x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Nevada
|
52-2088326
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
Large
accelerated filer
o
|
Accelerated
filer o
|
Non-accelerated
filer o (Do
not check if a smaller reporting company)
|
Smaller
reporting company x
|
Page | |||
PART
I
|
3 | ||
ITEM
1. Financial Statements
|
3 | ||
Condensed
consolidated balance sheets (unaudited)
|
3 | ||
Condensed
consolidated statements of operations (unaudited)
|
4 | ||
Condensed
consolidated statement of changes in stockholders’ deficiency
(unaudited)
|
5 | ||
Condensed
consolidated statements of cash flows (unaudited)
|
14 | ||
Notes
to condensed consolidated financial statements
(unaudited)
|
16 | ||
ITEM
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
|
29 | ||
ITEM
3. Quantitative and Qualitative Disclosure About Market
Risk
|
38 | ||
ITEM
4. Controls and Procedures
|
38 | ||
PART
II
|
40 | ||
ITEM
1. Legal Proceedings
|
40 | ||
ITEM
1A. Risk Factors
|
41 | ||
ITEM
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
41 | ||
ITEM
3. Defaults Upon Senior Securities
|
42 | ||
ITEM
4. Submission of Matters to a Vote of Security
Holders
|
42 | ||
ITEM
5. Other Information
|
43 | ||
ITEM
6. Exhibits
|
43 | ||
SIGNATURES
|
44 | ||
EXHIBIT
INDEX
|
45 | ||
EXHIBIT
31.1
|
|||
EXHIBIT
31.2
|
|||
EXHIBIT
32
|
September
30, 2009
(unaudited)
|
December
31,
2008
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
|
$
|
8,378
|
$
|
59,346
|
||||
Other
current assets
|
13,195
|
33,275
|
||||||
Total
current assets
|
21,573
|
92,621
|
||||||
Property and Equipment, net of
accumulated depreciation and amortization of $136,149
and $111,193, respectively
|
107,013
|
131,969
|
||||||
Other
assets
|
11,020
|
11,250
|
||||||
Total
assets
|
$
|
139,606
|
$
|
235,840
|
||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable-related parties
|
$
|
170,750
|
$
|
93,003
|
||||
Accounts
payable-License Agreements
|
852,750
|
716,500
|
||||||
Accounts
payable-other
|
497,269
|
384,467
|
||||||
Accrued
expenses
|
1,126,119
|
803,795
|
||||||
Accrued
professional fees
|
455,999
|
390,535
|
||||||
Loans
payable-related parties and shareholders
|
102,628
|
78,280
|
||||||
Convertible
debentures, net-related parties
|
56,832
|
12,466
|
||||||
Convertible
debentures, net-others
|
898,545
|
290,659
|
||||||
Total
current liabilities
|
$
|
4,160,892
|
2,769,705
|
|||||
Commitments
and contingencies
|
||||||||
Stockholders’
deficiency
|
||||||||
Common
stock, $.001 par value: 200,000,000 shares authorized, 65,959,620 and
62,940,891 shares issued and outstanding at September 30, 2009 and
December 31, 2008, respectively
|
65,960
|
62,941
|
||||||
Common
stock to be issued (97,059 shares at December 31,
2008)
|
-
|
16,500
|
||||||
Additional
paid-in capital
|
41,938,994
|
40,129,758
|
||||||
Deficit
accumulated during the development stage
|
(46,026,240)
|
(42,743,064
|
)
|
|||||
Total
stockholders’ deficiency
|
(4,021,286)
|
(2,533,865
|
)
|
|||||
Total
liabilities and stockholders’ deficiency
|
$
|
139,606
|
$
|
235,840
|
Three
months ended
September
30,
|
Nine
months ended
September
30,
|
For
the Period From February
18, 1998 (Date of Inception) through
|
||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
September
30, 2009
|
||||||||||||||||
Net
sales
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
69,000
|
||||||||||
Cost
of goods sold
|
-
|
-
|
-
|
-
|
24,120
|
|||||||||||||||
Gross
profit
|
-
|
-
|
-
|
-
|
44,880
|
|||||||||||||||
Operating
expenses
|
488,281
|
1,148,887
|
1,923,703
|
2,428,889
|
31,850,643
|
|||||||||||||||
Research
and development expenses
|
12,517
|
109,822
|
274,577
|
432,184
|
5,733,170
|
|||||||||||||||
Non-cash
patent settlement costs
|
-
|
-
|
-
|
-
|
