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 September 30, 2010

OR

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

For the transition period from                      to                     

Commission File No. 000-24455

TORVEC, INC.

(Exact name of registrant as specified in its charter)

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

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 (1) has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o      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:

		Number of Shares Outstanding at
Class		November 10, 2010
Common Stock, $.01 par value		45,633,429

 

 

TORVEC, INC.
(a development stage company)

INDEX

		PAGE
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets — September 30, 2010 (Unaudited) and December 31, 2009			3
Condensed Consolidated Statements of Operations—Three and Nine Months Ended September 30, 2010 and 2009 and September 25, 1996 (Inception) through September 30, 2010 (Unaudited)			4
Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2010 and 2009 and September 25, 1996 (Inception) through September 30, 2010 (Unaudited)			5
Notes to Condensed Consolidated Financial Statements (Unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			23
Item 4. Controls and Procedures			23
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			25
Item 1A. Risk Factors			25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			25
Item 3. Defaults Upon Senior Securities			25
Item 4. Submission of Matters to a Vote of Security Holders			25
Item 5. Other Information			25
Item 6. Exhibits			26
SIGNATURE PAGE			32
EXHIBIT INDEX			33
Exhibit 31.1
Exhibit 32

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

TORVEC, INC.
(a development stage company)

Condensed Consolidated Balance Sheets

		September 30, 2010				December 31, 2009
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	117,000			$	41,000
Prepaid expenses and other receivables			8,000				111,000
Total current assets			125,000				152,000
Property and Equipment:
Office equipment			68,000				68,000
Shop equipment			142,000				139,000
Leasehold improvements			213,000				213,000
Transportation equipment			64,000				106,000
			487,000				526,000
Less accumulated depreciation and amortization			(298,000	)			(299,000	)
Net property and equipment			189,000				227,000
Total Assets		$	314,000			$	379,000
LIABILITIES
Current liabilities:
Notes payable, current portion		$	90,000			$	20,000
Accounts payable			146,000				255,000
Accrued liabilities			567,000				451,000
Due to related party			11,000				22,000
Deferred income			28,000				828,000
Total current liabilities			842,000				1,576,000
Deferred rent			22,000				29,000
Notes payable, net of current portion			—				9,000
Total liabilities		$	864,000			$	1,614,000
Commitments and contingencies (See Note F)
STOCKHOLDERS’ CAPITAL DEFICIT
Preferred stock, $.01 par value, 100,000,000 shares authorized
3,300,000 designated as Class A, Non-voting, convertible, cumulative dividend $.40 per share, per annum, September 30, 2010 and December 31, 2009: 630,851 and 655,851 shares issued and outstanding, respectively (liquidation preference $3,868,269 and $3,841,491, respectively)
300,000 designated as Class B, Non-voting, convertible, cumulative dividend $.50 per share, per annum, September 30, 2010 and December 31, 2009: 77,500 and 77,500 shares issued and outstanding, respectively (liquidation preference $581,858 and $552,795, respectively)			7,000				7,000
Common stock, $.01 par value, 405,000,000 shares authorized, 37,847,555 and 35,811,192 issued and outstanding, at September 30, 2010 and December 31, 2009, respectively			378,000				358,000
Additional paid-in capital			52,944,000				51,613,000
Deficit accumulated during the development stage			(53,879,000	)			(53,213,000	)
Total Torvec, Inc. Stockholders’ Capital Deficit			(550,000	)			(1,235,000	)
Noncontrolling Interest of Subsidiary			—				—
Total Stockholders’ Capital Deficit			(550,000	)			(1,235,000	)
Total Liabilities and Stockholders’ Capital Deficit		$	314,000			$	379,000

See notes to condensed consolidated financial statements.

TORVEC, INC.
(a development stage company)

Condensed Consolidated Statements of Operations

(Unaudited)

		Three				Three												September 25,
		Months				Months				Nine Months				Nine Months				1996 (Inception)
		ended September				ended September				ended September				ended September				through September
		30, 2010				30, 2009				30, 2010				30, 2009				30, 2010
Revenue		$	—			$	—			$	—			$	175,000			$	422,000
Cost of Goods Sold			—				—				—				90,000				315,000
Gross Profit			—				—				—				85,000				107,000
Costs and expenses
Research and development			133,000				189,000				301,000				418,000				16,156,000
General and administrative			916,000				619,000				2,263,000				2,103,000				42,116,000
Asset impairments			—				—				—				—				1,071,000
Loss from operations		$	(1,049,000	)		$	(808,000	)		$	(2,564,000	)		$	(2,436,000	)		$	(59,236,000	)
Reversal of liability on cancellation of debt			—				—				—				—				1,541,000
Other income / (expense)			(31,000	)			—				1,898,000				—				2,158,000
Loss Before Income Tax Benefits		$	(1,080,000	)		$	(808,000	)		$	(666,000	)		$	(2,436,000	)		$	(55,537,000	)
Income tax benefits			—				151,000				—				151,000				386,000
Net Loss		$	(1,080,000	)		$	(657,000	)		$	(666,000	)		$	(2,285,000	)		$	(55,151,000	)
Net loss attributable to non-controlling interest in subsidiary			—				—				—				—				1,272,000
Net Loss attributable to Torvec, Inc.		$	(1,080,000	)		$	(657,000	)		$	(666,000	)		$	(2,285,000	)		$	(53,879,000	)
Preferred stock beneficial conversion feature			—				—				—				—				763,000
Preferred stock dividends			72,000				73,000				156,000				234,000				1,539,000
Net Loss attributable to common stockholders		$	(1,152,000	)		$	(730,000	)		$	(822,000	)		$	(2,519,000	)		$	(56,181,000	)
Basic and Diluted Net Loss attributable to common stock per share		$	(0.03	)		$	(0.02	)		$	(0.02	)		$	(0.07	)
Weighted average number of shares of Common stock, Basic and Diluted			37,576,000				34,524,000				36,878,000				33,719,000

See notes to condensed consolidated financial statements.

TORVEC, INC.
(a development stage company)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

										September 25,
										1996
										(Inception)
		Nine Months Ended								Through
		September 30,								September 30,
		2010				2009				2010
Cash flows from operating activities:
Net loss		$	(666,000	)		$	(2,285,000	)		$	(55,151,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			40,000				48,000				2,552,000
Loss on impairment of license			—				—				1,071,000
Impairment of goodwill			—				—				19,000
Gain on sale of fixed assets			(27,000	)			—				(37,000	)
Compensation expense attributable to common stock in subsidiary			—				—				619,000
Common stock issued for services			449,000				1,114,000				14,961,000
Warrants issued for services			45,000				—				294,000
Shares issued for future consulting services			—				—				103,000
Stockholder contribution of services			286,000				1,050,000				3,895,000
Gain on cancellation of debt			—				—				(1,541,000	)
Contribution to capital, Ford Truck			—				—				16,000
Common Stock issued in connection with Commercializing Event			13,000				14,000				63,000
Cancellation of trust shares at trust termination			(45,000	)			—				(45,000	)
Gain on sale of Ice Engineering license			(1,900,000	)			—				(1,900,000	)
Compensatory common stock, options and warrants			441,000				—				18,317,000
Change in fair value measurement			30,000				—				30,000
Changes in:
Prepaid expenses and other receivables			103,000				(122,000	)			153,000
Deferred revenue			—				—				(63,000	)
Deferred rent			(7,000	)			(7,000	)			22,000
Accounts payable and accrued expenses			46,000				298,000				4,467,000
Deferred compensation			—				(535,000	)			—
Due to a related party			(11,000	)			—				11,000
Net cash used in operating activities			(1,203,000	)			(425,000	)			(12,144,000	)
Cash flows from investing activities:
Purchase of property and equipment			(3,000	)			—				(363,000	)
Cost of acquisition			—				—				(16,000	)
Proceeds from sale of license			1,100,000				—				1,900,000
Proceeds from sale of fixed assets			27,000				—				37,000
Net cash provided by investing activities			1,124,000				—				1,558,000

