10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended MARCH 31, 2013

OR

o Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File No. 000-24455

TORVEC, INC.

(Exact name of registrant as specified in its charter)

New York (State or other jurisdiction of incorporation or organization) 16-1509512 (I.R.S. Employer Identification No.)

1999 Mt. Read Blvd. Building 3, Rochester, New York 14615

(Address of principal executive offices and Zip Code)

(585) 254-1100

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Number of Shares Outstanding at April 30, 2013
Common Stock, $.01 par value	45,715,727

1

TORVEC, INC.

(a development stage company)

INDEX

PART I – FINANCIAL INFORMATION

Page

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2013 (Unaudited) and December 31, 2012	3
	Condensed Consolidated Statements of Operations – Three Month Periods Ended March 31, 2013 and 2012 and for the Period from September 25, 1996 (Inception) through March 31, 2013 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows – Three Month Periods Ended March 31, 2013 and 2012 and for the Period from September 25, 1996 (Inception) through March 31, 2013 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
SIGNATURE PAGE		30
EXHIBITS
Exhibit 31.1
Exhibit 31.2
Exhibit 32

2

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

TORVEC, INC.

(a development stage company)

Condensed Consolidated Balance Sheets

	March 31, 2013			December 31, 2012
ASSETS
Current Assets:
Cash and cash equivalents	$	2,891,000		$	3,549,000
Inventories		80,000			65,000
Prepaid expenses and other current assets		40,000			22,000
Total current assets		3,011,000			3,636,000
Property and Equipment:
Office equipment and software		192,000			192,000
Shop equipment		174,000			171,000
Leasehold improvements		253,000			253,000
Transportation equipment		94,000			94,000
Construction in progress		8,000			0
		721,000			710,000
Less accumulated depreciation and amortization		325,000			293,000
Net property and equipment		396,000			417,000
Total Assets	$	3,407,000		$	4,053,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable, current portion	$	111,000		$	113,000
Accounts payable		97,000			99,000
Accrued liabilities		197,000			278,000
Total current liabilities		405,000			490,000
Notes payable, net of current portion		27,000			54,000
Total Liabilities		432,000			544,000
Commitments and other matters (Note H)		0			0
Stockholders' Equity:
Preferred stock, $.01 par value, 100,000,000 shares authorized
a) 3,300,000 designated as Class A, Non-voting, convertible, cumulative dividend $.40 per share per annum, shares issued and outstanding at March 31, 2013 and December 31, 2012: 587,101 and 587,101, respectively		6,000			6,000
b) 300,000 designated as Class B, Non-voting, convertible, cumulative dividend $.50 per share per annum, shares issued and outstanding at March 31, 2013 and December 31, 2012: 67,500 and 67,500, respectively		1,000			1,000
c) 16,250,000 designated as Class C, Voting, convertible, no dividend, shares issued and outstanding at March 31, 2013 and December 31, 2012: 16,250,000 and 16,250,000, respectively		162,000			162,000
Common stock, $.01 par value, 400,000,000 shares authorized; shares issued and outstanding at March 31, 2013 and December 31, 2012: 45,715,727 and 45,715,727, respectively		457,000			457,000
Additional paid-in capital		66,239,000			66,010,000
Deficit accumulated during the development stage		(63,890,000	)		(63,127,000	)
Total Stockholders' Equity		2,975,000			3,509,000
Total Liabilities and Stockholders' Equity	$	3,407,000		$	4,053,000

See notes to condensed consolidated financial statements.

3

TORVEC, INC.

(a development stage company)

Condensed Consolidated Statements of Operations

	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012			September 25, 1996 (Inception) through March 31, 2013
Revenue	$	0		$	60,000		$	512,000
Cost of Goods Sold		0			45,000			377,000
Gross Profit		0			15,000			135,000
Costs and expenses:
Research and development:
R&D costs, excluding stock-based compensation expense		226,000			202,000			16,590,000
Stock-based compensation expense related to options and warrants		32,000			18,000			1,827,000
Total research and development		258,000			220,000			18,417,000
General and administrative:
G&A costs, excluding stock-based compensation expense		311,000			287,000			29,478,000
Stock-based compensation expense related to options and warrants		197,000			267,000			20,448,000
Total general and administrative		508,000			554,000			49,926,000
Asset impairments		0			0			1,071,000
Total costs and expenses		766,000			774,000			69,414,000
Loss from operations		(766,000	)		(759,000	)		(69,279,000	)
Reversal of liability on cancellation of debt		0			0			1,541,000
Gain on litigation settlement		0			0			1,900,000
Other income		3,000			6,000			292,000
Loss before income tax benefits		(763,000	)		(753,000	)		(65,546,000	)
Income tax benefits		0			0			384,000
Net Loss		(763,000	)		(753,000	)		(65,162,000	)
Net loss attributable to non-controlling interest in subsidiary		0			0			1,272,000
Net Loss attributable to Torvec, Inc.		(763,000	)		(753,000	)		(63,890,000	)
Preferred stock beneficial conversion feature		0			0			6,345,000
Issuance of warrants to preferred shareholders		0			0			812,000
Preferred stock dividends		66,000			67,000			2,280,000
Net Loss attributable to Torvec, Inc. common stockholders	$	(829,000	)	$	(820,000	)	$	(73,327,000	)
Net Loss per common share attributable to stockholders of Torvec, Inc.:
Basic and Diluted	$	(0.02	)	$	(0.02	)
Weighted average number of shares of common stock:
Basic and Diluted		45,716,000			45,700,000

See notes to condensed consolidated financial statements.

4

TORVEC, INC.

(a development stage company)

Condensed Consolidated Statements of Cash Flows

	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012			September 25, 1996 (Inception) through March 31, 2013
Cash flows from operating activities:
Net loss	$	(763,000	)	$	(753,000	)	$	(65,162,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		32,000			16,000			2,744,000
Gain on sale / disposition of fixed assets		0			0			(57,000	)
Gain on sale of Ice Engineering license		0			0			(1,900,000	)
Loss on impairment of license		0			0			1,071,000
Expenses financed via note with related party		0			0			27,000
Impairment of goodwill		0			0			19,000
Common stock issued for services		0			0			13,844,000
Compensatory common stock		0			0			2,463,000
Shares issued for future consulting services		0			0			103,000
Common stock issued in connection with commercializing event plan		0			0			63,000
Stock-based compensation related to stock options and warrants		229,000			285,000			22,010,000
Compensation expense attributable to common stock in subsidiary		0			0			619,000
Stockholder contribution of services		0			0			4,220,000
Contribution to capital, Ford Truck		0			0			16,000
Reversal of liability		0			0			(1,541,000	)
Changes in:
Accounts receivable		0			(60,000	)		0
Inventories		(15,000	)		0			(80,000	)
Prepaid expenses and other current assets		(18,000	)		28,000			132,000
Deferred liabilities		0			(2,000	)		(91,000	)
Change in accrued payroll taxes		(51,000	)		(40,000	)		23,000
Accounts payable and other accrued expenses		(32,000	)		27,000			3,989,000
Net cash used in operating activities		(618,000	)		(499,000	)		(17,488,000	)
Cash flows from investing activities:
Purchase of property and equipment		(11,000	)		(6,000	)		(524,000	)
Cost of acquisition		0			0			(16,000	)
Proceeds from sale of license		0			0			1,900,000
Proceeds from sale of fixed assets		0			0			59,000
Net cash (used in) provided by investing activities		(11,000	)		(6,000	)		1,419,000
Cash flows from financing activities:
Net proceeds from sales of common stock and upon exercise of options and warrants		0			0			9,223,000
Net proceeds from sales of preferred stock		0			0			9,931,000
Net proceeds from sale of subsidiary stock		0			0			234,000
Net proceeds from issuance of notes payable		0			0			57,000
Repayments of notes payable		(29,000	)		(10,000	)		(199,000	)
Proceeds from loans		0			0			335,000
Repayments of loans		0			0			(109,000	)
Repayment of officer & stockholder loans and advances		0			0			(147,000	)
Distributions		0			0			(365,000	)
Net cash (used in) provided by financing activities		(29,000	)		(10,000	)		18,960,000
Net (decrease) increase in cash and cash equivalents		(658,000	)		(515,000	)		2,891,000
Cash and cash equivalents at beginning of period		3,549,000			5,939,000			0
Cash and cash equivalents at end of period	$	2,891,000		$	5,424,000		$	2,891,000

5

TORVEC, INC.

(a development stage company)

Condensed Consolidated Statements of Cash Flows (continued)

	Three Months Ended March 31, 2013		Three Months Ended March 31, 2012		September 25, 1996 (Inception) through March 31, 2013
Noncash investing and financing activities:
Preferred stock issued in payment of dividend	$	0	$	0	$	61,000
Issuance of common stock for license		0		0		3,405,000
Issuance of common stock, warrant and options in settlement of liabilities, except notes payable		0		0		2,907,000
Notes payable exchanged for common stock		0		0		50,000
Advance settled with common stock		0		0		25,000
Loss on exchange of noncontrolling interest		0		0		232,000
Shares issued for future consulting services		0		0		103,000
Issuance of common stock for a finder’s fee		0		0		225,000
Advance from stockholder		0		0		250,000
Contribution of FTV Ford Truck		0		0		16,000
Ice Engineering LLC payable netted against receivable		0		0		91,000
Common stock issued in settlement of director fee payable		0		0		121,000
Common stock issued in settlement of patent expense		0		0		117,000
Issuance of common stock as payment for Preferred A and B dividends		0		0		207,000
Purchases of fixed assets with debt		0		0		250,000
Supplemental Disclosures:
Interest paid		2,000		1,000		89,000
Income taxes paid		0		0		1,000

See notes to condensed consolidated financial statements.

6

TORVEC, INC.

(a development stage company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — THE COMPANY AND BASIS OF PRESENTATION

The interim information contained herein with respect to the three month periods ended March 31, 2013 and 2012 and the period from September 25, 1996 (inception) through March 31, 2013 has not been audited but was prepared in conformity with generally accepted accounting principles for interim financial information and instructions for Form 10-Q. Accordingly, the condensed consolidated financial statements do not include all information and footnotes required by generally accepted accounting principles for financial statements. Included are ordinary adjustments which, in the opinion of management, are necessary for a fair presentation of the financial information for the three month periods ended March 31, 2013 and 2012 and since inception. The results are not necessarily indicative of results to be expected for the entire year. Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the current year presentation.

Torvec, Inc. was incorporated as a New York business corporation on September 25, 1996. Upon its incorporation, the Company acquired numerous patents, inventions and know-how created by Vernon E. Gleasman and his sons, James and Keith Gleasman, a family with more than fifty years of experience in the automotive industry. Since its inception, the Company has endeavored to design, develop, build and commercialize its automotive technology portfolio.  We have not yet had any significant revenue-producing operations and, as such, we are a development stage entity.  The Company currently is focusing its commercialization strategies on the following technologies: the IsoTorque® differential and the Torvec hydraulic pump.

As used in this quarterly report, unless otherwise indicated, the terms “we”, “our”, “us” and “the Company” refer to Torvec, Inc.

NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation: The financial statements include the accounts of the Company, our wholly-owned subsidiary Iso-Torque Corporation, and our majority-owned subsidiary, Ice Surface Development, Inc. (56% owned at March 31, 2013 and December 31, 2012).  As of March 31, 2013, each of the subsidiaries is non-operational.  During 2012, we dissolved Creative Performance Consultants Inc., Variable Gear LLC, and Torvec China LLC.  We are intending to let Ice Surface Development, Inc. dissolve by proclamation.  All material intercompany transactions and account balances have been eliminated in consolidation.

Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates are used in valuing the useful lives of any intangible assets and the future realizable value of such assets. These estimates are subject to a high degree of judgment and potential change. Actual results could differ from those estimates.

Reclassifications: Certain reclassifications have been made to prior year balances to conform to the current year’s presentation.

Cash and Cash Equivalents: Cash and cash equivalents may include time deposits, certificates of deposit, and highly liquid debt instruments with original maturities of three months or less. We maintain cash and cash equivalents at financial institutions which periodically may exceed federally insured amounts.

 Accounts Receivable: We carry our accounts receivable at invoice amount less an allowance for doubtful accounts.  On a periodic basis, we evaluate our accounts receivable and establish an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions.  We do not accrue interest on past due invoices.  There was $0 allowance for doubtful accounts as of March 31, 2013 and December 31, 2012, as determined by management.

Inventories: Inventories are stated at the lower of cost or market with cost determined under the first-in, first-out (FIFO) method. We record provisions for excess, obsolete or slow-moving inventory based on changes in customer demand, technology developments or other economic factors.

7

Property and Equipment: Property and equipment are stated at cost.  Estimated useful lives are as follows:

Office Equipment and Software (years)	3	–	7
Leasehold Improvements	Lesser of useful life or lease term
Shop Equipment (years)		7
Transportation Equipment (years)	5	–	7

Depreciation and amortization are computed using the straight-line method.  Betterments, renewals and extraordinary repairs that extend the life of the assets are capitalized.  Other repairs and maintenance costs are expensed when incurred. When disposed, the cost and accumulated depreciation applicable to assets retired are removed from the accounts and the gain or loss on disposition is recognized in other income (expense).  Depreciation and amortization expense for the three month periods ended March 31, 2013 and 2012 amounted to $32,000 and $16,000, respectively.

Whenever events or circumstances indicate, our long-lived assets, including any intangible assets with finite useful lives, are tested for impairment by using the estimated future cash flows directly associated with, and that are expected to arise as a direct result of, the use of the assets.  If the carrying amount exceeds the estimated undiscounted cash flows, an impairment may be indicated. The carrying amount is then compared to the estimated discounted cash flows, and if there is an excess, such amount is recorded as an impairment.  During the three month periods ended March 31 2013 and 2012, we recorded $0 in impairment charges.

Fair Value of Financial Instruments: As defined by U.S. GAAP, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  All assets and liabilities are required to be measured and reported on a fair value basis.  A hierarchy for ranking the quality and reliability of the information is used to determine fair values.  Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The FASB’s (Financial Accounting Standards Board) guidance for the disclosure about fair value of financial instruments requires disclosure of an estimate of the fair value of certain financial instruments. The fair value of financial instruments pursuant to FASB’s guidance for the disclosure about fair value of financial instruments approximated their carrying values at March 31, 2013 and December 31, 2012.  The carrying amount of cash, accounts receivable, accounts payable, and accrued expenses approximates their fair value due to their short maturity.  The carrying amount of notes payable approximates fair value because stated or implied interest rates approximate current interest rates that are available for debt with similar terms.

Revenue Recognition: Our terms provide that customers are obligated to pay for products sold to them within a specified number of days from the date that title to the products is transferred to the customers. Our standard terms are typically net 30 days. We recognize revenue when transfer of title occurs, risk of ownership passes to a customer at the time of shipment or delivery depending on the terms of the agreement with a particular customer and collection is reasonably assured. The sale price of our products is substantially fixed and determinable at the date of the sale based upon purchase orders generated by a customer and accepted by us.

We occasionally enter into prototype development contracts with customers.  In such cases, revenue is recognized using either (a) the proportional effort method based on the relationship of costs incurred to date to the total estimated cost to complete a contract, or (b) where appropriate, the milestone method, if milestones are clearly identifiable and substantive.

During the first quarter of 2011, we entered into a prototype development agreement to design, build and integrate our IsoTorque differential into the product of a customer for total consideration of $120,000.  Milestones include completion of design, manufacturing of a prototype, and installation / integration of the prototype. The payment required for each milestone was considered to be substantive based on the fact that performance required by us in order to achieve the milestone enhanced the value of the item delivered and is reasonable in relation to all of the deliverables. The first milestone consisted of completion and delivery of the design for the prototype, which was completed and delivered during the first quarter of 2011 and resulted in the recognition of revenue in the amount of $30,000, as well as the related costs incurred to complete this milestone.  The second milestone consisted of the manufacture and delivery of two prototype differentials to our customer, which was completed in March 2012 and resulted in the recognition of revenue in the amount of an additional $60,000, as well as the related costs incurred to complete this milestone.  Further revenue will be recognized, as well as related costs, upon reaching other milestones defined in the contract.

8

Research and Development and Patents: Research and development costs and patent expenses are charged to operations as incurred. Research and development includes personnel-related costs, materials and supplies, depreciation, consulting services, and amortization of the Ice technology. Depreciation expense for the three month periods ended March 31, 2013 and 2012 that was charged to research and development was $10,000 and $5,000, respectively.

Patent costs for the three month periods ended March 31, 2013 and 2012 amounted to $45,000 and $43,000, respectively, and are included in general and administrative expenses.

Stock-based Compensation: FASB Accounting Standards Codification (“ASC”) 718-10 requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values on the grant date. Under the modified prospective method that we adopted, awards that were granted, modified, or settled on or after January 1, 2006 are measured and accounted for in accordance with ASC 718-10. Unvested equity-classified awards that were granted prior to January 1, 2006 will continue to be accounted for in accordance with ASC 718-10, except that the grant date fair value of all awards are recognized in the results of operations over the remaining vesting periods. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized. In addition, the realization of tax benefits in excess of amounts recognized for financial reporting purposes will be recognized as a financing activity in accordance with ASC 718-10.

No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for substantially all net deferred tax assets. We elected to adopt the alternative method of calculating the historical pool of windfall tax benefits as permitted by ASC 718-10-65 (previously known as: FASB Staff Position (FSP) No. SFAS 123(R)-c, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards”). This is a simplified method to determine the pool of windfall tax benefits that is used in determining the tax effects of stock compensation in the results of operations and cash flow reporting for awards that were outstanding as of the adoption of ASC 718-10.

Income Taxes: We account for income taxes using the asset and liability method, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax bases of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled.  A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.  We adopted FASB ASC 740-10 relating to “Accounting for uncertainty in income taxes” on January 1, 2008.  As a result of the implementation of FASB ASC 740-10, we recognized no adjustment for uncertain tax positions. It is our policy to recognize interest and penalties related to income tax matters as general and administrative expenses.  The tax years 2009 through 2012 remain open to examination by the federal and state tax jurisdictions to which we are subject.

Loss per Common Share: FASB’s ASC 260-10 (previously known as: FASB Statement 128, “Earnings Per Share”) requires the presentation of basic earnings per share, which is based on weighted average common stock outstanding, and dilutive earnings per share, which gives effect to options, warrants and convertible securities in periods when they are dilutive. At March 31, 2013 and 2012, we excluded 29,108,682 and 28,973,631 potential common shares, respectively, relating to convertible preferred stock, options and warrants outstanding from the diluted net loss per common share calculation because their inclusion would be anti-dilutive. In addition, we excluded 625,000 warrants from the diluted net loss per common share calculation at March 31, 2013 and 2012 as the conditions for their vesting are not time-based.

Recent Accounting Pronouncements: There have been no accounting pronouncements issued since January 1, 2012 that have had an impact on the reporting of the Company’s financial results.

NOTE C — RELATED PARTY TRANSACTIONS

[1] Effective January 1, 2008, the board instituted a compensation plan for James Gleasman, our chief executive officer, and Keith Gleasman, our president, each of whom were major shareholders and co-founders of the Company.  The compensation plan was designed to compensate each of them for services performed, and inventions and know-how transferred to us, at the rate of $300,000 per year. Actual payment of this compensation, or any portion thereof, was conditioned upon a determination by the board that we had the requisite cash to make payment, after the complete funding of all ongoing Company projects.

We did not have the requisite cash available to pay the Gleasmans’ compensation under this arrangement from January 1, 2008 through August 17, 2009, the date on which each of the Gleasmans waived all of his rights and interest in and to the board-created compensation plan, including all of his rights and interest in and to the amount(s) under the plan accrued to such date. As a result of such waiver, of the $942,000 accrued under the plan at September 30, 2009, $900,000 was reclassified to equity as a contribution of services and $42,000 accrued under the plan for payroll taxes was recorded as a reduction to general and administrative expenses in the quarter ended September 30, 2009.

9

For subsequent periods, there had not been a compensation plan in place for the Gleasmans.  However, due to the significance of their ownership interest at the time and their influence within the Company, we were required to record the estimated value of each of the Gleasman’s services rendered to us (estimated at $300,000 each per annum) as a contribution of services in accordance with generally accepted accounting principles, and we allocated the amount of such contribution between research and development expenses and general and administrative expenses, based upon management’s estimate of the Gleasmans’ time allocation.  Effective March 14, 2010, James Gleasman retired as our chief executive officer, interim chief financial officer and as a member of the board of directors.  As of October 1, 2011 following our September 2011 private placement, we reassessed the estimated value of the services we were receiving from Keith Gleasman as a result of the reduction of his overall ownership interest, and reduced the amount we were recording for his contribution for shareholder services to the equivalent of $100,000 per annum.  On January 9, 2012, the board approved a base salary for Keith Gleasman of $100,000 per annum to be effective as of January 1, 2012.  The board’s decision was based upon the recommendation of our chief executive officer and our Governance and Compensation Committee, composed entirely of independent directors.

Effective as of January 1, 2012, we no longer imputed an expense related to contributed shareholder services.

[2] On September 14, 2007, we moved our executive offices from Pittsford, New York to Rochester, New York, which includes both a manufacturing and executive office facility. The Rochester facility is owned by a partnership, with which Asher J. Flaum, a Company director, is associated.  On April 28, 2008, our board of directors approved the terms of a lease and such lease was executed on April 29, 2008.

Effective October 24, 2012, we amended certain terms of the lease for our Rochester facility.  The primary changes that were made include a two-year extension of the current lease originally set to expire as of May 31, 2013 at the same rent rate, and the addition of two three-year renewal options with a 10% rate increase at each subsequent renewal period.  These renewal options replace the previous renewal options of three five-year renewal periods which had incorporated 15% rate increases at each subsequent renewal period.  (See Note H[1].)

[3] On December 13, 2010, we executed a consultant agreement with a director to provide consulting services to us at a rate of $200 per hour. Pursuant to the agreement, we also agreed to pay the consultant an incentive fee equal to $10,000 or proportionate part thereof for each $1,000,000 of revenue or proportionate part thereof actually received by us for a period of five years, provided the definitive agreement with the third party results from the material efforts of the consultant.  During the three month periods ended March 31, 2013 and 2012, we recorded an expense of $0 and $2,000, respectively, for services rendered in relation to this agreement.

[4] Effective on March 27, 2012, we hired Dr. William Mark McVea as our Chief Technology Officer.  Prior to joining the Company, Dr. McVea provided us with consulting services through KBE+, Inc., a group of consulting engineers engaged in the design and development of gear trains and power transmission devices, and of which Dr. McVea was the principal engineer and president.  At March 31, 2013 and 2012, we had an outstanding liability of $0 and $41,000 to KBE+, Inc. related to consulting services provided to the Company.

On April 30, 2012, we purchased various test equipment, office furniture, and supplies from KBE+, Inc. for a total of $162,500.  We have entered into a financing agreement with KBE+, Inc., whereby we are paying KBE+, Inc. over 24 months in equal monthly installments of approximately $6,800, beginning on May 1, 2012.  Based on an imputed interest rate of approximately 5%, the initial principal of the note was approximately $154,000, and as of March 31, 2013, the outstanding principal on the note was approximately $86,000.  Interest expense pertaining to this note amounted to approximately $1,000 and $0 for the three month periods ended March 31, 2013 and 2012, respectively.

In May 2012, we purchased certain additional testing tools and supplies from KBE+, Inc. for approximately $5,700.  At March 31, 2013, we had an outstanding payable of $1,000 to KBE+, Inc. related to this purchase.

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NOTE D — INVENTORIES

At March 31, 2013 and December 31, 2012, the composition of inventories was:

	March 31, 2013		December 31, 2012
Raw Materials	$	80,000	$	65,000
Work in Process		0		0
Finished Goods		0		0
	$	80,000	$	65,000

NOTE E — ACCRUED LIABILITIES

At March 31, 2013 and December 31, 2012, accrued liabilities consist of the following:

	March 31, 2013		December 31, 2012
Accrued Compensation	$	23,000	$	51,000
Accrued Payroll Taxes Payable		161,000		212,000
Accrued Legal		2,000		8,000
Other		11,000		7,000
	$	197,000	$	278,000

NOTE F — NOTES PAYABLE

As of March 31, 2013 and December 31, 2012, notes payable consists of the following:

	March 31, 2013		December 31, 2012
Additional Office Space (1)	$	2,000	$	6,000
Copy Machine (2)		5,000		5,000
Engineering Design Software (3)		31,000		36,000
Test Equipment and Supplies (4)		86,000		105,000
Automobile (5)		14,000		15,000
	$	138,000	$	167,000

(1) In November 2010, we completed a construction project for some additional office space at our leased corporate office facility.  The cost of the leasehold improvement was $32,500 and the landlord agreed to finance this cost over the remaining initial term of the lease which expires in May 2013.  The monthly payments are approximately $1,100 per month, with an implicit interest rate of approximately 2.5%.  At December 31, 2012, the outstanding balance on this note was approximately $6,000, all of which was classified as a current liability.  At March 31, 2013, the outstanding balance on this note was approximately $2,000, all of which was classified as a current liability.

