UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 10-Q
 
x
  
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2009
or
 
o
  
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                     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
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
235 Tennant Avenue
Morgan Hill, California 95037
(Address, including zip code, of principal executive offices
(408) 778-0101
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Exchange Act: None.
 
Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.001 par value.
 
Check whether the Registrant (1) 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 

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.

Large accelerated filer o
 
Accelerated filer  o
 
Non-accelerated filer  o  (Do not check if a smaller reporting company)
Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o   No  x
 
The number of shares of the Registrant’s Common Stock outstanding as of August 11, 2009 was 65,676,057 shares.
 
 
 
 
 
 
SAVE THE WORLD AIR, INC.
FORM 10-Q
 INDEX
 
       
   
Page
  
PART I
      
       
ITEM 1. Financial Statements
      
Condensed consolidated balance sheets
     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
     28  
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
     37  
ITEM 4. Controls and Procedures
     37  
       
PART II
      
       
ITEM 1. Legal Proceedings
     39  
ITEM 1A. Risk Factors
     40  
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
     40  
ITEM 3. Defaults Upon Senior Securities
     41  
ITEM 4. Submission of Matters to a Vote of Security Holders
     41  
ITEM 5. Other Information
     42  
ITEM 6. Exhibits
     42  
       
SIGNATURES
     43  
       
EXHIBIT INDEX
     44  
       
EXHIBIT 31.1
      
EXHIBIT 31.2
      
EXHIBIT 32
      
 
 
 
2
 
 
PART I
Item 1. Financial Statements
SAVE THE WORLD AIR, INC. AND SUBSIDIARY
 (A DEVELOPMENT STAGE ENTERPRISE)

 CONDENSED CONSOLIDATED BALANCE SHEETS
   
   
June 30, 2009
(unaudited)
    
December 31,
2008
  
ASSETS
                
Current assets
                
Cash
  
$
5,195
    
$
59,346
  
Other current assets
    
23,047
      
33,275
  
Total current assets
    
28,242
      
92,621
  
Property and Equipment, net of accumulated depreciation and amortization of $127,969 and $111,193, respectively
    
115,193
      
131,969
  
Other assets
    
11,020
      
11,250
  
Total assets
  
$
154,455
    
$
235,840
  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
                
Current liabilities
                
Accounts payable-related parties
  
$
156,227
    
$
93,003
  
Accounts payable-License Agreements
    
840,750
      
716,500
  
Accounts payable-other
    
501,310
      
384,467
  
Accrued expenses
    
1,022,976
      
803,795
  
Accrued professional fees
    
431,242
      
390,535
  
Loans payable-related parties and shareholders
    
162,341
      
78,280
  
Convertible debentures, net-related parties
    
39,782
      
12,466
  
Convertible debentures, net-others
    
847,253
      
290,659
  
Total current liabilities
    
4,001,881
      
2,769,705
  
                 
Commitments and contingencies
                
                 
Stockholders’ deficiency
                
Common stock, $.001 par value: 200,000,000 shares authorized, 65,508,160 and 62,940,891 shares issued and outstanding at June 30, 2009 and December 31, 2008, respectively
    
65,508
      
62,941
  
Common stock to be issued (99,200 shares at June 30, 2009 and 97,059 shares at December 31, 2008 respectively)
    
33,750
      
16,500
  
Additional paid-in capital
    
41,328,142
      
40,129,758
  
Deficit accumulated during the development stage
    
(45,274,826)
      
(42,743,064
)
Total stockholders’ deficiency
    
(3,847,426)
      
(2,533,865
)
Total liabilities and stockholders’ deficiency
  
$
           154,455
    
$
235,840
  

 
See notes to condensed consolidated financial statements.

