U.S. 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, 2008
 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.
 (Name of Small Business Issuer in its charter)
 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)
 Issuers Telephone Number, including Area Code: (585) 254-1100
 Securities registered pursuant to Section 12(b) of the Exchange Act:
 Name of each exchange onTitle of each class
    
    which registered
 Securities registered pursuant to Section 12(g) of the Exchange Act
 $.01 par value common voting stock
 (Title of class)
 Yes o No þ
 Yes o No þ
 Note
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
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TABLE OF CONTENTS
 PAGEPART IItem 1. Description of Business
    
    
    4Item 1A. Risk Factors
    
    
    11Item 2. Properties
    
    
    13Item 3. Legal Proceedings
    
    
    13Item 4. Submission of Matters to a Vote of Security Holders
    
    
    15Item 5. Market for Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    16Item 6. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    26Item 6A. Quantitative and Qualitative Disclosures About Market RiskPART II  DECEMBER 31, 2008 and 2007 FINANCIAL INFORMATIONItem 7. Consolidated Financial Statements
    
    
    F-1Report of Independent Registered Public Accounting Firm
    
    
    F-2Torvec, Inc. and Subsidiaries Consolidated Balance Sheet as of December
31, 2008 and 2007
    
    
    F-3Torvec, Inc. and Subsidiaries Consolidated Statements of Operations for
each of the years in the Two-Year Period Ended December 31, 2008 and
for the Period from September 25, 1996 (Inception) through December 31,
2008
    
    
    F-4Torvec, Inc. and Subsidiaries Consolidated Statements of Changes in
Stockholders Equity (Capital Deficit) for the Period from
September 25, 1996 (Inception) through December 31, 2008
    
    
    F-5  F-11Torvec, Inc. and Subsidiaries Consolidated Statements of Cash Flows for
each of the years in The Two Year Period Ended December 31, 2008 and
for the Period from September 25, 1996 (Inception) through December 31,
2008
    
    
    F-12Notes to Consolidated Financial Statements
    
    
    F-13Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    33Item 8A. Controls and Procedures
    
    
    33Item 8B. Other Information
    
    
    34PART IIIItem 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
    
    
    35Item 10. Executive Compensation
    
    
    48Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Shareholder Matters
    
    
    59Item 12. Certain Relationships and Related Transactions and Director Independence
    
    
    62Item 13. Principal Accountant Fees and Services
    
    
    64Exhibits
    
    
    65SIGNATURES PAGE
    
    
    70EXHIBIT INDEX
    
    
    71
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PART I
 
 Item 1. DESCRIPTION OF BUSINESS.
 (a) History and Development of Our Inventions
 ®
 (i)
    
    Iso-torque® differential;(ii)
    
    infinitely variable transmissions (IVT) for diesel and gasoline engines;(iii)
    
    steering drive and suspension system for tracked vehicles;(iv)
    
    high speed, steel-reinforced rubber tracks;(v)
    
    hydraulic pump and motor;(vi)
    
    constant velocity joint mechanism.
    4




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(b) Our Automotive Properties
  (1) Full Terrain Vehicle ®
    Automotive News
 (2) IsoTorque® Differential
 ®
 ®
  5




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reliable efficient
  (3) Infinitely Variable Transmission  Hydraulic Pump/Motor
      
    
    generated a 38.5% improvement in fuel efficiency over a same-model Dodge 4x4 diesel
truck with a 4-speed automatic; and
 
    
    generated a 28.5% improvement in fuel efficiency over a same model Dodge 4x4 diesel
truck with a manual transmission.
  6




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
    
    the elimination of vehicle creep, a characteristic of an automatic transmission
vehicle at rest without application of the brake;
 
    
    interchangeability, i.e. the transmission fit in the same space as an existing automatic
transmission, thus, eliminating the need for major costly design changes to car and truck frames;
        7




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Constant Velocity Joint Mechanism
       8




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(c) Our Ice Technology
           9




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(d) Current Status of Product Development
  (e) Competition, Industry and Market Acceptance
  ® ® ®
  ®
  10




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®
 ®
   
 Item 1A. RISK FACTORS
     11




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Item 1B. UNRESOLVED STAFF COMMENTS
   12




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Item 2. PROPERTIES
   th
  
 Item 3. LEGAL PROCEEDINGS
 (1)
    
    On September 30, 2005, the company filed a declaratory judgment action
in the Supreme Court of the State of New York for the Seventh Judicial
District seeking that courts determination that certain, purported
agreements with a management consulting firm are null and void and
unenforceable as against the company, its officers and directors. This
litigation has been settled and, in accordance with the terms of the
settlement agreement executed March 6, 2009, the parties released one
another from all claims and counterclaims against each other and
terminated any and all obligations emanating out of their relationship
with each other, including any and all obligations under the purported
agreements.
  13




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(2)
    
    On April 12, 2007, the company commenced a second lawsuit against the
same management consulting firm in the Supreme Court, Seventh Judicial
District, alleging that such firm had fraudulently induced the company
to enter into certain purported agreements with the management firm,
did not perform the services for which the company had engaged the
firm and that, as a result, the company has been damaged in excess of
$6,000,000 by such firm. This litigation has been settled and, in
accordance with the terms of the settlement agreement executed March
6, 2009, the parties released one another from all claims and
counterclaims against each other and terminated any and all
obligations emanating out of their relationship with each other,
including any and all obligations under the purported agreements.(3)
    
    On October 8, 2007, the controlling persons of the companys
majority-owned subsidiary, Ice Surface Development, Inc.(ISDI),
namely its chief executive officer, its chief operating officer and
its vice-president of manufacturing, filed for arbitration of their
claims that ISDI is obligated to pay them certain amounts under their
employment contracts.On October 19, 2007, the same three persons commenced a shareholders
derivative action in the Federal District Court for the Western
District of New York claiming that the company and its president
breached their fiduciary duties to the minority shareholders of ISDI
in assigning the Dartmouth College ice technology license for
inadequate consideration.On June 27, 2008, the Federal Court dismissed, with prejudice, the
shareholders derivative action and the deadline for appealing the
decision has expired.On August 18, 2008, the plaintiffs withdrew their arbitration claim,
thus ending the litigation in its entirety.(4)
    
    On October 31, 2008, the company commenced an action in New York State
Supreme Court, County of New York, Commercial Division against Ice
Engineering, LLC seeking the total balance owed by Ice Engineering to
the company pursuant to an agreement entered into by the parties,
effective June 15, 2007, namely, $2,700,000. Under the agreement, in
connection with Torvecs assignment of the ice technology license, Ice
Engineering agreed to reimburse Torvec for approximately $3,500,000
the company previously had expended acquiring and maintaining the
license. Ice Engineering has paid approximately $800,000 but is in
arrears with respect to installments due June 1, 2008, September 1,
2008 and December 1, 2008 and apparently has repudiated its remaining
payment obligations under the agreement. Ice Engineering has
counterclaimed for the $800,000 paid under the agreement thus far,
alleging that the company failed to deliver certain business
information to Ice Engineering as called for under the agreement.
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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Subsequent Event
  1.
    
    Election of Directors
 Election of Directors
    
    For
    
    
    WithheldDaniel R. Bickel
    
    
    26,960,435
    
    
    
    198,990Herbert H. Dobbs
    
    
    26,935,709
    
    
    
    223,716Asher J. Flaum
    
    
    26,951,958
    
    
    
    207,467James Y. Gleasman
    
    
    26,952,935
    
    
    
    206,490Keith E. Gleasman
    
    
    26,952,935
    
    
    
    206,490Joseph B. Rizzo
    
    
    26,961,209
    
    
    
    198,216Gary A. Siconolfi
    
    
    26,977,249
    
    
    
    182,176
 2.
    
    Ratification of the appointment of Eisner LLP by the Audit Committee of the board of
directors as the Independent Registered Public Accounting Firm of the company for its year
ending December 31, 2008. For
    
    Against
    
    
    Abstained27,093,809
    
    
    7,576
    
    
    
    58,040
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Item 5.
    
    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 (a) Market Information
    2008
    
    High
    
    
    Low1st Quarter
    
    $
    3.14
    
    
    $
    2.322nd Quarter
    
    $
    2.85
    
    
    $
    2.023rd Quarter
    
    $
    2.40
    
    
    $
    1.354th Quarter
    
    $
    1.80
    
    
    $
    .60
 2007
    
    High
    
    
    Low1st Quarter
    
    $
    5.40
    
    
    $
    3.152nd Quarter
    
    $
    4.28
    
    
    $
    3.203rd Quarter
    
    $
    3.84
    
    
    $
    2.504th Quarter
    
    $
    4.56
    
    
    $
    2.84
 (b) Holders of Common Stock
  (c) Dividend Policy on Common Stock
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(d) Securities Authorized for Issuance under Equity Compensation Plans
 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)
    
    $
    4.70
    
    
    None      (1)Equity compensation plans
not approved by security
holders
    
    
    1,214,500
    (5)
    
    $
    3.30
    
    
    None      (2)-(5)Total
    
    
    1,856,348
    (5)
    
    $
    4.00
    
    
    None      (1)-(5)
 (1)
    
    Represents number of common stock options outstanding. The companys stock option plan was terminated effective May 28,
2008 as to future grants under the plan.(2)
    
The company granted 125,000 common stock warrants to a consultant in connection with a non-exclusive financial consulting
agreement dated February 11, 1997. The warrants are only exercisable
if and when the company has an initial public offering of its common
stock.(3)
    
    The company granted 1,080,000 common stock warrants to a management
consulting firm as compensation for services such firm was supposed to
provide to the company. 528,800 of these warrants have been exercised
through December 31, 2008. The company litigated that the management
firm was not legally entitled to any shares already issued to such
consulting firm, to exercise the remaining unexercised warrants
outstanding as well the issuance of an indeterminate number of
additional common stock warrants issuable under purported agreements
with such firm. Effective December 31, 2008, the company and the
management firm released all claims and terminated all obligations
under the purported agreements including all common stock warrants.
See footnote H to the companys financial statements.(4)
    
    The company has granted 123,500 common stock warrants to its
nonmanagement directors under its nonmanagement directors plan. 69,000
warrants have been exercised through December 31, 2008. The plan was
modified on October 13, 2006 so that no further warrants are issuable
under the plan.(5)
    
    The company has granted an aggregate 1,571,583 common stock warrants
which the company has issued to a number of business, engineering,
financial, governmental affairs and technical consultants in
connection with its operations. 536,583 warrants have been exercised
or have been cancelled or expired by their terms through December 31,
2008. See footnote H [10] to the companys financial statements.  17




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(e) Class A Preferred Stock
   A.
    
    Number of SharesThe number of Class A Preferred initially authorized is 3,300,000 Class A Preferred. The initial
number authorized shall be increased as required to provide Class A Preferred for payment of
dividends as described in Section B, distribution to holders in accordance with Section C and as
described in Section F.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 and no more 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.
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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.
 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.
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(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.
 E.
    
