U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
     [  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
              THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
     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                                   I.R.S. Employer Identification No.
             incorporation or organization)

11 Pond View Drive                                                                  14534
                    Pittsford, New York                                                              (Zip Code)     (Address of principal executive offices)

Issuer's Telephone Number, including Area Code: (716) 248-8549
                    Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class                                                       Name of each exchange on
                                                                                                                   which registered

Securities registered pursuant to Section 12(g) of the Exchange Act
$.01 par value common voting stock
(Title of class)



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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  X          No

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.  [X]

State issuer's revenues for its most recent fiscal year.     $0.00

State the aggregate market value of the voting stock held by nonaffiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days.  (See definition of affiliate in Rule 12(b)-2 of the Exchange Act).     $17,126,606

Note:  If determining whether a person is an affiliate will involve an unreasonable effort and expense, the issuer may calculate the aggregate market value of the common equity held by non-affiliates on the basis of reasonable assumptions, if the assumptions are stated.

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS |
DURING THE PAST FIVE YEARS)

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.  Yes            No

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.  22,678,825

DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated:  (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").  The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1990).

Transitional Small Business Disclosure Form (Check one):

Yes       No X



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PART I



THE COMPANY



Item 1.     DESCRIPTION OF BUSINESS.

(a)   History and Development of Our Inventions

Torvec, Inc. was incorporated as a New York business corporation on September 25, 1996.  Upon its incorporation, the company  acquired numerous patents, inventions and know-how developed for more than ten years by Vernon E. Gleasman and members of his family.  The company presently is a development stage company specializing in automotive and related technology. The company owns many U.S. and international patent properties developed by the Gleasmans protecting important inventions relating to five different areas of automotive technology:



|o | (i) steering drive for tracked vehicles
|- | ---------------------------------------
|  |                                        
|o | (ii) infinitely-variable transmission  
|  |                                        
|o | (iii) hydraulic pump and motor         
|  |                                        
|o | (iv) constant velocity joint           
|  |                                        
|o | (v) spherical gearing                  
|  |                                        

As a family, the Gleasmans have operated and sold their own innovative products and companies over the past 30 years.  The Gleasmans knowledge of the automotive industry and its trends was the basis of the various research projects that are now the properties of the company.  A review of Vernon Gleasman's first 100 plus inventions indicates that almost all of them are improvements of other companies' technology, and most of Vernon Gleasman's inventions were created either while he was employed by various companies, or while he was acting as a consultant to these other companies.

Historically, the major impediments to the incorporation of Gleasman inventions into other companies' vehicles have been the "not invented here" syndrome and the problems relating to enforcement of licensing agreements by an independent inventor.  Consequently, the company decided to build refined prototypes of each of its inventions, and to date has engineered and developed highly refined prototypes of its steer drive for tracked vehicles, hydraulic pump and motor, spherical gearing and constant velocity joint.  The company is currently engineering and developing its infinitely variable transmission prototype.



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Each of the company's inventions can be commercialized on a stand-alone basis.  However, in contrast to the Gleasmans' past procedures of selling their inventions for another company's use, the management of Torvec decided to incorporate the steer drive mechanism and, as they are built, the hydraulic pump and motor, spherical gearing and constant velocity joint into a new type of vehicle which can be designed as a specific product that can be sold directly to the consumer.  The company therefore built the highly refined prototype of its fast-track, full terrain vehicle-the FTVä
 .  The FTV prototype was completed in February, 1999 and was initially showcased to the public in early spring, 1999.  The company intends to also incorporate its infinite variable transmission into the FTV when that prototype is completed.

To date, the company has no employees, relying on the full-time services of Vernon, Keith and James Gleasman as consultants.  The company also relies on the services of the staff of Joseph Neri Chevrolet, Williamson, New York on a project by project basis, free of charge.  To date, the company has conducted substantially all of its research, testing and product-showcasing at Neri Chevrolet.  It has outsourced the actual building of all of its prototypes, subject to the direct supervision of the Gleasmans.

In addition, Morton A. Polster devotes the majority of his time rendering ongoing patent services to the company, including the prosecution of all of the company's foreign patent applications.  Herbert H. Dobbs is active in company powerpoint presentations to and discussions with auto and truck manufacturers, auto parts suppliers, glass component suppliers and the U.S. military.  Lee Sawyer provides the company with ongoing expertise regarding the Asian automotive markets based upon his 30 years experience with Asian automobile manufacturers.  He has facilitated the company's discussions with Japanese and Korean auto manufacturers and has established company contacts with Chinese, Indonesian and other Far Eastern country representatives.

(b)   Our Patented Automotive Properties

The following is an overview of our automotive technologies:

Torvec's FTVä

Historically, wheeled trucks and cars have been able to travel at high speeds on prepared roads and are easy to drive and steer.  However, wheeled trucks and cars have lacked the ability to traverse truly difficult terrain.  On the other hand, tracked vehicles have the ability to traverse truly difficult terrain but are difficult to steer precisely, are cumbersome to drive and are limited to relatively low speeds even on prepared roads.





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The company's FTV is a new type of vehicle, that management believes combines the high speed capabilities of trucks and cars with the high traction capabilities of tracked vehicles.  The company has tested the FTV prototype over the past 2 years at Neri Chevrolet.  It has demonstrated the FTV in person to representatives of the majority of U.S. and foreign auto and truck manufacturers at the Neri facility over the past 2 years.  Based upon these tests, demonstrations and the reaction of industry representatives, the company believes it has shown that the FTV is relatively easy to drive and steers as easily as a car.  The company also believes it has shown that this tracked vehicle can traverse almost any terrain at speeds ranging from 45 to 65 mph.  The company also believes that it has shown that the FTV is also environmentally sensitive since its low ground pressure, less than 2 pounds per square inch, does not damage paved road surfaces or leave ruts or cause potholes on unpaved surfaces.  We believe our rubber tracks will be made by Goodyear, a corporation dedicated to supporting original equipment manufacturers, and Goodyear has provided the tracks for the company's prototype FTV.  The FTV is able to perform as it does because of its unique steering mechanism, which is protect by several patents in Europe and Japan as well as the following U.S. patents: multi-axle vehicle steer drive system (4732053), no-slip imposed differential reduction drive (4776235), no-slip imposed differential (4776236), steer-driven reduction drive system (4895052) and modular track system (6135220).  This steer-drive mechanism can best be described in engineering terms as a hydro mechanical steering mechanism.  The "mechanical" portion is manufactured from conventional, high volume gearing, while the "hydro" portion is our patented hydraulic pump and motor.  Conventional hydraulic pumps and motors are large, noisy and inefficient at low revolutions per minute.  The company believes that company sponsored tests at the Neri facility has shown that our patented hydraulic pump and motor has substantially solved these problems.

Torvec's Infinitely Variable Transmission

The Company is now building a prototype of the infinitely variable transmission, which we estimate will be completed by mid to late summer.  The infinitely variable transmission is a transmission that provides an uninterrupted drive through an infinite number of geared speed ratios, allowing ideal torque flow to propel the vehicle while permitting the engine to run at optimum efficiency.  In sharp contrast to work being done by other companies in relation to diesel/gasoline engine management, the company's new transmission will not require any change, costly or otherwise, to the manufacture or operation of existing diesel/gasoline engines. Instead, it permits present automotive diesel/gasoline engines to operate in a near steady-state mode, with dramatically reduced pollution, at most times during normal operation, i.e., under the starting, stopping, acceleration and deceleration of normal urban traffic.  For instance, such a near steady-state optimum condition may match the usual engine setting when the vehicle is being driven at its top urban speed (e.g., 35-45 miles per hour). It should be noted that this optimum urban cruising speed may be only approximately twice the normal idling speed of the engine, and that this steady-state setting is relatively low in comparison to the normally required engine speed of three, four or five times idling speed that must be attained by the same diesel/gasoline engine each time the vehicle accelerates between each of the conventional forward gears (e.g., when shifting from first gear to second gear, then from second to third, etc.).





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In addition to having the potential of reducing particulates, the company's transmission will be less complicated and has approximately 1/3 fewer parts when compared to a conventional four or five speed automatic transmission, making it smaller in size, lighter in weight and, therefore, further improving fuel economy. The company's transmission, which the company believes will be simpler and less expensive to manufacture than existing transmissions, should provide the automotive industry with a higher performing product at a lower cost.

In view of the above, and because all vehicles currently have transmissions, the company believes that the company's transmission will permit substantial reductions in diesel/gasoline engine pollutants and that such significant environmental benefits will be achieved without an economic penalty.  Further, it is believed that the company's transmission will not be in direct competition with companies who provide other diesel/gasoline engine pollution remedies and that the latter may even be interested in working with the company to explore possible synergistic effects with the company's transmission.

In December, 1999, the company finished a wide-ranging and complete CAD/CAM design evaluation on the infinitely variable transmission which demonstrates that the Company's transmissions will meet the new emissions standards for light trucks announced in December, 1999 by the federal government.  The evaluation included finite element analysis, fluid dynamics analysis and material compatibility analysis for "real world conditions" under temperatures ranging from minus 20 degrees fahrenheit to 150 degrees.

Because it is an infinitely variable transmission and changes its ratios extremely quickly, the company's transmission can accelerate a diesel-powered vehicle as quickly as a gasoline-powered vehicle.  The company's transmission also may be able to significantly improve the performance of electric drive vehicles.  There are a number of kinds of electric motors that can be chosen to drive a vehicle.  Their performance and physical characteristics vary considerably.  Weight (for a given power level), zero-speed torque, useful speed range, efficiency-vs-motor-speed, and control characteristics are among these, and there are conflicts in making the best choice for a given vehicle application.  A transmission of some sort commonly is needed to resolve these issue.  The performance characteristics of the company's transmission make it a promising candidate for such applications.



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Hydraulic Pump/Motor, Constant Velocity Joint, and Spherical Gearing

The company's patented infinitely variable transmission will incorporate a hydraulic pump/motor machine and, although it can be operated with commercially-available pump/motors, it is most effectively used in combination with the company's patented hydraulic pump/motors.  The company's pump and motor is significantly simpler, smaller and lighter than other commercially available pump/motors having comparable performance specifications. The key feature of the company's pump and motor is its swash-plate mounting arrangements that utilize a new form of gearing which is also proprietary to the company. This new form of gearing -- spherical gearing -- is based upon the geometry of spheres rather than conventional gear of geometry of cylinders and cones.  This spherical gearing has been incorporated in yet another company-owned invention, which has been developed to replace constant velocity joints used, among other places, in all front-wheel drive vehicles.  The company's constant velocity joint is a departure from known designs, and its efficiency and weight savings may provide a significant competitive advantage in the annual constant velocity joint market of 180,000,000 units per year (1994 Annual Report of GKN (the world's largest producer of constant velocity joints)).

The company's spherical gears have been used to form a geared ball-and-socket coupling in which driving tooth contact is maintained continuously while, at the same time, permitting the coupling to be flexed at 40 degrees to either side of center. The potential versatility of the company's spherical gears may open the door to many yet unknown solutions and products yet to be discovered.  This new gearing paradigm is found in the swash-plate mechanism of the company's hydraulic pump and motor, and it will also be used to create a constant velocity joint as a working prototype ready for installation in a car.  The company's constant velocity joint is designed to be interchangeable in over 40 existing car models.  It is notably lighter, less costly to manufacture, and potentially more durable than the constant velocity joints presently being used in all front-wheel drive vehicles.  In spite of mechanical and design limitations, the constant velocity joints currently in use are manufactured at the rate of over "180 million units annually" according to the 1994 Annual Report of GKN.

(c)     Our Patented Ice Technology

On November 29, 2000, the Company entered into an Agreement and Plan of Merger to acquire Ice Surface Development, Inc. ("ISD"), a wholly-owned subsidiary of UTEK Corporation, 202 South Wheeler Street, Plant City, Florida 33566.  As a result of the merger, the Company acquired through a wholly-owned subsidiary, a 20 year, exclusive worldwide license granted by the Trustees of Dartmouth College to ISD for land-based motorized applications to a novel ice adhesion modification system developed by Professor Victor F. Petrenko at Dartmouth's Thayer School of Engineering.  The Dartmouth patented technology allows for the rapid non-thermal de-icing of vehicle surfaces using a novel electrochemical decomposition technology invented by Dr. Petrenko.  Dr. Petrenko's work has shown that electrodes attached directly to surfaces can break down ice and water through the process of electrolysis.  When applied to automotive and truck surfaces, gas bubbles of hydrogen and oxygen are formed during the electrolysis process.  These bubbles generate pressure on the vehicle surface therefore shedding ice.



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In June, 2000, Dr. Petrenko's technology was licensed by Dartmouth to The BF Goodrich company for all aircraft and marine applications.  Recently Discover Magazine honored Dr. Petrenko's technology as the "most innovative invention for the aerospace industry in the year 2000."

Aside from repelling ice on glass and other surfaces, Dr. Petrenko's technology also increases the traction of rubber on ice by a factor of 20.  New ice traction systems based upon this technology could give vehicles, including the FTV vehicle, as much traction on ice as if they were driving on dry pavement.  Vehicles could one day be equipped with "smart" tracks that grab ice.
               The company acquired ISD from UTEK to integrate the Dartmouth icing technology into its FTVä
 as well as to sub-license the technology for a wide-assortment of land-based motorized vehicle applications (e.g. cars, trucks, trains, trailers), including their components (e.g. windshields).

(d)     Current Status of Product Development

Based upon our research to date, we believe the following inventions will eventually become commercially viable:



|o
o
o
o
o | the FTV, including the steering drive for tracked vehicles;
the infinitely variable transmission;
the hydraulic pump and motor;
the constant velocity joint which includes Torvec's spherical gearing;
the ice technology.
|--------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the past three years, we have engineered and developed our inventions from concept to prototype, a process which has included detail computer aided design, generation of computer aided engineering simulation, generation of adequate drawings and process definition, the manufacture and assembly of each of our prototypes, testing of the prototypes, identifying and resolving problems resulting from testing and updating the design where appropriate to reflect any changes needed.







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These inventions are in the following stages of development:



|o | the FTV - the prototype has been completed and continues to be showcased to automobile, truck manufacturers and assembly suppliers.  We have developed a detailed manufacturing plan for the FTV, including factory floor layouts, commitments for the sourcing of major assemblies, identification of major suppliers, identification of critical skills necessary to produce the vehicle on a commercial basis, assembly cost estimates, and an overall business plan for the manufacture, assembly and distribution of the vehicle;                                                                                                                                                                                                                                                            
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|o | the infinitely variable transmission - the initial detailed design for the infinitely variable transmission has been completed.  We are currently building and assembling a prototype of the infinitely variable transmission.  The infinitely variable transmission incorporates the hydraulic pump and motor allowing us to meet the desired envelope for incorporation into automobiles, trucks and the FTV.  Preliminary tests of the infinitely variable transmission have been performed at an independent test facility.  The results have confirmed the transmission's function, which is to enable an automotive engine to run at a fixed revolutions per minute, while providing the needed range of power and torque output to reduce harmful exhaust emissions and improve efficiency;
|o | the hydraulic pump and motor - the prototype has been completed, testing has been completed and the pump and motor is now being incorporated into our infinitely variable transmission as discussed above;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|o | the constant velocity joint - the constant velocity joint prototype has been completed, has gone through preliminary testing, and our preliminary tests indicate that this will be a lower cost product with fewer components resulting in a more compact, lighter weight device than is currently used in the automotive industry;                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|o | the ice technology - we continue to work with Dr. Petrenko at Dartmouth College to refine this technology.  The technology is undergoing field testing by Goodrich for use in the aerospace industry.  We, through Dr. Petrenko, share the results of this field testing, and we believe that the technology has been developed sufficiently to enable us to negotiate with automotive manufacturers, automotive parts suppliers as well as companies servicing the automotive industry to sublicense this technology.                                                                                                                                                                                                                                                                            



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(e)     Business Development and Commercialization of Products

Although we believe that we have made substantial progress in engineering, building and testing prototypes for each of our inventions and the FTV, to date we have not manufactured any of our inventions in commercial quantities for sale, and we have not entered into any written arrangements with auto or truck manufacturers for the manufacture, assembly, production or distribution of our products.  As stated above, we believe our ice technology has been sufficiently developed, and we are currently entertaining proposals from companies to become sublicensees of this technology.

