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EXCEL - IDEA: XBRL DOCUMENT - SAVE THE WORLD AIR INCFinancial_Report.xls
EX-32 - CERTIFICATION - SAVE THE WORLD AIR INCstwa_10q-ex3200.htm
EX-31.1 - CERTIFICATION - SAVE THE WORLD AIR INCstwa_10q-ex3101.htm
EX-31.2 - CERTIFICATION - SAVE THE WORLD AIR INCstwa_10q-ex3102.htm

 

 

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 September 30, 2012

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.)

 

735 State Street, Suite 500

Santa Barbara, California 93101

(Address, including zip code, of principal executive offices

(805)-845-3561

(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 o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx 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 November 6, 2012 was 138,297,834.

 

 

 

 
 

 

SAVE THE WORLD AIR, INC.

FORM 10-Q

 INDEX

 

    Page
PART I      
       
ITEM 1. Financial Statements   3  
Condensed consolidated balance sheets (unaudited)   3  
Condensed consolidated statements of operations (unaudited)   4  
Condensed consolidated statement of changes in stockholders’ deficiency (unaudited)   5  
Condensed consolidated statements of cash flows (unaudited)   6  
Notes to condensed consolidated financial statements (unaudited)   8  
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   18  
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk   22  
ITEM 4. Controls and Procedures   22  
       
PART II   25  
       
ITEM 1. Legal Proceedings   25  
ITEM 1A. Risk Factors   25  
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds   25  
ITEM 3. Defaults Upon Senior Securities   25  
ITEM 4. Mine Safety Disclosures   25  
ITEM 5. Other Information   26  
ITEM 6. Exhibits   26  
       
SIGNATURES   27  
       
EXHIBIT INDEX   28  
       
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

   

   

 

September 30, 2012

(unaudited)

    December 31, 2011  
ASSETS            
Current assets:                
Cash   $ 902,333     $ 617,797  
Other current assets     25,563       77,907  
Total current assets     927,896       695,704  
Property and Equipment, net of accumulated depreciation of $240,842 and $212,963 at September 30, 2012 and December 31, 2011, respectively     62,797       75,609  
Other assets     10,330       10,330  
Total assets   $ 1,001,023     $ 781,643  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY                
Current liabilities:                
Accounts payable-related parties   $ 43,253     $ 63,003  
Accounts payable-license agreements     206,475       178,125  
Accounts payable-other     386,715       478,402  
Accrued expenses-related parties     767,204       812,993  
Accrued expenses-other     37,237       247,169  
Accrued professional fees     109,303       294,552  
Convertible debentures, net-of-discount     15,560       169,542  
Fair value of derivative liabilities     3,035,739       1,643,139  
Total current liabilities     4,601,486       3,886,925  
                 
Commitments and contingencies                
                 
Stockholders’ deficiency                
Common stock, $.001 par value: 200,000,000 shares authorized, 137,236,654 and 114,273,470, shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively     137,237       114,274  
Additional paid-in capital     77,090,419       66,069,911  
Deficit accumulated during the development stage     (80,828,119 )     (69,289,467 )
Total stockholders’ deficiency     (3,600,463 )     (3,105,282 )
Total liabilities and stockholders’ deficiency   $ 1,001,023     $ 781,643  

 

See notes to condensed consolidated financial statements.

 

 

3
 

 

SAVE THE WORLD AIR, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

   Three months ended
September 30,
   Nine months ended
September 30,
   Inception
(February 18, 1998) to September 30,
 
   2012   2011   2012   2011   2012 
                     
Net sales  $   $   $   $   $69,000 
Cost of goods sold                   24,120 
Gross profit                   44,880 
Operating expenses   2,429,153    2,129,273    6,288,872    4,640,508    50,433,507 
Research and development expenses   177,311    379,391    528,201    931,959    7,973,198 
Non-cash patent settlement costs                   1,610,066 
Loss before other income (expense)   (2,606,464)   (2,508,664)   (6,817,073)   (5,572,467)   (59,971,891)
                          
Other income (expense)                         
Other income (expense)   4,593    112,453    20,568    150,903    212,540 
Interest income                   16,342 
Interest and financing expense   (774,232)   (1,014,043)   (3,588,522)   (4,810,735)   (20,265,138)
Change in fair value of derivative liabilities   (2,688,512)   1,158,500    (2,856,087)   2,722,084    (727,886)
Gain on extinguishment of derivative liabilities   1,377,911        1,463,487        1,463,487 
Costs of private placement                   (1,640,715)
Costs to induce conversion of notes                   (469,043)
Loss on disposition of equipment                   (14,426)
Settlement of Debt Due Morale/Matthews                   (927,903)
Settlement of litigation and debt   16,000        239,775        1,504,796 
                          
Loss before provision for income taxes   (4,670,704)   (2,251,754)   (11,537,852)   (7,510,215)   (80,819,837)
Provision for income taxes           800    800    8,282 
Net loss  $(4,670,704)  $(2,251,754)  $(11,538,652)  $(7,511,015)  $(80,828,119)
Net loss per share, basic and diluted  $(0.04)  $(0.02)  $(0.09)  $(0.07)     
Weighted average common shares outstanding, basic and diluted   129,389,182    109,394,365    124,978,300    100,944,733      

 

 

 

See notes to condensed consolidated financial statements. 

 

4
 

 

SAVE THE WORLD AIR, INC.

(A DEVELOPMENT STAGE ENTERPRISE)

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

NINE MONTHS ENDED SEPTEMBER 30, 2012 (UNAUDITED)

 

    Price Per   Common Stock   Additional
Paid-in
  Deficit
Accumulated During the
Development
  Total Stockholders’
    Share   Shares   Amount   Capital   Stage   Deficiency
Balance, December 31, 2011           $ 114,273,470     $ 114,274     $ 66,069,911     $ (69,289,467 )   $ (3,105,282  )
Common stock issued upon conversion of convertible debt   $ .25-.40       14,155,006       14,155       3,727,629       -       3,741,784  
Common stock issued upon exercise of warrants   $ .25-.40       6,224,844       6,225       1,756,468       -       1,762,693  
Fair value of options and warrants issued as compensation     -       -       -       2,417,314       -       2,417,314  
Common stock issued upon exercise of options   $ .27       58,334       58       15,692       -       15,750  
Common stock issued for services   $ .30-1.07       2,525,000       2,525       1,225,725       -       1,228,250  
Fair value of warrants and beneficial conversion feature of issued convertible notes     -       -       -       1,877,680       -       1,877,680  
Net loss for the nine months  ended September 30, 2012     -       -       -       -       (11,538,652 )     (11,538,652 )
Balance, September 30, 2012             137,236,654     $ 137,237     $ 77,090,419     $ (80,828,119 )   $ (3,600,463 )

 

 

 

 

See notes to condensed consolidated financial statements.