										September 25,
										1996
										(Inception)
		Nine Months Ended								Through
		September 30,								September 30,
		2010				2009				2010
Cash flows from financing activities:
Net proceeds from sales of common stock and upon exercise of options and warrants			127,000				215,000				7,161,000
Net proceeds from sales of preferred stock			—				—				3,537,000
Net proceeds from sale of subsidiary stock			—				—				234,000
Proceeds from long-term borrowings			57,000				—				142,000
Repayments of long-term debt			(29,000	)			(12,000	)			(109,000	)
Proceeds from stockholders’ loan and advances			—				—				250,000
Repayment of stockholders’ loan and advances			—				—				(147,000	)
Distributions			—				—				(365,000	)
Net cash provided by financing activities			155,000				203,000				10,703,000
Net increase (decrease) in cash			76,000				(222,000	)			117,000
Cash at beginning of period			41,000				304,000
Cash at end of period		$	117,000			$	82,000			$	117,000
Supplemental Disclosures:
Interest paid		$	1,000			$	3,000			$	28,000
Income tax paid			—				—				1,000
Non cash investing and financing activities:
Shares issued for acquisition of leasehold improvements			—				—				166,000
Issuance of common stock in settlement of payables			35,000				62,000				156,000
Preferred stock issued in payment of dividend			—				—				39,000
Shares issued for acquisition of Variable Gear			—				—				19,000
Issuance of common stock for license			—				—				3,405,000
Issuance of common stock, warrant and options in settlement of liabilities, except notes payable			—				—				2,907,000
Notes payable exchanged for common stock			—				—				50,000
Advance settled with common stock			—				—				25,000
Loss on exchange of noncontrolling interest			—				—				232,000
Shares issued for future consulting services			—				—				103,000
Issuance of common stock for a finder’s fee			—				—				225,000
Advance from stockholder			—				—				250,000
Contribution of FTV Ford Truck			—				—				16,000
Ice Engineering LLC payable netted against receivable			—				—				91,000
Common stock issued in settlement of payable			—				—				58,000
Common stock issued in settlement of patent expense			—				—				117,000
Issuance of common stock as payment for preferred A and B dividends			46,000				—				123,000

See notes to condensed consolidated financial statements.

TORVEC, INC.
(a development stage company)

Notes to Condensed Consolidated Financial Statements

NOTE A — The Company and Basis of Presentation

The interim information contained herein with respect to the three and nine month periods ended September 30, 2010 and 2009 and the period from September 25, 1996 (inception) through September 30, 2010 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 nine month periods ended September 30, 2010 and 2009 and since inception. The results are not necessarily indicative of results to be expected for the entire year. Certain amounts in the prior year consolidated financial statements have been reclassified to conform to current year presentation.

Torvec, Inc. (the “company”) was incorporated as a New York State business corporation in September 1996. The company, which has not had any significant revenue producing operations and 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, is refining and intends to commercialize its technologies, presently focusing on its IsoTorque ^® differential and its hydraulic pump.

For the period from September 1996 (inception) through September 30, 2010, the company has accumulated a deficit of $53,879,000, and at September 30, 2010 has a working capital deficit of $717,000 and stockholders’ capital deficit of $550,000. The company has been dependent upon equity financing and advances from stockholders to meet its obligations and sustain operations. The company’s efforts are principally devoted to the ongoing refining of its technologies and commercializing its products. In October 2010, the company raised approximately $2,050,000 in a private equity offering through the issuance of 6,834,002 common shares at a price of $0.30 per share (see Note J [2]). Management believes that based upon its current cash position and its projected cash flows from its business operations and access to capital markets, the company will be able to meet its anticipated cash requirements through at least September 30, 2011. However, if adequate funds are not available, the company may need to downsize operations, incur debt or raise additional capital. There can be no assurance that the company will be successful in raising additional capital or incur debt when needed on terms acceptable to the company.

NOTE B — Summary of Significant Accounting Policies

[1]

Consolidation:

The financial statements include the accounts of the company, its majority-owned inactive subsidiary, Ice Surface Development, Inc. (56% owned at September 30, 2010 and 2009), 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]

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 determining the useful lives of its fixed assets and the future realizable value of such assets. The financial statements contain an estimate for a potential payroll tax liability. These estimates are subject to a high degree of judgment and potential change. Actual results could differ from those estimates.

[4]

Loss per Common Share:

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 260-10 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 and nine month periods ended September 30, 2010 and 2009, the company excluded 7,722,949 and 3,405,699, and 2,497,949 and 2,430,699 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 company also excluded 625,000 warrants at September 30, 2010 and 2009 as the conditions for their vesting were not yet satisfied.

[5]

Income Taxes:

The company accounts for income taxes using the asset and liability method described in FASB ASC 740-10 which requires recording of 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 FASB ASC 740-10 relating to “accounting for uncertainty in income taxes” on January 1, 2008. As a result of the implementation of FASB ASC 740-10, we recognized no adjustment for uncertain tax positions. As of September 30, 2010, we have not recognized an increase or decrease to reserves for uncertain tax positions nor have we accrued interest and penalties related to uncertain tax positions. The tax years 2007 through 2009 remain open to examination by the federal and state tax jurisdictions to which we are subject.

[6]

Fair Value of Financial Instruments:

The carrying amount of cash, accounts payable and accrued expenses approximates their fair value due to the short maturity of those instruments. The carrying amount of the notes payable is considered to approximate their fair value.

[7]

Stock-Based Compensation:

The company’s Stock Option Plan was terminated as of May 27, 2008 as to the grant of additional options. 641,848 previously issued and outstanding options remain exercisable in accordance with the terms of the options. ASC 718-10 requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values on the grant date. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized. In addition, the realization of tax benefits in excess of amounts recognized for financial reporting purposes will be recognized as a financing activity in accordance with ASC 718-10.

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 ASC 718-10-65 (prior authoritative literature: FASB Staff Position (FSP) No. SFAS 123(R)-c, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards”). This is a simplified method to determine the pool of windfall tax benefits that is used in determining the tax effects of stock compensation in the results of operations and cash flow reporting for awards that were outstanding as of the adoption of ASC 718-10.

[8]

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, 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 collection is reasonably assured. 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.

[9]

Recent Accounting Pronouncements:

In May 2009, the FASB issued new accounting guidance that establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In February 2010, the FASB amended the guidance and removed the contradictions between the requirements of U.S. generally accepted accounting principles U.S. GAAP (“GAAP”) and the Securities and Exchange Commission (“SEC”) filing rules. As a result, public companies will no longer have to disclose the date of evaluation of subsequent events in both issued and revised financial statements.

NOTE C — License from the Trustees of Dartmouth College

On November 28, 2000, the company’s majority-owned subsidiary, Ice Surface Development LLC (“Ice Surface”) entered into a 20-year exclusive license with the Trustees of Dartmouth College for land-based applications to a novel ice adhesion modification system developed by Dr. Victor Petrenko at Dartmouth’s Thayer School of Engineering. Under the license agreement the company made a single payment of $140,000 in 2000 for sponsored research. The license agreement provided for a royalty of 3.5% based on the value of net sales of licensed product with minimum annual payments of $10,000 for the first two years, $15,000 for the third year and $25,000 per year through 2021. In addition, the agreement provided for the payment of 50% of sub-license fee income.

Effective June 15, 2007, Ice Surface assigned the license to an unrelated company, Ice Engineering, LLC (“Ice Engineering”) in exchange for Ice Engineering’s agreement to pay the shareholders of Ice Surface an annual royalty equal to 5% of the annual gross revenues generated by the license and its agreement to assume the obligations to Dartmouth under the license.