The following table sets forth the advances we have made with respect to our technology, the material stages of development that are required in order to manufacture and commercially offer our products and an approximate timeline for doing so:

|Product                          | Feasibility
Studies/
Testing | Product/Process 
Development                          | Commercialization                 | Estimated Time to 
Commercialization
|-------------------------------- | ---------------------------- | ----------------------------------------------------- | --------------------------------- | ------------------------------------
|                                 |                              |                                                       |                                   |                                     
|FTVÔ                             | Complete                     | Prototype built-being 
test driven and 
showcased     | OEM discussions
underway          | 24 to 36 months                     
|                                 |                              |                                                       |                                   |                                     
|Infinitely Variable
Transmission | Complete                     | Prototype being built                                 | OEM discussions 
underway         | 18 to 24 months                     
|                                 |                              |                                                       |                                   |                                     
|Hydraulic 
Pump/Motor            | Complete                     | Prototype built; initial 
tool design in process      | OEM discussions 
underway         | 9 to 10 months                      
|                                 |                              |                                                       |                                   |                                     
|CV Joint                         | Complete                     | Prototype built; initial 
tool design in process      | OEM discussions 
underway         | 12 to 14 months                     
|                                 |                              |                                                       |                                   |                                     
|Ice Technology                   | Complete                     | Prototype built; field
testing; in commercial 
design | Sublicense 
discussions 
underway | 12 months                           

As indicated in the above chart, we have been and continue to be in ongoing and periodic discussions with automobile manufacturers, truck manufacturers as well as parts and assembly suppliers to manufacture, produce and distribute our automotive technologies, including the FTV, to the consuming public.  Generally, these discussions no longer are focusing on the validation and credibility of our inventions, but now are focusing on pricing issues as well as how to structure a Torvec-auto or truck manufacturer transaction, including direct licensing, joint venture partnership and the direct acquisition by or of Torvec through a merger or similar transaction.  Based upon the status of these current discussions, including the regular and ongoing expressed interest in our technologies vocalized by U.S. and international auto and truck manufacturers, management believes that a written letter of intent regarding our automotive technology could be forthcoming within the next 12-18 months.

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In August, 1999, we entered into a working relationship with HTV Export to conduct a worldwide market survey and introduce our inventions to potential customers including private companies and governmental agencies throughout Europe, Asia, Africa and South America.  HTV Export has focused its attention on generating interest in our FTV and, in the course of its ongoing marketing efforts, has solicited and obtained valuable feedback on the uses to be made of and interest in purchasing, when it is available, the FTV.  Within the last number of months, representatives of HTV Export have joined with Torvec management to provide automotive industry representatives its findings on the considerable worldwide interest in Torvec's FTV.

Our board chairman, Herbert H. Dobbs, was the former technical director of the United States Army Tank-Automotive Command, which effectively made him the United States Army's chief engineer for all ground vehicles and related technology.  Since his retirement from the U.S. Army in 1985, Dr. Dobbs has remained active as a consultant to the U.S. Army on specific issues related to his expertise and, since 1994, has been a member of or consultant to the Army Science Board.  The Army Science Board provides direct advice to the Secretary of the Army, the Chief of Staff of the Army and the Department of the Army staff on technical and management issues.  Dr. Dobbs has made a number of presentations regarding the FTV and its capabilities to the Army Science Board and is personally in a working relationship with senior U.S. Army personnel responsible for the development and acquisition of U.S. military ground vehicles.  Under its normal procurement procedures, the Army tells industry what it needs and then chooses the best candidate offered by industry that meets specified Army requirements.  Torvec management has been assured that the Army will consider the FTV as a candidate if and when the next U.S. military truck acquisition program is initiated by the Department of Defense.

(f)     Competition and Market Acceptance

The company believes that its automotive technology is superior to similar products manufactured in the automotive industry and in some instances represents a true paradigm shift with respect to presently known technology.  However, once the company commences operations, it will be competing against companies that have significantly greater financial, marketing and operating resources than the company.  The company also believes that its ice technology is truly unique.  No other company in the world possesses the right to commercialize such technology in the motorized, land-based vehicle field.

The company's immediate future development is, in part, dependent upon its ability to successfully commercialize its ice technology either through a sublicense or through a joint venture arrangement.  It is also dependent, in part, upon acceptance of the FTV vehicle especially in the Asian, African, South and Central American markets.



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With respect to these foreign markets, the infrastructure of most of Asia, Africa, South and Central America is very similar to the U.S. in the early 1900's.  At that time U.S. demographics were as follows:  eighty percent of the population lived in rural areas, income was low and transportation was limited to walking, bicycles, push carts and animal pulled vehicles.  Roads, when they existed, were dirt and at time impassable due to terrain or inclement weather.  Even with the advent of automobiles, commerce remained inhibited because paved roads were only found in the cities.  Similarly, the wheeled vehicles of the developing country today can only traverse the rural dirt roads during certain seasons of the year.  When roads are in rough condition (e.g., muddy, blocked by snow or ice, etc.), there is little difference in travel time between an animal drawn cart, a man on foot or bicycle, or a wheeled car.  If they are able to travel at all, even four-wheeled drive vehicles are usually limited to 4-5 mph under these conditions.  The idealized vehicle would be a vehicle that could travel at higher speeds (25-50 mph), regardless of the terrain, significantly shortening the travel time between rural areas and the primary marketplaces in the city.  A tracked vehicle, in effect, "brings its own road with it".

The company's ability to generate revenue and become profitable is also dependent upon the automotive industry's acceptance of its other products, namely the infinitely-variable transmission, the hydraulic pump and motor, the constant velocity joint and spherical gearing.  The company's ultimate growth and future financial performance will depend on demonstrating the advantages of such products over existing technologies to an automotive industry which has committed substantial resources to product systems utilizing old technology.  In addition, despite management's belief that its products are superior, the company will have to overcome the "not invented here" attitude that permeates the industry.  However, the recent Bush Administration decision to implement the previous administration's stricter diesel emission standards has lead to increased automotive industry interest in the emission reduction capabilities of the company's automotive inventions especially its infinitely-variable transmission.

Item 2.     DESCRIPTION OF PROPERTY.

On January 7, 1998, the company entered into a Service and Space Agreement with Joseph L. Neri, Sr. (a shareholder) and Joseph Neri Chevrolet-Oldsmobile-Pontiac pursuant to which the company was entitled to lease the premises described below.  The agreement was terminated on August 31, 1999 and, in accordance with an informal and oral understanding with Mr. Neri, the company was permitted to utilize the premises at no charge from time to time during fiscal year 2000 and anticipates utilizing the facility in fiscal year 2001 in similar fashion.  The facility is located at 3740 Route 104, Williamson, New York (approximately 20 minutes from downtown Rochester, New York).  The facility is approximately 17,000 sq. ft., situated on 8 acres of land.  The company has been able to use the facility, all utilities (including telephone system with an after-hour answering service), computer system, service department, specialized equipment and tools with D.E.C. approved above-ground lifts, one of which has a 28,000 lb. capacity for trucks and buses, an 8 bay body shop, complete with a paint room and Kansas Jack straightening machine, and a two floor parts department.  The company believes that this facility is sufficient to construct all prototype FTV vehicles as well as assemble and install all prototypes for the company's other products for testing and demonstration purposes.

The executive offices of the company are located at 11 Pond View Drive, Rochester, New York 14534.

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Item 3.     LEGAL PROCEEDINGS.

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Except as provided below, the company is not a party to any pending, material litigation.  To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (i)     On November 14, 2000, the company joined with Vernon and Keith Gleasman, as plaintiffs, in filing a lawsuit against McElroy Manufacturing, Inc., Arthur H. McElroy, II and Tri-Mc (collectively, "MMI") in the United States District Court for the Northern District of Oklahoma.
Under an October 10, 1991 agreement between MMI and the Gleasmans, McElroy was to manufacture from one to five prototypes of an hydraulic pump and motor designed by the Gleasmans for use in a continuously variable gear transmission also designed by them.  The hydraulic pump and motor designed by the Gleasmans necessitated a constant velocity joint in order to be marketable, and the Gleasmans utilized a gimbal in their designs for the constant velocity joint.  The designs and related technology were patented under U.S. Patent No. 5, 440,878.                                    
| | MMI manufactured a first-generation prototype of the pump and motor using a gimbal for the constant velocity joint.  However, after such manufacture, on numerous occasions, MMI stated to the Gleasmans that the first-generation prototype pulsated or oscillated during operation of the motor which rendered the pump and motor inoperable for its stated purposes and, thus, unmarketable, and that the gimbal was the source of the pulsation or oscillation.

In the summer of 2000, the company's engineers, based upon CAD/CAM studies, discovered that the first generation gimbal did not pulsate or oscillate.  The Gleasmans and the company's management only then concluded that MMI had been misleading the Gleasmans, the company and the Court concerning the operability of the prototype of the pump and motor design which utilized the gimbal as a constant velocity joint.



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| | As the result of such discovery, management of the company believes that MMI's earlier statements regarding the inoperability of the gimbal were false and fraudulent and that MMI knew that the first-generation pump and motor utilizing a gimbal as the constant velocity joint, as specifically designed by the Gleasmans, did not pulsate or oscillate but was instead a valuable and marketable pump and motor system which could have been rapidly commercialized.

Management therefore believes that the company has been harmed by MMI in the following important respects:                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | By reason of the foregoing, management believes that MMI is liable to the plaintiffs for considerable compensatory and punitive damages in an amount to be determined at trial.  The plaintiffs have demanded a jury trial with respect to this litigation.

On January 2, 2001, MMI moved to dismiss the plaintiffs' complaint on the grounds that it constituted an impermissible collateral attack on the arbitration award of April 22, 1999 and July 10, 2000.  Moreover, MMI alleged that the plaintiffs' fraud claims were reviewed and rejected by the arbitrator.

On January 31, 2001 plaintiffs responded to MMI's motion to dismiss.  In its papers, the plaintiffs stated that the fraud complained of was never at issue in the arbitration proceedings and that inasmuch as the Company was not a party to the arbitration, it should be permitted a full and fair opportunity to litigate its claims.



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| | The company seeks compensatory and punitive damages against the defendant(s) in an amount to be determined at trial and has demanded a jury trial.  The Complaint has been filed but defendant(s) has yet to respond.



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| | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | The Gleasman Litigation
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------
| | On August 29, 1997, McElroy Manufacturing, Inc. of Tulsa, Oklahoma, and two MMI employees (collectively "MMI"), initiated a lawsuit against Vernon and Keith Gleasman in the United States District Court for the Northern District of Oklahoma.  The company is not a party to this litigation.  The plaintiffs claimed that the Gleasmans had breached an agreement dated October 10, 1991 to market inventions developed under U.S. Patent 5,440,878 (the gimbal patent), in which MMI had an interest.  Secondly, the plaintiffs alleged that the two MMI employees should have been named as co-inventors on three other patents.  The plaintiffs also sought reimbursement of their development costs in the amount of $750,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | On February 6, 1998, the Court stayed all aspects of the litigation pending arbitration in New York State.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Hearings were conducted before the arbitrator in 1998.  On April 22, 1999, the arbitrator issued a nonappealable decision which determined that Vernon and Keith Gleasman exclusively owned all three patents, thereby confirming that these patents, which were assigned by them to the company, are the exclusive patents of the company.  The arbitrator also determined that neither party breached the 1991 Agreement, but that, in accordance with its terms, the sum of $862,699.61 should be paid to MMI (as reimbursement for development costs) by the Gleasmans out of royalties and other sums which they may receive and that MMI was entitled to a 20% interest in all royalties and other sums received by the Gleasmans.

On June 15, 1999, MMI filed its amended complaint in the United States District Court for the Northern District of Oklahoma.  There were two causes of action.  The first cause of action sought correction of the inventorship of the subject patents.   The second cause of action sought an order confirming the arbitrator's award and, in addition, sought an order directing that the Gleasmans reimburse MMI immediately for its expenses in the amount of $862,699.61 plus interest accruing from the date of the arbitrator's award.



| | -17-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On March 31, 2000, the Court remanded the case to the arbitrator to clarify certain ambiguities regarding the payment and terms of his April 22, 1999 decision.  On July 10, 2000, the arbitrator issued an "Addendum and Clarification Memorandum" awarding $360,000 to MMI in partial reimbursement of its expenses.  This amount is to be paid by Vernon and Keith Gleasman, not the company.

On March 23, 2001, the Court confirmed the arbitrator's award against Vernon and Keith Gleasman for MMI's expense reimbursement in the amount of $360,000.  The Court stayed enforcement of the award until the court resolved the question of whether MMI committed fraud upon the court in bringing its lawsuit.  As a condition for the stay, Vernon and Keith Gleasman deposited $423,000 (including $63,000 interest) with the Court.
| | As stated above, the company is not, and never has been, a party to this litigation.  Based upon the amended complaint filed by MMI and the order of the court confirming the award against Vernon and Keith Gleasman, the company's position has been confirmed that it is not obligated in any way to reimburse MMI for their expenses nor liable to MMI for any continuing royalty obligation or any other sums.                                                                                                                                                                                                                                                                                                                                                                                                                         

Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no matters submitted to the Company's shareholders during the fourth quarter of the Company's fiscal year ended December 31, 2000.



-18-



PART II

Item 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a)     Swartz Private Equity Financing

On September 5, 2000 the Company entered into an Agreement with Swartz Private Equity, LLC pursuant to which Swartz Private Equity, LLC ("Swartz") granted to the Company a $50,000,000 equity funding commitment which continues for a period of thirty-six months.  This flexible funding Agreement provides that from time to time at the Company's request, Swartz will purchase from the Company that number of the Company's common shares equal to 15% of the lesser of the number of shares traded in the market in the 20 business days before or after the requested purchase.  The purchase price is the lesser of 91% of the lowest closing bid price for the Company's common stock during that 20 day period following the request or that price less $.20.  Swartz will not be required to purchase at any one time shares having a value in excess of $2,000,000.  The Company may make additional requests at intervals of approximately 30 days.

As a commitment fee, the Company granted to Swartz commitment warrants to purchase 960,101 shares of the Company's common stock which warrants can be exercised at an initial exercise price of $4.875, the market price of the Company's common stock on the date of the commitment by Swartz.  The total number of commitment warrants will be adjusted upwards to represent 4.5% of the total outstanding common shares of the Company under certain circumstances during the three years that the commitment remains in effect.  The warrant exercise price is reset to the lowest closing price of the Company's common stock during the 5 trading days ending on each 6 month anniversary of the warrants issue date.

In addition to the commitment warrants referred to above, Swartz will be issued a warrant to purchase one share of common stock of the Company for every ten shares that it purchases pursuant to the Agreement.  These purchase warrants will initially be exercisable at 110% of the market price of the shares simultaneously purchased by Swartz.  Such exercise price is subject to the same reset provisions as govern the commitment warrants.

Swartz has been granted a right of first refusal to handle future financings for the Company.  However, that right continues only during the period of the commitment and the commitment can be terminated at any time upon paying a termination fee to Swartz.  The termination fee is a maximum of $200,000 and may be less, dependent upon the amount of financing which has been provided by Swartz prior to the termination.

