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<SEC-DOCUMENT>0000950129-06-003471.txt : 20060331
<SEC-HEADER>0000950129-06-003471.hdr.sgml : 20060331
<ACCEPTANCE-DATETIME>20060331144217
ACCESSION NUMBER:		0000950129-06-003471
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		11
CONFORMED PERIOD OF REPORT:	20051231
FILED AS OF DATE:		20060331
DATE AS OF CHANGE:		20060331

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:		10KSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-29185
		FILM NUMBER:		06727961

	BUSINESS ADDRESS:	
		STREET 1:		5125 LANKERSHIM BOULEVARD
		CITY:			NORTH HOLLYWOOD
		STATE:			CA
		ZIP:			91601
		BUSINESS PHONE:		818-487-8000

	MAIL ADDRESS:	
		STREET 1:		5125 LANKERSHIM BOULEVARD
		CITY:			NORTH HOLLYWOOD
		STATE:			CA
		ZIP:			91601
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>v18588e10ksb.htm
<DESCRIPTION>SAVE THE WORLD AIR, INC. - 12/31/2005
<TEXT>
<HTML>
<HEAD>
<TITLE>e10ksb</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 6pt"><B>Form&nbsp;10-KSB</B>
</DIV>

<DIV align="center" style="margin-top: 6pt">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 1pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the fiscal year ended December&nbsp;31, 2005.</B>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>or</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the transition period from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission File Number 0-29185</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>Save the World Air, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><I>(Exact name of registrant as specified in its charter)</I></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Nevada</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>52-2088326</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><I>(State or other jurisdiction of</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><I>(I.R.S. Employer</I></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><I>incorporation or organization)</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><I>Identification No.)</I></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>5125 Lankershim Boulevard<BR>
North Hollywood, California 91601</B><BR>
<I>(Address, including zip code, of principal executive offices)</I><BR>
<B>(818)&nbsp;487-8000</B><BR>
<I>(Registrant&#146;s telephone number, including area code)</I></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Securities registered pursuant to Section&nbsp;12(b) of the Exchange Act: None.<BR>
Securities registered pursuant to Section&nbsp;12(g) of the Exchange Act: Common Stock, $0.001 par value.</B></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes
<FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#111;</FONT>
</div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this report is an annual or transition report, indicate by check
mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#111;</FONT>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Check whether the Registrant (1)&nbsp;filed all reports required to be filed by Section&nbsp;13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for such shorter period that
the registrant was required to file such reports), and (2)&nbsp;has been subject to such filing
requirements for the past 90&nbsp;days. Yes
<FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Check if disclosure of delinquent filers in response to Item&nbsp;405 of Regulation&nbsp;S-B is not
contained in this form, and no disclosure will be contained, to the best of Registrant&#146;s knowledge,
in definitive proxy or information statements incorporated by reference in Part&nbsp;III of this Form
10-KSB or any amendment to this Form 10-KSB. <FONT face="Wingdings">&#111;</FONT>
</DIV>
 <DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See
definition of &#147;accelerated filer and large accelerated
filer&#148; in Rule 12b-2 of the Exchange Act. (Check one):<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Large accelerated filer <FONT face="Wingdings">&#111;</FONT>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated filer <FONT face="Wingdings">&#111;</FONT>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-accelerated filer <FONT face="Wingdings">&#111;</FONT>
</div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of
the Exchange Act). Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Registrant&#146;s revenues for its most recent fiscal year: None.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate market value of voting and non-voting common equity held by non-affiliates of
the Registrant was approximately $104,045,355 as of March&nbsp;10, 2006, based upon the closing price on
the OTC Bulletin Board reported for such date. This calculation does not reflect a determination that
certain persons are affiliates of the Registrant for any other purpose.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of shares of the Registrant&#146;s Common Stock outstanding as of March&nbsp;10, 2006 was
31,387,418 shares.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DOCUMENTS INCORPORATED BY REFERENCE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Portions of the Registrant&#146;s Proxy Statement for its 2006 Annual Meeting of Stockholders (the
&#147;Proxy Statement&#148;), to be filed with the Securities and Exchange Commission, are incorporated by
reference into Part&nbsp;III of this Form 10-KSB.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Transitional Small Business Disclosure Format (Check one): Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>






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


<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SAVE THE WORLD AIR, INC.<BR>
FORM 10-KSB<BR>
INDEX</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><A href="#101"><B>PART I</B></A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#102">Item&nbsp;1
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#102">Business</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#103">Item&nbsp;2
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#103">Properties</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">14</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#104">Item&nbsp;3
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#104">Legal Proceedings</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">15</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#105">Item&nbsp;4
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#105">Submission of Matters to a Vote of Security Holders</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><A href="#106"><B>PART II</B></A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#107">Item&nbsp;5
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#107">Market for Common Equity and Related Stockholder Matters</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">18</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#108">Item&nbsp;6
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#108">Management&#146;s Discussion and Analysis or Plan of Operation</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">19</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#109">Item&nbsp;7
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#109">Financial Statements</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">23</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#110">Item&nbsp;8
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#110">Changes in and Disagreements With Accountants on Accounting and Financial Disclosure</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">23</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#111">Item&nbsp;8A
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#111">Controls and Procedures</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">23</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#112">Item&nbsp;8B
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#112">Other Information</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">23</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><A href="#113"><B>PART III</B></A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#114">Item&nbsp;9
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#114">Directors and Executive Officers of Registrant</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">24</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#115">Item&nbsp;10
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#115">Executive Compensation</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">24</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#116">Item&nbsp;11
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#116">Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">24</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#117">Item&nbsp;12
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#117">Certain Relationships and Related Transactions</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">24</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#118">Item&nbsp;13
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#118">Exhibits</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">24</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#119">Item&nbsp;14
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#119">Principal Accountant Fees and Services</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">26</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#120">SIGNATURES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">27</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v18588exv10w3.htm">Exhibit 10.3</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v18588exv10w4.htm">Exhibit 10.4</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v18588exv10w42.htm">Exhibit 10.42</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v18588exv10w45.htm">Exhibit 10.45</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v18588exv10w46.htm">Exhibit 10.46</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v18588exv23w1.htm">Exhibit 23.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v18588exv31w1.htm">Exhibit 31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v18588exv31w2.htm">Exhibit 31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="v18588exv32w1.htm">Exhibit 32.1</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp;i&nbsp;
</DIV>



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


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Forward-Looking Statements</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Annual Report on Form 10-KSB contains forward-looking statements. These forward-looking
statements include predictions regarding our future:
</DIV>

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

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>revenues and profits;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>customers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>research and development expenses and efforts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>scientific test results;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>sales and marketing expenses and efforts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>liquidity and sufficiency of existing cash;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>technology and products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the outcome of pending or threatened litigation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effect of recent accounting pronouncements on our financial
condition and results of operations.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You can identify these and other forward-looking statements by the use of words such as &#147;may,&#148;
&#147;will,&#148; &#147;expects,&#148; &#147;anticipates,&#148; &#147;believes,&#148; &#147;estimates,&#148;, &#147;continues,&#148; or the negative of such
terms, or other comparable terminology. Forward-looking statements also include the assumptions
underlying or relating to any of the foregoing statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our actual results could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth below under the heading &#147;Risk
Factors.&#148; All forward-looking statements included in this document are based on information
available to us on the date hereof. We assume no obligation to update any forward-looking
statements.
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1. </B><B><I>Business</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The discussion of our business is as of the date of filing this report, unless otherwise
indicated.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Overview</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a development stage company that is transitioning to operations. We have not yet
generated revenues. Much of our focus remains on research and development of our proprietary and
patented devices that are designed to reduce harmful emissions, and improve fuel efficiency and
overall performance on equipment and vehicles driven by internal combustion engines. Our devices
are called &#147;ZEFS&#148; and &#147;CAT-MATE.&#148; Historically, we have devoted the bulk of our efforts to the
completion of the design, the development of our production models and the promotion of our
products in the marketplace worldwide.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, we also began to focus on the initial marketing of our devices. We entered into
the first agreements for the distribution of our products in late 2005 and early 2006. We
anticipate that we will
begin delivering devices under these agreements commencing in the
second quarter of 2006 and we currently believe that we
will begin to generate revenue during the third quarter of 2006. In addition, we have
initiated marketing efforts
</DIV>


<P align="center" style="font-size: 10pt">1
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">to international governmental entities in cooperation with the United
Nations Environmental Programme (UNEP)&nbsp;and various original equipment manufacturers (OEMs), and the
aftermarket to sell or license our ZEFS and CAT-MATE devices and technology.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the past four years, we have been acquiring new technologies, developing products using
our technologies, conducting scientific tests regarding our technologies and prototype products,
and initiating sales and marketing efforts. We have taken actions within the U.S. and
internationally to secure our intellectual property rights to the ZEFS and CAT-MATE devices. In
late 2003, the Company acquired worldwide intellectual property and patent rights to technologies
which reduce carbon monoxide, hydrocarbon and oxides of nitrogen emissions in 2- and 4-stroke
motorcycles, fuel-injection engines, generators and small engines. We acquired the worldwide
manufacturing and marketing rights to the ZEFS device from its inventors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expenses to date have been funded through the sale of company stock and the issuance of debt.
We will need to raise additional capital during 2006 to fund our sales and marketing efforts,
continuing research and development, and certain other expenses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company was incorporated on February&nbsp;18, 1998, as a Nevada corporation under the name
Mandalay Capital Corporation. We changed our name to Save the World Air, Inc. on February&nbsp;11, 1999
following the acquisition of marketing and manufacturing rights of the ZEFS device. Our mailing
address and executive offices are located at 5125 Lankershim Boulevard, North Hollywood,
California, 91601. Our telephone number is (818)&nbsp;487-8000. Our corporate website is
www.savetheworldair.com. Information contained on the website is not deemed part of this Annual
Report.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Governmental Mandates to Reduce Air Pollution</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The incomplete and inefficient burning of fossil fuel in internal combustion engines results
in unburned gases, such as hydrocarbons and carbon monoxide being expelled as harmful emission as a
by-product of the engine&#146;s exhaust. These emissions have contributed to significant air pollution
and depletion of the ozone layer that protects the world&#146;s atmosphere from harmful ultraviolet
radiation. As a result, the world has experienced significant deterioration to its air quality
since the beginning of the 20th century and the problem has gotten progressively worse with each
passing year. Forecasts published by the World Resources Institute indicate that this trend will
continue to accelerate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Governments internationally recognize the serious effects caused by air pollution and have
enacted legislation to mandate that engine manufacturers be required to reduce exhaust emissions
caused by their products. As evidenced by the overwhelming participation in the establishment of
the Kyoto Accord, most nations are moving towards tighter emissions control. The EU requires all
member nations to adopt EURO3 emissions standards, and many Asian and Eastern European countries
have also announced gradual phase-in of this standard. The cost of adding emissions control devices
has always been a mitigating factor, shifting the cost burden to the consumer. In developing
nations, where incomes are extremely low, economics and the lack of government resources have
hampered progress. Nonetheless, we anticipate that the social and political realities of protecting
our environment may result in further government mandates that manufacturers adopt better cost
effective solutions, such as our ZEFS device, for reducing motor emissions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Business Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our Devices</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal business focus currently rests with development and distribution of devices
designed to solve the complex problems caused by pollution from motorcycles, automobiles and other
equipment driven by internal combustion engines and to improve the performance of those engines. We
have designed and tested multiple versions of the ZEFS and CAT-MATE devices for use on 2- and
4-stroke carbureted
and fuel injection gasoline engines and are currently in the process of adapting this technology to
work on engines that use diesel fuels.
</DIV>


<P align="center" style="font-size: 10pt">2
</DIV>

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ZEFS devices contain permanent rare-earth magnets, which produce a very strong magnetic field.
This field, when arranged in specific manner of shape and strength, causes a molecular change in
the fuel as it passes through the field. This in turn causes a drop in viscosity and surface
tension in the fuel allowing finer atomization, resulting in a more optimized mixture and therefore
more efficient combustion. Hence lower emissions, more horsepower and torque and improved fuel
economy. The scientific theory behind the technology is explained in detail in the draft final
report from the RAND Corporation, which oversaw our testing. ZEFS devices are easily fitted to
the base plates of carburetors and fuel injection systems; the devices are compact, there are no
moving parts. They are also inexpensive to
produce, extremely durable and unaffected by poor quality fuel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, manufacturers of vehicles, motorcycles, power sports equipment, boats and small
utility motors have had very few technological options to reduce emissions to the strictest levels
of current and future government standards. The approach used by engine manufacturers to address
this mandate has thus far generally taken the form of installing catalytic converters, which work
on the principle of super heating gases within the exhaust manifold after the damaging gases have
been created through internal combustion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These traditional devices are expensive, and sensitive to the poor quality and adulterated
fuel that is commonly found in developing nations. Bad fuel can permanently damage a catalytic
converter with the first tank full, whereas the ZEFS device is unaffected by the problem of bad
fuel. Catalytic converters also do not share the benefits of ZEFS technology of increased fuel
efficiency and performance. In fact, in many cases catalytic converters are detrimental to mileage
and power.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CAT-MATE devices enhance the function of common catalytic converters, when incorporated into
their design. The device consists of a series of specifically shaped steel rings that, when placed
in line with the exhaust flow before and/or after the catalytic substrate, facilitates acceleration
in heat rise in the converter. This allows the converter to ignite quicker and easier on small
displacement motors, which build heat much slower than do large displacement models. CAT-MATE also
helps retain heat in the converter, allowing it to stay lit under idling and low RPM operation.
Small motors, especially 2-stroke versions, are subject to low exhaust velocity and heat during
idling, which causes most converters to extinguish and then become fouled with oil and contaminants
eventually rendering them difficult to relight or useless.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CAT-MATE devices are not only designed to perform the functions stated above on both 2- and
4-stroke gasoline engines, along with diesel motors, but also perform as well as or better than an
OEM catalytic converter, at a fraction of their cost. Specifically, CAT-MATE is designed for use
on two- and four-stroke motorcycles, off-road and marine vehicles, generators, lawn mowers, on
stationary implements and on &#147;carbureted&#148; and fuel injection motor vehicles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Testing by the Company&#146;s own R&#038;D efforts, as well as by independent sources, has demonstrated
that the use of ZEFS and CAT-MATE devices generate significant reductions in hydrocarbon, oxides of
nitrogen and carbon monoxide emissions and, in the case of ZEFS devices, also improves gas
consumption and mileage performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Research and Development</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are actively continuing our development of the ZEFS and CAT-MATE devices for
use on gasoline and diesel powered engines and have taken steps to finalize devices to fit on carbureted, throttle body and multi-port fuel injection systems.
We have used these prototype devices as demonstration units, during presentations, before
manufacturers. It is our objective to facilitate the adoption of this technology by engine,
carburetor, muffler and exhaust manufacturers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have successfully developed multiple ZEFS devices for use on one-, two- and four-barrel
carbureted engines and created production CAD drawings for these devices and produced multiple
samples
using aluminum housings and pre-production prototypes made of high temperature polymers. We have
also created several prototype devices for use on fuel injection engines.
</DIV>

<P align="center" style="font-size: 10pt">3

</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because of the complexity and enormity of the task of designing variants of ZEFS and CAT-MATE
devices to fit every make and model, we rely on the cooperation of manufacturers to support this
function, including engineering, marketing, and installation of the devices. Additionally, we are
cognizant that in order to preserve the integrity of the warranties provided by manufacturers, they
must be involved in the process of designing and installing the ZEFS and CAT-MATE devices on legacy
vehicles. We envision that a cooperative venture between manufacturers and us will result in the
most optimal mechanism for the installation of ZEFS and CAT-MATE devices on the greatest percentage
of vehicles possible, through agreements between the company, manufacturers and their dealerships.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are also engaged in the research and development of ZEFS and CAT-MATE devices for use on
diesel engines, such as those used on trucks, buses, heavy equipment and generators. Because these
types of vehicles use engines provided from Cummins, Caterpillar, or Detroit Diesel almost
exclusively, the number of ZEFS and CAT-MATE variants needed to service these fleets is
considerably less than the number required to satisfy other markets. This fact alone makes entry
into the diesel engine market extremely attractive for our business, offering a large number of
potential customers with a minimum of expense for research and development of product variants.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the third quarter of 2005, we established a state-of-the-art research and product
development facility in Morgan Hill, California, to compliment our R&#038;D center in Queensland,
Australia. We have completed testing of ZEFS and CAT-MATE devices for multiple automobiles,
trucks, motorcycles, off-road vehicles and stationary engines, the results of which have been
provided to RAND for evaluation. RAND was responsible for overseeing our R&#038;D when that effort was
based in Queensland. In connection with the establishment of our Morgan Hill facility, we
transitioned the major focus of our R&#038;D from Queensland to Morgan Hill. RAND assisted us in
setting up our testing protocols at Morgan Hill. Our Queensland facility now focuses on novel
technology research under the direction of our senior engineer and consultant, Adrian Menzell.
RAND has now completed the majority of its work for us and is focusing on finalizing its report to
us on the theoretical and technical issues relating to magnetism and fuels. In early 2005, we
phased out the use of our third party R&#038;D and testing facility in Los Angeles, California.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We spent $1,873,464 in fiscal year 2004 and $1,150,361 in fiscal 2005 on research and
development. Please see Item&nbsp;6, &#147;Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operation &#150; Results of Operations&#148; and Note&nbsp;9 to Notes to Financial Statements for a
more complete understanding of our research and development expense in 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Independent Laboratory and Scientific Testing</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The four internationally recognized emissions standards testing agencies for the certification
of motor vehicles, parts, systems and aftermarket devices are the United States Environmental
Protection Agency (EPA), California Air Resources Board (CARB), United Kingdom Vehicle
Certification Agency (VCA)&nbsp;and TUF (Germany/EU).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have performed independent laboratory testing of our ZEFS and CAT-MATE devices in order to
gain better market acceptance by manufacturers and governmental regulatory officials. Research and
testing using government standard test equipment in the United
States, Thailand and Hong Kong has
demonstrated that the ZEFS and CAT-MATE devices may lead to engine emissions, such as carbon
monoxide, oxides of nitrogen and hydrocarbons, while also improving fuel consumption and
performance.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2002, we retained RAND to study the validity and market potential of our
technology. RAND determined then that sufficient theoretical basis exists to warrant entry into a
comprehensive product-testing program. As a result, in May&nbsp;2003, we entered into an arrangement in
which RAND would coordinate and supervise both a theoretical scientific study of the concepts
underlying the ZEFS device as well as an empirical study. In response to an RFP that RAND sent to
14 universities in
the US, Temple University in Philadelphia, Pennsylvania was chosen to research our technology.
Draft reports have been provided by RAND and their final report is in the process clearing peer
review.
</DIV>



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

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tests of our CAT-MATE device on a Honda 2-stroke NSR 150 motorcycle and a Warrior 2-stroke
63cc generator conducted by Hong Kong Exhaust Emissions Laboratory (HKEEL)&nbsp;in July and August&nbsp;2004
showed that CAT-MATE devices reduce emissions of carbon monoxide (CO), oxides of nitrogen (NOX)&nbsp;and
hydrocarbons (THC). These results were certified by United Kingdom&#146;s VCA in January&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In emissions and fuel economy tests conducted in 2004 and 2005 at Automotive Testing and
Development Services, Inc. in Ontario, California Emissions, and in 2005 at Northern California
Diagnostics Laboratory in Napa, California, both EPA-approved testing laboratories, on a CAT-MATE
device within the OEM exhaust system of a 1995 Mexican fuel injected Volkswagen Beetle taxi, showed
significant reductions of CO, NOX and THC emissions, compared to the in-place original OEM exhaust
system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional testing of our ZEFS device was conducted in December&nbsp;2005 on a used 4-stroke
motorcycle in Bangkok, Thailand at Automotive Emission Laboratory, Pollution Control Department,
Ministry of Natural Resources and Environment of Thailand, and was performed jointly with S.P.
Suzuki of Thailand, the authorized distributor of Suzuki products in Thailand. These certified
test results surpassed &#145;hot start&#146; EURO 2 standards in all three of the harmful exhaust emissions,
CO, NOX and THC, by the following amounts:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">THC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">NOx</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">CO</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EURO2 Standard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">1.20 g/km</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">0.30 g/km</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">5.50 g/km</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">With ZEFS Device</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">0.52 g/km</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">0.10 g/km</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">1.42 g/km</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">% Below EURO2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">56%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">65%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">74%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, during the testing horsepower increased at all ranges, peaking at 18.8% at 50km/h
and fuel economy increased 33% over the baseline tests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The most recent testing was conducted in early March&nbsp;2006 at HKEEL, a certified laboratory of
the United Kingdom&#146;s VCA. In multiple certified tests of our ZEFS device on a new
Chinese-manufactured carbureted 4-stroke Suyijia SZK125 motorcycle. These certified test results
surpassed EURO3 standards for motorcycles of 150cc or less in all three of the harmful exhaust
emissions, CO, NOX and THC, by the following amounts:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">THC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">NOx</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">CO</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EURO 3 Standard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">0.8 g/km</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">0.15 g/km</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">2.0 g/km</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">With ZEFS Device</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">0.33 g/km</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">0.108 g/km</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">1.86 g/km</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">% Below EURO 3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">59%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">28%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">7%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, during the testing fuel economy increased 7% over the baseline tests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Of further note of the recent HKEEL testing, is the fact that it is difficult to meet EURO 3
guidelines because the testing includes a &#147;cold start&#148; phase. The &#147;cold start&#148; phase includes
exhaust emissions created when a motor is started after an 8-hour
cold soak. It is during this warm-up
time that engines produce their highest level of emissions. This is also where many catalytic converters fail
because they must be heated to about 300 degrees (Fahrenheit) to begin working effectively.
</DIV>



