UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
(MARK ONE)
X ANNUAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER: 0-21802
[GRAPHIC OMITTED]
N-VIRO INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 34-1741211
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.
INCORPORATION OR ORGANIZATION)
3450 W. CENTRAL AVENUE, SUITE 328
TOLEDO, OHIO 43606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (419) 535-6374
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, par
value $.01 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes No X
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act. Yes No X
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days. Yes X No
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company X
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes No X
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter: $7,967,000.
The number of shares of Common Stock of the registrant outstanding as of March
19, 2010 was 5,194,153.
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
----------------
The Registrant is filing this Amendment No. 1 on Form 10-K/A to its Annual
Report on Form 10-K for the fiscal year ended December 31, 2009 to include all
of the Part III information required by applicable SEC rules and regulations.
The Registrant intended to satisfy its obligations by incorporating by reference
into Part III of its Annual Report on Form 10-K the Registrant's definitive
proxy statement for its 2010 Annual Meeting of Stockholders. However, the
Registrant will be unable to file its definitive proxy statement within the time
period allotted for incorporation by reference under applicable SEC rules and
regulations. Accordingly, the Registrant hereby amends and replaces in their
entirety Items 10, 11, 12, 13 and 14 in its Annual Report on Form 10-K for the
year ended December 31, 2009.
As required by Rule 12b-15, the Registrant's principal executive officer
and principal financial officers are providing Rule 13a-14(a)/15(d)-14(a)
certifications. Accordingly, the Registrant hereby amends Item 15 in its Annual
Report on Form 10-K for the year ended December 31, 2009 to add such reports as
Exhibits.
Except as described above, this amendment does not update or modify in any
way the disclosures in the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 2009, and does not purport to reflect any
information or events subsequent to the filing thereof.
We refer to N-Viro International Corporation as "N-Viro," "us," "we" and
"our" in this report.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS OF THE COMPANY
The Board is currently composed of four Class I Directors: Carl Richard,
Joseph H. Scheib, Mark D. Hagans and Joan B. Wills; and three Class II
Directors: James H. Hartung, Timothy R. Kasmoch and Thomas L. Kovacik (whose
terms will expire upon the election and qualification of directors at the annual
meetings of stockholders to be held in 2011 and 2010, respectively). At each
annual meeting of stockholders, directors will be elected for a full term of two
years to succeed those directors whose terms are expiring.
The following table sets forth the names and ages of our directors.
Name Age Position
- ------------------ --- --------------------------------------------------------
Mark D. Hagans 43 Class I Director
James H. Hartung 67 Class II Director, Chairman of the Board
Timothy R. Kasmoch 48 Class II Director, President and Chief Executive Officer
Thomas L. Kovacik 62 Class II Director
Carl Richard 83 Class I Director
Joseph H. Scheib 53 Class I Director
Joan B. Wills 57 Class I Director
MARK D. HAGANS is an attorney and partner with the law firm of Plassman, Rupp,
Short & Hagans, of Archbold, Ohio, and his practice focuses on corporation,
taxation and banking law. Mr. Hagans serves on numerous Boards of directors,
including the Fulton County Health Center, where he is presently chair of the
Finance Committee. Mr. Hagans earned his law degree from the University of
Toledo. Mr. Hagans has served as our Director since December 2006 and is a
member of the Board's Audit, Finance and Technology Committees. Mr. Hagans
experience as a lawyer and businessman enables him to bring valuable resources
to the Board.
JAMES H. HARTUNG is the former President and Chief Executive Officer of the
Toledo-Lucas County (Ohio) Port Authority, a position he held from 1994 until
2008. Mr. Hartung has served as our Director since January 2006 and is a member
of the Board's Compensation and Nominating Committees. Mr. Hartung's
qualifications to serve as a director and our Chairman of the Board consist of
several years experience as a businessman, as an organizational leader and
community organizer, and in dealings with local government and related agencies
that enable him to bring valuable insights to the Board.
TIMOTHY R. KASMOCH has been our President and Chief Executive Officer since
February 2006 and a Director since January 2006. Until April 1, 2007, Mr.
Kasmoch was also President and CEO of Tri-State Garden Supply, d/b/a
Gardenscape, a bagger and distributor of lawn and garden products, which has
provided trucking services to our Company. Mr. Kasmoch is a graduate of Penn
State University. Mr. Kasmoch is a member of the Board's Finance and Technology
Committees. Mr. Kasmoch's qualifications to serve as a director of the Company
consist of his experience in the soil and distribution business as well as an
extensive knowledge of the transportation and trucking industry. Mr. Kasmoch's
strength is in strategic planning and he possesses a broad, fundamental
understanding of the business drivers affecting us. He is also the President
and CEO and the only "insider" on the Board.
