##### 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 September 30, 2009
 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
    
    16-1509512(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 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
    
    November 16, 2009Common Stock, $.01 par value
    
    35,188,485




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##### 



INDEX
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets  September 30, 2009
(Unaudited) and December 31, 2008
    
    
    3Condensed Consolidated Statements of OperationsThree and Nine
months Ended September 30, 2009 and 2008 and September 25, 1996
(Inception) through September 30, 2009 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows  Nine months
Ended September 30, 2009 and 2008 and September 25, 1996
(Inception) through September 30, 2009 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements(Unaudited)
    
    
    6-20Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    21-27Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    28PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3. Defaults Upon Senior Securities
    
    
    30Item 4. Submission of Matters to a Vote of Security Holders
    
    
    30Item 5. Other Information
    
    
    30Item 6. Exhibits
    
    
    30-35SIGNATURE PAGE
    
    
    36EXHIBIT INDEX
    
    
    37Exhibit 31.1Exhibit 32




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 
 
  September 30, 2009
    
    
    December 31, 2008(Unaudited)ASSETSCurrent assets:Cash
    
    $
    82,000
    
    
    $
    304,000Prepaid expenses and other receivables
    
    
    224,000
    
    
    
    102,000Total current assets
    
    
    306,000
    
    
    
    406,000Property and Equipment:Office equipment
    
    
    68,000
    
    
    
    68,000Shop equipment
    
    
    139,000
    
    
    
    139,000Leasehold improvements
    
    
    213,000
    
    
    
    213,000Transportation equipment
    
    
    106,000
    
    
    
    106,000526,000
    
    
    
    526,000Less accumulated depreciation and amortization
    
    
    (285,000
    )
    
    
    (237,000
    )Net property and equipment
    
    
    241,000
    
    
    
    289,000Total Assets
    
    $
    547,000
    
    
    $
    695,000LIABILITIESCurrent liabilities:Notes payable, current portion
    
    $
    15,000
    
    
    $
    15,000Accounts Payable and Accrued Liabilities
    
    
    210,000
    
    
    
    177,000Deferred Compensation and Other
    
    
    361,000
    
    
    
    755,000Total current liabilities
    
    
    586,000
    
    
    
    947,000Deferred revenue
    
    
    800,000
    
    
    
    800,000Deferred rent expense
    
    
    32,000
    
    
    
    39,000Notes payable, net of current portion
    
    
    17,000
    
    
    
    29,000Total liabilities
    
    $
    1,435,000
    
    
    $
    1,815,000Commitments and contingenciesSTOCKHOLDERS CAPITAL DEFICITPreferred stock, $.01 par value, 100,000,000 shares authorized
3,300,000 designated as Class A, convertible Non-voting,
cumulative dividend $.40 per share, per annum, September 30,
2009 and December 31, 2008: 649,601 and 707,101 shares issued
and outstanding, respectively (liquidation preference
$3,804,650 and $3,858,015, respectively)300,000 designated as Class B, convertible Non-voting,
cumulative dividend $.50 per share, per annum, September 30,
2009 and December 31, 2008: 77,500 and 97,500 shares issued
and outstanding, respectively (liquidation preference
$369,246 and $360,339, respectively)
    
    
    7,000
    
    
    
    8,000Common stock, $.01 par value, 400,000,000 shares authorized,
34,884,150 and 32,811,422 issued and outstanding, at
September 30, 2009 and December 31, 2008, respectively
    
    
    349,000
    
    
    
    328,000Additional paid-in capital
    
    
    50,982,000
    
    
    
    48,485,000Deficit accumulated during the development stage
    
    
    (52,226,000
    )
    
    
    (49,941,000
    )Total Torvec, Inc. Stockholders Capital Deficit
    
    
    (888,000
    )
    
    
    (1,120,000
    )Noncontrolling Interest of Subsidiary
    
    
    
    
    
    
    Total Stockholders Capital Deficit
    
    
    (888,000
    )
    
    
    (1,120,000
    )Total Liabilities and Stockholders Capital Deficit
    
    $
    547,000
    
    
    $
    695,000
 See notes to condensed consolidated financial statements.
  3




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##### Table of Contents



SeptemberThree
    
    
    Three
    
    
    Nine
    
    
    Nine
    
    
    25, 1996Months
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    (Inception)ended
    
    
    ended
    
    
    ended
    
    
    ended
    
    
    throughSeptember
    
    
    September
    
    
    September
    
    
    September
    
    
    September30, 2009
    
    
    30, 2008
    
    
    30, 2009
    
    
    30, 2008
    
    
    30, 2009Revenue
    
    $
    
    
    
    $
    
    
    
    $
    175,000
    
    
    $
    30,000
    
    
    $
    422,000Cost of Goods Sold
    
    
    
    
    
    
    
    
    
    
    90,000
    
    
    
    11,000
    
    
    
    315,000Gross Profit
    
    
    
    
    
    
    
    
    
    
    85,000
    
    
    
    19,000
    
    
    
    107,000Costs and expensesResearch and development
    
    
    189,000
    
    
    
    143,000
    
    
    
    418,000
    
    
    
    405,000
    
    
    
    15,753,000General and administrative
    
    
    619,000
    
    
    
    694,000
    
    
    
    2,103,000
    
    
    
    2,475,000
    
    
    
    39,079,000Asset Impairments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,071,000Loss for operations
    
    $
    (808,000
    )
    
    $
    (837,000
    )
    
    $
    (2,436,000
    )
    
    $
    (2,861,000
    )
    
    $
    (55,796,000
    )Other Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    260,000Loss before gain on
cancellation of debt, and
tax benefit
    
    $
    (808,000
    )
    
    $
    (837,000
    )
    
    $
    (2,436,000
    )
    
    $
    (2,860,000
    )
    