1,610,066
|
|||||||||||||||
Loss
before other income (expense)
|
(500,798)
|
(1,258,709)
|
(2,198,280)
|
(2,861,073)
|
(39,148,999
|
)
|
||||||||||||||
Other
income (expense)
|
||||||||||||||||||||
Other
income (expense)
|
-
|
(30)
|
-
|
533
|
(1,140
|
)
|
||||||||||||||
Interest
income
|
-
|
-
|
-
|
2
|
16,342
|
|||||||||||||||
Interest
expense
|
(250,616)
|
|
(220,400
|
)
|
(1,084,896)
|
(708,959)
|
(7,039,202
|
)
|
||||||||||||
Loss
on sale of equipment
|
-
|
-
|
(9,683)
|
(14,426
|
)
|
|||||||||||||||
Settlement
of debt due Morale/Matthews
|
-
|
-
|
-
|
(927,903)
|
(927,903
|
)
|
||||||||||||||
Settlement
of litigation and debt
|
-
|
-
|
-
|
52,070
|
1,089,088
|
|||||||||||||||
Net
loss
|
$
|
(751,414)
|
|
$
|
(1,4,79,139)
|
$
|
(3,283,176)
|
$
|
(4,455,013)
|
$
|
(46,026,240
|
)
|
||||||||
Net
loss per share, basic and diluted
|
$
|
(0.01)
|
|
$
|
(0.03)
|
$
|
(0.05)
|
$
|
(0.10)
|
|||||||||||
Weighted
average shares outstanding, basic and diluted
|
65,653,349
|
47,312,880
|
64,891,529
|
45,374,117
|
Price
per
|
Common
Stock
|
Common
Stock
to
be
|
Additional
Paid-in
|
Deferred
|
Deficit
Accumulated
During
the
Development
|
Total
Stockholders’
|
|||||||||||||||||||||||||
Share
|
Shares
|
Amount
|
Issued
|
Capital
|
Compensation
|
Stage
|
Deficiency
|
||||||||||||||||||||||||
Balance, February 18,
1998 (date of inception)
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||||||||
Issuance
of common stock on April 18, 1998
|
.0015 -
.01
|
10,030,000
|
10,030
|
—
|
14,270
|
—
|
—
|
24,300
|
|||||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(21,307
|
)
|
(21,307
|
)
|
||||||||||||||||||||||
Balance,
December 31, 1998
|
10,030,000
|
$
|
10,030
|
$
|
—
|
14,270
|
$
|
—
|
$
|
(21,307
|
)
|
$
|
2,993
|
||||||||||||||||||
Issuance
of common stock on May 18, 1999
|
1.00 -
6.40
|
198,003
|
198
|
—
|
516,738
|
—
|
—
|
516,936
|
|||||||||||||||||||||||
Issuance
of common stock for ZEFS on September 14, 1999
|
.001
|
5,000,000
|
5,000
|
—
|
—
|
—
|
—
|
5,000
|
|||||||||||||||||||||||
Stock
issued for professional services on May 18, 1999
|
0.88
|
69,122
|
69
|
—
|
49,444
|
—
|
—
|
49,513
|
|||||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(1,075,264
|
)
|
(1,075,264
|
)
|
||||||||||||||||||||||
Balance,
December 31, 1999
|
15,297,125
|
$
|
15,297
|
$
|
—
|
$
|
580,452
|
$
|
—
|
$
|
(1,096,571
|
)
|
$
|
(500,822
|
)
|
Price
per
|
Common
Stock
|
Common
Stock
to
be
|
Additional
Paid-in
|
Deferred
|
Deficit
Accumulated
During
the
Development
|
Total
Stockholders’
|
||||||||||||||||||
Share
|
Shares
|
Amount
|
Issued
|
Capital
|
Compensation
|
Stage
|
Deficiency
|
|||||||||||||||||
Balance,
December 31, 1999
|
15,297,125
|
$
|
15,297
|
$
|
—
|
$
|
580,452
|
$
|
—
|
$
|
(1,096,571
|
) |
$
|
(500,822
|
)
|
|||||||||
Issuance
of common stock for services
|
$0.38 -
$5.31
|
305,810
|
306
|
—
|
588,704
|
—
|
—
|
589,010
|
||||||||||||||||
Stock
issued for employee compensation on February 8, 2000
|
$1.03-$5.31
|
42,000
|
42
|
—
|
137,378
|
—
|
—
|
137,420
|
||||||||||||||||
Stock
issued for directors fees
|
$3.38-$4.44
|
56,000
|
56
|
—
|
195,584
|
—
|
—
|
195,640
|
||||||||||||||||
Common
stock cancelled
|
(55,000
|
) |
(55
|
) |
(64,245
|
) |
(64,300
|
)
|
||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(1,270,762
|
)
|
(1,270,762
|
)
|
|||||||||||||||
Balance,
December 31, 2000
|
15,645,935
|
15,646
|
—
|
1,437,873
|
—
|
(2,367,333
|
)
|
(913,814
|
)
|
|||||||||||||||
Issuance
of common stock for services
|
$0.25-$1.65
|
1,339,912
|
1,340
|
—
|
1,031,231
|
—
|
—
|
1,032,571
|
||||||||||||||||
Stock
issued for directors fees
|
$0.60-$0.95
|
1,100,000
|
1,100
|
1,008,900
|
1,010,000
|
|||||||||||||||||||
Intrinsic
value of options issued to employees
|
2,600,000