5
 

SAVE THE WORLD AIR, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE ENTERPRISE)

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

       Inception
(February 18, 1998)
 
   Nine Months Ended September 30,   to September 30, 
   2012   2011   2012 
Cash flows from operating activities               
Net Loss  $(11,538,652)  $(7,511,015)  $(80,828,119)
Adjustments to reconcile net loss to net cash used in operating activities:               
Write off of intangible assets           505,000 
Settlement of litigation and debt   (239,775)   (114,903)   (1,578,029)
Settlement of debt due Morale/Matthews           927,903 
Stock based compensation expense   1,660,828    919,289    7,836,945 
Issuance of common stock for services   1,228,250    862,000    9,263,038 
Issuance of options for legal settlement           31,500 
Issuance of warrants for legal settlement           4,957 
Issuance of warrants for financing fees           153,501 
Issuance of warrants for consulting fees   756,486    339,122    1,294,374 
Increase in convertible notes related to default       2,376    299,274 
Interest on related party loans           22,305 
Patent acquisition cost           1,610,066 
Amortization of issuance costs and original issue debt discounts including beneficial conversion feature-part of interest expense   3,587,802    4,796,647    19,721,879 
Fair value of common stock and warrants issued to induce conversion of notes           469,043 
Costs of private placement convertible notes           1,640,715 
Change in fair value of derivative liability   2,856,087    (2,722,084)   727,886 
Gain on extinguishment of derivative liability   (1,463,487)       (1,463,487)
Amortization of deferred compensation           3,060,744 
Loss on disposition of assets           14,426 
Depreciation and amortization   27,879    25,735    522,778 
Bad debt           1,300 
Changes in operating assets and liabilities:               
Accounts receivable           (1,380)
Prepaid expenses and other   52,344    (28,908)   (25,482)
Other assets       (2,310)   (10,330)
Accounts payable and accrued expenses   (200,853)   154,220    4,826,997 
Accounts payable – license agreements   28,350    (375,172)   (444,662)
Accounts payable and accrued expenses – related parties   (65,539)   (167,788)   (95,539)
Net cash used in operating activities   (3,310,280)   (3,822,791)   (31,512,397)
Cash flows from investing activities               
Purchase of equipment   (15,067)   (32,243)   (613,929)
Proceeds from sale of equipment           17,478 
Net cash used in investing activities   (15,067)   (32,243)   (596,451)
Cash flows from financing activities               
Net proceeds under equity line of credit           1,262,386 
(Decrease) increase in payables to related parties and stockholder       (86,947)   536,979 
Advances from founding executive officer           517,208 
Net proceeds from issuance of convertible notes and warrants   1,831,440    3,831,430    18,396,488 
Repayment of convertible notes           (296,397)
Proceeds from sale of stock and exercise of warrants and options   1,778,443    13,500    12,594,517 
Net cash provided by financing activities   3,609,883    3,757,983    33,011,181 
Net (decrease) increase in cash   284,536    (97,051)   902,333 
Cash, beginning of period   617,797    101,645     
Cash, end of period  $902,333   $4,594   $902,333 
6
 

 

SAVE THE WORLD AIR, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE ENTERPRISE)

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(continued)

 

   Nine Months Ended September 30,   Inception
(February 18, 1998)
to September 30,
 
   2012   2011   2012 
Supplemental disclosures of cash flow information            
Cash paid during the year for:               
   Interest  $720   $11,713   $172,100 
   Income taxes  $800   $800   $8,282 
Non-cash investing and financing activities               
Acquisition of intangible asset through advance from related party and issuance of common stock  $   $   $505,000 
Deferred compensation for stock options issued for services           3,202,931 
Purchase of property and equipment financed by advance from related party           3,550 
Conversion of related party debt to equity           515,000 
Issuance of common stock in settlement of payable           247,584 
Cancellation of stock           8,047 
Conversion of accounts payable and accrued expenses to common stock           612,521 
Conversion of accounts payable and accrued expenses to convertible debentures   46,240    301,075    683,715 
Conversion of related party debt to convertible debentures           72,500 
Conversion of convertible debentures to common stock   3,741,784    4,702,386    19,493,135 
Issuance of shares for settlement of loans and other payable to Morale/Matthews           2,783,711 
Write off of deferred compensation           142,187 
Fair value of derivative liability recorded as note discount           2,130,625 
Proceeds of exercise of options applied to accounts payable       7,500    67,500 
Fair value of warrants and beneficial conversion feature associated with issued convertible notes   1,877,680    4,132,505    15,790,413 

 

 

 

See notes to condensed consolidated financial statements.

 

 

7
 

 

SAVE THE WORLD AIR, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE ENTERPRISE)

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)

 

1.  Organization and basis of presentation

 

Description of business

 

Save the World Air, Inc. (“STWA” or “Company”) designs, licenses and develops products to reduce operational costs for oil pipelines, and improve fuel economy and reduce emissions from diesel-powered internal combustion engines.  The Company is a green technology company that leverages a suite of patented, patent-pending and licensed intellectual properties related to the treatment of fuels. Technologies patented by or licensed to us utilize either magnetic or uniform electrical fields to alter physical characteristics of fuels and are designed to create cleaner combustion or improve efficiency of crude oil pipeline transportation. Cleaner combustion has been shown to improve performance, enhance fuel economy and/or reduce harmful emissions in laboratory testing.

 

The Company was incorporated on February 18, 1998, as a Nevada corporation, under the name Mandalay Capital Corporation. The Company changed its name to Save the World Air, Inc. on February 11, 1999, following the acquisition of marketing and manufacturing rights of the ZEFS technologies. Our executive offices are at 735 State Street, Suite 500, Santa Barbara, California 93101.  The telephone number is (877) USA-STWA. Our research and development facility is at 235 Tennant Avenue, Morgan Hill, California 95037. The corporate website is www.stwa.com.  The Company’s common stock is quoted under the symbol “ZERO” on the Over-the-Counter Bulletin Board 

 

The Company’s technology has two commercial applications; AOT™ (Applied Oil Technology) and ELEKTRA™ and legacy technologies of ZEFS and MK IV.  AOT™ has entered the commercial manufacturing phase, and is currently being made in Wyoming, USA. We believe the testing of AOT™ at the RMOTC and at the Daqing oilfield owned by Petro China have enabled management to determine the value of benefits the product presents at full scale operation on active pipelines. ELEKTRA™ is nearing the end of the product development cycle.

 

The AOT™ and ELEKTRA™ are technologies, which use electric fields to alter some physical properties of petrochemical fluids to reduce viscosity of the fluids. The Company differentiates AOT™ and ELEKTRA™ products based on their differing attributes and marketing focus. AOT™ products are primarily designed to reduce operation costs for oil pipelines, and ELEKTRA™ products are primarily designed to improve fuel economy and reduce emissions from diesel-powered internal combustion engines. Our AOT™ products are intended to reduce the viscosity of crude oil, thereby making it less restrictive to pipeline transport. Our AOT™ products will be marketed primarily to pipeline operators as well as to pilot and government mandated delivery programs. Our ELEKTRA™ products are intended to increase fuel efficiency and reduce emissions.  ELEKTRA™ will be marketed primarily to specialty consumer accessories market for many types of diesel-fueled vehicles, including but not limited to trucks, trains, maritime, military and aviation.

 

Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements of Save the World Air, Inc. (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting companies. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year.

 

The condensed consolidated balance sheet information as of December 31, 2011 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K filed with the SEC. These interim financial statements should be read in conjunction with that report. 

 

8
 

Going concern

 

Since its inception, the Company has been primarily engaged in organizational and pre-operating activities. The Company has generated insignificant revenues and has incurred accumulated losses of $80,828,119 from February 18, 1998 (Inception) through September 30, 2012. As reflected in the accompanying condensed consolidated financial statements, the Company had a net loss of $11,538,652 and a negative cash flow from operations of $3,310,280 for the nine months ended September 30, 2012, and had a working capital deficiency (excluding derivative liabilities) of $637,851 and a stockholders' deficiency of $3,600,463 at September 30, 2012. As a result, the Company’s independent registered public accounting firm, in their report on the Company’s 2011 consolidated financial statements, raised substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The Company’s operations from inception, February 18, 1998 to September 30, 2012 have been funded through issuances of its common stock and convertible notes. As of September 30, 2012, the Company raised an aggregate of $30,991,005 of which $18,396,488 was from the sale of convertible notes.  As of September 30, 2012, the outstanding balance of convertible notes was $43,450. The Company expects substantially all of the outstanding notes will be converted into shares of common stock of the Company. See “Note 11 Subsequent events”. 

