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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Fiscal Year Ended DECEMBER 31, 2010
 OR
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Transition Period from  to
 Commission file number 000-24455
 TORVEC, INC.
  NEW YORK
    
    16-1509512(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)1999 Mount Read Blvd., Building 3
Rochester, New York
    
    14615(Address of principal executive offices)
    
    (Zip Code)
   Title of each class
    
    Name of each exchange on which registeredNone.
    
    N/A
 
 Yes o No þ
 Yes o No þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
 $8,153,731.
 45,691,099




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TABLE OF CONTENTS
 PAGEPART IItem 1. Description of Business
    
    
    4Item 1A. Risk Factors
    
    
    6Item 1B. Unresolved Staff Comments
    
    
    7Item 2. Properties
    
    
    7Item 3. Legal Proceedings
    
    
    7Item 4. Removed and Reserved
    
    
    8Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    8Item 6. Selected Financial Data
    
    
    18Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22PART II  DECEMBER 31, 2010 AND 2009 FINANCIAL INFORMATIONItem 8. Consolidated Financial Statements
    
    
    23Report of Independent Registered Public Accounting Firm
    
    
    24Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    25Consolidated Statements of Operations for each of the years in the Two-Year
Period Ended December 31, 2010 and for the Period from September 25, 1996 (Inception)
through December 31, 2010
    
    
    26Consolidated Statements of Changes in Stockholders Equity (Capital Deficit)
for the Period from September 25, 1996 (Inception) through December 31, 2010
    
    
    27Consolidated Statements of Cash Flows for each of the years in the Two-Year
Period Ended December 31, 2010 and for the Period from September 25, 1996 (Inception)
through December 31, 2010
    
    
    38Notes to Consolidated Financial Statements
    
    
    40Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    64Item 9A. Controls and Procedures
    
    
    64Item 9B. Other Information
    
    
    65PART IIIItem 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section
16(a) of
the Exchange Act
    
    
    66
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PAGEItem 11. Executive Compensation
    
    
    79Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters
    
    
    91Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    93Item 14. Principal Accountant Fees and Services
    
    
    95Item 15. Exhibits
    
    
    97SIGNATURE PAGE
    
    
    104EXHIBIT INDEX
    
    
    105Exhibit 10.72Exhibit 10.73Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32
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PART I
 
 Item 1.
    
    DESCRIPTION OF BUSINESS
 (A) History and Development of Our Inventions
   The IsoTorque® Differential
    The Rota-Torque Hydraulic Pump
   The Torsteer Vehicle Steer-Drive
   4




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®
 (B) Competition, Industry and Market Acceptance
    ®
    5




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Item 1A.
    
    RISK FACTORS
           6




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Item 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 Item 2.
    
    PROPERTIES
  th
  
 Item 3.
    
    LEGAL PROCEEDINGS
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Item 4.
    
    REMOVED AND RESERVED
 
 Item 5.
    
    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
 (A) Market Information
    2010
    
    High
    
    
    Low1st Quarter
    
    $
    0.51
    
    
    $
    0.382nd Quarter
    
    $
    0.48
    
    
    $
    0.303rd Quarter
    
    $
    0.45
    
    
    $
    0.324th Quarter
    
    $
    2.94
    
    
    $
    0.44
 2009
    
    High
    
    
    Low1st Quarter
    
    $
    1.65
    
    
    $
    0.702nd Quarter
    
    $
    0.90
    
    
    $
    0.523rd Quarter
    
    $
    1.05
    
    
    $
    0.514th Quarter
    
    $
    0.79
    
    
    $
    0.40
 (B) Holders of Common Stock
  (C) Dividend Policy on Common Stock
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(D) Securities Authorized for Issuance under Equity Compensation Plans as of December 31,
2010
 Number of securitiesto be issued upon
    
    
    Weighted averageexercise of
    
    
    exercise price of
    
    
    Number of securitiesoutstanding options,
    
    
    outstanding options,
    
    
    remaining availablewarrants and rights
    
    
    warrants and rights
    
    
    for future issuancePlan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved by security holders
    
    
    641,848
    (1)
    
    $
    4.79
    
    
    NoneEquity compensation plans not approved by security holders
    
    
    7,727,500
    (2)
    
    $
    1.02
    
    
    NoneTotal
    
    
    8,369,348
    (1,2)
    
    $
    1.31
    
    
    None
 (1)
    
    Represents the aggregate number of common stock options outstanding under the companys
1998 Stock Option Plan. The 1998 Plan was terminated effective May 28, 2008 as to the grant of
future options thereunder.(2)
    
    Represents stock options granted to the companys chief executive officer, chief financial
officer, and certain retired directors, as well as common stock warrants issued to executive
officers, nonmanagement directors and certain of our business, engineering, financial, governmental
affairs and technical consultants. See Note H to the companys financial statements for details.  (E) Class A Preferred Stock
   A.
    
    Number of Shares
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B.
    
    Dividends
 (i)
    
    So long as any Class A Preferred is outstanding, the holders of the Class A Preferred will
be entitled to receive cumulative preferential dividends in the amount of $.40 per share of Class A
Preferred for each annual dividend period. The annual dividend period shall commence on the first
day of each March and shall end on the last day of the immediately succeeding February, which
February date is referred to as the Dividend Accrual Date.(ii)
    
    When and as declared by the board, dividends payable on the Class A Preferred will
be paid in cash out of any funds legally available for the payment of dividends or, in the
discretion of the board, will be paid in Class A Preferred at a rate of 1 share of Class A
Preferred for each $4.00 of dividends. No fractions of Class A Preferred shall issue. The Company
shall pay cash in lieu of paying fractions of Class A Preferred on a pro rata basis.(iii)
    
    Dividends shall be cumulative from the date of issuance of each share of Class A
Preferred, whether or not declared and whether or not, in any annual dividend period(s), there are
net profits or net assets of the Company legally available for the payment of dividends.(iv)
    
    Accumulated and unpaid dividends on the Class A Preferred will not bear interest.(v)
    
    So long as any Class A Preferred is outstanding, the Company may not declare or pay any
dividend, make any distribution, or fund, set aside or make monies available for a sinking fund for
the purchase or redemption of, any shares or stock of the Company ranking junior to the Class A
Preferred with respect to the payment of dividends, including the $.01 par value common stock of
the Company (Junior Stock), unless all dividends in respect of the Class A Preferred for all past
annual dividend periods have been paid and such dividends for the current annual dividend period
have been paid or declared and duly provided for. Subject to the foregoing, and not otherwise, the
dividends (payable in cash, stock or otherwise) as may be determined by the board, may be declared
and paid on any Junior Stock from time to time out of any funds legally available therefore, and
the Class A Preferred will be entitled to participate in any such dividends, whether payable in
cash, stock or otherwise on a pro rata basis.
 C.
    
    Liquidation Rights
 (i)
    
    In the event of any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the holders of Class A Preferred then outstanding are entitled to be paid
out of the assets of the Company available for distribution to its shareholders, whether such
assets are capital, surplus or earnings, before any payment or declaration and setting apart for
payment of any amount in respect of any shares of any Junior Stock with respect to the payment of
dividends or distribution of assets on liquidation, dissolution or winding up of the Company, all
accumulated and unpaid dividends (including a prorated dividend from the last Dividend Accrual
Date) in respect of any liquidation, dissolution or winding up consummated except that,
notwithstanding the provisions of Section B(ii), all of such accumulated and unpaid dividends will
be paid in Class A Preferred at a rate of 1 share of Class A Preferred for each $4.00 of dividends.
No fractions of Class A Preferred shall issue. The Company shall pay cash in lieu of paying
fractions of Class A Preferred on a pro rata basis.(ii)
    
    The Class A Preferred will be entitled to participate on a pro rata basis in any
distribution of assets as may be made or paid on Junior Stock upon the liquidation, dissolution or
winding up of the Company.(iii)
    
    A consolidation or merger of the Company with or into any other corporation or
corporations or any other legal entity will not be deemed to constitute a liquidation, dissolution
or winding up of the Company as those terms are used in this Section C.
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D.
    
    Redemption
 (i)
    
    The Company may, in the absolute discretion of its board, redeem at any time and from time
to time from any source of funds legally available any and all of the Class A Preferred at the
Redemption Price.(ii)
    
    For each redemption, the Redemption Price for each share of Class A Preferred shall
be equal to amount paid per share of Class A Preferred payable in cash, plus an amount payable (not
withstanding the provisions of Section B (ii)) in cash equal to the sum of all accumulated unpaid
dividends per share of Class A Preferred (including a prorated annual dividend from the last
Dividend Accrual Date) to the respective date for each redemption on which the Company shall redeem
any shares of Class A Preferred (the Redemption Date).(iii)
    
    In the event of redemption of only a portion of the then outstanding Class A
Preferred, the Company will affect the redemption pro rata according to the number shares held by
each holder of Class A Preferred.(iv)
    
    At least 20 days and not more than 60 days prior to the date fixed by the board for
any redemption of Class A Preferred, written notice (the Redemption Notice) will be mailed,
postage prepaid, to each holder of record of the Class A Preferred at his or her post office
address last shown on the records of the Company. The Redemption Notice will state:
 
    
    Whether all or less than all of the outstanding Class A Preferred is to be redeemed and the
total number of shares of Class A Preferred being redeemed;
    
    the number of shares of Class A Preferred held by the holder that the Company intends
to redeem;
    
    the Redemption Date and Redemption Price; and
    
    that the holder is to surrender to the Company, in the manner and at the place
designated in Section D(v), his or her certificate or certificates representing the number of
shares of Class A Preferred to be redeemed.
 (v)
    
    On or before the date fixed for redemption, each holder of Class A Preferred must
surrender the certificate or certificates representing the number of shares of Class A Preferred to
the Company, accompanied by instruments of transfer satisfactory to the Company and sufficient to
transfer the Class A Preferred being redeemed to the Company free and clear of any adverse
interest, at the place designated in the Redemption Notice. The Redemption Price for the number of
shares of Class A Preferred redeemed will be payable in cash on the Redemption Date to the person
whose name appears on the certificate(s) as the owner of such certificate(s) as of the date of the
Redemption Notice. In the event that less than all of the shares of Class A Preferred represented
by any certificate(s) are redeemed, a new certificate will issued by the Company representing the
unredeemed Class A Preferred to the same record owner.(vi)
    
    As promptly as practicable after surrender of the certificate(s) representing the
redeemed Class A Preferred, the Company will pay the Redemption Price to the record holder of the
redeemed Class A Preferred.(vii)
    
    Unless the Company defaults in the payment in full of the Redemption Price, the
obligation of the Company to pay dividends on the Class A Preferred redeemed shall cease on the
Redemption Date, and the holders of the Class A Preferred redeemed will cease to have any further
rights with respect to such redeemed Class A Preferred on the Redemption Date, other than to
receive the Redemption Price.(viii)
    
    The holders of the Class A Preferred have no right to seek or to compel redemption of
the Class A Preferred.
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E.
    
    Voting Rights
 (i)
    
    The holders of Class A Preferred are not entitled to vote in any and all elections of
directors and with respect to any and all other matters as to which the vote or consent of
shareholders of the Company shall be required or taken.
 F.
    
    Conversion Privilege
 (i)
    
    The holders of the Class A Preferred have the right, at each holders option but subject
to board approval in each case, to convert each share of Class A Preferred into 1 fully paid and
nonassessable share of the $.01 par value common stock of the Company (Common Share) without
payment of any conversion price or other consideration. Such 1 for 1 rate of conversion is subject
to adjustment as set forth in Section F(x).(ii)
    
    The Conversion Privilege set forth in this Section F may not be exercised by the
holder of Class A Preferred until 1 year shall have elapsed from the issue date of the Class A
Preferred held by such holder and may not be exercised if the board shall not have approved the
actual exercise of such Conversion Privilege by such holder of Class A Preferred. Such approval
shall not be unreasonably withheld. Upon receipt of the Notice of Conversion described in Section
F(iii) below and the boards approval of such conversion, the Company shall give a Notice of
Approval to the holder within 48 hours of the receipt of the Notice of Conversion that the exercise
of the Conversion Privilege by such holder is approved.(iii)
    
    In order to exercise the Conversion Privilege, the holder of Class A Preferred
must give written notice to the Company that the holder elects to covert the number of shares of
Class A Preferred as specified in the Notice of Conversion. The Notice of Conversion will also
state the name(s) and address (es) in which the certificate(s) for Common Shares issuable upon the
conversion are to be issued. Upon receipt of the Companys Notice of Approval, the holder of the
Class A Preferred must surrender the certificate(s) representing the number of shares of Class A
Preferred being converted to the Company, accompanied by instruments of transfer satisfactory to
the Company and sufficient to transfer the Class A Preferred being converted to the Company free
and clear of any adverse interest at the office maintained for such purpose by the Company. As
promptly as practicable after the surrender of the certificate(s) representing the number of shares
of Class A Preferred converted, the Company will issue and deliver to the holder, or to such other
person designated by the holders written order, a certificate(s) for the number of full Common
Shares issuable upon the conversion of the Class A Preferred in accordance with the provisions of
this Section F(iii).(iv)
    
    The Conversion Privilege may be exercised in whole or in part and, if exercised in
part, a certificate(s) will be issued for the remaining number of Class A Preferred in any case in
which fewer than all of the Class A Preferred represented by a certificate(s) are converted to the
same record holder of Class A Preferred converted.(v)
    
    Each conversion will be deemed to have been effective immediately prior to the close
of business on the date on which the Class A Preferred will have been so surrendered as provided in
Section F(iii) (the Conversion Date) and the person(s) in whose name(s) any certificate(s) for
Common Shares will be issuable upon the conversion will be deemed to have become the holder(s) of
record of the Common Shares on the Conversion Date. Effective as of the Conversion Date, the
Company will have no obligation to pay dividends on the Class A Preferred converted provided that
effective as of the Conversion Date, the Company shall pay all accumulated and unpaid dividends
(including the prorated dividend from the last Dividend Accrual Date) on the Class A Preferred
converted, payable in the discretion of the Board, in cash out of any funds legally available for
payment of such dividends or in Class A Preferred.(vi)
    
    The Conversion Privilege shall terminate with respect to Class A Preferred called for
redemption by the mailing of a Redemption Notice described in Section D(iv) on the close of
business on the date immediately preceding the Redemption Date.
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(vii)
    
    Notwithstanding the requirement for board approval and the 1 year limit set forth in
Section F(ii), in case of any consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the surviving corporation or in case of any sale or
conveyance to another
corporation of all or substantially all of the assets of the Company or in the case of any
statutory exchange of securities representing an excess of 50% of the total outstanding securities
of the Company with another corporation (including any exchange effected in connection with a
merger of a third corporation into the Company), the holders of Class A Preferred then outstanding
will have the right to convert the Class A Preferred into the kind and amount of securities, cash
or other property which the holder would have owned or have been entitled to receive immediately
after the consolidation, merger, statutory exchange, sale or conveyance, had the Class A Preferred
been converted immediately prior to the effective date of the consolidation, merger, statutory
exchange, sale or conveyance as the case may be.(viii)
    
    Notwithstanding the 1 year holding period set forth in Section F(ii), in the event the
highest bid price for the Companys $.01 par value common stock quoted on any exchange, automated
quotation system or the OTC Bulletin Board on which such stock is actively traded is $20 or more on
5 consecutive trading days, the holders of Class A Preferred shall have the right to convert such
Class A Preferred upon Board approval.(ix)
    
    Common Shares delivered upon conversion of Class A Preferred will be, upon delivery,
validly issued, fully paid and nonassessable, free of all liens and charges and not subject to any
preemptive rights.(x)
    
    In case the Company
 
    
    Declares a dividend, or makes a distribution, on shares of its $.01 par value common stock
in shares of its $.01 par value common stock; or
    
    Subdivides its outstanding shares of its $.01 par value common stock into a greater
number of shares of its $.01 par value common stock; or
    
    Combines its outstanding shares of its $.01 par value common stock into a smaller
number of shares of $.01 par value common stock, the number of Common Shares issuable upon the
conversion of the Class A Preferred shall be adjusted at the time of the record date for the
dividend or distribution or the effective date of the subdivision or a combination so that after
such record or effective date, the holder of Class A Preferred will be entitled to receive the same
percentage of ownership of the Companys $.01 par value common stock as such holder would have been
entitled to receive immediately prior to such record or effective date.
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(F) Class B Preferred Stock
 ®
   A.
    