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

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

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Marketing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2004, we commenced marketing efforts for our emission control and
performance-enhancing ZEFS and CAT-MATE technologies and these efforts continued throughout 2005.
We are focused on selling or licensing our technologies and devices domestically and
internationally to motorcycle, automobile, carburetor, fuel-injection and diesel engine
manufacturers as well as, exhaust and muffler original equipment manufacturers (OEMs) and the
after-market. We have presented our ZEFS and CAT-MATE technologies to OEMs in the United States,
Asia and Europe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into our first distribution agreements for our products in late 2005 and early
2006. Our first two US distributorship agreements with Team Phantom of Alaska and Motorcycle
Products Consulting of California, provides for the sale of our ZEFS devices in the North American
OEM and after-market for motorcycles through the distributors to certain named prospective
purchasers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2006, we entered into our first international distributorship agreement, with
Golden Allied Enterprises (Group) Co., Ltd. (&#147;GAE&#148;). The agreement provides that GAE will serve as
our exclusive distributor for our ZEFS and CAT-MATE devices in the People&#146;s Republic of China. The
agreement with GAE is conditioned upon our ZEFS device achieving EURO2 standards in tests to be
conducted in Shanghai. These tests are currently scheduled for April&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the success of recent testing of our ZEFS device meeting EURO3 standards, we now also
intend to seek distribution opportunities for our devices in Europe, in addition to our marketing
efforts in the United States and Asia. See &#147;Independent Laboratory and Scientific Testing&#148; above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also intend to pursue marketing of our products in developing nations of the world.
Harmful exhaust emissions from motorcycles and automobiles in developing countries is at the
highest levels because of the continued widespread use of older models with either no or
malfunctioning catalytic converters. We intend to continue to work with governments worldwide at
all levels, together with industry, to capitalize on our technology to achieve what we know to be
common global environmental objectives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2004, management met with UNEP in New York to enlist its aid with this objective.
By UNEP invitation, we participated in a UNEP-sponsored meeting in Bali , Indonesia in December
2004, which resulted in the initiation of informal negotiations with United Nations and government
officials to explore the possibility of pilot programs using our technology in Indonesia, Kenya ,
Mexico, Thailand, Brazil and Sri Lanka.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also participated in a United Nations sponsored Summit in Lake Toba, North Sumatra,
Indonesia in March&nbsp;2005. This resulted in an announcement by the Lake Toba Summit Chair, Nico
Barito, endorsed by HRH Sri Sultan Hamengkubowono X of Yogyakarta and the Governor of North
Sumatra, Razil Nurdin, of two pilot programs intended to minimize carbon monoxide emissions,
hydrocarbons and oxides of nitrogen, by installing our devices on 10,000 student motorcycles at
universities in Yogyakarta and Medan in Indonesia. We expect to deliver the first installment of
our devices for this project during the second quarter of 2006. While this project is not expected
to generate any revenue for us, we believe that it will provide evidence of the utility of our
low-cost, easy-to-install technologies in developing countries, which may then seek ways to finance
the purchase of our products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Competition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The automotive and motor engine industry is highly competitive. We have many competitors in
the United States and throughout the world developing technologies to make engines more
environmentally friendly and fuel efficient. Many of our competitors have greater financial,
research, marketing and staff resources than we do. For instance, automobile manufacturers have
already developed catalytic converters on automobiles, in order to reduce emissions. While we
believe that our technology has greater benefits, it may be unable to gain market acceptance.
Furthermore, research and development throughout the world is constantly uncovering new
technologies. Although we are unaware of any technologies that compete
directly with ours, there can be no assurance that any existing or future technology is or will be
superior to our ZEFS and CAT-MATE devices.
</DIV>

<P align="center" style="font-size: 10pt">6
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Government Regulation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our research and development activities are not subject to any governmental regulations that
would have a significant impact on our business to date and we believe that we are in compliance
with all applicable regulations that apply to our business as it is presently conducted. Depending
upon whether we manufacture or license our devices in the future and in which countries such
devices are manufactured or sold, we may be subject to regulations, including environmental
regulations at such time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Intellectual Property</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;1998, the Company acquired all of the marketing and manufacturing rights to the
ZEFS technology from the purported inventor of the technology in exchange for 5,000,000 shares of
our common stock, $500,000 and $10 royalty for each unit sold. In November&nbsp;2002, under our
settlement with the bankruptcy trustee for the estate of the purported inventor and his wife, the
trustee transferred all ownership and legal rights to the international patent application for the
ZEFS device to us. In exchange for these rights, we gave the bankruptcy trustee an option to
purchase 500,000 shares of our common stock at $1.00 share and $0.20 royalty on each device we
sell. See &#147;Part&nbsp;I, Item&nbsp;3. Legal Proceedings&#148; and Note 1 to Notes to Financial Statements&#148; below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2002, we settled a dispute with Kevin &#147;Pro&#148; Hart, who claimed proprietary rights to the
ZEFS technology. He assigned to us all his rights to the ZEFS technology in exchange for an option
to purchase 500,000 shares of our common stock at $1.00 share and a $0.20 royalty on each device we
sell. Mr.&nbsp;Hart currently serves as a member of our Advisory Board. See &#147;Advisory Board&#148; below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The CAT-MATE technology was created by Adrian Menzell, a member of our research team in
Australia. On August&nbsp;20, 2003, Mr.&nbsp;Menzell filed preliminary Australian patent application
#2004900192 for the CAT-FLAP. This technology was enhanced and on June&nbsp;4, 2004, Mr.&nbsp;Menzell filed
preliminary Australian patent application #2004903000 for the CAT-MATE. On September&nbsp;1, 2003, we
entered into an Assignment Agreement with Mr.&nbsp;Menzell, pursuant to which this technology was
assigned to us in exchange for 20,000 shares of our common stock and a royalty of $.25 for each
CAT-MATE device sold. On June&nbsp;26, 2004, we received a deed of assignment from Mr.&nbsp;Menzell and each
pending patent application was transferred to our name. Mr.&nbsp;Menzell currently serves as our senior
engineer and a consultant to our company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>ZEFS Patent Applications</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We obtained the patent application for the ZEFS MK1 device &#091;PCT/AU1/00585&#093; originally filed in
Australia on May&nbsp;19, 2000. The International Filing Application for our ZEFS MK1 technology was
filed on May&nbsp;21, 2001 (Official No.&nbsp;10/275946) &#091;PCT/AU1/00585&#093; and modified as ZEFS MK2 on July&nbsp;9,
2003. On November&nbsp;4, 2003 we filed for our ZEFS MK3 (#2003906094). The United States Patent and
Trademark Office issued a Notice of Allowance of Patent dated January&nbsp;24, 2005. The duration of the
patent is 20&nbsp;years from the date the original application was filed. Prior to the issuance of such
patent, we relied solely on trade secrets, proprietary know-how and technological innovation to
develop our technology and the designs and specifications for the ZEFS technology. Overall, we have
applied for a patent on an international basis in approximately 64 countries worldwide.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>ZEFS MK1&#151;Device For Saving Fuel and Reducing Emissions</I></B><B>. </B>Thi<B>s </B>fuel saving device has a disk-
like nonmagnetic body provided with a central opening and a number of permanent magnets having
opposed polarities positioned about the central opening to provide multidirectional magnetic
fields. The device is positioned in a fuel air mixture to reduce emissions.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the status of the ZEFS MK1 patent application in the following
countries:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Country</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Filing date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Status</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Australia
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">2001258057</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GRANTED</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Bosnia &#038; Herzegovina
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">BAP 021290A
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Short Term Patent GRANTED. Apply for
Standard Patent by 21/05/2009</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Brazil
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">0111365-8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Examination requested 5 September&nbsp;2003.
Report expected mid 2007</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Bulgaria
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">107391</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Awaiting examination</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Canada (small<BR>
entity status)
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">2409195</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Examination to be requested by 21 May&nbsp;2006</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">China
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">01809802.9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Under examination &#151; response filed</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Columbia
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">02115018</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Examination requested 23 July&nbsp;2004.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Croatia
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">P20020982A</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Examination requested 29 August&nbsp;2005</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Czech Republic
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">PV 2002-4092
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Under Examination</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Eurasian &#043;&#043;&#043;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">200201237</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GRANTED</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Europe &#043;&#043;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">019331222.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Awaiting examination</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Georgia
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">4098/01-2002</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GRANTED</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Hong Kong
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">04100327.0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Automatic grant upon grant of the Chinese
application</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Hungary
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">P 03 01796</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Examination to be requested by 28 April
2006.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">India
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">IN/PCT/2002/01523
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Examination requested May&nbsp;2005.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Indonesia
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">WO0200202844
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Examination requested November&nbsp;2003</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Israel
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">152902</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Allowed/accepted &#151; awaiting grant</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Korea &#091;South&#093;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD nowrap align="center" valign="top">2002-7015531</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Examination to be requested by 21 May&nbsp;2006</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Japan
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">586731/2001</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Examination to be requested by 21 May&nbsp;2008</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Mexico
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">PA/A/2002/011365
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Awaiting examination</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Morocco
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">PV/26.964
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GRANTED</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">New Zealand
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">523113</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GRANTED</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Norway
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">20025531</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Awaiting examination</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Poland
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">P358837</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Awaiting examination</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Serbia/Montenegro
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">P-870/02</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Examination requested December&nbsp;2002</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Singapore
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">93310
&#091;WO 01/90562&#093;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GRANTED</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">South Africa
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">2002/10013</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GRANTED</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Sri Lanka
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">12918</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Awaiting examination</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Trinidad &#038; Tobago
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">TT/A/2002/00213
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Allowed/accepted &#151; awaiting grant.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Ukraine
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">20021210144</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Allowed/accepted &#151; awaiting grant.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">United States
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">10/275946</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GRANTED</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Vietnam
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD nowrap align="center" valign="top">1-2002-01168</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">21 May&nbsp;2001
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Response to Office Action filed with IPO</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD valign="top" width="1%">&#043;&#043;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="98%">European patent application covers Austria Belgium Switzerland Liechtenstein Cyprus Germany
Denmark Spain Finland France Great Britain Greece Ireland Italy Luxembourg Netherlands Portugal
Sweden Turkey Lithuania Latvia Slovenia Romania Macedonia.</td></tr>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>

 <TR valign="bottom">
    <TD valign="top" width="1%">&#043;&#043;&#043;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="98%">The Eurasian Patent Convention was signed on September&nbsp;9, 1994 in Moscow by the Heads of the
Governments of the Republic of Azerbaijan, the Republic of Armenia, the Republic of Belarus,
Georgia, the Republic of Kazahkstan, the Kyrgyz Republic, the Republic of Moldova, the Russian
Federation, the Republic of Tajikistan and Ukraine .</td></tr></table>




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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>ZEFS MK2&#151;Device for Saving Fuel and Reducing Emissions</I></B><B>. </B>This fuel saving device
similar to that of the MK1 except that a central magnet can be provided in the opening and the
peripheral magnets extend only partially through the depth of the body and stop short of the top
wall to provide the option of moving the magnetic field further away from the base of the
carburetor to increase the area of magnetic influence between the point of fuel atomization and the
point of cessation of magnetic influence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The priority date is July&nbsp;19, 2003 from Australian patent application
2003903626.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the status of the ZEFS MK2 patent application in the following
countries:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Country</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Filing Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Status</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Taiwan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">92134811&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">July&nbsp;19, 2003
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Granted</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">International
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PCT/AU2004/000950
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">July&nbsp;15, 2004
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Clear International
Search Report
issued. Clear
International
Preliminary
Examination Report
issued.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approximately 125 countries are covered by the PCT. National Patent Applications were filed on
or before January&nbsp;15, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>ZEFS MK3&#151;Emission Control Devices. </I></B>This emission control device is particularly suited for
fuel injection systems which has an elongate body formed with one or more channels and a number of
permanent magnets is positioned in the channels. The device sits on a fuel rail.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The priority date is November&nbsp;4, 2003 from Australia patent application 2003906094.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the status of the ZEFS MK3 patent application in the following
countries:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Country</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Filing Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Status</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thailand
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">095155&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">November&nbsp;3, 2004
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Awaiting Examination</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">International
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PCT/AU2004/001518
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">November&nbsp;4, 2004
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Demand for
International
Preliminary
Examination filed
June&nbsp;8, 2005 &#151;
awaiting report.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approximately 125 countries are covered by the PCT. National Patent Applications are due by
May&nbsp;4, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>CAT-MATE Patent Applications</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>CAT-FLAP
(Afterburner) &#151;Improvements in or Relating to Emission Control Systems</I></B><B>. </B>A catalytic
converter is provided in an engine exhaust flow to reduce emissions. A valve is provided downstream
from the catalytic converter. The valve is in a closed position when the exhaust flow volume is low
to keep the hot exhaust gas around the catalytic converter to keep the catalytic converter within
its operational temperatures. When the exhaust flow volume is high (e.g. the engine is revving) the
catalyst is kept at its operational temperature by normal gas flow and valve is opened to not
impede exhaust flow. A simple hinge flap is one method by which this can be achieved.
</DIV>

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

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Country</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Filing date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Status</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thailand
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">096762</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4 January&nbsp;2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Application filed &#151; awaiting examination</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</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">Taiwan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">93140533</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">24 December&nbsp;2004
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Application filed. Substantive examination to be
requested by 24 December&nbsp;2007.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</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">Malaysia
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">PI20050041
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6 January&nbsp;2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Application filed &#151; awaiting
examination.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</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">International
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">PCT/AU2004/001821
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">23 December&nbsp;2004
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">IPE requested 21 June&nbsp;2005 &#151; awaiting report.
Awaiting Written
Opinion</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The priority date is January&nbsp;16, 2004 from Australian patent application 2004900192.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approximately 125 countries are covered by the PCT. National Patent Applications are due by
July&nbsp;8, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>CAT-MATE&#151;Inline Exhaust Device to Improve Efficiency of a Catalytic Converter</I></B><B>. </B>A set of rings
is placed downstream from the catalytic converter to re-radiate heat to the catalytic converter to
keep the converter working at a warmer temperature and therefore greater efficiency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The priority date is June&nbsp;4, 2004 from Australian patent application 2004903000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This invention was incorporated into the specifications filed pursuant to the CAT-FLAP
invention.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Method and Apparatus for Treatment of a Fluid (Temple University</I></B><U><B>)</B></U><B>. </B>This is an
apparatus for the magnetic treatment of oils to improve viscosity.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Country</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Filing date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Status</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GCC*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">GCC/P/2005/5066
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">22 August&nbsp;2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Application filed &#151; awaiting
examination.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</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">International **
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">PCT/AU2005/000688
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">13 May&nbsp;2005
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Clear ISR received.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt; margin-left: 2%; text-indent: -2%">*
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The GCC application covers Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, and
Bahrain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 2%; text-indent: -2%">**
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This application is in the name of Temple University of the Commonwealth System of Higher
Education.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The priority date is May&nbsp;14, 2004 from Australian patent application 2004902563.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approximately 125 countries are covered by the PCT. National patent applications are due by
November&nbsp;14, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Device for Saving Fuel and Reducing Emissions</I></B><B>. </B>This device is similar to the Mark I device
but uses stacked magnets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The priority date is June&nbsp;21, 2005 from Australian patent application 2005903248.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the terms of the Paris Convention, the Australian patent application provides &#147;cover
note&#148; type protection for 12&nbsp;months (i.e. until June&nbsp;21, 2006) in all countries that are party to
the Paris Convention, and there are over 160 countries, including all the major economies.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to June&nbsp;21, 2006, it will be necessary to file an International patent application to
keep patent rights pending in over 120 countries. We intend to make this filing in a timely
manner.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into agreements with certain employees and consultants, which limit access to,
and disclosure or use of, our technology. There can be no assurance, however, that the steps we
have taken to deter misappropriation of our intellectual property or third party development of our
technology and/or processes will be adequate, that others will not independently develop similar
technologies and/or processes or that secrecy will not be breached. In addition, although
management believes that our technology has been independently developed and does not infringe on
the proprietary rights of others, there can be no assurance that our technology does not and will
not so infringe or that third parties will not assert infringement claims against us in the future.
Management believes that the steps they have taken to date will provide some degree of protection,
however, no assurance can be given that this will be the case.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, we had seven full-time employees and seven part-time employees. As of
such date, we also utilized the services of three full-time consultants in our R&#038;D facility in
Australia and three additional part-time consultants to assist us with various matters, including
marketing. We intend to hire additional personnel to provide services when they are needed on a
full-time basis. We recognize that our efficiency largely depends, in part, on our ability to hire
and retain additional qualified personnel as and when needed and we have adopted procedures to
assure our ability to do so.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Advisory Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Advisory Board provides specific expertise in areas of research and development relevant
to our business and meets with our management personnel from time to time to discuss our present
and long-term research and development activities. Our Advisory Board members are:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Sir Jack Brabham</B>, Triple Formula One World Champion and Twice Formula One World Constructors
Champion, is an expert in the areas of racing car design.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Kevin &#147;Pro&#148; Hart</B>, is a famous Australian artist and inventor of the &#147;ZEFS&#148; device.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Jack Reader, Ph.D</B>., Director, BIFS Technologies Corporation. Mr.&nbsp;Reader is a systems engineer
and an expert in business management and energy conservation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Bobby Unser, Jr</B>., Founder, Unser Driving, Inc. Mr.&nbsp;Unser is an expert in motor racing and
stunt driving.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risk Factors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We expect to incur future losses and may not be able to achieve profitability.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not yet generated any revenue from operations and, accordingly, we have incurred net
losses every year since our inception in 1998. Although we expect to generate revenue beginning in
2006 from sales of our ZEFS and CAT-MATE devices, we anticipate net losses and negative cash flow
to continue for the foreseeable future until such time as our products are brought to market in
sufficient amounts to offset operating losses. As planned, we have significantly expanded both our
research and development efforts, and our sales and marketing efforts, during the past year.
Consequently, we will need to generate significant additional revenue to fund our operations. This
has put a proportionate corresponding demand on capital. Our ability to achieve profitability is
entirely dependent upon our research and development efforts to deliver a viable product and the
company&#146;s ability to successfully bring it to market. Although our management is optimistic that we
will succeed with marketing the ZEFS and CAT-MATE devices we cannot be certain as to timing or
whether we will generate sufficient revenue to be able to operate profitably. If we cannot achieve
or sustain profitability, we may not be able to fund our expected cash needs or continue our
operations.
</DIV>


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

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We will need additional capital to meet our operating needs, and we cannot be sure that
additional financing will be available.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005 and thereafter, our expenses ran, and are expected to continue to run,
at a &#147;burn rate&#148; of approximately <B>$</B>350,000 per month. Our current capital resources will be
sufficient to fund operations only through May&nbsp;2006, and we will require additional capital in
order to operate beyond this date. In order to fund our capital needs for the foreseeable future,
we intend to begin a private offering in the first or second quarter of 2006 for the sale of our
common stock for an amount that would provide us sufficient capital for the remainder of 2006 and
the foreseeable future thereafter. Management cannot predict with certainty that the offering will
be successful to provide adequate funds, or any funds at all. If we cannot obtain needed capital,
our research and development, and sales and marketing plans, business and financial condition and
our ability to reduce losses and generate profits are likely to be materially and adversely
affected.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We will need additional capital to repay certain short-term debt as it matures during 2006.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We issued an aggregate of $1,075,000 of our 9% convertible subordinated notes to investors in
late 2005 and early 2006 (the &#147;Bridge Notes&#148;). The Bridge Notes mature on the earlier of May&nbsp;31,
2006 or the successful completion of an offering of our securities of $5,000,000. We intend to
begin a private offering in the first or second quarter of 2006 for the sale of our common stock
for an amount that would provide us sufficient capital for the repayment of the Bridge Notes,
among other things.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we also issued an aggregate of $1,501,378 of our 9% convertible subordinated
notes (the &#147;Investor Notes&#148;) due July&nbsp;31<B>, </B>2006 to certain investors. The Company may, at its
option, require that the Investor Notes be converted into shares of our Common Stock if we raise
at least $5,000,000 in new financing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management cannot predict with certainty that the planned stock offering in 2006 will be
successful to provide adequate funds, or any funds at all, to repay the Bridge Notes or to require
the conversion of the Investor Notes on or prior to their respective maturity dates. If we do not
raise adequate funds, we would be unable to repay these obligations as they mature during 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>As a company with an unproven business strategy, our limited history of operations makes
evaluation of our business and prospects difficult.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business prospects are difficult to predict because of our limited
operating history, early stage of development and unproven business strategy. Since our
incorporation in 1998, we have been and continue to be involved in development of products using
our technology, establishing manufacturing and marketing of these products to consumers and
industry partners. Although we believe our technology and products in development have significant
profit potential, we may not attain profitable operations and our management may not succeed in
realizing our business objectives.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>If we are not able to devote adequate resources to product development and commercialization,
we may not be able to develop our products.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business strategy is to develop, manufacture and market ZEFS and CAT-MATE products using
our technology. We believe that our revenue growth and profitability, if any, will substantially
depend upon our ability to:
</DIV>


