##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 000-24455
 TORVEC, INC.
  New York
(State or other jurisdiction of 
incorporation or organization)
    
    16-1509512
(I.R.S. Employer Identification No.)
 1999 Mt. Read Blvd. Building 3, Rochester, New York 14615
(Address of principal executive offices and Zip Code)
 (585) 254-1100
(Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
  o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS:
 practicable date:
 Number of Shares Outstanding atClass
    
    July 31, 2010Common Stock, $.01 par value
    
    37,518,441




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##### 



INDEX
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets  June 30, 2010 (Unaudited) and December 31, 2009
    
    
    3Condensed Consolidated Statements of OperationsThree and Six Months Ended June 30, 2010 and
2009 and September 25, 1996 (Inception) through June 30, 2010 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows  Six Months Ended June 30, 2010 and 2009
and September 25, 1996 (Inception) through June 30, 2010 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements(Unaudited)
    
    
    6-15Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16-18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    19PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    20Item 1A. Risk Factors
    
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3. Defaults Upon Senior Securities
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    20-24SIGNATURE PAGE
    
    
    25EXHIBIT INDEX
    
    
    25Exhibit 31.1Exhibit 32
   2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    FINANCIAL STATEMENTS
 
 
  June 30, 2010
    
    
    December 31, 2009(Unaudited)ASSETSCurrent assets:Cash
    
    $
    444,000
    
    
    $
    41,000Prepaid expenses and other receivables
    
    
    8,000
    
    
    
    111,000Total current assets
    
    
    452,000
    
    
    
    152,000Property and Equipment:Office equipment
    
    
    68,000
    
    
    
    68,000Shop equipment
    
    
    142,000
    
    
    
    139,000Leasehold improvements
    
    
    213,000
    
    
    
    213,000Transportation equipment
    
    
    64,000
    
    
    
    106,000487,000
    
    
    
    526,000Less accumulated depreciation and amortization
    
    
    (285,000
    )
    
    
    (299,000
    )Net property and equipment
    
    
    202,000
    
    
    
    227,000Total Assets
    
    $
    654,000
    
    
    $
    379,000LIABILITIESCurrent liabilities:Notes payable, current portion
    
    $
    3,000
    
    
    $
    20,000Accounts payable
    
    
    193,000
    
    
    
    255,000Accrued liabilities
    
    
    406,000
    
    
    
    451,000Due to related party
    
    
    11,000
    
    
    
    22,000Deferred income
    
    
    28,000
    
    
    
    828,000Total current liabilities
    
    
    641,000
    
    
    
    1,576,000Deferred rent expense
    
    
    24,000
    
    
    
    29,000Notes payable, net of current portion
    
    
    
    
    
    
    9,000Total liabilities
    
    $
    665,000
    
    
    $
    1,614,000Commitments and contingenciesSTOCKHOLDERS CAPITAL DEFICITPreferred stock, $.01 par value, 100,000,000 shares authorized3,300,000 designated as Class A, Non-voting, convertible, cumulative dividend $.40 per share, per annum, June 30, 2010 and December 31, 2009: 630,851 and 655,851
shares issued and outstanding, respectively (liquidation preference $3,806,316 and $3,841,491, respectively)300,000 designated as Class B, Non-voting, convertible, cumulative dividend $.50 per share, per annum, June 30, 2010 and December 31, 2009: 77,500 and 77,500
shares issued and outstanding, respectively (liquidation preference $572,170 and $552,795, respectively)
    
    
    7,000
    
    
    
    7,000Common stock, $.01 par value, 405,000,000 shares authorized, 37,268,150 and 35,811,192 issued and outstanding, at June 30, 2010 and December 31, 2009, respectively
    
    
    373,000
    
    
    
    358,000Additional paid-in capital
    
    
    52,408,000
    
    
    
    51,613,000Deficit accumulated during the development stage
    
    
    (52,799,000
    )
    
    
    (53,213,000
    )Total Torvec, Inc. Stockholders Capital Deficit
    
    
    (11,000
    )
    
    
    (1,235,000
    )Noncontrolling Interest of Subsidiary
    
    
    
    
    
    
    Total Stockholders Capital Deficit
    
    
    (11,000
    )
    
    
    (1,235,000
    )Total Liabilities and Stockholders Capital Deficit
    
    $
    654,000
    
    
    $
    379,000
 See notes to condensed consolidated financial statements.
  3




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##### Table of Contents



Three
    
    
    Three
    
    
    
    
    
    
    
    
    
    
    September 25,Months
    
    
    Months
    
    
    Six Months
    
    
    Six Months
    
    
    1996 (Inception)ended June
    
    
    ended June
    
    
    ended June
    
    
    ended June
    
    
    through June30, 2010
    
    
    30, 2009
    
    
    30, 2010
    
    
    30, 2009
    
    
    30, 2010Revenue
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    175,000
    
    
    $
    422,000Cost of Goods Sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,000
    
    
    
    315,000Gross Profit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,000
    
    
    
    107,000Costs and expensesResearch and development
    
    
    67,000
    
    
    
    96,000
    
    
    
    168,000
    
    
    
    229,000
    
    
    
    16,023,000General and administrative
    
    
    599,000
    
    
    
    834,000
    
    
    
    1,347,000
    
    
    
    1,485,000
    
    
    
    41,200,000Asset impairments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,071,000Loss from operations
    
    $
    (666,000
    )
    
    $
    (930,000
    )
    
    $
    (1,515,000
    )
    
    $
    (1,629,000
    )
    
    $
    (58,187,000
    )Reversal of liability on cancellation of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,541,000Other Income
    
    
    29,000
    
    
    
    
    
    
    
    1,929,000
    
    
    
    
    
    
    
    2,189,000(Loss) Income Before Income Tax Benefits
    
    $
    (637,000
    )
    
    $
    (930,000
    )
    
    $
    414,000
    
    
    $
    (1,629,000
    )
    
    $
    (54,457,000
    )Income tax benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    386,000Net (Loss) Income
    
    $
    (637,000
    )
    
    $
    (930,000
    )
    
    $
    414,000
    
    
    $
    (1,629,000
    )
    
    $
    (54,071,000
    )(Loss) Income: Net loss attributable to non-controlling interest in subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,272,000Net (Loss) Income attributable to Torvec, Inc
    
    $
    (637,000
    )
    
    $
    (930,000
    )
    
    $
    414,000
    
    
    $
    (1,629,000
    )
    
    $
    (52,799,000
    )Preferred stock beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    763,000Preferred stock dividends
    
    
    55,000
    
    
    
    78,000
    
    
    
    130,000
    
    
    
    161,000
    
    
    
    1,535,000Net (Loss) Income attributable to common stockholders
    
    $
    (692,000
    )
    
    $
    (1,008,000
    )
    
    $
    284,,000
    
    
    $
    (1,790,000
    )
    
    $
    (55,097,000
    )Basic and Diluted Net (Loss) Income attributable to common stock per share
    
    
    (0.02
    )
    
    
    (0.03
    )
    
    
    0.01
    
    
    
    (0.05
    )Weighted average number of shares ofCommon stock, Basic
    
    
    36,888,000
    
    
    
    33,635,000
    
    
    
    36,530,000
    
    
    
    33,308,000Common stock , Diluted
    
    
    36,888,000
    
    
    
    33,635,000
    
    
    
    36,601,000
    
    
    
    33,308,000
 See notes to condensed consolidated financial statements.
  4




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##### Table of Contents



September 25,1996(Inception)Six months Ended
    
    
    ThroughJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010Cash flows from operating activities:Net income (loss)
    
    $
    414,000
    
    
    $
    (1,629,000
    )
    
    $
    (54,071,000
    )Adjustments to reconcile net income (loss) to net cash used in operating activities:Depreciation and amortization
    
    
    28,000
    
    
    
    33,000
    
    
    
    2,540,000Change in accrued taxes
    
    
    90,000
    
    
    
    
    
    
    
    267,000Loss on impairment of license
    
    
    
    
    
    
    
    
    
    
    1,071,000Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    19,000Gain on sale of fixed assets
    
    
    (27,000
    )
    
    
    
    
    
    
    (37,000
    )Compensation expense attributable to common stock in subsidiary
    
    
    
    
    
    
    
    
    
    
    619,000Common stock issued for services
    
    
    331,000
    
    
    
    756,000
    
    
    
    14,843,000Warrants issued for services
    
    
    45,000
    
    
    
    
    
    
    
    294,000Shares issued for future consulting services
    
    
    
    
    
    
    
    
    
    
    103,000Stockholder contribution of services
    
    
    211,000
    
    
    
    
    
    
    
    3,820,000Gain on cancellation of debt
    
    
    
    
    
    
    
    
    
    
    (1,541,000
    )Contribution to capital, Ford Truck
    
    
    
    
    
    
    
    
    
    
    16,000Common Stock issued in connection with Commercializing Event
    
    
    13,000
    
    
    
    14,000
    
    
    
    63,000Cancellation of trust shares at trust termination
    
    
    (45,000
    )
    
    
    
    
    
