of January 1, 2009, was reclassified from
equity and reflected as a liability. The fair value of these warrants
amounted to $828,827 as of December 31, 2009. The $514,089 increase
in the fair value of these warrants during 2009 has been reflected as a
non-operating loss in the Statement of Operations for 2009. The
warrants are being valued at each reporting period using the Black-Scholes
pricing model to determine the fair market value per share. We will
continue to mark the warrants to market value each quarter-end until they
expire.
Financial
Condition, Liquidity, and Capital Resources: For the Year Ended December 31,
2009
The
Company has suffered recurring losses from operations, and experienced a
deficiency of cash of approximately $3,000,000 and $3,100,000 from operations
for the years ended December 31, 2009 and 2008, respectively. For the
years ended December 31, 2009 and December 31, 2008, we had net losses of
$4,168,708 and $3,948,204, respectively. In our Auditors’ Report
dated March 31, 2010 on our December 31, 2009 financial statements included
in this report, our auditors have stated that these factors raise substantial
doubt about our ability to continue as a “going concern”. Our
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amount of
liabilities that might be necessary should we be unable to continue in
existence.
The
Company’s continuation as a “going concern” is dependent upon achieving
profitable operations and related positive cash flow and satisfying our
immediate cash needs by external financing until we are profitable. Our
plans to achieve profitability include developing new products, obtaining new
customers and increasing sales to existing customers. We are seeking to
raise additional capital through equity issuance, debt financing and other types
of financing, but we cannot guarantee that sufficient capital will be
raised.
On March
30, 2010, the Company issued unsecured notes payable to Steven Strasser, the
Company’s CEO, totaling $125,000. The notes bear interest at 5%,
payable upon maturity. The notes mature two months after issuance.
Since
inception, the Company has financed its operations primarily through the sale of
its securities. In 2009, the Company received a total of
approximately $1,210,000 in gross proceeds from a private placement of its
Series C and Series C-1 preferred stock and warrants to purchase common
stock. In 2008 and 2007, the Company received a total of
approximately $8,025,000 in gross proceeds from a private placement of its
Series B preferred stock, common stock and warrants to purchase common stock, as
to which the Company was required to file a registration statement on Form SB-2
or other relevant registration statement. Of this amount, $1,850,000
was converted from existing debt securities. Also in 2007, the
Company grossed approximately $680,000 in cash from the exercise of
warrants. As of December 31, 2009 the Company has received a total of
approximately $21,515,000 from public and private offerings of its equity
securities, received $300,000 from a bridge note with a shareholder (which was
converted into 3,000,000 shares of common stock and 1,500,000 warrants with an
additional investment of $300,000 on July 8, 2005), received approximately
$445,386 under a bank line of credit (which was repaid during 2002), and
received $1,000,000 under a line of credit with a shareholder (which was
converted to Series A-1 Preferred Convertible shares during 2003). In October
2004 and February 2005, the Company received $1,589,806 in debt financing
through a debt offering arranged by a placement agent, Pali Capital. Of this
total, $300,000 plus accrued interest was converted from borrowings with the
same shareholder as referenced above. In April 2006, the Company
received $1,000,000 in debt financing from EMTUCK , LLC, in which the managing
member is a management company wholly owned and controlled by Steven Strasser,
the Company's CEO. In May 2006, the Company received an additional
$500,000 in debt financing from EMTUCK. In November 2006, the Company
received $2,000,000 in debt financing. Of this amount, $1,450,000 was
converted from borrowings from prior investors. This $2,000,000 note
was paid off in full in October of 2007. As of December 31, 2009 the
Company had cash of $247,564 and has no outstanding debt
securities.
Net cash
used for operating activities for the year ended December 31, 2009 was
$3,002,386 which primarily consisted of: a net loss of $4,168,708; less bad debt
expense of $8,149, depreciation and amortization of $66,589, loss on the
disposal of fixed assets of $3,097, warrants and options issued in connection
services from vendors, and to employees and consultants of $405,143, change in
fair value of warrant liability of $514,089, deferred tax provision of $49,946,
decreases in prepaid expenses and other current assets of $10,728, and deposits
of $11,292, increases in accounts receivable of $30,133 and inventory of
$35,233. In addition, these amounts were partially offset by
decreases in deferred rent of $3,750, and increases in accounts payable and
accrued expenses of $166,405.
Net cash
used for operating activities for the year ended December 31, 2008 was
$3,102,847 which primarily consisted of: a net loss of $3,948,204; less bad debt
expense of $7,770, inventory obsolescence expense of $40,758, depreciation and
amortization of $74,539, warrants and options issued in connection with services
from vendors, and to employees and consultants of $765,504, common stock issued
for consulting services of $7,960, decreases in accounts receivable of $57,323
and deposits of $84,057, increases in inventory of $155,016 and prepaid expenses
of $5,869. In addition, these amounts were partially offset by
decreases in accounts payable and accrued expenses of $30,669 and customer
deposits of $1,605, and increases in deferred rent of $605.
Net cash
used in investing activities for fiscal year 2009 was $32,882, compared to
$132,364 in fiscal year 2008. The amount for 2009 consisted of the
purchase of fixed assets of $9,601, costs related to patent applications of
$24,174, and proceeds from the sale of fixed assets of $893. The
amount for 2008 consisted of the purchase of fixed assets of $104,857, and costs
related to patent applications of $27,507.
Net cash
provided by financing activities for fiscal year 2009 was
$1,182,819. The entire amount consisted of the net proceeds from the
issuance of equity securities.
Net cash
provided by financing activities for fiscal year 2008 was
$248,846. The entire amount consisted of the net proceeds from the
issuance of equity securities.
The
Company expects to increase its operating expenses, particularly in research and
development and selling, general and administrative expenses, for the
foreseeable future in order to execute its business strategy. As a result, the
Company anticipates that operating expenses will constitute a material use of
any cash resources.
Cash
Requirements and Need for Additional Funds
The
Company anticipates a substantial need for cash to fund its working capital
requirements. It is the opinion of management that approximately $2.5
- 3 million will be required to cover operating expenses, including, but not
limited to, marketing, sales, research and operations during the next twelve
months. If the Company is unable to obtain funding on reasonable
terms or finance its needs through current operations, the Company will be
forced to restructure, file for bankruptcy or cease operations.
Notable
changes to expenses are expected to include an increase in the Company’s sales
personnel and efforts, and developing more advanced versions of the Company’s
technology and products.
Critical
Accounting Policies and Estimates
Management’s
discussion and analysis of Power Efficiency Corporation’s financial condition
and results of operations are based upon the condensed financial statements
contained in this Annual Report on Form 10-K, which have been prepared in
accordance with accounting principles generally accepted in the United
States. 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 disclosure of contingent assets
and liabilities. On an on-going basis, management evaluates
estimates, including those related to the valuation of inventory and the
allowance for uncollectible accounts receivable. We base our
estimates on historical experience and on various other assumptions that
management believes to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other
sources. Actual results may differ materially from these estimates
under different assumptions or conditions. We believe the following
critical accounting policies affect our more significant judgments and estimates
used in the preparation of our condensed financial statements.
Inventories
Inventories
are valued at the lower of cost (first-in, first-out) or market. The
Company reviews inventory for impairments to net realizable value whenever
circumstances arise. Such circumstances may include, but are not
limited to, the discontinuation of a product line or re-engineering certain
components making certain parts obsolete. Management has determined a
reserve for inventory obsolescence is not necessary at December 31, 2009 or
2008.
Accounts
Receivable
The
Company carries its accounts receivable at cost less an allowance for doubtful
accounts and returns. On a periodic basis, the Company evaluates its
accounts receivable and establishes an allowance for doubtful accounts, based on
a history of past write-offs and collections and current credit
conditions. Change in customer liquidity or financial condition could
affect the collectability of that account, resulting in the adjustment upward or
downward in the provision for bad debts, with a corresponding impact to our
results of operations.
Fair
Value Measurements:
FASB ASC
820-10 (SFAS No. 157) emphasizes that fair value is a market-based
measurement, not an entity-specific measurement. Therefore, a fair value
measurement should be determined based on the assumptions that market
participants would use in pricing the asset or liability. As a basis for
considering market participant assumptions in fair value measurements, FASB ASC
820-10 (SFAS No. 157) establishes a fair value hierarchy that distinguishes
between market participant assumptions based on market data obtained from
sources independent of the reporting entity (observable inputs that are
classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s
own assumptions about market participant assumptions (unobservable inputs
classified within Level 3 of the hierarchy). The Company has applied FASB ASC
820-10 (SFAS 157) to measure the amount of the liability related to its
derivative instruments at fair value and to determine fair value for purposes of
testing goodwill for impairment.
Level 1
inputs utilize quoted prices (unadjusted) in active markets for identical
assets or liabilities that the Company has the ability to access. Level 2 inputs
are inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly or indirectly. Level 2 inputs may
include quoted prices for similar assets and liabilities in active markets, as
well as inputs that are observable for the asset or liability (other than quoted
prices), such as interest rates and yield curves that are observable at commonly
quoted intervals. Level 3 inputs are unobservable inputs for the asset or
liability, which is typically based on an entity’s own assumptions, as there is
little, if any, related market activity. In instances where the determination of
the fair value measurement is based on inputs from different levels of the fair
value hierarchy, the level in the fair value hierarchy within which the entire
fair value measurement falls is based on the lowest level input that is
significant to the fair value measurement in its entirety. The Company’s
assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgment, and considers factors specific to
the asset or liability.
Revenue
Recognition
Revenue
from product sales is recognized at the time of shipment, when all services are
complete. Returns and other sales adjustments (warranty accruals,
discounts and shipping credits) are provided for in the same period the related
sales are recorded.
Accounting
for Stock Based Compensation
The
Company accounts for employee stock options as compensation expense, in
accordance with FASB ASC 718 (SFAS 123(R)). FASB ASC 718 (SFAS
123(R)) requires companies to expense the value of employee stock options and
similar awards, and applies to all outstanding and vested stock-based
awards.
In
computing the impact, the fair value of each option is estimated on the date of
grant based on the Black-Scholes options-pricing model utilizing certain
assumptions for a risk free interest rate; volatility; and expected remaining
lives of the awards. The assumptions used in calculating the fair
value of share-based payment awards represent management's best estimates, but
these estimates involve inherent uncertainties and the application of
management’s judgment. As a result, if factors change and the Company
uses different assumptions, the Company’s stock-based compensation expense could
be materially different in the future. In addition, the Company is required to
estimate the expected forfeiture rate and only recognize expense for those
shares expected to vest. In estimating the Company’s forfeiture rate,
the Company analyzed its historical forfeiture rate, the remaining lives of
unvested options, and the amount of vested options as a percentage of total
options outstanding. If the Company’s actual forfeiture rate is
materially different from its estimate, or if the Company reevaluates the
forfeiture rate in the future, the stock-based compensation expense could be
significantly different from what we have recorded in the current
period. The impact of applying FASB ASC 718 (SFAS 123(R))
approximated $405,000 and $766,000 in additional compensation expense during the
periods ended December 31, 2009 and 2008, respectively. Such amounts
are included in research and development expenses and selling, general and
administrative expense on the statement of operations.
Product
Warranties
The
Company typically warrants its products for two years. Estimated
product warranty expenses are accrued in cost of sales at the time the related
sale is recognized. Estimates of warranty expenses are based primarily on
historical warranty claim experience. Warranty expenses include accruals for
basic warranties for products sold. While management believes
our estimates are reasonable, an increase or decrease in submitted warranty
claims could affect warranty expense and the related current and future
liability.
Provision
for Income Taxes
The
Company utilizes the asset and liability method of accounting for income taxes
pursuant to FASB ASC 740 Accounting for Income Taxes (Prior
authoritative literature FASB SFAS No. 109, Accounting for Income Taxes (“SFAS
109”)), which requires the
recognition of deferred tax assets and liabilities for both the expected future
tax impact of differences between the financial statement and tax basis of
assets and liabilities, and for the expected future tax benefit to be derived
from tax loss and tax credit carryforwards. FASB ASC 740 (SFAS 109)
additionally requires the establishment of a valuation allowance to reflect the
likelihood of realization of deferred tax assets. We have reported
net operating losses for consecutive years, and do not have projected taxable
income in the near future. This significant evidence causes our
management to believe a full valuation allowance should be recorded against the
deferred tax assets.
FASB ASC
740-10-25-10 Definition of
Settlement in FASB Interpretation No. 48 (Prior authoritative literature
FIN 48-1 Definition of
Settlement in FASB Interpretation No. 48 (“FIN 48-1”) issued May
2007) provides
guidance on how to determine whether a tax position is effectively settled for
the purpose of recognizing previously unrecognized tax benefits. FASB
ASC 740-10-25-10 (FIN 48-1) is effective retroactively to January 1,
2007. Under FASB ASC 740 (FIN 48), the impact of an uncertain tax
position taken or expected to be taken on an income tax return must be
recognized in the financial statements at the amount that is more likely than
not to be sustained upon audit by the relevant taxing authority. An uncertain
income tax position will not be recognized in the financial statements unless it
is more likely than not of being sustained. The implementation of FASB ASC 740
(FIN 48) and FASB ASC 740-10-25-10 (FIN 48-1) did not have a material impact on
the Company’s financial position, results of operations or cash
flows.
Goodwill
FASB ASC
350, Goodwill and Other
Intangible Assets (Prior authoritative literature:
FASB SFAS No. 142, Goodwill and Other Intangible
Assets (“SFAS 142”)) requires that goodwill shall not be
amortized. At a minimum, goodwill is tested for impairment, on an
annual basis by the Company, or when certain events indicate a possible
impairment, utilizing a two-step test, as described in FASB ASC 350 (SFAS
142).
The
Company’s most recent impairment analysis was performed on December 31, 2009, on
the Company’s single reporting unit. Using the Company’s market
capitalization (based on Level 1 inputs), management determined that the
estimated fair market value substantially exceeded the company’s book value. As
of December 31, 2009, the Company’s market capitalization was $13,896,024, and
the Company’s book value was $801,642. As of December 31, 2008, the
Company’s market capitalization was $8,651,088, and the Company’s book value was
$4,046,747. Based on this, no impairment exists as of December 31,
2009 and 2008. Circumstances may arise in which the Company will
perform an impairment test in addition to its annual tests. A significant impairment could have a
material adverse affect on our financial condition and results of
operations.
New
Accounting Pronouncements:
In
October 2009, the Financial Accounting Standards Board issued Accounting
Standards Update 2009-13, “Revenue Recognition (Topic 605) Multiple-Deliverable
Revenue Arrangements, a consensus of the FASB Emerging Issues Task Force (“ASU
2009-13”). ASU 2009-13 amends existing accounting guidance for
separating consideration in multiple-deliverable arrangements. ASU
2009-13 establishes a selling price hierarchy for determining the selling price
of a deliverable. The selling price used for each deliverable will be
based on vendor-specific objective evidence if available, third-party evidence
if vendor-specific evidence is not available, or estimated selling price if
neither vendor-specific evidence nor third-party evidence is
available. ASU 2009-13 eliminates residual method of allocation and
requires that arrangement consideration be allocated at the inception of the
arrangement to all deliverables using the “relative selling price
method.” The relative selling price method allocates any discount in
the arrangement proportionately to each deliverable on the basis of each
deliverable’s selling price. ASU 2009-13 requires that a vendor
determine its best estimate of selling price in a manner that is consistent with
that used to determine the price to sell the deliverable on a stand-alone
basis. ASU 2009-13 is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010, with earlier adoption permitted. We do not
believe the adoption of ASU 2009-13 will have any material impact on our
financial statements.
In
January 2010, the FASB issued accounting standards update (ASU) No. 2010-06,
Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about
Fair Value Measurements (ASU No. 2010-06). ASU No. 2010-06 requires: (1) fair
value disclosures of assets and liabilities by class; (2) disclosures about
significant transfers in and out of Levels 1 and 2 on the fair value hierarchy,
in addition to Level 3; (3) purchases, sales, issuances and settlements be
disclosed on gross basis on the reconciliation of beginning and ending balances
of Level 3 assets and liabilities; and (4) disclosures about valuation methods
and inputs used to measure the fair value of Level 2 assets and liabilities. ASU
No. 2010-06 becomes effective for the first financial reporting period beginning
after December 15, 2009, except for disclosures about purchases, sales,
issuances and settlements of Level 3 assets and liabilities which will be
effective for fiscal years beginning after December 15, 2010. We are currently
assessing what impact, if any, ASU No. 2010-06 will have on our fair value
disclosures; however, we do not believe the adoption of the guidance provided in
this codification update to have a material impact on our financial
statements.
BUSINESS
General
Background
We
design, develop and market energy efficiency technologies and products for
electric motors. Until recently these products were called the “Power Genius™”.
We recently re-branded the product as the "MEC". Our new digital technology is
called “ E-SAVE
Technology ™”. Our products reduce the amount of power consumed by
lightly loaded alternating current induction motors that operate at a constant
speed. Utilizing patented improvements upon NASA-developed motor diagnostic
technologies, our products provide energy cost savings to the user of as much as
35%. We market our products directly under the brand name MEC, and through other
companies under names such as Power Commander® and EcoStart™. These companies
include the leading elevator/escalator manufacturers in the world, such as Otis
Elevator Co (a division of United Technologies) and KONE, Inc.
Description
of Business
Formation
Power
Efficiency Corporation was incorporated in Delaware on October 19, 1994. From
inception through 1997, the Company was a development stage entity that was
engaged in the design, development, marketing and sale of proprietary solid
state electrical components designed to reduce energy consumption in alternating
current induction motors. Alternating current induction motors are commonly
found in industrial and commercial facilities throughout the world.
(b)
|
Business of the
Company
|
The
Company’s Principal Products and Technology
In the
late 1990s the Company commenced the sale of its initial product, which was
based on analog technology and reduces energy consumption in alternating current
induction motors in certain applications. This product has been known by several
names, including the Power
Commander® and Power
Genius. In 2005 the Company began development of a digital
product that would overcome many of the commercial limitations of the analog
product. In 2008, limited models of the first-generation of the
digital product were launched. In mid-2009 the Company launched a line of
products up to 300 horsepower that had certification from Underwriters
Laboratories (“UL”) and its second-generation digital circuitry was
launched. Going forward, the Company has chosen to call its products
Motor Efficiency Controllers (“MEC”).
The
Company has developed patented and patent-pending technologies for effectively
controlling the energy usage of an electric motor. The Company’s first United
States Patent was granted in 1998. Over the past four years the Company has
undertaken extensive study and computer modeling of motors and their energy use,
and has developed digital technologies for its controllers. In the process, the
Company has discovered what it believes are significant innovations and has
completed numerous patent filings around these new inventions. The Company has
branded these collective patented and patent pending technologies as E-SAVE Technology® and has a
registered trademark on this name.
The
Company has developed technologies and products for use on three-phase and
single-phase motors. Three-phase power and motors are generally found in
industrial and commercial buildings for larger applications than single-phase
power and motors.
The
Company’s marketing efforts initially focused on the three-phase version but it
is also now marketing the single-phase product. The Company’s digital
Three-Phase MEC is designed to have the following functionality:
|
2.
|
Provide a soft start for the
motor, bringing it gradually from rest to full
speed
|
|
3.
|
Provide various motor protection
capabilities, such as sensing current overload, phase loss, under- and
over-voltage, and more.
|
|
4.
|
Save energy when the motor is at
full speed but is less than fully
loaded
|
The
Company’s digital Single-Phase MEC is designed to have the following
functionality:
|
2.
|
Provide a soft start for the
motor, bringing it gradually from rest to full
speed
|
|
3.
|
Save energy when the motor is at
full speed but is less than fully
loaded
|
Three-Phase
and Single-Phase MECs are unique particularly because of their energy savings
capabilities. The product reduces energy consumption by electric motors by
electronically sensing and controlling the amount of energy the motor consumes.
A motor with an MEC installed only uses the energy it needs to perform its work
task, thereby increasing its efficiency. The result is a reduction of energy
consumption typically ranging from 15% - 35% in applications that do not always
run at peak load levels. The amount of energy savings depends on a
variety of factors, including the load on the motor and the motor’s
characteristics.
The
Company’s management believes its Motor Efficiency Controllers offer certain
advantages over competing products for the following reasons:
|
·
|
Motor and Equipment Life: The MEC
extends motor life by reducing the stress and strain on the motor and
surrounding equipment, and reduces the amperage to the motor, which
results in cooler running.
|
|
·
|
Successful Utility and Customer
Tests: The MEC has been successfully tested by numerous electric utilities
and customers. For example, Paragon Consulting Services, a contractor for
Nevada Power Company, the electric utility for southern Nevada, performed
8 field tests on escalators and one on an elevator in major Las Vegas
casinos. The tests resulted in average energy savings of over
30% on the escalators and 20% on the
elevator.
|
|
·
|
Utility Incentive Financing: The
three-phase product has qualified for rebate incentive financing, most
frequently called “rebates”, from many electric utilities. This financing
is generally paid to the end user of the MEC as an incentive to invest in
energy saving products. As such, this financing effectively decreases the
cost of the Company’s MEC for end users. The utilities that have approved
the Company’s products for incentive financing include: NV Energy
(formerly Nevada Power Company and Sierra Pacific Power Company), the Los
Angeles Department of Water and Power, Southern California Edison,
Sacramento Municipal Utility District, Anaheim Utilities, the New York
Power Authority, Excel Energy and San Diego Gas and
Electric.
|
|
·
|
Acceptance by Original Equipment
Manufacturers: The Company’s products have been approved and installed by
numerous original equipment manufacturers (“OEMs”) in the escalator and
granulator industries.
|
Three-Phase
MEC
The
Company initially focused its marketing efforts for the Three-Phase MEC in the
elevator and escalator industry, although the Company is also actively marketing
this product to industrial markets, such as recycling, mining, plastics, and
manufacturing. Industries that operate equipment such as conveyor systems,
crushing equipment, stamping presses, granulators, grinders, shredders and other
motor driven equipment with varying loads, are believed to be viable target
markets for the Three-Phase MEC. The Company is seeking to target markets with
appropriate applications and market access, using direct sales, OEMs,
distributors and independent representatives to address these
markets.
Single-Phase
Product
Like the
Company’s three-phase product described above, the Company’s single-phase
product reduces
energy consumption in electric motors by sensing and controlling the amount of
energy the motor consumes. Many motors commonly used in home appliances and
other consumer goods are single-phase AC motors. Since the single-phase product
is much smaller, has a much lower price point, and can be incorporated directly
into a broad variety of applications, the Company believes it is a product most
suitable for installation at the OEM level.
Product
Development
The
Company has devoted significant time and resources in the past several years
toward developing “digital” versions of its three-phase and single-phase
products. Through this process, the Company has transformed its technology so
that its key technological breakthroughs are primarily incorporated in
algorithms and software on a microchip. The Company believes the digital
versions of its products have several distinct advantages over the older analog
versions, including:
|
·
|
Motor starter and motor
protection capabilities similar to standard solid state starters sold by
large motor control companies. The analog product could not start a motor
and provided no motor protection, so the customer had to purchase these
items at additional costs for components and installation. The digital MEC
instead incorporates all these functions and therefore replaces a standard
solid state motor control.
|
|
·
|
Increased ease of installation
and reduced technical support requirements. For example, instead of
approximated and manual adjustments during installation, which can require
technical support from the Company, the digitized unit will allow more
simplified and precise adjustments by customers and third party
installers.
|
|
·
|
Reduced product size, which is
important for many
installations.
|
|
·
|
Input-output communications
capabilities, so the device can communicate with external control
systems.
|
|
·
|
Increased functionality. The
Company expects to be able to add new functionality to the products. These
new functions may include such things
as:
|
|
·
|
Recording and reporting of actual
energy savings;
|
|
·
|
Prediction of maintenance
problems by reading and reporting on changes in the motor’s operating
characteristics; and
|
|
·
|
More secure intellectual property
protection through the use of secured chips and
software.
|
Marketing
and Sales
The
Company’s marketing efforts have historically been concentrated in the elevator
and escalator industry, primarily to OEMs of elevator and escalator equipment
and end users that own this equipment. With UL approval in mid-2009,
the Company has targeted more heavily industrial markets, such as mining
aggregates and plastics. End users of the Company’s products include retail
chains, hotels, airports, transit systems, and mining, plastics and
manufacturing companies.
The
Company sells products into the elevator and escalator market primarily to and
through large OEM resellers. The elevator and escalator market is dominated by
four global companies, Otis Elevator, Schindler, ThyssenKrupp and KONE.
Collectively these companies are believed to have over 80% of the world market
for new equipment and service contracts. The Company has formal supply
agreements for North America with ThyssenKrupp and KONE. The Company also sells
to and completes projects with Otis Elevator and Schindler.