(2) In November 2010, we entered into a capital lease for a copy machine over a 5 year term, with a fair market value buyout.  The capitalized value of the lease was approximately $8,900, and the monthly payment is approximately $170 with an implicit interest rate of approximately 5.3%.  At December 31, 2012, the outstanding balance on this note was approximately $5,000, of which $3,000 was classified as a non-current liability.  At March 31, 2013, the outstanding balance on this note was approximately $5,000, of which $3,000 was classified as a non-current liability.

(3) In August 2011, we financed the purchase of engineering design software, along with a one-year maintenance agreement, through a three year loan maturing in August 2014, and collateralized by the software.  The total cost of the software and the maintenance agreement was approximately $64,800.  The monthly payments are approximately $2,100 per month with an implicit interest rate of approximately 9.6%.  At December 31, 2012, the outstanding balance on this note was approximately $36,000, of which $14,000 was classified as a non-current liability. At March 31, 2013, the outstanding balance on this note was approximately $31,000, of which $8,000 was classified as a non-current liability.

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(4) In April 2012, we financed the purchase of various test equipment, office furniture, and supplies from KBE+, Inc. (of which our chief technology officer is an officer) through a 24 month promissory note for a total amount to be paid of $162,500.  Based on an imputed interest rate of approximately 5%, the initial principal of the note was approximately $154,000.  The monthly payments are approximately $6,800 per month.  At December 31, 2012, the outstanding balance on this related party note was approximately $105,000, of which $27,000 was classified as a non-current liability.  At March 31, 2013, the outstanding balance on this related party note was approximately $86,000, of which $7,000 was classified as a non-current liability.

(5) In August 2012, we purchased an automobile for $16,600, a vehicle that we had previously been leasing.  We financed this purchase with a 36- month promissory note.  The interest rate on the loan is approximately 10%, and the payments are approximately $540 per month.  At December 31, 2012, the outstanding balance on this note was approximately $15,000, of which $10,000 was classified as a non-current liability.  At March 31,2013, the outstanding balance on this note was approximately $14,000, of which $9,000 was classified as a non-current liability.

NOTE G — STOCKHOLDERS’ EQUITY

[1] Preferred Stock

On August 30, 2000, we amended our certificate of incorporation to permit the Company to issue up to 100,000,000 shares of $.01 par value preferred stock. Under the amendment, the board of directors has the authority to allocate these shares into as many separate classes of preferred as it deems appropriate and with respect to each class, designate the number of preferred shares issuable and the relative rights, preferences, seniority with respect to other classes and to our common stock and any limitations and/or restrictions that may be applicable without obtaining shareholder approval.

(a) Class A Preferred Stock

In March 2002, our board designated the first series of preferred shares, authorizing the issuance of up to 3,300,000 Class A Non-Voting Cumulative Convertible Preferred Shares. Each Class A Preferred Share is convertible after a one year holding period, at the holder’s election, into one share of our common stock. The conversion rate is subject to adjustment in the event of the issuance of our common stock as a dividend or distribution and in the case of the subdivision or combination of our common stock. The Class A Preferred has no voting rights, except with respect to matters directly impacting upon the rights and privileges accorded to such Class.

The holders of the Class A Preferred are entitled to receive cumulative preferential dividends in the amount of $.40 per share of Class A Preferred for each annual dividend period.

Dividends payable on the Class A Preferred will be paid in cash out of any funds legally available for the payment of dividends or, in the discretion of the board, will be paid in Class A Preferred at a rate of 1 share of Class A Preferred for each $4.00 of dividends.

If dividends are paid in shares of Class A Preferred, such dividend shares are not entitled to accumulate additional dividends and themselves may be converted into the common stock of the Company on a one for one basis. Holders of Class A Preferred are permitted to request that dividends payable in Class A Preferred be immediately converted into shares of our common stock.  At times, our board may elect to settle the dividends through the issuance of common stock in lieu of cash.

Accumulated and unpaid dividends on the Class A Preferred will not bear interest. Class A Preferred shares are also entitled to participate pro rata in dividends declared and/or distributions made with respect to all classes of our outstanding equity.

We may, in the absolute discretion of our board, redeem at any time and from time to time from any source of funds legally available any and all of the outstanding Class A Preferred at the redemption price of $4.00 per Class A Preferred, plus all unpaid accumulated dividends payable with respect to each Class A Preferred Share.

Since its designation in March 2002, we have sold an aggregate 765,512 shares of Class A Preferred for proceeds of approximately $3,062,000.  We sold 0 Class A Preferred shares during the three month period ended March 31, 2013 and the year ended December 31, 2012.

Since its designation in March 2002, Class A Preferred shareholders have converted an aggregate 189,750 Class A Preferred into our common stock (on a one to one basis) through March 31, 2013.  There were 0 Class A Preferred shares converted in each of the three month periods ended March 31, 2013 and 2012, respectively.

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For each of the three month periods ended March 31, 2013 and 2012, we settled 0 Class A Preferred dividends.  Since its inception in March 2002 through March 31, 2013, we have settled an aggregate Class A Preferred dividend amounting to approximately $242,000 through the issuance of 11,339 Class A Preferred shares and 100,924 common shares.

At March 31, 2013, there were 587,101 outstanding shares of Class A Preferred stock, of which 11,339 shares resulted from the settlement of dividends due to conversion, and those shares no longer accrue dividends.  The value of dividends payable upon the conversion of the remaining 575,762 outstanding shares of Class A Preferred stock amounted to approximately $1,846,000 at March 31, 2013.

In the event of the liquidation, dissolution and winding up of the Company, and subject to the liquidation rights and privileges of our Class C Preferred, Class A Preferred shareholders have a liquidation preference with respect to all accumulated and unsettled dividends.  The value of the Class A Preferred shareholders’ liquidation preference was approximately $1,846,000 and $1,788,000 at March 31, 2013 and December 31, 2012, respectively.  In the event of a liquidation, dissolution or winding up of the Company, unpaid accumulated dividends on the Class A Preferred are payable in Class A Preferred shares at a rate of 1 share of Class A Preferred for each $4.00 of dividends.

(b) Class B Preferred Stock

In September 2004, the board created a second series of preferred stock by authorizing the issuance of up to 300,000 Class B Non-Voting, Cumulative Convertible Preferred Shares to fund the business operations of Iso-Torque Corporation, an entity incorporated to separately commercialize our IsoTorque differential technology.

Each Class B Preferred Share is convertible after a one year holding period, at the holder’s election, into one share of our common stock or one share of the common stock of IsoTorque Corporation. The conversion rate is subject to adjustment in the event of the issuance of the Company’s or IsoTorque Corporation’s common stock as a dividend or distribution and in the case of the subdivision or combination of such common stock. The Class B Preferred has no voting rights, except with respect to matters directly impacting upon the rights and privileges accorded to such Class.

Subject to the dividend rights and privileges of our Class A Preferred, the holders of the Class B Preferred are entitled to receive cumulative preferential dividends in the amount of $.50 per share of Class B Preferred for each annual dividend period.

Dividends payable on the Class B Preferred will be paid in cash out of any funds legally available for the payment of dividends or, in the discretion of the board, will be paid in Class B Preferred at a rate of 1 share of Class B Preferred for each $5.00 of dividends.

If dividends are paid in shares of Class B Preferred, such dividend shares are not entitled to accumulate additional dividends and themselves may be converted into the common stock of the Company on a one for one basis. Holders of Class B Preferred are permitted to request that dividends payable in Class B Preferred be immediately converted into shares of our common stock.

Accumulated and unpaid dividends on the Class B Preferred will not bear interest. Class B Preferred shares are also entitled to participate pro rata in dividends declared and/or distributions made with respect to all classes of our outstanding equity.

We may, in the absolute discretion of our board, redeem at any time and from time to time from any source of funds legally available any and all of the outstanding Class B Preferred at the redemption price of $5.00 per Class B Preferred, plus all unpaid accumulated dividends payable with respect to each Class B Preferred Share.

Since its designation in September 2004, we have sold an aggregate 97,500 Class B Preferred in a number of private placements for proceeds of approximately $487,500.  We sold 0 Class B Preferred shares during the three month periods ended March 31, 2013 and 2012.

Since its designation, Class B Preferred shareholders have converted an aggregate 30,000 Class B Preferred into our common stock (on a one to one basis) through March 31, 2013.  Through March 31, 2013, we have issued 0 Class B Preferred shares to converting Class B Preferred shareholders as a dividend.

Depending upon our cash position, from time to time we may request that a converting preferred shareholder receiving dividends in cash consent to receive shares of restricted common stock in lieu thereof.  During each of the three month periods ended March 31, 2013 and 2012, we issued 0 shares of restricted common stock in payment of Class B dividends.  Cumulatively through March 31, 2013, we have issued 35,431 restricted common shares in payment of Class B dividends amounting to approximately $51,000.

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At March 31, 2013, dividends payable upon the conversion of 67,500 outstanding shares of Class B Preferred amounted to approximately $260,000.  In the event of the liquidation, dissolution and winding up of the Company, and subject to the liquidation rights and privileges of our Class C Preferred and our Class A Preferred, Class B Preferred shareholders have a liquidation preference with respect to all accumulated and unsettled dividends.  The value of the Class B Preferred shareholders’ liquidation preference was $260,000 and $251,000 at March 31, 2013 and December 31, 2012, respectively.  In the event of a liquidation, dissolution or winding up of the Company, unpaid accumulated dividends on the Class B Preferred are payable in Class B Preferred shares at a rate of 1 share of Class B Preferred for each $5.00 of dividends.

(c) Class C Preferred Stock

In September 2011, the board of directors authorized, and Class A Preferred and Class B Preferred shareholders approved, a third series of preferred stock, namely 16,250,000 shares of Class C Voting Convertible Preferred Stock.  On September 23, 2011, we sold and issued a total of 16,250,000 shares of Series C Voting Convertible Preferred Stock and warrants to purchase 1,625,000 shares of our common stock in a private placement transaction, generating gross proceeds of $6,500,000.  Direct expenses of approximately $106,000 pertaining to the transaction, consisting of primarily external legal costs, were incurred, resulting in net proceeds of approximately $6,394,000.

Each Class C Preferred share is convertible, at the holder’s election, into one share of our common stock.  The conversion rate is subject to adjustment in the event of the issuance of common stock as a dividend or distribution, and the subdivision or combination of the outstanding common stock.

The Class C Preferred shares have a liquidation preference at their stated value per share of $0.40 that is senior to our common stock, and the Company’s Class A Non-Voting Cumulative Convertible Preferred Shares and Class B Non-Voting Cumulative Convertible Preferred Shares.  The liquidation preference is payable upon a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or upon a deemed liquidation of the Company.

The Class C Preferred shares have no right to receive dividends and have no redemption right. The Class C Preferred shares vote with the common stock on an as-converted basis.  Class C Preferred is also entitled to participate pro rata in dividends declared and distributions made with respect to all classes of our outstanding equity.
 

The associated warrants have a ten (10) year term and are immediately exercisable for 1,625,000 shares of common stock.  The warrants are exercisable, at the holder’s election, for shares of the Company’s common stock in either a cash or cashless exercise. The warrants have an exercise price equal to the greater of (i) $0.01 or (ii) eighty percent (80%) of the volume weighted average sale price per share of our common stock during the ten (10) consecutive trading days immediately preceding the notice of exercise.  The number of warrants and exercise price are subject to adjustment in the event of the issuance of common stock as a dividend or distribution, and the subdivision or combination of the outstanding common stock.  At the time of issuance, we estimated a value of $.50 per warrant, or a total of approximately $812,000, using a weighted average of assigned probabilities for various gain scenarios at certain price points based on expected volatility.  As a result of the combined issuance of the Class C Preferred stock with the associated warrants, we reflected a non-cash distribution on the Class C Preferred shares for the warrants issued in our consolidated statements of operations for 2011.  (See Note G[3](o).)

In conjunction with the issuance of the 16,250,000 shares of Class C Preferred stock, we computed the value of the non-cash beneficial conversion feature associated with the right to convert the shares into common stock on a one-for-one basis.  We compared the fair value of our common stock on the date of issuance with the effective conversion price after allocation of the proceeds to the related warrants, and determined that the value of the non-cash beneficial conversion feature is approximately $5,582,000, which was reflected in our consolidated statements of operations for the year ended December 31, 2011 as an adjustment to arrive at the net loss attributable to common stockholders.

Cumulatively through March 31, 2013, Class C Preferred shareholders have converted 0 shares of Class C Preferred into common stock.  At March 31, 2013, there were 16,250,000 shares of Preferred C stock outstanding.  The value of the Class C Preferred shareholders’ liquidation preference was $6,500,000 at March 31, 2013.

[2] Stock Options

(a) 1998  Stock Option Plan

In December 1997, our board approved a Stock Option Plan (the “1998 Plan”) which provided for the granting of up to 2,000,000 shares of common stock, pursuant to which officers, directors, key employees and key consultants/advisors are eligible to receive incentive, nonqualified or reload stock options which plan was ratified by the shareholders on May 28, 1998. Options granted under the 1998 Plan are exercisable for a period of up to 10 years from date of grant at an exercise price which is not less than the fair value on date of grant, except that the exercise period of options granted to a stockholder owning more than 10% of the outstanding capital stock may not exceed five years and their exercise price may not be less than 110% of the fair value of the common stock at date of grant. Options may vest over five years.

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By its terms, our 1998 Plan terminated as to the grant of future options on May 27, 2008. Consequently, no additional stock options will be granted under the 1998 Plan, although outstanding options remain available for exercise in accordance with their terms. There were 0 options exercised under the 1998 Plan during each of the three month periods ended March 31, 2013 and 2012.

Through March 31, 2013, a total of 1,823,895 stock options had been granted under the 1998 Plan, 0 stock options had been exercised, and 1,282,047 stock options have expired.  As of March 31, 2013, there were 541,848 outstanding stock options under the 1998 Plan, all of which were fully vested.  The following table summarizes information relating to stock options outstanding under the 1998 Plan at March 31, 2013:

Options Outstanding and Exercisable
Shares	Weighted Average Exercise Price	Weighted Average Remaining Life in Years	Aggregate Intrinsic Value
541,848	$4.75	0.9	$0

As of March 31, 2013, we had $0 unrecognized stock compensation related to unvested awards under the 1998 Plan.

(b) 2011 Stock Option Plan

On November 3, 2010, the board adopted, and on January 27, 2011 the shareholders approved, the 2011 Stock Option Plan (“2011 Plan”)  which provides for the grant of up to 3,000,000 common stock options to provide equity incentives to directors, officers, employees and consultants. Two types of options may be granted under the 2011 Plan: non-qualified options and incentive options.

Non-qualified options may be granted to our officers, directors, employees and outside consultants. Incentive options may be granted only to our employees, including officers and directors who are also employees. In the case of non-qualified options, the exercise price may be less than the fair market value of our stock on the date of grant. In the case of incentive options, the exercise price may not be less than such fair market value and in the case of an employee who owns more than 10% of our common stock, the exercise price may not be less than 110% of such market price. Options generally are exercisable for ten years from the date of grant, except that the exercise period for an incentive option granted to an employee who owns more than 10% of our stock may not be greater than five years.

Effective January 28, 2011, our board of directors appointed Wesley K. Clark as a member of the board of directors. Our board voted to grant Gen. Clark a non-qualified stock option for 250,000 common shares under the 2011 Plan, effective January 28, 2011 and exercisable at $.90 per share. The option is conditioned upon Gen. Clark serving as a director and vests in four tranches of 25% of the total granted shares on each of the four annual anniversary dates of January 28, 2011.  The original terms of the option required the optionee to exercise each tranche within two and one-half months following the calendar year in which the tranche vests or lose the tranche.  However, on March 20, 2012, the board approved a modification of these options to provide for a 10 year term with an expiration date of January 28, 2021, and this modification was subsequently approved by shareholders at the Company’s annual meeting on June 14, 2012.  We used the Black-Scholes option-pricing model to value the cost of this modification at approximately $56,000, which is being recognized ratably over the vesting periods of the respective tranches.

In March 2012, we granted an incentive stock option to our new chief technology officer to acquire 250,000 common shares at an exercise price of $.82 per share, exercisable for 10 years.  The option vests in four tranches of 25% of the total granted shares on each of the four annual anniversary dates from the initial date of grant.

In December 2012, we granted a non-qualified stock option to a new director to acquire 250,000 common shares at an exercise price of $.70 per share, exercisable for 10 years.  The option vests in four tranches of 25% of the total granted shares on each of the four annual anniversary dates from the initial date of grant.

During the three month period ended March 31, 2013, we granted 0 stock options under the 2011 Plan, 125,250 options became vested, and 0 options expired or were exercised.  During the three month period ended March 31, 2012, we granted 250,000 stock options under the 2011 Plan, 62,750 options became vested, and 0 options expired or were exercised. As of March 31, 2013, there were 1,182,000 stock options outstanding under the 2011 Plan, 347,998 of which were vested.  At March 31, 2013, there were 1,818,000 options remaining available for future grant under the 2011 Plan.

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(c) Non-Plan Options

During the first quarter of 2011, we granted a total of 1,350,000 non-plan stock options.  On January 27, 2011, our shareholders approved the issuance of stock options to 5 directors each for 250,000 common shares, and the issuance of stock options to a consultant acting in the capacity as a special advisor to the board for 100,000 common shares, exercisable at $.90 per common share. Each option is conditioned upon the optionee serving as a director or consultant and vests in four tranches of 25% of the total granted shares on each of the four annual anniversary dates of January 27, 2011. The original terms of the options required the optionee to exercise each tranche within two and one-half months following the calendar year in which the tranche vests or lose the tranche.  However, on March 20, 2012, the board approved a modification of these options to provide for a 10 year term with a uniform expiration date of January 27, 2021, and this modification was subsequently approved by shareholders at the Company’s annual meeting on June 14, 2012.  We used the Black-Scholes option-pricing model to value the cost of this modification at approximately $304,000, which is being recognized ratably over the vesting periods of the respective tranches.

During the three month period ended March 31, 2013, there were 0 non-plan stock options granted.

As of March 31, 2013, there were a total of 7,161,668 non-plan options outstanding, of which 4,274,168 were fully vested.  During the three month period ended March 31, 2013, we granted 0 non-plan stock options, 337,500 options became vested, and 0 options were exercised or cancelled.  During the three month period ended March 31, 2012, we granted 0 non-plan stock options, 337,500 options became vested, and 0 options were exercised or cancelled.

(d) Summary

For the three month periods ended March 31, 2013 and 2012, compensation cost related to all stock options amounted to $229,000 and $285,000, respectively.  As of March 31, 2013, there was $1,125,000 of total unrecognized compensation costs related to outstanding stock options, which are expected to be recognized over the next 3 ¾ years.

The weighted average grant-date fair value of all stock options granted during the three month period ended March 31, 2012 was $.74 per share; no stock options were granted during the three month period ended March 31, 2013. The total grant date fair value of all stock options vested during the three month periods ended March 31, 2013 and 2012 was approximately $680,000 and $605,000, respectively.

The fair value of each option granted during the three month period ended March 31, 2012 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2012
Expected Term (years)		6.0
Expected forfeiture rate		0	%
Risk-free rate		1.3	%
Volatility		132.5	%
Dividend yield		0.0	%

The average risk-free interest rate is based on the U.S. treasury security rate in effect as of the grant date. We determined expected volatility using the historical closing stock price. The expected life was generally determined using the simplified method as we do not believe we have sufficient historical stock option exercise experience on which to base the expected term.

The following summarizes the activity of all of our outstanding stock options for the three month period ended March 31, 2103:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2013		8,885,516	(A)	$	.94
Granted		0			0
Exercised		0			0
Canceled or expired		0			0
Outstanding at March 31, 2013		8,885,516	(A)	$	.94		7.2		$	1,700,000
Exercisable at March 31, 2013		5,164,014		$	1.20		6.7		$	990,000

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Note (A) – Figures include the impact of 405,000 options that were granted in 2011 to replace options / warrants previously granted to certain engineering personnel.  The previously issued options / warrants will expire as the newer options vest on a one-to-one basis.  During the fourth quarter of 2012, 134,998 of these options vested, and 98,332 previously issued options and 36,666 previously issued warrants were cancelled concurrently in conjunction with the vesting of the 2011 options, leaving 270,002 options remaining to vest.

As of March 31, 2013, the exercise prices of all outstanding stock options, as well as all vested stock options, ranged from $.36 per share to $5.00 per share.

[3] Warrants

As of March 31, 2013, outstanding warrants to acquire shares of our common stock are as follows:

Exercise Price		Expiration	Number of Warrants Outstanding			Number of Warrants Exercisable
Not yet determinable		Not yet determinable		125,000	(a)		0
$	.75	None		500,000	(b)		0
$	.01	2015-2016		54,500	(c)		54,500
$	.01	None		3,000	(d)		3,000
$	5.00	None		75,000	(e)		75,000
$	5.00	2016		83,334	(e)		83,334
$	.01	None		60,000	(f)		60,000
$	.01	2016		3,750	(g)		3,750
$	1.00	None		20,500	(h)		20,500
$	.44	2020		400,000	(i)		400,000
$	3.75	2016		200,000	(j)		200,000
$	5.00	2016		30,000	(k)		30,000
$	5.00	2017		50,000	(l)		50,000
$	5.00	2017		100,000	(m)		100,000
$	2.50	2020		100,000	(n)		100,000
Not yet determinable		2021		1,625,000	(o)		1,625,000
				3,430,084			2,805,084

(a)  Exercisable only if we have an IPO and exercisable at the IPO price five years from IPO. Through March 31, 2013, we have not conducted an IPO.

(b)  On April 15, 2002, we issued 1,000,000 warrants at prices ranging from $.30 to $.75 to our then chairman of the board of directors and chief executive officer. Of the total warrants, 250,000 were exercisable at $.30, and 250,000 were exercisable at $.50 on the date the then board elected the executive to the board and named him chief executive officer. During the year ended December 31, 2002, 250,000 warrants were exercised for $.30 per share, resulting in proceeds of $75,000. During the year ended December 31, 2003, 250,000 warrants were exercised for $.50 per share, resulting in proceeds of $125,000. The remaining 500,000 warrants are exercisable upon the occurrence of a significant transaction, which includes execution by us of a binding agreement for the sale, transfer, license or assignment for value of any and/or all of our automotive technology, at $.75 per share. We will record a charge representing the fair value of the warrants when the warrants become exercisable.

(c)  We issued an aggregate 123,500 warrants at an exercise price of $0.01 with a ten year term to our nonmanagement directors for services rendered to the board under our Nonmanagement Directors Plan prior to its amendment on October 13, 2006. There are 0 further warrants issuable under the Plan as modified by the board of directors on October 13, 2006. An aggregate 69,000 warrants have been exercised for proceeds of $690.

(d)  In 2005, we issued 12,500 warrants to consultants, immediately exercisable at $0.01 per common share. During 2005 and 2006, 3,500 of these warrants were exercised. During 2010, an additional 6,000 of these warrants were exercised. The 3,000 remaining outstanding warrants have no expiration date.

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(e)  In 2005, we issued 95,000 warrants to two engineering and administrative consultants, exercisable immediately at $5.00 per common share. During 2006, we issued an additional 100,000 warrants to these same consultants exercisable over a ten year term at $5.00 per common share, but only exercisable if there is a commercializing event as determined by the board of directors. During 2008, these warrants were cancelled and new warrants were issued to the same consultants for an aggregate 195,000 shares exercisable until 2016 at $5.00 per common share and conditioned upon the happening of a commercializing event as determined by the board.  We recorded a charge of $249,000 in 2008 to general and administrative expense. In 2010, 95,000 of the total number of 195,000 warrants issued to these consultants were modified to eliminate both the term and the commercializing event condition for exercise.  The charge related to the 2010 modification was insignificant.  In December 2011, 110,000 of these outstanding warrants were amended so that they will be cancelled in conjunction with the vesting of stock options that were issued to replace such warrants, with each option having an exercise price of $1.14 per share, and proportionate vesting on each of the succeeding anniversary dates over a three year period.  The approximately $16,000 expense related to the issuance of the stock options to replace the warrants is being amortized over the vesting period of the stock options.  In the fourth quarter of 2012, 36,666 of these warrants were cancelled as the corresponding number of options vested.