    Voting Rights The holders of Class A Preferred are not be
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 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).
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(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.(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.
  21




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(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.
      (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.
  22




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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.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).
  23




---



##### 



(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. Such 1 for 1 rate of conversion is subject to
adjustment as set forth in Section G(10); (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:
       24




---



##### 



25




---



##### 



(g) Reports to Shareholders
  (h) Transfer Agent and Registrar
  
 Item 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (a) Overall Business Strategy
 ® ®
 ®
   26




---



##### 



(b) Current Status of Business Plan and Ongoing Projects
  ®
     ®
       27




---



##### 



28




---



##### 



(c) Company Expenses
    (d) Liquidity and Capital Resources
  
    
    the receipt in 2007 of the first installment of $500,000 of an
aggregate $3,500,000 reimbursement payable in connection with the
assignment of the companys ice technology license and the receipt of
$209,000 in April 2008 representing the second reimbursement
installment;
    
    the receipt in 2007 of $126,000 in revenue from the sale of the
companys products to various end-users;
    
    the receipt of approximately $121,000 of revenue during the twelve
month period ended December 31, 2008 attributable to the sale of the
companys products to various end users;
    
    the purchase of an aggregate 36,364 restricted common stock in
June 2008 for $100,000 by an accredited investor at a price of $2.75
per common share.
    
    the purchase of an aggregate 50,000 restricted common shares in the
fourth Quarter of 2008 for $75,000 by accredited investors at a price
of $1.50 per common share.
    
    the receipt of $114,000 of other income for the testing of the
companys products for a potential customer.
    
    the receipt in the fourth quarter of approximately $280,000
representing New York State corporation income tax refundable credits
allocable to certain research and development expenses incurred in the
years 2005-2007.
   29




---



##### 



(e) Critical Accounting Policies
    30




---



##### 



31




---



##### 



Disclosures about Derivative Instruments and Hedging Activities – an
amendment of FASB Statement No. 133
   (f) Impact of Inflation
  (g) Quarterly Fluctuations
   32




---



##### 



TORVEC, INC. AND SUBSIDIARIES
 Contents
 
 Financial Statements
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated balance sheets as of December 31, 2008 and 2007
    
    
    F-3Consolidated statements of operations for each of the years
in the two-year period ended December 31, 2008 and for the
period from September 25, 1996 (inception) through
December 31, 2008
    
    
    F-4Consolidated statements of changes in stockholders equity
(capital deficit) for the period from September 25, 1996
(inception) through December 31, 2008
    
    
    F-5  F-11Consolidated statements of cash flows for each of the years
in the two-year period ended December 31, 2008 and for the
period from September 25, 1996 (inception) through
December 31, 2008
    
    
    F-12Notes to consolidated financial statements
    
    
    F-13
  F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
  F-2




---



##### 



2008
    
    
    2007ASSETSCurrent assets:Cash
    
    $
    304,000
    
    
    $
    192,000Prepaid expenses and other receivable
    
    
    102,000
    
    
    
    43,000Total current assets
    
    
    406,000
    
    
    
    235,000Property and Equipment:Office equipment
    
    
    68,000
    
    
    
    67,000Shop equipment
    
    
    139,000
    
    
    
    129,000Leasehold improvements
    
    
    213,000
    
    
    
    149,000Transportation equipment
    
    
    106,000
    
    
    
    106,000526,000
    
    
    
    451,000Less accumulated depreciation and amortization
    
    
    237,000
    
    
    
    170,000Net property and equipment
    
    
    289,000
    
    
    
    281,000Total Assets
    
    $
    695,000
    
    
    $
    516,000LIABILITIESCurrent liabilities:Notes payable  current
    
    $
    15,000
    
    
    $
    15,000Accounts payable
    
    
    177,000
    
    
    
    261,000Accrued liabilities
    
    
    755,000
    
    
    
    1,704,000Total current liabilities
    
    
    947,000
    
    
    
    1,980,000Deferred Rent Expense
    
    
    39,000Deferred revenue
    
    
    800,000
    
    
    
    500,000Notes payable  long term
    
    
    29,000
    
    
    
    43,000Total liabilities
    
    
    1,815,000
    
    
    
    2,523,000Commitments, Contingencies and other mattersSTOCKHOLDERS CAPITAL DEFICITPreferred stock, $.01 par value, 100,000,000
shares authorized 3,300,000 designated as Class
A, non-voting, cumulative dividend $.40 per
share, per annum, convertible 2008 and 2007: 707,101 and 732,493 shares issued and
outstanding, respectively, (liquidation
preference 2008: $3,858,015 and 2007: $3,701,162) 300,000 designated as Class B,
non-voting, cumulative dividend $.50 per share,
per annum, convertible 2008 and 2007: 97,500
shares issued and outstanding (liquidation
preference 2008: $360,339 and 2007: $311,787)
    
    
    8,000
    
    
    
    9,000Common stock, $.01 par value, 400,000,000 shares
authorized, 32,811,422 and 31,640,045 issued and
outstanding
    
    
    328,000
    
    
    
    316,000Additional paid-in capital
    
    
    48,485,000
    
    
    
    45,926,000Deficit accumulated during the development stage
    
    
    (49,941,000
    )
    
    
    (48,258,000
    )Total Capital Deficit
    
    
    (1,120,000
    )
    
    
    (2,007,000
    )Total Liability and Stockholders Capital Deficit
    
    $
    695,000
    
    
    $
    516,000
 See notes to consolidated financial statements
  F-3




---



##### 



September 25,1996(Inception)Year Ended
    
    
    ThroughDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008RevenueSales
    
    $
    121,000
    
    
    $
    126,000
    
    
    $
    247,000Cost of Goods Sold
    
    
    105,000
    
    
    
    120,000
    
    
    
    225,000Gross Profit
    
    
    16,000
    
    
    
    6,000
    
    
    
    22,000Costs and expenses:Research and development
    
    
    535,000
    
    
    
    710,000
    
    
    
    15,335,000General and administrative
    
    
    3,165,000
    
    
    
    2,653,000
    
    
    
    36,976,000Asset Impairment
    
    
    
    
    
    
    
    
    
    
    1,071,000Loss from operations
    
    
    (3,684,000
    )
    
    
    (3,357,000
    )
    
    
    (53,360,000
    )Other Income
    
    
    114,000
    
    
    
    146,000
    
    
    
    260,000Loss
before Reversal of liability, minority interest and tax benefit
    
    
    (3,570,000
    )
    
    
    (3,211,000
    )
    
    
    (53,100,000
    )Reversal of
liability on Cancellation Debt
    
    
    1,541,000
    
    
    
    
    
    
    
    1,541,000Minority interest in loss of consolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    1,272,000Net Loss Before Income Tax Provision
    
    
    (2,029,000
    )
    
    
    (3,211,000
    )
    
    
    (50,287,000
    )Income Tax Benefit
    
    
    346,000
    
    
    
    
    
    
    
    346,000Net loss
    
    
    (1,683,000
    )
    
    
    (3,211,000
    )
    
    
    (49,941,000
    )Preferred stock beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    763,000Preferred stock dividend
    
    
    307,000
    
    
    
    341,000
    
    
    
    1,176,000Net loss attributable to common stockholders
    
    $
    (1,990,000
    )
    
    $
    (3,552,000
    )
    
    $
    (51,880,000
    )Basic and diluted net loss attributable to common
stockholders per share
    
    $
    (0.06
    )
    
    $
    (0.11
    )Weighted average number of shares of common stock 
basic and diluted
    
    
    32,196,000
    
    
    
    31,261,000
 See notes to consolidated financial statements
  F-4




---



##### 



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
    )Balance  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
  F-5




---



##### 



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
  F-6




---



##### 



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
  F-7




---



##### 



DeficitUnearned
    
    
    AccumulatedAdditional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    TotalClass A Preferred Stock
    
    
    Class B 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
  F-8




---



##### 



DeficitUnearned
    
    
    AccumulatedAdditional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    TotalClass A Preferred Stock
    
    
    Class B 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
  F-9




---



##### 



DeficitUnearned
    
    
    AccumulatedAdditional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    TotalClass A Preferred Stock
    
    
    Class B 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
  F-10




---



##### 



DeficitUnearned
    
    
    Accumulated
    
    
    TotalAdditional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    StockholdersClass A Preferred Stock
    
    
    Class B 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
 Unearned
    
    
    Accumulated
    
    
    TotalAdditional
    
    
    Due
    
    
    Compensatory
    
    
    During the
    
    
    StockholdersClass A Preferred Stock
    
    
    Class B 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
    
    
    
    1,731,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,738,000Shares Issued as Compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147,757
    
    
    
    3,000
    
    
    
    331,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    334,000Dividend
    
    
    6,913Sale of Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,364
    
    
    
    1,000
    
    
    
    197,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    198,000Warrants 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
  F-11




---



##### 



C F
 September 25,1996(Inception)Year Ended
    
    
    ThroughDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (1,683,000
    )
    
    $
    (3,211,000
    )
    
    $
    (49,941,000
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    67,000
    
    
    
    47,000
    
    
    
    2,450,000Change in
Accrued Payroll Taxes
    
    
    109,000
    
    
    
    
    
    
    
    109,000Loss on impairment
    
    
    
    
    
    
    
    
    
    
    1,071,000Impairment of goodwill
    
    
    
    
    
    
    19,000
    
    
    
    19,000Gain on sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    (10,000
    )Minority interest in loss of consolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    (1,272,000
    )Compensation expense attributable to common stock in
Subsidiary
    
    
    
    
    
    
    
    
    
    
    619,000Common stock issued for services
    
    
    1,498,000
    
    
    
    1,090,000
    
    
    
    13,194,000Contribution
to Capital, Ford Truck
    
    
    16,000
    
    
    
    
    
    
    
    16,000Stockholder contribution of services
    
    
    
    
    
    
    300,000
    
    
    
    2,409,000Common stock issued in connection with commercializing
event planning
    
    
    36,000
    
    
    
    
    
    
    
    36,000Reversal of
Liability
    
    
    (1,541,000
    )
    
    
    
    
    
    
    (1,541,000
    )Compensatory common stock
    
    
    334,000
    
    
    
    650,000
    
    
    
    17,835,000Warrants
issued for services
    
    
    249,000
    
    
    
    
    
    
    
    249,000Shares issued for future consulting services
    
    
    
    
    
    
    
    
    
    
    103,000Changes toPrepaid
expenses and other receivables
    
    
    (59,000
    )
    
    
    30,000
    
    
    
    59,000Deferred revenue
    
    
    209,000
    
    
    
    350,000
    
    
    
    709,000Deferred rent expense
    
    
    39,000
    
    
    
    
    
    
    
    39,000Accounts payable and accrued expenses
    
    
    65,000
    
    
    
    279,000
    
    
    
    3,938,000Deferred Compensation and Other
    
    
    600,000
    
    
    
    2,000
    
    
    
    600,000Net cash used in operating activities
    
    
    (61,000
    )
    
    
    (444,000
    )
    
    
    (9,558,000
    )Cash flows from investing activities:Purchase of equipment
    
    
    (11,000
    )
    
    
    (70,000
    )
    
    
    (360,000
    )Cost of acquisition
    
    
    
    
    
    
    
    
    
    
    (16,000
    )Proceeds from sale of fixed asset
    
    
    
    
    
    
    
    
    
    
    10,000Net cash used in investing activities
    
    
    (11,000
    )
    
    
    (70,000
    )
    
    
    (366,000
    )Cash flows from financing activities:Net proceeds from sales of common stock and upon exercise of
options and warrants
    
    
    198,000
    
    
    
    1,000
    
    
    
    6,631,000Net proceeds from sales of preferred stock
    
    
    
    
    
    
    
    
    
    
    3,537,000Net proceeds from sale of subsidiary stock
    
    
    
    
    
    
    
    
    
    
    234,000Proceeds from loan
    
    
    
    
    
    
    
    
    
    
    85,000Repayment of loan
    
    
    (14,000
    )
    
    
    (15,000
    )
    
    
    (65,000
    )Proceeds from loan
    
    
    
    
    
    
    250,000
    
    
    
    250,000Repayment of officer loan
    
    
    
    
    
    
    (250,000
    )
    
    
    (147,000
    )Distributions
    
    
    
    
    
    
    
    
    
    
    (365,000
    )Net cash provided by (used in) financing activities
    
    
    (184,000
    )
    
    
    (14,000
    )
    
    
    10,160,000Net (decrease) increase in cash and cash equivalents
    
    
    112,000
    
    
    
    (528,000
    )
    
    
    304,000Cash and cash equivalents at beginning of period
    
    
    192,000
    
    
    
