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<SEC-DOCUMENT>0000950129-05-004529.txt : 20050502
<SEC-HEADER>0000950129-05-004529.hdr.sgml : 20050502
<ACCEPTANCE-DATETIME>20050502164536
ACCESSION NUMBER:		0000950129-05-004529
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20050524
FILED AS OF DATE:		20050502
DATE AS OF CHANGE:		20050502
EFFECTIVENESS DATE:		20050502

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SAVE THE WORLD AIR INC
		CENTRAL INDEX KEY:			0001103795
		STANDARD INDUSTRIAL CLASSIFICATION:	WHOLESALE-HARDWARE & PLUMBING & HEATING EQUIPMENT & SUPPLIES [5070]
		IRS NUMBER:				522088326
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-29185
		FILM NUMBER:		05791312

	BUSINESS ADDRESS:	
		STREET 1:		29229 CANWOOD STREET
		STREET 2:		SUITE 206
		CITY:			AGOURA HILLS
		STATE:			CA
		ZIP:			91301
		BUSINESS PHONE:		818.865.3500

	MAIL ADDRESS:	
		STREET 1:		29229 CANWOOD STREET
		STREET 2:		SUITE 206
		CITY:			AGOURA HILLS
		STATE:			CA
		ZIP:			91301
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>v07972ddef14a.htm
<DESCRIPTION>SAVE THE WORLD AIR, INC.
<TEXT>
<HTML>
<HEAD>
<TITLE>def14a</TITLE>
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<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2"><B>SCHEDULE 14A INFORMATION</B></FONT>

<P align="center"><FONT size="2"><B>PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B></FONT>

<P align="center"><FONT size="2"><B>(AMENDMENT NO.___)</B></FONT>

<P><FONT size="2">Filed by the Registrant
<FONT face="wingdings" size="3">&#254;</FONT>
</FONT>
<P><FONT size="2">Filed by a Party other than the Registrant <FONT face="wingdings" size="3">o</FONT>
</FONT>
<P><FONT size="2">Check the appropriate box:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="2%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="95%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT face="wingdings" size="3">o</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Preliminary Proxy Statement</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT face="wingdings" size="3">&#254;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Definitive Proxy Statement</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT face="wingdings" size="3">o</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Confidential, for Use of the Commission Only (as permitted by Rule&nbsp;14a-6(e)(2))</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT face="wingdings" size="3">o</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Definitive Additional Materials</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT face="wingdings" size="3">o</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Soliciting Material Pursuant to &#167;240.14a-12</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>&nbsp;</P>
<P>


<P align="center"><FONT size="4"><B>Save The World Air, Inc.</B></FONT>
<HR size="1" noshade>
<DIV align="center"><FONT size="2"><B>(Name of Registrant as Specified In Its Charter)</B></FONT></DIV>

<BR CLEAR="all">
<P align="center"><FONT size="3"><B>&nbsp;</B></FONT>
<HR size="1" noshade>
<DIV align="center"><FONT size="2"><B>(Name of Person(s) Filing Proxy Statement, if other than the Registrant)</B></FONT></DIV>

<P><FONT size="2">Payment of Filing Fee (Check the appropriate box):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="93%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT face="wingdings" size="3">&#254;</FONT></TD>
        <TD align="left" valign="top" colspan="4"><FONT size="2">&nbsp;&nbsp;Fee not required.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT face="wingdings" size="3">o</FONT></TD>

<TD align="left" valign="top" colspan="4"><FONT size="2">&nbsp;&nbsp;Fee
computed on table below per Exchange Act Rules&nbsp;14a-6(i)(4) and 0-11.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(1)
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" colspan="2"><FONT size="2">Title of each class of securities to which transaction applies:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(2)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Aggregate number of securities to which transaction applies:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(3)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule&nbsp;0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(4)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Proposed maximum aggregate value of transaction:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(5)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Total fee paid:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT face="wingdings" size="3">o</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" colspan="3"><FONT size="2">Fee paid previously with preliminary materials.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT face="wingdings" size="3">o</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" colspan="3"><FONT size="2">Check box if any part of the fee is offset as provided by Exchange Act Rule&nbsp;0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(1)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Amount Previously Paid:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(2)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Form, Schedule or Registration Statement No.:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(3)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Filing Party:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(4)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Date Filed:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2"></FONT>



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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center" style="font-size: 14pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SAVE THE WORLD AIR, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>5125 Lankershim Boulevard</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>North Hollywood, CA 91601</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTICE OF 2005 ANNUAL MEETING OF STOCKHOLDERS</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>To Be Held on May&nbsp;24, 2005</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To Our Stockholders:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You are cordially invited to attend the 2005 Annual Meeting of
Stockholders (the &#147;2005 Annual Meeting&#148;) of Save the
World Air, Inc., which will be held at the Sheraton Universal
Hotel, 333 Universal Hollywood Drive, Universal City, California
91608, at 10:00&nbsp;a.m. on Tuesday, May&nbsp;24, 2005 for the
purposes of considering and voting upon:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    1.&nbsp;A proposal to elect seven directors to our Board of
    Directors.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    2.&nbsp;A proposal to increase the number of shares authorized
    for issuance under our 2004 Stock Option Plan.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    3.&nbsp;A proposal to ratify the appointment of
    Weinberg&nbsp;&#38; Co., P.A. as our independent auditor for the
    fiscal year ending December&nbsp;31, 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These matters are described more fully in the proxy statement
accompanying this notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our stockholders will also act upon such other business as may
properly come before the meeting or any adjournment or
postponement thereof. The Board is not aware of any other
business to be presented to a vote of the stockholders at the
2005 Annual Meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board has fixed the close of business on April&nbsp;8, 2005
as the record date (the &#147;Record Date&#148;) for determining
those stockholders who will be entitled to notice of and to vote
at the 2005 Annual Meeting. The stock transfer books will remain
open between the Record Date and the date of the 2005 Annual
Meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Representation of at least a majority in voting interest of our
common stock either in person or by proxy is required to
constitute a quorum for purposes of voting on each proposal to
be voted on at the 2005 Annual Meeting. Accordingly, it is
important that your shares be represented at the 2005 Annual
Meeting. <B>WHETHER OR NOT YOU PLAN TO ATTEND THE 2005 ANNUAL
MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE.</B> Your proxy may be
revoked at any time prior to the time it is voted at the 2005
Annual Meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Please read the accompanying proxy material carefully. Your vote
is important and we appreciate your cooperation in considering
and acting on the matters presented.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    By Order of the Board of Directors,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <IMG src="v07972dv0797200.gif" alt="(-s- Edward L. Masry)"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT style="font-variant:SMALL-CAPS">Edward L. Masry
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I>Chairman of the Board and</I></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I>Chief Executive Officer</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
April&nbsp;29, 2005
</DIV>

<DIV align="left" style="font-size: 10pt;">
North Hollywood, California
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Stockholders Should Read the Entire Proxy Statement</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Carefully Prior to Returning Their Proxies</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PROXY STATEMENT FOR 2005</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>ANNUAL MEETING OF STOCKHOLDERS</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>OF</B>
</DIV>

<DIV align="center" style="font-size: 14pt;">
<B>SAVE THE WORLD AIR, INC.</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>To Be Held on May&nbsp;24, 2005</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This proxy statement is furnished in connection with the
solicitation by our Board of Directors (the &#147;Board&#148;)
of proxies to be voted at the 2005 Annual Meeting of
Stockholders (the &#147;2005 Annual Meeting&#148;) of Save the
World Air, Inc. (the &#147;Company&#148;), which will be held at
10:00&nbsp;a.m. on May&nbsp;24, 2005 at the Sheraton Universal
Hotel, 333 Universal Hollywood Drive, Universal City, California
91608, or at any adjournments or postponements thereof, for the
purposes set forth in the accompanying Notice of 2005 Annual
Meeting of Stockholders (the &#147;Notice&#148;). This proxy
statement and the proxy card are first being delivered or mailed
to stockholders on or about May&nbsp;6, 2005. Our 2004 Annual
Report to Stockholders and our Annual Report for the year ended
December&nbsp;31, 2004 on Form&nbsp;10-KSB (the
&#147;10-KSB&#148;) are being mailed to stockholders
concurrently with this proxy statement. Neither our 2004 Annual
Report to Stockholders nor the 10-KSB are to be regarded as
proxy soliciting material or as a communication by means of
which any solicitation of proxies is to be made.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>VOTING RIGHTS AND SOLICITATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The close of business on April&nbsp;8, 2005 was the record date
(the &#147;Record Date&#148;) for stockholders entitled to
notice of and to vote at the 2005 Annual Meeting. As of the
Record Date, we had 38,450,321&nbsp;shares of common stock, par
value $.001&nbsp;per share issued and outstanding. All of the
shares of our common stock outstanding on the Record Date, and
only those shares, are entitled to vote on each of the proposals
to be voted upon at the 2005 Annual Meeting. Holders of the
common stock of record entitled to vote at the 2005 Annual
Meeting will have one vote for each share of common stock so
held with regard to each matter to be voted upon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All votes will be tabulated by the inspector of elections
appointed for the 2005 Annual Meeting, who will separately
tabulate affirmative and negative votes, abstentions and broker
non-votes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of a majority in voting interest of the common stock
outstanding and entitled to vote at the 2005 Annual Meeting
shall constitute a quorum for the transaction of business at the
2005 Annual Meeting. The voting interest of shares of the common
stock represented in person or by proxy will be counted for
purposes of determining whether a quorum is present at the 2005
Annual Meeting. Shares which abstain from voting as to a
particular matter will be treated as shares that are present and
entitled to vote for purposes of determining the voting interest
present and entitled to vote with respect to any particular
matter, but will not be counted as votes cast on such matter. If
a broker or nominee holding stock in &#147;street name&#148;
indicates on a proxy that it does not have discretionary
authority to vote as to a particular matter, those shares will
not be considered as present and entitled to vote with respect
to such matter and will not be counted as a vote cast on such
matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In voting with regard to the proposal to elect directors
(Proposal&nbsp;1), stockholders may vote in favor of all the
nominees, withhold their votes as to all nominees or withhold
their votes as to a specific nominee. The vote required by
Proposal&nbsp;1 is governed by Nevada law and is a plurality of
the votes cast by the holders of shares entitled to vote,
provided a quorum is present. As a result, in accordance with
Nevada law, votes that are withheld and broker non-votes will
not be counted and will have no effect on the voting for
election of directors.
</DIV>

