Torvec Updates Investors on Licensing Negotiations
14 June 1999
Torvec Updates Investors on Licensing Negotiations
Formal Negotiations on FTV to Begin in July
Proposes Restructuring of Assets to Maximize Value
ROCHESTER, N.Y., June 14 -- Torvec, Inc.
(OTC Bulletin Board: TOVC), developer of advanced automotive technologies and
the FTV(TM) vehicle, updates investors on its negotiations to sell or license
its patents. To maximize shareholder value within the structure of these
negotiations, Torvec is proposing to spin-off certain assets. Additionally,
the Company disclosed a royalty payment dispute which it believes has no
merit.
Torvec has engaged in informal negotiations to license or sell the FTV
fast tracked vehicle to a Fortune 500 company which has indicated, in writing,
its interest in becoming an exclusive supplier of critical FTV core components
and in being a "champion" for Torvec's technology. In turn, Torvec has stated
its desire to become a division of that company in exchange for stock. Formal
negotiations on a licensing or merger agreement are expected to begin in
mid-July following a press launch of the FTV vehicle. Torvec, Inc. makes no
guarantee that these negotiations will be successfully completed.
Torvec's FTVTM brings its own road with it -- making it ideal for unpaved
areas comprising most of Asia, Africa and South America. Millions of trucks
and 4x4s are sold each year in Asia, South America and Africa. Torvec
believes that the FTVTM could capture a meaningful share of this market. The
FTVTM is designed to be competitive in price with light trucks. The FTVTM
smoothly navigates the roughest terrain off-road with higher payloads than
4x4s and trucks. The FTV can reach highway speeds on paved roads, and leaves
no ruts due to its very low ground pressure. None of the millions of
four-wheel drive vehicles produced every year, and no track vehicle, combine
all the FTV's advantages.
Separately, Torvec's constant velocity joint, infinitely variable
transmission and the hydraulic pumps and motors are the subject of informal
licensing negotiations with other companies. The Company cautions readers
that there can be no guarantee that these licensing negotiations will be
successfully completed.
Restructuring of Assets to Maximize Value
To maximize ultimate value to shareholders, Torvec will ask shareholders
to vote on a proposal to split the Company into two entities with the goal of
selling one for stock and earning royalties in the second.
The first entity will be the publicly traded Torvec, Inc. which will
continue to own the FTV fast tracked vehicle and its related technologies.
Management's objective is to exchange common stock in Torvec for that of the
Fortune 500 company with which it is negotiating.
The second entity will be Variable Gear LLC, which will own and control
the patents to the CV Joint, the IVT transmission and the hydraulic pump and
motor. Variable Gear LLC will not be an operating company but will collect
royalties on these patents. Torvec's Board of Directors will ask shareholders
to approve the spinoff of these assets into Variable Gear LLC, which was
established upon Torvec's inception for the express purpose of distributing
royalties to shareholders. Shareholders of Torvec, Inc. common stock would
receive one share of Variable Gear LLC for each share of Torvec common they
own.
The LLC structure provides the highest possible net return to
shareholders. Royalty income will be directly passed through to shareholders
and taxed at their personal or corporate income tax rate. Otherwise, as a
C corporation, these royalties would be taxed at the corporate level and then
taxed again when dividends are distributed to shareholders.
The Proposed Variable Gear Patent Portfolio
The following patented advances comprise the proposed Variable Gear LLC.
Together, the markets for these applications exceed $110 billion, according to
Company estimates.
Infinitely Variable Transmission: Torvec's transmission has almost
300 fewer parts, is smaller and significantly lighter than a standard
automatic transmission, and is less expensive to manufacture. The IVT makes
it practical and economical to switch from gasoline to diesel engines, while
solving the pollution and acceleration problems long associated with diesel
engines. Over 50 million transmissions are manufactured every year. At an
average cost of approximately $1,500, this represents a market exceeding
$75 billion. Torvec believes that its infinitely variable transmission could
capture a meaningful share of this market.
Hydraulics: Torvec's transmission is possible, in part, through Torvec's
patented lightweight hydraulic pump and motor assembly. In the past,
hydraulics were not acceptable for use in cars and light trucks because of
their excessive noise, heat and weight. Torvec's infinitely variable
transmission has none of these disadvantages. Using Torvec's hydraulics, its
transmission weighs as much as 25 pounds less than today's automatic
transmissions, depending upon engine size. Torvec estimates that the market
for hydraulic pumps and motors is approximately $20 billion.
CV Joints and Spherical Gearing: Torvec has developed a new breed of
constant velocity joint which has true infinite gearing based on Torvec's
proprietary spherical gearing assembly. CV joints are essential to steering
mechanisms and other flexible coupling applications. Torvec estimates that
200 million CV joints, 90 million drive shaft universal joints and over
100 million steering column universal joints are manufactured annually,
comprising a market totaling $15 billion.
Gleasman Royalty Payments
A recently completed arbitration award confirmed Torvec's ownership of
three patents which were under dispute: the CV joint, the infinitely variable
transmission, and the hydraulic pump and motor assembly. The arbitration
award requires that Vernon Gleasman, Inventor and Keith Gleasman, President,
share 20% of their royalty payments from these patents with McElroy
Corporation. If shareholders approve the transfer of non-FTV patents to
Variable Gear LLC, then Mssrs. Gleasman would pay 20% of their portion of any
royalty income to McElroy and reimburse McElroy for $863,000 in expenses
incurred in manufacturing prototypes of certain pumps and motors. Last week,
McElroy made demands against Torvec, Inc. to collect $863,000. Torvec, Inc.
and the Gleasmans maintain that there was no basis for this from the
arbitrator's decision or in their original contract with McElroy.
McElroy has also moved to have its name attached to the three Torvec
patents cited above. Regardless of the final decision on this matter,
ownership of these patents will not be affected. Torvec maintains that the
original contract with McElroy states that McElroy will assign these patents
to the Gleasmans; this was confirmed by the arbitration award. Torvec
believes that there is no merit to McElroy's demands.
This press release contains forward-looking statements based on current
expectations that are subject to risks and uncertainties, especially in
regards to sale, stock exchange, merger or licensing negotiations and others
outlined in the Company's 10-K statement.
Torvec's financial results are filed with the Securities and Exchange
Commission and available online through the Edgar system. Readers are
encouraged to visit http://www.torvec.com for more information on the Company.