    720,000Cash and cash equivalents at end of period
    
    $
    304,000
    
    
    $
    192,000
    
    
    $
    304,000Supplemental disclosure of noncash investing and financing
activities:Issuance 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
    
    
    
    
    
    
    
    
    
    
    50,000Loss on exchange of minority interest
    
    
    
    
    
    
    
    
    
    
    232,000Advance settled with common stock
    
    
    
    
    
    
    
    
    
    
    25,000Issuance of common stock in settlement of notes
payable
    
    
    
    
    
    
    
    
    
    
    28,000Preferred dividends paid in preferred stock
    
    $
    7,000
    
    
    
    
    
    
    
    39,000Shares issued for future consulting services
    
    
    
    
    
    
    
    
    
    
    103,000Issuance of common stock for a finders fee
    
    
    
    
    
    
    
    
    
    
    225,000Advance from stockholder
    
    
    
    
    
    
    
    
    
    
    250,000Issuance of common stock, leasehold improvement
    
    
    64,000
    
    
    $
    102,000
    
    
    
    166,000Shares issued for acquisition of Variable Gear
    
    
    
    
    
    
    19,000
    
    
    
    19,000Contribution of FTV Ford Truck
    
    
    16,000
    
    
    
    
    
    
    
    16,000ICE payable netted against receivable
    
    
    91,000
    
    
    
    
    
    
    
    91,000Common stock issued in settlement of directors fee
payable
    
    
    58,000
    
    
    
    
    
    
    
    58,000Common stock issued in settlement of Patent expense
    
    
    117,000
    
    
    
    
    
    
    
    117,000Interest
    
    
    4,000
    
    
    
    11,000
    
    
    
    24,000Taxes
    
    
    
    
    
    
    
    
    
    
    1,000
 See notes to consolidated financial statements
  F-12




---



##### 



Note A
 The Company and Basis of Presentation
 ®
     Note B  Summary of Significant Accounting Policies
 [1]
    
    Consolidation:The financial statements include the accounts of the company, its
majority-owned subsidiary, Ice Surface Development, Inc. (56 % and
69.26% owned at December 31, 2008 and 2007, respectively), and its
wholly-owned subsidiaries Iso-Torque Corporation, IVT Diesel Corp. and
Variable Gear LLC. All material intercompany transactions and account
balances have been eliminated in consolidation.[2]
    
    Cash and Cash EquivalentsCash and cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original
maturities of three months or less. The company maintains cash and
cash equivalents at financial institutions which periodically may
exceed federally insured amounts.[3]
    
    Property and Equipment:Equipment, including a prototype vehicle, is stated at cost less
accumulated depreciation. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets
which range from three to seven years. Leasehold improvements are
being amortized over shorter of lease term or useful life.
  F-13




---



##### 



[4]
    
    Research and Development and Patents:Research and development costs and patent expenses are charged to
operations as incurred. Research and development includes amortization
of the Ice technology, purchase of parts, depreciation and consulting
services. Depreciation expense in each of the years ended December 31,
2008 and 2007 that was charged to research and development was $67,000 and $47,000 respectively.Patent costs for the year ended December 31, 2008 and 2007 are
$114,000 and $43,000, respectively.[5]
    
    License:The company follows SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Whenever events or circumstances
indicate, the companys long-lived assets, including intangible assets
with finite useful lives, are tested for impairment by using the
estimated future cash flows directly associated with, and that are
expected to arise as a direct result of, the use of the assets. If the
carrying amount exceeds the estimated undiscounted cash flows, an
impairment may be indicated. The carrying amount is then compared to
the estimated discounted cash flows, and if there is an excess, such
amount is recorded as an impairment.In accordance with SFAS No. 144, management determined that events and
circumstances indicated that the carrying amount of the license for
the companys Ice technology exceeded the estimated undiscounted cash
flows to be generated by the license. Based upon such determination,
management compared the carrying amount of the license as of
December 31, 2006 to the estimated discounted cash flows to be
generated by the license and recorded such excess as an impairment.
Management has concluded that the carrying amount of its Dartmouth
College license as of December 31, 2006 ($1,071,000) was impaired in
accordance with SFAS No. 144. (See Note C.)Effective June 15, 2007, the company assigned the license to Ice
Engineering, LLC in exchange for Ice Engineerings agreement to pay
the shareholders of the companys majority-owned subsidiary, Ice
Surface Development, Inc., an annual royalty equal to 5% of the annual
gross revenues generated by the license and its agreement to assume
all of the obligations to Dartmouth College under the license.
See Note C.[6]
    
    Use of Estimates:The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Such estimates are
used in valuing the useful lives of its intangible assets and the
future realizable value of such assets. These estimates are subject to
a high degree of judgment and potential change. Actual results could
differ from those estimates.[7]
    
    Loss per Common Share:Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings Per Share, requires the presentation of basic earnings per
share, which is based on common stock outstanding, and dilutive
earnings per share, which gives effect to options, warrants and
convertible securities in periods when they are dilutive. At
December 31, 2008, and 2007, the company excluded 3,098,899 and
3,540,739 potential common shares, respectively, relating to
convertible preferred stock outstanding, options and warrants from its
diluted net loss per common share calculation because they are
anti-dilative.[8]
    
    Fair Value of Financial Instruments:The carrying amount of cash, prepaid expenses, accounts payable, and
accrued expenses approximates their fair value due to the short
maturity of those instruments.
  F-14




---



##### 



[9]
    
    Stock-based Compensation:The Stock Options Plan was terminated as of May 27, 2008 as to the
grant of additional options. 641,848 previously issued and
outstanding options remain exercisable in accordance with the terms
of the options.Effective January 1, 2006, we adopted Statement of Financial
Accounting Standards (SFAS) No. 123(R), Share Based Payment. We
elected to use the modified prospective transition method; therefore,
prior period results were not restated. Prior to the adoption of SFAS
123(R), stock-based compensation expense related to stock options was
not recognized in the results of operations if the exercise price was
at least equal to the market value of the common stock on the grant
date, in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees.SFAS 123(R) requires all share-based payments to employees, including
grants of employee stock options, to be recognized as compensation
expense over the service period (generally the vesting period) in the
consolidated financial statements based on their fair values. Under
the modified prospective method, awards that were granted, modified,
or settled on or after January 1, 2006 are measured and accounted for
in accordance with SFAS 123(R). Unvested equity-classified awards
that were granted prior to January 1, 2006 will continue to be
accounted for in accordance with SFAS 123, except that the grant date
fair value of all awards are recognized in the results of operations
over the remaining vesting periods. The impact of forfeitures that
may occur prior to vesting is also estimated and considered in the
amount recognized. In addition, the realization of tax benefits in
excess of amounts recognized for financial reporting purposes will be
recognized as a financing activity in accordance with SFAS 123(R).No tax benefits were attributed to the stock-based compensation
expense because a valuation allowance was maintained for
substantially all net deferred tax assets. We elected to adopt the
alternative method of calculating the historical pool of windfall tax
benefits as permitted by FASB Staff Position (FSP) No. SFAS 123(R)-c,
Transition Election Related to Accounting for the Tax Effects of
Share-Based Payment Awards. This is a simplified method to determine
the pool of windfall tax benefits that is used in determining the tax
effects of stock compensation in the results of operations and cash
flow reporting for awards that were outstanding as of the adoption of
SFAS 123(R).[10]
    
    Revenue Recognition:The companys terms provided that customers are obligated to pay for
products sold to them within a specified number of days from the date
that title to the products is transferred to the customers. The
companys standard terms are typically net 30 days. The company
recognizes revenue when transfer of title occurs and risk of
ownership passes to a customer at the time of shipment or delivery
depending on the terms of the agreement with a particular customer.
The sale price of the companys products is substantially fixed and
determinable at the date of the sale based upon purchase orders
generated by a customer and accepted by the company.
  F-15




---



##### 



[11]
    
    Recent Accounting Pronouncements:Effective January 1, 2008, the company adopted SFAS No. 157, Fair
Value Measurements (SFAS157), which defines fair value,
establishes a framework for measuring fair value and requires
additional disclosures about fair value measurements. In February
2008, the FASB delayed the effective date of SFAS 157 for one year
for all nonfinancial assets and nonfinancial liabilities, except for
those items that are recognized or disclosed at fair value in the
financial statements on a recurring basis. Management has determined
that the adoption of SFAS 157 did not have a material effect on the
companys consolidated financial statements.Effective January 1, 2008 the company adopted SFAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities 
including an amendment of FASB Statement 115 (SFAS 159). This
statement provides companies with an option to report selected
financial assets and liabilities at fair value. As of December 31,
2008, the company has not elected to use the fair value option
allowed by SFAS 159. Management has determined that the adoption of
SFAS 159 did not have a material effect on the companys consolidated
financial position, results of operations, cash flows or financial
statement disclosures.In December 2007, the FASB issued Statement No. 141 (revised),
Business Combinations (SFAS 141 (R)). The standard changes the
accounting for business combinations including the measurement of
acquirer shares issued in consideration for a business combination,
the recognition of contingent consideration, the accounting for
pre-acquisition gain and loss contingencies, the recognition of
capitalized in-process research and development , the accounting for
acquisition-related restructuring cost accruals, the treatment of
acquisition related transaction costs and the recognition of changes
in the acquirers income tax valuation allowance. SFAS 141(R) is
effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008, with early adoption
prohibited. As such, the company is required to adopt these
provisions at the beginning of the fiscal year ending December 31,
2009. SFAS 141(R) will be applied prospectively for acquisitions
beginning in 2009 or thereafter.In March 2008, the Financial Accounting Standards Boards (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 161,
Disclosures about Derivative Instruments and Hedging Activities  an
amendment of FASB Statement No. 133. SFAS 161 requires enhanced
disclosures about an entitys derivative and hedging activities. SFAS
161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008 with early
application encouraged. As such, the Company is required to adopt
these provisions at the beginning of the fiscal year ending December
31, 2009. In review of SFAS 161, the Company has determined that it
is not applicable and will have no effect to its consolidated
financial statements.In May 2008, the FASB issued Statement of Financial Accounting
Standards No. 162 (SFAS 162), The Hierarchy of Generally Accepted
Accounting Principles. SFAS 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental
entities that are presented in conformity with U.S. GAAP. SFAS 162
became effective in September 2008 following the approval by the SEC.
The Company adheres to the hierarchy of US GAAP as present in
SFAS 162 and adoptions did not have a material effect.In 2008, the FASB issued EITF 07-05, Determining whether
an Instrument (or Embedded Feature) Is Indexed to an Entitys
Own Stock, (EITF 07-05). EITF 07-05 provides
guidance on determining what types of instruments or embedded
features in an instrument held by a reporting entity can be
considered indexed to its own stock for the purpose of evaluating the
first criteria of the scope exception in paragraph 11(a) of
SFAS 133. EITF 07-05 is effective for financial statements
issued for fiscal years beginning after December 15, 2008 and
early application is not permitted. Management believes the adoption
of EITF 07-05 in fiscal 2009 will not have any impact on the
Company.
  F-16




---



##### 



NOTE C  LICENSE FROM THE TRUSTEES OF DARTMOUTH COLLEGE
    Separately, Ice Engineering, LLC agreed to reimburse approximately $3,500,000
of acquisition and maintenance costs expended by the company in connection with
the ice technology. Pursuant to the reimbursement agreement, the company
received $500,000 on June 15, 2007. Under the license assignment agreement, the
$3,000,000 balance is to be paid at the rate of $300,000 per quarter commencing
March 1, 2008, less approximately $91,000 in fees payable to Dartmouth College
accrued through June 14, 2007 to be deducted from the first quarterly
reimbursement amount. The company received the first installment of $209,000
due March 1, 2008 on April 3, 2008 and did not receive the installments due
June 1, 2008 and September 1, 2008.
   NOTE D  RELATED PARTY TRANSACTIONS
 [1]
    