  

On September 30, 2012, the Company had cash on hand in the amount of $902,333.  In addition to the funds on hand, the Company will require additional funds to continue to operate our business. This includes expenses we will incur in connection with license agreements; product development and commercialization of the AOT and ELEKTRA technologies; costs to manufacture and ship our products; costs to design and implement an effective system of internal controls and disclosure controls and procedures; costs of maintaining our status as a public company by filing periodic reports with the SEC and costs required to protect our intellectual property. In addition, the Company has contractual commitments for salaries to its executive officers pursuant to employment agreements, consulting fees and research and licensing fees commitment to Temple University, during 2012 and beyond. In light of the Company’s financial commitments over the next several months and its liquidity constraints, we have implemented cost reduction measures in all areas of operations. The Company intends to review these measures on an ongoing basis and make additional decisions as may be required.

 

2.  Summary of significant accounting policies

 

Development stage enterprise

 

The Company is a development stage enterprise.  All losses accumulated since the inception of the Company have been considered as part of the Company’s development stage activities.

 

The Company’s focus is on product development and marketing of proprietary devices that are designed to reduce operation costs of petrochemical pipeline transport and fuel efficiency of diesel engines and has not yet generated meaningful revenues.  The technologies are called “AOT” and “ELEKTRA”.  The Company is currently in the mid-late stages of developing its AOT™ and ELEKTRA™ technologies for commercial applications.  Expenses have been funded through the sale of company stock, convertible notes and the exercise of warrants.  The Company has taken actions to secure the intellectual property rights to the AOT™ and ELEKTRA™ technologies and is the worldwide exclusive licensee for patent pending technologies associated with the development of ELEKTRA™.

 

Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Certain significant estimates were made in connection with preparing the Company’s financial statements. Actual results could differ from those estimates.

 

9
 

Loss per share

 

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution, using the treasury stock method that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the Company. In computing diluted loss per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. For the nine month period ended September 30, 2012 and 2011, the dilutive impact of outstanding stock options of 28,859,558 and 22,177,892 respectively, and outstanding warrants of 47,951,693 and 40,552,211 have been excluded because their impact on the loss per share is anti-dilutive.

 

Stock-Based Compensation

 

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

   

The fair value of the Company's common stock option grant is estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

 

Accounting for Derivative Financial Instruments

 

The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations.  For stock-based derivative financial instruments, the Company uses a probability weighted average series Black-Scholes-Merton option pricing models to value the derivative instruments at inception and on subsequent valuation dates.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.  Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

Fair value of financial instruments

 

Effective January 1, 2008, fair value measurements are determined by the Company's adoption of authoritative guidance issued by the FASB, with the exception of the application of the statement to non-recurring, non-financial assets and liabilities as permitted. The adoption of the authoritative guidance did not have a material impact on the Company's fair value measurements.  Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

 

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

 

Level 2—Inputs, other than the quoted prices in active markets, are observable either directly or indirectly.

 

Level 3—Unobservable inputs based on the Company's assumptions.

 

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The Company is required to use observable market data if such data is available without undue cost and effort

 

The following table presents certain investments and liabilities of the Company’s financial assets measured and recorded at fair value on the Company’s condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of September 30, 2012 and 2011.

 

    Level 1       Level 2     Level 3     Total  
Fair value of Derivative Liability-September 30, 2012 -0-     -0-     $ 3,035,739     $ 3,035,739  
Fair value of Derivative Liability-December 31, 2011 -0-     -0-     $ 1,643,139     $ 1,643,139  

 

Recent Accounting Pronouncements

  

In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment”, an update to existing guidance on the assessment of goodwill impairment. This update simplifies the assessment of goodwill for impairment by allowing companies to consider qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount before performing the two step impairment review process. It also amends the examples of events or circumstances that would be considered in a goodwill impairment evaluation. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company adopted ASU 2011-08 effective January 1, 2012. We do not believe that the adoption of this new accounting guidance will have a significant effect on our goodwill impairment assessments in the future.

 

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” This ASU requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU No. 2011-11 will be applied retrospectively and is effective for annual and interim reporting periods beginning on or after January 1, 2013. The Company does not expect adoption of this standard to have a material impact on its consolidated results of operations, financial condition, or liquidity.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

 

3.  Certain relationships and related transactions

 

Accounts Payable to related parties

 

As of September 30, 2012 and December 31, 2011, the Company had accounts payable to related parties in the amount of $43,253 and $63,003, respectively. These amounts are unpaid Directors Fees and expenses incurred by officers and directors.

 

Accrued expense due to related parties

 

As of September 30, 2012 and December 31, 2011, the Company accrued the unpaid salaries, unused vacation and the corresponding payroll taxes of its employees in the amount of $767,204 and $812,993, respectively. Included in these accruals are the salaries due to the President and to a former officer of the Company.

 

The President of the Company has agreed to defer payment of salary for an indefinite period of time. No payment was made during the period ended September 30, 2012 and balance as of September 30, 2012 was $451,020 including expenses of $7,839.

 

A former officer of the Company has agreed to a monthly payment schedule $10,000 to $15,000 which will end in October 2013 pursuant to a December 2011 Settlement Agreement upon his resignation. During the period ended September 30, 2012, the Company paid $120,000 leaving a balance of $200,000.

 

Cash Bonus Paid to Chief Executive Officer

 

General and administrative expenses for the three and nine months ending September 30, 2012, include a cash bonus of $100,000 and $0, respectively paid to the Company’s Chief Executive Officer.

 

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4.  Convertible Debentures

 

Convertible debentures consist of the following:

 

   September 30,
2012
   December 31,
2011
 
         
Convertible debentures  $43,450   $1,720,460 
           
Less, remaining debt discount   (27,890)   (1,550,918)
Convertible debentures, net  $15,560    169,542 

  

From December 13, 2010 through July 23, 2012, the Company conducted private offerings of up to $10,000,000 aggregate face amount of its convertible notes. A total of $8,302,153 aggregate face amount of the notes were sold for an aggregate purchase price of $7,547,411. Through December 31, 2011, $6,239,029 of these notes were sold, of which $4,518,425 were converted to shares of common stock during 2011, leaving a balance of convertible notes outstanding as of December 31, 2011 of $1,720,460. During 2012, the Company sold an additional $2,064,774 of these convertible notes, and additional $3,741,784 of these notes were converted to shares of common stock, leaving a balance of convertible notes outstanding of September 30, 2012 of $43,450. While the stated interest rate on the notes is 0%, the actual interest rate on the notes is 10% per annum. The notes mature on the first anniversary of their respective date of issuance. The notes outstanding at September 30, 2012 are convertible, at the option of the note holder, into 132,550 shares of common stock of the Company (the “Conversion Shares”) at a conversion price of $0.25-$0.40 per share (the “Conversion Price”).

 

Each of the investors in the offerings received, for no additional consideration, a warrant entitling the holder to purchase a number of shares of the Company’s common stock equal to 100% of the number of shares of common stock into which the notes are convertible (the “Warrant Shares”).  Each warrant is exercisable on a cash basis only at an initial price of $0.30-$0.40 per share, and is exercisable immediately upon issuance and for a period of two (2) to three (3) years from the date of issuance. Warrants to acquire 7,405,716 shares of common stock were granted during the nine months ended September 30, 2012.

