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UNDER
THE SECURITIES ACT OF 1933
Nevada | 5013 | 52-2088326 | ||
(State or Other Jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer | ||
Incorporation or Organization) | Classification Code Number) | Identification No.) |
North Hollywood, California 91601
(818) 487-8000
(Address and Telephone Number of Principal Executive Offices and Principal Place of Business)
Chief Executive Officer
5125 Lankershim Boulevard
North Hollywood, California 91601
(818) 487-8000
(Name, Address and Telephone Number of Agent For Service)
Lance Jon Kimmel, Esq.
SEC Law Firm
11693 San Vicente Boulevard, Suite 357
Los Angeles, California 90049
(310) 557-3059
Proposed Maximum | Proposed Maximum | Amount of | ||||||||||||||||||||
Title of Each Class of | Amount to be | Offering Price | Aggregate | Registration | ||||||||||||||||||
Securities to be Registered | Registered | per Share(1) | Offering Price(1) | Fee(1) | ||||||||||||||||||
Common Stock, par value $0.001 | 7,000,000(2 | ) | $1.60 | $11,200,000 | $1,198.40 | |||||||||||||||||
Total | 7,000,000(2 | ) | $1.60 | $11,200,000 | $1,198.40 | |||||||||||||||||
(1) | The price is estimated in accordance with Rule 457(c) under the Securities Act of 1933, as amended, solely for the purpose of calculating the registration fee and represents the average of the high and the low prices of the common stock on October 3, 2006, as reported on the OTC Bulletin Board. | |
(2) | Represents a maximum of 7,000,000 shares which may be issued to Dutchess Private Equities Fund, L.P. in connection with an equity line of credit. |
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The information in this prospectus is not complete and may be changed. The selling security holders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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EXHIBIT 23 |
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Assumed percentage of shares issued | 100 | % | 50 | % | 25 | % | 10 | % | ||||||||
Number of shares issued | 7,000,000 | 3.500,000 | 1,750,000 | 700,000 | ||||||||||||
Assumed public offering price per share | $ | 1.4162 | $ | 1.4162 | $ | 1.4162 | $ | 1.4162 | ||||||||
Net tangible book value per share before this offering | $ | (0.0039 | ) | $ | (0.0039 | ) | $ | (0.0039 | ) | $ | (0.0039 | ) | ||||
Net tangible book value after this offering | $ | 8,915,139 | $ | 4,354,975 | $ | 2,074,893 | $ | 706,844 | ||||||||
Net tangible book value per share after this offering | $ | 0.192 | $ | 0.102 | $ | 0.051 | $ | 0.018 | ||||||||
Dilution of net tangible book value per share to new investors | $ | (1.224 | ) | $ | (1.314 | ) | $ | (1.366 | ) | $ | (1.399 | ) | ||||
Increase in net tangible book value per share to existing shareholders | $ | 0.196 | $ | 0.106 | $ | 0.054 | $ | 0.022 |
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Common stock offered by the selling security holders | 7,000,000 shares | |
Common stock currently outstanding as of September 20, 2006 | 39,317,619 shares(1) | |
Common stock to be outstanding after the offering, assuming issuance of all of the shares covered by this prospectus | 46,317,619 shares(1) | |
OTC Bulletin Board Trading Symbol | ZERO | |
Risk Factors | An investment in our common stock involves significant risks. See “Risk Factors” beginning on page 5. |
(1) | Does not include 7,328,299 shares of common stock issuable upon the exercise of outstanding options (with exercise prices ranging from $0.10 per share to $2.255 per share) and 21,358,517 shares of common stock issuable upon the exercise of warrants (with exercise prices ranging from $0.40 to $2.70 per share). |
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• | raise additional needed capital for research and development; | ||
• | complete development of our products in development; and | ||
• | successfully introduce and commercialize our new products. |
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• | the willingness and ability of consumers and industry partners to adopt new technologies; | ||
• | the willingness of governments to mandate reduction of motor vehicle emissions; | ||
• | our ability to convince potential industry partners and consumers that our technologies are an attractive alternative to other | ||
technologies for reduction of motor vehicle emissions; | |||
• | our ability to manufacture products and provide services in sufficient quantities with acceptable quality and at an acceptable cost; and | ||
• | our ability to place and service sufficient quantities of our products. |
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• | delays in product development; | ||
• | market acceptance of our new products; | ||
• | changes in the demand for, and pricing, of our products; | ||
• | competition and pricing pressure from competitive products; | ||
• | manufacturing delays; and | ||
• | expenses related to, and the results of, proceedings relating to our intellectual property. |
• | incur substantial monetary damages; | ||
• | encounter significant delays in marketing our current and proposed product candidates; | ||
• | be unable to conduct or participate in the manufacture, use or sale of product | ||
candidates or methods of treatment requiring licenses; | |||
• | lose patent protection for our inventions and products; or | ||
• | find our patents are unenforceable, invalid, or have a reduced scope of protection. |
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Percent below | Percent of | |||||||||||||||||
current market | Price per share | Number of shares | Shares | outstanding | ||||||||||||||
price | (1) | issuable (2) | outstanding (3) | shares (4) | ||||||||||||||
0 | % | $ | 1.4162 | 7,061,150 | 46,378,769 | 15.22 | % | |||||||||||
10 | % | $ | 1.2746 | 7,845,599 | 47,163,218 | 16.63 | % | |||||||||||
25 | % | $ | 1.0622 | 9,414,423 | 48,732,042 | 19.32 | % | |||||||||||
50 | % | $ | 0.7081 | 14,122,299 | 53,439,918 | 26.43 | % |
(1) | Represents purchase prices equal to 97% of $1.46 and potential reductions of 10%, 25% and 50%. | |
(2) | Represents the number of shares issuable if the entire $10,000,000 remaining commitment under the equity line of credit was drawn down at the indicated purchase prices.Since only 7,000,000 shares of our common stock are |
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being registered hereunder, we would have to file another registration statement and have it declared effective by the SEC in order to make additional drawdowns resulting in the issuance of more than the 7,000,000 shares of common stock being registered hereunder. | ||
(3) | Based on 39,317,619 shares of common stock issued and outstanding as of September 20, 2006. | |
(4) | Percentage of the total outstanding common stock after the issuance of the shares indicated, without considering the 4.99% contractual restriction on the number of shares that Dutchess may own at any point in time or other restrictions on the number of shares we may issue. |
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• | developments with respect to patents or proprietary rights; | ||
• | announcements of technological innovations by us or our competitors; | ||
• | announcements of new products or new contracts by us or our competitors; | ||
• | actual or anticipated variations in our operating results due to the level of development expenses and other factors; | ||
• | changes in financial estimates by securities analysts and whether any future earnings of ours meet or exceed such estimates; | ||
• | conditions and trends in our industry; | ||
• | new accounting standards; | ||
• | general economic, political and market conditions and other factors; and | ||
• | the occurrence of any of the risks described in this prospectus. |
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THC | NOx | CO | ||||||||||
EURO2 Standard | 1.20 | g/km | 0.30 | g/km | 5.50 | g/km | ||||||
With ZEFS Device | 0.52 | g/km | 0.10 | g/km | 1.42 | g/km | ||||||
% Below EURO2 | 56 | % | 65 | % | 74 | % |
THC | NOx | CO | ||||||||||
EURO3 Standard | 0.80 | g/km | 0.15 | g/km | 2.0 | g/km | ||||||
With ZEFS Device | 0.33 | g/km | 0.108 | g/km | 1.86 | g/km | ||||||
% Below EURO3 | 59 | % | 28 | % | 7 | % |
Run 1 | Run 2 | Run 3 | ||||||||||||||
(l/km) | (l/km) | (l/km) | Average | |||||||||||||
Baseline FC Test Runs with out MKIV Device | 0.0196 | 0.0195 | 0.0193 | 0.0195 | ||||||||||||
FC Test Runs with MKIV Device | 0.0186 | 0.0184 | 0.0185 | 0.0185 | ||||||||||||
Difference | 0.0010 | 0.0011 | 0.0008 | 0.0010 | ||||||||||||
Improvement | 5.10 | % | 5.64 | % | 4.15 | % | 5.13 | % |
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Country | Number | Filing Date | Status | |||||
Australia | 2001258057 | May 21, 2001 | GRANTED | |||||
Bosnia & Herzegovina | BAP 021290A | May 21, 2001 | Short Term Patent GRANTED. Apply for Standard Patent filed | |||||
Brazil | 0111365-8 | May 21, 2001 | Examination requested September 5, 2003. Report expected mid-2007 | |||||
Bulgaria | 107391 | May 21, 2001 | Awaiting examination | |||||
Canada (small entity status) | 2409195 | May 21, 2001 | Examination requested April 2006 | |||||
China | 01809802.9 | May 21, 2001 | Under examination — response filed | |||||
Colombia | 02115018 | May 21, 2001 | Examination requested July 23, 2004 | |||||
Croatia | P20020982A | May 21, 2001 | GRANTED | |||||
Czech Republic | PV 2002-4092 | May 21, 2001 | Under Examination – response filed at IPO | |||||
Eurasian* | 200201237 | May 21, 2001 | GRANTED | |||||
Europe** | 019331222.2 | May 21, 2001 | Awaiting examination | |||||
Georgia | 4098/01-2002 | May 21, 2001 | GRANTED | |||||
Hong Kong | 04100327.0 | May 21, 2001 | Automatic grant upon grant of the Chinese application | |||||
Hungary | P 03 01796 | May 21, 2001 | Examination requested April 2006 | |||||
India*** | IN/PCT/2002/01523 | May 21, 2001 | Under examination – response filed at IPO | |||||
Indonesia | WO0200202844 | May 21, 2001 | Registration Fee Paid – awaiting grant | |||||
Israel | 152902 | May 21, 2001 | GRANTED | |||||
Korea [South] | 2002-7015531 | May 21, 2001 | Examination requested May 2006 | |||||
Japan | 586731/2001 | May 21, 2001 | Examination to be requested by May 21, 2008 | |||||
Mexico | PA/A/2002/011365 | May 21, 2001 | GRANTED | |||||
Morocco | PV/26.964 | May 21, 2001 | GRANTED | |||||
New Zealand | 523113 | May 21, 2001 | GRANTED | |||||
Norway | 20025531 | May 21, 2001 | Awaiting examination | |||||
Poland | P358837 | May 21, 2001 | Awaiting examination | |||||