|
(2,600,000)
|
—
|
|||||||||||||||||||||
Fair
value of options issued to non-employees
|
142,318
|
142,318
|
||||||||||||||||||||||
Amortization
of deferred compensation
|
191,667
|
191,667
|
||||||||||||||||||||||
Net
loss
|
(2,735,013
|
) |
(2,735,013
|
)
|
||||||||||||||||||||
Balance,
December 31, 2001
|
18,085,847
|
$
|
18,086
|
$
|
—
|
$
|
6,220,322
|
$
|
(2,408,333
|
) |
$
|
(5,102,346
|
)
|
$
|
(1,272,271
|
) |
Price
per
|
Common
Stock
|
Common
Stock
to
be
|
Additional
Paid-in
|
Deferred
|
Deficit
Accumulated
During
the
Development
|
Total
Stockholders’
|
|||||||||||||||||||||||||
Share
|
Shares
|
Amount
|
Issued
|
Capital
|
Compensation
|
Stage
|
Deficiency
|
||||||||||||||||||||||||
Balance,
December 31, 2001
|
18,085,847
|
$
|
18,086
|
$
|
—
|
$
|
6,220,322
|
$
|
(2,408,333
|
) |
$
|
(5,102,346
|
) |
$
|
(1,272,271
|
) | |||||||||||||||
Stock
issued for directors fees
|
0.40
|
2,150,000
|
2,150
|
—
|
857,850
|
—
|
—
|
860,000
|
|||||||||||||||||||||||
Common
stock sold (2,305,000
shares)
|
0.15-0.25
|
—
|
—
|
389,875
|
—
|
—
|
—
|
389,875
|
|||||||||||||||||||||||
Fair
value of options issued to non-employees for services
|
—
|
—
|
—
|
54,909
|
(54,909
|
)
|
—
|
—
|
|||||||||||||||||||||||
Amortization
of deferred compensation
|
—
|
—
|
—
|
—
|
891,182
|
—
|
891,182
|
||||||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(2,749,199
|
)
|
(2,749,199
|
)
|
||||||||||||||||||||||
Balance,
December 31, 2002
|
20,235,847
|
20,236
|
389,875
|
7,133,081
|
(1,572,060)
|
(7,851,545
|
)
|
(1,880,413
|
)
|
||||||||||||||||||||||
Common
stock issued previously paid for
|
0.15-0.25
|
2,305,000
|
2,305
|
(433,750
|
)
|
431,445
|
—
|
—
|
—
|
||||||||||||||||||||||
Sale
of common stock
|
$ |
0.25
|
9,504,000
|
9,504
|
2,366,439
|
—
|
—
|
2,375,943
|
|||||||||||||||||||||||
Issuance
of common stock for services
|
$ |
0.55
|
83,414
|
83
|
—
|
45,794
|
—
|
—
|
45,877
|
||||||||||||||||||||||
Common
stock issued for convertible debt
|
$ |
0.25
|
2,000,000
|
2,000
|
498,000
|
—
|
—
|
500,000
|
|||||||||||||||||||||||
Finders’
fees related to stock issuances
|
—
|
—
|
43,875
|
(312,582
|
)
|
—
|
—
|
(268,707
|
) | ||||||||||||||||||||||
Common
stock
sold
(25,000
shares)
|
0.25
|
—
|
—
|
6,250
|
—
|
—
|
—
|
6,250
|
|||||||||||||||||||||||
Amortization
of deferred comp
|
—
|
—
|
—
|
—
|
863,727
|
—
|
863,727
|
||||||||||||||||||||||||
Net
loss
|
(2,476,063
|
) |
(2,476,063
|
) | |||||||||||||||||||||||||||
Balance,
December 31, 2003
|
34,128,261
|
$
|
34,128
|
$
|
6,250
|
$
|
10,162,177
|
$
|
(708,333
|
) |
$
|
(10,327,608
|
)
|
$
|
(833,386
|
)
|
Price
per
|
Common
Stock
|
Common
Stock
to
be
|
Additional
Paid-in
|
Deferred
|
Deficit
Accumulated
During
the
Development
|
Total
Stockholders’
|
||||||||||||||||||||||||
Share
|
Shares
|
Amount
|
Issued
|
Capital
|
Compensation
|
Stage
|
Deficiency
|
|||||||||||||||||||||||
Balance,
December 31, 2003
|
34,128,261
|
$
|
34,128
|
$
|
6,250
|
$
|
10,162,177
|
$
|
(708,333
|
) |
$
|
(10,327,608
|
)
|
$
|
(833,386
|
) | ||||||||||||||
Common
stock issued previously
paid for
|
$ |
.25
|
25,000
|
25
|
(6,250)
|
6,225
|
—
|
|||||||||||||||||||||||
Sale
of common stock
|
$ |
1.00
|
1,272,500
|
1,273
|
119,000
|
1,271,227
|
—
|
—
|
1,391,500
|
|||||||||||||||||||||
Stock
issued for services
|
$ |
.15-$1.70
|
1,268,560
|
1,
|
1,268
|
1,388,663
|
1,389,931
|
|||||||||||||||||||||||
Stock
issued for directors fees
|
$ |
1.50
|
50,000
|
50
|
—
|
74,950
|
—
|
—
|
75,000
|
|||||||||||||||||||||
Common
stock issued for convertible debt
|
$ |
1.53
|
60,000
|
60
|
91,740
|
—
|
—
|
91,800
|
||||||||||||||||||||||
Common
stock issued upon exercise of warrants and options
|
$ |
.20
-$.40
|
960,500
|
960
|
—
|
193,240
|
—
|
—
|
194,200
|
|||||||||||||||||||||