    $
    (55,536,000
    )Gain on Cancellation of
debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,541,000
    
    
    
    1,541,000Net Loss Before Income Tax
Provision
    
    $
    (808,000
    )
    
    $
    (837,000
    )
    
    $
    (2,436,000
    )
    
    $
    (1,319,000
    )
    
    $
    (53,995,000
    )Income Tax Benefits
    
    
    151,000
    
    
    
    380,000
    
    
    
    151,000
    
    
    
    380,000
    
    
    
    497,000Net Loss
    
    $
    (657,000
    )
    
    $
    (457,000
    )
    
    $
    (2,285,000
    )
    
    $
    (939,000
    )
    
    $
    (53,498,000
    )Net Loss attributable to
non-controlling interest
in consolidating
subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,272,000Net Loss attributable to
Torvec, Inc
    
    $
    (657,000
    )
    
    $
    (457,000
    )
    
    $
    (2,285,000
    )
    
    $
    (939,000
    )
    
    $
    (52,226,000
    )Preferred stock beneficial
conversion feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    763,000Preferred stock dividends
    
    
    73,000
    
    
    
    79,000
    
    
    
    234,000
    
    
    
    246,000
    
    
    
    1,434,000Net Loss attributable to
common stockholder
    
    $
    (730,000
    )
    
    $
    (536,000
    )
    
    $
    (2,519,000
    )
    
    $
    (1,185,000
    )
    
    $
    (54,423,000
    )Basic and Diluted net loss
attributable to common
stock per share
    
    
    (0.02
    )
    
    
    (0.02
    )
    
    
    (0.07
    )
    
    
    (0.04
    )Weighted average number of
shares ofCommon stock, Basic
And Diluted
    
    
    34,524,000
    
    
    
    32,266,000
    
    
    
    33,719,000
    
    
    
    32,021,000
 See notes to condensed consolidated financial statements.
  4




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September 25,1996(Inception)Nine months Ended
    
    
    ThroughSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (2,285,000
    )
    
    $
    (939,000
    )
    
    $
    (52,226,000
    )Adjustments to reconcile net loss to net cash used in operating activities:Loss attributable to noncontrolling interest in consolidated
subsidiary
    
    
    
    
    
    
    
    
    
    
    (1,272,000
    )Depreciation and amortization
    
    
    48,000
    
    
    
    52,000
    
    
    
    2,498,000Loss on impairment of license
    
    
    
    
    
    
    
    
    
    
    1,071,000Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    19,000Gain on sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    (10,000
    )Compensation expense attributable to common stock in Subsidiary
    
    
    
    
    
    
    
    
    
    
    619,000Common stock issued for services
    
    
    1,114,000
    
    
    
    1,511,000
    
    
    
    14,308,000Shares issued for future consulting services
    
    
    
    
    
    
    
    
    
    
    103,000Stockholder contribution of services
    
    
    1,050,000
    
    
    
    249,000
    
    
    
    3,459,000Gain on cancellation of debt
    
    
    
    
    
    
    (1,541,000
    )
    
    
    (1,541,000
    )Contribution to Capital, Ford Truck
    
    
    
    
    
    
    
    
    
    
    16,000Common Stock Issued in connection with Commercializing Event
    
    
    14,000
    
    
    
    17,000
    
    
    
    50,000Compensatory common stock, options and warrants
    
    
    
    
    
    
    
    
    
    
    17,835,000Changes in:Inventory
    
    
    
    
    
    
    (140,000
    )
    
    
    Prepaid expenses and other receivables
    
    
    (122,000
    )
    
    
    (374,000
    )
    
    
    (63,000
    )Deferred Revenue
    
    
    
    
    
    
    398,000
    
    
    
    709,000Deferred rent
    
    
    (7,000
    )
    
    
    46,000
    
    
    
    34,000Accounts payable and accrued expenses
    
    
    298,000
    
    
    
    (118,000
    )
    
    
    4,234,000Deferred Compensation and Other
    
    
    (535,000
    )
    
    
    581,000
    
    
    
    174,000Net cash used in operating activities
    
    
    (425,000
    )
    
    
    (258,000
    )
    
    
    (9,983,000
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    
    
    
    
    (11,000
    )
    
    
    (360,000
    )Cost of acquisition
    
    
    
    
    
    
    
    
    
    
    (16,000
    )Proceeds from sale of fixed asset
    
    
    
    
    
    
    
    
    
    
    10,000Net cash used in investing activities
    
    
    
    
    
    
    (11,000
    )
    
    
    (366,000
    )Cash flows from financing activities:Net proceeds from sales of common stock and upon exercise of options and
warrants
    
    
    215,000
    
    
    
    130,000
    
    
    
    6,914,000Net 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
    
    
    (12,000
    )
    
    
    (10,000
    )
    
    
    (77,000
    )Proceeds from stockholders loan and advances
    
    
    
    
    
    
    
    
    
    
    250,000Repayment of stockholders loan and advances
    
    
    
    
    
    
    
    
    
    
    (147,000
    )Distributions
    
    
    
    
    
    
    
    
    
    
    (365,000
    )Net cash provided by financing activities
    
    
    203,000
    
    
    
    120,000
    
    
    
    10,431,000Net decrease in cash
    
    
    (222,000
    )
    
    
    (149,000
    )
    
    
    82,000Cash at beginning of period
    
    
    304,000
    
    
    
    192,000
    
    
    
    Cash at end of period
    
    $
    82,000
    
    
    $
    43,000
    
    
    $
    82,000Supplemental Disclosures:Interest paid
    
    $
    3,000
    
    
    $
    4,000
    
    
    $
    27,000Income Tax Paid
    
    
    
    
    
    
    
    
    
    
    1,000Non cash investing and financing activities:Shares issued for acquisition leasehold improvements
    