<P align="center" style="font-size: 10pt;">

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In voting with regard to the proposal to increase the number of
shares of common stock that may be issued under the 2004 Stock
Option Plan (the &#147;2004 Plan&#148;) (Proposal&nbsp;2),
stockholders may vote in favor of such proposal or against such
proposal or may abstain from voting. The vote required to
approve Proposal&nbsp;2 is governed by Nevada law, and the
minimum vote required is a majority of the total votes cast on
such proposal, provided a quorum is present. As a result, in
accordance with Nevada law, abstentions and broker non-votes
will not be counted and will have no effect on the outcome of
the vote on this proposal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In voting with regard to the proposal to ratify the appointment
of our independent auditor (Proposal&nbsp;3), stockholders may
vote in favor of such proposal or against such proposal or may
abstain from voting. The vote required to approve
Proposal&nbsp;3 is governed by Nevada law, and the minimum vote
required is a majority of the total votes cast on such proposal,
provided a quorum is present. As a result, in accordance with
Nevada law, abstentions and broker non-votes will not be counted
and will have no effect on the outcome of the vote on this
proposal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the rules of The New York Stock Exchange (the
&#147;NYSE&#148;) that govern most domestic stock brokerage
firms, member brokerage firms that hold shares in &#147;street
name&#148; for beneficial owners may, to the extent that such
beneficial owners do not furnish voting instructions with
respect to any or all proposals submitted for stockholder
action, vote in their discretion upon proposals which are
considered &#147;discretionary&#148; proposals under the rules
of the NYSE. Member brokerage firms that have received no
instructions from their clients as to
&#147;non-discretionary&#148; proposals do not have discretion
to vote on these proposals. Such broker non-votes will not be
considered in determining whether a quorum exists at the 2005
Annual Meeting and will not be considered as votes cast in
determining the outcome of any proposal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Shares of our common stock represented by proxies in the
accompanying form which are properly executed and returned to us
will be voted at the 2005 Annual Meeting in accordance with the
stockholders&#146; instructions contained therein. In the
absence of contrary instructions, shares represented by such
proxies will be voted FOR each of Proposal&nbsp;1,
Proposal&nbsp;2 and Proposal&nbsp;3. Management does not know of
any matters to be presented at the 2005 Annual Meeting other
than those set forth in this proxy statement and in the Notice
accompanying this proxy statement. If other matters should
properly come before the 2005 Annual Meeting, the proxyholders
will vote on such matters in accordance with their best judgment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any stockholder has the right to revoke his, her or its proxy at
any time before it is voted at the 2005 Annual Meeting by giving
written notice to our Secretary, and by executing and delivering
to the Secretary a duly executed proxy card bearing a later
date, or by appearing at the 2005 Annual Meeting and voting in
person; <I>provided, however</I>, that under the rules of the
NYSE, any beneficial owner whose shares are held in &#147;street
name&#148; by a member brokerage firm may revoke his, her or its
proxy and vote his, her or its shares in person at the 2005
Annual Meeting only in accordance with the applicable rules and
procedures of the NYSE.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The entire cost of soliciting proxies will be borne by the
Company. Proxies will be solicited principally through the use
of the mails, but, if deemed desirable, may be solicited
personally or by telephone, or special letter by our officers
and regular employees for no additional compensation.
Arrangements may be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy
material to the beneficial owners of our common stock, and such
persons may be reimbursed for their expenses.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PROPOSAL&nbsp;1</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ELECTION OF DIRECTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Composition of Board of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bylaws provide that the Board shall consist of not less than
seven and not more than eleven directors. The Board currently
consists of seven members elected by the holders of the common
stock. The Board has fixed the size of the Board to be elected
at the 2005 Annual Meeting at seven members. Our directors are
elected by our stockholders at each annual meeting of
stockholders and will serve until their successors are elected
and qualified, or until their earlier resignation or removal.
There are no family relationships among any of our current
directors, the nominees for directors or our executive officers.
</DIV>

<P align="center" style="font-size: 10pt;">2
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The proxyholders named on the proxy card intend to vote all
proxies received by them in the accompanying form&nbsp;FOR the
election of the nominees listed below, unless instructions to
the contrary are marked on the proxy. These nominees have been
selected by the Board, acting upon the recommendation of the
Board&#146;s Nominating and Corporate Governance Committee. All
of the nominees are currently members of the Board. If elected,
each nominee will serve until the annual meeting of stockholders
to be held in 2006 or until his or her successor has been duly
elected and qualified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that a nominee is unable or declines to serve as a
director at the time of the 2005 Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the
present Board to fill the vacancy. In the event that additional
persons are nominated for election as directors, the
proxyholders intend to vote all proxies received by them for the
nominees listed below, unless instructions are given to the
contrary. As of the date of this proxy statement, the Board is
not aware of any nominee who is unable or will decline to serve
as a director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Nominees for Election as Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is certain information as of April&nbsp;8, 2005
regarding the nominees for election as directors:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Director Since</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Edward L. Masry, Esq.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Executive Officer and Chairman of the Board</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2001</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eugene E. Eichler, CPA(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President, Chief Financial Officer and Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2002</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce H. McKinnon(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Operating Officer and Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2002</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert F. Sylk(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2001</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hon. J. Joseph Brown, AO(2)(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2002</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John F. Price, Ph.D(1)(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2002</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Joseph Helleis(1)(2)(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2002</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Member of the Audit Committee</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Member of the Compensation Committee</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Member of the Nominating and Corporate Governance Committee</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Biographical Information Regarding Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Edward L. Masry,&nbsp;Esq.</I> has served as our Chairman of
the Board and Chief Executive Officer since October 2001 and
served as our President from October 2001 until March 2004.
Mr.&nbsp;Masry has been a member of the law firm of
Masry&nbsp;&#38; Vititoe PC since 1986 and was Mayor of Thousand
Oaks City and currently a member of the City Council. From 1960
to 1986, he was a partner of various law firms. Mr.&nbsp;Masry
was corporate director of Merlin Olsen Porsche Audi from 1970 to
1988 and corporate director of Gabriel Olsen Volkswagen from
1969 to 1973. Mr.&nbsp;Masry received a J.D. from Loyola Law
School, Los Angeles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Eugene E. Eichler, CPA</I>, has served as our President since
March 2004, our Chief Operating Officer and Chief Financial
Officer and Treasurer since October 2001 and as a director since
May 2002. Mr.&nbsp;Eichler was the Chief Financial Officer and
Firm Administrator of the law firm Masry&nbsp;&#38; Vititoe PC
from 1982 to October 2001. From 1974 to 1982, Mr.&nbsp;Eichler
provided financial consulting services to Foundation for
HMO&#146;s, Acne Care Medical Clinics and Earth Foods, Inc. From
1960 to 1974, Mr.&nbsp;Eichler headed financial consulting
services for Milburn Industries and Brown, Eichler&nbsp;&#38;
Company. From 1953 to 1960, he held the position of Chief
Budgets and Forecasts at North American Aviation. From 1951 to
1953, Mr.&nbsp;Eichler held various audit positions at the
Atomic Energy Commission. Mr.&nbsp;Eichler received a B.A. from
University of Montana.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Bruce H. McKinnon </I>has served as a director since May
2002, our Executive Vice-President of Business Development since
December 2003 and our Chief Operating Officer since March 2004.
Mr.&nbsp;McKinnon served
</DIV>

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<DIV align="left" style="font-size: 10pt;">
as Chief Executive Officer and President of KZ Golf, Inc., an
international golf equipment company, from 1994 to 2004. From
1990 to 1994, he was President and Chief Executive Officer of
TTL Corporation and Novaterra, Inc., environmental remediation
and technology corporations. Prior to 1990, Mr.&nbsp;McKinnon
was an owner, Chairman and Chief Executive Officer of several
international trading and manufacturing corporations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Robert F. Sylk </I>has served as a director since October
2001. He currently is one of the board of directors of the
La&nbsp;Quinta, California Chamber of Commerce and Chairman of
its Ambassadors Committee. From 1991 to 2003, he has served as a
senior executive of Mirage Resorts. He was a delegate to the
California Tourism and Trade Commission from 1994 to 1998. From
1993 to 1997, he was Senior Vice President of the Marina Del Rey
Chamber of Commerce. He was a board member for the Los Angeles
County Department of Beaches and Harbors and on the Board of the
United Service Organizations (U.S.O.) from 1993 to 2000.
Mr.&nbsp;Sylk is presently a director for the Agua Caliente
Casino, located in Rancho Mirage, Calif.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Hon.&nbsp;J. Joseph (&#147;John&#148;) Brown, AO </I>has
served as a director since May 2002. He has served as Chairman
of the Australian Tourism Task Force since 1989 and currently is
a professional consultant to Service Corporation International
Australia. Mr.&nbsp;Brown has also served as director of
Macquarie Tourism and Leisure since 1990. From 1983 to 1988,
Mr.&nbsp;Brown was Minister for Sport and Tourism for the
Australian government and from 1987 to 1988 he was the Minister
for the Environment. He was a member of the Olympics bid teams
for Brisbane (1992), Melbourne (1996)&nbsp;and the successful
Sydney bid (2000). Mr.&nbsp;Brown was Founding Director of the
Sydney Olympic Games Organizing Committee in 1992 and the Sydney
Paralympic Organizing Committee in 1998.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>John F. Price, PhD </I>has served as a director since May
2002. He co-founded and has served as Chairman of the Board of
Conscious Investing Pty Ltd., a software company, since May
2001. In June 1998, Mr.&nbsp;Price founded Price Value, Inc., a
software company to market software that he developed. He has
served as Chairman of the Board of Price Value, Inc. since 1998.
Since October 1997, Mr.&nbsp;Price has held various teaching
positions in mathematics and physics at University of New South
Wales. From 1990 to 1998, he was professor and head of the
Mathematics Department at Maharishi University of Management.
Mr.&nbsp;Price received a B.Sc. and M.Sc. from the University of
Melbourne and a Ph.D. from the Australian National University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Joseph Helleis </I>has served as a director since May 2002.
Since 2002, he has been operating his own financial services
consulting firm, Joseph Helleis and Associates. From 2000 to
2002, he was President/ Chief Executive Officer with Bank of
Whittier, California. From 1981 to 2000, he served in senior
executive capacities as Chairman/ CEO, President/ CEO, and Chief
Credit Officer with number of financial institutions in the
southern California region. After his honorable discharge from
the United States Navy in 1960, Mr.&nbsp;Helleis served with
Citibank in New York City until 1981 where his last position was
Vice President/ Senior Credit Officer for the New York State
Business Banking Region. Mr.&nbsp;Helleis has an AA degree from
the National Institute of Credit.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CORPORATE GOVERNANCE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain a corporate governance page on our corporate website
at <I><U>www.savetheworldair.com</U></I>, which includes
information regarding the Company&#146;s corporate governance
practices. Our codes of business conduct and ethics, Board
committee charters and certain other corporate governance
documents and policies are available on that website. Any
changes to these documents and any waivers granted with respect
to our code of business conduct will be posted on our website.
In addition, we will provide a copy of any of these documents
without charge to any stockholder upon written request made to
Corporate Secretary, Save the World Air, Inc., 5125 Lankershim
Boulevard, North Hollywood, California 91601. The information on
our website is not, and shall not be deemed to be, a part of
this proxy statement or incorporated by reference into this or
any other filing we make with the Securities and Exchange
Commission (&#147;SEC&#148;).
</DIV>