(f)  During 2005, we issued 60,000 warrants to an engineering consultant exercisable immediately at $5.00 per common share and with no expiration date.

(g)  During 2005, we issued 62,500 warrants to investors in connection with their purchase of 62,500 Class A Preferred, immediately exercisable at $.01 per common share and with a ten year term. During 2006, we issued 135,849 warrants to investors along with their purchase of 162,000 Class A Preferred and 20,000 Class B Preferred, all immediately exercisable at $.01 per common share and with a ten year term. Through March 31, 2013, an aggregate of 194,599 of these warrants have been exercised for proceeds of approximately $1,258.  There were 0 warrants exercised during the three month period ended March 31, 2013.

(h)  During 2006, one investor purchased 20,500 warrants with no expiration date and an exercise price of $1.00 per common share, for a purchase price of $2,000.

(i)  During 2006, we issued 400,000 warrants immediately exercisable for ten years at an exercise price of $3.27 per common share to a business consultant. Effective October 15, 2010, these warrants were modified and reissued upon the mutual agreement of the parties. Effective October 15, 2010, we issued 400,000 warrants immediately exercisable at $.44 per common share for a period of ten years from the modification date.  As a result of the modification, we recorded a charge of $68,000 to general and administrative expenses in the fourth quarter of 2010.  During the three month period ended March 31, 2013, 0 warrants were exercised.

(j)  During 2006, we issued 200,000 warrants immediately exercisable for ten years at an exercise price of $3.75 per common share to a former governmental affairs consultant.

(k)  In 2006, we issued 30,000 warrants to consultants exercisable immediately for a ten year term at $5.00 per common share.

(l)  During 2007, we issued 50,000 warrants exercisable for ten years at $5.00 per common share upon the happening of a commercializing event. The warrants were issued to a consultant who assisted us to potentially place our products in various state school bus programs. We recorded a charge of $249,000 to general and administrative expenses.

(m)  During 2007, we issued 100,000 warrants immediately exercisable for ten years at an exercise price of $5.00 per common share to two engineering consultants in connection with our engagement to furnish constant velocity joints to a military contractor. We recorded a charge of $401,000 to general and administrative expenses.

(n)  On February 17, 2010, we issued 100,000 common stock warrants exercisable for ten years at an exercise price of $2.50 per common share to an adviser. We recorded a charge of $45,000 to general and administrative expenses in the first quarter of 2010.

(o)  On September 23, 2011, we issued 1,625,000 common stock warrants in connection with the sale and issuance of a total of 16,250,000 shares of Series C Voting Convertible Preferred Stock in a private placement transaction, generating gross proceeds of $6,500,000.  The warrants have a ten (10) year term and are immediately exercisable for 1,625,000 shares of common stock.  The warrants are exercisable, at the holder’s election, for shares of our common stock in either a cash or cashless exercise.  The warrants have an exercise price equal to the greater of (i) $0.01 or (ii) eighty percent (80%) of the volume weighted average sale price per share of our common stock during the ten (10) consecutive trading days immediately preceding the notice of exercise.  The number of warrants and exercise price are subject to adjustment in the event of the issuance of common stock as a dividend or distribution, and the subdivision or combination of the outstanding common stock.  (See Note G[1](c).)

We typically use the Black-Scholes option-pricing model to estimate the fair value of stock-based awards.  However, for the 1,625,000 warrants issued in September 2011, the exercise price is variable based on 80% of the price of our common stock on the date of exercise.  For the valuation of these particular warrants, we used a weighted average of assigned probabilities for various gain scenarios at certain price points based on expected volatility of approximately 136% over an assumed term of five years to estimate an overall value of these warrants, which amounted to approximately $812,000, or $.50 per warrant.  These inputs are unobservable inputs based on our own assumptions used to measure the value of the instrument.  Accordingly, these warrants are classified within Level 3 of the fair value hierarchy in accordance with FASB ASC 820.

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The following summarizes the activity of our outstanding warrants for the three month period ended March 31, 2013:

	Shares		Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (years)			Aggregate Intrinsic Value
Outstanding at January 1, 2013		3,430,084	$	2.12
Granted		0		0
Exercised		0		0
Canceled or expired		0		0
Outstanding at March 31, 2013		3,430,084	$	2.12	(A)		7.3	(B)	$	366,000
Exercisable at March 31, 2013		2,805,084	$	2.70			7.3	(C)	$	366,000

(A) The weighted average exercise price for warrants outstanding as of March 31, 2013 excludes 1,750,000 warrants with no determined exercise price.

(B) The weighted average remaining contractual term for warrants outstanding as of March 31, 2013 excludes 783,500 warrants with no expiration date.

(C) The weighted average remaining contractual term for warrants exercisable as of March 31, 2013 excludes 158,500 warrants with no expiration date.

NOTE H — COMMITMENTS AND OTHER MATTERS

 [1] Leases

We lease a facility from a related party (see Note C[2]) located at 1999 Mount Read Blvd., Rochester, New York. On April 29, 2008, we executed a five and one-half year  lease for the premises (with a December 1, 2007 lease commencement date), providing for rent to be paid at a rate of $5,687 per month ($68,244 per annum) and in addition, for the payment of our proportionate share of yearly real estate taxes and yearly common area operating costs.  Under the lease, monthly rental payments commenced June 1, 2008 and were to continue through May 2013. The lease contained three 5-year renewal options and grants us an option to lease additional adjacent manufacturing and assembly space.

Effective October 24, 2012, we amended certain terms of the lease.  The primary changes that were made include a two-year extension of the current lease originally set to expire as of May 31, 2013 at the same rent rate, and the addition of two three-year renewal options with a 10% rate increase at each subsequent renewal period.  These renewal options replace the previous renewal options of three 5-year renewal periods which had incorporated 15% rate increases at each subsequent renewal period.

Rent expense for the three month periods ended March 31, 2013 and 2012 was approximately $17,000 and $15,000, respectively.  Rent payments required under the amended lease for the full years ending December 31, 2013, 2014 and 2015 amount to approximately $68,000, $68,000 and $28,000, respectively

[2] Employment Agreements

Effective October 4, 2010, we appointed a new chief executive officer and executed a five year employment agreement pursuant to which we will pay base compensation of $50,000 per annum, which compensation increases to $200,000 per annum on the first day of the calendar year immediately following the calendar year in which we have adjusted EBITDA of at least $300,000 (earnings before interest, taxes, depreciation and amortization, but excluding all non-cash expenses associated with stock options). Under the agreement, the executive is entitled to a performance bonus based upon financial targets established each year in good faith by the Governance and Compensation Committee and the achievement of individual management objectives established annually by such committee. The executive is entitled to participate in all employee benefit plans as are provided from time to time for senior executives. If we terminate the executive, remove him as CEO, or a change in control of the Company occurs, the executive is entitled to three years’ severance pay, consisting of base pay and any incentive compensation.

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Effective October 18, 2010, we engaged a new chief financial officer under a letter agreement dated October 18, 2010.  If we terminate the executive, remove him as CFO, or a change in control of the company occurs, the executive is entitled to 12 months’ severance pay.

[3] Consulting Agreements

Effective July 1, 2010, in two separate agreements, we engaged the services of a consulting firm to provide expertise with business development initiatives, strategic planning and general funding opportunities.   We agreed to pay the consultant an annual retainer of $82,500 for both agreements combined, to be paid in quarterly installments.  We also agreed to pay the consultant a commission equal to 4% of the value received by us from third parties introduced by or through the auspices of the consultant for a period of a minimum of 4 years beyond the initial term of the agreement. The agreements were for one and two year terms.  On March 31, 2011, we signed a modification agreement pursuant to which, in exchange for a one-time payment of $17,250, all of the cash obligations under these two agreements were cancelled.  The obligation to pay a 4% commission with respect to the generation of business from efforts initiated by the consultant remains in effect through January 1, 2017.

On December 13, 2010, we executed a consultant agreement with a director to provide consulting services to us at a rate of $200 per hour. Pursuant to the agreement, we also agreed to pay the consultant an incentive fee equal to $10,000 or proportionate part thereof for each $1,000,000 of revenue or proportionate part thereof actually received by us for a period of five years, provided the definitive agreement with the third party results from the material efforts of the consultant.  During the three month periods ended March 31, 2013 and 2012, we recorded an expense of approximately $0 and $2,000, respectively, for consulting services under the agreement.

Effective as of January 1, 2013, we entered into a one-year consulting agreement with SCIRE Corporation, of which one of our directors is president, to provide us with expertise and advice on hydraulic pump technology and related markets.  The consulting agreement provides for a guaranteed minimum of $3,840 per month, based on 32 hours of consulting.  Additional hours above this minimum will be billed at a rate of $120 per hour.  During the three month period ended March 31, 2013, we recorded an expense of approximately $12,000 for consulting services under the agreement.

[4] Prototype Development Agreements

On January 28, 2011, we announced that we entered into a contract with a West Virginia remanufacturer of components for the mining and associated industrial equipment industry to develop, evaluate, manufacture and sell our IsoTorque® differential technology in mining shuttle cars.  The contract calls for us to design and build a prototype IsoTorque® unit for installation in a 21 SC model mining shuttle car. The remanufacturer will pay us $120,000 for the initial development. Upon successful completion of the prototype phase, the parties have agreed that we will sell 100% of the differential requirements for all 21 SC model mining shuttle cars remanufactured by the remanufacturer on an exclusive basis. Minimum purchase requirements will be established after the first anniversary of the agreement.  During the first quarter of 2012, we recorded $60,000 in revenue upon the completion of the second milestone.  In the three month period ended March 31, 2013, we recorded $0 in revenue related to this contract.  Through March 31, 2013, we have recorded a total of $90,000 in revenue associated with this agreement.

On January 28, 2013, we issued a press release announcing that we have entered into a development agreement with Chinese automotive manufacturer, BAIC Motor Co., Ltd.  Under the agreement, BAIC Motor Co., Ltd. will pay us to manufacture a number of prototypes of our IsoTorque® differential for one of BAIC's anticipated future car models. We will supply BAIC with these prototypes for their evaluation and testing.  In the three month period ended March 31, 2013, we recorded $0 in revenue related to this contract.

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Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(A) Overall Business Strategy

Torvec, Inc. was incorporated as a New York business corporation on September 25, 1996. Upon its incorporation, the Company acquired numerous patents, inventions and know-how created by Vernon E. Gleasman and his sons, James and Keith Gleasman, a family with more than fifty years of experience in the automotive industry. Since its inception, we have endeavored to design, develop, build and commercialize our automotive and powertrain technology portfolio.  We have not yet had any significant revenue-producing operations and, as such, we are a development stage entity.

(B) Current Status of Business Plan and Ongoing Projects

We are continuing to make progress toward optimizing the designs and productizing our two key technologies, although the process has been taking longer than we had expected.  The following summarizes the current status of the development efforts for our IsoTorque® differential and our Torvec hydraulic pump.

IsoTorque Differential –

During 2012, we made tremendous strides toward enhancing the design of the IsoTorque differential, and acquiring a significantly greater understanding of the technology.  Through the addition of tooling, equipment, software and personnel, we improved our design cycle and developed testing protocol to gain information that we previously have not had.  Our testing procedures have become much more structured and defined, and we are taking the necessary steps to develop a quality product.

During 2012 and into 2013, we have focused our development efforts toward developing a rear-wheel drive differential for two model platforms (for certain Corvette and Camaro models) that can be marketed and sold in the aftermarket.  During the fourth quarter of 2012, the test results of our design were still not satisfactory to us, so we are making appropriate design modifications to improve the IsoTorque’s high-impact durability.  Although we are now at a point where we feel there will be no problems under “normal” use, we are not the best we can be. We feel that if we are going to be a world class company, our product has to be world class in every way.  For that reason, we have decided not to begin to ship our differentials until we are completely satisfied with the product.  During the past few months, we have continued to enhance the design characteristics, and we will be conducting additional tests with prototype differentials to meet our stringent requirements.  While we are confident that there is nothing in the marketplace that can compete with the IsoTorque’s performance and safety, we must also make it the most dependable.

In anticipation of our ability to succeed, during 2012 we began efforts to sell the IsoTorque differential into the automobile aftermarket.  With limited effort, we have received orders for approximately 40 units for high powered Corvettes and Camaros. This along with feedback we have received makes us confident that we have a very saleable product.

In the meantime, we continue to have a great deal of interest from many companies.  During the fourth quarter of 2012, we sent two IsoTorques to a large OEM for internal functional model development, and in April 2013 they conducted some initial testing.

Pending the successful work on the present IsoTorque configuration, we expect to begin designing an IsoTorque for other sizes of differentials for additional rear-wheel drive applications, as well as for front-wheel drive vehicles.  We believe that our IsoTorque design could create a very significant breakthrough in front-wheel drive technology.

In January 2013, after many months of discussions, we entered into a development agreement with Chinese automotive manufacturer, BAIC Motor Co., Ltd. (“BAIC”).  Under the agreement, BAIC will pay us to manufacture a number of prototypes of our IsoTorque differential for one of BAIC’s anticipated future car models.  Torvec will supply BAIC with these prototypes for its evaluation and testing.  This is a great opportunity for Torvec to work with an established auto manufacturer in the world’s largest automotive market.  We are awaiting a formal written purchase order, documentation and specific hardware from BAIC before we initiate work on this development effort, in accordance with the written agreement.

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In addition to the automotive sector, we continue to market into off-highway markets such as mining and construction.  In January 2011, we entered into development contract with a West Virginia remanufacturer of components for mining and associated industrial equipment to develop an IsoTorque differential prototype to demonstrate its feasibility to alleviate steering problems associated with mining shuttle cars.  The contract calls for us to jointly evaluate the performance and durability of the prototype units and upon successful evaluation, to build and sell IsoTorque differentials to our customer for incorporation in 21 SC mining cars it remanufactures for the mining industry.  If the prototype test is successful, the contract calls for us to furnish the remanufacturer with all of their differential requirements during the three year contract term, as mutually extended.  During the first quarter of 2012, we shipped two prototype IsoTorque differentials to our customer, who is planning to install and test them in a vehicle.  However, due to a significant slowdown in the mining industry, the testing of our prototype continues to be delayed longer than anticipated.  We are hopeful that the testing will take place sometime during 2013, depending on market conditions.  Based on the results of the test installation, which could take up to six months or longer in a mining application, we are hopeful that the customer will place a production order for these differentials.

Torvec Hydraulic Pump –

During 2012, we invested in software, test equipment and personnel to enhance our development efforts.  During the year, we went through a drastic redesign of the Torvec Hydraulic Pump to improve the overall performance of our pump while maintaining the significant advantages we have in size and weight.  In the fourth quarter of 2012, we completed the assembly of two newly redesigned prototypes.  We built our own testing facility for initial testing, which would have otherwise taken place at a third party testing facility, and we were pleased with the test results that we achieved.  Based on the test results and the guidance of hydraulics expert, Mr. Thomas J. Labus who was elected to Torvec’s board of directors in December 2012, we modified our designs during the first quarter of 2013 and are now planning to assemble and test this design with working prototypes during the second quarter of 2013.  Following our successful internal testing, we expect to go to our independent testing facility for full testing within the next 3 to 6 months. Depending on the test results, we are targeting to begin marketing this product to potential customers later in 2013.  We are also working on additional patents as a result of engineering breakthroughs in our redesign.

The development of our new pump design has taken on added significance in light of recently issued U.S. Government emissions regulations for off road diesel engines that will take effect in the near future.  These regulations will require diesel engines to pollute less.  To help achieve these new standards, companies are attempting to run the diesel engines, and thus their hydraulic pumps, at lower rotational speeds. This requires larger displacement hydraulic pumps to be installed to compensate for the decrease in rotational speed.  Among other advantages, the unique technology of the Torvec hydraulic pump allows a larger displacement pump to fit into the same or smaller footprint than that of existing pumps.  This enables manufacturers to keep the current equipment layout without the need for expensive modifications to accommodate larger hydraulic pumps.

The key elements of our operating plan for the next 12 months are as follows:

1) to implement a strategy to sell IsoTorque differentials into the aftermarket, through both a distributor network and direct sales to end users;

2) to design, build and provide IsoTorque differentials to domestic and foreign OEMs, to engage with manufacturers in the performance and durability evaluation of our IsoTorque in rear-wheel and front-wheel drive applications, and to market the IsoTorque to manufacturers for use in their future vehicle platforms, including automotive and truck fleets;

3) to work with potential customers of our IsoTorque differential for off-road uses, including the IsoTorque’s integration in the drive wheel assemblies of 21 SC mining shuttle cars under a development contract we have with a remanufacturer of mining and associated industrial equipment.  In addition, we will continue to look at other off-road applications;

4) to develop non-automotive applications for our unique gear technology and extend our market penetration; and

5) to enhance the design, build prototype units, and evaluate the operating performance and efficiencies of our hydraulic pump for commercial and industrial applications and to begin to market the Torvec hydraulic pump to industrial users of hydraulic pumps and associated manufacturers.

In addition to the activities to be undertaken by us to implement our plan of operation detailed above, we may expand our marketing activities depending upon future circumstances and developments. Information regarding the Company and all of our inventions, including regular updates on technological and business developments, can be found on our recently upgraded website, www.torvec.com.

(C) Company Revenue and Expenses

Three Month Periods Ended March 31, 2013 and 2012

There was no revenue reported for the three month period ended March 31, 2013, compared with $60,000 for the three month period ended March 31, 2012.  The revenue that was generated in 2012 resulted from the completion of a particular milestone on a prototype development contract for a mining car differential.  No cost of goods sold were reflected in 2013, while the cost of goods sold in 2012 was $45,000, or 75% of revenue.  Gross profit for the three month period ended March 31, 2012 was $15,000, or 25%.

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Research and development expenses for the three months ended March 31, 2013 amounted to $258,000 as compared to $220,000 for the comparable period in 2012.  Non-cash stock-based compensation expense attributable to stock options for the three months ended March 31, 2013 was $32,000, compared with $18,000 for the three months ended March 31, 2012.  Excluding the non-cash stock-based compensation expense, research and development expenses for the three month period ended March 31, 2013 amounted to $226,000, an increase of $24,000, or 12%, from $202,000 recorded in the same period in 2012.  The increase in 2013 was mainly attributable to higher personnel-related costs.

General and administrative expense for the three months ended March 31, 2013 amounted to $508,000 compared to $554,000 for 2012.  Non-cash stock-based compensation expense attributable to stock options for the three months ended March 31, 2013 was $197,000, a decrease of $70,000 from $267,000 for the three months ended March 31, 2012 that primarily resulted from the completion of expensing for certain options that had met their vesting milestones.  Excluding the non-cash stock-based compensation expense, general and administrative expense for the first quarter of 2013 amounted to $311,000 compared to $287,000 in 2012.  The increase of $24,000, or 8%, resulted primarily from higher professional fees for tax-related work.

The loss from operations for the three month period ended March 31, 2013 was $766,000, compared with a loss from operations in 2012 of $759,000.  The change in other income from $6,000 in 2012 to $3,000 in 2013 was primarily a result of lower interest income from lower cash balances.  Preferred stock dividends amounted to $66,000 and $67,000 in 2013 and 2012, respectively.

The net loss attributable to common stockholders for the three month period ended March 31, 2103 was $829,000 as compared to a net loss for the same period in 2012 of $820,000.  The weighted average diluted common shares outstanding amounted to 45,716,000 and 45,700,000 for the three month periods ended March 31, 2013 and 2012, respectively.  Diluted net loss per common share for each of the three month periods ended March 31, 2013 and 2012 was $.02.

(D) Liquidity and Capital Resources

As of March 31, 2013, cash and cash equivalents totaled $2,891,000, a decrease of $658,000 from the beginning of the year.  During the three months ended March 31, 2013, we used $618,000 of cash in operating activities, an increase of $119,000 over the same period in 2012.  A reported net loss of $763,000 for the first three months of 2013, offset in part mainly by non-cash stock-based compensation of $229,000, resulted in cash used in operating activities amounting to $618,000 for the three month period ended March 31, 2013.   In 2012, a reported net loss of $753,000, offset in part mainly by $285,000 of non-cash stock-based compensation, resulted in cash used in operating activities of $499,000 for the three months ended March 31, 2012.

We used a net of $11,000 in cash for investing activities in the first three months of 2013 for the purchase of property and equipment.  During the first three months of 2012, we used $6,000 in cash for investing activities to purchase fixed assets.

During the three month period ended March 31, 2013, we used $29,000, for financing activities, resulting from payments on outstanding notes payable.  During the first three months of 2012, we used $10,000 for financing activities pertaining to payments on outstanding notes payable.

During each of the three month periods ended March 31, 2013 and 2012, we issued 0 shares of common stock.  

Current Cash Outlook

For the period from September 1996 (inception) through March 31, 2013, we have accumulated a deficit of $63,890,000.  At March 31, 2013, we have stockholders’ equity of $2,975.000, current liabilities of $405,000 and working capital of $2,606,000.  We have been dependent upon equity financing and advances from stockholders to meet our obligations and sustain operations.  In September 2011, we raised $6,500,000 in gross proceeds through a private placement of a new class of preferred stock.  The proceeds from this transaction are being used to support the ongoing development and marketing of our core technologies and product initiatives.  Presently, we anticipate that our operating cash requirements for the full year of 2013 will be in the range of approximately $2,200,000.  In addition, we are expecting to spend approximately $100,000 on capital expenditures for the development of in-house testing equipment and approximately $100,000 on payments to reduce notes payable balances during the full year of 2013.  We believe that based upon our current cash position and the current outlook for our business operations, we have sufficient cash to continue operations through March 31, 2014.

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 (E) Critical Accounting Policies

Revenue Recognition

Our terms provide that customers are obligated to pay for products sold to them within a specified number of days from the date that title to the products is transferred to the customers. Our standard terms are typically net 30 days. We recognize revenue when transfer of title occurs, risk of ownership passes to a customer at the time of shipment or delivery depending on the terms of the agreement with a particular customer and collection is reasonably assured. The sale price of our products is substantially fixed and determinable at the date of the sale based upon purchase orders generated by a customer and accepted by us.

We occasionally enter into prototype development contracts with customers.  In such cases, revenue is recognized using either (a) the proportional effort method based on the relationship of costs incurred to date to the total estimated cost to complete a contract, or (b) where appropriate, the milestone method, if milestones are clearly identifiable and substantive.  In January 2011, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2010-17, “Revenue Recognition — Milestone Method (Topic 605): Milestone Method of Revenue Recognition — a consensus of the FASB EITF”.  Our adoption of this pronouncement did not have a significant impact on our financial statements.

Income Taxes

We account for income taxes using the asset and liability method, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax bases of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled.  A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

We account for uncertain tax positions using a more-likely-than-not recognition threshold based on the technical merits of the tax position taken.  Tax benefits that meet the more-likely-than-not recognition threshold should be measured as the largest amount of tax benefits, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement in the financial statements.  It is our policy to recognize interest and penalties related to income tax matters as general and administrative expenses.  As of March 31, 2013, there was $0 accrued interest or penalties related to uncertain tax positions.

Stock-Based Compensation

FASB ASC 718-10 requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the requisite service period (generally the vesting period) in the consolidated financial statements based on their fair values on the grant date.  The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized. In addition, the realization of tax benefits in excess of amounts recognized for financial reporting purposes will be recognized as a financing activity in accordance with FASB ASC 718-10.

No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for substantially all net deferred tax assets. We elected to adopt the alternative method of calculating the historical pool of windfall tax benefits as permitted by FASB ASC 718-10-65 (previously known as FASB Staff Position (FSP) No. SFAS 123(R)-c, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards”).  This is a simplified method to determine the pool of windfall tax benefits that is used in determining the tax effects of stock compensation in the results of operations and cash flow reporting for awards that were outstanding as of the adoption of FASB ASC 718-10.

