June 28, 2006

I begin this CEO Update by stating the obvious: Torvec’s automotive products are ready and our time has arrived.

As we all are aware, the increasing competition for limited amounts of raw materials and the current high cost of fuel are problems that, in the long run, will not go away and, in fact, will only become worse as the world’s developing countries, spearheaded by China and India, will increasingly compete in the world marketplace for an ever dwindling supply of natural resources, especially oil. This burgeoning crisis, coupled with the increasing financial weakness of the U.S. automotive industry, is leading executives (and politicians), for the first time perhaps, to seek non-conventional solutions in the form of new and unproven products --- i.e. products which currently are not being widely used in the marketplace.

However, the “solutions” which have been touted in the media and even by well-meaning politicians and business leaders, such as bio-fuels, ethanol, the hydrogen fuel-cell and electric hybrids, all suffer from the same fatal flaws --- individually or in combination, they are inadequate to the problem and are years away from full implementation. And, in the case of ethanol and the hydrogen fuel-cell, the “solution” may prove to be considerably more costly and environmentally damaging than heretofore imagined.

We, at Torvec, have always felt that we had real, environmentally friendly, solutions to the issues of fuel economy and dependence on foreign oil (our IVT), increased vehicle handling and safety (our Iso-Torque differential and our CV Joint) and greater distribution and utilization of natural resources, especially in emerging nations(FTV).

Now, based upon a quantum leap in the number of serious inquiries concerning our products and the almost-overwhelming number of visitors from the automotive, trucking and public transportation industries as well as governmental leaders to our development facility in the last two months, it appears the industry, the government and the community-at-large is finally awakening to the real impact Torvec’s products can have in the world’s markets. Specifically, favorable engineering reports prepared by non-Torvec engineers concerning all of our products have been presented to the presidents and chief executive officers of 5 international automotive companies since May 1, 2006.

With respect to each of our major automotive products in particular----

Full Terrain Vehicle

During May, 2006, Chinese executives were treated to demonstrations of our FTV operating at high speed on flat roads as well as traversing swampy terrain and hilly grades which no 4x4 could manage. Our guests confirmed from their own experience that our FTV is the only vehicle capable of ending the rural isolation of half the world’s population, enabling “millions of tons” of food to be transported to the cities rather than rotting in the field. As far as the potential market for the FTV is concerned, they more than once acknowledged that, in many respects, China, Indonesia, India, vast tracts of Africa, South and Central America, western Asia and Russia are strikingly similar to the conditions existing in the U.S. at the turn of the last century --- conditions in which Henry Ford sold over fifteen million Model-Ts out of a population of ninety million. Rather than ninety million, this part of world has over three billion. Please view our "World Roads" presentaion.

In our opinion, the May visit of the Chinese was very successful, meaning that we believe, from a commercial standpoint, the future of the FTV is very bright.

Aside from the Chinese, interest in the FTV continues to accelerate. We will be demonstrating the vehicle to two Japanese companies and one major U.S. automotive manufacturer this July, 2006.

The IsoTorque Differential; Constant Velocity Joint

As we have previously announced, we were engaged by Nissan’s product planning division and its top racing team to install our IsoTorque differential in a number of its racing cars during the 2006 racing season. Nissan recently shipped the 4 rear-axle housings to be used in the race cars and we are currently preparing them for the installation of our Iso-Torque differentials.

During June, a major U.S. truck manufacturer visited our facility. The manufacturer’s representatives expressed the view that our IsoTorque differential will provide their Class 8 heavy trucks with the steering, traction and handling capabilities that only our IsoTorque differential can deliver. They also expressed concern with the performance of universal joints now available in the marketplace, stating that breakdowns plague the industry ( one engineer put it this way: “It’s not ‘if’ but ‘when’ will a universal joint break down”). Recognizing that Torvec’s Constant Velocity Joint provides many advantages over conventional universal joints, the manufacturer informed us that it will be providing us with engineering specifications to enable us to provide a quotation both for our IsoTorque differential and Constant Velocity Joint. Such an engagement would also enable Torvec to retrofit the millions of Class 8 trucks currently in operation throughout the country.

Infinitely Variable Transmission

We are making good progress in our efforts to obtain the approximately $5,000,000 needed for us to launch our school bus project. We have described this project at length in our previous CEO Update, in our filings with the SEC, in numerous meetings with local, state and national government representatives, including the staffs of U.S. Senator Schumer and Congresswoman Slaughter and with representatives of the Rochester business community. The project has met with an overwhelmingly favorable response and we are energetically moving forward. For example, in June, 2006, we were visited by a major U.S. bus manufacturer who expressed serious interest in forming a joint venture relationship to pursue our school bus initiative.

We also were visited in June by a major U.S. automotive electronics supplier of automatic transmission controls. The firm is seriously considering an agreement with Torvec to become the exclusive manufacturer of the unique electronic control system we have invented to enable our IVT to function and operate at all times as an infinitely variable transmission is supposed to operate, thus generating the greatest fuel savings in all driving scenarios, especially the stop and go traffic patterns with which we are all too familiar.

The meetings continue. For example, on June 28, 2006, we will be meeting with representatives from the staffs of U.S. Senator Hillary Clinton and Mayor Robert Duffy as well as with New York State Assemblyman Joseph Morelle and his staff. And, as stated earlier, we will be meeting with two Japanese automotive manufacturers and a major U.S. automotive manufacturer in early July, 2006.

You must understand that we are promoting our products, especially our IVT, with an eye on emerging world trends. Frankly, there is a growing body of evidence that the fuel of the future will be clean diesel fuel produced from natural gas and coal. For example, the world’s oil companies have made a commitment to the production of clean diesel fuel from natural gas and coal, investing in excess of $20 billion in a natural gas production facility in Qatar. The President of Shell Oil, John Hofmeister, confirmed at an energy conference we participated in Rochester on June 26, 2006, that one of Shell Oil’s most important projects is the production of clean diesel fuel from significant coal deposits located in China. And, the oil companies, as well as U.S. government officials, are beginning to understand that since America is blessed with large deposits of natural gas and coal, a clean diesel fuel will lessen U.S. dependence on foreign oil and because it is 99.8% carbon dioxide free, will slow the rate of global warming and all but eliminate fuel-generated pollution.

This is why we believe the time for Torvec has arrived. This is why we are engaged in conferences, meetings and demonstrations day after day with companies and officials who now are seeking us out, rather than the other way around. And, this is why beginning, in July, we will be moving our transmission from the gasoline Tahoe to a diesel-fueled Dodge Ram.

We want our shareholders to know that our appreciation of their support and patience is exceeded only by our desire to enhance the value of their investment in Torvec. Our goal remains the commercialization of our technology portfolio by executing deals with the right partners for the long term benefit of our shareholders.

Sincerely,

James Gleasman
CEO