##### 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 MARCH 31, 2011
 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.)
 
 
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS:
  Class
    
    Number of Shares Outstanding at April 30, 2011Common Stock, $.01 par value
    
    45,700,399




---



##### 



TORVEC, INC.
(a development stage company)
 INDEX
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2011 (Unaudited) and December 31,
2010
    
    
    3Condensed Consolidated Statements of Operations  Three Month Periods Ended March 31 2011
and 2010 and for the Period from September 25, 1996 (Inception) through March 31, 2011
    
    
    4Condensed Consolidated Statements of Cash Flows  Three Month Periods Ended March 31, 2011
and 2010 and for the Period from September 25, 1996 (Inception) through March 31, 2011
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 3. Defaults Upon Senior Securities
    
    
    27Item 4. (Removed and Reserved)
    
    
    27Item 5. Other Information
    
    
    27Item 6. Exhibits
    
    
    28SIGNATURE PAGE
    
    
    31EXHIBIT INDEX
    
    
    32Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    FINANCIAL STATEMENTS
 TORVEC, INC.
(a development stage company)
 
 Condensed Consolidated Balance Sheets
 March 31, 2011
    
    
    December 31, 2010(unaudited)ASSETSCurrent assets:Cash
    
    $
    1,064,000
    
    
    $
    1,518,000Accounts receivable
    
    
    9,000
    
    
    
    Prepaid expenses and other current assets
    
    
    40,000
    
    
    
    48,000Total current assets
    
    
    1,113,000
    
    
    
    1,566,000Property and Equipment:Office equipment
    
    
    68,000
    
    
    
    68,000Shop equipment
    
    
    118,000
    
    
    
    118,000Leasehold Improvements
    
    
    243,000
    
    
    
    243,000Transportation equipment
    
    
    37,000
    
    
    
    37,000466,000
    
    
    
    466,000Less accumulated depreciation and amortization
    
    
    265,000
    
    
    
    246,000Net property and equipment
    
    
    201,000
    
    
    
    220,000Total Assets
    
    $
    1,314,000
    
    
    $
    1,786,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Notes payable, current portion
    
    $
    15,000
    
    
    $
    15,000Accounts payable
    
    
    262,000
    
    
    
    167,000Accrued liabilities
    
    
    499,000
    
    
    
    618,000Deferred income
    
    
    
    
    
    
    21,000Total current liabilities
    
    
    776,000
    
    
    
    821,000Notes payable, net of current portion
    
    
    21,000
    
    
    
    26,000Deferred rent
    
    
    17,000
    
    
    
    19,000Total Liabilities
    
    
    814,000
    
    
    
    866,000Commitments and other matters (Note H)Stockholders Equity:Preferred stock, $.01 par value, 100,000,000 shares authorizeda) 3,300,000 designated as Class A, Non-voting, convertible, cumulative dividend $.40 per share per annum, shares issued
and outstanding at
March 31, 2011 and December 31, 2010: 593,351 and 598,772, respectively (liquidation preference $3,771,000 and $3,734,000, respectively)
    
    
    6,000
    
    
    
    6,000b) 300,000 designated as Class B, Non-voting, convertible, cumulative dividend $.50 per share per annum, shares issued
and outstanding at March 31, 2011 and December 31, 2010: 77,500 and 77,500, respectively (liquidation
preference $601,000 and $592,000, respectively)
    
    
    1,000
    
    
    
    1,000Common stock, $.01 par value, 400,000,000 shares authorized, 45,691,099 and 45,685,678 issued and
outstanding, at March 31, 2011 and December 31, 2010, respectively
    
    
    457,000
    
    
    
    457,000Additional paid-in capital
    
    
    57,101,000
    
    
    
    56,722,000Deficit accumulated during the development stage
    
    
    (57,065,000
    )
    
    
    (56,266,000
    )Total Stockholders Equity
    
    
    500,000
    
    
    
    920,000Total Liabilities and Stockholders Equity
    
    $
    1,314,000
    
    
    $
    1,786,000
 See notes to condensed consolidated financial statements.
  3




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TORVEC, INC.
(a development stage company)
 
 Condensed Consolidated Statements of Operations
  September 25,Three Months
    
    
    Three Months
    
    
    1996 (Inception)Ended March
    
    
    Ended March
    
    
    through March 31,31, 2011
    
    
    31, 2010
    
    
    2011Revenue
    
    $
    30,000
    
    
    $
    
    
    
