CRGS CurAegis Technologies Inc (CE)

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 000-24455

TORVEC, INC.

(Exact name of registrant as specified in its charter)

New York		16-1509512
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

1999 Mt. Read Blvd. Building 3, Rochester, New York 14615
(Address of principal executive offices and Zip Code)

(585) 254-1100
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class		Number of Shares Outstanding at July 31, 2008
Common Stock, $.01 par value		32,237,669

 

 

TORVEC, INC. AND SUBSIDIARIES
(a development stage company)

INDEX

		PAGE
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets — June 30, 2008 (Unaudited) and December 31, 2007 (Derived from Audited Financial Statements)			3
Condensed Consolidated Statements of Operations—Three and Six Months Ended June 30, 2008 and 2007 and September 25, 1996 (Inception) through June 30, 2008 (Unaudited)			4
Condensed Consolidated Statements of Cash Flows — Six Months Ended June 30, 2008 and 2007 and September 25, 1996 (Inception) through June 30, 2008 (Unaudited)			5
Notes to Condensed Consolidated Financial Statements			6-20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			25
Item 4. Controls and Procedures			25
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			26
Item 1A. Risk Factors			26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			26
Item 3. Defaults Upon Senior Securities			26
Item 4. Submission of Matters to a Vote of Security Holders			26
Item 5. Other Information			27
Item 6. Exhibits			27-30
SIGNATURES PAGE			31
EXHIBIT INDEX			32
Exhibit 31
Exhibit 32

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS .

TORVEC, INC. AND SUBSIDIARIES
(a development stage company)

Condensed Consolidated Balance Sheets
(Unaudited)

		June 30, 2008				December 31, 2007
						(Derived from
						Audited Financial
		(Unaudited)				Statements)
ASSETS
Current assets:
Cash		$	113,000			$	192,000
Inventory			46,000				—
Prepaid expenses and other receivables			37,000				43,000
Total current assets			196,000				235,000
Property and Equipment:
Office equipment			68,000				67,000
Shop equipment			139,000				129,000
Leasehold improvements			213,000				149,000
Transportation equipment			106,000				106,000
			526,000				451,000
Less accumulated depreciation and amortization			205,000				170,000
Net property and equipment			321,000				281,000
Total Assets		$	517,000			$	516,000
LIABILITIES
Current liabilities:
Notes payable, current portion		$	15,000			$	15,000
Accounts payable			190,000				261,000
Accrued liabilities			300,000				1,704,000
Total current liabilities			505,000				1,980,000
Deferred income			898,000				500,000
Deferred rent			44,000
Notes payable, net of current portion			37,000				43,000
Total liabilities			1,484,000				2,523,000
Commitments and contingencies
CAPITAL DEFICIENCY
Preferred stock, $.01 par value, 100,000,000 shares authorized
3,300,000 designated as Class A, Non-voting, cumulative dividend $.40 per share, per annum, convertible, June 30, 2008 and December 31, 2007 713,351 and 732,493 shares issued and outstanding (liquidation preference $3,745,052 and $3,701,162)			8,000				8,000
300,000 designated as Class B, Non-voting, cumulative dividend $.50 per share, per annum, convertible, June 30, 2008 and December 31, 2007 97,500 shares issued and outstanding (liquidation preference $336,063 and $311,787)			1,000				1,000
Common stock, $.01 par value, 400,000,000 shares authorized, 32,140,456 and 31,640,045 issued and outstanding, at June 30, 2008 and December 31, 2007, respectively			321,000				316,000
Additional paid-in capital			47,443,000				45,926,000
Deficit accumulated during the development stage			(48,740,000	)			(48,258,000	)
Total Capital Deficiency			(967,000	)			(2,007,000	)
Total Liabilities and Capital Deficiency		$	517,000			$	516,000

See notes to condensed consolidated financial statements

TORVEC, INC. AND SUBSIDIARIES
(a development stage company)

Condensed Consolidated Statements of Operations
(Unaudited)

		Three Months ended				Three Months ended				Six Months ended				Six Months ended				From Inception
		June 30, 2008				June 30, 2007				June 30, 2008				June 30, 2007				thru 06/30/08
Revenue			15,000				28,000				30,000				28,000				156,000
Cost of Goods Sold			6,000				26,000				11,000				26,000				131,000
Gross Profit			9,000				2,000				19,000				2,000				25,000
Costs and expenses
Research and development			114,000				155,000				262,000				390,000				15,062,000
Selling, general and administrative			734,000				904,000				1,781,000				1,500,000				35,592,000
Asset Impairment			—				—				—				—				1,071,000
Loss from operations			(839,000	)			(1,057,000	)			(2,024,000	)			(1,888,000	)			(51,700,000	)
Other Income			—				130,000				1,000				130,000				147,000
Loss before Gain and minority interest			(839,000	)			(927,000	)			(2,023,000	)			(1,758,000	)			(51,553,000	)
Gain on cancellation of debt			1,541,000								1,541,000								1,541,000
Minority interest in Loss of consolidated subsidiary			—				—				—				—				1,272,000
Net Income (Loss)			702,000				(927,000	)			(482,000	)			(1,758,000	)			(48,740,000	)
Preferred stock beneficial conversion feature																			763,000
Preferred stock dividend			84,000				85,000				167,000				170,000				1,036,000
Net income (loss) attributable to common stockholders			618,000				(1,012,000	)			(649,000	)			(1,928,000	)			(50,539,000	)
Basic and Diluted net income (loss) attributable to common stockholders per share			0.02				(0.03	)			(0.02	)			(0.06	)
Weighted average number of shares of
Common stock Basic			32,020,000				31,352,000				31,899,000				31,371,000
Common stock Diluted			35,751,000				31,352,000				31,899,000				31,371,000

See notes to condensed consolidated financial statements

TORVEC, INC. AND SUBSIDIARIES

(a development stage company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)

										September 25,
										1996
										(Inception)
		Six Months Ended								Through
		June 30,								June 30,
		2008				2007				2008
Cash flows from operating activities:
Net loss		$	(482,000	)		$	(1,758,000	)		$	(48,740,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			35,000				21,000				2,418,000
Loss on impairment of license			—				—				1,071,000
Impairment of goodwill			—				19,000				19,000
Gain on sale of fixed assets			—				—				(10,000	)
Minority interest in gain (loss) of consolidated subsidiary			—				—				(1,272,000	)
Compensation expense attributable to common stock in Subsidiary			—				—				619,000
Common stock issued for services			1,109,000				417,000				12,805,000
Shares issued for future consulting services			—				—				103,000
Stockholder contribution of services			—				150,000				2,409,000
Compensatory common stock, options and warrants			249,000				650,000				17,501,000
Changes in:
Accounts receivable			—				(28,000	)			—
Inventory			(46,000	)			—				(46,000	)
Prepaid expenses			6,000				4,000				124,000
Deferred rent			44,000				—				44,000
Accounts payable and accrued expenses			(1,475,000	)			99,000				2,398,000
Deferred Income			398,000				350,000				898,000
Net cash used in operating activities			(162,000	)			(76,000	)			(9,659,000	)
Cash flows from investing activities:
Purchase of property and equipment			(11,000	)			—				(360,000	)
Cost of acquisition			—				—				(16,000	)
Proceeds from sale of fixed asset			—				—				10,000
Net cash used in investing activities			(11,000	)			—				(366,000	)
Cash flows from financing activities:
Net proceeds from sales of common stock and upon exercise of options and warrants			100,000				—				6,601,000
Net proceeds from sales of preferred stock			—				—				3,537,000
Net proceeds from sale of subsidiary stock			—				—				234,000
Proceeds from long — term borrowings			—				—				85,000
Repayments of long — term debt			(6,000	)			(6,000	)			(57,000	)
Proceeds from stockholders’ loan and advances			—				—				250,000
Repayment of stockholders’ loan and advances			—				—				(147,000	)
Distributions			—				—				(365,000	)
Net cash provided by (used in) financing activities			94,000				(6,000	)			10,138,000
Net decrease in cash			(79,000	)			(82,000	)			113,000
Cash at beginning of period			192,000				720,000
Cash at end of period		$	113,000			$	638,000			$	113,000
Supplemental Disclosures:
Interest paid		$	3,000			$	8,000
Non cash investing and financing activities:
Shares issued for acquisition leasehold improvements			64,000				—
Preferred stock issued in payment of dividend			6,000				—
Shares issued for acquisition of VariableGear			—				19,000

See notes to condensed consolidated financial statements

TORVEC, INC. AND SUBSIDIARIES
(a development stage company)

Notes to Condensed Consolidated Financial Statements
(Unaudited)

NOTE A — The Company and Basis of Presentation

		The interim information contained herein with respect to the three and six month periods ended June 30, 2008 and 2007 and the period from September 25, 1996 (inception) through June 30, 2008 has not been audited but was prepared in conformity with generally accepted accounting principles for interim financial information and instructions for Form 10-Q. Accordingly, the condensed consolidated financial statements do not include all information and footnotes required by generally accepted accounting principles for financial statements. Included are ordinary adjustments which in the opinion of management are necessary for a fair presentation of the financial information for the three and six month periods ended June 30, 2008 and 2007 and since inception. The results are not necessarily indicative of results to be expected for the entire year.
		Torvec, Inc. (the “company”) was incorporated as a New York State business corporation in September 1996. The company, which is in the development stage, has developed technology for use in automotive applications. In September, 1996, the company acquired numerous patents, inventions and know-how contributed by Vernon E. Gleasman, James Y. Gleasman and Keith E. Gleasman (the“Gleasmans”). The company has developed, designed and intends to commercialize its infinitely variable transmissions, its pumps/motors, its IsoTorque differential, its constant velocity joint and the substructure and components of its full terrain vehicle.
		The company’s financial statements have been prepared assuming that it will continue as a going concern. For the period from September 1996 (inception) through June 30, 2008, the company has a deficit accumulated during the development stage of $48,740,000, and at June 30, 2008 has a working capital deficiency of $309,000 and a capital deficiency of $967,000. The company has been dependent upon equity financing and advances from stockholders to meet its obligations and sustain operations. The company’s efforts have been principally devoted to the development of its technologies and commercializing its products. Management believes that based upon its current cash position, its budget for its business operations through June 30, 2009, and an outstanding funding commitment from a director/officer to fund deficiencies that may arise up to $400,000, will not be able to meet its anticipated cash requirements through June 30, 2009. These conditions indicate that the Company may not be able to continue as a going concern.
		The Company is actively seeking additional sources of capital. There can be no assurance that the Company can successfully implement its business plan or raise sufficient capital on acceptable terms. Without sufficient additional capital or debt financing, and ultimately profitable operating results the Company will not be able to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

NOTE B — Summary of Significant Accounting Policies

[1]		Consolidation:
		The financial statements include the accounts of the company, its majority-owned subsidiary, Ice (56% owned at June 30, 2008 and 69% owned at June 30, 2007), and its wholly-owned subsidiaries Iso-Torque Corporation, IVT Diesel Corp. and Variable Gear LLC. All material intercompany transactions and account balances have been eliminated in consolidation.
[2]		Cash and Cash Equivalents:
		Cash and cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less. The company maintains cash and cash equivalents at financial institutions which periodically may exceed federally insured amounts.