    Three hundred thousand (300,000) authorized preferred shares of the par value of $.01 each
as fixed by the board of directors, shall be issued in and as a series to be designated Class B
Non-Voting Cumulative Convertible Preferred Shares, $.01 par value. Said series is hereinafter
called Class B Preferred Shares. The term preferred shares as used herein shall include all
100,000,000 of the preferred shares, $.01 par value authorized by the Certificate of Incorporation
of the Corporation of which Class B Preferred Shares is the second series.
 B.
    (1)
    So long as any Class B Preferred are outstanding, the holders of the Class B Preferred
will be entitled to receive cumulative preferential dividends in the amount of $.50 per share of
Class B Preferred and no more for each annual dividend period. The annual dividend period shall
commence on the first day of each September and shall end on the last day of the immediately
succeeding August, which August date is referred to as the Dividend Accrual Date.
 (2)
    
    When and as declared by the board, dividends payable on the Class B Preferred will
be paid in cash out of any funds legally available for the payment of dividends or, in the
discretion of the board, will be paid in Class B Preferred at a rate of 1 share of Class B
Preferred for each $5.00 of dividends. No fractions of Class B Preferred shall be issued. The
Corporation shall pay cash in lieu of paying fractions of Class B Preferred on a pro rata basis.
 (3)
    
    Dividends shall be cumulative from the date of issuance of each share of Class B
Preferred, whether or not declared and whether or not, in any annual dividend period(s), there are
net profits or net assets of the Corporation legally available for the payment of dividends.
 (4)
    
    Accumulated and unpaid dividends on the Class B Preferred will not bear interest.
 (5)
    
    So long as any shares of Class B Preferred are outstanding, the Corporation may not
declare or pay any dividend, make any distribution, or fund, set aside or make monies available for
a sinking fund for the purchase or redemption of any shares or stock of the Corporation ranking
junior to the Class B Preferred with respect to the payment of dividends, including the $.01 par
value common stock of the company, for all past annual dividend periods have been paid and such
dividends for the current annual dividend period have been paid or declared and duly provided for.
Subject to the foregoing, and not otherwise, the dividends (payable in cash, stock or otherwise) as
may be determined by the Board, may be declared and paid on any Junior Stock from time to time out
of any funds legally available therefore, and the Class B Preferred will be entitled to participate
in any such dividends, whether payable in cash, stock or otherwise, on a pro rata basis.
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C.
    
    The Class B Preferred shall rank junior and be classified as Junior Stock with respect to
the Corporations Class A Preferred Shares in all respects.
 D.
    (1)
    In the event of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of Class B Preferred then outstanding are entitled to be paid
out of the assets of the Corporation available for distribution to its shareholders, whether such
assets are capital, surplus or earnings, before any payment or declaration and setting apart for
payment of any amount in respect of any shares of any Junior stock with respect to the payment of
dividends or distribution of assets on liquidation, dissolution or winding up of the Corporation,
all accumulated and unpaid dividends (including a prorated dividend from the last Dividend Accrual
Date) in respect of any liquidation, dissolution or winding up consummated except that,
notwithstanding the provisions of Section B(2), all of such accumulated and unpaid dividends will
be paid in shares of Class B Preferred at a rate of 1 share of Class B Preferred for each $5.00 of
dividends. No fractions of Class B Preferred shall be issued. The Corporation shall pay cash in
lieu of paying fractions of Class B Preferred on a pro rata basis. (2) The Class B Preferred will
be entitled to participate on a pro rata basis in any distribution of assets as may be made or paid
on Junior Stock upon the liquidation, dissolution or winding up of the Corporation.
 E.
    (1)
    The Corporation may in the absolute discretion of its board, redeem at any time and
from time to time from any source of funds legally available any and all of the Class B Preferred
at the Redemption Price.
 (2)
    
    For each redemption, the Redemption Price for each share of Class B Preferred shall
be equal to the sum of $5.00 per share of Class B Preferred, payable in cash, plus an amount
payable (not withstanding the provisions of Section B(2)) in cash equal to the sum of all
accumulated unpaid dividends per share of Class B Preferred (including a prorated annual dividend
from the last Dividend Accrual Date) to the respective date for each redemption on which the
Corporation shall redeem any shares of Class B Preferred (the Redemption Date).(3)
    
    In the event of a redemption of only a portion of the then outstanding Class B
Preferred, the Corporation will affect the redemption pro rata according to the number shares held
by each holder of Class B Preferred.(4)
    
    Unless the Corporation defaults in the payment in full of the Redemption Price, the
obligation of the Corporation to pay dividends on the Class B Preferred redeemed shall cease on the
Redemption Date, and the holders of the Class B Preferred redeemed will cease to have any further
rights with respect to such redeemed Class B Preferred on the Redemption Date, other than to
receive the Redemption Price.(5)
    
    The holders of the Class B Preferred have no right to seek or to compel redemption
of the Class B Preferred.
 F.
    
    The holders of Class B Preferred are not entitled to vote in any and all elections of
directors and with respect to any and all other matters as to which the vote or consent of
shareholders of the Corporation shall be required or taken.
 G.
    (1)
    The holders of the Class B Preferred have the right, at each holders option but
subject to board approval in each case, to (i) convert each share of Class B Preferred into 1 fully
paid and nonassessable share of the $.01 par value common stock of the Corporation (Torvec
Common) without payment of any conversion price or other consideration; or to (ii) convert each
share of Class B Preferred into 1 fully paid and nonassessable share of the $.01 par value common
stock of Iso-Torque Corporation (Iso-Torque Common) without payment of any conversion price or
other consideration upon the happening of any of the following events:
 (a)
    
    the effectiveness of a registration statement as filed with the Securities and Exchange
Commission pursuant to and under the Securities Act of 1933 with respect to an initial public
offering of Iso-Torque Common; or
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(b)
    
    the effectiveness of a registration statement as filed with the Securities and
Exchange Commission pursuant to and under the Securities Exchange Act of 1934 with respect to an
initial trading of Iso-Torque Common on a national exchange, the NASDAQ or the OTCBB; or(c)
    
    notwithstanding the 1 year holding period set forth in Section G(2) the execution of
a definitive agreement for the sale, transfer and/or exchange of all of the issued and outstanding
Iso-Torque Common to a third party purchaser of such stock or by any of a business combination of
Iso-Torque Corporation with an unrelated entity, other than a merger or consolidation in which
Iso-Torque Corporation is the surviving corporation.
 (2)
    
    The Conversion Privilege set forth in this Section G may not be exercised by the holder of
Class B Preferred until 1 year shall have elapsed from the issue date of the Class B Preferred held
by such holder and may not be exercised if the board shall not have approved the actual exercise of
such Conversion Privilege by such holder of Class B Preferred. Such approval shall not be
unreasonably withheld. Upon receipt of the Notice of Conversion and the boards approval of such
conversion, the Corporation shall give a Notice of Approval to the holder within 48 hours of the
receipt of the Notice of Conversion that the exercise of the Conversion Privilege by such holder is
approved.
 (3)
    
    The Conversion Privilege may be exercised in whole or in part and, if exercised in
part, a certificate(s) will be issued for the remaining Class B Preferred in any case in which
fewer than all of the Class B Preferred represented by a certificate(s) are converted to the same
record holder of Class B Preferred converted.
 (4)
    
    Each conversion will be deemed to have been effective immediately prior to the close
of business on the date on which the Class B Preferred will have been so surrendered (the
Conversion Date) and the person(s) in whose name(s) any certificate(s) for Torvec Common or
Iso-Torque Common will be issuable upon the conversion will be deemed to have become the holder(s)
of record of the Torvec Common or Iso-Torque Common on the Conversion Date. Effective as of the
Conversion Date, the Corporation will have no obligation to pay dividends on the Class B Preferred
converted provided that effective as of the Conversion Date, the Corporation shall pay all
accumulated and unpaid dividends (including the prorated dividend from the last Dividend Accrual
Date) on the Class B Preferred converted, payable in the discretion of the board, in cash out of
any funds legally available for payment of such dividends or in shares of Class B Preferred.
 (5)
    
    The Conversion Privilege shall terminate with respect to Class B Preferred called for
redemption by the mailing of a Redemption Notice on the close of business on the date immediately
preceding the Redemption Date.
 (6)
    
    Notwithstanding the requirement for board approval and the 1 year limit set forth in
Section G(2), in case of any consolidation or merger to which the Corporation is a party other than
a merger or consolidation in which the Corporation is the surviving corporation or in case of any
sale or conveyance to another corporation of all or substantially all of the assets of the
Corporation or in the case of any statutory exchange of securities representing an excess of 50% of
the total outstanding securities of the Corporation with another corporation (including any
exchange effected in connection with a merger of a third corporation into the Corporation), the
holders of Class B Preferred then outstanding will have the right to convert the Class B Preferred
into the kind and amount of securities, cash or other property which the holder would have owned or
have been entitled to receive immediately after the consolidation, merger, statutory exchange, sale
or conveyance, had the Class B Preferred been converted immediately prior to the effective date of
the consolidation, merger, statutory exchange, sale or conveyance as the case may be.
  16




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##### Table of Contents



(7)
    
    Notwithstanding the 1 year holding period set forth in Section G(2), in the event
the highest bid price for the Corporations $.01 par value common stock quoted on any exchange,
automated quotation system or the OTC Bulletin Board on which such stock is actively traded is $20
or more on 5 consecutive trading days, the holders of Class B Preferred shall have the right to
convert such Class B Preferred upon board approval for such conversion period.(8)
    
    Torvec Common or Iso-Torque Common delivered upon conversion of Class B Preferred
will be, upon delivery, validly issued, fully paid and nonassessable, free of all liens and charges
and not subject to any preemptive rights.(9)
    
    In case the Corporation
 (a)
    
    declares a dividend, or makes a distribution, on shares of its $.01 par value common stock
in shares of its $.01 par value common stock; or(b)
    
    subdivides its outstanding shares of its $.01 par value common stock into a greater
number of shares of its $.01 par value common stock; or(c)
    
    combines its outstanding shares of its $.01 par value common stock into a smaller
number of shares of $.01 par value common stock, the number of Torvec Common issuable upon the
conversion of the Class B Preferred shall be adjusted at the time of the record date for the
dividend or distribution or the effective date of the subdivision or a combination so that after
such record or effective date, each holder of Class B Preferred will be entitled to receive the
same percentage of ownership of the Corporations $.01 par value common stock as such holder would
have been entitled to receive immediately prior to such record or effective date.
      (G) Reports to Shareholders
   17




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##### Table of Contents



(H) Transfer Agent and Registrar
  
 Item 6.
    
    SELECTED FINANCIAL DATA
   18




---



##### Table of Contents



Item 7.
    
    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
      19




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##### Table of Contents



(D) Liquidity and Capital Resources
     Contribution of Shareholder Services:
    20




---



##### Table of Contents



Current Cash Outlook:
   (E) Critical Accounting Policies
        21




---



##### Table of Contents



(F) Impact of Inflation
  (G) Quarterly Fluctuations
  
 Item 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   22




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##### Table of Contents



Item 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 TORVEC, INC.   Contents
Financial Statements
 Report of Independent Registered Public Accounting Firm
    
    
    24Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    25Consolidated Statements of Operations for each of the years in the Two-Year
Period Ended December 31, 2010 and for the Period from September 25, 1996 (Inception)
through December 31, 2010
    
    
    26Consolidated Statements of Changes in Stockholders Equity (Capital Deficit)
for the Period from September 25, 1996 (Inception) through December 31, 2010
    
    
    27Consolidated Statements of Cash Flows for each of the years in the Two-Year
Period Ended December 31, 2010 and for the Period from September 25, 1996 (Inception)
through December 31, 2010
    
    
    38Notes to Consolidated Financial Statements
    
    
    40
  23




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    
  24




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##### Table of Contents



TORVEC, INC.
(a development stage company)
 
 Consolidated Balance Sheets
 December 31, 2010
    
    
    December 31, 2009ASSETSCurrent assets:Cash
    
    $
    1,518,000
    
    
    $
    41,000Prepaid expenses and other current assets
    
    
    48,000
    
    
    
    111,000Total current assets
    
    
    1,566,000
    
    
    
    152,000Property and Equipment:Office equipment
    
    
    68,000
    
    
    
    68,000Shop equipment
    
    
    118,000
    
    
    
    139,000Leasehold Improvements
    
    
    243,000
    
    
    
    213,000Transportation equipment
    
    
    37,000
    
    
    
    106,000466,000
    
    
    
    526,000Less accumulated depreciation and amortization
    
    
    246,000
    
    
    
    299,000Net property and equipment
    
    
    220,000
    
    
    
    227,000Total Assets
    
    $
    1,786,000
    
    
    $
    379,000LIABILITIES AND STOCKHOLDERS EQUITY (CAPITAL DEFICIT)Current Liabilities:Notes payable, current portion
    
    $
    15,000
    
    
    $
    20,000Accounts payable
    
    
    167,000
    
    
    
    255,000Accrued liabilities
    
    
    618,000
    
    
    
    451,000Advance from related party
    
    
    
    
    
    
    22,000Deferred income
    
    
    21,000
    
    
    
    828,000Total current liabilities
    
    
    821,000
    
    
    
    1,576,000Deferred rent
    
    
    19,000
    
    
    
    29,000Notes payable, net of current portion
    
    
    26,000
    
    
    
    9,000Total Liabilities
    
    
    866,000
    
    
    
    1,614,000Commitments and other matters (Note I)Stockholders Equity (Capital Deficit):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, December 31, 2010 and 2009: 598,772 and 655,851 shares issued and outstanding, respectively (liquidation preference $3,734,000 and $3,841,000, respectively)
    
    
    6,000
    
    
    
    6,000b) 300,000 designated as Class B, Non-voting, convertible, cumulative dividend $.50 per share, per annum, December 31, 2010 and 2009: 77,500 and 77,500 shares issued and outstanding, respectively (liquidation preference $592,000 and $553,000, respectively)
    
    
    1,000
    
    
    
    1,000Common stock, $.01 par value, 400,000,000 shares authorized, 45,685,678 and 35,811,192 issued and outstanding, at December 31, 2010 and 2009, respectively
    
    
    457,000
    
    
    
    358,000Additional paid-in capital
    
    
    56,722,000
    
    
    
    51,613,000Deficit accumulated during the development stage
    
    
    (56,266,000
    )
    
    
    (53,213,000
    )Total Stockholders Equity (Capital Deficit)
    
    
    920,000
    
    
    
    (1,235,000
    )Total Liabilities and Stockholders Equity (Capital Deficit)
    
    $
    1,786,000
    
    
    $
    379,000
 See notes to consolidated financial statements.
  25




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##### Table of Contents



TORVEC, INC.
(a development stage company)
 
 Consolidated Statements of Operations
 September 25,Year      ended
    
    
    Year  ended
    
    
    1996 (Inception)December 31,
    
    
    December 31,
    
    
    through December2010
    
    
    2009
    
    
    31, 2010Revenue
    
    $
    
    
    
    $
    175,000
    
    
    $
    422,000Cost of Goods Sold
    
    
    
    
    
    
    90,000
    
    
    
    315,000Gross Profit
    
    
    
    
    
    
    85,000
    
    
    
    107,000Costs and expenses:Research and development
    
    
    469,000
    
    
    
    520,000
    
    
    
    16,324,000General and administrative (including compensation expense
from options and warrants of $1,686,000, $0, and
$19,240,000, respectively)
    
    
    4,471,000
    
    
    
    2,877,000
    
    
    
    44,324,000Asset impairments
    
    
    
    
    
    
    
    
    
    
    1,071,000Loss from operations
    
    
    (4,940,000
    )
    
    
    (3,312,000
    )
    
    
    (61,612,000
    )Reversal of liability on cancellation of debt
    
    
    
    
    
    
    
    
    
    
    1,541,000Gain on litigation settlement
    
    
    1,900,000
    
    
    
    
    
    
    
    1,900,000Other income / (expense)
    
    
    (11,000
    )
    
    
    
    
    
    
    249,000Loss Before Income Tax (Expense) / Benefits
    
    
    (3,051,000
    )
    
    
    (3,312,000
    )
    
    
    (57,922,000
    )Income tax (expense) / benefits
    
    
    (2,000
    )
    
    
    40,000
    
    
    
    384,000Net Loss
    
    
    (3,053,000
    )
    
    
    (3,272,000
    )
    
    
    (57,538,000
    )Net loss attributable to non-controlling interest in subsidiary
    
    
    
    
    
    
    
    
    
    
    1,272,000Net Loss attributable to Torvec, Inc.
    