    
    (45,000
    )Gain on sale of Ice Engineering license
    
    
    (1,900,000
    )
    
    
    
    
    
    
    (1,900,000
    )Compensatory common stock, options and warrants
    
    
    110,000
    
    
    
    
    
    
    
    17,986,000Changes in:Prepaid expenses and other receivables
    
    
    103,000
    
    
    
    17,000
    
    
    
    153,000Deferred revenue
    
    
    
    
    
    
    
    
    
    
    (63,000
    )Deferred rent
    
    
    (5,000
    )
    
    
    (5,000
    )
    
    
    24,000Accounts payable and accrued expenses
    
    
    (162,000
    )
    
    
    198,000
    
    
    
    4,082,000Deferred compensation
    
    
    
    
    
    
    374,000
    
    
    
    Due to a related party
    
    
    (11,000
    )
    
    
    
    
    
    
    11,000Net cash used in operating activities
    
    
    (805,000
    )
    
    
    (242,000
    )
    
    
    (11,746,000
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (3,000
    )
    
    
    
    
    
    
    (363,000
    )Cost of acquisition
    
    
    
    
    
    
    
    
    
    
    (16,000
    )Proceeds from sale of license
    
    
    1,100,000
    
    
    
    
    
    
    
    1,900,000Proceeds from sale of fixed asset
    
    
    27,000
    
    
    
    
    
    
    
    37,000Net cash provided by investing activities
    
    
    1,124,000
    
    
    
    
    
    
    
    1,558,000Cash flows from financing activities:Net proceeds from sales of common stock and upon exercise of options and warrants
    
    
    110,000
    
    
    
    70,000
    
    
    
    7,144,000Net proceeds from sales of preferred stock
    
    
    
    
    
    
    
    
    
    
    3,537,000Net proceeds from sale of subsidiary stock
    
    
    
    
    
    
    
    
    
    
    234,000Proceeds from long-term borrowings
    
    
    
    
    
    
    
    
    
    
    85,000Repayments of long-term debt
    
    
    (26,000
    )
    
    
    (8,000
    )
    
    
    (106,000
    )Proceeds from stockholders loan and advances
    
    
    
    
    
    
    
    
    
    
    250,000Repayment of stockholders loan and advances
    
    
    
    
    
    
    
    
    
    
    (147,000
    )Distributions
    
    
    
    
    
    
    
    
    
    
    (365,000
    )Net cash provided by financing activities
    
    
    84,000
    
    
    
    62,000
    
    
    
    10,632,000Net (decrease) increase in cash
    
    
    403,000
    
    
    
    (180,000
    )
    
    
    444,000Cash at beginning of period
    
    
    41,000
    
    
    
    304,000Cash at end of period
    
    $
    444,000
    
    
    $
    124,000
    
    
    $
    444,000Supplemental Disclosures:Interest paid
    
    $
    1,000
    
    
    $
    2,000
    
    
    $
    28,000Income Tax Paid
    
    
    
    
    
    
    
    
    
    
    1,000Non cash investing and financing activities:Shares issued for acquisition of leasehold improvements
    
    
    
    
    
    
    
    
    
    
    166,000Issuance of common stock in settlement of payables
    
    
    35,000
    
    
    
    62,000
    
    
    
    156,000Preferred stock issued in payment of dividend
    
    
    
    
    
    
    
    
    
    
    39,000Shares issued for acquisition of Variable Gear
    
    
    
    
    
    
    
    
    
    
    19,000Issuance of common stock for license
    
    
    
    
    
    
    
    
    
    
    3,405,000Issuance of common stock, warrant and options in settlement of liabilities, except notes payable
    
    
    
    
    
    
    
    
    
    
    2,907,000Notes Payable exchanged for common stock
    
    
    
    
    
    
    
    
    
    
    50,000Advance settled with common stock
    
    
    
    
    
    
    
    
    
    
    25,000Loss on exchange of noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    232,000Shares issued for future consulting services
    
    
    
    
    
    
    
    
    
    
    103,000Issuance of common stock for a finders fee
    
    
    
    
    
    
    
    
    
    
    225,000Advance from stockholder
    
    
    
    
    
    
    
    
    
    
    250,000Contribution of FTV Ford Truck
    
    
    
    
    
    
    
    
    
    
    16,000ICE payable netted against receivable
    
    
    
    
    
    
    
    
    
    
    91,000Common stock issued in settlement of payable
    
    
    
    
    
    
    
    
    
    
    58,000Common stock issued in settlement of Patent expense
    
    
    
    
    
    
    
    
    
    
    117,000Issuance of common stock as payment for Preferred A and B dividends
    
    
    46,000
    
    
    
    
    
    
    
    123,000
 See notes to condensed consolidated financial statements.
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##### Table of Contents



NOTE A  The Company and Basis of Presentation
    NOTE B  Summary of Significant Accounting Policies
 [1]
    
    Consolidation:
  [2]
    
    Cash and Cash Equivalents:
  [3]
    
    Use of Estimates:
  [4]
    
    Income (Loss) per Common Share:
   6




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##### Table of Contents



[5]
    
    Income Taxes:
  [6]
    
    Fair Value of Financial Instruments:
  [7]
    
    Stock-Based Compensation
   [8]
    
    Revenue Recognition:
  [9]
    
    Recent Accounting Pronouncements:
  NOTE C  License from the Trustees of Dartmouth College
     7




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##### Table of Contents



NOTE D  Related Party Transactions
 [1]
    
    Effective January 1, 2008, the board of directors instituted a compensation plan for James and Keith Gleasman by which the company would compensate each of them for services performed and    inventions
and know-how transferred at the rate of $300,000 per year. Actual payment under the plan was conditioned upon a board determination that the company had the requisite cash, after the
complete funding of all ongoing projects, to make payment.
 The company did not have the requisite cash available to pay the Gleasmans compensation under this arrangement from January 1, 2008 through August 17, 2009, the date on which each of the Gleasmans
waived all rights and interest in and to the board-created compensation plan, including all rights and interest in and to the amount(s) under the plan accrued to such date. As a result of such
waiver, of the $942,000 accrued under the plan at August 17, 2009, $900,000 was reclassified to equity as a contribution of services and $42,000 accrued under the plan for payroll taxes was recorded
as a reduction to general and administrative expenses.
 For periods for which there is no compensation plan in effect for the Gleasmans, the company is required to record the estimated value of each of the Gleasmans services rendered to the company
(estimated at $300,000 each per annum) as a contribution of services under generally accepted accounting principles applicable to the company and is required under the same accounting guidance to
allocate the amount of such contribution between research and development expenses on the one hand and general and administrative expenses on the other hand. For the three and six month period ended
June 30, 2010, the company recorded $50,000 and $75,000 to research and development expense and $86,000 and $136,000 to general and administrative expense, respectively, based upon managements
estimate. For the three and six month period ended June 30, 2009, the company recorded $50,000 and $100,000 to research and development expense and $100,000 and $200,000 to general and
administrative expense, respectively, based upon managements estimate of the Gleasmans time allocation.
 Effective March 14, 2010, James Gleasman retired as the companys chief executive officer, interim chief financial officer and as a member of the board of directors. Mr. Gleasman died on May 29, 2010.
 During the year ended December 31, 2009, James Gleasman advanced the company $22,000. The outstanding balance as of June 30, 2010 is $11,000.
 [2]
    
    During the three month periods ended June 30, 2010 and 2009, the company incurred an expense of $25,350 for each period    to a member of the Gleasman family for administrative, technological and
engineering consulting services. During the six month periods ended June 30, 2010 and 2009, the company incurred an expense of $37,050 and $50,700, respectively, to the same person. The related
payments consisted of cash of $25,350 and $0 for the three month periods ended June 30, 2010 and 2009, respectively, with the balance paid in business consulting common shares. For the six month
periods ended June 30, 2010 and 2009, the related payments consisted of cash of $33,150 and $0, respectively, with the balance paid in business consulting shares.
 [3]
    
    During the three month periods ended June 30, 2010 and 2009, the company incurred an expense of $23,270 for each period to a family member of its general counsel for engineering services rendered    to
the company. During the six month periods ended June 30, 2010 and 2009, the company incurred an expense of $41,170 and 46,540, respectively, to the same person. The related payments consisted of
cash of $23,270 and $0 for the three month periods ended June 30, 2010 and 2009, respectively, with the balance paid in business consulting common shares. For the six month periods ended June 30,
2010 and 2009, the related payments consisted of cash of $30,430 and $0, respectively, with the balance paid in business consulting shares.
 [4]
    
    On September 14, 2007, the company moved its executive offices and engineering operations from Pittsford and Webster, New York to a Rochester, New York facility, which includes both manufacturing and
executive office space. The Rochester facility is owned by a partnership, in which Asher J. Flaum, a company director is a partner. On April 28, 2008, the companys board of directors approved the
terms of a lease for these premises and such lease was executed on April 29, 2008. (See Note F 2).
 In February 2010, the company made a one-time payment in shares for payments of additional rent. The company charged approximately $20,000 to general and administrative expense.
  8