    
    
    
    
    
    64,000
    
    
    
    166,000Issuance of common stock in settlement of payables
    
    
    124,000
    
    
    
    
    
    
    
    210,000Preferred stock issued in payment of dividend
    
    
    
    
    
    
    7,000
    
    
    
    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 minority interest
    
    
    
    
    
    
    
    
    
    
    232,000Shares issued for future consulting services
    
    
    
    
    
    
    
    
    
    
    103,000Issuance of common stock for a finder fee
    
    
    
    
    
    
    
    
    
    
    225,000Advance from stockholder
    
    
    
    
    
    
    
    
    
    
    250,000Contribution of FTV Ford Truck
    
    
    
    
    
    
    
    
    
    
    16,000ICE payable netted against receivable
    
    
    
    
    
    
    
    
    
    
    91,000Common stock issued in settlement of Patent expense
    
    
    
    
    
    
    
    
    
    
    117,000
 See notes to condensed consolidated financial statements.
  5




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NOTE A  The Company and Basis of Presentation
     6




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##### Table of Contents



NOTE B  Summary of Significant Accounting Policies
 [1]
    
    Consolidation:The financial statements include the accounts of the company, its
majority-owned subsidiary, Ice Surface Development, Inc. (56%
owned at September 30, 2009 and 2008), and its wholly-owned
subsidiaries Iso-Torque Corporation, IVT Diesel Corp. and
Variable Gear LLC. All material intercompany transactions and
account balances have been eliminated in consolidation.[2]
    
    Cash and Cash Equivalents:Cash and cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original
maturities of three months or less. The company maintains cash
and cash equivalents at financial institutions which periodically
may exceed federally insured amounts.[3]
    
    Use of Estimates:The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Such estimates are used in valuing the useful lives of
its fixed assets and the future realizable value of such assets.
These estimates are subject to a high degree of judgment and
potential change. Actual results could differ from those
estimates.[4]
    
    Loss per Common Share:Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) 260-10 (Previously known as: FASB
Statement 128, Earnings Per Share) requires the presentation of
basic earnings per share, which is based on common stock
outstanding, and dilutive earnings per share, which gives effect
to options, warrants and convertible securities in periods when
they are dilutive. For the three and nine month periods ended
September 30, 2009 and 2008 the company excluded 2,497,699 and
3,098,899 potential common shares, respectively, relating to
convertible preferred stock outstanding, options and warrants
from its diluted net loss per common share calculation because
they are anti-dilutive.[5]
    
    Income Taxes:The company accounts for income taxes using the asset and
liability method described in FASB ASC 740-10 (Previously known
as: FASB Statement 109, Accounting for Income Taxes,) the
objective of which is to establish deferred tax assets and
liabilities for the temporary differences between the financial
reporting and the tax bases of the companys assets and
liabilities at enacted tax rates expected to be in effect when
such amounts are realized or settled. A valuation allowance
related to deferred tax assets is recorded when it is more likely
than not that some portion or all of the deferred tax assets will
not be realized. We adopted FASB ASC 740-10 (Previously known as:
FASB interpretation No. 48 Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement 109) on January 1,
2008. As a result of the implementation of FASB ASC 740-10, we
recognized no adjustment for uncertain tax provisions. At the
adoption date of January 1, 2008, we had a deferred tax asset
which was fully reserved by a valuation allowance to reduce the
deferred tax asset to the amount that more likely than not to be
realized. As of September 30, 2009, we have not recognized an
increase or decrease to reserves for uncertain tax positions nor
have we accrued interest and penalties related to uncertain tax
positions. The tax years 2006 through 2008 remain open to
examination by the major tax jurisdictions to which we are
subject.As of September 30, 2009, the company filed a New York State
corporate tax return which claims $216,000 of refundable credits
allocable to certain research and development expenses incurred
in the year 2008. As of December 31, 2008, the company estimated
a $65,000 receivable for this credit. For the three and nine
month periods ending September 30, 2009, the company has recorded
an increase of $151,000 income tax benefit of the refundable
credit.[6]
    
    Fair Value of Financial Instruments:The carrying amount of cash, prepaid expenses, accounts payable
and accrued expenses approximates their fair value due to the
short maturity of those instruments.  7




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##### Table of Contents



[7]
    
    Stock-Based Compensation:Effective January 1, 2006, we adopted FASB ASC 718-10 and FASB
ASC 505-50 (Previously known as: FASB Statement 123(R), Share
Based Payment.) We elected to use the modified prospective
transition method; therefore, prior period results were not
restated. Prior to the adoption of SFAS 123(R), stock-based
compensation expense related to stock options was not recognized
in the results of operations if the exercise price was at least
equal to the market value of the common stock on the grant date,
in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. FASB ASC 718-10 requires all share-based payments to employees,
including grants of employee stock options, to be recognized as
compensation expense over the requisite service period (generally
the vesting period) in the financial statements based on their
fair values. The impact of forfeitures that may occur prior to
vesting is also estimated and considered in the amount
recognized. In addition, the realization of tax benefits in
excess of amounts recognized for financial reporting purposes
will be recognized as a financing activity in accordance with
FASB ASC 718-10.No tax benefits were attributed to the stock-based compensation
expense because a valuation allowance was maintained for
substantially all net deferred tax assets. We elected to adopt
the alternative method of calculating the historical pool of
windfall tax benefits as permitted by FASB ASC 718-10-65
(Previously known as: FASB Staff Position (FSP) No. SFAS
123(R)-c, Transition Election Related to Accounting for the Tax
Effects of Share-Based Payment Awards.) This is a simplified
method to determine the pool of windfall tax benefits that is
used in determining the tax effects of stock compensation in the
results of operations and cash flow reporting for awards that
were outstanding as of the adoption of FASB ASC 718-10.[8]
    