    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 (Note H [6]). These options
expired on November 30, 2007. For the years ended December 31,2003,
2002, 2001, 2000,1999, 1998 and 1997, the company incurred expenses
amounting to approximately $450,000, $450,000, $450,000, $522,000,
$528,000, $528,000 and $45,000, respectively, in connection with these
agreements (which were extended for an additional three years,
effective December 1, 2000, and amended to provide that compensation
was payable, in the board of directors discretion, in common stock,
cash or a combination).During 2001, the company issued 126,667 common shares under the
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
(see Note H [6]). These options expired unexercised on
September 30, 2007.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 was not renewed.
  F-17




---



##### 



Commencing January 1, 2004, each of the Gleasmans agreed to provide
consulting services and assign new patents, existing patent
improvements and all know-how in connection with all of their
inventions to the company. In addition, Keith Gleasman agreed to
continue as President and James Gleasman agreed to serve as the
companys chief executive officer and interim chief financial officer.
During the year ended December 31, 2007, the company did not pay the
Gleasmans any consulting fees for their services. The company recorded
approximately $300,000, for the year ended December 31, 2007, for the
estimated value of these services based upon the compensation payable
under the previous consulting agreements. The company recorded $125,000 to research and development and $175,000
to general and administrative for each of the years ended December 31,
2008 and 2007.
On March 28, 2008 the board of directors approved the governance and
compensation committees recommendation that, effective January 1,
2008, each of the Gleasmans be compensated at the rate of $300,000 per
year. Such amount is payable in cash. No payment of all or any portion
of the Gleasmans compensation shall be paid unless and until the
company shall have the requisite cash available. The determination of
the availability of the requisite amount of cash shall be made by the
board of directors in the light of approved-budgets, existing and
anticipated capital requirements and existing and estimated cash
flows. Unpaid amounts are accumulated and carry over from one year to
the next. No amount was paid to either of the Gleasmans under this
compensation arrangement during the year ended December 31, 2008. The
amount of unpaid compensation accrued as of December 31, 2008 is
$600,000.[2]
    
    During the years ended December 31, 2008 and 2007, the
company paid $93,600 and $88,820 respectively, to a member of the
Gleasman family for administrative, technological and engineering
consulting services. Management believes this compensation is
reasonable.[3]
    
    During the years ended December 31, 2008 and 2007, the company paid
$91,290 and $31,160 to a family member of its general counsel for
engineering services rendered to the company. Management believes this
compensation is reasonable.[4]
    
    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, in which Asher J. Flaum, a company director is
a partner. On April 28, 2008, the companys board of directors
approved the terms of a lease and such lease was executed on April 29,
2008. (See Note I 4).[5]
    
    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 valued at $19,250. 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.[6]
    
    On August 18, 2006, the company granted 400,000 nonqualified common
stock warrants valued at approximately $1,237,000 to a director of the
company for consulting services. The warrants are immediately exercisable at $3.27 per common
share for a period of ten years.[7]
    
    On June 19, 2006, the company awarded an aggregate 360,000
nonqualified common stock warrants with no expiration date, 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.[8]
    
    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.
 NOTE E  INCOME TAXES
    F-18




---



##### 



Year EndedDecember 31,2008
    
    
    2007Computed federal income tax benefit at 34% rate
    
    $
    (690,000
    )
    
    $
    (1,092,000
    )State tax benefit, net of federal tax benefit
    
    
    (107,000
    )
    
    
    (170,000
    )Nondeductible expenses
    
    
    3,000
    
    
    
    3,000Refundable
state tax credit
    
    
    (346,000
    )Valuation allowance
    
    
    794,000
    
    
    
    1,259,000$
    (346,000
    )
    
    $
    0
    NOTE FACCOUNTS PAYABLE AND ACCRUED LIABILITY EXPENSES
  2008
    
    
    2007Professional fees
    
    $
    177,000
    
    
    $
    470,000Salaries to officer/stockholders of Ice (Note K)
    
    
    
    
    
    
    1,495,000Salaries and
Payroll Tax Payable for Torvec
    
    
    755,000
    
    
    
    $
    932,000
    
    
    $
    1,965,000
 NOTE G  NOTE PAYABLE
 [1]
    
    Notes Payable  Financial Institution:During the year ended December 31, 2005, the company financed a
vehicle to be used with its prototype technology and pledged the
vehicle as collateral for this loan. The loan in the amount of $24,000
is paid in monthly installments of $479 consisting of principal and
interest at 6.59% per annum through December 2010.
  F-19




---



##### 



Period EndingDecember 31,2009
    
    $
    20,0002010
    
    
    20,0002011
    
    
    10,000Total Minimum payments
    
    
    50,000Less-amount representing interest
    
    
    6,00044,000Less-Current Maturities
    
    
    15,000Long Term Portion
    
    $
    29,000
 Note H  Stockholders Equity (Capital Deficit)
 [1]
    
    Private Placement:
       [2]
    
    Class A Preferred Stock:
   F-20




---



##### 



(i)
    
    In the event of any liquidation, dissolution or winding up of the company,
whether voluntary or involuntary, the holders of Class A Preferred Shares
then outstanding are entitled to be paid out of the assets of the company
available for distribution to its stockholders, 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 Shares at a rate of 1 Class A Preferred Share for each $4.00 of
dividends. No fractions of Class A Preferred Shares shall issue. The company
shall pay cash in lieu of paying fractions of Class A Preferred Shares on a
pro rata basis.(ii)
    
    The Class A Preferred Shares 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.During 2003, the company sold 15,687 Class A Preferred to accredited
investors for proceeds of $63,000. In December 2003, the company received
$9,216 for 2,305 Class A Preferred Shares.During 2004, the company sold 235,770 Class A Preferred to accredited
investors for proceeds of $943,000.During 2004, Class A Preferred holders converted 38,500 Class A Preferred
into 38,500 common shares and received dividends of 8,031 Class A Preferred
upon conversion. In June, 2004, 2,550 of the Class A Preferred shares issued
as dividends were converted into 2,550 common shares.During 2005, the company sold 200,000 Class A Preferred to accredited
investors for proceeds of $800,000 and issued 62,500 common stock warrants
immediately exercisable for $.01 per common share over a ten year term.During 2006, the company sold 273,250 Class A Preferred to accredited
investors for proceeds of $1,093,000 and issued 137,932 common stock
warrants immediately exercisable for $.01 per common share over a ten year
term. During 2006, an accredited investor also purchased 20,500 common stock
warrants for a purchase price of $2,000. The warrants are immediately
exercisable for $.01 per common share over a ten year term. The fair value
of the warrants when considered with the exercise price of the warrants
resulted in a beneficial conversion feature of $48,000 and was recorded as a
preferred stock beneficial conversion feature in determining net loss
attributable to common stockholders.No Class A Preferred was sold for the years ended December 31, 2008 and 2007.During 2004, holders of Class A Preferred converted 38,500 Class A Preferred
into 38,500 common shares and received dividends of 8,031 Class A Preferred
upon conversion. In 2004, the 2,550 Class A Preferred issued as dividends
were converted into 2,550 common shares.
For the year ended December 31, 2008, 32,305 Class A Preferred (including
1,055 Class A Preferred issued as dividends) were converted into 32,305
common shares and received dividends of 6,913 Class A Preferred upon
conversion.
At December 31, 2008 and 2007, Class A Preferred dividends in arrears
amounted to approximately $1,029,000 and $771,000, respectively.
  F-21




---



##### 



[3]
    
    Class B Preferred Stock:On October 21, 2004, the company authorized the sale of up to 300,000 shares
of its Class B Non-Voting Cumulative Convertible Preferred Stock (Class B
Preferred). Each share of Class B Preferred pays cumulative dividends at
$.50 per share per annum and is convertible into either one share of the companys common stock or one
share of the common stock of the companys subsidiary, IsoTorque Corporation. The holder has the right
to convert after one year, subject to board approval.
 (1)
    
    In the event of any liquidation, dissolution or winding up of the
company, whether voluntary or involuntary, the holders of Class B Preferred
Shares 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(2), all of such accumulated and unpaid dividends will be paid in
Class B Preferred Shares at a rate of 1 Class B Preferred Share for each
$5.00 of dividends. No fractions of Class B Preferred Shares shall be
issued. The company shall pay cash in lieu of paying fractions of Class B
Preferred Shares on a pro rata basis.(2)
    
    The Class B Preferred Shares 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.During 2004, the company sold 42,500 Class B Preferred to accredited
investors for proceeds of $212,500.During 2006, the company sold 55,000 Class B Preferred to accredited
investors for proceeds of $275,000.No Class B Preferred was sold for the years ended December 31, 2008 and 2007.At December 31, 2008 and 2007, dividends in arrears amounted to
approximately $147,000 and $98,000, respectively.[4]
    
    Initial Public Offering Consultant:In February, 1997, the company entered into a three-year agreement with an
IPO consulting firm (IPO Consultant) to arrange for an initial public
offering of the companys common stock and to provide financial advisory
services. In consideration, the company issued an aggregate 1,000,000
restricted common shares to five principals of the IPO Consultant for an
aggregate $50. In addition, the company granted an aggregate 500,000
warrants to the same principals. Such warrants were only exercisable in the
event the company conducted an initial public offering for its common stock.
In such event, the warrants were exercisable for a term of five years after
the IPO and were exercisable at the per share public offering exercise price
(unless during the warrant term after the IPO, at least 50% of the companys
assets were acquired by a third party in which case the exercise price was
$1.50 per share).In February,
1999, the company entered into a one-year consulting agreement directly with
two of the former principals of the IPO Consultant to provide financial
advisory services. In connection with this agreement, the company and the
two former principals agreed to convert the 375,000 warrants they owned into
375,000 common stock purchase options exercisable immediately through
February, 2004 at $5.00 per common share. The company valued these options
at $2,780,000 using the Black-Scholes option-pricing model with the
following weighted average assumptions for the year ended December 31, 1999:
risk free interest rate of 5%, dividend yield of 0%, volatility of 40% and
expected life of the options granted of 5 years. These options were charged
to operations over the term of the consulting agreement. In February, 1999,
21,000 of these options were exercised for proceeds of $105,000. The term of
the remaining 354,000 options expired in February, 2004. As of December 31, 2008, none of the warrants are exercisable.[5]
    
    Common Stock Subject to Resale Guarantee:During 2002, the company issued 190,695 common shares to former officers and
certain minority shareholders of Ice in exchange for approximately $269,000
owed to them. If, on the sale of the shares, the amount realized is less
than $269,000, additional shares are required to be issued and if the amount
is greater than $269,000, the excess is to be paid to the company. During
2002, all of such shares were sold for proceeds of approximately $269,000.
  F-22




---



##### 



[6]
    
    Stock-Option Plan:In December 1997, the Board of Directors of the company approved a Stock
Option Plan (the Plan) which provides for the granting of up to 2,000,000
shares of common stock, pursuant to which officers, directors, key employees
and key consultants/advisors are eligible to receive incentive, nonstatutory
or reload stock options ratified by the shareholders on May 28, 1998.
Options granted under the Plan are exercisable for a period of up to
10 years from date of grant at an exercise price which is not less than the
fair value on date of grant, except that the exercise period of options
granted to a stockholder owning more than 10% of the outstanding capital
stock may not exceed five years and their exercise price may not be less
than 110% of the fair value of the common stock at date of grant. Options
may vest over five years.
          Year Ended December 31,2008
    
    
    2007Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Aggregate
    
    
    
    
    
    
    AverageExercise
    
    
    Intrinsic
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Value
    
    
    Shares
    
    
    PriceOutstanding at beginning of year
    
    
    1,021,848
    
    
    $
    4.77
    
    
    
    
    
    
    
    1,823,895
    
    
    $
    4.92Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    (380,000
    )
    