At times prior to 2011, we have accounted for the settlement of commission arrangements to non-employee consultants, directors, executives and certain administrative personnel with the issuance of our business consulting shares under FASB ASC 505 (previously known as FASB Statement 123(R) “Share Based Payment”), provided that there are sufficient shares available under the business consulting plan. Under FASB ASC 505, we measured commission arrangements at the fair value of the equity instruments issued. In the event that there are insufficient shares available to settle the obligation, we will follow the provisions of FASB ASC 815-40 (previously known as EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”). Under FASB ASC 815-40, we will record a liability instrument for the resulting changes in fair value from the date incurred to the end of each reporting period until such liability is satisfied.

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Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

Item 4.  CONTROLS AND PROCEDURES

Disclosure controls and procedures

Evaluation of Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded, as of March 31, 2013, that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of such period, are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Control Over Financial Reporting

There have been no significant changes in our internal control over financial reporting during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.  Legal Proceedings

None.

Item 1A.  Risk Factors

There have been no significant changes to the risk factors facing the Company as disclosed in our Form 10-K for the year ended December 31, 2012.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not Applicable.

Item 5.  Other Information

None.

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Item 6.  Exhibits

The following Exhibits, as applicable, are attached to this Quarterly Report (Form 10-Q). The Exhibit Index is found on the page immediately succeeding the signature page and the Exhibits follow on the pages immediately succeeding the Exhibit Index.

(2)  Plan of acquisition, reorganization, arrangement, liquidation, or succession

None

(3)  Articles of Incorporation, By-laws

3.1  Certificate of Incorporation, incorporated by reference to Form 10-SB/A , Registration Statement, registering Company’s $.01 par value common stock under section 12(g) of the Securities Exchange Act of 1934;

3.2  Certificate of Amendment to the Certificate of Incorporation dated August 30, 2000, incorporated by reference to Form SB-2 filed October 19, 2000;

3.3  Certificate of Correction dated March 22, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2002;

3.4  By-laws, as amended by shareholders on January 24, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2002;

3.5  Certificate of Amendment to the Certificate of Incorporation dated October 21, 2004 setting forth terms and conditions of Class B Preferred, incorporated by reference to Form 10-QSB filed for fiscal quarter ended September 30, 2004;

3.6  Certificate of Amendment to the Certificate of Incorporation dated January 26, 2007 increasing authorized common shares from 40,000,000 to 400,000,000, incorporated by reference to Form 10-K filed for fiscal year ended December 31, 2006;

3.7  Certificate of Amendment to the Certificate of Incorporation dated September 21, 2011 setting forth terms and conditions of Class C Preferred, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 26, 2011.

(4)  Instruments defining the rights of holders including indentures

None.

(10)  Material Contracts

10.1  The Company’s 1998 Stock Option Plan and related Stock Options Agreements, incorporated by reference to Form S-8, Registration Statement, registering 2,000,000 shares of the Company’s $.01 par value common stock reserved for issuance thereunder, effective December 17, 1998;

10.2  Stock Option Agreement dated September 30, 2010 between the Company and Richard A. Kaplan, incorporated by reference to current report (Form 8-K) filed October 6, 2010;

10.3  Employment Agreement dated October 4, 2010 between the Company and Richard A. Kaplan, incorporated by reference to current report (Form 8-K) filed October 6, 2010;

10.4  Letter Agreement dated October 18, 2010 between the Company and Robert W. Fishback, incorporated by reference to current report (Form 8-K) filed October 22, 2010;

10.5  Stock Option Agreement dated October 18, 2010 between the Company and Robert W. Fishback, incorporated by reference to current report (Form 8-K) filed October 22, 2010;

10.6  2011 Stock Option Plan and template agreements to be used to grant options thereunder, incorporated by reference to annual report (Form 10-K) filed March 29, 2011;

10.7  Agreement dated December 13, 2010 between Heinrocket Inc. as Consultant and Torvec, Inc., incorporated by reference to annual report (Form 10-K) filed March 29, 2011.

27

10.8  Securities Purchase Agreement by and among Torvec, Inc., a New York corporation, B. Thomas Golisano, and each purchaser listed on the Schedule of Purchasers attached thereto, dated September 23, 2011, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 26, 2011.

10.9  Form of Warrant to Purchase Common Stock of Torvec, Inc., incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 26, 2011.

10.10  Form of Directors Subscription Agreement, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 26, 2011.

10.11  Investors’ Rights Agreement by and between Torvec, Inc., a New York corporation, B. Thomas Golisano, Charles T. Graham, and David Still, dated September 23, 2011, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 26, 2011.

10.12  Letter Agreement between Torvec, Inc. and SCIRE Corporation, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on December 27, 2012.

(11)  Statement re computation of per share earnings (loss)

Not applicable.

(15)  Letter re: unaudited interim financial information

None.

(18)  Letter re change in accounting principles

None.

(19)  Report furnished to security holders

None.

(22)  Published report regarding matters submitted to vote of security holders

None.

(23)  Consents of experts and counsel

None.

(23.1)  Registered independent accounting firm consent

None.

(24)  Power of attorney

None.

(31.1)  Rule 13(a)-14(a)/15(d)-14(a) Certifications – CEO

(31.2)  Rule 13(a)-14(d)/15(d)-14(d) Certifications – CFO

28

(32)  Section 1350 Certifications

(99)  Additional exhibits

None.

(100)  XBRL-related documents

None.

(101)  The following materials from Torvec, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three month periods ended March 31, 2013 and 2012 and for the period from September 25, 1996 (Inception) through March 31, 2013, (ii) Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, (iii) Condensed Consolidated Statements of Cash Flows for the three month periods ended March 31, 2013 and 2012, and  for the period from September 25, 1996 (Inception) through March 31, 2013 and (iv) Notes to Condensed Consolidated Financial Statements*

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

29

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TORVEC, INC.
Date: May 6, 2013	By:	/s/ Richard A. Kaplan
	Richard A. Kaplan
	Chief Executive Officer

Date: May 6, 2013	By:	/s/ Robert W. Fishback
	Robert W. Fishback
	Chief Financial Officer and Principal Accounting Officer

30

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Richard A. Kaplan, Chief Executive Officer of Torvec, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Torvec, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are  responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2013	/s/ Richard A. Kaplan
	Richard A. Kaplan
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Robert W. Fishback, Chief Financial Officer and Principal Accounting Officer of Torvec, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Torvec, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2013	/s/ Robert W. Fishback
	Robert W. Fishback
	Chief Financial Officer and Principal Accounting Officer

EX-32

EXHIBIT 32

Certificate pursuant to 18 U.S.C. Section 1350,

as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Torvec, Inc. (“Torvec”) on Form 10-Q for the period ending March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Richard A. Kaplan, chief executive officer, and Robert W. Fishback, chief financial officer and principal accounting officer, respectively, of Torvec, Inc. certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Torvec, Inc.

May 6, 2013	/s/ Richard A. Kaplan
	Richard A. Kaplan
	Chief Executive Officer

May 6, 2013	/s/ Robert W. Fishback
	Robert W. Fishback
	Chief Financial Officer and Principal Accounting Officer

Issuer Statement

A signed original of this written statement required by Section 906 has been provided to Torvec, Inc.

and will be retained by Torvec, Inc. and furnished to the Securities and Exchange Commission

or its staff upon request.

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Note H - Commitments And Other Matters (Detail) (USD $)	3 Months Ended		65 Months Ended	198 Months Ended			3 Months Ended		26 Months Ended	3 Months Ended				66 Months Ended		3 Months Ended	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Apr. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Feb. 28, 2011	Mar. 31, 2013 West Virginia Remanufacturer [Member]	Mar. 31, 2012 West Virginia Remanufacturer [Member]	Mar. 31, 2013 West Virginia Remanufacturer [Member]	Mar. 31, 2013 BAIC Motor [Member]	Mar. 31, 2013 Business Plan Consultant [Member]	Mar. 31, 2012 Business Plan Consultant [Member]	Mar. 31, 2011 Business Plan Consultant [Member]	Dec. 31, 2016 Business Plan Consultant [Member]	Jun. 30, 2010 Business Plan Consultant [Member]	Mar. 31, 2013 SCIRE Corp [Member]	Dec. 31, 2013 Minimum [Member]
Monthly Rent Payment Under Operating Lease			$ 5,687
Annual Rent Payment Under Operating Lease			68,244
Operating Leases, Rent Expense	17,000	15,000
Operating Leases, Future Minimum Payments Due, Next Twelve Months	68,000			68,000
Operating Leases, Future Minimum Payments, Due in Two Years	68,000			68,000
Operating Leases, Future Minimum Payments, Due in Three Years	28,000			28,000
Officers' Compensation																	50,000
Accrued Professional Fees, Current	2,000			2,000	8,000										82,500
Sales Commission Rate														4.00%
Professional Fees		2,000									0	2,000	17,250			12,000
Deferred Revenue						120,000
Revenues	$ 0	$ 60,000		$ 512,000			$ 0	$ 60,000	$ 90,000	$ 0

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Note F - Notes Payable (Detail) (USD $)				60 Months Ended				36 Months Ended				25 Months Ended				30 Months Ended			12 Months Ended			60 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Dec. 31, 2010	Oct. 31, 2015 Office Equipment [Member]	Mar. 31, 2013 Office Equipment [Member]	Dec. 31, 2012 Office Equipment [Member]	Nov. 30, 2010 Office Equipment [Member]	Aug. 31, 2014 Software [Member]	Mar. 31, 2013 Software [Member]	Dec. 31, 2012 Software [Member]	Aug. 31, 2011 Software [Member]	Aug. 31, 2014 Vehicles [Member]	Mar. 31, 2013 Vehicles [Member]	Dec. 31, 2012 Vehicles [Member]	Aug. 31, 2012 Vehicles [Member]	May 31, 2013 Leasehold Improvement [Member]	Mar. 31, 2013 Leasehold Improvement [Member]	Dec. 31, 2012 Leasehold Improvement [Member]	Mar. 31, 2013 Promissory Note [Member]	Dec. 31, 2012 Promissory Note [Member]	Apr. 30, 2012 Promissory Note [Member]	Oct. 31, 2015 Capital Lease Obligations [Member]	Apr. 30, 2012 Promissory Note [Member]
Leasehold Improvements, Gross	$ 253,000	$ 253,000	$ 32,500
Debt Instrument, Periodic Payment, Principal																1,100
Debt Instrument, Interest Rate, Stated Percentage															10.00%	2.50%					5.00%
Notes Payable, Noncurrent	27,000	54,000			3,000				8,000	36,000			9,000	10,000				6,000	7,000	27,000
Notes Payable	138,000	167,000			5,000				31,000	14,000			14,000	15,000	16,600		2,000		86,000	105,000	162,500
Capital Lease Term				5
Capital Leased Assets, Gross							8,900
Capital Lease Monthly Payment				170
Debt Instrument, Interest Rate During Period								9.60%														5.30%
Capital Lease Obligations						5,000
Capital Lease Obligations, Noncurrent						3,000
Capitalized Computer Software, Gross											64,800
Long Term Loan Monthly Payment								2,100
Debt Instrument, Face Amount																							154,000
Debt Instrument, Periodic Payment												$ 540							$ 6,800

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Note D - Inventories

3 Months Ended

Mar. 31, 2013

Inventory Disclosure [Text Block]

NOTE D — INVENTORIES

At March 31, 2013 and December 31, 2012, the composition of inventories was:

	March 31, 2013		December 31, 2012
Raw Materials	$	80,000	$	65,000
Work in Process		0		0
Finished Goods		0		0
	$	80,000	$	65,000

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Note G - Stockholders' Equity (Detail) - Share-based Payment Award, Stock Options, Valuation Assumptions	3 Months Ended
	Mar. 31, 2012
Expected Term (years)	6 years
Expected forfeiture rate	0.00%
Risk-free rate	1.30%
Volatility	132.50%
Dividend yield	0.00%

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Note G - Stockholders' Equity (Detail) - Stock Options Outstanding (USD $)	3 Months Ended
	Mar. 31, 2013
	541,848
(in Dollars per share)	$ 4.75
	328 days
(in Dollars)	$ 0

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Note G - Stockholders' Equity (Detail) - Outstanding Stock Options Activities (USD $)	1 Months Ended	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2013
Outstanding at January 1, 2013		8,885,516	[1]
Outstanding at January 1, 2013 (in Dollars per share)		$ 0.94	[1]
Granted	250,000	0
Granted (in Dollars per share)	$ 0.82	$ 0
Exercised		0
Exercised (in Dollars per share)		$ 0
Canceled or expired		0
Canceled or expired (in Dollars per share)		$ 0
Outstanding at March 31, 2013		8,885,516	[1]
Outstanding at March 31, 2013 (in Dollars per share)		$ 0.94	[1]
Outstanding at March 31, 2013		7 years 73 days	[1]
Outstanding at March 31, 2013 (in Dollars)		$ 1,700,000	[1]
Exercisable at March 31, 2013		5,164,014
Exercisable at March 31, 2013 (in Dollars per share)		$ 1.20
Exercisable at March 31, 2013	10 years	6 years 255 days
Exercisable at March 31, 2013 (in Dollars)		$ 990,000

[1] Note (A) - Figures include the impact of 405,000 options that were granted in 2011 to replace options / warrants previously granted to certain engineering personnel. The previously issued options / warrants will expire as the newer options vest on a one-to-one basis. During the fourth quarter of 2012, 134,998 of these options vested, and 98,332 previously issued options and 36,666 previously issued warrants were cancelled concurrently in conjunction with the vesting of the 2011 options, leaving 270,002 options remaining to vest.

XML

Note G - Stockholders' Equity (Detail) - Stockholders' Equity Note, Warrants (USD $)				3 Months Ended		0 Months Ended	3 Months Ended				12 Months Ended		3 Months Ended		12 Months Ended		3 Months Ended		12 Months Ended	3 Months Ended						12 Months Ended	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2013 Warrant A [Member]		Mar. 31, 2013 Warrant B [Member]		Oct. 13, 2006 Warrant C [Member]	Mar. 31, 2013 Warrant C [Member]		Mar. 31, 2013 Warrant D [Member]		Dec. 31, 2005 Warrant D [Member]	Sep. 30, 2012 Warrant D [Member]	Mar. 31, 2013 Warrant E1 [Member]		Dec. 31, 2006 Warrant E1 [Member]	Dec. 31, 2005 Warrant E1 [Member]	Mar. 31, 2013 Warrant E2 [Member]		Dec. 31, 2008 Warrant E2 [Member]	Mar. 31, 2013 Warrant F [Member]		Mar. 31, 2013 Warrant G [Member]		Mar. 31, 2013 Warrant H [Member]		Dec. 31, 2006 Warrant H [Member]	Mar. 31, 2013 Warrant I [Member]		Mar. 31, 2013 Warrant J [Member]		Mar. 31, 2013 Warrant K [Member]		Mar. 31, 2013 Warrant L [Member]		Mar. 31, 2013 Warrant M [Member]		Mar. 31, 2013 Warrant N [Member]		Mar. 31, 2013 Warrant O [Member]		Mar. 31, 2013 All Warrants [Member]
Exercise Price (in Dollars per share)				$ 0.75		$ 0.01	$ 0.01		$ 0.01		$ 0.01		$ 5.00		$ 5.00	$ 5.00	$ 5.00		$ 5.00	$ 0.01		$ 0.01		$ 1.00		$ 2,000	$ 0.44		$ 3.75		$ 5.00		$ 5.00		$ 5.00		$ 2.50
Expiration							Dec. 31, 2016										Dec. 31, 2016					Dec. 31, 2016					Dec. 31, 2020		Dec. 31, 2016		Dec. 31, 2016		Dec. 31, 2017		Dec. 31, 2017		Dec. 31, 2020		Dec. 31, 2021
Number of Warrants Outstanding		125,000	[1]	500,000	[2]	123,500	54,500	[3]	3,000	[4]		3,000	75,000	[5]			83,334	[5]		60,000	[6]	3,750	[7]	20,500	[8]		400,000	[9]	200,000	[10]	30,000	[11]	50,000	[12]	100,000	[13]	100,000	[14]	1,625,000	[15]	3,430,084
Number of Warrants Exercisable	5,164,014	0		0			54,500		3,000				75,000				83,334			60,000		3,750		20,500			400,000		200,000		30,000		50,000		100,000		100,000		1,625,000		2,805,084

[1] Exercisable only if we have an IPO and exercisable at the IPO price five years from IPO. Through March 31, 2013, we have not conducted an IPO.

[2] On April 15, 2002, we issued 1,000,000 warrants at prices ranging from $.30 to $.75 to our then chairman of the board of directors and chief executive officer. Of the total warrants, 250,000 were exercisable at $.30, and 250,000 were exercisable at $.50 on the date the then board elected the executive to the board and named him chief executive officer. During the year ended December 31, 2002, 250,000 warrants were exercised for $.30 per share, resulting in proceeds of $75,000. During the year ended December 31, 2003, 250,000 warrants were exercised for $.50 per share, resulting in proceeds of $125,000. The remaining 500,000 warrants are exercisable upon the occurrence of a significant transaction, which includes execution by us of a binding agreement for the sale, transfer, license or assignment for value of any and/or all of our automotive technology, at $.75 per share. We will record a charge representing the fair value of the warrants when the warrants become exercisable.

[3] We issued an aggregate 123,500 warrants at an exercise price of $0.01 with a ten year term to our nonmanagement directors for services rendered to the board under our Nonmanagement Directors Plan prior to its amendment on October 13, 2006. There are 0 further warrants issuable under the Plan as modified by the board of directors on October 13, 2006. An aggregate 69,000 warrants have been exercised for proceeds of $690.

[4] In 2005, we issued 12,500 warrants to consultants, immediately exercisable at $0.01 per common share. During 2005 and 2006, 3,500 of these warrants were exercised. During 2010, an additional 6,000 of these warrants were exercised. The 3,000 remaining outstanding warrants have no expiration date.

[5] In 2005, we issued 95,000 warrants to two engineering and administrative consultants, exercisable immediately at $5.00 per common share. During 2006, we issued an additional 100,000 warrants to these same consultants exercisable over a ten year term at $5.00 per common share, but only exercisable if there is a commercializing event as determined by the board of directors. During 2008, these warrants were cancelled and new warrants were issued to the same consultants for an aggregate 195,000 shares exercisable until 2016 at $5.00 per common share and conditioned upon the happening of a commercializing event as determined by the board. We recorded a charge of $249,000 in 2008 to general and administrative expense. In 2010, 95,000 of the total number of 195,000 warrants issued to these consultants were modified to eliminate both the term and the commercializing event condition for exercise. The charge related to the 2010 modification was insignificant. In December 2011, 110,000 of these outstanding warrants were amended so that they will be cancelled in conjunction with the vesting of stock options that were issued to replace such warrants, with each option having an exercise price of $1.14 per share, and proportionate vesting on each of the succeeding anniversary dates over a three year period. The approximately $16,000 expense related to the issuance of the stock options to replace the warrants is being amortized over the vesting period of the stock options. In the fourth quarter of 2012, 36,666 of these warrants were cancelled as the corresponding number of options vested.

[6] During 2005, we issued 60,000 warrants to an engineering consultant exercisable immediately at $5.00 per common share and with no expiration date.

[7] During 2005, we issued 62,500 warrants to investors in connection with their purchase of 62,500 Class A Preferred, immediately exercisable at $.01 per common share and with a ten year term. During 2006, we issued 135,849 warrants to investors along with their purchase of 162,000 Class A Preferred and 20,000 Class B Preferred, all immediately exercisable at $.01 per common share and with a ten year term. Through March 31, 2013, an aggregate of 194,599 of these warrants have been exercised for proceeds of approximately $1,258. There were 0 warrants exercised during the three month period ended March 31, 2013.

[8] During 2006, one investor purchased 20,500 warrants with no expiration date and an exercise price of $1.00 per common share, for a purchase price of $2,000.

[9] During 2006, we issued 400,000 warrants immediately exercisable for ten years at an exercise price of $3.27 per common share to a business consultant. Effective October 15, 2010, these warrants were modified and reissued upon the mutual agreement of the parties. Effective October 15, 2010, we issued 400,000 warrants immediately exercisable at $.44 per common share for a period of ten years from the modification date. As a result of the modification, we recorded a charge of $68,000 to general and administrative expenses in the fourth quarter of 2010. During the three month period ended March 31, 2013, 0 warrants were exercised.

[10] During 2006, we issued 200,000 warrants immediately exercisable for ten years at an exercise price of $3.75 per common share to a former governmental affairs consultant.

[11] In 2006, we issued 30,000 warrants to consultants exercisable immediately for a ten year term at $5.00 per common share.

[12] During 2007, we issued 50,000 warrants exercisable for ten years at $5.00 per common share upon the happening of a commercializing event. The warrants were issued to a consultant who assisted us to potentially place our products in various state school bus programs. We recorded a charge of $249,000 to general and administrative expenses.

[13] During 2007, we issued 100,000 warrants immediately exercisable for ten years at an exercise price of $5.00 per common share to two engineering consultants in connection with our engagement to furnish constant velocity joints to a military contractor. We recorded a charge of $401,000 to general and administrative expenses.

[14] On February 17, 2010, we issued 100,000 common stock warrants exercisable for ten years at an exercise price of $2.50 per common share to an adviser. We recorded a charge of $45,000 to general and administrative expenses in the first quarter of 2010.

[15] On September 23, 2011, we issued 1,625,000 common stock warrants in connection with the sale and issuance of a total of 16,250,000 shares of Series C Voting Convertible Preferred Stock in a private placement transaction, generating gross proceeds of $6,500,000. The warrants have a ten (10) year term and are immediately exercisable for 1,625,000 shares of common stock. The warrants are exercisable, at the holder's election, for shares of our common stock in either a cash or cashless exercise. The warrants have an exercise price equal to the greater of (i) $0.01 or (ii) eighty percent (80%) of the volume weighted average sale price per share of our common stock during the ten (10) consecutive trading days immediately preceding the notice of exercise. The number of warrants and exercise price are subject to adjustment in the event of the issuance of common stock as a dividend or distribution, and the subdivision or combination of the outstanding common stock. (See Note G[1](c).)We typically use the Black-Scholes option-pricing model to estimate the fair value of stock-based awards. However, for the 1,625,000 warrants issued in September 2011, the exercise price is variable based on 80% of the price of our common stock on the date of exercise. For the valuation of these particular warrants, we used a weighted average of assigned probabilities for various gain scenarios at certain price points based on expected volatility of approximately 136% over an assumed term of five years to estimate an overall value of these warrants, which amounted to approximately $812,000, or $.50 per warrant. These inputs are unobservable inputs based on our own assumptions used to measure the value of the instrument. Accordingly, these warrants are classified within Level 3 of the fair value hierarchy in accordance with FASB ASC 820.

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Note C - Related Party Transactions

3 Months Ended

Mar. 31, 2013

Related Party Transactions Disclosure [Text Block]

NOTE C — RELATED PARTY TRANSACTIONS

[1] Effective January 1, 2008, the board instituted a compensation plan for James Gleasman, our chief executive officer, and Keith Gleasman, our president, each of whom were major shareholders and co-founders of the Company.  The compensation plan was designed to compensate each of them for services performed, and inventions and know-how transferred to us, at the rate of $300,000 per year. Actual payment of this compensation, or any portion thereof, was conditioned upon a determination by the board that we had the requisite cash to make payment, after the complete funding of all ongoing Company projects.

We did not have the requisite cash available to pay the Gleasmans’ compensation under this arrangement from January 1, 2008 through August 17, 2009, the date on which each of the Gleasmans waived all of his rights and interest in and to the board-created compensation plan, including all of his rights and interest in and to the amount(s) under the plan accrued to such date. As a result of such waiver, of the $942,000 accrued under the plan at September 30, 2009, $900,000 was reclassified to equity as a contribution of services and $42,000 accrued under the plan for payroll taxes was recorded as a reduction to general and administrative expenses in the quarter ended September 30, 2009.

For subsequent periods, there had not been a compensation plan in place for the Gleasmans.  However, due to the significance of their ownership interest at the time and their influence within the Company, we were required to record the estimated value of each of the Gleasman’s services rendered to us (estimated at $300,000 each per annum) as a contribution of services in accordance with generally accepted accounting principles, and we allocated the amount of such contribution between research and development expenses and general and administrative expenses, based upon management’s estimate of the Gleasmans’ time allocation.  Effective March 14, 2010, James Gleasman retired as our chief executive officer, interim chief financial officer and as a member of the board of directors.  As of October 1, 2011 following our September 2011 private placement, we reassessed the estimated value of the services we were receiving from Keith Gleasman as a result of the reduction of his overall ownership interest, and reduced the amount we were recording for his contribution for shareholder services to the equivalent of $100,000 per annum.  On January 9, 2012, the board approved a base salary for Keith Gleasman of $100,000 per annum to be effective as of January 1, 2012.  The board’s decision was based upon the recommendation of our chief executive officer and our Governance and Compensation Committee, composed entirely of independent directors.