    
    (3,053,000
    )
    
    
    (3,272,000
    )
    
    
    (56,266,000
    )Preferred stock beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    763,000Preferred stock dividends
    
    
    273,000
    
    
    
    229,000
    
    
    
    1,678,000Net Loss attributable to Torvec, Inc. common stockholders
    
    $
    (3,326,000
    )
    
    $
    (3,501,000
    )
    
    $
    (58,707,000
    )Net Loss per common share attributable to stockholders of Torvec, Inc., Basic and Diluted
    
    $
    (0.09
    )
    
    $
    (0.10
    )Weighted average number of shares of common stock, Basic and Diluted
    
    
    38,895,000
    
    
    
    34,035,000
 See notes to consolidated financial statements.
  26




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##### Table of Contents



TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
 
   DeficitUnearned
    
    
    AccumulatedClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    TotalPreferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    From
    
    
    Stock and
    
    
    Development
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stockholders
    
    
    Options
    
    
    Stage
    
    
    EquityIssuance of shares to founders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,464,400
    
    
    $
    165,000
    
    
    $
    (165,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0Issuance of stock for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,535,600
    
    
    
    25,000
    
    
    
    381,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    406,000Sale of common stock  November ($1.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,600
    
    
    
    1,000
    
    
    
    96,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97,000Sale of common stock  December ($1.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    156,201
    
    
    
    1,000
    
    
    
    233,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    234,000Distribution to founders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (489,000
    )
    
    
    (489,000
    )Balance  December 31, 1996
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,220,801
    
    
    
    192,000
    
    
    
    518,000
    
    
    
    
    
    
    
    
    
    
    
    (489,000
    )
    
    
    221,000Issuance of compensatory stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    10,000
    
    
    
    1,490,000
    
    
    
    
    
    
    $
    (1,500,000
    )
    
    
    
    
    
    
    0Issuance of stock for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,000
    
    
    
    
    
    
    
    18,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,000Sale of common stock  January ($1.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,266
    
    
    
    1,000
    
    
    
    86,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87,000Sale of common stock  February ($1.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,361
    
    
    
    1,000
    
    
    
    112,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,000Sale of common stock  May ($1.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    45,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,000Issuance of stock for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000Sale of common stock  June ($3.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,166
    
    
    
    1,000
    
    
    
    219,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    220,000Sale of common stock  July ($3.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,335
    
    
    
    
    
    
    
    40,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,000Sale of common stock  August ($3.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,567
    
    
    
    1,000
    
    
    
    181,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182,000Sale of common stock  September ($3.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000Sale of common stock  October ($3.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,000
    
    
    
    
    
    
    
    21,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,000Sale of common stock  November ($3.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000Sale of common stock  December ($3.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    1,000
    
    
    
    299,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000Issuance of compensatory options to consultants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    234,000
    
    
    
    
    
    
    
    (234,000
    )
    
    
    
    
    
    
    0Compensatory stock and options earned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    451,000
    
    
    
    
    
    
    
    451,000Distributions to founders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (338,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (338,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (922,000
    )
    
    
    (922,000
    )
  27




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##### Table of Contents



DeficitUnearned
    
    
    AccumulatedClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    TotalPreferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    From
    
    
    Stock and
    
    
    Development
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stockholders
    
    
    Options
    
    
    Stage
    
    
    EquityBalance  December 31, 1997
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,672,496
    
    
    
    207,000
    
    
    
    2,991,000
    
    
    
    
    
    
    
    (1,283,000
    )
    
    
    (1,411,000
    )
    
    
    504,000Issuance of stock for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Sale of common stock  May 11 to September 20 ($5.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,620
    
    
    
    1,000
    
    
    
    562,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    563,000Sale of common stock  September 21 to December 31 ($10.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,500
    
    
    
    
    
    
    
    255,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255,000Costs of offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60,000
    )Compensatory stock and options earned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    578,000
    
    
    
    
    
    
    
    578,000Contribution of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,122,000
    )
    
    
    (2,122,000
    )Balance  December 31, 1998
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,811,616
    
    
    
    208,000
    
    
    
    3,766,000
    
    
    
    
    
    
    
    (705,000
    )
    
    
    (3,533,000
    )
    
    
    (264,000
    )Issuance of stock for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,351
    
    
    
    
    
    
    
    327,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    327,000Sale of common stock  January 1 to August 9 ($10.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,670
    
    
    
    1,000
    
    
    
    806,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    807,000Sale of common stock  August 10 to November 30 ($5.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,500
    
    
    
    1,000
    
    
    
    422,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    423,000Issuance of compensatory options to consultants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,780,000
    
    
    
    
    
    
    
    (2,780,000
    )
    
    
    
    
    
    
    0Common stock issued- exercise of options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,000
    
    
    
    
    
    
    
    105,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,000Compensatory stock and options earned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,050,000
    
    
    
    
    
    
    
    3,050,000Contribution of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,788,000
    )
    
    
    (4,788,000
    )Balance  December 31, 1999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,043,137
    
    
    $
    210,000
    
    
    
    8,221,000
    
    
    
    
    
    
    $
    (435,000
    )
    
    
    (8,321,000
    )
    
    
    (325,000
    )
 See notes to consolidated financial statements
  28




---



##### Table of Contents



TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
 DeficitUnearned
    
    
    AccumulatedClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    TotalPreferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    From
    
    
    Stock and
    
    
    Development
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stockholders
    
    
    Options
    
    
    Stage
    
    
    EquityIssuance of stock for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196,259
    
    
    $
    2,000
    
    
    $
    838,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    840,000Sale of common stock  March 29 ($4.51 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,321
    
    
    
    
    
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Sale of common stock  June 23 ($3.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    1,000
    
    
    
    349,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350,000Acquisition of Ice Surface Development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,068,354
    
    
    
    11,000
    
    
    
    3,394,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,405,000Proceeds from exercise of put option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,735
    
    
    
    1,000
    
    
    
    108,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109,000Compensatory stock and options earned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    435,000
    
    
    
    
    
    
    
    435,000Contribution of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (2,374,000
    )
    
    
    (2,374,000
    )Balance  December 31, 2000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,488,806
    
    
    
    225,000
    
    
    
    13,125,000
    
    
    
    
    
    
    
    0
    
    
    
    (10,695,000
    )
    
    
    2,655,000Issuance of stock for liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    126,667
    
    
    
    1,000
    
    
    
    664,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    665,000Issuance of stock for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    361,100
    
    
    
    4,000
    
    
    
    1,007,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,011,000Issuance of option to consultant for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398,000Proceeds from exercise of put option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,910
    
    
    
    1,000
    
    
    
    323,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    324,000Contribution of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,871,000
    )
    
    
    (3,871,000
    )Balance  December 31, 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,078,483
    
    
    
    231,000
    
    
    
    15,532,000
    
    
    
    
    
    
    
    0
    
    
    
    (14,566,000
    )
    
    
    1,197,000Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,448
    
    
    
    1,000
    
    
    
    126,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,000Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000
    
    
    
    3,000
    
    
    
    72,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,000Loss on sale of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (232,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (232,000
    )Sale of preferred stock and warrant
    
    
    38,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,000Issuance of stock for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,001,454
    
    
    
    10,000
    
    
    
    1,224,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,234,000Issuance of options in settlement of liabilities and consulting fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    653,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    653,000Issuance of warrants to chairman
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    690,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    690,000Proceeds from exercise of put option ($.90 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    440,000
    
    
    
    5,000
    
    
    
    391,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    396,000Common stock issued in exchange for loan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,461
    
    
    
    
    
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000Sale of common stock  July ($1.45 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,897
    
    
    
    
    
    
    
    68,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,000Sale of common stock  August ($1.42 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211,265
    
    
    
    2,000
    
    
    
    298,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000Sale of common stock  September ($1.42 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140,845
    
    
    
    1,000
    
    
    
    199,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Sale of common stock  December ($.91 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109,890
    
    
    
    1,000
    
    
    
    99,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Contribution of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Issuance of warrant for financial services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,000Warrant issued in lieu of compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    633,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    633,000Issuance of shares in settlement of liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,965
    
    
    
    2,000
    
    
    
    267,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    269,000Compensatory stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,000Employees/Stockholders Contribution of services in subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    519,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    519,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,577,000
    )
    
    
    (4,577,000
    )Balance  December 31, 2002
    
    
    38,500
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    25,629,708
    
    
    $
    256,000
    
    
    $
    20,786,000
    
    
    
    
    
    
    $
    0
    
    
    $
    (19,143,000
    )
    
    $
    1,899,000
 See notes to consolidated financial statements
  29




---



##### Table of Contents



TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
 DeficitUnearned
    
    
    AccumulatedClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    TotalPreferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    From
    
    
    Stock and
    
    
    Development
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stockholders
    
    
    Options
    
    
    Stage
    
    
    EquitySale of Common Stock  March ($0.90 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111,112
    
    
    
    1,000
    
    
    $
    99,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    100,000Sale of Common Stock  June (0.80 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000
    
    
    
    3,000
    
    
    
    197,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Sale of Common Stock  September ($2.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,000
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000Advance settled with Common Stock  October ($2.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000Exercise of warrant for common stock  (December $0.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000
    
    
    
    2,000
    
    
    
    123,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,000Issuance of stock for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    753,824
    
    
    
    8,000
    
    
    
    842,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    850,000Exercise of Warrants for $.01 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130,000
    
    
    
    1,000
    
    
    
    (1,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of Warrants for $.01 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    1,000
    
    
    
    (1,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of Warrants for $.01 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,680
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of Warrants for $.01 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,500Cashless exercise of put option
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    654,432
    
    
    
    7,000
    
    
    
    (7,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of Class A Preferred Stock  September ($4.00 per share)
    
    
    5,575
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,000Sale of Class A Preferred Stock  December ($4.00 per share)
    
    
    10,112
    
    
    $
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,000Issuance of option for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,000Issuance of options in settlement of liabilities and consulting fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    265,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    265,000Contribution of services in subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173,000Adjustment for equity issuances of subsidiary common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,000Class A Preferred stock issued
    
    
    2,305
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,000NET LOSS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,927,000
    )
    
    
    (2,927,000
    )Balance at December 31, 2003
    
    
    56,492
    
    
    $
    1,000
    
    
    
    
    
    
    
    
    
    
    
    27,858,256
    
    
    $
    279,000
    
    
    $
    22,717,000
    
    
    
    
    
    
    
    
    
    
    $
    (22,070,000
    )
    
    $
    927,000
 See notes to consolidated financial statements
  30




---



##### Table of Contents



TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
 DeficitUnearned
    
    
    AccumulatedClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    TotalPreferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    From
    
    
    Stock and
    
    
    Development
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stockholders
    
    
    Options
    
    
    Stage
    
    
    EquitySale of Common Stock  June 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,000
    
    
    $
    1,000
    
    
    $
    300,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    301,000Issuance of common stock for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    469,883
    
    
    
    4,000
    
    
    
    2,348,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,352,000Sale of Class A Preferred Stock ($4.00 per share)  March
    
    
    203,117
    
    
    $
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    820,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    822,000Sale of Class A Preferred Stock ($4.00 per share)  April
    
    
    32,653
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,000Conversion of Preferred Stock Class A
    
    
    (41,050
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Preferred Dividend Class A attributable to converted shares
    
    
    8,031
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of Class B Preferred Stock ($5.00 per share)  September
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Sale of Class B Preferred Stock ($5.00 per share)  October
    
    
    
    
    
    
    
    
    
    
    22,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,000Contribution of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,000Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268,865
    
    
    
    3,000
    
    
    
    (2,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000Exercise of consultants warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    345,600
    
    
    
    3,000
    
    
    
    
    
    
    
    (3,000
    )
    
    
    
    
    
    
    
    
    
    
    Issuance of warrants for consulting services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,794,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,794,000Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,805,000
    )
    
    
    (9,805,000
    )Balance at December 31, 2004
    
    
    259,243
    
    
    $
    3,000
    
    
    
    42,500
    
    
    
    
    
    
    
    29,043,654
    
    
    $
    290,000
    
    
    $
    32,761,000
    
    
    $
    (3,000
    )
    
    
    
    
    
    $
    (31,875,000
    )
    
    $
    1,176,000
 See notes to consolidated financial statements
  31




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##### Table of Contents



TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
 DeficitUnearned
    
    
    AccumulatedClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    TotalPreferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    From
    
    
    Stock and
    
    
    Development
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stockholders
    
    
    Options
    
    
    Stage
    
    
    EquityIssuance of common stock for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    786,309
    
    
    $
    8,000
    
    
    $
    1,771,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,779,000Sale of Class A Preferred Stock ($4.00 per share)  March
    
    
    47,500
    
    
    $
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    189,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,000Sale of Class A Preferred Stock ($4.00 per share)  April/May
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,000Sale of Class A Preferred Stock ($4.00 per share)
    
    
    92,500
    
    
    $
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    369,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    370,000Sale of Class A Preferred Stock ($4.00 per share)  October/November
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,000Contribution of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000Issuance of options for consulting services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    247,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    247,000Exercise of consultants warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161,000
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000Issuance of warrants for consulting services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,261,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,261,000Issuance of shares for debt repayment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,667
    
    
    
    
    
    
    
    28,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,000Shares issued for future consulting services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    
    
    
    
    103,000
    
    
    
    
    
    
    
    (103,000
    )Receipt for common stock par stock value for amounts paid in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,000
    )
    
    
    2,000Reclass of due from Stockholder to other receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,000Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,445,000
    )
    
    
    (5,445,000
    )Balance at December 31, 2005
    
    
    459,243
    
    
    $
    5,000
    
    
    
    42,500
    
    
    
    
    
    
    
    30,052,630
    
    
    $
    300,000
    
    
    $
    37,267,000
    
    
    $
    
    
    
    $
    (103,000
    )
    
    $
    (37,320,000
    )
    
    $
    149,000
 See notes to consolidated financial statements
  32




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##### Table of Contents



TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
 DeficitUnearned
    
    
    AccumulatedClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    TotalPreferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    From
    
    
    Stock and
    
    
    Development
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stockholders
    
    
    Options
    
    
    Stage
    
    
    EquityIssuance of common stock for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375,230
    
    
    $
    5,000
    
    
    $
    799,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    804,000Sale of Class A Preferred Stock ($4.00 per share)  January and March 2006
    
    
    58,250
    
    
    $
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    232,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    233,000Sale of Class A Preferred Stock ($4.00 per share)  May 2006
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Sale of Class A Preferred Stock ($4.00 per share)  July and August 2006
    
    
    78,750
    
    
    $
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    315,000Sale of Class A Preferred Stock ($4.00 per share)  October and November 2006
    
    
    111,250
    
    
    $
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    444,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    445,000Sale of Class B Preferred Stock ($5.00 per share)
    
    
    
    
    
    
    
    
    
    
    55,000
    
    
    $
    1,000
    
    
    
    
    
    
    
    
    
    
    
    274,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    275,000Contribution of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000Exercise of consultants warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    680,932
    
    
    $
    7,000
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Issuance of warrants for consulting services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,614,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,614,000Shares issued for consulting services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160,000
    
    
    $
    1,000
    
    
    
    420,000
    
    
    
    
    
    
    
    103,000
    
    
    
    
    
    
    
    524,000Issuance of Common Stock to Placement agent for finders fee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,000Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,727,000
    )
    
    
    (7,727,000
    )Balance at December 31, 2006
    
    
    732,493
    
    
    $
    8,000
    
    
    