 
3
 

SAVE THE WORLD AIR, INC. AND SUBSIDIARY
 (A DEVELOPMENT STAGE ENTERPRISE)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

   
Three months ended
June 30,
    
Six months ended
June 30,
    
For the Period From
February 18, 1998 (Date of Inception) through
  
   
2009
    
2008
    
2009
    
2008
    
June 30, 2009
  
                               
Net sales
  
$
-
    
$
-
    
$
-
    
$
-
    
$
69,000
  
Cost of goods sold
    
-
      
-
      
-
      
-
      
24,120
  
Gross profit
    
-
      
-
      
-
      
-
      
44,880
  
                                         
Operating expenses
    
594,604
      
519,860
      
1,435,422
      
1,280,002
      
31,362,362
  
                                         
Research and development expenses
    
15,220
      
62,692
      
262,060
      
322,362
      
5,720,653
  
                                         
Non-cash patent settlement costs
    
-
      
-
      
-
      
-
      
1,610,066
  
                                         
Loss before other income (expense)
    
(609,824
 )     
(582,552
)
    
(1,697,482)
      
(1,602,364
)
    
(38,648,201
)
                                         
Other income (expense)
                                        
Other income
    
-
      
11
      
-
      
563
      
   (1,140
) 
Interest income
    
-
      
-
      
-
      
2
      
16,342
  
Interest expense
    
(369,720
 )    
(161,556
)
    
(834,280)
      
(488,559
)
    
(6,788,586
)
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
      
-
      
52,070
      
1,089,088
  
                                         
Net loss
  
$
(979,544
 )  
$
(692,027
)
  
$
(2,531,762)
    
$
(2,975,874
)
  
$
(45,274,826
)
                                         
Net loss per share, basic and diluted
  
$
(0.02
 )  
$
(0.02
)
  
$
(0.04)
    
$
(0.06
)
        
                                         
Weighted average shares outstanding, basic and diluted
    
65,037,789
      
44,938,165
      
64,504,305
      
46,979,175
          

 
See notes to condensed consolidated financial statements.

 
4
 
 
SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY
FROM FEBRUARY 18, 1998 (INCEPTION) TO JUNE 30, 2009
 
   
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
)
 
 
(continued)
 
5
 

SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY
FROM FEBRUARY 18, 1998 (INCEPTION) TO JUNE 30, 2009
 
 
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
 ) 
 
 
(continued)
 
6
 

SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY (continued)
FROM FEBRUARY 18, 1998 (INCEPTION) TO JUNE 30, 2009
 
   
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
)
 
 
(continued)
 
7
 

SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY (continued)
FROM FEBRUARY 18, 1998 (INCEPTION) TO JUNE 30, 2009
 
   
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
)
 
 
 
(continued)
 
8
 
 
SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY (continued)
FROM FEBRUARY 18, 1998 (INCEPTION) TO JUNE 30, 2009
 
 
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
)
 
 
(continued)
 
9
 

SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY (continued)
FROM FEBRUARY 18, 1998 (INCEPTION) TO JUNE 30, 2009
 
 
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
)
 
 
(continued)
 
10
 

SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY (continued)
FROM FEBRUARY 18, 1998 (INCEPTION) TO JUNE 30, 2009
 
 
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
)
 
 
 
(continued)
 
11
 

SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY (continued)
FROM FEBRUARY 18, 1998 (INCEPTION) TO JUNE 30, 2009
 
 
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
)
 
 
(continued)
 
12
 

SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY (continued)
FROM FEBRUARY 18, 1998 (INCEPTION) TO JUNE 30, 2009
 

   
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       2,014,914       2,015       (16,500 )     430,614       —       416,129  
Common stock issued for services
     0.17-0.49       502,355       502       —       173,911       —       174,413  
Common stock issued for settlement of accounts payable
     0.27       50,000       50       33,750       13,450       —       47,250  
Fair value of options issued as compensation
     —       —       —       —       44,498       —       44,498  
Fair value of warrants issued for note payable
     —       —       —       —       1,248       —       1,248  
 Fair value of warrants issued and intrinsic value of beneficial conversion associated with convertible notes
     —       —       —       —       534,663       —       534,663  
Net loss
     —       —       —       —       —       (2,531,762 )     (2,531,762 )
Balance, June 30, 2009 (unaudited)
             65,508,160     $ 65,508     $ 33,750       41,328,142     $ (45,274,826 )   $ (3,847,426 )




See notes to condensed consolidated financial statements.