   

During 2012, the Company sold $2,064,774 of convertible notes for aggregate consideration of $1,831,440, resulting in a discount of $187,094 and conversion of $46,240 of accounts payable. The aggregate relative value of the warrants issued in the 2012 offerings were valued at $832,814 using the Black-Scholes-Merton option valuation model with the following assumptions; risk-free interest rate of .23%-.28%; dividend yield of 0%; volatility factors of the expected market price of common stock of 111%; and an expected life of two to three years (statutory term). The Company also determined that the notes contained a beneficial conversion feature of $1,036,259.  The aggregate value of $2,064,774 of the 2012 Offering Warrants, the beneficial conversion feature and the note discount are considered as debt discount and will be amortized over the life of the notes.  The value of this debt discount was added to the outstanding debt discount of $1,550,918 as of December 31, 2011.  During the period ended September 30, 2012, the Company amortized $3,587,802 of debt discount, resulting in an unamortized debt discount balance of $27,890 as of September 30, 2012.

 

As of September 30, 2012, the outstanding balance of the notes was $43,450.

 

5. Capital stock  

 

During the nine months ended September 30, 2012, the Company issued 14,155,006 shares of common stock in exchange for conversion of $3,741,784 of Convertible Notes.

 

During the nine months ended September 30, 2012, the Company issued 6,224,844 shares of common stock upon exercise of warrants at an average price of $0.28 per share and valued at $1,762,693.

 

During the nine months ended September 30, 2012, the Company issued 2,525,000 shares of common stock for consulting services at an average price of $0.47 per share and valued at $1,228,250. The shares issued were valued at the trading price at the date of the agreement.

 

During the nine months ended September 30, 2012, the Company issued 58,334 shares of common stock upon exercise of options at $0.27 per share and valued at $15,750.

 

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6.  Stock options and warrants

 

The Company periodically issues stock options and warrants to employees and non-employees in capital raising transactions, for services and for financing costs.  Stock-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite service period.  Options vest and expire according to terms established at the grant date.

 

Options

 

The Company currently issues stock options to employees, directors and consultants under the 2004 Stock Option Plan (the Plan). The Company could issue options under the Plan to acquire up to 5,000,000 shares of common stock. In February 2006, the board approved an amendment to the Plan (approved by the Shareholders in May 2006), increasing the authorized shares by 2,000,000 shares to 7,000,000 shares. At September 30, 2012, 2,750,442 were available to be granted under the Plan. Prior to 2004, the Company granted 3,250,000 options outside the Plan to officers of the Company.

 

On February 1, 2012, the Company issued 4,000,000 options to its Chief Financial Officer, valued at $1,207,193 using Black-Scholes-Merton calculation. The options have an exercise price of $0.25 per share, vest over a four year period, and expire ten years from date of grant. Twelve and a half percent vested immediately, twelve and a half percent will vest on the first anniversary date, and twenty-five percent will vest on the following three anniversary dates.

 

On May 18, 2012, the Company issued 850,000 options to its employees, valued at $242,963 using Black-Scholes-Merton calculation. The options have an exercise price of $0.30 per share, vesting immediately, and expire ten years from date of grant.

 

Employee options vest according to the terms of the specific grant and expire from 5 to 10 years from date of grant. Non-employee option grants to date are vested upon issuance. The weighted-average, remaining contractual life of employee options outstanding at September 30, 2012 was 8.1 years. Stock option activity for the period January 1, 2012 to September 30, 2012, was as follows:

 

Options  Shares   Weighted-
Average
Exercise
Price
   Weighted-
Average
Remaining
Contractual
Term
   Aggregate
Intrinsic
Value
 
Outstanding at January 1, 2012   24,067,892   $0.30           
Granted   4,850,000    0.26           
Exercised   (58,334)   0.27           
Forfeited or expired                  
Outstanding at September 30, 2012   28,859,558   $0.30    8.1   $13,980,449 
Vested and exercisable at September 30, 2012   11,279,558   $0.37    7.3   $4,838,849 

 

The weighted average exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest under the Plan as of September 30, 2012 were as follows:

 

    Outstanding Options   Exercisable Options
Option
Exercise Price Per Share
  Shares   Life
(Years)
  Weighted
Average
Exercise
Price
  Shares   Weighted
Average Exercise
Price
  $ 0.21 - $ 0.99       28,532,012       8.1     $ .28       10,952,012     $ 0.34  
  $ 1.00 - $ 1.99       327,546       2.6       1.25       327,546       1.25  
          28,859,558       8.1     $ 0.30       11,279,558     $ 0.37  

 

During the nine months ended September 30, 2012, the Company amortized $1,519,597 of compensation cost based on the vesting of the options. Future unamortized compensation expense on the outstanding options at September 30, 2012 is $5,646,252.

 

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Black-Scholes-Merton value of options

 

During the nine months ended September 30, 2012 and 2011, the Company valued options at the grant date using the Black-Scholes-Merton pricing model with the following average assumptions:

 

   September 30, 
   2012   2011 
         
Expected life (years)   5.0 – 7.0    6.0 
Risk free interest rate   .75% - 1.27%    1.95% 
Volatility     125%-132%    135.00% 
Expected dividend yield   0.00%    0.00% 
           

 

Warrants

  

During the period ended September 30, 2012, the Company granted warrants to consultants to purchase 1,850,000 shares of its common stock.  The warrants have an average exercise price of $0.27/share, vesting immediately and will expire in two to three years from grant date.  Total fair value of the warrant amounted to $517,777 using the Black-Scholes Merton valuation model with the following average assumptions: risk-free interest rate of 0.23% to 0.39%; dividend yield of 0%; volatility of 112%; and an expected life of two to three years.  During the period ended September 30, 2012, the Company recognized amortization expense of $517,777 based upon vesting of the warrants.

 

During the nine months ended September 30, 2012, the Company amortized $379,940 of the compensation based on the vesting of these warrants granted in prior periods. Future unamortized compensation expense on the outstanding warrants at September 30, 2012 is $99,540.

 

During the period ended September 30, 2012, the Company granted issued 7,405,716 warrants to acquire shares of its common stock in connection of its issuance of convertible notes.  The warrants have an average exercise price of $0.32/share, fully vested, and will expire in two to three years from date of grant (See note 4).

 

The following table summarizes certain information about the Company’s stock purchase warrants from January 1, 2012 to September 30, 2012:

 

 

Warrants  Shares   Weighted-
Average
Exercise
Price
   Weighted-
Average
Remaining
Contractual
Term
   Aggregate
Intrinsic
Value
 
Outstanding at January 1, 2012   49,106,280   $0.28           
Granted   9,255,716    0.31           
Exercised   (6,347,393)   0.35           
Forfeited or expired   (4,062,910)   0.49           
Outstanding at September 30, 2012   47,951,693   $0.31    1.5   $22,351,154 
Vested and exercisable at September 30, 2012   46,585,026   $0.31    1.1   $21,708,821 

 

    Outstanding Warrants   Exercisable Warrants
Warrant
Exercise Price Per Share
  Shares   Life
(Years)
  Weighted
Average
Exercise
Price
  Shares   Weighted
Average Exercise
Price
  $ 0.25 - $ 0.99       47,451,693       1.5     $ .30       46,085,026     $ .30  
  $ 1.00 - $ 1.99       500,000       1.8       1.00       500,000       1.00  
          47,951,693       1.5     $ 0.31       46,585,026     $ 0.31  

  

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7.  Research and development

 

The Company has research and development facilities in Morgan Hill, California. The Company has tested ELEKTRA technologies and legacy products incorporating its “legacy” ZEFS, MK IV, ELEKTRA for multiple makes and models diesel engines, motorbikes, boats, generators, lawn mowers and other small engines. The Company has purchased test vehicles, test engines and testing equipment. 