THOMAS L. KOVACIK is presently employed as the Executive Director of
Transportation Advocacy Group of Northwest Ohio ("TAGNO"), a strategic planning
organization working with local and Ohio transportation and economic development
officials. Mr. Kovacik was previously employed by us from 1992 to 1995 as
President of Great Lakes N-Viro, at the time one of our divisions. Mr. Kovacik
has also held various positions with local government, utilities and
environmental companies, and earned a masters degree from Bowling Green State
University in Geochemistry. Mr. Kovacik has served as our Director since
December 2006, and is a member of the Board's Compensation and Technology
Committees. Mr. Kovacik's qualifications to serve as a director of the Company
consist of his experience in the environmental, government and utilities
industries, and his prior position with us as a divisional president. His
strength in strategic planning and transactional experience offers a unique
perspective to the Board.
CARL RICHARD is the former Executive Vice-President of P.R. Transportation, a
trucking company located in Toledo, Ohio, and was a consultant to us from
January 2006 to April 2007. Mr. Richard served as Vice-President of C.A.
Transportation from 1988 through 2000 and as Vice-President of R.O.S.S.
Investments, a real estate holding company, from 1980 through 2000. Mr. Richard
has served as our Director since December 2004 and is a member of the Board's
Nominating Committee. Mr. Richard's qualifications to serve as a director of
the Company consist of his extensive experience in the transportation and
trucking industry.
JOSEPH H. SCHEIB is the Chief Financial Officer of Broad Street Software Group,
a comprehensive software technology company located in Edenton, North Carolina,
a position he has held since June 2003. From May 2000 until February 2003, Mr.
Scheib was the Financial Operation Principal/Compliance Officer of Triangle
Securities, LLC of Raleigh, North Carolina, an asset management, brokerage and
investment banking firm. Mr. Scheib is a CPA and a graduate of East Carolina
University with a degree in accounting. Mr. Scheib has served as our Director
since December 2004, and is a member of the Board's Audit, Finance and
Nomination Committees. Mr. Scheib's qualifications to serve as a director of
the Company consist of his strong financial and asset management experience and
serving the Company in a financial oversight role as the Chair of the Audit
Committee. Given his extensive knowledge and experience in finance, Mr. Scheib
has been determined to be an audit committee financial expert by the board.
JOAN B. WILLS is currently legal counsel for The Narragansett Bay Commission, a
regional sewer authority located in Providence, Rhode Island, a position she has
held since 2008. Also, Ms. Wills is currently Trustee of the Cooke Family
Trust, an owner of more than 5% of N-Viro International Corporation common
stock. From 2006 until 2008, Ms. Wills provided legal counsel to the Rhode
Island Office of Legislative Counsel, an agency involved in drafting new
legislation and amendments to the State of Rhode Island. Ms. Wills has been a
practicing attorney at various points in her career, and holds a Bachelor of
Arts degree from the University of Rhode Island and a Juris Doctorate from
Suffolk University Law School in Boston. In February 2010, Ms. Wills was made a
member of the Compensation Committee. Ms. Wills' qualifications to serve as a
director of the Company consist of her experience as an attorney in the
utilities industry.
KEY RELATIONSHIPS
Joan Wills is currently Trustee of the Cooke Family Trust, an owner of more
than 5% of N-Viro International Corporation common stock.
CORPORATE GOVERNANCE AND BOARD MATTERS
OUR BOARD OF DIRECTORS
Our business, property and affairs are managed under the direction of our
Board. We have determined that the Company's interests are best served by
having a Chairman of the Board who is independent of the management of the
Company because it is our view this inherently strengthens board independence in
dealing with issues that closely involve management. Our Chief Executive
Officer has responsibility for setting our strategic direction and the
day-to-day leadership and performance, while the Chairman of the Board has a
greater focus on long-range Company goals and plans and governance of our Board
of Directors. This balance between the two positions enables Mr. Kasmoch to
focus on the operational and strategic challenges we presently face, with Mr.
Hartung providing board leadership on matters of governance and management
oversight.
Our Board, as a whole, has the responsibility for risk oversight of
management. The role of our Board of Directors is to oversee the President and
Chief Executive Officer, the Executive Vice President and the Chief Financial
Officer in the operation of the Company, including management's establishment
and implementation of appropriate practices and policies with respect to areas
of potentially significant risk to us. Our Board considers risks to the Company
as part of the strategic planning process and thorough review of compliance
issues in committees of our Board, as appropriate. While the Board has the
ultimate oversight responsibility for such risk management process, various
committees of the Board are structured to oversee specific risks in the areas
covered by their respective assignments such as audits or compensation. In
addition, our Board may retain, on such terms as determined by the Board and in
its sole discretion, independent legal, financial and other consultants and
advisors to advise and assist the Board in fulfilling its oversight
responsibilities. Currently, there are no such consultants in any category
assisting or advising the Company.
Management is responsible for N-Viro's day-to-day risk management, and the
entire Board's role is to engage in informed oversight. Our Chief Executive
Officer is a member of the Board of Directors, and our Chief Financial Officer
and Executive Vice President/General Counsel regularly attend Board meetings,
which helps facilitate discussions regarding risk between the Board and our
senior management, as well as the exchange of risk-related information or
concerns between the Board and the senior management. The Board believes Mr.