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

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>raise additional needed capital for research and development;</TD>
</TR>

</TABLE>
</DIV>

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

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>complete development of our products in development; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>successfully introduce and commercialize our new products.</TD>
</TR>

</TABLE>
</DIV>

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

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


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



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of our products are still under various stages of development. Because we have limited
resources to devote to product development and commercialization, any delay in the development of
one product or reallocation of resources to product development efforts that prove unsuccessful may
delay or jeopardize the development of other product candidates. Although our management believes
that it can finance our product development through private placements and other capital sources,
if we do not develop new products and bring them to market, our ability to generate revenues will
be adversely affected.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The commercial viability of the ZEFS and CAT-MATE devices remains largely unproven and we may
not be able to attract customers.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite the fact that have entered into our first distribution agreements, to the best of our
knowledge, no consumer or automobile manufacturer has used the ZEFS or CAT-MATE devices to reduce
motor vehicle emissions to date. Accordingly, the commercial viability of our devices are not known
at this time. If commercial opportunities are not realized from the use of the ZEFS and CAT-MATE
devices, our ability to generate revenue would be adversely affected.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>If our products and services do not gain market acceptance, it is unlikely that we will become
profitable.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market for products that reduce harmful motor vehicle emissions is evolving and we have
many successful competitors. Automobile manufacturers have historically used various technologies,
including catalytic converters, to reduce exhaust emissions caused by their products. At this time,
our technology is unproven, and the use of our technology by others is limited. The commercial
success of our products will depend upon the adoption of our technology by auto manufacturers and
consumers as an approach to reduce motor vehicle emissions. Market acceptance will depend on many
factors, including:
</DIV>


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

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the willingness and ability of consumers and industry partners to adopt new technologies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the willingness of governments to mandate reduction of motor vehicle emissions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to convince potential industry partners and consumers that our technology is an
attractive alternative to other technologies for reduction of motor vehicle emissions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to manufacture products and provide services in sufficient quantities with
acceptable quality and at an acceptable cost; and</TD>
</TR>

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


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to place and service sufficient quantities of our products.</TD>
</TR>

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


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD align="left" colspan="3">If our products do not achieve a significant level of market acceptance, demand for our
products will not develop as expected and it is unlikely that we will become profitable.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Any revenues that we may earn in the future are unpredictable, and our operating results are
likely to fluctuate from quarter to quarter.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our future operating results will fluctuate due to a variety of factors,
including:
</DIV>


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

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays in product development;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>market acceptance of our new products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the demand for, and pricing, of our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>competition and pricing pressure from competitive products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>manufacturing delays; and</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">13
</DIV>

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


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


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>expenses related to, and the results of, proceedings relating to our intellectual property.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A large portion of our expenses, including expenses for our facilities, equipment and
personnel, is relatively fixed and not subject to significant reduction. In addition, we expect our
operating expenses will continue to increase significantly in 2006 as we further increase our
research and development, production and marketing activities. Although we expect to generate
revenues from sales of our products in the future, revenues may decline or not grow as anticipated
and our operating results could be substantially harmed for a particular fiscal period. Moreover,
our operating results in some quarters may not meet the expectations of stock market analysts and
investors. In that case, our stock price most likely would decline.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>If we lose our key personnel or are unable to attract and retain additional personnel, we may
be unable to achieve profitability.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success is substantially dependent on the efforts of our senior management,
particularly Eugene Eichler and Bruce McKinnon. The loss of the services of members of our senior
management may significantly delay or prevent the achievement of product development and other
business objectives. Because of the scientific nature of our business, we depend substantially on
our ability to attract and retain qualified marketing, scientific and technical personnel. There is
intense competition among specialized automotive companies for qualified personnel in the areas of
our activities. If we lose the services of, or do not successfully recruit key marketing,
scientific and technical personnel, the growth of our business could be substantially impaired. We
do not maintain key man insurance for any of these individuals.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>We may face costly intellectual property disputes.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability to compete effectively will depend in part on our ability to develop and maintain
proprietary aspects of our technology and either to operate without infringing the proprietary
rights of others or to obtain rights to technology owned by third parties. Our pending patent
applications, specifically patent rights of the ZEFS and CAT-MATE devices, may not result in the
issuance of any patents or any issued patents that will offer protection against competitors with
similar technology. Patents we receive may be challenged, invalidated or circumvented in the future
or the rights created by those patents may not provide a competitive advantage. We also rely on
trade secrets, technical know-how and continuing invention to develop and maintain our competitive
position. Others may independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our common stock is subject to penny stock regulation, which may make it more difficult for us
to raise capital.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is considered penny stock under SEC regulations. It is subject to rules that
impose additional sales practice requirements on broker-dealers who sell our securities. For
example, broker-dealers must make a suitability determination for the purchaser, receive the
purchaser&#146;s written consent to the transaction prior to sale, and make special disclosures
regarding sales commissions, current stock price quotations, recent price information and
information on the limited market in penny stock. Because of these additional obligations, some
broker-dealers may not effect transactions in penny stocks, which may adversely affect the
liquidity of our common stock and shareholders&#146; ability to sell our common stock in the secondary
market. This lack of liquidity may make it difficult for us to raise capital in the future.
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2. </B><B><I>Properties</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal executive offices consist of leased space in North Hollywood, California. We
lease this space from KZ Golf, Inc., pursuant to a lease we entered into on October&nbsp;16, 2003 and
which expired on October&nbsp;16, 2005. We exercised an option to renew the lease, which now expires on
October&nbsp;13, 2007. Through October&nbsp;16, 2005, the rent was $3,400 per month for approximately 1,225
square feet, and for comprehensive office support services, including reception, parking and
conference facilities. During the new lease term, the rent is $3,740 per month. We believe that
our North Hollywood facility is adequate for
</DIV>



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

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">our current and planned administrative activities, and can provide additional space if
required by us in the future.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bruce H. McKinnon, our President and a director, is an owner of KZ Golf, Inc. Management
believes that the terms of the lease with KZ Golf, Inc. are no less favorable than what we would
have had to pay for equivalent space and comparable services with an unaffiliated party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our research and development facility located in Queensland, Australia is leased. We entered
into the lease for this facility on November&nbsp;15, 2003 for a term of two years, and extended the
lease on a month-to-month basis thereafter until March&nbsp;14, 2006. The rent during this period was
AUD $1,292 (approximately US $956) per month. On March&nbsp;14, 2006, we entered into a new lease for
this facility for a term of two years commencing March&nbsp;15, 2006 at a rent of AUD $1462
(approximately US $1,082). Upon the termination of the term of the lease, we have the option to
renew the lease up to two times, each for an additional two-year term, at an increase over the base
rent of the greater of 5% or the increase in the annual consumer price index in Australia. We
believe that our present research and development facility is adequate for our current and planned
activities and that suitable additional or replacement facilities in the Queensland area are
readily available on commercially reasonable terms should such facilities be needed in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our engineering, production and testing facility is located in Morgan Hill, California. The
lease for this facility was entered into on September&nbsp;1, 2005 and amended on February&nbsp;1, 2006. The
term is for two years, expiring on August&nbsp;31, 2007. The base rent is $4,160 per month for
approximately 5,600 square feet of industrial usage space, and is renewable, at our option, for two
additional years at the then prevailing market rate. We believe that this space is adequate for
our current and planned engineering, production and testing activities.
</DIV>
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. </B><B><I>Legal Proceedings</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;19, 2001, the SEC filed civil charges in the United States Federal District Court,
Southern District of New York, against us, our former President and then sole director Jeffrey A.
Muller, and others, alleging that we and the other defendants were engaged in a fraudulent scheme
to promote our stock. The SEC complaint alleged the existence of a promotional campaign using press
releases, Internet postings, an elaborate website, and televised media events to disseminate false
and materially misleading information as part of a fraudulent scheme to manipulate the market for
stock in our corporation, which was then controlled by Mr.&nbsp;Muller. On March&nbsp;22, 2002, we signed a
Consent to Final Judgment of Permanent Injunction and Other Relief in settlement of this action as
against the corporation only, which the court approved on July&nbsp;2, 2002. Under this settlement, we
were not required to admit fault and did not pay any fines or restitution. The SEC&#146;s charges of
fraud and stock manipulation continue against Mr.&nbsp;Muller and others.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;2, 2002, after an investigation by our newly constituted board of directors, we filed
a cross-complaint in the SEC action against Mr.&nbsp;Muller and others seeking injunctive relief,
disgorgement of monies and stock and financial restitution for a variety of acts and omissions in
connection with sales of our stock and other transactions occurring between 1998 and 2002. Among
other things, we alleged that Mr.&nbsp;Muller and certain others sold Company stock without providing
adequate consideration to us; sold insider shares without making proper disclosures and failed to
make necessary filing required under federal securities laws; engaged in self-dealing and entered
into various undisclosed related-party transactions; misappropriated for their own use proceeds
from sales of our stock; and entered into various undisclosed arrangement regarding the control,
voting and disposition of their stock. We contend that we are entitled to a judgment canceling all
of the approximately 8,716,710 shares of our common stock that was previously obtained and
controlled, directly or indirectly, by Mr.&nbsp;Muller; divesting and preventing any subsequent holders
of the right to exercise options previously held by Mr.&nbsp;Muller for 10,000,000 shares of our common
stock, conversion of an existing preliminary injunction to a permanent injunction to prevent Mr.
Muller from any involvement with the Company and a monetary judgment against Mr.&nbsp;Muller and others
in the amount of several million dollars.
</DIV>

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

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;30, 2002, the U.S. Federal District Court, Southern District of New York, granted our
application for a preliminary injunction against Mr.&nbsp;Muller and others, which prevented Mr.&nbsp;Muller
and other cross-defendants from selling, transferring, or encumbering any assets and property
previously acquired from us, from selling or transferring any of our stock that they may own or
control, or from taking any action to injure us or our business and from having any direct contact
with our shareholders. The injunctive order also prevents Mr.&nbsp;Muller from engaging in any effort to
exercise control over our corporation and from serving as an officer or director of our company.
While we believe that we have valid claims, there can be no assurance that an adverse result or
settlement would not have a material adverse effect on our financial position or cash flow.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the course of the litigation, we have obtained ownership control over Mr.&nbsp;Muller&#146;s claimed
patent rights to the ZEFS device. Under a Buy-Sell Agreement between Mr.&nbsp;Muller and dated December
29, 1998, Mr.&nbsp;Muller, who was listed on the ZEFS devise patent application as the inventor of the
ZEFS device, purported to grant us all international marketing, manufacturing and distribution
rights to the ZEFS device. Those rights were disputed because an original inventor of the ZEFS
device contested Mr.&nbsp;Muller&#146;s legal ability to have conveyed those rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Australia, Mr.&nbsp;Muller entered into a bankruptcy action seeking to overcome our claims for
ownership of the ZEFS device. In conjunction with these litigation proceedings, a settlement
agreement was reached with the bankruptcy trustee whereby the $10 per unit royalty previously due
to Mr.&nbsp;Muller under his contested Buy-Sell Agreement was terminated and replaced with a $.20 per
unit royalty payable to the bankruptcy trustee. On November&nbsp;7, 2002, under a settlement agreement
executed with Mr.&nbsp;Muller&#146;s bankruptcy trustee, the trustee transferred to us all ownership and
legal rights to this international patent application for the ZEFS device.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both the SEC and we filed Motions for Summary Judgment contending that there are no material
issues of fact in contention and as a matter of law, the Court should grant a judgment against Mr.
Muller and the cross-defendants. Mr.&nbsp;Muller filed a response contending the motions are without
merit or substance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Muller and several of the defendants filed a Motion to Dismiss the complaint filed by us
and moved for summary judgment in their favor. On December&nbsp;28, 2004, Judge George B. Daniels,
denied the cross-defendants&#146; motion to dismiss our cross-complaint, denied the defendants&#146; request
to vacate the July&nbsp;2, 2002 preliminary injunction and denied their request for damages against us.
The court also refused to grant a summary judgment in favor of the cross-defendants and dismissed
Mr.&nbsp;Muller&#146;s claims against us for indemnification for his legal costs and for damages resulting
from the litigation. Neither Mr.&nbsp;Muller nor any of the cross-defendants have filed any cross-claims
against us and we are not exposed to any liability as a result of the litigation, except for
possibly incurring legal fees and expenses should we lose the litigation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;16, 2005, the Court granted the SEC&#146;s motion for summary judgment. In granting the
motion, the Court has barred Mr.&nbsp;Muller from serving as an officer or director of a public company
for a period of 20&nbsp;years, ordered Mr.&nbsp;Muller to disgorge any shares of our stock that he still owns
and directed the Company to cancel any issued and outstanding shares of our stock still owned by
Mr.&nbsp;Muller. Mr.&nbsp;Muller was also ordered to disgorge to the SEC unlawful profits in the amount of
$7.5&nbsp;million and a pay a civil penalty in the amount of $100,000. Acting in accordance with the
ruling and decision of the Court, we have canceled (i)&nbsp;8,047,403 shares of its common stock held by
Mr.&nbsp;Muller and/or his affiliates, (ii)&nbsp;options to acquire an additional 10,000,000 shares of our
common stock held by Mr.&nbsp;Muller personally and (iii) $1,017,208 of debt which Mr.&nbsp;Muller
claimed was owed to him by the Company. See Note 3 to Notes to Financial Statements and
&#147;Management&#146;s Discussion and Analysis and Results of
Operations &#151; Liquidity and Capital Resources&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A final decision on the motion for summary judgment filed by us, which potentially would
terminate the ongoing litigation, is still pending. Should the Court not grant summary judgment in
our favor, the case will be scheduled for final disposition in a trial. Although the outcome of
this litigation cannot be predicted with any degree of certainty, we are optimistic that, based
upon previous developments in the litigation and the Court&#146;s granting of the SEC&#146;s motion for
summary judgment, the Court&#146;s ruling on our motion for summary judgment will either significantly
narrow the issues for any later trial or will result in a final disposition of the case in a manner
favorable to us.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2005, Jeffrey A. Muller, the Company&#146;s former sole director and executive officer,
filed a complaint against us in the Federal District Court for the Central District of California,
seeking declaratory and injunctive relief and alleging unfair competition in connection with a
claimed prior patent interest in the ZEFS device and stock option rights. In seeking declaratory
relief, Mr.&nbsp;Muller is seeking to have the patent rights in the ZEFS device that were previously
transferred to us by Mr.&nbsp;Muller&#146;s bankruptcy trustee declared null and void.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This recent lawsuit brought by Mr.&nbsp;Muller arose out of the same claims that are the subject of
ongoing litigation in the Federal District Court for the Southern District of New York, in which we
have previously obtained a preliminary injunction against Mr.&nbsp;Muller barring him from any
involvement with the Company and preventing Mr.&nbsp;Muller, his agents or assigns, from exercising any
claimed rights to our assets or stock. Mr.&nbsp;Muller previously filed the same complaint in the
Federal District Court for the Southern District of New York, which claim is still pending. On
December&nbsp;28, 2004, Federal District Court Judge George B. Daniels issued a decision dismissing
motions filed by Mr.&nbsp;Muller against our cross-claims. The dismissal of those motions involved
similar causes of action as those contained in Mr.&nbsp;Muller&#146;s recent lawsuit commenced in the Federal
District Court for the Central District of California. Since the case in New York is still
pending, we believe that the filing of the new lawsuit in California is subject to various defenses
which should result in the dismissal of the new lawsuit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;25, 2006, Mr.&nbsp;Muller&#146;s complaint, filed in the California District Court and
transferred to the Federal Court in the Southern District of New York, was assigned to Judge George
B. Daniels. It is expected that the Court will consolidate that complaint with the already
pending claims encompassed within our Motion for Summary Judgment. While we believe that we have
valid claims and defenses, there can be no assurance that an adverse result or outcome on the
pending motions or a trial of this case would not have a material adverse effect on our financial
position or cash flow.
</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. </B><B><I>Submission of Matters to a Vote of Security Holders.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No matters were submitted to a vote of security holders during the fourth quarter of fiscal
2005.
</DIV>