 
13
 
SAVE THE WORLD AIR, INC. AND SUBSIDIARY
 (A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
   
Six months ended
    
February 18, 1998
  
   
June 30,
    
June 30,
    
(inception)
  
   
2009
    
2008
    
To June 30, 2009
  
Cash flows from operating activities
                        
Net loss
  
$
(2,531,762
)
   $
(2,975,874
)
  
$
(45,274,826
)
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 expense
    
45,746
      
43,636
      
3,660,667
  
Issuance of common stock for services
    
174,413
      
51,879
      
5,378,644
  
Issuance of options for legal settlement
    
—
      
—
      
31,500
  
Issuance of warrants for legal settlement
    
—
      
—
      
4,957
  
Issuance of warrants for financing fees
    
—
      
116,913
      
152,253
  
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
    
23,000
      
—
      
23,000
  
Amortization of issuance costs and original issue debt discounts including beneficial conversion feature-part of interest expense
    
797,457
      
514,942
      
6,415,766
  
Amortization of deferred compensation
    
—
      
—
      
3,060,744
  
Loss on disposition of assets
    
—
      
9,683
      
14,426
  
Depreciation and amortization
    
16,776
      
19,447
      
409,905
  
Bad debt
    
—
      
1,380
      
1,380
  
Changes in operating assets and liabilities:
                        
Accounts receivable
    
—
      
—
      
(1,380
)
Inventory
    
—
      
—
      
—
  
Prepaid expenses and other
    
10,228
      
(15,870
)
    
(23,047
)
Other assets
    
230
      
(6,750
)
    
(11,020
)
Accounts payable and accrued expenses
    
610,880
      
167,869
      
4,298,491
  
Net cash used in operating activities
    
(853,032
)
    
(1,055,372
)
    
(19,668,817
)
                   
Cash flows from investing activities
                        
Purchase of property and equipment
    
—
      
(345
)
    
(553,452
)
Proceeds from sale of equipment
    
—
      
17,477
      
17,478
  
Net cash provided by (used in) investing activities
    
—
      
17,132
      
(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
    
84,061
      
2,442
      
694,125
  
Advances from founding executive officer
    
—
      
—
      
517,208
  
Net proceeds from issuance of convertible notes and warrants
    
714,820
      
534,000
      
7,175,243
  
Repayment of convertible notes
    
—
      
—
      
(226,250
)
Net proceeds from issuance of common stock
    
—
      
532,325
      
10,787,274
  
                   
Net cash provided by financing activities
    
798,881
      
1,068,767
      
20,209,986
  
                   
Net increase (decrease) in cash
    
(54,151
)
    
30,527
      
5,195
  
Cash, beginning of period
    
59,346
      
47,660
      
—
  
                         
Cash, end of period
  
$
5,195
     $
78,187
    
$
5,195
  
 
 
(Continued)

 
14
 

SAVE THE WORLD AIR, INC. AND SUBSIDIARY
 (A DEVELOPMENT STAGE ENTERPRISE)

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
 
   
Six months ended
    
February 18, 1998
  
   
June 30,
    
June 30,
    
(inception) to
  
   
2009
    
2008
    
June 30, 2009
  
                   
Supplemental disclosures of cash flow information
                  
Cash paid during the period for
                  
Interest
  
$
1,584
    
$                        621
    
$
137,983
  
                       
Income taxes
  
$
—
    
 $
— 
    
$
5,882
  
                         
                         
Non-cash investing and financing activities
                        
Acquisition of intangible asset through advance from related party and issuance of common stock
  
 $
— 
    
 $
—