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##### Table of Contents



NOTE E  Stockholders Capital Deficit
 [1]
    
    Common Stock
 During the three and six month periods ended June 30, 2010, the company sold 350,167 and 360,167
restricted common shares for proceeds of $105,050 and $110,050, respectively, to accredited
investors in a series of private placements.
 During the three and six month periods ended June 30, 2009, the company sold 64,103 restricted
common shares for proceeds of $50,000 to accredited investors in a series of private placements.
 For the three and six month periods ended June 30, 2010, the company issued 0 and 22,756
restricted common shares to an accounting firm in partial payment for services rendered in the
amount of $9,785. For the three and six month periods ended June 30, 2009, the company issued
5,000 restricted common shares to an accounting firm in partial payment for services rendered in
the amount of $4,000.
 [2]
    
    Class A Preferred stock:
 In January 2002, the company authorized the sale of up to 3,300,000 shares of its Class A Non
Voting Cumulative Convertible Preferred Stock (Class A Preferred) at $4.00 per share. Each
share of Class A Preferred is convertible into one share of voting common stock and entitles the
holder to dividends, at $.40 per share per annum. The holder has the right to convert after one
year subject to board approval.
 Since its designation, the company has sold an aggregate 765,512 Class A Preferred shares for
aggregate proceeds of $3,062,048. The company has issued an aggregate 198,349 common stock
warrants in connection with the sale of Class A Preferred to the holders of the Class A
Preferred, all exercisable over a 10 year period at $.01 per common share. 182,099 of these
warrants have been exercised through June 30, 2010.
 Since its designation, Class A Preferred holders have converted an
aggregate 146,000 Class A Preferred shares into the companys common
stock on a one for one basis through June 30, 2010. For the three and six
month periods ended June 30, 2010, 25,000 Class A Preferred shares were
converted. For the three and six month periods ended June 30, 2009,
51,250 Class A Preferred shares were converted.
 Upon conversion, Class A Preferred shareholders are entitled to receive,
in accordance with the terms of the Class A Preferred, dividends payable
either in cash or in Class A Preferred shares, at discretion of the board
of directors, calculated at the rate of 10 percent per annum. At times,
the companys board may elect to settle dividends through the issuance of
common stock in lieu of cash. The number of common shares issued is based
on the market price of such stock at the time of conversion. Class A
Preferred shares paid as dividends do not participate in cumulative
dividend rights.
 Through June 30, 2010, an aggregate of $164,993 dividends have been paid
on the Class A Preferred by the issuance of 16,389 Class A Preferred shares and 77,499 common shares. 11,534 common shares were isssued as
dividends in the three and six month periods ended June 30, 2010. 65,965
common shares were issued as dividends in the three and six month
periods ended June 30, 2009.
 At both June 30, 2010 and 2009, dividends payable upon conversion of
619,512 outstanding shares of Class A Preferred amounted to approximately
$1,283,000 and $1,114,000, respectively. Through June 30, 2010, the
company has issued 11,339 Class A Preferred shares as dividends which are
excluded from the accumulated dividend payable.
 [3]
    
    Class B Preferred stock:
 On October 21, 2004, the company authorized the sale of up to 300,000 shares of its Class B
Non-Voting Cumulative Convertible Preferred Stock (Class B Preferred) at $5.00 per share. Each
share of Class B Preferred pays cumulative dividends at $.50 per share per annum and is
convertible into either one share of voting common stock of the company or one share of common
stock of Iso-Torque Corporation under certain circumstances. The holder has the right to convert
after one year subject to Board approval. Since its designation, the company has sold an aggregate 97,500 Class B
Preferred in a number of private placements for proceeds of approximately
$487,500.
 Since its designation, 20,000 Class B Preferred have been converted on a
one for one basis into 20,000 shares of common stock. For the three and
six months ended June 30, 2010 and 2009, no Class B Preferred were
converted.
 Upon conversion, Class B Preferred shareholders are entitled to receive, in accordance with the
terms of the Class B Preferred, dividends payable either in cash or in Class B Preferred shares,
at the discretion of the board of directors, calculated at the rate of 10 percent per annum. At
times, the companys board may elect to settle dividends through the issuance of common stock in
lieu of cash. The number of common shares issued is based on the market price of such stock at
the time of conversion. Class B Preferred shares paid as dividends do not participate in
cumulative dividend rights.
  9




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Through June 30, 2010, aggregate $24,082 dividends have been paid on the Class B Preferred
by the issuance of 30,103 common shares. No dividends were paid in the three and six month
periods ended June 30, 2010 and 2009.
 At June 30, 2010 and 2009, dividends payable upon the conversion of 77,500 shares of Class B
Preferred outstanding amounted to approximately $185,000 and $146,000, respectively.
 [4]
    
    Stock-Option Plan:
 In December 1997, the board of directors adopted and on May 28, 1998, the companys shareholders
ratified the creation of a Stock Option Plan (the Option Plan) which provides for the grant of
up to 2,000,000 common stock options to officers, directors and consultants who are eligible to
receive incentive, nonqualified or reload stock options. Options granted under the Option Plan
are exercisable for a period of up to ten years from the date of grant at an exercise price
which is not less than the per share trading price of the underlying common stock on the date of
grant, except that the exercise period for options granted to a greater than 10% shareholder may
not exceed five years and the exercise price may not be less than 110% of such trading price per
share on the date of grant.
 The following table represents information relating to stock options outstanding at June 30, 2010:
 Options Outstanding and ExercisableWeighted
    
    
    WeightedAverage
    
    
    Average
    
    
    AggregateExercise
    
    
    Remaining Life
    
    
    IntrinsicShares
    
    Price
    
    
    in Years
    
    
    Value641,848
    
    
    4.79
    
    
    
    3.22
    
    
    $
    0
 By its terms, the companys Option Plan terminated as to the grant of future options on May 27,
2008. Consequently, no additional stock options will be granted under the Option Plan, although
outstanding options remain available for exercise in accordance with their terms. No options
were exercised for the three and six month periods ended June 30, 2010 and 2009.
 As of June 30, 2010, the company did not have any unrecognized stock compensation related to
unvested awards.
 [5]
    
    Business Consultants Stock Plan:
 For the three month periods ended June 30, 2010 and 2009, the company issued 443,400 and 506,998
common shares to business consultants under the Business Consultants Stock Plan and charged
$169,000 and $401,000 to operations in connection with these share issuances. For the six month
periods ended June 30, 2010 and 2009, the company issued 1,075,819 and 944,392 common shares to
business consultants under the Plan and charged operations $463,000 and $770,000 in connection
with these services including stock issued in connection with commercializing events. Share
issuances are valued generally on the date immediately prior to the date of issuance, except for shares issued to pay invoices which are valued as of the invoice date and except for shares
issued under the Nonmanagement Directors Plan which are valued as of the end of each month
effective February 17, 2009.
 On March 23, 2010, the board of directors approved an increase in the number of common shares
reserved for issuance under the companys Business Consultants Stock Plan by 5,000,000 common shares. These shares were registered under the Securities Act of 1933 by the filing of a
registration statement on Form S-8 with the Securities and Exchange Commission which became
effective on April 1, 2010.
 On May 24, 2010, 88,857 unallocated business consultant shares were returned by the
consultants trust to the company for cancellation on the companys stock record books. The
company credited the fair value of the shares to general and administrative expense for
approximately $45,000. The related liability was satisfied through cash payments.
 As of June 30, 2010, 5,423,020 shares are available for future issuances under the Business
Consultants Stock Plan.
 [6]
    
    Nonmanagement Directors Plan:
 On October 1, 2004, the board of directors approved a Nonmanagement Directors Plan pursuant to
which each nonmanagement director is entitled to receive, if certain conditions are met, on an
annual basis for services rendered as a director, warrants to purchase 12,000 shares of the
companys common stock at $.01 per share. In addition, the chairman of the audit committee is
entitled to receive, on an annual basis for services rendered as chairman, additional warrants
for 5,000 shares of the companys common stock at $.01 per share.
 Due to changes made to the Nonmanagement Directors Plan described below, the company did not
issue any warrants under the plan for the three and six month periods ended June 30, 2010 and
2009. No previously issued warrants were exercised during the three and six month periods ended
June 30, 2010 and 2009.
  10