The
Company is focused on penetrating industrial markets through independent
representatives and distributors who will in turn sell to OEMs of industrial
equipment and end users. The Company significantly increased these industrial
market activities in late 2009 after receiving UL certification, since this
certification is required by many industrial concerns.
The
Company’s longer term goal is to be a high value supplier of technologies, with
numerous OEMs and other resellers engaged with high volume sales and/or
licensing agreements.
Manufacturing
and Distribution
The
Company’s products are manufactured internally and by a multi-billion dollar
global contract manufacturer, Sanmina SCI (“Sanmina”). The Company’s strategy is
to manufacture internally products that sell at lower volumes, such as MECs for
very large motors, and to outsource the manufacturing of higher volume products,
such as smaller units and circuit boards. The Company believes this strategy
allows for high quality production, cost efficiencies, and the capability to
rapidly increase production volumes. Management believes this strategy has the
ability to meet the Company’s production needs and the Company would be
successful in finding alternative manufacturers should Sanmina not be available
to manufacture our product.
Competition
Power
Efficiency believes the principal competitive factors in the Company’s markets
include innovative product development, return on investment from energy
savings, product quality, product performance, utility rebate acceptance,
established customer relationships, name recognition, distribution and
price.
Three-Phase
Competition. The
Company’s Three-Phase MEC’s principal capabilities include being a motor
starter, providing a soft start and protection for the motor, and reducing the
motor’s electricity consumption once the motor is at full speed. The Company
believes its products are unique primarily because of the last capability –
energy savings.
The first
capabilities - starting, soft starting and protecting a motor - are commonly
found in existing motor control products. There are billions of dollars of motor
starters and soft starts sold every year. These products are typically
manufactured and marketed by large motor control companies, many of which have
longer operating histories, established markets and far greater financial,
advertising, research and development, manufacturing, marketing, personnel and
other resources than the Company currently has or may reasonably be expected to
have in the foreseeable future. This competition may have an adverse effect on
the ability of the Company to commence and expand its operations or operate in a
profitable manner.
There are
also several small companies that reportedly make products that combine motor
starting, soft starting and energy savings. The Company is unaware of any large
company that makes a product of this nature. Although the Company has not
completed any formal market study, the Company believes its Three-Phase MEC has the following
competitive advantages over other products:
|
·
|
It combines soft start features
with energy savings features in a single integrated unit that is CSA, UL
and CE certified and has achieved energy savings levels of up to 15% to
35% in independent, third party
testing;
|
|
·
|
Its circuitry is proprietary,
protected by one patent. Three additional patent filings on new
innovations are pending approval of the U.S. Patent and Trademark
Office;
|
|
·
|
It has been tested extensively by
utilities with documented energy savings and approval for incentive
financing rebates;
|
|
·
|
It is accepted by OEMs in the
escalator and granulator
industries.
|
Single-Phase
Competition. There have been
several companies that have, with different technologies, attempted to exploit
this market due to the enormous opportunity in single-phase motor applications.
These products include among others, “Green Plug” (voltage clamping), “Power
Planner” (digital microchip) and “Econelectric” (power factor control). The
Company has made numerous innovations in the past three years that it believes
overcome many of the problems with these and the Company’s earlier designs. The
Company has filed for a patent on these innovations and has reduced the product
in size and cost to the point it can be sold to OEMs of applicable appliances
and other equipment driven by single-phase AC motors.
Premium
Efficiency Motors. Motors are rated by
their efficiency at full load. However, when motors, including “premium
efficiency motors” are lightly loaded, they become very inefficient. Management
believes that the energy savings gain attributable to premium efficiency motors
is materially lower than that of its MEC on underloaded motor applications.
Furthermore, the Company’s products are able to save energy on underloaded
premium efficiency motors, so that such motors and the Company’s technology are
not mutually exclusive.
Source
of Supply and Availability of Raw Materials
The MEC
has been designed to use standard, off-the-shelf, easily acquired components,
except for the custom made circuit boards. Such off-the-shelf components are
basic items readily available worldwide at competitive prices. They come in
standard and miniature versions and offer the Company latitude in product design
and production. Although the Company believes most of the key components
required for the production of its products are currently available in
sufficient production quantities from multiple sources, there can be no
assurance they will remain so readily available or at comparable
prices.
Customers
The
Company currently does business with approximately 20 customers. Of this number,
four customers presently account for approximately 71% of the Company’s gross
revenues. These customers and their respective gross revenue
percentages are KONE – 49%; IXYS – 8%; Otis – 7%; and Global PET –
7%. The Company is, and may continue to be, dependent upon a limited
number of customers. Accordingly, the loss of one or more of these customers may
have a material adverse effect upon the Company’s business.
Patents
and Proprietary Rights
The
Company currently relies on a combination of trade secrets, non-disclosure
agreements and patent protection to establish and protect its proprietary rights
in its products. There can be no assurance these mechanisms will provide the
Company with any competitive advantages. Furthermore, there can be no assurance
others will not independently develop similar technologies, duplicate or
“reverse engineer” the proprietary aspects of the Company’s
technology.
The
Company has one U.S. patent issued with respect to its products. The “Balanced
and Synchronized Phase Detector for an AC Induction Motor Controller,” No.
5,821,726, was issued on October 13, 1998 and expires in 2017. This patent
covers improvements to the technology under the NASA License Agreement
(described below), which were developed by the Company. Management believes this
patent protects the Company’s intellectual property position beyond the
expiration of the NASA License Agreement.
The
Company has filed three utility patents on new inventions associated with the
development of its digital products. The Company is continually
making improvements to its products and technologies, and anticipates making
additional patent filings on new inventions when warranted.
The
Company has obtained U.S. Trademark registration of the E-Save Technology®
mark.
NASA
License Agreement
The
Company had been the exclusive United States licensee of certain power factor
controller technology owned by the United States of America, as represented by
NASA. This license agreement covered the United States and its territories and
possessions and did not require the Company to pay royalties to NASA in
connection with the Company’s sale of products employing technology utilizing
the licensed patents. The Company’s rights under the license agreement were
non-transferable and were not to be sublicensed without NASA’s
consent. The license agreement terminated on December 16, 2002 upon
expiration of all of the licensed patents.
The
Company believes its products and other proprietary rights do not infringe any
proprietary rights possessed by third parties. There can be no assurance,
however, that third parties will not assert infringement claims in the future,
the defense costs of which could be substantial.
Government
Regulation
The
Company is not required to be certified by any government agencies. However,
most of the Company’s products are manufactured to comply with specific codes
that meet industry accepted safety standards. Presently, many of the Company’s
products are certified to comply with UL 508 Industrial Control Equipment and
the Company has also received certification meeting CSA (Canadian Standards
Association) B44.1/ASME-17.5 Elevator and Escalator Electrical Equipment for
many of the Company’s products. Many of the Company’s products are also CE
marked. The Department of Commerce does not require the Company’s technology to
be certified for export. The Company’s industrial code is 421610 and the SIC
code is 5063.
Deregulation
of Electrical Energy
Sales of
the Company’s product are not dependent on deregulation of the electrical energy
market as the Company’s product can be sold in regulated and deregulated
markets.
Research
and Development
The
Company intends to continue its research and development effort to introduce new
products based on its energy saving technology. Towards this end, the Company
spent $953,004 and $1,016,158 in fiscal years 2009 and 2008, respectively, on
research and development activities, virtually none of which was borne by
customers. A major focus of the Company’s foreseeable research and development
activities will be on completing additional features and refinements to the
three-phase and single phase products. The Company also anticipates the
possibility of working with OEMs that make or purchase motor control equipment,
in order to develop products with features or specifications they
require.
Effect
of Environmental Regulations
The
Company is not aware of any federal, state, or local provisions regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment with which compliance by the Company has had, or
is expected to have, a material effect upon the capital expenditures, earnings,
or competitive position of the Company.
Employees
At the
date of this document, the Company employs fourteen people. Of this
number, two are engaged in accounting and finance, three in operations and
general management, three in sales and marketing, and six in product research
and development, engineering and manufacturing. At such time as
business conditions dictate, the Company may hire additional personnel for,
among other things, increased engineering, marketing and sales. The Company has
no collective bargaining agreements and considers its relationship with its
employees to be good. The Company utilizes consultants in the areas of
marketing, product and technology development and finance on a regular
basis.
(c)
|
Reports to Security
Holders
|
The
Company is a smaller reporting company, and as such files Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q under the scaled disclosure requirements
and Current Reports on Form 8-K on a regular basis with the
SEC.
The
public may read and copy any materials the Company files with the SEC at the
SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC at http://www.sec.gov.
Description
of Property
The
Company’s corporate office space is located at 3960 Howard Hughes Pkwy, Suite
460, Las Vegas, Nevada 89169. The office lease calls for rent of $11,292 per
month, plus annual increases equal to 3%, through the end of the lease term in
February 2011.
The
Company leases office space at 6380 South Valley View Blvd., Suite 412, Las
Vegas, Nevada 89118. The lease calls for rent of $1,995 plus common area
maintenance charges, per month, through the end of the lease term in August
2010. This space is used primarily for research and development.
The
Company leases office space at 6380 South Valley View Blvd., Suite 402, Las
Vegas, Nevada 89118. The lease calls for rent of $1,605 plus common area
maintenance charges, per month, through the end of the lease term in August
2010. This space is used primarily for manufacturing and
warehousing.
Legal
Proceedings
None.
MANAGEMENT
INFORMATION
ABOUT THE COMPANY'S EXECUTIVE OFFICERS AND DIRECTORS
The
following table lists the current executive officers and directors and, in the
case of directors, their length of service on the board. Each director is
elected to hold office for a term expiring at the first annual meeting of
stockholders held following such director's election and until his successor has
been elected and qualified, or until his prior resignation or removal. All of
the Company's current directors were either appointed by the plurality of votes
cast by the holders of our common stock present, or represented, at the 2009
Annual Meeting of the Stockholders in July 2009, or elected by the board. On
March 29, 2010, Gregory Curhan resigned from the Board of
Directors. Mr. Curhan’s resignation is not as a result of any
disagreement with the Company on any matter relating to the Company’s
operations, policies or practices.
Name
|
|
Age
|
|
Director
Since
|
|
Position
|
Steven
Z. Strasser
|
|
61
|
|
2002
|
|
C Chairman,
Chief Executive Officer
|
John
(BJ) Lackland
|
|
39
|
|
2002
|
|
Di Director,
Chief Financial Officer, and Secretary
|
George
Boyadjieff
|
|
71
|
|
2006
|
|
Di Director,
Senior Technical Advisor
|
Douglas
M. Dunn
|
|
67
|
|
2006
|
|
Di Director
|
Richard
Morgan
|
|
64
|
|
2007
|
|
Di Director
|
Gary
Rado
|
|
70
|
|
2005
|
|
Di Director
|
Kenneth
Dickey
|
|
68
|
|
2009
|
|
Di Director,
Consultant
|
Director
Independence
Pursuant
to SEC rules, a majority of our Board of Directors is comprised of independent
directors, as defined under Section 121(A) of the New York Stock Exchange
Constitution and Rules. Messrs. Boyadjieff, Dickey, Dunn, Morgan and
Rado are independent directors. Our audit committee is comprised of
Messrs. Dunn, Morgan and Rado; and our compensation committee is comprised of
Messrs. Boyadjieff, Dickey and Rado, all of whom are independent
directors.
Steven Strasser – Chairman and
Chief Executive Officer. Prior to becoming the Company’s CEO in October 2004,
Mr. Strasser was the Managing Director, founder and majority owner of Summit
Energy Ventures LLC, currently the largest stockholder in Power Efficiency
Corporation. Summit is a private equity firm focused on investments in companies
with energy efficiency technologies. At Summit, Mr. Strasser spent four years,
from 2001 through 2005, evaluating and investing in energy technology companies
and serving on the boards of portfolio companies. Mr. Strasser has been a
director since August 2002.
From 1984
through 2000, Mr. Strasser was the founder and CEO of Northwest Power
Enterprises. Over its seventeen-year history, Northwest Power Enterprises and
its predecessor companies were involved in multiple aspects of the energy
development business. Mr. Strasser received law degrees from McGill
University, Montreal, Canada and the University of Washington, Seattle,
Washington.
John (BJ) Lackland
– Director, Chief Financial Officer, and Secretary. Mr. Lackland
became the Company’s CFO in October 2004. Mr. Lackland has been the Vice
President and Director Summit Energy Ventures since 2001, a private equity firm
that is the largest stockholder in Power Efficiency Corporation. Summit focuses
on investments in companies with energy efficiency technologies. At Summit, Mr.
Lackland evaluated and invested in energy technology companies and served on the
boards of portfolio companies. Prior to joining Summit, Mr. Lackland was
the Director of Strategic Relations at Encompass Globalization, where he was in
charge of strategic alliances and mergers and acquisitions. Prior to Encompass,
he was the Director of Strategic Planning and Corporate Development at an
Internet business development consulting company, where he was in charge of
strategic planning and investor relations. Mr. Lackland has been an
independent consultant to Fortune 1,000 companies and startups.
Mr. Lackland also worked at The National Bureau of Asian Research, an
internationally acclaimed research company focusing on U.S. policy toward Asia,
where he led economic and political research projects for Microsoft, Dell,
Compaq and U.S. government agencies. Mr. Lackland has been a director since
August 2002.
Mr. Lackland
earned an M.B.A. from the University of Washington Business School, an M.A. in
International Studies (Asian Studies) from the University of Washington’s
Jackson School of International Studies, and a B.A. in Politics, Philosophy and
Economics from Claremont McKenna College.
George Boyadjieff — Director
and Senior Technical Advisor. Mr. Boyadjieff has been a director of the Company
since May 2006, and Senior Technical Advisor of the Company since April 2005.
Mr. Boyadjieff is the retired CEO of the former Varco International, a New York
Stock Exchange traded oil service company with over $1.3 billion in annual
revenues at the time of Mr. Boyadjieff’s retirement. Varco has recently merged
with National Oil Well to become National Oil Well Varco (NOV). Mr. Boyadjieff
joined Varco in 1969 as Chief Engineer and was appointed CEO in 1991. Currently
Mr. Boyadjieff is a director of Southwall Technologies, a Silicon Valley hi-tech
firm. Mr. Boyadjieff joined Southwall in December 2004.
Mr.
Boyadjieff holds over 50 US patents related to oil and gas well drilling
equipment. Mr. Boyadjieff holds BS and MS degrees in Mechanical Engineering from
the University of California at Berkeley and is a graduate of the University of
California at Irvine executive program.
Dr. Douglas Dunn — Dr. Dunn
has had an extensive career in research, business and academic leadership. Dr.
Dunn served as dean of Carnegie Mellon University's Graduate School of
Industrial Administration (now the Tepper School of Business) from July 1996
through June 2002, after which he retired. He began his career at AT&T Bell
Laboratories, and his corporate experienced culminated in senior positions as a
corporate officer leading Federal Regulatory Matters, Regional Government
Affairs, and Visual Communications and Multimedia Strategy for AT&T. Dr.
Dunn is a board member of Universal Stainless & Alloy Products, Inc.
(NasdaqNM: USAP). He holds a Ph.D. in business from the University of Michigan,
an MS in industrial management and a BS in physics from the Georgia Institute of
Technology.
Richard Morgan – Mr.
Morgan is currently Of Counsel to the law firm of Lionel, Sawyer & Collins,
and is the Dean Emeritus and a former Professor of Law at the William S. Boyd
School of Law at the University of Nevada, Las Vegas, a position he held from
September 1, 1997 through June 30, 2007. Mr. Morgan is an experienced legal
educator, having served as dean at both the Arizona State University College of
Law and the University of Wyoming College of Law. Mr. Morgan earned his B.A. in
Political Science at the University of California, Berkeley in 1967. In 1971 he
received his J.D. from UCLA, where he was an editor of the UCLA Law Review. He
practiced with the Los Angeles law firm of Nossaman, Krueger & Marsh in the
corporate/securities areas from 1971 to 1980. He was a professor at the Arizona
State University College of Law from 1980 to 1987 and served as associate dean
from 1983 to 1987. He was dean at the University of Wyoming College of Law from
1987 to 1990 and returned to the Arizona State University College of Law in
1990, where he served as dean and professor of law until 1997.
Gary Rado – Mr. Rado retired
in 2002 after being the President of Casio Inc. USA for 3 years. He joined Casio
in 1996 as an EVP to spearhead the move into the digital camera
business. Before joining Casio, Mr. Rado was with Texas Instruments
Inc. for 21 years. He was the Division Manager of the Consumer
Products Division Worldwide and ran the division for 7 years, including two
years while based in Europe. This division was responsible for home computer,
calculator, and educational products. Mr. Rado earned a Bachelors of
Science in Business Administration from Concord College in 1963.
Kenneth Dickey– Mr. Dickey is
the co-founder of The Institute of Strategic Mapping, and has spent his
extensive career learning how superior results can be achieved from very average
businesses and how to translate this winning process into an understandable,
reusable format. Mr. Dickey has been retired since February
2002. From October 1999 to February 2002, Mr. Dickey was Vice
President Sales-Marketing for Safetronics, where he developed sales and
marketing strategies, completed Safetronic’s acquisition of Fincor Electric, a
manufacturer of variable frequency drives, and ran that business
unit. Prior to this, Mr. Dickey was the President/CEO of Cleveland
Motion Control, Dynact Inc., and Motion Science, Inc., from February 1997 to
October 1999. Prior to this, Mr. Dickey served as Senior Vice-President
Sales for Reliance Electric/Rockwell Automation from 1994 thru 1996. His
responsibilities included Sales/Marketing with 76 sales offices (located in the
Americas), which generated more than $900 million in revenue. He also spent 9
years as the Operating General Manager of the Industrial Motor Division at
Reliance Electric from 1986 to 1994. Mr. Dickey earned his Bachelor of
Science degree in Finance from the University of Akron and an Executive MBA from
Case-Western Reserve University.
On March
29, 2010, Gregory Curhan resigned from the Board of Directors. Mr.
Curhan’s resignation is not as a result of any disagreement with the
Company on any matter relating to the Company’s operations, policies or
practices.
Board
of Directors and Committees of the Board
Our
business affairs are conducted under the direction of our board of
directors. The role of our board of directors is to effectively
govern our affairs for the benefit of our stockholders and, to the extent
appropriate under governing law, of other constituencies, which include our
employees, customers, suppliers and creditors. Our board strives to
ensure the success and continuity of our business through the selection of a
qualified management team. It is also responsible for ensuring that
our activities are conducted in a responsible ethical manner. Our
board of directors has two standing committees – an audit committee and a
compensation committee.
Our board
of directors met eight times in 2009.
We do not
have a policy that requires directors to attend our annual meetings of
stockholders. All but one of the directors attended the 2009 Meeting
of Stockholders on July 16, 2009.
Audit
Committee
Douglas
Dunn, Richard Morgan and Gary Rado currently serve on our audit
committee. Messrs. Dunn, Morgan and Rado are each independent
directors as required by Section 301 of the Sarbanes-Oxley Act of 2002, Rule
10A(3)(b)(1) of the Securities Exchange Act of 1934 and Section 121(A) of the
New York Stock Exchange Constitution and Rules. Raymond Skiptunis
served as the Chairman of our audit committee from January 1 through April 20,
2009. Dr. Dunn, the current Chairman of our audit committee,
qualifies as a financial expert. Our audit committee, among other
things:
|
•
|
selects the independent auditors,
considering independence and
effectiveness;
|
|
•
|
receives the written disclosures
and the letter from the independent accountant required by applicable
requirements of the Public Company Accounting Oversight Board regarding
the independent accountant's communications with the audit committee
concerning independence, and has discussed with the independent accountant
the independent accountant's
independence;
|
|
•
|
discusses the scope and results
of the audit with the independent auditors and reviews with management and
the independent auditors our interim and year-end operating
results;
|
|
•
|
discusses with the independent
accountant the matters required to be discussed by Statement on Auditing
Standards No. 114 (Communications with Audit
Committees);
|
|
•
|
considers the adequacy of our
internal accounting controls and audit
procedures;
|
|
•
|
reviews and approves all audit
and non-audit services to be performed by the independent auditors;
and
|
|
•
|
administers the whistleblower
policy.
|
The audit
committee has the sole and direct responsibility for appointing, evaluating and
retaining our independent auditors and for overseeing their work.
Compensation
Committee
Kenneth
Dickey, Gary Rado and George Boyadjieff currently serve on our compensation
committee. Messrs. Dickey, Rado and Boyadjieff are independent
directors as required by SEC Rules and as defined in Section 121(A) of the
American Stock Exchange Constitution and Rules. Mr. Dickey serves as
the Chairman of our compensation committee. Our compensation
committee, among other things:
|
•
|
recommends to the board of
directors the compensation level of the executive
officers;
|
|
•
|
reviews and makes recommendations
to our board of directors with respect to our equity incentive
plans;
|
|
•
|
establishes and reviews general
policies relating to compensation and benefits of our
employees.
|
Committee
Interlocks and Insider Participation
None of
our executive officers currently serve as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving on our board of directors or compensation committee.
CODE
OF ETHICS
The
Company has not adopted a code of ethics. The Company has been focused on
developing technology, generating sales and raising capital to support
operations and consequently has not focused on adopting a code of ethics. In
early 2006, the Company developed and implemented an official Employee Manual
that requires ethical behavior from its employees, and defines the consequences
of unethical behavior by its employees.
Executive
Compensation
The
following table summarizes compensation information for the last two fiscal
years for (i) Mr. Steven Z. Strasser, our Principal Executive Officer and (ii)
John (BJ) Lackland, our Principal Financial Officer, who were serving as
executive officers at the end of the fiscal year and who we refer to
collectively, the Named Executive Officers.
SUMMARY COMPENSATION
TABLE
|
|
Name
and
principal
position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings ($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
Steven Z. Strasser(1)
|
|
2009
|
|
$
|
304,730
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
304,730
|
|
Chairman
and Chief
|
|
2008
|
|
$
|
311,208
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
311,208
|
|
Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John (BJ) Lackland (2)
|
|
2009
|
|
$
|
177,037
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
177,037
|
|
Director
and Chief
|
|
2008
|
|
$
|
198,042
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
198,042
|
|
Financial
Officer
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Narrative
Disclosure to Summary Compensation Table
During
2004, we hired the following officers: Steven Strasser, Chief Executive Officer,
and John (BJ) Lackland, Chief Financial Officer. Effective June 1, 2005, the
Company entered into employment agreements with the above
officers. These two individuals comprise our current executive
officers. The term of each agreement is five years. In the
event of a defined change in control of the Company, each agreement will provide
for accelerated vesting of stock options and a cash severance payment equal to
2.99 times the executive's then current salary and previous year's
bonus.
The
following table sets forth the material financial terms of the agreements for
each of our executives as of December 31, 2009:
Name
|
|
Salary (1)
|
|
|
Bonus(4)
|
|
Common
Stock
Options(5)
|
|
Steven
Strasser
|
|
$ |
275,000 |
(2)
|
|
|
|
|
3,000,000 |
|
BJ
Lackland
|
|
$ |
175,000 |
(3)
|
|
|
|
|
1,800,000 |
|
(1)
|
To be increased annually by at
least 5% of current year’s base
salary.
|
(2)
|
First year's salary to be paid
$60,000 in cash and options to purchase 1,612,500 shares of Common Stock
at an exercise price equal to not less than market at date of grant in
lieu of remaining cash vesting quarterly over one
year.
|
(3)
|
First year's salary to be paid
$120,000 in cash and options to purchase 412,500 shares of Common Stock at
an exercise price equal to market at date of grant in lieu of remaining
cash vesting quarterly over one
year.
|
(4)
|
At the discretion of the
disinterested members of the
Board.
|
(5)
|
Vesting evenly and quarterly over
five years.
|
Outstanding
equity awards
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
OPTION
AWARDS
|
|
STOCK
AWARDS
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or Units
of
Stock
That
Have
Not
Vested
(#)
|
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
|
Steven
Strasser
|
|
|
2,272,729
|
|
|
|
300,000
|
|
|
|
-
|
|
|
$
|
0.22
|
|
5/31/2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2,039,771
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.20
|
|
5/31/2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
600,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.65
|
|
11/28/2014
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BJ
Lackland
|
|
|
2,032,500
|
|
|
|
180,000
|
|
|
|
-
|
|
|
$
|
0.20
|
|
5/31/2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
375,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.65
|
|
11/28/2014
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock
Option Plan Narrative Disclosure
As of
December 31, 2009, we had an aggregate of 17,474,896 shares of Common Stock
available for issuance under our stock plans. The following is a description of
our plans.