<P align="center" style="font-size: 10pt;">4

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Board of Directors</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Director Independence</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Board of Directors currently consists of seven members. The
Board has affirmatively determined that Messrs.&nbsp;Helleis,
Sylk, Price and Brown are independent under the standards
currently in effect of the Nasdaq Stock Market
(&#147;Nasdaq&#148;).
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Meetings of the Board</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board held four meetings during 2004. Each of the directors
attended 75% or more of the aggregate number of meetings of the
Board and committees on which the director served in 2004.
Because the Company is in the development stage and has no
operations, our non-management directors do not meet regularly
in executive session without management present.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of our directors is encouraged to attend the Company&#146;s
annual meeting of stockholders and to be available to answer any
questions posed by stockholders to such director. Because our
Board holds one of its regular meetings in conjunction with our
annual meeting of stockholders, unless one or more members of
the Board are unable to attend, all of the members of the Board
are present for the annual meeting. All of the incumbent
directors attended our 2004 Annual Meeting of Stockholders.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Communications with the Board</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following procedures have been established by the Board in
order to facilitate communications between our stockholders and
the Board:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Stockholders may send correspondence, which should indicate that
    the sender is a stockholder, to the Board or to any individual
    director, by mail to Corporate Secretary, Save the World Air,
    Inc., 5125&nbsp;Lankershim Boulevard, North Hollywood,
    California 91601, or by e-mail to
    <U>questions@savetheworldair.com</U>.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Our Secretary will be responsible for the first review and
    logging of this correspondence and will forward the
    communication to the director or directors to whom it is
    addressed unless it is a type of correspondence which the Board
    has identified as correspondence which may be retained in our
    files and not sent to directors. The Board has authorized the
    Secretary to retain and not send to directors communications
    that: (a)&nbsp;are advertising or promotional in nature
    (offering goods or services), (b)&nbsp;solely relate to
    complaints by clients with respect to ordinary course of
    business customer service and satisfaction issues or
    (c)&nbsp;clearly are unrelated to our business, industry,
    management or Board or committee matters. These types of
    communications will be logged and filed but not circulated to
    directors. Except as set forth in the preceding sentence, the
    Secretary will not screen communications sent to directors.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    The log of stockholder correspondence will be available to
    members of the Board for inspection. At least once each year,
    the Secretary will provide to the Board a summary of the
    communications received from stockholders, including the
    communications not sent to directors in accordance with the
    procedures set forth above.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our stockholders may also communicate directly with the
non-management directors, individually or as a group, by mail
c/o&nbsp;Corporate Secretary, Save the World Air, Inc.,
5125&nbsp;Lankershim Boulevard, North Hollywood, California
91601, or by e-mail to <U>questions@savetheworldair.com</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee is in the process of establishing procedures
for the receipt, retention and treatment of complaints regarding
questionable accounting, internal controls, financial
improprieties or auditing matters. Any of the Company&#146;s
employees may confidentially communicate concerns about any of
these matters by calling our toll-free number,
(877)&nbsp;487-0200. Upon receipt of a complaint or concern, a
determination will be made whether it pertains to accounting,
internal controls or auditing matters and if it does, it will be
handled in accordance with the procedures established by the
Audit Committee.
</DIV>

<P align="center" style="font-size: 10pt;">5

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Committees of the Board</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board has a standing Audit Committee, Compensation
Committee, and Nominating and Corporate Governance Committee.
Each of these committees operates under a written charter.
Copies of these charters, and other corporate governance
documents, are available on our website,
<U>www.savetheworldair.com</U>. In addition, we will provide a
copy of any of these documents without charge to any stockholder
upon written request made to Corporate Secretary, Save the World
Air, Inc., 5125&nbsp;Lankershim Boulevard, North Hollywood,
California 91601.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The composition, functions and general responsibilities of each
committee are summarized below.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Audit Committee</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee consists of Messrs.&nbsp;Helleis
(chairperson), Eichler, McKinnon and Price. The Board has
determined that Mr.&nbsp;Helleis is an audit committee financial
expert, as that term is defined in Item&nbsp;401(e) of
Regulation&nbsp;S-B of the Securities Exchange Act of 1934 as
amended (the &#147;Exchange Act&#148;), and is independent
within the meaning of Item&nbsp;7(d)(3)(iv) of Schedule&nbsp;14A
of the Exchange Act and the requirements of Nasdaq as currently
in effect. The Board also believes that Mr.&nbsp;Price meets the
independence and knowledge requirements of Nasdaq as currently
in effect, and that Messrs.&nbsp;Eichler and McKinnon meet the
knowledge requirements but not the independence requirements of
Nasdaq as currently in effect. The Audit Committee held a total
of four meetings during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee operates under a written charter. The Audit
Committee&#146;s duties include responsibility for reviewing our
accounting practices and audit procedures. In addition, the
Audit Committee has responsibility for reviewing complaints
about, and investigating allegations of, financial impropriety
or misconduct. The Audit Committee works closely with management
and our independent auditors. The Audit Committee also meets
with our independent auditors on a quarterly basis, following
completion of their quarterly reviews and annual audit, to
review the results of their work. The Audit Committee also meets
with our independent auditors to approve the annual scope of the
audit services to be performed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of its responsibility, the Audit Committee is
responsible for engaging our independent auditor, as well as
pre-approving audit and non-audit services performed by our
independent auditor in order to assure that the provision of
such services does not impair the independent auditor&#146;s
independence. The Audit Committee is in the process of
establishing a pre-approval policy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Please see &#147;Audit Committee Report&#148; below, which
provides further details of many of the duties and
responsibilities of the Audit Committee.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Compensation Committee, Compensation Committee Interlocks
    and Insider Participation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Compensation Committee currently consists of
Messrs.&nbsp;Helleis (chairperson), Brown and Price.
Mr.&nbsp;McKinnon also served on the Compensation Committee
until May 2004. The Board believes that Messrs.&nbsp;Helleis,
Brown and Price meet the independence requirements of Nasdaq as
currently in effect. None of our executive officers served on
the compensation committee of another entity or on any other
committee of the board of directors of another entity performing
similar functions during 2004. The Compensation Committee held
two meetings during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Compensation Committee operates under a written charter. The
Compensation Committee establishes the compensation and benefits
of our executive officers. The Compensation Committee also
administers our employee benefit plans, including our 2004 Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Please see &#147;Compensation Committee Report&#148; below,
which details the Compensation Committee&#146;s report on our
executive compensation for 2004.
</DIV>

<P align="center" style="font-size: 10pt;">6
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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Nominating and Corporate Governance Committee</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Nominating and Corporate Governance Committee currently
consists of Messrs.&nbsp;Helleis (chairperson), Brown and Sylk.
Mr.&nbsp;Sylk joined the Nominating and Corporate Governance
Committee in May 2004. The Board believes that
Messrs.&nbsp;Helleis, Brown and Sylk meet the independence
requirements of Nasdaq as currently in effect. The Nominating
and Corporate Governance Committee held one meeting during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Nominating and Corporate Governance Committee operates under
a written charter. The Nominating and Corporate Governance
Committee has the primary responsibility for overseeing the
Company&#146;s corporate governance compliance practices, as
well as supervising the affairs of the Company as they relate to
the nomination of directors. The principal ongoing functions of
the Nominating and Corporate Governance Committee include
developing criteria for selecting new directors, establishing
and monitoring procedures for the receipt and consideration of
director nominations by stockholders and others, considering and
examining director candidates, developing and recommending
corporate governance principles for the Company and monitoring
the Company&#146;s compliance with these principles and
establishing and monitoring procedures for the receipt of
stockholder communications directed to the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Nominating and Corporate Governance Committee is also
responsible for conducting an annual evaluation of the Board to
determine whether the Board and its committees are functioning
effectively. In performing this evaluation, the Nominating and
Corporate Governance Committee receives comments from all
directors and reports annually to the Board with the results of
this evaluation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Director Nominations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Nominating and Corporate Governance Committee seeks out
appropriate candidates to serve as directors of the Company, and
the Nominating and Corporate Governance Committee interviews and
examines director candidates and makes recommendations to the
Board regarding candidate selection. In considering candidates
to serve as director, the Nominating and Corporate Governance
Committee evaluates various minimum individual qualifications,
including strength of character, maturity of judgment, relevant
technical skills or financial acumen, diversity of viewpoint and
industry knowledge, as well as the extent to which the candidate
would fill a present need on the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Nominating and Corporate Governance Committee will consider
stockholder nominations for director. Nominations for director
submitted to this committee by stockholders are evaluated
according to the Company&#146;s overall needs and the
nominee&#146;s knowledge, experience and background. A
nominating stockholder must give appropriate notice to the
Company of the nomination not less than 90&nbsp;days prior to
the first anniversary of the preceding year&#146;s annual
meeting. In the event that the date of the annual meeting is
advanced by more than 30&nbsp;days or delayed by more than
60&nbsp;days from the anniversary date of the preceding
year&#146;s annual meeting, the notice by the stockholder must
be delivered not later than the close of business on the later
of the 60th day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of
such annual meeting is first made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The stockholders&#146; notice shall set forth, as to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each person whom the stockholder proposes to nominate for
    election as a director:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the name, age, business address and residence address of such
    person,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the principal occupation or employment of the person,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the class and number of shares of the Company which are
    beneficially owned by such person, if any,&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any other information relating to such person which is required
    to be disclosed in solicitations for proxies for election of
    directors pursuant to Regulation&nbsp;14A under the Exchange Act
    and the rules thereunder;&nbsp;and</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">7

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the stockholder giving the notice:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the name and record address of the stockholder and the class and
    number of shares of the Company which are beneficially owned by
    the stockholder,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a description of all arrangements or understandings between such
    stockholder and each proposed nominee and any other person or
    persons (including their names) pursuant to which nomination(s)
    are to be made by such stockholder,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a representation that such stockholder intends to appear in
    person or by proxy at the meeting to nominate the persons named
    in its notice,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any other information relating to such person which is required
    to be disclosed in solicitations for proxies for election of
    directors pursuant to Regulation&nbsp;14A under the Exchange Act
    and the rules thereunder.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The notice must be accompanied by a written consent of the
proposed nominee to be named as a director.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIRECTOR COMPENSATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our directors who are not officers or employees of the Company
are compensated for their services in the amount of
$750&nbsp;per meeting of the Board. In addition, effective
January&nbsp;1, 2005, the chairperson of the Audit Committee
receives a retainer of $1,500&nbsp;per month and the chairperson
of the Compensation and Nominating and Corporate Governance
Committees each receives a retainer of $1,000&nbsp;per month.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Vote Required</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a quorum is present, the nominees receiving the highest
number of votes will be elected to the Board of Directors.
Abstentions and broker non-votes will have no effect on the
election of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recommendation of the Board</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>The Board unanimously recommends that stockholders
vote&nbsp;FOR election of each of the nominees identified
above.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PROPOSAL&nbsp;2</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>AMENDMENT OF 2004 STOCK OPTION PLAN</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;2, 2004, the Board approved the 2004 Plan, subject
to approval from our stockholders, which approval was received
at the 2004 Annual Meeting on May&nbsp;24, 2004. At this time,
the Board is asking our stockholders to approve an amendment to
the 2004 Plan to increase the maximum number of shares of common
stock that can be issued under the 2004 Plan from a total of
1,500,000&nbsp;shares of common stock to 5,000,000&nbsp;shares
of common stock, or an increase of 3,500,000&nbsp;shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Given our limited cash reserves, we must rely on stock options
to compensate and incentivize a number of individuals, including
our directors, employees and consultants. We believe that this
increase in the number of shares in the 2004 Plan will provide a
sufficient number of shares to cover option grants for at least
the next two years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All other terms of the 2004 Plan will remain unchanged. The
following summary of the principal provisions of the 2004 Plan
is qualified in its entirety by reference to the 2004 Plan
itself.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Purpose of the 2004 Plan.</I> The 2004 Plan is intended to
benefit and strengthen the Company and its stockholders by:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    encouraging stock ownership by selected key employees,
    directors, consultants and advisers</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">8