Separately, Ice Engineering, 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 September 15, 2007. Under the license assignment agreement, the $3,000,000 balance was 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 September 14, 2007 to be deducted from the first quarterly reimbursement amount. The company received the first installment of $209,000 due March 1, 2008 on April 3, 2008 and did not receive any other installments.

On October 31, 2008, the company commenced an action in New York State Supreme Court, County of New York, Commercial Division against Ice Engineering, seeking the total balance owed by Ice Engineering to the company pursuant to the assignment agreement.

On January 27, 2010, the company and Ice Engineering settled this litigation. Under the settlement agreement, the company’s assignment of the ice technology license is made permanent. The company elected to forego its right to royalties and agreed to receive $1,100,000, with $300,000 paid to the company by Ice Engineering on January 27, 2010 and $800,000 paid to the company by Ice Engineering on February 26, 2010.

The company recognized in the first quarter the $1,100,000 received in 2010 in regard to the settlement of the litigation. The company also recognized in the first quarter the $800,000 previously recorded as deferred income in connection with the original contract for the license (See Note G).

NOTE D — Related Party Transactions

[1]		Effective January 1, 2008, the board of directors instituted a compensation plan for James and Keith Gleasman by which the company would compensate each of them for services performed and inventions and know-how transferred at the rate of $300,000 per year. Actual payment under the plan was conditioned upon a board determination that the company had the requisite cash, after the complete funding of all ongoing projects, to make payment.
		The company did not have the requisite cash available to pay the Gleasmans’ compensation under this arrangement from January 1, 2008 through August 17, 2009, the date on which each of the Gleasmans waived all rights and interest in and to the board-created compensation plan, including all rights and interest in and to the amount(s) under the plan accrued to such date. As a result of such waiver, of the $942,000 accrued under the plan at August 17, 2009, $900,000 was reclassified to equity as a contribution of services and $42,000 accrued under the plan for payroll taxes was recorded as a reduction to general and administrative expenses.

		For periods for which there is no compensation plan in effect for the Gleasmans, the company is required to record the estimated value of each of the Gleasmans services rendered to the company (estimated at $300,000 each per annum) as a contribution of services under generally accepted accounting principles applicable to the company and is required under the same accounting guidance to allocate the amount of such contribution between research and development expenses on the one hand and general and administrative expenses on the other hand. For the three and nine month period ended September 30, 2010, the company recorded $25,000 and $100,000 to research and development expense and $50,000 and $186,000 to general and administrative expense, respectively, based upon management’s estimate. For the three and nine month period ended September 30, 2009, the company recorded $50,000 and $150,000 to research and development expense and $100,000 and $300,000 to general and administrative expense, respectively, based upon management’s estimate of the Gleasmans time allocation.
		Effective March 14, 2010, James Gleasman retired as the company’s chief executive officer, interim chief financial officer and as a member of the board of directors. Mr. Gleasman died on May 29, 2010.
		During the year ended December 31, 2009, James Gleasman advanced the company $22,000. The outstanding balance as of September 30, 2010 is $11,000.
[2]		During the three month period ended September 30, 2010 and 2009, the company incurred an expense of $23,400 and $25,350, respectively, to a member of the Gleasman family for administrative, technological and engineering consulting services. During the nine month periods ended September 30, 2010 and 2009, the company incurred an expense of $60,450 and $76,050, respectively, to the same person. The related payments consisted of cash of $23,400 and $0 for the three month periods ended September 30, 2010 and 2009, respectively, with the balance paid in business consulting common shares. For the nine month periods ended September 30, 2010 and 2009, the related payments consisted of cash of $56,550 and $0, respectively, with the balance paid in business consulting shares.
[3]		During the three month periods ended September 30, 2010 and 2009, the company incurred an expense of $21,480 and $23,270, respectively, for each period to a family member of its general counsel for engineering services rendered to the company. During the nine month periods ended September 30, 2010 and 2009, the company incurred an expense of $62,650 and 69,810 respectively, to the same person. The related payments consisted of cash of $21,480 and $0 for the three month periods ended September 30, 2010 and 2009, respectively, with the balance paid in business consulting common shares. For the nine month periods ended September 30, 2010 and 2009, the related payments consisted of cash of $51,910 and $0, respectively, with the balance paid in business consulting shares.
[4]		On September 14, 2007, the company moved its executive offices and engineering operations from Pittsford and Webster, New York to a Rochester, New York facility, which includes both manufacturing and executive office space. The Rochester facility is owned by a partnership, in which Asher J. Flaum, a company director is a partner. On April 28, 2008, the company’s board of directors approved the terms of a lease for these premises and such lease was executed on April 29, 2008. (See note F[2]).
		In February 2010, the company made a one-time payment in shares for payments of additional rent. The company charged approximately $20,000 to general and administrative expense.
[5]		On July 16, 2010, Asher J. Flaum, a director of Torvec, Inc. purchased 40,000 restricted common shares of the company for $16,400.
[6]		On September 28, 2010, the board of directors accelerated the payment of the standard monthly compensation due to each of its chairman of the board and general counsel for the months of September-December, 2010, inclusive, by approving the issuance of 162,033 and 208,333 common shares respectively, at the closing price of the company’s common stock on September 28, 2010, namely $.36 per share. The shares were issued on October 7, 2010. The total expense related to this matter is approximately $133,000. The company accrued approximately $33,000 to general and administrative expense in September 2010, and the remaining $100,000 will be charged to general and administrative expense in the fourth quarter of 2010.

NOTE E — Convertible Note

On July 19, 2010, the company received a net $57,000, after payment of $3,000 in legal expenses, in connection with a Securities Purchase Agreement for the issuance of a Convertible Note in the principal amount of $60,000 due and payable on April 2, 2011, with interest payable at the rate of 8% per annum.

The outstanding Note principal can be converted, in whole or in part, into the company’s common stock at the election of the Holder from time to time beginning 180 days after the July 2, 2010 issue date. The conversion price is equal to 58% of the average of the three lowest closing bid prices of the company’s common stock during a 10 day trading period immediately prior to the date the Holder’s conversion notice is sent to the company.

The company may prepay the principal amount of the Note and all accrued interest at any time beginning on the July 2, 2010 issue date and expiring 180 days thereafter. In the event the company elects to prepay within the first 90 days, the repayment amount is 150% of the $60,000 principal amount and outstanding accrued interest and if between the 91 ^st and the 180 ^th day, the repayment amount is 175% of the $60,000 principal amount and outstanding accrued interest.

In the event of default, the amount of principal and interest not paid when due bears interest at the rate of 22% per annum and the Note becomes immediately due and payable.

The Note agreement contains covenants requiring the Holder’s written consent for certain activities not in existence or not committed to by the company on the date of issuance as follows: common stock dividend distributions in cash or shares, stock repurchases, borrowings, sale of significantly all assets, certain advances and loans in excess of $100,000 and certain guarantees with respect to third-party liabilities.

Due to the prepayment penalty clause in the agreement, the company has recorded a $30,000 charge to other expense in the Condensed Consolidated Statements of Operations as of September 30, 2010. As of September 30, 2010, the Condensed Consolidated Balance Sheets reflect a liability of $90,000 for the convertible note, consisting of the $60,000 principal and the $30,000 prepayment penalty.