The Company has agreed to reserve 5,000,000 common shares for sale pursuant to this Agreement.



-19-



On October 2, 2000, the Company filed a Current Report (Form 8-K) to disclose the Swartz transaction as well as to file all documents in connection therewith.

In the Agreement with Swartz, the Company agreed to file a Registration Statement pursuant to the Securities Act of 1933 for sale by Swartz of the shares acquired through this transaction.  The Company filed a Form SB-2 Registration Statement covering the 5,000,000 shares reserved for sale under the Agreement on October 19, 2000.  Such Registration Statement was declared effective by the Securities and Exchange Commission on October 23, 2000.

In accordance with the Agreement, the Company sold 36,735 shares to Swartz and raised proceeds equal to $108,643.76 during its fiscal year ending December 31, 2000.  In connection with this sale, the company issued 3,674 purchase warrants to Swartz at an initial exercise price of $3.575 per share.  The company has sold an additional 39,915 shares receiving proceeds in the aggregate amount of $158,911.59 through February 2001.  In connection with these sales, the company issued 3,992 purchase warrants to Swartz at an average initial exercise price of $4.8125 per share.

Also registered on the Form SB-2 were 354,000 common shares on behalf of certain consultants under a piggyback registration, which will allow these consultants to exercise options for common stock at $5.00 per share.  If all these options are exercised, $1,770,000 will be provided to the Company.  No options were exercised during fiscal year 2000.

(b)     Market Information

Effective September 23, 1998, the Company's $.01 par value common stock, as a class, was registered with the Securities and Exchange Commission under the Securities  Exchange Act of 1934.  As a result, shares of the Company's common stock which had been owned for one year or more became eligible for trading of the over-the-counter bulletin board maintained by the National Association of Securities Dealers, Inc. on December 22, 1998.  The Company's stock began trading on January 21, 1999 at $12.00 per share.  The Company has approximately 10 market makers for its common stock.



-20-



The following table presents the range of high and low bid prices for the Company's $.01 par value common stock for each quarter during its last two fiscal years.  The source of the high and low bid information is the Over-the-Counter Bulletin Board.  The market represented by the OTC Bulletin Board is extremely limited and the price for our common stock quoted on the OTC Bulletin Board is not necessarily a reliable indication of the value of our common stock.  Quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.



|1999        | High   | Low  
|----------- | ------ | -----
|1st Quarter | $12.25 | $4.75
|2nd Quarter | $10.50 | $3.50
|3rd Quarter | $ 9.94 | $5.12
|4th Quarter | $ 8.50 | $4.13
|            |        |      
|2000        | High   | Low  
|1st Quarter | $ 7.12 | $3.37
|2nd Quarter | $ 4.87 | $2.06
|3rd Quarter | $10.00 | $2.50
|4th Quarter | $ 5.25 | $2.50



(c)     Holders

As of December 31, 2000, the Company had 230 shareholders of record.

(d)     Dividend Policy on Common Stock

The Company has not paid any dividends to its shareholders since its inception.  The declaration or payment of dividends, if any, to its shareholders is within the discretion of the Board of Directors of the Company and will depend upon the Company's earnings, capital requirements, financial condition and other relevant factors.  The Board of Directors does not currently intend to declare or pay any dividends on its common stock in the foreseeable future and intends to retain any earnings to finance the growth of the Company.

(e)     Preferred Stock

On August 30, 2000, the Company filed an Amendment to its Certificate of Incorporation to increase its authorized shares to 140,000,000 and to divide such authorized shares into 100,000,000 shares of $.01 par value preferred stock and 40,000,000 shares of $.01 par value common stock.  The Company did not issue any preferred stock in fiscal 2000.



-21-



(f)     Reports to Shareholders

The Company intends to furnish its shareholders with annual reports containing audited financial statements and such other periodic reports as the Company may determine to be appropriate or as may be required by law.  The Company is required to comply with periodic reporting, proxy solicitation and certain other requirements of the Securities Exchange Act of 1934.

(g)     Transfer Agent and Registrar

Continental Stock Transfer & Trust Company has been appointed as the Company's Transfer Agent and Registrar for its Common Stock.

Item 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The company's overall business strategy relating to its automotive inventions is



|o | to manufacture, market and sell, either directly, through others or jointly, the FTVÔ
 to domestic and foreign customers, especially in the Asian, African, South and Central American markets; and                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|o | to manufacture, market and sell, either directly, through others or jointly, its hydraulic pump and motor, its constant velocity joint and its infinitely variable transmission to automotive and truck manufacturers, suppliers and component parts assemblers.

The company's plan of operation relative to its automotive inventions over the next
12 months is:



|o | to complete the infinitely variable transmission prototype;
|- | -----------------------------------------------------------



|o | to install the infinitely variable transmission into a company
owned vehicle and begin testing to document actual emission
levels and fuel economy;
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------



-22-





|o | to initiate discussions with national and state environmental
agencies in the United States and other countries to quantify
exact fuel savings and emissions levels and to determine
the potential effect of the infinitely variable transmission on
the worldwide problem of diesel engine pollutants;       
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|o | to install the constant velocity joint, including its spherical
gearing, into a company owned vehicle and to test and
evaluate its actual operation;                                                                                                                                                          
|o | to incorporate all of the company's completed prototypes
into the FTVÔ
;                                                                                                                                                                                                                                      
|o | continue negotiations with selected automotive and truck
manufacturers to generate a letter of intent with respect to
either a license, merger or joint partnership for the continued
development and testing of all of the company's prototypes,
their manufacture, their marketing and their worldwide sale;
|o | to continue to improve the company's inventions and, where
appropriate, to obtain patent protection on such new improvements.                                                                                                                                                                                 



The company has, as yet, not found a facility suitable for manufacturing commercial
quantities of the FTV itself.  During the next 12 months, management will continue to attempt to
locate a suitable facility.

In addition, the company continues to investigate the possibility of manufacturing the FTV itself.  The company has investigated and is investigating potential sites in Rochester, New York and other communities.  The company and has engaged in preliminary discussions with a number of financial institutions to formulate a financial package which, together with government based incentives, will enable the company to pursue this approach with the actual production of the vehicle.  The company believes that it will need at least 12-15 million dollars initially in order to pursue this possibility.  Management is presently investigating ways in which to acquire this amount of money including the proceeds from Swartz as well as additional equity and/or debt financing.  However, no specific financial package with banks or other lenders has been negotiated to date.  If a suitable facility is found in the next 12 months, management will reinstitute discussions to obtain financing to acquire, refurbish, modernize, equip and staff such a facility.

On April 25, 2000, the Company inaugurated its website, www.torvec.com, for marketing, sales, education and information relating to the Company's inventions.



-23-



On June 29, 2000, the Company announced that it had granted an exclusive, world-wide license of all its automotive technology to Variable Gear, LLC for the aeronautical and marine markets.  Variable Gear will pay the Company 4% royalties for 7 years after which the Company is obligated to repurchase the license.  Variable Gear is owned 51% by Robert C. Horton, Chairman and CEO of Ultrafab, Inc. and a Company shareholder.  The Company owns the remaining 49%.  The Company does not share in any profit or losses in this entity.  It has initiated discussions with a number of boat manufacturers, but to date Variable Gear has not commenced operations or sublicensed our automotive technology in its markets.

The Company's overall business strategy relating to its ice technology is to



|o | to develop, in cooperation with Dr. Petrenko at Darthmouth under his one year consulting agreement commercially viable de-icing and 
ice adhesion systems for land-based motorized 
vehicle applications;
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|o | to enter into appropriate licensing/joint venture 
arrangements;                                                                                                                                         
|o | to otherwise promote utilization of the
Company's ice technology world-wide                                                                                                                              

The Company's license agreement with Dartmouth provides for a royalty of 3.5% based
on the value of net sales of licensed product with minimum annual payments of $10,000 for the
first two years, $15,000 for the third year and $25,000 per year thereafter.  In addition, the
agreement provides for the payment of 50% of sub-license fee income.  Based upon industry
discussing the company anticipates that it will sublicensed, joint-venture or otherwise
commercialize this technology within the next 12 months.

The net loss for the year ended December 31, 2000 was $2,374,000 as compared to the year ended December 31, 1999 net loss of $4,788,000.  The decrease in the net loss of $2,414,000 is principally related to a decrease in the amortization of unearned compensatory stock.  The amortization, which is a non-cash item, amounted to $435,000 for the year ended December 31, 2000 compared to $3,050,000 for the year ended December 31, 1999.

Research and development expenses for the year ended December 31, 2000 amounted to $731,000 as compared to $1,035,000 for the year ended December 31, 1999.  This decrease amounted to $304,000 and is due to the decrease in expenses associated with the FasTrack.

General and administrative expenses for the year ended December 31, 2000 amounted to $1,643,000 as compared to $3,753,000 for the year ended December 31, 1999.  This decrease amounted to $2,110,000 and is due to a decrease in unearned compensatory stock previously discussed, offset by an increase in advertising and promotion of approximately $433,000 and an increase in legal and professional fees of $201,000 and a decrease of $164,000 relating to lease payments charged to operations in 1999 on termination of agreement.



-24-



During fiscal 1999, we spent approximately 65% of research and development expenses on building the FTV prototype, testing and upgrades.  We spent approximately 12% of research and development expenses on the hydraulic pump and motor, 11% on the CV joint and 12% on the infinitely variable transmission.  During fiscal 2000, we spent approximately 24% of research and development expenses on upgrades to the FTV prototype.  We spent approximately 15% of research and development expenses on upgrading our steer drive, 25% of research and development expenses on the hydraulic pump and motor, 25% on the CV joint and 11% on the infinitely variable transmission.

Liquidity and Capital Resources

The company's plan of operations during its fiscal year ended December 31, 2000 was partially funded through the sale of 144,321 shares to Robert C. Horton for aggregate proceeds of approximately $550,000.  In addition, during fiscal year 2000, the company issued 196,259 shares to business consultants under its Business Consultant's Stock Plan in exchange for ongoing corporate legal services, internal crediting services and associated expenses incurred by our chief financial officer, expenses associated with our two lawsuits, marketing research expenses as well as legal fees and associated expenses for ongoing patent work.

The company anticipates that the funding it will receive from Swartz as well as its continuing issuance of shares under its Business Consultant's Stock Plan will be adequate to fund its plan of operation during the next 12 months.  However, the company also recognizes, based on its currently proposed plans and assumptions relating to its plan of operation (including assumptions regarding the nature and extent of its prototype development program, its testing program, the ability of the company to secure adequate manufacturing and distribution relationships and market acceptance of the company's products) that, over the next twelve months, the company may be required to seek additional financing in the form of a significant equity investment by one or more investors in privately-negotiated transactions or through debt-financing or both.

If we were to need financing in addition to monies we raised from Swartz and we were not successful in obtaining it, we would be forced to cancel any attempt to manufacture and distribute our products ourselves.  We would have to reduce and or delay expenditures, including research and development expenditures.  We would also be forced to lengthen the timeframes within which we would be able to commercialize all our automotive technologies.  We may also be forced to commercialize our technologies on terms which are less favorable than are presently being negotiated.

The company's cash position at any time during fiscal 2000 was directly dependent upon its success in selling stock since the company generated no revenues from any other source.  This trend is expected to continue throughout fiscal 2001.

The company has an obligation to repurchase 51% of Variable Gear, LLC on January 1, 2008.  The purchase price is equal to 51% of the then value of Variable Gear as determined by an independent appraiser selected by the parties.  This liability can not be estimated at this time.  We believe that a combination of cash flows from operations, financing and strategic alliances will produce sufficient cash flow to fund this obligation.

-25-



Y2K Compliance

The Company currently uses a software which management believes is in "Year 2000" (Y2K) compliance.  Management will continue to evaluate the current software and implement any necessary changes to remain in "Year 2000" (Y2K) compliance.

Impact of Inflation

Inflation has not had a significant impact on the company's operations to date and management is currently unable to determine the extent inflation may impact the company's operations during its fiscal year ending December 31, 2000.

Quarterly Fluctuations

As of December 31, 2000, the Company had not engaged in significant revenue producing operations.  Once the company actually commences significant revenue producing operations, the company's operating results may fluctuate significantly from period to period as a result of a variety of factors, including purchasing patterns of consumers, the length of the company's sales cycle to key customers and distributors, the timing of the introduction of new products and product enhancements by the company and its competitors, technological factors, variations in sales by product and distribution channel, product returns, and competitive pricing.  Consequently, once the company actually commences significant revenue producing operations, the Company's product revenues may vary significantly by quarter and the company's operating results may experience significant fluctuations.



-26-

TORVEC, INC.(a development stage company)

FINANCIAL STATEMENTS

Contents

|                                                                                                                                                                                                      |    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---
|Independent auditors' report                                                                                                                                                                          | F-2
|Consolidated balance sheet as of December 31, 2000                                                                                                                                                    | F-3
|Consolidated statements of operations for each of the years in the two-year
     period ended December 31, 2000 and for the period from September 25, 1996
     (inception) through December 31, 2000 | F-4
|Consolidated statements of changes in stockholders' equity for the period from
     September 25, 1996 (inception) through December 31, 2000                                                          | F-5
|Consolidated statements of cash flows for each of the years in the two-year period
     ended December 31, 2000 and for the period from September 25, 1996
     (inception) through December 31, 2000 | F-6
|Notes to financial statements                                                                                                                                                                         | F-7

F-1



-27-



INDEPENDENT AUDITORS' REPORTBoard of Directors and Stockholders
Torvec, Inc.We have audited the accompanying consolidated balance sheet of Torvec, Inc., (a development stage company) and its subsidiary, as of December 31, 2000, and the related consolidated statements of operations and cash flows for each of the years in the two-year period ended December 31, 2000 and for the period from September 25, 1996 (inception) through December 31, 2000 and changes in stockholders' equity for the period from September 25, 1996 (inception) through December 31, 2000.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present fairly, in all material respects, the consolidated financial position of Torvec, Inc. and its subsidiary as of December 31, 2000 and the consolidated results of their operations and their consolidated cash flows for each of the years in the two-year period ended December 31, 2000 and for the period from September 25, 1996 (inception) through December 31, 2000 in conformity with generally accepted accounting principles in the United States of America.

As described in Note J[4], the principal stockholders are involved in an arbitration proceeding relating to certain technology which they contributed to the Company at its formation.