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

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;5. </B><B><I>Market for Common Equity and Related Stockholder Matters</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through February&nbsp;1, 2006, our common stock was quoted on the Pink Sheets under the symbol
&#147;ZERO.&#148; Effective February&nbsp;2, 2006, our common stock is quoted on the Over the Counter Bulletin
Board. The following table sets forth the high and low closing prices of the common stock for the
quarters indicated as quoted on the Pink Sheets:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.90</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.90</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.72</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to the records of our transfer agent, we had 1,067 stockholders of record of our
common stock at December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not pay a dividend on our common stock and we currently intend to retain future cash
flows to finance our operations and fund the growth of our business. Any payment of future
dividends will be at the discretion of our Board of Directors and will depend upon, among other
things, our earnings, financial condition, capital requirements, level of indebtedness, contractual
restrictions in respect to the payment of dividends and other factors that our Board of Directors
deems relevant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Issuances of Unregistered Securities in Last Fiscal Year</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From July&nbsp;2004 through July&nbsp;2005, we engaged in a private offering of units, comprised of
shares of our common stock and one-year warrants to purchase an equal number of shares of our
common stock at an exercise price of $1.50 per share. As we previously reported in our Current
Reports on Form 8-K, the expiration date of each of these warrants has been extended for an
aggregate of one additional year from their respective dates of issuance, for a total term of of
two years from their respective dates of issuance. During 2005, we sold an aggregate of 1,480,500 such units, consisting of 1,480,500 shares of common
stock and warrants to purchase 1,480,500 shares of common stock exercisable at $1.50 per share.
For the sale of such units, we received aggregate gross proceeds of $1,480,500 and net proceeds of
$1,420,860. During 2004 we sold 119,000 of such units and received $119,000 of gross and net
proceeds for those units, but did not issue the stock and warrant certificates until 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2005, we issued 50,500 shares to two individuals in connection with their exercise
of warrants, for which we received gross and net proceeds of $50,200.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2005, the Company issued options to purchase 2,085,909 shares of common stock to
certain of our directors, officers and employees. The options have an aggregate intrinsic value of
$243,750.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From August through November&nbsp;2005, the Company received gross proceeds of $1,051,378 (net
proceeds of $996,432) for the issuance of 9% Convertible Promissory Notes due July&nbsp;31, 2006 and
Warrants to purchase an aggregate of 2,306,580 shares of Common Stock which expire August&nbsp;31, 2007.
These Notes are convertible at $0.70 per share and these Warrants are exercisable at $1.00 per
share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2005, the Company received gross proceeds of $525,000 (net proceeds $456,750) for
the issuance of 9% Subordinated Convertible Notes due May&nbsp;31, 2006 and two-year Warrants to
purchase 1,237,500 shares of Common Stock in a private offering conducted by Spencer Clarke, LLC of
New York. These Notes are convertible at $0.70 per share and these Warrants are exercisable at
$1.00 per share.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, we also issued warrants to purchase 35,000 shares of common stock exercisable at
$1.00 per common share. Of this total, two-year warrants to purchase 25,000 shares were issued as
part of the terms of a consulting agreement and three-year warrants to purchase 10,000 shares were
issued in settlement of a claim.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The issuances of the securities described above were made in reliance on the exemptions from
registration set forth in Section&nbsp;4(2) of the Securities Act of 1933 (the &#147;Act&#148;), as amended, or
Regulations D or S promulgated thereunder.
</DIV>
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. </B><B><I>Management&#146;s Discussion and Analysis or Plan of Operation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with the Financial Statements and supplementary data referred to in
Item&nbsp;7 of this Form 10-KSB.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This discussion contains forward-looking statements that involve risks and uncertainties. Such
statements, which include statements concerning future revenue sources and concentration, selling,
general and administrative expenses, research and development expenses, capital resources,
additional financings and additional losses, are subject to risks and uncertainties, including, but
not limited to, those discussed above in Item&nbsp;1 and elsewhere in this Form 10-KSB, particularly in
&#147;Risk Factors,&#148; that could cause actual results to differ materially from those projected. Unless
otherwise expressly indicated, the information set forth in this Form 10-KSB is as of the date of
the filing of this report, and we undertake no duty to update this information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a development stage company that is transitioning to operations. We have not yet
generated revenues. The company&#146;s focus is on research and development, and initial sales and
marketing, of proprietary and patented devices that are designed to reduce harmful emissions, and
improve fuel efficiency and engine performance on equipment and vehicles driven by internal
combustion engines. Our devices are called &#147;ZEFS&#148;and &#147;CAT-MATE.&#148; Expenses to date have been funded
through the sale of company stock and the issuance of debt.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have devoted the bulk of our efforts to the completion of the design, the development of
our production models, testing of our devices and the promotion of our products in the marketplace
worldwide. We anticipate that these efforts will continue during 2006 and that we will begin
generating revenue in the third quarter of 2006. We will need to raise additional capital during
2006 to fund our research and development and marketing efforts and other expenses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Results of Operation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To date, we have not generated any revenues and our business continues in the development
stage. We have focused our efforts on verifying and developing our technologies and devices and
commencing marketing efforts for their distribution and sale. We entered into the first agreements
for the distribution of our devices in late 2005 and early 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
and administrative expenses were $2,980,046 for the fiscal year ended December&nbsp;31,
2005, compared to $3,323,030 for the fiscal year ended
December&nbsp;31, 2004, a decrease of $342,984.
This decrease is attributable to decreases in non-cash amortization of deferred compensation, consulting
fees, director fees, professional fees and settlement costs ($938,935); corporate expenses ($36,695) and
travel ($34,007), partially offset by increases in non-cash interest relating to convertible debt ($296,692);
salaries and consulting ($201,749); interest and finance costs ($53,591); other office expense ($39,049);
insurance ($24,549); professional fees ($23,741); rent and utilities ($16,619); and non-cash depreciation ($10,660).
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research
and development expenses were $1,150,361 for the fiscal year ended December&nbsp;31, 2005,
compared to $ 1,873,464 for the fiscal year ended December&nbsp;31, 2004, a decrease of $723,103. Our
research and development expenses include contractual payments to RAND, consultant&#146;s fees, capital
expenditures, cost of services and supplies. The decrease in research and development expenses is
primarily attributable to a decrease in non-cash research expense of $1,210,450, as well as actual
R&#038;D expenses for Australia also decreasing by $20,375. These decreases were offset by increases in
actual expenses at our United States R&#038;D facility, which increased by $112,722, and, contractual
payments to RAND Corporation which increased by $395,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Patent settlement costs were $-0- in the fiscal year ended December&nbsp;31, 2005, compared to
$1,610,066 in the fiscal year ended December&nbsp;31, 2004. The patent settlement costs in the fiscal
year ended December&nbsp;31, 2004 were attributable to the Black-Scholes valuation placed on 1,000,000
warrants issued in connection with the acquisition of certain of our intellectual property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net other income increased by $1,011,940 primarily from the cancellation of the Muller loan of
$1,017,208.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
had a net loss of $3,115,186, or $.08 per share, for the year ended December&nbsp;31, 2005, as
compared to a net loss of $6,803,280, or $.19 per share in the fiscal year ended December&nbsp;31, 2004.
We expect a decrease in the net loss in the fiscal year ending December&nbsp;31, 2006 primarily
attributable to sales we currently expect in the third and fourth quarter of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have incurred negative cash flow from operations in the developmental stage since our
inception in 1998. As of December&nbsp;31, 2005, we had cash of $279,821 and an accumulated deficit of
$20,246,074. Our negative operating cash flow in 2005 was funded primarily through the sale of
common stock and convertible notes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements accompanying this Annual Report have been prepared on a going concern
basis, which contemplates the realization of assets and the settlement of liabilities and
commitments in the normal course of our business. As reflected in the accompanying financial
statements, we had a net loss of $3,115,186 and a negative cash flow
from operations of $2,567,178 for the year ending December&nbsp;31, 2005, and a stockholders&#146;
deficiency of $1,408,175 as of December&nbsp;31, 2005. These factors raise substantial doubt about
our ability to continue as a going concern.
Our ability to continue as a going concern is dependent on our ability to raise additional funds
and implement our business plan. The financial statements do not include any adjustments that might
be necessary if we are unable to continue as a going concern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2005 through February&nbsp;2, 2006, we raised an aggregate of $3,606,878 gross proceeds
($3,352,542 net proceeds) from the sale of our stock and the issuance of debt, as follows:
</DIV>

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

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Gross proceeds of $1,480,500 (net proceeds of $1,420,860) from the sale
of stock and warrants in a private offering conducted by the company that
terminated in July&nbsp;2005;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Gross proceeds of $1,051,378 (net proceeds of $996,432) from the sale
of the Investor Notes and related warrants in a private offering conducted
by the company from July&nbsp;2005 through September&nbsp;2005; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Gross proceeds of $1,075,000 (net proceeds of $935,250) from the
issuance of the Bridge Notes and related warrants in a private offering
conducted by Spencer Clarke LLC of New York that began in November&nbsp;2005
and was completed in February&nbsp;2006. Of this amount, the Company received
gross proceeds of $525,000 (net proceeds $456,750) in 2005.</TD>
</TR>



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also during 2005, we received $50,200 gross and net proceeds from the
exercise of warrants to purchase shares of our common stock.</DIV>





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

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


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



</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See &#147;Market for Common Equity and Related Stockholder Matters <I>- </I>Issuances of Unregistered
Securities in Last Fiscal Year&#148; for more details of these issuances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
in December&nbsp;2005, Eugene Eichler, the Company&#146;s Chief
Executive Officer, loaned $45,000 to the Company for working capital
purposes. The loan is unsecured, bears interest at 6% per annum and
is due on demand. In February 2006, Mr. Eichler converted the loan
into Bridge Notes, which Bridge Notes and related warrants he
received on the same terms as all other investors in that offering.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005 and thereafter, our expenses ran, and are expected to continue to run,
at a &#147;burn rate&#148; of approximately <B>$</B>350,000 per month. Our current capital resources will be
sufficient to fund operations only through May&nbsp;2006, and we will require additional capital in
order to operate beyond this date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Bridge Notes mature on the earlier of May&nbsp;31, 2006 or the successful
completion of a new offering of our securities of at least $5,000,000. The Investor Notes mature
on July&nbsp;31<B>, </B>2006; however, the Company may, at its option, require that the Investor Notes be
converted into shares of our Common Stock if we raise at least $5,000,000 in new financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to fund our capital needs for the foreseeable future, including the repayment of the
Bridge Notes as they mature, and to permit us to require the mandatory conversion of the Investor
Notes, we intend to begin a private offering in the first or second quarter of 2006 for the sale of
our common stock for an amount that would provide us sufficient capital for the remainder of 2006
and the foreseeable future thereafter. We also believe that exercises of in-the-money options and
warrants, with various expiration dates during 2006, may provide additional proceeds needed to meet
our capital requirements during 2006. However, there can be no assurance that any additional
equity or debt financing will be available or available on terms favorable to us, or that any
options or warrants, even if they are in-the-money, will be exercised. If we are unable to obtain
additional capital, we may be required to delay, reduce the scope of, or eliminate, our research
and development programs, reduce marketing activities or relinquish rights to technologies that we
might otherwise seek to develop or commercialize. In addition, in such event, we would be unable
to repay the Bridge Notes and the Investor Notes as they mature.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acting pursuant to the order of the Court issued in November&nbsp;2005 in connection with certain
litigation against Mr.&nbsp;Muller, we have also canceled $1,017,208 of debt which Mr.&nbsp;Muller claimed
was owed to him by the Company. See &#147;Legal Proceedings&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Critical Accounting Policies and Estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our discussion and analysis of financial condition and results of operations is
based upon our Financial Statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation of these Financial
Statements and related disclosures requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, expenses, and related disclosure of contingent assets and
liabilities. We evaluate, on an on-going basis, our estimates and judgments, including those
related to the useful life of the assets. We base our estimates on historical experience and
assumptions that we believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The methods, estimates and judgments we use in applying our most critical accounting policies
have a significant impact on the results that we report in our Financial Statements. The SEC
considers an entity&#146;s most critical accounting policies to be those policies that are both most
important to the portrayal of a company&#146;s financial condition and results of operations and those
that require management&#146;s most difficult, subjective or complex judgments, often as a result of the
need to make estimates about matters that are inherently uncertain at the time of estimation. We
believe the following critical accounting policies, among others, require significant judgments and
estimates used in the preparation of our Financial Statements:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and
</DIV>

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

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Certain
significant estimates were made in connection with preparing our financial statements as described
in Note 1 to Notes to Financial Statements. See Item&nbsp;7, &#147;Financial Statements&#148;. Actual results
could differ from those estimates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Stock-Based Compensation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We account for stock-based compensation to employees as defined by using the intrinsic-value
method prescribed in Accounting Principles Board Opinion (APB)&nbsp;No.&nbsp;25, &#147;Accounting for Stock Issued
to Employees.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We account for stock option and warrant grants issued to non-employees using the guidance of
SFAS No.&nbsp;123, &#147;Accounting for Stock-Based Compensation&#148; and EITF No.&nbsp;96-18: &#147;Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services,&#148; whereby the fair value of such option and warrant grants is determined using
the Black-Scholes option pricing model at the earlier of the date at which the non-employee&#146;s
performance is completed or a performance commitment is reached.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recent Accounting Pronouncements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2004, the Financial Accounting Standards Board &#147;(FASB&#148;) issued Statement of
Financial Accounting Standards No.&nbsp;151, &#147;Inventory Costs&#148;. This Statement amends the guidance in
ARB No.&nbsp;43 Chapter&nbsp;4 Inventory Pricing, to require items such as idle facility costs, excessive
spoilage, double freight and rehandling costs to be expensed in the current period, regardless if
they are abnormal amounts or not. This Statement will become effective for us in the first quarter
of 2006. The adoption of SFAS No.&nbsp;151 is not expected to have a material impact on our financial
condition, results of operations, or cash flows.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the FASB issued SFAS No.&nbsp;123R, a revision of SFAS No.&nbsp;123, &#147;Share Based
Payment&#148; (&#147;SFAS No.&nbsp;123R&#148;). SFAS No.&nbsp;123R eliminates the alternative to use APB Opinion No.&nbsp;25&#146;s
intrinsic value method of accounting that was provided for in SFAS No.&nbsp;123 as originally issued,
and requires entities to recognize the cost of employee services received in exchange for awards of
equity instruments based on the grant date fair value of those awards. The fair value of equity
instrument awards is to be estimated using option-pricing models. The resulting cost will be
recognized over the period during which an employee is required to provide service in exchange for
the award, usually the vesting period. Under the original SFAS No.&nbsp;123, this accounting treatment
was optional with pro forma disclosures required.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company will adopt SFAS No.&nbsp;123R effective January&nbsp;1, 2006. It will be effective for all
awards granted after that date. For those stock option awards granted prior to January&nbsp;1, 2006, but
for which the vesting period is not complete, the Company will use the modified prospective
transition method permitted by SFAS No.&nbsp;123R. Under this method, the Company will account for such
awards on a prospective basis, with expense being recognized in the statement of operations
beginning in the first quarter of 2006 using the grant-date fair values previously calculated for
the SFAS No.&nbsp;123 pro forma disclosures presented in Note 7. The compensation expense not
previously recognized in the SFAS No.&nbsp;123 pro forma disclosures for the options that have not
vested will be recognized over the remaining employee service period required to earn the awards.
For stock option awards granted after January&nbsp;1, 2006 the Company will value those awards under the
provisions of SFAS No.&nbsp;123R and will record compensation expense over the employee service period
required to earn the awards. Through December&nbsp;31, 2005, the Company accounted for share-based
payments to employees using Opinion No.&nbsp;25&#146;s intrinsic value method and as such, generally
recognized no compensation expense for employee stock options in the statement of operations.
Accordingly, the adoption of SFAS No.&nbsp;123R&#146;s fair value method will reduce the Company&#146;s results of
operations, but it is not yet known if such reduction will have a material effect on the Company&#146;s overall financial
condition and results of operations.
</DIV>


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

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We anticipate that the impact on our statement of operations of adopting SFAS 123R for our
stock options outstanding at December&nbsp;31, 2005 will be similar to the pro forma impact of SFAS No.
123 presented in Note 7 to our financial statements. However, the incremental expense related to
future stock option grants is difficult to predict because the expense will depend on the number of
awards granted, the grant date stock price, volatility of our stock price and other factors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2005, the FASB issued Statement No.&nbsp;154 (&#147;SFAS 154&#148;) &#147;Accounting Changes and Error
Corrections &#151; a replacement of APB Opinion No.&nbsp;20 and FASB
Statement No.&nbsp;3.&#148; SFAS&nbsp;154 changes the
requirements for the accounting for and reporting of a change in
accounting principle. APB Opinion&nbsp;20 previously required that most voluntary changes in accounting principle be recognized by
including in net income of the period of the change the cumulative effect of changing to the new
accounting principle. SFAS&nbsp;154 requires retrospective application to prior periods&#146; financial
statements of changes in accounting principle, unless it is impracticable to determine either the
period-specific effects of the cumulative effect of the change. In the event of such
impracticality, SFAS 154 provides for other means of application. In the event the Company changes
accounting principles, it will evaluate the impact of SFAS&nbsp;154.
</DIV>













<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7. </B><B><I>Financial Statements</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our consolidated financial statements as of and for the years ended December&nbsp;31, 2005 and 2004
are presented in a separate section of this report following Item&nbsp;14 and begin with the index on
page F-1.
</DIV>

<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;8. </B><B><I>Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;8A. </B><B><I>Controls and Procedures</I></B>
</DIV>


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

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><I>(a)</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Evaluation of disclosure controls and procedures: </I>Our management
evaluated, with the participation of our Chief Executive Officer and
Chief Financial Officer, the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this Annual Report on
Form 10-KSB. Based on this evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that our disclosure controls and
procedures (as defined in Rules&nbsp;13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the Exchange Act)) are not adequate to
ensure that information required to be disclosed by us in reports that we
file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in SEC rules and forms. We
have developed, and have partially implemented, a plan to ensure that all
information will be recorded, processed, summarized and reported on a
timely basis. This plan is dependent, in part, upon reallocation of
responsibilities among various personnel, hiring additional personnel and
additional funding. We began to implement this plan during 2005,
including the hiring in August&nbsp;2005 of a Controller who is a Certified
Public Accountant. However, full implementation of the plan has been
delayed due the lack of adequate financial resources during the majority
of 2005. It should also be noted that the design of any system of
controls is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions, regardless of how remote.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><I>(b)</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Changes in internal control over financial reporting: </I>There was no change in our internal
control over financial reporting that occurred during the period covered by this Annual Report on
Form 10-KSB that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Item&nbsp;8B. Other Information</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>


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

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


<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain information required by Part&nbsp;III is incorporated by reference from our Proxy Statement
to be filed with the Securities and Exchange Commission in connection with the solicitation of
proxies for our 2006 Annual Meeting of Stockholders to be held on May&nbsp;19, 2006 (the &#147;Proxy
Statement&#148;).
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9. </B><B><I>Directors and Executive Officers of Registrant</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this section is incorporated by reference from the section
entitled &#147;Proposal 1 &#151; Election of Directors&#148;, &#147;Executive Officers of the Company&#148; and &#147;Significant
Employees&#148; in the Proxy Statement. Item&nbsp;405 of Regulation&nbsp;S-B calls for disclosure of any known
late filing or failure by an insider to file a report required by Section&nbsp;16 of the Exchange Act.
This disclosure is incorporated by reference to the section entitled &#147;Section&nbsp;16(a) Beneficial
Ownership Reporting Compliance&#148; in the Proxy Statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Code of Business Conduct</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have adopted codes of business conduct and ethics for our directors, officers and employees
which also meets the requirements of a code of ethics under Item&nbsp;406 of Regulation&nbsp;S-B. You can
access the Company&#146;s Code of Business Conduct and Ethics and our Code of Ethics for Senior
Executives and Financial Officers on the Corporate Governance page of the Company&#146;s website at
www.savetheworldair.com. Any shareholder who so requests may obtain a printed copy of the Code of
Conduct by submitting a request to the Company&#146;s Corporate Secretary.
</DIV>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;10. </B><B><I>Executive Compensation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this section is incorporated by reference from the information in
the section entitled &#147;Executive Compensation&#148; in the Proxy Statement.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Item&nbsp;11. </B><B><I>Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this section is incorporated by reference from the information in
the section entitled &#147;Security Ownership of Certain Beneficial Owners and Management&#148; in the Proxy
Statement.
</DIV>
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;12. </B><B><I>Certain Relationships and Related Transactions</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this section is incorporated by reference from the information in
the section entitled &#147;Certain Relationships and Related Transactions&#148; in the Proxy Statement.
</DIV>
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;13. </B><B><I>Exhibits</I></B>
</DIV>


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

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following documents are filed as part of this Form 10-KSB.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial Statements:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reference is made to the contents to Financial Statements of Save the World Air, Inc. under
Item&nbsp;7 of this Form 10-KSB.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Exhibits:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The exhibits listed below are required by Item&nbsp;601 of Regulation&nbsp;S-B.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">24
</DIV>

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


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



</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles of Incorporation, as amended, of the Registrant.</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">3.2(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bylaws of the Registrant.</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">10.1(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Commercial Sublease dated October&nbsp;16, 2003 between the Registrant and KZ
Golf, Inc.</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">10.2(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment dated June&nbsp;15, 2004 to Exhibit&nbsp;10.1</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">10.3*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment dated August&nbsp;14, 2005 to Exhibit&nbsp;10.1</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">10.4*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">General Tenancy Agreement dated March&nbsp;14, 2006 between the Registrant
and Autumlee Pty Ltd.</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">10.5(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement dated December&nbsp;13, 2002 between the Registrant and RAND.</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" nowrap><DIV style="margin-left:0px; text-indent:-0px">10.6(2)**
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement dated May&nbsp;7, 2003 between the Registrant and RAND.</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">10.7(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Modification No.&nbsp;1 dated as of August&nbsp;21, 2003 to Exhibit&nbsp;10.5</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">10.8(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Modification No.&nbsp;2 dated as of October&nbsp;17, 2003 to Exhibit&nbsp;10.5</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">10.9(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Modification No.&nbsp;3 dated as of January&nbsp;20, 2004 to Exhibit&nbsp;10.5</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">10.10(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deed and Document Conveyance between the Trustee of the Property of Jeffrey Ann Muller and Lynette Anne Muller (Bankrupts).</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">10.11(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Bill of Sale dated May&nbsp;28, 2002
between the Registrant
and Kevin Charles Hart.</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">10.12(6)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated December&nbsp;1, 2003 between the Registrant and
Joseph Helleis.</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">10.13(6)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated December&nbsp;1, 2003 between the Registrant and
Edward L. Masry.</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">10.14(6)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated December&nbsp;1, 2003 between the Registrant and
Eugene E. Eichler.</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">10.15(9)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment dated as of March&nbsp;2, 2004 to Exhibit&nbsp;10.13</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">10.16(6)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated December&nbsp;1, 2003 between the Registrant and
Bruce H. McKinnon.</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">10.17(9)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment dated as of March&nbsp;2, 2004 to Exhibit&nbsp;10.15</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">10.18(7)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Save the World Air, Inc. 2004 Stock Option Plan</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">10.19(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Incentive Stock Option Agreement under 2004 Stock Option Plan</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">10.20(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Non-Qualified Stock Option Agreement under 2004 Stock Option Plan</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">10.21(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of April&nbsp;1, 2003 between the Registrant
and Adrian Menzell</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">10.22(10)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Exhibit&nbsp;10.21</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">10.23(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of April&nbsp;1, 2003 between the Registrant
and Pat Baker</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">10.24(10)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Exhibit&nbsp;10.23</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">10.25(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of April&nbsp;1, 2003 between the Registrant
and John Kostic</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">10.26(10)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Exhibit&nbsp;10.25</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">10.27(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of October&nbsp;1, 2004 between the Registrant
and John Fawcett</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">10.28(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Advisory Services Agreement dated as of February&nbsp;26, 2003 between the
Registrant and Kevin Charles Hart</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">10.29(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Advisory Services Agreement dated as of July&nbsp;7, 2003 between the
Registrant and Sir Jack Brabham</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">10.30(8)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">License Agreement dated as of
July&nbsp;1, 2004 between the Registrant and Temple University &#150; The Commonwealth System of Higher Education</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.31(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Exclusive Capital Raising Agreement dated as of July&nbsp;29, 2004 between
the Registrant and London Aussie Marketing, Ltd.</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">10.32(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of November&nbsp;19, 2004 between the
Registrant and London Aussie Marketing, Ltd.</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" nowrap><DIV style="margin-left:0px; text-indent:-0px">10.33(9)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated September&nbsp;1, 2004 with Erin Brockovich</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">10.34(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Representation Agreement dated as of October&nbsp;1, 2004 between the
Registrant and Gurminder Singh</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">10.35(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Advisory Services Agreement dated as of August<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> , 2002 between the
Registrant and Bobby Unser, Jr.</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">10.36(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Advisory Services Agreement dated as of August<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> , 2002 between the
Registrant and Jack Reader</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">10.37(9)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Advisory Services Agreement dated as of August<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> , 2002 between the
Registrant and Nate Sheldon</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">10.38(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment of Patent Rights dated as of September&nbsp;1, 2003 between the
Registrant and Adrian Menzell</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">10.39(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Global Deed of Assignment dated June&nbsp;26, 2004 between the Registrant and
Adrian Menzell</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" nowrap><DIV style="margin-left:0px; text-indent:-0px">10.40(11)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated July&nbsp;1, 2005 between the Registrant and John
K. Bautista</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">10.41(11)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease dated August&nbsp;15, 2005 between the Registrant and Thomas L. Jackson</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">10.42*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment dated February&nbsp;1, 2006 to Exhibit&nbsp;10.41</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">10.43(11)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registrant&#146;s 9% convertible note issued in 2005 Interim Financing</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">10.44(11)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registrant&#146;s stock
purchase warrant issued in 2005 Interim Financing</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">10.45*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registrant&#146;s 9% convertible note issued in 2005 Bridge Financing</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">10.46*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registrant&#146;s stock purchase warrant issued in 2005 Bridge Financing</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">23.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Weinberg &#038; Co.</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">24*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney (included on Signature Page)</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">31.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Executive Officer of Annual Report Pursuant to
Rule&nbsp;13(a)&#151;15(e) or Rule&nbsp;15(d)&#151;15(e).</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">31.2*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Financial Officer of Annual Report Pursuant to 18
U.S.C. Section&nbsp;1350.</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">32.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Executive Officer and Chief Financial Officer of
Annual Report pursuant to Rule&nbsp;13(a)&#151;15(e) or Rule&nbsp;15(d)&#151;15(e).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</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 nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Filed herewith.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Confidential treatment previously requested.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD>Management contract or compensatory plan or arrangement.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Registration Statement on Form 10-SB (Registration Number 000-29185), as amended, filed on March&nbsp;2, 2000.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 10-KSB for the fiscal year ended December&nbsp;31, 2002.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 8-K filed on December&nbsp;30, 2002.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 10-QSB for the quarter ended March&nbsp;31, 2004.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 8-K filed on November&nbsp;12, 2002.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 10-KSB for the fiscal year ended December&nbsp;31, 2003.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Appendix&nbsp;C of Registrant&#146;s Schedule&nbsp;14A filed on April&nbsp;30, 2004, in connection with its Annual Meeting of
Stockholders held on May&nbsp;24, 2004.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant Form 8-K filed on July&nbsp;12, 2004.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 10-KSB for the fiscal year ended December&nbsp;31, 2004.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 10-QSB for the quarter ended June&nbsp;30, 2005.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 10-QSB for the quarter ended September&nbsp;30, 2005.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. </B><B><I>Principal Accountant Fees and Services</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this section is incorporated by reference from the information in
the section entitled &#147;Proposal 3 &#151; Ratification of Appointment of Independent Auditors&#148; in the
Proxy Statement.
</DIV>