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On October 10, 2007, the Nonmanagement Directors Plan was modified to (1) eliminate the
issuance of warrants and replace the payment with either cash or common shares, at the
discretion of the board of directors, and (2) increase the fees payable to the companys
nonmanagement directors. As adjusted, each nonmanagment director (a total of 4 persons) would
receive $26,460 for board and committee service per annum. The chairman of the audit committee
would receive an additional $12,600 per annum and the chairman of the nominating committee would
receive an additional $5,355 per annum.
 The Nonmanagement Directors Plan was also modified to provide that the chairman of the board,
chairman of the executive committee and chairman of the governance and compensation committee,
one person, will be paid an aggregate $110,000 per annum for all services rendered by him as a
director and in such capacities. The effective date for these adjustments to the plan was
July 1, 2007.
 On April 28, 2008, the plan was again modified to increase the compensation of the person
serving as chairman of the board, chairman of the executive committee, chairman of the
governance and compensation committee (one person) to $125,000 per annum.
 On April 28, 2008, the board of directors approved a one-time payment to its chairman of the
governance and compensation committee of $46,000 for special services rendered in connection
with required compliance under the Sarbanes-Oxley Act. This amount was paid by the issuance of
19,167 common shares valued as of the closing price on April 28, 2008. The company charged
$46,000 to operations in connection with such services.
 For the three month periods ended June 30, 2010 and 2009, the company issued 182,400 and 93,885
common shares under the plan to satisfy the payables for services rendered by the Companys
non-management directors with a value of $68,000 and $62,000 for such periods, respectively.
$45,000 and $41,000 were charged to operations for the three month periods ended June 30, 2010
and 2009, and $23,000 and $21,000 were a settlement of fees payable as of March 31, 2010 and
2009, respectively.
 For the six month periods ended June 30, 2010 and 2009, the company issued 345,939 and 165,875
common shares under the plan to satisfy the payables for services rendered by the Companys
non-management directors with a value of $144,000 and $124,000 for such periods, respectively.
$109,000 and $62,000 were charged to operations for the six month periods ended June 30, 2010
and 2009, and $35,000 and $62,000 were a settlement of fees payable as of December 31, 2009 and
2008, respectively.
 [7]
    
    Business, Financial and Engineering Consultants:
 Through June 30, 2010, the company has issued 1,689,583 common stock warrants to various
business, financial and engineering consultants, of which 94,583 have been exercised for
proceeds of $918 and 445,000 cancelled in exchange for the participation of certain engineers in
the companys 2008 Commercializing Event Plan. (Note E [10]).
 On March 28, 2008, the board approved the issuance of an aggregate 195,000 warrants, immediately
exercisable at $5.00 per common share until 2016, to two consultants who elected not to
participate in the companys 2008 Commercializing Event Plan. The company recorded a charge in
the amount of $249,000 to general and administrative expense.
 On February 17, 2010, the company issued 100,000 common stock warrants vesting immediately and
exercisable for ten years at an exercise price of $2.50 per common share to an adviser. The
company recorded a charge of $45,000 to general and administrative expenses using the
Black-Scholes inputs to calculate the value of the warrants. None of these warrants have been
exercised through June 30, 2010 (Note E [8(m)]).
 [8]
    
    Warrants:
 As of June 30, 2010, outstanding warrants to acquire shares of the companys common stock are as
follows:
 Number of
    
    
    Number ofExercise
    
    
    
    
    Shares
    
    
    SharesPrice
    
    
    Expiration
    
    Outstanding
    
    
    Exercisable(a)
    

    
    (a)
    
    125,000
    (a)
    
    
    $
    .75
    
    
    None
    
    
    500,000
    (b)
    
    
    $
    .01
    
    
    2015/2016
    
    
    54,500
    (c)
    
    
    54,500$
    .01-5.00
    
    
    2010/2016
    
    
    39,000
    (d)
    
    
    39,000$
    5.00
    
    
    2015
    
    
    255,000
    (e)
    
    
    255,000$
    .01
    
    
    2010
    
    
    0
    (f)
    
    Exercised$
    .01
    
    
    2011
    
    
    3,750
    (g)
    
    
    3,750$
    1.00
    
    
    2011
    
    
    20,500
    (h)
    
    
    20,500$
    3.27
    
    
    2016
    
    
    400,000
    (i)
    
    
    400,000$
    3.75
    
    
    2016
    
    
    200,000
    (j)
    
    
    200,000$
    5.00
    
    
    2017
    
    
    50,000
    (k)
    
    
    50,000$
    5.00
    
    
    2017
    
    
    100,000
    (l)
    
    
    100,000$
    2.50
    
    
    2017
    
    
    100,000
    (m)
    
    
    100,000
 (a)
    
    Exercisable only if the company has an IPO and exercisable at the IPO price five years from IPO. Through
the quarter ended June 30, 2010, the company has not conducted an IPO.  11




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(b)
    
    On April 15, 2002, the company issued 1,000,000 warrants to
purchase common stock at prices ranging from $.30 to $.75 to its
then chairman of the board of directors and chief executive
officer. Of the total warrants, 250,000 were exercisable at $.30,
and 250,000 were exercisable at $.50 on the date the then board
elected the executive to the board and named him chief executive
officer. During the year ended December 31, 2002, 250,000
warrants were exercised for $.30 per share, resulting in proceeds
of $75,000. During the year ended December 31, 2003, 250,000
warrants were exercised for $.50 per share, resulting in proceeds
of $125,000. The remaining 500,000 warrants are exercisable upon
the execution by the company of a binding agreement for the sale,
transfer, license or assignment for value of any and/or all of
its companys automotive technology at $.75 per share. The
company will record a charge representing the fair value of the
warrants when the warrants become exercisable.(c)
    
    The company has issued an aggregate 123,500 warrants at an
exercise price of $0.01 to its nonmanagement directors for
services rendered to the board under its Nonmanagement Directors
Stock Plan prior to its amendment on October 13, 2006. No further
warrants are issuable under the Plan as modified by the board of
directors on October 13, 2006 (See Note E [6]). An aggregate
69,000 warrants have been exercised for approximately $630 in
proceeds. No warrants were exercised during the three and six
month periods ended June 30, 2010.(d)
    
    In 2005, the company issued 12,000 warrants to a consultant,
immediately exercisable at .01 per common share. During 2005,
3,000 warrants were exercised for proceeds of $30. In 2006, the
company issued 30,000 warrants to consultants exercisable
immediately for a ten year term at $5.00 per common share. None
of these warrants were exercised during the three and six month
periods ended June 30, 2010 and 2009.(e)
    
    During 2005, the company issued 210,000 warrants to certain
engineering and administrative consultants, exercisable
immediately for a ten year term at $5.00 per common share. During
2006, the company issued 295,000 warrants to certain engineering
consultants exercisable over a ten year term at $5.00 per common
share, but only exercisable if the company sells, licenses or
otherwise transfers one or more technologies for value. The
engineering consultants holding 445,000 of these warrants agreed
to cancel them in the fourth quarter of 2008 in exchange for
their participation in the companys Commercializing Event Plan.
On March 28, 2008, the company issued an aggregate 195,000
warrants exercisable until 2016 at $5.00 per common share to two
consultants who elected not to participate in the companys 2008
Commercializing Event Plan. The company recorded a charge of
$249,000 to general and administrative expense. None of these
warrants were exercised during the three and six month periods
ended June 30, 2010 and 2009.(f)
    
    During 2005, the company issued 6,000 warrants to a
consultant, exercisable immediately for a five year term at .01
per common share. All 6,000 warrants were exercised on a cashless
basis on May 3, 2010.(g)
    
    During 2005, the company issued 62,500 warrants to investors
in connection with their purchase of 62,500 Class A Preferred,
immediately exercisable at $.01 per common share. During 2006,
the company issued 135,849 warrants to investors along with their
purchase of 162,000 Class A Preferred and 20,000 Class B
Preferred, all immediately exercisable at $.01 per common share.
Through December 31, 2009, an aggregate 194,599 of these warrants
have been exercised for proceeds of approximately $1, 383. No
additional warrants were exercised in the three and six month
periods ended June 30, 2010.(h)
    
    During 2006, one investor purchased 20,500 warrants
exercisable immediately for a five year term at $1.00 per common
share for a purchase price of $2,000. None of these warrants have
been exercised through June 30, 2010.(i)
    
    During 2006, the company issued 400,000 warrants immediately
exercisable for ten years at an exercise price of $3.27 per
common share to a business consultant. None of these warrants
have been exercised through June 30, 2010.(j)
    
    During 2006, the company issued 200,000 warrants immediately
exercisable for ten years at an exercise price of $3.75 per
common share to a former governmental affairs consultant. None of
these warrants have been exercised through June 30, 2010.(k)
    
    During 2007, the company issued 50,000 warrants exercisable
for ten years at $5.00 per common share upon the happening of a
commercializing event. The warrants were issued to a consultant
who assisted the company to potentially place its products in
various state school bus programs. The company recorded a charge
of $249,000 to general and administrative expenses. None of these
warrants have been exercised through June 30, 2010.(l)
    
    During 2007, the company issued 100,000 warrants immediately
exercisable for ten years at an exercise price of $5.00 per
common share to two engineering consultants in connection with
the companys engagement to furnish constant velocity joints to a
military contractor. The company recorded a charge of $401,000 to
general and administrative expenses. None of these warrants have
been exercised through June 30, 2010.(m)
    
    On February 17, 2010, the company issued 100,000 common stock
warrants exercisable for ten years at an exercise price of $2.50
per common share to an adviser. The company recorded a charge of
$45,000 to general and administrative expenses using the
Black-Scholes inputs shown below to calculate the value of the
warrants. None of these warrants have been exercised through
June 30, 2010.  12