Serbia/Montenegro | P-870/02 | May 21, 2001 | Examination requested December 2002 | |||||
Singapore | 93310 [WO 01/90562] | May 21, 2001 | GRANTED | |||||
South Africa | 2002/10013 | May 21, 2001 | GRANTED | |||||
Sri Lanka*** | 12918 | May 21, 2001 | Awaiting examination | |||||
Trinidad & Tobago | TT/A/2002/00213 | May 21, 2001 | Registration fee paid – awaiting grant | |||||
Ukraine | 20021210144 | May 21, 2001 | GRANTED | |||||
United States | 10/275946 | May 21, 2001 | GRANTED | |||||
Vietnam | 1-2002-01168 | May 21, 2001 | GRANTED |
* | The Eurasian Patent Convention was signed on September 9, 1994 in Moscow by the Heads of the Governments of the |
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Republic of Azerbaijan, the Republic of Armenia, the Republic of Belarus, Georgia, the Republic of Kazahkstan, the Kyrgyz Republic, the Republic of Moldova, the Russian Federation, the Republic of Tajikistan and Ukraine. | ||
** | European patent application covers Austria, Belgium, Switzerland, Liechtenstein, Cyprus, Germany, Denmark, Spain, Finland, France, Great Britain, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Sweden, Turkey, Lithuania, Latvia, Slovenia, Romania and Macedonia. | |
*** | The assignment to the Company has been recorded on these applications, but the applications will remain in the name of the original inventor until grant. |
Country | Number | Filing Date | Status | |||||
Taiwan | 1236519 | July 19, 2003 | GRANTED | |||||
China | 200480025660.X | July 15, 2004 | Filed, awaiting examination | |||||
Europe | 04737571.2 | July 15, 2004 | Filed, awaiting examination | |||||
India | 300/KOL NP/06 | July 15, 2004 | Filed, awaiting examination | |||||
Indonesia | WO0200600441 | July 15, 2004 | Filed | |||||
Japan | Awaiting Number | July 15, 2004 | Filed | |||||
United States | 10/564747 | July 15, 2004 | Filed, awaiting examination |
Country | Number | Filing Date | Status | |||||
Thailand | 095155 | November 3, 2004 | Awaiting examination | |||||
International | PCT/AU2004/001518 | November 4, 2004 | Demand for International Preliminary Examination filed June 8, 2005 — awaiting report. | |||||
China | 200480039739.8 | November 4, 2004 | ||||||
Japan | Awaiting Number | November 4, 2004 | ||||||
United States | 10/578311 | November 4, 2004 | ||||||
Europe | 04796967.0 | November 4, 2006 |
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Country | Number | Filing Date | Status | |||||
Malaysia | PI 20062013 | May 2, 2006 | Examination due by May 2, 2008 | |||||
Taiwan | 95115220 | April 28, 2006 | Examination due by April 29, 2009 | |||||
Thailand | 0601001997 | May 2, 2006 | Awaiting examination | |||||
PCT | PCT/AU2006/000861 | June 20, 2006 | Demand for IPE due January 21, 2007 |
Country | Number | Filing Date | Status | |||
GCC* | GCC/P/2005/5066 | August 22, 2006 | Application filed, awaiting examination. | |||
International** | PCT/AU2005/000688 | May 13, 2005 | Clear ISR received. |
* | The GCC application covers Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, and Bahrain. | |
** | This application is in the name of Temple University of the Commonwealth System of Higher Education. |
Country | Number | Filing Date | Status | |||||
Australia | 2004312099 | December 23, 2004 | Examination due by December 23, 2009 | |||||
Canada | N/A | |||||||
China | N/A | |||||||
Europe | 04802122.4 | December 23, 2004 | Awaiting examination | |||||
Indonesia | WO0200602208 | December 23, 2004 | ||||||
Japan | N/A | |||||||
Korea | 2006-7016017 | December 23, 2004 | Examination due by December 23, 2009 | |||||
Mexico | N/A | |||||||
Malaysia | PI20050041 | January 6, 2005 | Application filed, awaiting examination. | |||||
New Zealand | 548993 | December 23, 2004 | Application filed, awaiting examination. | |||||
Thailand | 096762 | January 4, 2005 | Application filed, awaiting examination | |||||
Taiwan | 93140533 | 24 December 2004 | Application filed. Substantive examination to be requested by December 24, 2007 | |||||
United States | N/A | Application filed – awaiting examination. |
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Country | Number | Filing Date | Status | Renewal | ||||||
Australia | 1008291 | June 25, 2004 | Registered | June 25, 2014 | ||||||
Madrid* | 858359 | December 21, 2004 | Registered | December 21, 2014 |
* | The Madrid Protocol application designated the following countries: United States, China, European Union, Japan, Korea and Singapore. |
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AND OTHER STOCKHOLDER MATTERS
2004 | ||||||||
High | Low | |||||||
First Quarter | $ | 1.50 | $ | 0.95 | ||||
Second Quarter | $ | 2.05 | $ | 1.20 | ||||
Third Quarter | $ | 1.95 | $ | 1.20 | ||||
Fourth Quarter | $ | 1.90 | $ | 1.16 |
2005 | ||||||||
High | Low | |||||||
First Quarter | $ | 1.49 | $ | 0.90 | ||||
Second Quarter | $ | 1.20 | $ | 0.90 | ||||
Third Quarter | $ | 1.14 | $ | 0.75 | ||||
Fourth Quarter | $ | 1.01 | $ | 0.72 |
2006 | ||||||||
High | Low | |||||||
First Quarter | $ | 4.74 | $ | 0.65 | ||||
Second Quarter | $ | 3.09 | $ | 1.49 |
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• | revenues and profits; | |
• | customers; | |
• | research and development expenses and efforts; | |
• | scientific test results; | |
• | sales and marketing expenses and efforts; | |
• | liquidity and sufficiency of existing cash; | |
• | pending and future financings; | |
• | the success of new product development; | |
• | market acceptance and commercial viability of our existing and new products; | |
• | the outcome of pending or threatened litigation; and | |
• | the effect of recent accounting pronouncements on our financial condition and results of operations. |
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2006(1) | 2007 | 2008 | Total | |||||||||||||
Operating Leases | $ | 69,000 | $ | 94,000 | $ | 3,000 | $ | 166,000 | ||||||||
Convertible notes(2) | — | — | — | — | ||||||||||||
Employment Agreements(3) | 400,000 | 810,000 | — | 1,210,000 | ||||||||||||
Total | $ | 469,000 | $ | 904,000 | $ | 3,000 | $ | 1,376,000 |
(1) | 2006 is for the six-month period ending December 31, 2006. 2007 and 2008 reflect the 12-month periods then ending. | |
(2) | Convertible notes above exclude notes totaling $1,128,000 that were converted into common stock subsequent to June 30, 2006. | |
(3) | Excludes for 2008 employment agreements that expire on December 31, 2007, but which are automatically renewable unless notice of termination is previously given. |
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Name | Age | Position | Director Since | |||||||
Eugene E. Eichler, CPA | 79 | Chief Executive Officer, Chief Financial Officer and Director | 2002 | |||||||
Bruce H. McKinnon | 64 | President and Director | 2002 | |||||||
John Bautista | 47 | Executive Vice President of Operations | — | |||||||
Joseph Helleis(1)(2) | 68 | Chairman of the Board and Director | 2002 | |||||||
Hon. John J. Brown, AO(2)(3) | 74 | Director | 2002 | |||||||
John F. Price, Ph.D(1)(2)(3) | 63 | Director | 2002 | |||||||
Cecil Bond Kyte(1)(3) | 35 | Director | 2006 |
(1) | Member of the Audit Committee. | |
(2) | Member of the Compensation Committee | |
(3) | Member of the Nominating and Corporate Governance Committee |
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Long-Term Compensation Awards | ||||||||||||||||||||
Annual | Restricted Stock | Securities | ||||||||||||||||||
Fiscal | Compensation | Award(s) | Underlying | All Other | ||||||||||||||||
Name and Principal Position | Year | Salary ($)(4) | ($)(5) | Options (#) | Compensation ($) | |||||||||||||||
Edward L. Masry(1) | 2005 | $ | 1 | $ | — | 490,909 | $ | — | ||||||||||||
Chairman and Chief | 2004 | $ | 1 | $ | — | 328,740 | $ | — | ||||||||||||
Executive Officer | 2003 | $ | — | $ | — | — | $ | — | ||||||||||||
Eugene E. Eichler(2) | 2005 | $ | 240,000 | $ | — | 425,000 | $ | — | ||||||||||||
Chief Executive Officer | 2004 | $ | 234,500 | $ | — | 286,956 | $ | — | ||||||||||||
and Chief Financial Officer | 2003 | $ | 172,328 | $ | — | — | $ | — | ||||||||||||
Bruce H. McKinnon(3) | 2005 | $ | 192,000 | $ | — | 350,000 | $ | — | ||||||||||||
President | 2004 | $ | 191,800 | $ | — | 236,956 | $ | — | ||||||||||||
2003 | $ | — | $ | — | — | $ | — |
(1) | Mr. Masry was appointed President and Chief Executive Officer in October 2001 at no annual salary. In March 2004, Mr. Masry relinquished his position as President, but continued to serve as Chief Executive Officer at a contractual salary of $1 per year until October 2005, when he resigned that position. Mr. Masry passed away on December 6, 2005 and the 490,909 shares relating to long-term compensation awards lapsed upon his death because they had not vested as of such date. See “Employment Agreements” below. | |
(2) | Mr. Eichler was appointed Chief Operating Officer, Chief Financial Officer and Treasurer in October 2001. In March 2004, Mr. Eichler relinquished his position as Chief Operating Officer, and was appointed President of the Company, a position he held until October 2005, when he assumed the position of Chief Executive Officer. Mr. Eichler continues to serve as Chief Financial Officer. See “Employment Agreements” below. | |
(3) | Mr. McKinnon was appointed Executive Vice President of Business Development in October 2001. In March 2004, Mr. McKinnon was appointed Chief Operating Officer of the Company, a position he held until October 2005, when he assumed the position of President. Mr. McKinnon was also named Chief Operating Officer on August 8, 2006. See “Employment Agreements” below. | |
(4) | The law firm Masry & Vititoe, PC, of which Mr. Masry was a principal shareholder, paid for Mr. Eichler’s salary for 2003 pursuant to an arrangement under which we reimbursed Masry & Vititoe, PC for a portion of his salary. The portion reimbursed by us is shown in the table above. | |
(5) | The number and value of vested and unvested restricted stock based upon the closing market price of the common stock at December 30, 2005 ($0.72) were as follows: Mr. Eichler, 500,000 vested shares valued at $360,000; and Mr. McKinnon, 400,000 vested shares valued at $288,000. Messrs. Eichler’s and McKinnon’s shares vested in October 2003. |
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Individual Grants | ||||||||||||||||
Number of | Percent of | |||||||||||||||
Securities | Total Options | |||||||||||||||
Underlying | Granted to | Exercise or | ||||||||||||||
Options | Employees in | Base Price | Expiration | |||||||||||||
Name | Granted | Fiscal 2005 | per Share | Date | ||||||||||||
