January 13, 2006

As many of you probably know, the Environmental Protection Agency announced on January 10, 2006 that it will be revamping its testing procedures for estimating city and highway miles per gallon so that its test results will more accurately reflect what drivers on high-speed freeways and clogged city streets can actually expect from their vehicles. See EPA PR and AAA.

We at Torvec have repeatedly stated that the old testing procedures, first developed in the 1970s, were generating misleading and highly inaccurate results. See, for example, our CEO Update dated May 31, 2005 for a fuller explanation of our concerns. Therefore, over the past several months, we have been working hard to create an acceptable, SCIENTIFIC methodology to measure the fuel efficiencies of our modular, hydromechanical IVT in our gasoline-powered Tahoe under real world driving scenarios on our state-of-the-art Mustang dynamometer. We can tell you that we have achieved very significant results as can be seen from the following table:

Test Vehicle:

GM Tahoe 2004
5.3L V8 295 HP
5575 lbs.
4-speed automatic
3.73 rear axle ratio

Test runs on IVT 12-27-05
3785 ccm per U.S. gallon

5 min long steady state at 15 mph, 30 mph, 50 mph

I want to stress that these results are accurate, repeatable and will likely create the same improvements that our IVT will achieve when the new testing procedures announced by the EPA become available for our use. We are anxiously awaiting the EPA’s codification of its new tests so that we can perform them on our dynamometer and immediately publish the results.

I also want to stress that our modular, hydromechanical IVT is a TRUE, FUNCTIONING INFINITELY VARIABLE TRANSMISSION AND THAT WE HAVE ACCOMPLISHED WHAT FEW IN THE AUTO INDUSTRY THOUGHT POSSIBLE:

WE HAVE SOLVED THE PROBLEM OF INTERFACING OUR IVT WITH THE OEM’s ELECTRONIC ENGINE CONTROLS SO THAT OUR IVT IS ABLE TO FUNCTION AS AN IVT AND NOT AS A GLORIFIED MULTIPLE-GEARED TRANSMISSION.

This breakthrough has attracted a steady increase in the number of visitors to our facilities over the past several months. Many of these visitors have stated that what excites them the most about our modular transmission is the fact that not only does our IVT work well in gasoline engines, it is “the perfect transmission for diesel engines to maximize fuel efficiency and reduce pollution.” Our visitors recognized that the IVT that is now functioning in the gasoline Tahoe will surpass the previously produced solid diesel fuel efficiencies obtained in our Dodge Ram 4x4 and therefore should become the transmission of choice for all diesel vehicles, such as Hummvees, school buses and trucks.

I have much more to tell you and can’t wait to do so at our annual shareholders meeting to be held at 7:00 p.m. on Thursday, January 26, 2006 at the Casa Larga Vineyards. In this regard, the number of our shareholders has increased over the past year from approximately 2800 to over 3500. I look forward to seeing our faithful supporters over the years as well as plenty of new faces.

Sincerely,

James Gleasman
Chief Executive Officer