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##### Table of Contents



For the Six Months Ended
June 30, 2010
Black-Scholes Assumptions
 Term
    
    10.00 yearsExpected forfeiture rate
    
    
    -0-
    %Risk-free rate
    
    
    3.74
    %Volatility
    
    
    122.25
    %Dividend yield
    
    
    0.0
    %
 The following summarizes the activity of the companys outstanding warrants for the six month
period ended June 30, 2010:
 WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicWarrants
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at January 1, 2010
    
    
    1,753,750
    
    
    $
    2.84
    
    
    6.65 years

        
    $
    Granted
    
    
    100,000
    
    
    
    2.50
    
    
    9.77 years
    
    
    
    Exercised
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    Canceled or expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at June 30, 2010
    
    
    1,847,750
    
    
    $
    2.83
    
    
    6.47 years
        
    $
    22,865Exercisable at June 30, 2010
    
    
    1,222,750
    
    
    $
    3.68
    
    
    6.47 years
        
    $
    22,865
 [9]
    
    Shares Issued to Trust for Consulting Services:
 On September 17, 2005, certain consultants created a trust to enable them to sell business
consultants shares issued to them by the company under their consultant agreements. The company
issues business consultant common shares to the trust from time to time, contingent on the
performance of services by the consultants under such consultant agreements. The company
values the shares issued to the trust using the closing market price on the date immediately
prior to the date of issuance.
 During the three and six month periods ended June 30, 2010, the company issued 0 and 104,167
business consultants shares of common stock valued at $0 and $50,000, respectively, to the
trust to satisfy the payment of invoices submitted by the consultants for services rendered
during such periods. In May, 2010, the consultants elected to terminate the trust and on May
24, 2010, 88,857 business consulting shares which were unallocated with respect to the payment
of invoices as of the termination were returned to the company and cancelled on the companys
record books. The related liability was satisfied through cash payments.
 During the three and six month periods ended June 30, 2009, the company issued 188,500 and
331,055 business consultants shares of common stock valued at $143,700 and $281,150,
respectively, to the trust to satisfy the payment of invoices submitted by the consultants for
services rendered during such periods.
 [10]
    
    Commercializing Event Plan:
 On October 13, 2006, the board of directors adopted a Commercializing Event Plan (2006 Event
Plan) designed to reward the companys directors, executives and certain administrative
personnel for the successful completion of one or more commercializing events. No payments were
made under the 2006 Event Plan and the 2006 Event Plan was terminated on October 31, 2007.
 On October 31, 2007, the board of directors adopted a new 2007 Commercializing Event Plan (the
2007 Event Plan). The 2007 Event Plan provides that upon the happening of any commercializing
event, each of the directors and executive officers of the company as well as certain
management personnel shall be entitled to share equally in 6% of the gross amount derived or to
be derived from the commercializing event transaction(s). Similarly, certain of the companys
engineers are entitled to share equally in 2% of such gross amount. The plan provides for
payment to be made with the issuance of common shares.
 In order to actually receive payment under the 2007 Event Plan, each participant must be both
a) employed by, a consultant to or associated with the company and b) judged to be in good
standing with the company at the time payment is made, all as determined by the board as of
the date of the boards authorization of payments to be made.
 During the three and six month periods ended June 30, 2010, the company issued 0 and 32,077
common shares under the 2007 Event Plan and recorded charges of $0 and $13,000, respectively.
For the three and six month periods ended June 30, 2009, the company issued 4,669 common shares
under the 2007 Event Plan and recorded charges of $14,000.
  13




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##### Table of Contents



The company accounts for the settlement of its commission arrangements to non-employee
consultants, directors, executives and certain administrative personnel with the issuance of
its business consulting shares under ASC 505-50 (Previously known as: FASB Statement 123(R)
Share Based Payment), provided that there are sufficient shares under the business
consultants plan. Under ASC 505-50, the company measures commission arrangements at the fair
value of the equity instruments issued. In the event that there are insufficient shares
available to settle the obligation, the company will follow the provisions of FASB ASC 815-40
(Prior authoritative literature: EITF 00-19 Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Companys Own Stock). Under ASC 815-40, the company
will record a liability instrument for the resulting changes in fair value from the date due to
the end of each reporting period until such liability is satisfied.
 In the fourth quarter of 2007, certain engineering consultants agreed to cancel 445,000
warrants issued in 2005 and 2006 in exchange for their participation in the 2007 Event Plan.
The exchange of the warrants for the participation rights in a commercialization event did not
result in an accounting charge. The warrants at the date of the exchange were considered to
have no value because the underlying condition for vesting the warrants was not satisfied. The
company determined that the fair value of the rights to be de minimis at the date of the
exchange based on managements estimate (Note: E [8]).
 On March 28, 2008, the board of directors approved the grant of an aggregate 195,000 common
stock warrants exercisable until December 1, 2016 at $5.00 per share to two engineering
consultants in lieu of their participation in the 2007 Event Plan. The company valued the
warrants at $249,000 using the Black-Scholes option/pricing model and charged operations.
 NOTE F  Commitments and Other Matters
 [1]
    
    Consulting Agreements:
 On February 6, 2009, the company signed a consulting agreement with a strategic planning,
government relations, marketing and public relations firm to render consulting services for a
one year period. Under the agreement, the company is obligated to pay the consulting firm
$20,000 per month, except that, until the consultant has assisted the company in securing an
agreed-upon level of governmental and /or private funding, the companys monthly obligation is
limited to $4,000. On February 19, 2010, the agreement with the consulting firm was renewed for
an additional six months under the same terms. As of June 30, 2010, no funding had been
obtained under the extended agreement and as a result, the companys monthly obligation under
the extended agreement is $4,000. Payments to the consultant firm are charged to operations.
This agreement will terminate by its terms on August 19, 2010.
 [2]
    
    Leases:
 The company leases a facility located at 1999 Mount Read Blvd., Rochester, New York. On
April 29, 2008, the company executed a five-year lease for the premises (with a December 1,
2007 lease commencement date) which provides for rent to be paid at a rate of $5,687 per month
($68,244 per annum) and in addition, for the payment of the companys proportionate share of
yearly real estate taxes and yearly common area operating costs.
 Rental payments and certain other payments due to the landlord may be paid in common shares of
the company, based upon the closing price per share on the 15th day of the calendar month
immediately prior to the date any installment payment of monthly rent or other payment is due
landlord.
 Rent expense for the three and six months ended June 30, 2010 and 2009 was $15,000 and $29,600
and $15,000 and $30,000, respectively. For the three and six months period ended June 30, 2010,
the company issued 54,787 and 103,974 business consultant common shares in payment for rent.
For the three and six months ended June 30, 2009, the company issued 53,655 and 83,680 business
consultant common shares in payment for rent.
 NOTE G  Litigation
     14




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##### Table of Contents



NOTE H  Royalty Agreement
  NOTE I  Subsequent Events
   st th
       15




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##### Table of Contents



Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 (a)
    
    Overall Business Strategy
 From its inception in 1996, the companys overall business plan has been to design, develop,
build and commercialize its automotive technologies, including its hydraulic pump/motor system,
infinitely variable transmissions, Iso-Torque® differential, constant velocity joint
technology and full terrain vehicle.
 As a result of its development efforts, three of the companys technologies are ready for
immediate production and commercialization on a design-specific basis:
 ®  ®
 In managements opinion, each of these products represents technological breakthroughs that
ultimately benefit both the end user and the environment.
 The companys current focus is to take its products to the market as swiftly as possible, to
maximize return on its technologies. Towards this end, Torvec has created products and developed
specific marketing strategies for each product. Each product has an immediate niche/custom
market component and a mass market component, in order to fully capitalize on its technological
innovations.
 Torvec is currently seeking to ally itself with one or more strategic partners in terms of
capital infusion and/or manufacturing /distribution capabilities to penetrate each defined
product market as expeditiously as possible for all parties involved.
 IsoTorque® Differential
 Our IsoTorque Differential is an evolution in differential design, allowing for maximum traction
without interfering with differentiation, resulting in improved performance, handling and
safety. Evaluations by four separate racing teams have all shown a reduction in lap times by one
second per lap with installation of the IsoTorque. The IsoTorque differential allows for optimal
utilization of engine power by perfecting balancing the torque to each wheel according to the
amount of traction under each wheel.
 Full Terrain Vehicle®
 The Full Terrain Vehicle (FTV®) is an environmentally sensitive tracked vehicle that is capable
of achieving speeds up to 60 mph, while maintaining the high traction and load capability of a
tracked vehicle. This makes the FTV ideally suited for off-road application in the military, aid
relief, agriculture, utilities, forestry, fire & rescue, and construction industries, among
others.
 The FTV has both off-and-on highway capabilities with rubber tracks that do not damage paved
highways. The vehicles light weight yields light track pressure (less than 3.0 PSI when fully
loaded) thus avoiding soil erosion and compaction. It allows for driver-friendly operation
through the use of a steering wheel. The vehicle is maneuverable, pivoting 360° on its center.
Traction surpasses that of a 4WD on any terrain, and the patented Steer-Drive is not used in any
other track vehicle (most others employ either traditional skid steering or hydrostatics).
 Torvec delivered the FTV to Tyndale Air Force base in Florida on February 9, 2010 with the
vehicle meeting all specifications to serve as the USAFs Advance Combat Firefighting Vehicle
Platform.
 Infinity Variable Transmission
 Torvecs primary foray into green technology is its Infinity Variable Transmission (IVT). In
its most recent testing in a Dodge ram 3/4 ton truck, Torvec obtained gains of 17% in fuel economy
compared to a 4 speed automatic in the New York City Cycle EPA test. Emission data has also been
collected comparing the IVT to the stock automatic transmission demonstrating a steep drop in
hydrocarbon emissions, as well as drops in carbon dioxide, free carbon, and nitrogen oxide
emissions.
  16