Edward L. Masry (1) | 90,909 | 5.6 | % | $ | 1.10 | 03/02/09 | ||||||||||
Edward L. Masry (1) | 400,000 | 24.8 | % | $ | .85 | 03/02/14 | ||||||||||
Eugene E. Eichler | 100,000 | 6.2 | % | $ | 1.10 | 03/02/14 | ||||||||||
Eugene E. Eichler | 325,000 | 20.2 | % | $ | .85 | 03/02/14 | ||||||||||
Bruce H. McKinnon | 100,000 | 6.2 | % | $ | 1.00 | 03/02/14 | ||||||||||
Bruce H. McKinnon | 250,000 | 15.5 | % | $ | .85 | 03/02/14 |
(1) | Mr. Masry passed away on December 6, 2005 and the 490,909 shares relating to option grants in 2005 lapsed upon his death because they had not vested as of such date. |
And Year-End Option Values
Number of Securities | ||||||||||||||||||||||||
Underlying Unexercised | ||||||||||||||||||||||||
Shares | Value | Options at | Value of Unexercised | |||||||||||||||||||||
Acquired on | Realized | Fiscal Year-End (#) | In-the-Money Options ($)(1) | |||||||||||||||||||||
Name | Exercise (#) | ($) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Edward L. Masry | — | $ | — | 2,537,208 | 282,441 | $ | 2,458,468 | $ | 230,137 | |||||||||||||||
Eugene E. Eichler | — | $ | — | 717,435 | 244,521 | $ | 674,970 | $ | 186,986 | |||||||||||||||
Bruce H. McKinnon | — | $ | — | 385,586 | 201,370 | $ | 343,120 | $ | 143,836 |
(1) | Market value of our common stock at fiscal year-end minus the exercise price. The closing price of our common stock on December 30, 2005, the last trading day of the year, was $0.72 per share. |
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Board Member | $ | 7,500 | ||
Chairman of the Board | $ | 25,000 | ||
Audit Committee Chair | $ | 20,000 | ||
Compensation Committee Chair | $ | 15,000 | ||
Nominating/Corporate Governance Committee Chair | $ | 15,000 |
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• | encouraging stock ownership by selected key employees, directors, consultants and advisers | ||
• | assisting the Company in attracting and retaining key personnel; and | ||
• | providing to participating personnel added incentive for high level of performance. |
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BENEFICIAL OWNERS AND MANAGEMENT
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• | each person, or group of affiliated persons, known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock; | ||
• | each of our directors; | ||
• | our Chief Executive Officer and each of our four other most highly-compensated executive officers serving as such as of December 31, 2005 whose total annual salary and bonus exceeded $100,000, for services rendered in all capacities to the Company (such individuals are hereafter referred to as the “Named Executive Officers”); and | ||
• | all of our directors and executive officers as a group. |
Number of Shares of | Percentage of | |||||||
Common Stock | Shares Beneficially | |||||||
Name and Address of Beneficial Owner(1) | Beneficially Owned(2) | Owned(2) | ||||||
Estate of Edward L. Masry(3) | 7,328,740 | 17.6 | % | |||||
Cecil Kyte(4) | 2,317,359 | 5.7 | % | |||||
Eugene E. Eichler(5) | 1,640,528 | 4.1 | % | |||||
Bruce H. McKinnon(6) | 1,135,341 | 2.8 | % | |||||
Joseph Helleis(7) | 525,000 | 1.3 | % | |||||
John Price(8) | 441,000 | 1.1 | % | |||||
John Brown(9) | 400,000 | 1.0 | % | |||||
All directors and executive officers as a group (8 persons)(10) | 14,120,953 | 31.2 | % |
(1) | Unless otherwise indicated, the address of each listed person is c/o Save the World Air, Inc., 5125 Lankershim Boulevard, North Hollywood, California 91601. | |
(2) | Percentage of beneficial ownership is based upon 39,317,619 shares of our common stock outstanding as of September 20, 2006. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options and warrants currently exercisable or convertible, or exercisable or convertible within 60 days, are deemed outstanding for determining the number of shares beneficially owned and for computing the percentage ownership of the person holding such options, but are not deemed outstanding for computing the percentage ownership of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. | |
(3) | Under the rules of the SEC, Mr. Masry is a Named Executive Officer of our company for 2005. Mr. Masry passed away on December 6, 2005. Consists of 1,000,000 shares of our common stock and options to purchase 2,328,740 shares of our common stock exercisable either currently or within 60 days after September 20, 2006 and 2,800,000 shares and warrants to purchase an aggregate 1,200,000 shares of our common stock held by Masry & Vititoe, PC. Mr. Masry was a shareholder of Masry & Vititoe, PC, and may be deemed to have been a beneficial owner of the shares held by such entity during the period that Mr. Masry served as our Chairman and Chief Executive Officer. During is lifetime, Mr. Masry disclaimed beneficial ownership of these shares except to the extent of his proportional share therein. | |
(4) | Consists of 1,207,359 shares of our common stock and warrants to purchase 1,110,000 shares of our common stock exercisable either currently or within 60 days after September 20, 2006. | |
(5) | Consists of 500,000 shares of our common stock and, options to purchase 961,956 shares of our common stock held by Mr. Eichler and 71,429 shares of our common stock and, warrants to purchase 107,143 shares of our common stock held by the Eichler/Wise Family Trust, a revocable trust of which Mr. Eichler is a Trustee. All of such options and warrants are exercisable or convertible either currently or within 60 days after September 20, 2006. | |
(6) | Consists of 400,000 shares of our common stock held by Mr. McKinnon, options to purchase 586,956 shares of our common stock exercisable either currently or within 60 days of September 20, 2006 and 69,814 shares of our common stock and warrants to purchase 78,571 shares of our common stock held by the KZ Golf, Inc. Defined Benefit Pension Plan exercisable or convertible either currently or within 60 days after September 20, 2006. Mr. McKinnon is a principal stockholder of KZ |
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Golf, Inc. and a participant in the KZ Golf Defined Benefit Pension Plan. | ||
(7) | Consists of 250,000 shares of our common stock held by M. Helleis and options to purchase 275,000 shares of our common stock exercisable either currently or within 60 days after September 20, 2006. | |
(8) | Consists of 291,000 shares of our common stock held by Mr. Price and options to purchase 150,000 shares of our common stock exercisable either currently or within 60 days after September 20, 2006. | |
(9) | Consists of 250,000 shares of our common stock held by Mr. Brown and options to purchase 150,000 shares of our common stock exercisable either currently or within 60 days after September 20, 2006. | |
(10) | In addition to the securities indicated in the foregoing footnotes, consists of 154,414 shares of our common stock and options and warrants to purchase 178,517 shares of our common stock exercisable within 60 days of September 20, 2006. |
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Closing bid | ||||||||
Date | price | Volume | ||||||
Sept. 6, 2006 | $ | 1.20 | 94,779 | |||||
Sept. 7, 2006 | $ | 1.20 | 124,095 | |||||
Sept. 8, 2006 | $ | 1.21 | 153,504 | |||||
Sept. 11, 2006 | $ | 1.20 | 24,206 | |||||
Sept. 12, 2006 | $ | 1.20 | 86,240 | |||||
Sept. 13, 2006 | $ | 1.30 | 47,175 | |||||
Sept. 14, 2006 | $ | 1.56 | 28,508 | |||||
Sept. 15, 2006 | $ | 1.65 | 47,730 | |||||
Sept. 18, 2006 | $ | 1.46 | 30,379 | |||||
Sept. 19, 2006 | $ | 1.46 | 7,864 | |||||
Sept. 20, 2006 | $ | 1.46 | 13,730 | |||||
Sept. 21, 2006 | $ | 1.40 | 18,205 | |||||
Sept. 22, 2006 | $ | 1.30 | 32,689 | |||||
Sept. 25, 2006 | $ | 1.46 | 62,765 | |||||
Sept. 26, 2006 | $ | 1.46 | 22,655 | |||||
Sept. 27, 2006 | $ | 1.46 | 3,749 |
(i) | a registration statement is and remains effective for the resale of securities in connection with the equity line of credit; | ||
(ii) | at all times during the period between our request for a drawdown and its subsequent funding, our common stock is listed on its principal market and shall not have been suspended from trading thereon for a period of two consecutive trading days; | ||
(iii) | we have complied with our obligations and are otherwise not in breach or default of any agreement related to the equity line of credit; | ||
(iv) | no injunction shall have been issued and remain in force, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of securities in connection with the equity line of credit; and | ||
(v) | the issuance of the securities in connection with the equity line of credit will not violate any shareholder approval requirements of the principal market. |
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• | may be acquired in an amount up to an aggregate 7,000,000 shares of our common stock at an assumed purchase price of $1.4162 per share (based on 97% of the closing price of our common stock as quoted on the OTC Bulletin Board on September 20, 2006), under our equity line of credit. |
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Beneficial Ownership Before Offering | Beneficial Ownership | |||||||||||||||||||
Number of | After Offering | |||||||||||||||||||
Number of | Shares Being | Number | ||||||||||||||||||
Name of Selling Security Holder | Shares | Percent(1) | Offered | of Shares | Percent(1)(2) | |||||||||||||||
Dutchess Private Equities Fund, L.P.(2) | 7,000,000 | 17.79% | 7,000,000 | 0 | — |
* | less than 1%. | |
(1) | Assumes 39,317,619 shares of common stock are outstanding immediately before and immediately after the offering. | |
(2) | Douglas Leighton and Michael Novelli are the managing members of Dutchess Capital Management, LLC, which acts as general partner to Dutchess Private Equities Fund, L.P. |
• | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; | ||
• | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; | ||
• | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; | ||
• | an exchange distribution in accordance with the rules of the applicable exchange; | ||
• | privately negotiated transactions; | ||
• | broker-dealers may agree with the selling security holders to sell a specified number of such shares at a stipulated price per share; | ||
• | a combination of any such methods of sale; or | ||
• | any other method permitted pursuant to applicable law. |
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FOR SECURITIES ACT LIABILITIES
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(A DEVELOPMENT STAGE ENTERPRISE)
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Save the World Air, Inc.