Effective as of January 1, 2012, we no longer imputed an expense related to contributed shareholder services.

[2] On September 14, 2007, we moved our executive offices from Pittsford, New York to Rochester, New York, which includes both a manufacturing and executive office facility. The Rochester facility is owned by a partnership, with which Asher J. Flaum, a Company director, is associated.  On April 28, 2008, our board of directors approved the terms of a lease and such lease was executed on April 29, 2008.

Effective October 24, 2012, we amended certain terms of the lease for our Rochester facility.  The primary changes that were made include a two-year extension of the current lease originally set to expire as of May 31, 2013 at the same rent rate, and the addition of two three-year renewal options with a 10% rate increase at each subsequent renewal period.  These renewal options replace the previous renewal options of three five-year renewal periods which had incorporated 15% rate increases at each subsequent renewal period.  (See Note H[1].)

[3] On December 13, 2010, we executed a consultant agreement with a director to provide consulting services to us at a rate of $200 per hour. Pursuant to the agreement, we also agreed to pay the consultant an incentive fee equal to $10,000 or proportionate part thereof for each $1,000,000 of revenue or proportionate part thereof actually received by us for a period of five years, provided the definitive agreement with the third party results from the material efforts of the consultant.  During the three month periods ended March 31, 2013 and 2012, we recorded an expense of $0 and $2,000, respectively, for services rendered in relation to this agreement.

[4] Effective on March 27, 2012, we hired Dr. William Mark McVea as our Chief Technology Officer.  Prior to joining the Company, Dr. McVea provided us with consulting services through KBE+, Inc., a group of consulting engineers engaged in the design and development of gear trains and power transmission devices, and of which Dr. McVea was the principal engineer and president.  At March 31, 2013 and 2012, we had an outstanding liability of $0 and $41,000 to KBE+, Inc. related to consulting services provided to the Company.

On April 30, 2012, we purchased various test equipment, office furniture, and supplies from KBE+, Inc. for a total of $162,500.  We have entered into a financing agreement with KBE+, Inc., whereby we are paying KBE+, Inc. over 24 months in equal monthly installments of approximately $6,800, beginning on May 1, 2012.  Based on an imputed interest rate of approximately 5%, the initial principal of the note was approximately $154,000, and as of March 31, 2013, the outstanding principal on the note was approximately $86,000.  Interest expense pertaining to this note amounted to approximately $1,000 and $0 for the three month periods ended March 31, 2013 and 2012, respectively.

In May 2012, we purchased certain additional testing tools and supplies from KBE+, Inc. for approximately $5,700.  At March 31, 2013, we had an outstanding payable of $1,000 to KBE+, Inc. related to this purchase.

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Note G - Stockholders' Equity (Detail) - Outstanding Warrants Activities (USD $)	1 Months Ended	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2013
Outstanding at January 1, 2013		8,885,516	[1]
Outstanding at January 1, 2013 (in Dollars per share)		$ 0.94	[1]
Granted	250,000	0
Granted (in Dollars per share)	$ 0.82	$ 0
Exercised		0
Exercised (in Dollars per share)		$ 0
Canceled or expired		0
Canceled or expired (in Dollars per share)		$ 0
Outstanding at March 31, 2013		8,885,516	[1]
Outstanding at March 31, 2013 (in Dollars per share)		$ 0.94	[1]
Outstanding at March 31, 2013		7 years 73 days	[1]
Outstanding at March 31, 2013 (in Dollars)		$ 1,700,000	[1]
Exercisable at March 31, 2013		5,164,014
Exercisable at March 31, 2013 (in Dollars per share)		$ 1.20
Exercisable at March 31, 2013	10 years	6 years 255 days
Exercisable at March 31, 2013 (in Dollars)		990,000
Warrant [Member]
Outstanding at January 1, 2013		3,430,084
Outstanding at January 1, 2013 (in Dollars per share)		$ 2.12
Granted		0
Granted (in Dollars per share)		$ 0
Exercised		0
Exercised (in Dollars per share)		$ 0
Canceled or expired		0
Canceled or expired (in Dollars per share)		$ 0
Outstanding at March 31, 2013		3,430,084
Outstanding at March 31, 2013 (in Dollars per share)		$ 2.12	[2]
Outstanding at March 31, 2013		7 years 109 days	[3]
Outstanding at March 31, 2013 (in Dollars)		366,000
Exercisable at March 31, 2013		2,805,084
Exercisable at March 31, 2013 (in Dollars per share)		$ 2.70
Exercisable at March 31, 2013		7 years 109 days	[4]
Exercisable at March 31, 2013 (in Dollars)		$ 366,000

[1] Note (A) - Figures include the impact of 405,000 options that were granted in 2011 to replace options / warrants previously granted to certain engineering personnel. The previously issued options / warrants will expire as the newer options vest on a one-to-one basis. During the fourth quarter of 2012, 134,998 of these options vested, and 98,332 previously issued options and 36,666 previously issued warrants were cancelled concurrently in conjunction with the vesting of the 2011 options, leaving 270,002 options remaining to vest.

[2] The weighted average exercise price for warrants outstanding as of March 31, 2013 excludes 1,750,000 warrants with no determined exercise price.

[3] The weighted average remaining contractual term for warrants outstanding as of March 31, 2013 excludes 783,500 warrants with no expiration date.

[4] The weighted average remaining contractual term for warrants exercisable as of March 31, 2013 excludes 158,500 warrants with no expiration date.

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Condensed Consolidated Balance Sheets (USD $)	Mar. 31, 2013	Dec. 31, 2012
ASSETS
Cash and cash equivalents	$ 2,891,000	$ 3,549,000
Inventories	80,000	65,000
Prepaid expenses and other current assets	40,000	22,000
Total current assets	3,011,000	3,636,000
Office equipment and software	192,000	192,000
Shop equipment	174,000	171,000
Leasehold improvements	253,000	253,000
Transportation equipment	94,000	94,000
Construction in progress	8,000	0
	721,000	710,000
Less accumulated depreciation and amortization	325,000	293,000
Net property and equipment	396,000	417,000
Total Assets	3,407,000	4,053,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable, current portion	111,000	113,000
Accounts payable	97,000	99,000
Accrued liabilities	197,000	278,000
Total current liabilities	405,000	490,000
Notes payable, net of current portion	27,000	54,000
Total Liabilities	432,000	544,000
Commitments and other matters (Note H)	0	0
Preferred stock, value issued
Common stock, $.01 par value, 400,000,000 shares authorized; shares issued and outstanding at March 31, 2013 and December 31, 2012: 45,715,727 and 45,715,727, respectively	457,000	457,000
Additional paid-in capital	66,239,000	66,010,000
Deficit accumulated during the development stage	(63,890,000)	(63,127,000)
Total Stockholders' Equity	2,975,000	3,509,000
Total Liabilities and Stockholders' Equity	3,407,000	4,053,000
Preferred Class A [Member]
LIABILITIES AND STOCKHOLDERS' EQUITY
Preferred stock, value issued	6,000	6,000
Preferred Class B [Member]
LIABILITIES AND STOCKHOLDERS' EQUITY
Preferred stock, value issued	1,000	1,000
Preferred Class C [Member]
LIABILITIES AND STOCKHOLDERS' EQUITY
Preferred stock, value issued	$ 162,000	$ 162,000

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Note A - The Company and Basis of Presentation

3 Months Ended

Mar. 31, 2013

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE A — THE COMPANY AND BASIS OF PRESENTATION

The interim information contained herein with respect to the three month periods ended March 31, 2013 and 2012 and the period from September 25, 1996 (inception) through March 31, 2013 has not been audited but was prepared in conformity with generally accepted accounting principles for interim financial information and instructions for Form 10-Q. Accordingly, the condensed consolidated financial statements do not include all information and footnotes required by generally accepted accounting principles for financial statements. Included are ordinary adjustments which, in the opinion of management, are necessary for a fair presentation of the financial information for the three month periods ended March 31, 2013 and 2012 and since inception. The results are not necessarily indicative of results to be expected for the entire year. Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the current year presentation.

Torvec, Inc. was incorporated as a New York business corporation on September 25, 1996. Upon its incorporation, the Company acquired numerous patents, inventions and know-how created by Vernon E. Gleasman and his sons, James and Keith Gleasman, a family with more than fifty years of experience in the automotive industry. Since its inception, the Company has endeavored to design, develop, build and commercialize its automotive technology portfolio.  We have not yet had any significant revenue-producing operations and, as such, we are a development stage entity.  The Company currently is focusing its commercialization strategies on the following technologies: the IsoTorque® differential and the Torvec hydraulic pump.

As used in this quarterly report, unless otherwise indicated, the terms “we”, “our”, “us” and “the Company” refer to Torvec, Inc.

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Note C - Related Party Transactions (Detail) (USD $)	3 Months Ended	45 Months Ended			1 Months Ended		3 Months Ended	1 Months Ended		3 Months Ended		15 Months Ended	24 Months Ended
	Mar. 31, 2012	Sep. 30, 2011	Mar. 31, 2013	Dec. 31, 2012	Oct. 31, 2011 Chief Executive Officer [Member]	Sep. 30, 2009 Chief Executive Officer [Member]	Mar. 31, 2013 Director [Member]	May 31, 2012 KBE Inc [Member]	Apr. 30, 2012 KBE Inc [Member]	Mar. 31, 2013 KBE Inc [Member]	Mar. 31, 2012 KBE Inc [Member]	Mar. 31, 2013 KBE Inc [Member]	Apr. 30, 2014 KBE Inc [Member]
CEO Annual Compensation Rate		$ 300,000
Accrued Salaries						942,000
Additional Paid in Capital			66,239,000	66,010,000		900,000
Accrued Payroll Taxes						42,000
Officers' Compensation					100,000
Professional Fees	2,000						0
Related Party Transaction, Expenses from Transactions with Related Party									162,500	0	41,000
Debt Instrument, Periodic Payment													6,800
Debt Instrument, Payment Terms												5%
Debt Instrument, Face Amount										154,000		154,000
Due to Related Parties										86,000		86,000
Interest Expense, Related Party										1,000	0
Supplies Expense								5,700
Accounts Payable, Related Parties										$ 1,000		$ 1,000

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Note E - Accrued Liabilities (Detail) - Accrued Liabilities (USD $)	Mar. 31, 2013	Dec. 31, 2012
Accrued Compensation	$ 23,000	$ 51,000
Accrued Payroll Taxes Payable	161,000	212,000
Accrued Legal	2,000	8,000
Other	11,000	7,000
	$ 197,000	$ 278,000

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Note B - Summary Of Significant Accounting Policies

3 Months Ended

Mar. 31, 2013

Significant Accounting Policies [Text Block]

NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation: The financial statements include the accounts of the Company, our wholly-owned subsidiary Iso-Torque Corporation, and our majority-owned subsidiary, Ice Surface Development, Inc. (56% owned at March 31, 2013 and December 31, 2012).  As of March 31, 2013, each of the subsidiaries is non-operational.  During 2012, we dissolved Creative Performance Consultants Inc., Variable Gear LLC, and Torvec China LLC.  We are intending to let Ice Surface Development, Inc. dissolve by proclamation.  All material intercompany transactions and account balances have been eliminated in consolidation.

Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates are used in valuing the useful lives of any intangible assets and the future realizable value of such assets. These estimates are subject to a high degree of judgment and potential change. Actual results could differ from those estimates.

Reclassifications: Certain reclassifications have been made to prior year balances to conform to the current year’s presentation.

Cash and Cash Equivalents: Cash and cash equivalents may include time deposits, certificates of deposit, and highly liquid debt instruments with original maturities of three months or less. We maintain cash and cash equivalents at financial institutions which periodically may exceed federally insured amounts.

 Accounts Receivable: We carry our accounts receivable at invoice amount less an allowance for doubtful accounts.  On a periodic basis, we evaluate our accounts receivable and establish an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions.  We do not accrue interest on past due invoices.  There was $0 allowance for doubtful accounts as of March 31, 2013 and December 31, 2012, as determined by management.

Inventories: Inventories are stated at the lower of cost or market with cost determined under the first-in, first-out (FIFO) method. We record provisions for excess, obsolete or slow-moving inventory based on changes in customer demand, technology developments or other economic factors.

Property and Equipment: Property and equipment are stated at cost.  Estimated useful lives are as follows:

Office Equipment and Software (years)	3	-	7
Leasehold Improvements		Lesser of useful life or lease term
Shop Equipment (years)		7
Transportation Equipment (years)	5	-	7

Depreciation and amortization are computed using the straight-line method.  Betterments, renewals and extraordinary repairs that extend the life of the assets are capitalized.  Other repairs and maintenance costs are expensed when incurred. When disposed, the cost and accumulated depreciation applicable to assets retired are removed from the accounts and the gain or loss on disposition is recognized in other income (expense).  Depreciation and amortization expense for the three month periods ended March 31, 2013 and 2012 amounted to $32,000 and $16,000, respectively.

Whenever events or circumstances indicate, our long-lived assets, including any intangible assets with finite useful lives, are tested for impairment by using the estimated future cash flows directly associated with, and that are expected to arise as a direct result of, the use of the assets.  If the carrying amount exceeds the estimated undiscounted cash flows, an impairment may be indicated. The carrying amount is then compared to the estimated discounted cash flows, and if there is an excess, such amount is recorded as an impairment.  During the three month periods ended March 31 2013 and 2012, we recorded $0 in impairment charges.

Fair Value of Financial Instruments: As defined by U.S. GAAP, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  All assets and liabilities are required to be measured and reported on a fair value basis.  A hierarchy for ranking the quality and reliability of the information is used to determine fair values.  Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The FASB’s (Financial Accounting Standards Board) guidance for the disclosure about fair value of financial instruments requires disclosure of an estimate of the fair value of certain financial instruments. The fair value of financial instruments pursuant to FASB’s guidance for the disclosure about fair value of financial instruments approximated their carrying values at March 31, 2013 and December 31, 2012.  The carrying amount of cash, accounts receivable, accounts payable, and accrued expenses approximates their fair value due to their short maturity.  The carrying amount of notes payable approximates fair value because stated or implied interest rates approximate current interest rates that are available for debt with similar terms.

Revenue Recognition: Our terms provide that customers are obligated to pay for products sold to them within a specified number of days from the date that title to the products is transferred to the customers. Our standard terms are typically net 30 days. We recognize revenue when transfer of title occurs, risk of ownership passes to a customer at the time of shipment or delivery depending on the terms of the agreement with a particular customer and collection is reasonably assured. The sale price of our products is substantially fixed and determinable at the date of the sale based upon purchase orders generated by a customer and accepted by us.

We occasionally enter into prototype development contracts with customers.  In such cases, revenue is recognized using either (a) the proportional effort method based on the relationship of costs incurred to date to the total estimated cost to complete a contract, or (b) where appropriate, the milestone method, if milestones are clearly identifiable and substantive.

During the first quarter of 2011, we entered into a prototype development agreement to design, build and integrate our IsoTorque differential into the product of a customer for total consideration of $120,000.  Milestones include completion of design, manufacturing of a prototype, and installation / integration of the prototype. The payment required for each milestone was considered to be substantive based on the fact that performance required by us in order to achieve the milestone enhanced the value of the item delivered and is reasonable in relation to all of the deliverables. The first milestone consisted of completion and delivery of the design for the prototype, which was completed and delivered during the first quarter of 2011 and resulted in the recognition of revenue in the amount of $30,000, as well as the related costs incurred to complete this milestone.  The second milestone consisted of the manufacture and delivery of two prototype differentials to our customer, which was completed in March 2012 and resulted in the recognition of revenue in the amount of an additional $60,000, as well as the related costs incurred to complete this milestone.  Further revenue will be recognized, as well as related costs, upon reaching other milestones defined in the contract.

Research and Development and Patents: Research and development costs and patent expenses are charged to operations as incurred. Research and development includes personnel-related costs, materials and supplies, depreciation, consulting services, and amortization of the Ice technology. Depreciation expense for the three month periods ended March 31, 2013 and 2012 that was charged to research and development was $10,000 and $5,000, respectively.

Patent costs for the three month periods ended March 31, 2013 and 2012 amounted to $45,000 and $43,000, respectively, and are included in general and administrative expenses.

Stock-based Compensation: FASB Accounting Standards Codification (“ASC”) 718-10 requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values on the grant date. Under the modified prospective method that we adopted, awards that were granted, modified, or settled on or after January 1, 2006 are measured and accounted for in accordance with ASC 718-10. Unvested equity-classified awards that were granted prior to January 1, 2006 will continue to be accounted for in accordance with ASC 718-10, except that the grant date fair value of all awards are recognized in the results of operations over the remaining vesting periods. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized. In addition, the realization of tax benefits in excess of amounts recognized for financial reporting purposes will be recognized as a financing activity in accordance with ASC 718-10.

No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for substantially all net deferred tax assets. We elected to adopt the alternative method of calculating the historical pool of windfall tax benefits as permitted by ASC 718-10-65 (previously known as: FASB Staff Position (FSP) No. SFAS 123(R)-c, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards”). This is a simplified method to determine the pool of windfall tax benefits that is used in determining the tax effects of stock compensation in the results of operations and cash flow reporting for awards that were outstanding as of the adoption of ASC 718-10.

Income Taxes: We account for income taxes using the asset and liability method, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax bases of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled.  A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.  We adopted FASB ASC 740-10 relating to “Accounting for uncertainty in income taxes” on January 1, 2008.  As a result of the implementation of FASB ASC 740-10, we recognized no adjustment for uncertain tax positions. It is our policy to recognize interest and penalties related to income tax matters as general and administrative expenses.  The tax years 2009 through 2012 remain open to examination by the federal and state tax jurisdictions to which we are subject.

Loss per Common Share: FASB’s ASC 260-10 (previously known as: FASB Statement 128, “Earnings Per Share”) requires the presentation of basic earnings per share, which is based on weighted average common stock outstanding, and dilutive earnings per share, which gives effect to options, warrants and convertible securities in periods when they are dilutive. At March 31, 2013 and 2012, we excluded 29,108,682 and 28,973,631 potential common shares, respectively, relating to convertible preferred stock, options and warrants outstanding from the diluted net loss per common share calculation because their inclusion would be anti-dilutive. In addition, we excluded 625,000 warrants from the diluted net loss per common share calculation at March 31, 2013 and 2012 as the conditions for their vesting are not time-based.

Recent Accounting Pronouncements: There have been no accounting pronouncements issued since January 1, 2012 that have had an impact on the reporting of the Company’s financial results.

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Condensed Consolidated Balance Sheets (Parentheticals) (USD $)	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2013 Preferred Class A [Member]	Dec. 31, 2012 Preferred Class A [Member]	Mar. 31, 2013 Preferred Class B [Member]	Dec. 31, 2012 Preferred Class B [Member]	Mar. 31, 2013 Preferred Class C [Member]	Dec. 31, 2012 Preferred Class C [Member]
Preferred stock, par value (in Dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	100,000,000	100,000,000	3,300,000	3,300,000	300,000	300,000	16,250,000	16,250,000
Preferred stock, cumulative dividend per share (in Dollars per share)			$ 0.40	$ 0.40	$ 0.50	$ 0.50
Preferred stock, shares issued			587,101	587,101	67,500	67,500	16,250,000	16,250,000
Preferred stock, shares outstanding			587,101	587,101	67,500	67,500	16,250,000	16,250,000
Common stock, par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	400,000,000	400,000,000
Common stock, shares issued	45,715,727	45,715,727
Common stock, shares outstanding	45,715,727	45,715,727

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Note E - Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Accrued Liabilities [Table Text Block]

	March 31, 2013		December 31, 2012
Accrued Compensation	$	23,000	$	51,000
Accrued Payroll Taxes Payable		161,000		212,000
Accrued Legal		2,000		8,000
Other		11,000		7,000
	$	197,000	$	278,000

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Document And Entity Information	3 Months Ended
	Mar. 31, 2013	Apr. 30, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	TORVEC INC
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		45,715,727
Amendment Flag	false
Entity Central Index Key	0001063197
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Mar. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

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Note F - Notes Payable (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Debt [Table Text Block]

	March 31, 2013		December 31, 2012
Additional Office Space (1)	$	2,000	$	6,000
Copy Machine (2)		5,000		5,000
Engineering Design Software (3)		31,000		36,000
Test Equipment and Supplies (4)		86,000		105,000
Automobile (5)		14,000		15,000
	$	138,000	$	167,000

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Condensed Consolidated Statements of Operations (USD $)	3 Months Ended		198 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013
Revenue	$ 0	$ 60,000	$ 512,000
Cost of Goods Sold	0	45,000	377,000
Gross Profit	0	15,000	135,000
Costs and expenses:
R&D costs, excluding stock-based compensation expense	226,000	202,000	16,590,000
Stock-based compensation expense related to options and warrants	32,000	18,000	1,827,000
Total research and development	258,000	220,000	18,417,000
G&A costs, excluding stock-based compensation expense	311,000	287,000	29,478,000
Stock-based compensation expense related to options and warrants	197,000	267,000	20,448,000
Total general and administrative	508,000	554,000	49,926,000
Asset impairments	0	0	1,071,000
Total costs and expenses	766,000	774,000	69,414,000
Loss from operations	(766,000)	(759,000)	(69,279,000)
Reversal of liability on cancellation of debt	0	0	1,541,000
Gain on litigation settlement	0	0	1,900,000
Other income	3,000	6,000	292,000
Loss before income tax benefits	(763,000)	(753,000)	(65,546,000)
Income tax benefits	0	0	384,000
Net Loss	(763,000)	(753,000)	(65,162,000)
Net loss attributable to non-controlling interest in subsidiary	0	0	1,272,000
Net Loss attributable to Torvec, Inc.	(763,000)	(753,000)	(63,890,000)
Preferred stock beneficial conversion feature	0	0	6,345,000
Issuance of warrants to preferred shareholders	0	0	812,000
Preferred stock dividends	66,000	67,000	2,280,000
Net Loss attributable to Torvec, Inc. common stockholders	$ (829,000)	$ (820,000)	$ (73,327,000)
Net Loss per common share attributable to stockholders of Torvec, Inc.:
Basic and Diluted (in Dollars per share)	$ (0.02)	$ (0.02)
Weighted average number of shares of common stock:
Basic and Diluted (in Shares)	45,716,000	45,700,000

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Note G - Stockholders' Equity

3 Months Ended

Mar. 31, 2013

Stockholders' Equity Note Disclosure [Text Block]

NOTE G — STOCKHOLDERS’ EQUITY

[1] Preferred Stock

On August 30, 2000, we amended our certificate of incorporation to permit the Company to issue up to 100,000,000 shares of $.01 par value preferred stock. Under the amendment, the board of directors has the authority to allocate these shares into as many separate classes of preferred as it deems appropriate and with respect to each class, designate the number of preferred shares issuable and the relative rights, preferences, seniority with respect to other classes and to our common stock and any limitations and/or restrictions that may be applicable without obtaining shareholder approval.

(a) Class A Preferred Stock

In March 2002, our board designated the first series of preferred shares, authorizing the issuance of up to 3,300,000 Class A Non-Voting Cumulative Convertible Preferred Shares. Each Class A Preferred Share is convertible after a one year holding period, at the holder’s election, into one share of our common stock. The conversion rate is subject to adjustment in the event of the issuance of our common stock as a dividend or distribution and in the case of the subdivision or combination of our common stock. The Class A Preferred has no voting rights, except with respect to matters directly impacting upon the rights and privileges accorded to such Class.

The holders of the Class A Preferred are entitled to receive cumulative preferential dividends in the amount of $.40 per share of Class A Preferred for each annual dividend period.

Dividends payable on the Class A Preferred will be paid in cash out of any funds legally available for the payment of dividends or, in the discretion of the board, will be paid in Class A Preferred at a rate of 1 share of Class A Preferred for each $4.00 of dividends.

If dividends are paid in shares of Class A Preferred, such dividend shares are not entitled to accumulate additional dividends and themselves may be converted into the common stock of the Company on a one for one basis. Holders of Class A Preferred are permitted to request that dividends payable in Class A Preferred be immediately converted into shares of our common stock.  At times, our board may elect to settle the dividends through the issuance of common stock in lieu of cash.