2000
Stock Option and Restricted Stock Plan, or the 2000 Plan
The 2000
Plan was adopted by our board of directors and our stockholders in
2000. On July 16, 2009, the 2000 Plan was amended and restated. As of
December 31, 2009, no restricted shares of Common Stock have been issued, and
117,871 of the outstanding options to purchase shares of our Common Stock have
been exercised pursuant to the 2000 Plan. There are 17,474,896
options outstanding under the 2000 Plan as of December 31, 2009.
Share
Reserve. Under the 2000 Plan, we have initially reserved for
issuance an aggregate of 25,000,000 shares.
Administration. The
2000 Plan is administered by the board of directors. The stock option awards
qualify as "performance-based-compensation" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, or the Code, with two
or more outside directors within the meaning of Section 162(m) of the Code. The
board of directors has the power to determine the terms of the awards, including
the exercise price, the number of shares subject to each award, the
exercisability of the awards and the form of consideration payable upon
exercise.
Eligibility. Awards
under the 2000 Plan may be granted to any of our employees, directors or
consultants or those of our affiliates.
Options. With
respect to non-statutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code and incentive
stock options, the exercise price must be at least equal to the fair market
value of our Common Stock on the date of grant. In addition, the
exercise price for any incentive stock option granted to any employee owning
more than 10% of our Common Stock may not be less than 110% of the fair market
value of our Common Stock on the date of grant. The term of any stock
option may not exceed ten years, except that with respect to any participant who
owns 10% or more of the voting power of all classes of our outstanding capital
stock, the term for incentive stock options must not exceed five
years.
Stock Awards. The
administrator may determine the number of shares to be granted and impose
whatever conditions to vesting it determines to be appropriate, including
performance criteria. The criteria may be based on financial
performance, personal performance evaluations and/or completion of service by
the participant. The administrator will determine the level of
achievement of performance criteria. Unless the administrator
determines otherwise, shares that do not vest typically will be subject to
forfeiture or to our right of repurchase, which we may exercise upon the
voluntary or involuntary termination of the participant's service with us for
any reason, including death or disability.
Adjustments upon Merger or Change in
Control. The 2000 Plan provides that in the event of a merger
with or into another corporation or a "change in control," including the sale of
all or substantially all of our assets, and certain other events, our board of
directors (or a committee of the board of directors) may, in its discretion,
provide for some or all of:
|
·
|
assumption or substitution of, or
adjustment to, each outstanding
award;
|
|
·
|
acceleration of the vesting of
options and stock appreciation
rights;
|
|
·
|
termination of any restrictions
on stock awards or cash awards;
or
|
|
·
|
cancellation of awards in
exchange for a cash payment to the
participant.
|
Amendment and
Termination. The board of directors has the authority to
amend, alter or discontinue the 2000 Plan, subject to the approval of the
stockholders, but no amendment will impair the rights of any award, unless
mutually agreed to between the participant and the administrator.
Compensation
of Directors Summary Table
DIRECTOR
COMPENSATION
|
|
|
Name
(a)
|
|
Fees
Earned or
Paid in
Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)***
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total ($)
|
|
R Raymond
J. Skiptunis*
|
|
$
|
4,000
|
|
|
|
-
|
|
|
$
|
8,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
12,250
|
|
G George
Boyadjieff
|
|
|
-
|
|
|
|
-
|
|
|
$
|
11,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
11,000
|
|
D Douglas
M. Dunn
|
|
|
-
|
|
|
|
-
|
|
|
$
|
13,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
13,750
|
|
Ri
Richard Morgan
|
|
|
-
|
|
|
|
-
|
|
|
$
|
11,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
11,000
|
|
G Gary
Rado
|
|
|
-
|
|
|
|
-
|
|
|
$
|
13,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
13,750
|
|
G Greg
Curhan**
|
|
|
-
|
|
|
|
-
|
|
|
$
|
11,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
11,000
|
|
Kenneth
Dickey
|
|
|
-
|
|
|
|
-
|
|
|
$
|
17,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
17,250
|
|
*
|
Mr. Skiptunis resigned from the
Board of Directors on April 20,
2009.
|
**
|
Mr. Curhan resigned from the
Board of Directors on March 29,
2010.
|
**
|
Aggregate fair value as of date
of grant.
|
Narrative
to Director Compensation
In
January 2009, non-employee directors received options to purchase 100,000 shares
of common stock per year for their board service, pro-rated for the quarters in
the year they served. Employee directors do not receive compensation
for serving on the board of directors. The Chairman of the Audit
Committee received an additional 50,000 options per year, pro-rated for the
quarters in the year he served, and $1,000 per month for the months in the year
he served. This cash payment ended when Mr. Skiptunis resigned as
Chairman. The remaining members of the audit committee receive an
additional 25,000, prorated for the quarters in the year they
served. Depending on the anticipated workload and organization, the
board of directors may elect to increase the compensation for committee members
and/or all non-executive board members.
Limitation
of Liability and Indemnification of Directors and Officers
Our
certificate of incorporation provides that the personal liability of our
directors shall be limited to the fullest extent permitted by the provisions of
Section 102(b)(7) of the General Corporation Law of the State of Delaware,
or the DGCL. Section 102(b)(7) of the DGCL generally provides that no
director shall be liable personally to us or our stockholders for monetary
damages for breach of fiduciary duty as a director, provided that our
certificate of incorporation does not eliminate the liability of a director for
(i) any breach of the director's duty of loyalty to us or our stockholders;
(ii) acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law; (iii) acts or omissions in
respect of certain unlawful dividend payments or stock redemptions or
repurchases; or (iv) any transaction from which such director derives
improper personal benefit. The effect of this provision is to eliminate our
rights and the rights of our stockholders through stockholders' derivative suits
on our behalf, to recover monetary damages against a director for breach of her
or his fiduciary duty of care as a director including breaches resulting from
negligent or grossly negligent behavior except in the situations described in
clauses (i) through (iv) above. The limitations summarized above,
however, do not affect our or our stockholders' ability to seek non-monetary
remedies, such as an injunction or rescission, against a director for breach of
her or his fiduciary duty.
In
addition, our certificate of incorporation and bylaws provide that we shall, to
the fullest extent permitted by Section 145 of the DGCL, indemnify all
directors and officers who we may indemnify pursuant to Section 145 of the
DGCL. Section 145 of the DGCL permits a company to indemnify an officer or
director who was or is a party or is threatened to be made a party to any
proceeding because of his or her position, if the officer or director acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of such company and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. We have entered into indemnification agreements with our directors and
officers consistent with indemnification to the fullest extent permitted under
the DGCL.
We
maintain a directors' and officers' liability insurance policy covering certain
liabilities that may be incurred by our directors and officers in connection
with the performance of their duties. The entire premium for such insurance is
paid by us.
Insofar
as indemnification for liabilities arising under the Securities Act, our
directors and officers, and persons controlling us pursuant to the foregoing
provisions, we have been informed that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial
Ownership
The
following table sets forth information as to our shares of common stock
beneficially owned as of March 31, 2010 by (i) each person known
by us to be the beneficial owner of more than five percent of our outstanding
common stock, (ii) each of our directors, (iii) each of our executive officers
named in the Summary Compensation Table and (iv) all of our directors and
executive officers as a group.
|
|
|
|
|
|
|
Percent
of
|
|
Title of Class
|
|
Name
of Beneficial
Owner(1)
|
|
Shares
Owned
|
|
|
Shares
Owned(10)
|
|
Common
Stock
|
|
Steven
Strasser, CEO, Chairman of the Board
|
|
|
23,974,575
|
(2)
|
|
|
40.58
|
%
|
Common
Stock
|
|
John
(BJ) Lackland, CFO, Director
|
|
|
2,886,026
|
(3)
|
|
|
6.04
|
%
|
Common
Stock
|
|
Gary
Rado, Director
|
|
|
867,303
|
(4)
|
|
|
1.89
|
%
|
Common
Stock
|
|
George
Boyadjieff, Director
|
|
|
3,072,105
|
(5)
|
|
|
6.53
|
%
|
Common
Stock
|
|
Douglas
Dunn, Director
|
|
|
643,026
|
(6)
|
|
|
1.41
|
%
|
Common
Stock
|
|
Richard
Morgan, Director
|
|
|
325,000
|
(7)
|
|
Less
than 1
|
%
|
Common
Stock
|
|
Greg
Curhan, Director
|
|
|
125,000
|
(8)
|
|
Less
than 1
|
%
|
Common
Stock
|
|
Kenneth
Dickey, Director
|
|
|
471,074
|
(9)
|
|
|
1.03
|
%
|
Common
Stock
|
|
Summit
Energy Ventures, LLC
|
|
|
8,803,901
|
(2)
|
|
|
18.70
|
%
|
Common
Stock
|
|
Sarkowsky
Family L.P.
|
|
|
8,018,455
|
|
|
|
16.39
|
%
|
Common
Stock
|
|
Ron
Boyer
|
|
|
9,851,558
|
|
|
|
18.85
|
%
|
Common
Stock
|
|
Michael
J. Goldfarb Enterprises
|
|
|
2,513,685
|
|
|
|
5.40
|
%
|
Common
Stock
|
|
Byron
LeBow Family Trust
|
|
|
4,289,370
|
|
|
|
7.90
|
%
|
Common
Stock
|
|
Marathon
Hard Asset Fund L.P.
|
|
|
4,289,370
|
|
|
|
9.05
|
%
|
Common
Stock
|
|
Irwin
Helford Family Trust
|
|
|
3,341,424
|
|
|
|
7.06
|
%
|
Common
Stock
|
|
All
Executive Officers and Directors as a Group (8 persons)
|
|
|
32,364,109
|
|
|
|
48.99
|
%
|
(1)
|
Information in this table
regarding directors and executive officers is based on information
provided by them. Unless otherwise indicated in the footnotes
and subject to community property laws where applicable, each of the
directors and executive officers has sole voting and/or investment power
with respect to such shares. The address for each of the
persons reported in the table other than Commerce Energy Group is in care
of Power Efficiency Corporation at 3960 Howard Hughes Pkwy, Ste 460, Las
Vegas, Nevada 89169.
|
(2)
|
Includes 9,968,910 common shares
and common shares subject to options and warrants exercisable within 60
days of the date hereof held by Summit, in which Steven Strasser is one of
two members, 2,010,000 common shares subject to the conversion of 20,100
shares of Series B Preferred Stock, 1,083,334 common shares subject to the
conversion of 8,125 shares of Series C-1 Preferred Stock, and 10,912,331
common shares subject to options and warrants which are presently
exercisable or will become exercisable within 60 days of the date
hereof. Mr. Strasser was also granted an additional
150,000 common shares subject to options which will become exercisable
after 60 days of the date hereof. Mr. Strasser’s options and
warrants expire on various dates from May, 2010 through November,
2015.
|
(3)
|
Includes 188,526 common shares,
100,000 common shares subject to the conversion of 1,000 shares of Series
B Preferred Stock, and 2,597,500 common shares and common shares subject
to options and warrants presently exercisable or will become exercisable
within 60 days of the date hereof. Mr. Lackland was also
granted an additional 90,000 common shares subject to options which will
become exercisable after 60 days of the date hereof. Mr.
Lackland’s options and warrants expire on various dates from May, 2010
through November, 2015.
|
(4)
|
Includes 61,053 common shares,
200,000 common shares subject to the conversion of 2,000 shares of Series
B Preferred Stock, and 606,250 common shares subject to options presently
exercisable or will become exercisable within 60 days of the date
hereof. Mr. Rado was also granted an additional 93,750 common
shares subject to options which will become exercisable after 60 days of
the date hereof. Mr. Rado’s options expire on various dates
from September, 2015 through February,
2020.
|
(5)
|
Includes 1,122,105 common shares,
400,000 common shares subject to the conversion of 4,000 shares of Series
B Preferred Stock, and 1,550,000 common shares subject to options and
warrants presently exercisable or will become exercisable within 60 days
of the date hereof. Mr. Boyadjieff was also granted an
additional 75,000 common shares subject to options which will become
exercisable after 60 days of the date hereof. Mr. Boyadjieff’s
options and warrants expire on various dates from April, 2010 through
February, 2020.
|
(6)
|
Includes 30,526 common shares,
100,000 common shares subject to the conversion of 1,000 shares of Series
B Preferred Stock, and 512,500 common shares subject to options presently
exercisable or which will become exercisable within 60 days of the date
hereof. Dr. Dunn was also granted an additional 112,500 shares
of common stock subject to options which will become exercisable after 60
days of the date hereof. Dr. Dunn’s options expire on various
dates from May 2016 through February,
2020.
|
(7)
|
Includes 325,000 common shares
subject to options presently exercisable or which will become exercisable
within 60 days of the date hereof. Mr. Morgan was also granted
an additional 75,000 common shares subject to options exercisable after 60
days of the date hereof. Mr. Morgan’s options expire on various
dates from January, 2017 through February,
2020.
|
(8)
|
Includes 125,000 common shares
subject to options presently exercisable or which will become exercisable
within 60 days of the date hereof. Mr. Curhan was also granted
an additional 75,000 common shares subject to options exercisable after 60
days of the date hereof. Mr. Curhan’s options expire on various
dates from March, 2019 through February,
2020.
|
(9)
|
Includes 4,407 common shares,
166,667 common shares subject to the conversion of 1,250 shares of Series
C-1 Preferred Stock, 300,000 common shares subject to options and warrants
presently exercisable or which will become exercisable within 60 days of
the date hereof. Mr. Dickey was also granted an additional
75,000 common shares subject to options exercisable after 60 days of the
date hereof. Mr. Dickey’s options expire on various dates from
February, 2012 through February,
2020.
|
(10)
|
The percentage for common stock
includes all common shares subject to options and warrants exercisable
within 60 days of the date
hereof.
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Relationship
with Steven Strasser and Summit
Mr.
Strasser, our CEO, owns 99.5% of Summit. As of March 31, 2009, Summit
owned 6,803,901 shares of our common stock and 2,000,000 warrants to purchase
common stock. In addition, Mr. Strasser owns beneficially 23,974,575
shares of common stock (including those shares beneficially owned by Summit)
issued or issuable on the exercise of options and warrants, the conversion of
Series B Preferred Stock and the conversion of Series C-1 Preferred
Stock, exercisable within 60 days of March 31, 2009.
On March
30, 2010, the Company issued unsecured notes payable to Steven Strasser, the
Company’s CEO, totaling $125,000. The notes bear interest at 5%, payable upon
maturity. The notes mature two months after issuance.
On
February 24, 2010, Mr. Strasser purchased 1,875 shares of Series C-1 Preferred
Stock and 93,750 warrants to purchase the Company’s common stock for $75,000 in
cash.
On
December 11, 2009, Mr. Strasser exchanged 6,250 shares of Series C Preferred
Stock into 6,250 shares of Series C-1 Preferred Stock and 312,500 warrants to
purchase the Company’s common stock.
On
September 29, 2009, Mr. Strasser purchased 350,000 shares of common stock, 2,500
shares of Series B Preferred Stock, and 203,062 warrants to purchase the
Company’s common stock for $90,000 in cash, from another
shareholder
On August
12, 2009, Mr. Strasser purchased 6,250 shares of Series C Preferred Stock and
312,500 warrants to purchase the Company’s common stock for $250,000 in
cash
On
January 21, 2008, Mr. Strasser purchased 1,600 units, resulting in the issuance
of 1,600 shares of Series B Preferred Stock and 80,000 warrants to purchase the
Company’s common stock, for $80,000 in cash.
Relationship
with John (BJ) Lackland
Mr.
Lackland, our CFO, owns 0.5% of Summit. Mr. Lackland owns
beneficially 2,886,026 shares of common stock, issued or issuable on the
exercise of options and warrants, and the conversion of Series B Preferred
Stock, exercisable within 60 days of December 31, 2009.
On
September 29, 2009, Mr. Lackland purchased 1,000 shares of Series B Preferred
Stock and 50,000 warrants to purchase the Company’s common stock for $15,000 in
cash, from another shareholder.
Agreements
with Officers and Directors
We will
enter and expect to continue to enter into indemnification agreements with our
directors and officers. Generally, these agreements attempt to provide the
maximum protection permitted by law with respect to indemnification. See
“Management — Limitation of Liability and Indemnification of Directors and
Officers.”
SELLING
STOCKHOLDERS
The
following table provides certain information with respect to the selling
stockholders' beneficial ownership of our common stock as of April 27, 2010 and
as adjusted to give effect to the sale of all of the shares of common stock
offered by this prospectus. We do not know when or in what amounts the selling
stockholders may offer for sale the shares of common stock pursuant to this
prospectus. The selling stockholders may choose not to sell any of the shares
offered by this prospectus. For purposes of this table, we have assumed the
selling stockholders will have sold all of the shares covered by this prospectus
upon the completion of the offering.
Beneficial
ownership is determined in accordance with the rules of the SEC. In computing
the number of shares beneficially owned by a selling stockholder and the
percentage of ownership of that selling stockholder, shares of common stock
underlying outstanding shares of our Series B Preferred Stock, convertible
debentures, options or warrants held by that selling stockholder that are
convertible or exercisable, as the case may be, within 60 days from the
date of this prospectus are included. Those shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
selling stockholder. Each selling stockholder's percentage of ownership in the
following table is based upon 40,486,441 shares of common stock outstanding as
of April 27, 2010. We will not receive any of the proceeds from the
sale of our common stock by the selling stockholders.
Except as
noted below, none of these selling stockholders are, or are affiliates of, a
broker-dealer registered under the Exchange Act.
Except as
described below, to our knowledge, none of the selling stockholders within the
past three years has had any material relationship with us or any of our
predecessors or affiliates:
Except as
described below, to our knowledge, none of the selling stockholders within the
past three years has had any material relationship with us or any of our
predecessors or affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
Total Number
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
of Shares of
|
|
|
Shares of Common
|
|
|
|
Beneficially Owned
|
|
|
Common
|
|
|
Stock Beneficially
|
|
|
|
Prior to Offering
|
|
|
Stock
|
|
|
Owned After Offering
|
|
Selling
|
|
Number of
|
|
|
Registered
|
|
|
Number of
|
|
|
|
|
Stockholder
|
|
Shares(1)
|
|
|
for Sale
|
|
|
Shares
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ron
Boyer (2)
|
|
|
9,851,560 |
|
|
|
5,935,769 |
|
|
|
3,915,791 |
|
|
|
9 |
% |
6129
SW Sheridan St
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portland,
OR 97225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sarkowsky
Family L.P.
|
|
|
8,004,863 |
|
|
|
6,069,074 |
|
|
|
1,935,789 |
|
|
|
4 |
% |
Herman
Sarkowsky (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1201
3rd Ave, Suite 5450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seattle,
WA 98101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
LaMarque Family Trust
|
|
|
1,805,263 |
|
|
|
1,500,000 |
|
|
|
305,263 |
|
|
|
1 |
% |
Hector
LaMarque TTEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
322
Karen Ave # 3604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warren
and Cathy Smith
|
|
|
340,000 |
|
|
|
300,000 |
|
|
|
40,000 |
|
|
|
* |
|
Trustees
of the Warren and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cathy
Smith Revocable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust
U.A.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1648
E. Mira Vista
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flagstaff,
AZ 86001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
R. Butler
|
|
|
1,111,053 |
|
|
|
1,050,000 |
|
|
|
61,053 |
|
|
|
* |
|
600
108th Street NE, #242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bellevue,
WA 98004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brett
Goldfarb
|
|
|
298,598 |
|
|
|
200,001 |
|
|
|
98,597 |
|
|
|
* |
|
600
University St. #2912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seattle,
WA 98101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
J. Goldfarb
|
|
|
2,513,685 |
|
|
|
2,300,001 |
|
|
|
213,684 |
|
|
|
* |
|
Enterprises
LLC (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600
University St. #2912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seattle,
WA 98101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irwin
Helford Family Trust (5)
|
|
|
3,341,424 |
|
|
|
1,800,000 |
|
|
|
1,541,424 |
|
|
|
3 |
% |
One
Hughes Center Drive,
#1804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AP
Finance, LLC
|
|
|
13,412 |
|
|
|
13,412 |
|
|
|
- |
|
|
|
- |
|
152
West 57th Street, 4th Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
York, NY 10019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry
S. Spitcaufsky Actring Trustee
|
|
|
532,093 |
|
|
|
32,093 |
|
|
|
500,000 |
|
|
|
1 |
% |
U/A
Dated 04-24-2003 FBO
Larry
S. Spitcaufsky Second
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended
and Restated Revocable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PO
Box 891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rancho
Santa Fe, CA 92067-0891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
DiMarco
|
|
|
532,093 |
|
|
|
32,093 |
|
|
|
500,000 |
|
|
|
1 |
% |
4770
Santa Fe St
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San
Diego, CA 92109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan
Taylor (8)
|
|
|
231,419 |
|
|
|
6,419 |
|
|
|
225,000 |
|
|
|
* |
|
23649
Kathryn Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Murrieta,
CA 92562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Murdock
|
|
|
106,419 |
|
|
|
6,419 |
|
|
|
100,000 |
|
|
|
* |
|
50
Durango Station Dr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henderson,
NV 89102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
J. Taylor (8)
|
|
|
492,763 |
|
|
|
75,000 |
|
|
|
417,763 |
|
|
|
1 |
% |
23
Viola St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South
San Francisco, CA 94040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
A. Saltman and
|
|
|
1,319,388 |
|
|
|
800,001 |
|
|
|
519,387 |
|
|
|
1 |
% |
Sonja
Saltman 1997 Family Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Hughes Center Drive, #1830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Byron
LeBow Revocable
|
|
|
3,821,122 |
|
|
|
2,700,003 |
|
|
|
1,121,119 |
|
|
|
2 |
% |
Family
Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Byron
LeBow TTEE (6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Hughes Center Drive
#1104N
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerome
F. Snyder
|
|
|
180,526 |
|
|
|
150,000 |
|
|
|
30,526 |
|
|
|
* |
|
8628
Scarsdale Dr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCP
Operating LLC
|
|
|
1,434,725 |
|
|
|
782,093 |
|
|
|
652,632 |
|
|
|
1 |
% |
Phillip
C. Peckman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9525
Hillwood Dr., Suite 160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fred
Chin
|
|
|
180,526 |
|
|
|
150,000 |
|
|
|
30,526 |
|
|
|
* |
|
3230
South Plaris Avenue
Ste.
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arthur
& Jayn Marshall
|
|
|
180,526 |
|
|
|
150,000 |
|
|
|
30,526 |
|
|
|
* |
|
Family
Trust DTD 7/2/1973 (7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turmberry
Place
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2877
Paradise Road, No. 1701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Todd
Marshall Revocable Trust
|
|
|
180,526 |
|
|
|
150,000 |
|
|
|
30,526 |
|
|
|
* |
|
UAD
DTD 04/01/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Todd
Marshall TTEE (7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PO
Box 46470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cari
Marshall Trust UAD
|
|
|
180,526 |
|
|
|
150,000 |
|
|
|
30,526 |
|
|
|
* |
|
DTD
01/09/1995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cari
Marshal TTEE (7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
Grouse Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
Boyadjieff (8)(9)
|
|
|
4,097,105 |
|
|
|
3,550,000 |
|
|
|
597,105 |
|
|
|
1 |
% |
18772
Colony Circle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Villa
Park, CA 92861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas
M. and
|
|
|
680,526 |
|
|
|
150,000 |
|
|
|
605,526 |
|
|
|
1 |
% |
Karen
M. Dunn Trustees;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dunn
Family Trust (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dated
April 7, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11817
Oakland Hills Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alvin
Goldfarb
|
|
|
541,579 |
|
|
|
450,000 |
|
|
|
91,579 |
|
|
|
* |
|
4823
Lake Washington Blvd. NE #3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kirkland,
WA 98033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
G. Coyne
|
|
|
180,526 |
|
|
|
150,000 |
|
|
|
30,526 |
|
|
|
* |
|
3230
South Polaris Avenue,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ste.