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    assisting the Company in attracting and retaining key
    personnel;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    providing to participating personnel added incentive for high
    level of performance.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Administration.</I> A committee of three or more people
selected by the Board administers the 2004 Plan. The Board has
designated the Compensation Committee as the administrator of
the 2004 Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Shares Available for Grant Under the Plan.</I> As originally
adopted by the stockholders at the 2004 Annual Meeting, the 2004
Plan contains a total of 1,500,000&nbsp;shares of our common
stock, subject to adjustment in the event of certain changes in
our capitalization. The stockholders are being asked at the 2005
Annual Meeting to approve an increase in the total number of
shares which can be the subject to grants under the 2004 Plan
from 1,500,000 to 5,000,000, an increase of
3,500,000&nbsp;shares. If an option terminates or expires for
any reason without having vested and been exercised, the related
shares of common stock will again become available for grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Eligibility.</I> All employees, directors, consultants and
advisers of the Company are eligible to receive option grants
under the 2004 Plan. As of April&nbsp;8, 2005, three Named
Executive Officers (as defined below on page&nbsp;13), four
non-employee directors and five other employees were eligible to
be selected by the Compensation Committee to receive grants
under the 2004 Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Types and Terms of Stock Options.</I> The Compensation
Committee may grant either incentive stock options qualified
with respect to Internal Revenue Code Section&nbsp;422
(&#147;ISOs&#148;) or options not qualified under any section of
the Internal Revenue Code (&#147;non-qualified options&#148;).
All ISOs granted under the 2004 Plan must have an exercise price
that is at least equal to the fair market value of our common
stock on the grant date and, in the case of a person who is a
10% or greater stockholder, the exercise price must be at least
100% of the fair marketing value of our common stock on the
grant date. The exercise price of a non-qualified option shall
be determined by the Board or the Compensation Committee. As of
April&nbsp;8, 2005, the fair market value of a share of our
common stock, determined by the closing price per share on that
date as quoted on Pink Sheets, was $1.00. No stock option
granted under the 2004 Plan may have a term longer than ten
years and, in the case of a person who is a 10% or greater
stockholder, the stock option may not have a term longer than
five years. The exercise price of stock options may be paid in
cash, or, if the Compensation Committee permits, by tendering
shares of common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Vesting.</I> The Compensation Committee has the authority to
determine the amounts and period of time over which a stock
option shall become exercisable (vest). However, the fair market
value with respect to which an ISO is exercisable by an optionee
during any calendar year may not exceed $100,000.
</DIV>

<P align="center" style="font-size: 10pt;">9

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Stock Options Granted to Certain Individuals.</I> The number
of options that an individual may receive under the 2004 Plan
will be in the discretion of the Compensation Committee and
therefore cannot be determined in advance. The following table
sets forth (a)&nbsp;the aggregate 1,172,652&nbsp;shares subject
to options granted during 2004, and (b)&nbsp;the average per
share exercise price of such options:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per Share</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name of Individual or Group</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options Granted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Edward L. Masry</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.98</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eugene E. Eichler</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.98</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce H. McKinnon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.98</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Joseph Helleis</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.98</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John Brown</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.98</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John F. Price</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.98</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert F. Sylk</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.98</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nathan Shelton</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.98</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Janice Holder</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Evelyn Updyke</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Philip Bryan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    All executive officers, as a group (6&nbsp;persons)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>912,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.09</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    All directors who are not executive officers, as a group
    (4&nbsp;persons)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.98</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    All employees, including officers who are not executive
    officers, as a group (2&nbsp;persons)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.15</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Federal Income Tax Consequences.</I> The following summary is
intended only as a general guide to the United States federal
income tax consequences under current law of incentive stock
options and non-qualified stock options, which are authorized
for grant under the 2004 Plan. It does not attempt to describe
all possible federal or other tax consequences of participation
in the 2004 Plan or tax consequences based on particular
circumstances. The tax consequences may vary if options are
granted outside the United States.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I>Incentive Stock Options.</I> An option holder recognizes no
    taxable income for regular income tax purposes as a result of
    the grant or exercise of an incentive stock option qualifying
    under Internal Revenue Code Section&nbsp;422. Option holders who
    dispose of the shares acquired under an incentive stock option
    after two years following the date the option was granted and
    after one year following the exercise of the option will
    normally recognize a capital gain or loss upon a sale of the
    shares equal to the difference, if any, between the sale price
    and the purchase price of the shares. If an option holder
    satisfies such holding periods upon a sale of the shares, the
    Company will not be entitled to any deduction for federal income
    tax purposes. If an option holder disposes of shares within two
    years after the date of grant or within one year after the date
    of exercise (a &#147;disqualifying disposition&#148;), the
    difference between the fair market value of the shares on the
    exercise date and the option exercise price (not to exceed the
    gain realized on the sale if the disposition is a transaction
    with respect to which a loss, if sustained, would be recognized)
    will be taxed as ordinary income at the time of disposition. Any
    gain in excess of that amount will be a capital gain. If a loss
    is recognized, there will be no ordinary income, and such loss
    will be a capital loss. Any ordinary income recognized by the
    option holder upon the disqualifying disposition of the shares
    generally will result in a deduction by the Company for federal
    income tax purposes.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I>Non-Qualified Options.</I> Options not designated or
    qualifying as incentive stock options will be non-qualified
    options having no special tax status. An optionee generally
    recognizes no taxable income as the result of the grant of such
    an option. Upon exercise of a non-qualified option, the optionee
    normally</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">10

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    recognizes ordinary income in the amount of the difference
    between the option exercise price and the fair market value of
    the shares on the exercise date. If the optionee is an employee,
    such ordinary income generally is subject to withholding of
    income and employment taxes. Upon the sale of stock acquired by
    the exercise of a non-qualified option, any gain or loss, based
    on the difference between the sale price and the fair market
    value on the exercise date, will be taxed as a capital gain or
    loss. No tax deduction is available to the Company with respect
    to the grant of a non-qualified option or the sale of the stock
    acquired pursuant to such grant. The Company generally should be
    entitled to a deduction equal to the amount of ordinary income
    recognized by the optionee as a result of the exercise of a
    non-qualified option.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I>Other Considerations.</I> The Internal Revenue Code allows
    publicly-held corporations to deduct compensation in excess of
    $1&nbsp;million paid to the corporation&#146;s chief executive
    officer and its four other most highly compensated executive
    officers in office at the end of the tax year if the
    compensation is payable solely based on the attainment of one or
    more performance goals and certain statutory requirements are
    satisfied. We intend for compensation arising from grants of
    awards under the 2004 Plan which are based on performance goals,
    including stock options and stock appreciation rights granted at
    fair market value, to be deductible by us as performance-based
    compensation not subject to the $1&nbsp;million limitation on
    deductibility.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Transferability.</I> All ISOs are non-transferable other than
by will or the laws of descent and distribution and shall be
exercisable during an optionee&#146;s lifetime only by the
optionee. The Compensation Committee may provide that a
non-qualified option may be transferred under certain terms and
conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Extraordinary Events.</I> In the event of a sale of more than
half the fair market value of the assets of the Company, the
acquisition by a group or entity of more than 30% of the voting
securities of the Company, or the dissolution or liquidation of
the Company, all stock options not exercised shall terminate as
of the date such transaction or event takes place, unless the
stock options are assumed. The vesting of unvested stock options
shall be accelerated in certain circumstances in connection with
the acquisition of the assets or stock of the Company and the
optionee shall be entitled to receive cash equal to the
difference between the exercise price of the stock option and
value of the consideration attributable to the transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Amendment and Termination.</I> The Board or the Compensation
Committee may suspend, amend or terminate the 2004 Plan at any
time, but no such action may be taken without stockholder
approval if such approval is required by law or if such action
increases the maximum number of shares that may be issued under
the 2004 Plan, reduces the exercise price of an ISO, increases
the maximum term of an ISO or permits stock options to be
granted to anyone not eligible to be granted options at the time
of the adoption of the 2004 Plan. The Board may, with the
consent of an optionee, make modifications of the terms and
conditions of that person&#146;s stock option, other than as
described in the preceding sentence, in which case stockholder
approval is also required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Vote Required</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a quorum is present, the affirmative vote of a majority of
the shares present and entitled to vote at the 2005&nbsp;Annual
Meeting will be required to approve the proposed amendment to
the 2004 Plan. Abstentions will have the effect of a vote
&#147;against&#148; the approval of the proposed amendment to
the 2004 Plan. Broker non-votes will not be considered as
present and entitled to vote on this proposal but will be
counted as present for the purpose of determining a quorum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recommendation of the Board</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>The Board of Directors unanimously recommends that
stockholders vote &#147;FOR&#148; the amendment of the 2004
Plan.</B>
</DIV>