[3]		Use of Estimates:
		The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates are used in valuing the useful lives of its fixed assets and the future realizable value of such assets. These estimates are subject to a high degree of judgment and potential change. Actual results could differ from those estimates.
[4]		Income (Loss) per Common Share:
		Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings Per Share,” requires the presentation of basic earnings per share, which is based on common stock outstanding, and dilutive earnings per share, which gives effect to options, warrants and convertible securities in periods when they are dilutive. For the three months ended June 30, 2007 and for the six months ended June 30, 2008 and 2007, the company excluded 4,567,588, 3,105,149 and 4,567,588 potential common shares, respectively, relating to convertible preferred stock outstanding, options and warrants from its diluted net loss per common share calculation because they are anti-dilutive.
		The following table sets forth the computation of basic and diluted earnings per share at June 30, 2008.

		Three Months				Three Months				Six Months				Six Months
		June 30, 2008				June 30, 2007				June 30, 2008				June 30, 2007
Numerator:
Net (loss) income		$	702,000			$	(1,758,000	)		$	(482,000	)		$	(927,000	)
Denominator:
Denominator for basic earnings per share (weighted average shares)			32,020,000				31,352,000				31,899,000				31,371,000
Effect of dilutive securities:
Preferred A Shares			713,000
Preferred B Shares			97,000
Options Outstanding			642,000
Warrants			2,279,000
Denominator for diluted earnings per share (adjusted weighted average shares) and assumed conversions			35,751,000				31,352,000				31,899,000				31,371,000
Basic earnings per share		$	0.02			$	(0.06	)		$	(0.02	)		$	(0.03	)
Diluted earnings per share		$	0.02			$	(0.06	)		$	(0.02	)		$	(0.03	)

[5]		Income Taxes:
		The Company accounts for income taxes using the asset and liability method described in SFAS No. 109, “ Accounting for Income Taxes,” the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax bases of the company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. We adopted the provisions of Financial Accounting Standards Board interpretation No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”) an interpretation of FASB Statement No. 109 (“SFAS 109”) on January 1, 2007. As a result of the implementation of FIN 48, we recognized no adjustment for uncertain tax provisions. At the adoption date of January 1, 2007, we had a deferred tax asset which was fully reserved by a valuation allowance to reduce the deferred tax asset to the amount that more likely than not to be realized. We recognize interest and penalties related to uncertain tax positions in general and administrative expense. As of June 30, 2008, we have not recorded any provisions for accrued interest and penalties related to uncertain tax positions. The tax years 2005 — 2007 remains open to examination by the major tax jurisdictions to which we are subject.
[6]		Inventory
		The Company’s inventories consisted of the following at June 30, 2008 and 2007:

		2008				2007
Work-in Process		$	9,000				—
Finished Goods			37,000				—
Total Inventory		$	46,000				—

All inventories are stated at the lower of cost or market with cost determined using the specific identification method.

[7]		Fair Value of Financial Instruments:
		The carrying amount of cash, prepaid expenses, accounts payable and accrued expenses approximates their fair value due to the short maturity of those instruments.
[8]		Stock-based Compensation:
		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 may vest over five years.
		We follow Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share Based Payment.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the requisite service period (generally the vesting period) in the financial statements based on their fair values. For options with graded vesting, we value the stock option grants to vendors and other non employees, directors and recognize compensation expense as if each vesting portion of the award was a separate award. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount of expense recognized. In addition, the realization of tax benefits in excess of amounts recognized for financial reporting purposes will be recognized in the cash flow statement as a financing activity rather than as an operating activity.
		No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for substantially all net deferred tax assets. We elected to adopt the alternative method of calculating the historical pool of windfall tax benefits as permitted by FASB Staff Position (FSP), “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.” This is a simplified method to determine the pool of windfall tax benefits that is used in determining the tax effects of stock compensation in the results of operations and cash flow reporting for awards that were outstanding as of the adoption of SFAS 123(R).
		By its terms, the Plan terminated on May 28, 2008 as to the grant of new options thereunder, outstanding but unexercised options previously issued under the Plan remain exercisable in accordance with their terms.
[9]		Revenue Recognition:
		The company’s terms provide that customers are obligated to pay for products sold to them within a specified number of days from the date that title to the products is transferred to the customers. The company’s standard terms are typically net 30 days. The company recognizes revenue when transfer of title occurs and risk of ownership passes to a customer at the time of shipment or delivery depending on the terms of the agreement with a particular customer and collectibility is reasonably assured. The Company also considers the credit-worthiness of the customer. The sale price of the company’s products is substantially fixed and determinable at the date of the sale based upon purchase orders generated by a customer and accepted by the company. The company will use the allowance method to record receivables that are uncollectible.
[10]		Recent Accounting Pronouncements:
		Effective January 1, 2008, the company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and requires additional disclosures about fair value measurements. In February 2008, the FASB delayed the effective date of SFAS 157 for one year for all nonfinancial assets and nonfinancial liabilities, except for those items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Management has determined that the adoption of SFAS 157 did not have a material effect on the company’s consolidated financial statements.
		Effective January 1, 2008, the company adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement 115” (“SFAS 159”). This statement provides companies with an option to report selected financial assets and liabilities at fair value. As of June 30, 2008, the company has not elected to use the fair value option allowed by SFAS 159. Management has determined that the adoption of SFAS 159 did not have a material effect on the company’s consolidated financial position, results of operations, cash flows or financial statement disclosures.

		In December 2007, the FASB issued Statement No. 141 (revised), “Business Combinations” (“SFAS 141 (R)”). The standard changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The company does not expect SFAS 141(R) to have a significant impact on the company’s financial position.
		In December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS 160”). The standard changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to noncontrolling interests reported as part of consolidated earnings. Additionally, SFAS 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. SFAS 160 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The company is currently evaluating the effect, if any, the adoption will have on the company’s financial position and results of operations, but does not expect the adoption of SFAS 160 to have a significant impact on the company’s financial position.
		In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 161, Ðisclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133”. SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 with early application encouraged. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended December 31, 2009. In review of SFAS 161, the Company has determined that it is not applicable and will have no effect to its consolidated financial statements.
		In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162 (SFAS 162), “The Heirarchy of Generally Accepted Accounting Principles.” SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S. GAAP. SFAS 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” This statement is not expected as a result in a change in our current practice.

NOTE C — RELATED PARTY TRANSACTIONS

[1]		Commencing January 1, 2004, James Y. Gleasman and Keith E. Gleasman (the “Gleasmans”) agreed to provide consulting services and assign new patents, existing patent improvements and all know-how in connection with all of their inventions to the company on a noncompensated basis. In addition, Keith Gleasman agreed to continue as President and James Gleasman agreed to serve as the company’s chief executive officer and interim chief financial officer. During the six month period ended June 30, 2007 the company did not pay the Gleasmans any consulting fees for their services in accordance with this policy. The company recorded approximately $150,000 for the estimated value of these services for the six month period ended June 30, 2007 as a contribution to capital based upon approved time and hours spent. For such period, the company recorded $100,000 to research and development and $50,000 to general and administrative based upon management’s estimate.
		On March 28, 2008 the board of directors approved the governance and compensation committee’s recommendation that, effective January 1, 2008, each of the Gleasmans be compensated at the rate of $300,000 per year. Such amount is payable in cash. No payment of all or any portion of the Gleasmans’ consulting fees shall be paid unless and until the company shall have the requisite cash available. The determination of the availability of the requisite amount of cash shall be made by the board of directors in the light of approved-budgets, existing and anticipated capital requirements and existing and estimated cash flows.
		Since the company did not have the requisite cash available to pay the Gleasmans compensation under their new arrangement with the company with respect to the six month period ended June 30, 2008, the company accrued an aggregate $300,000 of compensation expense for such period and recorded the compensation expense of $100,000 to research and development and $200,000 to general and administrative expense based upon management’s estimate.
[2]		During the three and six month periods ended June 30, 2008, the company paid $25,350 and $50,700 respectively, to a member of the Gleasman family for administrative, technological and engineering consulting services. During the three and six month periods ended June 30, 2007, the company paid $23,400 and 41,900 to the same person for similar services. Management believes this compensation is reasonable.
[3]		During the three and six month periods ended June 30, 2008, the company paid $23,270 and $46,540, respectively, to a family member of its general counsel for engineering services rendered to the company. Management believes this compensation is reasonable.