    
    
    
    
    
    
    
    
    
    (802,047
    )
    
    
    Outstanding at end of year
    
    
    641,848
    
    
    
    4.70
    
    
    
    
    
    
    
    1,021,848
    
    
    
    4.77Options exercisable at year end
    
    
    641,848
    
    
    
    4.70
    
    
    
    
    
    
    
    1,021,848
    
    
    
    4.77Options Vested and Expected to Vest
    
    
    641,848
    
    
    
    4.70
    
    
    
    
    
    
    
    1,021,848
    
    
    
    4.77
  F-23




---



##### 



Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    Remaining Life
    
    
    
    
    
    
    ExerciseShares
    
    Price
    
    
    in Years
    
    
    Shares
    
    
    Price641,848
    
    
    4.70
    
    
    
    4.81
    
    
    
    641,848
    
    
    
    4.70
  [7]
    
    Business Consultants Stock Plan:In June, 1999, the company adopted the Business Consultants Stock Plan (the Stock Plan). The Plan, as amended, provides for the issuance of up to
10,000,000 common shares to be awarded from time to time to consultants in exchange for business, financial, legal, accounting, engineering, research and
development, technical, governmental relations and other similar services.
 Common Shares Issued to BusinessFor the year ended
    
    Consultants and Other Third Parties
    
    
    Amount Charged toDecember 31,
    
    in Exchange for Services
    
    
    Operations
    
    
    Note2008
    
    
    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 at a value of approximately $629,000.B-
    
    Includes 190,965 issued in settlement of amounts owed at a approximate value of $269,000 (see Note H[10])
At December 31, 2008, 3,653,278 business consultant common shares were available for future issuance under the business consultants stock plan. [8]
    
    Nonmanagement Directors Plan:On October 1, 2004, the board of directors approved a Nonmanagement Directors Plan pursuant to which each nonmanagement director is entitled to receive, if
certain conditions are met, on an annual basis for services rendered as a director, warrants to purchase 12,000 shares of the companys common stock at $.01
per share. In addition, the chairman of the audit committee is entitled to receive, on an annual basis for services rendered as chairman, additional
warrants for 5,000 shares of the companys common stock at $.01 per share.For the year ending December 31, 2006, the company granted 26,500 warrants under the Nonmanagement Directors Plan and recorded a charge of approximately
$48,000 to general and administrative expenses representing the fair value for such warrants in 2006. During 2006, a number of directors exercised 42,000
warrants granted to them under the Nonmanagement Directors Plan.Due to changes made to the Nonmanagement Directors Plan described below, the company did not issue any warrants under the plan for the years ended December
31, 2008 and 2007. No previously issued warrants were exercised during the year ended December 31, 2008 and 6,000 warrants were exercised during the year
ended December 31, 2007.
On October 10, 2007, the Nonmanagement Directors Plan was modified, effective July 1, 2007, to increase the fees payable to the
companys nonmanagement directors. As adjusted, each nonmanagment director (a total of 4 persons) would receive $26,460 for board and committee service per
annum. The chairman of the audit committee would receive an additional $12,600 per annum and the chairman of the nominating committee would receive an
additional $5,355 per annum.
The Nonmanagement Directors Plan was also modified to provide that the chairman of the board, chairman of the executive
committee and chairman of the governance and compensation committee, one person, will be paid an aggregate $110,000 per annum for all services rendered by
him as a director and in such capacities. This proposal was made in the light of the risks associated with the positions he has undertaken as well as the
fact that he is and has been since the summer of 2005, serving the company in these positions on a full-time basis. The proposal was also made in
recognition of the fact that the services required to be performed by the chairman of the boards executive committee and of its governance and compensation
committee have expanded both in responsibilities covered and time
expended. The effective date for these adjustments to the plan was July 1, 2007.
On April 28, 2008, the plan was again modified to increase the compensation of the person serving as chairman of the board, chairman of the executive
committee, chairman of the governance and compensation committee (one person) to $125,000 per annum.
  F-24




---



##### 



[9]
    
    Restricted Shares Issued for Services and Rent:
  [10]
    
    Business, Financial and Engineering Consultants:
      F-25




---



##### 



Year Ended December 31,2008
    
    
    2007Dividend yield
    
    
    0.0
    %
    
    
    0
    %Expected volatility
    
    
    0.55
    %
    
    
    1.12
    %Risk free interest rate
    
    
    2.89
    %
    
    
    4.31
    %Expected Life
    
    8.83 years
    
    
    10 years
 [11]
    
    Equity Funding Commitment:
  
 
  F-26




---



##### 



[12]
    
    Warrants:
  Number ofExercise
    
    
    
    SharesPrice
    
    Expiration
    
    Exercisable(a)
    
    (a)
    
    125,000
    
    (a)$.75
    
    None
    
    500,000
    
    (b)$.01
    
    Terminated on March 6, 2009
    
    
    
    (c)$.01
    
    None
    
    54,500
    
    (d)(e)
    
    (e)
    
    
    (e)
    (e)$.01
    
    (f)
    
    39,000
    
    (f)$5.00
    
    (g)
    
    255,000
    
    (g)$.01
    
    None
    
    6,000
    
    (h)$.01
    
    None
    
    16,250
    
    (i)$1.00
    
    None
    
    20,500
    
    (j)(k)
    
    (k)
    
    
    (k)
    (k)(l)
    
    (l)
    
    
    (l)
    (l)$3.27
    
    2016
    
    400,000
    
    (m)$3.75
    
    2016
    
    200,000
    
    (n)$5.00
    
    2017
    
    50,000
    
    (o)$5.00
    
    2017
    
    100,000
    
    (p)
 (a)
    
    Exercisable only if the company has an IPO at the IPO price and
exercisable five years from IPO. Through the year ending December
31, 2008, the company has not conducted an IPO.(b)
    
    On April 15, 2002, the company issued 1,000,000 warrants to
purchase common stock at prices ranging from $.30 to $.75 to its
then chairman of the board of directors and chief executive
officer. Of the total warrants, 250,000 were exercisable at $.30,
and 250,000 were exercisable at $.50 on the date the then board
elected the executive to the board and named him chief executive
officer. During the year ended December 31, 2002, 250,000
warrants were exercised for $.30 per share, resulting in proceeds
of $75,000. During the year ended December 31, 2003, 250,000
warrants were exercised for $.50 per share, resulting in proceeds
of $125,000. The remaining 500,000 warrants are exercisable upon
the execution of the company of a binding agreement for the sale,
transfer, license or assignment for value of any and/or all of
its companys automotive technology at $.75 per share. The
company will record a charge representing the fair value of the
warrants when the warrants become exercisable.(c)
    
    The company issued 1,080,000 warrants, exercisable at $.01 per
common share, to a management consulting firm. 528,800 of these
warrants have been exercised for aggregate proceeds of $5,484.
Beginning in 2005, the company litigated whether the management
consulting firm was legally entitled to retain and exercise the
remaining 551,200 unexercised warrants. On March 6, 2009, the
company and the management consulting firm executed a Settlement
Agreement and Release pursuant to which any and all claims and
counterclaims the parties may have or may have had arising out of
or related to their relationship, arrangement or services
provided one to the other were resolved and released and any and
all obligations between and among them were terminated effective
December 31, 2008. (See Notes K and M)(d)
    
    The company has issued an aggregate 123,500 warrants to its
nonmanagement directors for services rendered to the board under
its Nonmanagement Directors Stock Plan prior to its amendment on
October 13, 2006. For the years ended December 31, 2006 and 2005,
the company issued 26,500 and 44,000 warrants, immediately
exercisable for a ten year term at $.01 per common share. No
further warrants are issuable under the Plan as modified by the
board of directors on October 13, 2006 (See Note H [8]). During
the years ended December 31, 2007 and 2006 6,000 and 42,000 of
these warrants were exercised for proceeds of $60 and $420,
respectively. None of these warrants were exercised during the
year ended December 31, 2008.(e)
    
    During 2005, the company issued 120,000 warrants to a consultant,
immediately exercisable at $.01 per common share. 48,000 warrants
were exercised in 2005. The remaining 72,000 warrants were
exercised in 2006. During the years ended December 31, 2006 and
2005, the company received proceeds of $720 and $480
respectively.(f)
    
    In 2005, the company issued 12,000 warrants to a consultant,
immediately exercisable at .01 per common share. During 2005,
3,000 warrants were exercised for proceeds of $30. In 2006, the
company issued 30,000 warrants to consultants exercisable
immediately for a ten year term at $5.00 per common share. None
of these warrants were exercised during the years ended December
31, 2008 and 2007.(g)
    
    During 2005, the company issued 210,000 warrants to certain
engineering consultants, exercisable immediately for a ten year
term at $5.00 per common share. During 2006, the company issued
295,000 warrants to certain engineering consultants exercisable
over a ten year term at $5.00 per common share, but only
exercisable if the company sells, licenses or otherwise transfers
one or more technologies for value. The engineering consultants
holding 445,000 of these warrants agreed to cancel them in the
fourth quarter of 2007 in exchange for their participation in the
companys Commercializing Event Plan. On March 28, 2008, the
company issued an aggregate 195,000 warrants exercisable until
2016 at $5.00 per common shares to two engineers who elected not
to participate in the companys 2007 Commercializing Event Plan.
The company recorded a charge of $249,000 to general and
administrative expense.(h)
    
    During 2005, the company issued 6,000 warrants to a consultant,
exercisable at .01 per common share expiring on October 22, 2010. None of these warrants have
been exercised through December 31, 2008.  F-27




---



##### 



(i)
    
    During 2005, the company issued 62,500 warrants to investors in
connection with their purchase of 62,500 Class A Preferred,
exercisable at $.01 per common share and expiring during 2010. 50,000 of these warrants were
exercised in 2005 for proceeds of $625. 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. During the year ended December,
2006, 110,849 of these warrants were exercised for proceeds of
approximately $1,108. No additional warrants were issued during the
years ended December 31, 2008 and 2007. During the years ended
December 31, 2008 and 2007, 2,500 and 18,750 of these previously
issued warrants were exercised for proceeds of approximately $25 and
$188.(j)
    
    During 2006, one investor purchased 20,500 warrants immediately
exercisable at $1.00 per common share for a purchase price of $2,000.
None of these warrants have been exercised through December 31, 2008.(k)
    
    During 2006, the company issued 360,000 warrants to a director for
specific services rendered by such director as chairman of the
companys executive committee. These warrants were exercised on
September 1, 2006 and September 11, 2006 at $.01 per common share. The
company received proceeds of $3,600.(l)
    
    In connection with its business and financial operations for the year
ended December 31, 2006, the company issued 91,583 warrants,
immediately exercisable over a ten year term at $.01 per common share.
During the year ended December 31, 2006, 91,083 of these warrants were
exercised for proceeds of $910. During the year ended December 31,
2007, the remaining 500 warrants were exercised for proceeds of $5.00.(m)
    
    During 2006, the company issued 400,000 warrants immediately
exercisable for ten years at an exercise price of $3.27 per common
share to a business consultant. None of these warrants have been
exercised through December 31, 2008.(n)
    
    During 2006, the company issued 200,000 warrants immediately
exercisable for ten years at an exercise price of $3.75 per common
share to its governmental affairs consultant. None of these warrants
have been exercised through December 31, 2008.(o)
    
    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 in the development of its school bus program. The
company recorded a charge of $249,000 to general and administrative
expenses. None of these warrants have been exercised through
December 31, 2008.(p)
    
    During 2007, the company issued 100,000 warrants immediately
exercisable for ten years at an exercise price of $5.00 per common
share to two engineering consultants in connection with the companys
engagement to furnish constant velocity joints to a military
contractor. The company recorded a charge of $401,000 to general and
administrative expenses. None of these warrants have been exercised
through December 31, 2008.  2008WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at January 1,
    