<P align="center" style="font-size: 10pt">26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with Section&nbsp;13 or 15(d) of the Exchange Act, the Registrant has caused this
report to be signed on its behalf by the undersigned, hereunto duly authorized.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><FONT style="font-variant: SMALL-CAPS">Save The World Air, Inc.</FONT><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                          /s/ EUGENE E. EICHLER
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Eugene E. Eichler&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><I>Chief Executive Officer</I>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date:
March&nbsp;31, 2006
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>POWER OF ATTORNEY</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints, jointly and severally, Eugene E. Eichler and Bruce H. McKinnon, and each of them, as
his or her true and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments to this Annual Report on Form 10-KSB, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them,
or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->

<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/ EUGENE E. EICHLER
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chief Executive Officer,
Chief Financial</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;31, 2006</TD>
</TR>
<TR valign="bottom" style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>

<TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 0px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">Eugene E. Eichler</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Officer,Treasurer and Director
</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="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/ BRUCE H. McKINNON
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">President and Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;31, 2006</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 0px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">Bruce H. McKinnon</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/ JOSEPH HELLEIS
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chairman of the Board
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;31, 2006</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 0px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">Joseph Helleis</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/ ROBERT F. SYLK
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;31, 2006</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 0px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">Robert F. Sylk</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/ J. JOSEPH BROWN
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;31, 2006</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 0px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">J. Joseph Brown</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/ JOHN F. PRICE
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;31, 2006</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 0px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">John F. Price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">/s/ CECIL BOND KYTE
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;31, 2006</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">Cecil Bond Kyte</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">27
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><u>Report of Independent Registered Public Accounting Firm</u></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap>F-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><u>Balance sheets</u></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap>F-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><u>Statements of operations</u></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap>F-5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><u>Statements of stockholders&#146; deficiency</u></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap>F-6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><u>Statements of cash flows</u></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap>F-12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><u>Notes to financial statements</u></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap>F-14</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-1
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Board of Directors<BR>
Save the World Air, Inc.

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying balance sheets of Save the World Air, Inc. (a development stage
enterprise) as of December&nbsp;31, 2005 and 2004 and the related statements of operations, changes in
stockholders&#146; deficiency and cash flows for the years then ended and for the period from inception
(February&nbsp;18, 1998) to December&nbsp;31, 2005. These financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an opinion on these financial statements
based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Save the World Air, Inc. (a development stage enterprise) as of
December&nbsp;31, 2005 and 2004 and the results of its operations and its cash flows for the years then
ended and for the period from inception (February&nbsp;18, 1998) to December&nbsp;31, 2005, in conformity
with accounting principles generally accepted in the United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying financial statements have been prepared assuming that the Company will continue as
a going concern. As discussed in Note&nbsp;2 to the financial statements, the Company had a net loss of
$3,115,186 and a negative cash flow from operations of $2,567,178 for the year ended December&nbsp;31,
2005, and had a working capital deficiency of $1,708,049 and a stockholders&#146; deficiency of
$1,408,175 as of December&nbsp;31, 2005. These factors raise substantial doubt about its ability to
continue as a going concern. Management&#146;s plans concerning this
matter are also described in Note&nbsp;2. The accompanying financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 18pt">/s/ WEINBERG &#038; COMPANY, P.A.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">WEINBERG &#038; COMPANY, P.A.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">March&nbsp;22, 2006<BR>
Los Angeles, California
</DIV>


<P align="center" style="font-size: 10pt">F-2
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: Helvetica,Arial,sans-serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>SAVE THE WORLD AIR, INC.</B><BR>
<B>(A DEVELOPMENT STAGE ENTERPRISE)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>BALANCE SHEETS</B><BR>
<B>DECEMBER 31, 2005 AND 2004</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">279,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">84,826</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,602</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">288,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,428</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Property and equipment</B>, net of accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">295,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,596</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">588,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">123,024</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See notes to financial statements.
</DIV>


<P align="center" style="font-size: 10pt">F- 3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>SAVE THE WORLD AIR, INC. </B><BR>
<B>(A DEVELOPMENT STAGE ENTERPRISE)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>BALANCE SHEETS &#151; Continued</B><BR>
<B>DECEMBER 31, 2005 AND 2004</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND STOCKHOLDERS&#146; DEFICIENCY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">155,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">64,089</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,420</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued research and development fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">680,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued professional fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">450,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">876,452</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payable to stockholder</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payable to related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,478</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Finders fees payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,521</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Convertible notes, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,996,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,112,960</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Advances from founding executive officer</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,017,208</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Commitments and contingencies</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Stockholders&#146; deficiency</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock, $.001 par value: 200,000,000 shares
authorized, 31,387,418 and 37,784,821 shares
issued and outstanding at December&nbsp;31, 2005
and 2004, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,784</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock
to be issued, 846,548&nbsp;shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">612,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,336,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,043,028</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(142,187</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(76,068</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deficit accumulated during the development stage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,246,074</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,130,888</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total stockholders&#146; deficiency</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,408,175</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,007,144</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">588,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">123,024</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See notes to financial statements.
</DIV>



<P align="center" style="font-size: 10pt">F- 4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>SAVE THE WORLD AIR, INC.</B><BR>
<B>(A DEVELOPMENT STAGE ENTERPRISE)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>STATEMENTS OF OPERATIONS</B><BR>
<B>YEARS ENDED DECEMBER 31, 2005 AND 2004 AND FOR THE PERIOD FROM</B><BR>
<B>INCEPTION (FEBRUARY 18, 1998) TO
DECEMBER 31, 2005</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Cumulative</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>since</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>inception</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net sales</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,980,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,323,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,845,413</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Research and development expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,150,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,873,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,803,587</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-cash patent settlement cost</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,610,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,610,066</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Loss before other income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,130,407</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,806,560</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,259,066</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">953</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Settlement of litigation and debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,017,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,017,208</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Loss before provision for income taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,113,199</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,806,046</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,240,905</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Provision (benefit)&nbsp;for income taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,766</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,169</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net loss</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,115,186</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,803,280</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(20,246,074</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net loss per common share, basic and diluted</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.08</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Weighted average common shares outstanding, basic and diluted</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,248,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,841,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See notes to financial statements.
</DIV>



<P align="center" style="font-size: 10pt">F- 5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">

<!-- landscape -->



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>SAVE THE WORLD AIR, INC.</B><BR>
<B>(A DEVELOPMENT STAGE ENTERPRISE)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>STATEMENTS OF STOCKHOLDERS&#146; DEFICIENCY</B><BR>
<B>FROM INCEPTION (FEBRUARY 18, 1998) TO DECEMBER 31, 2005</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&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>
    <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>
    <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>
    <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>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Deficit accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total stockholders&#146;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Price per</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Deferred</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>during the</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>development</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>share</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>to be issued</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>development stage</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>stage deficiency</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, February&nbsp;18, 1998 </B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(date of inception)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of common stock on April&nbsp;18, 1998</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">.0015 &#150; .01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,030,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,307</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,307</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, December&nbsp;31, 1998</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,030,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,030</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,270</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(21,307</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,993</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of common stock on May&nbsp;18, 1999</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00 &#150; 6.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">516,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">516,936</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of common stock for ZEFS on September&nbsp;14, 1999</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for professional services on May&nbsp;18, 1999</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,513</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,075,264</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,075,264</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, December&nbsp;31, 1999</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,297,125</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,297</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>580,452</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,096,571</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(500,822</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for employee compensation on February&nbsp;8, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for consulting services on February&nbsp;8, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for professional services on April&nbsp;18, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for directors fees on April&nbsp;18, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for professional services on May&nbsp;19, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for directors fees on June&nbsp;20, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,640</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for professional services on June&nbsp;20, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,251</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for professional services on June&nbsp;26, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,675</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for employee compensation on June&nbsp;26, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,820</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for consulting services on June&nbsp;26, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,213</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for promotional services on July&nbsp;28, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,214</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for consulting services on July&nbsp;28, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,985</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for consulting services on August&nbsp;4, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,620</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for promotional services on August&nbsp;16, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for consulting services on September&nbsp;5, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,874</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for consulting services on September&nbsp;10, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock issued for consulting services on November&nbsp;2, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,653</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F- 6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: Helvetica,Arial,sans-serif">

<!-- landscape -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>STATEMENTS OF STOCKHOLDERS&#146; DEFICIENCY &#151; Continued<BR>
FROM INCEPTION (FEBRUARY 18, 1998) TO DECEMBER 31, 2005</B>

</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="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Deficit accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total stockholders&#146;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price per</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Deferred</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>during the</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>development</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>to be issued</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>development stage</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>stage deficiency</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
November
4, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,653</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
December
20, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
filing
services
on
December
20, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,586</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
professional
services
on
December
26, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,925</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other
stock
issuance
on
August
24, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common
shares
cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(55,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(55</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(64,245</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(64,300</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,270,762</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,270,762</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance,
December
31, 2000</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,645,935</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,646</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,437,873</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,367,333</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(913,814</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
January
8, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
February
1, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,245</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
March
1, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,753</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
legal
services
on
March
13, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
April
3, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,458</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
legal
services
on
April
4, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,730</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
professional
services
on
April
4, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,760</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
April
5, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
filing
fees on
April
30, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,034</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
filing
fees on
September
19, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,276</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
professional
services
on
September
28, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
directors
services
on
October
5, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
legal
services
on
October
17, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,666</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
October
18, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">379,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
October
19, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">187,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">187,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
exhibit
fees on
October
22, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,751</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
directors
services
on
November
2, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">949,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">950,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
November
7, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F - 7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">
<!-- landscape -->

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>STATEMENTS OF STOCKHOLDERS&#146; DEFICIENCY &#151; Continued<BR>
FROM INCEPTION (FEBRUARY 18, 1998) TO DECEMBER 31, 2005</B>

</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="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Deficit accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total stockholders&#146;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price per</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Deferred</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>during the</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>development</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>to be issued</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>development stage</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>stage deficiency</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
November
20, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,140</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
November
27, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
November
28, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">187,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intrinsic
value
of
options
issued
to
employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,600,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fair
value
of
options
issued
to
non-employees
for
services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,318</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization
of
deferred
compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191,667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,735,013</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,735,013</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance,
December
31, 2001</B></DIV></TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">18,085,847</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">18,086</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold" align="right">&#151;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">6,220,322</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">(2,408,333</TD>
    <TD style="font-weight: bold">)</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">(5,102,346</TD>
    <TD style="font-weight: bold">)</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">(1,272,271</TD>
    <TD style="font-weight: bold">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
directors
services
on
December
10, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">857,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">860,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common
stock
paid
for,
but not
issued
(2,305,000
shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">0.15-0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">389,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">389,875</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fair
value
of
options
issued
to
non-employees
for
services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(54,909</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization
of
deferred
compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">891,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">891,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss
for the
year
ended
December
31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,749,199</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,749,199</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance,
December
31, 2002</B></DIV></TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">20,235,847</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">20,236</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">389,875</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">7,133,081</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">(1,572,060</TD>
    <TD style="font-weight: bold">)</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">(7,851,545</TD>
    <TD style="font-weight: bold">)</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">&nbsp;</TD>
    <TD style="font-weight: bold">(1,880,413</TD>
    <TD style="font-weight: bold">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common
stock
issued,
previously
paid for</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,425,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(213,750</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">212,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common
stock
issued,
previously
paid for</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(220,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
March
20, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">670,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
April
4, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224,962</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
April
8, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
May&nbsp;8,
2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">287,480</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
June
16, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">475,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
legal
services
on June
27, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,877</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt
converted
to
stock
on June
27, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock and
warrants
issued
for
cash on
July
11, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">519,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock and
warrants
issued
for
cash on
September
29, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,775,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">441,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">443,751</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock and
warrants
issued
for
cash on
October
21, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,845,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">459,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">461,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock and
warrants
issued
for
cash on
October
28, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,570,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock and
warrants
issued
for
cash on
November
19, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F - 8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">

<!-- landscape -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>STATEMENTS OF STOCKHOLDERS&#146; DEFICIENCY &#151; Continued<BR>
FROM INCEPTION (FEBRUARY 18, 1998) TO DECEMBER 31, 2005</B>

</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="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Deficit accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total stockholders&#146;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price per</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Deferred</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>during the</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>development</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>to be issued</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>development stage</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>stage deficiency</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Finders&#146;
fees
related
to
stock
issuances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(312,582</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(268,707</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common
stock
paid
for,
but not
issued
(25,000
shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization
of
deferred
comp</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">863,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">863,727</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss
for
year
ended
December
31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,476,063</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,476,063</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance,
December
31, 2003</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34,128,261</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34,128</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,250</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,162,177</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(708,333</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(10,327,608</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(833,386</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common
stock
issued,
previously
paid for</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,250</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
director
services
on
March
31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
finders
fees on
March
31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,375</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
finders
fees on
March
31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">406,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,606</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
services
on
April
2, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,450</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt
converted
to
stock
on
April
2, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
upon
exercise
of
warrants
on May
21, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">950,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
directors
services
on June
8, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,020,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
August
25, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">549,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
upon
exercise
of
options
on
August
30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
September
8, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
consulting
services
on
September
15, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
patent
settlement
on
September
22, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
research
and
development
on
October
6, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
October
6, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
October
15, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
upon
exercise
of
stock
options
on
October
21, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
November
3, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
November
18, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
December
9, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock
issued
for
cash on
December
23, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Finders
fees
related
to
stock
issuances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(88,384</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(88,384</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common
stock
paid
for,
but not
issued
(119,000
shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F - 9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">
<!-- landscape -->

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>STATEMENTS OF STOCKHOLDERS&#146; DEFICIENCY &#151; Continued<BR>
FROM INCEPTION (FEBRUARY 18, 1998) TO DECEMBER 31, 2005</B>

</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="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Deficit accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total stockholders&#146;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price per</B></TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Deferred</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>during the</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>development</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>to be issued</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>development stage</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>stage deficiency</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Intrinsic value
of options
issued to
employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(248,891</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fair value of
options issued
to
non-employees
for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(55,381</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fair value of
warrants
issued for
settlement
costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,585,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,585,266</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fair value of
warrants
issued to
non-employees
for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,872</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of
deferred
compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">936,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">936,537</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net loss for
year ended
December&nbsp;31,
2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,803,280</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,803,280</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, December
31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37,784,821</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37,784</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>119,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,043,028</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(76,068</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(17,130,888</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,007,144</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Common stock
issued,
previously
paid for</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(69,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock issued
upon exercise
of warrants,
previously
paid for</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(50,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock issued for
cash on
January&nbsp;20,
2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock issued
upon exercise
of warrants on
January&nbsp;31,
2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock issued for
cash on
February&nbsp;17,
2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock issued for
cash on March
31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock issued for
cash on May
17, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock issued for
cash on June
7, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">299,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock issued for
cash on August
5, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">480,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">480,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">480,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock issued for
cash on August
9, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock issued for
cash on
October&nbsp;27,
2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Common stock
cancelled on
December&nbsp;7,
2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">Various</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,047,403</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,047</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock issued for
settlement of
payables on
December&nbsp;21,
2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,092</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock issued for
settlement of
payables on
December&nbsp;31,
2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">555,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">555,429</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Finders fees
related to
stock issuances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(109,840</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(109,840</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Intrinsic value
of options
issued to
employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(243,750</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fair value of
options issued
for settlement
costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fair value of
warrants
issued for
settlement
costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fair value of
warrants
issued to
non-employees
for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of
deferred
compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177,631</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Warrants issued
with convertible notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">756,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">756,768</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



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


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: Helvetica,Arial,sans-serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>SAVE THE WORLD AIR, INC.</B><BR>
<B>(A DEVELOPMENT STAGE ENTERPRISE)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>STATEMENTS OF STOCKHOLDERS&#146; DEFICIENCY &#151; Continued<BR>
FROM INCEPTION (FEBRUARY 18, 1998) TO DECEMBER 31, 2005</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><DIV style="border-bottom: 0px solid #000000; font-size: 1px">&nbsp;</DIV>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&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>
    <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>
    <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>
    <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>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Deficit accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total stockholders&#146;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Price per</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Deferred</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>during the</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>development</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>share</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>to be issued</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>development stage</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>stage deficiency</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intrinsic value of beneficial
conversion associated
with convertible
notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">696,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">696,413</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss for year ended
December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,115,186</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,115,186</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31,387,418</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>31,387</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>612,521</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>18,336,178</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(142,187</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(20,246,074</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1,408,175</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 0px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">See notes to financial statements.
</DIV>