    Revenue Recognition:The companys terms provide 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, 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 and collection is reasonably assured. 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.[9]
    
    Recently Adopted Accounting Pronouncements:In June 2009, the FASB issued under ASC Topic 105-10 which
establishes as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities
in the preparation of financial statements in conformity with
GAAP. ASC Topic 105-10 is effective for financial statements
issued for interim and annual periods ending after September 15,
2009. ASC Topic 105-10 explicitly recognizes rules and
interpretative releases of the Securities and Exchange Commission
(SEC) under federal securities laws as authoritative GAAP for
SEC Registrants. Upon adoption of this guidance under ASC Topic
105-10, the Codification superseded all then- existing non-SEC
accounting and reporting standards. All other non-grandfathered
non-SEC accounting literature not included in the Codification
became non-authoritative.In April 2009, the FASB issued FASB ASC 805-10 (Previously known
as: FSP 141(R) Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arises from Contigencies
). For business combinations, the standard requires the
acquirer to recognize at fair value an asset acquired or
liability assumed from a contingency if the acquisition date fair
value can be determined during the measurement period. FASB ASC
805-10 is effective for business combinations during the fiscal
years, and interim periods within those fiscal years, beginning
on or after December 15, 2008, with early adoption prohibited.
The company adopted these provisions at the beginning of the
fiscal year January 1, 2009. FASB ASC 805-10 will be applied
prospectively for acquisitions in 2009 or thereafter.In December 2007, the FASB issued FASB ASC 810-10-65 (Previously
known as: FASB Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51).
The standard changes the accounting for noncontrolling
(minority) interests in consolidated financial statements
including the requirements to classify noncontrolling interests
as a component of consolidated stockholders equity, and replace
references minority interest with noncontrolling interests.
Additionally, FASB ASC 810-10-65 revises the accounting for both
increases and decreases in a parents controlling ownership
interest. The company adopted the standard as of January 1, 2009.
The adoption of FASB ASC 810-10-65 did not have a significant
impact on the companys financial position.  8




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##### Table of Contents



In June 2008, the FASB Task Force reached a
consensus-for-exposure that an entity should determine whether an
equity-linked financial instrument (or embedded feature) is
indexed to its own stock first by evaluating the instruments
contingent exercise provisions, if any, and then by evaluating
the instruments settlement provisions. FASB ASC 815-40
(Previously known as: EITF 07-5, Determining Whether an
Instrument (or Embedded Feature) Is Indexed to an Entitys Own
Stock). FASB ASC 810-10-15 (Previously known as: Paragraph 11(a)
of FAS 133) specifies that a contract issued or held by the
reporting entity that is both (a) indexed to its own stock and
(b) classified in stockholders equity in its statement of
financial position shall not be considered a derivative financial
instrument for purposes of applying that Statement. If a
freestanding financial instrument (for example, a stock purchase
warrant) meets the scope exception in FASB ASC 810-10-15, it is
classified as an equity instrument and is not accounted for as a
derivative instrument. The adoption of FASB ASC 815-40 did not
have a material impact on the companys financial position.In April 2009, the FASB issued FASB ASC 825-10-50 (Previously
known as: FASB Staff Position No. FAS 107-1, Disclosures about
Fair Value of Financial Instruments) and FASB ASC 270-10-05
(Previously known as: APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments, which requires disclosures about
fair value of financial instruments for interim reporting periods
of publicly traded companies as well as in annual financial
statements. This ASC 825-10-50 is effective for interim reporting
periods ending after June 15, 2009, with early adoption permitted
for periods ending after March 15, 2009. The adoption of this
accounting pronouncement did not have a material impact on the
financial statements.In May 2009, the FASB issued ASC Topic 855 (SFAS No. 165), 
Subsequent Events which establishes general standards for
accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued.
More specifically, SFAS 165 sets forth the period after the
balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for
potential recognition in the financial statements, identifies the
circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its
financial statements and the disclosures that should be made
about events or transactions that occur after the balance sheet
date. ASC Topic 855 provides largely the same guidance on
subsequent events which previously existed in auditing
literature. The disclosure is required in financial statements
for interim and annual periods ending after June 15, 2009.[10]
    
    Recent Accounting Pronouncements:In June 2009, the FASB issued ASC Topic 860 ( SFAS No. 166)
Accounting for Transfers of Financial Assetsan amendment of
FASB Statement No. 140 improves the relevance, representational
faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a
transfer of financial assets; the effects of a transfer on its
financial position, financial performance, and cash flows; and a
transferors continuing involvement, if any, in transferred
financial assets. ASC Topic 860 is effective as of the beginning
of each reporting entitys first annual reporting period that
begins after November 15, 2009, for interim periods within that
first annual reporting period and for interim and annual
reporting periods thereafter. The company is evaluating the
impact the adoption of ASC Topic 860 will have on its financial
statements.In June 2009, the FASB amended accounting guidance related to the
consolidation of variable interest entities. The amended
guidance changes how a reporting entity determines when an entity
that is insufficiently capitalized or is not controlled through
voting (or similar rights) should be consolidated. The
determination of whether a reporting entity is required to
consolidate another entity is based on, among other things, the
other entitys purpose and design and the reporting entitys
ability to direct the activities of the other entity that most
significantly impact the other entitys economic performance.
The amended guidance is effective for fiscal years, and interim
periods within those fiscal years, beginning after November 15,
2009. The company doses not expect adoption to have a material
impact on the companys consolidated financial position, results
of operations or cash flows.In October 2009, the FASB issued new guidance for revenue
recognition with multiple deliverables, which is effective for
revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010, although early
adoption is permitted. This guidance eliminates the residual
method under the current guidance and replaces it with the
relative selling price method when allocating revenue in a
multiple deliverable arrangement. The selling price for each
deliverable shall be determined using vendor specific objective
evidence of selling price, if it exists, otherwise third-party
evidence of selling price shall be used. If neither exists for a
deliverable, the vendor shall use its best estimate of the
selling price for that deliverable. After adoption, this
guidance will also require expanded qualitative and quantitative
disclosures. The Company is currently assessing the impact of
adoption on its financial position and results of operations.  9