Kasmoch's service as Chief Executive Officer and on the Board is appropriate
because it bridges a critical gap between our management and the Board, enabling
the Board to benefit from management's perspective on our business while the
Board performs its oversight function.
The Company's philosophy about diversity among its Board members is
discussed below under "Nominating Committee."
MEETINGS OF THE BOARD OF DIRECTORS
Our Board held six formal meetings during 2009, consisting of two regular
meetings and four special meetings. Each director attended 100% of the
aggregate number of meetings held by the Board of Directors and the Committees
of the Board of Directors on which he served, except for Messrs. Hartung and
Kovacik, who each missed one special meeting. It is the policy of the Company
that the members of the Board attend our annual stockholder meeting. Failure to
attend annual meetings without good reason is a factor the Nominating Committee
and Board will consider in determining whether to renominate a current Board
member. All members of the Board serving at the time attended the 2009 Annual
Meeting.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
We encourage stockholder communications with directors. Stockholders may
communicate with a particular director, all directors or the Chairman of the
Board by mail or courier addressed to him or the entire Board in care of James
K. McHugh, Corporate Secretary, N-Viro International Corporation, 3450 West
Central Avenue, Suite #328, Toledo, OH 43606. All correspondence should be in
a sealed envelope marked "Confidential" and will be forwarded unopened to the
director as appropriate.
BOARD INDEPENDENCE
Although we are not subject to the listing requirements of any stock
exchange, we are committed to a board in which a majority of our members consist
of independent directors, as defined under the NASDAQ rules. The Board has
reviewed the independence of its members, applying the NASDAQ standards and
considering other commercial, legal, accounting and familial relationships
between the Directors and us. The Board has determined that all of the
Directors and director nominees are independent other than Mr. Kasmoch, who is
not an independent Director by virtue of his current position as our Chief
Executive Officer, and Mr. Hartung, who is deemed not to be independent because
his son was employed as an executive officer of the Company within the past
three years.
CODE OF ETHICS
We have adopted a Code of Ethics which covers the Chief Executive Officer
and Chief Financial Officer, which is administered and monitored by the Audit
Committee of the Board. A copy of the Code of Ethics was attached as Exhibit
14.1 to our Annual Report on Form 10-K for the year ended December 31, 2009, and
is posted on our web site at www.nviro.com.
-------------
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has the following standing committees: the Audit Committee, the
Compensation Committee, the Finance Committee, the Nominating Committee and the
Technology Committee. The composition and function of each Committee is set
forth below:
DIRECTOR AUDIT COMPENSATION NOMINATING FINANCE TECHNOLOGY
- ------------------ ----- ------------ ---------- ------- ----------
Mark D. Hagans X X* X
James H. Hartung X X
Timothy R. Kasmoch X X*
Thomas L. Kovacik X* X
Carl Richard X
Joseph H. Scheib X* X* X
Joan B. Wills X
* Committee Chair
AUDIT COMMITTEE
Our Audit Committee consisted of Messrs. Scheib, Hagans and DiPrete, until
Mr. DiPrete's resignation from the Board in May 2009. In accordance with our
Audit Committee Charter, each of the Audit Committee members must be
"independent" as determined under the NASDAQ rules. The Audit Committee
currently is not subject to, and does not follow, the independence criteria set
forth in Section 10A of the Securities Exchange Act 1934, as amended. The Board
has determined that each of the directors who serve on the Audit Committee are
"independent" under the NASDAQ rules, meaning that none of them has a
relationship with us that may interfere with their independence from us and our
management. Further, the Board has determined that Mr. Scheib qualifies as a
"financial expert" as defined by the Securities and Exchange Commission (the
"SEC").
The Audit Committee recommends the appointment of the outside auditor,
oversees our accounting and internal audit functions and reviews and approves
the terms of transactions between us and related party entities. During 2009,
the Audit Committee met two times. The Audit Committee has retained UHY LLP to
conduct the audit for the year ended December 31, 2010. The Audit committee is
governed by a written charter, a copy of which was attached to the Proxy
Statement for our annual meeting held on June 8, 2007.
COMPENSATION COMMITTEE
The Compensation Committee determines officers' salaries and bonuses and
administers the grant of stock options pursuant to our stock option plans. The
Compensation Committee does not have a written charter. The Compensation
Committee consisted of Messrs. Kovacik, Hartung and DiPrete, until Mr. DiPrete's
resignation in May 2009, and Ms. Wills, who was appointed to the Committee in
February 2010. The Compensation Committee met two times during 2009.
The Board has determined that a majority of the members of the committee
are "independent" as determined under the NASDAQ standards. Mr. Hartung is not
deemed to be "independent" due to his son, Howard Hartung, serving as one of our
executive officers until January 2008. Under the NASDAQ standards, Mr. Hartung
will not be independent for at least three years after the resignation of his
son. Despite his lack of "independence," the Board determined that Mr.
Hartung's exercise of independent judgment has not been and will not be affected
by this relationship.
