UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-QSB (X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended JUNE 30, 2001 ( ) Transition report pursuant of Section 13 or 15(d) of the Securities Exchange Act of 1939 for the transition period ____ to______ COMMISSION FILE NUMBER 0-29185 ------- SAVE THE WORLD AIR INC. (Exact name of registrant as specified in its charter) Nevada 52-2088326 - ---------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1285 Avenue of the Americas, 35th Floor New York, NY 10019-6028 (212) 554 4197 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices, including Registrant's zip code and telephone number) - ---------------------- Former name, former address and former fiscal year, if changed Indicate by check mark 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 [X] No [ ] The number of shares of the registrant's common stock as of June 30, 2001: 16,007,058 shares. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] TABLE OF CONTENTS PAGE ----------------- ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (a) Balance Sheet 3 (b) Statement of Operations 4 (c) Statement of Cash Flows 5 (d) Statement of Stockholders' Equity 6 (e) Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION 10 Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults On Senior Securities Item 4. Submission of Items to a Vote Item 5. Other Information Item 6 (a) Exhibits (b) Reports on Form 8K SIGNATURES 11 2 SAVE THE WORLD AIR INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS AS OF JUNE 30, 2001 AND DECEMBER 31, 2000 (UNAUDITED) June 30, December 31, 2001 2000 ---------- ---------- ASSETS CURRENT ASSETS Cash at Bank $ - $ - ---------- ---------- - - FIXED ASSETS Marketing and Manufacturing Rights Zero Pollution Fuel Device 505,000 505,000 ---------- ---------- TOTAL ASSETS $ 505,000 $ 505,000 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 943 $ 4,354 Shareholder payable 989,619 857,555 ---------- ---------- TOTAL LIABILITIES 990,562 861,909 STOCKHOLDERS' EQUITY Common stock 200,000,000 shares authorized at $.001 par value 15,825,434 and 16,007,058 issued and outstanding at December 31, 2000 and June 30, 2001 respectively 16,007 15,645 Capital in excess of par 102,120 14,270 Accumulated Deficit (603,689) (386,824) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY (485,562) (356,909) ---------- ---------- TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 505,000 $ 505,000 ========== ========== The accompanying notes are an integral part of these financial accounts. 3 SAVE THE WORLD AIR INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 AND FOR THE PERIOD FROM INCEPTION TO JUNE 30, 2001 (UNAUDITED)
For the Six Months Ended ------------------------------------ June 30, June 30, Inception to 2001 2000 June 30, 2001 ---------------- ---------------- ---------------- INCOME Sale of Licenses for Distributorships $ - $ - $ 125,000 Consultancy Fees - 9,980 9,980 ---------------- ---------------- ---------------- - 9,980 134,980 ================ ================ ================ GENERAL AND ADMINISTRATIVE EXPENSES Accommodation and international expenses 16,280 40,811 86,098 Accounting and Auditing 2,800 4,875 22,575 Automotive testing expenses 6,800 - 6,800 Bank Charges 30 873 4,479 Car Hire 6,578 4,865 13,697 Computer Services 180 2,597 10,748 Consulting Fees - 65,027 131,406 Filing Fees 308 1,581 4,998 Internet Services 360 3,337 3,485 Legal Fees 43,200 - 43,908 Mineral Claims Written Off - - 3,151 Miscellaneous 2,723 - 5,001 Office Expense 672 - 672 Printing and Postage 550 221 3,446 Professional Fees 1,200 1,021 65,965 Radio and PR Fees - 13,594 23,594 Rent 2,540 1,216 4,408 Secretarial Fees 2,400 866 25,871 Telephone Fees 2,777 4,393 15,413 Transfer Agents Fees 9,084 13,018 27,440 Travel, airline, and other travel related costs 31,421 40,508 148,551 Compensatory Element of Stock Issuances Legal Fees 45,229 - 45,230 Charitable Contributions 25,000 - 25,000 Public Relations 9,833 - 9,833 Consulting Fees 6,900 - 6,900 ---------------- ---------------- ---------------- TOTAL COSTS 216,865 198,803 738,669 ---------------- ---------------- ---------------- Profit (Loss) for Period $ (216,865) $ (188,823) $ (603,689) ================ ================ ================ Shares outstanding 16,007,058 15,579,222 ================ ================ Gain (Loss) per Common Share $ (0.14) $ (0.12) ================ ================ The accompanying notes are an integral part of these financial statements.