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##### Table of Contents



NOTE C  License from the Trustees of Dartmouth College
      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.Since the company did not have the requisite cash
available to pay the Gleasmans compensation under
this arrangement from January 1, 2008 through June
30, 2009, the company accrued, for each quarterly
period from January 1, 2008 through June 30, 2009, an
aggregate $942,000 of compensation expense, including
$42,000 of payroll taxes, and recorded the
compensation expense of $300,000 to research and
development and $600,000 to general and
administrative expense based upon managements
estimate.  10




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##### Table of Contents



On August 17, 2009, each of the Gleasmans waived all
of his rights and interest in and to the
board-created compensation plan, including all of his
rights and interest in and to the amount(s) accrued
to such date. As the result of such waiver, the
aggregate amount accrued under the plan to June 30,
2009, namely $942,000, has been reclassified to
equity as a contribution of services and the $42,000
accrued for payroll taxes have been recorded as a
reduction to general and administrative expense.During the three months ended September 30, 2009 and
2008, the company recorded contributions of services
of $50,000 and $ -0- to research and development and
$100,000 and $-0- to general & administrative,
respectively, based upon managements estimate.[2]
    
    During the three and nine month periods ended
September 30, 2009 and 2008, the company recorded an
expense of $25,350 and $76,050 and $23,400 and
$74,100, respectively to a member of the Gleasman
family for administrative, technological and
engineering consulting services. Management believes
this compensation is reasonable.For the three and nine months ended September 30,
2009, the company issued 27,500 and 94,211 business
consultant common shares in payment of this expense.
For the three and nine months period ended September
30, 2008, the company issued 11,878 and 34,148
business consultant common shares in payment for this
consulting services.[3]
    
    During the three and nine month periods ended
September 30, 2009 and 2008, the company recorded an
expense of $23,270 and $69,810 and $21,480 and
$68,080, respectively, to a family member of its
general counsel for engineering services rendered to
the company. Management believes this compensation is
reasonable.For the three and nine months ended September 30,
2009, the company issued 27,637 and 88,774 business
consultant common shares in payment of this expense.
For the three and nine months period ended September
30, 2008, the company issued 10,904 and 31,373
business consultant common shares in payment for this
consulting services.[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).  11




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##### Table of Contents



NOTE E  Stockholders Equity (Capital Deficit)
 [1]
    
    Common Stock:During the three and nine month periods ended September 30, 2009, the company sold 228,128 and
322,231 restricted common shares for proceeds of $145,000 and $215,000, respectively, in a
number
private placements.The investors are qualified accredited investors within the meaning of regulation D
promulgated under the Securities Act of 1933 and the company is therefore relying on section 4(2)
of said Act as a transaction by
an issuer not involving a public offering.For the three and nine month periods ended September 30, 2009, the company issued 16,173 and
21,173 restricted common shares to an accounting firm in partial payment for services rendered
in the
amount of $13,100 and $17,100, respectively.[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.The company has sold an aggregate 780,456 Class A Preferred for
aggregate proceeds of $3,062,046. 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 September 30,
2009.The company did not sell any Class A Preferred or issue any
warrants during the three and nine month periods ended September
30, 2009 and 2008.From April 19, 2004 through September 30, 2009, eight Class A
Preferred holders have converted an aggregate 189,125 Class A
Preferred (including 79,464 Class A issued as dividends) into an
equal number of common shares. For the three and nine month period
ended September 30, 2009, 6,250 and 123,465 (including 65,965
issued as dividends) Class A Preferred were converted. For the
three and nine month period ended September 30, 2008, 7,305 and
32,305 (including 1,055 issued as dividends) Class A Preferred were
converted.From September 2004 through September 30, 2009, an aggregate 79,464
Class A Preferred have been issued as dividends.At September 30, 2009 and 2008, Class A Preferred dividends in
arrears amounted to approximately $1,176,000 and $958,000,
respectively.  12




---



##### Table of Contents



[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.The company has sold an aggregate 97,500 Class B Preferred for aggregate proceeds of $487,500.During the three and nine month periods ended September 30, 2009 and 2008, the company did not sell any Class B Preferred.
For the three and nine month periods ended September 30, 2009 -0- and 20,000 Class B Preferred were converted. For the three and nine month period ended September 30, 2008, -0- and -0- Class B Preferred were
converted.At September 30, 2009 and 2008, Class B Preferred dividends in arrears amounted to approximately $156,000 and $135,000, 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. Nine Months Periods Ended September 30,2009
    
    
    2008Weighted
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Average
    
    
    Aggregate
    
    
    
    
    
    
    AverageExercise
    
    
    Remaining
    
    
    Intrinsic
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Life in Years
    
    
    Value
    
    
    Shares
    
    
    PriceOutstanding at beginning of period
    
    
    641,848
    
    
    $
    4.70
    
    
    
    4.81
    
    
    
    
    
    
    
    1,021,848
    
    
    $
    4.77Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (380,000
    )
    
    
    Outstanding at end of period
    
    
    641,848
    
    
    
    4.70
    
    
    
    4.03
    
    
    $
    
    
    
    
    641,848
    
    
    
    4.70Options exercisable at end of
period
    
    
    641,848
    
    
    
    4.70
    
    
    
    4.03
    
    
    $
    
    
    
    
    641,848
    
    
    
    4.70Options Vested and Expected to
Vest
    
    
    641,848
    
    
    
    4.70
    
    
    