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##### Table of Contents



(b)
    
    Results of Operations
 The company did not generate revenue in the three and six month period ended June 30, 2010.
Revenue net of cost of goods sold for the three and six month period ended June 30, 2009 was $0
and $85,000, respectively. The revenue generated was due to a sale of a prototype , which was a
non recurring event. Other income for the three and six month period ended June 30, 2010 was
$29,000 and $1,929,000, respectively. This was due to the sale of assets and the settlement of
license litigation, respectively. There was $0 of other income for the comparative prior three
and six month periods ended June 30, 2009.
 Research and development expenses for the three month period ended June 30, 2010 amounted to
$67,000 as compared to $96,000 for the three month period ended June 30, 2009. Research and
development expenses for the six month period ended June 30, 2010 amounted to $168,000 as
compared to $229,000 for the six month period ended June 30, 2009. The decrease of $29,000 and
$61,000 in the three and six month comparative is due to decreased cost associated with the
allocation of the companys technology expenses. Expenses are generally directly attributable to
a project and there has been a decrease in the research and development of projects. The company
policy is to allocate a portion of the Gleasmans contributed services to research and
development. Management expects research and development to continue in this trend of decrease
expense in comparison to prior periods due to the emphasis on commercialization.
 General and administrative expense for the three month period ended June 30, 2010 amounted to
$599,000 compared to $834,000 for the three month period ended June 30, 2009. General and
administrative expenses for the six month period ended June 30, 2010 amounted to $1,347,000 as
compared to $1,485,000 for the six month period ended June 30, 2009. This decrease of $235,000
and $138,000 in the three and six month comparative is due, in large part, to the decreased
spending on consulting services.
 The net loss for the three month period ended June 30, 2010 was $637,000 as compared to the three
month period ended June 30, 2009 of a net loss of $930,000. The net income for the six month
period ended June 30, 2010 was $414,000 as compared to a net loss of $1,629,000 for the six month
period ended June 30, 2009. The three month period comparative decrease of net loss of $293,000
is due to a decrease in expenses. Research and development expense decreased by $29,000 due to
the position left vacant by Jim Gleasman and the general and administrative expense decreased by
$235,000 largely due to the decrease in professional and consulting expenses. The six month
period result was a net income of $414,000 compared to a net loss of $1,629,000 for the six month
period ended June 30, 2009, principally related to the gain on sale of Ice Engineer of $1,900,000
during the first quarter of fiscal 2010.
 (c)
    
    Liquidity and Capital Resources
 The companys business activities during the six month periods ended June 30, 2010 were funded
principally through the receipt of $1,100,000 in settlement of litigation with Ice Engineering,
LLC, the receipt of approximately $103,000 representing New York State corporation income tax
refundable credits, recognized in prior years, allocable to certain research and development
expenses incurred in the 2008 tax year, and the receipt of approximately $110,000 from the sale
of approximately 360,167 restricted common shares to accredited investors.
 For the six month periods ended June 30, 2010 and 2009, net cash used in operating activities
$805,000 and $242,000, respectively. The increase of $563,000 was due in large part to the
availability of cash to pay consultants instead of payment in the issuance of common shares.
 For the six month periods ended June 30, 2010 and 2009, cash provided by investing activities
amounted to $1,124,000 and $0, respectively. This increase was due to the receipt of $1,100,000
in settlement of litigation with Ice Engineering LLC.
 For the six month periods ended June 30, 2010 and 2009, cash provided by financing activities
amounted to $84,000 and $62,000, respectively. This increase was due in large part to higher
sales of common stock.
 For the six month period ended June 30, 2010, the company issued 1,075,819 and 944,392 common
 shares to business consultants under the Business Consultants Stock Plan in exchange for ongoing
business advisory services, engineering services, legal fees, including patent services,
internal accounting services and other corporate services. As of June 30, 2010, 5,423,020
shares are available for future issuances under the Business Consultants Stock Plan.
 Effective January 1, 2008, the board of directors instituted a compensation plan for James and
Keith Gleasman by which the company would compensate each of them for services performed and
inventions and know-how transferred at the rate of $300,000 per year. Actual payment under the
plan was conditioned upon a board determination that the company had the requisite cash, after
the complete funding of all ongoing projects, to make payment.
 The company did not have the requisite cash available to pay the Gleasmans compensation under
this arrangement from January 1, 2008 through August 17, 2009, the date on which each of the
Gleasmans waived all rights and interest in and to the board-created compensation plan,
including all rights and interest in and to the amount(s) under the plan accrued to such date.
As a result of such waiver, of the $942,000 accrued under the plan at August 17, 2009, $900,000
was reclassified to equity as a contribution of services and $42,000 accrued under the plan for
payroll taxes was recorded as a reduction to general and administrative expenses.
 For periods for which there is no compensation plan in effect for the Gleasmans, the company is
required to record the estimated value of each of the Gleasmans services rendered to the company
(estimated at $300,000 each per annum) as a contribution of services under generally accepted
accounting principles applicable to the company and is required under the same accounting
principles to allocate the amount of such contribution between research and development expenses
on the one hand and general and administrative expenses on the other hand.
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##### Table of Contents



Effective March 14, 2010, James Gleasman retired as the companys chief executive
officer, interim chief financial officer and as a member of the board of directors. Mr. Gleasman
passed away on May 29, 2010.
 For the three and six month period ended June 30, 2010, the company recorded $25,000 and $75,000
to research and development expense and $50,000 and $136,000 to general and administrative
expense, based upon managements estimate of the Gleasmans time allocation.
 For the period from September 1996 (inception) through June 30, 2010, the company has
accumulated a deficit of $52,799,000, and at June 30, 2010 has a working capital deficit of
$189,000 and stockholders capital deficit of $11,000. The company has been dependent upon
equity financing and advances from stockholders to meet its obligations and sustain operations.
The companys efforts are principally devoted to the ongoing refining of its technologies and
commercializing its products. Management believes that based upon its current cash position and
its projected cash flows from its business operations, the company will be able to meet its
anticipated cash requirements through June 30, 2011. However, if adequate funds are not
available, the company may need to downsize operations, incur debt or raise additional capital.
There can be no assurance that the company will be successful in raising additional capital or
incur debt when needed on terms acceptable to the company. These conditions indicate that we may
not be able to continue operations as a going concern as we may be unable to generate the funds
necessary to pay our obligations in the ordinary course of business. The accompanying financial
statements do not include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.
 (d)
    
    Critical Accounting Policies
 Revenue Recognition:
 The companys terms provided that customers are obligated to pay for products sold to them
within a specified number of days from the date that title to the products is transferred to the
customers. The companys standard terms are typically net 30 days. The company recognizes
revenue when transfer of title occurs and risk of ownership passes to a customer at the time of
shipment or delivery depending on the terms of the agreement with a particular customer. The
sale price of the companys products is substantially fixed and determinable at the date of the
sale based upon purchase orders generated by a customer and accepted by the company. To the
extent that collectability of the receivable is not assured, the company follows the cost
recovery approach. Accordingly, amounts collected will be accounted for as a reduction of costs.
 Share-based Payments
 The company accounts for the settlement of its commission arrangements to non-employee
consultants, directors, executives and certain administrative personnel with the issuance of its
business consulting shares under ASC 505 (Previously known as FASB Statement 123®
Share Based Payment), provided that there are sufficient shares available under the business
consulting plan. Under ASC 505, the company measures commission arrangements at the fair value
of the equity instruments issued. In the event that there are insufficient shares available to
settle the obligation, the company will follow the provisions of ASC 815-40 (Previously known
as: EITF 00-19 Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Companys Own Stock). Under ASC 815-40, the company will record a liability
instrument for the resulting changes in fair value from the date due to the end of each
reporting period until such liability is satisfied.
 Recent Accounting Pronouncements:
 See Note B [9] of the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1
herein for a discussion of the impact of the recent accounting standards
 (e)
    
    Impact of Inflation
 The extent inflation has impacted the companys operations during the three and six month
periods ended June 30, 2010, has been determined by management not to have been significant.
 (f)
    
    Quarterly Fluctuations
 As of June 30, 2010 and 2009, the company had not engaged in substantial revenue producing
operations. Once the company actually commences significant revenue producing operations, the
companys operating results may fluctuate significantly from period to period as a result of a
variety of factors, including purchasing patterns of consumers, the length of the companys
sales cycle to key customers and distributors, the timing of the introduction of new products
and product enhancements by the company and its competitors, technological factors, variations
in sales by product and distribution channel, product returns, and competitive pricing.
Consequently, once the company actually commences significant revenue producing operations, the
companys product revenues may vary significantly by quarter and the companys operating results
may experience significant fluctuations.
 