/S/ RICHARD A. EISNER & COMPANY, LLP

Richard A. Eisner & Company, LLP
New York, New York
March 7, 2001
With respect to Note K

May 2, 2001

F-2



-28-

TORVEC, INC.(a development stage company)Consolidated Balance Sheet
December 31, 2000

|ASSETS
Current assets:
   Cash
   Stock Subscription receivable (collected in January 2001)
   Prepaid expenses
     Total current assets                                                                                                                                                                                                                                                                                                                                                                                                                                                              | $      34,000
      109,000147,000
       290,000                                                                                            
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------
|Equipment:
   Office equipment 
   Transportation equipment
Less accumulated depreciation
Net equipment
License, less accumulated amortization of $15,000                                                                                                                                                                                                                                                                                                                                                                                                                                              | 9,000
  53,000       62,000(36,000)26,0003,246,000
$  3,562,000                                                                              
|LIABILITIES
Current liabilities:
   Current portion of loan payable
   Accounts payable and accrued expenses
   Consulting fees payable to related parties
      Total current liabilities
Deferred revenue
Loan payable
Commitments, contingency and other matterSTOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 100,000,000 shares authorized, none issued
Common stock, $.01 par value, 40,000,000 shares authorized, 22,552,062
   issued and outstanding (including 63,256 shares issued subject to put option)
Additional paid-in capital
Deficit accumulated during the development stage | $       6,000
       77,000665,000      748,000150,000
           9,000907,000
       225,000
   13,125,000(10,695,000)2,655,000$   3,562,000



See independent auditors' report and notes to financial statements                                          F-3



-29-

TORVEC, INC.(a development stage company)Statements of Operations

|                                                                                                                                                                                                         | Year EndedDecember 31,                                          | September 25,
1996
(Inception)
Through
December 31,2000     
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------------------------
|                                                                                                                                                                                                         | 2000      (consolidated)                                        | 1999                                                        
|Cost and expenses:
   Research and development
   General and administrativeNet lossBasic and diluted loss per common shareWeighted average number of 
   shares of common stock - basic 
   and diluted | $      731,0001,643,000
$  (2,374,000)
       $(0.11)21,322,000 | $  1,035,0003,753,000
$ (4,788,000)     $(0.23)
  20,918,000



See independent auditors' report and notes to financial statements                                                    F-4

-30-

TORVEC, INC.(a development stage company)

Consolidated Statements of Changes in Stockholders' Equity

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Common Stock
    Shares         Amount                                                                                                                                                                                                                                                                                                                                                                                                                                        | Additional
Paid-inCapital                                                                                                                                                                                                                         | Unearned
Compensatory
Stock andOptions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Deficit
Accumulated
During the
DevelopmentStage                                                                                                                                                    | Total 
Stockholders'Equity                                                                                                                 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------
|Issuance of shares to founders (Note A)
Issuance of stock for services (Note A)
Sale of common stock - November ($1.50 per share)
Sale of common stock - December ($1.50 per share)
Distribution to founders (Note A)
Net loss
Balance - December 31, 1996
Issuance of compensatory stock (Note I[2])
Issuance of stock for services (Note I[6])
Sale of common stock - January ($1.50 per share)
Sale of common stock - February ($1.50 per share)
Sale of common stock - May ($1.50 per share)
Issuance of stock for services (Note I[6])
Sale of common stock - June ($3.00 per share)
Sale of common stock - July ($3.00 per share)
Sale of common stock - August ($3.00 per share)
Sale of common stock - September ($3.00 per share)
Sale of common stock - October  ($3.00 per share)
Sale of common stock - November ($3.00 per share)
Sale of common stock - December ($3.00 per share)
Issuance of compensatory options to consultants (Note I[4])
Compensatory stock and options earned
Distributions to founders (Note A)
Net loss
Balance - December 31, 1997
Issuance of stock for services (Note I[6])
Sale of common stock - May 11 to September 20 ($5.00 per share)
Sale of common stock - September 21 to December 31 ($10.00 per share)
Costs of offering
Compensatory stock and options earned
Contribution of services (Note E[2])
Net loss
Balance - December 31, 1998
Issuance of stock for services (Note I[5])
Sale of common stock - January 1 to August 9 ($10.00 per share)
Sale of common stock - August 10 to November 30 ($5.00 per share)
Issuance of compensatory options to consultants (Note I[2])
Common stock issued- exercise of options (Note I[2])
Compensatory stock and options earned
Contribution of services (Note E[2])
Net loss
Balance - December 31, 1999
Issuance of stock for services (Note I[5])
Sale of common stock - March 29 ($4.51 per share)
Sale of common stock - June 23 ($3.50 per share)
Acquisition of Ice Surface Development (Note B)
Proceeds from exercise of put option
Compensatory stock and options earned
Contribution of services (Note E[2])
Net loss
Balance - December 31, 2000 | 16,464,400
    2,535,600
       64,600
      156,201  19,220,801
   1,000,000
       12,000
       58,266
       75,361
       30,000
         2,000
       73,166
       13,335
       60,567
       10,000
        7,000
       10,000
      100,000  20,672,496
         1,000
      112,620
       25,500  20,811,616
       45,351
       80,670
       84,500
       21,000  21,043,137
      196,259
       44,321
      100,000
    1,068,354
       36,73522,488,806 | $ 165,000
    25,000
      1,000
      1,000   192,000
    10,000
     1,000
     1,000
     1,000
      1,000
      1,000   207,000
      1,000   208,000
     1,000
     1,000   210,000
      2,000
      1,000
    11,000
     1,000$ 225,000 | $    (165,000)
       381,000
         96,000
       233,000
       (27,000)
       518,000
     1,490,000
         18,000
        86,000
       112,000
         45,000
          6,000
       219,000
         40,000
       181,000
         30,000
         21,000
        30,000
       299,000
       234,000
     (338,000)     2,991,000
          3,000
       562,000
       255,000
       (60,000)
         15,000     3,766,000
       327,000
       806,000
       422,000
     2,780,000
       105,000
         15,000     8,221,000
       838,000
       200,000
       349,000
     3,394,000
       108,000
         15,000$ 13,125,000 | $   (1,500,000)
       (234,000)
         451,000     (1,283,000)
         578,000       (705,000)
     (2,780,000)
       3,050,000       (435,000)
     
     
         435,000$               0 | $     (489,000)
       (489,000)(922,000)
     (1,411,000)(2,122,000)     (3,533,000)(4,788,000)
     (8,321,000)(2,374,000)$  (10,695,000)

See independent auditors' report and notes to financial statements                                                                                                                                                                                                                   F-5

-31-

TORVEC, INC.(a development stage company)Consolidated Statements of Cash Flows

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Year Ended    December 31,2000                              1999(consolidated)                               | September 25,
1996
(Inception)
Through
  December 31,2000                                                 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------
|Cash flows from operating activities:
          Net loss
          Adjustments to reconcile net loss to net cash used in
                    operating activities:
                              Depreciation and amortization
                              Common stock issued for services
                              Contribution of services
                              Compensation expense attributable to 
                                        common stock and options
                              Changes in:
                                        Other assets
                                        Prepaid expenses
                                        Deferred revenue
                                        Accounts payable and accrued expenses
                                                  Net cash used in operating activities | $ (2,374,000)
         27,000
        840,000
         15,000
        435,000
13,000
150,000217,000(677,000) | $ (4,788,000)
          12,000
         327,000
        15,000
       3,050,000
164,000(38,000)(1,258,000)
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                              |                                                                                                           
|Cash flows from investing activities:
          Purchase of equipment
          Cost of acquisition
                                                  Net cash used in investing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 16,000
       16,000                                                                                         |                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                              |                                                                                                           
|Cash flows from financing activities:
          Net proceeds from sales of common stock and expense of options
          Proceeds from loan
          Repayments of loan
          Distributions
                                                  Net cash provided by financing activities
Net increase (decrease) in cash
Cash at beginning of period
Cash at end of period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 550,000
(6,000)
__________544,000
             
    (149,000)183,000
$       34,000                          | 1,416,000
        (5,000)1,411,000153,00030,000
$      183,000                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                              |                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                              |                                                                                                           
|Supplemental disclosure of noncash investing and financing activities:
           Issuance of compensatory options to consultants
           Issuance of common stock for license
          Cash paid for interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | $   3,405,000
$        2,000                                                                                 | $   2,780,000
$        2,000                                                                              



See independent auditors' report and notes to financial statements                                            F-6





-32-

TORVEC, INC.

Torvec, Inc. (the "Company") was incorporated in New York on September 25, 1996.  The Company, which is in the development stage, specializes in automotive technology.  In September 1996, the Company acquired numerous patents, inventions and know-how (the "technology") contributed by Vernon E. Gleasman and members of his family (the "Gleasmans") (see Note J[4]).  The Company intends to develop and design specific applications for this technology relating to steering drives for tracked vehicles, infinitely variable transmissions, hydraulic pumps and motors and constant velocity joints and spherical gearings.  As consideration for this contributed technology, the Company issued 16,464,400 shares of common stock and $365,000 to the Gleasmans.  In September 1996, the Company issued 2,535,600 shares of common stock (valued at $406,000) to individuals as consideration for the cost of services and facilities provided in assisting with the development of this technology.

For the period from inception through December 31, 2000, the Company has accumulated a deficit of $10,684,000, and at December 31, 2000 has a working capital deficiency of $479,000 and has been dependent upon equity financing to meet its obligations and sustain operations.  The Company is in the development stage and its efforts have been principally devoted to research and development, raising capital and marketing of principal products. Substantial additional financing will be required by the Company to fund its activities (see Note I[7]).

Note B - acquisition of license

On November 29, 2000, the Company entered into an Agreement and Plan of Merger to acquire Ice Surface Development, Inc ("Ice") (incorporated on May 2, 2000) for 1,068,354 shares of common stock. The acquisition was accounted for under the purchase method. The fair value of the common stock issued of approximately $3,405,000 was allocated as follows:



|Prepaid expenses
    Sponsored research
    Consulting agreement
License (Note D)
Consideration (including costs of $16,000) | $    140,000
         20,0003,261,000
  $ 3,421,000
|---------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------

The results of operations of Ice prior to acquisition were de minimis.

Note C - summary of significant accounting policies

|[1] | Consolidation:
The financial statements include the accounts of the Company and its wholly-owned subsidiary, Ice, as at December 31, 2000 and from the date of its acquisition through December 31, 2000.  All material intercompany transactions and account balances have been eliminated in consolidation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[2] | Equipment:
Equipment, including a vehicle intended to be used as a prototype, 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 five to seven years.                                  

F-7



-33-

TORVEC, INC.

|[3] | Research and development and patents:Research and development costs and patent expenses are charged to operations as incurred.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|[4] | License:
The license is being amortized over its remaining life of approximately 19 years which correlates to an underlying patent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[5] | Use of estimates:
The preparation of financial statements in conformity with 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 revenues and expenses during the reporting period.  Actual results could differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|[6] | Loss per common share:
Statement of Financial Accounting Standards 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.  The number of potentially dilutive securities excluded from the computation of diluted loss per share were approximately 1,898,000 and 934,000 for the years ended December 31, 2000 and 1999.                                                                                                                                                                                                                                                                                                                                                                                                                     
|[7] | Fair value of financial instruments:
The carrying value of cash, accounts payable and accrued expenses approximates their fair value due to the short maturity of those instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|[8] | Stock-based compensation:
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value.  The Company has elected to account for its employee stock-based compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25").  Under the provisions of APB No. 25, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's common stock at the date of the grant over the amount an employee must pay to acquire the stock.  Stock options granted to nonemployees for goods or services are measured using the fair value of these options and such costs are included in operating results as an expense.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-8





-34-

TORVEC, INC.

|[9]  | Revenue Recognition:
Revenue in connection with the granting of a license (Note J[3]) is to be recognized when all conditions specified under recent accounting standards have be met.  Generally, revenue is recorded only when no future performance is required related to item.                                                          
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[10] | Impairment of Long-Lived Assets:
The company has adopted Statement of Financial Accounting Standards No. 121, "Impairment of Long-Lived Assets to be Disposed of."  Accordingly, whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable, management assesses the recoverability of the assets.

Note D - LICENSE FROM THE TRUSTEES OF DARTMOUTH COLLEGE

|On November 28, 2000, Ice entered into a 20 year exclusive license with the Trustees of Dartmouth College for land-based applications to a novel ice adhesion modification system developed by Dr. Petrenko at Dartmouth Thayer School of Engineering for $25,000.  The license agreement provides for the payment of $140,000 for sponsored research and a royalty of 3.5% based on the value of net sales of licensed product with minimum annual payments of $10,000 for the first two years, $15,000 for the third year and $25,000 per year thereafter.  In addition, the agreement provides for the payment of 50% of sub-license fee income.

Dr. Petrenko also entered into a one year consulting agreement with Ice for a minimum of $20,000.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note E - Related Party Transactions

|[1] | On December 1, 1997, the Company entered into three-year consulting agreements with three members of the Gleasman family (major stockholders and directors) whereby each will provide technical services to the Company in exchange for compensation of $12,500 each per month.  In addition, the Company granted them options to purchase a total of 75,000 shares of common stock at an exercise price of $5.00 per share (Note I[2]).  For the years ended December 31, 2000, 1999, 1998 and 1997, the Company incurred expenses amounting to approximately $522,000, $528,000, $528,000 and $45,000, respectively, in connection with these agreements.  Effective December 1, 2000, the agreement was extended for three years and amended to provide for the payment of prior and future compensation at the discretion of the Board of Directors in either cash or shares of common stock or combination of both.  Prior to these agreements, one member of the Gleasman family provided consulting services to the Company.  Amounts charged to operations for the year ended December 31, 1997 and for the period ended December 31, 1996 were approximately $55,000 and $18,000, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



-35-

TORVEC, INC.

Note E - Related Party Transactions (Continued)

|[2] | During the three years ended December 31, 2000 a stockholder provided space and services to the Company at no charge.  The fair value of such space and services amount to $15,000 in each year and was treated as a capital contribution and expensed.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[3] | During the years ended December 31, 2000 and 1999 the Company issued to a director 2,882 and 6,231 shares of common stock, respectively, under the business consultants stock plan (Note I[5]) for services rendered as patent counsel.                

Note F - Income Taxes

The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.



At December 31, 2000, the Company has available $3,661,000 of net operating loss carryforwards to offset future taxable income tax expiring through 2020.

At December 31, 2000, the Company has a deferred tax asset of approximately $1,438,000 representing the benefits of its net operating loss carryforward and a deferred tax asset of $2,524,000 from temporary differences, principally stock options not currently deductible and certain operating expenses which have been capitalized as start-up costs for federal income tax purposes.  The total of these deferred tax assets has been fully reserved by a valuation allowance since realization of their benefit is uncertain.

F-9



-36-

TORVEC, INC.(a development stage company)Notes to Financial Statements
December 31, 2000Note F - Income Taxes (continued)



A reconciliation between the actual income tax benefit and income taxes computed by applying the federal income tax rate of 34% to the net loss is as follows:





|                                                | Year Ended             
|----------------------------------------------- | -----------------------
|                                                | December 31,           
|                                                | 2000                   
|                                                |                        
|Computed federal income tax benefit at 34% rate | $           (807,000)  
|State tax benefit, net of federal tax benefit   | (125,000)              
|Nondeductible expenses                          | 33,000                 
|Valuation allowance                             | 899,000                
|                                                |                        
|                                                | $                     0

Note G - Accounts Payable and Accrued Expenses



At December 31, 2000, accounts payable and accrued expenses consist of the following:





|Professional fees | $          23,000
|----------------- | -----------------
|Trade payables    | 54,000           
|                  |                  
|                  | $         77,000 



Note H - Loan Payable



During 1998, the Company purchased a vehicle that is intended to be used as a prototype.  The vehicle is collateral for the loan.  The loan is payable in monthly installments of principal and interest (at 10.13% per annum) of approximately $610 through March 2003.



F-10



-37-

TORVEC, INC.



At December 31, 2000 the net book value of the prototype vehicle was approximately $21,000.