 

Temple University Research & Development Agreement

 

On February 2, 2007, the Company entered into a research and development agreement (R&D Agreement) with Temple University to conduct further research on the ELEKTRA technology. Under the R&D Agreement Temple University will conduct a 24-month research project towards expanding the scope of, and developing products utilizing, the technologies covered under the License Agreements, including design and manufacture of prototypes utilizing electric fields to improve diesel, gasoline and kerosene fuel injection in engines using such fuels and a device utilizing a magnetic field to reduce crude oil viscosity for crude oil (paraffin and mixed base) and edible oil flow in pipelines. If the research project yields results within the scope of the technologies licensed pursuant to the License Agreements, those results will be deemed included as rights licensed to the Company pursuant to the License Agreements. If the research project yields results outside of the scope of the technologies covered by the License Agreements, the Company has a nine-month right of first negotiation to enter into a new worldwide, exclusive license agreement with Temple University for the intellectual property covered by those results. Pursuant to the R & D Agreement, the Company will make payments to Temple University in the aggregate amount of $500,000. At September 30, 2012 the Company has completed payment in full of $500,000 under the R & D Agreement.

 

On August 1, 2011, the Company and Temple University (“Temple”) entered into two (2) Exclusive License Agreements (collectively, the “License Agreements”) relating to Temple’s patent applications, patents and technical information pertaining to technology associated with an electric and/or magnetic field assisted fuel injector system (the “First Temple License”), and to technology to reduce crude oil viscosity (the “Second Temple License”).  The License Agreements are exclusive and the territory licensed to the Company is worldwide and replace previously issued License Agreements.

 

Pursuant to the two licensing agreements, the Company agreed to pay Temple the following: (i) non-refundable license maintenance fee of $300,000; (ii) annual maintenance fees of $187,500; (iii) royalty fee ranging from 4% up to 7% from revenues generated from the licensing agreements; and (iv) 25% of all revenues generated from sub-licensees to secure or maintain the sub-license or option thereon. Temple also agreed to cancel $37,500 of the amount due if the Company agrees to fund at least $250,000 in research or development of Temple’s patent rights licensed to the Company. The term of the licenses commences in August 2011 through the expiration of the patents contemplated thereunder, or unless sooner terminated under terms of the licensing agreements.

 

At the date of the agreements, the Company recorded the entire $300,000 non-refundable license maintenance fee as part of its research and development costs, of which, $200,000 was paid in November 2011 and $100,000 was subsequently paid in February 2012. As of September 30, 2012, the Company accrued a total of $187,500 of the annual maintenance fees, of which, $140,625 was recognized during the period ended September 30, 2012 and $150,000 was paid in August 2012.

   

As of September 30, 2012, there were no revenues generated from these two licenses.

 

Sponsored Research Agreement

 

On March 19, 2012, the Company entered into a Sponsored Research Agreement (“Research Agreement”) with Temple University (“Temple”), whereby Temple, under the direction of Dr. Rongjia Tao, will perform ongoing research related to the Company’s AOT device (the “Project”), for the period April 1, 2012, through April 1, 2014.  All rights and title to intellectual property resulting from Temple’s work related to the Project shall be subject to the Exclusive License Agreements between Temple and the Company, dated August 1, 2011.  In exchange for Temple’s research efforts on the Project, the Company has agreed to pay Temple $500,000, payable in quarterly installments of $62,500. During the period ended September 30, 2012, the Company recognized a total of $125,000 pursuant to this agreement.

 

15
 

AOT Testing

 

On July 16, 2010, the Company entered into a Letter of Intent with the U.S. Department of Energy-Naval Petroleum Reserve/Rocky Mountain Oilfield Testing Center (RMOTC) in Wyoming. On December 22, 2010, a formal Agreement was entered into with RMOTC for testing of our Applied Oil Technology (AOT). Third-party vendors were used to build the AOT 1.X prototype(s) to be used at for full scale testing purposes. Third-party vendors were also used to furnish hardware, electrical supplies, oil tanks and engineering testing devices, and other testing-related equipment. Costs incurred for the testing during the nine months ended September 30, 2012 was $262,576. Testing began in July 2011 and the Company has the exclusive right to use the facility for testing until December 31, 2016.

 

The Company incurred costs of $177,311 and $379,391 and $528,201 and $931,959 for the three and nine months ended September 30, 2012 and 2011, respectively, on its research and development activities and $7,973,198 from February 18, 1998 (inception) to September 30, 2012.

 

8. Derivative liability

 

In June 2008, the FASB issued authoritative guidance on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock.  Under the authoritative guidance, effective January 1, 2009, instruments which do not have fixed settlement provisions are deemed to be derivative instruments.  The strike price of the warrants issued by the Company in connection with certain convertible note offerings made during 2009 and 2010 in the aggregate of 8,322,500 warrants, exercisable at $.25 per share, contain exercise prices that may fluctuate based on the occurrence of future offerings or events.  As a result, these warrants are not considered indexed to the Company’s own stock.  The Company characterized the fair value of these warrants as derivative liabilities upon issuance.  The FASB’s guidance requires the fair value of these liabilities be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

 

The derivative liabilities were valued using a probability weighted average series of Black-Scholes-Merton models as a valuation technique with the following assumptions:

 

   Fair Value of Warrants 
   September 30, 2012   December 31,
2011
 
Risk-free interest rate   0.10%    0.12% 
Expected volatility   206%    92% 
Expected life (in years)   0.29    0.75 – 1.00 
Expected dividend yield   0%    0% 
Fair Value:          
2009 Summer Warrants       332,998 
2009 Wellfleet Warrants       17,807 
2009 Fall Warrants   3,035,739    1,292,334 
Total Fair Value  $3,035,739   $1,643,139 

  

The risk-free interest rate is based on the yield available on U.S. Treasury securities.  The Company estimates volatility based on the historical volatility of its common stock.  The expected life warrants are based on the expiration date of the related warrants.  The expected dividend yield was based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to pay dividends to common shareholders in the future. 

 

As of September 30, 2012, the Company re-measured the derivative liabilities and determined the fair value to be $3,035,739. For the nine months ended September 30, 2012, the Company recorded a loss on the change in fair value of derivatives of $2,856,087. During the period ended September 30, 2012, 220,000 warrants expired unexercised, and 2,675,000 warrants were exercised. As such, the Company recorded a gain of $1,463,487 related to the extinguishment of the corresponding derivative liability.

 

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9.  Commitments and contingencies

 

Legal matters

  

There is no other litigation of any significance with the exception of the matters that have arisen under, and are being handled in, the normal course of business.

   

Lease agreement

 

The Company entered into a lease agreement with Balboa building on February 1, 2012. This agreement calls for the company to lease suites 215, 216, 217, 218, 219, 220, 221, 229, 230 on the second floor of the Balboa building located at 735 State St. Santa Barbara, Ca. This lease was executed in anticipation of the Company's growth and the need to increase square footage while space is available. The lease agreement calls for a monthly rental of $7,095, which will expire on December 31, 2013.

 

10.  Other income

 

During 2012, one of the Company’s legal counsel agreed to cancel $223,775 of unpaid legal fees for services rendered to the Company as of September 30, 2012.  As a result, the Company recognized a gain of $223,775 in the accompanying condensed consolidated statements of operations.

 

11.  Subsequent events

 

Increase in Outstanding Shares

 

During the period from October 1, 2012 through November 6, 2012, the Company issued 1,061,180 shares of its common stock.  This was comprised of the following:

 

The Company issued 105,000 shares of its common stock upon exercise of options for $28,350.

 

The Company issued 48,400 shares of its common stock upon conversion of $12,100 of debt to its existing convertible note holders.