FINANCE COMMITTEE
The Finance Committee, consisting of Messrs. Hagans, Kasmoch and Scheib,
assists in monitoring our cash flow requirements and approves any internal or
external financing or leasing arrangements. The Finance Committee does not have
a written charter. This committee met two times during 2009.
NOMINATING COMMITTEE
The Nominating Committee, consisting of Messrs. Scheib, Richard and
Hartung, considers and recommends to the Board qualified candidates for election
as Board members, and establishes and periodically reviews criteria for
selection of directors. The Nominating Committee does not have a written
charter. The committee met one time during 2009.
The Board has determined that a majority of the members of the committee
are "independent" as determined under the NASDAQ standards. Mr. Hartung is not
deemed to be "independent" due to his son, Howard Hartung, serving as one of our
executive officers until January 2008. Under the NASDAQ standards, Mr. Hartung
will not be independent for at least three years after the resignation of his
son. Despite his lack of "independence," the Board determined that Mr.
Hartung's exercise of independent judgment has not been and will not be affected
by this relationship.
The Nominating Committee will consider candidates recommended by
stockholders, directors, officers, third-party search firms and other sources
for nomination as a director. The Committee considers the needs of the Board
and evaluates each director candidate in light of, among other things, the
candidate's qualifications. Recommended candidates must be of the highest
character and integrity, free of any conflicts of interest and possess the
ability to work collaboratively with others, and have the time to devote to
Board activities. All candidates will be reviewed in the same manner,
regardless of the source of the recommendation. Presently, the Nominating
Committee does not consider diversity as a characteristic in its selection of
candidates except to the extent that the Nominating Committee seeks to expand
the range of categories of experience and relationships in different aspects of
the waste management process the Company requires for the different foci of its
business and potential contacts with sources of business opportunity for the
Company.
The Nominating Committee will consider all stockholder recommendations of
proposed director nominees, if such recommendations are timely received under
applicable SEC regulations and include all of the information required to be
included as set forth in the By-Laws. To be considered "timely received,"
recommendations must be received in writing at our principal executive offices,
at N-Viro International Corporation, 3450 W. Central Avenue, Suite 328, Toledo,
Ohio 43606, Attention: Chairman, Nominating Committee, c/o James K. McHugh,
Corporate Secretary, no later than March 15, 2011.
All candidates recommended by stockholders should be independent and
possess substantial and significant experience which would be of value to us in
the performance of the duties of a director. In addition, any stockholder
director nominee recommendation must include, at a minimum, the following
information: the stockholder's name; address; the number and class of shares
owned; the candidate's biographical information, including name, residential and
business address, telephone number, age, education, accomplishments, employment
history (including positions held and current position), and current and former
directorships; and the stockholder's opinion as to whether the stockholder
recommended candidate meets the definitions of "independent" under the NASDAQ
standards. In addition, the recommendation letter must provide the information
that would be required to be disclosed in the solicitation of proxies for
election of directors under federal securities laws. The stockholder must
include the candidate's statement that he/she meets these requirements; is
willing to promptly complete the Questionnaire required of all officers,
directors and candidates for nomination to the Board; will provide such other
information as the Committee may reasonably request; consents to serve on the
Board if elected; and a statement whether such candidate, if elected, intends to
tender, promptly following such person's election or re-election, an irrevocable
resignation effective upon such person's failure to receive the required vote
for re-election at the next meeting at which such person would face re-election.
COMPENSATION OF DIRECTORS
Our Board of Directors has approved the payment of cash compensation to
non-employee directors in exchange for their service on the Board. The amount
of cash compensation to be received by each non-employee director is $1,000 per
regular meeting attended during each calendar year, and $500 per special meeting
attended. Our Board of Directors generally has four meetings per calendar year.
The Directors are reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board of Directors or any committees thereof.
Under our current stock option plan, approved by the stockholders in May
2004 and amended by the stockholders in June 2008 and again in August 2009, each
non-employee Director automatically receives a grant of options to purchase
2,500 shares of Common Stock for each regular meeting attended, and an option to
purchase 1,250 shares of Common Stock for each special meeting attended, subject
to a maximum of options to purchase 15,000 in any year.
Directors who are our employees do not receive any additional compensation
for serving as Directors. Directors who are our consultants do not receive any
additional cash compensation for serving as Directors, but do receive stock
options per the provisions of the N-Viro International Corporation Second
Amended and Restated 2004 Stock Option Plan.
See "Certain Relationships and Related Transactions" for additional
compensation to Directors.