4 SAVE THE WORLD AIR INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 AND FOR THE PERIOD FROM INCEPTION TO JUNE 30, 2001 (UNAUDITED) For the Three Months Ended ------------------------------------ June 30, June 30, 2001 2000 ---------------- ---------------- INCOME Sale of Licenses for Distributorships $ - $ - Consultancy Fees - - ---------------- ---------------- - - ================ ================ GENERAL AND ADMINISTRATIVE EXPENSES Accommodation and international expenses 11,111 40,811 Accounting and Auditing 1,760 4,875 Automotive testing expenses 6,800 - Bank Charges 30 873 Car Hire 4,850 4,865 Computer Services 180 2,597 Consulting Fees - 65,027 Filing Fees 308 616 Internet Services - 3,337 Legal Fees 43,200 - Mineral Claims Written Off - - Miscellaneous 223 - Office Expense 500 - Printing and Postage 550 221 Professional Fees 1,200 601 Radio and PR Fees - 7,594 Rent 1,000 1,216 Secretarial Fees 2,400 - Telephone Fees 2,304 4,393 Transfer Agents Fees 7,200 12,233 Travel, airline, and other travel related costs 10,912 39,722 Compensatory Element of Stock Issuances Legal Fees 7,730 - Charitable Contributions 25,000 - Public Relations 2,458 - Consulting Fees 6,900 - ---------------- ---------------- TOTAL COSTS 136,615 188,981 ---------------- ---------------- Profit (Loss) for Period $ (136,615) $ (188,981) ================ ================ Shares outstanding 16,007,058 15,579,222 ================ ================ Gain (Loss) per Common Share $ (0.14) $ (0.12) ================ ================ The accompanying notes are an integral part of these financial statements. 5 SAVE THE WORLD AIR INC. (DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED)
Six months ended June 30, 2001 2000 ------------- ------------- CASH FLOW FROM OPERATING ACTIVITIES Net gain (loss) during development stage $ (216,865) $ (188,823) Adjustment to reconcile net income (loss) to net cash Common shares value issued for services 87,867 - Increase (decrease) in operating liabilities Accounts payable (3,431) - ------------- ------------- Net cash flow from operating activities (132,429) (188,823) CASH FLOW FROM FINANCING ACTIVITIES Loans from shareholder 132,064 187,946 Proceeds from issuance of stock 365 282 ------------- ------------- Net cash flow from financing activities 132,429 188,228 ------------- ------------- Net cash from all activities - (595) Cash balance at year end - 595 ------------- ------------- Cash balance at March 31 $ - $ - ============= ============= The accompanying notes are an integral part of these financial statements.
6 SAVE THE WORLD AIR INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF SHAREHOLDERS' EQUITY FOR THE PERIOD ENDED JUNE 30, 2001 (UNAUDITED)
Common Stock --------------------------------------------------- Deficit accumulated Number of Issued at par Paid in during development shares capital stage -------------- ---------------- ------------- ------------- Balance at December 31, 1998 10,030,000 $ 10,030 $ 14,270 $ (21,307) Common stock issued for acquisition of rights to Zero Pollution Fuel Saving Device 5,000,000 5,000 Common Stock issued for services rendered at par value $0.001 237,125 267 Net (Loss) during development stage (2,665) -------------- ---------------- ------------- ------------- Balance at December 31, 1999 15,297,125 $ 15,297 $ 14,270 $ (23,972) Issuance of Common Stock for services rendered at par value $0.001 348,810 348 Net (loss) during development stage (362,852) -------------- ---------------- ------------- ------------- Balance at December 31, 2000 15,645,935 $ 15,645 $ 14,270 $ (386,824) Issuance of Common Stock for services rendered at par value $0.001 361,123 362 87,850 Net (loss) for the period (216,865) -------------- ---------------- ------------- ------------- Balance at June 30, 2001 16,007,058 $ 16,007 $ 102,120 $ (603,689) ============== ================ ============= ============= The accompanying notes are an integral part of these financial statements.