NOTE F — Stockholders’ Capital Deficit

[1]		Common Stock
		During the three and nine month periods ended September 30, 2010, the company sold 44,000 and 404,167 restricted common shares for proceeds of $17,800 and $127,850, respectively, to accredited investors in a series of private placements. During the three and nine month periods ended September 30, 2009, the company sold 228,128 and 322,231 restricted common shares for proceeds of $144,752 and $214,752 to accredited investors in a series of private placements.
		For the three and nine month periods ended September 30, 2010, the company issued 0 and 22,756 restricted common shares to an accounting firm in partial payment for services rendered in the amount of $0 and $9,785, respectively. For the three and nine month periods ended September 30, 2009, the company issued 16,173 and 21,173 restricted common shares to an accounting firm in partial payment for services rendered in the amount of $13,100 and $17,100, respectively.
[2]		Class A Preferred stock:
		In January 2002, the company authorized the sale of up to 3,300,000 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.
		Since its designation, the company has sold an aggregate 765,512 Class A Preferred shares for aggregate proceeds of $3,062,048. 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 September 30, 2010.

		Since its designation, Class A Preferred holders have converted an aggregate 146,000 Class A Preferred shares into the company’s common stock on a one for one basis through September 30, 2010. For the three and nine month periods ended September 30, 2010, 0 and 25,000 of Class A Preferred shares, respectively, were converted. For the three and nine month periods ended September 30, 2009, 0 and 51,250 of Class A Preferred shares, respectively, were converted.
		Upon conversion, Class A Preferred shareholders are entitled to receive, in accordance with the terms of the Class A Preferred, dividends payable either in cash or in Class A Preferred shares, at the discretion of the board of directors, calculated at the rate of 10 percent per annum. At times, the company’s board may elect to settle dividends through the issuance of common stock in lieu of cash. The number of common shares issued is based on the market price of such stock at the time of conversion. Class A Preferred shares paid as dividends do not participate in cumulative dividend rights.
		Through September 30, 2010, an aggregate of $164,993 in dividends have been paid on the Class A Preferred by the issuance of 16,389 Class A Preferred shares, of which 5,050 were converted into common shares, and 77,499 common shares. A total of 0 and 11,534 common shares were issued as dividends in the three and nine month periods ended September 30, 2010, respectively. A total of 0 and 65,965 common shares were issued as dividends in the three and nine month periods ended September 30, 2009, respectively.
		At September 30, 2010 and 2009, dividends payable upon conversion of 619,512 outstanding shares of Class A Preferred amounted to approximately $1,345,000 and $1,176,000, respectively. Through September 30, 2010, the company has issued 11,339 Class A Preferred shares as dividends which are excluded from the accumulated dividend payable.
[3]		Class B Preferred stock:
		On October 21, 2004, the company authorized the sale of up to 300,000 shares of its Class B Non-Voting Cumulative Convertible Preferred Stock (“Class B Preferred”) 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. Since its designation, the company has sold an aggregate 97,500 Class B Preferred in a number of private placements for proceeds of approximately $487,500.
		Since its designation, 20,000 Class B Preferred shares have been converted on a one for one basis into 20,000 shares of common stock. For the three and nine months ended September 30, 2010 and 2009, no Class B Preferred shares were converted.
		Upon conversion, Class B Preferred shareholders are entitled to receive, in accordance with the terms of the Class B Preferred, dividends payable either in cash or in Class B Preferred shares, at the discretion of the board of directors, calculated at the rate of 10 percent per annum. At times, the company’s board may elect to settle dividends through the issuance of common stock in lieu of cash. The number of common shares issued is based on the market price of such stock at the time of conversion. Class B Preferred shares paid as dividends do not participate in cumulative dividend rights.
		Through September 30, 2010, an aggregate of $24,082 in dividends have been paid on the Class B Preferred by the issuance of 30,103 common shares. No dividends were paid in the three and nine month periods ended September 30, 2010 and 2009. At September 30, 2010 and 2009, dividends payable upon the conversion of 77,500 outstanding shares of Class B Preferred amounted to approximately $194,000 and $156,000, respectively.
[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.

The following table represents information relating to stock options outstanding under this Plan at September 30, 2010:

Options Outstanding and Exercisable

Weighted

Weighted

Average

Average

Aggregate

Exercise

Remaining Life

Intrinsic

Shares

Price

in Years

Value

641,848

4.79

2.97

$

0

		By its terms, the company’s Option Plan terminated as to the grant of future options on May 27, 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. No options were exercised for the three and nine month periods ended September 30, 2010 and 2009.
		As of September 30, 2010, the company did not have any unrecognized stock compensation related to unvested awards.
[5]		Option Issued to Chief Executive Officer:
		On September 30, 2010, the company granted a stock option for 5,150,000 common shares exercisable for ten years at an exercise price of $0.36 per common share to its newly appointed chief executive officer. The option vests and is exercisable as follows: 1,000,000 options vest and are exercisable immediately upon grant; a second 1,000,000 options vest and are exercisable upon the trading price of the company’s common stock closing at a minimum of $1.00 per share; a third 1,000,000 options vest and are exercisable upon the trading price of the company’s common stock closing at a minimum of $2.00 per share; a fourth 1,000,000 options vest and are exercisable upon the trading price of the company’s common stock closing at a minimum of $3.00 per share and the balance of the options, namely 1,150,000 options, vest and are exercisable upon the trading price of the company’s common stock closing at a minimum of $4.00 per share. The company valued the option using a variation of a Black-Scholes model, with the following assumptions: (a) an average expected term of 8 years; (b) an expected forfeiture rate of 0%; (c) a risk-free interest rate of 2.1%; (d) an average volatility of 96%; and (f) a dividend yield of 0%. The weighted average value of a single option was determined to be $0.29. Immediate vesting was utilized for the initial tranche and the shorter of the expected vesting period or the 5 1 / 4 years expected service period will be utilized to amortize the expense related to each of the other tranches, but amortization will be accelerated if the market price milestone is achieved prior to the end of the amortization period. The company charged $262,000 to general and administrative expense as a result of the immediate vesting of 1,000,000 options on September 30, 2010. The unrecognized compensation cost as of September 30, 2010 is $1,255,000.
[6]		Business Consultants Stock Plan:
		For the three month periods ended September 30, 2010 and 2009, the company issued 472,548 and 598,864 common shares to business consultants under the Business Consultants Stock Plan and charged $165,000 and $406,000 to operations in connection with these share issuances. For the nine month periods ended September 30, 2010 and 2009, the company issued 1,548,367 and 1,543,256 common shares to business consultants under the Plan and charged operations $628,000 and $1,234,000 in connection with these services including stock issued in connection with commercializing events. 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 month effective February 17, 2009.
		On March 23, 2010, the board of directors approved an increase in the number of common shares reserved for issuance under the company’s Business Consultants Stock Plan by 5,000,000 common shares to a total of 15,000,000 shares authorized under the Plan. These shares were registered under the Securities Act of 1933 by the filing of a registration statement on Form S-8 with the Securities and Exchange Commission which became effective on April 1, 2010.
		On May 24, 2010, 88,857 unallocated business consultant shares were returned by the consultants’ trust to the company for cancellation on the company’s stock record books. The company credited the fair value of the shares to general and administrative expense for approximately $45,000. The related liability was satisfied through cash payments.
		As of September 30, 2010, a total of 10,049,528 shares have been issued under the Plan. As of September 30, 2010, 4,950,472 shares are available for future issuances under the Business Consultants Stock Plan.