[4]		On September 14, 2007, the company moved its executive offices from Pittsford, New York to Rochester, New York, which includes both a manufacturing and executive office facility. The Rochester facility is owned by a partnership, in which David M. Flaum, a company director, is a partner. On April 28, 2008, the company’s board of directors approved the terms of a lease and such lease was executed on April 29, 2008. (See Note E 2).
[5]		On June 29, 2000, the company granted an exclusive world-wide license of all its automotive technologies to Variable Gear, LLC for the aeronautical and marine markets for $150,000 cash. The company recorded the receipt of the $150,000 as deferred revenue to be recognized when all conditions for earning such fees are complete. At the time of its formation and through June 6, 2007 when his interest was purchased, Robert C. Horton, a company shareholder, owned 51% of Variable Gear, LLC. On June 6, 2007, the company purchased Mr. Horton’s entire interest in Variable Gear for 5,000 shares of common stock for $19,250. The company recognized the deferred revenue of $150,000 as other income and recorded an impairment of the goodwill of $19,250, since there were no operations of the entity since inception.

NOTE D — Capital Deficiency

[1]		Class A Preferred stock:
		In January 2002, the company authorized the sale of up to 2,000,000 shares of its Class A Non-Voting Cumulative Convertible Preferred Stock (“Class A Preferred”) at $4.00 per share. Each share of Class A Preferred is convertible into one share of voting common stock and entitles the holder to dividends, at $.40 per share per annum. The holder has the right to convert after one year subject to Board approval.
		The company has sold an aggregate 779,401 Class A Preferred for aggregate proceeds of $3,062,046. The company has issued an aggregate 198,349 common stock warrants in connection with the sale of Class A Preferred to the holders of the Class A Preferred, all exercisable over a 10 year period at $.01 per common share. 182,099 of these warrants have been exercised through June 30, 2008.
		The company did not sell any Class A Preferred or issue any warrants during the three and six month periods ended June 30, 2008 and 2007.
		From April 19, 2004 through June 30, 2008, five Class A Preferred holders have converted an aggregate 66,050 Class A Preferred into an equal number of common shares. No Class A Preferred were converted during the three month period ended June 30, 2008 and 25,000 Class A Preferred were converted during the first quarter of 2008.
		From September 2004 through June 30, 2008, an aggregate 13,889 Class A Preferred shares have been issued as dividends, with none issued during the three month period ended June 30, 2008 and 5,881 Class A Preferred issued as dividends during the first quarter of 2008.
		At June 30, 2008 and 2007, Class A Preferred dividends in arrears amounted to approximately $891,000 and $629,000, respectively.

[2]		Class B Preferred stock:
		On October 21, 2004, the company authorized the sale of up to 300,000 shares of its Class B Non-Voting Cumulative Convertible Preferred Stock (“Class B Preferred”) at $5.00 per share. Each share of Class B Preferred pays cumulative dividends at $.50 per share per annum and is convertible into either one share of voting common stock of the company or one share of common stock of Iso-Torque Corporation under certain circumstances. The holder has the right to convert after one year subject to Board approval.
		The company has sold an aggregate 97,500 Class B Preferred for aggregate proceeds of $487,500.
		During the three and six month periods ended June 30, 2008 and 2007, the company did not sell any Class B Preferred. No Class B Preferred have been converted into common stock through June 30, 2008.
		At June 30, 2008 and 2007, Class B Preferred dividends in arrears amounted to approximately $123,000 and $74,000, respectively.
[3]		Common Stock
		On June 23, 2008 the company sold 36,364 common shares to an accredited investor for proceeds of $100,000.
[4]		Stock-Option Plan:
		In December, 1997, the board of directors adopted and on May 28, 1998, the company’s shareholders ratified the creation of a Stock Option Plan (the “Option Plan”) which provides for the grant of up to 2,000,000 common stock options to officers, directors and consultants who are eligible to receive incentive, nonqualified or reload stock options. Options granted under the Option Plan are exercisable for a period of up to ten years from the date of grant at an exercise price which is not less than the per share trading price of the underlying common stock on the date of grant, except that the exercise period for options granted to a greater than 10% shareholder may not exceed five years and the exercise price may not be less than 110% of such trading price per share on the date of grant.

		Six Months Period Ended June 30, 2008
						Weighted
						Average				Aggregate
						Exercise				Intrinsic
		Shares				Price				Value
Outstanding at beginning of period			1,021,848			$	4.77
Granted			—				—
Expired			(380,000	)			—
Outstanding at end of period			641,848				4.70			$	—
Options exercisable at end of period			641,848				4.70			$	—
Options Vested and Expected to Vest			641,848				4.70			$	—

		By its terms, the company’s Option Plan terminated as to the grant of future options on May 28, 2008. Consequently, no additional stock options will be granted under the Option Plan, although outstanding options remain available for exercise in accordance with their terms.
		The following table represents information relating to stock options outstanding at June 30, 2008:

Options Exercisable
				Weighted				Weighted								Weighted
				Average				Average								Average
				Exercise				Remaining Life								Exercise
Shares				Price				in Years				Shares				Price
	591,848				5.00				5.37				591,848				5.00
	50,000				2.26				4.92				50,000				2.26
	641,848				4.70				5.31				641,848				4.70

As of June 30, 2008, the company did not have any unrecognized stock compensation related to unvested awards.

[5]		Business Consultants Stock Plan:
		For the three month periods ended June 30, 2008 and 2007, the company issued 202,286 and 74,646 common shares to business consultants under the Business Consultants Stock Plan and charged $509,453 and $295,000 to operations in connection with these share issuances. For the six month period ended June 30, 2008 and 2007, the company issued 432,975 and 120,623 common shares to business consultants under the Plan and charged operations $1,165,542 and $661,000 in connection with these services. Share issuances are valued generally on the date immediately prior to the date of issuance, except for shares issued to pay invoices which are valued as of the invoice date and except for shares issued under the Nonmanagement Directors Plan which are valued as of the end of each quarter effective October 13, 2006. As of June 30, 2008, 4,220,651 shares are available for future issuances under the Business Consultants Stock Plan.
[6]		Nonmanagement Directors Plan:
		On October 1, 2004, the board of directors approved a Nonmanagement Directors Plan pursuant to which each nonmanagement director is entitled to receive, if certain conditions are met, on an annual basis for services rendered as a director, warrants to purchase 12,000 shares of the company’s common stock at $.01 per share. In addition, the chairman of the audit committee is entitled to receive, on an annual basis for services rendered as chairman, additional warrants for 5,000 shares of the company’s common stock at $.01 per share.
		Due to changes made to the Nonmanagement Directors Plan described below, the company did not issue any warrants under the plan for the three and six month periods ended June 30, 2008 and 2007. No previously issued warrants were exercised during the three and six month periods ended June 30, 2008. No warrants were exercised under the plan during the three month period ended June 30, 2007 and 6,000 warrants were exercised during the first quarter of 2007.
		On October 10, 2007, the Nonmanagement Directors Plan was modified to increase the fees payable to the company’s nonmanagement directors. As adjusted, each nonmanagment director (a total of 4 persons) would receive $26,460 for board and committee service per annum. The chairman of the audit committee would receive an additional $12,600 per annum and the chairman of the nominating committee would receive an additional $5,355 per annum.
		The Nonmanagement Directors Plan was also modified to provide that the chairman of the board, chairman of the executive committee and chairman of the governance and compensation committee, one person, will be paid an aggregate $110,000 per annum for all services rendered by him as a director and in such capacities. This proposal was made in the light of the risks associated with the positions he has undertaken as well as the fact that he is and has been since the summer of 2005, serving the company in these positions on a full-time basis. The proposal was also made in recognition of the fact that the services required to be performed by the chairman of the board’s executive committee and of its governance and compensation committee have expanded both in responsibilities covered and time expended . The effective date for these adjustments to the plan was July 1, 2007.
		On April 28, 2008, the plan was again modified to increase the compensation of the person serving as chairman of the board, chairman of the executive committee, chairman of the governance and compensation committee (one person) to $125,000 per annum.
		During the three month periods ended June 30, 2008 and 2007, the company issued 25,388 and 9,982 common shares under the plan to satisfy the March 31, 2008 and 2007 payables in the amount of $62,199 and $41,925 and recorded charges of $62,199 and $41,925,respectively, for such periods.
		During the six month periods ended June 30, 2008 and 2007, the company issued 44,243 and 17,967 common shares under the plan to satisfy payables in the amount of $120,648 and $83,850 recorded a charge of $120,648 and $83,850 for such periods.
		On April 28, 2008, the board of directors approved a one-time payment to its chairman of the governance and compensation committee of $46,000 for special services rendered in connection with required compliance under the Sarbanes-Oxley Act. This amount was paid by the issuance of 19,167 common shares valued as of the closing price on April 28, 2008. The company charged $46,000 to operations in connection with such services.
[7]		Business, Financial and Engineering Consultants:
		The company has issued 1,376,583 common stock warrants to various business, financial and engineering consultants, of which, 91,583 have been exercised for proceeds of $915 and 445,000 cancelled in exchange for the participation of certain engineers in the company’s 2007 Commercializing Event Plan. (Note D [10]).
		On March 28, 2008, the board approved the issuance of an aggregate 195,000 warrants, immediately exercisable at $5.00 per common share until 2016, to two engineering consultants who elected not to participate in the company’s 2007 Commercializing Event Plan. The company recorded a charge in the amount of $249,000 to general and administrative expense.

[8]		Warrants:
		As of June 30, 2008, outstanding warrants to acquire shares of the company’s common stock are as follows:

Number of

Exercise

Shares

Price

Expiration

Exercisable

(a)

(a)

125,000

(a)

$.75

None

500,000

(b)

$.01

None

511,200

(c)

$.01

None

54,500

(d)

(e)

(e)

(e)

(e)

$.01

None

39,000

(f)

$5.00

10 years

255,000

(g)

$.01

None

6,000

(h)

$.01

None

16,250

(i)

$1.00

None

20,500

(j)

(k)

(k)

(k)

(k)

(l)

(l)

(l)

(l)

$3.27

10 years

400,000

(m)

$3.75

10 years

200,000

(n)

$5.00

10 years

50,000

(o)

$5.00

10 years

100,000

(p)

The following summarizes the activity of the company’s outstanding warrants for the six month period ended June 30, 2008.