7 SAVE THE WORLD AIR INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED) 1. DESCRIPTION OF THE BUSINESS The Company was incorporated on February 18, 1998 under the name "Mandalay Capital Corp.". The Company changed its name to "Save the World Air, Inc." on February 11, 1999 following the signing of the agreement by and between the Company and Jeffrey Muller with respect to the Company's purchase of "Zero Emissions Fuel Saver Device (ZEFS)". Under the terms of the agreement, the Company issued 5,000,000 shares of its common stock to Mr. Muller and agreed to pay $500,000 and $10 royalty for every unit of the device sold. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with generally accepted accounting principles and include the following policies. (a) BASIS OF PRESENTATION - GOING CONCERN The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The company has been engaged in the development of its zero emissions fuel saving device (ZEFS). The Company's ability to meet its obligations and successfully develop its project and, ultimately, to attain profitable operations is dependent upon further developing and marketing the device known as ZEFS and obtaining additional financing from either third parties or its present stockholders. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financials statements and accompanying notes. Actual results could differ from those estimates. (b) ACCOUNTING METHODS The Company recognizes income and expenses based on the accrual method of accounting. (c) DIVIDEND POLICY The Company has not yet adopted any policy regarding the payment of dividends. (d) LOSS PER SHARE Primary loss per share amount is computed based on the weighted average number of shares actually outstanding during the period reported on. Fully diluted loss per share is computed under the same basis since there are not warrants or share subscriptions outstanding. (e) INCOME TAXES The Company has a operating loss carry-forward incurred from inception to December 31, 1999 in the amount of $23,972. No tax benefit from the operating loss carried forward has been recorded because the future tax benefit is uncertain. The net operating loss carryover will expire beginning in the year 1999 through 2013. 8 (g) FOREIGN CURRENCY TRANSLATION The transactions of the Company completed in foreign currencies have been translated to US dollars. Assets and liabilities are translated at the year end exchange rates and the income and expenses at the average rates of exchange prevailing during the period reported on. Any gains or loss resulting from the translations would be shown in the Statement of Operations. (h) START UP EXPENSES The Company has expensed all start up expenses in accordance with AICPA Statements of Position 98-5. (i) STOCK ISSUED IN EXCHANGE FOR SERVICES Stock issued in exchange for services were valued at $.25 per share. 3. RELATED PARTY TRANSACTIONS All of the marketing and manufacturing rights for the Zero Pollution Fuel Saving Device were acquired from Jeffrey Muller, the Company's officer and sole director for 5,000,000 shares, $500,000 and a $10 royalty for each unit sold, pursuant to the agreement entered into in December 1998, by and between the Company and Mr. Muller. Mr. Muller, the majority stockholder, is active in running the business of the Company. No compensation is paid and the Company has reflected no expense in the Statement of Operations. In January 2000, the Company entered into an agreement offering Jeffrey Muller and Lyn Muller, Mr. Muller's wife, the rights to purchase five million shares each at $0.10 per share (current market price as of the date of grant) as consideration for work done for the Company. 4. LEASES The Company has no leases with respect to any property. The Company presently rents an office for $250 per month at 1285 Avenue of the Americas, 35th Floor, New York, N.Y. 10019-6029 and also the office of one of its shareholders in Australia at no cost to the Company. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ALL FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE DEEMED BY THE COMPANY TO BE COVERED BY AND TO QUALIFY FOR THE SAFE HARBOR PROTECTION PROVIDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 THE 1995 ACT SHAREHOLDERS AND PROSPECTIVE SHAREHOLDERS SHOULD UNDERSTAND THAT SEVERAL FACTORS GOVERN WHETHER ANY FORWARD-LOOKING STATEMENT CONTAINED HEREIN WILL BE OR CAN BE ACHIEVED. ANY ONE OF THOSE FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED HEREIN. THESE FORWARD-LOOKING STATEMENTS INCLUDE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, INCLUDING PLANS AND OBJECTIVES RELATING TO THE PRODUCTS AND THE FUTURE ECONOMIC PERFORMANCE OF THE COMPANY. ASSUMPTIONS RELATING TO THE FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS, FUTURE BUSINESS DECISIONS, AND THE TIME AND MONEY REQUIRED TO SUCCESSFULLY COMPLETE DEVELOPMENT PROJECTS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY OF THOSE ASSUMPTIONS COULD PROVE INACCURATE AND, THEREFORE, THERE CAN BE NO ASSURANCE THAT THE RESULTS CONTEMPLATED IN ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN WILL BE REALIZED. BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENT, THE COMPANY MAY ALTER ITS MARKETING, CAPITAL EXPENDITURE PLANS OR OTHER BUDGETS, WHICH MAY IN TURN AFFECT THE COMPANY'S RESULTS OF OPERATIONS. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED THEREIN, THE INCLUSION OF ANY SUCH STATEMENT SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES OR PLANS OF THE COMPANY WILL BE ACHIEVED. The Company was incorporated in February 1998 and the sole purpose of the Company is the manufacture and distribution of the device commonly referred to as the Zero Emission Fuel Saving Device ("ZEFS"). The Company has yet to make a profit and the Board of Directors believe that the Company will not make a profit in the immediate future. The purpose of the Company is to develop the technology and then to sell licenses world wide for the distribution of the device. At the same time, the Company continues to research and develop the product for increasing technological efficiency. It is also examining the market capabilities of other new environmentally friendly technologies. Obviously the Company does not have sufficient liquidity or the funding surplus to continue without help either its research and development or its day-to-day operations. These costs are being met from the personal resources of the majority shareholder, officer and director. Once the Company reaches a level of profitability, the shareholder's loans will be expected to be repaid by the Company. This shareholder has not placed an upper limit on the Company expenditure, but the Company anticipates that its reliance on this shareholder will diminish within the next two fiscal quarters as distribution licenses are sold within mainland America and other countries. The comparison of the six month quarter ended June 30, 2000 and the six months ended June 30, 2001 indicates that the Company has maintained its level of spending on Company operations. Marketing efforts will be stepped up as finances allow. The Company will continue in its efforts to raise capital. There can be no assurance that the Company will be able to obtain capital. QUARTERLY REVIEWS The Company's 10-QSB filing for the period ended June 30, 2001 was not reviewed by its independent certified public accountants in accordance with Statement of Auditing Standards No. 71, "Interim Financial Information", as required by the Securities and Exchange Commission. Management intends to file an amended 10-QSB in the near term that has been reviewed by its current independent certified public accountants. 10 PART II. OTHER INFORMATION Item 1. Legal proceedings NONE Item 2. Changes in securities and use of proceeds NONE Item 3. Defaults on senior securities NONE Item 4. Submission of items to a vote NONE Item 5. Other information NONE Item 6. a) Exhibits b) Reports on 8K NONE 11 SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. SAVE THE WORLD AIR, INC. (REGISTRANT) Signature Title Date - --------- ----- ---- /s/ Jeffrey A. Muller Chairman and President August 22, 2001 - --------------------------- (Jeffrey A. Muller) 12