    97,500
    
    
    $
    1,000
    
    
    
    31,307,792
    
    
    $
    313,000
    
    
    $
    43,767,000
    
    
    $
    0
    
    
    $
    0
    
    
    $
    (45,047,000
    )
    
    $
    (958,000
    )
 See notes to consolidated financial statements
  33




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##### Table of Contents



TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
 DeficitUnearned
    
    
    Accumulated
    
    
    TotalClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    StockholdersPreferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    From
    
    
    Stock and
    
    
    Development
    
    
    EquityShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stockholders
    
    
    Options
    
    
    Stage
    
    
    (Capital Deficit)Contribution of services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000Exercise of Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,250
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000Shares Issued for Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    302,003
    
    
    
    2,000
    
    
    
    1,190,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,192,000Warrants Issued for Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    650,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    650,000Stock Issued for Purchase
of Variable Gear, LLC
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    19,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,000Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,211,000
    )
    
    
    (3,211,000
    )Balance at December 31, 2007
    
    
    732,493
    
    
    $
    8,000
    
    
    
    97,500
    
    
    $
    1,000
    
    
    
    31,640,045
    
    
    $
    316,000
    
    
    $
    45,926,000
    
    
    $
    0
    
    
    $
    0
    
    
    $
    (48,258,000
    )
    
    $
    (2,007,000
    )
 See notes to consolidated financial statements
  34




---



##### Table of Contents



TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
 DeficitUnearned
    
    
    Accumulated
    
    
    TotalClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    StockholdersPreferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    From
    
    
    Stock and
    
    
    Development
    
    
    EquityShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stockholders
    
    
    Options
    
    
    Stage
    
    
    (Capital Deficit)Conversion
    
    
    (32,305
    )
    
    
    (1,000
    )
    
    
    
    
    
    
    
    
    
    
    32,305
    
    
    
    1,000Shares Issued for Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    875,390
    
    
    
    7,000
    
    
    
    1,730,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,737,000Shares Issued as Compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147,757
    
    
    
    3,000
    
    
    
    331,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    334,000Dividend
    
    
    6,913Issuance of Common Stock  June ($2.75 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,364
    
    
    
    1,000
    
    
    
    99,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Issuance of Common Stock  September ($1.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000Issuance of Common Stock  October ($1.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,000
    
    
    
    
    
    
    
    68,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,000Warrants Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,500Warrants Issued for Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    249,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    249,000Shares Issued for Commercializing Event
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,061
    
    
    
    
    
    
    
    36,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,000Contributed Capital  Ford Truck
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,000Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,683,000
    )
    
    
    (1,683,000
    )Balance at December 31, 2008
    
    
    707,101
    
    
    $
    7,000
    
    
    
    97,500
    
    
    $
    1,000
    
    
    
    32,811,422
    
    
    $
    328,000
    
    
    $
    48,485,000
    
    
    $
    0
    
    
    $
    0
    
    
    $
    (49,941,000
    )
    
    $
    (1,120,000
    )
 See notes to consolidated financial statements
  35




---



##### Table of Contents



TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
 DeficitUnearned
    
    
    Accumulated
    
    
    
    
    
    
    TotalClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    Non-
    
    
    StockholdersPreferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    From
    
    
    Stock and
    
    
    Development
    
    
    controlling
    
    
    EquityShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stockholders
    
    
    Options
    
    
    Stage
    
    
    Interest
    
    
    (Capital Deficit)Conversion Preferred A
    
    
    (51,250
    )
    
    
    (1,000
    )
    
    
    
    
    
    
    
    
    
    
    51,250
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payment of Preferred A Dividend in Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,965
    
    
    
    1,000
    
    
    
    (1,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion Preferred B
    
    
    
    
    
    
    
    
    
    
    (20,000
    )
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payment of Preferred B Dividend in Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares Issued for Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,861,475
    
    
    
    18,000
    
    
    
    1,281,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,299,000Shares Issued as Compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    377,152
    
    
    
    4,000
    
    
    
    286,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    290,000Issuance of common stock April ($0.78 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,103
    
    
    
    1,000
    
    
    
    49,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000Issuance of common stock June ($0.67 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000Issuance of common stock July ($0.60 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86,665
    
    
    
    1,000
    
    
    
    51,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,000Issuance of common stock July ($0.51 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,216
    
    
    
    1,000
    
    
    
    19,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000Issuance of common stock July ($0.76 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,200
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Issuance of common stock August ($0.60 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Issuance of common stock August ($0.72 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,961
    
    
    
    1,000
    
    
    
    29,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000Issuance of common stock September ($0.70 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,142
    
    
    
    
    
    
    
    12,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,000Issuance of common stock September ($0.77 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,944
    
    
    
    
    
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000Issuance of common stock October ($0.52 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192,308
    
    
    
    2,000
    
    
    
    98,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Issuance of common stock October ($0.63 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    13,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,000Issuance of common stock December ($0.40 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,944
    
    
    
    
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,000Warrants Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted share for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,173
    
    
    
    
    
    
    
    19,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,000Shares Issued for Commercializing Event
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,669
    
    
    
    
    
    
    
    14,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,000Contributed Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,200,000Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,272,000
    )
    
    
    
    
    
    
    (3,272,000
    )Balance at December 31, 2009
    
    
    655,851
    
    
    $
    6,000
    
    
    
    77,500
    
    
    $
    1,000
    
    
    
    35,811,192
    
    
    $
    358,000
    
    
    $
    51,613,000
    
    
    $
    0
    
    
    $
    0
    
    
    $
    (53,213,000
    )
    
    $
    0
    
    
    $
    (1,235,000
    )
 See notes to consolidated financial statements
  36




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##### Table of Contents



TORVEC, INC. AND SUBSIDIARIES
(a development stage company)
 DeficitUnearned
    
    
    AccumulatedClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    Non-Preferred Stock
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    From
    
    
    Stock and
    
    
    Development
    
    
    ControllingShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stockholders
    
    
    Options
    
    
    Stage
    
    
    Interest
    
    
    Total EquityConversion Preferred A
    
    
    (62,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payment of Preferred A dividend in Preferred Stock
    
    
    5,421
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payment of Preferred A dividend in Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,883
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares Issued for Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,476,992
    
    
    
    15,000
    
    
    
    561,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    576,000Shares Issued for Compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    889,195
    
    
    
    9,000
    
    
    
    330,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,000Issuance of Common Stock  January ($0.50 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Issuance of Common Stock  May ($0.30 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350,167
    
    
    
    4,000
    
    
    
    102,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,000Issuance of Common Stock  July ($0.39 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,571
    
    
    
    1,000
    
    
    
    26,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,000Issuance of Common Stock  August ($0.35 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000Issuance of Common Stock from October Private
Placement ($0.30 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,834,002
    
    
    
    69,000
    
    
    
    1,981,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,050,000Warrants Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of Common Stock Warrants for Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,000Issuance of Restricted Shares for Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118,099
    
    
    
    1,000
    
    
    
    43,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,000Shares issued for Commercializing Event
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,077
    
    
    
    
    
    
    
    13,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,000Stock-Based Compensation Related to Stock Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,573,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,573,000Warrant Modification
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,000Contributed Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    361,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    361,000Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,053,000
    )
    
    
    
    
    
    
    (3,053,000
    )Balance at December 31, 2010
    
    
    598,772
    
    
    $
    6,000
    
    
    
    77,500
    
    
    $
    1,000
    
    
    
    45,685,678
    
    
    $
    457,000
    
    
    $
    56,722,000
    
    
    $
    
    
    
    $
    
    
    
    $
    (56,266,000
    )
    
    $
    
    
    
    $
    920,000
 See notes to consolidated financial statements.
  37




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##### Table of Contents



TORVEC, INC.
(a development stage company)
 
 Consolidated Statement of Cash Flows
 September 25,1996(Inception)Year Ended
    
    
    ThroughDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010Cash flows from operating activities:Net loss
    
    $
    (3,053,000
    )
    
    $
    (3,272,000
    )
    
    $
    (57,538,000
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    51,000
    
    
    
    62,000
    
    
    
    2,563,000Loss on impairment of license
    
    
    
    
    
    
    
    
    
    
    1,071,000Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    19,000Gain on sale of fixed assets
    
    
    (27,000
    )
    
    
    
    
    
    
    (37,000
    )Compensation expense attributable to common stock in subsidiary
    
    
    
    
    
    
    
    
    
    
    619,000Common stock issued for services
    
    
    620,000
    
    
    
    1,318,000
    
    
    
    15,132,000Stock-based compensation related to stock options
    
    
    1,573,000
    
    
    
    
    
    
    
    1,573,000Warrant modification
    
    
    68,000
    
    
    
    
    
    
    
    68,000Warrants issued for services
    
    
    45,000
    
    
    
    
    
    
    
    294,000Shares issued for future consulting services
    
    
    
    
    
    
    
    
    
    
    103,000Stockholder contribution of services
    
    
    361,000
    
    
    
    1,200,000
    
    
    
    3,970,000Contribution to capital, Ford Truck
    
    
    
    
    
    
    
    
    
    
    16,000Common Stock issued in connection with commercializing event plan
    
    
    13,000
    
    
    
    14,000
    
    
    
    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
    
    
    339,000
    
    
    
    290,000
    
    
    
    18,215,000Changes in:Prepaid expenses and other current assets
    
    
    63,000
    
    
    
    (9,000
    )
    
    
    113,000Deferred revenue
    
    
    (7,000
    )
    
    
    28,000
    
    
    
    (70,000
    )Deferred rent
    
    
    (10,000
    )
    
    
    (10,000
    )
    
    
    19,000Change in accrued payroll taxes
    
    
    169,000
    
    
    
    68,000
    
    
    
    346,000Accounts payable and other accrued expenses
    
    
    (87,000
    )
    
    
    306,000
    
    
    
    4,157,000Deferred compensation and other
    
    
    
    
    
    
    (600,000
    )
    
    
    Due to a related party
    
    
    (22,000
    )
    
    
    22,000
    
    
    
    Net cash used in operating activities
    
    
    (1,804,000
    )
    
    
    (583,000
    )
    
    
    (12,745,000
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (3,000
    )
    
    
    
    
    
    
    (363,000
    )Cost of acquisition
    
    
    
    
    
    
    
    
    
    
    (16,000
    )Proceeds from sale of license
    
    
    1,100,000
    
    
    
    
    
    
    
    1,900,000Proceeds from sale of fixed assets
    
    
    27,000
    
    
    
    
    
    
    
    37,000Net cash provided by investing activities
    
    
    1,124,000
    
    
    
    
    
    
    
    1,558,000Cash flows from financing activities:Net proceeds from sales of common stock and upon exercise of options and warrants
    
    
    2,189,000
    
    
    
    335,000
    
    
    
    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
    
    
    57,000
    
    
    
    
    
    
    
    57,000Payments of notes payable
    
    
    (60,000
    )
    
    
    
    
    
    
    (60,000
    )Proceeds from loans
    
    
    
    
    
    
    
    
    
    
    335,000Repayments of loans
    
    
    (29,000
    )
    
    
    (15,000
    )
    
    
    (109,000
    )Repayment of officer & stockholder loans and advances
    
    
    
    
    
    
    
    
    
    
    (147,000
    )Distributions
    
    
    
    
    
    
    
    
    
    
    (365,000
    )Net cash provided by financing activities
    
    
    2,157,000
    
    
    
    320,000
    
    
    
    12,705,000Net increase (decrease) in cash
    
    
    1,477,000
    
    
    
    (263,000
    )
    
    
    1,518,000Cash at beginning of period
    
    
    41,000
    
    
    
    304,000
    
    
    
    Cash at end of period
    
    $
    1,518,000
    
    
    $
    41,000
    
    
    $
    1,518,000
  38




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##### Table of Contents



TORVEC, INC.
(a development stage company)
Consolidated Statement of Cash Flows
(continued)
 September 25,1996(Inception)Year Ended
    
    
    ThroughDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010Noncash investing and financing activities:Preferred stock issued in payment of dividend
    
    $
    22,000
    
    
    $
    
    
    
    $
    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
    
    
    
    
    
    
    63,000
    
    
    
    121,000Common stock issued in settlement of patent expense
    
    
    
    
    
    
    
    
    
    
    117,000Issuance of common stock as payment for Preferred A and B dividends
    
    
    91,000
    
    
    
    77,000
    
    
    
    168,000Purchases of fixed assets with debt
    
    
    41,000
    
    
    
    
    
    
    
    41,000Supplemental Disclosures:Interest paid
    
    $
    47,000
    
    
    $
    3,000
    
    
    $
    74,000Income tax paid
    
    
    
    
    
    
    
    
    
    
    1,000
 See notes to consolidated financial statements.
  39




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##### Table of Contents



TORVEC, INC.
(a development stage company)
 
   NOTE A  THE COMPANY AND BASIS OF PRESENTATION
 ®
   NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 [1] Consolidation
  [2] Cash and Cash Equivalents
  [3] Property and Equipment
   40




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[4] Research and Development and Patents
   [5] Intangible Assets
  [6] Use of Estimates
  [7] Loss per Common Share
  [8] Fair Value of Financial Instruments
  [9] Stock-based Compensation
 ASC 718-10.
  41




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##### Table of Contents



[10] Revenue Recognition
  [11] Recent Accounting Pronouncements
    [12] Reclassifications
   42




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NOTE C  LICENSE FROM THE TRUSTEES OF DARTMOUTH COLLEGE
      NOTE D  RELATED PARTY TRANSACTIONS
 [1]
    43




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[2]
 [3]
 [4]
 [5]
 [6]
 [7]
 [8]
 [9]
  44




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##### Table of Contents



[10]
 [11]
 NOTE E  INCOME TAXES
   December 31,
    
    
    December 31,Income Tax Provision
    
    2010
    
    
    2009Current tax expense (benefit)State
    
    $
    2,000
    
    
    $
    (40,000
    )Federal
    
    
    
    
    
    
    Deferred tax expense (benefit)State
    
    
    29,000
    
    
    
    (104,000
    )Federal
    
    
    182,000
    
    
    
    (664,000
    )Increase (decrease) in valuation allowance
    
    
    (211,000
    )
    
    
    768,000Provision for income tax
    
    $
    2,000
    
    
    $
    (40,000
    )
  December 31,
    
    
    December 31,2010
    
    
    2009Income tax benefit at the federal statutory rate
    
    $
    (1,038,000
    )
    
    $
    (1,087,000
    )State income tax benefit, net of effect of federal taxes
    
    
    (161,000
    )
    
    
    (103,000
    )Travel and entertainment
    
    
    1,000
    
    
    
    1,000New York State tax credit
    
    
    
    
    
    
    13,000Refundable tax credits
    
    
    
    
    
    
    (40,000
    )Contribution of capital  shareholders services
    
    
    123,000
    
    
    
    408,000Expiration of net operating loss carryforward
    
    
    1,288,000
    
    
    
    Increase (decrease) in valuation allowance
    
    
    (211,000
    )
    
    
    768,000Provision (benefit) for income tax
    
    $
    2,000
    
    
    $
    (40,000
    )
   45




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##### Table of Contents



2010
    
    
    2009Net operating loss carryforward
    
    $
    9,811,000
    
    
    $
    10,145,000Deferred startup costs
    
    
    7,224,000
    
    
    
    7,829,000Stock-based compensation
    
    
    1,003,000
    
    
    
    342,000Other
    
    
    193,000
    
    
    
    126,00018,231,000
    
    
    
    18,442,000Less: Valuation allowance
    
    
    (18,231,000
    )
    
    
    (18,442,000
    )Net deferred tax asset
    
    $
    
    
    
    $
    
    NOTE F  ACCRUED LIABILITIES
  2010
    
    
    2009Accrued Compensation
    
    $
    32,000
    
    
    $
    Accrued Payroll Taxes Payable
    
    
    484,000
    
    
    
    315,000Accrued Legal
    
    
    47,000
    
    
    
    124,000Other
    
    
    55,000
    
    
    