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
Rado (8)
|
|
|
989,553 |
|
|
|
400,000 |
|
|
|
652,053 |
|
|
|
1 |
% |
16
Chesterfield Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warren,
NJ 07059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
Mullin, Managing
|
|
|
4,289,370 |
|
|
|
4,000,002 |
|
|
|
289,368 |
|
|
|
1 |
% |
Director
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marathon
Hard Asset Fund, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Ferry Building, Suite 255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San
Francisco, CA 94111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald
D. and Dorothy R.
|
|
|
429,708 |
|
|
|
400,002 |
|
|
|
29,706 |
|
|
|
* |
|
Snyder
Living Trust 1989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2824
High Sail Ct.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
Sitkin
|
|
|
71,881 |
|
|
|
60,000 |
|
|
|
11,881 |
|
|
|
* |
|
1933
38th Avenue East
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seattle,
WA 98112-3139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward
& Mona Sher
|
|
|
1,093,555 |
|
|
|
300,000 |
|
|
|
793,555 |
|
|
|
2 |
% |
3111
Bel Air Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Burton
M Cohen Trust
|
|
|
88,893 |
|
|
|
75,000 |
|
|
|
13,893 |
|
|
|
* |
|
3111
Bel Air Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit
14C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSSS
Family Partners, L.P.
|
|
|
584,740 |
|
|
|
300,000 |
|
|
|
284,740 |
|
|
|
1 |
% |
1912
South Realeza Ct.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Richard A. Oshins
|
|
|
141,836 |
|
|
|
120,000 |
|
|
|
21,836 |
|
|
|
* |
|
1995
Irrevocable Trust (11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1645
Village Center Circle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Richard A. Oshins
|
|
|
106,376 |
|
|
|
90,000 |
|
|
|
16,376 |
|
|
|
* |
|
1990
Irrevocable Trust (11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1645
Village Center Circle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Ruth S. Oshins
|
|
|
295,902 |
|
|
|
75,000 |
|
|
|
220,902 |
|
|
|
* |
|
2000
Irrevocable Trust (11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1645
Village Center Circle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Benjamin Oshins
|
|
|
53,188 |
|
|
|
45,000 |
|
|
|
8,188 |
|
|
|
* |
|
Bypass
Trust (11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1645
Village Center Circle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Edward H. Oshins
|
|
|
141,836 |
|
|
|
120,000 |
|
|
|
21,836 |
|
|
|
* |
|
Revocable
Trust (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
John Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
York, NY 10038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LUH,
Inc.
|
|
|
354,588 |
|
|
|
300,000 |
|
|
|
54,588 |
|
|
|
* |
|
1001
Lakeside Ave., Suite 900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cleveland,
OH 44114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Lionel Trust
|
|
|
351,958 |
|
|
|
300,000 |
|
|
|
51,958 |
|
|
|
* |
|
Samuel
Lionel, Trustee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1700
Bank of America Tower
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300
South 4th Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Heerensperger
|
|
|
1,000,002 |
|
|
|
1,000,002 |
|
|
|
- |
|
|
|
- |
|
96
Cascade Key
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bellvue,
WA 98006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry
L. and Dana A. Wright
|
|
|
250,002 |
|
|
|
250,002 |
|
|
|
- |
|
|
|
- |
|
Living
Trust 2001,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry
Wright TTEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2500
North Buffalo Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
"BJ" Lackland (8)(12)
|
|
|
3,076,026 |
|
|
|
2,887,500 |
|
|
|
278,526 |
|
|
|
1 |
% |
3960
Howard Hughes Pkwy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ste
460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
Murray TTEE of the
|
|
|
238,000 |
|
|
|
150,000 |
|
|
|
88,000 |
|
|
|
* |
|
RMM
Living Trust, Dated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/11/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3960
Howard Hughes Pkwy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ste
460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharon
Fay Strasser (13)
|
|
|
437,502 |
|
|
|
437,502 |
|
|
|
- |
|
|
|
- |
|
1
Hughes Center Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
#1004-N
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nevada
Trust Company
|
|
|
250,002 |
|
|
|
250,002 |
|
|
|
- |
|
|
|
- |
|
As
Custodian F/B/O Mark L
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fine
Rollover IRA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U/A
Dated September 24, 1997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended
November 12, 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4043
South Easter Ave.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89193-3685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
S. Boyd Trust II
|
|
|
250,002 |
|
|
|
250,002 |
|
|
|
- |
|
|
|
- |
|
William
S. Boyd TTEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2950
Industrial Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Herbert
Soroca
|
|
|
44,272 |
|
|
|
44,272 |
|
|
|
- |
|
|
|
- |
|
Bear
Stearns Securities Corp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Metro Center
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brooklyn,
NY 11201-3859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patricia
R. Schwarz (13)
|
|
|
44,272 |
|
|
|
44,272 |
|
|
|
- |
|
|
|
- |
|
740
Pinehurst Way
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palm
Beach Gardens, FL 33418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
H. Schwartz (13)
|
|
|
44,272 |
|
|
|
44,272 |
|
|
|
- |
|
|
|
- |
|
740
Pinehurst Way
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palm
Beach Gardens, FL 33418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yahia
Bagzhouz
|
|
|
24,000 |
|
|
|
24,000 |
|
|
|
- |
|
|
|
- |
|
4504
Maryland Parkway
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Box
454026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth
Dickey (8)
|
|
|
512,074 |
|
|
|
100,000 |
|
|
|
462,074 |
|
|
|
1 |
% |
6481
Wooded View Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston
Heights, OH 44236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas
Anderson
|
|
|
66,000 |
|
|
|
66,000 |
|
|
|
- |
|
|
|
- |
|
1536
208th Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bayside,
NY 11360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R.
Scott Caputo
|
|
|
4,285 |
|
|
|
4,285 |
|
|
|
- |
|
|
|
- |
|
1155
Colonial Way
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bridgewater,
NJ 08807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Norbert
Mayer
|
|
|
15,000 |
|
|
|
15,000 |
|
|
|
- |
|
|
|
- |
|
576
Grassy Hill Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Orange,
CT 06477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
Straka
|
|
|
14,284 |
|
|
|
14,284 |
|
|
|
- |
|
|
|
- |
|
Hitachi
America Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
Prospect Ave
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tarrytown,
NY 10591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leonard
Bellezza
|
|
|
89,927 |
|
|
|
81,284 |
|
|
|
8,643 |
|
|
|
* |
|
79
Talltimber Rd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middletown,
NJ 07748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Art
Marsh
|
|
|
1,428 |
|
|
|
1,428 |
|
|
|
- |
|
|
|
- |
|
Blue
Mountain Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7386
Fairway Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parker,
CO 80134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond
Skiptunis (8)
|
|
|
471,039 |
|
|
|
111,000 |
|
|
|
360,039 |
|
|
|
1 |
% |
4459
Via Bianca Ave.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
Mataya
|
|
|
30,000 |
|
|
|
30,000 |
|
|
|
- |
|
|
|
- |
|
2
Locust Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helmetta,
NJ 08828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
Franzen
|
|
|
7,143 |
|
|
|
7,143 |
|
|
|
- |
|
|
|
- |
|
260
E. Flamingo Road, #311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joan
Dziena
|
|
|
1,214 |
|
|
|
1,214 |
|
|
|
- |
|
|
|
- |
|
865
UN Plaza, #16E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
York, NY 10017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Koch
|
|
|
154,666 |
|
|
|
106,354 |
|
|
|
48,312 |
|
|
|
* |
|
1604
Sound Watch Dr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wilmington,
NC 28409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leon
Mayer
|
|
|
50,000 |
|
|
|
50,000 |
|
|
|
- |
|
|
|
- |
|
547
McKinley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plymouth,
MI 48170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ron
Heagle
|
|
|
100,000 |
|
|
|
100,000 |
|
|
|
- |
|
|
|
- |
|
5533
Bilbao Place
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sarasota,
FL 34238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rick
Pulford
|
|
|
168,551 |
|
|
|
25,000 |
|
|
|
143,551 |
|
|
|
* |
|
3000
Town Center, Suite 540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southfield,
MI 48075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Don
Fields
|
|
|
200,000 |
|
|
|
200,000 |
|
|
|
- |
|
|
|
- |
|
11642
Deer Forest Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reston,
VA 20194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nils
Weibull
|
|
|
118,000 |
|
|
|
118,000 |
|
|
|
- |
|
|
|
- |
|
1689
W. Huron River Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ann
Arbor, MI 48103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dan
Koch
|
|
|
39,000 |
|
|
|
39,000 |
|
|
|
- |
|
|
|
- |
|
301
W 10th St, Apt 203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charlotte,
NC 28202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
Chan (8)
|
|
|
300,000 |
|
|
|
300,000 |
|
|
|
- |
|
|
|
- |
|
7021
Pipers Ridge Ave
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las
Vegas, NV 89109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abacus
Solutions
|
|
|
100,000 |
|
|
|
100,000 |
|
|
|
- |
|
|
|
- |
|
745
5th Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
York, NY 10151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Justin
Bellezza
|
|
|
1,000 |
|
|
|
1,000 |
|
|
|
- |
|
|
|
- |
|
500
Washington Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carlstadt,
NJ 07072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Sacharoff
|
|
|
33,000 |
|
|
|
33,000 |
|
|
|
- |
|
|
|
- |
|
500
Washington Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carlstadt,
NJ 07072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bernard
Geik
|
|
|
33,000 |
|
|
|
33,000 |
|
|
|
- |
|
|
|
- |
|
500
Washington Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carlstadt,
NJ 07072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domimick
Rizzitano
|
|
|
33,000 |
|
|
|
33,000 |
|
|
|
- |
|
|
|
- |
|
500
Washington Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carlstadt,
NJ 07072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DB
Max
|
|
|
700 |
|
|
|
700 |
|
|
|
- |
|
|
|
- |
|
8520
Roundhill Ct.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Saline,
MI 48176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reed
Smith LLP
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
- |
|
|
|
- |
|
P.O.
Box 23416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newark,
NJ 07198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
A. Ackner
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
14643
Draft House Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wellington,
FL 33414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
Anderson
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
4409
Willow Creek Circle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bellbrook,
OH 45305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bryan
Arakelian
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
- |
|
|
|
- |
|
7110
N. Fresno Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresno,
CA 93720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
F. Arnold &
|
|
|
100,000 |
|
|
|
100,000 |
|
|
|
- |
|
|
|
- |
|
Susan
L. Arnold JR WROS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
Fielding Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wakefield,
MA 01880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
J. Bargiel
|
|
|
112,500 |
|
|
|
112,500 |
|
|
|
- |
|
|
|
- |
|
100
West Monroe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicago,
IL 60603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
J. Bender
|
|
|
300,000 |
|
|
|
300,000 |
|
|
|
- |
|
|
|
- |
|
2803
22nd Street S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lacrosse,
WI 54601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Berkowitz
and Garfinkel
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
D.D.S.,
P.A. Employees'
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D/T/D
7/1/1972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
Berkowitz & Eric
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garfinkel
Trustees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Country Club Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marlboro,
NJ 07746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lester
B. Boelter
|
|
|
250,000 |
|
|
|
250,000 |
|
|
|
- |
|
|
|
- |
|
50
Shady Oak Court
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Winona,
MN 55987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
H. Brackman
|
|
|
225,000 |
|
|
|
225,000 |
|
|
|
- |
|
|
|
- |
|
5309
Crave Avenue E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Port
Orchard, WA 98366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith
Buhrdorf
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
4582
South Vister Steet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denver,
CO 80237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
Davis
|
|
|
125,000 |
|
|
|
125,000 |
|
|
|
- |
|
|
|
- |
|
383
North West 112th Ave
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coral
Springs, FL 33071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
Demarco & Rose
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
Demarco
JTWROS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
274
Rose Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staten
Island, NY 10306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas
Dotter
|
|
|
112,500 |
|
|
|
112,500 |
|
|
|
- |
|
|
|
- |
|
3615
West Lawther Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dallas,
TX 75214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arun
Dua & Satish Dua,
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
JTWROS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
W. Houston ST. 28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
York, NY 10012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward
Duffy
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
178
Hanson Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Rochelle, NY 10804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ahsan
Farooqi
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
54
Kimberly Court
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S.
Brunswick, NJ 08852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
L. Fox &
|
|
|
262,500 |
|
|
|
262,500 |
|
|
|
- |
|
|
|
- |
|
Lynne
Fox JT WROS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450
Music Mountain Rd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Falls
Village, CT 06031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bernie
J. Gallas
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
5200
North Diversey Blvd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Milwaikee,
WI 53217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
T. Hellner
|
|
|
1,159,091 |
|
|
|
1,159,091 |
|
|
|
- |
|
|
|
- |
|
900
West Olive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merced,
CA 95348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Paul A. Kaye Family
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
Trust
D/T/D 10/06/93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Paul A. Kaye Trustee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
Diamonte Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rancho
Palos Verdes, CA 90275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
J. Keller &
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
Debra
M. Keller JT WROS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1246
130th Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Richmond, WI 54017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
Kelly
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
1558
E. County Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800
N.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ockans,
IN 47452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
Kemp
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
2528
Boulder Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auburn
Hills, MI 48326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
N. Kitchens &
|
|
|
175,000 |
|
|
|
175,000 |
|
|
|
- |
|
|
|
- |
|
Martha
M. Kitchens
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JTWROS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
Fox Vale Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nashville,
TN 37221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lester
Krasno
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
- |
|
|
|
- |
|
400
North 2nd Steet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pottsville,
PA 17901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edwin
Kriel
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
2904
Pocock Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monkton,
MD 21111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
J. Lange
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
20800
Hunters Run
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brookfield,
WI 53045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lind
Family Investments LP
|
|
|
100,000 |
|
|
|
100,000 |
|
|
|
- |
|
|
|
- |
|
1000
West Washington St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
#502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicago,
IL 60607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry
Lind Revocable Trust
|
|
|
500,000 |
|
|
|
500,000 |
|
|
|
- |
|
|
|
- |
|
Barry
Lind Trustee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U/A/D
12/19/1989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1000
West Washington St.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
#502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicago,
IL 60607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National
Financial Services
|
|
|
600,000 |
|
|
|
600,000 |
|
|
|
- |
|
|
|
- |
|
LLC
As Custodian
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FBO
Lance Lindsey IRA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7700
Blanding Blvd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jacksonville,
FL 32244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dwight
Long
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
406
Belle Glen Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brentwood,
TN 37027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
S. McCorstin
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
4750
Blue Mountain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yorba
Linda, CA 92887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glen
Miskiewicz
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
Apt.
724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
Par-La-Ville Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hamilton
HM11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bermuda
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enrico
Monaco
|
|
|
125,000 |
|
|
|
125,000 |
|
|
|
- |
|
|
|
- |
|
2230
Ocean Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brooklyn,
NY 11229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natchez
Morice
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
- |
|
|
|
- |
|
12
A West Bank Exwy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gretna,
LA 70056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSB
Family Trust
|
|
|
250,000 |
|
|
|
250,000 |
|
|
|
- |
|
|
|
- |
|
D/T/D
6/25/93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Blechman TTEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
295
Shadowood Ln.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northfield,
IL 60093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
Navarro Jr. &
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
Richard
Navarro JT WROS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2036
Highway 35 North
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South
Amboy, NJ 08879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National
Financial Services
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
LLC
As Custodian
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FBO
Michael J. Radlove IRA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2748
Blackbird Hollow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cincinnati,
OH 452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prahalathan
Rajasekaran
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
1
Grosvenor Place
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
London,
England SW1X7JJ
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gretchen
Kinstler
|
|
|
750,000 |
|
|
|
750,000 |
|
|
|
- |
|
|
|
- |
|
49-365
Rio Arenoso
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
La
Quinto, CA 92253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lawrence
Silver
|
|
|
250,000 |
|
|
|
250,000 |
|
|
|
- |
|
|
|
- |
|
225
West Hubbard Suite 600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicago,
IL 60610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
A. Snyder &
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
Beverly
J. Snyder JT WROS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27297
Forest Grove Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Evergreen,
CO 80439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claire
Spooner
|
|
|
225,000 |
|
|
|
225,000 |
|
|
|
- |
|
|
|
- |
|
111
Seaview Court
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neptune,
NJ 07753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry
H. Strauss
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
12
Howard Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tappan,
NY 10983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Takacs
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
- |
|
|
|
- |
|
17073
Snyder Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bainbridge,
OH 44023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Terranova &
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
Vincent
Terranova TEN COM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
349
Bartlett Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staten
Island, NY 10312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
S. Tyrrell
|
|
|
262,500 |
|
|
|
262,500 |
|
|
|
- |
|
|
|
- |
|
2711
Edgehill Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bronx,
NY 10463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Herbert
Weisberger
|
|
|
112,500 |
|
|
|
112,500 |
|
|
|
- |
|
|
|
- |
|
2904
West Clay Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richmond,
VA 23230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Darren
R. Williams
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
17280
Timothy Way
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gladstone,
OR 97027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
A. Yates
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
Shakeseare
No 15-1 Piso
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cuydad
De Mexico
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distrito
Federal 11590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexico
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan
J. Young
|
|
|
250,000 |
|
|
|
250,000 |
|
|
|
- |
|
|
|
- |
|
1750
Braeside Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northbrook,
IL 60062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan
Arnett
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
7
Longwood Road
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sandspoint,
NY 11050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elliot
Braun
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
C/O
Atlantic Beverage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3775
Park Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edison,
NJ 08820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry
J. Buck
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
1624
Brandon Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hebron,
KY 41048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith
H. Cooper
|
|
|
100,000 |
|
|
|
100,000 |
|
|
|
- |
|
|
|
- |
|
5840
De Claire Court
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atlanta,
GA 30328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Gurewitsch
|
|
|
112,500 |
|
|
|
112,500 |
|
|
|
- |
|
|
|
- |
|
930
5th Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apt.
3-G
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
York, NY 10021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antonio
Hernandez
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
1575
Bengal Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
El
Paso, TX 79935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
Herron
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
601
Cleveland Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clearwater,
FL 33755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
W. Higginson
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
- |
|
|
|
- |
|
247-F Rosario
Blvd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Santa
Fe, NM 87501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Don
Jackler & Alana Jackler,
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
JTWROS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
246
E. 51st Street Suite 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald
Mapes
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
532
Bellepoint Drive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
St.
Pete Beach, FL 33706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
John McPhail
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
603
Beamon Steet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinton,
NC 28328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grace
Melton
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
1250
S. Beverly Glen Blvd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
#311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los
Angeles, CA 90024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry
R. Nichols &
|
|
|
50,000 |
|
|
|
50,000 |
|
|
|
- |
|
|
|
- |
|
Janet
B. Nichols JT WROS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9348
Burning Tree Dr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand
Blanc, MI 48439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National
Financial Services
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
LLC
As Custodian
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FBO
Michael J. Radlove IRA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2748
Blackbird Hollow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cincinnati,
OH 45244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry
Saxe
|
|
|
187,500 |
|
|
|
187,500 |
|
|
|
- |
|
|
|
- |
|
325
E. 41st Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
York, NY 10017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theodore
Staahl
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
1329
Spanos Court
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modesto,
CA 95355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Randolph
Stephenson
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
- |
|
|
|
- |
|
10316-300
Feld Farm Lane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charlotte,
NC 28210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony
Yodice
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
2443
Benson Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brooklyn,
NY 11214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
Schuman
|
|
|
210,000 |
|
|
|
210,000 |
|
|
|
- |
|
|
|
- |
|
2425
Olympic Blvd. Ste 500 East
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Santa
Monica, CA 90404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brooks
Dexter
|
|
|
90,000 |
|
|
|
90,000 |
|
|
|
- |
|
|
|
- |
|
2425
Olympic Blvd. Ste 500 East
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Santa
Monica, CA 90404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tony
Acone
|
|
|
45,000 |
|
|
|
45,000 |
|
|
|
- |
|
|
|
- |
|
44-489
Town Center Way #D
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palm
Desert, CA 92260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Investor Relations Group
|
|
|
252,101 |
|
|
|
252,101 |
|
|
|
- |
|
|
|
- |
|
11
Stone St. 3rd Floor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
York, NY 10004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,071,092 |
|
|
|
|
|
|
|
|
|
* Less
than 1%
(1)
|
All share numbers are based on
information that these selling stockholders supplied to us. The term
“selling stockholders” also includes any transferees, pledges, donees, or
other successors in interest to the selling stockholders named in the
table below. To our knowledge, subject to applicable community property
laws, each person named in the table has sole voting and investment power
with respect to the shares of common stock set forth opposite such
person's name, unless otherwise indicated below. The inclusion of any
shares in this table does not constitute an admission of beneficial
ownership by the selling
stockholder.
|
(2)
|
Ron Boyer owns over 6% of our
currently outstanding common stock and over 23% of our common stock on a
fully diluted basis, including upon conversion of our Series B Preferred
Stock and upon conversion or exercise of all outstanding options and
warrants within 60 days of the date hereof, and under certain definitions,
may be considered an affiliate of our
company.
|
(3)
|
The Sarkowsky Family
L.P. owns over 9% of our outstanding common stock and over 18% of our
common stock on a fully diluted basis, including upon conversion of our
Series B Preferred Stock and upon conversion or exercise of all
outstanding options and warrants within 60 days of the date hereof, and
under certain definitions, may be considered an affiliate of our
company.
|
(4)
|
Michael J. Goldfarb Enterprises
LLC owns over 2% of our outstanding common stock and over 7% of our common
stock on a fully diluted basis, including upon conversion of our Series B
Preferred Stock and upon conversion or exercise of all outstanding options
and warrants within 60 days of the date hereof, and under certain
definitions, may be considered an affiliate of our company. Michael J.
Goldfarb, the managing member of Michael J. Goldfarb Enterprises LLC, is
the father of Brett Goldfarb, and the brother of Alvin Goldfarb. Mr.
Goldfarb disclaims beneficial ownership of Brett Goldfarb’s and Alvin
Goldfarb’s shares.
|
(5)
|
The
Irwin Helford Family Trust owns over 2% of our outstanding common
stock and over 7% of our common stock on a fully diluted basis, including
upon conversion of our Series B and Series C-1 Preferred Stock and upon
conversion or exercise of all outstanding options and warrants within 60
days of the date hereof, and under certain definitions, may be considered
an affiliate of our company.
|
(6)
|
The Byron LeBow Revocable Family
Trust owns over 2% of our outstanding common stock and over 9% of our
common stock on a fully diluted basis, including upon conversion of our
Series B and Series C-1 Preferred Stock and upon conversion or exercise of
all outstanding options and warrants within 60 days of the date hereof,
and under certain definitions, may be considered an affiliate of our
company.
|
(7)
|
Arthur and Jayn Marshall,
trustees of the Arthur and Jayn Marshall Family Trust DTD 7/2/1973, are
the parents of Todd Marshall and Cari Marshall, trustees of the Todd
Marshall Revocable Trust UAD DTD 04/01/2003 and the Cari Marshall Trust
UAD DTD 01/09/1995, respectively. Arthur and Jayn Marshall disclaim
beneficial ownership of Todd Marshall’s and Cari Marshall’s beneficial
shares.
|
(8)
|
Indicates a person that has,
within the past three years, served as an employee, officer or director of
the company.
|
(9)
|
Mr. Boyadjieff has been a Senior
Technical Advisor of the Company since April 2005 and a Director of the
Company since May 2006. Mr. Boyadjieff owns over 2% of our outstanding
common stock and over 7% of our common stock on a fully diluted basis,
including upon conversion of our Series B Preferred Stock and upon
conversion or exercise of all outstanding options and warrants within 60
days of the date hereof, and under certain definitions, may be considered
an affiliate of our company. Mr. Boyadjieff beneficially owns a total of
3,825,000 commons shares, common shares issuable upon the exercise of
stock options and warrants and common shares issuable upon the conversion
of Series B Preferred Stock.
|
(10)
|
Mr. Mullin beneficially owns over
3% of our outstanding common stock and over 11% of our common stock on a
fully diluted basis, including upon conversion of our Series B Preferred
Stock and upon conversion or exercise of all outstanding options and
warrants within 60 days of the date hereof, and under certain definitions,
may be considered an affiliate of our company. Mr. Mullin is the managing
director of Marathon Hard Asset Fund, L.P. Of the 4,000,002 shares
beneficially owned by Mr. Mullin, all of the shares are held in the name
of Marathon Hard Asset Fund,
L.P.
|
(11)
|
Richard A. Oshins, trustee of the
Richard A. Oshins 1995 Irrevocable Trust and the Richard A. Oshins 1990
Irrevocable Trust, is married to Ruth S. Oshins, trustee of the Ruth S.
Oshins 2000 Irrevocable Trust, and is the father of Benjamin Oshins and
Edward H. Oshins, trustees of the Benjamin Oshins Bypass Trust and the
Edward H. Oshins Revocable Trust, respectively. Richard A. Oshins
disclaims beneficial owners ship of Ruth S. Oshins’, Benjamin Oshins’, and
Edward H. Oshins’ beneficial
shares.
|
(12)
|
Mr. Lackland has been a Director
of the Company since August 2007 and the Chief Financial Officer of the
Company since October 2004. Indicates a person that has, within the past
three years, served as an employee, officer or director of the company.
Mr. Lackland beneficially owns a total of 2,976,026 commons shares and
common shares issuable upon the conversion of our Series B Preferred Stock
and upon exercise of stock options and
warrants.
|
(13)
|
Sharon Strasser is married to the
Company’s Chief Executive Officer, Steven Strasser. Mr. Strasser disclaims
beneficial ownership of Mrs. Strasser’s
Shares.
|
(14)
|
Patricia Schwartz is married to
David Schwartz. Mrs. Schwartz disclaims beneficial ownership to Mr.