										Weighted
						Weighted				Average
						Average				Remaining				Aggregate
						Exercise				Contractual				Intrinsic
		Shares				Price				Term				Value
Outstanding at January 1, 2008			2,084,950			$	3.14			4.90 years				$	3,072,861
Granted			195,000			$	5.00			8.84 years
Exercised			(2,500	)
Canceled or expired
Outstanding at June 30, 2008			2,277,450			$	3.30			4.64 years				$	1,922,787
Exercisable at June 30, 2008			1,652,450			$	3.93			4.42 years				$	1,257,787

[9]		Issuance of Stock and Warrants by Subsidiary:
		In 2003, the company majority-owned subsidiary, Ice Surface Development, Inc. (“Ice Surface”) issued 308,041 of its common stock at $.76 per share realizing aggregate proceeds of $234,000 in a private placement. These issuances reduced the company’s interest in Ice Surface from 72% to approximately 69.26%. Based on the company’s accounting policy, the change in the company’s proportionate share of Ice Surface’s equity resulting from the additional equity raised by the subsidiary is accounted for as a capital transaction.
		In connection with the private placement, Ice Surface issued 53,948 warrants to the placement agent immediately exercisable at $.76 per common share through June 9, 2008. In addition, 50,000 warrants were issued by Ice Surface to a consultant immediately exercisable at $.76 per common share through June 9, 2008. In connection with the issuance of these warrants, a compensation charge of $36,000 was recognized. These warrants were cancelled effective June 7, 2007 upon the adoption by Ice Surface’s shareholders of a Plan for the complete liquidation and dissolution of Ice.
[10]		Shares Issued for Consulting Services:
		On September 17, 2005, certain consultants created a trust to enable them to sell business consultants shares issued to them by the company under their consultant agreements. The company issued 50,000 business consultant common shares valued at $102,000 on September 27, 2005, contingent on the performance by the consultants’ services under such consultant agreements. The company fair values the shares issued to the trust using the closing market price on the date immediately prior to the date of issuance. Amounts in excess of the consulting invoices are classified as shares issued for consulting services in stockholders’ (capital deficit) equity. No shares were sold in the trust in the year ended December 31, 2005.
		The company issued an aggregate 342,500 business consultants share valued at an aggregate $972,125 to the trust to satisfy the payment of invoices submitted by the consultants for services rendered through December 31, 2007. The trustee has sold an aggregate 339,045 business consultants shares for aggregate proceeds of $977,059 through December 31, 2007 and distributed the proceeds from the trust to the consultants in accordance with the trust’s terms.
		During the three and six month periods ended June 30, 2008, the company issued 70,000 and 130,000 business consultants shares valued at $184,300 and $349,300, respectively, to the trust to satisfy the payment of invoices submitted by the consultants for services rendered during such periods. During the three and six month periods ended June 30, 2007, the trustee sold 32,500 and 42,500 business consultant shares and distributed $127,875 and $172,375 in proceeds to the consultants in accordance with the trust’s terms.

		The company’s payment obligations with respect to the consultant agreements are met once it has issued shares to the trust in accordance with directives received from the consultants and the consultants, not the company, bear the risk of loss in the event the proceeds of stock sales by the trustee are less than the value of the stock contributed to the trust by the company on the date of contribution.
[11]		Commercializing Event Plan:
		On October 13, 2006, the board of directors adopted a Commercializing Event Plan (“ 2007 Event Plan”) designed to reward the company’s directors, executives and certain administrative personnel for the successful completion of one or more commercializing events. No payments were made under the 2007 Event Plan during the years ended December 31, 2007 and 2006.
		On March 28, 2008 the board of directors approved amendments to the 2007 Event Plan recommended by the governance and compensation committee to clarify that:
(a)		for purposes of the good standing requirement, all participants are considered to be in good standing unless a unanimous vote of the board of directors determines otherwise. In making this determination, the board is required to consider whether a person has engaged in conduct which has significantly harmed the company and to consider that any material violation of the company’s Code of Conduct shall constitute prima facie evidence that the company has been harmed;
(b)		participants shall be entitled to payment even though the participant is not actively engaged as a consultant to or employee of the company if the reason for not being so engaged is due to death, disability from accident, disease or similar circumstance beyond the participant’s control or is on a leave of absence approved by an authorized officer;
(c)		the plan shall terminate no earlier than October 10, 2017 but that subject to such condition, the plan may be terminated by the board of directors in its sole direction;
(d)		the benefits provided by the plan may not be reduced during its term as to amount, time, method, manner of payment and/or any other material condition;
(e)		distributions under the plan shall be made on a commercializing event by commercializing event basis;

(f)		the number of common shares distributable to participants in the case of any commercializing event not involving the sale of the company shall be calculated based upon a $3.00 per share price[the closing price of the company’s common stock on the date of the plan’s effective date, October 10, 2007] but that the number of shares distributable in the case of a commercializing event involving the sale of the company shall be calculated based upon the trading price of the acquiring company’s common stock as of the date the acquisition transaction is announced.
		On February 25, 2008, the company issued an aggregate 3,648 business consultants shares to thirteen participants in the 2007 Event Plan (304 shares to each of nine director, officer and administrative participants and 228 shares to each of four engineer participants) upon the completed sale of the company’s constant velocity joints to a military contractor.
		On April 30, 2008, the company issued an aggregate 5,581 business consultant shares to thirteen participants in the 2007 Event Plan (465 shares to each of nine director, officer and administrative participants and 349 shares to each of four engineer participants) upon receipt of the first quarterly payment from Ice Engineering, LLC.
		The company is accounting for the settlement of its commission arrangement with respect to this commercializing event transaction under SFAS 123(R) “Share Based Payment”. For the three and six month periods ended June 30, 2008, the company recorded a charge to operations in the amount of $16,730 and $27,687, respectively, representing the fair value of the equity instruments issued.
		In the fourth quarter of 2007, certain engineering consultants agreed to cancel 445,000 warrants issued in 2005 and 2006 in exchange for their participation in the 2007 Event Plan. The exchange of the warrants for the participation rights in a commercialization event did not result in an accounting charge. The warrants at the date of the exchange were considered to have no value because the underlying condition for vesting the warrants was not satisfied. The company determined that the fair value of the rights to be de minimis at the date of the exchange based on management’s estimate.
		On March 28, 2008, the board of directors approved the grant of an aggregate 195,000 common stock warrants exercisable until December 1, 2016 at $5.00 per share to two engineering consultants in lieu of their participation in the 2007 Event Plan. The company valued the warrants at $249,000 using the Black-Scholes option/pricing model and charged operations.

Black-Scholes Inputs

Term		8.84 years
Risk-free rate			2.89	%
Volatility			0.55
Dividend yield			0.0	%

NOTE E — Commitments and Other Matters

[1]		Employment Agreements:
		On April 1, 2002, the company’s majority-owned subsidiary, Ice Surface Development, Inc., entered into employment agreements with three persons as chief executive officer, chief operating officer and vice-president of manufacturing, respectively. The agreements expired on July 31, 2004 and are the subject of litigation between the company, Ice Surface Development, certain officers of Ice Surface and the three individuals. See Note G.
[2]		Leases:
		During the last three years, the company leased executive office space at Powder Mills Office Park, Pittsford, New York and leased research, development and manufacturing space in Webster, New York. The company terminated its Powder Mills lease as of June 30, 2007 and its Webster lease as of December 31, 2007 in order to access additional manufacturing and assembly space and to consolidate its executive and manufacturing functions under one roof. The company was released from all further obligations under these leases. Rent expense for the three and six months ended June 30, 2008 and 2007 are $16,000, $49,000, $5,000, $27,000, respectively.

On September 14, 2007, the company moved to a new facility located at 1999 Mount Read Blvd., Rochester, New York. The facility consists of approximately 13,650 sq. ft., with executive and engineer offices, conference room, “clean room,” manufacturing and assembly space, automotive bays, dynamometer and lift facilities and approximately thirty acres of land suitable for vehicle testing and demonstration. On April 29, 2008, the company executed a five-year lease for the premises (with a December 1, 2007 lease commencement date) providing for rent to be paid at a rate of $5,687.00 per month ($68,244.00 per annum) and in addition, for the payment of the company’s proportionate share of yearly real estate taxes and yearly common area operating costs. Under the lease, monthly rental payments commenced June 1, 2008. The lease contains three 5-year renewal options and grants an option to the company to lease up to an additional 7,000 sq. ft. of adjacent manufacturing and assembly space. During the three and six months ended June 30, 2008, the company recorded deferred rent in the amount of $33,000 and $44,000, respectively, in connection with this lease.

Rental payments and certain other payments due to the landlord is to be paid in common shares of the company, based upon the closing price per share on the 15 ^th day of the calendar month immediately prior to the date any installment payment of monthly rent or other payment is due landlord.

NOTE F — Management Agreement

On February 20, 2004, in June, 2004 and April, 2005, the company entered into consulting agreements with a management consulting firm. The company does not believe the June and/or the April agreements are valid. However, to the extent a court of applicable jurisdiction finally determines that the agreements, or any portion of them, are valid, the company has provided formal notice to the management consulting firm that, in accordance with the agreements’ terms, such agreements have been terminated effective June 30, 2006. (See Note G.)

NOTE G — Litigation

(1)		On September 30, 2005, the company filed a declaratory judgment action in the Supreme Court of the State of New York for the Seventh Judicial District seeking that court’s determination that the June, 2004 and April, 2005 agreements with a management consulting firm are null and void and unenforceable as against the company, its officers and directors. This litigation is in the predeposition, document-production, discovery phase.
(2)		On April 12, 2007, the company commenced a second lawsuit against the same management consulting firm in the Supreme Court, Seventh Judicial District, alleging that such firm had fraudulently induced the company to enter into certain purported agreements with the management firm, did not perform the services for which the company had engaged the firm and that, as a result, the company has been damaged in excess of $6,000,000 by such firm. This litigation is in the predeposition, document-production, discovery phase.