    12,000$
    618,000
    
    
    $
    451,000
 NOTE G  NOTES PAYABLE
    46




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##### Table of Contents



st th
    Period EndingDecember 31,2011
    
    $
    15,0002012
    
    
    15,0002013
    
    
    8,0002014
    
    
    2,0002015
    
    
    2,000Total Minimum payments
    
    
    42,000Less-amount representing interest
    
    
    1,00041,000Less-Current Maturities
    
    
    15,000Long Term Portion
    
    $
    26,000
  47




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NOTE H  STOCKHOLDERS EQUITY

(CAPITAL DEFICIT)
 [1] Private Placements of Common Stock
         [2] Initial Public Offering Consultant
    48




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##### Table of Contents



[3] Equity Funding Commitment
     [4] Common Stock Subject to Resale Guarantee
  [5] Class A Preferred Stock
     49




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[6] Class B Preferred Stock
    50




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##### Table of Contents



[7] Business Consultants Stock Plan
  Common Shares Issued to BusinessFor the year ended
    
    Consultants and Other Third Parties
    
    
    Amount Charged toDecember 31,
    
    in Exchange for Services
    
    
    Operations
    
    
    Note2010
    
    
    2,398,264
    
    
    $
    928,0002009
    
    
    2,243,296
    
    
    $
    1,603,0002008
    
    
    1,000,348
    
    
    $
    2,040,0002007
    
    
    359,432
    
    
    $
    1,245,0002006
    
    
    983,230
    
    
    $
    1,861,000
    
    
    
    A2005
    
    
    836,309
    
    
    $
    1,874,0002004
    
    
    469,883
    
    
    $
    2,352,0002003
    
    
    738,184
    
    
    $
    832,0002002
    
    
    1,057,455
    
    
    $
    1,036,000
    
    
    
    B2001
    
    
    361,100
    
    
    $
    1,011,0002000
    
    
    196,259
    
    
    $
    840,0001999
    
    
    45,351
    
    
    $
    327,000
 A-
    
    Includes 448,000 business consulting shares issued upon exercise of warrants for which a
compensation charge of approximately $629,000 had been previously recognized.B-
    
    Includes 190,965 shares issued in settlement of amounts owed of approximately $269,000 (see
Note H[15]).  51




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##### Table of Contents



[8] Nonmanagement Directors Plan
         [9] Shares Issued for Consulting Services
   52




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[10] Commercializing Event Plan
     ®
  53




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Expected Term
    
    5.00 yearsRisk-free rate
    
    
    1.68
    %Volatility
    
    
    124.61
    %Dividend yield
    
    
    0.0
    %
 [11] Restricted Shares Issued for Services and Rent
   [12] 1998 Stock-Option Plan
     54




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Options Outstanding and Exercisable
 Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    AggregateExercise
    
    
    Remaining Life
    
    
    IntrinsicShares
    
    Price
    
    
    in Years
    
    
    Value641,848
    
    
    4.79
    
    
    
    2.75
    
    
    $
    0
  [13] 2011 Stock Option Plan and Other Option Grants
    55




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##### Table of Contents



Expected Term
    
    6.74 yearsExpected forfeiture rate
    
    
    -0-
    %Risk-free rate
    
    
    1.92
    %Volatility
    
    
    124.61
    %Dividend yield
    
    
    0.0
    %
   56




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##### Table of Contents



Options Outstanding and Expected to VestWeighted-
    
    
    Weighted-Average
    
    
    Average
    
    
    AggregateRange
    
    Number
    
    
    Remaining
    
    
    Exercise Price
    
    
    IntrinsicExercise Prices
    
    Outstanding
    
    
    Contractual Life
    
    
    Per Share
    
    
    Value$0.36
    
    
    5,150,000
    
    
    
    9.9
    
    
    $
    0.36
    
    
    $
    4,790,000$0.85-$1.07
    
    
    400,000
    
    
    
    9.9
    
    
    $
    0.88
    
    
    $
    165,000$5.00
    
    
    360,000
    
    
    
    6.0
    
    
    $
    5.00
    
    
    $
    5,910,000
    
    
    
    9.7
    
    
    $
    0.68
    
    
    $
    4,955,000
 Options ExercisableWeighted-
    
    
    Weighted-Average
    
    
    Average
    
    
    AggregateRange
    
    Number
    
    
    Remaining
    
    
    Exercise Price
    
    
    IntrinsicExercise Prices
    
    Outstanding
    
    
    Contractual Life
    
    
    Per Share
    
    
    Value$0.36
    
    
    3,000,000
    
    
    
    9.9
    
    
    $
    0.36
    
    
    $
    2,790,000$0.85-$1.07
    
    
    212,500
    
    
    
    9.9
    
    
    $
    0.90
    
    
    $
    83,000$5.00
    
    
    360,000
    
    
    
    6.0
    
    
    $
    5.00
    
    
    $
    3,572,500
    
    
    
    9.5
    
    
    $
    0.86
    
    
    $
    2,873,000
  [14] 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 the year ended December 31, 2010, the company has not conducted an IPO.  57




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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 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 H
[8]). 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. At December 31, 2010 an aggregate 194,599 of these
warrants have been exercised for proceeds of approximately $1,258. No additional warrants were
exercised in the years ended December 31, 2010 and 2009.(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 using the Black-Scholes inputs shown below to
calculate the value of the warrants. Expected Term
    
    10.00 yearsRisk-free rate
    
    
    2.59
    %Volatility
    
    
    124.61
    %Dividend yield
    
    
    0.0
    %
  58




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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.(k)
    
    In 2006, the company issued 30,000 warrants to consultants exercisable immediately for a
ten year term at $5.00 per common share.(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 using the Black-Scholes inputs shown below to
calculate the value of the warrants. 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, 2010
    
    
    1,753,750
    
    
    $
    2.84
    
    
    6.65 yearsGranted
    
    
    500,000
    
    
    
    0.85
    
    
    9.80 yearsExercised
    
    
    (6,000
    )
    
    
    0.01
    
    
    
    Canceled or expired
    
    
    (406,000
    )
    
    
    3.27
    
    
    
    Outstanding at December 31, 2010
    
    
    1,841,750
    
    
    $
    2.18
    (A)
    
    7.79 years
    (B)
    
    $
    694,000Exercisable at December 31, 2010
    
    
    1,216,750
    
    
    $
    2.77
    
    
    7.79 years
    (C)
    
    $
    424,000
 A)
    
    The weighted average exercise price for warrants outstanding as of December 31, 2010
excludes 125,000 warrants with no determined exercise price.B)
    
    The weighted average remaining contractual term for warrants outstanding as of
December 31, 2010 excludes 803,500 warrants with no expiration date.C)
    
    The weighted average remaining contractual term for warrants exercisable as of
December 31, 2010 excludes 178,500 warrants with no expiration date.  59




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[15] Warrants Issued to Business, Financial and Engineering Consultants
              60




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##### Table of Contents



[16] Issuance of Stock and Warrants by Subsidiary
    NOTE I  COMMITMENTS AND OTHER MATTERS
 [1] Variable Gear, LLC
   [2] Leases
   th
   61




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##### Table of Contents



[3] Employment Agreements
    [4] Consulting Agreements
   NOTE J  LITIGATION
   62




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NOTE K  ROYALTY AGREEMENT
  NOTE L  SUBSEQUENT EVENTS
    ® ®
  63




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##### Table of Contents



Item 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
  
 Item 9A
    
    CONTROLS and PROCEDURES
  REPORT ON MANAGEMENTS ASSESSMENT OF INTERNAL CONTROL OVER  FINANCIAL REPORTING
      64




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##### Table of Contents



Item 9B.
    
    OTHER INFORMATION
   65




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##### Table of Contents



PART III
 
 Item 10.
    
    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
 (a) Identification of Directors, Executive Officers And Consultants
  Date of Election orDirector
    
    Principal Occupation
    
    Age
    
    
    Designation**Gary A. Siconolfi

325 VanVoorhis Avenue

Rochester, NY 14617

(1)
    
    Chairman of the Board
    
    59
    
    
    10/31/02Richard A. Kaplan

112 Heatherstone Lane

Rochester, New York 14618

(2)
    
    Chief Executive Officer
    
    65
    
    
    9/30/10Keith E. Gleasman

11 McCoordwoods Drive

Fairport, NY 14450

(3)
    
    President, Vice-President of
Marketing
    
    63
    
    
    09/26/96Thomas F. Bonadio

1 Country Club Drive

Rochester, New York 14618

(4)
    
    Chief Executive Officer, 

Managing Partner of
Accounting Firm
    
    61
    
    
    11/22/10Wesley K. Clark

116 Ottenheimer Plaza

Little Rock, Arkansas 72201

(5)
    
    Author, Commentator, 
Investment Banker
    
    66
    
    
    1/28/11William W. Destler, Ph.D.

One Lomb Memorial Drive

Rochester, New York 14623

(6)
    
    College President
    
    64
    
    
    9/15/09Asher J. Flaum

49 Sunrise Park

Pittsford, New York 14534

(7)
    
    Real Estate Developer
    
    30
    
    
    10/10/08John W. Heinricy

8850 Tipsico Lake Road

Holly, Michigan 48442

(8)
    
    President, International 
Automotive Consulting Firm
    
    63
    
    
    11/3/10
  66




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##### Table of Contents



Date of Election orDirector
    
    Principal Occupation
    
    Age
    
    
    Designation**Charles N. Mills

121 Sandringham Road

Rochester, New York 14610

(9)
    
    Real Estate Developer
    
    72
    
    
    11/3/10E. Philip Saunders

10709 Sugar Creek Road

Rochester, New York 14437

(10)
    
    Board Chairman of Regional
Bank
    
    73
    
    
    11/3/10
 **
    
    Changes in Control  To the best knowledge of the companys management, there are no
present arrangements or pledges of the companys common stock which may result in a change of
control of the company. Under the companys bylaws, the members of the board of directors serve
until the next annual meeting of shareholders and until their successors have been elected or
appointed and shall have qualified, or until their prior resignation or termination. All directors
were reelected to the board at the annual meeting of shareholders held on January 27, 2011. (b) Business Experience
 (1)
    
    Mr. Siconolfi was the owner and general manager of Panorama Dodge, Inc., Penfield, New York
from 1984-1995 and of Panorama Collision, Inc., East Rochester, New York from 1989-1995. He
started and managed a highly successful auto/truck dealership and collision business, building
the business to annual sales of $20 million, with 5 departments and 65 employees.
 Prior to opening the dealership and collision business, Mr. Siconolfi acquired an excellent
foundation in the automotive business, working in sales, sales management and general management
at Vanderstyne Ford, Schrieber Buick, Judge Motor Corporation and Meisenzahl Auto Parts, all in
the Rochester area. He has completed 100+ programs sponsored by Chrysler Corporation, Ford Motor
Company and General Motors in fields such as management, sales management, sales, customer
relations, human resources and service training. He earned numerous awards given by these
companies.
 A very active participant in his community, Mr. Siconolfi is currently involved in commercial
real estate.
 (2)
    
    Richard Kaplan is the former president of Richland Industries, Inc., a retail floor covering
chain; chairman and co-founder of Resnick Media Associates, Inc., an advertising and marketing
agency; chairman and co-founder of Blanton Communications, Inc., a computer software company;
president of RAK Realty Corporation, a real estate development company; chairman and founder
of WorkSmart International, Inc., a human resource development,publishing and training company
for multi-market, multinational corporations and organizations. He was also chairman and
founder of Maxim Group Inc., a publicly held company previously listed on the New York Stock
Exchange.
 Mr. Kaplan is on the boards of two startup companies: Cerebral Assessment Systems and Vnomics
Corp.
 Mr. Kaplan serves as vice-president of the Rochester Angel Investment Network, is former
chairman of the Rochester Broadway Theatre League, vice-chairman of the Better Business Bureau
and is, or has been, active in community organizations such as Sojourner House, Rochesters
Child, the Martial Arts Center of Rochester, the Center for Governmental Research, Camp Good
Days and Special Times and was former chairman of the Monroe County division of The American
Cancer Society.
  67




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##### Table of Contents



Mr. Kaplan is a member of the Board of Trustees of Rochester Institute of Technology and
Nazareth College. He is also chairman of the board of advisors at RITs Chester F. Carlson
Center for Imaging Science as well as serving as a member of the University of Rochesters
Economic Development Board.
 Mr. Kaplans business success and contributions within the community have been recognized by
multiple awards, including the prestigious Herbert W. Vanden Brul Entrepreneurial Award
presented by RITs E. Philip Saunders College of Business in April 2007. Other recipients
include B. Thomas Golisano, Robert Wegman, Arunas Chesonis, E. Philip Saunders, Wayne LeChase
and James Hammer. Mr. Kaplan was also designated theBusiness Man of the Year in 2007.
 Mr. Kaplan is the author of a book entitled A Time for CARING which delineates the causes
of many of the problems confronting American society in the 21st century and provides concrete
solutions for the remediation of such problems.
 Mr. Kaplan has an extensive background in economics, accounting, management and executive
leadership. He is regularly sought out by startups, universities and other organizations for
which he has done private consulting and guest lecturing on marketing, economics and
organizational development.
 (3)
    
    Keith E. Gleasman is co-inventor with Vernon E. Gleasman on all Torvec patents. Mr.
Gleasmans strengths include his extensive marketing and sales executive experience, in
addition to his design and development knowledge. His particular expertise has been in the
area of defining and demonstrating the products to persons within all levels of the automotive
industry, race crew members, educators and students.
 As former Vice President of Sales for the unrelated Gleason Corporation (Power Systems
Division), designed and conducted seminars on vehicle driveline systems for engineers at the
U.S. army tank automotive command.
 Mr. Gleasmans accomplishments include: a) Designing a complete nationwide after-market program
for the Torsen differential, which included trade show participation for the largest
after-market shows in the U.S., SCORE and SEMA; b) Developing extensive after-market experience
including pricing, distribution, sales catalogs, promotions, trade show booths designs and
vehicle sponsorships; c) publishing over 300 articles in trade magazines highlighting the Torsen
differential (e.g., Popular Science, Auto Week, Motor Trend, Off-Road, and Four Wheeler); d)
designing the FTV vehicle (from concept to assembly); and e) assisting in the development and
manufacturing procedures for the Torsen differential and for all of the Torvec products. Mr.
Gleasman has also instructed race teams on use of the Torsen differential (Indy cars, Formula 1,
SCCA Trans-Am, IMSA, GTO, GTU, GT-1, NASCAR, truck pullers and off-road racers), and has been
trained for up-to-date manufacturing techniques such as NWH, statistical process control and MRP
II.
 Mr. Gleasman has extensive technical and practical experience, covering all aspect of the
companys products such as, promotion, engineering and manufacturing.
 (4)
    
    Thomas F. Bonadio is Managing Partner of The Bonadio Group which he founded in 1978 with one
partner and one part-time employee (his mother). With 325 people in six offices, The Bonadio
Group has grown to be the largest independent provider of accounting, business advisory and
financial services in upstate New York. As founder and managing partner, Mr. Bonadio has been
the driver behind the firms growth and diversification, growing from a firm offering only
public accounting and auditing services to a multi-dimensional accounting, business advisory
and financial services organization.
 Mr. Bonadio has a B.B.A. degree in accounting from St. John Fisher College and was certified
as a CPA in 1973. He is a member of the American Institute of Certified Public Accountants, the
New York State Society of Certified Public Accountants and the National Association of Certified
Valuation Analysts. He was named a CPA ALLSTAR by CPA Magazine, an Outstanding Alumni by St.
John Fisher and received The Point of Light Foundation Award, sponsored by President George W.
Bush. Mr. Bonadio was named the 2009 Business Person of the Year by the Small Business Council
and inducted into the Rochester Business Hall of Fame in 2010.
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Mr. Bonadio has served as chairman of the Board of Trustees of St. John Fisher College and
chairman of the Colleges Accounting Advisory Board. He is chairman of the Audit Committee of
Conceptus, a NASDAQ-listed company and a board member of Eagle Productivity Solutions, CLIX
Photo, Moore Stephens North America and Windsor Technology.
 Mr. Bonadio has been active for many years in various charitable, cultural and professional
organizations, including Junior Achievement, United Way, Small Business Councils CEO
Roundtable, the City of Rochester City Budget Review Committee and the Athena Awards.
 (5)
    