DIRECTOR COMPENSATION
Fees Non-Equity Non-Qualified Non-Qualified
Earned or Incentive Incentive Deferred All
Paid in Stock Option Plan Plan Compensation Other
Name Cash Awards Awards Compensation Compensation Earnings Compensation TOTAL
- ------------------ -------- ------- -------- ------------- ------------- ------------- ------------- -------
R. Francis DiPrete $ 1,500 - $ 7,500 - - - - $ 9,000
Joseph H. Scheib $ 2,000 - $ 31,700 - - - - $ 33,700
Carl Richard $ 2,000 - $ 31,700 - - - - $ 33,700
James H. Hartung $ 2,000 - $ 32,600 - - - - $ 34,600
Mark D. Hagans $ 2,000 - $ 31,700 - - - - $ 33,700
Thomas L. Kovacik $ 1,500 - $ 31,700 - - - - $ 33,200
Joan B. Wills $ 500 - $ 2,795 - - - - $ 3,295
Timothy R. Kasmoch - - - - - - - $ 0
-------- ------- -------- ------------- ------------- ------------- ------------- --------
$ 11,500 $ 0 $169,695 $ 0 $ 0 $ 0 $ 0 $181,195
======== ======= ======== ============= ============= ============= ============= ========
EXECUTIVE OFFICERS OF THE COMPANY
Executive officers of the Company are appointed by the Board of Directors
and hold office at the pleasure of the Board. Set forth below is biographical
and other information on the current executive officers of the Company. Mr.
Kasmoch also serves as a member of the Board and his biographical information is
set forth above under the caption "Directors of the Company."
Name Age Position
- ------------------ --- ------------------------------------------------
Timothy R. Kasmoch 48 President and Chief Executive Officer
Robert W. Bohmer 40 Executive Vice-President and General Counsel
James K. McHugh 51 Chief Financial Officer, Secretary and Treasurer
ROBERT W. BOHMER has been our Executive Vice-President (formerly Vice-President
of Business Development) and General Counsel since July 2007. Since 1996, Mr.
Bohmer had been with the law firm of Watkins, Bates and Carey, LLP, Toledo,
Ohio. Since 2005, Mr. Bohmer had served as general outside counsel to the
Company.
JAMES K. MCHUGH has served as our Chief Financial Officer, Secretary and
Treasurer since January 1997. Prior to that date, Mr. McHugh served the Company
and our predecessor company in various financial positions since April 1992.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers, and persons who own beneficially more than
ten percent (10%) of the shares of our Common Stock, to file reports of
ownership and changes of ownership with the Securities and Exchange Commission,
or SEC. Copies of all filed reports are required to be furnished to us pursuant
to Section 16(a). Based solely on the reports received by us and on written
representations from reporting persons, we believe that the current directors
and executive officers complied with all applicable filing requirements during
the fiscal year ended December 31, 2009, with no exceptions.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table presents the total compensation paid to our Chief
Executive Officer, Executive Vice President and Chief Financial Officer during
2009. There were no other executive officers who were serving at the end of
2009 and whose total compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
Change in
Non-Equity Nonqualified
Incentive Deferred
Name and Principal Stock Option Plan Compensation All Other
Position Year Salary Bonus Awards Awards (4) Compensation Earnings Compensation TOTAL ($)
- --------------------------- ---- -------- ----- ------ ----------- ------------ ------------ ------------- ----------
TIMOTHY R. KASMOCH 2009 $150,000 - - $ 570,376 - - $ 10,000 $ 730,376
President and Chief 2008 $150,000 - - - - - $ 0 $ 150,000
Executive Officer (1)
ROBERT W. BOHMER 2009 $150,000 - - $ 454,344 - - $ 0 $ 604,344
Executive Vice-President + 2008 $150,000 - - $ 93,333 - - $ 0 $ 243,333
General Counsel (2)
JAMES K. MCHUGH 2009 $116,688 - - $ 190,746 - - $ 399 $ 307,833
Chief Financial Officer, 2008 $100,044 - - - - - $ 552 $ 100,596
Secretary + Treasurer (3)
<FN>
(1) For the "All Other Compensation" column, Mr. Kasmoch's spouse was
compensated for consulting services rendered to the Company at various times
during 2009. All compensation was in cash.
(2) Mr. Bohmer was not granted an option award in 2008 but the value
reflected is the amount of his 2007 grant recorded as an expense in 2008. The
value of his 2009 Option Award includes the 2007 grant award recorded as an
expense in the amount of $46,667.
(3) For the "All Other Compensation" column, Mr. McHugh is taxed on the
imputed benefit of a life insurance policy that benefits his personal
beneficiary for one-half the face value and N-Viro International Corporation for
one-half the face value of the policy.
(4) The amounts included in the Option Awards column include the aggregate
grant date fair value of options granted in the fiscal year computed in
accordance with FASB ASC Topic 718. We continue to use the Black-Scholes model
to measure the grant date fair value of stock options. For a discussion of the
valuation assumptions used to value the options, see Note 5 to our Consolidated
Financial Statements included in our annual report on Form 10-K for the fiscal
year ended December 31, 2009.
2009 GRANTS OF PLAN BASED AWARDS
Estimated Future Payouts Under Estimated Future Payouts Under
Non-Equity Incentive Plan Awards Equity Incentive Plan Awards
Grant Approval -------------------------------------- --------------------------------------
Name Date (1) Date Threshold ($) Target ($) Maximum ($) Threshold (#) Target (#) Maximum (#)
- ------------------ ---------- --------- ------------- ---------- ----------- ------------- ---------- -----------
Timothy R. Kasmoch 7/10/2009 7/10/2009 - - - - - 25,000
7/21/2009 7/21/2009 - - - - - 243,000
Robert W. Bohmer 7/10/2009 7/10/2009 - - - - - 25,000
7/21/2009 7/21/2009 - - - - - 168,000
James K. McHugh 7/10/2009 7/10/2009 - - - - - 25,000
7/21/2009 7/21/2009 - - - - - 68,000
Full Grant Base Price of
Date Fair Option
Name Value ($) Awards ($/shr.)