Common
stock issued for patent settlement
|
$ |
1.24
|
20,000
|
20
|
24,780
|
24,800
|
||||||||||||||||||||||||
Fair
value of warrants issued
|
1,614,138
|
1,614,138
|
||||||||||||||||||||||||||||
Fair
value of options issued to employees
|
—
|
—
|
—
|
248,891
|
(248,891
|
)
|
—
|
—
|
||||||||||||||||||||||
Fair
value of options issued to non-employees
|
—
|
—
|
—
|
55,381
|
(55,381
|
)
|
—
|
—
|
||||||||||||||||||||||
Amortization
of deferred compensation
|
—
|
—
|
—
|
—
|
936,537
|
—
|
936,537
|
|||||||||||||||||||||||
Finders’
fees related to stock issuances
|
(88,384
|
) | ||||||||||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(6,803,280
|
)
|
(6,803,280
|
)
|
|||||||||||||||||||||
Balance,
December 31, 2004
|
37,784,821
|
$
|
37,784
|
$
|
119,000
|
$
|
15,043,028
|
$
|
(76,068
|
) |
$
|
(17,130,888
|
)
|
$
|
(2,007,144
|
)
|
Price
per
|
Common
Stock
|
Common
Stock
to
be
|
Additional
Paid-in
|
Deferred
|
Deficit
Accumulated
During
the
Development
|
Total
Stockholders’
|
|||||||||||||||||||||
Share
|
Shares
|
Amount
|
Issued
|
Capital
|
Compensation
|
Stage
|
Deficiency
|
||||||||||||||||||||
Balance,
December 31, 2004
|
37,784,821
|
$
|
37,784
|
$
|
119,000
|
$
|
15,043,028
|
$
|
(76,068
|
) |
$
|
(17,130,888
|
)
|
$
|
(2,007,144
|
) | |||||||||||
Common
stock issued previously paid for
|
$1.00
|
119,000
|
119
|
(119,000
|
) |
118,881
|
—
|
—
|
—
|
||||||||||||||||||
Sale
of common stock
|
$1.00
|
1,530,500
|
1,530
|
1,528,970
|
—
|
—
|
1,530,500
|
||||||||||||||||||||
Common
stock issued upon exercise of warrants
|
$.40
- $1.00
|
500
|
1
|
—
|
199
|
—
|
—
|
200
|
|||||||||||||||||||
Common
stock to be issued for settlement of payables
|
612,521
|
612,521
|
|||||||||||||||||||||||||
Fair
value of options issued for settlement costs
|
31,500
|
31,500
|
|||||||||||||||||||||||||
Fair
value of warrants issued
|
18,462
|
18,462
|
|||||||||||||||||||||||||
Fair
value of warrants issued and intrinsic value of beneficial conversion
associated with convertible notes
|
1,453,181
|
1,453,181
|
|||||||||||||||||||||||||
Fair
value of options issued to employees
|
—
|
—
|
—
|
243,750
|
(243,750
|
)
|
—
|
—
|
|||||||||||||||||||
Amortization
of deferred compensation
|
—
|
—
|
—
|
—
|
177,631
|
—
|
177,631
|
||||||||||||||||||||
Finders’
fees related to stock issuances
|
(109,840
|
) |
(109,840
|
) | |||||||||||||||||||||||
Common
stock cancelled
|
(8,047,403
|
) |
(8,047
|
) |
8,047
|
—
|
|||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(3,115,186
|
)
|
(3,115,186
|
)
|
||||||||||||||||||
Balance,
December 31, 2005
|
31,387,418
|
$
|
31,387
|
$
|
612,521
|
$
|
18,336,178
|
$
|
(142,187
|
) |
$
|
(20,246,074
|
)
|
$
|
(1,408,175
|
)
|
Price
per
|
Common
Stock
|
Common
Stock
to
be
|
Additional
Paid-in
|
Deferred
|
Deficit
Accumulated
During
the
Development
|
Total
Stockholders’
|
|||||||||||||||||||||
Share
|
Shares
|
Amount
|
Issued
|
Capital
|
Compensation
|
Stage
|
Deficiency
|
||||||||||||||||||||
Balance,
December 31, 2005
|
31,387,418
|
$
|
31,387
|
$
|
612,521
|
$
|
18,336,178
|
$
|
(142,187)
|
$
|
(20,246,074
|
)
|
$
|
(1,408,175
|
) | ||||||||||||
Common
stock issued previously paid for
|
846,549
|
847
|
(612,521
|
) |
611,674
|
—
|
—
|
—
|
|||||||||||||||||||
Sale
of common stock
|
$1.00
- $1.89
|
1,360,537
|
1,360
|
60,000
|
2,401,048
|
—
|
—
|
2,462,408
|
|||||||||||||||||||
Common
stock issued upon exercise of warrants
|
$.50
- $1.50
|
2,583,533
|
2,584
|
—
|
1,794,944
|
—
|
—
|
1,797,528
|
|||||||||||||||||||
Common
stock to be issued for convertible debt
|
$.70
|
3,416,186
|
3,417
|
2,356,449
|
2,359,866
|
||||||||||||||||||||||
Common
stock to be issued for out of line of credit
|
$.55
- $1.22
|
487,483
|
|
487
|
379,610
|
380,097
|