 Item 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Item 4.
    
    CONTROLS AND PROCEDURES
 Disclosure controls and procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
  Internal Control over Financial Reporting  Guidance for Smaller Public
Companies
    Remediation of Material Weaknesses in Internal Control over Financial Reporting
  a)
    
    Income Tax Disclosures  Management is in the process of working with the consultant to
increase the amount of oversight in regard to the tax disclosure and the related components.
 b)
    
    Accounting for Equity Transactions  The internal control has been modified so that price
protection is no longer being provided to the companys consultants. The Compensation and
Governance Committee has reviewed this policy and it is managements assessment that this
material weakness has been resolved.
 c)
    
    Preparation of the Financial Statements  Management is in the process of working with the
consultant to increase the amount of oversight in regard to financial statement preparation.
Additional consulting services are now being provided and the Company has engaged as a
consultant an individual with over ten years experience as a chief financial officer of a
public company to oversee financial statement preparation.
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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
   
 Item 1A.
    
    Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
   
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
 Item 5.
    
    Other Information
  
 Item 6.
    
    Exhibits
  (2) Plan of acquisition, reorganization, arrangement, liquidation, or succession2.1
    
    
    Agreement and Plan of Merger, dated November 29, 2000 by and among Torvec Subsidiary Corporation, Torvec, Inc., UTEK Corporation and ICE Surface
Development, Inc. incorporated by reference to Form 8-K filed November 30, 2000 and Form 8K/A filed February 12, 2001.(3) Articles of Incorporation, By-laws3.1
    
    
    Certificate of Incorporation, incorporated by reference to Form 10-SB/A , Registration Statement, registering Companys $.01 par value common
stock under section 12(g) of the Securities Exchange Act of 1934;3.2
    
    
    Certificate of Amendment to the Certificate of Incorporation dated August 30, 2000, incorporated by reference to Form SB-2 filed October 19, 2000;3.3
    
    
    Certificate of Correction dated March 22, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2002;3.4
    
    
    By-laws, as amended by shareholders on January 24, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2002;3.5
    
    
    Certification of Amendment to the Certificate of Incorporation dated October 21, 2004 setting forth terms and conditions of Class B Preferred,
incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2004.
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3.6
    
    
    Certificate of Amendment to the Certificate of Incorporation dated January 26, 2008 increasing the authorized common shares from 40,000,000 to
400,000,000 common shares, incorporated by reference to annual report (Form 10-K) filed for the calendar year ended December 31, 2006.(4) Instruments defining the rights of holders including indenturesNone.(9) Voting Trust AgreementNone.(10) Material Contracts10.1
    
    
    Certain Employment Agreements, Consulting Agreements, certain assignments of patents, patent properties, technology and know-how to the Company,
Neri Service and Space Agreement and Ford Motor Company Agreement and Extension of Term, all incorporated by reference to Form 10-SB/A,
Registration Statement, registering Companys $.01 par value common stock under section 12(g) of the Securities Exchange Act of 1934;10.2
    
    
    The Companys 1998 Stock Option Plan and related Stock Options Agreements, incorporated by reference to Form S-8, Registration Statement,
registering 2,000,000 shares of the Companys $.01 par value common stock reserved for issuance thereunder, effective December 17, 1998;10.3
    
    
    The Companys Business Consultants Stock Plan, incorporated by reference to Form S-8, Registration Statement, registering 200,000 shares of the
Companys $.01 par value common stock reserved for issuance thereunder, effective June 11, 1999, as amended by reference to Form S-8 Registration
Statements registering an additional 200,000, 200,000, 100,000, 800,000, 250,000, 250,000, 350,000, 250,000, 2,500,000, 5,000,000 and 5,000,000
shares of the Companys $.01 par value common stock reserved for issuance thereunder, effective October 5, 2000, November 7, 2001, December 21,
2001, February 1, 2002, November 12, 2002, January 22, 2003, May 23, 2003, November 26, 2003, April 20, 2004, October 13, 2006 and April 1, 2010,
respectively.10.4
    
    
    Termination of Neri Service and Space Agreement dated August 31, 1999, incorporated by reference to Form 10-QSB filed for the quarter ended March
31, 1999;10.5
    
    
    Operating Agreement of Variable Gear, LLC dated June 28, 2000, incorporated by reference to Form 10-QSB filed for the quarter ended March 31, 2000;10.6
    
    
    License Agreement between Torvec, Inc. and Variable Gear, LLC dated June 28, 2000, incorporated by reference to Form SB-2 filed October 19, 2000;10.7
    
    
    Investment Agreement with Swartz Private Equity, LLC dated September 5, 2000, together with attachments thereto, incorporated by reference to Form
8-K filed October 2, 2000;10.8
    
    
    Extension of and Amendment to Consulting Agreement with James A. Gleasman, incorporated by reference to Form 10-KSB filed for the fiscal year
ended December 31, 2000;10.9
    
    
    Extension of and Amendment to Consulting Agreement with Keith E. Gleasman, incorporated by reference to Form 10-KSB filed for the fiscal year
ended December 31, 2000;10.10
    
    
    Extension of and Amendment to Consulting Agreement with Vernon E. Gleasman, incorporated by reference to Form 10-KSB filed for the fiscal year
ended December 31, 2000;10.11
    
    
    Option and Consulting Agreement with Marquis Capital, LLC dated February 10, 1999, incorporated by reference to Form 10-QSB filed for quarter
ended March 31, 2001;10.12
    
    
    Option and Consulting Agreement with PMC Direct Corp., dated February 10, 1999, incorporated by reference to Form 10-QSB filed for quarter ended
March 31, 2001;10.13
    
    
    Investment Banking Services Agreement with Swartz Institutional Finance (Dunwoody Brokerage Services, Inc.) dated December 8, 2000, incorporated
by reference to Form 10-QSB filed for quarter ended March 31, 2001;10.14
    
    
    Employment Agreement with Michael Martindale, Chief Executive Officer, dated August 1, 2001, incorporated by reference to Form 10-QSB filed for
fiscal quarter ended March 31, 2001;10.15
    
    
    Employment Agreement with Jacob H. Brooks, Chief Operating Officer, dated August 1, 2001, incorporated by reference to Form 10-QSB filed for
fiscal quarter ended March 31, 2001;10.16
    
    
    Employment Agreement with David K. Marshall, Vice-President of Manufacturing, dated September 1, 2001, incorporated by reference to Form 10-QSB
filed for fiscal quarter ended March 31, 2001;10.17
    
    
    Investment Banking Services Agreement with Swartz Institutional Finance (Dunwoody Brokerage Services, Inc.), as amended, dated October 23, 2001,
incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2001;10.18
    
    
    Stock Option Agreement with Samuel Bronsky, Chief Financial and Accounting Officer, dated August 28, 2001, incorporated by reference to Form
10-QSB filed for fiscal quarter ended March 31, 2001;
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10.19
    
    
    Pittsford Capital Group, LLC Agreement dated January 30, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31,
2001;10.20
    
    
    Gleasman-Steenburgh Indemnification Agreement dated April 9, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December
31, 2001;10.21
    
    
    Series B Warrant dated April 10, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2001;10.22
    
    
    Billow Butler & Company, LLC investment banking engagement letter dated October 1, 2003, incorporated by reference to Form 10-QSB filed for fiscal
quarter ended March 31, 2003;10.23
    
    
    Letter of Acknowledgement and Agreement with U.S. Environmental Protection Agency dated February 4, 2004, incorporated by reference to Form 10-KSB
filed for fiscal year ended December 31, 2003;10.24
    
    
    Letter Agreement with CXO on the GO, L.L.C. dated February 20, 2004, incorporated by reference to Form 10-KSB filed for fiscal year ended December
31, 2003;10.25
    
    
    Letter Amendment with CXO on the GO, L.L.C. dated February 23, 2004, incorporated by reference to Form 10-KSB filed for fiscal year ended December
31, 2003;10.26
    
    
    Lease Agreement for premises at Powder Mills Office Park, 1169 Pittsford-Victor Road, Suite 125, Pittsford, New York 14534, dated July 16, 2004;
incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2004;10.27
    
    
    Lease Agreement for testing facility and Mustang dynamometer, dated July 21, 2004; incorporated by reference to Form 10-QSB filed for fiscal
quarter ended March 31, 2004;10.28
    
    
    Advisory Agreement with PNB Consulting, LLC, 970 Peachtree Industrial Blvd., Suite 303, Suwanee, Georgia 30024; incorporated by reference to Form
10-QSB filed for fiscal quarter ended March 31, 2004;10.29
    