[7]		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 nine month periods ended September 30, 2010 and 2009. No previously issued warrants were exercised during the three and nine month periods ended September 30, 2010 and 2009.
		On October 10, 2007, the Nonmanagement Directors Plan was modified to (1) eliminate the issuance of warrants and replace the payment with either cash or common shares, at the discretion of the board of directors, and (2) 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. 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.
		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.
		For the three month periods ended September 30, 2010 and 2009, the company issued 194,529 and 93,115 common shares under the plan to satisfy the payables for services rendered by the Company’s non-management directors with a value of $68,000 and $62,000 for such periods, respectively. $45,000 and $41,000 were charged to operations for the three month periods ended September 30, 2010 and 2009, and $23,000 and $21,000 were a settlement of fees payable as of June 30, 2010 and 2009, respectively. See Note D [6] describing the acceleration of amounts payable to the chairman of the board for the months of September through December, 2010.
		For the nine month periods ended September 30, 2010 and 2009, the company issued 540,468 and 262,015 common shares, respectively, under the plan to satisfy the payables for services rendered by the Company’s non-management directors with a value of $212,000 and $186,000 for such periods, respectively. $177,000 and $124,000 were charged to operations for the nine month periods ended September 30, 2010 and 2009, and $35,000 and $62,000 were a settlement of fees payable as of December 31, 2009 and 2008, respectively. See Note D [6] describing the acceleration of amounts payable to the chairman of the board for the months of September through December, 2010.
		See Note J [4] describing the termination of the Nonmanagement Directors Plan by the company’s board of directors effective November 3, 2010.

[8]		Common Stock Warrants Issued to Business, Financial and Engineering Consultants:
		Through September 30, 2010, the company has issued 1,689,583 common stock warrants to various business, financial and engineering consultants, of which 94,583 have been exercised for proceeds of $918, and 445,000 were cancelled in exchange for the participation of certain engineers in the company’s 2008 Commercializing Event Plan. (Note F [11]).
		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 consultants who elected not to participate in the company’s 2008 Commercializing Event Plan. The company recorded a charge in the amount of $249,000 to general and administrative expense.
		On February 17, 2010, the company issued 100,000 common stock warrants vesting immediately and exercisable for ten years at an exercise price of $2.50 per common share to an adviser. The company recorded a charge of $45,000 to general and administrative expenses using the Black-Scholes inputs to calculate the value of the warrants. None of these warrants have been exercised through September 30, 2010 (Note E [9(m)]).
[9]		Warrants:
		As of September 30, 2010, outstanding warrants to acquire shares of the company’s common stock are as follows:

								Number of				Number of
Exercise								Shares				Shares
Price				Expiration				Outstanding				Exercisable
		(a)				(a)			125,000	(a)			—
$	.75			None					500,000	(b)			—
$	.01				2015/2016				54,500	(c)			54,500
$	.01-5.00				2010/2016				39,000	(d)			39,000
$	5.00				2015				255,000	(e)			255,000
$	.01				2010				0	(f)		Exercised
$	.01				2011				3,750	(g)			3,750
$	1.00				2011				20,500	(h)			20,500
$	3.27				2016				400,000	(i)			400,000
$	3.75				2016				200,000	(j)			200,000
$	5.00				2017				50,000	(k)			50,000
$	5.00				2017				100,000	(l)			100,000
$	2.50				2017				100,000	(m)			100,000
									1,847,750				1,222,750

For the Nine Months Ended
September 30, 2010
Black-Scholes Assumptions

Term		10.00 years
Expected forfeiture rate			-0-	%
Risk-free rate			3.74	%
Volatility			122.25	%
Dividend yield			0.0	%

The following summarizes the activity of the company’s outstanding warrants for the nine month period ended September 30, 2010:

										Weighted
						Weighted				Average
						Average				Remaining				Aggregate
						Exercise				Contractual				Intrinsic
		Warrants				Price				Term				Value
Outstanding at January 1, 2010			1,753,750			$	2.84			6.65 years
Granted			100,000				2.50			9.52 years
Exercised			6,000				.01				—
Canceled or expired			—				—				—
Outstanding at September 30, 2010			1,847,750			$	2.83			6.21 years				$	23,538
Exercisable at September 30, 2010			1,222,750			$	3.68			6.21 years				$	23,538

[10]		Shares Issued to Trust 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 issues business consultant common shares to the trust from time to time, contingent on the performance of services by the consultants under such consultant agreements. The company values the shares issued to the trust using the closing market price on the date immediately prior to the date of issuance.
		During the three and nine month periods ended September 30, 2010, the company issued 0 and 104,167 business consultants shares of common stock valued at $0 and $50,000, respectively, to the trust to satisfy the payment of invoices submitted by the consultants for services rendered during such periods. In May, 2010, the consultants elected to terminate the trust and on May 24, 2010, 88,857 business consulting shares which were unallocated with respect to the payment of invoices as of the termination were returned to the company and cancelled on the company’s record books.
		During the three and nine month periods ended September 30, 2009, the company issued 264,321 and 595,376 business consultants shares of common stock valued at $179,000 and $460,150, respectively, to the trust to satisfy the payment of invoices submitted by the consultants for services rendered during such periods.
[11]		Commercializing Event Plan:
		On October 13, 2006, the board of directors adopted a Commercializing Event Plan (“2006 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 2006 Event Plan and the 2006 Event Plan was terminated on October 31, 2007.
		On October 31, 2007, the board of directors adopted a new 2007 Commercializing Event Plan (the “2007 Event Plan”). The 2007 Event Plan provides that upon the happening of any commercializing event, each of the directors and executive officers of the company as well as certain management personnel shall be entitled to share equally in 6% of the gross amount derived or to be derived from the commercializing event transaction(s). Similarly, certain of the company’s engineers are entitled to share equally in 2% of such gross amount. The plan provides for payment to be made with the issuance of common shares.
		In order to actually receive payment under the 2007 Event Plan, each participant must be both a) employed by, a consultant to or associated with the company and b) judged to be “in good standing” with the company at the time payment is made, all as determined by the board as of the date of the board’s authorization of payments to be made.
		During the three and nine month periods ended September 30, 2010, the company issued 0 and 32,077 common shares under the 2007 Event Plan and recorded charges of $0 and $13,000, respectively. For the three and nine month periods ended September 30, 2009, the company issued 4,669 common shares under the 2007 Event Plan and recorded charges of $14,000.

		The company accounts for the settlement of its compensation arrangements to non-employee consultants, directors, executives and certain administrative personnel with the issuance of its business consulting shares under ASC 505-50 (previously known as: FASB Statement 123(R) “Share Based Payment”), provided that there are sufficient shares under the business consultants plan. Under ASC 505-50, the company measures compensation arrangements at the fair value of the equity instruments issued. In the event that there are insufficient shares available to settle the obligation, the company will follow the provisions of FASB ASC 815-40 (prior authoritative literature: EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”). Under ASC 815-40, the company will record a liability instrument for the resulting changes in fair value from the date due to the end of each reporting period until such liability is satisfied.
		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 (see Note: F [9]).
		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.

Effective November 3, 2010, the Company’s Board of Directors terminated the commercialising Event plan (see Note J(4)).

NOTE G — Commitments and Other Matters

[1]

Consulting Agreements:

	[a]		On February 6, 2009, the company signed a consulting agreement with a strategic planning, government relations, marketing and public relations firm to render consulting services for a one year period. Under the agreement, the company is obligated to pay the consulting firm $20,000 per month, except that, until the consultant has assisted the company in securing an agreed-upon level of governmental and /or private funding, the company’s monthly obligation is limited to $4,000. On February 19, 2010, the agreement with the consulting firm was renewed for an additional six months under the same terms. On August 19, 2010, this agreement was terminated. No funding was obtained under the extended agreement. All payments to the consulting firm were charged to operations.
	[b]		Effective July 1, 2010, the company engaged the services of a consulting firm to provide expertise in local, state and federal governmental relations, to advise the company with respect to media relations, business development and in negotiating with industry representatives. The company has agreed to pay the consultant an annual retainer of $48,000 to be paid in quarterly installments of $12,000 beginning July 1, 2010. The agreement is for a one year term. During the three month period ended September 30, 2010, the company issued 34,286 common shares and recorded a charge of $12,000 for payment of the company’s quarterly liability.
	[c]		Effective July 1, 2010, the company engaged a consultant to provide the company with assistance in the development of strategic plans, financial modeling, licensing agreements, partnership agreements and general funding opportunities. The company has agreed to pay the consultant an annual retainer equal to $34,500 to be paid in quarterly installments of $8,625 beginning July 1, 2010. The company also agreed to pay the consultant a commission equal to 4% of the value received by the company from third parties introduced by or through the auspices of the consultant. The agreement is for a two year term.