|||||||||||||||||||||
Fair
value of options issued to employees
|
—
|
—
|
—
|
2,253,263
|
—
|
2,253,263
|
|||||||||||||||||||||
Fair
value of options issued for settlement costs
|
31,500
|
31,500
|
|||||||||||||||||||||||||
Fair
value of warrants issued for services
|
463,627
|
463,627
|
|||||||||||||||||||||||||
Fair
value of warrants issued and intrinsic value of beneficial conversion
associated with convertible notes
|
1,259.696
|
1,259,696
|
|||||||||||||||||||||||||
Write
off of deferred compensation
|
—
|
—
|
—
|
(142,187
|
) |
142,187
|
—
|
—
|
|||||||||||||||||||
Finders’
fees related to stock issuances
|
(284,579
|
) |
(284,579
|
) | |||||||||||||||||||||||
Fees
paid on equity line of credit
|
(30,402
|
) |
(30,402
|
) | |||||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(10,181,523
|
)
|
(10,181,523
|
)
|
||||||||||||||||||
Balance,
December 31, 2006
|
40,081,757
|
$
|
40,082
|
$
|
60,000
|
$
|
29,430,821
|
$
|
—
|
$
|
(30,427,597
|
)
|
$
|
(896,694
|
)
|
Price
per
|
Common
Stock
|
Common
Stock
to
be
|
Additional
Paid-in
|
Deficit
Accumulated
During
the
Development
|
Total
Stockholders’
|
||||||||||||||||||||
Share
|
Shares
|
Amount
|
Issued
|
Capital
|
Stage
|
Deficiency
|
|||||||||||||||||||
Balance,
December 31, 2006
|
40,081,757
|
$
|
40,082
|
$
|
60,000
|
$
|
29,430,821
|
$
|
(30,427,597
|
)
|
$
|
(896,694
|
) | ||||||||||||
Common
stock issued previously paid for
|
2,597,524
|
2,598
|
(60,000
|
) |
57,402
|
—
|
—
|
||||||||||||||||||
Common
stock to be issued for convertible debt
|
$.17
- $.53
|
1,910,711
|
1,911
|
524,569
|
526,480
|
||||||||||||||||||||
Common
stock issued for put of line of
credit
|
$.27
- $.73
|
1,880,421
|
1,880
|
990,175
|
992,055
|
||||||||||||||||||||
Common
stock granted for services
|
4,000
|
4,000
|
|||||||||||||||||||||||
Fair
value of options issued to employees
|
—
|
—
|
—
|
67,592
|
—
|
67,592
|
|||||||||||||||||||
Fair
value of warrants issued for services
|
35,340
|
35,340
|
|||||||||||||||||||||||
Fair
value of warrants issued and intrinsic value of beneficial conversion
associated with convertible notes
|
1,253,548
|
1,253,548
|
|||||||||||||||||||||||
Fees
paid on equity line of credit
|
(79,364
|
) |
(79,364
|
) | |||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
(6,262,743
|
)
|
(6,262,743
|
)
|
|||||||||||||||||
Balance,
December 31, 2007
|
46,470,413
|
$
|
46,471
|
$
|
4,000
|
$
|
32,280,083
|
$
|
(36,690,340
|
)
|
$
|
(4,359,786
|
)
|
Price
per
|
Common
Stock
|
Common
Stock
to
be
|
Additional
Paid-in
|
Deficit
Accumulated
During
the
Development
|
Total
Stockholders’
|
||||||||||||||||||||
Share
|
Shares
|
Amount
|
Issued
|
Capital
|
Stage
|
Deficiency
|
|||||||||||||||||||
Balance,
December 31, 2007
|
46,470,413
|
$
|
46,471
|
$
|
4,000
|
$
|
32,280,083
|
$
|
(36,690,340
|
)
|
$
|
(4,359,786
|
)
|
||||||||||||
Common
stock issued for convertible debt
|
$.17
- $.53
|
5,575,082
|
5,574
|
16,500
|
1,936,171
|
—
|
1,958,245
|
||||||||||||||||||
Common
stock issued for Morale/ Matthews settlement
|
$.38
|
7,421,896
|
7,422
|
—
|
2,776,289
|
—
|
2,783,711
|
||||||||||||||||||
Common
stock issued for services
|
$.17
- $.49
|
2,398,850
|
2,399
|
—
|
516,230
|
—
|
518,629
|
||||||||||||||||||
Common
stock issued upon exercise of warrants
|
$.50
|
1,064,650
|
1,065
|
—
|
531,260
|
—
|
532,325
|
||||||||||||||||||
Fair
value of options issued as compensations
|
—
|
—
|
—
|
—
|
645,745
|
—
|
645,745
|
||||||||||||||||||
Fair
value of warrants issued and intrinsic value of beneficial conversion
associated with convertible notes
|
—
|
—
|
—
|
—
|
1,323,077
|
—
|
1,323,077
|
||||||||||||||||||
Fair
value of warrants issued to PIPE holders
|
—
|
—
|
—
|
—
|
116,913
|
—
|
116,913
|
||||||||||||||||||
Common
stock issued for services