Total future principal payments under the loan are as follows:





|2001
2002
2003 | $     6,000
      7,0002,000$   15,000
|-------------- | --------------------------------------



Note I - Stockholders' Equity



|[1] | Private placement:
On May 11, 1998 the Company initiated a private placement of its common stock at $5.00 per share.  On September 21, 1998 the Company increased the offering price to $10.00 per share.  The Company received net proceeds of $550,000, $1,230,000 (of which $507,000 was received from the Gleasman family), $758,000, $1,068,000 and $331,000 from private placements for the years ended December 31, 2000, 1999, 1998 and 1997 and for the period ended December 31, 1996, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[2] | Consultant:
In February 1997, the Company entered into a three-year agreement with a consultant (the "Consultant") whereby the Consultant will provide financial consulting services and assistance in obtaining financing as well as other services.  In consideration thereof, employees of the Consultant received an aggregate of 1,000,000 shares of common stock for $50.  The Company valued the shares of common stock at $1.50 per share.
In April 1997, the Company granted an aggregate of 500,000 warrants to five employees of the Consultant.  The warrants are exercisable into common stock at the initial public offering (the "IPO") price and are exercisable for five years from the date the Company's IPO is declared effective ("warrant term").  However, if fifty percent or more of either the Company's assets or its common stock is acquired by another entity or group during the warrant term, the exercise price shall be $1.50.  The Company will record a charge to operations representing the fair value of the warrants when the IPO is declared effective.
On February 10, 1999, the Company entered into a one-year agreement with two consultants to provide financial and public relation services.  In connection therewith, 375,000 of previously granted warrants were cancelled and the Company granted 375,000 options at an exercise price of $5.00 exercisable immediately through February 10, 2004.  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 0%, volatility 40% and expected life for options granted of 5 years.  These options will be charged to operations over the term of the consulting agreement.  In February 1999, 21,000 of such options were exercised.
|    | F-11                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



-38-

TORVEC, INC.



|[3] | Authorized shares:In August 2000, the Board of Directors amended the certificate of incorporation to authorize 100,000,000 shares of preferred stock and 40,000,000 shares of common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|[4] | 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.  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 generally vest over five years.

In connection with certain consulting agreements (see Note E[1]), the Company granted an aggregate of 75,000 nonqualified options to purchase common stock under the plan at an exercise price of 0$5.00 per share.  The options vest 20% per annum and are exercisable through November 30, 2007.  The Company valued these options at $234,000 using the Black-Scholes option-pricing model with the following weighted average assumptions for the year ended December 31, 1997: risk-free interest rate of 5.91%, dividend yield 0%, volatility 40% and expected life for options granted of 10 years.  The options are being amortized over the term of the consulting agreements.

On January 1, 1998 the Company granted 380,000 options under the plan at an exercise price of $5.00 per share to officers and directors.  The options are exercisable for a period of ten years and vest 20% per annum.

Pro forma information regarding net loss and net loss per share is required by SFAS 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that statement. The weighted fair value of options granted during the year ended  December 31, 1998 is estimated to be $.47. The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rate of 5.75%, dividend yield 0%, volatility of .40% and expected life of 10 years.
Had compensation cost for the Company's stock options been determined base upon the fair value at the grant date for awards under the plan consistent with the methodology prescribed under SFAS No. 123, the Company's pro forma net loss and pro forma net loss per share would be as follows:



|                                                                  | Year Ended
December 31,
|----------------------------------------------------------------- | -----------------------
|                                                                 
|                                                                  | 2000                   
|Pro forma net loss
Pro forma basic and diluted net loss per share | $2,486,000
$<0.12>     

F-12

|-39-
TORVEC, INC.(a development stage company)Notes to Financial Statements
December 31, 2000Note I - Stockholders' Equity  (continued)
|---------------------------------------------------------------------------------------------------------------------------------------

|[4] | Stock option plan (Continued):
At December 31, 2000, 455,000 options were outstanding with a weighted average exercise price of $5.00 per share and the weighted average remaining life was 7 years. At December 31, 2000, 273,000 options were exercisable with a weighted average exercise price of $ 5.00 per share.
At December 31, 2000, 1,545,000 options were available under the plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[5] | Business consultant stock plan:
In June 1999, the Company adopted the Business Consultant Stock Plan, as amended (the "Stock Plan").  The plan provides for up to 400,000 shares of common stock to be issued from time to time to consultants in exchange for services. For the years ended December 31, 2000 and 1999, 196,259 and 45,351 shares were issued, respectively, to consultants and third parties in exchange for services and amounts owed to them.  During the years ended December 31, 2000 and 1999 the Company charged $840,000 and $327,000, respectively, to operations in connection with the share issuances.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|[6] | Noncash transaction:
During 1998, the Company granted 1,000 shares of common stock, valued at $3.00 per share, for services provided.  During 1997, the Company granted 12,000 and 2,000 shares of common stock for services provided.  The Company valued the shares at their fair value of $1.50 and $3.00 per share, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|[7] | Equity funding commitment:
On September 5, 2000, the Company entered into an agreement with Swartz Private Equity, LLC ("Swartz") pursuant to which Swartz granted to the Company a $50,000,000 equity funding commitment which continues for a period of thirty-six months.  The agreement provides that from time to time, at the Company's request, Swartz will purchase from the Company that number of the Company's common shares equal to 15% of the number of shares traded in the market in the 20 business days after the date of the requested purchase.  The purchase price per share will be the lesser of, 91% of the average market price per share during that 20 day period or that market price minus $0.20.  Swartz will not be required to purchase at any one time shares having a value in excess of $2,000,000.  If the Company is in need of funds, the Company may make additional requests at intervals of approximately 30 days.

As a commitment fee, the Company granted to Swartz commitment warrants to purchase 960,101 shares of the Company's common stock which warrants can be exercised at $4.875 per share through August 15, 2005.  The total number of commitment warrants is subject to antidilution provisions.  The warrant exercise price is reset to the lowest closing price of the Company's common stock during the five trading days ending on each six month anniversary of warrant issue date.

F-13



-40-

TORVEC, INC.

|[7] | Equity funding commitment (Continued):
In addition to the commitment warrants referred to above, Swartz will be issued a warrant to purchase one share of common stock of the Company for every ten shares that it purchases pursuant to the agreement.  These purchase warrants will initially be exercisable at 110% of the market price of the shares simultaneously purchased by Swartz, subject to the same reset provisions as govern the commitment warrants.  In connection therewith the Company has reserved 367,263 shares of common stock.  At December 31, 2000 Swartz has been granted an option to purchase 3,674 shares of common stock at $3.575 per share exercisable through January 8, 2006.

Swartz has been granted a right of first refusal to handle future financings for the Company.  However, that right continues only during the period of the commitment and the commitment can be terminated at any time upon paying a termination fee to Swartz.  The termination fee is a maximum of $200,000 and may be less dependent upon the amount of financing which has been provided by Swartz prior to the termination.  The Company has agreed to reserve 5,000,000 common shares for sale pursuant to this agreement.  As of December 31, 2000, 100,000 shares of common stock had been issued under the agreement of which 36,735 were exercised under the put option.  The Company sold an additional 39,915 shares in February, 2001, receiving proceeds in the amount of $158,911.59.  In connection with this sale, the Company issued 3,992 purchase warrants to Swartz at an initial exercise price of $4.8125 per share.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Note J - COMMITMENTS, CONTINGENCY AND OTHER MATTER

|[1] | Lease:
In January 1998 the company entered into an agreement with a stockholder/landlord, as amended to be effective upon the completion of the Company's private placement, to lease land and a building for one year at $52,500 per month.  The agreement also provided for the right to purchase of land adjacent to the leased premises for one year after the effective date of the lease for $350,000.

The company paid approximately $164,000 representing the first month's rent and rent deposits.  On August 31, 1999, the Company and the stockholder terminated the lease agreement. The termination noted that the first and last monthly payments previously paid by the company constitute the total payment required to be made. As a result, the $164,000 was charged to operations during 1999.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[2] | Employment agreements:
The company has entered into three employment agreements with stockholders for a period of three years, commencing on the first day of the month in which the company receives the proceeds from an IPO.  Two agreements each provide for salaries of $150,000 per year.  The third agreement provides for a salary of  $240,000 in the first year, $252,000 in the second year and $264,000 in the third year and provides for a minimum bonus of $15,000 per quarter for the duration of the agreement.                                                                                                                                                                                                                                                                                  

F-14



-41-

TORVEC, INC.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[3] | Variable Gear, LLC:
In June 2000, the company sold 100,000 shares of common stock to a stockholder for $5.00 per share and granted an exclusive world-wide license of all its technology to Variable Gear, LLC ("Variable Gear") (an entity owned 51% by the stockholder) for the aeronautical and marine markets.  Variable Gear is to pay the company a royalty of 4% of the gross selling price of products incorporating the technology and 49% of compensation received with respect to sublicense income through January 1, 2008.  The company owns the remaining 49% of Variable Gear.  The company does not share in any profit or losses in this entity.  On January 1, 2008, the Company is required to purchase the membership interest of the stockholder at the then fair market value as defined.  At December 31, 2000 such fair value cannot yet be reasonably estimated.

The market price of the company's stock at the date of the transaction was $3.50.  Accordingly, $1.50 per share has been allocated to the license agreement and included in deferred revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|[4] | Arbitration:
During 1997 certain members of the Gleasman family were named in a lawsuit seeking monetary damages relating to the development of certain technology and related matters.  The court stayed all aspects of the litigation and directed that the parties arbitrate such matters in dispute.  The arbitration proceedings were conducted during 1998 and a decision on this matter was rendered in April 1999.  The arbitrator issued a nonappealable decision which determined that the Gleasmans exclusively owned all the patents and the patents are exclusive patents of the Company. The arbitrator's decision also awarded the sum of $863,000 to be paid to McElroy Manufacturing, Inc. ("McElroy") by the Gleasmans out of royalties which they may receive and awarded McElroy a 20% interest in all royalties and other sums received by the Gleasmans.  The company was not a party to the arbitration.
In June 1999, McElroy filed an amended complaint in the United States District Court for the Northern District of Oklahoma seeking correction of the inventorship of the subject patents and that the Gleasmans immediately reimburse McElroy for its expense in the amount of $863,000 plus interest.  In addition McElroy has demanded that the company pay out of proceeds generated by sale of its stock the sums demanded of the Gleasmans.
In March 2000, the Court remanded the case to the arbitrator to clarify certain ambiguities regarding the payment and terms of the April 1999 decision.  In July 2000, the arbitrator issued an "Addendum and clarification Memorandum" awarding $360,000 to McElroy in partial reimbursement of its expenses.  This amount is to be paid by Vernon and Keith Gleasman, not the company.
Vernon and Keith Gleasman made an application to the arbitrator to vacate so much of the addendum which related to the payment of $360,000 to McElroy and, if the application to vacate was not granted, to reopen the hearing before the arbitrator to allow Vernon and Keith Gleasman to introduce additional evidence regarding their expenses.
In September 2000, the arbitrator found that Vernon and Keith Gleasman's contentions to reopen the hearing were without merit and therefore denied in all respects Vernon and Keith Gleasman's application to vacate so much of the addendum as it relates to the payment of $360,000 or, in the alternative, to reopen the hearing to allow them to introduce additional evidence regarding their expenses.
|    | F-15                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



-42-



TORVEC, INC.

|[4] | Arbitration:  (continued)
In rendering its decision, the arbitrator stated that the existence of the company has nothing to do with the lawsuit or the arbitration and that the Gleasmans have certain obligations to McElroy, and McElroy to the Gleasmans.
Management of the company believes that certain demands made by McElroy upon the company constitute a complete misreading of the arbitrator's decision and are without merit since the contract was between the Gleasmans and McElroy, the company did not participate in the arbitration proceedings and that the arbitrator's decision did not direct payment of any sums from the Company to McElroy.
Should the company's position not prevail, it would have an adverse effect on the company's financial position and results of operations. No provision for such contingency has been made in the financial statements.  Presently, such loss cannot be reasonably estimated.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|
|



Note K - Retroactive Adjustment

In the second half of fiscal year 2000 the company previously reported revenues from a world-wide license to Variable Gear, LLC, which it is changing, based upon accounting guidance derived from SEC Staff Accounting Bulletin 101.  Accordingly, deferred revenue and deficit accumulated during the development stage has been increased by $11,000 at December 31, 2000.  There was no change reported per share data.
                                                                                                                                                    F-16

-43-





Item 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 
ACCOUNTING AND FINANCIAL DISCLOSURE.

None

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

The following table sets forth certain information about the current directors, executive officers of the Company and its consultants.

|Name                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Age                  | Position                                                                                                                                                                                                                   | Date of
   Electionor Designation                                                      | Date of
Termination or Resignation                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | -------------------------------------------------------------------------
|Herbert H. Dobbs
448 West Maryknoll Road
Rochester Hills, MI 48309
Keith E. Gleasman
11 Pond View Drive
Pittsford, NY 14534
Lee E. Sawyer
16 Williamsburg Lane
Rolling Hills, CA 90274
Morton A. Polster
c/o Eugene Stephens & Associates
56 Windsor Street
Rochester, NY 14605
James A. Gleasman
11 Pond View Drive
Pittsford, NY 14534
Vernon E. Gleasman
11 Pond View Drive
Pittsford, NY 14534
Samuel M. Bronsky
6653 Main Street
Williamsville, NY  14221 | 69
53
59
73
60
89
39 | Chairman of the Board
of Directors
Director; President and
Consultant to Torvec, Inc.
Director
Director; Secretary of Torvec, Inc.
Director; Consultant to Torvec, Inc.
Consultant to Torvec, Inc.
Chief Financial Officer | 02/20/98  
  09/26/96  
  09/27/96  
  09/27/96  
  02/20/98  
  12/01/97  
  04/01/98 | *
          *
          *
          *
          *
          *
          *



-44-



*Changes in Control

To the 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.  The members of the Board of Directors shall serve until the next annual meeting of shareholders and until their successors are elected or appointed and shall have qualified, or until their prior resignation or termination.

(b)     Business Experience

1.          Dr. Herbert H. Dobbs - Chairman of the Board of Directors

| | 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.  He has the broad background needed to guide the Company's growth and development.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|  | During his career he has:                                                                                                                                                                                                 
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|o | Worked as a manufacturing engineer.                                                                                                                                                                                       
|o | Worked as a design engineer in the aircraft and missile industry.                                                                                                                                                         
|o | Managed Army laboratories as a captain, lieutenant colonel and colonel.                                                                                                                                                   
|o | 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.
|o | 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).                                              
|o | Managed advanced development of the laser guided 155mm-artillery shell now known as the "Copperhead".                                                                                                                     
|o | Served in Taiwan as a member of the U.S. Military Assistance Advisory Group (MAAG) working with the Republic of China Army General Staff.                                                                                 
|o | Served as liaison officer between the Army and Air Force for development of the laser seeker for the Hellfire missile.                                                                                                    
|o | 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 Vernon Gleasman's Torsen® differential.      



-45-





|o | 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-Automotive and 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 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2.          Keith E. Gleasman - Director; President and Consultant to Torvec, Inc.

| | 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|o | As Vice President of Sales for Gleason Corporation (Power Systems Division), designed and conducted seminars on vehicle driveline systems for engineers at the U.S. army tank automotive command.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|o | Designed a complete nationwide after-market program for the Torsenâ
 Differential, which included trade show participation for the largest after-market shows in the U.S., SCORE and SEMA.       
|o | Extensive after-market experience including pricing, distribution, sales catalogs, promotions, trade show booths designs and vehicle sponsorships.                                               
|o | 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).                           



-46-





|o | Designed FTV prototype (from concept to assembly).                                                                                                             
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|o | Assisted in developing engineering and manufacturing procedures for the Torsen Differential and for all of the Torvec prototypes.                              
|o | 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).
|o | 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.