    $
    452,000Cost of Goods Sold
    
    
    17,000
    
    
    
    
    
    
    
    332,000Gross Profit
    
    
    13,000
    
    
    
    
    
    
    
    120,000Costs and expenses:Research and development
    
    
    202,000
    
    
    
    101,000
    
    
    
    16,526,000General and administrative (including compensation expense
from options and warrants of $304,000, $45,000, and
$19,544,000, respectively)
    
    
    611,000
    
    
    
    748,000
    
    
    
    44,935,000Asset impairments
    
    
    
    
    
    
    
    
    
    
    1,071,000Total costs and expenses
    
    
    813,000
    
    
    
    849,000
    
    
    
    62,532,000Loss from operations
    
    
    (800,000
    )
    
    
    (849,000
    )
    
    
    (62,412,000
    )Reversal of liability on cancellation of debt
    
    
    
    
    
    
    
    
    
    
    1,541,000Gain on litigation settlement
    
    
    
    
    
    
    1,900,000
    
    
    
    1,900,000Other income / (expense)
    
    
    1,000
    
    
    
    
    
    
    
    250,000Income (Loss) Before Income Tax Benefits
    
    
    (799,000
    )
    
    
    1,051,000
    
    
    
    (58,721,000
    )Income tax benefits
    
    
    
    
    
    
    
    
    
    
    384,000Net Income (Loss)
    
    
    (799,000
    )
    
    
    1,051,000
    
    
    
    (58,337,000
    )Net loss attributable to non-controlling interest in subsidiary
    
    
    
    
    
    
    
    
    
    
    1,272,000Net Income (Loss) attributable to Torvec, Inc.
    
    
    (799,000
    )
    
    
    1,051,000
    
    
    
    (57,065,000
    )Preferred stock beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    763,000Preferred stock dividends
    
    
    68,000
    
    
    
    75,000
    
    
    
    1,746,000Net Income (Loss) attributable to Torvec, Inc. common stockholders
    
    $
    (867,000
    )
    
    $
    976,000
    
    
    $
    (59,574,000
    )Net Income (Loss) per common share attributable to stockholders of Torvec, Inc.:Basic
    
    $
    (0.02
    )
    
    $
    0.03Diluted
    
    $
    (0.02
    )
    
    $
    0.03Weighted average number of shares of common stock:Basic
    
    
    45,690,000
    
    
    
    36,171,000Diluted
    
    
    45,690,000
    
    
    
    36,243,000
 See notes to condensed consolidated financial statements.
  4




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TORVEC, INC.
(a development stage company)
 
 Condensed Consolidated Statement of Cash Flows
  September 25,1996(Inception)Three Months Ended
    
    
    ThroughMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011Cash flows from operating activities:Net loss
    
    $
    (799,000
    )
    
    $
    1,051,000
    
    
    $
    (58,337,000
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    19,000
    
    
    
    15,000
    
    
    
    2,582,000Loss on impairment of license
    
    
    
    
    
    
    
    
    
    
    1,071,000Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    19,000Gain on sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    (37,000
    )Compensation expense attributable to common stock in subsidiary
    
    
    
    
    
    
    
    
    
    
    619,000Common stock issued for services
    
    
    
    
    
    
    217,000
    
    
    
    15,132,000Stock-based compensation related to stock options
    
    
    304,000
    
    
    
    
    
    
    
    1,877,000Warrant modification
    
    
    
    
    
    
    
    
    
    
    68,000Warrants issued for services
    
    
    
    
    
    
    45,000
    
    
    
    294,000Shares issued for future consulting services
    
    
    
    
    
    
    
    
    
    
    103,000Stockholder contribution of services
    
    
    75,000
    
    
    
    136,000
    
    
    
    4,045,000Contribution to capital, Ford Truck
    
    
    
    
    
    
    
    
    
    
    16,000Common Stock issued in connection with commercializing event plan
    
    
    
    
    
    
    13,000
    
    
    
    63,000Reversal of liability
    
    
    
    
    
    
    
    
    
    
    (1,541,000
    )Gain on sale of Ice Engineering license
    
    
    
    
    
    
    (1,900,000
    )
    
    
    (1,900,000
    )Compensatory common stock, options and warrants
    
    
    
    
    
    
    41,000
    
    
    
    18,215,000Changes in:Accounts receivable
    
    
    (9,000
    )
    
    
    
    
    
    
    (9,000
    )Prepaid expenses and other current assets
    
    
    8,000
    
    
    