|
0.17
|
10,000
|
10
|
(4,000
|
)
|
3,990
|
—
|
—
|
|||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(6,052,724
|
)
|
(6,052,724
|
|||||||||||||||||
Balance,
December 31, 2008
|
62,940,891
|
$
|
62,941
|
$
|
16,500
|
$
|
40,129,758
|
$
|
(42,743,064
|
)
|
$
|
(2,533,865
|
)
|
Price
per
|
Common
Stock
|
Common
Stock
to
be
|
Additional
Paid-in
|
Deficit
Accumulated
During
the
Development
|
Total
Stockholders’
|
||||||||||||||||||||
Share
|
Shares
|
Amount
|
Issued
|
Capital
|
Stage
|
Deficiency
|
|||||||||||||||||||
Balance,
December 31, 2008
|
62,940,891
|
$
|
62,941
|
$
|
16,500
|
$
|
40,129,758
|
$
|
(42,743,064
|
)
|
$
|
(2,533,865
|
)
|
||||||||||||
Common
stock issued for convertible debt
|
0.15
- 0.50
|
2,165,026
|
2,165
|
(16,500
|
) |
474,464
|
—
|
460,129
|
|||||||||||||||||
Common
stock issued for services
|
0.17
- 0.49
|
340,000
|
340
|
—
|
137,160
|
—
|
137,500
|
||||||||||||||||||
Common
stock issued for settlement of accounts payable
|
0.27
|
430,370
|
431
|
0
|
103,983
|
—
|
104,414
|
||||||||||||||||||
Common
stock issued upon exercise of options
|
0.27 |
83,333
|
83
|
0
|
22,417
|
—
|
22,500
|
||||||||||||||||||
Fair
value of warrants issued for
note payable
|
—
|
—
|
1,248
|
1,248
|
|||||||||||||||||||||
Fair
value of options issued as compensation
|
—
|
—
|
—
|
—
|
67,801
|
—
|
67,801
|
||||||||||||||||||
Fair
value of warrants issued and intrinsic value of beneficial conversion
associated with convertible notes
|
—
|
—
|
—
|
—
|
1,002,163
|
—
|
1,002,163
|
||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(3,283,176
|
)
|
(3,283,176
|
) | ||||||||||||||||
Balance,
September 30, 2009 (unaudited)
|
65,959,620
|
$
|
65,960
|
$
|
—
|
$
|
41,938,994
|
$
|
(46,026,240
|
)
|
$
|
(4,021,286
|
)
|
Nine months
ended
|
February
18, 1998
|
|||||||||||
September
30,
|
September
30,
|
(inception)
to
|
||||||||||
2009
|
2008
|
September
30, 2009
|
||||||||||
Cash
flows from operating activities
|
||||||||||||
Net
loss
|
$
|
(3,283,176
|
)
|
$
|
(4,455,013)
|
$
|
(46,026,240
|
)
|
||||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Write
off of intangible assets
|
-
|
-
|
505,000
|
|||||||||
Settlement
of litigation and debt
|
-
|
-
|
(1,017,208
|
)
|
||||||||
Settlement
of debt due Morale/Matthews
|
-
|
927,903
|
927,903
|
|||||||||
Stock
based compensation and warrant expense
|
67,801
|
599,754
|
3,682,723
|
|||||||||
Issuance
of common stock for services
|
137,500
|
51,879
|
5,341,731
|
|||||||||
Issuance
of options for legal settlement
|
-
|
-
|
31,500
|
|||||||||
Issuance
of warrants for legal settlement
|
-
|
-
|
4,957
|
|||||||||
Issuance
of warrants for financing fees
|
1,248
|
116,913
|
153,501
|
|||||||||
Non-cash
increase in convertible notes recorded as expense
|
-
|
89,470
|
163,962
|
|||||||||
Patent
acquisition cost
|
-
|
-
|
1,610,066
|
|||||||||
Addition
of Interest Expense to Convertible Note Principal
|
58,100
|
-
|
58,100
|
|||||||||
Amortization
of issuance costs and original issue debt discounts including beneficial
conversion feature-part of interest expense
|
994,476
|
733,805
|
6,612,785
|
|||||||||
Amortization
of deferred compensation
|
-
|
-
|
3,060,744
|
|||||||||
Loss
on disposition of assets
|
-
|
9,683
|
14,426
|
|||||||||
Depreciation
and amortization
|
24,956
|
28,551
|
418,085
|
|||||||||
Bad
debt
|
-
|
1,380
|
1,380
|
|||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Accounts
receivable
|
-
|
-
|
(1,380
|
)
|
||||||||
Other
current assets
|
20,080
|
(14,292)
|
(13,195
|
)
|
||||||||
Other
assets
|
230
|
(6,750)
|
(11,020
|
)
|
||||||||
Accounts
payable and accrued expenses
|
841,501
|
430,111
|
4,529,111
|
|||||||||
Net
cash used in operating activities
|
(1,137,284
|
)
|
(1,486,606
|
) |
(19,953,069