    
    2,084,950
    
    
    $
    2.59
    
    
    5.60 years
    
    $
    3,109,611Granted
    
    
    195,000
    
    
    
    5.00
    
    
    8.07 yearsExercised
    
    
    (2,500
    )
    
    
    0.01
    
    
    3.27 yearsCanceled or expired
    
    
    (511,200
    )
    
    
    
    
    
    
    
    
    
    
    Outstanding at December 31,
    
    
    1,766,250
    
    
    $
    3.30
    
    
    4.13 years
    
    $
    1,063,043Exercisable at December 31,
    
    
    1,652,450
    
    
    $
    3.93
    
    
    3.93 years
    
    $
    398,043
 2007WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at January 1,
    
    
    2,652,700
    
    
    $
    1.90
    
    
    5.18 years
    
    $
    3,291,000Granted
    
    
    150,000
    
    
    
    5.00
    
    
    8.33 yearsExercised
    
    
    (25,250
    )
    
    
    0.01
    
    
    5.65 yearsCanceled or expired
    
    
    (692,500
    )
    
    
    3.26
    
    
    10.52 years
    
    
    Outstanding at December 31,
    
    
    2,084,950
    
    
    $
    2.59
    
    
    5.60 years
    
    $
    3,109,611Exercisable at December 31,
    
    
    1,164,950
    
    
    $
    3.93
    
    
    2.41 years
    
    $
    1,934,611
 [13]
    
    Issuance of Stock and Warrants by Subsidiary:
    F-28




---



##### 



Year Ended December 312008
    
    
    2007Outstanding at the beginning of the year
    
    
    
    
    
    
    103,948Granted
    
    
    
    
    
    
    Cancelled
    
    
    
    
    
    
    (103,948
    )Outstanding at the end of the year
    
    
    
    
    
    
    
 [14]
    
    Shares Issued for Consulting Services:
      [15]
    
    Commercializing Event Plan:
      F-29




---



##### 



(a)
    
    for purposes of the good standing requirement, all participants are
considered to be in good standing unless a unanimous vote of the board
of directors determines otherwise. In making this determination, the
board is required to consider whether a person has engaged in conduct
which has significantly harmed the company and to consider that any
material violation of the companys Code of Conduct shall constitute
prima facie evidence that the company has been harmed;(b)
    
    participants shall be entitled to payment even though the participant
is not actively engaged as a consultant to or employee of the company
if the reason for not being so engaged is due to death, disability
from accident, disease or similar circumstance beyond the
participants control or is on a leave of absence approved by an
authorized officer;(c)
    
    the plan shall terminate no earlier than October 10, 2017 but that
subject to such condition, the plan may be terminated by the board of
directors in its sole direction;(d)
    
    the benefits provided by the plan may not be reduced during its term
as to amount, time, method, manner of payment and/or any other
material condition;(e)
    
    distributions under the plan shall be made on a commercializing event
by commercializing event basis.
     F-30




---



##### 



Note I  Commitments and Other Matters
 [1]
    
    Consulting Agreements:
      [2]
    
    Variable Gear, LLC:
   [3]
    
    Leases:
   F-31




---



##### 



th
  Note J Management Agreement
   Note K Litigation
        F-32




---



##### 



Note L  Royalty Agreement
  Note M  Subsequent Events
     F-33




---



##### 



Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE .
  
 Item 8 (a) CONTROLS and PROCEDURES
   33




---



##### 



REPORT ON MANAGEMENTS ASSESSMENT OF INTERNAL CONTROL OVER  FINANCIAL REPORTING
      
 Item 8B. OTHER INFORMATION
   34




---



##### 



PART III
 
 Item 9. 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
    
    Chairman of the Board
    
    
    57
    
    
    
    10/31/02325 VanVoorhis Avenue
Rochester, NY 14617
(1)James Y. Gleasman
    
    Chief Executive Officer,
    
    
    68
    
    
    
    02/20/98987 Elmwood Avenue
    
    Interim Chief FinancialBrighton,
New York 14618 (2)
    
    Officer, DirectorKeith E. Gleasman
    
    President, Director
    
    
    61
    
    
    
    09/26/9611 McCoordwoods Drive
Fairport, NY 14450
(3)Herbert H. Dobbs
    
    Secretary, Director
    
    
    77
    
    
    
    02/20/98448 West Maryknoll Road
Rochester Hills, MI 48309
(4)Daniel R. Bickel
    
    Certified Public Accountant,
    
    
    60
    
    
    
    10/31/0239 Whippletree Road
    
    DirectorFairport, New York 14450
(5)Asher J. Flaum
    
    Real Estate Developer, Director
    
    
    28
    
    
    
    10/10/0849 Sunrise Park
Pittsford, New York 14534
(6)Joseph B. Rizzo
    
    Attorney, Director
    
    
    43
    
    
    
    9/9/0539 State Street, Suite 700
Rochester, New York 14614
(7)
 **
    
    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 29, 2009.  35




---



##### 



(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) James Y. Gleasman has been a director and consultant of the company since its inception. His business background includes the following: 
    
    Life-long entrepreneur.
    
    Skilled in management, finance, strategic planning, organizing and marketing.
    
    Principal inventor of the infinitely variable transmissions (IVT); co-inventor of several other patented
inventions.
    
    Established manufacturing of the Torsen® differential in Argentina, Brazil, etc.
    
    Former principal with two companies formerly owned by the Gleasman family.
    
    Set business strategies for small companies dealings with large companies.
    
    Joint venture partner with Clayton Brokerage Co. of St. Louis, MO.
    
    Owned financial-consulting business.
    
    Negotiated with numerous Asian Corporations (including Mitsubishi and Mitsui).
    
    Educated in Asian philosophy, business practices and culture.
  36




---



##### 



(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.
    
    Designed 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.
    
    Extensive after-market experience including pricing, distribution, sales catalogs, promotions, trade show booths designs and vehicle sponsorships.
    
    Responsible for over 300 articles in trade magazines highlighting the Torsen differential (e.g., Popular Science, Auto Week, Motor Trend, Off-Road, and Four Wheeler).
    
    Designed FTV vehicle (from concept to assembly).
    
    Assisted in developing engineering and manufacturing procedures for the Torsen differential and for all of the Torvec products.
    
    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).
    
    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)
    
    Dr. Dobbs, Ph.D., P.E., has worked at every level from design engineer to technical director of an Army Major Commodity Command at the two-star level. He has worked as a
hands-on engineer and scientist in industry and government, commanded field units, managed Army R & D programs and laboratories and currently has his own practice as a
consultant engineer. His broad background has helped guide the companys growth and development.  37




---



##### 



During his career he has: 
    
    Worked as a manufacturing engineer.
    
    Worked as a design engineer in the aircraft and missile industry.
    
    Managed Army laboratories as a captain, lieutenant colonel and colonel.
    
    Organized, implemented and operated the theater-wide Red Ball Express quick response supply system in Vietnam to get disabled weapons and other critical equipment repaired and back into combat as
rapidly as possible.
    
    Done basic research on multi-phase turbulent fluid dynamics supporting development of the gas turbine primary power system now used in the M1 Abrams Main Battle Tank (MBT).
    
    Managed advanced development of the laser guided 155mm-artillery shell now known as the Copperhead.
    
    Served in Taiwan as a member of the U.S. Military Assistance Advisory Group (MAAG) working with the Republic of China Army General Staff.
    
    Served as liaison officer between the Army and Air Force for development of the laser seeker for the Hellfire missile.
    
    Guided development of a new family of tactical vehicles for the Army, including the High Mobility Multipurpose Wheeled Vehicle (HMMWV) now known as the Hummer, which uses the Torsen® differential.
    
    Served as Technical Director of U.S. Army Tank-automotive Command* (TACOM), which then employed some 6,400 people and is responsible for all support of U.S. military ground vehicles (a fleet of
440,000) from development to ultimate disposal with a budget of nearly $10 billion a year. He was also responsible for negotiation and management of military automotive R&D agreements with the
French and German Ministries of Defense.
 *
    
    Now the U.S. Army Tank-Armaments Command.At the end of 1985, Herbert H. Dobbs left government service and started his own consulting practice and began working with the Gleasmans to develop and market Vernon Gleasmans and
Torvecs inventions. Herbert H. Dobbs holds a Ph.D. in Mechanical Engineering from the University of Michigan and is a registered professional engineer in Michigan. He holds several
patents of his own and, among many affiliations, is a member of SAE, ASME, NSPE, AAAS, Sigma XI, AUSA, NDIA and the U.S. Army Science Board. The last named organization is a small
group of senior technical and managerial people chosen from industry and academia to provide direct advice to the Secretary of the Army, the Chief of Staff, and the Department of the
Army concerning issues of policy, budgets, doctrine, organization, training and technology.(5)
    
    Daniel R. Bickel is a partner in the accounting firm of Bickel & Dewar, C.P.A.s, an accounting firm providing a variety of accounting services to small to medium sized business. The
services provided include audits, reviews, compilations, business and personal consulting, business acquisition and sale assistance and income tax preparation. Mr. Bickel is a graduate
of the Rochester Institute of Technology. He has been licensed in New York State as a certified public accountant for almost 30 years and is a member of the American Institute of
Certified Public Accountants and the New York State Society of Certified Public Accountants. He has served as an officer and director of numerous non-profit and civic organizations.  38




---



##### 



(6)
    
    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).(7)
    
    Joseph B. Rizzo, Partner and Head of the Litigation Department of the law firm of Gallo & Iacovangelo, LLP, was born January 17, 1965, in Buffalo, New York. Graduated from Pittsford
Mendon High School, 1982; State University of New York at Buffalo, B.A., English, 1986; State University of New York at Buffalo, School of Law, Juris Doctor, 1989. Admitted to practice
law in the State of New York, 1990. Associate Attorney with the law firm of Speyer & Perlberg, New York, New York, 1989 to 1995. Joined law firm of Gallo & Iacovangelo, LLP, Rochester,
New York in 1995 and became a Partner and Head of the firms Litigation Department, 1997 to present. Mr. Rizzo is a published legal commentator and a lecturer for the New York State
Bar Association. He is a member of the New York State Bar Association and the National Crime Victims Bar Association. Appears in the Strathmores Whos Who 2005-2006 Edition for
outstanding leadership and achievement in the practice of law. (c) Relationships; Agreements
  (d) Section 16(a) Beneficial Ownership Reporting Compliance
    39




---



##### 



(e) Corporate Governance, Code of Ethics, Director Independence
 Role of the Board of Directors
     Operation of the Board and its Committees
    Director Independence
   40




---



##### 



Code of Ethics/Committee Charters
      41




---



##### 



Policy/Procedure for Review/ Approval of Related Party Transactions
     Executive Sessions of Independent Directors
   42




---



##### 



Committees of the Board
 The Audit Committee
   
    
 
 
 
 
 
 
   43




---



##### 



The Nominating Committee
   
             44




---



##### 



The Governance and Compensation Committee
   
           45




---



##### 



The Executive Committee
   
          Shareholder Communications
  Officer
    
    Mailing Address
    
    E-mailJames Y. Gleasman
    
    Torvec, Inc.
    
    jgleasman@torvec.comChief Executive Officer,
    
    Mt. Read Industrial FacilityInterim Chief Financial Officer
    
    1999 Mt. Read Blvd.Rochester, New York 14615Keith E. Gleasman
    
    Torvec, Inc.
    
    kgleasman@torvec.comPresident
    
    Mt. Read Industrial Facility1999 Mt. Read Blvd.Rochester, New York 14615
  46




---



##### 



Herbert H. Dobbs
    
    dr.hh.dobbs@earthlink.netJoseph Rizzo
    
    josephrizzo@gallolaw.comDaniel R. Bickel
    
    dbickel@frontiernet.netGary A. Siconolfi
    
    gary1015@rochester.rr.comAsher J. Flaum
    
    aflaum@flaummgt.comRegular mail may be addressed to:
    