Schwartz’s shares.
|
DESCRIPTION
OF SECURITIES
The
following is a summary of the rights of our common and preferred stock and
related provisions of our articles of incorporation and our bylaws, as will be
in effect upon the closing of this offering. This summary is not complete. For
more detailed information, please see our articles of incorporation, bylaws and
related agreements, which are filed as exhibits or incorporated by reference to
the registration statement of which this prospectus is a part.
Common
Stock
We are
authorized to issue up to 140,000,000 shares of common stock. As of April 27,
2010 there were 45,077,984 shares of common stock issued and
outstanding. Each holder of issued and outstanding shares of our
common stock will be entitled to one vote per share on all matters submitted to
a vote of our stockholders. Holders of shares of our common stock do not have
cumulative voting rights. Therefore, the holders of more than 50% of the shares
of our common stock will have the ability to elect all of our
directors.
Holders
of our common stock are entitled to share ratably in dividends payable in cash,
property or shares of our capital stock, when, as and if declared by our Board
of Directors. We do not currently expect to pay any cash dividends on our common
stock. Upon our voluntary or involuntary liquidation, dissolution or winding up,
any assets remaining after prior payment in full of all of our liabilities and
after prior payment in full of the liquidation preference of any preferred stock
would be paid ratably to holders of our common stock.
Options
to Purchase Common Stock
The
following table describes the options to purchase shares of our common stock
that are outstanding as of April 27, 2010, and that will be outstanding
immediately following the offering:
|
|
Total Number
of Shares
Underlying
Options
Before this
|
|
|
Weighted
Average
Exercise Price
Per Share
Before This
|
|
Total Number
of Shares
Underlying
Options After
|
|
|
Weighted Average
Exercise Price For
Shares After this
|
|
Description
|
|
Offering
|
|
|
Offering
|
|
This Offering
|
|
|
Offering
|
|
2000
Stock Option and Restricted Stock Plan
|
|
|
16,197,396 |
|
|
$ |
0.35 |
|
|
|
16,197,396 |
|
|
$ |
0.35 |
|
1994
Stock Option Plan
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
Total
|
|
|
16,197,396 |
|
|
$ |
0.35 |
|
|
|
16,197,396 |
|
|
$ |
0.35 |
|
The
options also contain provisions for the adjustment of the exercise price and the
aggregate number of shares issuable upon exercise of the options in the event of
stock dividends, stock splits, reorganization, reclassifications and
consolidation.
Warrants
to Purchase Common Stock
As of the
date hereof, there are, and following this offering there will be, 31,447,563
warrants outstanding with exercise prices ranging from $0.11 to $2.17 with
expiration dates ranging from July 7, 2010 through February 23,
2015.
Certain
of the warrants have net exercise provisions under which their respective
holders may, in lieu of payment of the exercise price in cash, surrender the
warrant and receive a net amount of shares based on the fair market value of our
common stock after deduction of the aggregate exercise price. These warrants
also contain provisions for the adjustment of the exercise price and the
aggregate number of shares issuable upon exercise of the warrants in the event
of stock dividends, stock splits, reorganization, reclassifications and
consolidations.
Preferred
Stock
We are
authorized to issue 10,000,000 shares of preferred stock, $.001 par value per
share. As of April 27, 2010, 140,000 shares of preferred stock have been
designated as Series B Preferred, 125,000 shares of preferred stock have been
designated as Series C Preferred Stock and 175,000 shares of preferred stock
have been designated as Series C-1 Preferred Stock. As of such date
all such shares of Series B Preferred Stock are issued and outstanding, no
shares of Series C Preferred Stock are issued and outstanding and 32,750 shares
of Series C-1 Preferred Stock are issued and outstanding.
Series
B Preferred Stock
The
Series B Preferred Stock votes with the common stock on an as-converted basis,
and is entitled to dividends at a rate of 8% per annum, payable in cash or
common stock only when, or if, declared by our Board of Directors.
Each
share of Series B Preferred Stock is initially convertible into 100 shares of
our common stock at any time at the option of the stockholder. The shares of
Series B Preferred Stock are automatically converted into common stock in the
event the average closing price of the common stock for any ten day period
equals or exceeds $1.00 per share.
The
Certificate of Designations of the Series B Preferred Stock provides that in the
event we issue stock in connection with a dividend, distribution,
classification, merger or consolidation of the number of shares of common stock
that the Series B Stock is convertible into will be adjusted
accordingly.
In the
event of any dissolution or winding up of the Company, whether voluntary or
involuntary, holders of each outstanding share of Series B Preferred Stock will
be entitled to be paid pari passu with any other series of preferred stock equal
to the Series B Preferred Stock.
Series
C Preferred Stock
The
Series C Preferred Stock votes with the common stock on an as-converted basis,
and is entitled to dividends at a rate of 8% per annum, payable in cash or
common stock only when, or if, declared by our Board of Directors.
Each
share of Series C Preferred Stock is initially convertible into 100 shares of
our common stock at any time at the option of the stockholder. The shares of
Series C Preferred Stock are automatically converted into common stock in the
event the average closing price of the common stock for any ten day period
equals or exceeds $1.00 per share.
The
Certificate of Designation of the Series C Preferred Stock provides that in the
event we issue stock in connection with a dividend, distribution,
classification, merger or consolidation of the number of shares of common stock
that the Series C Stock is convertible into will be adjusted
accordingly.
In the
event of any dissolution or winding up of the Company, whether voluntary or
involuntary, holders of each outstanding share of Series C Preferred Stock will
be entitled to be paid pari passu with any other series of preferred stock equal
to the Series C Preferred Stock.
As
described below, all shares of Series C Preferred Stock were converted into
shares of Series C-1 Preferred Stock in connection with such
offering.
Series
C-1 Preferred Stock
The
Series C-1 Preferred Stock votes with the common stock on an as-converted basis,
and is entitled to dividends at a rate of 8% per annum, payable in cash or
common stock only when, or if, declared by our Board of Directors.
Each
share of Series C-1 Preferred Stock is initially convertible into 133 shares of
our common stock at any time at the option of the stockholder. The shares of
Series C-1 Preferred Stock are automatically converted into common stock in the
event the average closing price of the common stock for any ten day period
equals or exceeds $1.00 per share.
The
Certificate of Designation of the Series C-1 Preferred Stock provides that in
the event we issue stock in connection with a dividend, distribution,
classification, merger or consolidation of the number of shares of common stock
that the Series C-1 Stock is convertible into will be adjusted
accordingly.
In the
event of any dissolution or winding up of the Company, whether voluntary or
involuntary, holders of each outstanding share of Series C-1 Preferred Stock
will be entitled to be paid pari passu with any other series of preferred stock
equal to the Series C-1 Preferred Stock.
Registration
Rights
Pursuant
to the offering which terminated on January 21, 2008, we are obligated to (i)
use reasonable best efforts to register by March 21, 2008, the shares of common
stock issuable upon the conversion of our Series B Preferred Stock and warrants
in a registration statement to be filed by us with the Securities and Exchange
Commission and (ii) use our best efforts to cause such registration statement to
be declared effective by the Commission by May 20, 2008 and to remain effective
without any lapse of 30 or more consecutive days.
Certain
Statutory and Charter Provisions Relating to a Change of Control
We are
subject to the provisions of Section 203 of the DGCL. In general, this provision
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder.
A
“business combination” includes a merger, asset sale, or other transaction
resulting in a financial benefit to the interested stockholder. An “interested
stockholder” is a person, other than the corporation and any direct or indirect
wholly-owned subsidiary of the corporation, who together with the affiliates and
associates, owns or, as an affiliate or associate, within three years prior, did
own 15% or more of the corporation's outstanding voting stock.
This
prohibition is lifted if:
|
·
|
prior
to such date, the corporation's Board of Directors approved either the
business combination or the transaction that resulted in the stockholder
becoming an interested stockholder;
|
|
·
|
upon
consummation of the transaction that resulted in such person becoming an
interested stockholder, the interested stockholder owned at least 85% of
the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding, shares owned by certain directors or certain employee
stock plans; or
|
|
·
|
on
or after the date the stockholder became an interested stockholder, the
business combination is approved by the corporation's Board of Directors
and authorized by the affirmative vote, and not by written consent, of at
least two-thirds of the outstanding voting stock of the corporation
excluding that owned by the interested
stockholder.
|
Section
203 expressly exempts from the requirements described above any business
combination by a corporation with an interested stockholder who becomes an
interested stockholder in a transaction approved by the corporation's Board of
Directors.
Rule
144
Of the
45,077,984 shares of the Company’s common stock outstanding on the date of
this report, 33,547,157 shares are freely trading in the market place (the “Free
Trading Shares”). The Free Trading Shares are comprised mostly of shares (1)
originally issued in private offerings of common stock from June through March
2007, that were later registered in the Company’s S-1 Registration Statement
(the “Registration Statement”), declared effective on October 10, 2008 and (2)
shares originally issued in transactions exempt from registration under the
Securities Act.
The
remaining 11,530,927 shares of our common stock outstanding are restricted
securities as defined in Rule 144 and under certain circumstances may be resold
without registration pursuant to Rule 144. These shares include the
9,968,910 shares held by Summit and Steven Strasser in the aggregate, and
1,561,917 shares held by directors and insiders.
In
addition, the Company had approximately 31,447,563 common stock purchase
warrants outstanding and approximately 16,197,396 common stock options
outstanding as of the date of this report, including the warrants issued in
connection with the private offer and sale of preferred stock units in 2008 and
2009 (See Note 15 to the Financial Statements). The shares issuable
on exercise of the options and warrants may, under certain circumstances, be
available for public sale in the open market under the Registration Statement or
pursuant to Rule 144, subject to certain limitations.
In
general, pursuant to Rule 144, after satisfying a six month holding period: (i)
affiliated stockholder (or stockholders whose shares are aggregated) may, under
certain circumstances, sell within any three month period a number of securities
which does not exceed the greater of 1% of the then outstanding shares of common
stock or the average weekly trading volume of the class during the four calendar
weeks prior to such sale and (ii) non-affiliated stockholders may sell without
such limitations, provided we are current in our public reporting
obligations. Rule 144 also permits the sale of securities by
non-affiliates that have satisfied a one year holding period without any
limitation or restriction. Any substantial sale of the common stock
pursuant to Rule 144 may have an adverse effect on the market price of the
Company’s shares.
Transfer
Agent and Registrar
The
transfer agent for our common stock is Continental Stock Transfer and Trust,
located at 17 Battery Place, New York, New York, 10004.
PLAN
OF DISTRIBUTION
Our
common stock is currently traded on the OTC Bulletin Board.
All of
the shares of our common stock included in this prospectus are for sale by the
selling stockholders. We will not receive any proceeds from the sale by the
selling stockholders of the shares of common stock pursuant to this prospectus
which are already owned by them, or which are to be issued to them upon their
conversion of shares of our convertible preferred stock. We will receive cash
proceeds from the issuance of shares to selling stockholders on exercise of
options or warrants, but not from the resale of any such shares.
The
selling stockholders and any of their pledgees, assignees and
successors-in-interest, may, from time to time, sell any or all of their shares
of our common stock on any stock exchange, market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the date of this
prospectus;
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
·
|
a
combination of any such methods of
sale;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
or
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares under Rule 144, if available,
rather than under this prospectus.
NASD
Notice to Members 88-101 states that in the event a selling stockholder intends
to sell any of the shares registered for resale in this Prospectus through a
member of the NASD participating in a distribution of our securities, such
member is responsible for insuring that a timely filing is first made with the
Corporate Finance Department of the NASD and disclosing to the NASD the
following:
|
·
|
it
intends to take possession of the registered securities or to facilitate
the transfer of such certificates;
|
|
·
|
the
complete details of how the selling stockholders shares are and will be
held, including location of the particular
accounts;
|
|
·
|
whether
the member firm or any direct or indirect affiliates thereof have entered
into, will facilitate or otherwise
participate in any type of payment transaction with the selling
stockholders, including details regarding any such transactions;
and
|
|
·
|
in
the event any of the securities offered by the selling stockholders are
sold, transferred, assigned or hypothecated
by any selling stockholder in a transaction that directly or indirectly
involves a member firm of the NASD or any affiliates thereof, that prior
to or at the time of said transaction the member firm will timely file all
relevant documents with respect to such transaction(s) with the Corporate
Finance Department of the NASD for
review.
|
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. Each
selling stockholder does not expect these commissions and discounts relating to
its sales of shares to exceed what is customary in the types of transactions
involved.
In
connection with the sale of our common stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The selling
stockholders may, after the date of this prospectus, also sell shares of our
common stock short and deliver these securities to close out their short
positions, or loan or pledge the common stock to broker-dealers that in turn may
sell these securities. The selling stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The
selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each selling stockholders has informed us
that it does not have any agreement or understanding, directly or indirectly,
with any person to distribute our common stock. If any of the selling
stockholders enter into an agreement with an underwriter to do a firm commitment
offering of the shares of our common stock offered by such selling stockholder
through this prospectus, if we are aware of such underwriting agreement we will
file a post-effective amendment to the registration statement of which this
prospectus is a part setting forth the material terms of such underwriting
agreement. The selling stockholder may not sell any of the shares in such firm
underwriting until such post-effective amendment becomes effective.
Because
selling stockholders may be deemed to be "underwriters" within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act. In addition, any securities covered by this prospectus
which qualify for sale pursuant to Rule 144 may be sold under Rule 144
rather than under this prospectus. Each selling stockholder has advised us that
they have not entered into any agreements, understandings or arrangements with
any underwriter or broker-dealer regarding the sale of the resale shares. There
is no underwriter or coordinating broker acting in connection with the proposed
sale of the resale shares by the selling stockholders.
The
resale shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states, the resale shares may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied
with.
Under
applicable rules and regulations under the Exchange Act, any person engaged in
the distribution of the resale shares may not simultaneously engage in market
making activities with respect to our common stock for a period of two business
days prior to the commencement of the distribution. In addition, the selling
stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including Regulation M, which may
limit the timing of purchases and sales of shares of our common stock by the
selling stockholders or any other person. We will make copies of this prospectus
available to the selling stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of
the sale.
We do not
know whether any selling stockholder will sell any or all of the shares of
common stock registered by the registration statement of which this prospectus
forms a part.
We will
pay all expenses of the registration of the shares of common stock offered
pursuant to this prospectus including SEC filing fees and expenses of compliance
with state securities or "blue sky" laws, except that the selling stockholders
will pay any underwriting discounts and selling commissions for the sale of
their shares. We expect that our expenses for this offering, consisting
primarily of legal, accounting and printing expenses, will be approximately
$59,201.
We will
indemnify the selling stockholders against liabilities, including some
liabilities under the Securities Act, in accordance with registration rights and
other agreements entered into by us with the selling stockholders, or the
selling stockholders will be entitled to contribution.
Once sold
under the registration statement, of which this prospectus forms a part, by any
of the selling stockholders, the shares of common stock will be freely tradable
in the hands of persons other than our affiliates.
LEGAL
MATTERS
Certain
legal matters will be passed upon for us by Ellenoff Grossman & Schole LLP,
New York, New York.
EXPERTS
The
financial statements as of December 31, 2009, and for the year then ended,
included in this Prospectus have been so included in reliance on the report of
BDO Seidman, LLP, an independent registered public accounting firm (the report
contains an explanatory paragraph regarding the Company's ability to continue as
a going concern) appearing elsewhere herein, given on the authority of said firm
as experts in auditing and accounting.
The
balance sheet as of December 31, 2008 and the related statements of operations,
changes in stockholders’ equity and cash flows for the years ended December 31,
2008 included in this Prospectus have been so included in reliance on the report
(which contains an explanatory paragraph relating to the Company’s ability to
continue as a going concern as described in Note 3 to the financial statements)
of Sobel & Co., LLC, independent registered public accounting firm, given on
the authority of said firm as experts in auditing and
accounting.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS
(a)
Dismissal of Certifying Accountant
On April
23, 2009, we dismissed Sobel & Co., LLC (“Sobel”) as our independent
registered public accounting firm. Our audit committee approved the
termination of Sobel.
Sobel’s
audit report dated March 30, 2009 (which was included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2008) on our consolidated
financial statements as of, and for the years ended, December 31, 2008 and
December 31, 2007, did not contain an adverse opinion or a disclaimer opinion,
nor was it qualified or modified as to uncertainty, audit scope, or accounting
principles, except the audit report contained a separate paragraph
stating:
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations,
and the Company has experienced a deficiency of cash from
operations. These matters raise substantial doubt as to the Company's
ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
During
our two most recent fiscal years and the subsequent interim period through April
23, 2009, there were no disagreements with Sobel on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which disagreement, if not resolved to Sobel’s satisfaction, would
have caused Sobel to make reference to the subject matter of the disagreement in
connection with its report. There were no “reportable events” as defined in Item
304(a)(1)(v) of Regulation S-K during our two most recent fiscal years and the
subsequent interim period through April 23, 2009.
We
provided Sobel with a copy of the foregoing disclosures and requested Sobel to
furnish us a letter addressed to the Securities and Exchange Commission stating
whether or not it agrees with the above statements. Such letter
states Sobel’s agreement with the foregoing statements.
(b)
Engagement of New Certifying Accountant
On April
27, 2009, our audit committee approved the engagement of BDO Seidman, LLP (“BDO
Seidman”) as our new independent registered public accounting firm. We have not
consulted with BDO Seidman during our two most recent fiscal years or during the
subsequent interim period through April 27, 2009 regarding the application of
accounting principles to a specific completed or proposed transaction, or the
type of audit opinion that might be rendered on our financial statements, or as
to any disagreement or reportable event as described in Item 304(a)(1)(iv) and
Item 304(a)(1)(v) of Regulation S-K.
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus is a part of the registration statement filed on Form S-1 with the
SEC. The registration statement contains more information about us and our
common stock than this prospectus, including exhibits and schedules. You should
refer to the registration statement for additional information about us and our
common stock being offered in this prospectus. Statements contained in this
prospectus as to the contents of any contract or other document referred to in
this prospectus are not necessarily complete and, where that contract is an
exhibit to the registration statement, each statement is qualified in all
respects by reference to the exhibit to which the reference
relates.
We are
subject to the information and reporting requirements of the Exchange Act and,
in accordance therewith, file reports and other information with the SEC. You
may read and copy any document that we file at the SEC's public reference
facilities at 450 Fifth Street N.W., Room 1024, Washington, D.C. 20549. Please
call the SEC at 1-800-732-0330 for more information about its public reference
facilities. Our SEC filings are also available to you free of charge at the
SEC's web site at http://www.sec.gov. Information about us may be obtained from
our website www.powerefficiencycorp.com. Copies of our SEC filings are available
free of charge on the website as soon as they are filed with the SEC through a
link to the SEC's EDGAR reporting system. Simply select the "Investors" menu
item, then click on the "SEC Filings" link.
POWER EFFICIENCY
CORPORATION
FINANCIAL
STATEMENTS
DECEMBER 31, 2009 AND
2008
POWER EFFICIENCY
CORPORATION
DECEMBER 31, 2009 AND
2008
INDEX
|
|
Page
|
|
|
|
|
|
Reports
of Independent Registered Public Accounting Firms
|
|
|
F-1
– F-2 |
|
|
|
|
|
|
Financial
Statements:
|
|
|
|
|
|
|
|
|
|
Balance
Sheets
|
|
|
F-3 |
|
|
|
|
|
|
Statements
of Operations
|
|
|
F-4 |
|
|
|
|
|
|
Statements
of Changes in Stockholders' Equity
|
|
|
F-5 |
|
|
|
|
|
|
Statements
of Cash Flows
|
|
|
F-6 |
|
|
|
|
|
|
Notes
to Financial Statements
|
|
|
F-7
- F-33 |
|
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors
Power
Efficiency Corporation
Las
Vegas, Nevada
We have
audited the accompanying balance sheet of Power Efficiency Corporation as of
December 31, 2009 and the related statement of operations, changes in
stockholders’ equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We
conducted our audit 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 audit provides 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 Power Efficiency Corporation at
December 31, 2009 and the results of its operations and its cash flows for the
year then ended 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 has suffered recurring losses from operations and has a
working capital deficiency that raise substantial doubt about its ability to
continue as a going concern. Management’s plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Las
Vegas, Nevada
March 30,
2010
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors
Power
Efficiency Corporation
Las
Vegas, Nevada
We have
audited the accompanying balance sheet of Power Efficiency Corporation, (a
Delaware corporation) (the "Company") as of December 31, 2008, and the related
statements of operations, changes in stockholders' equity, and cash flows for
each of the year ended December 31, 2008. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the 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 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 Power Efficiency Corporation at
December 31, 2008 and the results of its operations and its cash flows for the
years ended December 31, 2008 in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations,
and the Company has experienced a deficiency of cash from
operations. These matters raise substantial doubt as to the Company's
ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
|
/s/Sobel
& Co., LLC
|
|
Certified
Public Accountants
|
March 30,
2009
Livingston,
New Jersey
POWER
EFFICIENCY CORPORATION
|
BALANCE SHEETS
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash
|
|
$ |
247,564 |
|
|
$ |
2,100,013 |
|
Accounts
receivable, net of allowance of $28,861 in 2009 and $26,082 in
2008
|
|
|
66,143 |
|
|
|
44,159 |
|
Inventories
|
|
|
281,253 |
|
|
|
246,020 |
|
Prepaid
expenses
|
|
|
36,437 |
|
|
|
47,165 |
|
Total
Current Assets
|
|
|
631,397 |
|
|
|
2,437,357 |
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, Net
|
|
|
86,533 |
|
|
|
144,967 |
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
26,914 |
|
|
|
38,206 |
|
Patents,
net
|
|
|
86,342 |
|
|
|
64,711 |
|
Goodwill
|
|
|
1,929,963 |
|
|
|
1,929,963 |
|
Total
Other Assets
|
|
|
2,043,219 |
|
|
|
2,032,880 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,761,149 |
|
|
$ |
4,615,204 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
722,195 |
|
|
$ |
555,789 |
|
Warrant
liability
|
|
|
828,827 |
|
|
|
- |
|
Total
Current Liabilities
|
|
|
1,551,022 |
|
|
|
555,789 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES:
|
|
|
|
|
|
|
|
|
Deferred
rent
|
|
|
8,918 |
|
|
|
12,668 |
|
Deferred
tax liability
|
|
|
399,567 |
|
|
|
- |
|
Total
Long-Term Liabilities
|
|
|
408,485 |
|
|
|
12,668 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
1,959,507 |
|
|
|
568,457 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
|
Series
B and Series C-1 Convertible Preferred Stock, $0.001 par value 10,000,000
shares authorized, 170,250 issued and outstanding in 2009 and 140,000
issued and outstanding in 2008
|
|
|
170 |
|
|
|
140 |
|
Common
stock, $0.001 par value, 140,000,000 shares authorized, 44,825,883 shares
issued and oustanding in 2009 and 43,255,441 shares issued and oustanding
in 2008
|
|
|
44,826 |
|
|
|
43,256 |
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
36,797,628 |
|
|
|
35,307,119 |
|
Accumulated
deficit
|
|
|
(36,040,982 |
) |
|
|
(31,303,768 |
) |
Total
Stockholders' Equity
|
|
|
801,642 |
|
|
|
4,046,747 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,761,149 |
|
|
$ |
4,615,204 |
|
|
|
|
|
|
|
|
|
|
See
notes to financial statements.
POWER
EFFICIENCY CORPORATION
|
STATEMENTS
OF OPERATIONS
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$ |
283,990 |
|
|
$ |
480,513 |
|
|
|
|
|
|
|
|
|
|
COMPONENTS
OF COST OF SALES:
|
|
|
|
|
|
|
|
|
Material,
labor and overhead
|
|
|
223,762 |
|
|
|
356,942 |
|
Inventory
obsolesence expense
|
|
|
- |
|
|
|
40,758 |
|
Total
Cost of Sales
|
|
|
223,762 |
|
|
|
397,700 |
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
60,228 |
|
|
|
82,813 |
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES:
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
2,649,733 |
|
|
|
3,032,733 |
|
Research
and development
|
|
|
953,004 |
|
|
|
1,016,158 |
|
Depreciation
and amortization
|
|
|
66,589 |
|
|
|
74,539 |
|
Total
Costs and Expenses
|
|
|
3,669,326 |
|
|
|
4,123,430 |
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(3,609,098 |
) |
|
|
(4,040,617 |
) |
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
15,294 |
|
|
|
104,684 |
|
Change
in fair value of warrant liability
|
|
|
(514,089 |
) |
|
|
- |
|
Total
Other Income (Expenses), Net
|
|
|
(498,795 |
) |
|
|
104,684 |
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE PROVISION FOR TAXES
|
|
|
(4,107,893 |
) |
|
|
(3,935,933 |
) |
|
|
|
|
|
|
|
|
|
PROVISION
FOR TAXES
|
|
|
(60,815 |
) |
|
|
(12,271 |
) |
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
|
(4,168,708 |
) |
|
|
(3,948,204 |
) |
|
|
|
|
|
|
|
|
|
DIVIDENDS
PAID OR PAYABLE ON SERIES B. SERIES C AND
|
|
|
|
|
|
|
|
|
SERIES
C-1 CONVERTIBLE PREFERRED STOCK
|
|
|
1,270,984 |
|
|
|
545,800 |
|
|
|
|
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO COMMON
|
|
|
|
|
|
|
|
|
SHAREHOLDERS
|
|
$ |
(5,439,692 |
) |
|
$ |
(4,494,004 |
) |
|
|
|
|
|
|
|
|
|
BASIC
AND FULLY DILUTED LOSS PER COMMON SHARE
|
|
$ |
(0.13 |
) |
|
$ |
(0.11 |
) |
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
43,390,464 |
|
|
|
40,909,504 |
|
|
|
|
|
|
|
|
|
|
See
notes to financial statements.