Accumulated and unpaid dividends on the Class A Preferred will not bear interest. Class A Preferred shares are also entitled to participate pro rata in dividends declared and/or distributions made with respect to all classes of our outstanding equity.

We may, in the absolute discretion of our board, redeem at any time and from time to time from any source of funds legally available any and all of the outstanding Class A Preferred at the redemption price of $4.00 per Class A Preferred, plus all unpaid accumulated dividends payable with respect to each Class A Preferred Share.

Since its designation in March 2002, we have sold an aggregate 765,512 shares of Class A Preferred for proceeds of approximately $3,062,000.  We sold 0 Class A Preferred shares during the three month period ended March 31, 2013 and the year ended December 31, 2012.

Since its designation in March 2002, Class A Preferred shareholders have converted an aggregate 189,750 Class A Preferred into our common stock (on a one to one basis) through March 31, 2013.  There were 0 Class A Preferred shares converted in each of the three month periods ended March 31, 2013 and 2012, respectively.

For each of the three month periods ended March 31, 2013 and 2012, we settled 0 Class A Preferred dividends.  Since its inception in March 2002 through March 31, 2013, we have settled an aggregate Class A Preferred dividend amounting to approximately $242,000 through the issuance of 11,339 Class A Preferred shares and 100,924 common shares.

At March 31, 2013, there were 587,101 outstanding shares of Class A Preferred stock, of which 11,339 shares resulted from the settlement of dividends due to conversion, and those shares no longer accrue dividends.  The value of dividends payable upon the conversion of the remaining 575,762 outstanding shares of Class A Preferred stock amounted to approximately $1,846,000 at March 31, 2013.

In the event of the liquidation, dissolution and winding up of the Company, and subject to the liquidation rights and privileges of our Class C Preferred, Class A Preferred shareholders have a liquidation preference with respect to all accumulated and unsettled dividends.  The value of the Class A Preferred shareholders’ liquidation preference was approximately $1,846,000 and $1,788,000 at March 31, 2013 and December 31, 2012, respectively.  In the event of a liquidation, dissolution or winding up of the Company, unpaid accumulated dividends on the Class A Preferred are payable in Class A Preferred shares at a rate of 1 share of Class A Preferred for each $4.00 of dividends.

(b) Class B Preferred Stock

In September 2004, the board created a second series of preferred stock by authorizing the issuance of up to 300,000 Class B Non-Voting, Cumulative Convertible Preferred Shares to fund the business operations of Iso-Torque Corporation, an entity incorporated to separately commercialize our IsoTorque differential technology.

Each Class B Preferred Share is convertible after a one year holding period, at the holder’s election, into one share of our common stock or one share of the common stock of IsoTorque Corporation. The conversion rate is subject to adjustment in the event of the issuance of the Company’s or IsoTorque Corporation’s common stock as a dividend or distribution and in the case of the subdivision or combination of such common stock. The Class B Preferred has no voting rights, except with respect to matters directly impacting upon the rights and privileges accorded to such Class.

Subject to the dividend rights and privileges of our Class A Preferred, the holders of the Class B Preferred are entitled to receive cumulative preferential dividends in the amount of $.50 per share of Class B Preferred for each annual dividend period.

Dividends payable on the Class B Preferred will be paid in cash out of any funds legally available for the payment of dividends or, in the discretion of the board, will be paid in Class B Preferred at a rate of 1 share of Class B Preferred for each $5.00 of dividends.

If dividends are paid in shares of Class B Preferred, such dividend shares are not entitled to accumulate additional dividends and themselves may be converted into the common stock of the Company on a one for one basis. Holders of Class B Preferred are permitted to request that dividends payable in Class B Preferred be immediately converted into shares of our common stock.

Accumulated and unpaid dividends on the Class B Preferred will not bear interest. Class B Preferred shares are also entitled to participate pro rata in dividends declared and/or distributions made with respect to all classes of our outstanding equity.

We may, in the absolute discretion of our board, redeem at any time and from time to time from any source of funds legally available any and all of the outstanding Class B Preferred at the redemption price of $5.00 per Class B Preferred, plus all unpaid accumulated dividends payable with respect to each Class B Preferred Share.

Since its designation in September 2004, we have sold an aggregate 97,500 Class B Preferred in a number of private placements for proceeds of approximately $487,500.  We sold 0 Class B Preferred shares during the three month periods ended March 31, 2013 and 2012.

Since its designation, Class B Preferred shareholders have converted an aggregate 30,000 Class B Preferred into our common stock (on a one to one basis) through March 31, 2013.  Through March 31, 2013, we have issued 0 Class B Preferred shares to converting Class B Preferred shareholders as a dividend.

Depending upon our cash position, from time to time we may request that a converting preferred shareholder receiving dividends in cash consent to receive shares of restricted common stock in lieu thereof.  During each of the three month periods ended March 31, 2013 and 2012, we issued 0 shares of restricted common stock in payment of Class B dividends.  Cumulatively through March 31, 2013, we have issued 35,431 restricted common shares in payment of Class B dividends amounting to approximately $51,000.

At March 31, 2013, dividends payable upon the conversion of 67,500 outstanding shares of Class B Preferred amounted to approximately $260,000.  In the event of the liquidation, dissolution and winding up of the Company, and subject to the liquidation rights and privileges of our Class C Preferred and our Class A Preferred, Class B Preferred shareholders have a liquidation preference with respect to all accumulated and unsettled dividends.  The value of the Class B Preferred shareholders’ liquidation preference was $260,000 and $251,000 at March 31, 2013 and December 31, 2012, respectively.  In the event of a liquidation, dissolution or winding up of the Company, unpaid accumulated dividends on the Class B Preferred are payable in Class B Preferred shares at a rate of 1 share of Class B Preferred for each $5.00 of dividends.

(c) Class C Preferred Stock

In September 2011, the board of directors authorized, and Class A Preferred and Class B Preferred shareholders approved, a third series of preferred stock, namely 16,250,000 shares of Class C Voting Convertible Preferred Stock.  On September 23, 2011, we sold and issued a total of 16,250,000 shares of Series C Voting Convertible Preferred Stock and warrants to purchase 1,625,000 shares of our common stock in a private placement transaction, generating gross proceeds of $6,500,000.  Direct expenses of approximately $106,000 pertaining to the transaction, consisting of primarily external legal costs, were incurred, resulting in net proceeds of approximately $6,394,000.

Each Class C Preferred share is convertible, at the holder’s election, into one share of our common stock.  The conversion rate is subject to adjustment in the event of the issuance of common stock as a dividend or distribution, and the subdivision or combination of the outstanding common stock.

The Class C Preferred shares have a liquidation preference at their stated value per share of $0.40 that is senior to our common stock, and the Company’s Class A Non-Voting Cumulative Convertible Preferred Shares and Class B Non-Voting Cumulative Convertible Preferred Shares.  The liquidation preference is payable upon a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or upon a deemed liquidation of the Company.

The Class C Preferred shares have no right to receive dividends and have no redemption right. The Class C Preferred shares vote with the common stock on an as-converted basis.  Class C Preferred is also entitled to participate pro rata in dividends declared and distributions made with respect to all classes of our outstanding equity.

The associated warrants have a ten (10) year term and are immediately exercisable for 1,625,000 shares of common stock.  The warrants are exercisable, at the holder’s election, for shares of the Company’s common stock in either a cash or cashless exercise. The warrants have an exercise price equal to the greater of (i) $0.01 or (ii) eighty percent (80%) of the volume weighted average sale price per share of our common stock during the ten (10) consecutive trading days immediately preceding the notice of exercise.  The number of warrants and exercise price are subject to adjustment in the event of the issuance of common stock as a dividend or distribution, and the subdivision or combination of the outstanding common stock.  At the time of issuance, we estimated a value of $.50 per warrant, or a total of approximately $812,000, using a weighted average of assigned probabilities for various gain scenarios at certain price points based on expected volatility.  As a result of the combined issuance of the Class C Preferred stock with the associated warrants, we reflected a non-cash distribution on the Class C Preferred shares for the warrants issued in our consolidated statements of operations for 2011.  (See Note G[3](o).)

In conjunction with the issuance of the 16,250,000 shares of Class C Preferred stock, we computed the value of the non-cash beneficial conversion feature associated with the right to convert the shares into common stock on a one-for-one basis.  We compared the fair value of our common stock on the date of issuance with the effective conversion price after allocation of the proceeds to the related warrants, and determined that the value of the non-cash beneficial conversion feature is approximately $5,582,000, which was reflected in our consolidated statements of operations for the year ended December 31, 2011 as an adjustment to arrive at the net loss attributable to common stockholders.

Cumulatively through March 31, 2013, Class C Preferred shareholders have converted 0 shares of Class C Preferred into common stock.  At March 31, 2013, there were 16,250,000 shares of Preferred C stock outstanding.  The value of the Class C Preferred shareholders’ liquidation preference was $6,500,000 at March 31, 2013.

[2] Stock Options

(a) 1998  Stock Option Plan

In December 1997, our board approved a Stock Option Plan (the “1998 Plan”) which provided for the granting of up to 2,000,000 shares of common stock, pursuant to which officers, directors, key employees and key consultants/advisors are eligible to receive incentive, nonqualified or reload stock options which plan was ratified by the shareholders on May 28, 1998. Options granted under the 1998 Plan are exercisable for a period of up to 10 years from date of grant at an exercise price which is not less than the fair value on date of grant, except that the exercise period of options granted to a stockholder owning more than 10% of the outstanding capital stock may not exceed five years and their exercise price may not be less than 110% of the fair value of the common stock at date of grant. Options may vest over five years.

By its terms, our 1998 Plan terminated as to the grant of future options on May 27, 2008. Consequently, no additional stock options will be granted under the 1998 Plan, although outstanding options remain available for exercise in accordance with their terms. There were 0 options exercised under the 1998 Plan during each of the three month periods ended March 31, 2013 and 2012.

Through March 31, 2013, a total of 1,823,895 stock options had been granted under the 1998 Plan, 0 stock options had been exercised, and 1,282,047 stock options have expired.  As of March 31, 2013, there were 541,848 outstanding stock options under the 1998 Plan, all of which were fully vested.  The following table summarizes information relating to stock options outstanding under the 1998 Plan at March 31, 2013:

Options Outstanding and Exercisable
Shares		Weighted Average Exercise Price		Weighted Average Remaining Life in Years		Aggregate Intrinsic Value
	541,848	$	4.75		0.9	$	0

As of March 31, 2013, we had $0 unrecognized stock compensation related to unvested awards under the 1998 Plan.

(b) 2011 Stock Option Plan

On November 3, 2010, the board adopted, and on January 27, 2011 the shareholders approved, the 2011 Stock Option Plan (“2011 Plan”)  which provides for the grant of up to 3,000,000 common stock options to provide equity incentives to directors, officers, employees and consultants. Two types of options may be granted under the 2011 Plan: non-qualified options and incentive options.

Non-qualified options may be granted to our officers, directors, employees and outside consultants. Incentive options may be granted only to our employees, including officers and directors who are also employees. In the case of non-qualified options, the exercise price may be less than the fair market value of our stock on the date of grant. In the case of incentive options, the exercise price may not be less than such fair market value and in the case of an employee who owns more than 10% of our common stock, the exercise price may not be less than 110% of such market price. Options generally are exercisable for ten years from the date of grant, except that the exercise period for an incentive option granted to an employee who owns more than 10% of our stock may not be greater than five years.

Effective January 28, 2011, our board of directors appointed Wesley K. Clark as a member of the board of directors. Our board voted to grant Gen. Clark a non-qualified stock option for 250,000 common shares under the 2011 Plan, effective January 28, 2011 and exercisable at $.90 per share. The option is conditioned upon Gen. Clark serving as a director and vests in four tranches of 25% of the total granted shares on each of the four annual anniversary dates of January 28, 2011.  The original terms of the option required the optionee to exercise each tranche within two and one-half months following the calendar year in which the tranche vests or lose the tranche.  However, on March 20, 2012, the board approved a modification of these options to provide for a 10 year term with an expiration date of January 28, 2021, and this modification was subsequently approved by shareholders at the Company’s annual meeting on June 14, 2012.  We used the Black-Scholes option-pricing model to value the cost of this modification at approximately $56,000, which is being recognized ratably over the vesting periods of the respective tranches.

In March 2012, we granted an incentive stock option to our new chief technology officer to acquire 250,000 common shares at an exercise price of $.82 per share, exercisable for 10 years.  The option vests in four tranches of 25% of the total granted shares on each of the four annual anniversary dates from the initial date of grant.

In December 2012, we granted a non-qualified stock option to a new director to acquire 250,000 common shares at an exercise price of $.70 per share, exercisable for 10 years.  The option vests in four tranches of 25% of the total granted shares on each of the four annual anniversary dates from the initial date of grant.

During the three month period ended March 31, 2013, we granted 0 stock options under the 2011 Plan, 125,250 options became vested, and 0 options expired or were exercised.  During the three month period ended March 31, 2012, we granted 250,000 stock options under the 2011 Plan, 62,750 options became vested, and 0 options expired or were exercised. As of March 31, 2013, there were 1,182,000 stock options outstanding under the 2011 Plan, 347,998 of which were vested.  At March 31, 2013, there were 1,818,000 options remaining available for future grant under the 2011 Plan.

(c) Non-Plan Options

During the first quarter of 2011, we granted a total of 1,350,000 non-plan stock options.  On January 27, 2011, our shareholders approved the issuance of stock options to 5 directors each for 250,000 common shares, and the issuance of stock options to a consultant acting in the capacity as a special advisor to the board for 100,000 common shares, exercisable at $.90 per common share. Each option is conditioned upon the optionee serving as a director or consultant and vests in four tranches of 25% of the total granted shares on each of the four annual anniversary dates of January 27, 2011. The original terms of the options required the optionee to exercise each tranche within two and one-half months following the calendar year in which the tranche vests or lose the tranche.  However, on March 20, 2012, the board approved a modification of these options to provide for a 10 year term with a uniform expiration date of January 27, 2021, and this modification was subsequently approved by shareholders at the Company’s annual meeting on June 14, 2012.  We used the Black-Scholes option-pricing model to value the cost of this modification at approximately $304,000, which is being recognized ratably over the vesting periods of the respective tranches.

During the three month period ended March 31, 2013, there were 0 non-plan stock options granted.

As of March 31, 2013, there were a total of 7,161,668 non-plan options outstanding, of which 4,274,168 were fully vested.  During the three month period ended March 31, 2013, we granted 0 non-plan stock options, 337,500 options became vested, and 0 options were exercised or cancelled.  During the three month period ended March 31, 2012, we granted 0 non-plan stock options, 337,500 options became vested, and 0 options were exercised or cancelled.

(d) Summary

For the three month periods ended March 31, 2013 and 2012, compensation cost related to all stock options amounted to $229,000 and $285,000, respectively.  As of March 31, 2013, there was $1,125,000 of total unrecognized compensation costs related to outstanding stock options, which are expected to be recognized over the next 3 ¾ years.

The weighted average grant-date fair value of all stock options granted during the three month period ended March 31, 2012 was $.74 per share; no stock options were granted during the three month period ended March 31, 2013. The total grant date fair value of all stock options vested during the three month periods ended March 31, 2013 and 2012 was approximately $680,000 and $605,000, respectively.

The fair value of each option granted during the three month period ended March 31, 2012 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2012
Expected Term (years)	6.0
Expected forfeiture rate		0	%
Risk-free rate		1.3	%
Volatility		132.5	%
Dividend yield		0.0	%

The average risk-free interest rate is based on the U.S. treasury security rate in effect as of the grant date. We determined expected volatility using the historical closing stock price. The expected life was generally determined using the simplified method as we do not believe we have sufficient historical stock option exercise experience on which to base the expected term.

The following summarizes the activity of all of our outstanding stock options for the three month period ended March 31, 2103:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2013		8,885,516	(A)	$	.94
Granted		0			0
Exercised		0			0
Canceled or expired		0			0
Outstanding at March 31, 2013		8,885,516	(A)	$	.94		7.2	$	1,700,000
Exercisable at March 31, 2013		5,164,014		$	1.20		6.7	$	990,000

Note (A) – Figures include the impact of 405,000 options that were granted in 2011 to replace options / warrants previously granted to certain engineering personnel.  The previously issued options / warrants will expire as the newer options vest on a one-to-one basis.  During the fourth quarter of 2012, 134,998 of these options vested, and 98,332 previously issued options and 36,666 previously issued warrants were cancelled concurrently in conjunction with the vesting of the 2011 options, leaving 270,002 options remaining to vest.

As of March 31, 2013, the exercise prices of all outstanding stock options, as well as all vested stock options, ranged from $.36 per share to $5.00 per share.

[3] Warrants

As of March 31, 2013, outstanding warrants to acquire shares of our common stock are as follows:

Exercise Price		Expiration	Number of Warrants Outstanding			Number of Warrants Exercisable
	Not yet determinable	Not yet determinable		125,000	(a)		0
$	.75	None		500,000	(b)		0
$	.01	2015-2016		54,500	(c)		54,500
$	.01	None		3,000	(d)		3,000
$	5.00	None		75,000	(e)		75,000
$	5.00	2016		83,334	(e)		83,334
$	.01	None		60,000	(f)		60,000
$	.01	2016		3,750	(g)		3,750
$	1.00	None		20,500	(h)		20,500
$	.44	2020		400,000	(i)		400,000
$	3.75	2016		200,000	(j)		200,000
$	5.00	2016		30,000	(k)		30,000
$	5.00	2017		50,000	(l)		50,000
$	5.00	2017		100,000	(m)		100,000
$	2.50	2020		100,000	(n)		100,000
	Not yet determinable	2021		1,625,000	(o)		1,625,000
				3,430,084			2,805,084

(a)	Exercisable only if we have an IPO and exercisable at the IPO price five years from IPO. Through March 31, 2013, we have not conducted an IPO.
(b)	On April 15, 2002, we issued 1,000,000 warrants at prices ranging from $.30 to $.75 to our then chairman of the board of directors and chief executive officer. Of the total warrants, 250,000 were exercisable at $.30, and 250,000 were exercisable at $.50 on the date the then board elected the executive to the board and named him chief executive officer. During the year ended December 31, 2002, 250,000 warrants were exercised for $.30 per share, resulting in proceeds of $75,000. During the year ended December 31, 2003, 250,000 warrants were exercised for $.50 per share, resulting in proceeds of $125,000. The remaining 500,000 warrants are exercisable upon the occurrence of a significant transaction, which includes execution by us of a binding agreement for the sale, transfer, license or assignment for value of any and/or all of our automotive technology, at $.75 per share. We will record a charge representing the fair value of the warrants when the warrants become exercisable.
(c)	We issued an aggregate 123,500 warrants at an exercise price of $0.01 with a ten year term to our nonmanagement directors for services rendered to the board under our Nonmanagement Directors Plan prior to its amendment on October 13, 2006. There are 0 further warrants issuable under the Plan as modified by the board of directors on October 13, 2006. An aggregate 69,000 warrants have been exercised for proceeds of $690.
(d)	In 2005, we issued 12,500 warrants to consultants, immediately exercisable at $0.01 per common share. During 2005 and 2006, 3,500 of these warrants were exercised. During 2010, an additional 6,000 of these warrants were exercised. The 3,000 remaining outstanding warrants have no expiration date.
(e)	In 2005, we issued 95,000 warrants to two engineering and administrative consultants, exercisable immediately at $5.00 per common share. During 2006, we issued an additional 100,000 warrants to these same consultants exercisable over a ten year term at $5.00 per common share, but only exercisable if there is a commercializing event as determined by the board of directors. During 2008, these warrants were cancelled and new warrants were issued to the same consultants for an aggregate 195,000 shares exercisable until 2016 at $5.00 per common share and conditioned upon the happening of a commercializing event as determined by the board.  We recorded a charge of $249,000 in 2008 to general and administrative expense. In 2010, 95,000 of the total number of 195,000 warrants issued to these consultants were modified to eliminate both the term and the commercializing event condition for exercise.  The charge related to the 2010 modification was insignificant.  In December 2011, 110,000 of these outstanding warrants were amended so that they will be cancelled in conjunction with the vesting of stock options that were issued to replace such warrants, with each option having an exercise price of $1.14 per share, and proportionate vesting on each of the succeeding anniversary dates over a three year period.  The approximately $16,000 expense related to the issuance of the stock options to replace the warrants is being amortized over the vesting period of the stock options.  In the fourth quarter of 2012, 36,666 of these warrants were cancelled as the corresponding number of options vested.

	(f)		During 2005, we issued 60,000 warrants to an engineering consultant exercisable immediately at $5.00 per common share and with no expiration date.
	(g)		During 2005, we issued 62,500 warrants to investors in connection with their purchase of 62,500 Class A Preferred, immediately exercisable at $.01 per common share and with a ten year term. During 2006, we issued 135,849 warrants to investors along with their purchase of 162,000 Class A Preferred and 20,000 Class B Preferred, all immediately exercisable at $.01 per common share and with a ten year term. Through March 31, 2013, an aggregate of 194,599 of these warrants have been exercised for proceeds of approximately $1,258.  There were 0 warrants exercised during the three month period ended March 31, 2013.
	(h)		During 2006, one investor purchased 20,500 warrants with no expiration date and an exercise price of $1.00 per common share, for a purchase price of $2,000.
	(i)		During 2006, we issued 400,000 warrants immediately exercisable for ten years at an exercise price of $3.27 per common share to a business consultant. Effective October 15, 2010, these warrants were modified and reissued upon the mutual agreement of the parties. Effective October 15, 2010, we issued 400,000 warrants immediately exercisable at $.44 per common share for a period of ten years from the modification date.  As a result of the modification, we recorded a charge of $68,000 to general and administrative expenses in the fourth quarter of 2010.  During the three month period ended March 31, 2013, 0 warrants were exercised.
(j)		During 2006, we issued 200,000 warrants immediately exercisable for ten years at an exercise price of $3.75 per common share to a former governmental affairs consultant.
(k)		In 2006, we issued 30,000 warrants to consultants exercisable immediately for a ten year term at $5.00 per common share.
(l)		During 2007, we issued 50,000 warrants exercisable for ten years at $5.00 per common share upon the happening of a commercializing event. The warrants were issued to a consultant who assisted us to potentially place our products in various state school bus programs. We recorded a charge of $249,000 to general and administrative expenses.
(m)		During 2007, we issued 100,000 warrants immediately exercisable for ten years at an exercise price of $5.00 per common share to two engineering consultants in connection with our engagement to furnish constant velocity joints to a military contractor. We recorded a charge of $401,000 to general and administrative expenses.
(n)		On February 17, 2010, we issued 100,000 common stock warrants exercisable for ten years at an exercise price of $2.50 per common share to an adviser. We recorded a charge of $45,000 to general and administrative expenses in the first quarter of 2010.
(o)		On September 23, 2011, we issued 1,625,000 common stock warrants in connection with the sale and issuance of a total of 16,250,000 shares of Series C Voting Convertible Preferred Stock in a private placement transaction, generating gross proceeds of $6,500,000.  The warrants have a ten (10) year term and are immediately exercisable for 1,625,000 shares of common stock.  The warrants are exercisable, at the holder’s election, for shares of our common stock in either a cash or cashless exercise.  The warrants have an exercise price equal to the greater of (i) $0.01 or (ii) eighty percent (80%) of the volume weighted average sale price per share of our common stock during the ten (10) consecutive trading days immediately preceding the notice of exercise.  The number of warrants and exercise price are subject to adjustment in the event of the issuance of common stock as a dividend or distribution, and the subdivision or combination of the outstanding common stock.  (See Note G[1](c).)
		We typically use the Black-Scholes option-pricing model to estimate the fair value of stock-based awards.  However, for the 1,625,000 warrants issued in September 2011, the exercise price is variable based on 80% of the price of our common stock on the date of exercise.  For the valuation of these particular warrants, we used a weighted average of assigned probabilities for various gain scenarios at certain price points based on expected volatility of approximately 136% over an assumed term of five years to estimate an overall value of these warrants, which amounted to approximately $812,000, or $.50 per warrant.  These inputs are unobservable inputs based on our own assumptions used to measure the value of the instrument.  Accordingly, these warrants are classified within Level 3 of the fair value hierarchy in accordance with FASB ASC 820.