    103,000
    
    
    
    121,000Deferred revenue
    
    
    (21,000
    )
    
    
    
    
    
    
    (91,000
    )Deferred rent
    
    
    (2,000
    )
    
    
    (4,000
    )
    
    
    17,000Change in accrued payroll taxes
    
    
    (52,000
    )
    
    
    51,000
    
    
    
    294,000Accounts payable and other accrued expenses
    
    
    28,000
    
    
    
    (140,000
    )
    
    
    4,185,000Due to a related party
    
    
    
    
    
    
    (11,000
    )
    
    
    Net cash used in operating activities
    
    
    (449,000
    )
    
    
    (383,000
    )
    
    
    (13,194,000
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    
    
    
    
    
    
    
    
    (363,000
    )Cost of acquisition
    
    
    
    
    
    
    
    
    
    
    (16,000
    )Proceeds from sale of license
    
    
    
    
    
    
    1,100,000
    
    
    
    1,900,000Proceeds from sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    37,000Net cash provided by investing activities
    
    
    
    
    
    
    1,100,000
    
    
    
    1,558,000Cash flows from financing activities:Net proceeds from sales of common stock and upon exercise of options and warrants
    
    
    
    
    
    
    5,000
    
    
    
    9,223,000Net proceeds from sales of preferred stock
    
    
    
    
    
    
    
    
    
    
    3,537,000Net proceeds from sale of subsidiary stock
    
    
    
    
    
    
    
    
    
    
    234,000Net proceeds from issuance of notes payable
    
    
    
    
    
    
    
    
    
    
    57,000Payments of notes payable
    
    
    (5,000
    )
    
    
    (6,000
    )
    
    
    (65,000
    )Proceeds from loans
    
    
    
    
    
    
    
    
    
    
    335,000Repayments of loans
    
    
    
    
    
    
    
    
    
    
    (109,000
    )Repayment of officer & stockholder loans and advances
    
    
    
    
    
    
    
    
    
    
    (147,000
    )Distributions
    
    
    
    
    
    
    
    
    
    
    (365,000
    )Net cash (used in) provided by financing activities
    
    
    (5,000
    )
    
    
    (1,000
    )
    
    
    12,700,000Net increase (decrease) in cash
    
    
    (454,000
    )
    
    
    716,000
    
    
    
    1,064,000Cash at beginning of period
    
    
    1,518,000
    
    
    
    41,000
    
    
    
    Cash at end of period
    
    $
    1,064,000
    
    
    $
    757,000
    
    
    $
    1,064,000
  5




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TORVEC, INC.
(a development stage company)
Condensed Consolidated Statement of Cash Flows (continued)
 September 25,1996(Inception)Three Months Ended
    
    
    ThroughMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011Noncash investing and financing activities:Preferred stock issued in payment of dividend
    
    $
    
    
    
    $
    
    
    
    $
    61,000Issuance 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 Engineering LLC payable netted against receivable
    
    
    
    
    
    
    
    
    
    
    91,000Common stock issued in settlement of director fee payable
    
    
    
    
    
    
    35,000
    
    
    
    121,000Common stock issued in settlement of patent expense
    
    
    
    
    
    
    
    
    
    
    117,000Issuance of common stock as payment for Preferred A and B dividends
    
    
    
    
    
    
    
    
    
    
    168,000Purchases of fixed assets with debt
    
    
    
    
    
    
    
    
    
    
    41,000Supplemental Disclosures:Interest paid
    
    $
    
    
    
    $
    1,000
    
    
    $
    74,000Income taxes paid
    
    
    2,000
    
    
    
    
    
    
    
    3,000
 See notes to condensed consolidated financial statements.
  6




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##### Table of Contents



TORVEC, INC.
(a development stage company)
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE A  THE COMPANY AND BASIS OF PRESENTATION
     NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 [1] Consolidation
  [2] Cash and Cash Equivalents
  [3] Accounts Receivable
   7




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##### Table of Contents



[4] Property and Equipment
   [5] Research and Development and Patents
   [6] Income Taxes
  [7] Use of Estimates
  [8] Earnings / Loss per Common Share
  [9] Fair Value of Financial Instruments
   8




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##### Table of Contents



[10] Stock-Based Compensation
    [11] Revenue Recognition
    [12] Recent Accounting Pronouncements
   9