(3)		On October 8, 2007, the controlling persons of the company’s majority-owned subsidiary, Ice Surface Development, Inc.(“ISDI”), namely its chief executive officer, its chief operating officer and its vice-president of manufacturing, filed for arbitration of their claims that ISDI is obligated to pay them certain amounts under their employment contracts. ISDI has opposed plaintiffs’ claims on the grounds that they are without merit. The arbitration is in the predeposition discovery phase.
		On October 19, 2007, the same three persons commenced a shareholders’ derivative action in the Federal District Court for the Western District of New York claiming that the company and its president breached their fiduciary duties to the minority shareholders of ISDI in assigning the Dartmouth College ice technology license for inadequate consideration. On January 31, 2008, the company and its president moved to dismiss the complaint for failure to state a cause of action or, in the alternative, to stay such action pending the resolution of plaintiffs’ claims in arbitration.
		On June 27, 2008, the Federal Court dismissed, with prejudice, the shareholders derivative action in its entirety. Based upon its reading of the Court’s decision, management believes the dismissal effectively ends of the litigation involving the assignment of the ice technology license, and eviscerates the arbitration proceeding since the Court held that the approximate $1,495,000 liability claimed to be owed to the plaintiffs had in fact been paid to them by the issuance of Ice Surface Development common stock on June 7, 2007.

NOTE H — Royalty Agreement

On December 12, 2007, the company granted High Density Poweretrain, Inc. of Waterford, Michigan (“HDP”) an exclusive, worldwide license to incorporate the company’s constant velocity joint technology in HDP’s family of highly-powered, multifueled, fuel efficient, light weight, cost effective internal combustion engines. In consideration for the grant of the license, the company will receive annual royalties equal to 5% of annual gross revenues generated by the sale of HDP’s multifuel engines, including all sublicense of such technology. There are no minimum royalty payments and the grant does not affect the company’s ability to commercialize its constant velocity joint technology in any other field and/or application. At June 30, 2008, the company did not record any royalties under this agreement.

NOTE I — Gain on Cancellation of Debt

On June 27, 2008, the company was awarded a judgment that dismissed, with prejudice, an action seeking accrued compensation under certain employment agreements. The federal district court rendered its decision that consideration for such accrual had been satisfied in shares of ISDI stock with a carrying value of $0, which were immediately converted into a right to receive an increased percentage of future royalty payments.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

PLAN OF OPERATION

(a)		Overall Business Strategy
		From its inception in 1996, the company’s overall business plan has been to design, develop, build and commercialize its FTV ® worldwide, especially in the Asian, African, South and Central American and Eastern European markets. In addressing issues and solving problems encountered in the design and development of the FTV, the company designed and developed a number of automotive drive-line technologies— i.e. the company’s hydraulic pump/motor system, infinitely variable transmissions, Iso-Torque™ differential and constant velocity joint technology.
		The FTV has been developed and is ready for commercialization. In addition, each of the company’s other automotive technologies has been developed and are ready for commercialization — either independently on a stand-alone basis or as incorporated into the company’s FTV.
		In present circumstances, the company intends to produce, market and distribute FTV’s by entering into a joint venture relationship with an automotive manufacturer. The company intends to incorporate its drive-line technologies into the FTV to enhance its marketability and value. The company also intends to license and/or enter into supply contracts with automotive manufacturers, military contractors, tier-one suppliers and possibly end-users for its drive-line technologies independent of their utilization in the FTV.

(b)		Current Status of Business Plan and Ongoing Projects
		The company’s plan of operation during the year ending December 31, 2008 is as follows:
1)		to complete and ship approximately seven design-specific infinitely variable transmissions to the National Aeronautics and Space Administration for use in that agency’s lunar rover in connection with NASA’s program entitled “America’s return to the moon”; to continue to work with NASA as an “official” drive-line consultant to the lunar rover project;
2)		to complete the integration of the company’s patented FTV technology, namely, its steer drive, suspension system and high speed tracks, with a cabover truck furnished by a major U.S. automotive company in order commercialize the FTV initially in the North American market and eventually in the worldwide markets of Asia, Africa, Latin and South America and Europe;
3)		to deliver approximately six constant velocity joints to a major U.S. military contractor for installation in the contractor’s production-ready Joint Light Tactical Vehicle the contractor is planning to submit to the U.S. Army in 2008 as part of the bidding process for a contract and to work with the contractor with respect to the commercialization of the company’s other technologies;
4)		to work with another major U.S. automotive manufacturer with respect to the possible installation of the company’s IsoTorque differential in a number of that manufacturer’s vehicles;
5)		to deliver a design-specific, prototype constant velocity joint for installation in a California metropolitan bus company’s hybrid bus and, upon the successful integration of such unit, to explore a potential supply contract with such company for all of its hybrid bus production;
6)		to work with an American subsidiary of a Korean manufacturer for installation of the company’s patented hydraulic pump and motor technology in its construction and agriculture vehicles.
		Information regarding the company and all of its automotive inventions, including regular updates on technological and business developments, can be found on the company’s website, www.torvec.com.
		Through June 14, 2007, the company held a license to ice technology granted by the Trustees of Dartmouth College. This license was held through the company’s majority-owned subsidiary, Ice Surface Development, Inc. The license required the company to pay Dartmouth College a royalty of 3.5% of the net sales of licensed product with minimum annual payments of $25,000 through 2021. In addition, the license provided for the payment of 50% of sub-license fee income.

Since its acquisition of the ice technology license, the company worked with the technology’s inventor, Dr. Victor Petrenko at Dartmouth’s Thayer School of Engineering, to refine the various methods of deicing and used its best efforts to sublicense such technology to one or more domestic and/or foreign glass manufacturers, automotive companies and other potential end-users. A considerable amount of additional development work was performed at the Dartmouth College’s Center for Ice Technology on the college’s campus, which work was supervised by Dr. Petrenko.

In December, 2006, the company was informed by Dr. Petrenko that while the physics underlying the ice technology is still valid and the technology remains promising, he could not estimate a time frame when the technology would be mature enough for automotive commercialization. Given Dr. Petrenko’s assessment with respect to the ice technology, management determined that the unamortized cost of the ice license as of December 31, 2006 should be recorded as an impairment in accordance with SFAS No. 144 as of and for the year ended December 31, 2006.

During 2007, the company and Dr. Petrenko discussed the terms and conditions under which the company would accept Dr. Petrenko’s offer to purchase the license from the company. Effective June 15, 2007, the company assigned all of its rights, title and interest in and to the license to Dr. Petrenko’s company (Ice Engineering, LLC) in exchange for an agreement by Ice Engineering to pay the shareholders of Ice Surface Development a royalty equal to 5% of the gross revenues generated by the license and the assumption of the company’s obligations to Dartmouth College under the license.

Separately, Ice Engineering, LLC agreed to reimburse approximately $3,500,000 of acquisition and maintenance costs expended by the company in connection with the ice technology. Pursuant to the reimbursement agreement, the company received $500,000 on June 15, 2007. The $3,000,000 balance is to be paid at the rate of $300,000 per quarter commencing March 1, 2008, less approximately $91,000 in fees payable to Dartmouth College accrued through June 14, 2007 to be deducted from the first quarterly reimbursement amount. At March 31, 2008, the company has accrued $91,000 of these license associated expenses. On April 3, 2008, the company received net proceeds of approximately $209,000 representing the March 1, 2008 quarterly payment. In the circumstances, the collectibility of the amounts due under the agreement are not reasonably determinable and such reimbursements will not be recognized until cash has been received.

The company did not receive the second quarterly reimbursement installment due June 1, 2008. The company received a request from Ice Engineering LLC to shift the payment schedule under the agreement so that the June payment would be payable September 1, 2008, with successive quarterly installments payable quarterly in accordance with the shifted schedule. The company accommodated Ice Engineering’s request upon the condition that Ice Engineering make partial payment of the June installment immediately.

The company has accounted for the receipt of the reimbursement proceeds as a recovery of costs since such amounts represent an initial payment and is subject to additional installments and when payments received exceed the cost accumulated, revenue will be recorded under the cost recovery approach to the extent that the proceeds exceed the basis and to the extent where the Company could potentially be required to satisfy certain obligations under the license.

In anticipation of the assignment of the ice technology license, the shareholders of Ice Surface Development adopted and approved a Plan of Liquidation and Dissolution on June 7, 2007. Pursuant to the Plan, all liabilities owed by Ice Surface to its former officers, approximately $1.5 million, were extinguished in exchange for an increase in their percentage equity in Ice Surface Development. The former officers of Ice Surface Development contested this treatment, pursuant to a pending arbitration proceeding and an action brought in federal district court.

On June 27, 2008, the federal district court dismissed, with prejudice, the former officers’ action in its entirety. Based upon its reading of the court’s decision, management believes the dismissal effectively ends the litigation involving the assignment of the ice technology license, and eviscerates the arbitration proceeding since the court held that the approximate $1,495,000 liability claimed to be owed to plaintiffs had in fact been paid to them by the issuance of Ice Surface Development common stock on June 7, 2007. The Company expects to proceed with its ICE Liquidation Plan in the third quarter.