POWER
EFFICIENCY CORPORATION
|
STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY
|
YEAR
ENDED DECEMBER 31, 2009 AND 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Preferred Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance,
January 1, 2008
|
|
|
40,367,523 |
|
|
$ |
40,368 |
|
|
|
134,400 |
|
|
$ |
134 |
|
|
$ |
33,741,902 |
|
|
$ |
(26,809,764 |
) |
|
$ |
6,972,640 |
|
Issuance
of common stock
|
|
|
40,000 |
|
|
|
40 |
|
|
|
- |
|
|
|
- |
|
|
|
7,960 |
|
|
|
- |
|
|
|
8,000 |
|
Issuance
of preferred stock
|
|
|
- |
|
|
|
- |
|
|
|
5,600 |
|
|
|
6 |
|
|
|
279,994 |
|
|
|
- |
|
|
|
280,000 |
|
Common
stock dividends paid
|
|
|
2,729,000 |
|
|
|
2,729 |
|
|
|
- |
|
|
|
- |
|
|
|
543,071 |
|
|
|
(545,800 |
) |
|
|
- |
|
Common
stock issued upon exercise of options and warrants
|
|
|
118,918 |
|
|
|
119 |
|
|
|
- |
|
|
|
- |
|
|
|
(119 |
) |
|
|
- |
|
|
|
- |
|
Warrants
and options issued with common stock and debt and to employees and
consultants, including debt discount
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
765,504 |
|
|
|
- |
|
|
|
765,504 |
|
Expenses
related to issuance of preferred and common stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(31,193 |
) |
|
|
- |
|
|
|
(31,193 |
) |
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,948,204 |
) |
|
|
(3,948,204 |
) |
Balance,
December 31, 2008
|
|
|
43,255,441 |
|
|
|
43,256 |
|
|
|
140,000 |
|
|
|
140 |
|
|
|
35,307,119 |
|
|
|
(31,303,768 |
) |
|
|
4,046,747 |
|
Cumulative
effect of change in accounting for warrant liability
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,433,954 |
) |
|
|
1,052,099 |
|
|
|
(381,855 |
) |
Cumulative
effect of deferred tax provision
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(349,621 |
) |
|
|
(349,621 |
) |
Adjusted
opening balance, January 1, 2009
|
|
|
43,255,441 |
|
|
|
43,256 |
|
|
|
140,000 |
|
|
|
140 |
|
|
|
33,873,165 |
|
|
|
(30,601,290 |
) |
|
|
3,315,271 |
|
Issuance
of preferred stock
|
|
|
- |
|
|
|
- |
|
|
|
30,250 |
|
|
|
30 |
|
|
|
620,063 |
|
|
|
- |
|
|
|
620,093 |
|
Warrants
issued with preferred stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
657,024 |
|
|
|
- |
|
|
|
657,024 |
|
Preferred
stock dividends recognized on beneficial conversion features of preferred
stock issuances
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
589,907 |
|
|
|
(589,907 |
) |
|
|
- |
|
Expenses
related to issuances of preferred stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(27,181 |
) |
|
|
- |
|
|
|
(27,181 |
) |
Common
stock issued upon cashless exercise of options and
warrants
|
|
|
18,781 |
|
|
|
19 |
|
|
|
- |
|
|
|
- |
|
|
|
(19 |
) |
|
|
- |
|
|
|
- |
|
Warrants
and options issued to employees and consultants
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
405,143 |
|
|
|
- |
|
|
|
405,143 |
|
Preferred
stock dividends paid or payable in comon stock
|
|
|
1,551,661 |
|
|
|
1,551 |
|
|
|
- |
|
|
|
- |
|
|
|
679,526 |
|
|
|
(681,077 |
) |
|
|
- |
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,168,708 |
) |
|
|
(4,168,708 |
) |
Balance,
December 31, 2009
|
|
|
44,825,883 |
|
|
$ |
44,826 |
|
|
|
170,250 |
|
|
$ |
170 |
|
|
$ |
36,797,628 |
|
|
$ |
(36,040,982 |
) |
|
$ |
801,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to financial statements.
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
CASH
FLOWS PROVIDED BY (USED FOR):
|
|
|
|
|
|
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(4,168,708 |
) |
|
$ |
(3,948,204 |
) |
Adjustments
to reconcile net loss to net cash used for operating
activities:
|
|
|
|
|
|
|
|
|
Bad
debt expense
|
|
|
8,149 |
|
|
|
7,770 |
|
Inventory
obsolescense expense
|
|
|
- |
|
|
|
40,758 |
|
Depreciation
and amortization
|
|
|
66,589 |
|
|
|
74,539 |
|
Loss
on disposition of fixed assets
|
|
|
3,097 |
|
|
|
- |
|
Warrants
and options issued in connection with services from vendors and to
employees and consultants
|
|
|
405,143 |
|
|
|
765,504 |
|
Change
in fair value of warrant liability
|
|
|
514,089 |
|
|
|
- |
|
Common
Stock issued for consulting services
|
|
|
- |
|
|
|
7,960 |
|
Deferred
tax provision
|
|
|
49,946 |
|
|
|
- |
|
Changes
in certain assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(30,133 |
) |
|
|
57,323 |
|
Inventory
|
|
|
(35,233 |
) |
|
|
(155,016 |
) |
Prepaid
expenses
|
|
|
10,728 |
|
|
|
(5,869 |
) |
Deposits
|
|
|
11,292 |
|
|
|
84,057 |
|
Accounts
payable and accrued expenses
|
|
|
166,405 |
|
|
|
(30,669 |
) |
Customer
deposits
|
|
|
- |
|
|
|
(1,605 |
) |
Deferred
rent
|
|
|
(3,750 |
) |
|
|
605 |
|
Net
Cash Used for Operating Activities
|
|
|
(3,002,386 |
) |
|
|
(3,102,847 |
) |
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Costs
related to patent applications
|
|
|
(24,174 |
) |
|
|
(27,507 |
) |
Purchase
of property, equipment and other assets
|
|
|
(9,601 |
) |
|
|
(104,857 |
) |
Sale
of property, equipment and other assets
|
|
|
893 |
|
|
|
- |
|
Net
Cash Used for Investing Activities
|
|
|
(32,882 |
) |
|
|
(132,364 |
) |
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of equity securities, net of costs
|
|
|
1,182,819 |
|
|
|
248,846 |
|
Net
Cash Provided by Financing Activities
|
|
|
1,182,819 |
|
|
|
248,846 |
|
|
|
|
|
|
|
|
|
|
DECREASE
IN CASH
|
|
|
(1,852,449 |
) |
|
|
(2,986,365 |
) |
|
|
|
|
|
|
|
|
|
CASH
|
|
|
|
|
|
|
|
|
Beginning
of year
|
|
|
2,100,013 |
|
|
|
5,086,378 |
|
|
|
|
|
|
|
|
|
|
End
of year
|
|
$ |
247,564 |
|
|
$ |
2,100,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to financial
statements.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND 2008
|
NOTE 1 - NATURE OF BUSINESS:
Power
Efficiency Corporation ("Power Efficiency" and/or the "Company"), is
incorporated in Delaware. Power Efficiency designs, develops, markets
and sells proprietary solid state electrical devices designed to reduce energy
consumption in alternating current induction motors. Alternating
current induction motors are commonly found in industrial and commercial
facilities throughout the world. The Company currently has one
principal and proprietary product: the three phase Motor Efficiency Controller,
which is used in industrial and commercial applications, such as rock crushers,
granulators, and escalators. Additionally, the Company has developed
a digital single phase controller in preparation for working with Original
Equipment Manufacturers (“OEMs”) to incorporate the technology into their
equipment.
The
Company's primary customers have been OEMs and commercial accounts located
throughout the United States of America and various countries.
Power
Efficiency formed Design Efficient Energy Services, LLC, a Delaware limited
liability company. This entity was formed to obtain energy grants and
rebates for customers of the Company from state governmental
bodies. Design Efficient Energy Services, LLC has been inactive since
inception.
The
accompanying financial statements have been prepared assuming the Company is a
going concern, which assumption contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The
Company has suffered recurring losses from operations, and the Company
experienced a $3,002,386 deficiency of cash from operations in 2009 and lacks sufficient
liquidity to continue its operations.
These
factors raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amount of liabilities that might be necessary should the Company
be unable to continue in existence. Continuation of the Company as a
going concern is dependent upon achieving profitable
operations. Management's plans to achieve profitability include
developing new products, obtaining new customers and increasing sales to
existing customers. Management is seeking to raise additional capital
through equity issuance, debt financing or other types of
financing. However, there are no assurances that sufficient capital
will be raised. If we are unable to obtain it on reasonable terms, we
would be forced to restructure, file for bankruptcy or cease
operations.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use
of Estimates:
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 may differ from those
estimates.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
Inventories:
Inventories
are valued at the lower of cost or market using the first-in, first-out cost
flow assumption. The Company reviews inventory for impairments to net
realizable value whenever circumstances arise. Such circumstances may
include, but are not limited to, the discontinuation of a product line or
re-engineering certain components making certain parts
obsolete. Management has determined a reserve for inventory
obsolescence was not necessary at December 31, 2009 or 2008.
As of
December 31, inventories are comprised as follows:
|
|
2009
|
|
|
2008
|
|
Raw
materials
|
|
$ |
175,806 |
|
|
$ |
178,698 |
|
Finished
Goods
|
|
|
105,447 |
|
|
|
67,322 |
|
Inventories
|
|
$ |
281,253 |
|
|
$ |
246,020 |
|
Accounts
Receivable:
The
Company carries its accounts receivable at cost less an allowance for doubtful
accounts and returns. On a periodic basis, the Company evaluates its
accounts receivable and establishes an allowance for doubtful accounts, based on
a history of past write-offs and collections and current credit
conditions. The Company recorded an allowance for doubtful accounts
of $28,861 and $26,082 as of December 31, 2009 and 2008,
respectively.
Research
and Development:
Research
and development expenditures are charged to expense as incurred.
Property,
Equipment and Depreciation:
Property
and equipment are stated at cost. Maintenance and repairs are
expensed as incurred, while betterments are capitalized. Depreciation
is computed using the straight-line method over the estimated useful lives of
the assets, which range from 3 to 7 years. Property and equipment are
reviewed for impairment whenever events or circumstances indicate that the
carrying amount of assets is not recoverable.
Website:
Website
development, maintenance and hosting costs are charged to expense as
incurred.
Shipping
and Handling Costs:
The
Company bills customers for freight. Actual costs for shipping and
handling are included as a component of cost of sales.
Patents:
Costs
associated with applying for U.S. patents based upon technology developed by the
Company are capitalized. At the time the patented technologies are
used in the business, the asset will be amortized on a straight line basis, over
the remaining term of the patent. If no patent is issued, these costs
will be expensed in the period when it is determined that no patent will be
issued.
Deferred
Rent:
The
Company accounts for rent expense on a straight-line basis for financial
reporting purposes. The difference between cash payments and rent
expense is included in deferred rent.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
Fair
Value Measurements:
We
measure fair value in accordance with FASB ASC 820-10, Fair Value Measurements and
Disclosures (prior
authoritative literature: FASB SFAS No. 157, Fair Value Measurements,
issued September 2006) (“FASB ASC 820-10
(SFAS 157)”). FASB ASC 820-10 (SFAS No. 157)
emphasizes that fair value is a market-based measurement, not an entity-specific
measurement. Therefore, a fair value measurement should be determined based on
the assumptions that market participants would use in pricing the asset or
liability. As a basis for considering market participant assumptions in fair
value measurements, FASB ASC 820-10 (SFAS No. 157) establishes a fair value
hierarchy that distinguishes between market participant assumptions based on
market data obtained from sources independent of the reporting entity
(observable inputs that are classified within Levels 1 and 2 of the hierarchy)
and the reporting entity’s own assumptions about market participant assumptions
(unobservable inputs classified within Level 3 of the hierarchy). The Company
has applied FASB ASC 820-10 (SFAS 157) to recognize the liability related to its
derivative instruments at fair value and to determine fair value for purposes of
testing goodwill for impairment.
Level 1
inputs utilize quoted prices (unadjusted) in active markets for identical
assets or liabilities. Level 2 inputs are inputs other than quoted prices
included in Level 1 that are observable for the asset or liability, either
directly or indirectly. Level 2 inputs may include quoted prices for similar
assets and liabilities in active markets, as well as inputs that are observable
for the asset or liability (other than quoted prices), such as interest rates
and yield curves that are observable at commonly quoted intervals. Level 3
inputs are unobservable inputs for the asset or liability, which is typically
based on an entity’s own assumptions about market participants’ assumptions, as
there is little, if any, related market activity. In instances where the
determination of the fair value measurement is based on inputs from different
levels of the fair value hierarchy, the level in the fair value hierarchy within
which the entire fair value measurement falls is based on the lowest level input
that is significant to the fair value measurement in its entirety. The Company’s
assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgment, and considers factors specific to
the asset or liability.
Liabilities
measured at fair value on a recurring basis include warrant liabilities
resulting from an equity financing in 2005 (see Note 10). In
accordance with FASB ASC 820-10 (SFAS 157), the warrant liabilities are being
remeasured to fair value each quarter until they all expire. The
warrants are valued using the Black-Scholes option pricing model, using
observable and unobservable assumptions (Level 3) consistent with our
application of FASB ASC 718 (SFAS 123(R)).
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
Revenue
Recognition:
Revenue
from product sales is recognized when pervasive evidence of an arrangement
exists, delivery has occurred, the price to the buyer is fixed or determinable,
and collectability is reasonably assured. Returns and other sales
adjustments (warranty accruals, discounts and shipping credits) are provided for
in the same period the related sales are recorded.
Loss
Per Common Share:
Loss per
common share is determined by dividing net loss available to common stockholders
by the weighted average number of common shares outstanding during the
year. Diluted loss per common share is equivalent to basic loss per
common share and is presented on the statement of operations.
Accounting
for Stock Based Compensation:
The
Company accounts for employee stock options as compensation expense, in
accordance with FASB ASC 718, Share-Based Payments (Prior authoritative
literature: FASB SFAS No. 123(R), Share-Based Payments (“SFAS 123(R)”)). FASB ASC 718
(SFAS 123(R)) requires companies to expense the value of all employee stock
options and similar awards. In computing the impact, the fair value of each
option is estimated on the date of grant based on the Black-Scholes options
pricing model utilizing certain assumptions for a risk free interest rate;
volatility; and expected remaining lives of the awards. The
assumptions used in calculating the fair value of share-based payment awards
represent management's best estimates, but these estimates involve inherent
uncertainties and the application of management judgment. As a
result, if factors change and the Company uses different assumptions, the
Company’s stock-based compensation expense could be materially different in the
future. In addition, the Company is required to estimate the expected forfeiture
rate and only recognize expense for those shares expected to vest. In
estimating the Company’s forfeiture rate, the Company analyzed its historical
forfeiture rate, the remaining lives of unvested options, and the amount of
vested options as a percentage of total options outstanding. If the
Company’s actual forfeiture rate is materially different from its estimate, or
if the Company reevaluates the forfeiture rate in the future, the stock-based
compensation expense could be materially different from what we have recorded in
the current period. The impact of applying FASB ASC 718 (SFAS
123(R)) approximated $405,000 and $766,000 in compensation expense during
the years ended December 31, 2009 and 2008, respectively. Such
amounts are included in research and development expenses and selling,
general and administrative expense on the statement of
operations. The Company issues new authorized, unissued shares upon
exercise of stock options.
Product
Warranties:
The
Company warranties its products for two years. Estimated product
warranty expenses are accrued in cost of sales at the time the related sale is
recognized. Estimates of warranty expenses are based primarily on historical
warranty claim experience. Warranty expenses include accruals for basic
warranties for products sold. While management believes our estimates
are reasonable, an increase or decrease in submitted warranty claims could
affect warranty expense and the related current and future
liability.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
Provision
for Income Taxes:
The
Company utilizes the asset and liability method of accounting for income taxes
pursuant to FASB ASC 740 Accounting for Income Taxes (Prior
authoritative literature FASB SFAS No. 109, Accounting for Income Taxes (“SFAS
109”)), which requires the
recognition of deferred tax assets and liabilities for both the expected future
tax impact of differences between the financial statement and tax basis of
assets and liabilities, and for the expected future tax benefit to be derived
from tax loss and tax credit carryforwards. FASB ASC 740 (SFAS 109)
additionally requires the establishment of a valuation allowance to reflect the
likelihood of realization of deferred tax assets. We have reported
net operating losses for consecutive years, and do not have projected taxable
income in the near future. This significant evidence causes our
management to believe a full valuation allowance should be recorded against the
deferred tax assets.
Goodwill:
FASB ASC
350, Goodwill and Other
Intangible Assets (Prior authoritative literature:
FASB SFAS No. 142, Goodwill and Other Intangible
Assets (“SFAS 142”), requires that goodwill shall not be
amortized. At a minimum, goodwill is tested for impairment, on an
annual basis by the Company, or when certain events indicate a possible
impairment, utilizing a two-step test, as described in FASB ASC 350 (SFAS
142). A significant impairment could have a material adverse effect
on our financial condition and results of operations. No impairment
charges were recorded in 2009 or 2008.
The first
part of the test is to compare the Company’s fair market value to the book value
of the Company as of the date of the test. If the fair market value
of the Company is greater than the book value, no impairment exists as of the
date of the test. However, if book value exceeds fair market value,
the Company must perform part two of the test, which involves recalculating the
implied fair value of goodwill by repeating the acquisition analysis that was
originally used to calculate goodwill, using purchase accounting as if the
acquisition happened on the date of the test, to calculate the implied fair
value of goodwill as of the date of the test.
Advertising:
Advertising
costs are expensed as incurred. Advertising expenses were $4,553 and
$48,987 for the years ended December 31, 2009 and 2008,
respectively.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
New
Accounting Pronouncements:
In
October 2009, the Financial Accounting Standards Board issued Accounting
Standards Update 2009-13, “Revenue Recognition (Topic 605) Multiple-Deliverable
Revenue Arrangements, a consensus of the FASB Emerging Issues Task Force (“ASU
2009-13”). ASU 2009-13 amends existing accounting guidance for
separating consideration in multiple-deliverable arrangements. ASU
2009-13 establishes a selling price hierarchy for determining the selling price
of a deliverable. The selling price used for each deliverable will be
based on vendor-specific objective evidence if available, third-party evidence
if vendor-specific evidence is not available, or estimated selling price if
neither vendor-specific evidence nor third-party evidence is
available. ASU 2009-13 eliminates residual method of allocation and
requires that arrangement consideration be allocated at the inception of the
arrangement to all deliverables using the “relative selling price
method.” The relative selling price method allocates any discount in
the arrangement proportionately to each deliverable on the basis of each
deliverable’s selling price. ASU 2009-13 requires that a vendor
determine its best estimate of selling price in a manner that is consistent with
that used to determine the price to sell the deliverable on a stand-alone
basis. ASU 2009-13 is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010, with earlier adoption permitted. We have not yet
determined the impact of the adoption of ASU 2009-13 on our consolidated
financial statements.
In
January 2010, the FASB issued accounting standards update (ASU) No. 2010-06,
Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about
Fair Value Measurements (ASU No. 2010-06). ASU No. 2010-06 requires: (1) fair
value disclosures of assets and liabilities by class; (2) disclosures about
significant transfers in and out of Levels 1 and 2 on the fair value hierarchy,
in addition to Level 3; (3) purchases, sales, issuances and settlements be
disclosed on gross basis on the reconciliation of beginning and ending balances
of Level 3 assets and liabilities; and (4) disclosures about valuation methods
and inputs used to measure the fair value of Level 2 assets and liabilities. ASU
No. 2010-06 becomes effective for the first financial reporting period beginning
after December 15, 2009, except for disclosures about purchases, sales,
issuances and settlements of Level 3 assets and liabilities which will be
effective for fiscal years beginning after December 15, 2010. We are currently
assessing what impact, if any, ASU No. 2010-06 will have on our fair value
disclosures; however, we do not expect the adoption of the guidance provided in
this codification update to have any material impact on our consolidated
financial statements.
Financial
Statement Reclassifications:
Certain
reclassifications have been made to the 2008 financial statements in order for
them to conform to the 2009 financial statement presentation.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND 2008
|
NOTE 4 - PREPAID EXPENSES:
As of
December 31, prepaid expenses assets are comprised as follows:
|
|
2009
|
|
|
2008
|
|
Prepaid
insurance
|
|
$ |
5,634 |
|
|
$ |
10,192 |
|
Other
prepaid expenses
|
|
|
30,803 |
|
|
|
36,973 |
|
Prepaid
expenses
|
|
$ |
36,437 |
|
|
$ |
47,165 |
|
NOTE 5 - PROPERTY AND EQUIPMENT:
At
December 31, property and equipment is comprised as follows:
|
|
2009
|
|
|
2008
|
|
Machinery
and equipment
|
|
$ |
205,797 |
|
|
$ |
253,976 |
|
Office
furniture and equipment
|
|
|
20,113 |
|
|
|
20,113 |
|
|
|
|
225,910 |
|
|
|
274,089 |
|
Less: Accumulated
depreciation
|
|
|
139,377 |
|
|
|
129,122 |
|
Property
and equipment, net
|
|
$ |
86,533 |
|
|
$ |
144,967 |
|
Depreciation
for the years ended December 31, 2009 and 2008 amounted to $64,045 and $71,996,
respectively.
In
accordance with FASB ASC 350, Goodwill and Other Intangible
Assets (Prior
authoritative literature: FASB SFAS No. 142, Goodwill and Other Intangible
Assets (“SFAS 142”), previously recognized goodwill was tested by
management for impairment during 2009 and 2008 utilizing a two-step
test. At a minimum, an annual goodwill impairment test is required,
or when certain events indicate a possible impairment.
The first
part of the test is to compare the Company’s fair market value to the book value
of the Company). If the fair market value of the Company is greater
than the book value, no impairment exists as of the date of the
test. However, if book value exceeds fair market value, the Company
must perform part two of the test, which involves recalculating the implied fair
value of goodwill by repeating the acquisition analysis that was originally used
to calculate goodwill, using purchase accounting as if the acquisition happened
on the date of the test, to calculate the implied fair value of goodwill as of
the date of the test.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
The
Company has no accumulated impairment losses on goodwill. The
Company’s impairment analysis is performed on December 31 each year, on the
Company’s single reporting unit. Using the Company’s market
capitalization (based on Level 1 inputs), management determined that the
estimated fair market value substantially exceeded the company’s book
value as of December 31, 2009 and 2008. Based on this, no impairment
exists as of December 31, 2009 and 2008.
NOTE 7 - INTANGIBLE ASSETS:
Intangible
assets subject to amortization consist of the following at December
31:
|
|
2009
|
|
|
2008
|
|
Patents
|
|
$ |
101,283 |
|
|
$ |
77,109 |
|
Less:
Accumulated amortization
|
|
|
14,941 |
|
|
|
12,398 |
|
Intangible
Assets, Net
|
|
$ |
86,342 |
|
|
$ |
64,711 |
|
Amortization
expense in 2009 and 2008 amounted to $2,542 for each year.
During
2009 and 2008, the Company capitalized approximately $24,000 and $28,000 in
expenses related to patent filings, respectively. The Company will
begin amortizing these costs over the life of the patent, once the patented
technologies are used in the business.
Amortization
expense expected in the succeeding five years for the Company’s existing patents
is as follows:
2010
|
|
$ |
2,542 |
|
2011
|
|
|
2,542 |
|
2012
|
|
|
2,542 |
|
2013
|
|
|
2,542 |
|
2014
|
|
|
2,542 |
|
Thereafter
|
|
|
73,632 |
|
|
|
$ |
86,342 |
|
NOTE 8 - CONCENTRATIONS OF CREDIT RISKS:
Financial
instruments which potentially subject the Company to concentrations of credit
risk consist primarily of cash and temporary cash investments and accounts
receivable.