3.          Morton A. Polster - Director; Secretary of Torvec, Inc.

| | Partner in the intellectual property law firm of Eugene Stephens & Associates. Formerly, General Patent Counsel and, thereafter, Secretary and Corporate Counsel for Gleason Corporation (1969 - 1989) and prior to that, Patent Counsel for Eastman Kodak Corporation (1960 - 1969).  While with Gleason Corporation, Mr. Polster represented Gleason when the latter purchased the Gleasman's Triple D, Inc., and exclusive rights to the Gleasman patents relating to the design and manufacture of the Torsen differential.  He was part of the management team overseeing the operation of the Gleason Power Systems Division, which was created to manufacture and sell the Torsen differential.  Also, he represented Gleason when the latter sold its Power Systems Division and its rights to the Torsen Differential to Diesel Kiki, Ltd. of Japan (now Zexel Corporation).  While in private practice, since 1989, Mr. Polster represented Zexel Torsen, Inc., (subsidiary of Zexel Corp.), which was created to manage the manufacture and sale of Torsen Differentials.  Mr. Polster has been patent counsel to the Gleasmans since 1989 and has been in charge of the preparation and execution of their U.S. and international patent protection.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

4.          Lee E. Sawyer - Director



| | Over a 30-year career in the wholesale side of the automotive industry, Mr. Sawyer has worked for Ford in the technical training field and for Toyota in sales, marketing, motorsports and service.  During the last ten years, he was part of the start-up teams that successfully launched Hyundai and Kia Motors America focusing on parts, service, quality assurance, fleet sales, public relations and consumer affairs policy, procedures and systems.   During his career he has worked with these automakers as follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 
| | 







|-47-               
|-------------------
|Ford Motor Company:
|o
o                



|Toyota Motor Sales USA:
|-----------------------
|o
o
o
o                
|Hyundai Motor America: 
|o
o                    
|Kia Motors America:    
|o
o                    



-48-



|                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Mr. Sawyer is a start-up specialist with the operations, management, communications and problem solving skills required to launch the Company successfully.  He holds a B.A. in Industrial Technology and attended USC School of Business-International Relations, Ford Marketing Institute, Toyota Management Training, American Management Association Training, Interpersonal skills training, and U.S. Coast Guard Leadership and Diesel Engine schools.

5.           James A. Gleasman - Director; Consultant to Torvec, Inc.



|o | Life-long entrepreneur.                                                                                                                
|- | ---------------------------------------------------------------------------------------------------------------------------------------
|o | Skilled in management, finance, strategic planning, organizing and marketing.                                                          
|o | Co-inventor of the Gleasman GSD-10 steer drive.                                                                                        
|o | Established manufacturing of the Torsen® Differential in Argentina, Brazil, etc.                                                       
|o | Principal at two of the family companies, raised capital, negotiated international, military and automotive contracts.                 
|o | Set business strategies for small company's dealings with large companies, including sale of family company to Gleason Corp., New York.
|o | Joint venture partner with Clayton Brokerage Co. of St. Louis, MO.                                                                     
|o | Owned financial-consulting business.                                                                                                   
|o | Negotiated with numerous Asian Corporations (including Mitsubishi and Mitsui).                                                         
|o | Educated in Asian philosophy, business practices and culture.                                                                          

6.          Samuel M. Bronsky - Chief Financial Officer



|Owner of a Certified Public Accounting firm specializing in small to medium-sized businesses.  Services include audits, reviews, compilations, and consulting services, including among other items, business valuations, computer applications, assisting in debt acquisition and consolidation, purchasing and selling of businesses and related tax ramifications, and general business assistance for clients.  In addition, Mr. Bronsky has worked with various government agencies in a variety of audit contexts, including sales tax audits, IRS examinations.  Mr. Bronsky is licensed in New York and is a member of the New York State Society of CPAs and the American Institute of CPAs.  He is a director of the East Buffalo Credit Union and the Erie Community College Foundation and is the treasurer of the East Buffalo Credit Union.  Mr. Bronsky is past treasurer and director of the Amherst Chamber of Commerce.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



-49-

7.          Vernon E. Gleasman - Consultant to Torvec, Inc.



|Mr. Gleasman is co-inventor (with sons, James A. and Keith E. Gleasman) of the all-gear GSD-10 (a hydro-mechanical steering system for track vehicles); conceived and engineered the FTV; and is inventor of the Torsen® Differential now used in many passenger automobiles around the world such as: Porsche, Audi Quattro's, 8 car lines of Toyota (e.g., Lexus, Supra and RAV4), Mazda Miata and RX7, Chevrolet Camero, Pontiac Firebird, Oldsmobile Achieva, Suzuki, and the U.S. Army HMMWV (Hummer).  Mr. Gleasman was the winner of the Society of Automotive Engineers' 1983 Schwitzer Award for Most Innovative New Product at the Indianapolis 500; is listed in Who's Who in American Inventors 1990 Edition; he has been nominated to the National Inventors Hall of Fame -- ; and he was named as Inventor of the Year 2001 by the Rochester Intellectual Property Law Association -- his work is featured in the Theory of Machines and Mechanisms, McGraw-Hill, 1995 (Mr. Gleasman's Torsen® Differential is pictured on the jacket cover).  He has been granted over 20 patents on gearing, differentials, and machine tools over the past 30 years, and he is the principal inventor on over 100 U.S. patents (as well as corresponding foreign patents), primarily automotive-related.  Examples (U.S. patent numbers in parenthesis): hydraulic clutch transmission (2177213); hydraulic clutch for transmission (2226309); Bendix fuel direct engine injector valve and Bendix diesel engine starter (2450129); hydraulic variable-speed hydrostatic transmission (2471031); Vane-type fluid drive (2552167), hypoid differential (2628508); fluid transmission (2668417); White Motor Co. tilting cab (2838126), assigned to White Motor; hydro-vector fuel-injector advance mechanism; catalytic converter for diesel trucks.  He is also the inventor of non-freeze water meter, machine tools and other products.  Early career: engineer at Bendix; and vice president manufacturing at White Motor, where engineering and management experience included designing and planning White's plant for manufacture of White 9000 heavy truck and organizing manufacturing and production of aircraft components for White's Aircraft division. Later, Mr. Gleasman founded his own companies, including Triple-D, Inc., sold to Gleason Corporation, Rochester, New York.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(c)     Family Relationships

Vernon E. Gleasman is the father of James A. and Keith E. Gleasman.  There are no other family relationships between any directors or executive officers of the Company, either by blood or by marriage.

(d)     Section 16(a) Beneficial Ownership Reporting  Compliance

Based upon its review of copies of Forms 3 and 4 and 5 received by it, the Company believes that, to the extent such Forms were required to be filed, such Forms were timely filed pursuant to Section 16 of the Securities Exchange Act of 1934, and that no director, officer and/or 10% Shareholder required to file such Forms failed to either file them or file them in timely fashion.



-50-

Item 10.     EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the aggregate compensation paid or accrued to the Company's Named Executive Officers and Consultants by the Company for services rendered during the fiscal year ending December 31, 2000:

|                                                                                                                                                                                           |                    |                                                    | Long TermCompensation Awards
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------ | -------------------------------------------------- | ----------------------------
|                                                                                                                                                                                           |                    |                                                   
|Name and Position                                                                                                                                                                          | AnnualCompensation | OptionsGranted                                     | StockAwards                 
|Salary                                                                                                                                                                                     | Consultants Fee   
|Keith E. Gleasman
President and Consultant
James A. Gleasman
Consultant
Vernon E. Gleasman
Consultant
Morton A. Polster
Secretary and Consultant
Samuel M. Bronsky
Chief Financial Officer | $0
$0
$0
$0
$0     | $75,000(1)(4)
$60,000(2)(4)
$71,000(3)(4)
$0(5)
$0 | 0
0
0
0
0                   

(1)     On December 1, 1997, the Company entered into a 3 year consulting agreement with Keith E. Gleasman, under which he is obligated to devote substantially all of his business and professional time to the Company and its Plan of Operation in the capacity of Consultant to the Company.  Under such agreement, Mr. Keith E. Gleasman is entitled to receive an annual consulting fee of $150,000 and was granted an option to purchase 25,000 shares of the Company's Common Stock pursuant to the Company's 1998 Stock Option Plan.  The Company has accrued a total of $201,000 under the consulting agreement though December 31, 2000, of which $75,000 was accrued in fiscal 2000.  The consulting agreement was extended as of December 1, 2000 for an additional 3 years and was modified to authorize the Board of Directors, in its sole discretion, to pay accrued and future Gleasman consulting fees in cash or the capital stock of the Company, or a combination of both, at such times as the Board deems appropriate.



-51-

(2)     On December 1, 1997, the Company entered into a 3 year consulting agreement with James A. Gleasman, under which he is obligated to devote substantially all of his business and professional time to the Company and its Plan of Operation in the capacity of Consultant to the Company.  Under such agreement, Mr. James A. Gleasman is entitled to receive an annual consulting fee of $150,000 and was granted an option to purchase 25,000 shares of the Company's Common Stock pursuant to the Company's 1998 Stock Option Plan.  The Company has accrued a total of $250,000 under the consulting agreement through December 31, 2000, of which $90,000 was accrued in fiscal 2000.  The consulting agreement was extended as of December 1, 2000 for an additional 3 years and was modified to authorize the Board of Directors, in its sole discretion, to pay accrued and future Gleasman consulting fees in cash or the capital stock of the Company, or a combination of both, at such times as the Board deems appropriate.

(3)     On December 1, 1997, the Company entered into a 3 year consulting agreement with Vernon E. Gleasman, under which he is obligated to devote substantially all of his business and professional time to the Company and its Plan of Operation in the capacity of Consultant to the Company.  Under such agreement, Mr. Vernon Gleasman is entitled to receive an annual consulting fee of $150,000 and was granted an option to purchase 25,000 shares of the Company's Common Stock pursuant to the Company's 1998 Stock Option Plan.  The Company has accrued a total of $214,000 under the consulting agreement through December 31, 2000, of which $79,000 was accrued in fiscal year 2000.  The consulting agreement was extended as of December 1, 2000 for an additional 3 years and was modified to authorize the Board of Directors, in its sole discretion, to pay accrued and future Gleasman consulting fees in cash or the capital stock of the Company, or a combination of both, at such times as the Board deems appropriate.

(4)     Each of the consulting agreements contain customary covenants prohibiting the consultant from disclosure of confidential information regarding the Company, its inventions and its products, and provisions confirming that all inventions conceived, made or developed by the consultant and relating to the business of the Company constitutes the sole property of the Company. Each of the consulting agreements contains covenants restricting the consultant from engaging in any activities competitive with the business of the Company during the terms of such agreements and for a period of two years after termination.  Each of the consulting agreements also contain a provision that the benefits provided thereunder continue even if the consultant were to become unable to perform services for the Company during its term.

(5)     On February 6, 1998, the Company entered into a 3 year employment agreement with Morton A. Polster, commencing on the first day of the month in which the Company receives the proceeds from the completion of an initial public offering of its securities, under which he is obligated to devote substantially all of his business and professional time to the Company and its Plan of Operation in the capacity as Secretary and Legal and Patent Counsel of the Company.  Under such agreement, Mr. Polster is entitled to receive a salary of $150,000 during the first year of the agreement, $150,000 during the second year and $150,000 during the  last year.  He is also entitled to certain employee benefits normally associated with employment such as vacation, health and disability insurance and was granted an option to purchase 100,000 shares of the Company's Common Stock pursuant to the Company's 1998 Stock Option Plan.



-52-

The agreement is automatically renewable for an additional 3 years and may be terminated earlier by the employee upon 12 months notice or by the Company upon payment of a severance of 12 months base pay, except if the termination is for cause.  Since the Company has not initiated an initial public offering, the employment agreement, by its terms, has not become effective.

(6)     During fiscal year 2000, Mr. Polster was paid 2,882 shares of the Company's common stock as remuneration for legal services rendered to the Company in connection with its patents.

(7)     During fiscal year 2000, Mr. Bronsky was paid 11,989 shares of the Company's common stock for services rendered as Chief Financial Officer.

Herbert H. Dobbs is Chairman of the Company's Board of Directors.  Lee E. Sawyer is a Director of the Company.  During its fiscal year ending December 31, 2000, the Company did not renumerate either of them in such capacities.

On February 6, 1998, the Company entered into a 3 year employment agreement with Herbert H. Dobbs, commencing on the first day of the month in which the Company receives the proceeds from the completion of an initial public offering of its securities, under which he is obligated to devote substantially all of his business and professional time to the Company and its Plan of Operation in the capacity as Chairman and Chief Executive Officer of the Company.  Under such agreement, Herbert H. Dobbs is entitled to receive a salary of $150,000 during the first year of the agreement, $150,000 during the second year and $150,000 during the last year.  He is also entitled to certain employee benefits normally associated with employment such as vacation, health and disability insurance and was granted an option to purchase 100,000 shares of the Company's Common Stock pursuant to the Company's 1998 Stock Option Plan.  The agreement is automatically renewable for an additional 3 years and may be terminated earlier by the employee upon 12 months notice or by the Company upon payment of a severance of 12 months base pay, except if the termination is for cause. Since the Company has not initiated an initial public offering, the employment agreement, by its terms, has not become effective.

On February 6, 1998, the Company entered into a 3 year employment agreement with Lee E. Sawyer, commencing on the first day of the month in which the Company receives the proceeds from the completion of an initial public offering of its securities, under which he is obligated to devote substantially all of his business and professional time to the Company and its Plan of Operation in the capacity as President and Chief Operating Officer of the Company.  Under such agreement, Mr. Sawyer is entitled to receive a salary of $240,000 during the first year of the agreement, $252,000 during the second year and $264,000 during the last year and a minimum bonus of $15,000 per quarter during the agreement's term, with bonus increases determined by the Board of Directors depending upon such factors as performance, profitability and the financial condition of the Company.  He is also entitled to certain employee benefits normally associated with employment such as vacation, health and disability insurance and was granted an option to purchase 180,000 shares of the Company's Common Stock pursuant to the Company's 1998 Stock Option Plan.  The agreement is automatically renewable for an additional 3 years and may be terminated earlier by the employee upon 12 months notice or by the Company upon payment of a severance of 12 months base pay and minimum bonus, except if the termination is for cause. Since the Company has not initiated an initial public offering, the employment agreement, by its terms, has not become effective.

-53-

Each of the employment agreements contain customary covenants prohibiting the employee from disclosure of confidential information regarding the Company, its inventions and its products, and provisions confirming that all inventions conceived, made or developed by the employee and relating to the business of the Company constitutes the sole property of the Company. Each of the employment agreements contains covenants restricting the employee from engaging in any activities competitive with the business of the Company during the terms of such agreements and for a period of two years after termination.  Each of the employment agreements also contain a provision that the benefits provided thereunder continue even if the employee were to become unable to perform services for the Company during its term.

Option/SAR Grants in Last Fiscal Year

The following table sets forth certain information for the Named Executive Officers as well as the Company's Consultants with respect to the grant of options to purchase common stock during the fiscal year ended December 31, 2000.

|                   | Shares Underlying | % of Options         |                |                
|------------------ | ----------------- | -------------------- | -------------- | ---------------
|Name               | Options Granted   | Granted to Employees | Exercise Price | Expiration Date
|                   |                   |                      |                |                
|Keith E. Gleasman  | 0                 | 0%                   | 0              | 0              
|James A. Gleasman  | 0                 | 0%                   | 0              | 0              
|Vernon E. Gleasman | 0                 | 0%                   | 0              | 0              
|Morton A. Polster  | 0                 | 0%                   | 0              | 0              
|Herbert H. Dobbs   | 0                 | 0%                   | 0              | 0              
|Lee E. Sawyer      | 0                 | 0%                   | 0              | 0              



Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

The following table sets forth certain information for the Named Executive Officers as well as the Company's Consultants with respect to the exercise of options to purchase common stock during the fiscal year ended December 31, 2000 and the number and value of securities underlying unexercised options held by the Named Executive Officers as well as the Company's Consultants as of such date.

|Name               | Shares
Acquiredon Exercise | ValueRealized | Number of Unexercised
Options atDecember 31, 2000Exercisable      Unexercisable | Value of Unexercised
   In-the-Money Options
  at December 31, 2000(1)Exercisable     Unexercisable
|------------------ | -------------------------- | ------------- | ------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------
|                   |                            |               |                                                                                 |                                                                                                    
|Keith E. Gleasman  | 0                          | 0             | 20,000                                                                          | 5,000                                                                                              
|James A. Gleasman  | 0                          | 0             | 20,000                                                                          | 5,000                                                                                              
|Vernon E. Gleasman | 0                          | 0             | 20,000                                                                          | 5,000                                                                                              
|Morton A. Polster  | 0                          | 0             | 60,000                                                                          | 40,000                                                                                             
|Lee E. Sawyer      | 0                          | 0             | 108,000                                                                         | 72,000                                                                                             
|Herbert H. Dobbs   | 0                          | 0             | 60,000                                                                          | 40,000                                                                                             

-54-



(1)     The closing price of the Company's common stock on December 29, 2000 (the last trading day of the year) was $4.125 per share.  Since the per share exercise price is $5.00 under the option agreements, none of the options were "in-the-money" as of that date.



