September 7, 2005

In a departure from customary practice, I, Keith Gleasman, as Torvec’s President, wish to tell you why the executive committee of the board of directors, composed of a majority of the board and of our independent directors, unanimously appointed James Gleasman as Chief Executive Officer.

Many of you, especially among our newer shareholders, may not be aware of, or appreciate, Jim’s contributions to the company since its inception in September, 1996.

It is important to note at the outset that the creation of Torvec as a strategic business entity to own the Gleasman family’s paradigm shifting technologies, its initial financing through private placements and the decision to create a public exit for private investors (without an IPO) as well as a currency for the company were all the products of Jim’s fertile mind – a mind that had been honed in the rough and tumble world of the commodities futures market and, like the rest of the family, well seasoned in the auto industry. Jim is simply a unique strategic planner who, because of his experience in these two fields, has been and is able to forecast major economic and business trends, a quality which has enabled Torvec to formulate ongoing business strategies which are both comprehensive in scope and flexible in application.

To clearly put Jim’s contribution in focus, it is necessary to briefly review Torvec’s history.

Jim, Keith and Vernon Gleasman formed Torvec in September 1996 to further develop and commercialize the most seasoned, advanced fruits of Vernon Gleasman’s genius. At the time of its formation, Torvec's assets consisted largely of first generation prototypes, patents and sophisticated engineering drawings and designs of second generation models. The company faced a monumental task – to create viable, preproduction prototypes of each of its inventions, to obtain and maintain worldwide patent protection for all of them and to demonstrate their truly revolutionary potential to change the face of the worldwide auto industry.

From the beginning, Jim focused the company upon the ability of Torvec’s products to reduce pollution, to lower manufacturing costs due to lighter, cheaper and fewer parts, to affect fuel consumption and to address the ever-widening disparity in the worldwide demand for limited natural resources. He forecasted correctly that Torvec’s inventions would have the most dramatic impact in developing countries, especially China, and our ongoing discussions with the Chinese has borne this out.

It was self-evident that all of this would require enormous capital. Yet, the traditional sources for such capital were limited – bank loans, venture capital investment or private investment, coupled with accessing the public markets through an initial public offering. Jim had the foresight to see that incurring bank debt (perhaps the quickest and easiest financing method) was a recipe for disaster. Venture capitalists were willing to provide relatively little capital at an enormous price – a 60% - 80% ownership interest in the company. In addition, given Wall Street’s late 90’s love affair with the “Dot Coms” and it’s aversion to provide meaningful valuations to auto related companies, an IPO was not attractive since it would have involved enormous dilution even if Wall Street had been willing to underwrite a public offering.

Faced with these imponderables, Jim devised a rather unique financing solution which, over the years, has provided Torvec with substantial dollars. He first initiated a series of private placements at $1.50, $3, $5 and $10 per share, raising in excess of $2 million. He then orchestrated the registration of our common stock for trading on the OTC market (we could not list on NASDAQ or one of the exchanges because we had no steady revenue stream).

This registration accomplished two important goals:

• It gave our private placement shareholders an exit strategy;
  
  
• It created a currency for the company; that is, through the issuance of freely tradable consulting shares, we were and continue to pay for engineering services, labor, parts, hardware, vehicles, legal and patent expenses, the costs associated with building and testing the FTV™, hydraulic pump & motor, IVT, Iso-Torque™ and CV Joint, as well as ongoing costs associated with compensating management and staff.

Upon the registration of our stock we filed annual, fully audited financial statements as well as quarterly and other reports required by the SEC during a time frame when such requirements were not applicable to OTC companies. Moreover, we adopted the corporate governance structure and all of the rules required by NASDAQ for listed companies even though we were not listed on NASDAQ. We did this to assure our shareholders that they would have top quality management and certified financial statements available to them at all times.

Through Jim’s efforts since 1996, we have raised more than $7 million in cash, and more importantly we have paid over $16 million in expenses using our common stock as currency with far less dilution than we would have experienced through either the venture capital or IPO routes.

This was an incredibly difficult task. Think about it. First, our most important asset and the core of our value, namely, our patents, are given zero value on our balance sheet under generally accepted accounting principles (GAAP). Second, all expenses associated with the development of our technologies are recorded as losses on our income statement. Third, we have not generated any revenue to date. Fourth, Torvec has not and is not operating in a vacuum. The downturn in the stock market, the stagnating economy, especially after 9/11/2001, the increasing weakness of the U.S. auto industry (due especially to mounting pension and health costs), has created an intense, risk adverse climate (the New Orleans tragedy can only intensify this negative atmosphere).

This environment has forced us to spend more and more time (more time than perhaps originally anticipated in the heady days of the mid to late 90’s) enhancing and perfecting our products. Frankly, the industry is now demanding preproduction quality units and flawless test results before making any monetary commitment.

Meanwhile costs continue to be incurred – for example, our patent fees and the cost of maintaining our patents worldwide, to date, have run in excess of $2 million. Yet, because of Jim’s foresight, Torvec’s financial position, is and will remain sound. Importantly for our shareholders to understand is the fact that any attempt of the auto industry or others to “wait us out” and acquire us “on the cheap” will fail because of the firm financial foundation created by Jim.