Los Angeles, California
53
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(A DEVELOPMENT STAGE ENTERPRISE)
DECEMBER 31, 2004 AND 2005 AND JUNE 30, 2006 (UNAUDITED)
December 31, | June 30, | |||||||||||
2004 | 2005 | 2006 | ||||||||||
(Unaudited) | ||||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash | $ | 84,826 | $ | 279,821 | $ | 1,628,517 | ||||||
Inventory | — | — | 3,719 | |||||||||
Other current assets | 2,602 | 9,009 | 122,588 | |||||||||
Total current assets | 87,428 | 288,830 | 1,754,824 | |||||||||
Property and equipment,net of accumulated depreciation | 35,596 | 295,374 | 367,272 | |||||||||
Other assets | — | 4,500 | 4,500 | |||||||||
$ | 123,024 | $ | 588,704 | $ | 2,126,596 | |||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable | $ | 64,089 | $ | 155,456 | $ | 117,942 | ||||||
Accrued expenses | 84,420 | 179,461 | 178,582 | |||||||||
Accrued research and development fees | 50,000 | 680,000 | 495,000 | |||||||||
Accrued professional fees | 876,452 | 450,555 | 501,732 | |||||||||
Payable to shareholder | — | 45,000 | — | |||||||||
Payable to related parties | 36,478 | 158,732 | — | |||||||||
Finders fees payable | 1,521 | 8,916 | 4,666 | |||||||||
Convertible debentures, net | — | 318,759 | 983,863 | |||||||||
Total current liabilities | 1,112,960 | 1,996,879 | 2,281,785 | |||||||||
Advances from founding executive officer | 1,017,208 | — | — | |||||||||
Commitments and contingencies | ||||||||||||
Stockholders’ deficiency | ||||||||||||
Common stock, $.001 par value: 200,000,000 shares authorized, 37,784,821, 31,387,418, and 37,360,368 (unaudited) shares issued and outstanding at December 31, 2004 and 2005 and June 30, 2006, respectively | 37,784 | 31,387 | 37,360 | |||||||||
Common stock to be issued | 119,000 | 612,521 | 47,722 | |||||||||
Additional paid-in capital | 15,043,028 | 18,336,178 | 25,996,133 | |||||||||
Deferred compensation | (76,068 | ) | (142,187 | ) | — | |||||||
Deficit accumulated during the development stage | (17,130,888 | ) | (20,246,074 | ) | (26,236,404 | ) | ||||||
Total stockholders’ deficiency | (2,007,144 | ) | (1,408,175 | ) | (155,189 | ) | ||||||
$ | 123,024 | $ | 588,704 | $ | 2,126,596 | |||||||
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(A DEVELOPMENT STAGE ENTERPRISE)
YEARS ENDED DECEMBER 31, 2004 AND 2005 AND SIX AND THREE MONTHS
ENDED JUNE 30, 2005 AND 2006 (UNAUDITED) AND FOR THE PERIOD FROM
INCEPTION (FEBRUARY 18, 1998) TO JUNE 30, 2006 (UNAUDITED)
Cumulative | ||||||||||||||||||||||||||||
Years Ended December 31, | Six Months Ended June 30, | Three Months Ended June 30, | Since | |||||||||||||||||||||||||
2004 | 2005 | 2005 | 2006 | 2005 | 2006 | Inception | ||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||
Net sales | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Operating expenses | 3,319,901 | 2,631,082 | 1,244,905 | 3,607,840 | 583,310 | 1,852,870 | 19,098,589 | |||||||||||||||||||||
Research and development expenses | 1,873,464 | 1,150,361 | 592,122 | 178,873 | 190,637 | 121,111 | 3,982,460 | |||||||||||||||||||||
Non-cash patent settlement cost | 1,610,066 | — | — | — | — | — | 1,610,066 | |||||||||||||||||||||
Loss before other income | (6,803,431 | ) | (3,781,443 | ) | (1,837,027 | ) | (3,786,713 | ) | (773,947 | ) | (1,973,981 | ) | (24,691,115 | ) | ||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||
Other income | — | — | — | 125 | — | 125 | 125 | |||||||||||||||||||||
Interest income | 514 | — | — | 6,976 | — | 6,976 | 7,930 | |||||||||||||||||||||
Interest expense | (3,129 | ) | (348,964 | ) | (570 | ) | (2,209,918 | ) | (570 | ) | (1,025,345 | ) | (2,564,583 | ) | ||||||||||||||
Settlement of litigation and debt | — | 1,017,208 | — | — | — | — | 1,017,208 | |||||||||||||||||||||
Loss before provision for income taxes | (6,806,046 | ) | (3,113,199 | ) | (1,837,597 | ) | (5,989,530 | ) | (774,517 | ) | (2,992,225 | ) | (26,230,435 | ) | ||||||||||||||
Provision (benefit) for income taxes | (2,766 | ) | 1,987 | 1,976 | 800 | — | — | 5,969 | ||||||||||||||||||||
Net loss | $ | (6,803,280 | ) | $ | (3,115,186 | ) | $ | (1,839,573 | ) | $ | (5,990,330 | ) | $ | (774,517 | ) | $ | (2,992,225 | ) | $ | (26,236,404 | ) | |||||||
Net loss per common share, basic and diluted | $ | (0.19 | ) | $ | (0.08 | ) | $ | (0.05 | ) | $ | (0.18 | ) | $ | (0.02 | ) | $ | (0.09 | ) | ||||||||||
Weighted average common shares outstanding, basic and diluted | 35,841,225 | 38,248,575 | 38,283,771 | 32,816,890 | 38,528,563 | 33,661,360 | ||||||||||||||||||||||
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(A DEVELOPMENT STAGE ENTERPRISE)
FROM INCEPTION (FEBRUARY 18, 1998) TO DECEMBER 31, 2005
AND SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
Deficit | Total | |||||||||||||||||||||||||||||||
Additional | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||
Price per | Common Stock | Common Stock | Paid-in | Deferred | During the | Development | ||||||||||||||||||||||||||
Share | Shares | Amount | to be Issued | Capital | Compensation | Development Stage | Stage Deficiency | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
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 | ) | |||||||||||||||||||||||
Stock issued for employee compensation on February 8, 2000 | 1.03 | 20,000 | 20 | — | 20,580 | — | — | 20,600 | ||||||||||||||||||||||||
Stock issued for consulting services on February 8, 2000 | 1.03 | 100,000 | 100 | — | 102,900 | — | — | 103,000 | ||||||||||||||||||||||||
Stock issued for professional services on April 18, 2000 | 3.38 | 27,000 | 27 | — | 91,233 | — | — | 91,260 | ||||||||||||||||||||||||
Stock issued for directors fees on April 18, 2000 | 3.38 | 50,000 | 50 | — | 168,950 | — | — | 169,000 | ||||||||||||||||||||||||
Stock issued for professional services on May 19, 2000 | 4.06 | 5,000 | 5 | — | 20,295 | — | — | 20,300 | ||||||||||||||||||||||||
Stock issued for directors fees on June 20, 2000 | 4.44 | 6,000 | 6 | — | 26,634 | — | — | 26,640 | ||||||||||||||||||||||||
Stock issued for professional services on June 20, 2000 | 4.44 | 1,633 | 2 | — | 7,249 | — | — | 7,251 | ||||||||||||||||||||||||
Stock issued for professional services on June 26, 2000 | 5.31 | 1,257 | 1 | — | 6,674 | — | — | 6,675 | ||||||||||||||||||||||||
Stock issued for employee compensation on June 26, 2000 | 5.31 | 22,000 | 22 | — | 116,798 | — | — | 116,820 | ||||||||||||||||||||||||
Stock issued for consulting services on June 26, 2000 | 5.31 | 9,833 | 10 | — | 52,203 | — | — | 52,213 | ||||||||||||||||||||||||
Stock issued for promotional services on July 28, 2000 | 4.88 | 9,675 | 9 | — | 47,205 | — | — | 47,214 | ||||||||||||||||||||||||
Stock issued for consulting services on July 28, 2000 | 4.88 | 9,833 | 10 | — | 47,975 | — | — | 47,985 | ||||||||||||||||||||||||
Stock issued for consulting services on August 4, 2000 | 2.13 | 35,033 | 35 | — | 74,585 | — | — | 74,620 | ||||||||||||||||||||||||
Stock issued for promotional services on August 16, 2000 | 2.25 | 25,000 | 25 | — | 56,225 | — | — | 56,250 | ||||||||||||||||||||||||
Stock issued for consulting services on September 5, 2000 | 2.25 | 12,833 | 13 | — | 28,861 | — | — | 28,874 |
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Deficit | Total | |||||||||||||||||||||||||||||||
Additional | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||
Price per | Common Stock | Common Stock | Paid-in | Deferred | During the | Development | ||||||||||||||||||||||||||
Share | Shares | Amount | to be Issued | Capital | Compensation | Development Stage | Stage Deficiency | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
Stock issued for consulting services on September 10, 2000 | 1.50 | 9,833 | 10 | — | 14,740 | — | — | 14,750 | ||||||||||||||||||||||||
Stock issued for consulting services on November 2, 2000 | 0.88 | 9,833 | 10 | — | 8,643 | — | — | 8,653 | ||||||||||||||||||||||||
Stock issued for consulting services on November 4, 2000 | 0.88 | 9,833 | 10 | — | 8,643 | — | — | 8,653 | ||||||||||||||||||||||||
Stock issued for consulting services on December 20, 2000 | 0.50 | 19,082 | 19 | — | 9,522 | — | — | 9,541 | ||||||||||||||||||||||||
Stock issued for filing services on December 20, 2000 | 0.50 | 5,172 | 5 | — | 2,581 | — | — | 2,586 | ||||||||||||||||||||||||
Stock issued for professional services on December 26, 2000 | 0.38 | 12,960 | 13 | — | 4,912 | — | — | 4,925 | ||||||||||||||||||||||||
Other stock issuance on August 24, 2000 | 2.13 | 2,000 | 2 | — | 4,258 | — | — | 4,260 | ||||||||||||||||||||||||
Common shares 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 | ) | |||||||||||||||||||||||
Stock issued for consulting services on January 8, 2001 | 0.31 | 9,833 | 10 | — | 3,038 | — | — | 3,048 | ||||||||||||||||||||||||
Stock issued for consulting services on February 1, 2001 | 0.33 | 9,833 | 10 | — | 3,235 | — | — | 3,245 | ||||||||||||||||||||||||
Stock issued for consulting services on March 1, 2001 | 0.28 | 9,833 | 10 | — | 2,743 | — | — | 2,753 | ||||||||||||||||||||||||
Stock issued for legal services on March 13, 2001 | 0.32 | 150,000 | 150 | — | 47,850 | — | — | 48,000 | ||||||||||||||||||||||||
Stock issued for consulting services on April 3, 2001 | 0.25 | 9,833 | 10 | — | 2,448 | — | — | 2,458 | ||||||||||||||||||||||||
Stock issued for legal services on April 4, 2001 | 0.25 | 30,918 | 31 | — | 7,699 | — | — | 7,730 | ||||||||||||||||||||||||
Stock issued for professional services on April 4, 2001 | 0.25 | 7,040 | 7 | — | 1,753 | — | — | 1,760 | ||||||||||||||||||||||||
Stock issued for consulting services on April 5, 2001 | 0.25 | 132,600 | 132 | — | 33,018 | — | — | 33,150 | ||||||||||||||||||||||||
Stock issued for filing fees on April 30, 2001 | 1.65 | 1,233 | 1 | — | 2,033 | — | — | 2,034 | ||||||||||||||||||||||||
Stock issued for filing fees on September 19, 2001 | 0.85 | 2,678 | 2 | — | 2,274 | — | — | 2,276 | ||||||||||||||||||||||||
Stock issued for professional services on September 28, 2001 | 0.62 | 150,000 | 150 | — | 92,850 | — | — | 93,000 | ||||||||||||||||||||||||
Stock issued for directors services on October 5, 2001 | 0.60 | 100,000 | 100 | — | 59,900 | — | — | 60,000 | ||||||||||||||||||||||||
Stock issued for legal services on October 17, 2001 | 0.60 | 11,111 | 11 | — | 6,655 | — | — | 6,666 | ||||||||||||||||||||||||
Stock issued for consulting services on October 18, 2001 | 0.95 | 400,000 | 400 | — | 379,600 | — | — | 380,000 | ||||||||||||||||||||||||
Stock issued for consulting services on October 19, 2001 | 1.25 | 150,000 | 150 | — | 187,350 | — | — | 187,500 | ||||||||||||||||||||||||
Stock issued for exhibit fees on October 22, 2001 | 1.35 | 5,000 | 6 | — | 6,745 | — | — | 6,751 | ||||||||||||||||||||||||
Stock issued for directors | 0.95 | 1,000,000 | 1,000 | — | 949,000 | — | — | 950,000 | ||||||||||||||||||||||||