    
    Agreement between Torvec and ZT Technologies, Inc. dated July 21, 2004, incorporated by reference to Form 10-QSB filed for fiscal quarter ended
March 31, 2004;10.30
    
    
    Assignment and Assumption of Lease between William J. Green and Ronald J. Green and Torvec, Inc. effective as of December 31, 2004, incorporated
by reference to Form 10-KSB filed for fiscal year ended December 31, 2004;10.31
    
    
    Bill of Sale between Dynamx, Inc. and Torvec, Inc. for equipment and machinery, incorporated by reference to Form 10-KSB filed for fiscal year
ended December 31, 2004;10.32
    
    
    Lease and Services Agreement between Robert C. Horton as Landlord and Torvec, Inc. as Tenant dated March 18, 2005, incorporated by reference to
Form 10-KSB filed for fiscal year ended December 31, 2004;10.33
    
    
    Settlement Agreement and Mutual Release between Torvec, Inc. and ZT Technologies, Inc. dated March 29, 2005, incorporated by reference to Form
10-QSB filed for fiscal quarter ended March 31, 2005;10.34
    
    
    Advisory Agreement between Robert C. Horton and Torvec, Inc. dated February 15, 2005, incorporated by reference to Form 10-QSB filed for fiscal
quarter ended March 31, 2005;10.35
    
    
    Lease and Services Agreement between Dennis J. Trask as Landlord and Torvec, Inc. as Tenant dated April 18, 2005, incorporated by reference to
Form 10-QSB filed for fiscal quarter ended March 31, 2005;10.36
    
    
    Consulting Agreement with Matthew R. Wrona, dated March 31, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March
31, 2005;10.37
    
    
    Option Agreement between Matthew R. Wrona and Torvec, Inc. dated March 31, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter
ended March 31, 2005;10.38
    
    
    Trust Agreement between Matthew R. Wrona, Donald Gabel, Lawrence Clark, Steven Urbanik, Floyd G. Cady, Jr., and Michael Pomponi as Grantors and
Richard B. Sullivan as Trustee, dated September 22, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2005;10.39
    
    
    Consultant Agreement with Floyd G. Cady, Jr., dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March
31, 2005;10.40
    
    
    Consultant Agreement with Lawrence W. Clark, dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March
31, 2005;
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##### Table of Contents



10.41
    
    
    Consultant Agreement with Donald W. Gabel, dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March
31, 2005;10.42
    
    
    Consultant Agreement with Michael A. Pomponi, dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March
31, 2005;10.43
    
    
    Consultant Agreement with Steven Urbanik, dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31,
2005;10.44
    
    
    Consultant Agreement with Kiwee Johnson, dated March 31, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31,
2005;10.45
    
    
    Confidentiality Agreement with Joseph B. Rizzo, dated October 24, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended
March 31, 2005.10.46
    
    
    Minutes of meeting Board of Directors Torvec, Inc., held October 19, 2004, creating the non-management directors plan, incorporated by reference
to Form 10-KSB filed for the fiscal year ended December 31, 2006.10.47
    
    
    Excerpts from minutes of the meeting of Board of Directors Torvec, Inc., adopting changes to the non-management directors plan creating, a
commercialized event plan, approving an increase in shares to be issued under business consulting plan and adopting recommendation that
shareholders increase number of authorized common shares from 40,000,000 to 400,000,000 common shares, incorporated by reference to Form 8-K filed
on October 16, 2006.10.48
    
    
    Order of Supreme Court of the State of New York with respect to litigation between the company and a management consulting firm, incorporated by
reference to Form 8-K filed on June 20, 2006;10.49
    
    
    Letter agreement with American Continental Group, LLC, executed on October 22, 2006, incorporated by reference to Form 8-K filed on October 30,
2006;10.50
    
    
    New York State School Bus Proposal incorporated by reference to Form 10-Q filed for quarter ended March 31, 2006;10.51
    
    
    Order of Supreme Court of the State of New York directing the Monroe County Clerk to release back to the company 40,000 common shares and 245,000
common stock warrants issued to a management consulting firm with which the company is in litigation and held in escrow by such Clerk by virtue of
a previous court order and directing the return to the company of a $250,000 (less administrative fee) undertaking deposited with the Monroe
County Treasurer in connection with the same litigation, incorporated by reference to Form 10-Q filed for the quarter ended March 31, 2008;10.52
    
    
    License Assignment and Transfer Agreement by and between Ice Engineering, LLC and Torvec, Inc. made effective June 15, 2008 assigning license
granted by Dartmouth College with respect to ice technology from Torvec to Ice Engineering, incorporated by reference to Form 8-K filed on July
18, 2008.10.53
    
    
    License Agreement by and between High Density Powertrain and Torvec, Inc. dated December 12, 2008, incorporated by reference to current report
(Form 8-K) filed December 14, 2008;10.54
    
    
    Consulting Agreement by and between Clifford Carlson and Torvec, Inc. dated December 12, 2008, incorporated by reference to current report (Form
8-K) filed December 14, 2008;10.55
    
    
    Minutes of meeting of Governance and Compensation Committee dated February 19, 2008 establishing compensation for the companys president and
chief executive officer and amending the companys commercializing event plan, incorporated by reference to annual report (Form 10-K) filed for
year ended December 31, 2007;10.56
    
    
    Consulting Agreement by and between Capital Campaigns, Inc. and Torvec, Inc., dated February 6, 2009, incorporated by reference to annual report
(Form 10-K) filed for the year ended December 31, 2008;10.57
    
    
    Settlement and Release Agreement by and between CXO on the Go of Delaware, LLC et. al and Torvec, Inc. et. al., dated March 6, 2009, incorporated
by reference to annual report (Form 10-K) filed for the year ended December 31,2008;10.58
    
    
    Memorandum of Understanding between Rochester Institute of Technology and Torvec, inc. dated as of July 31,2010, incorporated by reference to
current report (Form 8-K) filed August 6, 2009;10.59
    
    
    Prototype Agreement between Eastern Mining & Industrial Supply and Torvec, Inc. dated as of November 11, 2009, incorporated by reference to
current report (Form 8-K) filed November 18, 2009;10.60
    
    
    Agreement between Rochester Institute of Technologys Center for Integrated Manufacturing Studies and Torvec, inc. dated as of October 6, 2009,
incorporated by reference to current report (Form 8-K) filed November 18, 2009;10.61
    
    
    Resignation letter of James Y. Gleasman as chief executive officer, interim chief financial officer and director dated March 5, 2010, incorporated
by reference to current report (Form 8-K) filed March 5, 2010;
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10.62
    
    
    Corporate Sponsorship Agreement between Phoenix Performance, Inc. and Torvec, inc. dated as of May 18, 2010, incorporated by reference to current
report (Form 8-K) filed May 26, 2010;10.63
    
    
    Operating Agreement of Torvec-China, LLC dated as of June 11, 2010, incorporated by reference to current report (Form 8-K) filed June 16, 2010;10.64
    
    
    Exclusive Marketing Agreement between Torvec, inc. and Torvec-China, LLC dated as of June 11, 2010, incorporated by reference to current report
(Form 8-K) filed June 16, 2010;10.65
    
    
    Sales and Marketing Agreement between Torvec-China, LLC and Across-China (USA), Inc. dated as of June 11, 2010, incorporated by reference to
current report (Form 8-K) filed June 16, 2010;10.66
    
    
    Convertible Promissory Note issued by Torvec, Inc. to Asher Enterprises, Inc. dated as of July 2, 2010, incorporated by reference to current
report (Form 8-K) filed July 20, 2010;10.67
    
    
    Securities Purchase Agreement between Asher Enterprises, Inc. and Torvec, Inc. dated as of July 2, 2010, incorporated by reference to current
report (Form 8-K) filed July 20, 2010;11
    
    
    Statement regarding computation of per share earnings (loss)Not applicable14
    
    
    Code of Ethics16
    
    
    Letter on change in certifying accountantNone18
    
    
    Letter regarding change in accounting principlesNone20
    
    
    Other documents or statements to security holdersNone21
    
    
    Subsidiaries of the registrantIce Surface Development, Inc. (New York)Iso-Torque Corporation (New York)IVT Diesel Corp. (New York)Variable Gear, LLC (New York)Torvec-China, LLC(New York)22
    
    
    Published report regarding matters submitted to vote of security holdersNone23
    
    
    Consents of experts and counsel24
    
    
    Power of attorneyNone31.1
    
    
    Rule 13(a)-14(a)/15(d)-14(a) Certifications32
    
    
    Section 1350 Certifications99
    
    
    Additional exhibitsNone
  24




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##### Table of Contents



SIGNATURES
  Date: August 13, 2010
    TORVEC, INC.By:
    /s/ Keith E. GleasmanKeith E. Gleasman, President andInterim Chief Financial Officer  Dated: August 13, 2010
    By:
    /s/ Keith E. GleasmanKeith E. Gleasman, President andInterim Chief Financial Officer 
 EXHIBIT INDEX
 (31.1
    )
    
    Rule 13(a)-14(a)/15(d)-14(a) Certifications(32
    )
    
    Section 1350 Certifications
  25