<P align="center" style="font-size: 10pt">F-11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.</B><BR>
<B>(A DEVELOPMENT STAGE ENTERPRISE)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>STATEMENTS OF CASH FLOWS<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004 AND FOR THE<BR>
PERIOD FROM INCEPTION (FEBRUARY 18, 1998) TO<BR>
DECEMBER 31, 2005</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><DIV style="border-bottom: 0px solid #000000; font-size: 1px">&nbsp;</DIV>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Cumulative</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>since</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>inception</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,115,186</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,803,280</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(20,246,074</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net loss to net cash
used in operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Write off of intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">505,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Settlement
of litigation and debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,017,208</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fair value of options issued for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,190</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Issuance of common stock for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,427,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,280,623</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Issuance of options for legal settlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Issuance of warrants for legal settlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Issuance of warrants for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Patent acquisition cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,610,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,610,066</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of debt discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318,759</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">936,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,060,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,762</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in operating assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepaid expenses and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,907</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,602</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,509</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,991</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts payable and accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,010,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">388,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,799,923</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash used in operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,567,178</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,411,464</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,429,554</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(279,123</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,037</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(325,586</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(279,123</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,037</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(325,586</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Increase (decrease)&nbsp;in payables to related parties and stockholder</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,425</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">715,183</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances from founding executive officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(500,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net proceeds
from issuance of convertible notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,453,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,453,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of common stock for cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,420,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,466,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,366,596</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock issuable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,041,296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,579,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,034,961</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net increase (decrease)&nbsp;in cash</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(841,226</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279,821</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash</B>, beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">926,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash</B>, end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">279,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">84,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">279,821</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">See notes to financial statements.
</DIV>


<P align="center" style="font-size: 10pt">F-12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.</B><BR>
<B>(A DEVELOPMENT STAGE ENTERPRISE)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>STATEMENTS
OF CASH FLOWS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004 AND FOR THE<BR>
PERIOD FROM INCEPTION (FEBRUARY 18, 1998) TO<BR>
DECEMBER 31, 2005</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><DIV style="border-bottom: 0px solid #000000; font-size: 1px">&nbsp;</DIV>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Cumulative</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>since</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>inception</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Supplemental disclosures of cash flow
information</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash paid during the year for</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,157</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-cash investing and financing
activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of intangible asset through
advance from related party and issuance
of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">505,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred compensation for stock options
issued for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">304,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,202,931</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of property and equipment
financed by advance from related party</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,550</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Conversion of related party debt to equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">515,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of common stock in settlement of
payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,981</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock, previously paid for</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Finders fees accrued for issuance of
common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400,966</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Value of warrants and beneficial conversion
feature of convertible notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,453,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,453,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cancellation of stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,047</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Conversion of accounts payable and accrued expenses to common stock to be issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">612,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">612,521</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">See notes to financial statements.
</DIV>



<P align="center" style="font-size: 10pt">F-13
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>1. Description of business, significant matters and prior period corrections</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Description of business
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Save the World Air, Inc. (the &#147;Company&#148;) was incorporated in Nevada on February&nbsp;18, 1998
under the name Mandalay Capital Corp. The Company changed its name to Save the World Air,
Inc. on February&nbsp;11, 1999 following the purchase of the worldwide exclusive manufacturing,
marketing and distribution rights for the ZEFS device. The ZEFS is a device, which is
fitted to an internal combustion engine and is expected to reduce carbon monoxide
hydrocarbons and nitrous oxide emissions. During the past three years, the Company has
been acquiring new technologies, developing prototype products using the Company&#146;s
technologies and conducting scientific tests regarding the technologies and prototype
products. In 2003, the Company acquired worldwide intellectual property and patent rights
to technologies which reduce carbon monoxide, hydrocarbons and nitrous oxide emissions in
two- and four-stroke motorcycles, fuel-injection engines, generators and small engines.
The Company has also developed prototype products and named them &#147;CAT-MATE&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Summary of significant accounting policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development stage enterprise
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company is a development stage enterprise as defined by Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;7, &#147;Accounting and Reporting by Development Stage
Enterprises.&#148; All losses accumulated since the inception of the Company have been
considered as part of the Company&#146;s development stage activities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company&#146;s focus is on research and development of proprietary devices that are
designed to reduce harmful emissions, and improve fuel efficiency and engine performance
on equipment and vehicles driven by internal combustion engines and has not yet generated
any revenues. The prototype devices are called &#147;ZEFS&#148; and &#147;CAT-MATE.&#148; The Company has put
forth efforts to complete the design, the development of production models and the
promotion of products in the market place worldwide. Expenses have been funded through
the sale of company stock and convertible notes. The Company has taken actions to
secure the intellectual property rights to the ZEFS and CAT-MATE devices. In addition,
the Company has initiated marketing efforts to international governmental entities in
cooperation with the United Nations Environmental Programme (&#147;UNEP&#148;) and various original
equipment manufacturers (&#147;OEMs&#148;), to eventually sell or license the ZEFS and CAT-MATE
products and technology.
</DIV>

<P align="center" style="font-size: 10pt">F - 14
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Summary of significant accounting policies &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liquidity
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company is subject to the usual risks associated with a development stage enterprise.
These risks include, among others, those associated with product development, acceptance
of the product by users and the ability to raise the capital necessary to sustain
operations. Since its inception, the Company has incurred significant losses. The
Company anticipates increasing expenditures over at least the next year as the Company
continues its product development and evaluation efforts, and begins its marketing
activities. Without significant revenue, these expenditures will likely result
in additional losses. The Company is in the process of raising additional funds and
raised $1,420,860 (net of finders fees of $109,840) in 2005 through the sale of 1,531,000
shares of its common stock in private placement transactions and the exercise of 50,500
warrants and options (see Note 6).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Going concern
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The accompanying financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities and commitments
in the normal course of business. As reflected in the accompanying financial statements,
the Company had a net loss of $3,115,186 and a negative cash flow from operations of
$2,567,178 for the year ended December&nbsp;31, 2005, and had a working capital deficiency of
$1,708,049 and a stockholders&#146; deficiency of $1,408,175 at December&nbsp;31, 2005. These
factors raise substantial doubt about its ability to continue as a going concern. The
ability of the Company to continue as a going concern is dependent upon the Company&#146;s
ability to raise additional funds and implement its business plan. The financial
statements do not include any adjustments that might be necessary if the Company is unable
to continue as a going concern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment and depreciation
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Property and equipment are stated at cost. Depreciation is computed using the
straight-line method based on the estimated useful lives of the assets, generally ranging
from three to ten years. Expenditures for major renewals and improvements that extend the
useful lives of property and equipment are capitalized. Expenditures for repairs and
maintenance are charged to expense as incurred. Leasehold improvements are amortized
using the straight-line method over the shorter of the estimated useful life of the asset
or the lease term.
</DIV>

<P align="center" style="font-size: 10pt">F - 15
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>SAVE THE WORLD AIR, INC.</B><BR>
<B>(A DEVELOPMENT STAGE ENTERPRISE)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued</B><BR>
<B>YEARS ENDED DECEMBER 31, 2005 AND 2004</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>2. Summary of significant accounting policies &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-lived assets
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company accounts for the impairment and disposition of long-lived assets in accordance
with SFAS No.&nbsp;144, &#147;Accounting for the Impairment or Disposal of Long-Lived Assets.&#148; In
accordance with SFAS No.&nbsp;144, long-lived assets to be held are reviewed for events or
changes in circumstances that indicate that their carrying value may not be recoverable.
The Company periodically reviews the carrying values of long-lived assts to determine
whether or not an impairment to such value has occurred. No impairments were recorded
during the period from inception (February&nbsp;18, 1998) through December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Earnings (loss)&nbsp;per share
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Basic earnings (loss)&nbsp;per share is computed by dividing net income (loss)&nbsp;available to
common stockholders by the weighted average number of common shares outstanding during the
period. Diluted earnings per share reflects the potential dilution, using the treasury
stock method, that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the Company. In computing diluted earnings per share, the
treasury stock method assumes that outstanding options and warrants are exercised and the
proceeds are used to purchase common stock at the average market price during the period.
Options and warrants will have a dilutive effect under the treasury stock method only when
the average market price of the common stock during the period exceeds the exercise price
of the options and warrants. For the years ended December&nbsp;31, 2005 and 2004, the dilutive
impact of outstanding stock options of 6,508,561 and 14,422,652 respectively, and
outstanding warrants of 20,657,492 and 15,529,414 have been excluded because their impact
on the loss per share is antidilutive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company accounts for income taxes in accordance with SFAS No.&nbsp;109, &#147;Accounting for
Income Taxes.&#148; Under SFAS No.&nbsp;109, income taxes are recognized for the amount of taxes
payable or refundable for the current year and deferred tax liabilities and assets are
recognized for the future tax consequences of transactions that have been recognized in
the Company&#146;s financial statements or tax returns. A valuation allowance is provided when
it is more likely than not that some portion or all of the deferred tax asset will not be
realized.
</DIV>

<P align="center" style="font-size: 10pt">F - 16
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Summary of significant accounting policies &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company accounts for stock-based compensation issued to employees using the
intrinsic-value method prescribed in Accounting Principles Board Opinion (&#147;APB&#148;) No.&nbsp;25,
&#147;Accounting for Stock Issued to Employees.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company accounts for stock option and warrant grants issued to non-employees using the
guidance of SFAS No.&nbsp;123, &#147;Accounting for Stock-Based Compensation&#148; and EITF No.&nbsp;96-18:
&#147;Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring,
or in Conjunction with Selling, Goods or Services,&#148; whereby the fair value of such option
and warrant grants is determined using the Black-Scholes option pricing model at the
earlier of the date at which the non-employee&#146;s performance is completed or a performance
commitment is reached.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company has elected to account for stock-based compensation using the intrinsic value
method prescribed in APB No.&nbsp;25 and related interpretations, and follow the pro forma
disclosure requirements of SFAS No.&nbsp;123. Accordingly, no compensation expense has been
recognized related to the granting of stock options, except as noted above. The following
table illustrates the effect on net income as if the Company had applied the fair value
recognition provisions of SFAS No.&nbsp;123 to stock-based employee compensation.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Cumulative</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>since</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>inception</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,115,186</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,803,280</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(20,246,074</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: total fair value method stock-
based employee compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,039,268</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,721,222</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,010,310</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: deferred compensation
amortization for below market
employee options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">895,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,950,454</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,990,668</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(7,629,501</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(22,305,930</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma loss per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.10</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F - 17
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Summary of significant accounting policies &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation &#151; Continued
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The fair market value of the stock options at the grant date was estimated using the
Black-Scholes pricing model with the following weighted average assumptions:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="82%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Expected life (years)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.26</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Risk free interest rate
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.02</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Volatility
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">188.83</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Expected dividend yield
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.00</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Business and credit concentrations
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company&#146;s cash balances in financial institutions at times may exceed federally
insured limits. As of December&nbsp;31, 2005, before adjustments for outstanding checks and
deposits in transit, the Company had $376,429 on deposit with two banks. The deposits are
federally insured up to $100,000 on each bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Estimates
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Certain significant estimates were made in connection with
preparing the Company&#146;s financial statements. Actual results could differ from those
estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of financial instruments
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The carrying amounts of financial instruments, including cash, accounts payable and
accrued expenses, convertible notes, and payables to related parties approximate fair value because of their
short maturity as of December&nbsp;31, 2005.
</DIV>

<P align="center" style="font-size: 10pt">F - 18
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Summary of significant accounting policies &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recent accounting pronouncements
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In November&nbsp;2004, the FASB issued Statement of Financial Accounting Standards No.&nbsp;151,
&#147;Inventory Costs&#148;. This Statement amends the guidance in ARB No.&nbsp;43 Chapter&nbsp;4 Inventory
Pricing, to require items such as idle facility costs, excessive spoilage, double freight
and rehandling costs to be expensed in the current period, regardless if they are abnormal
amounts or not. This Statement will become effective for us in the first quarter of 2006.
The adoption of SFAS No.&nbsp;151 is not expected to have a material impact on our financial
condition, results of operations, or cash flows.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In December&nbsp;2004, the FASB issued SFAS No.&nbsp;123R, a revision of SFAS No.&nbsp;123, &#147;Share Based
Payment&#148;. SFAS No.&nbsp;123R eliminates the alternative to use APB Opinion No.&nbsp;25&#146;s intrinsic
value method of accounting that was provided for in SFAS No.&nbsp;123 as originally issued, and
requires entities to recognize the cost of employee services received in exchange for
awards of equity instruments based on the grant date fair value of those awards. The fair
value of equity instrument awards is to be estimated using option-pricing models. The
resulting cost will be recognized over the period during which an employee is required to
provide service in exchange for the award, usually the vesting period. Under the original
SFAS No.&nbsp;123, this accounting treatment was optional with pro forma disclosures required.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company will adopt SFAS No.&nbsp;123R effective January&nbsp;1, 2006. It will be effective for
all awards granted after that date. For those stock option awards granted prior to January
1, 2006, but for which the vesting period is not complete, the Company will use the
modified prospective transition method permitted by SFAS No.&nbsp;123R. Under this method, the
Company will account for such awards on a prospective basis, with expense being recognized
in the statement of operations beginning in the first quarter of 2006 using the grant-date
fair values previously calculated for the SFAS No.&nbsp;123 pro forma disclosures presented in
Note 2. The compensation expense not previously recognized in the SFAS No.&nbsp;123 pro forma
disclosures for the options that have not vested will be recognized over the remaining
employee service period required to earn the awards. For stock option awards granted
after January&nbsp;1, 2006 the Company will value those awards under the provisions of SFAS No.
123R and will record compensation expense over the employee service period required to
earn the awards. Through December&nbsp;31, 2005, the Company accounted for share-based
payments to employees using Opinion No.&nbsp;25&#146;s intrinsic value method and as such, generally
recognized no compensation expense for employee stock options in the statement of
operations.
</DIV>

<P align="center" style="font-size: 10pt">F - 19
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Summary of significant accounting policies &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recent accounting pronouncements &#151; Continued
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The
Company anticipates that the impact on the statement of operations of adopting SFAS
123R for the stock options outstanding at December&nbsp;31, 2005 will be similar to the pro
forma impact of SFAS No.&nbsp;123 presented in Note 2 to the financial statements. However, the
incremental expense related to future stock option grants is difficult to predict because
the expense will depend on the number of awards granted, the grant date stock price,
volatility of the stock price and other factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In May&nbsp;2005, the FASB issued Statement No.&nbsp;154 (&#147;SFAS 154&#148;) &#147;Accounting Changes and Error
Corrections &#151; a replacement of APB Opinion No.&nbsp;20 and FASB Statement No.&nbsp;3.&#148; SFAS 154 changes the
requirements for the accounting for and reporting of a change in accounting principle. APB Opinion
20 previously required that most voluntary changes in accounting principle be recognized by
including in net income of the period of the change the cumulative effect of changing to the new
accounting principle. SFAS 154 requires retrospective application to prior periods&#146; financial
statements of changes in accounting principle, unless it is impracticable to determine either the
period-specific effects of the cumulative effect of the change. In the event of such
impracticality, SFAS 154 provides for other means of application. In the event the Company changes
accounting principles, it will evaluate the impact of SFAS 154.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. Certain relationships and related transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advances from founding executive officer
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">All of the marketing and manufacturing rights for the ZEFS were acquired from Mr.&nbsp;Muller,
for 5,000,000 shares of common stock, $500,000 and a $10 royalty for each unit sold (see
discussion below), pursuant to the Agreement entered into in December&nbsp;1998, by and between
the Company and Mr.&nbsp;Muller. Working capital advances in the amount of $517,208 and
payment in the amount of $500,000 for marketing and distribution rights of the ZEFS are
due to Mr.&nbsp;Muller. Such amounts are interest free and do not have any due dates for
payment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In January&nbsp;2000, the Company entered into an agreement offering Mr.&nbsp;Muller and Lynne
Muller, Mr.&nbsp;Muller&#146;s wife, the option to purchase 5,000,000 shares each at $0.10 per share
as consideration for work performed for the Company. Mrs.&nbsp;Muller subsequently transferred
her option to Mr.&nbsp;Muller.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In connection with the Company&#146;s legal proceedings against Mr.&nbsp;Muller (see Note 10). The
Company has canceled (i)&nbsp;the 8,047,403 shares of its common stock held by Mr.&nbsp;Muller
and/or his affiliates, (ii)&nbsp;the options to acquire an additional 10,000,000 shares of the
Company&#146;s common stock held by Mr.&nbsp;Muller personally and (iii)&nbsp;the $1,017,208 of debt
which Mr.&nbsp;Muller claimed was owed to him by the Company.
</DIV>

<P align="center" style="font-size: 10pt">F - 20
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. Certain relationships and related transactions &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans from related parties
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Masry &#038; Vititoe, a law firm in which Edward Masry, the Company&#146;s former Chief Executive
Officer, was a partner, has advanced $158,733 and $36,478 as of December&nbsp;31, 2005 and
2004, respectively, to the Company for working capital purposes. Advances by Masry and
Vititoe are unsecured, non-interest bearing, and are due on demand. In April&nbsp;2004, the
Company issued 60,000 shares of common stock to convert $15,000 of an outstanding loan
made to the Company by the wife of Edward Masry. The shares issued are valued at the
current market price at the date of issuance of $91,800 resulting in additional charge to
expense of $76,800, which was reflected as consulting expense in the financial statements
for the year ended December&nbsp;31, 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">As of December&nbsp;31, 2005, Eugene Eichler, the Company&#146;s Chief Executive Officer, advanced
$45,000 to the Company for working capital purposes. These advances are unsecured, bear
interest at 6% per annum and are due on demand. In February&nbsp;2006, these advances were
converted into a convertible note (Note 11).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease agreement
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In October&nbsp;2003, the Company entered into a lease agreement with an entity to lease office
space for its primary administrative facility. A director of the Company is an indirect
owner of the entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. Property and equipment</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2005 and 2004, property and equipment consist of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">329,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">50,013</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33,762</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,417</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">295,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35,596</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation expense for the year ended December&nbsp;31, 2005 and 2004 was $19,345 and $8,685,
respectively.
</DIV>

<P align="center" style="font-size: 10pt">F - 21
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. Income taxes</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company has net operating loss (NOL)&nbsp;carryforwards in the amount of approximately $14.6
million, which begin to expire in 2018. The deferred tax asset related to these NOL
carryforwards has been fully reserved. The provision for income taxes represents the
minimum state income taxes payable plus estimated penalties and interest.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company&#146;s ability to utilize its NOL is dependent upon current filing status with the
Internal Revenue Service (IRS)&nbsp;and is subject to the IRS&#146;s statute of limitations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">A reconciliation of the Company&#146;s tax provision to income taxes at the applicable statutory
rates is shown below.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes at statutory federal rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,032,035</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,316,681</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State income taxes, net of federal benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(268,021</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(408,197</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,301,243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,721,312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minimum state income taxes, plus penalties and interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,766</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6. Stockholders&#146; deficiency</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">As of December&nbsp;31, 2005, the Company has authorized 200,000,000 shares of its common stock,
of which 31,387,418 shares were issued and outstanding.
</DIV>

<P align="center" style="font-size: 10pt">F - 22
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6. Stockholders&#146; deficiency &#151; Continued</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In April&nbsp;2004, the Company issued 60,000 shares of common stock to convert $15,000 of
related party debt into equity (see Note 3). The shares issued were valued at the current market
price of the date of issuance of $91,800, resulting in additional charge to expense $76,800, which
has been reflected in the accompanying financial statements ended December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During 2004, the Company sold 1,272,500 units of common stock, each unit consisting of one
share of common stock and one warrant to acquire a share of common stock at $1.50, for $1,272,500.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During 2004, the Company issued 960,500 shares of common stock for $194,200 from the exercise
of 960,500 warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In November and December&nbsp;2004, the Company sold 119,000 shares of its common stock in a series
of private placement transactions. The Company received proceeds, net of offering costs, in the
amount of $119,000 for the shares prior to December&nbsp;31, 2004, but did not issue the stock
certificates until 2005. These shares are shown as common stock to be issued in the accompanying
financial statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During
the year ended December&nbsp;31, 2005, the Company sold 1,531,000 units,
each unit consisting of one share of common stock and one warrant to acquire a
share of common stock at an exercise price of $1.50 per share, for net proceeds of
$1,420,860. The 1,531,000 warrants were issued to investors as part of an equity
agreement and were not ascribed any value in the accompanying financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During the year ended December&nbsp;31, 2005, the Company issued 119,000 shares (of which
50,500 relates to the exercise of warrants) of common stock for which payment was
previously received.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During the year ended December&nbsp;31, 2005, the Company agreed to issue 846,548 shares in
settlement of accrued expenses of $612,521. These shares are
reflected as common stock to be issued in the accompanying
December&nbsp;31, 2005 financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. Stock options and warrants</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company issues stock options to employees, directors and consultants under the 2004 Stock Option Plan. Employee options vest according to the terms of the specific grant and expire from 5
to 10&nbsp;years from date of grant. Non-employee option grants to date are vested upon
issuance. The weighted average remaining contractual life of employee options outstanding
at December&nbsp;31, 2005 was 7.80&nbsp;years. Stock option activity for the years ended December&nbsp;31,
2005 and 2004, was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted Avg.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted Avg.</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options, January&nbsp;1, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,172,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.03</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options, December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,422,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,085,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.92</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,000,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options, December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,508,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F - 23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. Stock options and warrants &#151; Continued</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Options outstanding at December&nbsp;31, 2005 and the related weighted average exercise price and
remaining life information is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>weighted</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Range of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>average</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>options</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>exercise</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>prices</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>life in years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>price</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">$0.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3,000,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3.84</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">0.10</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3,000,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">0.10</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">0.40</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">250,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.40</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">250,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.40</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">0.85</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">400,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4.58</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.85</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">0.85</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,225,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">9.58</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.85</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">0.98</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">900,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.98</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">900,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.98</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">1.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">370,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">9.58</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.00</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">1.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">90,909</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4.58</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.10</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">1.15</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">193,912</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.15</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">86,956</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.15</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">1.27</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">78,740</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.27</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">185,696</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.27</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="right" style="border-top: 1px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD nowrap colspan="0" align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">$0.10-$1.27</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6,508,561</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5.26</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">0.27</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4,422,652</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">0.23</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="right" style="border-top: 3px double #000000"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
        <TD nowrap colspan="0" align="center" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intrinsic value of employee options
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During the years ended December&nbsp;31, 2004 and prior, certain employee options were granted
with exercise prices less the than fair market value of the Company&#146;s stock at the date of
grant. As the grants were to employees, the intrinsic value method, as allowed under APB
No.&nbsp;25, was used to calculate the related compensation expense. For the year ended
December&nbsp;31, 2005, the Company granted 2,085,909 options to certain employees, exercisable
at amounts ranging from $0.85 to $1.10, vested over one year with a ten-year life, and
$177,631 and $936,537 of deferred compensation costs were amortized and recognized as
expense in the years ended December&nbsp;31, 2005 and 2004 respectively.
</DIV>