Stock issued for consulting services on November 7, 2001 | 0.85 | 20,000 | 20 | — | 16,980 | — | — | 17,000 |
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Deficit | Total | |||||||||||||||||||||||||||||||
Additional | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||
Price per | Common Stock | Common Stock | Paid-in | Deferred | During the | Development | ||||||||||||||||||||||||||
Share | Shares | Amount | to be Issued | Capital | Compensation | Development Stage | Stage Deficiency | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
Stock issued for consulting services on November 20, 2001 | 0.98 | 43,000 | 43 | — | 42,097 | — | — | 42,140 | ||||||||||||||||||||||||
Stock issued for consulting services on November 27, 2001 | 0.98 | 10,000 | 10 | — | 9,790 | — | — | 9,800 | ||||||||||||||||||||||||
Stock issued for consulting services on November 28, 2001 | 0.98 | 187,000 | 187 | — | 183,073 | — | — | 183,260 | ||||||||||||||||||||||||
Intrinsic value of options issued to employees | — | — | — | 2,600,000 | (2,600,000 | ) | — | — | ||||||||||||||||||||||||
Fair value of options issued to non-employees for services | — | — | — | 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 | ) | ||||||||||||||||||||||
Stock issued for directors services on December 10, 2002 | 0.40 | 2,150,000 | 2,150 | — | 857,850 | — | — | 860,000 | ||||||||||||||||||||||||
Common stock paid for, but not issued (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 for the year ended December 31, 2002 | — | — | — | — | — | (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 | 1,425,000 | 1,425 | (213,750 | ) | 212,325 | — | — | — | |||||||||||||||||||||||
Common stock issued, previously paid for | 0.25 | 880,000 | 880 | (220,000 | ) | 219,120 | — | — | — | |||||||||||||||||||||||
Stock issued for cash on March 20, 2003 | 0.25 | 670,000 | 670 | — | 166,830 | — | �� | — | 167,500 | |||||||||||||||||||||||
Stock issued for cash on April 4, 2003 | 0.25 | 900,000 | 900 | — | 224,062 | — | — | 224,962 | ||||||||||||||||||||||||
Stock issued for cash on April 8, 2003 | 0.25 | 100,000 | 100 | — | 24,900 | — | — | 25,000 | ||||||||||||||||||||||||
Stock issued for cash on May 8, 2003 | 0.25 | 1,150,000 | 1,150 | — | 286,330 | — | — | 287,480 | ||||||||||||||||||||||||
Stock issued for cash on June 16, 2003 | 0.25 | 475,000 | 475 | — | 118,275 | — | — | 118,750 | ||||||||||||||||||||||||
Stock issued for legal services on June 27, 2003 | 0.55 | 83,414 | 83 | — | 45,794 | — | — | 45,877 | ||||||||||||||||||||||||
Debt converted to stock on June 27, 2003 | 0.25 | 2,000,000 | 2,000 | — | 498,000 | — | — | 500,000 | ||||||||||||||||||||||||
Stock and warrants issued for cash on July 11, 2003 | 0.25 | 519,000 | 519 | — | 129,231 | — | — | 129,750 | ||||||||||||||||||||||||
Stock and warrants issued for cash on September 29, 2003 | 0.25 | 1,775,000 | 1,775 | — | 441,976 | — | — | 443,751 | ||||||||||||||||||||||||
Stock and warrants issued for cash on October 21, 2003 | 0.25 | 1,845,000 | 1,845 | — | 459,405 | — | — | 461,250 | ||||||||||||||||||||||||
Stock and warrants issued for cash on October 28, 2003 | 0.25 | 1,570,000 | 1,570 | — | 390,930 | — | — | 392,500 | ||||||||||||||||||||||||
Stock and warrants issued for cash on November 19, 2003 | 0.25 | 500,000 | 500 | — | 124,500 | — | — | 125,000 |
58
Table of Contents
Deficit | Total | |||||||||||||||||||||||||||||||
Additional | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||
Price per | Common Stock | Common Stock | Paid-in | Deferred | During the | Development | ||||||||||||||||||||||||||
Share | Shares | Amount | to be Issued | Capital | Compensation | Development Stage | Stage Deficiency | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
Finders’ fees related to stock issuances | — | — | 43,875 | (312,582 | ) | — | — | (268,707 | ) | |||||||||||||||||||||||
Common stock paid for, but not issued (25,000 shares) | 0.25 | — | — | 6,250 | — | — | — | 6,250 | ||||||||||||||||||||||||
Amortization of deferred comp | — | — | — | — | 863,727 | — | 863,727 | |||||||||||||||||||||||||
Net loss for year ended December 31, 2003 | — | — | — | — | — | (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 | ) | ||||||||||||||||||||||
Common stock issued, previously paid for | 0.25 | 25,000 | 25 | (6,250 | ) | 6,225 | — | — | — | |||||||||||||||||||||||
Stock issued for director services on March 31, 2004 | 1.50 | 50,000 | 50 | — | 74,950 | — | — | 75,000 | ||||||||||||||||||||||||
Stock issued for finders fees on March 31, 2004 | 0.15 | 82,500 | 82 | — | 12,293 | — | — | 12,375 | ||||||||||||||||||||||||
Stock issued for finders fees on March 31, 2004 | 0.25 | 406,060 | 407 | — | 101,199 | — | — | 101,606 | ||||||||||||||||||||||||
Stock issued for services on April 2, 2004 | 1.53 | 65,000 | 65 | — | 99,385 | — | — | 99,450 | ||||||||||||||||||||||||
Debt converted to stock on April 2, 2004 | 1.53 | 60,000 | 60 | — | 91,740 | — | — | 91,800 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on May 21, 2004 | 0.20 | 950,000 | 950 | — | 189,050 | — | — | 190,000 | ||||||||||||||||||||||||
Stock issued for directors services on June 8, 2004 | 1.70 | 600,000 | 600 | — | 1,019,400 | — | — | 1,020,000 | ||||||||||||||||||||||||
Stock issued for cash on August 25, 2004 | 1.00 | 550,000 | 550 | — | 549,450 | — | — | 550,000 | ||||||||||||||||||||||||
Stock issued upon exercise of options on August 30, 2004 | 0.40 | 4,000 | 4 | — | 1,596 | — | — | 1,600 | ||||||||||||||||||||||||
Stock issued for cash on September 8, 2004 | 1.00 | 25,000 | 25 | — | 24,975 | — | — | 25,000 | ||||||||||||||||||||||||
Stock issued for consulting services on September 15, 2004 | 1.31 | 50,000 | 49 | — | 65,451 | — | — | 65,500 | ||||||||||||||||||||||||
Stock issued for patent settlement on September 22, 2004 | 1.24 | 20,000 | 20 | — | 24,780 | — | — | 24,800 | ||||||||||||||||||||||||
Stock issued for research and development on October 6, 2004 | 1.40 | 65,000 | 65 | — | 90,935 | — | — | 91,000 | ||||||||||||||||||||||||
Stock issued for cash on October 6, 2004 | 1.00 | 25,000 | 25 | — | 24,975 | — | — | 25,000 | ||||||||||||||||||||||||
Stock issued for cash on October 15, 2004 | 1.00 | 150,000 | 150 | — | 149,850 | — | — | 150,000 | ||||||||||||||||||||||||
Stock issued upon exercise of stock options on October 21, 2004 | 0.40 | 6,500 | 6 | — | 2,594 | — | — | 2,600 | ||||||||||||||||||||||||
Stock issued for cash on November 3, 2004 | 1.00 | 25,000 | 25 | — | 24,975 | — | — | 25,000 | ||||||||||||||||||||||||
Stock issued for cash on November 18, 2004 | 1.00 | 172,500 | 173 | — | 172,327 | — | — | 172,500 | ||||||||||||||||||||||||
Stock issued for cash on December 9, 2004 | 1.00 | 75,000 | 75 | — | 74,925 | — | — | 75,000 | ||||||||||||||||||||||||
Stock issued for cash on December 23, 2004 | 1.00 | 250,000 | 250 | — | 249,750 | — | — | 250,000 | ||||||||||||||||||||||||
Finders fees related to stock issuances | — | — | — | — | (88,384 | ) | — | — | (88,384 | ) | ||||||||||||||||||||||
Common stock paid for, but not issued (119,000 shares) | — | — | — | 119,000 | — | — | — | 119,000 | ||||||||||||||||||||||||
Intrinsic value of options issued to employees | — | — | — | — | 248,891 | (248,891 | ) | — | — |
59
Table of Contents
Deficit | Total | |||||||||||||||||||||||||||||||
Additional | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||
Price per | Common Stock | Common Stock | Paid-in | Deferred | During the | Development | ||||||||||||||||||||||||||
Share | Shares | Amount | to be Issued | Capital | Compensation | Development Stage | Stage Deficiency | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
Fair value of options issued to non-employees for services | — | — | — | — | 55,381 | (55,381 | ) | — | — | |||||||||||||||||||||||
Fair value of warrants issued for settlement costs | — | — | — | — | 1,585,266 | — | — | 1,585,266 | ||||||||||||||||||||||||
Fair value of warrants issued to non-employees for services | — | — | — | — | 28,872 | — | — | 28,872 | ||||||||||||||||||||||||
Amortization of deferred compensation | — | — | — | — | — | 936,537 | — | 936,537 | ||||||||||||||||||||||||
Net loss for year ended December 31, 2004 | — | — | — | — | — | — | (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 | ) | ||||||||||||||||||||||
Common stock issued, previously paid for | 1.00 | 69,000 | 69 | (69,000 | ) | 68,931 | — | — | — | |||||||||||||||||||||||
Stock issued upon exercise of warrants, previously paid for | 1.00 | 50,000 | 50 | (50,000 | ) | 49,950 | — | — | — | |||||||||||||||||||||||
Stock issued for cash on January 20, 2005 | 1.00 | 25,000 | 25 | — | 24,975 | — | — | 25,000 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on January 31, 2005 | 0.40 | 500 | 1 | — | 199 | — | — | 200 | ||||||||||||||||||||||||
Stock issued for cash on February 17, 2005 | 1.00 | 325,000 | 325 | — | 324,675 | — | — | 325,000 | ||||||||||||||||||||||||
Stock issued for cash on March 31, 2005 | 1.00 | 215,000 | 215 | — | 214,785 | — | — | 215,000 | ||||||||||||||||||||||||
Stock issued for cash on May 17, 2005 | 1.00 | 5,000 | 5 | — | 4,995 | — | — | 5,000 | ||||||||||||||||||||||||
Stock issued for cash on June 7, 2005 | 1.00 | 300,000 | 300 | — | 299,700 | — | — | 300,000 | ||||||||||||||||||||||||
Stock issued for cash on August 5, 2005 | 1.00 | 480,500 | 480 | — | 480,020 | — | — | 480,500 | ||||||||||||||||||||||||
Stock issued for cash on August 9, 2005 | 1.00 | 100,000 | 100 | — | 99,900 | — | — | 100,000 | ||||||||||||||||||||||||
Stock issued for cash on October 27, 2005 | 1.00 | 80,000 | 80 | — | 79,920 | — | — | 80,000 | ||||||||||||||||||||||||
Common stock cancelled on December 7, 2005 | Various | (8,047,403 | ) | (8,047 | ) | — | 8,047 | — | — | — | ||||||||||||||||||||||
Stock issued for settlement of payables on December 21, 2005 | — | — | — | 57,092 | — | — | — | 57,092 | ||||||||||||||||||||||||
Stock issued for settlement of payables on December 31, 2005 | — | — | — | 555,429 | — | — | — | 555,429 | ||||||||||||||||||||||||
Finders fees related to stock issuances | — | — | — | — | (109,840 | ) | — | — | (109,840 | ) | ||||||||||||||||||||||
Intrinsic value of options issued to employees | — | — | — | — | 243,750 | (243,750 | ) | — | — | |||||||||||||||||||||||
Fair value of options issued for settlement costs | — | — | — | — | 31,500 | — | — | 31,500 | ||||||||||||||||||||||||
Fair value of warrants issued for settlement costs | — | — | — | — | 4,957 | — | — | 4,957 | ||||||||||||||||||||||||
Fair value of warrants issued to non-employees for services | — | — | — | — | 13,505 | — | — | 13,505 | ||||||||||||||||||||||||
Amortization of deferred compensation | — | — | — | — | — | 177,631 | — | 177,631 | ||||||||||||||||||||||||
