August 7, 2007

Dear Shareholders,

This summer has been an extraordinarily active one for us at Torvec.

As I have repeatedly explained to our shareholders, Torvec is following a parallel path to commercialize our products so that we increase shareholder wealth. First, our long-term strategy has been and continues to be positioning the company for sale at a price that is reasonable, equitable and based upon a fair value for all of the company’s technologies.

In furtherance of this strategy and as a means to increase the value of the company, we also are proceeding to prepare ourselves to go into production of certain of our products, namely our IsoTorque differential and our constant velocity joints. We made this decision in concert with a number of OEMs and first-tier suppliers who recently have expressed interest in entering into joint venture relationships with us or have asked us whether we would be willing to supply them IsoTorque differentials and CV Joints.

Torvec therefore will be moving in mid-to late September into a newly refurbished facility with over 13,000 sq.ft. of manufacturing space with the ability to lease an additional 7,000 sq.ft. when and if we need it. We also will be moving our offices from Powder Mills Office Park to the new facility so the entire Torvec team will be under one roof for the first time in our history.

Specifically, we are in discussions with a large military contractor to supply it with our CV Joints under the Department of Defense’s program to develop the Joint Light Tactical Vehicle, a vehicle designed to replace the Humvee as the military’s vehicle of choice for the 21 st century battlefield (MRAP vs. JLTV & JLTV Detailed Info). The initial procurement under the program is estimated to be approximately 40,000 vehicles, with up to 160,000 vehicles called for under the life of the program. A minimum of 8 CV Joints are required for each vehicle, with minimum prices of $500 or more per CV Joint. The contractor chose the company’s constant velocity joint technology because the technology increases the vehicle’s ground clearance, thereby enabling it to better withstand roadside bombs.

A U.S-based. manufacturer of construction vehicles recently visited us to review our IsoTorque differential, CV Joint, tracked steering, hydraulic pumps and motors, infinitely variable transmission and FTV technologies. After actual demonstrations of operating hardware for each of these technologies, we centered our discussions on the manufacturer or its foreign parent providing investment capital to Torvec to facilitate Torvec’s production and sale of our differentials, CV Joints FTVs and a number of other technologies under an exclusive supply contract to meet the manufacturer’s annual requirements. Currently, the manufacturer’s sales are in the billions. Both of us believe Torvec’s technologies would significantly increase the manufacturer’s market share.

One of the nation’s largest automotive companies has requested us to enter into a working arrangement to furnish it with a specially-designed, production ready full terrain vehicle which would be integrated into that company’s existing fleet of cab-over trucks. The automotive company is shipping its latest cab-over truck to us for creation of the next generation FTV. The automotive company has indicated to us that its marketing plans for the FTV will initially consist of the entire North American market.

I should point out here that adjacent to our new facility is approximately 30 acres which we intend to utilize for testing and showcasing of our technologies. The availability of this acreage will be of great benefit as we move forward on these projects.

A California manufacturer of hybrid metropolitan buses has requested we design our constant velocity joint technology for installation in that manufacturer’s newly designed buses since our CV Joint technology is the only technology available to solve the high angle drive shaft problem created by their new design.

Our Chicago-based “green” initiative continues unabated. The City has furnished us with the specifications and requirements to specially design our infinitely variable transmission for installation in a ¾ ton F-250 vehicle which forms the backbone of the City’s utility and service vehicles. We have informed the City that actual installation of the transmission in the vehicle will take place at our new manufacturing facility.

We have been informed that the Mayor of Chicago’s sister-city, Shanghai, China, as well as the Commerce Department of the national Chinese government is pressing to become involved in the project, perhaps with a view to have the transmissions built in China by Shanghai Automotive. In some respects, this overture dovetails with our own Chinese initiatives. However, details regarding the exact level and nature of the potential Chinese involvement have not been communicated to us as yet and, most importantly for our shareholders, details regarding the monetary commitment of either the City of Shanghai and/or the Chinese government itself have not been clarified. Obviously, we will keep you informed as events move forward.

We have received a formal contract from Impact Engineering for a joint venture in integrating our transmission in the hydraulic accumulator system Impact Engineering has developed under a federal grant. Impact Engineering has also sent us a diesel, crew-cab F-350 truck for this purpose. While the project is intriguing and while Impact has acknowledged to us that they approached us precisely because our transmission technology alone could solve hurdles they to date have been unable to overcome, the dollars available to Torvec under the current federal grant simply are not adequate. This is especially the case given the risks Torvec might run in protecting any commercially viable products generated by the project due to government funding.

The jury is still out on this one but I doubt we will be pursuing this project unless the funding issue is resolved.

Of course, you should all be aware by now that we are deeply involved with NASA in the development of that agency’s first generation lunar rover for the planned return to the moon. We recently shipped and were paid by NASA for seven IsoTorque differentials and we will be shipping modified transmissions to them by the end of September.

While I am discussing NASA, I can not understand why some wish to minimize the significance of our participation in this project. The fact that the world’s greatest space agency chose Torvec’s transmission and differential technology is an event in which we all should take pride. The fact that the technology has performed flawlessly is again rather priceless. We have received numerous first-hand reports that our involvement with NASA has silenced some of our most vociferous critics in the auto industry. One day, all the world will once again focus on the moon – and it will be Torvec’s technology that will be basking in the glow from our stellar companion.

Two final points. First, I have and I will continue to tell you everything about our ongoing activities to the extent I am legally able. I am not hiding behind a jurist’s cloak--- just ask the Enron executives, the Qwest Communications people or Martha Stewart. We are bound by legally enforceable confidentiality agreements (for example, we signed four in one day last week) and think about this---what company would be willing to talk to us if they feared we would violate a confidentiality agreement we signed with them?

Secondly, we have not abandoned our stated intention to immediately apply for listing with NASDAQ as soon as any one of these arrangements, or any other that may develop in the future, becomes finalized in an agreement. We believe such a listing will greatly enhance the visibility and liquidity of our stock and, at the same time, immunize it from organized “short-selling” and the adverse impact that market makers have on the price of our stock..

I trust I will be able to tell you much more in the near future. Until then, remember we have no intention of failing.

Sincerely,

James Gleasman
CEO