- ------------------ ---------- ---------------
Timothy R. Kasmoch 43,233 1.94
527,143 2.23
Robert W. Bohmer 43,233 1.94
364,444 2.23
James K. McHugh 43,233 1.94
147,513 2.23
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS STOCK AWARDS
----------------------------------------------------------------- ----------------------------------
Equity
Equity Incentive
Incentive Plan Awards:
Plan Market # Unearned
# of # of Awards: # of Value of Shares,
Securities Securities # Securities Shares or Shares or Units or
Underlying Underlying Underlying Units of Units of Other Rights
Unexercised Unexercised Unexercised Option Option Stock That Stock That That Have
Options (#) Options (#) Unearned Exercise Expiration Have Not Have Not Not
Name Exercisable Unexercisable Options (#) Price (#) Date Vested (#) Vested ($) Vested (#)
- ------------------ ------------ -------------- ----------- ---------- ---------- ---------- ---------- ----------
Timothy R. Kasmoch 2,500 - - $ 1.70 2/15/16 - - -
Timothy R. Kasmoch 250,000 - - $ 2.00 12/31/11 - - -
Timothy R. Kasmoch 25,000 - - $ 1.94 7/11/19 - - -
Timothy R. Kasmoch 243,000 - - $ 2.23 7/22/19 - - -
Robert W. Bohmer 100,000 - - $ 2.80 6/13/17 - - -
Robert W. Bohmer 25,000 - - $ 1.94 7/11/19 - - -
Robert W. Bohmer 168,000 - - $ 2.23 7/22/19 - - -
James K. McHugh 6,000 - - $ 5.00 5/12/10 - - -
James K. McHugh 5,000 - - $ 1.50 12/15/10 - - -
James K. McHugh 10,000 - - $ 1.50 12/7/11 - - -
James K. McHugh 12,000 - - $ 2.10 11/11/14 - - -
James K. McHugh 50,000 - - $ 2.00 12/31/16 - - -
James K. McHugh 25,000 - - $ 1.94 7/11/19 - - -
James K. McHugh 68,000 - - $ 2.23 7/22/19 - - -
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other Rights
That Have
Name Not Vested (#)
- ------------------ --------------
Timothy R. Kasmoch -
Timothy R. Kasmoch -
Timothy R. Kasmoch -
Timothy R. Kasmoch -
Robert W. Bohmer -
Robert W. Bohmer -
Robert W. Bohmer -
James K. McHugh -
James K. McHugh -
James K. McHugh -
James K. McHugh -
James K. McHugh -
James K. McHugh -
James K. McHugh -
All options awards were made granted under the Company's current stock
option plan described under the caption "Equity Compensation Plan Information."
EMPLOYMENT AGREEMENTS
On February 13, 2007, we entered into an employment agreement with Mr.
Timothy R. Kasmoch as our President and Chief Executive Officer. Mr. Kasmoch's
employment agreement is for a two-year term commencing on February 13, 2007 and
provides for automatic renewal of successive one-year terms unless notice is
provided ninety (90) days prior to the expiration of the then current term. The
agreement provides that Mr. Kasmoch is to receive an annual base salary of
$150,000, subject to an annual increase at the discretion of the Board. In
addition, Mr. Kasmoch is eligible for an annual cash bonus in an amount to be
determined, and otherwise subject to the discretion of, the Board. Under the
agreement, this determination is to be based upon the Board's complete review of
Mr. Kasmoch's performance, including the growth and profitability of the
Company.
Generally, Mr. Kasmoch's employment agreement may be terminated by us with
or without cause or by the Employee for any reason. If the agreement is
terminated by us without cause (other than by reason of the death or disability
of Mr. Kasmoch), Mr. Kasmoch will continue to receive his base salary then in
effect for the period between the termination date and the expiration date of
the agreement. If the agreement is terminated for any other reason by either
party, Mr. Kasmoch is entitled to receive his base salary through the effective
date of the termination plus any bonus or incentive compensation which has been
earned or payable through the termination date, as provided for in the
agreement. A copy of Mr. Kasmoch's employment agreement was attached to a Form
8-K as Exhibit 10.1, filed by us on March 12, 2007.
Effective April 2, 2008, we entered into a first amendment to the
employment agreement with Mr. Kasmoch. The amendment extends the term of Mr.
Kasmoch's employment agreement for an additional two years. As a result, the
term of Mr. Kasmoch's employment agreement will expire on February 12, 2011,
instead of February 12, 2009 as provided for in the original employment
agreement. Except for the extension of the term, there were no other changes to
Mr. Kasmoch's employment agreement. The amendment was approved by our Board of
Directors at a regular meeting held on April 2, 2008. A copy of the amendment to
Mr. Kasmoch's employment agreement was attached to a Form 8-K as Exhibit 10.1,
filed by us on April 7, 2008.