    During 34 years of service in the United States Army, Wesley K. Clark rose to the rank of
four-star general as NATOs Supreme Allied Commander, Europe. After his retirement in 2000, he
became an investment banker, author, commentator and businessman. In September 2003 he entered
politics as a Democratic candidate for president of the United States. His campaign won the
state of Oklahoma before he returned to the private sector in February 2004.
 In his final military command, Clark commanded Operation Allied Force, NATOs first major combat
action, which saved 1.5 million Albanians from ethnic cleansing in Kosovo. He was also
responsible for the peacekeeping operation in Bosnia.
 Clarks awards and honors include the Presidential Medal of Freedom, the State Department
Distinguished Service Award, the U.S. Department of Defense Distinguished Service Medal (five
awards), the U.S. Army Distinguished Service Medal(two awards), the Silver Star, the Bronze
Star, the Purple Heart, and Honorary Knighthoods from the British and Dutch governments.
 He is the author of two books and is seen as a guest commentator on many national news programs.
 Clark graduated from the U.S. Military Academy in 1966 as valedictorian of his class, and
completed two degrees at Oxford University as a Rhodes Scholar. He is also a graduate of the
Ranger and Airborne schools.
 Today, Clark is an investment banker and is active in the finance, technology and energy fields.
He currently serves in leadership roles with a number of for profit and non-profit
organizations, including Chairman of New York investment bank Rodman and Renshaw, Chairman of
Wesley K. Clark and Associates, a strategic consulting firm, Trustee of the International
Crisis Group, and Chairman of City Year Little Rock, as well as a member of other private and
public boards.
 (6)
    
    Dr. William W. Destler became president of Rochester Institute of Technology on July 1, 2007.
He is the ninth president in the universitys 178-year history. He was formerly senior vice
president for academic affairs and provost of the University of Maryland at College Park.
 At RIT, Dr. Destler is responsible for one of the nations leading career-oriented universities
with 16,450-students from all 50 states and more than 100 foreign countries, 2,800 faculty and
staff, an annual operating budget of more than $492 million, and an endowment of more than $600
million. The university has one of the oldest and largest cooperative education programs in the
country.
 Dr. Destler serves on the American Council on Educations Commission on Effective Leadership and
is a board member for the National Institute of Aerospace Foundation. He is a member of the
board of directors for New Yorks Commission on Independent Colleges and Universities. He also
serves on community boards in Rochester: Rochester General Health System, Greater Rochester
Enterprise, Rochester Business Alliance, Golisano Family Foundation and High Tech of Rochester,
and Torvec Inc.
 Prior to RIT, Dr. Destler spent more than 30 years at the University of Maryland, rising from
the ranks of research associate and assistant professor of electrical engineering to senior vice
president and provost. At Maryland, he also served as electrical engineering department chair,
dean of the A. James Clark School of Engineering, interim vice president for university
advancement, vice president for research, and dean of the graduate school.
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As engineering school dean, Dr. Destler created the Gemstone Program, a multidisciplinary
four-year research program for undergraduate honors students of all majors in which teams of
students design, direct and conduct research exploring the interdependence of science and
technology with society. During his term as graduate school dean, student applications increased
by more than 20 percent and research funding rose by more than 30 percent. While interim vice
president for advancement, Dr. Destler was credited with securing a $25 million gift from
Comcast Corp. for naming rights supporting the construction of the Comcast Center sports arena.
As senior vice president for academic affairs, retention increased and the graduation rate rose
from 62 percent to 80 percent over five years. Other achievements at Maryland include leading a
faculty team in the creation of a cross-disciplinary masters degree program in
telecommunications; originating the Hinman CEOs Program, a living-learning entrepreneurship
initiative for undergraduate students; and involvement in the Presidents Promise, an
outside-the-classroom experiential program for freshmen.
 Dr. Destler is an international authority on high-power microwave sources and advanced
accelerator concepts. He is best known for his pioneering work in the collective acceleration of
heavy ions, achieving the highest energies to date by this method, and for his development of
large orbit microwave devices, including large orbit gyrotrons and rotating beam free electron
lasers. He has consulted for government agencies and private firms, received more than $40
million in grants and contracts, published more than 200 journal articles and book chapters, and
presented many papers. Dr. Destler has also directed 18 masters and doctoral student theses and
earned awards for his teaching.
 Dr. Destler earned a bachelors degree from Stevens Institute of Technology and a Ph.D. from
Cornell University. Both degrees were in the field of applied physics.
 (7)
    
    Asher J. Flaum is President of Flaum Management Co., Inc., a full service real estate company
that owns and manages a portfolio of several million square feet of commercial real estate
including retail, office, industrial, development projects as well as provides complete real
estate brokerage services through its real estate brokerage division. Through his active
involvement with Flaum Management, Mr. Flaum focuses on real property management, development,
acquisitions and finance, leasing and brokerage services. He has participated in multiple real
estate transactions involving Fortune 500, national and regional companies. A licensed real
estate broker, Mr. Flaum is a member of the International Council of Shopping Centers (ICSC)
and a member of the New York State Commercial Association of Realtors (NYSCAR). Mr. Flaum, who
has a B.S. degree from Syracuse University, serves on the board of directors and finance
committee of the Jewish Community Federation and on the board of directors of Constellation
Brands Marvin Sands Performing Arts Center (CMAC).
 (8)
    
    As Director of High-Performance Vehicle Operations, General Motors Performance Division until
2008, Mr. Heinricy was responsible for the planning, development, testing and execution of all
the performance versions of GM vehicles, from the Cobalt SS to the Cadillac CTS-V to the
Corvette Z-06. John is also a legendary race-car driver, capturing 11 SCCA national titles.
This past summer, he won six out of six SCCA races, driving a C-5 Corvette equipped with
Torvecs IsoTorque® differential.
 Mr. Heinricy began his career at General Motors in 1970. During his first tour of the
engineering rotation in Chevrolet Racing R&D, he was assigned to the Milford Proving Grounds
where he became immersed in the development and testing of GMs LS6 and LS7 Corvettes and
Chevrolet Chevelle L88s. Mr. Heinricy became Vehicle Development Manager for the Corvette
platform in 1989 and in 1995, he became head of Vehicle Integration Engineering for the
Corvette. In 1997, he became Chief Engineer for the Camaro and Firebird and was appointed the
Director of Vehicle Dynamics for all of GMs cars and trucks in 2001. Later that same year, he
became the Director of High-Performance Vehicle Operations in GMs Performance Division,
retiring from GM in 2008.
 Mr. Heinricy has raced Corvettes, Camaros, and Pontiac Firebirds professionally since 1984,
driving in over 240 professional races, including thirty-five 24-hour races, has won 4
Professional Driver Championships, 11 SCCA National Championships, has set 3 FIA world speed
records and was a 2001 Presidents Cup recipient.
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Through his company, Heinrocket Inc., Mr. Heinricy today is an international automotive
consultant, specializing in vehicle testing and development, high performance driver training,
race car development and motivational speaking.
 (9)
    
    Charles Mills founded the law firm of Mills, Schwartz and White in 1967 which later merged to
become Bernstein, Mills, Schwartz, White and Bernstein. Mr. Mills substantially concentrated
on real estate syndication, venture capital and securities law. Wanting to branch out from his
legal career, Mr. Mills ventured into his own real estate development company. As CEO of
Crosskeys Corporation, he led the company into many successful ventures, including office
parks, high-end office buildings and a commercial mall/plaza. In 2001, Mr. Mills sold most of
his real estate empire but still manages quite a few prime properties.
 Mr. Mills holds a BS degree in Business Administration from Syracuse University and a law degree
from Cornell Law School. He is also active in several charitable organizations in his community.
 (10)
    
    Known for both his business acumen and his philanthropic efforts, E. Philip Saunders
ventures are far-reaching and diverse. He was instrumental in reshaping the truck stop
industry, taking it from poorly stocked, overgrown gas stations to modern travel plazas with
stores, restaurants, and lodging facilities. Saunders began in 1958 with his fathers gas
station, and built it into the Truckstops of America chain. Saunders later founded Travel
Ports of America, Inc. which merged with Ryders TravelCenters of America in 1999. Today,
TravelCenters is the nations largest chain of truck stops.
 Mr. Saunders ventured into liquid-fuels distribution and convenience stores. In 1979, he
purchased W.W. Griffith Oil Corp. and began the Sugar Creek Corp. chain of retail gas and
convenience stores. In 1998, Saunders sold Griffith Oil Inc to Rochester Gas and Electric
Corp.s Energetix subsidiary. Two years later he sold the 105-store Sugar Creek chain to Tops
Markets Inc.
 Mr. Saunders has successfully diversified his interests to auto and truck rental, recreation and
tourism, packaged foods, property management, and banking. His previous business history
includes owner of Econocar International, owner of Richardson Foods, chief executive officer of
American Rock Salt, and Sr. Vice President of Ryder Systems. Currently, Mr. Saunders is the
owner of Swain Ski Center in Swain, NY and Bristol Harbour Resort in Canandaigua, NY. He is also
owner of Essex Property Management, which maintains over 100 commercial properties. Saunders
has a major interest in Western New York Energy, Youngblood and Genesee Regional Bank where he
serves as Board Chairman. In 1997, Mr. Saunders and a Rochester attorney bought Lyndon
Guaranty Bank of New York from ITT Corp., renaming it Genesee Regional Bank.
 Mr. Saunders currently serves on the board of directors for Paul Smiths College, American Rock
Salt, Western New York Energy, Lewis Tree and the Rochester Institute of Technology. His past
services have incorporated membership on the board of directors of several organizations,
including Rochester General Hospital, Excellus Blue Cross/Blue Shield, Security-Norstar Ryder
Systems, and the Boy Scouts of America-Steuben Area Council. He has received numerous awards for
his contributions to the community, including the Herbert W. Vanden Brul Entrepreneurial Award
from the Rochester Institute of Technologys College of Business (now known as the E. Philip
Saunders College of Business), a Doctorate of Commercial Science from Paul Smiths College, the
Teddi Award from Camp Good Days and Special Times and the Livingston County Citizen of the Year.
He was elected to the Rochester Business Hall of Fame in 2004.
 (c) Relationships; Agreements
  (d) Section 16(a) Beneficial Ownership Reporting Compliance
   71




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(e) Corporate Governance, Code of Ethics, Director Independence
 Role of the Board of Directors
     Risk Oversight
  Annual Meeting Attendance
  Operation of the Board of Directors
   72




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Director Independence
       Code of Ethics/Committee Charters
 www.torvec.com
   73




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www.torvec.com
   Policy/Procedure for Review/ Approval of Related Party Transactions
      74




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Executive Sessions of Independent Directors
  Committees of the Board
 The Audit Committee
 
 
    
    
    the appointment, compensation, retention and oversight of the work of the independent,
registered public accounting firm engaged (including the resolution of disagreements
between management and the auditor regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work or performing other audit, review or
attest services;
 
    
    the pre-approval of all auditing and legally permissible non-auditing services to be
performed by the companys independent, registered public accounting firm;
 
    
    the disclosure by the company of all pre-approved non-audit services in periodic
reports filed by the company with the Securities and Exchange Commission;
 
    
    the disclosure by the company of the number and name(s) of each Audit Committee member
who is an audit committee financial expert as defined by the charter in accordance with
rules promulgated by the Securities and Exchange Commission;
 
    
    the establishment of internal procedures for complaints concerning the companys
accounting, internal accounting controls or auditing matters;
 
    
    the review of internal controls, accounting practices, and financial reporting,
including the results of the annual audit and the review of the interim financial
statements with management and the independent, registered public accounting firm;
 
    
    the engagement of independent counsel and advisors as it determines necessary to carry
out its duties and the funding thereof.
   75




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The Nominating Committee
 
 
           76




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The Governance and Compensation Committee
 
 
           77




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##### Table of Contents



Compensation Committee Interlocks and Insider Participation
  Shareholder Communications
  Officer
    
    Mailing Address
    
    E-mailRichard A. Kaplan, 
Chief Executive Officer
    
    Torvec, Inc. 
Mt. Read Industrial Facility 
1999 Mt. Read Blvd. 
Rochester, New York 14615
    
    dickk@torvec.comKeith E. Gleasman, 
President, Vice President
of Marketing
    
    Torvec, Inc. 
Mt. Read Industrial Facility 
1999 Mt. Read Blvd. 
Rochester, New York 14615
    
    kgleasman@torvec.comRobert W. Fishback, 
Chief Financial Officer
& Secretary
    
    Torvec, Inc. 
Mt. Read Industrial Facility 
1999 Mt. Read Blvd. 
Rochester, New York 14615
    
    bfishback@torvec.com
  Thomas F. Bonadio
    
    tbonadio@bonadio.comWesley K. Clark
    
    wclark@wesleykclark.comWilliam W. Destler
    
    wwdpro@rit.eduAsher J. Flaum
    
    aflaum@flaummgt.comJohn W. Heinricy
    
    heinrocket@gmail.comCharles N. Mills
    
    charlesnmills@gmail.comE. Philip Saunders
    
    PhilS@saundersmgt.comGary A. Siconolfi
    
    gsiconolfi@torvec.comRegular mail may be addressed to:
    
    Torvec Independent Directors
c/o Torvec, Inc.
Mt. Read Industrial Facility
1999 Mt. Read Blvd.
Rochester, New York 14615
Attention: Robert W. Fishback
  78




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Sarbanes-Oxley Compliance
    
 Item 11.
    
    EXECUTIVE COMPENSATION
 A. Compensation Discussion and Analysis
  1) Current Executive Compensation
    79




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2) Shareholder Advice on Executive Compensation
   3) Long-Term Compensation Philosophy
     80




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##### Table of Contents



4) The 2011 Stock Option Plan
  Types of Options
   Corporate Governance Provisions
  i)
    No
    Stock Option Repricings.  Stock options may not be repriced absent shareholder
approval. This provision applies to both direct repricingslowering the exercise price of
an outstanding stock optionand indirect repricings, that is, canceling an outstanding
stock option and granting a replacement stock option with a lower exercise price;
 ii)
    No
    Evergreen Provision.  The 2011 Plan does not contain an evergreen
provisionthere is no automatic provision to replenish the aggregate number of shares of
common stock authorized for issuance under the 2011 Plan;
 iii)
    No
    Unlimited Recycling.The 2011 Plan permits recycling (i.e. adding back shares to
the number of shares available for future grants) only with respect to shares underlying
options that have expired or terminated without issuance. Specifically, recycling is not
permitted with respect to common stock transferred as consideration for the purchase of
shares underlying an option, common stock retained to satisfy tax withholding obligations,
or common stock repurchased by the company in open market transactions
  81




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##### Table of Contents



Administration
  Eligibility
  Authorized Number of Shares Reserved Under the 2011 Plan
  Adjustments
  Change in Control
  Transferability of Options
  Amendment and Termination
   82




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##### Table of Contents



Federal Income Tax Consequences
  Non-Qualified Options
   Incentive Options
    83




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5) Stand-Alone Director Options
 rd rd
    84




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##### Table of Contents



Change inPension ValueandNon-
    
    
    NonqualifiedEquity
    
    
    Deferred
    
    
    AllName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Option
    
    
    Incentive Plan
    
    
    Compensation
    
    
    OtherPrincipal
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Earnings
    
    
    Compensation
    
    
    TotalPosition
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)(a)
    
    (b)
    
    
    (c)
    
    
    (d)
    
    
    (e)
    
    
    (f)
    
    
    (g)
    
    
    (h)
    
    
    (i)
    
    
    (j)Richard A. Kaplan,
    
    
    2008
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Chief Executive Officer (1)
    
    
    2009
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2010
    
    
    $
    10,577
    
    
    $
    
    
    
    $
    
    
    
    $
    1,517,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,527,577James Y. Gleasman,
    
    
    2008
    
    
    $
    
    
    
    $
    
    
    
    $
    3,014
    (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,014Former Chief Executive Officer,
    
    
    2009
    
    
    $
    
    
    
    $
    
    
    
    $
    1,167
    (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,167Interim Chief Financial Officer (2)
    
    
    2010
    
    
    $
    
    
    
    $
    
    
    
    $
    1,363
    (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,363Keith E. Gleasman,
    