(c)		Company Expenses The net income for the three month period ended June 30, 2008 was $702,000 as compared to the three month period ended June 30, 2007 of a net loss of $927,000. The net loss for the six month period ended June 30, 2008 was $482,000 as compared to the six month period ended June 30, 2007 net loss of $1,758,000. The decrease in the net loss of$1,629,000 and $1,276,000, respectively, is principally related to the gain on cancellation of debt which provided the company with other income of $1,541,000.
		Research and development expenses for the three month period ended June 30, 2008 amounted to $114,000 as compared to $155,000 for the three month period ended June 30, 2007. Research and development expenses for the six month period ended June 30, 2008 amounted to $262,000 as compared to $390,000 for the six month period ended June 30, 2007. The decrease of $41,000 and $129,000 in the three and six month comparative is due to decreased cost associated with commercializing our technologies.
		General and administrative expense for the three month period ended June 30, 2008 amounted to $734,000 compared to $904,000 for the three month period ended June 30, 2007. General and administrative expenses for the six month period ended June 30, 2008 amounted to $1,781,000 as compared to $1,500,000 for the six month period ended June 30, 2007. This increase in the six month period amounted to $281,000 and is due, in large part, to the increase in accrued compensation to James and Keith Gleasman of $100,000 and the legal expenditures of $200,000 for patents. The decrease of $170,000 in the three month period is due in part to a decrease of professional fees and consulting fees of $90,000 and $75,000, respectively.

(d)		Liquidity and Capital Resources
		The company’s business activities during the six month period ended June 30, 2008 were funded principally through:

	•		the receipt in 2007 of the first installment of $500,000 of an aggregate $3,500,000 reimbursement payable in connection with the assignment of the company’s ice technology license and the receipt in 2007 of $126,000 in revenue from the sale of the company’s products to various end-users; and
	•		the receipt of approximately $15,000 and $30,000 of revenue during the three and six month periods ended June 30, 2008,respectively, attributable to the sale of a constant velocity joint prototype to a California bus the sale of a prototype to a military contractor;
	•		of the purchase of restricted common stock for $100,000 by an accredited investor at a price of $2.75 per common share.

During the six month periods ended June 30, 2008 and 2007, the company issued 432,975 and 337,163 common shares to business consultants under its Business Consultants Stock Plan in exchange for ongoing corporate legal services, internal accounting services, business advisory services as well as legal fees and associated expenses for ongoing patent work and litigation. As of June 30, 2008 and 2007, there are 4,220,651 and 4,855,029 shares available for future grants under the plan.

On March 28, 2008 the board of directors approved the governance and compensation committee’s recommendation that, effective January 1, 2008, each of the Gleasmans be compensated at the rate of $300,000 per year. Such amount is payable in cash. No payment of all or any portion of the Gleasmans’ compensation shall be paid unless and until the company shall have the requisite cash available. The determination of the availability of the requisite amount of cash shall be made by the board of directors in the light of approved-budgets, existing and anticipated capital requirements and existing and estimated cash flows. Unpaid amounts are accumulated and carry over from one year to the next. No amount was paid to either of the Gleasmans under this compensation arrangement during the six month period ended June 30, 2008. The amount of unpaid compensation accrued as of June 30, 2008 is $300,000.

At June 30, 2008 and 2007, the company’s cash position was $113,000 and $638,000 and the company had a working capital deficit of $309,000 and $1,064,000. The company’s cash position at anytime during the six month periods ended June 30, 2008 and 2007 was dependent upon its success in selling its preferred stock, the receipt of reimbursement monies with respect to its ice technology license and revenues generated by the sale of its products. Since our inception, we have incurred significant operating and net losses and have not generated positive cash flows from operations. The balance of cash and cash equivalents and the funding commitment as of June 30, 2008 will not sufficient to meet our anticipated cash requirements through June 30, 2009, based on our present plan of operation. As a result, we are seeking to raise additional capital. Additional capital may not be available on acceptable terms or at all. Equity financings may be dilutive to existing stockholders. If we are unable to obtain sufficient capital as and when needed, we may be forced to delay, scale back or eliminate some or all of our operations including our research and development programs and commercialization plans, and/or license to third parties certain products or technologies that we would otherwise seek to commercialize independently. Our ability to continue is dependent on obtaining additional long-term financing and ultimately achieving profitable operating results. Please see Note A of our condensed consolidated financial statements for the six months ended June 30, 2008. Under these circumstances we may be unable to continue as a going concern.

At June 30, 2008 and 2007, the company had accounts payable and accrued expenses totaling $490,000 and 1,965,000, respectively, of which $1,451,000 is attributable to amounts claimed by the former officers and directors of the company’s ice technology subsidiary. (See Legal Proceedings.)

(e)		Critical Accounting Policies
		Revenue Recognition
		The company’s terms provided that customers are obligated to pay for products sold to them within a specified number of days from the date that title to the products is transferred to the customers. The company’s standard terms are typically net 30 days. The company recognizes revenue when transfer of title occurs and risk of ownership passes to a customer at the time of shipment or delivery depending on the terms of the agreement with a particular customer. The sale price of the company’s products is substantially fixed and determinable at the date of the sale based upon purchase orders generated by a customer and accepted by the company. To the extent that collectibility of the receivable is not assured, the company follows the cost recovery approach. Accordingly, amounts collected will be accounted for as a reduction of costs.

Recent Accounting Pronouncements

Effective January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and requires additional disclosures about fair value measurements. In February 2008, the FASB delayed the effective date of SFAS 157 for one year for all nonfinancial assets and nonfinancial liabilities, except for those items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Management has determined that the adoption of SFAS 157 did not have a material effect on the company’s consolidated financial statements.

Effective January 1, 2008, the company adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities- including an amendment of FASB Statement 115” (“SFAS 159”). This statement provides companies with an option to report selected financial assets and liabilities at fair value. As of June 30, 2008, the company has not elected to use the fair value option allowed by SFAS 159. Management has determined that the adoption of SFAS 159 did not have a material effect on the company’s consolidated financial position, results of operations, cash flows or financial statement disclosures.

In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133”. SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 with early application encouraged. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended December 31, 2009. in review of SFAS 161, the Company has determined that it is not applicable and will have no effect to its consolidated financial statements.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162 (SFAS 162), “The Hierarchy of Generally Accepted Accounting Principles.” SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S. GAAP. SFAS 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” This statement is not expected to result in a change in our current practice.

(f)		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 the six month period ended June 30, 2008.
(g)		Quarterly Fluctuations
		As of June 30, 2008 and 2007, the company had not engaged in substantial revenue producing operations. Once the company actually commences significant revenue producing operations, the company’s operating results may fluctuate significantly from period to period as a result of a variety of factors, including purchasing patterns of consumers, the length of the company’s sales cycle to key customers and distributors, the timing of the introduction of new products and product enhancements by the company and its competitors, technological factors, variations in sales by product and distribution channel, product returns, and competitive pricing. Consequently, once the company actually commences significant revenue producing operations, the company’s product revenues may vary significantly by quarter and the company’s operating results may experience significant fluctuations.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported on a timely basis and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

The company’s management, including the chief executive officer and interim chief financial officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of June 30, 2008 pursuant to Rule 13a-15(b) under the Exchange Act and has concluded that our disclosure controls and procedures were effective as of June 30, 2008.

Changes in Internal Control Over Financial Reporting

The company’s management, with the participation of the company’s chief executive officer and interim chief financial officer, has concluded that there were no changes in the company’s internal control over financial reporting that occurred during the quarter ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

(1)		On September 30, 2005, the company filed a declaratory judgment action in the Supreme Court of the State of New York for the Seventh Judicial District seeking that court’s determination that certain, purported agreements with a management consulting firm are null and void and unenforceable as against the company, its officers and directors. This litigation is in the predeposition, document-production discovery phase.
(2)		On April 12, 2007, the company commenced a second lawsuit against the same management consulting firm in the Supreme Court, Seventh Judicial District, alleging that such firm had fraudulently induced the company to enter into certain purported agreements with the management firm, did not perform the services for which the company had engaged the firm and that, as a result, the company has been damaged in excess of $6,000,000 by such firm. This litigation is in the predeposition, document-production discovery phase.
(3)		On October 8, 2007, the controlling persons of the company’s majority-owned subsidiary, Ice Surface Development, Inc.(“ISDI”), namely its chief executive officer, its chief operating officer and its vice-president of manufacturing, filed for arbitration of their claims that ISDI is obligated to pay them certain amounts under their employment contracts. ISDI has opposed plaintiffs’ claims on the grounds that they are without merit. The arbitration is in the predeposition discovery phase.
		On October 19, 2007, the same three persons commenced a shareholders’ derivative action in the Federal District Court for the Western District of New York claiming that the company and its president breached their fiduciary duties to the minority shareholders of ISDI in assigning the Dartmouth College ice technology license for inadequate consideration. On January 31, 2008, the company and its president moved to dismiss the complaint for failure to state a cause of action or, in the alternative, to stay such action pending the resolution of plaintiffs’ claims in arbitration.
		On June 27, 2008, the Federal Court dismissed, with prejudice, the shareholders derivative action in its entirety. Based upon its reading of the Court’s decision, management believes the dismissal effectively ends of the litigation involving the assignment of the ice technology license, and eviscerates the arbitration proceeding since the Court held that the approximate $1,495,000 liability claimed to be owed to the plaintiffs had in fact been paid to them by the issuance of Ice Surface Development common stock on June 7, 2007.

Item 1A. Risk Factors .

There have been no significant changes to the risk factors facing the company as disclosed in the Company’s Form 10-K for the year ended December 31, 2007, other than those described in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operation and Part II, Item 1, Legal Proceedings, all as set forth herein.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None.

Item 6. Exhibits

Exhibits as required by Item 601 of Regulation S-K, as applicable, are attached to this quarterly report (Form 10-Q). 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

Agreement and Plan of Merger, dated November 29, 2000 by and among Torvec Subsidiary Corporation, Torvec, Inc., UTEK Corporation and ICE Surface Development, Inc. incorporated by reference to Form 8-K filed November 30, 2000 and Form 8K/A filed February 12, 2001.