In June 2007, we executed an employment agreement with Robert W. Bohmer as
our Vice-President of Business Development and General Counsel, which commenced
July 1, 2007. Mr. Bohmer's agreement is for a two-year term at $150,000 per year
plus a stock option grant of 100,000 shares. In addition, Mr. Bohmer is eligible
for an annual cash bonus in an amount to be determined. Generally, the agreement
may be terminated by us with or without cause or by the Employee for any reason.
A copy of Mr. Bohmer's employment agreement was attached to a Form 8-K as
Exhibit 10.1, filed by us on June 20, 2007.
Effective June 19, 2008, we entered into a first amendment to the
employment agreement with Mr. Bohmer. The amendment extends the term of Mr.
Bohmer's employment agreement for an additional two years. As a result, the term
of Mr. Bohmer's employment agreement will expire on July 1, 2011, instead of
July 1, 2009 as provided for in the original employment agreement. Except for
the extension of the term, there were no other changes to Mr. Bohmer's
employment agreement. The amendment was approved by our Board of Directors at a
regular meeting held on June 16, 2008. A copy of the amendment to Mr. Bohmer's
employment agreement was attached to a Form 8-K as Exhibit 10.1, filed by us on
June 20, 2008.
EQUITY COMPENSATION PLAN INFORMATION
We maintain two stock option plans for directors, executive officers and
key employees. The current plan was approved by the stockholders in May 2004
and was amended by the stockholders in June 2008 and August 2009. The plan, as
amended, authorizes the Board of Directors or a committee thereof, to grant
awards of incentive stock options and non-qualified stock options for up to a
maximum of 2,500,000 shares of Common Stock. The total number of options
granted and outstanding as of December 31, 2009 was 1,279,825, and the number of
options available for future issuance was 1,061,675. Currently, the plan is
administered by the Compensation Committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
We had outstanding 5,224,628 shares of Common Stock, $.01 par value per
share, or the Common Stock, on April 15, 2010, which constitutes the only class
of our outstanding voting securities.
FIVE PERCENT STOCKHOLDERS
At April 15, 2010, the following were the only persons known to us to own
beneficially more than 5% of the outstanding shares of Common Stock:
Name Amount and Percentage of
Title of and Address of Nature of Outstanding Shares
Class Beneficial Owner Beneficial Ownership of Common Stock
- ------------ ----------------------------------------------------- -------------------- -------------------
Cooke Family Trust (1)
90 Grande Brook Circle, #1526
Common Stock Wakefield, Rhode Island 02879 753,437 14.3%
- ------------ ----------------------------------------------------- -------------------- -------------------
<FN>
1. The shares attributed to the Cooke Family Trust include 708,887 shares owned
beneficially and 44,550 in Common Stock warrants exercisable to purchase an equal number of
shares of Common Stock. This information was derived from the Schedule 13D Amendment #4 filed
on June 13, 2008.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 15, 2010, unless otherwise
specified, certain information with respect to the beneficial ownership of our
shares of Common Stock by each person who is our director, a nominee for the
Board, each of the Named Executive Officers, and by our directors and executive
officers as a group. Unless otherwise noted, each person has voting and
investment power, with respect to all such shares, based on 5,224,628 shares of
Common Stock outstanding on the record date. Pursuant to the rules of the SEC,
shares of Common Stock which a person has the right to acquire within 60 days of
the date hereof pursuant to the exercise of stock options are deemed to be
outstanding for the purpose of computing the percentage ownership of such person
but are not deemed outstanding for the purpose of computing the percentage
ownership of any other person.
Amount and Nature of Percent of
Title of Class Name of Beneficial Owner Beneficial Ownership 1 Class
- -------------- ----------------------------------------------------------- -------------------- -----------
Common Stock Mark D. Hagans 29,150 2 0.56%
Common Stock James H. Hartung 47,250 3 0.90%
Common Stock Timothy R. Kasmoch 772,500 4 13.12%
Common Stock Thomas L. Kovacik 37,500 5 0.71%
Common Stock Carl Richard 150,100 6 2.82%
Common Stock Joseph H. Scheib 223,888 7 4.20%
Common Stock Joan B. Wills 754,687 8 14.44%
Common Stock Robert W. Bohmer 359,600 9 6.44%
Common Stock James K. McHugh 204,920 10 3.78%
Common Stock All directors and executive officers as a group (9 persons) 2,579,595 11 38.19%
<FN>
1. Except as otherwise indicated, all shares are directly owned with voting
and investment power held by the person named.
2. Represents 4,450 shares of Common Stock owned by Mr. Hagans and 24,700
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $1.94 to $3.90 per share.
3. Represents 2,610 shares of Common Stock owned by Mr. Hartung, 33,750
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $1.42 to $3.90 per share and 10,890 unregistered shares
issuable upon exercise of warrants which are currently exercisable at $2.00 per
share.