The
Company maintains cash balances with commercial banks which at times may be in
excess of the insured limits.
Sales and
accounts receivable currently are from a relatively small number of customers of
the Company's products. The Company closely monitors extensions of
credit.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
Four
customers accounted for approximately 71% of 2009 sales and 79% of accounts
receivable at December 31, 2009. One of these customers accounted for
49% of 2009 sales and 42% of accounts receivable at December 31, 2009. Four
customers accounted for approximately 82% of 2008 sales and 21% of accounts
receivable at December 31, 2008. One of these customers accounted for
60% of 2008 sales and 10% of accounts receivable at December 31,
2008.
International
sales as a percentage of total revenues were 1% and 1% for each of the years
ended December 31, 2009 and 2008.
NOTE 9 - PROVISION FOR TAXES:
The
income tax provision is summarized as follows:
|
|
Year Ended
December 31,
2009
|
|
|
Year Ended
December 31,
2008
|
|
Current
|
|
|
|
|
|
|
Federal
|
|
$ |
- |
|
|
$ |
- |
|
State
|
|
|
10,869 |
|
|
|
12,271 |
|
Total
current
|
|
|
10,869 |
|
|
|
12,271 |
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
Federal
|
|
|
48,308 |
|
|
|
- |
|
State
|
|
|
1,638 |
|
|
|
- |
|
Total
deferred
|
|
|
49,946 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total
tax expense
|
|
$ |
60,815 |
|
|
$ |
12,271 |
|
Deferred
income taxes reflect the net tax effects of (a) temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes, and (b) operating losses and tax
credit carryforwards.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
The tax
effects of significant items comprising the Company’s deferred taxes are as
follows:
|
|
December 31,
2009
|
|
|
December 31,
2008
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
Accrued
expenses
|
|
$ |
10,145 |
|
|
$ |
9,169 |
|
Net
operating losses
|
|
|
10,351,295 |
|
|
|
9,998,009 |
|
Stock
based compensation
|
|
|
503,494 |
|
|
|
- |
|
Tax
credits
|
|
|
48,390 |
|
|
|
48,390 |
|
|
|
|
|
|
|
|
|
|
Total
deferred tax assets
|
|
|
10,913,324 |
|
|
|
10,055,568 |
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
(399,567 |
) |
|
|
(349,621 |
) |
Fixed
asset basis differences
|
|
|
(16,062 |
) |
|
|
(22,337 |
) |
|
|
|
|
|
|
|
|
|
Total
deferred tax liabilities
|
|
|
(415,629 |
) |
|
|
(371,958 |
) |
|
|
|
|
|
|
|
|
|
Preliminary
net deferred tax asset
|
|
|
10,497,695 |
|
|
|
9,683,610 |
|
Less: valuation
allowance for deferred tax asset
|
|
|
(10,897,262 |
) |
|
|
(9,683,610 |
) |
|
|
|
|
|
|
|
|
|
Net
deferred tax liability
|
|
$ |
(399,567 |
) |
|
$ |
- |
|
The
valuation allowance increased by $1.2 million during 2009 and $1.4 million
during 2008 primarily due to losses from current
operations. Approximately $349,000 of the change during 2009 was
related to the prior year tax provision error discussed in Note 18.
As of
December 31, 2009 and 2008, the Company has available, on a federal tax basis,
net operating loss carryforwards of approximately $29.5 million and $26.1
million, respectively. These net operating losses expire beginning
2020 through 2029.
FASB ASC
740-10 (SFAS 109) requires that the tax benefit of net operating losses,
temporary differences and credit carryforwards be recorded as an asset and that
management assesses whether realization is “more likely than
not.” Realization of the future tax benefits is dependent of the
Company’s ability to generate sufficient taxable income within the carryforward
period. Because of the Company’s history of operating losses,
management believes that the recognition of the deferred tax assets arising from
the above mentioned future tax benefits is currently not likely to be realized
and, accordingly, has provided a valuation allowance.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
A
reconciliation of the statutory tax rates for the years ended December 31 is as
follows:
|
|
2009
|
|
|
2008
|
|
Statutory
rate
|
|
|
(34 |
)% |
|
|
(34 |
)% |
State
income taxes – all states
|
|
|
(1 |
)% |
|
|
(1 |
)% |
Non-deductible
stock based compensation
|
|
|
2 |
% |
|
|
- |
% |
Change
in fair value of warrant liability
|
|
|
4 |
% |
|
|
- |
% |
True
up of deferred tax balances
|
|
|
9 |
% |
|
|
- |
% |
Change
in valuation allowance
|
|
|
21 |
% |
|
|
35 |
% |
|
|
|
|
|
|
|
|
|
Effective
tax rate
|
|
|
1 |
% |
|
|
- |
% |
The
Company accounts for uncertain tax positions under the provisions of FASB ASC
740-10 (FIN 48). The Company has not identified any uncertain tax
positions, nor does it believe it will have any material changes over the next
12 months. Any interest or penalties resulting from examinations will
be recognized as a component of the income tax provision. However,
since there are no unrecognized tax benefits as a result of the tax positions
taken, there are no accrued interest and penalties.
In
previous years, the Company did not recognize a deferred tax liability related
to its amortization of goodwill for tax purposes. The Company
reviewed and revised its tax provision to include this deferred tax liability as
of January 1, 2009 and for the year ended December 31, 2009. The
Company determined that the error was not material to prior years (see Note
18).
Warrant
activity during the years ended December 31, 2008 and 2009 follows:
|
|
Warrants
|
|
|
Average
Exercise Price
|
|
Warrants
outstanding at January 1, 2008
|
|
|
29,013,968 |
|
|
$ |
0.45 |
|
Issued
during 2008
|
|
|
1,280,000 |
|
|
|
0.44 |
|
Exercised
during 2008
|
|
|
(299,188 |
) |
|
|
0.20 |
|
Warrants
outstanding at December 31, 2008
|
|
|
29,994,780 |
|
|
|
0.45 |
|
Issued
during 2009
|
|
|
3,916,250 |
|
|
|
0.33 |
|
Canceled
or Expired in 2009
|
|
|
(2,523,561 |
) |
|
|
0.55 |
|
Warrants
outstanding at December 31, 2009
|
|
|
31,387,469 |
|
|
$ |
0.43 |
|
During
2009, the Company issued the following warrants: 1,235,000 warrants as
consulting fees to various consultants, which were valued at approximately
$175,000, and expensed in accordance with each warrant’s vesting schedule, as
selling, general and administrative expenses; 2,681,250 warrants to investors,
in connection with the Company’s private offerings of convertible preferred
stock (see Note 15), which were valued at approximately $590,000, of which
1,512,500 warrants valued at approximately $408,000 were classified in equity
and 1,168,750 warrants valued at approximately $182,000 were initially
classified as liabilities. Subsequent to the grant date and upon
modification, the 1,168,750 warrants were reclassified into paid-in capital at
their fair value totaling $248,680 on the dates of
reclassification.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
During
2008, the Company issued the following warrants: 1,000,000 warrants as
consulting fees to sales consultants, which were valued at approximately
$290,000. Because these warrants vest at the discretion of the CEO,
the Company did not recognize an expense for these warrants in 2009 or 2008;
280,000 warrants to investors, in connection with the Company’s private offering
of convertible preferred stock (see Note 15), which were valued at approximately
$90,160, and recorded as additional paid-in capital. During 2008, the
Company also expensed and included in selling general and administrative
expenses, $5,153 related to warrants, which vested during 2008. These
warrants were issued in 2007 as consulting fees to a sales
consultant.
The fair
value of each warrant is estimated on the date of grant based on the
Black-Scholes option pricing model utilizing certain assumptions for a risk free
interest rate; volatility; and expected remaining lives of the
awards. The assumptions used in calculating the fair value of
share-based payment awards represent management's best estimates, but these
estimates involve inherent uncertainties and the application of management
judgment. In addition, the Company is required to estimate the
expected forfeiture rate and only recognize expense for those shares expected to
vest. In estimating the Company’s forfeiture rate, the Company
analyzed its historical forfeiture rate, the remaining lives of unvested stock
warrants, and the amount of vested stock warrants as a percentage of total stock
warrants outstanding.
The fair
value of warrants granted is estimated on the date of grant based on the
weighted-average assumptions in the table below. The assumption for
the expected life is based on evaluations of historical and expected exercise
behavior. The risk-free interest rate is based on the U.S. Treasury
rates at the date of grant with maturity dates approximately equal to the
expected life at the grant date. The historical daily stock
volatility of the Company’s common stock (the Company’s only class of publically
traded stock) over the estimated life of the stock warrant is used as the basis
for the volatility assumption.
|
|
Years ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
Weighted
average risk-free rate
|
|
|
0.18%
- 2.70 |
% |
|
|
4.06
|
% |
Average
expected life in years*
|
|
|
3 |
|
|
|
3.5 |
|
Expected
dividends
|
|
None
|
|
|
None
|
|
Volatility
|
|
|
121%
- 209 |
% |
|
|
275 |
% |
Forfeiture
rate
|
|
|
46 |
% |
|
|
43 |
% |
|
*
|
The
remaining useful life of 0.52 years was used to calculate the value of
warrant liability as of December 31,
2009
|
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
Warrant
Liability:
On
January 1, 2009, the Company adopted FASB ASC 815, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock (Prior authoritative
literature: FASB EITF 07-5, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF
07-5”). The Company issued 5,696,591 warrants in connection
with a private offering of its common stock on July 8, 2005 and August 31,
2005. The proceeds attributable to the warrants, based on the fair
value of the warrants at the date of issuance, amounted to $1,433,954 and were
accounted for as a liability and valued in accordance with FASB ASC 815 (EITF
07-5) based on an evaluation of the terms and conditions related to the warrant
agreements, which provide that the exercise price of these warrants shall be
reduced, if through a subsequent financing, the Company issues common stock
below the lowest per share purchase price of the offering. The
warrant liability was valued at $828,827 and $381,856 as of December 31, 2009
and January 1, 2009, respectively, resulting in non-cash losses in our statement
of operations of $514,089 (including the fair value adjustment of $67,118
relating to warrants reclassified to equity) for the year ended December 31,
2009. In adopting ASC 815 (EITF 07-5), the Company recorded a
$1,052,099 cumulative adjustment to opening accumulated deficit and a reduction
to paid-in capital of $1,433,954 on January 1, 2009. In each
subsequent period, the Company adjusted the warrant liability to equal the fair
value of the warrants at the balance sheet date. Changes in the fair
value of warrants classified as a liability are recognized in
earnings.
Also, on
August 12, 2009 and October 5, 2009, the Company issued 1,168,750 warrants to
purchase the Company’s common stock, in conjunction with its sale of Series C
Convertible Preferred Stock. The warrant agreements drafted for these
warrants inadvertently contained an anti-dilution provision, which required the
warrants to be classified as a liability. As a result, the Company
initially classified $181,562 as a warrant liability. The Company
reclassified these warrants to paid-in capital upon receiving consent from each
of the holders of these warrants to correct the warrant agreements to remove the
anti-dilution provision. The fair value of the warrants on the dates
of reclassification totaled $248,680, resulting in an additional non-cash loss
of $67,118 in our statement of operations for the year ended December 31,
2009. On December 11, 2009, the $248,680 was reclassified to paid-in
capital.
The
Company has estimated the fair value of its warrant liability using the
Black-Scholes option pricing model (Level 3 inputs) containing the following
assumptions: volatility 121%, risk-free rate 1.78%, term equivalent
to the remaining life of the warrants. The Company recorded a
non-cash expense related to these warrants of $514,089 for the year ended
December 31, 2009, which was recorded in other income (expense).
The
following reconciles the warrant liability for the nine months ended December
31, 2009:
Beginning
balance, January 1, 2009
|
|
$ |
381,856 |
|
Warrants
classified as liabilities in 2009
|
|
|
181,562 |
|
Warrants
reclassified to paid-in capital in 2009
|
|
|
(248,680 |
) |
Changes
in fair value
|
|
|
514,089 |
|
Ending
balance, December 31, 2009
|
|
$ |
828,827 |
|
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
NOTE 11 - STOCK OPTION PLAN:
Stock
Option Plan activity during the years ended December 31, 2008 and 2009
follows:
|
|
Shares
|
|
|
Average
Exercise Price
|
|
|
Aggregate
Intrinsic
Value*
|
|
Options
outstanding and exercisable at January 1, 2008
|
|
|
14,309,896 |
|
|
$ |
0.36 |
|
|
$ |
2,718,880 |
|
Granted
during 2008
|
|
|
1,095,000 |
|
|
|
0.50 |
|
|
|
|
|
Cancelled
during 2008
|
|
|
(1,825,000 |
) |
|
|
0.37 |
|
|
|
|
|
Options
outstanding and exercisable at December 31, 2008
|
|
|
13,579,896 |
|
|
$ |
0.37 |
|
|
$ |
- |
|
Granted
during 2009
|
|
|
4,450,000 |
|
|
|
0.27 |
|
|
|
|
|
Cancelled
during 2009
|
|
|
(485,000 |
) |
|
|
0.42 |
|
|
|
|
|
Exercised
during 2009**
|
|
|
(70,000 |
) |
|
|
0.30 |
|
|
|
7,700 |
|
Options
outstanding and exercisable at December 31, 2009
|
|
|
17,474,896 |
|
|
$ |
0.34 |
|
|
$ |
- |
|
* The
aggregate intrinsic value represents the amount by which the market price of the
Company’s common stock exceeds the average exercise price of outstanding options
on a specific date, multiplied by the amount of outstanding options on that
date. If the average exercise price on the specific date exceeds the
market price of the Company’s common stock, the intrinsic value is
$0.
** All
options were exercised under an approved cashless exercise
Weighted
average remaining contractual life at December 31, 2009, for all options is 7.69
years.
In 2000,
the Company adopted the 2000 Stock Option and Restricted Stock Plan (the "2000
Plan"). On July 16, 2009, the 2000 Plan was amended and
restated. The 2000 Plan, as restated and amended, provides for the
granting of options to purchase up to 25,000,000 shares of common
stock. 170,000 options have been exercised cashlessly, resulting in
the issuance of 78,781 common shares, to date. There are 17,474,896
options outstanding under the 2000 Plan as of December 31, 2009.
During
2009, the Company granted 4,450,000 stock options to directors and employees at
exercise prices approximating fair market value of the stock on the date of each
grant. Such issuances to directors and employees were valued at
$640,170, utilizing similar factors as described below. Stock options
issued to directors vest evenly per quarter during 2009. Stock
options issued to employees vest evenly over five years from the date of
issuance. Total stock options expensed during 2009, including stock
options granted in prior years which vested during the current year, totaled
$229,844, of which $26,172 was expensed and included in research and development
expenses, and $203,672 was expensed and included in selling, general and
administrative expenses. The fair market value of stock options
issued in 2009 that has not been expensed is $591,071, and will be expensed
evenly over the next four years, unless cancelled.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
During
2008, the Company granted 1,095,000 stock options to directors and employees at
exercise prices approximating fair market value of the stock on the date of each
grant. Such issuances to directors and employees were valued at
$237,110, utilizing similar factors as described below. Stock options
issued to directors vest evenly per quarter during 2009. Stock
options issued to employees vest evenly over five years from the date of
issuance. Total stock options expensed during 2009, including stock
options granted in prior years which vested during 2008, totaled $760,350, of
which a net reduction of $9,283 was recorded and included in research and
development expenses for options that were cancelled during the year, and
$769,633 was expensed and included in selling, general and administrative
expenses. The fair market value of stock options issued in 2008 that
has not been expensed is $136,282, and will be expensed evenly over the next
three years, unless cancelled.
In 1994,
the Company adopted a Stock Option Plan (the "1994 Plan"). The 1994
Plan provides for the granting of options to purchase up to 71,429 shares of
common stock. No options have been exercised to
date. There are no options outstanding under the 1994 Plan, and the
Company does not plan to issue any more options under this plan.
Share
Based Compensation Payments:
During
the year ended December 31, 2009, the Board of Directors authorized the net
issuance of 4,450,000 stock options to directors and
employees. During the year ended December 31, 2008, the Board of
Directors authorized the net issuance of 1,095,000 stock options to directors
and employees. The fair value of each option grant was estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for grants: average expected
volatility of 161% and 275% for the years ended December 31, 2009 and 2008,
respectively; average risk-free interest rate of 2.9% and 4.06% for the years
ended December 31, 2009 and 2008, respectively; expected remaining
lives of 10 years; no expected dividends for the years ended December 31, 2009
and 2008; and forfeiture rates of 46% and 43% for the years ended December 31,
2009 and 2008, respectively.
The
Company accounts for employee stock options as compensation expense, in
accordance with FASB ASC 718 (SFAS 123(R)). FASB ASC 718 (SFAS
123(R)) requires companies to expense the value of employee stock options and
similar awards over the requisite service period.
In
computing the impact, the fair value of each option is estimated on the date of
grant based on the Black-Scholes options pricing model utilizing certain
assumptions for a risk free interest rate; volatility; and expected remaining
lives of the awards. The assumptions used in calculating the fair
value of share-based payment awards represent management's best estimates, but
these estimates involve inherent uncertainties and the application of management
judgment. As a result, if factors change and the Company uses
different assumptions, the Company’s stock-based compensation expense could be
materially different in the future. In addition, the Company is required to
estimate the expected forfeiture rate and only recognize expense for those
shares expected to vest. In estimating the Company’s forfeiture rate,
the Company analyzed its historical forfeiture rate, the remaining lives of
unvested options, and the amount of vested options as a percentage of total
options outstanding. If the Company’s actual forfeiture rate is
materially different from its estimate, or if the Company reevaluates the
forfeiture rate in the future, the stock-based compensation expense could be
materially different from what we have recorded in the current
period.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
NOTE 12 - COMMITMENTS AND CONTINGENCIES:
Leases:
The
Company leases office space, a manufacturing and warehousing facility, and a
research and development facility in Las Vegas, Nevada. The office
space lease includes a payment of $11,292 per month, plus annual increases of 3%
per year, which includes all cleaning and utilities, except phone and internet
service. The term of the lease is five years.
The
Company also leases a manufacturing and warehouse facility and a research and
development facility. The lease includes a payment of $3,600, plus
common area maintenance charges, per month. The term of the lease is
three years and one month.
Minimum
future rentals are as follows:
Year
|
|
|
|
2010
|
|
|
177,091 |
|
2011
|
|
|
12,688 |
|
|
|
$ |
189,779 |
|
Rent
expense, including base rent and additional charges, for the year ended December
31, 2009 and 2008 was $205,160 and $212,742, respectively.
Patent
License Agreements:
The
Company was an exclusive licensee pursuant to a patent license agreement of
certain power factor controller technology owned by the United States, as
represented by the National Aeronautics and Space Administration
(NASA). This license agreement covered the United States of America
and its territories and possessions on an exclusive basis and foreign sales on a
non-exclusive basis. Such license agreement did not require the
Company to pay royalties to NASA in connection with the Company's sale of
products employing technology utilizing the licensed patents. The
agreement terminated on December 16, 2002 upon the expiration of all of the
licensed patents.
The
Company filed and received its own patent (No. 5.821.726) on the Company’s
analog technology, that expires in 2017 that management believes will protect
the Company's intellectual property position. The Company has also
filed three utility patents in new inventions associated with the development of
its digital products, which are all pending approval with the U.S. Patent and
Trademark Office. The costs associated with these patents are
capitalized and presented in the balance sheet.
Software
User License Agreements:
In 2009,
the Company entered into an agreement to purchase software licenses for
accounting, manufacturing and CRM software. The commitment of the
software license agreement is approximately $28,000 in 2010 and $27,000 in
2009. These amounts will be/are included net of amortization in
prepaid expenses on the face of the balance sheet.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
Litigation:
The
Company is currently involved in a lawsuit against one of its former directors,
who was also an employee of the Company, as well as the company the former
director formed (collectively, the “Defendants”). The Company filed
this action against the Defendants for misappropriation of trade secrets, false
advertising, defamation/libel and other claims primarily arising from the
Defendant’s use of the Company’s confidential and proprietary information in the
development and marketing of motor control products. The Company
seeks a temporary retraining order, preliminary injunction, permanent
injunction, damages, exemplary damages, attorneys’ fees and costs against the
Defendants. The Company’s original complaint was filed on November
25, 2008, and its amended complaint was filed on August 6, 2009, in the U.S.
District Court, District of Nevada.
Subcontractors:
On
September 6, 2007, the Company entered into a manufacturing service agreement
with Sanima-Sci Corporation (“Sanmina-Sci”) for the production of digital units
and digital circuit boards. Pursuant to this agreement, the Company
will purchase an amount of digital units, subject to certain minimum quantities,
from Sanmina-Sci equal to an initial firm order agreed upon by the Company and
Sanmina-Sci and subsequent nine-month requirements forecasts. The
initial term of the contract is one year, and upon expiration of the initial
term, the contract will continue on a year to year basis until one party gives
notice to terminate. At the present time the
Company is not able to determine if the actual purchases will be in excess of
these minimum commitments, or if any potential liability will be
incurred. The Company had approximately $170,000 and $340,000 in open
purchase orders with this subcontractor as of December 31, 2009 and 2008,
respectively.
Investment
Advisory Agreements:
On March
11, 2009, the Company entered into a consulting agreement with one of the
Company’s directors. The agreement is for a term of 12 months and
calls for the director to provide investment and marketing related services for
the Company. The director will receive $3,000 per month and 360,000
warrants to purchase the Company’s common stock, at an exercise price of $0.11
per share, under the terms of this agreement (see Note 10). The
warrants vest equally over the term of the agreement.
On August
17, 2009, the Company entered into a consulting agreement with an investor
relations consulting firm. This agreement calls for the consultant to
perform investor relations and public relations services for the
Company. For its services, the Company has agreed to pay the
consultant a monthly retainer of $10,000, plus 450,000 warrants to purchase the
Company’s common stock, at an exercise price of $0.19 per share (see Note
10). The term of the consulting agreement is initially for 12 months,
can be extended at the end of the term, and can be terminated immediately upon
written notice by either party. The warrants vest equally over the
term of the agreement.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
Employment
Agreements:
On June
1, 2005, the Company entered into an employment and compensation agreement with
Steven Strasser, the Company’s Chief Executive Officer. The agreement
is for a term of five years, with a base salary for the first year of the
agreement of $275,000 with annual increases of at least 5% of the current year’s
base salary and bonuses at the discretion of the compensation committee of the
board of directors. During the first year of the Agreement, an
amount equal to $215,000 of the base salary shall be paid by grant of stock
options under the Company’s 2000 Stock Option and Restricted Stock Plan to
purchase 1,612,500 shares of the Company’s common stock, vesting in equal
quarterly installments over the year ending June 1, 2006, and the remaining
$60,000 of the base salary is to be paid-in cash. The agreement with
this Chief Executive Officer also provides, among other things, for
reimbursement of certain business expenses and for certain payments to be made
to this Chief Executive Officer in the event of a change in
control. This Chief Executive Officer also received 1,818,180
incentive stock options in June 2005, which will vest over a five year period
and have an exercise price of $0.22, and 1,181,820 non-qualified stock options
which will vest over a five year period and have an exercise price of $0.20 (see
Note 11). The agreement also provides for certain non-competition and
nondisclosure covenants. As of December 31, 2009, a total of
4,462,500 of the stock options are vested, and 150,000 stock options are
unvested, and all remain outstanding. Of these stock options,
2,572,729 expire on May 31, 2010, and 2,039,771 expire on May 31,
2015.
On June
1, 2005, the Company entered into an employment and compensation agreement with
John Lackland, the Company’s Chief Financial Officer. The agreement
is for a term of five years, with a base salary for the first year of the
agreement of $175,000 with annual increases of at least 5% of the current year’s
base salary and bonuses at the discretion of the compensation committee of the
board of directors. During the first year of the Agreement, an
amount equal to $55,000 of the base salary shall be paid by grant of stock
options under the Company’s 2000 Stock Option and Restricted Stock Plan to
purchase 412,500 shares of the Company’s common stock, vesting in equal
quarterly installments over the year ending June 1, 2006, and the remaining
$120,000 of the base salary is to be paid-in cash. The agreement with
this Chief Financial Officer also provides, among other things, for
reimbursement of certain business expenses and for certain payments to be made
to this Chief Financial Officer in the event of a change in
control. This Chief Financial Officer also received 1,733,750
incentive stock options in June 2005, which will vest over a five year period
and have an exercise price of $0.20, and 66,250 non-qualified stock options
which vested on June 1, 2006 and have an exercise price of $0.20 (see Note 11).