<P align="center" style="font-size: 10pt">F - 24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. Stock options and warrants &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The following table summarizes certain information about the company&#146;s stock purchase
warrants.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted Avg.</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Warrants</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants outstanding, January&nbsp;1, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,117,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,372,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(960,500</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants outstanding, December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,529,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,198,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50,500</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants outstanding, December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,657,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During the year ended December&nbsp;31, 2004, the Company issued 1,000,000 10&nbsp;year warrants to
acquire 1,000,000 shares of the Company&#146;s common stock. The warrants require a payment of
$1 for each share purchased. The warrants were issued to finalize a settlement with the
bankruptcy trustee and others who had claims to ZEFS technology in exchange for the full
release of their claims. The Company valued the warrants at $1,585,265 and reflected the
amount as patent settlement costs during the year ended December&nbsp;31, 2004. The warrants
were issued in July&nbsp;2004 when the Company became current in its SEC filings. The warrants
were valued by the Company using the Black Scholes pricing model using a ten year term
(statutory term), 46.2% volatility, no annual dividends, and a discount rate of 4.57%. The
trustee and the other individuals will also receive royalties when the product is sold.
There are no required royalties payable under this agreement for the year ending December
31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During 2004, the Company issued 100,000 warrants to two consultants and using the Black
Scholes pricing model, the fair value of these warrants was valued at $53,300 and included
as compensation expense. The remaining 1,272,500 warrants issued during 2004 were issued
to investors as part of equity agreement and were not ascribed any separate value in the
accompanying financial statements.
</DIV>

<P align="center" style="font-size: 10pt">F - 25
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. Stock options and warrants &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants &#151; Continued
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During the year ended December&nbsp;31, 2005, the Company issued 10,000 warrants to an
individual for settlement of a claim. The Company also issued 25,000 warrants to an
individual in exchange for consulting services rendered. The warrants were valued at an
aggregate amount of $18,462 using the Black Scholes pricing model using 3-year and 5-year
respective terms (statutory terms), 58.69% volatility, no annual dividends, and a discount
rate of 3.55% and 4.13%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8. Convertible debentures and warrants</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During the year ended December&nbsp;31, 2005, the Company completed the first part of a private
offering of its 9% Convertible Notes due at dates ranging between May&nbsp;31, 2006 and July&nbsp;31,
2006 (the &#147;Notes&#148;) and Warrants to purchase shares of the Company&#146;s common stock which
expire August&nbsp;31, 2007 (the &#147;Warrants&#148;). The Notes are convertible at $0.70 per share of
common stock and the Warrants entitle the holder to purchase a number of shares of the
Company&#146;s common stock equal to 150% of the number of shares of common stock into which the
Note is convertible. The Warrants are exercisable at a price of $1.00 per share.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During the year ended December&nbsp;31, 2005, the Company issued Notes totaling $1,576,378 and
paid related transaction fees of $123,196, resulting in net proceeds to the Company of
$1,453,182. In addition to the cash paid for transaction fees, 43,268 additional Warrants
were issued to certain placement agents. These Warrants expire August&nbsp;31, 2010 and are
exercisable at a price of $1.00 per share.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The aggregate value of the Warrants issued in connection with the offering and to the finder
were valued at $696,413 using the Black-Scholes option valuation model with the following
assumptions; risk-free interest rate of 4.02% to 4.45%; dividend yield of 0%; volatility
factors of the expected market price of common stock of 83.59%; and an expected life of two
to five years. The company also determined that the notes contained a beneficial conversion
feature of $756,768.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The value of the Warrants of $696,413, the conversion option of $756,768, and the
transaction fees of $123,196 are considered as debt discount and are being amortized over
the life of the Notes. $318,759 of such discount has been amortized and included in the
accompanying statement of operations for the year ended December&nbsp;31, 2005. The remaining
unamortized debt discount of $1,257,619 has been netted against the $1,576,378 Convertible
Notes in the accompanying December&nbsp;31, 2005 Balance Sheet.
</DIV>

<P align="center" style="font-size: 10pt">F - 26
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9. Research and development</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company has research and development facilities in Morgan Hill, California and
Queensland, Australia. The Company has expanded research and development to include
application of the technologies utilized by the ZEFS and CAT-MATE device for diesel engines,
motorbikes, boats, generators, lawnmowers and other small engines. The Company has
purchased test vehicles, test engines and testing equipment. The Company has completed
testing on ZEFS and CAT-MATE devices for multiple automobiles, trucks motorcycles, off-road
vehicles and stationary engines, the results of which have been provided to RAND Corporation
(RAND)&nbsp;for evaluation. RAND oversees the research and development facilities. The Company
also uses third party research and development facilities in Los Angeles, California for the
development of the ZEFS and CAT-MATE devices. The Company spent $1,150,361 and $1,873,460
for the years ended December&nbsp;31, 2005 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. Commitments and contingencies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Legal matters
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">On December&nbsp;19, 2001, the SEC filed civil charges in the United States Federal District
Court, Southern District of New York, against its former President and then sole director
Jeffrey A. Muller, and others, alleging that the Company and the other defendants were
engaged in a fraudulent scheme to promote the Company&#146;s stock. The SEC complaint alleged
the existence of a promotional campaign using press releases, Internet postings, an
elaborate website, and televised media events to disseminate false and materially
misleading information as part of a fraudulent scheme to manipulate the market for stock
for the Company, which was then controlled by Mr.&nbsp;Muller. On March&nbsp;22, 2002, the Company
signed a Consent to Final Judgment of Permanent Injunction and Other Relief in settlement
of this action as against the corporation only, which the court approved on July&nbsp;2, 2002.
Under this settlement, the Company was not required to admit fault and did not pay any
fines or restitution. The SEC&#146;s charges of fraud and stock manipulation continue against
Mr.&nbsp;Muller and others.
</DIV>

<P align="center" style="font-size: 10pt">F - 27
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. Commitments and contingencies &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Legal matters &#151; Continued
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">On July&nbsp;2, 2002, after an investigation by the Company&#146;s newly constituted board of
directors, the Company filed a cross-complaint in the SEC action against Mr.&nbsp;Muller and
others seeking injunctive relief, disgorgement of monies and stock and financial
restitution for a variety of acts and omissions in connection with sales of the Company&#146;s
stock and other transactions occurring between 1998 and 2002. Among other things, the
Company alleged that Mr.&nbsp;Muller and certain others sold company stock without providing
adequate consideration to the Company; sold insider shares without making proper
disclosures and failed to make necessary filings required under federal securities laws;
engaged in self-dealing and entered into various undisclosed related-party transactions;
misappropriated for their own use proceeds from sales of the Company&#146;s stock; and entered
into various undisclosed arrangements regarding the control, voting and disposition of
their stock. The Company contends that it is entitled to a judgment canceling all of the
approximately 8,716,710 shares of the Company&#146;s common stock that were previously obtained
and controlled, directly or indirectly, by Mr.&nbsp;Muller; divesting and preventing any
subsequent holders of the right to exercise options previously held by Mr.&nbsp;Muller for
10,000,000 shares of the Company&#146;s common stock, conversion of an existing preliminary
injunction to a permanent injunction to prevent Mr.&nbsp;Muller from any involvement with the
Company and a monetary judgment against Mr.&nbsp;Muller and others in the amount of several
million dollars.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">On July&nbsp;30, 2002, the U.S. Federal District Court, Southern District of New York, granted
the Company&#146;s application for a preliminary injunction against Mr.&nbsp;Muller and others,
which prevented Mr.&nbsp;Muller and other cross-defendants from selling, transferring, or
encumbering any assets and property previously acquired from the Company, from selling or
transferring any of the Company&#146;s stock that they may own or control, or from taking any
action to injure the business and from having any direct contact with the Company&#146;s
shareholders. The injunctive order also prevents Mr.&nbsp;Muller from engaging in any effort
to exercise control over the Company and from serving as an officer or director of the
Company. The Company believes that it has valid claims; however, there can be no
assurance that an adverse result or settlement would not have a material adverse effect on
the Company&#146;s financial position or cash flow.
</DIV>

<P align="center" style="font-size: 10pt">F - 28
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. Commitments and contingencies &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Legal matters &#151; Continued
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In the course of the litigation, the Company has obtained ownership control over Mr.
Muller&#146;s claimed patent rights to the ZEFS device. Under a Buy-Sell Agreement between Mr.
Muller and the Company dated December&nbsp;29, 1998, Mr.&nbsp;Muller, who was listed on the ZEFS
devise patent application as the inventor of the ZEFS device, purported to grant us all
international marketing, manufacturing and distribution rights to the ZEFS device. Those
rights were disputed because an original inventor of the ZEFS device contested Mr.
Muller&#146;s legal ability to have conveyed those rights.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In Australia, Mr.&nbsp;Muller entered into a bankruptcy action seeking to overcome the
Company&#146;s claims for ownership of the ZEFS device. In conjunction with these litigation
proceedings, a settlement agreement was reached whereby the $10 per unit royalty
previously due to Mr.&nbsp;Muller under his contested Buy-Sell Agreement was terminated and
replaced with a $.20 per unit royalty payable to the bankruptcy trustee. On November&nbsp;7,
2002, under a settlement agreement executed with the Mr.&nbsp;Muller&#146;s bankruptcy trustee, the
trustee transferred to the Company all ownership and legal rights to this international
patent application for the ZEFS device.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Both the SEC and the Company have filed Motions for Summary Judgment contending that there
are no material issues of fact in contention and as a matter of law, the Court should
grant a judgment against Mr.&nbsp;Muller and the cross-defendants. Mr.&nbsp;Muller has filed a
response contending the motions are without merit or substance.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Mr.&nbsp;Muller and several of the defendants filed a Motion to Dismiss the complaint filed by
the Company and moved for summary judgment in their favor. On December&nbsp;21, 2004, Judge
George B. Daniels denied the cross-defendants&#146; motion to dismiss the Company&#146;s
cross-complaint, denied the request to vacate the July&nbsp;2, 2002 preliminary injunction and
denied the request for damages against the Company. The court also refused to grant a
summary judgment in favor of the cross-defendants and dismissed Mr.&nbsp;Muller&#146;s claims
against the Company for indemnification for his legal costs and for damages resulting from
the litigation. Neither Mr.&nbsp;Muller nor any of the cross-defendants have filed any
cross-claims against the Company and the Company is not exposed to any liability as a
result of the litigation, except for possibly incurring legal fees and expenses should the
Company lose the litigation.
</DIV>

<P align="center" style="font-size: 10pt">F - 29
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. Commitments and contingencies &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Legal matters &#151; Continued
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">On November&nbsp;16, 2005, the Court granted the SEC&#146;s motion for summary judgment. In granting
the motion, the Court has barred Mr.&nbsp;Muller from serving as an officer or director of a
public company for a period of 20&nbsp;years, ordered Mr.&nbsp;Muller to disgorge any shares of our
stock that he still owns and directed the Company to cancel any
issued and outstanding shares of our stock still owned by Mr.&nbsp;Muller. Mr.&nbsp;Muller was also ordered to disgorge to
the SEC unlawful profits in the amount of $7.5&nbsp;million and a pay a civil penalty in the
amount of $100,000. Acting in accordance with the Court&#146;s order, the Company has canceled
(i)&nbsp;8,047,403 shares of its common stock held by Mr.&nbsp;Muller and/or his affiliates, (ii)
options to acquire an additional 10,000,000 shares of the Company&#146;s common stock held by
Mr.&nbsp;Muller personally and (iii) $1,017,208 of debt which Mr.&nbsp;Muller claimed was owed to
him by the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">A final decision on the motion for summary judgment filed by the Company, which
potentially would terminate the ongoing litigation, is still pending. Should the Court not
grant summary judgment in favor of the Company, the case will be scheduled for final
disposition in a trial. Although the outcome of this litigation cannot be predicted with
any degree of certainty, the Company is optimistic that, based upon previous developments
in the litigation and the Court&#146;s granting of the SEC&#146;s motion for summary judgment, the
Court&#146;s ruling on the motion for summary judgment will either significantly narrow the
issues for any later trial or will result in a final disposition of the case in a manner
favorable to the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In April&nbsp;2005, Jeffrey A. Muller, the Company&#146;s former sole director and executive
officer, filed a lawsuit in the Federal District Court for the Central District of
California, seeking declaratory and injunctive relief and alleging unfair competition in
connection with a claimed prior patent interest in the ZEFS device and stock option
rights. In seeking declaratory relief, Mr.&nbsp;Muller is seeking to have the patent rights in
the ZEFS device that were previously transferred to the Company by Mr.&nbsp;Muller&#146;s bankruptcy
trustee declared null and void.
</DIV>

<P align="center" style="font-size: 10pt">F - 30
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. Commitments and contingencies &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Legal matters &#151; Continued
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company was named as a defendant in a complaint filed before the Los Angeles Superior
Court, Civ. No.&nbsp;BC 312401, by Terracourt Pty Ltd, an Australian corporation
(&#147;Terracourt&#148;), claiming breach of contract and related remedies from promises allegedly
made by the former president of the Company in 1999. Terracourt sought specific
performance of the former president&#146;s alleged promises to transfer to Terracourt an
aggregate 480,000 shares of the Company&#146;s common stock for office consultant and
multimedia services. The complaint was filed on March&nbsp;18, 2004. Terracourt also filed a
Statement of Damages seeking costs of the lawsuit and general damages of $2&nbsp;million. The
case proceeded to trial in the Los Angeles Superior Court in May, 2005. In June, 2005,
the Judge issued a statement of decision which denied Terracourt&#146;s claims for 450,000
shares of stock, monetary damages, and costs of the lawsuit. The Court also ruled that
Terracourt was entitled to receive an option exercisable for 30,000 shares of the
Company&#146;s common stock, exercisable at $.001 per share (par value). Both parties filed
motions for a new trial on the issue of the opinion. In September&nbsp;2005, the court ruled
that the Company must pay Terracourt a total of $2,500 and cancelled the original award of
30,000 options.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">This recent lawsuit brought by Mr.&nbsp;Muller arises out of the same claims that are the
subject of ongoing litigation in the Federal District Court for the Southern District of
New York, in which the Company has previously obtained a preliminary injunction against
Mr.&nbsp;Muller barring him from any involvement with the Company and preventing Mr.&nbsp;Muller,
his agents or assigns, from exercising any claimed rights to the Company&#146;s assets or
stock. Mr.&nbsp;Muller previously filed the same complaint in the Federal District Court for
the Southern District of New York, which claim is pending dismissal. On December&nbsp;28,
2004, Federal District Court Judge George B. Daniels issued a decision dismissing motions
filed by Mr.&nbsp;Muller against the Company&#146;s cross-claims. The dismissal of those motions
involved similar causes of action as those contained in Mr.&nbsp;Muller&#146;s recent lawsuit
commenced in the Federal District Court for the Central District of California. Since the
case in New York is still pending, the filing of the new lawsuit in California is subject
to various defenses which should result in the dismissal of the new lawsuit.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">On January&nbsp;25, 2006, Mr.&nbsp;Muller&#146;s complaint, filed in the California District Court and
transferred to the Federal Court in the Southern District of New York, was assigned to
Judge George B. Daniels. It is expected that the Court will consolidate that complaint
with the already pending claims encompassed within the Company&#146;s Motion for Summary
Judgment. While the Company believes that it will have valid claims and defenses, there
can be no assurance that an adverse result or outcome on the pending motions or a trial of
this case would not have a material adverse effect on the Company&#146;s financial position or
cash flow.
</DIV>

<P align="center" style="font-size: 10pt">F - 31
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. Commitments and contingencies &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employment agreements
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In July&nbsp;2005, the Company entered into an employment agreement with an individual to serve
as a Vice President of Operations for the Company. The agreement expires December&nbsp;31,
2005, with an automatic one-year extension and provides for annual base compensation of
not less than $120,000 per year. During the employment term, the individual is eligible
to participate in certain incentive plans, stock option plans and similar arrangements in
accordance with the Company&#146;s recommendations at award levels consistent and commensurate
with the position and duties hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Leases
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In August&nbsp;2005, the Company amended its sublease of a portion of a building in North
Hollywood, California from an entity that is owned by a director of the Company. The lease
term is from November&nbsp;1, 2003 through October&nbsp;31, 2007 and carries an option to renew for
two additional years with a 10&nbsp;percent increase in the rental rate. Monthly rent is $3,740
per month under this lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In November&nbsp;2003, the Company entered into a lease for a research and development facility
located in Queensland, Australia. The term of the lease is from November&nbsp;15, 2003 through
March&nbsp;15, 2006 and carries an option to renew for two additional years each with an
increase of the greater of 5% or the increase in the then current Australian Consumer
Price Index. Monthly rent is AUD $1,292 (approximately US $1,000) per month under this
lease. In March&nbsp;2006, the Company entered into a new lease for this facility for a term
of two years commencing March&nbsp;15, 2006. Monthly rent is AUD $1,462 (approximately US
$1,100) per month under this lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In September&nbsp;2005, the Company entered into a lease for a testing facility located in
Morgan Hill, California. The term of the lease is from September&nbsp;1, 2005 through August
31, 2007 and carries an option to renew for two additional years at the then prevailing
market rate. Monthly rent is $2,240 per month under this lease. The lease was amended in
February&nbsp;2006 for additional space. Monthly rate under the amended lease is $4,160 per month.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Total rent expense under these leases for the years
ended December&nbsp;31, 2005 and 2004 is $44,180 and $33,720, respectively.
</DIV>
<P align="center" style="font-size: 10pt">F - 32
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SAVE THE WORLD AIR, INC.<BR>
(A DEVELOPMENT STAGE ENTERPRISE)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS &#151; Continued<BR>
YEARS ENDED DECEMBER 31, 2005 AND 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10.
Commitments and contingencies &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Leases
&#151; Continued
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The following is a schedule by years
of future minimum rental payments
required under the non-cancelable operating leases:
</DIV>



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>

<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD nowrap><DIV style="margin-left:129px; text-indent:-15px">Year ending December 31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->


<!-- Begin Table Body -->
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:189px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">109,781</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:189px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">88,224</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:189px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">3,655</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:189px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">201,660</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<!-- End Table Body -->
</TABLE>
</DIV>







<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>11. Subsequent events</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During February&nbsp;2006, the Company converted $45,000 of related party debt due to the
Company&#146;s Chief Executive Officer into a 9% convertible note due May&nbsp;31, 2006. The note is
convertible into common stock at $0.70 per share.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">During February 2006,
the Company issued 250,000 performance based warrants to an outside
consultant. These warrants are to be exercisable at $.40 per share, are fully vested
and exercisable immediately. These warrants were valued at $422,599 using the Black-Scholes option valuation
model with the following assumptions: risk-free interest rate of 4.59%; dividends yield of 0%; volatility factors
of the expected market price common of 220.56%; and an expected life of five years.
This amount will be recognized as an expense in the first quarter of 2006.
</DIV>