|
)
|
||||||
Cash
flows from investing activities
|
||||||||||||
Purchase
of property and equipment
|
-
|
(345)
|
(553,452
|
)
|
||||||||
Proceeds
from sale of equipment
|
-
|
17,478
|
17,478
|
|||||||||
Net
cash provided by (used in) investing activities
|
-
|
17,133
|
(535,974
|
)
|
||||||||
Cash
flows from financing activities
|
||||||||||||
Net
proceeds under equity line of credit
|
-
|
-
|
1,262,386
|
|||||||||
Increase
(decrease) in payables to related parties and
shareholder
|
24,348
|
(6,387)
|
634,412
|
|||||||||
Advances
from founding executive officer
|
-
|
-
|
517,208
|
|||||||||
Net
proceeds from issuance of convertible notes and
warrants
|
1,107,320
|
974,000
|
7,567,743
|
|||||||||
Repayment
of convertible notes
|
(45,352)
|
-
|
(271,602
|
)
|
||||||||
Net
proceeds from issuance of common stock
|
-
|
532,325
|
10,787,274
|
|||||||||
Net
cash provided by financing activities
|
1,086,316
|
1,499,938
|
20,497,421
|
|||||||||
Net
increase (decrease) in cash
|
(50,968)
|
30,465
|
8,378
|
|||||||||
Cash, beginning of
period
|
59,346
|
47,660
|
—
|
|||||||||
Cash, end of
period
|
$
|
8,378
|
$
|
78,125
|
$
|
8,378
|
Nine
months ended
|
February
18, 1998
|
|||||||||||
September
30,
|
September
30,
|
(inception)
to
|
||||||||||
2009
|
2008
|
September
30, 2009
|
||||||||||
Supplemental
disclosures of cash flow information
|
||||||||||||
Cash
paid during the period for
|
||||||||||||
Interest
|
$ | 9,736 | $ | 988 | $ | 146,135 | ||||||
Income
taxes
|
$ | - | $ | - | $ | 5,882 | ||||||
Non-cash
investing and financing activities
|
||||||||||||
Acquisition
of intangible asset through advance from related party and issuance of
common stock
|
$ | - | $ | - | $ | 505,000 | ||||||
Deferred
compensation for stock options issued for services
|
- | - | 3,202,931 | |||||||||
Purchase
of property and equipment financed by advance from related
party
|
- | - | 3,550 | |||||||||
Conversion
of related party debt to equity
|
-- | - | 515,000 | |||||||||
Issuance
of common stock in settlement of payable
|
104,414 | - | 204,895 | |||||||||
Cancellation
of stock
|
- | - | 8,047 | |||||||||
Conversion
of accounts payable and accrued expenses to common stock
issued
|
- | - | 612,521 | |||||||||
Conversion
of related party debt to convertible debentures
|
- | - | 45,000 | |||||||||
Conversion
of convertible debentures to common stock
|
460,129 | - | 5,391,808 | |||||||||
Issuance
of shares for settlement of loans and other payable to
Morale/Matthews
|
- | 2,783,711 | 2,783,711 | |||||||||
Write
off of deferred compensation
|
- | 142,187 | ||||||||||
Non-cash
equity-warrant valuation and intrinsic value of beneficial conversion
associated with convertible notes
|
1,002,163 | 314,460 | 6,408,578 | |||||||||
Proceeds
of exercise of options applied to accounts
payable
|
22,500 | - | 22,500 |
Maturity
dates
|
September
30,
2009
|
December
31,
2008
|
|||||||
2007
Winter Offering
|
February
29, 2009
|
$ | — | $ | 66,000 | ||||
2008
Summer Offering
|
August
31, 2009
|
375,100 | 341,000 | ||||||
2008
Fall Offering
|
October
31, 2009
|
127,820 | 152,020 | ||||||
2008
Winter Offering
|
December
5, 2009
|
117,700 | 337,700 | ||||||
2009
Winter Offering – I
|
April
26, 2009
|
202,148 | — | ||||||
2009
Winter Offering – II
|
March
12, 2010
|
161,502 | — | ||||||
2009
Spring
|
April
30, 2010
|
143,000 | — | ||||||
2009
Summer
|
September
29, 2012
|
467,500 | — | ||||||
Sub-total
|
1,594,770 | 896,720 | |||||||
Less,
remaining debt discount
|
(639,393 | ) | (593,595 | ) | |||||
955,377 | 303,125 | ||||||||
Less:
Convertible debentures, net, related parties
|
(56,832 | ) | (12,466 | ) | |||||
Convertible
debentures, net, others
|
$ | 898,545 | $ | 290,659 |
Weighted
Avg.
Options
|
Weighted
Avg.