<P align="center" style="font-size: 10pt;">11

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PROPOSAL&nbsp;3</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee has selected Weinberg&nbsp;&#38; Company,
P.A. to audit our financial statements for the fiscal year
ending December&nbsp;31, 2005. Although ratification by
stockholders is not required by law, the Board has determined
that it is desirable to request ratification of this selection
by the stockholders. Notwithstanding its selection, the Audit
Committee, in its discretion, may appoint new independent
auditors at any time during the year if the Audit Committee
believes that such a change would be in the best interest of the
Company and its stockholders. If the stockholders do not ratify
the appointment of Weinberg&nbsp;&#38; Company, P.A. the Audit
Committee may reconsider its selection.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Weinberg&nbsp;&#38; Company, P.A. was first appointed in fiscal
year 2003, and has audited our financial statements for fiscal
years 2002 through 2004. Certain additional information
regarding changes in our independent auditor in 2003 can be
found in Part&nbsp;II, Item&nbsp;8 of our Annual Report on
Form&nbsp;10-KSB, a copy of which accompanies this proxy
statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board expects that representatives of Weinberg&nbsp;&#38;
Company, P.A. will be present at the 2005 Annual Meeting to
respond to appropriate questions and to make a statement if they
so desire.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Audit and Other Fees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes the fees charged by
Weinberg&nbsp;&#38; Company, P.A. for certain services rendered
to the Company during 2003 and 2004. Weinberg&nbsp;&#38;
Company, P.A. was retained in December 2003 to audit the
Company&#146;s financial statements for fiscal years 2002 and
2003. Because of the date of the engagement, Weinberg&nbsp;&#38;
Company, P.A. did not commence its audit services until early
2004. Accordingly, no fees were billed by Weinberg&nbsp;&#38;
Company, P.A. to the Company in 2003.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Amount Billed</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Type of Fee</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fiscal Year 2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fiscal Year 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Audit(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>89,488</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Audit Related(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    All Other(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,699</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="white">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>93,187</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    This category consists of fees for the audit of our annual
    financial statements included in the Company&#146;s annual
    report on Form&nbsp;10-KSB and review of the financial
    statements included in the Company&#146;s quarterly reports on
    Form&nbsp;10-QSB. This category also includes advice on audit
    and accounting matters that arose during, or as a result of, the
    audit or the review of interim financial statements, statutory
    audits required by non-U.S.&nbsp;jurisdictions and the
    preparation of an annual &#147;management letter&#148; on
    internal control matters.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Represents services that are normally provided by the
    independent auditors in connection with statutory and regulatory
    filings or engagements for those fiscal years, aggregate fees
    charged for assurance and related services that are reasonably
    related to the performance of the audit and are not reported as
    audit fees. These services include consultations regarding
    Sarbanes-Oxley Act requirements, various SEC filings and the
    implementation of new accounting requirements.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Represents aggregate fees charged for professional services for
    tax compliance and preparation, tax consulting and advice, and
    tax planning.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Represents aggregate fees charged for products and services
    other than those services previously reported.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">12

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Vote Required</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a quorum is present, the affirmative vote of a majority of
the shares present and entitled to vote at the 2005&nbsp;Annual
Meeting will be required to ratify the appointment of
Weinberg&nbsp;&#38; Company, P.A. as our independent auditors.
Abstentions will have the effect of a vote &#147;against&#148;
the ratification of Weinberg&nbsp;&#38; Company, P.A. as our
independent auditors. Broker non-votes will have no effect on
the outcome of the vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recommendation of the Board</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>The Board unanimously recommends that stockholders
vote&nbsp;FOR the proposal to ratify the appointment of
Weinberg&nbsp;&#38; Co. , P.A. as our independent auditor for
the fiscal year ending December&nbsp;31, 2005.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of April&nbsp;8,
2005 by:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each of our directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our Chief Executive Officer and each of our four other most
    highly-compensated executive officers serving as such as of
    December&nbsp;31, 2004 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
    &#147;Named Executive Officers&#148;);&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    all of our directors and executive officers as a group.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of April&nbsp;8, 2005, there were 38,450,321&nbsp;shares of
our common stock outstanding.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of Shares of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares Beneficially</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Name and Address of Beneficial Owner(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beneficially Owned(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Owned(2)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><I>Named Executive Officers and Directors</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Edward L. Masry(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,388,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eugene E. Eichler(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,036,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce H. McKinnon(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>646,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert F. Sylk(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>385,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John Brown(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    John F. Price(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>341,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Joseph Helleis(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>350,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><I>Five Percent Stockholders</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Edward Skoda(8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>1773 Nelson Street, Suite&nbsp;101</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Vancouver, BC</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Canada V6G 1M6</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cecil Kyte(9)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,361,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>2934 Torito Road</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Santa&nbsp;Barbara, CA 93108</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    All directors and executive officers as a group
    (10&nbsp;persons)(10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,657,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">13

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="2%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>*&nbsp;</TD>
    <TD align="left">
    Represents beneficial ownership of less than one percent.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Unless otherwise indicated, the address of each listed person is
    c/o&nbsp;Save the World Air, Inc., 5125&nbsp;Lankershim
    Boulevard, North Hollywood, California 91601.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Percentage of beneficial ownership is based upon
    38,450,321&nbsp;shares of our common stock outstanding as of
    April&nbsp;8, 2005. 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&nbsp;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.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Includes options to purchase&nbsp;3,328,740&nbsp;shares of our
    common stock exercisable either currently or within 60&nbsp;days
    after April&nbsp;8, 2005 and 60,000&nbsp;shares of our common
    stock held by Mr.&nbsp;Masry&#146;s wife. Also includes
    2,000,000&nbsp;shares and warrants to purchase an aggregate
    2,000,000&nbsp;shares of our common stock held by
    Masry&nbsp;&#38; Vititoe, PC. Mr.&nbsp;Masry, our Chairman and
    Chief Executive Officer, is a shareholder of Masry&nbsp;&#38;
    Vititoe, PC, and may be deemed to be a beneficial owner of the
    shares held by such entity. Mr.&nbsp;Masry disclaims beneficial
    ownership of these shares except to the extent of his
    proportional share therein.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Includes options to purchase&nbsp;536,956&nbsp;shares of our
    common stock exercisable either currently or within 60&nbsp;days
    after April&nbsp;8, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;McKinnon is a participant in the KZ Golf, Inc. Defined
    Benefit Pension Plan, which is the owner of 9,100&nbsp;shares of
    our common stock. Includes options to
    purchase&nbsp;236,956&nbsp;shares of our common stock
    exercisable either currently or within 60&nbsp;days after
    April&nbsp;8, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Includes options to purchase&nbsp;50,000&nbsp;shares of our
    common stock exercisable either currently or within 60&nbsp;days
    after April&nbsp;8, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Includes options to purchase&nbsp;100,000&nbsp;shares of our
    common stock exercisable either currently or within 60&nbsp;days
    after April&nbsp;8, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    These shares are subject to pending litigation in the United
    States District Court, Southern District of New York, against
    Jeffrey Muller, our former Chief Executive Officer, his
    immediate family and various other persons and entities. We
    believe that Edward Skoda acted in concert with Mr.&nbsp;Muller
    with respect to these shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Includes warrants to purchase&nbsp;1,160,000&nbsp;shares of our
    common stock exercisable either currently or within 60&nbsp;days
    after April&nbsp;8, 2005.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    Includes options to purchase shares of our common stock
    exercisable either currently or within 60&nbsp;days after
    April&nbsp;8, 2005. Also includes 60,000&nbsp;shares of our
    common stock held by the wife of Mr.&nbsp;Masry, our Chairman of
    the Board and Chief Executive Officer, and 2,000,000&nbsp;shares
    of our common stock and warrants to
    purchase&nbsp;2,000,000&nbsp;shares of our common stock held by
    Masry&nbsp;&#38; Vititoe, PC, in which Mr.&nbsp;Masry is a
    shareholder. Mr.&nbsp;Masry disclaims beneficial ownership of
    these shares except to the extent of his proportional share
    therein.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXECUTIVE COMPENSATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information regarding the
compensation earned during the last three fiscal years by the
Named Executive Officers:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Compensation Table</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap><B>Long-Term Compensation Awards</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Annual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Restricted Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Award(s)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>All Other</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Name and Principal Position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fiscal Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Salary ($)(4)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)(5)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options (#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Compensation ($)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Edward L. Masry(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>328,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chairman and Chief</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eugene E. Eichler(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>234,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>286,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President, Chief Financial</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>172,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Officer and Treasurer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>167,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce H. McKinnon(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>191,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>236,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Operating Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>560,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Masry was appointed President and Chief Executive
    Officer in October 2001 at no annual salary. In March 2004,
    Mr.&nbsp;Masry relinquished his position as President, but
    continues to serve as Chief Executive Officer at a contractual
    salary of $1&nbsp;per year. See &#147;Employment
    Agreements&#148; below.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Eichler was appointed Chief Operating Officer, Chief
    Financial Officer and Treasurer in October 2001. In March 2004,
    Mr.&nbsp;Eichler relinquished his position as Chief Operating
    Officer, was appointed President of the Company and continues to
    serve as Chief Operating Officer, Chief Financial Officer and
    Treasurer. See &#147;Employment Agreements&#148; below.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;McKinnon was appointed Executive Vice President of
    Business Development in October 2001. In March 2004,
    Mr.&nbsp;McKinnon was appointed Chief Operating Officer of the
    Company. See &#147;Employment Agreements&#148; below.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    The law firm Masry&nbsp;&#38; Vititoe, PC paid for
    Mr.&nbsp;Eichler&#146;s salary for 2002 and 2003 pursuant to an
    arrangement under which we reimbursed Masry&nbsp;&#38; Vititoe,
    PC for a portion of his salary. The portion reimbursed by us is
    shown in the table above.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    The number and value of vested and unvested restricted stock
    based upon the closing market price of the common stock at
    December&nbsp;31, 2004 ($1.40) were as follows:
    Mr.&nbsp;Eichler, 500,000 vested shares valued at $700,000; and
    Mr.&nbsp;McKinnon, 400,000 vested shares valued at $560,000.
    Messrs.&nbsp;Eichler&#146;s and McKinnon&#146;s shares vested in
    October 2003.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OPTION GRANTS IN LAST FISCAL YEAR</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth information concerning the stock
option grants made to each of the Named Executive Officers
during the 2004 fiscal year. No stock appreciation rights were
granted to any of the Named Executive Officers during the 2004
fiscal year.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Individual Grants</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total Options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Granted to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise or</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Employees in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Base Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expiration</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Granted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fiscal 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Date</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Edward L. Masry</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>03/02/09</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Edward L. Masry</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27.1%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>03/02/14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eugene E. Eichler</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.4%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>03/02/14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eugene E. Eichler</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21.7%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>03/02/14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce H. McKinnon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.4%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>03/02/14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce H. McKinnon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.3%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>03/02/14</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>AND YEAR-END OPTION VALUES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No options were exercised by any of the Named Executive Officers
during the 2004 fiscal year. No stock appreciation rights were
exercised by any of the Named Executive Officers during the 2004
fiscal year. The following table sets forth the number of shares
of our common stock subject to exercisable and unexercisable
stock options which the Named Executive Officers held at the end
of the 2004 fiscal year.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="27%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Number of Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Underlying Unexercised</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Options at</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Value of Unexercised</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Value</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Fiscal Year-End (#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>In-the-Money Options ($)(1)</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Acquired on</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Realized</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise (#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unexercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unexercisable</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Edward L. Masry</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>328,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>115,236</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eugene E. Eichler</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>286,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>105,738</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bruce H. McKinnon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>236,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>80,538</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Market value of our common stock at fiscal year-end minus the
    exercise price. The market value of our common stock on
    December&nbsp;31, 2004 was $1.40&nbsp;per share.</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EQUITY COMPENSATION PLAN INFORMATION FOR 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth information regarding outstanding
options and shares reserved for future issuance under our equity
compensation plans as of December&nbsp;31, 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of Securities</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Remaining Available</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>for Future Issuance</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Under Equity</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>to be Issued upon</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted-Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation Plans</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise Price of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Excluding Securities</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Outstanding Options,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Outstanding Options,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Reflected in the</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Plan Category</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Warrants and Rights</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Warrants and Rights</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>First Column)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity compensation plans approved by security holders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,172,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>327,348</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity compensation plans not approved by security holders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="white">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,422,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">16