    Torvec Independent Directors
c/o Torvec, Inc.Mt. Read Industrial Facility1999 Mt. Read Blvd.Rochester, New York 14615Attention: Gary A. Siconolfi
 Sarbanes-Oxley Compliance
     47




---



##### 



Item 10. EXECUTIVE COMPENSATION
 (a) Compensation Discussion and Analysis
  Current Compensation Philosophy
      48




---



##### 



49




---



##### 



Long-Term Compensation Philosophy
     Participants
   Effective Date of 2007 Event Plan
  Salient Terms of the 2007 Event Plan
    50




---



##### 



51




---



##### 



®
  52




---



##### 



SUMMARY COMPENSATION TABLE FOR YEARS
 ENDED DECEMBER 31, 2006, 2007 and 2008
 Change inPension ValueandNon-
    
    
    NonqualifiedEquity
    
    
    Deferred
    
    
    AllName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    
    
    
    
    Incentive
    
    
    Compensation
    
    
    OtherPrincipal
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Option Awards
    
    
    Plan Compensation
    
    
    Earnings
    
    
    CompensationPosition
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    Total ($)(a)
    
    (b)
    
    
    (c)
    
    
    (d)
    
    
    (e)
    
    
    (f)
    
    
    (g)
    
    
    (h)
    
    
    (i)
    
    
    (j)Keith E. Gleasman,
    
    
    06
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0President(1)
    
    
    07
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    008
    
    
    $
    0
    
    
    $
    0
    
    
    $
    3014
    (4)
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    3014
    (4)James Y. Gleasman,
    
    
    06
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Chief Executive
    
    
    07
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Officer, Interim
    
    
    08
    
    
    $
    0
    
    
    $
    0
    
    
    $
    3014
    (4)
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    3014
    (4)Chief Financial
Officer(2)Richard B.
    
    
    06
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    129,500
    
    
    $
    129,000Sullivan
    
    
    07
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    144,000
    
    
    $
    144,000General
    
    
    08
    
    
    $
    0
    
    
    $
    0
    
    
    $
    3014
    (4)
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    175,000
    
    
    $
    180,321
    (4)Counsel(3)
 1)
    
    Mr. Keith E. Gleasman served as president during the years ended December 31, 2006, 2007 and
2008. Mr. Gleasman was not paid any compensation by the company for the year ended December 31,
2006. Under a compensation plan established for Mr. Gleasman by the board of directors, effective
January 1, 2007, 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, 2008 and
2007.(2)
    
    Mr. James Y. Gleasman became chief executive officer and interim chief financial officer on
August 19, 2006. Prior to assuming these positions, Mr. Gleasman served as chief strategist for the
company. Mr. Gleasman was not paid any compensation by the company for the year ended December 31,
2006. Under a compensation plan established for Mr. Gleasman by the board of directors, effective
January 1, 2007, 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, 2008 and 2007.(3)
    
    Mr. Sullivan became general counsel to the company on December 16, 2005. He is paid a
consulting fee quarterly in business consultants stock based upon the closing price of the
companys common stock as of the last day of the previous quarter. The amount of Mr. Sullivans
consulting fee is determined by the board of directors from time to time.(4)
    
    Represents payments made in accordance with companys commercializing event plan during year
ended December 31, 2008.  53




---



##### 



OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2008
 Option Award
    
    
    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
    
    
    
    
    
    
    Not
    
    
    Not
    
    
    Not
    
    
    Other Rights That(#)
    
    
    (#)
    
    
    Options
    
    
    Price
    
    
    Option Expiration
    
    
    Vested
    
    
    Vested
    
    
    Vested
    
    
    have Not VestedName
    
    Exercisable
    
    
    Unexercisable
    
    
    (#)
    
    
    ($)
    
    
    Date
    
    
    (#)
    
    
    ($)
    
    
    (#)
    
    
    ($)(a)
    
    (b)
    
    
    (c)
    
    
    (d)
    
    
    (e)
    
    
    (f)
    
    
    (g)
    
    
    (h)
    
    
    (i)
    
    
    (j)James Y. Gleasman
    
    
    39,575
    
    
    
    0
    
    
    
    0
    
    
    $
    5.00
    
    
    
    2013
    (1)
    
    
    0
    
    
    $
    0
    
    
    
    0
    
    
    $
    0Keith E. Gleasman
    
    
    31,818
    
    
    
    0
    
    
    
    0
    
    
    $
    5.00
    
    
    
    2013
    (2)
    
    
    0
    
    
    $
    0
    
    
    
    0
    
    
    $
    0
 (1)
    
    39,575 common stock purchase options exercisable for ten years at $5.00 per common share
expire on December 21, 2013.(2)
    
    31,818 common stock purchase options exercisable for ten years at $5.00 per common share
expire on December 21, 2013.  54




---



##### 



DIRECTOR COMPENSATION FOR THE YEAR ENDED DECEMBER 31, 2008
 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)
    
    $
    0
    
    
    
    42,074
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    42,074Herbert H. Dobbs (2)
    
    $
    0
    
    
    
    29,474
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    29,474Joseph B. Rizzo (3)
    
    $
    0
    
    
    
    34,829
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    34,829Gary A. Siconolfi (4)
    
    $
    0
    
    
    
    174,014
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    174,014David M.
Flaum (5)
    
    $
    0
    
    
    
    22,152
    
    
    
    
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    22,152Asher J. Flaum (6)
    
    $
    0
    
    
    $
    5,015
    
    
    
    
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    5,015
 (1)
    
    Daniel R. Bickel was paid $26,460 in business consultants shares for services rendered during
2008 as a director and $12,600 in business consultants shares for services rendered in 2008 as
chairman of the companys audit committee. In 2008, he was paid 1,005 common shares with a value at
issuance of $3,014 under the companys commercializing event plan.  55




---



##### 



(2)
    
    Herbert H. Dobbs was paid $26,460 in business consultants shares for services rendered during
2008 as a director. In 2008, he was paid 1,005 common shares with a value at issuance of $3,014
under the companys commercializing event plan.(3)
    
    Joseph B. Rizzo was paid $26,460 in business consultants shares for services rendered during
2008 as a director and $5,355 in business consultants shares for services rendered in 2008 as
chairman of the companys nominating committee. In 2008, he was paid 1,005 common shares with a
value at issuance of $3,014 under the companys commercializing event plan.(4)
    
    Gary A. Siconolfi was paid $125,000 in business consultants shares for services rendered during
2008 as a director, chairman of the board, chairman of the companys executive committee and
chairman of the company governance and compensation committee. Mr. Siconjolfi was paid $46,000 in
April, 2008 for special services rendered to the company in his capacity as chairman of governance
committee respecting
the companys compliance with the Sarbanes-Oxley Act. In 2008, he was paid 1,005 common shares with
a value at issuance of $3,014 under the companys commercializing event plan.(5)
    
    David M. Flaum was paid $22,152 in business consultants shares for services rendered during
2008 as a director until his resignation effective October 10, 2008. In 2008, he was paid 769
common shares with a value at issuance of $2,307 under the companys commercializing event plan.(6)
    
    Asher J. Flaum was paid $4,308 in business consultants shares for services rendered from his
appointment as a director on October 10, 2008. In 2008, he was paid 236 common shares with a value
at issuance of $707 under the companys commercializing event plan. (b) Discussion of Director Compensation
 1) Participation in the Nonmanagement Directors Plan
     56




---



##### 



.
    57




---



##### 



2) Participation in 1998 Stock Option Plan
       58




---



##### 



Item 11.
    
    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.
  59




---



##### 



Name and Address ofBeneficial Owner
    
    Number of Shares Owned
    
    
    Percent of Shares OwnedMargaret F. Gleasman
    
    
    2,455,274
    (1)
    
    
    7.46
    %11 Pond View Drive 

Pittsford, NY 14534
 (1)
    
    Includes 95,455 common shares which may be purchased through the exercise of a ten year option granted on January 5, 2004 all exercisable at $5.00 per
common share. Number of
    
    
    PercentName and Address of
    
    
    
    Shares
    
    
    of SharesBeneficial Owner
    
    Position
    
    Owned
    
    
    OwnedGary A.
Siconolfi 
325 VanVoorhis Avenue

Rochester, New York 
14617
    
    Chairman of the Board
    
    
    488,160
    (1)
    
    
    1.5
    %James Y. Gleasman
    
    Chief Executive Officer, Interim
    
    
    5,949,872
    (2)
    
    
    18.11
    %11 Pond View Drive
    
    Chief Financial Officer, DirectorPittsford, New York

14534Keith E. Gleasman
    
    President
    
    
    9,406,034
    (3)
    
    
    28.56
    %11 Pond View Drive
    
    DirectorPittsford, New York

14534Herbert H. Dobbs
    
    Secretary
    
    
    374,996
    
    
    
    1.14
    %48 West Maryknoll Road
    
    DirectorRochester Hills, Mich. 
48309Daniel R. Bickel
    
    Director
    
    
    102,728
    (4)
    
    less than 1%39 Whippletree Road

Fairport, New York 
14450Joseph B. Rizzo
    
    Director
    
    
    8,757
    
    
    less than 1%39 State Street, Suite 700

Rochester, New York 
14614Asher J. Flaum
    
    Director
    
    
    421,974
    (5)
    
    
    1.29
    %39 State Street 

Rochester, New York 
14614All Directors and Executive
Officers as a Group
    
    
    
    
    13,952,521
    (6)
    
    
    41.73
    %
  60




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##### 



(1)
    
    Includes 100,000 common shares which may be purchased through the exercise of a ten
year option granted on October 15, 2003, exercisable at $5.00 per share.(2)
    
    Includes 39,575 common shares which may be purchased through the exercise of a ten
year option granted on January 5, 2004, exercisable at $5.00 per share. Includes
1,400,000 common shares held by the Vernon E. Gleasman Grandchildrens Trust and
1,400,000 common shares held by the Margaret F. Gleasman Grandchildrens Trust of
which Mr. Gleasman is co-trustee.(3)
    
    Includes 31, 818 common shares which may be purchased through the exercise of a ten
year option granted on December 22, 2003 exercisable at 5.00 per share. Includes 30,
000 common shares owned by Mr. Gleasmans son. Includes 1,400,000 common shares held
by the Vernon E. Gleasman Grandchildrens Trust and 1,400,000 common shares held by
the Margaret F. Gleasman 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.(4)
    
    Includes 25,000 common shares which may be purchased through the exercise of a ten
year option granted on October 15, 2003, exercisable at $5.00 per share. Includes
29,750 common shares which may be purchased at $.01 per common share through the
exercise of warrants issued under the Nonmanagement Directors Plan.(5)
    
    Includes 400,000 common shares which may be purchased through the exercise of ten
year warrants exercisable at $3.27 per common share. Mr. Flaums shares and warrants
are owned directly by a company of which Mr. Flaum is a principal.(6)
    
    Includes an aggregate 196,393 common shares which may be purchased through the
exercise of options, all of which are exercisable at $5.00 per share; 1,400,000
common shares held by the Vernon E. Gleasman Grandchildrens Trust; 1,400,000 common
shares held by the Margaret F. Gleasman Grandchildrens Trust; and 1,666,666 common
shares held by the James Y. Gleasman Childrens Trust. Includes 29,750 common stock
warrants issued under the Nonmanagement Directors Plan exercisable at $.01 per common
share. Includes 400,000 common stock warrants exercisable at $3.27 per common share.
Includes 30,000 common shares owned by Keith E. Gleasmans son. The 2,800,000 common
shares owned by the Vernon and Margaret Gleasman Grandchildrens Trusts are counted
only once for this calculation. Security Ownership  Preferred Stock
    61