Warrants issued with convertible notes | — | — | — | — | 696,413 | — | — | 696,413 | ||||||||||||||||||||||||
Intrinsic value of beneficial conversion associated with convertible notes | — | — | — | — | 756,768 | — | — | 756,768 |
60
Table of Contents
Deficit | Total | |||||||||||||||||||||||||||||||
Additional | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||
Price per | Common Stock | Common Stock | Paid-in | Deferred | During the | Development | ||||||||||||||||||||||||||
Share | Shares | Amount | to be Issued | Capital | Compensation | Development Stage | Stage Deficiency | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
Net loss for year ended December 31, 2005 | — | — | — | — | — | — | (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 | ) | ||||||||||||||||
Stock issued, for previously settled payables (unaudited) | — | 846,549 | 847 | (612,521 | ) | 611,674 | — | — | — | |||||||||||||||||||||||
Stock issued upon exercise of warrants on March 23, 2006 (unaudited) | 1.50 | 25,000 | 25 | — | 37,475 | — | — | 37,500 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on March 27, 2006 (unaudited) | 1.50 | 50,000 | 50 | — | 74,950 | — | — | 75,000 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on March 27, 2006 (unaudited) | 0.50 | 25,000 | 25 | — | 12,475 | — | — | 12,500 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on March 30, 2006 (unaudited) | 1.00 | 10,000 | 10 | — | 9,990 | — | — | 10,000 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on April 10, 2006 (unaudited) | 0.50 | 36,250 | 36 | — | 18,089 | — | — | 18,125 | ||||||||||||||||||||||||
Common stock issued for convertible debt on April 10, 2006 (unaudited) | 0.70 | 269,600 | 270 | — | 188,450 | — | — | 188,720 | ||||||||||||||||||||||||
Stock issued for cash on April 24, 2006 (unaudited) | 1.56 | 473,000 | 473 | — | 737,408 | — | — | 737,881 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on April 26, 2006 (unaudited) | 0.50 | 125,000 | 125 | — | 62,375 | — | — | 62,500 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on April 26, 2006 (unaudited) | 1.50 | 100,000 | 100 | — | 149,900 | — | — | 150,000 | ||||||||||||||||||||||||
Common stock issued for convertible debt on April 26, 2006 (unaudited) | 0.70 | 35,714 | 36 | — | 24,964 | — | — | 25,000 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on May 6, 2006 (unaudited) | 0.50 | 200,000 | 200 | — | 99,800 | — | — | 100,000 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on May 15, 2006 (unaudited) | 1.50 | 25,000 | 25 | — | 37,475 | — | — | 37,500 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on May 15, 2006 (unaudited) | 0.50 | 50,000 | 50 | — | 24,950 | — | — | 25,000 | ||||||||||||||||||||||||
Stock issued for cash on June 7, 2006 (unaudited) | 1.89 | 873,018 | 872 | — | 1,649,136 | — | — | 1,650,008 | ||||||||||||||||||||||||
Common stock issued for convertible debt on June 7, 2006 (unaudited) | 0.70 | 1,535,715 | 1,536 | — | 1,073,464 | — | — | 1,075,000 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on June 8, 2006 (unaudited) | 0.50 | 900,000 | 900 | — | 449,100 | — | — | 450,000 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on June 9, 2006 (unaudited) | 0.50 | 9,000 | 9 | — | 4,491 | — | — | 4,500 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on June 23, 2006 (unaudited). | 0.50 | 150,000 | 150 | — | 74,850 | — | — | 75,000 | ||||||||||||||||||||||||
Stock issued upon exercise of warrants on June 23, 2006 (unaudited). | 1.50 | 15,000 | 15 | — | 22,485 | — | — | 22,500 | ||||||||||||||||||||||||
Common stock issued for convertible debt on June 30, 2006 (unaudited) | 0.70 | 219,104 | 219 | — | 153,155 | — | — | 153,374 |
61
Table of Contents
Deficit | Total | |||||||||||||||||||||||||||||||
Additional | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||
Price per | Common Stock | Common Stock | Paid-in | Deferred | During the | Development | ||||||||||||||||||||||||||
Share | Shares | Amount | to be Issued | Capital | Compensation | Development Stage | Stage Deficiency | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
Common stock paid for, but not issued (unaudited) | — | — | — | 37,500 | — | — | — | 37,500 | ||||||||||||||||||||||||
Common stock for convertible notes converted to stock, but not issued (unaudited) | — | — | — | 10,222 | — | — | — | 10,222 | ||||||||||||||||||||||||
Fair value of options issued to employees and officers (unaudited) | — | — | — | — | 1,214.775 | — | — | 1,214,775 | ||||||||||||||||||||||||
Fair value of warrants issued for services (unaudited) | — | — | — | — | 401,130 | — | — | 401,130 | ||||||||||||||||||||||||
Write off of deferred compensation (unaudited) | — | — | — | — | (142,187 | ) | 142,187 | — | — | |||||||||||||||||||||||
Warrants issued for consulting services (unaudited) | — | — | — | — | 43,660 | — | — | 43,660 | ||||||||||||||||||||||||
Warrants issued with convertible notes (unaudited) | — | — | — | — | 290,248 | — | — | 290,248 | ||||||||||||||||||||||||
Intrinsic value of beneficial conversion associated with convertible notes (unaudited) | — | — | — | — | 620,252 | — | — | 620,252 | ||||||||||||||||||||||||
Finders fees related to stock issuances (unaudited) | — | — | — | — | (284,579 | ) | — | — | (284,579 | ) | ||||||||||||||||||||||
Net loss for six months ended June 30, 2006 (unaudited) | — | — | — | — | — | — | (5,990,330 | ) | (5,990,330 | ) | ||||||||||||||||||||||
Balance, June 30, 2006 (unaudited) | 37,360,368 | $ | 37,360 | $ | 47,722 | $ | 25,996,133 | $ | — | $ | (26,236,404 | ) | $ | (155,189 | ) | |||||||||||||||||
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(A DEVELOPMENT STAGE ENTERPRISE)
YEARS ENDED DECEMBER 31, 2004 AND 2005 AND SIX MONTHS ENDED
JUNE 30, 2005 AND 2006 (UNAUDITED) AND FOR THE PERIOD FROM
INCEPTION (FEBRUARY 18, 1998) TO JUNE 30, 2006 (UNAUDITED)
Cumulative | ||||||||||||||||||||
Years Ended December 31, | Six Months Ended June 30, | Since | ||||||||||||||||||
2004 | 2005 | 2005 | 2006 | Inception | ||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Net loss | $ | (6,803,280 | ) | $ | (3,115,186 | ) | $ | (1,839,573 | ) | $ | (5,990,330 | ) | $ | (26,236,404 | ) | |||||
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 | ) | — | — | (1,017,208 | ) | |||||||||||||
Fair value of options and warrants issued for services | 28,872 | 13,505 | 13,505 | 1,659,565 | 1,844,260 | |||||||||||||||
Issuance of common stock for services | 1,427,750 | — | — | — | 4,668,102 | |||||||||||||||
Issuance of options for legal settlement | — | 31,500 | 31,500 | — | 31,500 | |||||||||||||||
Issuance of warrants for legal settlement | — | 4,957 | 4,957 | — | 4,957 | |||||||||||||||
Patent acquisition cost | 1,610,066 | — | — | — | 1,610,066 | |||||||||||||||
Amortization of issuance costs | — | 318,759 | — | 2,113,825 | 2,432,583 | |||||||||||||||
Amortization of deferred compensation | 936,537 | 177,631 | 76,068 | — | 3,060,744 | |||||||||||||||
Depreciation | 8,685 | 19,345 | 4,536 | 57,217 | 90,979 | |||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||
Inventory | — | — | — | (3,719 | ) | (3,719 | ) | |||||||||||||
Prepaid expenses and other | (2,602 | ) | (10,907 | ) | (550 | ) | (113,579 | ) | (122,588 | ) | ||||||||||
Other assets | — | — | — | — | (4,500 | ) | ||||||||||||||
Income taxes payable | (5,991 | ) | — | — | — | — | ||||||||||||||
Accounts payable and accrued expenses | 388,499 | 1,010,426 | 363,261 | (172,872 | ) | 2,137,862 | ||||||||||||||
Net cash used in operating activities | (2,411,464 | ) | (2,567,178 | ) | (1,346,296 | ) | (2,449,893 | ) | (10,998,366 | ) | ||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Purchase of property and equipment | (9,037 | ) | (279,123 | ) | — | (129,115 | ) | (454,701 | ) | |||||||||||
Net cash used in investing activities | (9,037 | ) | (279,123 | ) | — | (129,115 | ) | (454,701 | ) | |||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Increase (decrease) in payables to related parties and stockholder | (6,425 | ) | 167,255 | 122,255 | (158,732 | ) | 517,208 | |||||||||||||
Advances from founding executive officer | — | — | — | — | 556,450 | |||||||||||||||
Net proceeds from issuance of convertible notes | — | 1,453,182 | — | 865,500 | 2,318,683 | |||||||||||||||
Net proceeds from issuance of common stock and common stock issuable | 1,585,700 | 1,420,859 | 1,351,200 | 3,220,936 | 9,689,243 | |||||||||||||||
Net cash provided by financing activities | 1,579,275 | 3,041,296 | 1,473,455 | 3,927,704 | 13,081,584 | |||||||||||||||
Net increase (decrease) in cash | (841,226 | ) | 194,995 | 127,159 | 1,348,696 | 1,628,517 | ||||||||||||||
Cash, beginning of period | 926,052 | 84,826 | 84,826 | 279,821 | — | |||||||||||||||
Cash, end of period | $ | 84,826 | $ | 279,821 | $ | 211,985 | $ | 1,628,517 | $ | 1,628,517 | ||||||||||
Supplemental disclosures of cash flow information | ||||||||||||||||||||
Cash paid during the year for | ||||||||||||||||||||
Interest | $ | — | $ | — | $ | — | $ | 93,688 | $ | 109,573 | ||||||||||
Income taxes | $ | 2,400 | $ | 1,987 | $ | 1,976 | $ | 800 | $ | 5,969 | ||||||||||
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 | 304,272 | 243,750 | — | — | 3,202,931 | |||||||||||||||
Purchase of property and equipment financed by advance from related party | — | — | — | — | 3,550 | |||||||||||||||
Conversion of related party debt to equity | 15,000 | — | — | — | 515,000 | |||||||||||||||
Issuance of common stock in settlement of payable | 113,981 | — | — | — | 113,981 | |||||||||||||||
Value of warrants and beneficial conversion feature of convertible notes | — | 1,453,182 | — | 865,500 | 2,318,683 | |||||||||||||||
Cancellation of stock | — | 8,047 | — | — | 8,047 | |||||||||||||||
Conversion of accounts payable and accrued expenses to common stock | — | 612,521 | — | 612,521 | 612,521 | |||||||||||||||
Conversion of related party debt to convertible debentures | — | — | — | 45,000 | 45,000 | |||||||||||||||
Conversion of convertible debentures to common stock | — | — | — | 1,452,319 | 206,720 | |||||||||||||||
Write off of deferred compensation | — | — | — | 142,187 | 142,187 |
63
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(A DEVELOPMENT STAGE ENTERPRISE)
64
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65
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Six Months | Three Months | Cumulative | ||||||||||||||||||
December 31, | Ended June 30, | Ended June 30, | Since | |||||||||||||||||
2004 | 2005 | 2005 | 2005 | Inception | ||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||
Net loss, as reported | $ | (6,803,280 | ) | $ | (3,115,186 | ) | $ | (1,839,573 | ) | $ | (774,517 | ) | $ | (26,236,404 | ) | |||||