[2]		Leases:
		The company leases a facility located at 1999 Mount Read Blvd., Rochester, New York. On April 29, 2008, the company executed a five-year lease for the premises (with a December 1, 2007 lease commencement date) which provides for rent to be paid at a rate of $5,687 per month ($68,244 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.

		Rental payments and certain other payments due to the landlord may be paid in common shares of the company, based upon the closing price per share on the 15th day of the calendar month immediately prior to the date any installment payment of monthly rent or other payment is due landlord.
		Rent expense for the three and nine months ended September 30, 2010 and 2009 was $15,000 and $44,000, and $15,000 and $45,000, respectively. For the three and nine month periods ended September 30, 2010, the company issued 45,455 and 149,429 business consultant common shares in payment for rent. For the three and nine months ended September 30, 2009, the company issued 16,974 and 100,654 business consultant common shares in payment for rent.

NOTE H — Litigation

On October 31, 2008, the company commenced an action in New York Supreme Court, County of New York, Commercial Division against Ice Engineering, LLC seeking the total balance owed by Ice Engineering to the company pursuant to an assignment agreement entered into by the parties, effective June 15, 2007, whereby the company assigned all of its rights and interest in an ice technology license granted by Dartmouth College to Ice Engineering in exchange for a 2.8% royalty interest and a cash reimbursement of $3,500,000. The suit was commenced after the company had been paid approximately $800,000 in reimbursement monies.

On January 27, 2010, the company and Ice Engineering settled this litigation. Under the settlement agreement, the company’s assignment of the ice technology license is made permanent; the company elected to forego its right to royalties and will receive $1,100,000 in reimbursement monies, with $300,000 being paid to the company by Ice Engineering on January 27, 2010 and $800,000 being paid to the company by Ice Engineering by February 26, 2010. The company received the entire $1,100,000 due under the settlement agreement by the due dates specified in the settlement agreement.

The recovery of $1,100,000 received during January and February 2010 has been recorded as other income during the quarter ended March 31, 2010. The $800,000 received in 2007 and 2008 has previously been recorded as deferred income and, upon settlement of this litigation, has been reflected as other income during the quarter ended March 31, 2010.

NOTE I — Royalty Agreement

On December 12, 2007, the company granted High Density Powertrain, 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 September 30, 2010, the company had not received any royalties under this agreement.

NOTE J — Subsequent Events

[1]

Effective October 4, 2010, the company appointed a new chief executive officer and executed a five year employment agreement pursuant to which the company will pay base compensation of $50,000 per annum, which compensation increases to $200,000 per annum on the first day of the calendar year immediately following the calendar year in which the company has adjusted EBITDA of at least $300,000 (earnings before interest, taxes, depreciation and amortization, but excluding all non-cash expenses associated with stock options). Under the agreement, the executive is entitled to a performance bonus based upon financial targets established each year in good faith by the Governance and Compensation Committee and the achievement of individual management objectives established annually by such committee. The executive is entitled to participate in all employee benefit plans as are provided from time to time for senior executives. If the company terminates the executive, removes him as CEO, or a change in control of the company occurs, the executive is entitled to three years’ severance pay, consisting of base pay and any incentive compensation. See Note F (5) for a description of the stock option granted to the executive.

[2]

The company sold 6,834,002 restricted common shares to raise approximately $2,050,000 of gross proceeds in a non-brokered private placement of its common stock at $.30 per common share. The offering commenced on October 4, 2010 and was completed on October 14, 2010. The offering price was based upon the average trading price for the company’s common stock during the thirty trading days immediately preceding the commencement of the private placement. The company expects to use the offering proceeds over the next twelve months to fund its operations, including programs designed to commercialize the company’s technologies. As a result of the private placement, the company anticipates that it will significantly reduce the shares that it will need to issue during the next twelve months for services rendered by consultants and other independent contractors as has been its past practice. The company issued its shares in the private placement in reliance on an exemption from registration under section 4(2) of the Securities Act of 1933 and Regulation D promulgated thereunder. These shares may not be offered or resold in the United States absent registration or availability of an applicable exemption from registration. Under Rule 144 of the Securities Act, the shares may be traded after a six month holding period from the date of issuance.

[3]

Effective October 18, 2010, the company engaged a new chief financial officer under a letter agreement dated October 18, 2010 pursuant to which the company will pay annual compensation equal to $125,000, with increases of $25,000 per annum effective April 1, 2011, October 1, 2011 and January 1, 2012. The executive also was granted an option exercisable for 10 years to acquire 250,000 shares of the company’s common stock at $0.85 per share. The option vests and is exercisable as follows: 62,500 options vest and are immediately exercisable upon grant; 62,500 options vest and become exercisable on each of October 18, 2011, 2012 and 2013. If the company terminates the executive, removes him as CFO, or a change in control of the company occurs, the executive is entitled to 12 months’ severance pay.

[4]

Effective November 3, 2010, the company’s board terminated the Nonmanagement Directors Plan and the company’s Commercializing Event Plan.

[5]		On October 26, 2010, the company issued 164,187 shares of its common stock to each of its board chairman and general counsel for services rendered in connection with the engagement of the company’s chief executive officer.
[6]		At its meeting held on November 3, 2010, the company’s board of directors voted to grant each of three new directors and one existing director a stock option for 250,000 common shares effective January 3, 2011 at an exercise price of $0.90 per share, as an incentive for board services. Each option is conditioned upon the optionee serving as a director and vests in four tranches of 62,500 shares on each of the four anniversary dates of January 3, 2011. The optionee must exercise each 62,500 tranche within two and one-half months following the calendar year in which the tranche vests or lose the tranche. The option grant is subject to the approval of the company’s shareholders at the next annual meeting.
[7]		Upon their retirements as members of the company’s board of directors effective October 15, 2010, two directors were each granted 50,000 common stock options exercisable for ten years at an exercise price of $0.85 per share, equal to the closing price of the company’s common stock on the effective date. Upon his retirement as a member of the company’s board effective October 20, 2010, a director was granted 50,000 common stock options exercisable for ten years at an exercise price of $1.07 per share, equal to the closing price of the company’s common stock on the effective date.