(3)

Articles of Incorporation, By-laws

	3.1		Certificate of Incorporation, incorporated by reference to Form 10-SB/A , Registration Statement, registering Company’s $.01 par value common stock under section 12(g) of the Securities Exchange Act of 1934;
	3.2		Certificate of Amendment to the Certificate of Incorporation dated August 30, 2000, incorporated by reference to Form SB-2 filed October 19, 2000;
	3.3		Certificate of Correction dated March 22, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2002;
	3.4		By-laws, as amended by shareholders on January 24, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2002;
	3.5		Certification of Amendment to the Certificate of Incorporation dated October 21, 2004 setting forth terms and conditions of Class B Preferred, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2004.
	3.6		Certificate of Amendment to the Certificate of Incorporation dated January 26, 2007 increasing the authorized common shares from 40,000,000 to 400,000,000 common shares, incorporated by reference to annual report (Form 10-K) filed for the calendar year ended December 31, 2006.

(4)

Instruments defining the rights of holders including indentures

None

(9)

Voting Trust Agreement

None

(10)

Material Contracts

10.1		Certain Employment Agreements, Consulting Agreements, certain assignments of patents, patent properties, technology and know-how to the Company, Neri Service and Space Agreement and Ford Motor Company Agreement and Extension of Term, all incorporated by reference to Form 10-SB/A, Registration Statement, registering Company’s $.01 par value common stock under section 12(g) of the Securities Exchange Act of 1934;
10.2		The Company’s 1998 Stock Option Plan and related Stock Options Agreements, incorporated by reference to Form S-8, Registration Statement, registering 2,000,000 shares of the Company’s $.01 par value common stock reserved for issuance thereunder, effective December 17, 1998;
10.3		The Company’s Business Consultants Stock Plan, incorporated by reference to Form S-8, Registration Statement, registering 200,000 shares of the Company’s $.01 par value common stock reserved for issuance thereunder, effective June 11, 1999, as amended by reference to Form S-8 Registration Statements registering an additional 200,000, 200,000, 100,000, 800,000, 250,000, 250,000, 350,000, 250,000, 2,500,000 and 5,000,000 shares of the Company’s $.01 par value common stock reserved for issuance thereunder, effective October 5, 2000, November 7, 2001, December 21, 2001, February 1, 2002, November 12, 2002, January 22, 2003, May 23, 2003, November 26, 2003, April 20, 2004 and October 13, 2006, respectively;

10.4		Termination of Neri Service and Space Agreement dated August 31, 1999, incorporated by reference to Form 10-QSB filed for the quarter ended September 30, 1999;
10.5		Operating Agreement of Variable Gear, LLC dated June 28, 2000, incorporated by reference to Form 10-QSB filed for the quarter ended June 30, 2000;
10.6		License Agreement between Torvec, Inc. and Variable Gear, LLC dated June 28, 2000, incorporated by reference to Form SB-2 filed October 19, 2000;
10.7		Investment Agreement with Swartz Private Equity, LLC dated September 5, 2000, together with attachments thereto, incorporated by reference to Form 8-K filed October 2, 2000;
10.8		Extension of and Amendment to Consulting Agreement with James A. Gleasman, incorporated by reference to Form 10-KSB filed for the fiscal year ended December 31, 2000;
10.9		Extension of and Amendment to Consulting Agreement with Keith E. Gleasman, incorporated by reference to Form 10-KSB filed for the fiscal year ended December 31, 2000;
10.10		Extension of and Amendment to Consulting Agreement with Vernon E. Gleasman, incorporated by reference to Form 10-KSB filed for the fiscal year ended December 31, 2000;
10.11		Option and Consulting Agreement with Marquis Capital, LLC dated February 10, 1999, incorporated by reference to Form 10-QSB filed for quarter ended March 31, 2001;
10.12		Option and Consulting Agreement with PMC Direct Corp., dated February 10, 1999, incorporated by reference to Form 10-QSB filed for quarter ended March 31, 2001;
10.13		Investment Banking Services Agreement with Swartz Institutional Finance (Dunwoody Brokerage Services, Inc.) dated December 8, 2000, incorporated by reference to Form 10-QSB filed for quarter ended March 31, 2001;
10.14		Employment Agreement with Michael Martindale, Chief Executive Officer, dated August 1, 2001, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2001;
10.15		Employment Agreement with Jacob H. Brooks, Chief Operating Officer, dated August 1, 2001, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2001;
10.16		Employment Agreement with David K. Marshall, Vice-President of Manufacturing, dated September 1, 2001, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2001;
10.17		Investment Banking Services Agreement with Swartz Institutional Finance (Dunwoody Brokerage Services, Inc.), as amended, dated October 23, 2001, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2001;
10.18		Stock Option Agreement with Samuel Bronsky, Chief Financial and Accounting Officer, dated August 28, 2001, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2001;
10.19		Pittsford Capital Group, LLC Agreement dated January 30, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2001;
10.20		Gleasman-Steenburgh Indemnification Agreement dated April 9, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2001;
10.21		Series B Warrant dated April 10, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2001;
10.22		Billow Butler & Company, LLC investment banking engagement letter dated October 1, 2003, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2003;
10.23		Letter of Acknowledgement and Agreement with U.S. Environmental Protection Agency dated February 4, 2004, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2003;
10.24		Letter Agreement with CXO on the GO, L.L.C. dated February 20, 2004, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2003;
10.25		Letter Amendment with CXO on the GO, L.L.C. dated February 23, 2004, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2003;
10.26		Lease Agreement for premises at Powder Mills Office Park, 1169 Pittsford-Victor Road, Suite 125, Pittsford, New York 14534, dated July 16, 2004; incorporated by reference to Form 10-QSB filed for fiscal quarter ended June 30, 2004;
10.27		Lease Agreement for testing facility and Mustang dynamometer, dated July 21, 2004; incorporated by reference to Form 10-QSB filed for fiscal quarter ended June 30, 2004;

10.28		Advisory Agreement with PNB Consulting, LLC, 970 Peachtree Industrial Blvd., Suite 303, Suwanee, Georgia 30024; incorporated by reference to Form 10-QSB filed for fiscal quarter ended June 30, 2004;
10.29		Agreement between Torvec and ZT Technologies, Inc. dated July 21, 2004, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2004;
10.30		Assignment and Assumption of Lease between William J. Green and Ronald J. Green and Torvec, Inc. effective as of December 31, 2004, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2004;
10.31		Bill of Sale between Dynamx, Inc. and Torvec, Inc. for equipment and machinery, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2004;
10.32		Lease and Services Agreement between Robert C. Horton as Landlord and Torvec, Inc. as Tenant dated March 18, 2005, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2004;
10.33		Settlement Agreement and Mutual Release between Torvec, Inc. and ZT Technologies, Inc. dated March 29, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2005;
10.34		Advisory Agreement between Robert C. Horton and Torvec, Inc. dated February 15, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2005;
10.35		Lease and Services Agreement between Dennis J. Trask as Landlord and Torvec, Inc. as Tenant dated April 18, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2005;
10.36		Consulting Agreement with Matthew R. Wrona, dated June 30, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended June 30, 2005;
10.37		Option Agreement between Matthew R. Wrona and Torvec, Inc. dated June 30, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended June 30, 2005;
10.38		Trust Agreement between Matthew R. Wrona, Donald Gabel, Lawrence Clark, Steven Urbanik, Floyd G. Cady, Jr., and Michael Pomponi as Grantors and Richard B. Sullivan as Trustee, dated September 22, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;
10.39		Consultant Agreement with Floyd G. Cady, Jr., dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;
10.40		Consultant Agreement with Lawrence W. Clark, dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;
10.41		Consultant Agreement with Donald W. Gabel, dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;
10.42		Consultant Agreement with Michael A. Pomponi, dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;
10.43		Consultant Agreement with Steven Urbanik, dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;
10.44		Consultant Agreement with Kiwee Johnson, dated September 30, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;
10.45		Confidentiality Agreement with Joseph B. Rizzo, dated October 24, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005.
10.46		Minutes of meeting Board of Directors Torvec, Inc., held October 19, 2004, creating the non-management directors plan, incorporated by reference to Form 10-KSB filed for the fiscal year ended December 31, 2006.
10.47		Excerpts from minutes of the meeting of Board of Directors Torvec, Inc., adopting changes to the non-management directors plan creating, a commercialized event plan, approving an increase in shares to be issued under business consulting plan and adopting recommendation that shareholders increase number of authorized common shares from 40,000,000 to 400,000,000 common shares, incorporated by reference to Form 8-K filed on October 16, 2006.
10.48		Order of Supreme Court of the State of New York with respect to litigation between the company and a management consulting firm, incorporated by reference to Form 8-K filed on June 20, 2006;
10.49		Letter agreement with American Continental Group, LLC, executed on October 22, 2006, incorporated by reference to Form 8-K filed on October 30, 2006;
10.50		New York State School Bus Proposal incorporated by reference to Form 10-Q filed for quarter ended March 31, 2006;

10.51		Order of Supreme Court of the State of New York directing the Monroe County Clerk to release back to the company 40,000 common shares and 245,000 common stock warrants issued to a management consulting firm with which the company is in litigation and held in escrow by such Clerk by virtue of a previous court order and directing the return to the company of a $250,000 (less administrative fee) undertaking deposited with the Monroe County Treasurer in connection with the same litigation, incorporated by reference to Form 10-Q filed for the quarter ended March 31, 2007;
10.52		License Assignment and Transfer Agreement by and between Ice Engineering, LLC and Torvec, Inc. made effective June 15, 2007 assigning license granted by Dartmouth College with respect to ice technology from Torvec to Ice Engineering, incorporated by reference to Form 8-K filed on July 18, 2007.
10.53		License Agreement by and between High Density Powertrain and Torvec, Inc. dated December 12, 2007, incorporated by reference to current report (Form 8-K) filed December 14, 2007;
10.54		Consulting Agreement by and between Clifford Carlson and Torvec, Inc. dated December 12, 2007, incorporated by reference to current report (Form 8-K) filed December 14, 2007;
10.55		Minutes of meeting of Governance and Compensation Committee dated February 19, 2008 establishing compensation for the company’s president and chief executive officer and amending the company’s commercializing event plan, incorporated by reference to annual report (Form 10-K) filed for year ended December 31, 2007.
(11)		Statement regarding computation of per share earnings (loss)
		Not applicable
(14)		Code of Ethics
(16)		Letter on change in certifying accountant
		None
(18)		Letter regarding change in accounting principles
		None
(20)		Other documents or statements to security holders
		None
(21)		Subsidiaries of the registrant
		Ice Surface Development, Inc. (New York)
		Iso-Torque Corporation (New York)
		IVT Diesel Corp. (New York)
		Variable Gear, LLC (New York)
(22)		Published report regarding matters submitted to vote of security holders
		None
(23)		Consents of experts and counsel
(23.1)		Eisner LLP Consent
(24)		Power of attorney
		None
(31)		Rule 13(a)-14(a)/15(d)-14(a) Certifications
(32)		Section 1350 Certifications
(99)		Additional exhibits
		None

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.