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EMPLOYMENT AGREEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Agreement with Edward L. Masry.</I> On December&nbsp;1, 2003,
the Company entered into an employment agreement with Edward L.
Masry, pursuant to which he serves as our Chief Executive
Officer. The initial term of the agreement expires on
December&nbsp;31, 2007 and renews automatically for additional
one-year terms unless either party has given notice of
non-extension prior to the end of a term. The agreement provides
for a base compensation of $1&nbsp;per year. Mr.&nbsp;Masry is
eligible to participate in the Company&#146;s incentive and
benefit plans, including eligibility to receive grants of stock
options under the 2004 Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Masry&#146;s employment is terminated by us without
cause or as a result of his disability or death, he or his
estate, as the case may be, will be entitled to receive an
amount equal to the greater of the aggregate bonus(es), if any,
paid to him with respect to one of the two years immediately
preceding the year in which the termination occurs. In addition,
Mr.&nbsp;Masry and his dependents will be entitled to continue
to participate at the same levels in the Company&#146;s benefit
plans for a period of one year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Masry&#146;s employment is terminated by him for
good reason or as a result of a change of control, he will be
entitled to receive all accrued salary, bonus and benefits for a
period of three years from the date of termination. If
Mr.&nbsp;Masry&#146;s employment is terminated by us for cause
or by Mr.&nbsp;Masry without good reason, he will only be
entitled to receive accrued salary and benefits through the date
of termination. The agreement also contains standard
confidentiality and non-solicitation provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Agreement with Eugene E. Eichler.</I> On December&nbsp;1,
2003, the Company entered into an employment agreement with
Eugene E. Eichler, pursuant to which he originally served as our
Chief Operating Officer. Since March&nbsp;2, 2004,
Mr.&nbsp;Eichler has served as our President and Chief Financial
Officer and his employment agreement was amended accordingly.
The initial term of the agreement expires on December&nbsp;31,
2007 and renews automatically for additional one-year terms
unless either party has given notice of non-extension prior to
the end of a term. Under the agreement, as amended,
Mr.&nbsp;Eichler was paid base compensation of $192,000&nbsp;per
annum through March&nbsp;1, 2004 and $240,000&nbsp;per annum
effective March&nbsp;2, 2004. The base compensation is
reviewable by the Board in subsequent years of the term.
Mr.&nbsp;Eichler is also eligible to participate in the
Company&#146;s incentive and benefit plans, including
eligibility to receive grants of stock options under the 2004
Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Eichler&#146;s employment is terminated by us
without cause or as a result of his disability or death, he or
his estate, as the case may be, will be entitled to receive an
amount equal to the greater of (i)&nbsp;his highest base
compensation paid to him with respect to one of the two years
immediately preceding the year in which the termination occurs
or (ii)&nbsp;his base compensation in effect immediately prior
to the date of termination, for a period of one year beginning
on the date of termination. In addition, he will be entitled to
receive an amount equal to the greater of the aggregate
bonus(es), if any, paid to him with respect to one of the two
years immediately preceding the year in which the termination
occurs. Mr.&nbsp;Eichler and his dependents will be entitled to
continue to participate at the same levels in the Company&#146;s
benefit plans for a period of one year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Eichler&#146;s employment is terminated by him for
good reason or as a result of a change of control, he will be
entitled to receive all accrued salary, bonus and benefits for a
period of three years from the date of termination. If
Mr.&nbsp;Eichler&#146;s employment is terminated by us for cause
or by Mr.&nbsp;Eichler without good reason, he will only be
entitled to receive accrued salary and benefits through the date
of termination. The agreement also contains standard
confidentiality and non-solicitation provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Agreement with Bruce H. McKinnon.</I> On December&nbsp;1,
2003, the Company entered into an employment agreement with
Bruce H. McKinnon, pursuant to which he originally served as our
Executive Vice President of Business Development. Since
March&nbsp;2, 2004, Mr.&nbsp;McKinnon has served as our Chief
Operating Officer and his employment agreement was amended
accordingly. The initial term of the agreement expires on
December&nbsp;31, 2007 and renews automatically for additional
one-year terms unless either party has given notice of
non-extension prior to the end of a term. Under the agreement,
as amended, Mr.&nbsp;McKinnon was paid base compensation of
$153,600&nbsp;per annum through March&nbsp;1, 2004 and
$192,000&nbsp;per annum effective March&nbsp;2, 2004. The base
compensation is reviewable by the Board in subsequent years of
the term. Mr.&nbsp;McKinnon is
</DIV>

<P align="center" style="font-size: 10pt;">17

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<DIV align="left" style="font-size: 10pt;">
also eligible to participate in the Company&#146;s incentive and
benefit plans, including eligibility to receive grants of stock
options under the 2004 Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;McKinnon&#146;s employment is terminated by us
without cause or as a result of his disability or death, he, or
his estate as the case may be, will be entitled to receive an
amount equal to the greater of (i)&nbsp;his highest base
compensation paid to him with respect to one of the two years
immediately preceding the year in which the termination occurs
or (ii)&nbsp;his base compensation in effect immediately prior
to the date of termination, for a period of one year beginning
on the date of termination. In addition, he will be entitled to
receive an amount equal to the greater of the aggregate
bonus(es), if any, paid to him with respect to one of the two
years immediately preceding the year in which the termination
occurs. Mr.&nbsp;McKinnon and his dependents will be entitled to
continue to participate at the same levels in the Company&#146;s
benefit plans for a period of one year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;McKinnon&#146;s employment is terminated by him for
good reason or as a result of a change of control, he will be
entitled to receive all accrued salary, bonus and benefits for a
period of three years from the date of termination. If
Mr.&nbsp;McKinnon&#146;s employment is terminated by us for
cause or by Mr.&nbsp;McKinnon without good reason, he will only
be entitled to receive accrued salary and benefits through the
date of termination. The agreement also contains standard
confidentiality and non-solicitation provisions.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2002, we entered into an agreement with Edward&nbsp;L.
Masry, our Chairman of the Board and Chief Executive Officer,
for the reimbursement of a $500,000 loan made to us by
Masry&nbsp;&#38; Vititoe, PC, in which Mr.&nbsp;Masry is a
shareholder. In June 2003, we repaid this loan in full by
issuing 2,000,000 shares of our common stock at a price per
share of $0.25 and warrants to purchase 2,000,000 shares of our
common stock at an exercise price of $0.50 per share,
exercisable for a five-year period. In April 2004, we issued
60,000 shares of our common stock in consideration of the
cancellation of a loan in the amount of $15,000 made to us by
Joette Masry, the wife of Edward&nbsp;L. Masry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2003, we entered into a lease agreement with
KZ&nbsp;Golf, Inc. to lease office space for our primary
administrative facility. Jennifer J. King, the wife of Bruce H.
McKinnon, our Chief Operating Officer and one of our directors,
is the indirect principal stockholder of KZ&nbsp;Golf, Inc.
Through May&nbsp;31, 2004, we paid rent in the amount of
$2,000&nbsp;per month for approximately 1,000&nbsp;square feet.
Effective June&nbsp;1, 2004, we amended the lease to add
approximately 225&nbsp;square feet of office space and to have
provided expanded comprehensive services, including reception,
parking and conference facilities, for a total rent of
$3,400&nbsp;per month. The lease, as amended, is renewable, at
our option, for an additional two-year term at $3,760&nbsp;per
month.
</DIV>

<P align="center" style="font-size: 10pt;">18

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMPENSATION COMMITTEE REPORT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following Report of the Compensation Committee and the
Performance Graph that follows do not constitute soliciting
material and should not be deemed filed or incorporated by
reference into any of our other filings under the Securities Act
of 1933, as amended (the &#147;Securities Act&#148;), or the
Exchange Act, except to the extent that we specifically
incorporate this report or the performance graph by reference
therein.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Compensation Committee has furnished this report on
executive compensation for the 2004 fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Compensation Committee administers the Company&#146;s
executive compensation program. The Compensation Committee has
the authority to review and determine the salaries and bonuses
of the executive officers of the Company, including the Chief
Executive Officer and the other executive officers named in the
Summary Compensation Table (the &#147;Named Executive
Officers&#148;) appearing elsewhere in this proxy statement, and
to establish the general compensation policies for such
individuals. The Compensation Committee also has the sole and
exclusive authority to make discretionary option grants to all
of the Company&#146;s employees under the Company&#146;s 2004
Stock Option Plan (the &#147;2004 Plan&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Compensation Committee operates under a written charter. The
charter reflects these various responsibilities, and the
Committee is charged with periodically reviewing the charter. In
addition, the Committee has the authority to engage the services
of outside advisors, experts and others, including independent
compensation consultants who do not advise the Company, to
assist the Committee. The Compensation Committee met two times
during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Compensation Committee believes that the compensation
programs for the Company&#146;s executive officers should
reflect the Company&#146;s performance and the value created for
the Company&#146;s stockholders. In addition, the compensation
programs should support the short-term and long-term strategic
goals and values of the Company, reward individual contribution
to the Company&#146;s success and align the interests of the
Company&#146;s officers with the interests of its stockholders.
The committee believes that the Company&#146;s success depends
upon its ability to attract and retain qualified executives
through the competitive compensation packages it offers to such
individuals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The principal factors that were taken into account in
establishing each executive officer&#146;s compensation package
for the 2004 fiscal year are described below. However, the
Compensation Committee may in its discretion apply entirely
different factors, such as different measures of financial
performance, for future fiscal years. Moreover, all of the
Company&#146;s Named Executive Officers have entered into
employment agreements with the Company and many components of
each such person&#146;s compensation is set by such agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Chief Executive Officer Compensation.</I> We entered into an
employment agreement with Edward L. Masry in December 2003,
under which his base compensation will be $1&nbsp;per year for
each year of the term of the agreement, commencing in 2004.
Mr.&nbsp;Masry served as our President until March&nbsp;1, 2004
and as our Chief Executive Officer for all of 2004.
Mr.&nbsp;Masry&#146;s principal compensation came from his law
firm, Masry&nbsp;&#38; Vititoe PC. Because of the terms of
Mr.&nbsp;Masry&#146;s employment agreement, the Compensation
Committee did not consider specific factors in connection with
Mr.&nbsp;Masry&#146;s compensation. Because the Company is in
the development stage, the Compensation Committee did not award
a bonus to Mr.&nbsp;Masry for 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Executive Officer Compensation.</I> On December&nbsp;1,
2003, the Company entered into an employment agreement with
Eugene E. Eichler, pursuant to which he originally served as our
Chief Operating Officer. Since March&nbsp;2, 2004,
Mr.&nbsp;Eichler has served as our President and Chief Financial
Officer and his employment agreement was amended accordingly.
The initial term of the agreement expires on December&nbsp;31,
2007 and renews automatically for additional one-year terms
unless either party has given notice of non-extension prior to
the end of a term. Under the agreement, as amended,
Mr.&nbsp;Eichler was paid base compensation of $192,000&nbsp;per
annum through March&nbsp;1, 2004 and $240,000&nbsp;per annum
effective March&nbsp;2, 2004.
</DIV>