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

		Torvec, Inc. (the “company”) was incorporated as a New York State business corporation in September 1996. The company, which has not had any significant revenue producing operations and 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, is refining and intends to commercialize its technologies, presently focusing on its IsoTorque ® differential and its hydraulic pump.
(a)		Results of Operations
		The company did not generate revenue in the three and nine month periods ended September 30, 2010. Revenue for the three and nine month periods ended September 30, 2009 was $0 and $175,000, respectively. The revenue generated in 2009 was primarily due to the sale of a prototype Full Terrain Vehicle, which was a non- recurring event. Gross profit for the three and nine month periods ended September 30, 2009 was $0 and $85,000, respectively.
		Research and development expenses for the three month period ended September 30, 2010 amounted to $133,000 as compared to $189,000 for the three month period ended September 30, 2009. Research and development expenses for the nine month period ended September 30, 2010 amounted to $301,000 as compared to $418,000 for the nine month period ended September 30, 2009. The decreases of $56,000 and $117,000 in the three and nine month comparatives, respectively, are primarily due to lower personnel costs related to the retirement of Jim Gleasman in the first quarter of 2010, as well as lower spending for supplies.
		General and administrative expense for the three month period ended September 30, 2010 amounted to $916,000 compared to $619,000 for the three month period ended September 30, 2009. General and administrative expenses for the nine month period ended September 30, 2010 amounted to $2,263,000 as compared to $2,103,000 for the nine month period ended September 30, 2009. The $297,000 increase in the third quarter comparative is mainly related to non-cash stock compensation from stock option issuances to executives and higher legal costs. The $160,000 increase in the nine month comparative is mainly due to non-cash stock compensation costs, offset in part by lower personnel costs related to the retirement of Jim Gleasman in the first quarter of 2010 (costs were allocated between R&D and G&A) and decreased spending on consulting services.
		The loss from operations was $1,049,000 and $808,000 for the three months ended September 30, 2010 and 2009, respectively. The loss from operations for the nine month periods ended September 30, 2010 and 2009 was $2,564,000 and $2,436,000, respectively. Other income/(expense) for the three and nine month periods ended September 30, 2010 was an expense of $31,000 and income of $1,898,000, respectively. The other expense in the third quarter of 2010 primarily resulted from an accrual for a prepayment penalty on the company’s convertible note. Other income for the nine month period in 2010 was primarily due to the sale of the company’s Ice technology license to Ice Engineering LLC. There was $0 of other income for the comparative prior three and nine month periods ended September 30, 2009. We reported an income tax benefit of $151,000 in both of the three and nine month periods ended September 30, 2009 compared with $0 for in the same periods in 2010. The income tax benefit in 2009 resulted from New York State R&D tax credits. Preferred stock dividends amounted to $72,000 and $73,000 in the third quarter of 2010 and 2009, respectively, and $156,000 and $234,000 for the nine month periods ended September 30, 2010 and 2009, respectively.
		The net loss attributable to common stockholders for the three month period ended September 30, 2010 was $1,152,000 as compared to a net loss for the three month period ended September 30, 2009 of $730,000. The nine month period result for 2010 was a net loss of $822,000 compared to a net loss of $2,519,000 for the same nine month period in 2009. The weighted average basic common shares outstanding amounted to 37,576,000 and 34,524,000 for the third quarter of 2010 and 2009, respectively. The weighted average basic common shares outstanding for the nine month periods ended September 30, 2010 and 2009 were 36,878,000 and 33,719,000, respectively. Basic net loss per share for the three month periods ended September 30, 2010 and 2009 were $0.03 and $0.02, respectively. Basic net loss per share for the nine month periods in 2010 and 2009 were $0.02 and $0.07, respectively.

(b)		Liquidity and Capital Resources
		The company’s business activities during the nine month periods ended September 30, 2010 were funded principally through the receipt of $1,100,000 in settlement of litigation with Ice Engineering, LLC, the receipt of approximately $103,000 representing New York State corporation income tax refundable credits, recognized in prior years, allocable to certain research and development expenses incurred in the 2008 tax year, and the receipt of approximately $127,000 from the sale of 404,167 restricted common shares to accredited investors.
		For the nine month periods ended September 30, 2010 and 2009, net cash used in operating activities was $1,203,000 and $425,000, respectively. The increase of $778,000 was due primarily to an increased availability of cash to pay consultants and service providers in 2010 compared with payments made through the issuance of common shares in 2009.
		For the nine month periods ended September 30, 2010 and 2009, cash provided by investing activities amounted to $1,124,000 and $0, respectively. This increase was due to the receipt of $1,100,000 pertaining to the settlement of litigation with Ice Engineering, LLC.
		For the nine month periods ended September 30, 2010 and 2009, cash provided by financing activities amounted to $155,000 and $203,000, respectively. This decrease was due primarily to lesser proceeds from common stock issuances.
		For the nine month period ended September 30, 2010 and 2009, the company issued 1,548,367 and 1,543,256 common shares to business consultants under the Business Consultants Stock Plan in exchange for ongoing business advisory services, engineering services, legal fees, including patent services, internal accounting services and other corporate services. As of September 30, 2010, 4,950,472 shares are available for future issuances under the Business Consultants Stock Plan.
		For the period from September 1996 (inception) through September 30, 2010, the company has accumulated a deficit of $53,879,000, and at September 30, 2010 has a working capital deficit of $717,000 and stockholders’ capital deficit of $550,000. The company has been dependent upon equity financing and advances from stockholders to meet its obligations and sustain operations. The company’s efforts are principally devoted to the ongoing refining of its technologies and commercializing its products. In October 2010, the company raised approximately $2,050,000 in a private equity offering through the issuance of 6,834,002 common shares at a price of $0.30 per share. Management believes that based upon its current cash position and its projected cash flows from its business operations and access to capital markets, the company will be able to meet its anticipated cash requirements through September 30, 2011. However, if adequate funds are not available, the company may need to downsize operations, incur debt or raise additional capital. There can be no assurance that the company will be successful in raising additional capital or incur debt when needed on terms acceptable to the company.
(c)		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 collectability 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.

		Share-based Payments:
		The company accounts for the settlement of its commission arrangements to non-employee consultants, directors, executives and certain administrative personnel with the issuance of its business consulting shares under ASC 505 (Previously known as FASB Statement 123 ® “Share Based Payment”), provided that there are sufficient shares available under the business consulting plan. Under ASC 505, the company measures commission arrangements at the fair value of the equity instruments issued. In the event that there are insufficient shares available to settle the obligation, the company will follow the provisions of ASC 815-40 (Previously known as: EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”). Under ASC 815-40, the company will record a liability instrument for the resulting changes in fair value from the date due to the end of each reporting period until such liability is satisfied.
		Recent Accounting Pronouncements:
		See Note B [9] of the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 herein for a discussion of the impact of the recent accounting standards.
(d)		Impact of Inflation
		Inflation has not significantly impacted the company’s operations during the three and nine month periods ended September 30, 2010.
(e)		Quarterly Fluctuations
		As of September 30, 2010 and 2009, 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

Not Applicable

Item 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures

Evaluation of Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based on this evaluation and the identification of the material weaknesses in our internal control over financial reporting described below, our Chief Executive Officer and our Chief Financial Officer have concluded, as of September 30, 2010, that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of such period, are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Other than the remediation efforts described thereafter, there have been no significant changes in our internal controls over financial reporting during the third quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Below, we have described the material weaknesses that were identified for the year ended December 31, 2009 and the current status of management’s remediation efforts.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has conducted, with the participation of our President and our interim Chief Financial Officer, an assessment of the effectiveness, of our internal control over financial reporting as of September 30, 2010. Management’s assessment of internal control over financial reporting was conducted using the criteria in Internal Control over Financial Reporting — Guidance for Smaller Public Companies issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on the evaluation, our management concluded that there are material weaknesses in our internal control over financial reporting. The material weaknesses identified did not result in the restatement of any previously reported financial statements nor does management believe that it had any effect on the accuracy of the company’s financial statements for the current reporting period. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. We identified the following material weaknesses in our internal control over financial reporting as of December 31, 2009:

The material weaknesses relate to the a) preparation of the income tax disclosures and the related components of our deferred tax assets, b) accounting for equity transactions and c) the preparation of financial statements and footnotes and financial data provided to the company’s registered public accounting firm in connection with the annual audit. While we engage outside consultants to assist us in preparing our tax provision and tax returns, our financial statements and related disclosures, we did not have proper review controls to monitor outside consultants. We have not implemented an effective review process for accounting for income taxes, which could lead to errors in computation and disclosures. The company has not previously had sufficient technical expertise in financial reporting to monitor work performed by outside consultants.

We have taken appropriate and reasonable steps to make the necessary improvements to remediate the material weaknesses. We intend to consider the results of our remediation efforts and related testing as part of our fiscal 2010 assessment of the effectiveness of our internal control over financial reporting.