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: August  14, 2008

EXHIBIT INDEX

EXHIBIT								PAGE
	(2	)		Plan of acquisition, reorganization, arrangement, liquidation, or succession
				2.1		Agreement and Plan of Merger, dated November 29, 2000 by and among Torvec Subsidiary Corporation, Torvec, Inc., UTEK Corporation and ICE Surface Development, Inc. incorporated by reference to Form 8-K filed November 30, 2000 and Form 8K/A filed February 12, 2001.		N/A
	(3	)		Articles of Incorporation, By-laws
				3.1		Certificate of Incorporation, incorporated by reference to Form 10-SB/A, Registration Statement, registering Company’s $.01 par value common stock under section 12(g) of the Securities Exchange Act of 1934;		N/A
				3.2		Certificate of Amendment to the Certificate of Incorporation dated August 30, 2000, incorporated by reference to Form SB-2 filed October 19, 2000;		N/A
				3.3		Certificate of Correction dated March 22, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2002;		N/A
				3.4		By-laws, as amended by shareholders on January 24, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2002;		N/A
				3.5		Certification of Amendment to the Certificate of Incorporation dated October 21, 2004 setting forth terms and conditions of Class B Preferred, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2004.		N/A
				3.6		Certificate of Amendment to the Certificate of Incorporation dated January 26,2007 increasing authorized common shares from 40,000,000 to 400,000,000 common shares, incorporated by reference to annual report Form 10-K filed for the calendar year ended December 31, 2006.		N/A
	(4	)		Instruments defining the rights of holders including indentures
				None				N/A
	(9	)		Voting Trust Agreement
				None				N/A
	(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, 200,000, 100,000, 800,000, 250,000, 250,000, 350,000, 250,000,2,500,000 and 5,000,000 shares of the Company’s $.01 par value common stock reserved for issuance thereunder, effective October 5, 2000, November 7, 2001, December 21, 2001, February 1, 2002, November 12, 2002, January 22, 2003, May 23, 2003, November 26, 2003, April 20, 2004 and October 13, 2006 respectively;				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
	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

EXHIBIT								PAGE
	10.8			Extension of and Amendment to Consulting Agreement with James A. Gleasman, incorporated by reference to Form 10-KSB filed for the fiscal year ended December 31, 2000;				N/A
	10.9			Extension of and Amendment to Consulting Agreement with Keith E. Gleasman, incorporated by reference to Form 10-KSB filed for the fiscal year ended December 31, 2000;				N/A
	10.10			Extension of and Amendment to Consulting Agreement with Vernon E. Gleasman, incorporated by reference to Form 10-KSB filed for the fiscal year ended December 31, 2000;				N/A
	10.11			Option and Consulting Agreement with Marquis Capital, LLC dated February 10, 1999, incorporated by reference to Form 10-QSB filed for quarter ended March 31, 2001;				N/A
	10.12			Option and Consulting Agreement with PMC Direct Corp., dated February 10, 1999, incorporated by reference to Form 10-QSB filed for quarter ended March 31, 2001;				N/A
	10.13			Investment Banking Services Agreement with Swartz Institutional Finance (Dunwoody Brokerage Services, Inc.) dated December 8, 2000, incorporated by reference to Form 10-QSB filed for quarter ended March 31, 2001;				N/A
	10.14			Employment Agreement with Michael Martindale, Chief Executive Officer, dated August 1, 2001, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2001;				N/A
	10.15			Employment Agreement with Jacob H. Brooks, Chief Operating Officer, dated August 1, 2001, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2001;				N/A
	10.16			Employment Agreement with David K. Marshall, Vice-President of Manufacturing, dated September 1, 2001, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2001;				N/A
	10.17			Investment Banking Services Agreement with Swartz Institutional Finance (Dunwoody Brokerage Services, Inc.), as amended, dated October 23, 2001, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2001;				N/A
	10.18			Stock Option Agreement with Samuel Bronsky, Chief Financial and Accounting Officer, dated August 28, 2001, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2001;				N/A
	10.19			Pittsford Capital Group, LLC Agreement dated January 30, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2001;				N/A
	10.20			Gleasman-Steenburgh Indemnification Agreement dated April 9, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2001;				N/A
	10.21			Series B Warrant dated April 10, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2001;				N/A
	10.22			Billow Butler & Company, LLC investment banking engagement letter dated October 1, 2003, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2003;				N/A
	10.23			Letter of Acknowledgement and Agreement with U.S. Environmental Protection Agency dated February 4, 2004, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2003;				N/A
	10.24			Letter Agreement with CXO on the GO, L.L.C. dated February 20, 2004, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2003;				N/A
	10.25			Letter Amendment with CXO on the GO, L.L.C. dated February 23, 2004, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2003;				N/A
	10.26			Lease Agreement for premises at Powder Mills Office Park, 1169 Pittsford-Victor Road, Suite 125, Pittsford, New York 14534, dated July 16, 2004, incorporated by reference to Form 10-QSB filed for fiscal quarter ended June 30, 2004;				N/A
	10.27			Lease Agreement for testing facility and Mustang dynamometer, dated July 21, 2004; incorporated by reference to Form 10-QSB filed for fiscal quarter ended June 30, 2004;				N/A
	10.28			Advisory Agreement with PNB Consulting, LLC, 970 Peachtree Industrial Blvd., Suite 303, Suwanee, Georgia 30024; incorporated by reference to Form 10-QSB filed for fiscal quarter ended June 30, 2004;				N/A
	10.29			Agreement between Torvec and ZT Technologies, Inc. dated July 21, 2004, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2004;				N/A
	10.30			Assignment and Assumption of Lease between William J. Green and Ronald J. Green and Torvec, Inc. effective as of December 31, 2004, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2004;				N/A

EXHIBIT								PAGE
	10.31			Bill of Sale between Dynamx, Inc. and Torvec, Inc. for equipment and machinery, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2004;				N/A
	10.32			Lease and Services Agreement between Robert C. Horton as Landlord and Torvec, Inc. as Tenant dated March 18, 2005, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2004;				N/A
	10.33			Settlement Agreement and Mutual Release between Torvec, Inc. and ZT Technologies, Inc. dated March 29, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2005;				N/A
	10.34			Advisory Agreement between Robert C. Horton and Torvec, Inc. dated February 15, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2005;				N/A
	10.35			Lease and Services Agreement between Dennis J. Trask as Landlord and Torvec, Inc. as Tenant dated April 18, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2005;				N/A
	10.36			Consulting Agreement with Matthew R. Wrona, dated June 30, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended June 30, 2005;				N/A
	10.37			Option Agreement between Matthew R. Wrona and Torvec, Inc. dated June 30, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended June 30, 2005;				N/A
	10.38			Trust Agreement between Matthew R. Wrona, Donald Gabel, Lawrence Clark, Steve Urbanik, Floyd G. Cady, Jr. and Michael Pomponi as Grantors and Richard B. Sullivan as Trustee, dated September 22, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;				N/A
	10.39			Consultant Agreement with Floyd G. Cady, Jr., dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;				N/A
	10.40			Consultant Agreement with Lawrence W. Clark, dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;				N/A
	10.41			Consultant Agreement with Donald W. Gabel, dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;				N/A
	10.42			Consultant Agreement with Michael A. Pomponi, dated October 1, 2005, incorporated b y reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;				N/A
	10.43			Consultant Agreement with Steven Urbanik, dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;				N/A
	10.44			Consultant Agreement with Kiwee Johnson, dated September 30, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005;				N/A
	10.45			Confidentiality Agreement with Joseph B. Rizzo, dated October 24, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2005				N/A
	10.46			Minutes of meeting Board of Directors Torvec, Inc., held October 19, 2004, creating the non-management directors plan, incorporated by reference to Form 10-KSB for fiscal year ended December 31, 2005				N/A
	10.47			Excerpts from minutes of the meeting of Board of Directors Torvec, Inc., adopting changes to the non-management directors plan creating a commercializes event plan, approving an increase in shares to be issued under business consulting plan and adopting recommendation that shareholders increase number of authorized common Shares from 40,000,000 to 400,000,000, incorporated by reference to Form 8-K filed on October 16, 2006.				N/A
	10.48			Order of Supreme Court of the State of New York with respect to litigation between the company and a management consulting firm, incorporated by reference to Form 8-K filed on June 20, 2006;				N/A
	10.49			Letter agreement with American Continental Group, LLC dated October 27, 2006 incorporated by reference to Form 8-K filed on October 30, 2006;				N/A
	10.50			New York State School Bus Proposal, incorporated by reference to Form 10-Q filed for the quarter ended March 31, 2006;				N/A
	10.51			Order of Supreme Court of the State of New York directing the Monroe County Clerk to release back to the company 40,000 common shares and 245,000 common stock warrants issued to a management consulting firm with which the company is in litigation and held in escrow by such Clerk by virtue of a previous court order and directing the return to the company of a $250,000 (less administrative fee) undertaking deposited with the Monroe County Treasurer in connection with the same litigation, incorporated by reference to Form 10-Q filed for the quarter ended March 31, 2007;				N/A