Add: total fair value method stock-based employee compensation expense | (1,721,222 | ) | (1,039,268 | ) | (323,705 | ) | — | (5,010,310 | ) | |||||||||||
Less: deferred compensation amortization for below market employee options | 936,537 | 177,631 | 76,068 | — | 3,060,744 | |||||||||||||||
Pro forma net loss | $ | (7,587,965 | ) | $ | (3,976,823 | ) | $ | (2,087,210 | ) | $ | (774,517 | ) | $ | (28,509,675 | ) | |||||
Net loss per share: | ||||||||||||||||||||
As reported — basic and diluted | $ | (0.19 | ) | $ | (0.08 | ) | $ | (0.05 | ) | $ | (0.02 | ) | ||||||||
Pro forma — basic and diluted | $ | (0.21 | ) | $ | (0.10 | ) | $ | (0.05 | ) | $ | (0.02 | ) | ||||||||
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December 31, | June 30, | |||||||||||
2004 | 2005 | 2006 | ||||||||||
(Unaudited) | ||||||||||||
Office equipment | $ | 50,013 | $ | 329,136 | $ | 458,251 | ||||||
Less accumulated depreciation | (14,417 | ) | (33,762 | ) | (90,979 | ) | ||||||
Total current assets | $ | 35,596 | $ | 295,374 | $ | 367,272 | ||||||
December 31, | Six Months Ended June 30, | |||||||||||||||
2004 | 2005 | 2005 | 2006 | |||||||||||||
(Unaudited) | ||||||||||||||||
Income taxes at statutory federal rate | $ | (2,316,681 | ) | $ | (1,032,035 | ) | $ | (580,551 | ) | $ | (740,102 | ) | ||||
State income taxes, net of federal benefit | (408,197 | ) | (268,021 | ) | (150,634 | ) | (192,118 | ) | ||||||||
Valuation allowance | 2,721,312 | 1,301,243 | 732,361 | 932,220 | ||||||||||||
Minimum state taxes, plus penalties and interest | 800 | 800 | 800 | 800 | ||||||||||||
$ | (2,766 | ) | $ | 1,987 | $ | 1,976 | $ | 800 | ||||||||
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Weighted Avg. | Weighted Avg. | |||||||
Options | Exercise Price | |||||||
Options, January 1, 2004 | 13,250,000 | 0.11 | ||||||
Options granted | 1,172,652 | 1.03 | ||||||
Options exercised | — | — | ||||||
Options cancelled | — | — | ||||||
Options, December 31, 2004 | 14,422,652 | 0.18 | ||||||
Options granted | 2,085,909 | 0.92 | ||||||
Options exercised | — | — | ||||||
Options cancelled | (10,000,000 | ) | 0.10 | |||||
Options, December 31, 2005 | 6,508,561 | 0.53 | ||||||
Options granted (unaudited) | 1,163,605 | 1.08 | ||||||
Options exercised (unaudited) | — | — | ||||||
Options forfeited (unaudited) | (490,909 | ) | 0.90 | |||||
Options cancelled (unaudited) | — | — | ||||||
Options, June 30, 2006 (unaudited) | 7,181,257 | $ | 0.59 | |||||
Total | Exercisable | |||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||
Average | Average | Average | ||||||||||||||||||
Total Options | Remaining | Exercise | Options | Exercise | ||||||||||||||||
Exercise Prices | Outstanding | Life in Years | Price | Exercisable | Price | |||||||||||||||
$ 0.10 | 3,000,000 | 3.84 | $ | 0.10 | 3,000,000 | $ | 0.10 | |||||||||||||
0.40 | 250,000 | 3.17 | 0.40 | 250,000 | 0.40 | |||||||||||||||
0.85 | 400,000 | 4.58 | 0.85 | — | — | |||||||||||||||
0.85 | 1,225,000 | 9.58 | 0.85 | — | — | |||||||||||||||
0.98 | 900,000 | 3.17 | 0.98 | 900,000 | 0.98 | |||||||||||||||
1.00 | 370,000 | 9.58 | 1.00 | — | — | |||||||||||||||
1.10 | 90,909 | 4.58 | 1.10 | — | — | |||||||||||||||
1.15 | 193,912 | 3.17 | 1.15 | 193,912 | 1.15 | |||||||||||||||
1.27 | 78,740 | 3.17 | 1.27 | 78,740 | 1.27 | |||||||||||||||
$ 0.10-$1.27 | 6,508,561 | 5.26 | $ | 0.53 | 4,422,652 | $ | 0.36 | |||||||||||||
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Number | Average | Remaining | ||||||||||||||
of | Exercise | Contractual | Intrinsic | |||||||||||||
Shares | Price | Life (Years) | Value | |||||||||||||
As of December 31, 2005: | ||||||||||||||||
Outstanding | 6,508,561 | $ | 0.53 | 5.26 | $ | 2,600,000 | ||||||||||
Expected to Vest | 6,017,652 | $ | 0.43 | 5.31 | $ | 2,600,000 | ||||||||||
Exercisable | 4,422,652 | $ | 0.52 | 3.62 | $ | 2,600,000 |
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Total | Exercisable | |||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||
Average | Average | Average | ||||||||||||||||||
Total Options | Remaining | Exercise | Options | Exercise | ||||||||||||||||
Exercise Prices | Outstanding | Life in Years | Price | Exercisable | Price | |||||||||||||||
$ 0.10 | 3,000,000 | 3.35 | $ | 0.10 | 3,000,000 | $ | 0.10 | |||||||||||||
0.40 | 250,000 | 2.67 | 0.40 | 250,000 | 0.40 | |||||||||||||||
0.85 | 1,225,000 | 9.08 | 0.85 | — | — | |||||||||||||||
0.85 | 850,000 | 9.65 | 0.85 | |||||||||||||||||
0.98 | 900,000 | 2.67 | 0.98 | 900,000 | 0.98 | |||||||||||||||
1.00 | 370,000 | 9.08 | 1.00 | — | — | |||||||||||||||
1.15 | 193,912 | 2.67 | 1.15 | 193,912 | 1.15 | |||||||||||||||
1.27 | 78,740 | 2.67 | 1.27 | 78,740 | 1.27 | |||||||||||||||
1.69 | 313,605 | 9.65 | 1.69 | — | — | |||||||||||||||
$ 0.10-1.69 | 7,181,257 | 5.60 | $ | 0.59 | 4,422,652 | $ | 0.36 | |||||||||||||
2004 | 2005 | |||||||
Expected life (years) | 7.32 | 5.26 | ||||||
Risk free interest rate | 5.42 | % | 4.02 | % | ||||
Volatility | 238.46 | % | 188.83 | % | ||||
Expected dividend yield | 0.00 | % | 0.00 | % |
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Weighted Avg. | ||||||||
Warrants | Exercise Price | |||||||
Warrants outstanding, January 1, 2004 | 14,252,414 | $ | 0.48 | |||||
Warrants granted | 2,372,500 | 1.27 | ||||||
Warrants exercised | (960,500 | ) | 0.20 | |||||
Warrants cancelled | — | — | ||||||
Warrants outstanding, December 31, 2004 | 15,664,414 | 0.62 | ||||||
Warrants granted | 5,198,574 | 1.16 | ||||||
Warrants exercised | (50,500 | ) | 0.99 | |||||
Warrants cancelled | (20,000 | ) | 1.50 | |||||
Warrants outstanding, December 31, 2005 | 20,792,488 | 0.75 | ||||||
Warrants granted (unaudited) | 3,264,600 | 1.33 | ||||||
Warrants exercised (unaudited) | (1,745,250 | ) | 0.61 | |||||
Warrants cancelled (unaudited) | (126,784 | ) | 1.00 | |||||
Warrants outstanding, June 30, 2006 (unaudited) | 22,185,054 | $ | 0.84 | |||||
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Year | ||||
2006 | $ | 830,000 | ||
2007 | 810,000 | |||
Total | $ | 1,640,000 |
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December 31, | June 30, | |||||||
Periods Ending December 31, | 2005 | 2006 | ||||||
(Unaudited) | ||||||||
2006(1) | $ | 109,781 | $ | 68,874 | ||||
2007 | 88,224 | 94,000 | ||||||
2008 | 3,655 | 3,000 | ||||||
Total | $ | 201,660 | $ | 165,874 | ||||
(1) | The December 31, 2005 columns reflect the 2006 future minimum lease payments anticipated for the full year 2006. The June 30, 2006 column reflects the 2006 future minimum lease payments anticipated of the period July 1, 2006 to December 31, 2006. |
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SEC registration fee | $ | 1,198 | ||
Accounting fees and expenses | 29,000 | * | ||
Legal fees and expenses | 25,000 | * | ||
Printing and related expenses | 15,000 | * | ||
Transfer agent fees and expenses | 1,000 | * | ||
Miscellaneous | 1,000 | * | ||
Total | $ | 72,198 | * |
* | Estimated. |
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II-2
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Exhibit No. | Description | |||
3.1 | (1) | Articles of Incorporation, as amended, of the Registrant. | ||
3.2 | (1) | Bylaws of the Registrant. | ||
5 | ** | Opinion of counsel. | ||
10.1 | (13) | Commercial Sublease dated as of January 1, 2006 between the Registrant and KZ Golf, Inc. | ||
10.2 | (12) | General Tenancy Agreement dated March 14, 2006 between the Registrant and Autumlee Pty Ltd. | ||
10.3 | (3) | Agreement dated December 13, 2002 between the Registrant and RAND. | ||
10.4 | (2)*** | Agreement dated May 7, 2003 between the Registrant and RAND. | ||
10.5 | (4) | Modification No. 1 dated as of August 21, 2003 to Exhibit 10.4. | ||
10.6 | (4) | Modification No. 2 dated as of October 17, 2003 to Exhibit 10.4. | ||
10.7 | (4) | Modification No. 3 dated as of January 20, 2004 to Exhibit 10.4. | ||
10.8 | (5) | Deed and Document Conveyance between the Trustee of the Property of Jeffrey Ann Muller and Lynette Anne Muller (Bankrupts). | ||
10.9 | (5) | Assignment and Bill of Sale dated May 28, 2002 between the Registrant and Kevin Charles Hart. | ||
10.10 | (6)† | Employment Agreement dated December 1, 2003 between the Registrant and Edward L. Masry. | ||
10.11 | (14)† | Amended and Restated Employment Agreement dated as of October 5, 2005 between the Registrant and Eugene E. Eichler. | ||
10.12 | (14)† | Amended and Restated Employment Agreement dated as of October 5, 2005 between the Registrant and Bruce H. McKinnon. | ||
10.13 | (7) | Save the World Air, Inc. 2004 Stock Option Plan | ||
10.14 | (9) | Form of Incentive Stock Option Agreement under 2004 Stock Option Plan |
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Exhibit No. | Description | |||
10.15 | (9) | Form of Non-Qualified Stock Option Agreement under 2004 Stock Option Plan | ||
10.16 | (9) | Consulting Agreement dated as of April 1, 2003 between the Registrant and Adrian Menzell | ||
10.17 | (10) | Amendment to Exhibit 10.16. | ||
10.18 | (9) | Consulting Agreement dated as of April 1, 2003 between the Registrant and Pat Baker | ||
10.19 | (10) | Amendment to Exhibit 10.18. | ||
10.20 | (9) | Consulting Agreement dated as of April 1, 2003 between the Registrant and John Kostic | ||
10.21 | (10) | Amendment to Exhibit 10.20. | ||
10.22 | (9) | Consulting Agreement dated as of October 1, 2004 between the Registrant and John Fawcett | ||
10.23 | (9) | Advisory Services Agreement dated as of July 7, 2003 between the Registrant and Sir Jack Brabham | ||
10.24 | (8) | License Agreement dated as of July 1, 2004 between the Registrant and Temple University — The Commonwealth System of Higher Education | ||
10.25 | (9) | Exclusive Capital Raising Agreement dated as of July 29, 2004 between the Registrant and London Aussie Marketing, Ltd. | ||
10.26 | (9) | Consulting Agreement dated as of November 19, 2004 between the Registrant and London Aussie Marketing, Ltd. | ||
10.27 | ** | Amendment to Exhibit 10.26. | ||
10.28 | (9)† | Employment Agreement dated September 1, 2004 with Erin Brockovich | ||
10.29 | (9) | Representation Agreement dated as of October 1, 2004 between the Registrant and Gurminder Singh | ||
10.30 | (9) | Advisory Services Agreement dated as of August , 2002 between the Registrant and Bobby Unser, Jr. | ||
10.31 | (9)† | Advisory Services Agreement dated as of August , 2002 between the Registrant and Nate Sheldon | ||
10.32 | (9) | Assignment of Patent Rights dated as of September 1, 2003 between the Registrant and Adrian Menzell | ||
10.33 | (9) | Global Deed of Assignment dated June 26, 2004 between the Registrant and Adrian Menzell | ||
10.34 | (14)† | Amended and Restated Employment Agreement dated as of March 1, 2006 between the Registrant and John Richard Bautista, III | ||
10.35 | (11) | Lease dated August 15, 2005 between the Registrant and Thomas L. Jackson | ||