Year 2000 Options

No options were granted in the fiscal year ended December 31, 2000 under the Company's 1998 Stock Option Plan.



1998 Stock Option Plan

On December 1, 1997, the Company's Board of Directors adopted the Company's 1998 Stock Option Plan pursuant to which officers, directors, key employees and/or consultants of the Company may be granted incentive stock options and/or  non-qualified stock options to purchase up to an aggregate of 2,000,000 shares of the Company's common stock.  On May 27, 1998, the Company's shareholders approved the 1998 Stock Option Plan.  On December 17, 1998, the Company registered the shares reserved for issuance under the 1998 Stock Option Plan under the Securities Act of 1933.

With respect to incentive stock options, the Plan provides that the exercise price of each such option must be at least equal to 100% of the fair market value of the common stock on the date that such option is granted (110% of fair market value in the case of shareholders who, at the time the option is granted, own more than 10% of the total outstanding common stock), and requires that all such options have an expiration date not later than the date which is one day before the tenth anniversary of the date of the grant of such options (or the fifth anniversary of the date of grant in the case of 10% shareholders).  However, in the event that the option holder ceases to be an employee of the Company, such option holder's incentive options immediately terminate.  Pursuant to the provisions of the Plan, the aggregate fair market value, determined as of the date(s) of grant, for which incentive stock options are first exercisable by an option holder during any one calendar year cannot exceed $100,000.

With respect to non-qualified stock options, the Plan permits the exercise price to be less than the fair market value of the Common Stock on the date the option is granted and permits Board discretion with respect to the establishment of the terms of such options.  Unless the Board otherwise determines, in the event that the option holder ceases to be an employee of the Company, such option holder's non-qualified options immediately terminate.



-55-



In connection with their employment agreements, the Company's Board of Directors granted stock options under the 1998 Stock Option Plan to the Company's Named Executive Officers entitling them to purchase an aggregate of 380,000 shares of common stock, all of which provide for an exercise price of $5.00 per share, are exercisable on a cumulative basis at the rate of 20% per year beginning on January 1, 1998 and provide that the right to exercise the option in accordance with its terms shall survive the executive's termination of employment.  Each option expires on December 31, 2007.  In connection with their consulting agreements, the Board of Directors granted stock options under the 1998 Stock Option Plan to the Company's consultants entitling them to purchase an aggregate of 75,000 shares of common stock, all of which provide for an exercise price of $5.00 per share, are exercisable on a cumulative basis at the rate of 20% per year beginning on December 1, 1997 and provide that the right to exercise the option in accordance with its terms shall survive the consultant's termination of services.  Each option expires on November 30, 2007.

No options were granted under the Company's 1998 Stock Option Plan during the fiscal year ending December 31, 2000.  No options granted under the Plan were exercised during the fiscal year ended December 31, 2000.

Business Consultants Stock Plan

On June 2, 1999, the Company created a Business Consultants Stock Plan and reserved 200,000 shares of the Company's $.01 par value common stock, which may be issued from time to time to business consultants and advisors who provide bona fide services to the Company, provided that such services are not in connection with the offer or sale of securities of the Company in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company's securities.

With respect to the actual issuance by the Company of shares for services rendered in accordance with the terms of the Plan, the per share value of such shares is equal to the closing price for the Company's common stock on a date which is one business day immediately prior to the issuance of the shares as quoted in the over-the-counter market (OTCBB).

The Company registered the 200,000 shares reserved for issuance under the Business Consultants Stock Plan under the Securities Act of 1933, and the Registration Statement became effective on June 11, 1999.  By virtue of such registration, business consultants, who are not affiliates of the Company, may immediately sell such shares in open market transactions without securities law restrictions.

On September 12, 2000, the Board of Directors authorized a 200,000 share increase in the number of shares issuable under the Plan.  The Company filed Form S-8, Registration Statement with the Securities and Exchange Commission which became effective on October 5, 2000 to register the additional 200,000 shares.

For the fiscal year ending December 31, 2000, the Company issued 196,259 shares of common stock under the Business Consultants Stock Plan.

-56-

|Item 11. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|-------- | --------------------------------------------------------------

Security Ownership

The following table sets forth as of December 31, 2000 certain information with respect to the beneficial ownership of the common stock of the Company by (i) each person known by the Company to own more than 5% of the outstanding shares of the common stock of the Company, each director, each executive officer, each consultant and (ii) all directors, executive officers and named consultants of the Company as a group.  Unless otherwise indicated, the owners have sole voting and investment power with respect to their respective shares.

|Name and Address ofBeneficial Owner                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Number of    Position                                                                                                                                                                                                       | SharesOwned                                                                                  | Percent
  of SharesOwned(1)                                 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------------------------
|Herbert H. Dobbs
448 West Maryknoll Road
Rochester Hills, Michigan 48309
Keith E. Gleasman
11 Pond View Drive
Pittsford, New York  14534
Lee E. Sawyer
16 Williamsburg Lane
Rolling Hills, California 90274
Morton A. Polster
c/o Eugene Stephens & Associates
56 Windsor Street
Rochester, New York 14605
James A. Gleasman
11 Pond View Drive
Pittsford, NY  14534
Vernon E. Gleasman
11 Pond View Drive
Pittsford, NY  14534
Samuel M. Bronsky
6653 Main Street
Williamsville, NY  14221
All Executive Officers
and Directors as a Group
(7 persons) | Chairman of the
Board of Directors
Director; President and
Consultant to Torvec, 
Inc.
Director
Director; Secretary of
Torvec, Inc.
Director; Consultant
to Torvec, Inc.
Consultant to Torvec,
Inc.
Chief Financial Officer | 401,000(2)
5,382,943(3)
393,000(4)
319,883(5)
5,372,141(6)
5,477,601(7)
12,989
17,359,557(8) | 1.77%
23.84%
1.73%
1.41%
23.8%
24.3%
Less Than
    1%
76.21%



-57-



1.     Except as indicated in the footnotes to this table, the Company believes that all the persons named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable.  In accordance with the rules of the Commission, a person or entity is deemed to be the beneficial owner of securities that can be acquired by such person or entity within 60 days from December 31, 2000 upon the exercise of options or warrants.  Each beneficial owner's percentage ownership is determined by assuming that options and warrants that are held by such person (but not those held by any other person) and which are exercisable within 60 days of December 31, 2000 have been exercised.  The inclusion herein of such shares listed as beneficially owned does not constitute an admission of beneficial ownership.  Percentages herein reflect a base of 22,552,062 shares of common stock outstanding as of December 31, 2000.

2.     Includes 60,000 shares which may be purchased through the exercise of an option granted in connection with his employment agreement, exercisable at $5.00 per share.  In May, 1998, Dr. Dobbs entered into option agreements pursuant to which related parties have the right to purchase 360,000 shares of the Company's common stock from him at an exercise price of $5.00 per share at any time during a ten year option term.

3.     Includes 20,000 shares which may be purchased through the exercise of an option granted in connection with his consulting agreement, exercisable at $5.00 per share.  In December, 1997, Mr. Gleasman entered into option agreements pursuant to which related parties have the right to purchase 300,000 shares of the Company's common stock from him at an exercise price of $5.00 per share at any time during a ten year option term.

4.     Includes 108,000 shares which may be purchased through the exercise of an option granted in connection with his employment agreement, exercisable at $5.00 per share.

5.     Includes 60,000 shares which may be purchased through the exercise of an option granted in connection with his employment agreement, exercisable at $5.00 per share.

6.     Includes 20,000 shares which may be purchased through the exercise of an option granted in connection with his consulting agreement, exercisable at $5.00 per share.  In November, December 1997, Mr. Gleasman entered into option agreements pursuant to which related parties have the right to purchase 364,000 shares of the Company's common stock from him at an exercise price of $5.00 per share at any time during a 10 year option term.



-58-



7.     Includes 1,744,066 shares attributable to ownership by Mr. Gleasman's wife.  Includes 20,000 shares which may be purchased through the exercise of an option granted in connection with his consulting agreement, exercisable at $5.00 per share.  In December, 1997, Mr. Gleasman entered into option agreements pursuant to which related parties have the right to purchase 2,000,000 shares of the Company's common stock from him at an exercise price of $5.00 per share at any time during a 10 year option term.

8.     Includes an aggregate 288,000 shares which may be purchased through the exercise of options granted in connection with employment and consulting agreements, exercisable at $5.00 per share.

Item 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain Transactions

During the ten plus years prior to the incorporation of the Company, Vernon E., Keith E. and James A. 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 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 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.

On April 15, 1997, the Company issued 1,000,000 shares of its $.01 par value common stock to certain principals of LT Lawrence & Co., Inc. as compensation pursuant to the terms of a nonexclusive financial consulting agreement entered into February 11, 1997.  LT Lawrence & Co., Inc. dissolved in March 1998, although the principals still hold the shares which were issued to them less any shares they may have sold.  As a result of the same transaction, there are 125,000 outstanding consulting warrants which may be exercised if and when the Company has an initial public offering of its common stock.



-59-



On March 26, 1999, Keith and James Gleasman each purchased 26,000 shares of the Company's common stock at $10.00 per share under the Company's 1998 private placement.  On June 25, 1999, Keith and James Gleasman each purchased 9,500 shares of the Company's common stock at $10.00 per share under the Company's 1998 private placement.  On August 9, 1999, Keith Gleasman purchased 4,870 shares and James Gleasman purchased 3,500 shares at $10.00 per share under the Company's 1998 private placement.

On June 29, 2000, the Company announced that it had granted an exclusive, world-wide license of all its automotive technology to Variable Gear, LLC for the aeronautical and marine markets.  Variable Gear will pay the Company 4% royalties for 7 years after which the Company can repurchase the license.  Variable Gear is owned 51% by Robert C. Horton, Chairman and CEO of Ultrafab, Inc. and a Company shareholder.  The Company owns the remaining 49%.

Mr. Morton A. Polster, a director of the Company and its Secretary, has been Patent Counsel to the Gleasman family since 1989 and has been in charge of the preparation and execution of the Gleasmans' and now the Company's U.S. and international patent protection.  Mr. Polster received 291,600 shares of the Company's Common Stock at the inception of the Company.  Mr. Polster has received 9,113 shares under the Company's Business Consultants Stock Plan through March 15, 2001.

On December 8, 2000, the Company entered into an Investment Banking Services Agreement with Dunwoody Brokerage Services, Inc., d/b/a Swartz Institutional Finance.  Under the agreement, Swartz has agreed to introduce the Company to potential investment partners with a view to making an investment in the Company and/or entering into a strategic partnership with the Company.  Swartz will receive 4% of the "transaction value" of any closed transaction resulting from any Swartz introduction.  Such amount is payable in cash or common stock of the Company.  In addition, Swartz will be issued warrants to purchase the number of the Company's common shares equal to 4% of the transaction value of any closed transaction, based upon the market price of the Company's common stock on the closing date, at an exercise price equal to such market price.

Certain officers, directors and consultants may engage in transactions with the Company in the ordinary course of the business of the Company.  It is expected that the terms and conditions of such transactions will be substantially the same as similar transactions with unrelated parties.

Other than as described herein, there have been no material transactions, series of similar transactions or currently proposed transactions to which the Company was or is a party, in which the amount invested exceeds $60,000 and in which any director or executive officer, or any security holder who is known to the Company to own of record or beneficially more than five percent of the Company's common stock, or any member of the immediate family of any of the foregoing persons, had a material interest.



-60-



Item 13.     EXHIBITS AND REPORTS ON FORM 8-K.

(a)     Exhibits

The following Exhibits, as applicable, are attached to this Annual Report (Form 10-KSB).  The Exhibit Index is found on the page immediately succeeding the signature page and the Exhibits follow on the pages immediately succeeding the Exhibit Index.



| | (2) | Plan of acquisition, reorganization, arrangement, liquidation, or succession
| | --- | ----------------------------------------------------------------------------
| |     |                                                                             
| |     | 2.1                                                                         
| |     |                                                                             
| | (3) | Articles of Incorporation, By-laws                                          
| |     |                                                                             
| |     | 3.1                                                                         
| |     |                                                                             
| |     | 3.2                                                                         
| |     |                                                                             
| |     | 3.3                                                                         
| |     |                                                                             
| | (4) | Instruments defining the rights of holders including indentures
None        
| |     |                                                                             
| | (9) | Voting Trust Agreement                                                      
| |     |                                                                             
| |     | None                                                                        
| |     |                                                                             





-61-



|     |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---- | ------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Material Contracts |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     | 10.1               | Certain Employment Agreements, Consulting Agreements, certain
assignments of patents, patent properties, technology and know-how
to the Company, Neri Service and Space Agreement and Ford Motor
Company Agreement and Extension of Term, all incorporated by
reference to Form 10-SB/A, Registration Statement, registering
Company's $.01 par value common stock under section 12(g) of the
Securities Exchange Act of 1934;                                
|     |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     | 10.2               | The Company's 1998 Stock Option Plan and related Stock Options
Agreements, incorporated by reference to Form S-8, Registration
Statement, registering 2,000,000 shares of the Company's $.01 par
value common stock reserved for issuance thereunder, effective
December 17, 1998;                                                                                                                                                                            
|     |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     | 10.3               | The Company's Business Consultants Stock Plan, incorporated by
reference to Form S-8, Registration Statement, registering 200,000
shares of the Company's $.01 par value common stock reserved for
issuance thereunder, effective June 11, 1999 as amended by reference
to Form S-8 Registration Statement registering an additional 200,000
shares of the Company's $.01 par value common stock reserved for 
issuance thereunder, effective October 5, 2000;
|     |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     | 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;                                                                                                                                                                                                                                                                                                             
|     |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               



-62-



|     | 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                                                                                                         | Consulting Agreement Extension with Keith E. Gleasman, effective
December 1, 2000;                                                                                            | 
|     |                                                                                                              |                                                                                                                                                                               | 
|     | 10.9                                                                                                         | Consulting Agreement Extension with James A. Gleasman, effective
December 1, 2000;                                                                                            | 
|     |                                                                                                              |                                                                                                                                                                               | 
|     | 10.10                                                                                                        | Consulting Agreement Extension with Vernon E. Gleasman, effective
December 1, 2000.                                                                                           | 
|     |                                                                                                              |                                                                                                                                                                              
|(11) | Statement re computation of per share earnings (loss)                                                        |                                                                                                                                                                              
|     |                                                                                                              |                                                                                                                                                                              
|     | Not applicable                                                                                               |                                                                                                                                                                              
|     |                                                                                                              |                                                                                                                                                                              
|(13) | Annual report to security holders for last fiscal year, Form 10-QSB or quarterly report to security holders. |                                                                                                                                                                              
|     |                                                                                                              |                                                                                                                                                                              
|     | Not applicable                                                                                               |                                                                                                                                                                              
|     |                                                                                                              |                                                                                                                                                                              
|(16) | Letter on change in certifying accountant                                                                    |                                                                                                                                                                              
|     |                                                                                                              |                                                                                                                                                                              
|     | Not applicable                                                                                               |                                                                                                                                                                              
|     |                                                                                                              |                                                                                                                                                                              
|(18) | Letter re change in accounting principles                                                                    |                                                                                                                                                                              
|     |                                                                                                              |                                                                                                                                                                              
|     | Not applicable                                                                                               |                                                                                                                                                                              
|     |                                                                                                              |                                                                                                                                                                              
|(21) | Subsidiaries of the small business issuer                                                                    |                                                                                                                                                                              
|     |                                                                                                              |                                                                                                                                                                              
|     | 21.1                                                                                                         | ICE Surface Development, Inc. - New York                                                                                                                                      | 
|     |                                                                                                              |                                                                                                                                                                              
|     | 21.2                                                                                                         | Variable Gear, LLC - New York                                                                                                                                                 | 



-63-



|     |                                                                          |                                            
|---- | ------------------------------------------------------------------------ | -------------------------------------------
|     |                                                                          |                                            
|(22) | Published report regarding matters submitted to vote of security holders |                                            
|     |                                                                          |                                            
|     | Not applicable                                                           |                                            
|     |                                                                          |                                            
|(23) | Consents of experts and counsel                                          |                                            
|     |                                                                          |                                            
|     | 23.1                                                                     | Consent of Richard A. Eisner & Company, LLP
|     |                                                                          |                                            
|(24) | Power of attorney                                                        |                                            
|     |                                                                          |                                            
|     | Not applicable                                                           |                                            
|     |                                                                          |                                            
|(99) | Additional exhibits                                                      |                                            
|     |                                                                          |                                            
|     | Not applicable                                                           |                                            



(b)     Reports Filed on Form 8-K

On October 2, 2000, the Company filed a Form 8-K (Current Report) to disclose its Investment Agreement with Swartz Private Equity, LLC and to file as exhibits all documents in connection therewith.