Despite these ever increasing costs and the lack of a steady revenue stream to offset them, we have been able (through diligent cost cutting measures and other fiscal restraints) to limit our loss per share to an incredibly low $1.18 in the aggregate over nine years. This amounts to an average of approximately 19 cents per share annually. Compare this loss with losses sustained in recent times by operating companies, let alone a development company like Torvec. Moreover, the amount of our accumulated loss (currently at approximately $35 million) will be available to us as an offset against future revenue for federal and state income tax purposes. And, despite what some shareholders believe, Torvec does not receive any monies from shareholder sales of stock in the public markets.

More recently, Jim has continued his creative financing initiatives, e.g. the creation of our Class A Convertible Preferred to fund general operations and our Class B Convertible Preferred to fund the building, testing and commercialization of our Iso-Torque™ technology.

Jim’s contributions have not been limited to the strategic and financial. To avoid making this Update unusually long, I will simply list a few of the more salient ones:

• principal inventor of one of our infinitely variable transmissions (IVT); co-inventor of several other patented inventions;
  
  
• understands all aspects of our technologies, including the potential size of the markets for which they are targeted, a fact that is well recognized by the top engineers and management throughout the auto industry. This knowledge provides us with an extraordinary advantage in negotiations since we can cut through the “smoke screens” presented by auto companies bent on acquiring our technology at the lowest price;
  
  
• invested with myself over $800,000 in Torvec in 1999 by purchasing Torvec stock at $10 per share, the highest per share price paid by any investor putting capital directly into Torvec;
  
  
• Jim’s strategies are the main reason Torvec has been able to respond quickly and efficiently to the many hurdles which have confronted the company over the past nine years.

In summary, Jim reminds me of Teddy Roosevelt at the turn of the last century. The following quotations demonstrate my point:

"...the man who really counts in the world is the doer, not the mere critic-the man who actually does the work, even if roughly and imperfectly, not the man who only talks or writes about how it ought to be done." (1891)

"Criticism is necessary and useful; it is often indispensable; but it can never take the place of action, or be even a poor substitute for it. The function of the mere critic is of very subordinate usefulness. It is the doer of deeds who actually counts in the battle for life, and not the man who looks on and says how the fight ought to be fought, without himself sharing the stress and the danger." (1894)

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The Gleasman Family on Vernon's 91 Birthday (Vernon Gleasman 1912 - 2004)

I would like to shift gears and revisit for newer shareholders and those whose memory is short, the contributions made to Torvec by the entire Gleasman family. I feel this is necessary because of the ugly rumors that minority shareholders somehow need protection from the “majority” shareholders (i.e. the Gleasman Family).

• The Gleasman family formed Torvec for the express purpose of allowing investors in the company to own all of the patents covering the technologies developed over the previous 40 years by Vernon, Keith and Jim Gleasman. The family did not merely license the technologies – as so many inventors do. The family transferred actual ownership of the technologies to all of you shareholders.
  
  
• Not only did the family transfer all the patents we owned to Torvec in 1996 but we committed ourselves to transfer all future inventions and patents to the company. And, we have honored this commitment.
  
  
• Vernon and Keith Gleasman personally paid over $400,000 for hydraulic pump & motor prototypes developed under contract with a third party so that these prototypes would become Torvec property;
  
  
• From 1996-2004, Torvec’s corporate headquarters were occupied rent and utility free – an immense savings, especially in the early, critical days of the company’s existence;
  
  
• Vernon, Keith, and Jim Gleasman voluntarily accepted options in lieu of cash compensation – options with an exercise price of $5 per share even when, which was most of the time, the market price for the stock was less than $5. In effect, the Gleasmans converted the normal expectation that one is paid for one’s services into a scenario where they preformed services for the company and, in addition, paid the company for their services.
  
  
• Beginning in 2004, Vernon, Keith, and Jim Gleasman voluntarily agreed not to be paid for their services at all, saving the company in excess of $440,000 annually. This was not a deferral but an agreement to completely forego compensation. As a result we have been and will continue to sell small amounts our own stock
  .
  
• Although we have anticipated that we would each be able to sell our personally owned stock at an average rate of 500 shares a day, there have been many periods, August 2004 to December 2004 comes to mind, when we did not sell any shares due to ongoing developments within the company. As a result, during these periods, we did not receive any compensation.
  
  
• As mentioned previously, in early 1999 rather than lending money to the company, thus strapping it with debt, we elected to purchase $800,000 of common stock at $10 per share. We did not apply any discount to the share price.
  
  
• As a family we have always maintained that we would never permit Torvec’s technologies to be sold cheaply and, throughout the years, in negotiation after negotiation down to this day, we have and will continue to honor and remain firm in that commitment to our shareholders.
  
  

In short, the Gleasman family has given to Torvec - time, money, services, blood, sweat, tears and above all, given to Torvec the world’s most advanced auto technology. We have not taken from Torvec and/or its shareholders – despite rumors to the contrary – and will not do so.

The entire Gleasman family, especially Jim and I, remain committed to working tirelessly for the benefit of every single one of our shareholders. Of our commitment to this end you should have no doubt whatsoever.

Sincerely,

Keith E. Gleasman
President