    4.03
    
    
    $
    
    
    
    
    641,848
    
    
    
    4.70
 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 nine month periods ended September 30, 2009 and 2008.As of September 30, 2009, the company did not have any unrecognized stock compensation related to unvested awards.  13




---



##### Table of Contents



[5]
    
    Business Consultants Stock Plan:For the three month periods ended September 30, 2009 and 2008, the company issued
598,864 and 231,046 common shares to business consultants under the Business Consultants Stock
Plan and charged $406,000 and $446,000 to operations in connection with these share issuances. For
the nine month periods ended September 30, 2009 and 2008, the company issued 1,543,256 and
664,021 common shares to business consultants under the Plan and charged operations $1,234,000 and
$1,575,000 in connection with these services. 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. As of
September 30, 2009, 2,110,022 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 nine month periods ended September 30, 2009 and 2008. No
previously issued warrants were exercised during the three and nine month periods ended September 30, 2009 and 2008.On October 10, 2007, the Nonmanagement Directors Plan was modified to 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. This proposal was made in the light of the risks associated with the positions he has undertaken as
well as the fact that he is and has been since the summer of 2005, serving the company in these positions on a full-time basis. The proposal was also made in recognition of the fact that the services required to
be performed by the chairman of the boards executive committee and of its governance and compensation committee have expanded both in responsibilities covered and time expended.The effective date for these
adjustments to the plan was July 1, 2007.  14




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##### Table of Contents



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 September 30, 2009 and 2008, the company issued 93,115 and 29,903 common shares under the plan to satisfy the payables for each of such periods in the amount of $62,000 and
$62,000 and recorded charges of $62,000 and $62,000 for such periods, respectively.For the nine month periods ended September 30, 2009 and 2008, the company issued 262,015 and 74,146 common shares under the plan to satisfy payables in the amount of $186,000 and $183,000 recorded a charge of
$186,000 and $183,000 for such periods.[7]
    
    Business, Financial and Engineering Consultants:Through September 30, 2009, the company has issued 1,376,583 common stock warrants to various business, financial and engineering consultants, of which 91,583 have been exercised for proceeds of $915 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.[8]
    
    Warrants:As of September 30, 2009, 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
    
    
    
    
    None
    

    
    
    54,500
    (c)
    
    
    54,500$
    .01-5.00
    
    
    
    
    None
    

    
    
    39,000
    (d)
    
    
    39,000$
    5.00
    
    
    
    
    
    2015
    
    
    
    255,000
    (e)
    
    
    255,000$
    .01
    
    
    
    
    None
    

    
    
    6,000
    (f)
    
    
    6,000$
    .01
    
    
    
    
    None
    

    
    
    3,750
    (g)
    
    
    3,750$
    1.00
    
    
    
    
    None
    

    
    
    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
 (a)
    
    Exercisable only if the company has an IPO and exercisable at the IPO price five years from
IPO. Through the quarter ended September 30, 2009, the company has not conducted an IPO.  15




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##### Table of Contents



(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 of 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 of proceeds, with 6,000
warrants exercised during the second quarter of 2008 for proceeds of $60. No warrants were
exercised during the three and nine month periods ended September 30, 2009.(d)
    
    In 2005, the company issued 12,000 warrants to a consultant, immediately exercisable at $0.01
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 nine month
periods ended September 30, 2009 and 2008.(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 shares to two
consultants who elected not to participate in the companys 2007 Commercializing Event Plan.
The company recorded a charge of $249,000 to general and administrative expense. Non of these
warrants were exercised during the nine months periods ended September 30, 2009 and 2008.(f)
    
    During 2005, the company issued 6,000 warrants to a consultant, exercisable immediately for a
five year term at $0.01 per common share. None of these warrants have been exercised through
September 30, 2009.(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 162,000 Class A
Preferred and 20,000 Class B Preferred, all immediately exercisable at $.01 per common share.
At December 31, 2008 an aggregate 182,099 of these warrants have been exercised for proceeds of
approximately $1,258. On July 31, 2009, an additional 12,500 warrants were exercised for 12,500
common shares. No additional warrants were issued in the three and nine month periods ended
September 30, 2009.(h)
    
    During 2006, one investor purchased 20,500 warrants immediately 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 September 30, 2009.(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 September 30, 2009.  16




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##### Table of Contents



(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 September 30, 2009.(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 September 30, 2009.(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 September 30, 2009.  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicWarrants
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at January 1, 2009
    
    
    1,766,250
    
    
    $
    3.30
    
    
    4.13 years
    
    
    $
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (12,500
    )
    
    $
    .01
    
    
    
    
    
    
    
    Canceled or expiredOutstanding at September 30, 2009
    
    
    1,753,750
    
    
    $
    3.32
    
    
    3.59 years
    
    
    $
    48,473Exercisable at September 30, 2009
    
    
    1,128,750
    
    
    $
    4.58
    
    
    3.08 years
    
    
    $
    48,473
 WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicWarrants
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at January 1, 2008
    
    
    2,084,950
    
    
    $
    3.14
    
    
    4.90 years
    
    
    $
    Granted
    
    
    195,000
    
    
    $
    5.01
    
    
    8.33 yearsExercised
    
    
    (2,500
    )
    
    $
    .01Canceled or expiredOutstanding at September 30, 2008
    
    
    2,277,450
    
    
    $
    3.30
    
    
    4.38 years
    
    
    $
    1,404,106Exercisable at September 30, 2008
    
    
    1,652,450
    
    
    $
    3.93
    
    
    4.17 years
    
    
    $
    739,106
 [9]
    