 

The Company issued 907,780 shares of its common stock upon exercise of warrants for aggregate proceeds of $198,660.

 

Retainer for Nasdaq Application

 

The Company entered into an agreement with a law firm for representation in connection with analyzing, preparing and filing an application to list its shares on the NASDAQ Capital Market. This agreement calls for initial fee of $25,000, payable in two installments.

 

 

17
 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

    

This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements include predictions regarding our future:

 

revenues and profits;
 
customers;
 
research and development expenses and efforts;
 
scientific and other third-party test results;
 
sales and marketing expenses and efforts;
 
liquidity and sufficiency of existing cash;
 
technology and products;
 
the outcome of pending or threatened litigation; and
 
the effect of recent accounting pronouncements on our financial condition and results of operations

 

You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “expects”, “anticipates,” “believes,” “estimates,” “continues,” or the negative of such terms, or other comparable terminology.

 

Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements.

 

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011. All forward-looking statements included in this document are based on information available to us on the date hereof. We assume no obligation to update any forward-looking statements.

 

Overview

 

Save the World Air, Inc. (“STWA” or “Company” or “we”) designs, licenses and develops products to improve energy efficiency of large-scale energy production and improve diesel engine performance reducing emissions and improving fuel economy. We are a green technology company that leverages a suite of patented, patent-pending and licensed intellectual properties related to the treatment of fuels. Technologies patented by or licensed to us utilize either magnetic or uniform electrical fields to alter physical characteristics of fuels and are designed to create cleaner combustion. Cleaner combustion has been shown to improve performance, enhance fuel economy and/or reduce harmful emissions in laboratory testing.

 

On August 1, 2011, Save The World Air, Inc. and Temple University entered into two Exclusive License Agreements. One Agreement relates to Temple’s international patent applications, patents and technical information pertaining to technology associated with an electric and/or magnetic field assisted fuel injection system. The second agreement relates Temple’s international patent applications and patents and technical information pertaining to technology to reduce crude oil viscosity. The License Agreements are exclusive to the Company and the territory licensed to the Company is worldwide.

 

We have two product lines;  Applied Oil Technology (“AOT”) and ELEKTRA™.

 

AOT

 

On July 16, 2010, the Company entered into a Letter of Intent with the U.S. Department of Energy-Naval Petroleum Reserve/Rocky Mountain Oilfield Testing Center (RMOTC) in Wyoming. On December 22, 2010, a formal Agreement was entered into with RMOTC for testing of our Applied Oil Technology (AOT). Third-party vendors and suppliers were used by the Company to provide the facility construction materials and the prototype’s design and fabrication To conduct the testing, the Company was responsible for upgrading the testing facility’s existing infrastructure, located on the Naval Petroleum Reserve #3. Design and engineering began in January 2011 and construction was completed in June 2011.

 

The AOT Phase II testing program began in July 2011. It is the Company’s belief that the Phase II testing of the prototype will yield important information and data to the Company’s product development team. Costs incurred for the testing during the nine months ended September 30, 2012 was $244,472.

 

18
 

 

Elektra

 

The Company’s ELEKTRA technology is designed to improve diesel fuel economy in both land and marine diesel engines. The Company’s preliminary experimental prototypes have shown repeatable improvements in fuel economy. Research is being conducted under controlled conditions at the Company’s research facility in Morgan Hill California.

 

We operate in a highly competitive industry.  Many of our activities are subject to governmental regulation.  We have taken aggressive steps to protect our intellectual property.  

 

There are significant risks associated with our business, our Company and our stock.  

 

We are a development stage Company that generated minimal revenues in 2006 and 2007. We did not generate any sales or revenues from 2008 up to September 30, 2012. Our expenses to date have been funded primarily through the sale of stock and convertible debt, as well as proceeds from the exercise of stock purchase warrants. We raised capital in 2011 and will need to raise substantial additional capital in 2012, and beyond, to fund our sales and marketing efforts, continuing research and development, and certain other expenses, until our revenue base grows sufficiently to cover such expenditures.  See “Management’s Discussion and Analysis” below.

 

Our company was incorporated on February 18, 1998, as a Nevada corporation, under the name Mandalay Capital Corporation. We changed our name to Save the World Air, Inc. on February 11, 1999, following the acquisition of marketing and manufacturing rights of the ZEFS (legacy) technologies. Our mailing address is 735 State Street, Suite 500, Santa Barbara, California 93101. Our telephone number is (805) 845-3581. Our corporate website is www.stwa.com.  

 

Our common stock is quoted under the symbol “ZERO” on the Over-the-Counter Bulletin Board

 

Results of Operations

 

We did not generate any revenue for the three-month and nine-month periods ended September 30, 2012 and 2011.

 

Operating expenses were $2,429,153 for the three-month period ended September 30, 2012, compared to $2,129,273 for the three-month period ended September 30, 2011, an increase of $299,880. This increase is attributable to an increase in non-cash expenses of $340,415, offset by a decrease in cash expenses of $40,535. Specifically, the increase in non-cash expense is attributable to increases in stocks and warrants given to consultants and employees. Specifically, the decrease in cash expense is attributable to decreases in consulting and professional fees of $91,481, office and other expenses of $57,359, offset by an increase in salaries and benefits of $55,745, corporate expenses of $38,450, and travel expenses of $14,110.

 

Operating expenses were $6,288,872 for the nine-month period ended September 30, 2012, compared to $4,640,508 for the nine-month period ended September 30, 2011, an increase of $1,648,364. This increase is attributable to increases in non-cash expenses of $1,580,431 and cash expenses of $67,933. Specifically, the increase in non-cash expense is attributable to increases in stock and warrants given to consultants and employees of $1,526,287, bad debt expense of $52,000, and depreciation expense of $2,144. Specifically, the increase in cash expense is attributable to increases in salaries and benefits of $377,349, travel expenses of $25,971, and office and other expenses of $6,873, offset by decreases in consulting and professional fees of $319,684 and corporate expenses of $22,576.

 

Research and development expenses were $177,311 for the three-month period ended September 30, 2012, compared to $379,391 for the three-month period ended September 30, 2011, a decrease of $202,080. This decrease is attributable to a decrease in contract fees of $223,405, offset by an increase in product testing, research and supplies of $21,325.

 

Research and development expenses were $528,201 for the nine-month period ended September 30, 2012, compared to $931,959 for the nine-month period ended September 30, 2011, a decrease of $403,758. This decrease is attributable to decreases in product testing, research and supplies of $336,602 and contract fees of $67,156.

 

Other income and expense were $2,064,240 expense for the three-month period ended September 30, 2012, compared to $256,910 income for the three-month period ended September 30, 2011, an increase in expense of $2,321,150. This increase is attributable to an increase in fair value of derivative liabilities of $3,847,012 and a decrease in other income of $107,860, offset by income from extinguishment of derivative liabilities of $1,377,911, decrease in interest expense of $239,811, and a gain in settlement of legal fees of $16,000.

 

19
 

Other income and expense were $4,720,779 expense for the nine-month period ended September 30, 2012, compared to $1,937,748 expense for the nine-month period ended September 30, 2011, an increase in expense of $2,783,031. This increase is attributable to an increase in the fair value of derivative liabilities of $5,578,171, and a decrease in other income of $130,335, offset by income from extinguishment of derivative liabilities of $1,463,487, decrease in interest expense of $1,222,213, and a gain in settlement of legal fees of $239,775.

 

We had a net loss of 4,670,704, or $0.04 per share, for the three-month period ended September 30, 2012, compared to a net loss of $2,251,754, or $0.02 per share, for the three-month period ended September 30, 2011. 