4. Represents 100,000 unregistered shares and 8,000 registered shares of
Common Stock owned by Mr. Kasmoch, 50,000 unregistered shares issuable upon
exercise of warrants which are currently exercisable at $1.85 per share and
614,500 shares issuable upon exercise of options which are currently exercisable
at prices ranging from $1.70 to $3.27 per share.
5. Represents 1,000 shares of Common Stock owned by Mr. Kovacik and 36,500
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $1.82 to $3.90 per share.
6. Represents 47,661 shares of Common Stock owned by Mr. Richard, 45,000
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $0.70 to $3.90 per share and 57,439 unregistered shares
issuable upon exercise of warrants which are currently exercisable at prices
ranging from $1.85 to $2.00 per share.
7. Represents 120,238 shares of Common Stock owned by Mr. Scheib, 48,750
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $0.70 to $3.90 per share, 600 shares owned by a family
member over which Mr. Scheib acts as custodian and 54,300 unregistered shares
issuable upon exercise of warrants which are currently exercisable at prices
ranging from $1.85 to $2.52 per share.
8. Represents 1,250 shares issuable upon exercise of options which are
currently exercisable at $2.66 per share, 753,437 shares of Common Stock owned
by the Cooke Family Trust, a more than 5% stockholder of which Ms. Wills is the
trustee. See further information in the section "Five Percent Stockholders".
9. Represents 2,600 shares of Common Stock owned by Mr. Bohmer and 357,000
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $1.94 to $3.27 per share.
10. Represents 8,920 shares of Common Stock owned by Mr. McHugh and a total
of 196,000 shares issuable upon exercise of options which are currently
exercisable at prices ranging from $1.50 to $5.00 per share.
11. Represents 295,479 shares of Common Stock owned directly by the
directors and officers, 754,037 shares owned indirectly, 1,357,450 shares
issuable upon exercise of options which are currently exercisable at prices
ranging from $0.70 to $5.00 per share and a total of 172,629 unregistered shares
issuable upon exercise of warrants which are currently exercisable at prices
ranging from $1.85 to $2.52 per share.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
None
DIRECTOR INDEPENDENCE
Although we are not subject to the listing requirements of any stock
exchange, we are committed to a board in which a majority of our members consist
of independent directors, as defined under the NASDAQ rules. The Board has
reviewed the independence of its members, applying the NASDAQ standards and
considering other commercial, legal, accounting and familial relationships
between the Directors and us. The Board has determined that all of the
Directors and director nominees are independent other than Mr. Kasmoch, who is
not an independent Director by virtue of his current position as our chief
executive officer, and Mr. Hartung, who is deemed not to be independent because
his son was employed as an executive officer of the Company within the past
three years.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
Audit services of UHY LLP ("UHY") included the audit of our annual
financial statements for 2009 and 2008, and services related to quarterly
filings with the SEC through the reporting period ended September 30 in each of
those years. Fees for these services totaled approximately $72,000 for 2009 and
$67,000 for 2008.
AUDIT RELATED FEES
There were no fees billed for the years ended December 31, 2009 and
December 31, 2008 for assurance and related services by UHY that are reasonably
related to the performance of the audit or review of our financial statements.
TAX FEES
There were no fees billed for the years ended December 31, 2009 and
December 31, 2008 for professional services rendered by UHY for tax compliance,
tax advice, and tax planning.
ALL OTHER FEES
There were no fees billed for the years ended December 31, 2009 and
December 31, 2008 for assistance on accounting related matters.
Although the Audit Committee Charter does not explicitly require it, the
Audit Committee approves all engagements of outside auditors before any work is
begun on the engagement.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit
No. Description
- --- -----------
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
N-VIRO INTERNATIONAL CORPORATION
Dated: April 30, 2010
By: /s/ Timothy R. Kasmoch
---------------------------
Timothy R. Kasmoch, Chief Executive Officer and President
(Principal Executive Officer)
POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature
appears below constitutes and appoints James K. McHugh his attorney-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
any amendments to this Form 10-K, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the date indicated.
Dated: April 30, 2010
/s/ Timothy R. Kasmoch /s/ James K. McHugh
- ------------------------- ----------------------
Timothy R. Kasmoch, Chief Executive Officer, James K. McHugh
President and Director Chief Financial Officer,
(Principal Executive Officer) Secretary and Treasurer
(Principal Financial Officer)
/s/ James H. Hartung* /s/ Mark D. Hagans *
- ---------------------- ------------------------
James H. Hartung, Director Mark D. Hagans, Director
and Chairman of the Board
/s/ Joseph H.Scheib, Director * /s/ Thomas L. Kovacik*
- --------------------------------- --------------------------
Joseph H. Scheib, Director Thomas L. Kovacik, Director
/s/ Carl Richard* /s/ Joan B. Wills*
- ------------------- ---------------------
Carl Richard, Director Joan B. Wills, Director
* by James K. McHugh, Attorney-In-Fact