    Shares Issued 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 fair values the shares issued to the trust using the closing market price on the date immediately prior
to the date of issuance. Amounts in excess of the consulting invoices are classified as shares issued for consulting services in stockholders (capital deficit) equity.During the three and nine month periods ended September 30, 2009, the company issued 264,321 and 595,376 business consultants shares valued at $179,000 and $460,150, respectively, to the trust to satisfy the payment of invoices submitted
by the consultants for services rendered during such periods. For the three and nine month periods ended September 30, 2009, the trustee sold 184,676 and 362,251 business consultant shares and distributed $132,942 and $557,942,
respectively, in proceeds to the consultants in accordance with the trusts terms.  17




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##### Table of Contents



During the three and nine month periods ended September 30, 2008, the company issued 115,622 and 245,622 business consultants shares valued at $227,000 and $577,000, respectively, to the trust to satisfy the payment of invoices submitted
by the consultants for services rendered during such periods. For the three and nine month periods ended September 30, 2008, the trustee sold 66,016 and 177,575 business consultant shares and distributed $147,000 and $425,000,
respectively, in proceeds to the consultants in accordance with the trusts terms.The companys payment obligations with respect to the consultant agreements are met once it has issued shares to the trust in accordance with directives received from the consultants and the consultants, not the company, bear the risk of
loss in the event the proceeds of stock sales by the trustee are less than the value of the stock contributed to the trust by the company on the date of contribution.[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.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.For the three and nine month periods ended September 30, 2009, the company issued -0- and 4,669 common shares under the 2007 Event Plan. During the three and nine month periods ended September 30, 2008, the company issued an aggregate -0- and 9,229
common shares under the 2007 Event Plan.For the three and nine month periods ended September 30, 2009, the company charged $-0- and $14,000 under the Commercializing Event Plan.For the three and nine month periods ended September 30, 2008, the company charged $-0- and $17,000 under the Commercializing Event Plan.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 FASB 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 FASB 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(Previously known as: EITF 00-19 Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock). Under FASB 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.  18




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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)(e)]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. September 30, 2008
Black-Scholes Inputs
 Term
    
    
    8.84 yearsExpected forfeiture rate
    
    
    -0-
    %Risk-free rate
    
    
    2.89
    %Volatility
    
    
    0.55Dividend yield
    
    
    0.0
    %
 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 secure an agreed-upon level of governmental
and /or private funding, the companys monthly obligation is
limited to $4,000. As of September 30, 2009, no funding had been
obtained and as a result, the companys monthly obligation is
$4,000.No additional securities were issued under new and/or existing
consulting agreements during the three and nine month period ended
September 30, 2009 and no outstanding securities issued under these
consulting agreements were exercised during the three and nine
month period ended September 30, 2009.[2]
    
    Leases:The company leases a facility located at 1999 Mount Read Blvd.,
Rochester, New York. The facility consists of approximately 13,650
sq. ft., with executive and engineer offices, conference room,
clean room, manufacturing and assembly space, automotive bays,
dynamometer and lift facilities and approximately thirty acres of
land suitable for vehicle testing and demonstration. 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.
Under the lease, monthly rental payments commenced June 1, 2008.
The lease contains three 5-year renewal options and grants an
option to the company to lease up to an additional 7,000 sq. ft. of
adjacent manufacturing and assembly space.Rental payments and
certain other payments due to the landlord is to 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 nine months ended September 30, 2009
and 2008 are $15,000 and $45,000 and $15,000 and $64,000,
respectively. For the three and nine months ended September 30,
2009, the company issued 16,974 and 100,654 business consultant
common shares in payment for rent. For the three and nine months
period ended September 30, 2008, the company issued 11,890 and
48,148 business consultant common shares in payment for rent.  19




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NOTE G  Management Agreement
    NOTE H  Litigation
   NOTE I  Royalty Agreement
  NOTE J  Subsequent Event
     20




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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 PLAN OF OPERATION
 (a)
    
    Overall Business StrategyFrom its inception in 1996, the companys overall business plan has been to design, develop,
build and commercialize its FTV® worldwide, especially in the Asian, African, South and Central
American and Eastern European markets. In addressing issues and solving problems encountered in
the design and development of the FTV, the company designed, developed and is refining a number
of automotive drive-line technologiesi.e. the companys hydraulic pump/motor system,
infinitely variable transmissions, Iso-Torque® differential and constant velocity joint
technology.The FTV® has been developed and is ready for commercialization. In addition, each of the
companys other automotive technologies has been designed, developed and is being refined
either independently on a stand-alone basis or as incorporated into the companys FTV.In present circumstances, the company intends to produce, market and distribute FTVs by
entering into a joint venture relationship with an automotive manufacturer. The company intends
to incorporate its drive-line technologies into the FTV to enhance its marketability and value.
The company also intends to license and/or enter into supply contracts with automotive
manufacturers, military contractors, tier-one suppliers and possibly end-users for its
drive-line technologies independent of their utilization in the FTV.(b)
    
    2009 Plan of OperationThe companys plan of operation during the year ending December 31, 2009 is as follows:
 ®
    21




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®
 ®
     c)
    
    Ice Technology License
       22




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(d)
    
    Results of Operations
  ® ®
   23




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(f)
    
    Liquidity and Capital Resources
          24




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(g)
    
    Critical Accounting Policies
 Revenue Recognition:
  Fair Value of Financial Instruments
  Stock-Based Compensation
    (h)
    
    Newly Adopted Accounting Pronouncements
   25




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26




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(i)
    