Exercise
Price
|
|||||||
Options
outstanding, January 1, 2009
|
4,601,225
|
$
|
0.53
|
|||||
Options
granted
|
333,333
|
.30
|
||||||
Options
exercised
|
(83,333
|
)
|
0.27
|
|||||
Options
forfeited
|
—
|
—
|
||||||
Options
cancelled
|
—
|
—
|
||||||
Options
outstanding, September 30, 2009
|
4,851,225
|
$
|
0.52
|
Outstanding
Options
|
Exercisable
Options
|
|||||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||||
Option
|
Life
|
Average
Exercise
|
Average
Exercise
|
|||||||||||||||
Exercise
Price Per Share
|
Shares
|
(Years)
|
Exercise
Price
|
Shares
|
Price
|
|||||||||||||
$ 0.21 - $ 0.99
|
4,463,679
|
7.8
|
$
|
0.45
|
4,130,346
|
$
|
0.46
|
|||||||||||
$ 1.00 - $ 1.99
|
327,546
|
5.6
|
$
|
1.41
|
327,546
|
$
|
1.41
|
|||||||||||
$ 2.00 - $ 2.26
|
60,000
|
1.9
|
$
|
2.26
|
60,000
|
$
|
2.26
|
|||||||||||
4,851,225
|
7.8
|
$
|
0.52
|
4,517,892
|
$
|
0.54
|
September
30,
|
||||||||
2009
|
2008
|
|||||||
Expected
life (years)
|
5.5
|
5.5
|
||||||
Risk
free interest rate
|
2.57
|
% |
4.42
|
% | ||||
Volatility
|
129
|
% |
124.57
|
% | ||||
Expected
dividend yield
|
0.00
|
% |
0.00
|
% |
Warrants
|
Weighted
Avg.
Exercise
Price
|
|||||||
Warrants
outstanding, January 1, 2009
|
10,400,003
|
$
|
0.70
|
|||||
Warrants
granted
|
2,949,743
|
0.37
|
||||||
Warrants
exercised
|
—
|
—
|
||||||
Warrants
cancelled
|
(1,502,310
|
) |
—
|
|||||
Warrants
outstanding, June 30, 2009
|
11,847,436
|
$
|
0.55
|
Outstanding
Warrants
|
Exercisable
Warrants
|
||||||||||||||||
Warrant Exercise
Price |
Shares
|
Life (Years) |
Weighted Average
Exercise |
Shares
|
Weighted Average
Exercise |
||||||||||||
$
0.30 - $ 0.99
|
9,702,168
|
2.0
|
$
|
0.44
|
9,702,168
|
$
|
0.48
|
||||||||||
$
1.00 - $ 1.99
|
2,057,966
|
2.4
|
$
|
1.00
|
2,057,966
|
$
|
1.00
|
||||||||||
$
2.00 - $ 2.70
|
87,302
|
1.9
|
$
|
2.70
|
87,302
|
$
|
2.70
|
||||||||||
11,847,436
|
2.0
|
$
|
0.55
|
11,847,436
|
$
|
0.60
|
●
|
revenues
and profits;
|
●
|
customers;
|
●
|
research
and development expenses and efforts;
|
●
|
scientific
and other third-party test results;
|
●
|
sales
and marketing expenses and efforts;
|
●
|
liquidity
and sufficiency of existing cash;
|
●
|
technology
and products;
|
●
|
the
outcome of pending or threatened litigation; and
|
●
|
the
effect of recent accounting pronouncements on our financial condition and
results of operations
|
Year
ending December 31,
|
Operating
Leases
(1)
|
Guaranteed
Payments
|
||||||||
2009
|
$ | 10,560 | $ | 80,400 | (2) | |||||
2010
|
$ | 43,560 | $ | 207,200 | (3) | |||||
2011
|
$ | — | $ | — | ||||||
$ | 54,120 | $ | 287,600 |
●
|
Persuasive
evidence of an arrangement exists;
|
●
|
Delivery
has occurred or services rendered;
|
●
|
The
seller’s price to the buyer is fixed or determinable;
and
|
●
|
Collectability
is reasonably assured.
|
Exhibit
No.
|
Description
|
||
31.1
|
Certification
of Chief Executive Officer of Quarterly Report Pursuant to Rule
13(a)-15(e) or Rule 15(d)-15(e)
|
||
31.2
|
Certification
of Interim Chief Financial Officer of Quarterly Report pursuant to
Rule 13(a)-15(e) or
Rule 15(d)-15(e)
|
32
|
Certification
of Chief Executive Officer and Interim Chief Financial Officer of
Quarterly Report Pursuant to 18 U.S.C.
Section 1350
|
SAVE
THE WORLD AIR, INC.
|
|||
Date:
November 14, 2009
|
By:
|
/s/
EUGENE E. EICHLER
|
|
Eugene
E. Eichler
|
|||
Interim
Chief Financial Officer
|
Exhibit
No.
|
Description
|
||
31.1
|
Certification
of Chief Executive Officer of Quarterly Report Pursuant to Rule
13(a)-15(e) or Rule 15(d)-15(e)
|
||
31.2
|
Certification
of Interim Chief Financial Officer of Quarterly Report Pursuant to Rule
13(a)-15(e) or Rule 15(d)-15(e)
|
||
32
|
Certification
of Chief Executive Officer and Interim Chief Financial Officer of
Quarterly Report Pursuant to 18 U.S.C. Section
1350
|