 

We had a net loss of $11,538,652, or $0.09 per share, for the nine-month period ended September 30, 2012, compared to a net loss of $7,511,015, or $0.07 per share, for the nine-month period ended September 30, 2011.

 

We expect to incur additional net loss in the fiscal year ending December 31, 2012 primarily attributable to continued operating and marketing-related expenditures without the benefit of any significant revenue for the remainder of the year.

 

Liquidity and Capital Resources

 

Since its inception, we have been primarily engaged in organizational and pre-operating activities. We have generated insignificant revenues and have incurred accumulated losses of $80,828,119 from February 18, 1998 (Inception) through September 30, 2012. As reflected in the accompanying condensed consolidated financial statements, we had a net loss of $11,538,652 and a negative cash flow from operations of $3,310,280 for the nine months ended September 30, 2012, and had a working capital deficiency (excluding derivative liabilities) of $637,851 and a stockholders' deficiency of $3,600,463 at September 30, 2012. As a result, our independent registered public accounting firm, in their report on our 2011 consolidated financial statements, raised substantial doubt about our ability to continue as a going concern.  The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

 

Our ability to continue as a going concern is dependent upon our ability to raise additional funds and implement our business plan. Our operations from inception, February 18, 1998 to September 30, 2012 have been funded through issuances of our common stock and convertible notes. As of September 30, 2012, we raised an aggregate of $30,991,005 of which $18,396,488 was from the sale of convertible notes. As of September 30, 2012, the outstanding balance of convertible notes was $43,450, of which $27,500 represented convertible note offering, which closed on July 23, 2012. We expect substantially all of the outstanding notes will be converted into shares of common stock of the Company.

 

On September 30, 2012, we had cash on hand in the amount of $902,333. In addition to the funds on hand, we will require additional funds to continue to operate our business. This includes expenses we will incur in connection with license agreements; product development and commercialization of the AOT and ELEKTRA technologies; costs to manufacture and ship our products; costs to design and implement an effective system of internal controls and disclosure controls and procedures; costs of maintaining our status as a public company by filing periodic reports with the SEC and costs required to protect our intellectual property. In addition, we have contractual commitments for salaries to one of our executive officers pursuant to an employment agreement, severance payments to a former officer and consulting fees, during 2012 and beyond. In light of our financial commitments over the next several months and its liquidity constraints, we have implemented cost reduction measures in all areas of operations. We intend to review these measures on an ongoing basis and make additional decisions as may be required.

 

Details of Recent Financing Transactions

 

From December 13, 2010 through July 23, 2012, the Company conducted private offerings of up to $10,000,000 aggregate face amount of its convertible notes. A total of $8,291,703 aggregate face amount of the notes were sold for an aggregate purchase price of $7,537,911. Through December 31, 2011, $6,239,029 of these notes were sold, of which $4,518,425 were converted during 2011, leaving a balance of convertible notes outstanding as of December 31, 2011 of $1,720,460. During 2012, the Company sold an additional $2,064,774 of these convertible notes, and an additional $3,741,784 of these notes were converted, leaving a balance of convertible notes outstanding of September 30, 2012 of $43,450. While the stated interest rate on the notes is 0%, the actual interest rate on the notes is 10% per annum. The notes mature on the first anniversary of their respective date of issuance. The notes outstanding at September 30, 2012 are convertible, at the option of the note holder, into 132,550 shares of common stock of the Company (the “Conversion Shares”) at a conversion price of $0.25-$0.40 per share (the “Conversion Price”).

 

Each of the investors in the offerings received, for no additional consideration, a warrant entitling the holder to purchase a number of shares of the Company’s common stock equal to 100% of the number of shares of common stock into which the notes are convertible (the “Warrant Shares”).  Each warrant is exercisable on a cash basis only at an initial price of $0.30-$0.40 per share, and is exercisable immediately upon issuance and for a period of two (2) to three (3) years from the date of issuance. Warrants to acquire 7,405,716 shares of common stock were granted during the nine months ended September 30, 2012.

   

20
 

During 2012, the Company sold $2,064,774 of convertible notes for aggregate consideration of $1,831,440, resulting in a discount of $187,094 and conversion of $46,240 of accounts payable. The aggregate relative value of the warrants issued in the 2012 offerings were valued at $832,814 using the Black-Scholes-Merton option valuation model with the following assumptions; risk-free interest rate of .23%-.28%; dividend yield of 0%; volatility factors of the expected market price of common stock of 111%; and an expected life of two to three years (statutory term). The Company also determined that the notes contained a beneficial conversion feature of $1,036,259.  The aggregate value of $2,064,774 of the 2012 Offering Warrants, the beneficial conversion feature and the note discount are considered as debt discount and will be amortized over the life of the notes.  The value of this debt discount was added to the outstanding debt discount of $1,550,918 as of December 31, 2011.  During the period ended September 30, 2012, the Company amortized $3,587,802 of debt discount, resulting in an unamortized debt discount balance of $27,890 as of September 30, 2012.

 

As of September 30, 2012, the outstanding balance of the notes was $43,450.

 

Critical Accounting Policies and Estimates

 

Our discussion and analysis of our condensed consolidated financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosure of contingent assets and liabilities. We evaluate, on an on-going basis, our estimates and judgments, including those related to the useful life of the assets. We base our estimates on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the condensed consolidated results that we report in our financial statements. The SEC considers an entity’s most critical accounting policies to be those policies that are both most important to the portrayal of a company’s financial condition and results of operations and those that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about matters that are inherently uncertain at the time of estimation.. For a more detailed discussion of the accounting policies of the Company, see Note 2 of Notes to the condensed consolidated financial statements.

 

We believe the following critical accounting policies, among others, require significant judgments and estimates used in the preparation of our condensed consolidated financial statements:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Certain significant estimates were made in connection with preparing our condensed consolidated financial statements as described in Note 1 to Notes to condensed consolidated financial statements. Actual results could differ from those estimates.

 

Stock-Based Compensation

 

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

   

The fair value of the Company's common stock option grant is estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

 

21
 

Accounting for Derivative Financial Instruments

 

The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a probability weighted average series Black-Scholes-Merton option pricing models to value the derivative instruments at inception and on subsequent valuation dates.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current baaed on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

Recent Accounting Pronouncements

  

In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment”, an update to existing guidance on the assessment of goodwill impairment. This update simplifies the assessment of goodwill for impairment by allowing companies to consider qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount before performing the two step impairment review process. It also amends the examples of events or circumstances that would be considered in a goodwill impairment evaluation. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company adopted ASU 2011-08 effective January 1, 2012. We do not believe that the adoption of this new accounting guidance will have a significant effect on our goodwill impairment assessments in the future.

 

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” This ASU requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU No. 2011-11 will be applied retrospectively and is effective for annual and interim reporting periods beginning on or after January 1, 2013. The Company does not expect adoption of this standard to have a material impact on its consolidated results of operations, financial condition, or liquidity.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable.

 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures 

 

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)  is not effective as of September 30, 2012 due to existence of material weaknesses in our internal control over financial reporting as described below.

 

22
 

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.  Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  Internal control consists of procedures which are designed with the objective of providing reasonable assurance that our transactions are properly authorized, recorded and reported and our assets are safeguarded against unauthorized or improper use, to permit the preparation of our financial statements in conformity with generally accepted accounting principles.

 

We identified certain matters that constituted material weakness (as defined under the Public Company Accounting Oversight Board Auditing Standard No. 2) in our internal control over financial reporting as discussed on Management’s Annual Report Over Financial Reporting below.