    
    2008
    
    
    $
    
    
    
    $
    
    
    
    $
    3,014
    (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,014President (3)
    
    
    2009
    
    
    $
    
    
    
    $
    
    
    
    $
    1,167
    (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,1672010
    
    
    $
    
    
    
    $
    
    
    
    $
    1,363
    (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,363Robert W. Fishback,
    
    
    2008
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Chief Financial Officer (4)
    
    
    2009
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2010
    
    
    $
    19,231
    
    
    $
    
    
    
    $
    
    
    
    $
    198,125
    
    
    $
    
    
    
    $
    
    
    
    $
    48,544
    
    
    $
    265,900Richard B. Sullivan,
    
    
    2008
    
    
    $
    
    
    
    $
    
    
    
    $
    3,014
    (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    144,000
    
    
    $
    147,014General Counsel (5)
    
    
    2009
    
    
    $
    
    
    
    $
    
    
    
    $
    1,167
    (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    160,417
    
    
    $
    161,5842010
    
    
    $
    
    
    
    $
    
    
    
    $
    1,363
    (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    295,740
    
    
    $
    297,103
  85




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##### Table of Contents



1)
    
    Richard A. Kaplan became chief executive officer effective October 4. 2010. Under his
employment agreement, he is paid base compensation equal to $50,000 per annum ( adjusted
to $200,000 per annum on the first day of the calendar following the calendar year the
company has adjusted EBITDA of at least $300,000. In addition to his base compensation,
Mr. Kaplan is entitled to receive an expense allowance of not less than $25,000 per
annum, participate in all company benefit plans and participate in performance bonuses
granted to the companys executives. On September 30, 2010, Mr. Kaplan was granted an
option to acquire 5,150,000 shares of the companys $.01 par value common stock
exercisable for a period of ten years at $.36 per common share. The option vests as
follows: 1,000,000 shares immediately; 1,000,000 shares upon the closing price of the
companys common stock reaching $1.00 per share; another 1,000,000 upon the closing price
reaching $2.00 per share; another 1,000,000 upon the closing price reaching $3.00 per
share and the balance of 1,150,000 upon the closing price reaching $4.00 per share.
3,000,000 options have vested under the option agreement.2)
    
    Mr. James Y. Gleasman served as chief executive officer and interim chief financial
officer for the years ended December 31, 2008, 2009 and in 2010, until his resignation
effective March 14, 2010. Mr. Gleasman was paid 1,005 business consultants shares in
2008, 389 business consultants shares in 2009 and 2,673 business consultants shares in
2010, all under the companys commercializing event plan. At issuance, such shares had a
value of $3,014, $1,167, and $1,363, respectively.Under a compensation plan established for Mr. Gleasman by the board of directors, effective
January 1, 2008, Mr. Gleasmans annual compensation is $300,000, payable only if the
company has sufficient cash to pay all or any portion of such amount. The company did not
have cash to pay such compensation for the years ended December 31, 2009, and 2008. On
August 17, 2009, Mr. Gleasman 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) under the plan accrued to such date.3)
    
    Mr. Keith E. Gleasman served as president for the years ended December 31, 2008,
2009 and 2010. Mr. Gleasman was paid 1,005 business consultants shares in 2008, 389
business consultants shares in 2009 and 2,673 business consultants shares in 2010, all
under the companys commercializing event plan. At issuance, such shares had a value of
$3,014, $1,167 and $1,363, respectively.Under compensation plan established for Mr. Gleasman by the board of directors, effective
January 1, 2008, Mr. Gleasmans annual compensation is $300,000, payable only if the
company has sufficient cash to pay all or any portion of such amount. The company did not
have cash to pay such compensation for the years ended December 31, 2009 and 2008. On
August 17, 2009, Mr. Gleasman 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) under the plan accrued to such date.4)
    
    Robert W. Fishback became chief financial officer effective October 18, 2010. Under
his agreement with the company, he is paid an annual salary of $125,000, increasing to
$150,000 per annum beginning on April 1, 2011, increasing to $175,000 per annum beginning
on October 1, 2011 and increasing to $200,000 per annum beginning on January 1, 2012. He
is entitled to fully paid health care and dental benefits. Effective October 18, 2010,
Mr. Fishback was granted an option to acquire 250,000 shares of the companys $.01 par
value common stock exercisable for a period of ten years at an exercise price of $.85 per
common share. The option vests as follows: 62,500 shares immediately; 62,500 shares on
October 18, 2011; an additional 62,500 shares on October 18, 2012 and 62,500 shares of
October 18, 2013.5)
    
    Mr. Sullivan served as the companys general counsel for the years ended December
31, 2008, 2009 and 2010. He was paid a consulting fee monthly in business consultants
stock based upon the closing price of the companys common stock as of the last day of
the previous month. The amount of Mr. Sullivans consulting fee was determined by the
board of directors from time to time. As a participant in the companys commercializing
event plan, Mr. Sullivan was paid 1,005 business consultants shares in 2008, 389 business
consultants shares in 2009 and 2,673 business consultants shares in 2010, all under the
companys commercializing event plan. At issuance, such shares had a value of $3,014,
$1,167, and $1,363, respectively.6)
    
    Represents payments made in accordance with companys commercializing event plan
during years ended December 31, 2008, 2009 and 2010.  86




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##### Table of Contents



Option Awards
    
    
    Stock AwardsEquityIncentivePlanAwards:NumberEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Market
    
    
    ofIncentive Plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Value of
    
    
    UnearnedAwards:
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    Shares
    
    
    Shares,
    
    
    Equity IncentiveNumber of
    
    
    Number of
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    of Shares
    
    
    or Units
    
    
    Units or
    
    
    Plan Awards:Securities
    
    
    Securities
    
    
    of Securities
    
    
    
    
    
    
    
    
    
    
    or Units of
    
    
    of Stock
    
    
    Other
    
    
    Market or PayoutUnderlying
    
    
    Underlying
    
    
    Underlying
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    That
    
    
    Rights
    
    
    Value of UnearnedUnexercised
    
    
    Unexercised
    
    
    Unexercised
    
    
    Option
    
    
    
    
    
    
    That Have
    
    
    Have
    
    
    That Have
    
    
    Shares, Units orOptions
    
    
    Options
    
    
    Unearned
    
    
    Exercise
    
    
    Option
    
    
    Not
    
    
    Not
    
    
    Not
    
    
    Other Rights That(#)
    
    
    (#)
    
    
    Options
    
    
    Price
    
    
    Expiration
    
    
    Vested
    
    
    Vested
    
    
    Vested
    
    
    have Not VestedName
    
    Exercisable
    
    
    Unexercisable
    
    
    (#)
    
    
    ($)
    
    
    Date
    
    
    (#)
    
    
    ($)
    
    
    (#)
    
    
    ($)(a)
    
    (b)
    
    
    (c)
    
    
    (d)
    
    
    (e)
    
    
    (f)
    
    
    (g)
    
    
    (h)
    
    
    (i)
    
    
    (j)Estate of James Y. Gleasman
    
    
    39,575
    
    
    
    
    
    
    
    
    
    
    $
    5.00
    
    
    
    2013
    (1)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Richard A. Kaplan
    
    
    3,000,000
    
    
    
    2,150,000
    
    
    
    
    
    
    $
    0.36
    
    
    
    2020
    (2)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Robert W. Fishback
    
    
    62,500
    
    
    
    187,500
    
    
    
    
    
    
    $
    0.85
    
    
    
    2020
    (3)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Keith E. Gleasman
    
    
    31,818
    
    
    
    
    
    
    
    
    
    
    $
    5.00
    
    
    
    2013
    (4)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
 1)
    
    39,575 common stock purchase options exercisable at $5.00 per common share expiring on
December 21, 2013.2)
    
    On September 30, 2010, Mr. Kaplan was granted an option to acquire 5,150,000 shares of
the companys $.01 par value common stock exercisable for a period of ten years at $.36 per
common share. The option vests as follows: 1,000,000 shares immediately; 1,000,000 shares
upon the closing price of the companys common stock reaching $1.00 per share; another
1,000,000 upon the closing price reaching $2.00 per share; another 1,000,000 upon the
closing price reaching $3.00 per share and the balance of 1,150,000 upon the closing price
reaching $4.00 per share. 3,000,000 options have vested under the option agreement.3)
    
    Effective October 18, 2010, Mr. Fishback was granted an option to acquire 250,000 shares
of the companys $.01 par value common stock exercisable for a period of ten years at an
exercise price of $.85 per common share. The option vests as follows: 62,500 shares
immediately; 62,500 shares on October 18, 2011; an additional 62,500 shares on October 18,
2012 and 62,500 shares of October 18, 2013.4)
    
    31,818 common stock purchase options exercisable at $5.00 per common share expiring on
December 21, 2013.  87




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##### Table of Contents



Change in PensionFees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Value andEarned or
    
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    
    NonqualifiedPaid in
    
    
    Stock
    
    
    Option
    
    
    Incentive Plan
    
    
    Deferred
    
    
    All OtherCash
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    Compensation
    
    
    TotalName
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    Earnings ($)
    
    
    ($)
    
    
    ($)(a)
    
    (b)
    
    
    (c)
    
    
    (d)
    
    
    (e)
    
    
    (f)
    
    
    (g)
    
    
    (h)Daniel R. Bickel (1)
    
    $
    
    
    
    $
    33,636
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    33,636Herbert H. Dobbs (2)
    
    $
    
    
    
    $
    7,711
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    7,711Joseph B. Rizzo (3)
    
    $
    
    
    
    $
    26,520
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    26,520Gary A. Siconolfi (4)
    
    $
    
    
    
    $
    239,472
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    239,472Asher J. Flaum(5)
    
    $
    
    
    
    $
    23,146
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    23,146William W. Destler (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Thomas F. Bonadio (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    John W. Heinricy (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Charles N. Mills (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    E. Philip Saunders (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Wesley K. Clark (6)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  88




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##### Table of Contents



1)
    
    Daniel R. Bickel was paid $19,673 in business consultants shares for services rendered
during 2010 as a director and $12,600 in business consultants shares for services rendered
in 2010 as chairman of the companys audit committee. In 2010, he was paid 2,673 common
shares with a value at issuance of $1.363 under the companys commercializing event plan.
Mr. Bickel retired as a director and member of the Audit Committee effective October 15,
2010.2)
    
    Herbert H. Dobbs was paid $6,348 in business consultants shares for services rendered
during 2010 as a director. In 2010, he was paid 2,673 common shares with a value at issuance
of $1,363 under the companys commercializing event plan. Dr. Dobbs retired as a director
effective October 19, 2010.3)
    
    Joseph B. Rizzo was paid $19,802 in business consultants shares for services rendered
during 2010 as a director and $5,355 in business consultants shares for services rendered in
2010 as chairman of the companys nominating committee. In 2010, he was paid 2,673 common
shares with a value at issuance of $1,363 under the companys commercializing event plan.
Mr. Rizzo retired as a director effective October 15, 2010.4)
    
    Gary A. Siconolfi was paid $238,109 in business consultants shares for services rendered
during 2010 as a director, chairman of the board, chairman of the companys executive
committee, chairman of the company governance and compensation committee and special
services rendered in connection with the engagement of the companys new chief executive
officer. In 2010, he was paid 2,673 common shares with a value at issuance of $1,363 under
the companys commercializing event plan.5)
    
    Asher J. Flaum was paid $21, 783 in business consultants shares for services rendered in
2010 as a director. In 2010, he was paid 2,673 common shares with a value at issuance of
$1,363 under the companys commercializing event plan.6)
    
    William W. Destler, Thomas F. Bonadio, John W. Heinricy, Charles N. Mills, E. Philip
Saunders were not compensated as directors for the year ended December 31, 2010. Wesley K.
Clark was elected to the board effective January 28, 2011.  89




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##### Table of Contents



Discussion of Director Compensation
 1) Participation in the Nonmanagement Directors Plan
     2) Participation in Commercializing Event Plan
   3) Participation in 1998 Stock Option Plan
     90




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##### Table of Contents



4) Participation in 2011 Stock Option Plan
   
 Item 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED SHAREHOLDER MATTERS
 Security Ownership  Common Stock
  
    
    each person who is known by us to beneficially own more than 5% of our common stock;
    
    each of our directors;
    
    each of our named executive officers; and
    
    all of our directors and executive officers as a group.
   91




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##### Table of Contents



Number of
    
    
    PercentName of
    
    
    
    Shares
    
    
    of SharesBeneficial Owner
    
    Position
    
    Owned
    
    
    OwnedEstate of James Y. Gleasman
    
    N/A
    
    
    3,802,919
    (1)
    
    
    8.3
    %Gary A. Siconolfi
    
    Chairman of Board
    
    
    596,667
    (2)
    
    
    1.3
    %Richard A. Kaplan
    
    Chief Executive Officer, Torvec, Inc.; Director
    
    
    3,000,000
    (3)
    
    
    6.2
    %Keith E. Gleasman
    
    President, Torvec, Inc.; Director
    
    
    9,383,096
    (4)
    
    
    20.6
    %Robert W. Fishback
    
    Chief Financial Officer and Secretary
    
    
    87,302
    (5)
    
    Less than 1
    %Thomas Bonadio
    
    Director
    
    
    
    
    
    
    Wesley K. Clark
    
    Director
    
    
    25,000
    (6)
    
    Less than 1
    %William W. Destler
    
    Director
    
    
    186,667
    
    
    Less than 1
    %Asher J. Flaum
    
    Director
    
    
    560,006
    (7)
    
    
    1.2
    %John Heinricy
    
    Director
    
    
    
    
    
    
    Charles N. Mills
    
    Director
    
    
    
    
    
    
    E. Philip Saunders
    
    Director
    
    
    
    
    
    
    All 5% Owners, Directors
and Named Executive
Officers as a Group
    
    
    
    
    17,641,657
    (8)
    
    
    35.8
    %
 (1)
    
    Includes 39,575 shares which may be purchased through the exercise of ten year options
granted on December 22, 2003, exercisable at $5.00 per share.(2)
    
    Includes 100,000 shares which may be purchased through the exercise of a ten year option
granted on October 15, 2003, exercisable at $5.00 per share.(3)
    
    Represents 3,000,000 common shares which may be acquired upon the exercise of a ten year
non-qualified stock option granted on September 30, 2010 at an exercise price of $.36 per
share. The balance of the option, namely 2,150,000 common shares will vest when the companys
stock price reaches certain targets as set forth in the stock option agreement.(4)
    
    Includes 31,818 shares which may be purchased through the exercise of ten year options
granted on December 22, 2003, exercisable at $5.00 per share. Includes 30,000 shares owned by
Mr. Gleasmans son. Includes 1,400,000 shares held by the Vernon E. Gleasman Grandchildrens
Trust and 1,400,000 shares held by the Margaret F. Gleasmans Grandchildrens Trust of which
Mr. Gleasman is co-trustee. Includes 1,666,666 shares held by the James Y. Gleasman Childrens
Trust of which Mr. Gleasman is co-trustee.(5)
    
    Includes 24,802 shares of common stock owned directly by Mr. Fishback, and 62,500 common
shares which may be acquired upon the exercise of a ten year non-qualified stock option
granted on October 18, 2010 at an exercise price of $.85 per share.  92




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##### Table of Contents



(6)
    
    Includes 25,000 shares which may be purchased through the exercise of a ten year option
granted effective January 28, 2011, exercisable at $.90 per common share.(7)
    
    Includes 120,006 shares of common stock and 400,000 common stock warrants owned directly by a
limited liability company, of which Mr. Flaum is a member.(8)
    
    Includes an aggregate 171,393 shares which may be purchased through the exercise of options
exercisable at $5.00 per share, 3,000,000 shares which may be purchased through the exercise
of options exercisable at $.36 per share, 62,500 shares which may be purchased through
exercising options exercisable at $.85 per share,
25,000 shares which may be purchased through the exercise of options exercisable at $.90 per
share, and 400,000 shares which may be purchased through the exercise of warrants at $.44 per
share. Includes 1,400,000 shares held by the Vernon E. Gleasman Grandchildrens Trust, 1,400,000
shares held by the Margaret F. Gleasman Grandchildrens Trust and 1,666,666 held by the James Y.
Gleasman Childrens Trust by virtue of Keith E. Gleasman serving as the co-trustee of such
trusts. Security Ownership  Preferred Stock
  