The following summarizes the activity of our outstanding warrants for the three month period ended March 31, 2013:

	Shares		Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2013		3,430,084	$	2.12
Granted		0		0
Exercised		0		0
Canceled or expired		0		0
Outstanding at March 31, 2013		3,430,084	$	2.12	(A)	7.3	(B)	$	366,000
Exercisable at March 31, 2013		2,805,084	$	2.70		7.3	(C)	$	366,000

(A) The weighted average exercise price for warrants outstanding as of March 31, 2013 excludes 1,750,000 warrants with no determined exercise price.

(B) The weighted average remaining contractual term for warrants outstanding as of March 31, 2013 excludes 783,500 warrants with no expiration date.

(C) The weighted average remaining contractual term for warrants exercisable as of March 31, 2013 excludes 158,500 warrants with no expiration date.

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Note F - Notes Payable

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Text Block]

NOTE F — NOTES PAYABLE

As of March 31, 2013 and December 31, 2012, notes payable consists of the following:

	March 31, 2013		December 31, 2012
Additional Office Space (1)	$	2,000	$	6,000
Copy Machine (2)		5,000		5,000
Engineering Design Software (3)		31,000		36,000
Test Equipment and Supplies (4)		86,000		105,000
Automobile (5)		14,000		15,000
	$	138,000	$	167,000

(1) In November 2010, we completed a construction project for some additional office space at our leased corporate office facility.  The cost of the leasehold improvement was $32,500 and the landlord agreed to finance this cost over the remaining initial term of the lease which expires in May 2013.  The monthly payments are approximately $1,100 per month, with an implicit interest rate of approximately 2.5%.  At December 31, 2012, the outstanding balance on this note was approximately $6,000, all of which was classified as a current liability.  At March 31, 2013, the outstanding balance on this note was approximately $2,000, all of which was classified as a current liability.

(2) In November 2010, we entered into a capital lease for a copy machine over a 5 year term, with a fair market value buyout.  The capitalized value of the lease was approximately $8,900, and the monthly payment is approximately $170 with an implicit interest rate of approximately 5.3%.  At December 31, 2012, the outstanding balance on this note was approximately $5,000, of which $3,000 was classified as a non-current liability.  At March 31, 2013, the outstanding balance on this note was approximately $5,000, of which $3,000 was classified as a non-current liability.

(3) In August 2011, we financed the purchase of engineering design software, along with a one-year maintenance agreement, through a three year loan maturing in August 2014, and collateralized by the software.  The total cost of the software and the maintenance agreement was approximately $64,800.  The monthly payments are approximately $2,100 per month with an implicit interest rate of approximately 9.6%.  At December 31, 2012, the outstanding balance on this note was approximately $36,000, of which $14,000 was classified as a non-current liability. At March 31, 2013, the outstanding balance on this note was approximately $31,000, of which $8,000 was classified as a non-current liability.

(4) In April 2012, we financed the purchase of various test equipment, office furniture, and supplies from KBE+, Inc. (of which our chief technology officer is an officer) through a 24 month promissory note for a total amount to be paid of $162,500.  Based on an imputed interest rate of approximately 5%, the initial principal of the note was approximately $154,000.  The monthly payments are approximately $6,800 per month.  At December 31, 2012, the outstanding balance on this related party note was approximately $105,000, of which $27,000 was classified as a non-current liability.  At March 31, 2013, the outstanding balance on this related party note was approximately $86,000, of which $7,000 was classified as a non-current liability.

(5) In August 2012, we purchased an automobile for $16,600, a vehicle that we had previously been leasing.  We financed this purchase with a 36- month promissory note.  The interest rate on the loan is approximately 10%, and the payments are approximately $540 per month.  At December 31, 2012, the outstanding balance on this note was approximately $15,000, of which $10,000 was classified as a non-current liability.  At March 31,2013, the outstanding balance on this note was approximately $14,000, of which $9,000 was classified as a non-current liability.

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Note D - Inventories (Detail) - Inventories (USD $)	Mar. 31, 2013	Dec. 31, 2012
Raw Materials	$ 80,000	$ 65,000
Work in Process	0	0
Finished Goods	0	0
	$ 80,000	$ 65,000

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Note G - Stockholders' Equity (Tables)

3 Months Ended

9 Months Ended

Mar. 31, 2013

Sep. 30, 2012

Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding [Table Text Block]

Options Outstanding and Exercisable
Shares		Weighted Average Exercise Price		Weighted Average Remaining Life in Years		Aggregate Intrinsic Value
	541,848	$	4.75		0.9	$	0

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2012
Expected Term (years)	6.0
Expected forfeiture rate		0	%
Risk-free rate		1.3	%
Volatility		132.5	%
Dividend yield		0.0	%

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2013		8,885,516	(A)	$	.94
Granted		0			0
Exercised		0			0
Canceled or expired		0			0
Outstanding at March 31, 2013		8,885,516	(A)	$	.94		7.2	$	1,700,000
Exercisable at March 31, 2013		5,164,014		$	1.20		6.7	$	990,000

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

Exercise Price		Expiration	Number of Warrants Outstanding			Number of Warrants Exercisable
	Not yet determinable	Not yet determinable		125,000	(a)		0
$	.75	None		500,000	(b)		0
$	.01	2015-2016		54,500	(c)		54,500
$	.01	None		3,000	(d)		3,000
$	5.00	None		75,000	(e)		75,000
$	5.00	2016		83,334	(e)		83,334
$	.01	None		60,000	(f)		60,000
$	.01	2016		3,750	(g)		3,750
$	1.00	None		20,500	(h)		20,500
$	.44	2020		400,000	(i)		400,000
$	3.75	2016		200,000	(j)		200,000
$	5.00	2016		30,000	(k)		30,000
$	5.00	2017		50,000	(l)		50,000
$	5.00	2017		100,000	(m)		100,000
$	2.50	2020		100,000	(n)		100,000
	Not yet determinable	2021		1,625,000	(o)		1,625,000
				3,430,084			2,805,084

Warrant [Member]

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

	Shares		Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2013		3,430,084	$	2.12
Granted		0		0
Exercised		0		0
Canceled or expired		0		0
Outstanding at March 31, 2013		3,430,084	$	2.12	(A)	7.3	(B)	$	366,000
Exercisable at March 31, 2013		2,805,084	$	2.70		7.3	(C)	$	366,000

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Note B - Summary Of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2013

Property, Plant and Equipment [Table Text Block]

Office Equipment and Software (years)	3	-	7
Leasehold Improvements		Lesser of useful life or lease term
Shop Equipment (years)		7
Transportation Equipment (years)	5	-	7

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Note H - Commitments And Other Matters

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies Disclosure [Text Block]

NOTE H — COMMITMENTS AND OTHER MATTERS

 [1] Leases

We lease a facility from a related party (see Note C[2]) located at 1999 Mount Read Blvd., Rochester, New York. On April 29, 2008, we executed a five and one-half year  lease for the premises (with a December 1, 2007 lease commencement date), providing for rent to be paid at a rate of $5,687 per month ($68,244 per annum) and in addition, for the payment of our proportionate share of yearly real estate taxes and yearly common area operating costs.  Under the lease, monthly rental payments commenced June 1, 2008 and were to continue through May 2013. The lease contained three 5-year renewal options and grants us an option to lease additional adjacent manufacturing and assembly space.

Effective October 24, 2012, we amended certain terms of the lease.  The primary changes that were made include a two-year extension of the current lease originally set to expire as of May 31, 2013 at the same rent rate, and the addition of two three-year renewal options with a 10% rate increase at each subsequent renewal period.  These renewal options replace the previous renewal options of three 5-year renewal periods which had incorporated 15% rate increases at each subsequent renewal period.

Rent expense for the three month periods ended March 31, 2013 and 2012 was approximately $17,000 and $15,000, respectively.  Rent payments required under the amended lease for the full years ending December 31, 2013, 2014 and 2015 amount to approximately $68,000, $68,000 and $28,000, respectively

[2] Employment Agreements

Effective October 4, 2010, we appointed a new chief executive officer and executed a five year employment agreement pursuant to which we will pay base compensation of $50,000 per annum, which compensation increases to $200,000 per annum on the first day of the calendar year immediately following the calendar year in which we have adjusted EBITDA of at least $300,000 (earnings before interest, taxes, depreciation and amortization, but excluding all non-cash expenses associated with stock options). Under the agreement, the executive is entitled to a performance bonus based upon financial targets established each year in good faith by the Governance and Compensation Committee and the achievement of individual management objectives established annually by such committee. The executive is entitled to participate in all employee benefit plans as are provided from time to time for senior executives. If we terminate the executive, remove him as CEO, or a change in control of the Company occurs, the executive is entitled to three years’ severance pay, consisting of base pay and any incentive compensation.

Effective October 18, 2010, we engaged a new chief financial officer under a letter agreement dated October 18, 2010.  If we terminate the executive, remove him as CFO, or a change in control of the company occurs, the executive is entitled to 12 months’ severance pay.

[3] Consulting Agreements

Effective July 1, 2010, in two separate agreements, we engaged the services of a consulting firm to provide expertise with business development initiatives, strategic planning and general funding opportunities.   We agreed to pay the consultant an annual retainer of $82,500 for both agreements combined, to be paid in quarterly installments.  We also agreed to pay the consultant a commission equal to 4% of the value received by us from third parties introduced by or through the auspices of the consultant for a period of a minimum of 4 years beyond the initial term of the agreement. The agreements were for one and two year terms.  On March 31, 2011, we signed a modification agreement pursuant to which, in exchange for a one-time payment of $17,250, all of the cash obligations under these two agreements were cancelled.  The obligation to pay a 4% commission with respect to the generation of business from efforts initiated by the consultant remains in effect through January 1, 2017.

On December 13, 2010, we executed a consultant agreement with a director to provide consulting services to us at a rate of $200 per hour. Pursuant to the agreement, we also agreed to pay the consultant an incentive fee equal to $10,000 or proportionate part thereof for each $1,000,000 of revenue or proportionate part thereof actually received by us for a period of five years, provided the definitive agreement with the third party results from the material efforts of the consultant.  During the three month periods ended March 31, 2013 and 2012, we recorded an expense of approximately $0 and $2,000, respectively, for consulting services under the agreement.

Effective as of January 1, 2013, we entered into a one-year consulting agreement with SCIRE Corporation, of which one of our directors is president, to provide us with expertise and advice on hydraulic pump technology and related markets.  The consulting agreement provides for a guaranteed minimum of $3,840 per month, based on 32 hours of consulting.  Additional hours above this minimum will be billed at a rate of $120 per hour.  During the three month period ended March 31, 2013, we recorded an expense of approximately $12,000 for consulting services under the agreement.

[4] Prototype Development Agreements

On January 28, 2011, we announced that we entered into a contract with a West Virginia remanufacturer of components for the mining and associated industrial equipment industry to develop, evaluate, manufacture and sell our IsoTorque® differential technology in mining shuttle cars.  The contract calls for us to design and build a prototype IsoTorque® unit for installation in a 21 SC model mining shuttle car. The remanufacturer will pay us $120,000 for the initial development. Upon successful completion of the prototype phase, the parties have agreed that we will sell 100% of the differential requirements for all 21 SC model mining shuttle cars remanufactured by the remanufacturer on an exclusive basis. Minimum purchase requirements will be established after the first anniversary of the agreement.  During the first quarter of 2012, we recorded $60,000 in revenue upon the completion of the second milestone.  In the three month period ended March 31, 2013, we recorded $0 in revenue related to this contract.  Through March 31, 2013, we have recorded a total of $90,000 in revenue associated with this agreement.

On January 28, 2013, we issued a press release announcing that we have entered into a development agreement with Chinese automotive manufacturer, BAIC Motor Co., Ltd.  Under the agreement, BAIC Motor Co., Ltd. will pay us to manufacture a number of prototypes of our IsoTorque® differential for one of BAIC's anticipated future car models. We will supply BAIC with these prototypes for their evaluation and testing.  In the three month period ended March 31, 2013, we recorded $0 in revenue related to this contract.

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Accounting Policies, by Policy (Policies)

3 Months Ended

Mar. 31, 2013

Consolidation, Policy [Policy Text Block]

Consolidation: The financial statements include the accounts of the Company, our wholly-owned subsidiary Iso-Torque Corporation, and our majority-owned subsidiary, Ice Surface Development, Inc. (56% owned at March 31, 2013 and December 31, 2012).  As of March 31, 2013, each of the subsidiaries is non-operational.  During 2012, we dissolved Creative Performance Consultants Inc., Variable Gear LLC, and Torvec China LLC.  We are intending to let Ice Surface Development, Inc. dissolve by proclamation.  All material intercompany transactions and account balances have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates are used in valuing the useful lives of any intangible assets and the future realizable value of such assets. These estimates are subject to a high degree of judgment and potential change. Actual results could differ from those estimates.

Reclassification, Policy [Policy Text Block]

Reclassifications: Certain reclassifications have been made to prior year balances to conform to the current year’s presentation.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents: Cash and cash equivalents may include time deposits, certificates of deposit, and highly liquid debt instruments with original maturities of three months or less. We maintain cash and cash equivalents at financial institutions which periodically may exceed federally insured amounts.

Receivables, Policy [Policy Text Block]

Accounts Receivable: We carry our accounts receivable at invoice amount less an allowance for doubtful accounts.  On a periodic basis, we evaluate our accounts receivable and establish an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions.  We do not accrue interest on past due invoices.  There was $0 allowance for doubtful accounts as of March 31, 2013 and December 31, 2012, as determined by management.

Inventory, Policy [Policy Text Block]

Inventories: Inventories are stated at the lower of cost or market with cost determined under the first-in, first-out (FIFO) method. We record provisions for excess, obsolete or slow-moving inventory based on changes in customer demand, technology developments or other economic factors.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment: Property and equipment are stated at cost.  Estimated useful lives are as follows:

Office Equipment and Software (years)	3	-	7
Leasehold Improvements		Lesser of useful life or lease term
Shop Equipment (years)		7
Transportation Equipment (years)	5	-	7

Depreciation and amortization are computed using the straight-line method.  Betterments, renewals and extraordinary repairs that extend the life of the assets are capitalized.  Other repairs and maintenance costs are expensed when incurred. When disposed, the cost and accumulated depreciation applicable to assets retired are removed from the accounts and the gain or loss on disposition is recognized in other income (expense).  Depreciation and amortization expense for the three month periods ended March 31, 2013 and 2012 amounted to $32,000 and $16,000, respectively.

Whenever events or circumstances indicate, our long-lived assets, including any intangible assets with finite useful lives, are tested for impairment by using the estimated future cash flows directly associated with, and that are expected to arise as a direct result of, the use of the assets.  If the carrying amount exceeds the estimated undiscounted cash flows, an impairment may be indicated. The carrying amount is then compared to the estimated discounted cash flows, and if there is an excess, such amount is recorded as an impairment.  During the three month periods ended March 31 2013 and 2012, we recorded $0 in impairment charges.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value of Financial Instruments: As defined by U.S. GAAP, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  All assets and liabilities are required to be measured and reported on a fair value basis.  A hierarchy for ranking the quality and reliability of the information is used to determine fair values.  Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The FASB’s (Financial Accounting Standards Board) guidance for the disclosure about fair value of financial instruments requires disclosure of an estimate of the fair value of certain financial instruments. The fair value of financial instruments pursuant to FASB’s guidance for the disclosure about fair value of financial instruments approximated their carrying values at March 31, 2013 and December 31, 2012.  The carrying amount of cash, accounts receivable, accounts payable, and accrued expenses approximates their fair value due to their short maturity.  The carrying amount of notes payable approximates fair value because stated or implied interest rates approximate current interest rates that are available for debt with similar terms.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition: Our terms provide that customers are obligated to pay for products sold to them within a specified number of days from the date that title to the products is transferred to the customers. Our standard terms are typically net 30 days. We recognize revenue when transfer of title occurs, risk of ownership passes to a customer at the time of shipment or delivery depending on the terms of the agreement with a particular customer and collection is reasonably assured. The sale price of our products is substantially fixed and determinable at the date of the sale based upon purchase orders generated by a customer and accepted by us.

We occasionally enter into prototype development contracts with customers.  In such cases, revenue is recognized using either (a) the proportional effort method based on the relationship of costs incurred to date to the total estimated cost to complete a contract, or (b) where appropriate, the milestone method, if milestones are clearly identifiable and substantive.

During the first quarter of 2011, we entered into a prototype development agreement to design, build and integrate our IsoTorque differential into the product of a customer for total consideration of $120,000.  Milestones include completion of design, manufacturing of a prototype, and installation / integration of the prototype. The payment required for each milestone was considered to be substantive based on the fact that performance required by us in order to achieve the milestone enhanced the value of the item delivered and is reasonable in relation to all of the deliverables. The first milestone consisted of completion and delivery of the design for the prototype, which was completed and delivered during the first quarter of 2011 and resulted in the recognition of revenue in the amount of $30,000, as well as the related costs incurred to complete this milestone.  The second milestone consisted of the manufacture and delivery of two prototype differentials to our customer, which was completed in March 2012 and resulted in the recognition of revenue in the amount of an additional $60,000, as well as the related costs incurred to complete this milestone.  Further revenue will be recognized, as well as related costs, upon reaching other milestones defined in the contract.

In Process Research and Development, Policy [Policy Text Block]

Research and Development and Patents: Research and development costs and patent expenses are charged to operations as incurred. Research and development includes personnel-related costs, materials and supplies, depreciation, consulting services, and amortization of the Ice technology. Depreciation expense for the three month periods ended March 31, 2013 and 2012 that was charged to research and development was $10,000 and $5,000, respectively.

Patent costs for the three month periods ended March 31, 2013 and 2012 amounted to $45,000 and $43,000, respectively, and are included in general and administrative expenses.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-based Compensation: FASB Accounting Standards Codification (“ASC”) 718-10 requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values on the grant date. Under the modified prospective method that we adopted, awards that were granted, modified, or settled on or after January 1, 2006 are measured and accounted for in accordance with ASC 718-10. Unvested equity-classified awards that were granted prior to January 1, 2006 will continue to be accounted for in accordance with ASC 718-10, except that the grant date fair value of all awards are recognized in the results of operations over the remaining vesting periods. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized. In addition, the realization of tax benefits in excess of amounts recognized for financial reporting purposes will be recognized as a financing activity in accordance with ASC 718-10.

No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for substantially all net deferred tax assets. We elected to adopt the alternative method of calculating the historical pool of windfall tax benefits as permitted by ASC 718-10-65 (previously known as: FASB Staff Position (FSP) No. SFAS 123(R)-c, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards”). This is a simplified method to determine the pool of windfall tax benefits that is used in determining the tax effects of stock compensation in the results of operations and cash flow reporting for awards that were outstanding as of the adoption of ASC 718-10.

Income Tax, Policy [Policy Text Block]

Income Taxes: We account for income taxes using the asset and liability method, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax bases of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled.  A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.  We adopted FASB ASC 740-10 relating to “Accounting for uncertainty in income taxes” on January 1, 2008.  As a result of the implementation of FASB ASC 740-10, we recognized no adjustment for uncertain tax positions. It is our policy to recognize interest and penalties related to income tax matters as general and administrative expenses.  The tax years 2009 through 2012 remain open to examination by the federal and state tax jurisdictions to which we are subject.

Earnings Per Share, Policy [Policy Text Block]

Loss per Common Share: FASB’s ASC 260-10 (previously known as: FASB Statement 128, “Earnings Per Share”) requires the presentation of basic earnings per share, which is based on weighted average common stock outstanding, and dilutive earnings per share, which gives effect to options, warrants and convertible securities in periods when they are dilutive. At March 31, 2013 and 2012, we excluded 29,108,682 and 28,973,631 potential common shares, respectively, relating to convertible preferred stock, options and warrants outstanding from the diluted net loss per common share calculation because their inclusion would be anti-dilutive. In addition, we excluded 625,000 warrants from the diluted net loss per common share calculation at March 31, 2013 and 2012 as the conditions for their vesting are not time-based.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements: There have been no accounting pronouncements issued since January 1, 2012 that have had an impact on the reporting of the Company’s financial results.

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Note D - Inventories (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Inventory, Current [Table Text Block]

	March 31, 2013		December 31, 2012
Raw Materials	$	80,000	$	65,000
Work in Process		0		0
Finished Goods		0		0
	$	80,000	$	65,000

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Note B - Summary Of Significant Accounting Policies (Detail) - Property and Equipment, Estimated Useful Lives	3 Months Ended
	Mar. 31, 2013
Leasehold Improvements	Lesser of useful life or lease term
Office Equipment [Member] | Minimum [Member]
Useful life (years)	3 years
Office Equipment [Member] | Maximum [Member]
Useful life (years)	7 years
Equipment [Member]
Useful life (years)	7 years
Transportation Equipment [Member] | Minimum [Member]
Useful life (years)	5 years
Transportation Equipment [Member] | Maximum [Member]
Useful life (years)	7 years

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Note F - Notes Payable (Detail) - Notes Payable (USD $)	Mar. 31, 2013		Dec. 31, 2012
Long-Term Notes Payable	$ 138,000		$ 167,000
Additional Office Space [Member]
Long-Term Notes Payable	2,000	[1]	6,000	[1]
Copy Machine [Member]
Long-Term Notes Payable	5,000	[2]	5,000	[2]
Engineering Design Software [Member]
Long-Term Notes Payable	31,000	[3]	36,000	[3]
Test Equipment and Supplies [Member]
Long-Term Notes Payable	86,000	[4]	105,000	[4]
Automobile [Member]
Long-Term Notes Payable	$ 14,000	[5]	$ 15,000	[5]

[1] In November 2010, we completed a construction project for some additional office space at our leased corporate office facility. The cost of the leasehold improvement was $32,500 and the landlord agreed to finance this cost over the remaining initial term of the lease which expires in May 2013. The monthly payments are approximately $1,100 per month, with an implicit interest rate of approximately 2.5%. At December 31, 2012, the outstanding balance on this note was approximately $6,000, all of which was classified as a current liability. At March 31, 2013, the outstanding balance on this note was approximately $2,000, all of which was classified as a current liability.

[2] In November 2010, we entered into a capital lease for a copy machine over a 5 year term, with a fair market value buyout. The capitalized value of the lease was approximately $8,900, and the monthly payment is approximately $170 with an implicit interest rate of approximately 5.3%. At December 31, 2012, the outstanding balance on this note was approximately $5,000, of which $3,000 was classified as a non-current liability. At March 31, 2013, the outstanding balance on this note was approximately $5,000, of which $3,000 was classified as a non-current liability.

[3] In August 2011, we financed the purchase of engineering design software, along with a one-year maintenance agreement, through a three year loan maturing in August 2014, and collateralized by the software. The total cost of the software and the maintenance agreement was approximately $64,800. The monthly payments are approximately $2,100 per month with an implicit interest rate of approximately 9.6%. At December 31, 2012, the outstanding balance on this note was approximately $36,000, of which $14,000 was classified as a non-current liability. At March 31, 2013, the outstanding balance on this note was approximately $31,000, of which $8,000 was classified as a non-current liability.

[4] In April 2012, we financed the purchase of various test equipment, office furniture, and supplies from KBE+, Inc. (of which our chief technology officer is an officer) through a 24 month promissory note for a total amount to be paid of $162,500. Based on an imputed interest rate of approximately 5%, the initial principal of the note was approximately $154,000. The monthly payments are approximately $6,800 per month. At December 31, 2012, the outstanding balance on this related party note was approximately $105,000, of which $27,000 was classified as a non-current liability. At March 31, 2013, the outstanding balance on this related party note was approximately $86,000, of which $7,000 was classified as a non-current liability.

[5] In August 2012, we purchased an automobile for $16,600, a vehicle that we had previously been leasing. We financed this purchase with a 36- month promissory note. The interest rate on the loan is approximately 10%, and the payments are approximately $540 per month. At December 31, 2012, the outstanding balance on this note was approximately $15,000, of which $10,000 was classified as a non-current liability. At March 31,2013, the outstanding balance on this note was approximately $14,000, of which $9,000 was classified as a non-current liability.