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##### 



Item 12. 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 improvements relating to drive mechanisms for
tracked vehicles, transmissions, hydraulic pumps/motors, a unique form of gearing, universal
joints, and constant velocity joints as disclosed in such 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.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 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.(3)
    
    Commencing January 1, 2004, each of the Gleasmans agreed to provide
consulting services and assign new patents, existing patent
improvements and all know-how in connection with all of their
inventions to the company. In addition, Keith Gleasman agreed to
continue as President and James Gleasman agreed to serve as the
companys chief executive officer and interim chief financial
officer. During the years ended December 31, 2007, 2006 and 2005, the
company did not pay the Gleasmans any consulting fees for their
services. The company recorded approximately $300,000, for each of
the years ended December 31, 2007, 2006 and 2005, respectively, for
the estimated value of these services based upon the compensation
payable under the previous consulting agreements. The company
recorded $125,000 and $200,000to research and development and
$175,000 and $100,000 to general and administrative for the years
ended December 31, 2007 and 2006, respectively.
On March 28, 2008 the board of directors approved the governance and
compensation committees recommendation that, effective January 1,
2008, each of the Gleasmans be compensated at the rate of $300,000
per year. Such amount is payable in cash. No payment of all or any
portion of the Gleasmans compensation shall be paid unless and until
the company shall have the requisite cash available. The
determination of the availability of the requisite amount of cash
shall be made by the board of directors in the light of
approved-budgets, existing and anticipated capital requirements and
existing and estimated cash flows. Unpaid amounts are accumulated and
carry over from one year to the next. No amount was paid to either of
the Gleasmans under this compensation arrangement during the year
ended December 31, 2008. The amount of unpaid compensation accrued as
of December 31, 2008 is $600,000.
  62




---



##### 



(4)
    
    During the years ended December 31, 2008 and 2007, the company paid
$93,600 and $88,820 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, 2008 and 2007, the company paid
$91,290 and $31,160 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, in which Asher J. Flaum, a company
director is a partner. On April 28, 2008, the companys board of
directors approved the terms of a lease 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. 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)
    
    During the year ended December 2005, the company issued 90,000 common
 shares as rent for the companys use of a facility owned by a
stockholder valued at approximately $259,000 based upon the fair
market value of the common stock on the date of issuance. This
arrangement terminated effective February 28, 2006 when the company
moved to a new facility.(9)
    
    During the year ended December 31, 2005, the company incurred
approximately $298,000 for non-legal consulting services provided to
the company by one of its outside counsel. This arrangement
terminated on December 16, 2005.(10)
    
    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.(11)
    
    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.(12)
    
    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.(13)
    
    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.
  63




---



##### 



Director Independence
  
 Item 13. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Principal Accountant Fees and Services
 Audit Fees
  2008
    
    2007$120,000
    
    $170,500
 Audit-Related Fees
  
 Tax Fees
  All Other Fees
  
 Total Fees
  Pre-Approval of Policies and Procedures
  Audit -Committee Approval
   64




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##### 



Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a) Exhibits
   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.
  3.1
    
    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.
      10.1
    
    Certain Employment Agreements, Consulting Agreements, certain
assignments of patents, patent properties, technology and know-how to
the Company, Neri Service and Space Agreement and Ford Motor Company
Agreement and Extension of
Term, all incorporated by reference to Form 10-SB/A, Registration
Statement, registering Companys $.01 par value common stock under
section 12(g) of the Securities Exchange Act of 1934;
  65




---



##### 



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;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;
  66




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##### 



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;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;
  67




---



##### 



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;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;
  68




---



##### 



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
Deleware LLC, et. al. and Torvec, Inc. et.al. dated March 6, 2009;
                          69




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##### 



SIGNATURES
  TORVEC, INC.Date: March 31, 2009
    By:
    /s/ James Y. GleasmanJames Y. Gleasman,Chief Executive Officer  Dated:
March  31, 2009
    
    By:
    
    /s/ James Y. GleasmanJames Y. Gleasman,Chief Executive Officer,
Interim Chief Financial Officer and DirectorDated: March
 31, 2009
    
    By:
    
    /s/ Keith E. GleasmanKeith E. Gleasman, 
President and DirectorDated: March
 31, 2009
    
    By:
    
    /s/ Herbert H. DobbsHerbert H. Dobbs, Secretary and DirectorDated: March
 31, 2009
    
    By:
    
    /s/ Daniel R. BickelDaniel R. Bickel, DirectorDated: March
 31, 2009
    
    By:
    
    /s/ Joseph R.RizzoJoseph R. Rizzo, DirectorDated: March
 31, 2009
    
    By:
    
    /s/ Asher J. FlaumAsher J. Flaum, DirectorDated: March
 31, 2009
    
    By:
    
    /s/ Gary A. SiconolfiGary A. Siconolfi, Director
  70




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##### 



EXHIBIT INDEX
 EXHIBIT
    
    
    
    
    
    
    
    PAGE(2)
    
    Plan of acquisition, reorganization, arrangement, liquidation, or succession2.1
    
    
    Agreement and Plan
of Merger, dated
November 29, 2000
by and among Torvec
Subsidiary
Corporation,
Torvec, Inc., UTEK
Corporation and ICE
Surface
Development, Inc.
incorporated by
reference to
Form 8-K filed
November 30, 2000
and Form 8K/A filed
February 12, 2001.
    
    
    N/A(3)
    
    Articles of Incorporation, By-laws3.1
    
    
    Certificate of
Incorporation,
incorporated by
reference to
Form 10-SB/A,
Registration
Statement,
registering
Companys $.01 par
value common stock
under section 12(g)
of the Securities
Exchange Act of
1934;
    
    
    N/A3.2
    
    
    Certificate of
Amendment to the
Certificate of
Incorporation dated
August 30, 2000,
incorporated by
reference to
Form SB-2 filed
October 19, 2000;
    
    
    N/A3.3
    
    
    Certificate of
Correction dated
March 22, 2002,
incorporated by
reference to
Form 10-KSB filed
for fiscal year
ended December 31,
2002;
    
    
    N/A3.4
    
    
    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;
    
    
    N/A3.5
    
    
    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.
    
    
    N/A3.6
    
    
    Certificate of
Amendment to the
Certificate of
Incorporation dated
January 26, 2007
increasing
authorized common
shares from
40,000,000 to
400,000,000.
    
    
    N/A(4)
    
    Instruments defining the rights of holders including indenturesNone
    
    
    
    
    N/A(9)
    
    Voting Trust AgreementNone
    
    
    
    
    N/A(10)
    
    Material Contracts10.1
    
    
    Certain Employment
Agreements,
Consulting
Agreements, certain
assignments of
patents, patent
properties,
technology and
know-how to the
Company, Neri
Service and Space
Agreement and Ford
Motor Company
Agreement and
Extension of Term,
all incorporated by
reference to
Form 10-SB/A,
Registration
Statement,
registering
Companys $.01 par
value common stock
under section 12(g)
of the Securities
Exchange Act of
1934;
    
    
    N/A10.2
    
    
    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;
    
    
    N/A10.3
    
    
    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
Statement
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;
    
    
    N/A10.4
    
    
    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;
    
    
    N/A10.5
    
    
    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;
    
    
    N/A
  71




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##### 



EXHIBIT
    
    
    
    
    
    
    
    PAGE10.6
    
    
    License Agreement
between Torvec,
Inc. and Variable
Gear, LLC dated
June 28, 2000,
incorporated by
reference to
Form SB-2 filed
October 19, 2000;
    
    
    N/A10.7
    
    
    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;
    
    
    N/A10.8
    
    
    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;
    
    
    N/A10.9
    
    
    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;
    
    N/A10.10
    
    
    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;
    
    N/A10.11
    
    
    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;
    
    N/A10.12
    
    
    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;
    
    N/A10.13
    
    
    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;
    
    N/A10.14
    
    
    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;
    
    N/A10.15
    
    
    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;
    
    N/A10.16
    
    
    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;
    
    N/A10.17
    
    
    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;
    
    N/A10.18
    
    
    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;
    
    N/A10.19
    
    
    Pittsford Capital Group, LLC
Agreement dated January 30, 2002,
incorporated by reference to
Form 10-KSB filed for fiscal year
ended December 31, 2001;
    
    N/A10.20
    
    
    Gleasman-Steenburgh Indemnification
Agreement dated April 9, 2002,
incorporated by reference to
Form 10-KSB filed for fiscal year
ended December 31, 2001;
    
    N/A10.21
    
    
    Series B Warrant dated April 10,
2002, incorporated by reference to
Form 10-KSB filed for fiscal year
ended December 31, 2001;
    
    N/A10.22
    
    
    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;
    
    N/A10.23
    
    
    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;
    
    N/A10.24
    
    
    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;
    
    N/A
  72




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##### 



EXHIBIT
    
    
    
    
    
    
    
    PAGE10.25
    
    
    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;
    
    N/A10.26
    
    
    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;;
    
    N/A10.27
    
    
    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;
    
    N/A10.28
    
    
    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;
    
    N/A10.29
    
    
    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;
    
    N/A10.30
    
    
    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;
    
    N/A10.31
    
    
    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;
    
    N/A10.32
    
    
    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;
    
    N/A10.33
    
    
    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;
    
    N/A10.34
    
    
    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;
    
    N/A10.35
    
    
    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;
    
    N/A10.36
    
    
    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;
    
    N/A10.37
    
    
    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;
    
    N/A10.38
    
    
    Trust Agreement between Matthew R.
Wrona, Donald Gabel, Lawrence Clark,
Steve 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;
    
    N/A10.39
    
    
    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;
    
    N/A10.40
    
    
    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;
    
    N/A10.41
    
    
    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;
    
    N/A10.42
    
    
    Consultant Agreement with Michael A.
Pomponi, dated October 1, 2005,
incorporated b y reference to
Form 10-QSB filed for fiscal quarter
ended September 30, 2005;
    
    N/A
  73




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##### 



EXHIBIT
    
    
    
    
    
    
    
    PAGE10.43
    
    
    Consultant Agreement with Steven
Urbanik, dated October 1, 2005,
incorporated by reference to
Form 10-QSB filed for fiscal quarter
ended September 30, 2005;
    
    N/A10.44
    
    
    Consultant Agreement with Kiwee
Johnson, dated September 30, 2005,
incorporated by reference to
Form 10-QSB filed for fiscal quarter
ended September 30, 2005;
    
    N/A10.45
    
    
    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
    
    N/A10.46
    
    
    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;
    
    N/A10.47
    
    
    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;
    
    N/A10.48
    
    
    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.
    
    N/A10.49
    
    
    Agreement with American Continental
Group, LLC dated October 27, 2006
incorporated by reference to Current
Report (Form 8-K) filed October 30,
2006.
    
    N/A10.50
    
    
    New York State School Bus Proposal
incorporated by reference to
Quarterly Report (Form10-Q) filed
March 31, 200610.51
    
    
    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;
    
    
    N/A10.52
    
    
    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.
    
    
    N/A10.53
    
    
    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;
    
    
    N/A10.54
    
    
    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.
    
    
    N/A10.55
    
    
    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.
    
    
    N/A10.56
    
    
    Consulting
Agreement by and
between Capital
Campaigns,Inc. and
Torvec, Inc., dated
February 6, 2009;
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##### 



EXHIBIT
    
    
    
    
    
    
    
    PAGE10.57
    
    
    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;Not applicable(14)
    
    Code of Ethics
    
    
    N/A(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)(22)
    
    Published report regarding matters submitted to vote of security holders None(23)
    
    Consents of experts and counsel(23.1)
    
    Eisner LLP Consent
    
    
    104(24)
    
    Power of attorneyNone(31.1)
    
    Rule 13(a)-14(a)/15(d)-14(a) Certifications
    
    
    105(32)
    
    Section 1350 Certifications
    
    
    106(99)
    
    Additional exhibitsNone
  75