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##### Table of Contents



[13] Reclassifications
  NOTE C  LICENSE FROM THE TRUSTEES OF DARTMOUTH COLLEGE
      NOTE D  RELATED PARTY TRANSACTIONS
 [1]
    10




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[2]
 [3]
 [4]
 [5]
 [6]
 [7]
  11




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NOTE E  ACCRUED LIABILITIES
  March 31,
    
    
    December 31,2011
    
    
    2010Accrued Compensation
    
    $
    3,000
    
    
    $
    32,000Accrued Payroll Taxes Payable
    
    
    432,000
    
    
    
    484,000Accrued Legal
    
    
    5,000
    
    
    
    47,000Other
    
    
    59,000
    
    
    
    55,000$
    499,000
    
    
    $
    618,000
 NOTE F  NOTES PAYABLE
   NOTE G  STOCKHOLDERS CAPITAL DEFICIT
 [1] Private Placements of Common Stock
   [2] Preferred Stock
  (a) Class A Preferred Stock
   12




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##### Table of Contents



(b) Class B Preferred Stock
      13




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##### Table of Contents



[3] Business Consultants Stock Plan
    [4] Nonmanagement Directors Plan
        14




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##### Table of Contents



[5] Shares Issued for Consulting Services
     [6] Commercializing Event Plan
    ®
   15




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##### Table of Contents



[7] Restricted Shares Issued for Services and Rent
   [8] Stock Options
 (a) 1998 Stock Option Plan
   (b) 2011 Stock Option Plan
      16




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(c) Non-Plan Options
  1 4
    (d) Summary
 3 4
  17




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Expected Term
    
    3.5 yearsExpected forfeiture rate
    
    
    -0-
    %Risk-free rate
    
    
    1.3
    %Volatility
    
    
    153.7
    %Dividend yield
    
    
    0.0
    %
   WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at January 1, 2011
    
    
    6,551,848
    
    
    $
    1.08Granted
    
    
    1,626,000
    
    
    
    .90Exercised
    
    
    
    
    
    
    Canceled or expired
    
    
    
    
    
    
    Outstanding at March 31, 2011
    
    
    8,177,848
    
    
    $
    1.04
    
    
    7.5 years
    
    $
    4,584,000Exercisable at March 31, 2011
    
    
    4,239,848
    
    
    $
    1.45
    
    
    8.0 years
    
    $
    2,429,000
 [9] Warrants
  Number of
    
    
    Number ofExercise
    
    
    
    
    
    
    Warrants
    
    
    WarrantsPrice
    
    
    Expiration
    
    
    Outstanding
    
    
    Exercisable(a
    )
    
    
    (a
    )
    
    
    125,000
    (a)
    
    
    $
    
    
    .75
    
    
    None
    
    
    500,000
    (b)
    
    
    $
    
    
    .01
    
    
    
    2015-2016
    
    
    
    54,500
    (c)
    
    
    54,500$
    
    
    .01
    
    
    None
    
    
    3,000
    (d)
    
    
    3,000$
    
    
    5.00
    
    
    None
    
    
    95,000
    (e)
    
    
    95,000$
    
    
    5.00
    
    
    
    2016
    
    
    
    100,000
    (e)
    
    
    100,000$
    
    
    .01
    
    
    None
    
    
    60,000
    (f)
    
    
    60,000$
    
    
    .01
    
    
    
    2016
    
    
    
    3,750
    (g)
    
    
    3,750$
    
    
    1.00
    
    
    None
    
    
    20,500
    (h)
    
    
    20,500$
    
    
    .44
    
    
    
    2020
    
    
    
    400,000
    (i)
    
    
    400,000$
    
    
    3.75
    
    
    
    2016
    
    
    
    200,000
    (j)
    
    
    200,000$
    
    
    5.00
    
    
    
    2016
    
    
    
    30,000
    (k)
    
    
    30,000$
    
    
    5.00
    
    
    
    2017
    
    
    
    50,000
    (l)
    
    
    50,000$
    
    
    5.00
    
    
    
    2017
    
    
    
    100,000
    (m)
    
    
    100,000$
    
    
    2.50
    
    
    
    2020
    
    
    
    100,000
    (n)
    
    
    100,0001,841,750
    
    
    
    1,216,750
 (a)
    
    Exercisable only if the company has an IPO and exercisable at the
IPO price five years from IPO. Through March 31, 2011, the
company has not conducted an IPO.  18




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(b)
    
