December 12, 2007

Dear Shareholders,

I am pleased to announce that on December 12, 2007, Torvec granted High Density Powertrain, Inc. (“HDP”) of Waterford, Michigan an exclusive, worldwide license to incorporate Torvec’s Constant Velocity Joint technology(our Sphere-Gear™ CV Joint) in HDP’s family of highly powered, multifueled, fuel efficient, light weight, cost effective internal combustion piston engines. Under the license agreement, Torvec has been appointed HDP’s exclusive supplier of Sphere-Gear CV Joints at appropriately competitive prices for installation on HDP’s multifuel engines’ swash-plate mounting structures.

In consideration for the grant of the license, Torvec will receive annual royalties equal to 5% of annual gross revenues generated by the sale of HDP’s multifuel engines and 5% of gross revenues received from all sublicenses of HDP’s engine technology.

The license is limited to Torvec’s CV Joint technology and under the license agreement, Torvec retains all rights in its CV Joint technology for all applications other than its use in HDP’s multifuel engine.

HDP is in the business of providing customers with a total Powertrain solution, including an engine that is 25% of the size and weight, has 20% of the parts and a 25% increase in fuel efficiency compared to conventional engines. HDP intends to utilize Torvec’s CV Joint technology to minimize engine piston friction. HDP is affiliated with LSM System Engineering, also based in Waterford, Michigan, which is a designer and producer of some of the world’s top performance Powertrain components.

 In connection with this arrangement, Mr. Clifford Carlson has agreed to join our staff as a consultant to Torvec. Cliff retired from General Motors Advanced Powertrain after more than 30 years. The owner of numerous auto-related patents, Cliff is internationally recognized for the development of the world’s first closed-loop fuel injection carbureted car in 1977 and the first production-model vehicle with a cost effective, fuel injected base engine in 1983. After retiring from General Motors as the Manager of Advanced Poweretrain Architecture and Propulsion Concepts, Cliff spent the next 7 years in the same position at Ford Motor Company. At Ford, Cliff managed the development of the first Hydraulic Launch Assist system.

After his retirement from Ford, Cliff became a Powertrain consultant for the Army’s hydraulic hybrid program (“Project Hammer”).

As you can see, Cliff brings over 40 years of development expertise and industry-wide Powertrain contacts that can be readily applied to all of Torvec’s technologies. Cliff is a partner in HDP and is convinced that HDP’s new, highly compact, cost and fuel efficient multifuel engine will create many synergies with Torvec’s automotive technologies.

 I have inserted a link of Cliff’s complete background with this Update.

Clifford Carlson's Background

The other principal of HDP is Mr. Steven Lowe, his background is linked below.  

Steve Lowe’s Background

As the result of our relationship with HDP, Torvec will be positioned to offer all the components for the world’s most advanced driveline, specifically a highly compact, multifuel engine, an infinitely variable transmission, Isotorque differential and constant velocity joint. This synergistic combination can have enormous impact in enabling auto companies meet new and ever-tightening fuel emission and fuel economy standards imposed by Congress.

In addition, Cliff Carlson’s consulting services have already proved to be invaluable and his numerous contacts throughout the automotive industry, especially at General Motors and at Ford, have already enhanced our ability to penetrate the industry with all of our technologies. Cliff has already attended meetings with high level automotive executives and in doing so, has provided them with an independent and experienced assessment of the IsoTorque differential’s capabilities. For example, after a recent meeting, he commented:

 “After the meeting, Keith and I demonstrated the IsoTorque differential’s capabilities in an old parking lot. The asphalt was badly worn, there were large pockets of gravel and ice in pot holes randomly covering 50% of the surface area. You could not find a moremiserable place to drive a rear wheel drive sports car on full throttle accelerations and cornering. Except for the sound of gravel and the feel of pot holes, the car did everythingthat it was asked to do as if it were on dry solid pavement…
I have never seen anything like it.”

The International Auto Parts Expo In China

In other news, Elizabeth Harrington, along with Gary Eidlin and Paul Lui, Torvec’s authorized representatives in China, conducted a series of Torvec-related meetings at the Chinese International Auto Parts Expo sponsored by the Chinese Ministry of Commerce in Beijing, China on November 28 th to December 1, 2007. As part of the Expo, Elizabeth Harrington was the keynote speaker at the Taizhou, China seminar to an audience of over 500 leading auto/parts representatives. In addition, Elizabeth conducted a China-U.S. seminar attended by approximately 150 individuals from auto/parts companies. Elizabeth was also interviewed by a senior reporter for the China Auto News, the authoritative automotive publication in China. In the interview, Elizabeth discussed opportunities for Chinese companies to acquire leading edge US auto technology and cited Torvec as a key example of such technology.

Elizabeth furnished us with a report on all of her activities undertaken by Elizabeth and her colleagues at the Auto Show on behalf of Torvec.

Sincerely,

James Gleasman
CEO