    Recent Accounting PronouncementsIn June 2009, the FASB issued ASC Topic 160 ( SFAS No. 166)
Accounting for Transfers of Financial Assetsan amendment of
FASB Statement No. 140 improves the relevance, representational
faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a
transfer of financial assets; the effects of a transfer on its
financial position, financial performance, and cash flows; and a
transferors continuing involvement, if any, in transferred
financial assets. ASC Topic 160 is effective as of the beginning
of each reporting entitys first annual reporting period that
begins after November 15, 2009, for interim periods within that
first annual reporting period and for interim and annual
reporting periods thereafter. The company is evaluating the
impact the adoption of ASC Topic 160 will have on its financial
statements.In June 2009, the FASB amended accounting guidance related to the
consolidation of variable interest entities. The amended
guidance changes how a reporting entity determines when an entity
that is insufficiently capitalized or is not controlled through
voting (or similar rights) should be consolidated. The
determination of whether a reporting entity is required to
consolidate another entity is based on, among other things, the
other entitys purpose and design and the reporting entitys
ability to direct the activities of the other entity that most
significantly impact the other entitys economic performance.
The amended guidance is effective for fiscal years, and interim
periods within those fiscal years, beginning after November 15,
2009. The company doses not expect adoption to have a material
impact on the companys consolidated financial position, results
of operations or cash flows.In October 2009, the FASB issued new guidance for revenue
recognition with multiple deliverables, which is effective for
revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010, although early
adoption is permitted. This guidance eliminates the residual
method under the current guidance and replaces it with the
relative selling price method when allocating revenue in a
multiple deliverable arrangement. The selling price for each
deliverable shall be determined using vendor specific objective
evidence of selling price, if it exists, otherwise third-party
evidence of selling price shall be used. If neither exists for a
deliverable, the vendor shall use its best estimate of the
selling price for that deliverable. After adoption, this
guidance will also require expanded qualitative and quantitative
disclosures. The Company is currently assessing the impact of
adoption on its financial position and results of operations.(j)
    
    Impact of InflationThe extent inflation may impact the companys operations during
the three and nine month periods ended September 30, 2009, has
been determined by management not to have a significant impact on
the companys operations to date.(k)
    
    Quarterly FluctuationsAs of September 30, 2009 and 2008, 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.
  27




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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
 Disclosure controls and procedures
    Management Report on Internal Control over Financial Reporting
  
 
 
    28




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
 (1)
    
    On February 20, 2004 the company entered into an
agreement with a management firm to develop and
implement a business plan to commercialize its full
terrain vehicle. In June, 2004, the company engaged
three members of the management firm as the
companys chief executive officer, chief financial
officer and chairman of its board of directors. In
June, 2004 and in April, 2005, the company and the
management firm purported to execute agreements
reflecting the company-related capacities of the
management firms three members and reflecting the
management firms reorganization, respectively.In September, 2005, the company commenced litigation
challenging the validity of the June, 2004 and
April, 2005 agreements. On March 6, 2009, the
company and the management firm executed a
Settlement Agreement and Release pursuant to which
any and all claims and counterclaims the parties had
or may have had arising out of or related to their
relationship, arrangement or services provided one
to the other were resolved and released and any and
all obligations between and among them, specifically
including the contested agreements, were terminated
effective December 31, 2008.(2)
    
    On October 31, 2008, the company commenced an action
in New York State Supreme Court, County of New York,
Commercial Division against Ice Engineering, LLC
seeking the total balance owed by Ice Engineering to
the company pursuant to an agreement entered into by
the parties, effective June 15, 2007, namely,
$2,700,000. Under the agreement, in connection with
Torvecs assignment of the ice technology license,
Ice Engineering agreed to reimburse Torvec for
approximately $3,500,000 the company previously had
expended acquiring and maintaining the license. Ice
Engineering has paid approximately $800,000 but is
in arrears with respect to installments due June 1,
2008, September 1, 2008 and December 1, 2008 and
apparently has repudiated its remaining payment
obligations under the agreement. Ice Engineering has
counterclaimed for the $800,000 paid under the
agreement thus far, alleging that the company failed
to deliver certain business information to Ice
Engineering as called for under the agreement.The company filed a motion for summary judgment with
respect to its claims and on April 14, 2009, the
Court denied the motion without prejudice which
means that the company can re-file the motion after
discovery has been completed. The parties have
commenced discovery and that process is continuing.
 
 Item 1A. Risk Factors
   29




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##### Table of Contents



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 succession
 2.1
    
    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-laws
 3.1
    
    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, 2004.3.6
    
    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 indentures
   30




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##### Table of Contents



(9)
    
    Voting Trust Agreement
  (10)
    
    Material Contracts
 10.1
    
    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 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 and
October 13, 2006, 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;
  31




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##### Table of Contents



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;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;
  32




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##### Table of Contents



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;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.
  33




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##### Table of Contents



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;
 (11)
    
    Statement regarding computation of per share earnings (loss)
  (14)
    
    Code of Ethics(16)
    
    Letter on change in certifying accountant
   34




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##### Table of Contents



(18)
    
    Letter regarding change in accounting principles
  (20)
    
    Other documents or statements to security holders
  (21)
    
    Subsidiaries of the registrantIce Surface Development, Inc. (New York)Iso-Torque Corporation (New York)IVT Diesel Corp. (New York)Variable Gear, LLC (New York)(22)
    
    Published report regarding matters submitted to vote of security holders
  (23)
    
    Consents of experts and counsel(24)
    
    Power of attorney
  (31.1)
    
    Rule 13(a)-14(a)/15(d)-14(a) Certifications(32)
    
    Section 1350 Certifications(99)
    
    Additional exhibits
   35




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##### Table of Contents



SIGNATURES
  TORVEC, INC.Date: November 16, 2009By:
    /s/ James Y. GleasmanJames Y. Gleasman, Chief Executive Officer  Dated: November 16, 2009
    By:
    /s/ James Y. GleasmanJames Y. Gleasman, Chief Executive Officer andInterim Chief Financial Officer  36




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##### Table of Contents



EXHIBIT INDEX
 (31.1)
    
    Rule 13(a)-14(a)/15(d)-14(a) Certifications(32)
    
    Section 1350 Certifications
  37