10.36 | (12) | Amendment dated February 1, 2006 to Exhibit 10.35. | ||
10.37 | (11) | Form of Registrant’s 9% convertible note issued in 2005 Interim Financing | ||
10.38 | (11) | Form of Registrant’s stock purchase warrant issued in 2005 Interim Financing | ||
10.39 | (12) | Form of Registrant’s 9% convertible note issued in 2005 Bridge Financing | ||
10.40 | (12) | Form of Registrant’s stock purchase warrant issued in 2005 Bridge Financing | ||
10.41 | (14) | Form of Registrant’s stock purchase warrant issued in 2006 Regulation S Financing | ||
10.42 | (14) | Form of Registrant’s stock purchase warrant issued in 2006 PIPE Financing | ||
10.43 | (15) | Investment Agreement dated as of September 15, 2006 between Registrant and Dutchess Private Equities Fund, L.P. | ||
10.44 | (15) | Registration Rights Agreement dated as of September 15, 2006 between Registrant and Dutchess Private Equities Fund, L.P. |
II-4
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Exhibit No. | Description | |||
21** | List of subsidiaries | |||
23* | Consent of Weinberg & Company, P.A. | |||
24** | Power of Attorney (included on Signature Page) |
* | Filed herewith. | |
** | Previously filed. | |
*** | Confidential treatment previously requested. | |
† | Management contract or compensatory plan or arrangement. | |
(1) | Incorporated by reference from Registrant’s Registration Statement on Form 10-SB (Registration Number 000-29185), as amended, filed on March 2, 2000. | |
(2) | Incorporated by reference from Registrant’s Form 10-KSB for the fiscal year ended December 31, 2002. | |
(3) | Incorporated by reference from Registrant’s Form 8-K filed on December 30, 2002. | |
(4) | Incorporated by reference from Registrant’s Form 10-QSB for the quarter ended March 31, 2004. | |
(5) | Incorporated by reference from Registrant’s Form 8-K filed on November 12, 2002. | |
(6) | Incorporated by reference from Registrant’s Form 10-KSB for the fiscal year ended December 31, 2003. | |
(7) | Incorporated by reference from Appendix C of Registrant’s Schedule 14A filed on April 30, 2004, in connection with its Annual Meeting of Stockholders held on May 24, 2004. | |
(8) | Incorporated by reference from Registrant Form 8-K filed on July 12, 2004. | |
(9) | Incorporated by reference from Registrant’s Form 10-KSB for the fiscal year ended December 31, 2004. | |
(10) | Incorporated by reference from Registrant’s Form 10-QSB for the quarter ended June 30, 2005. | |
(11) | Incorporated by reference from Registrant’s Form 10-QSB for the quarter ended September 30, 2005. | |
(12) | Incorporated by reference from Registrant’s Form 10-KSB for the year ended December 31, 2005. | |
(13) | Incorporated by reference from Registrant’s Form 10-QSB for the quarter ended March 31, 2006. | |
(14) | Incorporated by reference from Registrant’s Registration Statement on Form SB-2 (File No. 333-135415). | |
(15) | Incorporated by reference from Registrant’s Current Report on Form 8-K filed on September 21, 2006. |
II-5
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II-6
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Save The World Air, Inc. | ||||
By: | /s/EUGENE E. EICHLER | |||
Eugene E. Eichler | ||||
Chief Executive Officer and Chief Financial Officer | ||||
Name | Title | Date | ||||||
/s/ EUGENE E. EICHLER | Chief Executive Officer, Chief Financial | October 27, 2006 | ||||||
Eugene E. Eichler | Officer and Director | |||||||
/s/ BRUCE H. MCKINNON | President, Chief Operating Officer and Director | October 27, 2006 | ||||||
Bruce H. McKinnon | ||||||||
/s/JOSEPH HELLEIS* | Chairman of the Board | October 27, 2006 | ||||||
Joseph Helleis | ||||||||
/s/JOHN J. BROWN* | Director | October 27, 2006 | ||||||
John J. Brown | ||||||||
/s/JOHN F. PRICE* | Director | October 27, 2006 | ||||||
John F. Price | ||||||||
/s/CECIL KYTE* | Director | October 27, 2006 | ||||||
Cecil Kyte |
*By: | /s/EUGENE E. EICHLER | ||
Eugene E. Eichler | |||
Attorney-in-fact |
II-7
Table of Contents
Exhibit No. | Description | |||
3.1 | (1) | Articles of Incorporation, as amended, of the Registrant. | ||
3.2 | (1) | Bylaws of the Registrant. | ||
5** | Opinion of counsel. | |||
10.1 | (13) | Commercial Sublease dated as of January 1, 2006 between the Registrant and KZ Golf, Inc. | ||
10.2 | (12) | General Tenancy Agreement dated March 14, 2006 between the Registrant and Autumlee Pty Ltd. | ||
10.3 | (3) | Agreement dated December 13, 2002 between the Registrant and RAND. | ||
10.4 | (2)*** | Agreement dated May 7, 2003 between the Registrant and RAND. | ||
10.5 | (4) | Modification No. 1 dated as of August 21, 2003 to Exhibit 10.4. | ||
10.6 | (4) | Modification No. 2 dated as of October 17, 2003 to Exhibit 10.4. | ||
10.7 | (4) | Modification No. 3 dated as of January 20, 2004 to Exhibit 10.4. | ||
10.8 | (5) | Deed and Document Conveyance between the Trustee of the Property of Jeffrey Ann Muller and Lynette Anne Muller (Bankrupts). | ||
10.9 | (5) | Assignment and Bill of Sale dated May 28, 2002 between the Registrant and Kevin Charles Hart. | ||
10.10 | (6)† | Employment Agreement dated December 1, 2003 between the Registrant and Edward L. Masry. | ||
10.11 | (14)† | Amended and Restated Employment Agreement dated as of October 5, 2005 between the Registrant and Eugene E. Eichler. | ||
10.12 | (14)† | Amended and Restated Employment Agreement dated as of October 5, 2005 between the Registrant and Bruce H. McKinnon. | ||
10.13 | (7) | Save the World Air, Inc. 2004 Stock Option Plan | ||
10.14 | (9) | Form of Incentive Stock Option Agreement under 2004 Stock Option Plan | ||
10.15 | (9) | Form of Non-Qualified Stock Option Agreement under 2004 Stock Option Plan | ||
10.16 | (9) | Consulting Agreement dated as of April 1, 2003 between the Registrant and Adrian Menzell | ||
10.17 | (10) | Amendment to Exhibit 10.16. | ||
10.18 | (9) | Consulting Agreement dated as of April 1, 2003 between the Registrant and Pat Baker | ||
10.19 | (10) | Amendment to Exhibit 10.18. | ||
10.20 | (9) | Consulting Agreement dated as of April 1, 2003 between the Registrant and John Kostic | ||
10.21 | (10) | Amendment to Exhibit 10.20. | ||
10.22 | (9) | Consulting Agreement dated as of October 1, 2004 between the Registrant and John Fawcett | ||
10.23 | (9) | Advisory Services Agreement dated as of July 7, 2003 between the Registrant and Sir Jack Brabham | ||
10.24 | (8) | License Agreement dated as of July 1, 2004 between the Registrant and Temple University — The Commonwealth System of Higher Education | ||
10.25 | (9) | Exclusive Capital Raising Agreement dated as of July 29, 2004 between the Registrant and London Aussie Marketing, Ltd. |
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Exhibit No. | Description | |||
10.26 | (9) | Consulting Agreement dated as of November 19, 2004 between the Registrant and London Aussie Marketing, Ltd. | ||
10.27 | ** | Amendment to Exhibit 10.26. | ||
10.28 | (9)† | Employment Agreement dated September 1, 2004 with Erin Brockovich | ||
10.29 | (9) | Representation Agreement dated as of October 1, 2004 between the Registrant and Gurminder Singh | ||
10.30 | (9) | Advisory Services Agreement dated as of August , 2002 between the Registrant and Bobby Unser, Jr. | ||
10.31 | (9)† | Advisory Services Agreement dated as of August , 2002 between the Registrant and Nate Sheldon | ||
10.32 | (9) | Assignment of Patent Rights dated as of September 1, 2003 between the Registrant and Adrian Menzell | ||
10.33 | (9) | Global Deed of Assignment dated June 26, 2004 between the Registrant and Adrian Menzell | ||
10.34 | (14)† | Amended and Restated Employment Agreement dated as of March 1, 2006 between the Registrant and John Richard Bautista, III | ||
10.35 | (11) | Lease dated August 15, 2005 between the Registrant and Thomas L. Jackson | ||
10.36 | (12) | Amendment dated February 1, 2006 to Exhibit 10.35. | ||
10.37 | (11) | Form of Registrant’s 9% convertible note issued in 2005 Interim Financing | ||
10.38 | (11) | Form of Registrant’s stock purchase warrant issued in 2005 Interim Financing | ||
10.39 | (12) | Form of Registrant’s 9% convertible note issued in 2005 Bridge Financing | ||
10.40 | (12) | Form of Registrant’s stock purchase warrant issued in 2005 Bridge Financing | ||
10.41 | (14) | Form of Registrant’s stock purchase warrant issued in 2006 Regulation S Financing | ||
10.42 | (14) | Form of Registrant’s stock purchase warrant issued in 2006 PIPE Financing | ||
10.43 | (15) | Investment Agreement dated as of September 15, 2006 between Registrant and Dutchess Private Equities Fund, L.P. | ||
10.44 | (15) | Registration Rights Agreement dated as of September 15, 2006 between Registrant and Dutchess Private Equities Fund, L.P. | ||
21** | List of subsidiaries | |||
23* | Consent of Weinberg & Company, P.A. | |||
24** | Power of Attorney (included on Signature Page) |
* | Filed herewith. | |
** | Previously filed. | |
*** | Confidential treatment previously requested. | |
† | Management contract or compensatory plan or arrangement. | |
(1) | Incorporated by reference from Registrant’s Registration Statement on Form 10-SB (Registration Number 000-29185), as amended, filed on March 2, 2000. | |
(2) | Incorporated by reference from Registrant’s Form 10-KSB for the fiscal year ended December 31, 2002. | |
(3) | Incorporated by reference from Registrant’s Form 8-K filed on December 30, 2002. | |
(4) | Incorporated by reference from Registrant’s Form 10-QSB for the quarter ended March 31, 2004. |
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(5) | Incorporated by reference from Registrant’s Form 8-K filed on November 12, 2002. | |
(6) | Incorporated by reference from Registrant’s Form 10-KSB for the fiscal year ended December 31, 2003. | |
(7) | Incorporated by reference from Appendix C of Registrant’s Schedule 14A filed on April 30, 2004, in connection with its Annual Meeting of Stockholders held on May 24, 2004. | |
(8) | Incorporated by reference from Registrant Form 8-K filed on July 12, 2004. | |
(9) | Incorporated by reference from Registrant’s Form 10-KSB for the fiscal year ended December 31, 2004. | |
(10) | Incorporated by reference from Registrant’s Form 10-QSB for the quarter ended June 30, 2005. | |
(11) | Incorporated by reference from Registrant’s Form 10-QSB for the quarter ended September 30, 2005. | |
(12) | Incorporated by reference from Registrant’s Form 10-KSB for the year ended December 31, 2005. | |
(13) | Incorporated by reference from Registrant’s Form 10-QSB for the quarter ended March 31, 2006. | |
(14) | Incorporated by reference from Registrant’s Registration Statement on Form SB-2 (File No. 333-135415). | |
(15) | Incorporated by reference from Registrant’s Current Report on Form 8-K filed on September 21, 2006. |