<P align="center" style="font-size: 10pt;">19

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<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;1, 2003, the Company entered into an employment
agreement with Bruce H. McKinnon, pursuant to which he
originally served as our Executive Vice President of Business
Development. Since March&nbsp;2, 2004, Mr.&nbsp;McKinnon has
served as our Chief Operating Officer and his employment
agreement was amended accordingly. The initial term of the
agreement expires on December&nbsp;31, 2007 and renews
automatically for additional one-year terms unless either party
has given notice of non-extension prior to the end of a term.
Under the agreement, as amended, Mr.&nbsp;McKinnon was paid base
compensation of $153,600&nbsp;per annum through March&nbsp;1,
2004 and $$192,000&nbsp;per annum effective March&nbsp;2, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;1, 2004, the Company entered into an
employment agreement with Erin Brockovich, pursuant to which she
serves as our Vice President of Environmental Affairs. The
initial term of the agreement expires on September&nbsp;30, 2005
and renews automatically for additional one-year terms unless
either party has given notice of non-extension prior to the end
of a term. The agreement provides for base compensation of
$60,000 per annum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our other executive officers were paid relatively nominal
amounts of base compensation in 2004, reflecting the development
stage of the Company. Because the Company is in the development
stage, the Compensation Committee also did not award a bonus to
any of our executive officers for 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Equity-Based Compensation.</I> The Committee believes in
linking long-term incentives to an increase in stock value.
Accordingly, it awards stock options under the 2004 Plan with an
exercise price equal to the fair market value of the underlying
stock on the date of grant that vest and become exercisable over
time. The Committee believes that these options encourage
employees to continue to use their best efforts and to remain in
the Company&#146;s employ. Options granted to executive officers
under the 2004 Plan generally vest and become exercisable in
annual 25% increments over a four-year period after grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Committee relies substantially on management of the Company
to make specific recommendations regarding which individuals
should receive option grants and the amounts of such grants. In
2004, the Committee granted 922,652 options to all employees,
with 852,652, or 92.4%, of such amount being granted to Named
Executive Officers. The Named Executive Officers were
individually awarded the number of stock options shown in the
table headed &#147;Option Grants in Last Fiscal Year&#148;
appearing elsewhere in this proxy statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company granted stock options to executive officers with a
cumulative option price of up to $100,000 as incentive stock
options and the remainder as non-qualified stock options, both
with an exercise price equal to the fair market value of the
Company&#146;s common stock on the date of grant. Accordingly,
those stock options will have value only if the market price of
the Company&#146;s common stock increases after that date. In
determining the size of stock option grants to executive
officers, the Committee bases its decisions on such
considerations as similar awards to individuals holding
comparable positions in our comparative groups, company
performance and individual performance, as well as the
allocation of overall share usage attributed to executive
officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Compliance with Code Section&nbsp;162(m).</I>
Section&nbsp;162(m) of the Code disallows a tax deduction to
publicly-held companies for compensation paid to certain of
their executive officers, to the extent that compensation
exceeds $1&nbsp;million per covered officer in any fiscal year.
The limitation applies only to compensation which is not
considered to be performance based. Non-performance based
compensation paid to the Company&#146;s executive officers for
the 2003 fiscal year did not exceed the $1&nbsp;million limit
per officer, and the Compensation Committee does not anticipate
that the non-performance based compensation to be paid to the
Company&#146;s executive officers for the 2004 fiscal year will
exceed that limit. Because it is unlikely that the cash
compensation payable to any of the Company&#146;s executive
officers in the foreseeable future will approach the
$1&nbsp;million limit, the Compensation Committee has decided at
this time not to take any action to limit or restructure the
elements of cash compensation payable to the Company&#146;s
executive officers. The Compensation Committee will reconsider
this decision should the individual cash non-performance based
compensation of any executive officer ever approach the
$1&nbsp;million level.
</DIV>

<P align="center" style="font-size: 10pt;">20

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<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board did not modify any action or recommendation made by
the Compensation Committee with respect to executive
compensation for the 2004 fiscal year. It is the opinion of the
Compensation Committee that the executive compensation policies
and plans provide the necessary total remuneration program to
properly align the Company&#146;s performance and the interests
of the Company&#146;s stockholders through the use of
competitive and equitable executive compensation in a balanced
and reasonable manner, for both the short and long term.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Respectfully submitted by:</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Joseph Helleis <I>(Chair)</I></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    John Brown</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    John F. Price</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">21

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>AUDIT COMMITTEE REPORT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following report of the Audit Committee does not
constitute soliciting material and should not be deemed filed or
incorporated by reference into any of our other filings under
the Securities Act or the Exchange Act, except to the extent
that we specifically incorporate this report by reference
therein, and shall not be deemed to be soliciting material or
otherwise deemed filed under either such Act.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee is currently composed of four directors, two
of whom are independent. The duties and responsibilities of a
member of the Audit Committee are in addition to his duties as a
member of the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee operates under a written charter, which is
available on the Company&#146;s website. The Board and the Audit
Committee believe that the Audit Committee charter complies with
the current standards set forth in SEC regulations. There may be
further action by the SEC during the current year on several
matters that affect all audit committees. The Board and the
Audit Committee continue to follow closely further developments
by the SEC in the area of the functions of audit committees,
particularly as it relates to internal controls for
non-accelerated filers, and will make additional changes to the
Audit Committee charter and the policies of the Audit Committee
as required or advisable as a result of these new rules and
regulations. The Audit Committee met four times during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee&#146;s primary duties and responsibilities
are to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    engage the Company&#146;s independent auditor;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    monitor the independent auditor&#146;s independence,
    qualifications and performance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pre-approve all audit and non-audit services;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    monitor the integrity of the Company&#146;s financial reporting
    process and internal controls system;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    provide an open avenue of communication among the independent
    auditor, financial and senior management of the Company and the
    Board;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    monitor the Company&#146;s compliance with legal and regulatory
    requirements.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management is responsible for the Company&#146;s internal
controls and the financial reporting process. The Company&#146;s
independent auditor is responsible for performing an independent
audit of the Company&#146;s financial statements in accordance
with the standards of the Public Company Accounting Oversight
Board and issuing a report thereon. The Audit Committee&#146;s
responsibility is to monitor and oversee these processes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is planning to form an internal management group,
reporting to the Chief Executive Officer and the Audit
Committee, that is charged with guiding the Company in meeting
the various requirements of Section&nbsp;404 of the
Sarbanes-Oxley Act of 2002. The Audit Committee has begun to
implement procedures to ensure that during the course of each
fiscal year it devotes the attention that it deems necessary or
appropriate to each of the matters assigned to it under its
charter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In overseeing the preparation of the Company&#146;s financial
statements, the Audit Committee held meetings with the
Company&#146;s independent auditors, both in the presence of
management and privately, to discuss the overall scope and plans
for their audit, review and discuss all financial statements
prior to their issuance, and discuss significant accounting
issues. Management advised the Audit Committee that all
financial statements were prepared in accordance with accounting
principles generally accepted in the United States of America,
and the Audit Committee discussed the statements with both
management and the Company&#146;s independent auditors. In
accordance with Section&nbsp;204 of the Sarbanes-Oxley Act and
the Statement on Auditing Standards (&#147;SAS&#148;)
No.&nbsp;61 (Communication With Audit Committees) as amended by
SAS No.&nbsp;90 (Audit Committee Communications), the Audit
Committee has discussed with the Company&#146;s independent
auditors all matters required under the Sarbanes-Oxley Act and
the foregoing standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With respect to the Company&#146;s independent auditors, the
Audit Committee, among other things, discussed with
Weinberg&nbsp;&#38; Co., P.A., matters relating to its
independence, including the written disclosures made to the
Audit Committee as required by the Independence Standards Board
Standard No.&nbsp;1
</DIV>

<P align="center" style="font-size: 10pt;">22

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<DIV align="left" style="font-size: 10pt;">
(Independence Discussions with Audit Committees). The Audit
Committee also reviewed and approved the audit and non-audit
fees of that firm.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On the basis of these reviews and discussions, the Audit
Committee (i)&nbsp;appointed Weinberg&nbsp;&#38; Co., P.A. as
the independent registered public accounting firm for the 2005
fiscal year and (ii)&nbsp;recommended to the Board that the
Board approve the inclusion of the Company&#146;s audited
financial statements in the&nbsp;10-KSB for filing with the SEC.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Respectfully submitted</TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Joseph Helleis <I>(Chair)</I></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Eugene E. Eichler</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Bruce H. McKinnon</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    John F. Price</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">23