 

In light of the material weaknesses in internal control over financial reporting described below, we performed additional analysis and other post-closing procedures to ensure that our financial statements were prepared in accordance with generally accepted accounting principles. Despite material weaknesses in our internal control over financial reporting, we believe that the financial statements included in our Form 10-Q for the period ended September 30, 2012 fairly present, in all material respects, our financial condition, results of operations, changes in shareholder’s equity and cash flows for the periods presented.

 

We have created policies and procedures for (i) segregation of duties; (ii) check of disbursements; (iii) level of authorities; and (iv)operating budget. These policies and procedures will be submitted to the Board for approval and will be implemented once approved. Such procedures will include, but not limited to the following: review, recording, and depositing of money received will be processed and recorded by separate employees; bank reconciliations will be performed by two accounting personnel on a monthly basis; disbursements will be reviewed by the appropriate personnel and will be prepared by any other than the signer(s); we will set a limit to each signer’s authority to sign; and require Board approval for contracts and agreements exceeding $200,000. Furthermore, the Company will also implement a monthly operating budget that will be reported to management and the Board on a periodic basis.

 

Management’s Annual Report on Internal Control over Financial Reporting.

 

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transaction and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. 

 

Because of its inherent limitation, internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives. 

 

Our Chief Executive Officer, Chief Financial Officer and Controller conducted an assessment of the effectiveness of our internal control over financial reporting as of September 30, 2012 based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

Based on that assessment, we have identified the following material weaknesses and have implemented the following remediation of material weaknesses in internal control over financial reporting: 

 

Lack of segregation of duties

 

We have limited staff in our corporate offices and, as such, there is a lack of segregation of duties. We recently developed an internal control procedure manual that allows for segregation of duties from within the financial department. This will be submitted for approval with a Board Resolution and will be implemented soon.

 

23
 

 

Lack of documented and reviewed system of internal control

 

We have an internal control weakness due to the lack of a documented and reviewed system of internal control.  We are currently reviewing an implementation process so as to be more in line with Sarbanes-Oxley 302.  We have started to enhance some of our key internal control systems surrounding purchasing and control, and to document those changes; however, this process is on-going and the implementation of policies and procedures may take several quarters.

 

As a result of the material weaknesses described above, we are currently implementing a process to ensure all invoices and statements of account are reviewed and approved by at least two individuals within the financial department.

 

We are conducting an evaluation to design and implement adequate systems of accounting and financial statement disclosure controls. We expect to complete a review during 2012 to comply with the requirements of the SEC, which as required by SEC rules, may include an opinion from our auditors regarding management’s report on internal control over financial reporting for our fiscal year ending 2012.  We believe that the ultimate success of our plan to improve our internal control over financial reporting will require a combination of additional financial resources, outside consulting services, legal advice, additional personnel, further reallocation of responsibility among various persons, and substantial additional training of those of our officers, personnel and others, including certain of our directors such as our Chairman of the Board and committee chairs, who are charged with implementing and/or carrying out our plan.  It should also be noted that the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. 

 

In addition, our management with the participation of our Chief Executive Officer and Chief Financial Officer have determined that no change in our internal control over financial reporting (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) occurred during or subsequent to the quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

`

 

 

 

 

24
 

 

PART II

 

Item 1.  Legal Proceedings

 

There is no other litigation of any significance with the exception of the matters that have arisen under, and are being handled in, the normal course of business.  

 

 

Item 1A.  Risk Factors

 

There have been no material changes in the risk factors previously disclosed in Form 10-K for the period ended December 31, 2011, which we filed with the SEC on March 30, 2012. 

 

 

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

 

2011 and 2012 Offering. From December 13, 2010, through July 23, 2012, we conducted a private offering consisting of an aggregate of $8,302,153 of Convertible Promissory Notes. The Notes were sold for an aggregate purchase price of $7,547,411 net proceeds. The Notes are convertible into 32,355,230 shares of our common stock and in addition investors received warrants to purchase up to 32,355,230 shares of our common stock.  (See “Details of Recent Financing Transactions”).

 

The sales of the securities described above were made in reliance on the exemptions from registration set forth in Section 4(2) of the Securities Act of 1933, as amended (the “Act”), or Regulation S promulgated thereunder, and other applicable exemptions. 

 

Other Issuances.

 

During the nine months ended September 30, 2012, we issued 14,155,006 shares of common stock in exchange for conversion of $3,741,784 of Convertible Notes.

 

During the nine months ended September 30, 2012, we issued 6,224,844 shares of common stock upon exercise of warrants at an average price of $0.28 per share and valued at $1,762,693.

 

During the nine months ended September 30, 2012, we issued 2,525,000 shares of common stock for consulting services at and average price of $0.47 per share and valued at $1,228,250.

 

During the nine months ended September 30, 2012, we issued 58,334 shares of common stock upon exercise of options at $0.27 per share and valued at $15,750.

 

Retainer for Nasdaq Application

 

We entered into an agreement with a law firm to represent us in connection with analyzing, preparing and filing an application to list its shares on the NASDAQ Capital Market. This agreement calls for initial fee of $25,000, payable in two installments.

 

Item 3. Defaults Upon Senior Securities

 

None

 

 

Item 4. Mine Safety Disclosures

 

None

 

 

25
 

 

Item 5. Other Information

 

Increase in Outstanding Shares

 

During the period from October 1, 2012 through November 6, 2012, we issued 1,061,180 shares of our common stock.  This was comprised of the following:

 

We issued 105,000 shares of our common stock upon exercise of options for $28,350.

 

We issued 48,400 shares of our common stock upon conversion of $12,100 of debt to its existing convertible note holders.

 

We issued 907,780 shares of our common stock upon exercise of warrants for aggregate proceeds of $198,660.

 

 

Item 6. Exhibits

  

Exhibit No.   Description
       
       
  31.1   Certification of Chief Executive Officer of Quarterly Report Pursuant to Rule 13(a)-15(e) or Rule 15(d)-15(e)
       
  31.2   Certification of Interim Chief Financial Officer of Quarterly Report pursuant to Rule 13(a)-15(e) or Rule 15(d)-15(e)
       
  32   Certification of Chief Executive Officer and Interim Chief Financial Officer of Quarterly Report Pursuant to 18 U.S.C. Section 1350
       
  101.INS   XBRL Instance Document
       
  101.SCH   XBRL Schema Document
       
  101.CAL   XBRL Calculation Linkbase Document
       
  101.LAB   XBRL Label Linkbase Document
       
  101.PRE   XBRL Presentation Linkbase Document
       
  101.DEF  

XBRL Definition Linkbase Document

 

 

26
 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

  SAVE THE WORLD AIR, INC.   
     
       
Date: November 9, 2012 By: /s/ GREGG BIGGER  
    Gregg Bigger  
    Chief Financial Officer   
       

 

 

 

 

 

 

 

27
 

 

EXHIBIT INDEX

 

 

Exhibit No.

 

 

Description

       
       
  31.1   Certification of Chief Executive Officer of Quarterly Report Pursuant to Rule 13(a)-15(e) or Rule 15(d)-15(e)
       
  31.2   Certification of Interim Chief Financial Officer of Quarterly Report Pursuant to Rule 13(a)-15(e) or Rule 15(d)-15(e)
       
  32   Certification of Chief Executive Officer and Interim Chief Financial Officer of Quarterly Report Pursuant to 18 U.S.C. Section 1350

 

  101.INS   XBRL Instance Document
       
  101.SCH   XBRL Schema Document
       
  101.CAL   XBRL Calculation Linkbase Document
       
  101.LAB   XBRL Label Linkbase Document
       
  101.PRE   XBRL Presentation Linkbase Document
       
  101.DEF   XBRL Definition Linkbase Document

 

 

 

28