    On April 15, 2002, the company issued 1,000,000 warrants 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
occurrence of a significant transaction, which includes execution
by the company of a binding agreement for the sale, transfer,
license or assignment for value of any and/or all of its
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 with a ten year term 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 G [5]). An aggregate 69,000 warrants have been exercised for
proceeds of $690.(d)
    
    In 2005, the company issued 12,500 warrants to consultants,
immediately exercisable at $0.01 per common share. During 2005
and 2006, 3,500 of these warrants were exercised. During the year
ended December 31, 2010, an additional 6,000 of these warrants
were exercised. The 3,000 remaining outstanding warrants have no
expiration date.(e)
    
    In 2005, the company issued 95,000 warrants to two engineering
and administrative consultants, exercisable immediately at $5.00
per common share. During 2006, the company issued an additional
100,000 warrants to these same consultants exercisable over a ten
year term at $5.00 per common share, but only exercisable if
there is a commercializing event as determined by the board of
directors. During 2008, these warrants were cancelled and new
warrants were issued to the same consultants for an aggregate
195,000 shares exercisable until 2016 at $5.00 per common share
and conditioned upon the happening of a commercializing event as
determined by the board. The company recorded a charge of
$249,000 in 2008 to general and administrative expense. In 2010,
95,000 of the total number of 195,000 warrants issued to these
consultants were modified to eliminate both the term and the
commercializing event condition for exercise. The charge related
to the modification was insignificant.(f)
    
    During 2005, the company issued 60,000 warrants to an engineering
consultant exercisable immediately at $5.00 per common share and
with no expiration date.(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 and with a ten
year term. 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 and with a ten year term. Through March 31, 2011 an
aggregate 194,599 of these warrants have been exercised for
proceeds of approximately $1,258. No warrants were exercised in
the three month period ended March 31, 2011.(h)
    
    During 2006, one investor purchased 20,500 warrants with no
expiration date at $1.00 per common share for a purchase price of
$2,000.(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. Effective October 15,
2010, these warrants were modified and reissued upon the mutual
agreement of the parties. Effective October 15, 2010, the company
issued 400,000 warrants immediately exercisable at $.44 per
common share for a period of ten years from the modification
date. The company recorded a charge of $68,000 to general and
administrative expenses in the fourth quarter of 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.(k)
    
    In 2006, the company issued 30,000 warrants to consultants
exercisable immediately for a ten year term at $5.00 per common
share.  19




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##### Table of Contents



(l)
    
    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.(m)
    
    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.(n)
    
    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 in the first
quarter of 2010.  Term
    
    10.00 yearsRisk-free rate
    
    
    3.74
    %Volatility
    
    
    122.25
    %Dividend yield
    
    
    0.0
    %
  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at January 1, 2011
    
    
    1,841,750
    
    
    $
    2.18
    
    
    7.79 yearsGranted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Canceled or expired
    
    
    
    
    
    
    Outstanding at March 31, 2011
    
    
    1,841,750
    
    
    $
    2.18
    (A)
    
    7.54 years
    (B)
    
    $
    557,000Exercisable at March 31, 2011
    
    
    1,216,750
    
    
    $
    2.77
    
    
    7.54 years
    (C)
    
    $
    357,000
 (A)
    
    The weighted average exercise price for warrants outstanding as of March 31, 2011 excludes
125,000 warrants with no determined exercise price.(B)
    
    The weighted average remaining contractual term for warrants outstanding as of March 31, 2011
excludes 803,500 warrants with no expiration date.(C)
    
    The weighted average remaining contractual term for warrants exercisable as of March 31, 2011
excludes 178,500 warrants with no expiration date. NOTE H  COMMITMENTS AND OTHER MATTERS
 [1] Leases
    20




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[2] Employment Agreements
    [3] Consulting Agreements
     21




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[4] Prototype Development Agreement
 ® ®
 NOTE I  LITIGATION
     22




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Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 (A) Overall Business Strategy
  (B) Current Status of Business Plan and Ongoing Projects
           (C) Company Revenue and Expenses
      23




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(D) Liquidity and Capital Resources
     Contribution of Shareholder Services
     24




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Current Cash Outlook
   (E) Critical Accounting Policies
 Revenue Recognition
   Stock-Based Compensation
    25




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Recently Issued Accounting Principles
  
 Item 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4.
    
    CONTROLS AND PROCEDURES
 Disclosure controls and procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
   26




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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.
    
    (Removed and Reserved)
 
 Item 5.
    
