In nearly two years at the helm of Torvec Inc., Richard Kaplan has restructured the board, narrowed the company’s focus, raised more than $6 million in investment funds and garnered some much-needed attention for the automotive technology company.
Still, despite Kaplan’s efforts, Torvec stock languishes at less than $1 a share, and its 52-week high was $1.48 last September. The firm posted a $3.4 million loss from operations for 2011, compared with a $4.9 million loss the year before.
“I understand the people who say, ‘Come on, already,’ because they’ve been here a long time,” Kaplan said. “As far as I’m concerned—and realistically—this is a startup company. It’s two years old.”
Indeed, prior to Kaplan’s arrival as CEO in October 2010, the company—which was founded in 1996—had lacked cohesiveness and direction and had yet to earn revenue.
“The company was really built on (co-founder) Vernon Gleasman’s mind. His mind was very prolific, and he had lots and lots of ideas and lots of technologies and patents,” Kaplan explained. “The problem the company had was it just didn’t focus. Plus, it was trying to come up with other things.”
One of his first tasks was to narrow Torvec’s focus. The company chose to turn its attention to the IsoTorque differential, a hydraulic pump and motor, and an offshoot of the IsoTorque, a Steer-Drive for tracked vehicles.
“We had to figure out how to make them into products that, No. 1, people can use; No. 2, that’s valuable to them; No. 3, that they can buy at a reasonable price; and, No. 4, that we can make a good profit on,” Kaplan said.
A $6.5 million investment last year from a group led by Paychex Inc. founder Thomas Golisano has enabled Torvec to complete its design phase and build prototypes of the products it plans to market, as well as complete virtual testing on the products, Kaplan said.
Golisano’s investment in Torvec amounts to nearly 27 percent of total shares in the company, a Securities and Exchange Commission filing shows. While the filing indicates Golisano can take a seat on Torvec’s board of directors, he has no plans to do so. Golisano could not be reached for comment.
The investment will carry the company through the next several years, Kaplan said.
“If nothing happened, it will last us three years,” he said. “But it should be more than enough for us to bootstrap ourselves.”
Torvec recently had nearly a dozen buyers of its differential at a show at the National Corvette Museum in Bowling Green, Ky.
“We’re pretty excited about it,” Kaplan said. “We think it’s going to be accepted in the aftermarket. That’s not going to be a huge market, but it could get us to breakeven in the next two or three years if that’s all we did.”
Hyundai Motor Co. featured the IsoTorque in a high-performance vehicle last year at the Specialty Equipment Market Association, an exposition that highlights the latest in automotive products for 100,000 visitors annually.
While Torvec continues to market the IsoTorque, Kaplan expects real-world testing of its hydraulic pump to begin in September. End users will include heavy-equipment manufacturers such as Caterpillar Inc., Deere & Co. and CNH America LLC.
“What I’ve come to believe is the IsoTorque is going to be a very good product for this company,” Kaplan said. “But the pump is going to ‘be’ the company. The market is very big.”
Last year Rep. Louise Slaughter, D-Perinton, held a forum highlighting Torvec and other local companies at the forefront of diesel fuel technology, noting that the work done by the companies would create the next generation of jobs and rebuild America’s manufacturing sector.
“From George Eastman to Joseph Wilson, Rochester knows well that innovation can benefit our city and change the world,” Slaughter said this week. “I’m proud to support organizations such as Torvec, Delphi, University of Rochester and Rochester Institute of Technology in order to innovate world-class products and create the industries and jobs of the future.”
Kaplan expects Torvec to have “substantial” employment growth over the next two to three years.
“Once we start producing, we’re going to try to do some kind of manufacturing here,” he said. “It’s very important to me, and always has been, to create jobs in Monroe County. And that will be in engineering and manufacturing and obviously in sales and marketing.”
Torvec now employs some 11 people and has 11 directors including RIT president William Destler, TravelCenters of America Inc. founder Philip Saunders and the Bonadio Group CEO Thomas Bonadio. Former Bausch & Lomb Inc. chairman and CEO Ronald Zarrella, who also served as president of General Motors North America, is a special adviser to the board.
“If the company is as good as our board, we’re going to be in great shape,” Kaplan said. “We have really great board members—very active, very supportive, very helpful to me.”
Bonadio’s motivation for joining Torvec’s board was Kaplan. Kaplan had approached him when he was brought on board and touted the company’s technology and potential.
“I got to meet some of the people and understand more about the company,” Bonadio said. “That convinced me.”
Former Crosskeys Corp. CEO Charles Mills said two factors brought him to the board of directors.
“Dick Kaplan asked me to come, and I respect him beyond any businessperson I’ve ever known,” Mills explained. “And No. 2, I looked at Torvec and its possibilities and where it was at that moment in time and where I thought it could go with proper leadership, and I thought it was an extraordinary opportunity to enjoy that growth.”
Mills said what Kaplan had to offer Torvec was organization.
“What we had was a wonderful product, properly developed but without the ability to organize it, market it and realize any success in the financial world for what they had achieved,” he said. “Dick Kaplan has that touch.”
Mills called Kaplan’s leadership unusual in that he has a feeling or instinct others might not possess.
“When other people lean left, he may lean right and not even be able to explain to you why he knows it’s time to lean in that direction,” Mills said. “That’s a talent. That’s something that’s in you. You can’t teach that to someone.”
When Kaplan arrived at Torvec, Mills added, the company had a “wonderful product, appropriately protected with patents but not yet marketed to the world.”
Bonadio agreed: “The company had great R&D and technology, and Dick has brought focus. He brought diligence and sense of the market and what needed to be done.”
Mills has high hopes for Torvec under Kaplan’s tutelage.
“It’s the right product at the right time in the right world being properly tested by the right purchasers,” he said, “all with terrific corporate support and engineering support. It’s the right time.”
Kaplan is banking on that. With the right set of circumstances, technologies and talent, Torvec stock should begin to rebound, he maintained.
“I can’t predict stock price. I don’t know why it works that way,” Kaplan said. “But I do know that if I concentrate and we concentrate on making the company profitable, making our clients profitable and happy, start doing a lot of business and making a lot of money, the stock price will usually go up. So that’s what I’m concentrating on.”
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