Remediation of Material Weaknesses in Internal Control over Financial Reporting

We are in the process of implementing remediation efforts with respect to the material weaknesses noted above as follows:

	a)		Income Tax Disclosures — Management is in the process of working with its external tax consultant to increase the amount of oversight in regard to the tax disclosure and the related components. With the October 2010 appointment of a CFO for the company, management believes that this material weakness will be remediated for its year-end 2010 reporting.
	b)		Accounting for Equity Transactions — The internal control has been modified so that price protection is no longer being provided to the company’s consultants. The Compensation and Governance Committee has reviewed this policy and it is management’s assessment that this material weakness has been resolved.
	c)		Preparation of the Financial Statements — Management is in the process of working with its consultant to increase the amount of oversight in regard to financial statement preparation. The company has recently appointed a CFO, with more than ten years of experience as a chief financial officer for another public company, who will help to provide added oversight and control in the financial statement preparation process.

We believe the foregoing efforts will enable us to improve our internal control over financial reporting. Management is committed to continuing efforts aimed at improving the design adequacy and operational effectiveness of its system of internal controls. The remediation efforts noted above will be subject to our internal control assessment, testing and evaluation process.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

On October 31, 2008, the company commenced an action in New York Supreme Court, County of New York, Commercial Division against Ice Engineering, LLC seeking the total balance owed by Ice Engineering to the company pursuant to an assignment agreement entered into by the parties, effective June 15, 2007, whereby the company assigned all of its rights and interest in an ice technology license granted by Dartmouth College to Ice Engineering in exchange for a 2.8% royalty interest and a cash reimbursement of $3,500,000. The suit was commenced after the company had been paid approximately $800,000 in reimbursement monies.

On January 27, 2010, the company and Ice Engineering settled this litigation. Under the settlement agreement, the company’s assignment of the ice technology license is made permanent; the company elected to forego its right to royalties and will receive $1,100,000 in reimbursement monies, with $300,000 being paid to the company by Ice Engineering on January 27, 2010 and $800,000 being paid to the company by Ice Engineering by February 26, 2010. The company received the entire $1,100,000 due under the settlement agreement by the due dates specified in the settlement agreement.

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, 2009.

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

During the three and nine month periods ended September 30, 2010, the company sold 44,000 and 404,167 restricted common shares for proceeds of $17,800 and $127,850, respectively, in a private placement.

The investors in each of these transactions are qualified accredited investors within the meaning of regulation D promulgated under the Securities Act of 1933 and the company is therefore relying on section 4(2) of said Act as a transaction by an issuer not involving a public offering.

See Note J [2] for a description of the company’s private placement which commenced on October 4, 2010 and was completed on October 14, 2010.

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 March 31, 2004.
	3.6			Certificate of Amendment to the Certificate of Incorporation dated January 26, 2008 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 September11, 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, 5,000,000 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, October 13, 2006 and April 1, 2010, 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 March 31, 1999;
	10.5			Operating Agreement of Variable Gear, LLC dated September28, 2000, incorporated by reference to Form 10-QSB filed for the quarter ended March 31, 2000;
	10.6			License Agreement between Torvec, Inc. and Variable Gear, LLC dated September28, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2005;
	10.37			Option Agreement between Matthew R. Wrona and Torvec, Inc. dated March 31, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 2005;
	10.43			Consultant Agreement with Steven Urbanik, dated October 1, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 2005;
	10.44			Consultant Agreement with Kiwee Johnson, dated March 31, 2005, incorporated by reference to Form 10-QSB filed for fiscal quarter ended March 31, 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 March 31, 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 September20, 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, 2008;
	10.52			License Assignment and Transfer Agreement by and between Ice Engineering, LLC and Torvec, Inc. made effective September15, 2008 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, 2008.
	10.53			License Agreement by and between High Density Powertrain and Torvec, Inc. dated December 12, 2008, incorporated by reference to current report (Form 8-K) filed December 14, 2008;
	10.54			Consulting Agreement by and between Clifford Carlson and Torvec, Inc. dated December 12, 2008, incorporated by reference to current report (Form 8-K) filed December 14, 2008;
	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;

	10.56			Consulting Agreement by and between Capital Campaigns, Inc. and Torvec, Inc., dated February 6, 2009, incorporated by reference to annual report (Form 10-K) filed for the year ended December 31, 2008;
	10.57			Settlement and Release Agreement by and between CXO on the Go of Delaware, LLC et. al and Torvec, Inc. et. al., dated March 6, 2009, incorporated by reference to annual report (Form 10-K) filed for the year ended December 31,2008;
	10.58			Memorandum of Understanding between Rochester Institute of Technology and Torvec, inc. dated as of July 31,2010, incorporated by reference to current report (Form 8-K) filed August 6, 2009;
	10.59			Prototype Agreement between Eastern Mining & Industrial Supply and Torvec, Inc. dated as of November 11, 2009, incorporated by reference to current report (Form 8-K) filed November 18, 2009;
	10.60			Agreement between Rochester Institute of Technology’s Center for Integrated Manufacturing Studies and Torvec, inc. dated as of October 6, 2009, incorporated by reference to current report (Form 8-K) filed November 18, 2009;
	10.61			Resignation letter of James Y. Gleasman as chief executive officer, interim chief financial officer and director dated March 5, 2010, incorporated by reference to current report (Form 8-K) filed March 5, 2010;
	10.62			Corporate Sponsorship Agreement between Phoenix Performance, Inc. and Torvec, inc. dated as of May 18, 2010, incorporated by reference to current report (Form 8-K) filed May 26, 2010;

	10.63			Operating Agreement of Torvec-China, LLC dated as of September11, 2010, incorporated by reference to current report (Form 8-K) filed September16, 2010;
	10.64			Exclusive Marketing Agreement between Torvec, inc. and Torvec-China, LLC dated as of September11, 2010, incorporated by reference to current report (Form 8-K) filed September16, 2010;
	10.65			Sales and Marketing Agreement between Torvec-China, LLC and Across-China (USA), Inc. dated as of September11, 2010, incorporated by reference to current report (Form 8-K) filed September16, 2010;
	10.66			Convertible Promissory Note issued by Torvec, Inc. to Asher Enterprises, Inc. dated as of July 2, 2010, incorporated by reference to current report (Form 8-K) filed July 20, 2010;
	10.67			Securities Purchase Agreement between Asher Enterprises, Inc. and Torvec, Inc. dated as of July 2, 2010, incorporated by reference to current report (Form 8-K) filed July 20, 2010;
	10.68			Stock Option Agreement dated September 30, 2010 between the company and Richard A. Kaplan, incorporated by reference to current report (Form 8-K) filed October 6, 2010;
	10.69			Employment Agreement dated October 4, 2010 between the company and Richard A. Kaplan, incorporated by reference to current report (Form 8-K) filed October 6, 2010;
	10.70			Letter Agreement dated October 18, 2010 between the company and Robert W. Fishback, incorporated by reference to current report (Form 8-K) filed October 22, 2010;
	10.71			Stock Option Agreement dated October 18, 2010 between the company and Robert W. Fishback, incorporated by reference to current report (Form 8-K) filed October 22, 2010.
	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)
				Torvec-China, LLC—(New York)
	22			Published report regarding matters submitted to vote of security holders
				None
	23			Consents of experts and counsel
	24			Power of attorney
				None
	31.1			Rule 13(a)-14(a)/15(d)-14(a) Certifications Filed herewith
	32			Section 1350 Certifications Filed herewith
	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.

		TORVEC, INC.
Date: November 15, 2010
		By:		/s/ Richard A. Kaplan   Richard A. Kaplan Chief Executive Officer

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.

Date: November 15, 2010
		By:		/s/ Richard A. Kaplan   Richard A. Kaplan Chief Executive Officer
Date: November 15, 2010
		By:		/s/ Robert W. Fishback
				Robert W. Fishback Chief Financial Officer

EXHIBIT INDEX

	(31.1	)		Rule 13(a)-14(a)/15(d)-14(a) Certifications
	(32	)		Section 1350 Certifications

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