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SECTION&nbsp;16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;16(a) of the Exchange Act requires our directors,
executive officers and holders of more than 10% of a registered
class of our equity securities to file with the SEC initial
reports of ownership and reports of changes in ownership of our
common stock and our other equity securities. Directors,
executive officers and greater than 10% stockholders are
required by SEC regulation to furnish us with copies of all
Section&nbsp;16(a) reports they file. Based solely on our review
of the copies of such forms received by us, or written
representation from certain reporting persons that no
Form&nbsp;5s were required for those persons, we believe that
all reporting requirements under Section&nbsp;16(a) for the 2004
fiscal year were met in a timely manner by our directors,
executive officers and greater than 10% beneficial owners,
except as follows. Mr.&nbsp;Masry did not make two filings on
Form&nbsp;4 with respect to (i)&nbsp;the March 2004 grant of
options to purchase 328,740&nbsp;shares of our common stock and
(ii)&nbsp;the acquisition by his wife of 60,000&nbsp;shares of
our common stock in April of 2004. Mr.&nbsp;Eichler did not make
a filing on Form&nbsp;4 with respect to the March 2004 grant of
options to purchase 286,956&nbsp;shares of our common stock.
Mr.&nbsp;McKinnon did not make a filing on Form&nbsp;4 with
respect to the March 2004 grant of options to purchase
236,956&nbsp;shares of our common stock. Mr.&nbsp;Brown did not
make a filing on Form&nbsp;4 with respect to the March 2004
grant of options to purchase 50,000&nbsp;shares of our common
stock. Mr.&nbsp;Helleis did not make a filing on Form&nbsp;4
with respect to the March 2004 grant of options to purchase
50,000&nbsp;shares of our common stock. Mr.&nbsp;Price did not
make a filing on Form&nbsp;4 with respect to the March 2004
grant of options to purchase 50,000&nbsp;shares of our common
stock. Mr.&nbsp;Sylk did not make a filing on Form&nbsp;4 with
respect to the March 2004 grant of options to purchase
50,000&nbsp;shares of our common stock. Mr.&nbsp;Shelton did not
make a filing on Form&nbsp;4 with respect to the March 2004
grant of options to purchase 50,000&nbsp;shares of our common
stock. Ms.&nbsp;Holder did not make a filing on Form&nbsp;4 with
respect to the March 2004 grant of options to purchase
10,000&nbsp;shares of our common stock. Ms.&nbsp;Brockovich did
not make a filing on Form&nbsp;3 at the time of her appointment
in September 2004 as our Vice President of Environmental
Affairs. Each of such officers and directors has since filed one
Form&nbsp;5 reporting their respective transactions described
above.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>STOCKHOLDER PROPOSALS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From time to time stockholders present proposals that may be
proper subjects for inclusion in a proxy statement and for
consideration at an annual meeting. Under the rules of the SEC,
to be included in the proxy statement for our 2006 annual
meeting of stockholders, proposals must be received by us no
later than January&nbsp;10, 2006.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ANNUAL REPORT ON FORM 10-KSB</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We filed our Annual Report on Form&nbsp;10-KSB with the SEC on
April&nbsp;27, 2005. A copy of the 10-KSB, without exhibits, has
been mailed to all stockholders along with this proxy statement.
Stockholders may obtain additional copies of the 10-KSB and the
exhibits thereto, without charge, by writing to the Corporate
Secretary at our principal executive offices at 5125 Lankershim
Boulevard, North Hollywood, California 91601.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OTHER MATTERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management does not know of any matters to be presented at the
2005 Annual Meeting other than those set forth herein and in the
Notice accompanying this proxy statement. If a stockholder vote
is necessary to transact any other business at the 2005 Annual
Meeting, the proxyholders intend to vote their proxies in
accordance with their best judgment related to such business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
It is important that your shares be represented at the 2005
Annual Meeting, regardless of the number of shares that you
hold. <B>YOU ARE, THEREFORE, URGED TO EXECUTE PROMPTLY AND
RETURN THE ACCOMPANYING PROXY IN THE ENVELOPE THAT HAS BEEN
ENCLOSED FOR YOUR</B>
</DIV>

<P align="center" style="font-size: 10pt;">24
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<DIV align="left" style="font-size: 10pt;">
<B>CONVENIENCE.</B> Stockholders who are present at the 2005
Annual Meeting may revoke their proxies and vote in person or,
if they prefer, may abstain from voting in person and allow
their proxies to be voted.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    By Order of the Board of Directors,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <IMG src="v07972dv0797200.gif" alt="(-s- Edward L. Masry)"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT style="font-variant:SMALL-CAPS">Edward L. Masry
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I>Chairman of the Board and <BR>
     Chief Executive Officer</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
April&nbsp;29, 2005
</DIV>

<DIV align="left" style="font-size: 10pt;">
North Hollywood, California
</DIV>

<P align="center" style="font-size: 10pt;">25

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SAVE THE WORLD AIR, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2005 Annual Meeting of Stockholders</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>May&nbsp;24, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>10:00 am</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Sheraton Universal Hotel</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>333 Universal Hollywood Drive</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Universal City, CA 91608</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Phone: (818)&nbsp;980-1212</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Directions from Los Angeles International Airport (LAX):</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>1.&nbsp;Merge onto I-405 N.</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(13.8 mi)</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>2.&nbsp;Merge onto US-101 S toward LOS ANGELES.</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7.2 mi)</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>3.&nbsp;Take the exit toward LANKERSHIM/ UNIVERSAL CITY.</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.1 mi)</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>4.&nbsp;Turn RIGHT onto CAHUENGA BLVD.</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.2 mi)</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>5.&nbsp;Turn RIGHT onto LANKERSHIM BLVD.</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.1 mi)</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>6.&nbsp;Turn RIGHT onto UNIVERSAL HOLLYWOOD DR.</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.2 mi)</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>7.&nbsp;End at 333 Universal Hollywood Drive.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Directions from Downtown Los Angeles:</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>1.&nbsp;Merge onto CA-110 N toward PASADENA.</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.9 mi)</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>2.&nbsp;Merge onto US-101 N toward HOLLYWOOD.</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8.8 mi)</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>3.&nbsp;Take the LANKERSHIM BLVD exit toward UNIVERSAL
    CITY.</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.2 mi)</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>4.&nbsp;Take RIGHT onto LANKERSHIM BLVD.</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.1 mi)</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>5.&nbsp;Turn RIGHT onto UNIVERSAL HOLLYWOOD DR.</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.2 mi)</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>6.&nbsp;End at 333 Universal Hollywood Drive.</B></TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">26
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><DIV style="border-bottom: 1px dashed #000000; font-size: 1px">&nbsp;</DIV>

<DIV style="position: relative; float: left; width: 20%">

</DIV>

<DIV style="position: relative; float: right; width: 80%; border-left: 1px dashed #000000">

<BR><P align="center" style="margin-left:6%; font-size: 14pt"><B>SAVE THE WORLD AIR, INC.</B>

<P align="center" style="margin-left:6%; font-size: 10pt"><B>2005 ANNUAL MEETING OF STOCKHOLDERS<BR>
May&nbsp;24, 2005</B>

<P align="left" style="margin-left:6%; font-size: 10pt">This proxy is solicited by the Board of Directors for use at the 2005 Annual Meeting of
Stockholders of Save the World Air, Inc., (the &#147;Company&#148;) to be held at the Sheraton Universal
Hotel, 333 Universal Hollywood Drive, Universal City, California, at 10:00&nbsp;A.M. on May&nbsp;24, 2005.

<P align="left" style="margin-left:6%; font-size: 10pt">By signing the proxy, you revoke all prior proxies, acknowledge receipt of the Notice of 2005
Annual Meeting of Stockholders and the Proxy Statement, and appoint Edward L. Masry, Eugene E.
Eichler and Bruce H. McKinnon, and each of them, with full power of substitution, to vote all your
shares of common stock of Save the World Air, Inc. which you are entitled to vote, on the matters
shown on the reverse side and any other matters which may come before the Annual Meeting and all
adjournments and postponements thereof.

<P align="left" style="margin-left:6%; font-size: 10pt">Whether or not a choice is specified, this proxy, when properly executed, will be voted in the
discretion of the proxy holders upon such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.

<P align="left" style="margin-left:6%; font-size: 10pt">The shares of stock you hold in your account will be voted as you specify on the reverse side.

<P align="left" style="margin-left:6%; font-size: 10pt"><B>THE COMPANY&#146;S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE DIRECTORS LISTED HEREON AND VOTES FOR EACH OF THE LISTED PROPOSALS. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR
THE ELECTION OF THE DIRECTORS LISTED HEREON AND FOR EACH OF PROPOSALS 2 AND 3.</B>

<P align="center" style="margin-left:6%; font-size: 10pt"><B>SEE REVERSE FOR VOTING INSTRUCTIONS.</B>

</DIV>
<BR clear="all"><BR>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><FONT face="Webdings">&#054;</FONT> DETACH PROXY CARD HERE <FONT face="Webdings">&#054;</FONT>

<DIV align="center" style="font-size: 10pt"><DIV style="border-bottom: 1px dashed #000000; font-size: 1px">&nbsp;</DIV></DIV>

<DIV style="position: relative; float: left; width: 80%; border-right: 1px dashed #000000; padding: 10px">

<P align="left" style="font-size: 8pt"><B>Please mark, sign and date your proxy card and return it today in the postage-paid envelope provided to: Nevada Agency and Trust Company,
50 West Liberty Street, Suite&nbsp;880, Reno, Nevada 89501, Attention: Proxy Department.</B>


<P><DIV style="position: relative; float: left; width: 56%">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 8pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>1.</B>&nbsp;&nbsp;</TD>
    <TD><B>The Board of Directors recommends a vote FOR Items 1, 2 and 3.</B></TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 8pt">ELECTION OF DIRECTORS</DIV>


<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><FONT style="font-size: 18pt" face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vote <B>FOR </B>all nominees listed</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-size: 18pt" face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vote <B>WITHHELD </B>from all nominees</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" nowrap>01 Edward L. Masry</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>02 Eugene E. Eichler</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>03 Bruce H. McKinnon</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>04 Robert F. Sylk</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" nowrap>05 John Brown</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>06 John F. Price</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>07 Joseph Helleis</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 8pt"><B>(to withhold authority to vote for any nominee, strike a line through the nominee&#146;s name above)</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 8pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.&nbsp;&nbsp;</TD>
    <TD>APPROVAL of the amendment of the 2004 Stock Option Plan</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><FONT style="font-size: 18pt" face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="middle"><B>FOR</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-size: 18pt" face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="middle"><B>AGAINST</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-size: 18pt" face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="middle"><B>ABSTAIN</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

</DIV>
<DIV style="position: relative; float: right; width: 36%">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 8pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.&nbsp;&nbsp;</TD>
    <TD>RATIFICATION OF APPOINTMENT OF WEINBERG &#038; CO., P.A. as independent auditors of Save the World Air, Inc. for the fiscal year ending December&nbsp;31, 2005</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><FONT style="font-size: 18pt" face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="middle"><B>FOR</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-size: 18pt" face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="middle"><B>AGAINST</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-size: 18pt" face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="middle"><B>ABSTAIN</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="100%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN,
WILL BE VOTED FOR THE ELECTION OF EACH OF THE DIRECTORS LISTED HEREON, IN FAVOR OF
PROPOSALS 2 AND 3, AND IN THE DISCRETION OF THE PROXY HOLDERS ON ALL OTHER MATTERS
PROPERLY BROUGHT BEFORE THE MEETING.</B></DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="center">Signature<BR></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="center">Signature (if joint or common ownership)<BR></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Please sign exactly as your name(s) appears on Proxy. If held in joint tenancy, all persons must sign.
Trustees, administrators, etc., should include title and authority. Corporations should provide full
name of corporation and title of authorized officer signing the proxy</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">For address change: Mark Box and indicate changes below:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-size: 18pt" face="Wingdings">&#111;</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

</DIV>
<BR clear="all"><BR>
</DIV>

<DIV style="position: relative; float: left; width: 20%">

<P align="center" style="font-size: 10pt"><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><IMG src="v07972dv0797201.gif" alt="(PLEASE DETACH HERE)">

<TABLE width="90%">
<TR><TD style="font-size: 1pt; color: #FFFFFF"><B>Please Detach Here</B></TD>
</TR>
</TABLE>

<TABLE width="90%">
<TR><TD style="font-size: 1pt; color: #FFFFFF"><B>You Must Detach This Portion of the Proxy Card Before Returning it in the Enclosed Envelope</B></TD>
</TR>
</TABLE>

</DIV>
<BR clear="all"><BR>

<P align="center" style="font-size: 10pt">&nbsp;
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