 Item 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
 Certain Transactions
 (1)
    
    During the ten plus years prior to the incorporation of the company, Vernon E., Keith E. and
James Y. Gleasman invented and patented numerous technologies as disclosed in domestically and
internationally filed patents. Upon the companys incorporation, the Gleasmans assigned all of
their right, title and interest to and in such inventions and patents to the company in exchange
for the issuance of 16,464,400 shares of the companys common stock and the agreement of the
company to pay the Gleasmans the sum of $365,000 for expenditures in the development of these
inventions and products, the Gleasmans having agreed to waive and release the company from payment
of any other expenses that they had incurred in the development of these inventions and products.
The board of directors of the company concluded that the value of the inventions, patents and
patent applications assigned to the company, as well as the value of the services rendered, had a
value in excess of the par value of the number of shares transferred to the assignors and service
providers, respectively. Shares issued are fully paid and nonassessable.(2)
    
    On December 1, 1997, the company entered into three-year consulting agreements with
Vernon, Keith and James Gleasman (major stockholders, directors and officers) whereby each was
obligated to provide services to the company in exchange for compensation of $12,500 each per
month. In 1997 the company granted each Vernon, Keith and James Gleasman 25,000 nonqualified common
stock options, exercisable immediately at $5.00 per common share for ten years. These options
expired in 2007 and were not extended or replaced.During 2001, the company issued 126,667 common shares under these agreements for
approximately $665,000 of accrued consulting fees.On September 30, 2002, the company granted 727,047 nonqualified common stock options,
all exercisable immediately at $5.00 per common share, in settlement of approximately $653,000 of
accrued consulting fees under these agreements. These options expired September 30, 2007 and were
not extended or replaced.On December 23, 2003, the company granted 166,848 nonqualified common stock options
exercisable immediately at $5.00 per common share, in settlement under the agreements for accrued
consulting fees of approximately $265,000. These options are exercisable for ten years.The companys consulting agreements with Vernon, Keith and James Gleasman expired on
December 1, 2003 and were not renewed.
  93




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##### Table of Contents



(3)
    
    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 to the company at the rate of $300,000 per year. Actual payment
of this compensation, or any portion thereof, was conditioned upon a board of director
determination that the company had the requisite cash, after the complete funding of all ongoing
company projects, to make payment.The company did not have the requisite cash available to pay the Gleasmans compensation
under this arrangement from January 1, 2008 through August 17, 2009, the date on which each of the
Gleasmans waived all 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) under the plan accrued to such
date. As a result of such waiver, of the $942,000 amount accrued under the plan at June 30, 2009,
$900,000 was reclassified to equity as a contribution of services and $42,000 accrued under the
plan for payroll taxes was recorded as a reduction to general and administrative expenses in the
quarter ended June 30, 2009.For periods for which there is no compensation plan, the company is required to record
the estimated value of each of the Gleasmans services rendered to the company (estimated at
$300,000 each per annum) as a contribution of services under generally accepted accounting
principles applicable to the company and is required under the same accounting principles to
allocate the amount of such contribution between research and development expenses and general and
administrative expenses. For the year ended December 31, 2010, the company recorded $125,000 to
research and development expense and $236,000 to general and administrative expense, based upon
managements estimate of the Gleasmans time allocation.Mr. James Y. Gleasman retired as the companys chief executive officer, interim chief
financial officer and member of the board of directors effective March 14, 2010.(4)
    
    During the years ended December 31, 2010 and 2009, the company paid in business consultant
common shares or cash $94,494 and $94,700 respectively, to a member of the Gleasman family for
administrative, technological and engineering consulting services. Management believes this
compensation is reasonable.(5)
    
    During the years ended December 31, 2010 and 2009, the company paid in business consultant
common shares or cash $76,002 and $87,700 to a family member of its general counsel for engineering
services rendered to the company. Management believes this compensation is reasonable.(6)
    
    On September 14, 2007, the company moved its executive offices from Pittsford, New York to
Rochester, New York, which includes both a manufacturing and executive office facility. The
Rochester facility is owned by a partnership, with which Asher J. Flaum, a company director, is
associated. On April 28, 2008, the companys board of directors approved the terms of a lease and
such lease was executed on April 29, 2008.(7)
    
    On June 29, 2000, the company granted an exclusive world-wide license of all its
automotive technologies to Variable Gear, LLC for the aeronautical and marine markets for $150,000
cash. The company recorded the receipt of the $150,000 as deferred revenue to be recognized when
all conditions for earning such fees are complete. At the time of its formation and through June 6,
2007 when his interest was purchased, Robert C. Horton, a company shareholder, owned 51% of
Variable Gear, LLC. On June 6, 2007, the company purchased Mr. Hortons entire interest in Variable
Gear for 5,000 shares of common stock for $19,250. In fiscal 2007, the company recognized the
deferred revenue of $150,000 as other income and recorded an impairment of the goodwill of $19,250,
since there were no operations of the entity since inception.(8)
    
    On August 18, 2006, the company granted 400,000 nonqualified common stock warrants valued
at approximately $1,237,000 to a company one member of which is a director. The warrants are
immediately exercisable at $3.27 per common share for a period of ten years. These warrants were
modified and reissued upon mutual agreement of the parties effective October 15, 2010. These
modified warrants are immediately exercisable at $.44 per common share for a period of ten years
from the modification date. This modification was valued at $68,000 and the company recognized
this expense in the fourth quarter of 2010.
  94




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##### Table of Contents



(9)
    
    On June 19, 2006, the company awarded an aggregate 360,000 nonqualified common stock
warrants valued at approximately $629,000 to a director for additional services rendered by such
director as chairman of the boards executive committee during 2006.(10)
    
    On August 17, 2005, the company repaid $28,000 indebtedness to a stockholder by issuing
11,667 restricted common shares, such number of shares based upon the closing price of the
companys common stock on August 16, 2005.(11)
    
    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.(12)
    
    On October 26, 2010, the company issued 164,187 common shares valued at approximately $62,400 to
each of its chairman of the board and general counsel for services rendered in connection with the
engagement of the companys new chief executive officer.(13)
    
    On December 13, 2010, the company executed a consultant agreement with a director to provide
consulting services to the company at a rate of $200 per hour. Pursuant to the agreement, the
company agreed to pay the consultant an incentive fee equal to $10,000 or proportionate part
thereof for each $1,000,000 of revenue or proportionate part thereof actually paid and received by
the company for a period of five years provided the definitive agreement with the third party payer
results from the material efforts of the consultant.
  Director Independence
  
 Item 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Principal Accountant Fees and Services
 Audit Fees
   95




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##### Table of Contents



Audit-Related Fees
  Tax Fees
  All Other Fees
  Total Fees
  Pre-Approval of Policies and Procedures
  Audit Committee Approval
   96




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##### Table of Contents



Item 15.
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a)
    
    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.(9)
    
    Voting Trust AgreementNone.
  97




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##### Table of Contents



(10)
    
    Material Contracts
 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, 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, and April 20, 2004 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 September 30, 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 June 30, 2000;10.6
    
    
    License Agreement between Torvec, Inc. and Variable Gear, LLC dated June 28, 2000,
incorporated by reference to Form SB-2 filed October 19, 2000;10.7
    
    
    Investment Agreement with Swartz Private Equity, LLC dated September 5, 2000, together with
attachments thereto, incorporated by reference to Form 8-K filed October 2, 2000;10.8
    
    
    Extension of and Amendment to Consulting Agreement with James A. Gleasman, incorporated by
reference to Form 10-KSB filed for the fiscal year ended December 31, 2000;10.9
    
    
    Extension of and Amendment to Consulting Agreement with Keith E. Gleasman, incorporated by
reference to Form 10-KSB filed for the fiscal year ended December 31, 2000;10.10
    
    
    Extension of and Amendment to Consulting Agreement with Vernon E. Gleasman, incorporated by
reference to Form 10-KSB filed for the fiscal year ended December 31, 2000;10.11
    
    
    Option and Consulting Agreement with Marquis Capital, LLC dated February 10, 1999,
incorporated by reference to Form 10-QSB filed for quarter ended March 31, 2001;10.12
    
    
    Option and Consulting Agreement with PMC Direct Corp., dated February 10, 1999, incorporated
by reference to Form 10-QSB filed for quarter ended March 31, 2001;10.13
    
    
    Investment Banking Services Agreement with Swartz Institutional Finance (Dunwoody Brokerage
Services, Inc.) dated December 8, 2000, incorporated by reference to Form 10-QSB filed for quarter
ended March 31, 2001;10.14
    
    
    Employment Agreement with Michael Martindale, Chief Executive Officer, dated August 1, 2001,
incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 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 September 30, 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 September 30,
2001;
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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 September 30, 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 September
30, 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 September 30, 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 June 30, 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 June 30, 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
June 30, 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 September 30, 2004;10.30
    
    
    Assignment and Assumption of Lease between William J. Green and Ronald J. Green and Torvec,
Inc. effective as of December 31, 2004, incorporated by reference to Form 10-KSB filed for fiscal
year ended December 31,2004;10.31
    
    
    Bill of Sale between Dynamx, Inc. and Torvec, Inc. for equipment and machinery, incorporated
by reference to Form 10-KSB filed for fiscal year ended December 31, 2004;
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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 June 30, 2005, incorporated by reference to
Form 10-QSB filed for fiscal quarter ended June 30, 2005;10.37
    
    
    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;10.38
    
    
    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 September 30,
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 September 30, 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 September 30, 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 September 30, 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 September 30, 2005;10.43
    
    
    Consultant Agreement with Steven Urbanik, dated October 1, 2005, incorporated by reference to
Form 10-QSB filed for fiscal quarter ended September 30, 2005;10.44
    
    
    Consultant Agreement with Kiwee Johnson, dated September 30, 2005, incorporated by reference
to Form 10-QSB filed for fiscal quarter ended September 30, 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 September 30, 2005;10.46
    
    
    Minutes of meeting Board of Directors Torvec, Inc., held October 19, 2004 Incorporated by
reference to annual report (Form 10-KSB) filed for the year ended December 31, 2005;
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##### Table of Contents



10.47
    
    
    Minutes of meeting of Board of Directors dated October 13, 2006 creating the Commercializing
Event Plan, modifying the Nonmanagement Directors Plan. increasing the number of authorized shares
to be issued under Business Consultants Plan and recommending shareholder approval of increase in
number of authorized common shares from 40,000,000 to 400,000,000;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 Current Report (Form 8-K)
filed on June 20, 2006;10.49
    
    
    Agreement with American Continental Group, LLC dated October 27, 2006 incorporated by
reference to Current Report (Form 8-K) filed 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, New York 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 which order directed the return to the company of a
$250,000 (less administrative fee) undertaking deposited with the Monroe County, New York Treasurer
in connection with the same litigation, incorporated by reference to quarterly report (Form 10-Q)
filed for the quarter ended March 31, 2007;10.52
    
    
    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;10.53
    
    
    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;10.54
    
    
    Consulting Agreement by and between Clifford Carlson and Torvec, Inc. dated December 12,
2007, incorporated by reference to current report (Form 8-K) filed December 14, 2007;10.55
    
    
    Minutes of meeting of Governance and Compensation Committee dated February 19, 2007
establishing compensation for the companys president and chief executive officer and amending the
companys commercializing event plan;10.56
    
    
    Consulting Agreement by and between Capital Campaigns, Inc. and Torvec, dated February 6,
2009;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;10.58
    
    
    Memorandum of Understanding between Rochester Institute of Technology and Torvec, inc. dated
as of July 31,2010, incorporated by reference to current report (Form 8-K) filed August 6, 2009;10.59
    
    
    Prototype Agreement between Eastern Mining & Industrial Supply and Torvec, Inc. dated as of
November 11, 2009, incorporated by reference to current report (Form 8-K) filed November 18, 2009;
  101




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##### Table of Contents



10.60
    
    
    Agreement between Rochester Institute of Technologys Center for Integrated Manufacturing
Studies and Torvec, Inc. dated as of October 6, 2009, incorporated by reference to current report
(Form 8-K) filed November 18, 2009;10.61
    
    
    Resignation letter of James Y. Gleasman as chief executive officer, interim chief financial
officer and director dated March 5, 2010, incorporated by reference to current report (Form 8-K)
filed March 5, 2010;10.62
    
    
    Corporate Sponsorship Agreement between Phoenix Performance, Inc. and Torvec, Inc. dated as
of May 18, 2010, incorporated by reference to current report (Form 8-K) filed May 26, 2010;10.63
    
    
    Operating Agreement of Torvec-China, LLC dated as of September 11, 2010, incorporated by
reference to current report (Form 8-K) filed September 16, 2010;10.64
    
    
    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;10.65
    
    
    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;10.66
    
    
    Convertible Promissory Note issued by Torvec, Inc. to Asher Enterprises, Inc. dated as of
July 2, 2010, incorporated by reference to current report (Form 8-K) filed July 20, 2010;10.67
    
    
    Securities Purchase Agreement between Asher Enterprises, Inc. and Torvec, Inc. dated as of
July 2, 2010, incorporated by reference to current report (Form 8-K) filed July 20, 2010;10.68
    
    
    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;10.69
    
    
    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;10.70
    
    
    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;10.71
    
    
    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;10.72
    
    
    2011 Stock Option Plan and template agreements to be used to grant options thereunder;10.73
    
    
    Agreement dated December 13, 2010 between Heinrocket Inc. as Consultant and Torvec, Inc.
 (11)
    
    Statement re computation of per share earnings (loss)Not applicable.(14)
    
    Code of Ethics
  102




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##### Table of Contents



(16)
    
    Letter on change in certifying accountantNone.(18)
    
    Letter re change in accounting principlesNone.(20)
    
    Other documents or statements to security holdersNone.(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)
Torvec China, LLC (New York)(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(a)/15(d)-14(a) Certifications  CFO(32)
    
    Section 1350 Certifications(99)
    
    Additional exhibitsNone.
  103




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##### Table of Contents



SIGNATURES
  TORVEC, INC.Date: March 29, 2011
    
    By:
    
    /s/  Richard A. Kaplan

Richard A. Kaplan,Chief Executive Officer
  Dated: March 29, 2011
    
    By:
    
    /s/  Richard A. Kaplan

Richard A. Kaplan,Chief Executive Officer and DirectorDated: March 29, 2011
    
    By:
    
    /s/ Robert W. Fishback

Robert W. Fishback,Chief Financial Officer and SecretaryDated: March 29, 2011
    
    By:
    
    /s/  Keith E. Gleasman

Keith E. Gleasman,President and DirectorDated: March 29, 2011
    
    By:
    
    /s/  Thomas F. Bonadio

Thomas F. BonadioDirectorDated: March 29, 2011
    
    By:
    
    /s/ Wesley K. Clark

Wesley K. ClarkDirectorDated: March 29, 2011
    
    By:
    
    /s/ William W. Destler

William W. DestlerDirectorDated: March 29, 2011
    
    By:
    
    /s/  Asher J. Flaum

Asher J. Flaum,DirectorDated: March 29, 2011
    
    By:
    
    /s/ John W. Heinricy

John W. HeinricyDirectorDated: March 29, 2011
    
    By:
    
    /s/ Charles N. Mills

Charles N. MillsDirectorDated: March 29, 2011
    
    By:
    
    /s/  E. Philip Saunders

E. Philip SaundersDirectorDated: March 29, 2011
    
    By:
    
    /s/  Gary A. Siconolfi

Gary A. SiconolfiDirector
  104




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    Description10.72
    
    
    2011 Stock Option Plan and template agreements to be used to grant options thereunder10.73
    
    
    Agreement dated December 13, 2010 between Heinrocket Inc. as Consultant and Torvec, Inc.23.1
    
    
    EisnerAmper LLP Consent31.1
    
    
    Rule 13(a)-14(a)/15(d)-14(a) Certifications  CEO31.2
    
    
    Rule 13(a)-14(a)/15(d)-14(a) Certifications  CFO32
    
    
    Section 1350 Certifications
  105