On November 21, 2000, the Company filed a Form 8-K (Current Report) to disclose that it had filed suit against McElroy Manufacturing, Inc. Arthur H. McElroy, II and Tri-Mc ("MMI").

On November 30, 2000, the Company filed a Form 8-K (Current Report) to disclose its acquisition of ICE Surface Development, Inc.

(c)     Forward Looking Information

This Annual Report contains forward-looking statements that are based on current expectations, estimates and projections about the Company and its plans for future operation as well as management's beliefs and assumptions.  Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements.  These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors") which are difficult to predict.  Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.  The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.



-64-



The Future Factors that may affect the Company, its plans for its future operations and performance and results of the Company's future business include, but are not limited to, the following:

| |    |                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. | general economic and competitive conditions in the markets and countries in which the Company will operate, and the risks inherent in any future international operations;                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                             
| | b. | the Company's ability to enter into collaborative joint working arrangements, formal joint venture arrangements and/or licensing arrangements with domestic and/or foreign governments, automotive industry manufacturers and suppliers to manufacture and promote the Company's inventions;
| |    |                                                                                                                                                                                                                                                                                             
| | c. | industry and consumer acceptance of the Company's inventions;                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                             
| | d. | the level of competition and resistance in the automotive industry;                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                             
| | e. | the strength of the U.S. dollar against currencies of other countries where the Company may operate, as well as cross-currencies between the Company's future operations outside of the U.S. and other countries with whom it transacts business.                                           
| |    |                                                                                                                                                                                                                                                                                             

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the forward-looking statements.  The Company does not intend to update forward-looking statements.



-65-

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                        | TORVEC, INC.                                                    
|----------------------- | ----------------------------------------------------------------
|Date:  November 6, 2001 | By:   /S/ KEITH E. GLEASMAN         Keith E. Gleasman, President

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

|Dated:  November 6, 2001 | By:  /S/ HERBERT H. DOBBS                                
|------------------------ | ---------------------------------------------------------
|                         | Herbert H. Dobbs, Chairman of the Board of Directors     
|                         |                                                          
|                         |                                                          
|Dated:  November 6, 2001 | By:  /S/ KEITH E. GLEASMAN                               
|                         | Keith E. Gleasman, President and Director                
|                         |                                                          
|                         |                                                          
|Dated:  November 6, 2001 | By:  /S/ MICHAEL MARTINDALE                              
|                         | Michael Martindale, Chief Executive Officer and Director 
|                         |                                                          
|                         |                                                          
|Dated:  November 6, 2001 | By:   /S/ JACOB H. BROOKS                                
|                         | Jacob H. Brooks, Chief Operating Officer and Director    
|                         |                                                          
|                         |                                                          
|Dated:  November 6, 2001 | By:  /S/ MORTON A. POLSTER                               
|                         | Morton A. Polster, Director and Secretary                
|                         |                                                          
|                         |                                                          
|Dated:  November 6, 2001 | By:  /S/ JAMES A. GLEASMAN                               
|                         | James A. Gleasman, Director; Consultant                  
|                         |                                                          
|                         |                                                          
|Dated:  November 6, 2001 | By:  /S/ LEE E. SAWYER                                   
|                         | Lee E. Sawyer, Director                                  
|                         |                                                          
|                         |                                                          
|Dated:  November 6, 2001 | By:  /S/ SAMUEL M. BRONSKY                               
|                         | Samuel M. Bronsky, Chief Financial and Accounting Officer



-66-



EXHIBIT INDEX



|EXHIBIT | PAGE
|------- | ----
|        |     
|(2)     |     
|        |     
|        |     
|        |     
|(3)     |     
|        |     
|        |     
|        |     
|        |     
|        |     
|        |     
|        |     
|(4)     |     
|        |     
|(9)     |     
|        |     
|        |     
|        |     





-67-



|EXHIBIT |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                | PAGE
|------- | ------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|        |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(10)    | Material Contracts |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 10.1               | Certain Employment Agreements, Consulting Agreements, certain
assignments of patents, patent properties, technology and know-how
to the Company, Neri Service and Space Agreement and Ford Motor
Company Agreement and Extension of Term, all incorporated by
reference to Form 10-SB/A, Registration Statement, registering
Company's $.01 par value common stock under section 12(g) of the
Securities Exchange Act of 1934;                                 | N/A 
|        |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     
|        | 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;                                                                                                                                                                             | N/A 
|        |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     
|        | 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 Statement registering an additional 200,000
shares of the Company's $.01 par value common stock reserved for 
issuance thereunder, effective October 5, 2000; | N/A 
|        |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     
|        | 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;                                                                                                                                                                                                                                                                                                | N/A 
|        |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     
|        | 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;                                                                                                                                                                                                                                                                                                             | N/A 
|        |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     
|        | 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;                                                                                                                                                                                                                                                                                                              | N/A 
|        |                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     



-68-



|EXHIBIT |                                                                                                              |                                                                                                                                                                               | PAGE
|------- | ------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|        |                                                                                                              |                                                                                                                                                                               |     
|        | 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; | N/A 
|        |                                                                                                              |                                                                                                                                                                               |     
|        | 10.8                                                                                                         | Consulting Agreement Extension with Keith E. Gleasman, effective
January 1, 2001;                                                                                             | 62  
|        |                                                                                                              |                                                                                                                                                                               |     
|        | 10.9                                                                                                         | Consulting Agreement Extension with James A. Gleasman, effective
January 1, 2001;                                                                                             | 63  
|        |                                                                                                              |                                                                                                                                                                               |     
|        | 10.10                                                                                                        | Consulting Agreement Extension with Vernon E. Gleasman, effective
January 1, 2001.                                                                                            | 64  
|        |                                                                                                              |                                                                                                                                                                              
|(11)    | Statement re computation of per share earnings (loss)                                                        | N/A                                                                                                                                                                          
|        |                                                                                                              |                                                                                                                                                                              
|(13)    | Annual report to security holders for last fiscal year, Form 10-QSB or quarterly
report to security holders. | N/A                                                                                                                                                                          
|        |                                                                                                              |                                                                                                                                                                              
|(16)    | Letter on change in certifying accountant                                                                    | N/A                                                                                                                                                                          
|        |                                                                                                              |                                                                                                                                                                              
|(18)    | Letter re change in accounting principles                                                                    | N/A                                                                                                                                                                          
|        |                                                                                                              |                                                                                                                                                                              
|(21)    | Subsidiaries of the small business issuer                                                                    |                                                                                                                                                                              
|        |                                                                                                              |                                                                                                                                                                              
|        | 21.1                                                                                                         | ICE Surface Development, Inc. - New York                                                                                                                                      | N/A 
|        |                                                                                                              |                                                                                                                                                                              
|        | 21.2                                                                                                         | Variable Gear, LLC - New York                                                                                                                                                 | N/A 
|        |                                                                                                              |                                                                                                                                                                              
|(22)    | Published report regarding matters submitted to vote of security holders                                     | N/A                                                                                                                                                                          
|        |                                                                                                              |                                                                                                                                                                              
|(23)    | Consents of experts and counsel                                                                              |                                                                                                                                                                              
|        |                                                                                                              |                                                                                                                                                                              
|        | 23.1                                                                                                         | Consent of Richard A. Eisner & Company, LLP                                                                                                                                   | 65  
|        |                                                                                                              |                                                                                                                                                                              
|(24)    | Power of attorney                                                                                            | N/A                                                                                                                                                                          
|        |                                                                                                              |                                                                                                                                                                              
|(99)    | Additional exhibits                                                                                          | N/A                                                                                                                                                                          
|        |                                                                                                              |                                                                                                                                                                              

EXHIBIT 10.8

-69-



EXTENSION OF AND AMENDMENT TO CONSULTING AGREEMENT

AGREEMENT made as of December 1, 2000 between TORVEC, Inc., a corporation organized and existing under the laws of the State of New York (the "Corporation"), and KEITH E. GLEASMAN, residing at 11 Pond View Drive, Pittsford, New York  14534 (the "Consultant").

W I T N E S S E T H:

WHEREAS, the parties hereto entered into a Consulting Agreement on the 1st day of December, 1997 ("Consulting Agreement") pursuant to which Consultant was engaged for a period of three (3) years, and

WHEREAS, the parties hereto desire to amend and extend the terms of said Consulting Agreement.

NOW, THEREFORE, it is agreed as follows:

1.               Paragraph 4 of the Consulting Agreement is hereby amended to add a new subparagraph (d) to read as follows:

| | (d) | "All compensation owed, accrued and/or to be paid under this Agreement as herein set forth  shall, in the discretion of the Board of Directors, be paid either in shares of TORVEC's capital stock, in cash or in a combination of both stock and cash at such time(s) as may be determined by the Board."
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2.               Paragraph 6 of the Consulting Agreement is hereby modified by deleting Paragraph 6 thereof and substituting therefor the following:

| |  | "This Agreement shall be for a period of three (3) years commencing on December 1, 2000 and shall be automatically extended for an additional one (1) year period as of each anniversary hereof, unless earlier terminated or canceled as provided herein."
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3.               In all other respects the Consulting Agreement is hereby ratified and confirmed.

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by its officers thereunto duly authorized and its corporate seal to be hereunto affixed, and the Consultant has hereunto set his hand and seal, all as of the day and year first above written.

|                 | TORVEC, Inc.
By:     /S/ MORTON A. POLSTER          Morton A. Polster, Secretary
|---------------- | --------------------------------------------------------------------------------
|[Corporate
Seal] | /S/ KEITH E. GLEASMAN          Keith E. Gleasman, Consultant                    



EXHIBIT 10.9

-70-



EXTENSION OF AND AMENDMENT TO CONSULTING AGREEMENT

AGREEMENT made as of December 1, 2000 between TORVEC, Inc., a corporation organized and existing under the laws of the State of New York (the "Corporation"), and JAMES A. GLEASMAN, residing at 11 Pond View Drive, Pittsford, New York  14534 (the "Consultant").

W I T N E S S E T H:

WHEREAS, the parties hereto entered into a Consulting Agreement on the 1st day of December, 1997 ("Consulting Agreement") pursuant to which Consultant was engaged for a period of three (3) years, and

WHEREAS, the parties hereto desire to amend and extend the terms of said Consulting Agreement.

NOW, THEREFORE, it is agreed as follows:

1.               Paragraph 4 of the Consulting Agreement is hereby amended to add a new subparagraph (d) to read as follows:

| | (d) | "All compensation owed, accrued and/or to be paid under this Agreement as herein set forth  shall, in the discretion of the Board of Directors, be paid either in shares of TORVEC's capital stock, in cash or in a combination of both stock and cash at such time(s) as may be determined by the Board."
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2.               Paragraph 6 of the Consulting Agreement is hereby modified by deleting Paragraph 6 thereof and substituting therefor the following:

| |  | "This Agreement shall be for a period of three (3) years commencing on December 1, 2000 and shall be automatically extended for an additional one (1) year period as of each anniversary hereof, unless earlier terminated or canceled as provided herein."
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3.               In all other respects the Consulting Agreement is hereby ratified and confirmed.

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by its officers thereunto duly authorized and its corporate seal to be hereunto affixed, and the Consultant has hereunto set his hand and seal, all as of the day and year first above written.

|                 | TORVEC, Inc.
By:     /S/ MORTON A. POLSTER          Morton A. Polster, Secretary
|---------------- | --------------------------------------------------------------------------------
|[Corporate
Seal] | /S/ JAMES A. GLEASMAN          James A. Gleasman, Consultant                    



EXHIBIT 10.10

-71-



EXTENSION OF AND AMENDMENT TO CONSULTING AGREEMENT

AGREEMENT made as of December 1, 2000 between TORVEC, Inc., a corporation organized and existing under the laws of the State of New York (the "Corporation"), and VERNON E. GLEASMAN, residing at 11 Pond View Drive, Pittsford, New York  14534 (the "Consultant").

W I T N E S S E T H:

WHEREAS, the parties hereto entered into a Consulting Agreement on the 1st day of December, 1997 ("Consulting Agreement") pursuant to which Consultant was engaged for a period of three (3) years, and

WHEREAS, the parties hereto desire to amend and extend the terms of said Consulting Agreement.

NOW, THEREFORE, it is agreed as follows:

1.               Paragraph 4 of the Consulting Agreement is hereby amended to add a new subparagraph (d) to read as follows:

| | (d) | "All compensation owed, accrued and/or to be paid under this Agreement as herein set forth  shall, in the discretion of the Board of Directors, be paid either in shares of TORVEC's capital stock, in cash or in a combination of both stock and cash at such time(s) as may be determined by the Board."
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2.               Paragraph 6 of the Consulting Agreement is hereby modified by deleting Paragraph 6 thereof and substituting therefor the following:

| |  | "This Agreement shall be for a period of three (3) years commencing on December 1, 2000 and shall be automatically extended for an additional one (1) year period as of each anniversary hereof, unless earlier terminated or canceled as provided herein."
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3.               In all other respects the Consulting Agreement is hereby ratified and confirmed.

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by its officers thereunto duly authorized and its corporate seal to be hereunto affixed, and the Consultant has hereunto set his hand and seal, all as of the day and year first above written.

|                 | TORVEC, Inc.
By:     /S/ MORTON A. POLSTER          Morton A. Polster, Secretary
|---------------- | --------------------------------------------------------------------------------
|[Corporate
Seal] | /S/ VERNON E. GLEASMAN          Vernon E. Gleasman, Consultant                  



-72-

EXHIBIT 23.1



INDEPENDENT AUDITORS' CONSENT





We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-80443), Form S-8 (No. 333-47392), Form S-8 (No. 333-69123) and Form SB-2 (333-48188), of Torvec, Inc. of our report dated March 7, 2001 (May 2, 2001 with respect to Note K), on our audit of the financial statements of Torvec, Inc. which is included in the annual report on Form 10-KSB/A for the year ended December 31, 2000.





/S/ RICHARD A. EISNER & COMPANY, LLP

Richard A. Eisner & Company, LLP





New York, New York
November 2, 2001