    Other Information
   27




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##### Table of Contents



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
    
    
    Certificate 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 September 30,
2004.3.6
    
    
    Certificate of
Amendment to the
Certificate of
Incorporation dated
January 26, 2007
increasing
authorized common
shares from
40,000,000 to
400,000,000.
 (4)
    
    Instruments defining the rights of holders including indenturesNone.(10)
    
    Material Contracts
 10.1
    
    
    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;10.2
    
    
    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,
and 2,500,000 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, November 16, 2006 and April
1, 2010, respectively;
  28




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##### Table of Contents



10.3
    
    
    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 September 30, 2001;10.4
    
    
    Option Agreement between Matthew R. Wrona
and Torvec, Inc. dated June 30, 2005,
incorporated by reference to Form 10-QSB
filed for fiscal quarter ended June 30,
2005;10.5
    
    
    License Assignment and Transfer Agreement by
and between Ice Engineering, LLC and Torvec,
LLC made effective June 15, 2007 assigning
license granted by Dartmouth College with
respect to ice technology from Torvec to Ice
Engineering, incorporated by reference to
current report (Form 8-K) filed July 18,
2007;10.6
    
    
    License Agreement by and between High
Density Powertrain and Torvec, Inc. dated
December 12, 2007, incorporated by reference
to current report (Form 8-K) filed December
14, 2007;10.7
    
    
    Operating Agreement of Torvec-China, LLC
dated as of September 11, 2010, incorporated
by reference to current report (Form 8-K)
filed September 16, 2010;10.8
    
    
    Exclusive Marketing Agreement between
Torvec, Inc. and Torvec-China, LLC dated as
of September 11, 2010, incorporated by
reference to current report (Form 8-K) filed
September 16, 2010;10.9
    
    
    Sales and Marketing Agreement between
Torvec-China, LLC and Across-China (USA),
Inc. dated as of September 11, 2010,
incorporated by reference to current report
(Form 8-K) filed September 16, 2010;10.10
    
    
    Stock Option Agreement dated September 30,
2010 between the company and Richard A.
Kaplan, incorporated by reference to current
report (Form 8-K) filed October 6, 2010;10.11
    
    
    Employment Agreement dated October 4, 2010
between the company and Richard A. Kaplan,
incorporated by reference to current report
(Form 8-K) filed October 6, 2010;10.12
    
    
    Letter Agreement dated October 18, 2010
between the company and Robert W. Fishback,
incorporated by reference to current report
(Form 8-K) filed October 22, 2010;10.13
    
    
    Stock Option Agreement dated October 18,
2010 between the company and Robert W.
Fishback, incorporated by reference to
current report (Form 8-K) filed October 22,
2010;10.14
    
    
    2011 Stock Option Plan and template
agreements to be used to grant options
thereunder, incorporated by reference to
annual report (Form 10-K) filed March 29,
2011;10.15
    
    
    Agreement dated December 13, 2010 between
Heinrocket Inc. as Consultant and Torvec,
Inc., incorporated by reference to annual
report (Form 10-K) filed March 29, 2011.
 (11)
    
    Statement re computation of per share earnings (loss)Not applicable.(15)
    
    Letter re: unaudited interim financial informationNone.(18)
    
    Letter re change in accounting principlesNone.
  29




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(19)
    
    Report furnished to security holdersNone.(22)
    
    Published report regarding matters submitted to vote of security holdersNone.(23)
    
    Consents of experts and counsel(23.1)
    
    EisnerAmper LLP Consent(24)
    
    Power of attorneyNone.(31.1)
    
    Rule 13(a)-14(a)/15(d)-14(a) Certifications  CEO(31.2)
    
    Rule 13(a)-14(d)/15(d)-14(d) Certifications  CFO(32)
    
    Section 1350 Certifications(99)
    
    Additional exhibitsNone.
  30




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##### Table of Contents



SIGNATURES
  TORVEC, INC.Date: May 12, 2011
    By:
    /s/ Richard A. KaplanRichard A. KaplanChief Executive OfficerDate: May 12, 2011
    By:
    /s/ Robert W. FishbackRobert W. FishbackChief Financial Officer  31




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##### Table of Contents



EXHIBIT INDEX
 Exhibit

    
    Description31.1
    
    
    Rule 13(a)-14(a)/15(d)-14(a) Certifications  CEO31.2
    
    
    Rule 13(a)-14(d)/15(d)-14(d) Certifications  CFO32
    
    
    Section 1350 Certifications
  32