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Condensed Consolidated Statements of Cash Flows (USD $)	3 Months Ended		198 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013
Cash flows from operating activities:
Net loss	$ (763,000)	$ (753,000)	$ (65,162,000)
Depreciation and amortization	32,000	16,000	2,744,000
Gain on sale / disposition of fixed assets	0	0	(57,000)
Gain on sale of Ice Engineering license	0	0	(1,900,000)
Loss on impairment of license	0	0	1,071,000
Expenses financed via note with related party	0	0	27,000
Impairment of goodwill	0	0	19,000
Common stock issued for services	0	0	13,844,000
Compensatory common stock	0	0	2,463,000
Shares issued for future consulting services	0	0	103,000
Common stock issued in connection with commercializing event plan	0	0	63,000
Stock-based compensation related to stock options and warrants	229,000	285,000	22,010,000
Compensation expense attributable to common stock in subsidiary	0	0	619,000
Stockholder contribution of services	0	0	4,220,000
Contribution to capital, Ford Truck	0	0	16,000
Reversal of liability	0	0	(1,541,000)
Accounts receivable	0	(60,000)	0
Inventories	(15,000)	0	(80,000)
Prepaid expenses and other current assets	(18,000)	28,000	132,000
Deferred liabilities	0	(2,000)	(91,000)
Change in accrued payroll taxes	(51,000)	(40,000)	23,000
Accounts payable and other accrued expenses	(32,000)	27,000	3,989,000
Net cash used in operating activities	(618,000)	(499,000)	(17,488,000)
Cash flows from investing activities:
Purchase of property and equipment	(11,000)	(6,000)	(524,000)
Cost of acquisition	0	0	(16,000)
Proceeds from sale of license	0	0	1,900,000
Proceeds from sale of fixed assets	0	0	59,000
Net cash (used in) provided by investing activities	(11,000)	(6,000)	1,419,000
Cash flows from financing activities:
Net proceeds from sales of common stock and upon exercise of options and warrants	0	0	9,223,000
Net proceeds from sales of preferred stock	0	0	9,931,000
Net proceeds from sale of subsidiary stock	0	0	234,000
Net proceeds from issuance of notes payable	0	0	57,000
Repayments of notes payable	(29,000)	(10,000)	(199,000)
Proceeds from loans	0	0	335,000
Repayments of loans	0	0	(109,000)
Repayment of officer & stockholder loans and advances	0	0	(147,000)
Distributions	0	0	(365,000)
Net cash (used in) provided by financing activities	(29,000)	(10,000)	18,960,000
Net (decrease) increase in cash and cash equivalents	(658,000)	(515,000)	2,891,000
Cash and cash equivalents at beginning of period	3,549,000	5,939,000	0
Cash and cash equivalents at end of period	2,891,000	5,424,000	2,891,000
Noncash investing and financing activities:
Preferred stock issued in payment of dividend	0	0	61,000
Issuance of common stock for license	0	0	3,405,000
Issuance of common stock, warrant and options in settlement of liabilities, except notes payable	0	0	2,907,000
Notes payable exchanged for common stock	0	0	50,000
Advance settled with common stock	0	0	25,000
Loss on exchange of noncontrolling interest	0	0	232,000
Shares issued for future consulting services	0	0	103,000
Issuance of common stock for a finder’s fee	0	0	225,000
Advance from stockholder	0	0	250,000
Contribution of FTV Ford Truck	0	0	16,000
Ice Engineering LLC payable netted against receivable	0	0	91,000
Common stock issued in settlement of director fee payable	0	0	121,000
Common stock issued in settlement of patent expense	0	0	117,000
Issuance of common stock as payment for Preferred A and B dividends	0	0	207,000
Purchases of fixed assets with debt	0	0	250,000
Supplemental Disclosures:
Interest paid	2,000	1,000	89,000
Income taxes paid	$ 0	$ 0	$ 1,000

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Note E - Accrued Liabilities

3 Months Ended

Mar. 31, 2013

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]

NOTE E — ACCRUED LIABILITIES

At March 31, 2013 and December 31, 2012, accrued liabilities consist of the following:

	March 31, 2013		December 31, 2012
Accrued Compensation	$	23,000	$	51,000
Accrued Payroll Taxes Payable		161,000		212,000
Accrued Legal		2,000		8,000
Other		11,000		7,000
	$	197,000	$	278,000

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Note G - Stockholders' Equity (Detail) (USD $)	1 Months Ended	3 Months Ended			198 Months Ended					3 Months Ended	183 Months Ended		1 Months Ended	3 Months Ended			3 Months Ended				121 Months Ended	3 Months Ended	132 Months Ended				0 Months Ended			3 Months Ended		9 Months Ended	12 Months Ended	0 Months Ended	3 Months Ended		78 Months Ended		3 Months Ended		12 Months Ended			3 Months Ended		12 Months Ended		1 Months Ended	3 Months Ended		12 Months Ended		3 Months Ended		12 Months Ended		3 Months Ended		12 Months Ended	99 Months Ended		3 Months Ended		12 Months Ended	1 Months Ended	3 Months Ended			12 Months Ended	3 Months Ended		12 Months Ended	3 Months Ended		12 Months Ended	3 Months Ended		12 Months Ended	3 Months Ended		12 Months Ended	3 Months Ended			1 Months Ended			3 Months Ended		12 Months Ended		132 Months Ended	133 Months Ended						3 Months Ended		12 Months Ended	97 Months Ended	103 Months Ended	127 Months Ended				27 Months Ended			4 Months Ended	12 Months Ended	27 Months Ended			1 Months Ended
	Mar. 31, 2012	Mar. 31, 2013		Mar. 31, 2012	Mar. 31, 2013		Dec. 31, 2012		Aug. 30, 2000	Mar. 31, 2013 Restricted Stock [Member]	Mar. 31, 2013 Stock Option Plan 1998 [Member]	Dec. 31, 1997 Stock Option Plan 1998 [Member]	Jan. 31, 2011 Stock Option Plan 2011 [Member]	Mar. 31, 2013 Stock Option Plan 2011 [Member]	Mar. 31, 2012 Stock Option Plan 2011 [Member]	Nov. 30, 2010 Stock Option Plan 2011 [Member]	Mar. 31, 2011 Non-Plan Options [Member] Special Advisor [Member]	Mar. 31, 2013 Non-Plan Options [Member]	Mar. 31, 2012 Non-Plan Options [Member]	Mar. 31, 2011 Non-Plan Options [Member]	Jan. 31, 2021 Non-Plan Options [Member]	Dec. 31, 2012 Replacement Options [Member]	Mar. 31, 2013 Replacement Options [Member]	Apr. 15, 2002 Warrant B1 [Member] Warrant B [Member]	Apr. 15, 2002 Warrant B2 [Member] Warrant B [Member]	Sep. 23, 2011 Convertible [Member] Series C Preferred Stock [Member]	Apr. 15, 2002 Warrant B [Member] Minimum [Member]	Apr. 15, 2002 Warrant B [Member] Maximum [Member]	Apr. 15, 2002 Warrant B [Member]	Mar. 31, 2013 Warrant B [Member]		Dec. 31, 2002 Warrant B [Member]	Dec. 31, 2003 Warrant B [Member]	Oct. 13, 2006 Warrant C [Member]	Mar. 31, 2013 Warrant C [Member]		Mar. 31, 2013 Warrant C [Member]		Mar. 31, 2013 Warrant D [Member]		Dec. 31, 2010 Warrant D [Member]	Dec. 31, 2005 Warrant D [Member]	Sep. 30, 2012 Warrant D [Member]	Mar. 31, 2013 Warrant E1 [Member]		Dec. 31, 2006 Warrant E1 [Member]	Dec. 31, 2005 Warrant E1 [Member]	Dec. 31, 2011 Warrant E2 [Member]	Mar. 31, 2013 Warrant E2 [Member]		Dec. 31, 2008 Warrant E2 [Member]	Dec. 31, 2006 Warrant E2 [Member]	Mar. 31, 2013 Warrant F [Member]		Dec. 31, 2005 Warrant F [Member]	Dec. 31, 2005 Warrant G [Member] Preferred Class A [Member]	Mar. 31, 2013 Warrant G [Member]		Dec. 31, 2006 Warrant G [Member]	Mar. 31, 2013 Warrant G [Member]		Mar. 31, 2013 Warrant H [Member]		Dec. 31, 2006 Warrant H [Member]	Oct. 31, 2010 Warrant I [Member]	Mar. 31, 2013 Warrant I [Member]		Dec. 31, 2010 Warrant I [Member]	Dec. 31, 2006 Warrant I [Member]	Mar. 31, 2013 Warrant J [Member]		Dec. 31, 2006 Warrant J [Member]	Mar. 31, 2013 Warrant K [Member]		Dec. 31, 2006 Warrant K [Member]	Mar. 31, 2013 Warrant L [Member]		Dec. 31, 2007 Warrant L [Member]	Mar. 31, 2013 Warrant M [Member]		Dec. 31, 2007 Warrant M [Member]	Mar. 31, 2013 Warrant N [Member]		Mar. 31, 2010 Warrant N [Member]	Sep. 30, 2011 Warrant O [Member]	Mar. 31, 2013 Warrant O [Member]		Mar. 31, 2013 Preferred Class A [Member]	Mar. 31, 2012 Preferred Class A [Member]	Dec. 31, 2012 Preferred Class A [Member]	Dec. 31, 2006 Preferred Class A [Member]	Mar. 31, 2013 Preferred Class A [Member]	Mar. 31, 2013 Preferred Class A [Member]	Dec. 31, 2013 Preferred Class A [Member]	Sep. 30, 2012 Preferred Class A [Member]	Dec. 31, 2011 Preferred Class A [Member]	Mar. 31, 2002 Preferred Class A [Member]	Sep. 30, 2012 Convertible Preferred Stock [Member]	Mar. 31, 2013 Preferred Class B [Member]	Mar. 31, 2012 Preferred Class B [Member]	Dec. 31, 2006 Preferred Class B [Member]	Sep. 30, 2012 Preferred Class B [Member]	Mar. 31, 2013 Preferred Class B [Member]	Mar. 31, 2013 Preferred Class B [Member]	Dec. 31, 2012 Preferred Class B [Member]	Dec. 31, 2004 Preferred Class B [Member]	Sep. 30, 2004 Preferred Class B [Member]	Mar. 31, 2013 Preferred Class C [Member]	Dec. 31, 2012 Preferred Class C [Member]	Sep. 30, 2011 Preferred Class C [Member]	Dec. 31, 2011 Series C Preferred Stock [Member]	Dec. 31, 2011 Series C Preferred Stock [Member]	Mar. 31, 2013 Series C Preferred Stock [Member]	Sep. 30, 2011 Series C Preferred Stock [Member]	Sep. 23, 2011 Series C Preferred Stock [Member]	Dec. 31, 2012 Nonvoting Common Stock [Member]	Jan. 31, 2011 Nonvoting Common Stock [Member]	Mar. 31, 2013 Minimum [Member]	Mar. 31, 2013 Maximum [Member]	Mar. 31, 2013 Estimate of Fair Value, Fair Value Disclosure [Member]
Preferred Stock, Shares Authorized		100,000,000			100,000,000		100,000,000		100,000,000																																																																															3,300,000		3,300,000		3,300,000	3,300,000				3,300,000		300,000				300,000	300,000	300,000		300,000	16,250,000	16,250,000	16,250,000
Preferred Stock, Par or Stated Value Per Share (in Dollars per share)		$ 0.01			$ 0.01		$ 0.01		$ 0.01																																																																																																								$ 0.40
Preferred Stock, Redemption Price Per Share (in Dollars per share)																																																																																								$ 0.40				$ 0.40	$ 0.40	$ 4.00												$ 5.00
Stock Issued During Period, Shares, New Issues																																																																																											162,000		765,512						0	0	20,000	97,500
Proceeds from Issuance of Preferred Stock and Preference Stock (in Dollars)		$ 0		$ 0	$ 9,931,000																																																																																$ 6,500,000								$ 3,062,000									$ 487,500									$ 6,500,000
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period																	100,000												1,000,000													12,500					95,000				195,000	100,000			60,000	62,500			135,849					20,500	400,000				400,000			200,000			30,000			50,000			100,000			100,000	1,625,000			0		0
Conversion of Stock, Shares Converted																																																																																								0	0			189,750											30,000										0
Dividends, Preferred Stock (in Dollars)		66,000		67,000	2,280,000																																																																																			0	0														51,000
Payments of Dividends (in Dollars)																																																																																												242,000
Preferred Stock Dividends, Shares																																																																																												11,339												0
Common Stock Dividends, Shares										0																																																																																		100,924								0			35,431
Preferred Stock, Shares Outstanding																																																																																								587,101		587,101		587,101	587,101					575,762	67,500				67,500	67,500	67,500			16,250,000	16,250,000
Dividends Payable (in Dollars)																																																																																																		1,846,000	260,000				260,000	260,000
Preferred Stock, Liquidation Preference, Value (in Dollars)																																																																																										1,788,000					1,846,000				260,000				260,000	260,000	251,000
Preferred Stock, Liquidation Preference Per Share (in Dollars per share)																																																																																																$ 4.00			$ 5.00				$ 5.00	$ 5.00
Preferred Stock, Dividends Per Share, Declared (in Dollars per share)																																																																																																			$ 0.50
Preferred Stock, Shares Issued																										16,250,000																																																														587,101		587,101		587,101	587,101						67,500				67,500	67,500	67,500			16,250,000	16,250,000						16,250,000
Class of Warrant or Right, Outstanding																														500,000	[1]			123,500	54,500	[2]	54,500	[2]	3,000	[3]			3,000	75,000	[4]				83,334	[4]			60,000	[5]			3,750	[6]		3,750	[6]	20,500	[7]			400,000	[8]			200,000	[9]		30,000	[10]		50,000	[11]		100,000	[12]		100,000	[13]			1,625,000	[14]																												1,625,000
Payments of Stock Issuance Costs (in Dollars)																																																																																																															106,000
Proceeds from Issuance of Preferred Stock, Net of Issuance Cost (in Dollars)																																																																																																															6,394,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																																																																																																																		1,625,000
Issuance of Warrants to Preferred Shareholders (in Dollars)		0		0	(812,000)																																																																																																							812,000
(in Dollars)		0		0	(6,345,000)																																																																																																											5,582,000
Preferred Stock, Value, Outstanding (in Dollars)																																																																																																												6,500,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized												2,000,000				3,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	250,000	0									1,823,895			0	250,000			0		1,350,000			405,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period		0									0							0	0																																						0									0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period											1,282,047			0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number		8,885,516	[15]		8,885,516	[15]	8,885,516	[15]			541,848			1,182,000				7,161,668
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized (in Dollars)		1,125,000			1,125,000						0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures													250,000																																																																																																							250,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)	$ 0.82	$ 0																																																																																																																		$ 0.70	$ 0.90
Share-based Compensation Arrangement by Share-based Payment Award, Description													10
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term	10 years	6 years 255 days
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period														125,250	62,750			337,500	337,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number														347,998				4,274,168				270,002
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant														1,818,000
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award																					10
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value (in Dollars)		680,000		605,000																	304,000
Share-based Compensation (in Dollars)		229,000		285,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share)				$ 0.74
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period																						98,332
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period																						36,666
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Exercise Price (in Dollars per share)																																																																																																																						$ 0.36	$ 5.00
Investment Warrants, Exercise Price (in Dollars per share)																											$ 0.30	$ 0.75		$ 0.75				$ 0.01	$ 0.01				$ 0.01			$ 0.01		$ 5.00		$ 5.00	$ 5.00		$ 5.00		$ 5.00		$ 0.01				$ 0.01					$ 1.00		$ 2,000		$ 0.44				$ 3.75			$ 5.00			$ 5.00			$ 5.00			$ 2.50
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number		5,164,014			5,164,014																			250,000	250,000					0					54,500		54,500		3,000					75,000					83,334				60,000				3,750			3,750		20,500				400,000				200,000			30,000			50,000			100,000			100,000				1,625,000
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Exercised																																250,000	250,000				69,000				6,000																			194,599
Proceeds from Warrant Exercises (in Dollars)																																75,000	125,000				690																							1,258
Class of Warrant or Right, Unissued																																		0
General and Administrative Expense (in Dollars)		508,000		554,000	49,926,000																																														249,000																	68,000										249,000			401,000			45,000
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Other																																																110,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price (in Dollars per share)		$ 0																																														$ 1.14							$ 5.00
Unamortized Share-based Compensation Cost Amount (in Dollars)																																																	16,000
Warrants and Rights Outstanding (in Dollars)																																																																																																																								$ 812,000
Warrants Without Determined Exercise Price Outstanding		1,750,000			1,750,000
Warrants Without Expiration Date Outstanding		783,500			783,500
Warrants Without Expiration Date Exercisable		158,500			158,500

[1] On April 15, 2002, we issued 1,000,000 warrants at prices ranging from $.30 to $.75 to our then chairman of the board of directors and chief executive officer. Of the total warrants, 250,000 were exercisable at $.30, and 250,000 were exercisable at $.50 on the date the then board elected the executive to the board and named him chief executive officer. During the year ended December 31, 2002, 250,000 warrants were exercised for $.30 per share, resulting in proceeds of $75,000. During the year ended December 31, 2003, 250,000 warrants were exercised for $.50 per share, resulting in proceeds of $125,000. The remaining 500,000 warrants are exercisable upon the occurrence of a significant transaction, which includes execution by us of a binding agreement for the sale, transfer, license or assignment for value of any and/or all of our automotive technology, at $.75 per share. We will record a charge representing the fair value of the warrants when the warrants become exercisable.

[2] We issued an aggregate 123,500 warrants at an exercise price of $0.01 with a ten year term to our nonmanagement directors for services rendered to the board under our Nonmanagement Directors Plan prior to its amendment on October 13, 2006. There are 0 further warrants issuable under the Plan as modified by the board of directors on October 13, 2006. An aggregate 69,000 warrants have been exercised for proceeds of $690.

[3] In 2005, we issued 12,500 warrants to consultants, immediately exercisable at $0.01 per common share. During 2005 and 2006, 3,500 of these warrants were exercised. During 2010, an additional 6,000 of these warrants were exercised. The 3,000 remaining outstanding warrants have no expiration date.

[4] In 2005, we issued 95,000 warrants to two engineering and administrative consultants, exercisable immediately at $5.00 per common share. During 2006, we issued an additional 100,000 warrants to these same consultants exercisable over a ten year term at $5.00 per common share, but only exercisable if there is a commercializing event as determined by the board of directors. During 2008, these warrants were cancelled and new warrants were issued to the same consultants for an aggregate 195,000 shares exercisable until 2016 at $5.00 per common share and conditioned upon the happening of a commercializing event as determined by the board. We recorded a charge of $249,000 in 2008 to general and administrative expense. In 2010, 95,000 of the total number of 195,000 warrants issued to these consultants were modified to eliminate both the term and the commercializing event condition for exercise. The charge related to the 2010 modification was insignificant. In December 2011, 110,000 of these outstanding warrants were amended so that they will be cancelled in conjunction with the vesting of stock options that were issued to replace such warrants, with each option having an exercise price of $1.14 per share, and proportionate vesting on each of the succeeding anniversary dates over a three year period. The approximately $16,000 expense related to the issuance of the stock options to replace the warrants is being amortized over the vesting period of the stock options. In the fourth quarter of 2012, 36,666 of these warrants were cancelled as the corresponding number of options vested.

[5] During 2005, we issued 60,000 warrants to an engineering consultant exercisable immediately at $5.00 per common share and with no expiration date.

[6] During 2005, we issued 62,500 warrants to investors in connection with their purchase of 62,500 Class A Preferred, immediately exercisable at $.01 per common share and with a ten year term. During 2006, we issued 135,849 warrants to investors along with their purchase of 162,000 Class A Preferred and 20,000 Class B Preferred, all immediately exercisable at $.01 per common share and with a ten year term. Through March 31, 2013, an aggregate of 194,599 of these warrants have been exercised for proceeds of approximately $1,258. There were 0 warrants exercised during the three month period ended March 31, 2013.

[7] During 2006, one investor purchased 20,500 warrants with no expiration date and an exercise price of $1.00 per common share, for a purchase price of $2,000.

[8] During 2006, we issued 400,000 warrants immediately exercisable for ten years at an exercise price of $3.27 per common share to a business consultant. Effective October 15, 2010, these warrants were modified and reissued upon the mutual agreement of the parties. Effective October 15, 2010, we issued 400,000 warrants immediately exercisable at $.44 per common share for a period of ten years from the modification date. As a result of the modification, we recorded a charge of $68,000 to general and administrative expenses in the fourth quarter of 2010. During the three month period ended March 31, 2013, 0 warrants were exercised.

[9] During 2006, we issued 200,000 warrants immediately exercisable for ten years at an exercise price of $3.75 per common share to a former governmental affairs consultant.

[10] In 2006, we issued 30,000 warrants to consultants exercisable immediately for a ten year term at $5.00 per common share.

[11] During 2007, we issued 50,000 warrants exercisable for ten years at $5.00 per common share upon the happening of a commercializing event. The warrants were issued to a consultant who assisted us to potentially place our products in various state school bus programs. We recorded a charge of $249,000 to general and administrative expenses.

[12] During 2007, we issued 100,000 warrants immediately exercisable for ten years at an exercise price of $5.00 per common share to two engineering consultants in connection with our engagement to furnish constant velocity joints to a military contractor. We recorded a charge of $401,000 to general and administrative expenses.

[13] On February 17, 2010, we issued 100,000 common stock warrants exercisable for ten years at an exercise price of $2.50 per common share to an adviser. We recorded a charge of $45,000 to general and administrative expenses in the first quarter of 2010.

[14] On September 23, 2011, we issued 1,625,000 common stock warrants in connection with the sale and issuance of a total of 16,250,000 shares of Series C Voting Convertible Preferred Stock in a private placement transaction, generating gross proceeds of $6,500,000. The warrants have a ten (10) year term and are immediately exercisable for 1,625,000 shares of common stock. The warrants are exercisable, at the holder's election, for shares of our common stock in either a cash or cashless exercise. The warrants have an exercise price equal to the greater of (i) $0.01 or (ii) eighty percent (80%) of the volume weighted average sale price per share of our common stock during the ten (10) consecutive trading days immediately preceding the notice of exercise. The number of warrants and exercise price are subject to adjustment in the event of the issuance of common stock as a dividend or distribution, and the subdivision or combination of the outstanding common stock. (See Note G[1](c).)We typically use the Black-Scholes option-pricing model to estimate the fair value of stock-based awards. However, for the 1,625,000 warrants issued in September 2011, the exercise price is variable based on 80% of the price of our common stock on the date of exercise. For the valuation of these particular warrants, we used a weighted average of assigned probabilities for various gain scenarios at certain price points based on expected volatility of approximately 136% over an assumed term of five years to estimate an overall value of these warrants, which amounted to approximately $812,000, or $.50 per warrant. These inputs are unobservable inputs based on our own assumptions used to measure the value of the instrument. Accordingly, these warrants are classified within Level 3 of the fair value hierarchy in accordance with FASB ASC 820.

[15] Note (A) - Figures include the impact of 405,000 options that were granted in 2011 to replace options / warrants previously granted to certain engineering personnel. The previously issued options / warrants will expire as the newer options vest on a one-to-one basis. During the fourth quarter of 2012, 134,998 of these options vested, and 98,332 previously issued options and 36,666 previously issued warrants were cancelled concurrently in conjunction with the vesting of the 2011 options, leaving 270,002 options remaining to vest.

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Note B - Summary Of Significant Accounting Policies (Detail) (USD $)	3 Months Ended		198 Months Ended			1 Months Ended	3 Months Ended		12 Months Ended			3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013	Dec. 31, 2012	Feb. 28, 2011	Mar. 31, 2012 IsoTorque Differential [Member]	Mar. 31, 2011 IsoTorque Differential [Member]	Mar. 31, 2013 Warrant [Member]	Dec. 31, 2012 Warrant [Member]	Mar. 31, 2013 Subsidiaries [Member]	Dec. 31, 2012 Subsidiaries [Member]	Mar. 31, 2013 Patents [Member]	Mar. 31, 2012 Patents [Member]
Equity Method Investment, Ownership Percentage										56.00%	56.00%
Allowance for Doubtful Accounts Receivable, Current (in Dollars)	$ 0		$ 0	$ 0
Depreciation, Depletion and Amortization (in Dollars)	32,000	16,000	2,744,000
Asset Impairment Charges (in Dollars)	0	0	1,071,000
Deferred Revenue (in Dollars)					120,000		120,000
Revenues (in Dollars)	0	60,000	512,000			60,000	30,000
Depreciation (in Dollars)	10,000	5,000
Research and Development Expense (in Dollars)	$ 258,000	$ 220,000	$ 18,417,000									$ 45,000	$ 43,000
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares)	29,108,682	28,973,631						625,000	625,000