The agreement also provides for certain non-competition and nondisclosure
covenants. As of December 31, 2009, a total of 2,122,500 of the stock
options are vested, and 90,000 stock options are unvested, and all remain
outstanding. All of these stock options expire on May 31,
2015.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
Consulting
Agreements:
On June
9, 2005, the Company entered into a consulting agreement with an advisor to
serve as the Company’s Senior Technical Advisor. The term of this
agreement is for 24 months and calls for the advisor to assist the Company in
digitizing the Company’s technology. For his services, the Company
agreed to issue the advisor 400,000 options, vesting quarterly from the date of
the agreement (see Note 11). In addition, the Company will reimburse
all reasonable and necessary expenses incurred by the advisor. In the
event that the Company’s annual sales from digital products reaches $5,000,000,
the Company will pay the advisor a $100,000 one time bonus. The
agreement contains confidentiality and non-competition
provisions. This agreement can be terminated in 90 days by either
party by written notices. On June 6, 2007, the Company renewed the
agreement with the advisor. In connection with the renewal, the
Company granted the advisor 1,000,000 warrants (see Note 10), which vest upon
the approval of certain patents created by the advisor, by the US Patent Office,
or the buy-out of the Company, whichever occurs first. All of the
1,000,000 warrants remain unvested as of December 31, 2009 and
2008.
On
January 7, 2008, the Company entered into a consulting agreement with a European
sales and marketing consultant. This agreement was terminated on
September 1, 2008 and all obligations have been satisfied in full and all stock
options issued to the consultant were cancelled.
On
October 8, 2008 and October 27, 2008, the Company entered into two business
advisory agreements with two advisors. The agreements call for each
of the advisors to perform introductory and business development services for
the Company. For their services, the Company has agreed to grant each
advisor 250,000 common stock warrants (see Note 10), 50,000 of which will vest
upon the commencement of testing of the Company’s technology as a
direct result of the advisors efforts, and the remaining 200,000 will vest upon
the purchase of the Company’s products or an agreement to license the Company’s
technology as a direct result of the advisors’ efforts. As of
December 31, 2009, these agreements have been terminated and 50,000 of the
granted warrants have been vested. The remaining warrants were
cancelled.
Other agreements:
On
January 23, 2008, the Company signed an efficiency aggregation contract with San
Diego Gas & Electric Company (“SDG&E”). Under the terms of
this contract, SDG&E will pay the Company $0.14 per kWh of energy saved in
the first year of operation of the MEC, for new installations of the MEC in
SDG&E’s service area. Payment to the Company is subject to
certain inspections, approvals and time restrictions. The term of
this contract is for 5 years, and either party may terminate this contract upon
written notice. As of the date of this report, Company has not
received any payments under this contract.
NOTE 13 - RELATED PARTY TRANSACTIONS:
On
December 11, 2009, the Company entered into a financing transaction in which it
issued 8,750 units, each unit consisting of one share of the Company’s Series
C-1 Preferred Stock and a warrant to purchase up to 50 shares of the Company’s
common stock, in exchange for 8,750 shares of its Series C Preferred Stock in
accordance with the terms of the Series C Preferred Stock. In this
transaction, Steven Strasser, the Company’s CEO, exchanged 6,250 shares, Kenneth
Dickey, a Director of the Company, exchanged 1,250 shares, and Scott Johnson,
the Company’s COO, exchanged 1,250 units shares (See Note 15).
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
On August
12, 2009, the Company entered into a financing transaction in which it issued
8,750 units, each unit consisting of one share of the Company’s Series C
Preferred Stock and a warrant to purchase up to 50 shares of the Company’s
common stock for $350,000 in cash. In this transaction, Steven
Strasser, the Company’s CEO, purchased 6,250 units for $250,000 in cash, Kenneth
Dickey, a Director of the Company, purchased 1,250 for $50,000 in cash, and
Scott Johnson, the Company’s COO, purchased 1,250 units for $50,000 in cash (See
Note 15).
On
January 21, 2008, the Company entered into a financing transaction in which it
issued 5,600 units, each unit consisting of one share of the Company’s Series B
Preferred Stock and a warrant to purchase up to 50 shares of the Company’s
common stock to Steven Strasser, the Company’s Chief Executive Officer, for
$80,000 in cash (See Note 15).
NOTE 14 - SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
INFORMATION:
Cash paid
during the year ended December 31, for:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Income/franchise
taxes
|
|
$ |
10,869 |
|
|
$ |
12,271 |
|
Non-cash
investing and financing activities during the year ended December 31,
for:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Warrants
and options issued with common stock issued to employees and
consultants
|
|
$ |
405,143 |
|
|
$ |
765,504 |
|
Common
stock issued upon cashless exercise of options and
warrants
|
|
$ |
19 |
|
|
$ |
- |
|
Warrants
reclassified from liability to paid-in capital
|
|
$ |
248,680 |
|
|
$ |
- |
|
Exchange
of Series C Preferred Stock to Series C-1 Preferred Stock
|
|
$ |
753,438 |
|
|
$ |
- |
|
Preferred
stock dividend recognized for beneficial conversion features of preferred
stock issuances
|
|
$ |
589,907 |
|
|
$ |
- |
|
Preferred
stock dividends paid or payable in common stock
|
|
$ |
681,077 |
|
|
$ |
545,800 |
|
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
NOTE 15 - CONVERTIBLE PREFERRED STOCK:
On
December 11, 2009 and December 29, 2009, the Company issued and sold 30,250
units, each unit consisting of one share of the Company’s Series C-1 Preferred
Stock, par value $.001 per share, and 50 warrants to purchase shares of the
Company’s common stock at an exercise price of $0.40 per share, resulting in the
sale and issuance of an aggregate of 30,250 shares of Series C-1 Preferred Stock
and warrants to purchase, initially, up to 1,512,500 shares of the Company’s
common stock, with exercise prices equal to $0.40 per share, in a private
offering for an aggregate of $1,210,000, of which $275,000 was in cash, and
$935,000 was from the conversion of 23,375 shares of the Company’s Series C
Preferred Stock, and is recorded as a component of Stockholders’
Equity. The former Series C Preferred Stockholders retained their
original Series C warrants to purchase, initially, up to 1,168,750 shares of the
Company’s common stock, with exercise prices equal to $0.40 per share, that were
originally valued at approximately $182,000. The securities were
issued pursuant to Regulation D of the Securities Act of 1933. All of the
purchasers of Units were either officers, directors or pre-existing stockholders
of the Company. Each of these purchasers represented that they were
an “accredited investor” as such term is defined in Regulation D of the
Securities Act (See Note 13). Of the aggregate $1,210,000 invested, a
value of approximately $408,000 was allocated to the 1,512,500 Series C-1
warrants, and a value of approximately $249,000 was allocated to the 1,168,750
Series C warrants, and recorded as a component of paid-in
capital. The latter amount includes approximately $67,000 which
is attributable to the change in value of certain warrants classified as
liabilities.
Each
share of Series C-1 Preferred Stock is initially convertible into 133.33 shares
of the Company’s common stock, subject to adjustment under certain
circumstances. The Series C-1 Preferred Stock is convertible at the
option of the holder at any time. The Series C-1 Preferred Stock is
also subject to mandatory conversion in the event the average closing price of
the Company’s common stock for any ten day period equals or exceeds $1.00 per
share, such conversion to be effective on the trading day immediately following
such ten day period. In addition, the Series C-1 Preferred
stockholders had the option to exchange their Series C-1 Preferred Stock for
units of a subsequent financing of the Company through December 30, 2009, at no
additional cost. The Series C-1 Preferred Stock has a dividend equal
to 8% of the aggregate $1,210,000 stated value of the Series C-1 Preferred
Stock, payable annually in cash or stock, at the discretion of the Company’s
board of directors. Upon any liquidation, dissolution, or winding up
of the Company, whether voluntary or involuntary, before any distribution or
payment is made to the holders of any stock of the Company, the holders of
Series C-1 Stock are entitled to be paid out of the assets of the Company,
proportionally with
any other series of preferred stock, an amount per share of Series C-1 Stock
equal to the stated value (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares), plus all
accrued but unpaid dividends (whether declared or not) on such shares of Series
C-1 Stock for each share of Series C-1 Stock held by
them. The conversion of the Series C Preferred Stock into units sold
in the offering of Series C-1 Preferred Stock and the conversion feature of the
Series C-1 Preferred Stock at the time of issuance were determined to be
beneficial conversion features on December 11, 2009, the date of the
transaction. The Company recorded additional preferred stock
dividends of approximately $590,000 related to the beneficial conversion
feature.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
On August
12, 2009 and October 5, 2009, the Company issued and sold 23,375 units, each
unit consisting of one share of the Company’s Series C Preferred Stock, par
value $.001 per share, and 50 warrants to purchase shares of the Company’s
common stock at an exercise price of $0.40 per share, resulting in the sale and
issuance of an aggregate of 23,375 shares of Series C Preferred Stock and
warrants to purchase, initially, up to 1,168,750 shares of the Company’s common
stock, with exercise prices of $0.40 per share, in a private offering for
$935,000 in cash, and is recorded as a component of Stockholders’
Equity. The securities were issued pursuant to Regulation D of the
Securities Act of 1933. All of the purchasers of Units were either officers,
directors or pre-existing stockholders of the Company. Each of these
purchasers represented that they were an “accredited investor” as such term is
defined in Regulation D of the Securities Act (See Note 13). Of the
aggregate $935,000 invested, a value of approximately $182,000 was allocated to
the 1,168,750 warrants, and initially recorded as warrant
liabilities. Subsequent to the grant date and upon qualification,
these warrants were reclassified into paid-in capital at their fair value
totaling $248,680 on the dates of reclassification. All outstanding
shares of the Company’s Series C Preferred Stock were exchanged for the
Company’s Series C-1 Preferred Stock on December 11, 2009. No shares
of the Company’s Series C Preferred Stock were outstanding at December 31,
2009.
Each
share of Series C Preferred Stock was initially convertible into 100 shares of
the Company’s common stock, subject to adjustment under certain
circumstances. The Series C Preferred Stock was convertible at the
option of the holder at any time. The Series C Preferred Stock was
also subject to mandatory conversion in the event the average closing price of
the Company’s common stock for any ten day period equals or exceeds $1.00 per
share, such conversion to be effective on the trading day immediately following
such ten day period. In addition, the Series C Preferred stockholders
had the option to exchange their Series C Preferred Stock for units of a
subsequent financing of the Company through December 30, 2009, at no additional
cost. The Series C Preferred Stock had a dividend equal to 8% of the
stated value of the Series C Preferred Stock, payable annually in cash or stock,
at the discretion of the Company’s board of directors. Upon any
liquidation, dissolution, or winding up of the Company, whether voluntary or
involuntary, before any distribution or payment is made to the holders of any
stock of the Company, the holders of Series C Stock were entitled to be paid out
of the assets of the Company, proportionally with any other series of preferred
stock, an amount per share of Series C Stock equal to the stated value (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares), plus all accrued but unpaid dividends
(whether declared or not) on such shares of Series C Stock for each share
of Series C Stock held by them.
On
various dates from October 29, 2007 through January 21, 2008, the Company issued
and sold 140,000 units, each unit consisting of one share of the Company’s
Series B Preferred Stock, par value $.001 per share, and a warrant to purchase
50 shares of the Company’s common stock, resulting in the sale and issuance of
an aggregate of 140,000 shares of Series B Preferred Stock and warrants to
purchase, initially, up to 7,000,000 shares of the Company’s common stock, with
exercise prices of $0.60 per share, in a private offering (the “Preferred
Offering”) for $7,000,000 in cash and cancellation of
indebtedness. Many of the purchasers of Units were either officers,
directors or pre-existing stockholders or noteholders of the Company (See Note
13).
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
Each
share of Series B Preferred Stock is initially convertible into 100 shares of
the Company’s common stock, subject to adjustment under certain
circumstances. The Series B Preferred Stock is convertible at the
option of the holder at any time. The Series B Preferred Stock is
also subject to mandatory conversion in the event the average closing price of
the Company’s common stock for any ten day period equals or exceeds $1.00 per
share, such conversion to be effective on the trading day immediately following
such ten day period. The Series B Preferred Stock has a dividend
equal to 8% of the aggregate $7,000,000 stated value of the Series B Preferred
Stock, payable annually in cash or stock, at the discretion of the Company’s
board of directors. Upon any liquidation, dissolution, or winding up
of the Company, whether voluntary or involuntary, before any distribution or
payment is made to the holders of any stock of the Company, the holders of
Series B Stock are entitled to be paid out of the assets of the Company,
proportionally with
any other series of preferred stock, an amount per share of Series B Stock equal
to the stated value (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), plus all accrued
but unpaid dividends (whether declared or not) on such shares of Series B Stock
for each share of Series B Stock held by them.
The
Preferred Offering was conducted pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Regulation
D, Section 4(2) and Rule 506 thereunder. No placement agent or
underwriter was used in connection with the Offering and there is no commission,
finder’s fee or other compensation due or owing to any party.
On
December 11, 2009 the Company declared and paid a stock dividend of 77,977
shares of common stock, valued at $23,392, payable to all of the holders of its
Series C Preferred Stock. As of December 31, 2009, the Company has $0
in dividends payable accrued for its Series C Preferred Stock, and $4,352 in
dividends payable accrued for its Series C-1 Preferred Stock, which is
classified as additional paid-in capital.
On
November 1, 2009, the Company declared a stock dividend of 1,473,684 shares of
common stock, valued at $560,000, payable to all of the holders of its Series B
Preferred Stock. The dividend was paid on December 1,
2009. As of December 31, 2009, the Company has $93,333 in dividends
payable accrued for its Series B Preferred Stock, which is classified as
additional paid-in capital.
On
November 1, 2008, the Company declared a stock dividend of 2,729,000 shares of
common stock, valued at $545,800, payable to all of the holders of its Series B
Preferred Stock. The dividend was paid on November 24,
2008. As of December 31, 2008, the Company had $0 in dividends
payable for its Series B Preferred Stock.
Series B
Preferred Stock Activity during the years ended December 31, 2008 and 2009 are
as follows:
|
|
Shares
|
|
|
Par Value
|
|
Series
B Preferred Stock issued and outstanding at January 1,
2008
|
|
|
134,400 |
|
|
$ |
134 |
|
Issued
during 2008
|
|
|
5,600 |
|
|
|
6 |
|
Series
B Preferred Stock issued and outstanding at December 31,
2008
|
|
|
140,000 |
|
|
|
140 |
|
Issued
during 2009
|
|
|
- |
|
|
|
- |
|
Series
B Preferred Stock issued and outstanding at December 31,
2009
|
|
|
140,000 |
|
|
$ |
140 |
|
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
Series C
Preferred Stock Activity during the years ended December 31, 2008 and 2009 are
as follows:
|
|
Shares
|
|
|
Par Value
|
|
Series
C Preferred Stock issued and outstanding at January 1,
2008
|
|
|
- |
|
|
$ |
- |
|
Issued
during 2008
|
|
|
- |
|
|
|
- |
|
Series
C Preferred Stock issued and outstanding at December 31,
2008
|
|
|
- |
|
|
|
- |
|
Issued
during 2009
|
|
|
23,375 |
|
|
|
23 |
|
Converted
to Series C-1 Preferred Stock during 2009
|
|
|
(23,375 |
) |
|
|
(23 |
) |
Series
C Preferred Stock issued and outstanding at December 31,
2009
|
|
|
- |
|
|
$ |
- |
|
Series
C-1 Preferred Stock Activity during the years ended December 31, 2008 and 2009
are as follows:
|
|
Shares
|
|
|
Par Value
|
|
Series
C-1 Preferred Stock issued and outstanding at January 1,
2008
|
|
|
- |
|
|
$ |
- |
|
Issued
during 2008
|
|
|
- |
|
|
|
- |
|
Series
C-1 Preferred Stock issued and outstanding at December 31,
2008
|
|
|
- |
|
|
|
- |
|
Issued
during 2009
|
|
|
30,250 |
|
|
|
30 |
|
Series
C-1 Preferred Stock issued and outstanding at December 31,
2009
|
|
|
30,250 |
|
|
$ |
30 |
|
On
various dates from November 30, 2006 through March 31, 2007, the Company issued
and sold an aggregate of 14,116,680 shares of its common stock and 7,058,340
warrants to purchase its common stock (the “Equity Warrants”), in a private
offering (the “Offering”) for $4,235,000 in cash, cancellation of indebtedness
and in lieu of compensation owed to certain employees, officers and directors of
the Company. The per share purchase price of the common stock was
$0.30. The Equity Warrants have a per share exercise price of $0.40,
are exercisable immediately and expire on various dates from November 29, 2011
through March 30, 2012.
The
$4,235,000 investment included $250,000 from Steven Strasser, the Company’s
Chief Executive Officer, $30,000 from John (BJ) Lackland, the Company’s Chief
Financial Officer, $30,000 from Robert Murray, the Company’s former Chief
Operating Officer, and $300,000 from George Boyadjieff, a Director of the
Company.
The
Offering was conducted pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Regulation
D, Section 4(2) and Rule 506 thereunder. No placement agent or
underwriter is entitled to compensation in connection with either the Offering
or the sale of the Notes and there is no commission, finder’s fee or other
compensation due or owing to any party.
NOTE 17 - 401(K) RETIREMENT PLANS:
The
Company maintains a 401(k) retirement plan (the 401(k) Plan). The
401(k) Plan is voluntary, and available to all employees who have been with the
Company for at least six months. The Company may make discretionary
contributions. The Company did not make any contributions in 2009 or
2008.
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
NOTE 18 – UNAUDITED SELECTED QUARTERLY FINANCIAL DATA:
During
the year ended December 31, 2009, the Company corrected errors in its warrant
liability valuation, related to its estimated volatility, as well as its
deferred tax liability calculation.
During
the year ended December 31, 2009, the Company discovered errors in its warrant
valuation model. The Company calculated its warrant liability values
utilizing an estimated volatility rate. During the audit for the year
ended December 31, 2009, the Company determined that the estimated volatility
rate used was incorrect. The Company reviewed and revised its
estimated volatility rate and warrant valuation model, which resulted in
material differences in the Company’s warrant liability and related fair market
value adjustments on warrant liability for the year ended December 31,
2009. The Company determined that the error was not material to prior
quarters due to the warrant liability’s non-cash nature and because the errors
were qualitatively insignificant to operations.
During
the year ended December 31, 2009, the Company identified errors in the Company’s
tax provision. Previously, the Company did not recognize a deferred
tax liability related to its amortization of goodwill for tax
purposes. The Company reviewed and revised its tax provision to
include this deferred tax liability as of January 1, 2009 and for the year ended
December 31, 2009. The Company determined that the error was not
material to prior years due to the deferred tax provision’s non-cash nature and
because the errors were qualitatively insignificant to operations.
The
following tables set forth the corrected quarterly financial data.
For the
three months ended March 31, 2009:
|
|
As Previously
Reported
|
|
|
Adjustments
|
|
|
As Adjusted
|
|
Revenues
|
|
$ |
47,147 |
|
|
$ |
- |
|
|
$ |
47,147 |
|
Cost
of revenues
|
|
|
28,808 |
|
|
|
- |
|
|
|
28,808 |
|
Gross
profit
|
|
|
18,339 |
|
|
|
- |
|
|
|
18,339 |
|
Total
costs and expenses
|
|
|
837,846 |
|
|
|
- |
|
|
|
837,846 |
|
Loss
from operations
|
|
|
(819,507 |
) |
|
|
- |
|
|
|
(819,507 |
) |
Other
income and (expense)
|
|
|
(476,834 |
) |
|
|
165,421 |
|
|
|
(311,413 |
) |
Loss
before provision for taxes
|
|
|
(1,296,341 |
) |
|
|
165,421 |
|
|
|
(1,130,920 |
) |
Provision
for taxes
|
|
|
- |
|
|
|
12,486 |
|
|
|
12,486 |
|
Net
loss
|
|
|
(1,296,341 |
) |
|
|
152,935 |
|
|
|
(1,143,406 |
) |
Dividends
paid or payable on Series B and Series C Convertible Preferred
Stock
|
|
|
233,333 |
|
|
|
- |
|
|
|
233,333 |
|
Net
loss attributable to common shareholders
|
|
$ |
(1,529,674 |
) |
|
$ |
152,935 |
|
|
$ |
(1,376,739 |
) |
Basic
and fully diluted loss per common share
|
|
$ |
(0.04 |
) |
|
$ |
0.01 |
|
|
$ |
(0.03 |
) |
Weighted
average common shares outstanding basic
|
|
|
43,255,441 |
|
|
|
43,255,441 |
|
|
|
43,255,441 |
|
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
For the
three months ended June 30, 2009:
|
|
As Previously
Reported
|
|
|
Adjustments
|
|
|
As Adjusted
|
|
Revenues
|
|
$ |
75,393 |
|
|
$ |
- |
|
|
$ |
75,393 |
|
Cost
of revenues
|
|
|
49,556 |
|
|
|
- |
|
|
|
49,556 |
|
Gross
profit
|
|
|
25,837 |
|
|
|
- |
|
|
|
25,837 |
|
Total
costs and expenses
|
|
|
916,310 |
|
|
|
- |
|
|
|
916,310 |
|
Loss
from operations
|
|
|
(890,473 |
) |
|
|
- |
|
|
|
(890,473 |
) |
Other
income and (expense)
|
|
|
852,108 |
|
|
|
(308,743 |
) |
|
|
543,365 |
|
Loss
before provision for taxes
|
|
|
(38,365 |
) |
|
|
(308,743 |
) |
|
|
(347,108 |
) |
Provision
for taxes
|
|
|
- |
|
|
|
12,486 |
|
|
|
12,486 |
|
Net
loss
|
|
|
(38,365 |
) |
|
|
(321,229 |
) |
|
|
(359,594 |
) |
Dividends
paid or payable on Series B and Series C Convertible Preferred
Stock
|
|
|
140,000 |
|
|
|
- |
|
|
|
140,000 |
|
Net
loss attributable to common shareholders
|
|
$ |
(178,365 |
) |
|
$ |
(321,229 |
) |
|
$ |
(499,594 |
) |
Basic
and fully diluted loss per common share
|
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
Weighted
average common shares outstanding basic
|
|
|
43,255,441 |
|
|
|
43,255,441 |
|
|
|
43,255,441 |
|
For the
three months ended September 30, 2009:
|
|
As Previously
Reported
|
|
|
Adjustments
|
|
|
As Adjusted
|
|
Revenues
|
|
$ |
63,130 |
|
|
$ |
- |
|
|
$ |
63,130 |
|
Cost
of revenues
|
|
|
49,703 |
|
|
|
- |
|
|
|
49,703 |
|
Gross
profit
|
|
|
13,427 |
|
|
|
- |
|
|
|
13,427 |
|
Total
costs and expenses
|
|
|
940,412 |
|
|
|
- |
|
|
|
940,412 |
|
Loss
from operations
|
|
|
(926,985 |
) |
|
|
- |
|
|
|
(926,985 |
) |
Other
income and (expense)
|
|
|
(332,452 |
) |
|
|
299,510 |
|
|
|
(32,942 |
) |
Loss
before provision for taxes
|
|
|
(1,259,437 |
) |
|
|
299,510 |
|
|
|
(959,927 |
) |
Provision
for taxes
|
|
|
- |
|
|
|
12,486 |
|
|
|
12,486 |
|
Net
loss
|
|
|
(1,259,437 |
) |
|
|
287,024 |
|
|
|
(972,413 |
) |
Dividends
paid or payable on Series B and Series C Convertible Preferred
Stock
|
|
|
145,281 |
|
|
|
- |
|
|
|
145,281 |
|
Net
loss attributable to common shareholders
|
|
$ |
(1,404,718 |
) |
|
$ |
287,024 |
|
|
$ |
(1,117,694 |
) |
Basic
and fully diluted loss per common share
|
|
$ |
(0.03 |
) |
|
$ |
0.00 |
|
|
$ |
(0.03 |
) |
Weighted
average common shares outstanding basic
|
|
|
43,255,441 |
|
|
|
43,255,441 |
|
|
|
43,255,441 |
|
POWER
EFFICIENCY CORPORATION
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2009 AND
2008
|
NOTE 19 - SUBSEQUENT EVENTS:
On
January 20, 2010, the Company issued and sold an additional 2,500 units,
resulting in the sale and issuance of an aggregate of 2,500 shares of Series C-1
Preferred Stock and warrants to purchase up to 125,000 shares of the Company’s
common stock for $100,000 in cash under the above referenced financing
transaction.
On March
30, 2010, the Company issued unsecured notes to Steven Strasser, the Company’s
CEO, totaling $125,000. The notes bear interest at 5%, payable upon
maturity. The notes mature two months after issuance.