<P align="center" style="font-size: 10pt">F - 33
</DIV>


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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles of Incorporation, as amended, of the Registrant.</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">3.2(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bylaws of the Registrant.</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">10.1(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Commercial Sublease dated October&nbsp;16, 2003 between the Registrant and KZ
Golf, Inc.</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">10.2(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment dated June&nbsp;15, 2004 to Exhibit&nbsp;10.1</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">10.3*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment dated August&nbsp;14, 2005 to Exhibit&nbsp;10.1</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">10.4*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">General Tenancy Agreement dated March&nbsp;14, 2006 between the Registrant
and Autumlee Pty Ltd.</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">10.5(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement dated December&nbsp;13, 2002 between the Registrant and RAND.</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" nowrap><DIV style="margin-left:0px; text-indent:-0px">10.6(2)**
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement dated May&nbsp;7, 2003 between the Registrant and RAND.</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">10.7(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Modification No.&nbsp;1 dated as of August&nbsp;21, 2003 to Exhibit&nbsp;10.5</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">10.8(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Modification No.&nbsp;2 dated as of October&nbsp;17, 2003 to Exhibit&nbsp;10.5</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">10.9(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Modification No.&nbsp;3 dated as of January&nbsp;20, 2004 to Exhibit&nbsp;10.5</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">10.10(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deed and Document Conveyance between the Trustee of the Property of
Jeffrey Ann Muller and Lynette Anne Muller (Bankrupts).</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">10.11(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Bill of Sale dated May&nbsp;28, 2002 between the Registrant
and Kevin Charles Hart.</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">10.12(6)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated December&nbsp;1, 2003 between the Registrant and
Joseph Helleis.</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">10.13(6)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated December&nbsp;1, 2003 between the Registrant and
Edward L. Masry.</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">10.14(6)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated December&nbsp;1, 2003 between the Registrant and
Eugene E. Eichler.</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">10.15(9)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment dated as of March&nbsp;2, 2004 to Exhibit&nbsp;10.13</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">10.16(6)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated December&nbsp;1, 2003 between the Registrant and
Bruce H. McKinnon.</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">10.17(9)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment dated as of March&nbsp;2, 2004 to Exhibit&nbsp;10.15</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">10.18(7)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Save the World Air, Inc. 2004 Stock Option Plan</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">10.19(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Incentive Stock Option Agreement under 2004 Stock Option Plan</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">10.20(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Non-Qualified Stock Option Agreement under 2004 Stock Option Plan</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">10.21(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of April&nbsp;1, 2003 between the Registrant
and Adrian Menzell</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">10.22(10)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Exhibit&nbsp;10.21</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">10.23(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of April&nbsp;1, 2003 between the Registrant
and Pat Baker</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">10.24(10)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Exhibit&nbsp;10.23</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">10.25(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of April&nbsp;1, 2003 between the Registrant
and John Kostic</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">10.26(10)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Exhibit&nbsp;10.25</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">10.27(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of October&nbsp;1, 2004 between the Registrant
and John Fawcett</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">10.28(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Advisory Services Agreement dated as of February&nbsp;26, 2003 between the
Registrant and Kevin Charles Hart</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.29(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Advisory Services Agreement dated as of July&nbsp;7, 2003 between the
Registrant and Sir Jack Brabham</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">10.30(8)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">License Agreement dated as of July&nbsp;1, 2004 between the Registrant and
Temple University &#150; The Commonwealth System of Higher Education</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">10.31(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Exclusive Capital Raising Agreement dated as of July&nbsp;29, 2004 between
the Registrant and London Aussie Marketing, Ltd.</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">10.32(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of November&nbsp;19, 2004 between the
Registrant and London Aussie Marketing, Ltd.</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" nowrap><DIV style="margin-left:0px; text-indent:-0px">10.33(9)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated September&nbsp;1, 2004 with Erin Brockovich</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">10.34(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Representation Agreement dated as of October&nbsp;1, 2004 between the
Registrant and Gurminder Singh</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">10.35(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Advisory Services Agreement dated
as of August &#95;&#95;&#95;, 2002 between the
Registrant and Bobby Unser, Jr.</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">10.36(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Advisory Services Agreement dated
as of August &#95;&#95;&#95;, 2002 between the
Registrant and Jack Reader</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">10.37(9)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Advisory Services Agreement dated
as of August  &#95;&#95;&#95;, 2002 between the
Registrant and Nate Sheldon</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">10.38(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment of Patent Rights dated as of September&nbsp;1, 2003 between the
Registrant and Adrian Menzell</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">10.39(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Global Deed of Assignment dated June&nbsp;26, 2004 between the Registrant and
Adrian Menzell</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" nowrap><DIV style="margin-left:0px; text-indent:-0px">10.40(11)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated July&nbsp;1, 2005 between the Registrant and John
K. Bautista</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">10.41(11)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease dated August&nbsp;15, 2005 between the Registrant and Thomas L. Jackson</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">10.42*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment dated February&nbsp;1, 2006 to Exhibit&nbsp;10.41</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">10.43(11)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registrant&#146;s 9% convertible note issued in 2005 Interim Financing</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">10.44(11)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registrant&#146;s stock purchase warrant issued in 2005 Interim Financing</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">10.45*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registrant&#146;s 9% convertible note issued in 2005 Bridge Financing</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">10.46*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registrant&#146;s stock purchase warrant issued in 2005 Bridge
Financing</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">23.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Weinberg &#038; Co.</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">24*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney (included on Signature Page)</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">31.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Executive Officer of Annual Report Pursuant to
Rule&nbsp;13(a)&#151;15(e) or Rule&nbsp;15(d)&#151;15(e).</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">31.2*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Financial Officer of Annual Report Pursuant to 18
U.S.C. Section&nbsp;1350.</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">32.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Executive Officer and Chief Financial Officer of
Annual Report pursuant to Rule&nbsp;13(a)&#151;15(e) or Rule&nbsp;15(d)&#151;15(e).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</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 nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Filed herewith.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Confidential treatment previously requested.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD>Management contract or compensatory plan or arrangement.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Registration Statement on Form 10-SB (Registration Number 000-29185), as amended, filed on March&nbsp;2, 2000.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 10-KSB for the fiscal year ended December&nbsp;31, 2002.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 8-K filed on December&nbsp;30, 2002.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 10-QSB for the quarter ended March&nbsp;31, 2004.</TD>
</TR>

</TABLE>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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





<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 nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 8-K filed on November&nbsp;12, 2002.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 10-KSB for the fiscal year ended December&nbsp;31, 2003.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Appendix&nbsp;C of Registrant&#146;s Schedule&nbsp;14A filed on April&nbsp;30, 2004, in connection with its Annual Meeting of
Stockholders held on May&nbsp;24, 2004.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant Form 8-K filed on July&nbsp;12, 2004.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 10-KSB for the fiscal year ended December&nbsp;31, 2004.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 10-QSB for the quarter ended June&nbsp;30, 2005.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from Registrant&#146;s Form 10-QSB for the quarter ended September&nbsp;30, 2005.</TD>
</TR>

</TABLE>


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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>2
<FILENAME>v18588exv10w3.htm
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w3</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 10.3</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="v18588v1858800.gif" alt="(SAVE THE WORLD LOGO)"><BR>
<B>5125 Lankershim Boulevard<BR>
North Hollywood, California 91601</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Telephone (818)&nbsp;487-8000 &#151; Toll Free (877)&nbsp;487-0200 &#151; Fax (818)&nbsp;487-8003</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;<BR>&nbsp;<BR>
August&nbsp;14,
2005

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">KZG<BR>
5125 Lankershim Blvd.<BR>
North Hollywood, Ca 91601

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Attention Jennifer King
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dear Ms.&nbsp;King,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">By the terms of the lease agreement between STWA and KZG executed November&nbsp;1,
2003 and amended June&nbsp;15, 2004, please be advised that STWA is exercising its option
to renew the lease for an additional period through October&nbsp;15, 2007 at a monthly rate of
$3,740.00.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;<BR>
Sincerely,

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;<BR>
/s/ Eugene E. Eichler<BR>
&nbsp;<BR>
Eugene E. Eichler<BR>

President

</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>3
<FILENAME>v18588exv10w4.htm
<DESCRIPTION>EXHIBIT 10.4
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w4</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;10.4</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">GENERAL TENANCY AGREEMENT
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(Not to be used for &#145;Residential Tenancies)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">.Memorandum of Agreement made the March day of 14<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> of 2006
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">BETWEEN <U>Autumlee pty Ltd</U> of <U>Unit 206 Sun City Gold Coast HQW</U> Surfers Paradise in
the state of Queensland (Hereinafter called the Landlord)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">And Qf
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>STWA, Inc. of 5125 Lankershim Boulevard North Hollywood</U>, California 91601 USA<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hereinafter called the Tenant)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">in &#147;the state
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">California USA
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">WHEREBY in consideration of the rent hereinafter reserved and the covenants and conditions<BR>
hereinafter<BR>
Contained on the part of the Tenant to be observed and performed the &#145;Landlord agrees to let to the<BR>
Tenant<BR>
And the Tenant agrees to take from the Landlord the ...FACTORY unit

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">And premises situated <U>in Taree Street</U> the land<BR>
Being described as Factory 1 Jot 94 Taree St. Andrews<BR>
Count of ...Ward Parish of ...<U>MudQeeraba</U> Town of <U>BurleiQh</U> Junction Qld<BR>
Area 2152 Sq. feet more or less, being the property known as..................and last occupied by STWA to be<BR>
held by the said <U>STWA Inc</U>. as Tenant at the rental of<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>$1462.00 AUD</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">per <U>calendar Month</U> SUCH tenancy to commence on <U>November</U><BR>
day of ....March ...........15<SUP style="font-size: 85%; vertical-align: text-top">th</SUP>..........2006 the year and such tenance is to continue for the term<BR>
of <U>2&nbsp;years &#043; 2 X 2 Year Option.</U><BR>
The rent is to be paid by the Tenant to the Landlord or his agent in advance on the 15<SUP style="font-size: 85%; vertical-align: text-top">th</SUP><BR>
day of each and V every Month of the tenancy, the first of such payments to be made

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">on March day <U>15<SUP style="font-size: 85%; vertical-align: text-top">th</SUP></U> the year of 2006
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Tenant hereby agrees:<BR>
1. To keep and at the end of this tenancy to deliver up to the said <U>Unit</U> 1..............<BR>
and premises to the said Landlord in a clean condition and good order and repair as at present,<BR>
fair wear<BR>
and tear and damage by fire, storm, flood, tempest or any act of God excepted.

</DIV>

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</DIV>

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

<DIV align="left" style="font-size: 10pt">2. Not to make, nor suffer to be made, any material alteration in the said Unit #1 ............ and
premises or any part thereof without the consent in writing of the said Landlord.</DIV>



<DIV align="left" style="font-size: 10pt">3. Not to use or permit to be used the premises or any part hereof for any purpose other than a
research on vehicle parts or carry on or permit to be carried upon the same any noisome dangerous
or offensive trade
business or process not do nor suffer to be done anything which may annoy persons in &#147;the
neighborhood of the premises or which may render the Landlord liable to pay more than the presl;_t
amount of water rates or sewerage Of cleansing charges or.,which may Render the Landlord liable to
pay in respect of the buildings or any part thereof more than the ordinary or present rate of
premium for insurance fire or which may make void or unavoidable any policy for such insurance.</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. To keep clean any drains or water pipes on the said premises.</DIV>



<DIV align="left" style="font-size: 10pt">5. To indemnigy the Landlord against all losses damages and expenses which he may sustain; expend
or-be out unto by reasn of any neglect, misconduct, or misperformance on the part of Tenant of any of
the covenants and agreements herein before contained.</DIV>



<DIV align="left" style="font-size: 10pt">7. That the Landlord may by himself or his agent at all reasonable times enter into and upon the
said described premises and view the state or repair thereof.</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">8. AND the Tenant will upon the date of expiration or determinations of the tenancy hereby created
deliver
up to the Landlord peaceably and quietly the possession of the demised premises and every part
thereof together with all erections, buildings, improvements, and fixtures, which he is not
entitled in terms of his tenancy to remove.</DIV>



<DIV align="left" style="font-size: 10pt">9. The tenant will keep the furniture and effects (if any) which are now hereby leased with the
premises and a list of which is contained in the schedule hereto marked &#147;A&#148; in good condition and
at the end of the tenancy leave the said furniture and effects clean and in as good state condition
and repair as they are now in and will make compensation &#145;for any damage done for any article
missing (reasonable wear and tear and damage by accidental fire excepted).</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">10. If at any time during the said term the buildings on the sid land or any part thereof shall be
damaged by fire then and in every such case all moneys received. By the Landlord in respect of such
damage shall be forthwith laid out and expended in reinstating the same so far as the said moneys
will extend and as form the date of such damage until the said insurance moneys shall have been
laid out in making good such damage the &#145;said rental shall abate by a fair and just proportion
PROVIDED AL WAYS that if at anytime during &#145;the said term the buildings on the said land shall be
completely destroyed by fire or so damaged by fire as to be uninhabitable then and in any such case
these presents shall ipso facto determine and should any dispute or difference arising touching or
concerning any matter or thing in this clause of these presents referred to then the same shall be
determined by a single arbitrator to be agreed upon by the parties hereto</DIV>



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

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




<DIV align="left" style="font-size: 10pt">and failing such agreement then the dispute or difference shall be referred to the arbitration of
two arbitrators (and in the case of their disagreeing by their umpire) one of such arbitrators to
be appointed by the Tenant and every such reference shall be deemed to be an arbitration within the
meaning of the &#147;Arbitration Act of 1973&#148; and be subject to the provisions as to Arbitration
contained in said Act.</DIV>



<DIV align="left" style="font-size: 10pt">11. In case the rent payable hereunder or any part thereof shall be unpaid on any day on which the
same ought to be paid and shall remain unpaid for seven days thereafter whether lawfully demanded
or not in case the Tenant becomes bankrupt or insolvent or in case of the breach non-observance or
non-performance by
the Tenant of any agreement or stipulation herein on the Tenant&#146;s part contained or implied then
and in every such case it shall be lawful for the Landlord forthwith or at any time thereafter
without notice or Suit to &#145;enter upon any part of the said lands in the flame of the whole and
determine the estate of the Tenant under these premises but without releasing the Tenant from
liability in respect of any breach of any of the same agreements and stipulations and it is hereby
declared that the power of reentry implied in leases by &#147;Property Law Act of 1974-1978&#148; shall be
implied herein but shall be modified accordingly.</DIV>


<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">AS WITNESS the hand of said parties the day and the year first above.,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Signed by the said<BR>
SCOTT WHIELDON

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the presence of

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">Landlord <U>/s/ Scott Whieldon</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>/s/ A. Menzell</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Signed by the said
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">JOHN KOSTIC
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the presence of
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">Tenant <U>/s/ John Kostic</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>/s/ A Menzell</U>
</DIV>

<DIV align="left"><DIV style="font-size: 3pt; margin-top: 16pt; width: 50%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>


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

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




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Annexure&#146; A&#146;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 16pt">1. Term of tenancy to be 2&nbsp;year plus 2 x 2&nbsp;year&#146;s option. The first year rent is $1462.00
Including all outgoings per month.</DIV>



<DIV align="left" style="font-size: 10pt">2. Rental increase for the first year of the 2x2 YEAR option period is to be 5% or C.P.I.
(Whichever is the greater) being added to the rental of the preceding month.</DIV>



<DIV align="left" style="font-size: 10pt">3. Lessee agrees to conduct the business wholly within the confines of the demised premises
and not to obstruct the vehicle access to other occupants of the adjacent building.</DIV>



<DIV align="left" style="font-size: 10pt">4. Lessee has the right to change or attach signage to the outside walls of the demised premises
but only after the consent from the&#146; Lessor as to the size and placement of the signage. This is
to have Council approval if necessary, cost paid by the Lessee.</DIV>



<DIV align="left" style="font-size: 10pt">5. Tenancy to commence <U>March&nbsp;15<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> 2006</U>.</DIV>



<DIV align="left" style="font-size: 10pt">6. Lessee to give 2&nbsp;months notice in writing prior to the expiration of the initial 2&nbsp;year period.
Such notice being of the intention to take up the option offered.</DIV>



<DIV align="left" style="font-size: 10pt">7. C.P.I (Consumer Price Index) as mentioned in the preceding clauses will be as for the City of
Brisbane.</DIV>



<DIV align="left" style="font-size: 10pt">8. The Lessee acknowledges that it has not relied upon any representation by the Lessor
or
any other person or Corporation in and about entering into this agreement other than is set
out herein.</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
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<TR valign="bottom">
    <TD align="left" valign="top">LESSOR <U>/s/ Scott Whieldon</U>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">LESSEE /s/ <U>John Kostic</U></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">WITNESS <U>/s/ A Menzell</U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
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</TABLE>
</DIV>



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


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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.42
<SEQUENCE>4
<FILENAME>v18588exv10w42.htm
<DESCRIPTION>EXHIBIT 10.42
<TEXT>
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<TITLE>exv10w42</TITLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 10.42</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>THIS IS AN ADDENDUM TO THE LEASE AGREEMENT DATED AUGUST 5,<BR>
2005 WHEREIN IS REFERRED TO AS &#147;LESSOR&#148; AND IS REFERRED TO AS<BR>
&#147;LESSEE&#148; FOR THE PROPERTY COMMONLY KNOWN AS 235 TENNANT<BR>
AVENUE #5, MORGAN HILL, CALIFORNIA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Provisions of this Addendum shall amend and supercede the Provisions if the Lease
Agreement were inconsistent. In all other aspects the Terms and Conditions contained in the
Lease Agreement shall remain in full force and effect.
</DIV>


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

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Additional Space Leased</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Lessee had elected to lease unit #4 adjacent to its current unit #5. Therefore, Section&nbsp;1.2(a)
of this lease shall be amended from a 3,200 square foot unit to a 5,600 square foot unit.
Total rent for the additional 2,400 square feet rented shall be $1,920.00 per month Gross.
This rent amount shall be added with the Lessee&#146;s current rent schedule under the same
terms and conditions in the above referenced lease.</TD>
</TR>

</TABLE>
</DIV>

<P>&nbsp;<BR>&nbsp;<BR>&nbsp;
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
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<TR valign="bottom">
    <TD colspan="3" align="left" valign="top"><B>READ AND APPROVED</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" align="left" valign="top"><B>Lessee: Save the World Air, Inc.</B>
</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top"><B>Lessor: Tom Jackson</B></TD>
</TR>
<TR><TD>&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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Bruce McKinnon
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Tom Jackson</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
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</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.45
<SEQUENCE>5
<FILENAME>v18588exv10w45.htm
<DESCRIPTION>EXHIBIT 10.45
<TEXT>
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<TITLE>exv10w45</TITLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 10.45</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">THIS SECURITY HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE
SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND THE CORPORATION SHALL HAVE RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF
SUCH EXEMPTION REASONABLY SATISFACTORY TO THE CORPORATION (WHICH MAY INCLUDE, AMONG OTHER
THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION).
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">SUBORDINATED CONVERTIBLE PROMISSORY NOTE
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
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<!-- Begin Table Body -->
<TR style="font-size: 12pt">    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD align="left" valign="top">Los Angeles, California
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, 2005</TD>
</TR>
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</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED, Save the World Air, Inc., a Nevada corporation (the &#147;Company&#148; or &#147;SWA&#148;),
promises to pay to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> (the &#147;Holder&#148;), or its assigns, the principal sum of
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, the outstanding principal amount subscribed to hereof and hereby noted on
the signature page below, together with interest from the date of this Note on the unpaid principal
balance at a rate equal to 9% (nine percent) per annum, computed on the basis of the actual number
of days elapsed and a year of 365&nbsp;days. All unpaid principal, together with any then unpaid and
accrued interest and other amounts payable hereunder, shall be due and payable on the &#147;Maturity
Date&#148; which date shall be the earlier of (i)&nbsp;May&nbsp;31, 2006, or (ii)&nbsp;within 5 (five)&nbsp;business days
after the closing of an additional $5,000,000 of net proceeds from one or more offerings of the
Company&#146;s equity or quasi-equity securities, or (iii)&nbsp;when such amounts are declared due and
payable by the Holder (or made automatically due and payable) upon or after the occurrence of an
Event of Default (as defined below).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a statement of the rights of the Holder and the conditions to which this Note
is subject, and to which the Holder, by the acceptance of this Note, agrees:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;DEFINITIONS. As used in this Note, the following capitalized terms have the following
meanings:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The &#147;Company&#148; includes the corporation initially executing this Note and any Person
which shall succeed to or assume the obligations of the Company under this Note.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) &#147;Certificate&#148; shall mean the Articles of Incorporation of Company as in effect on the
date hereof.
</DIV>


<P align="center" style="font-size: 10pt">1
</DIV>

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) &#147;Equity Securities&#148; of any Person shall mean (a)&nbsp;all common stock, preferred stock,
participations, shares, partnership interests or other equity interests in and of such Person
(regardless of how designated and whether or not voting or non-voting) and (b)&nbsp;all warrants,
options and other rights to acquire any of the foregoing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) &#147;Event of Default&#148; has the meaning given in Section&nbsp;7 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) &#147;Financial Statements&#148; shall mean, with respect to any accounting period for any
Person, statements of operations, retained earnings and cash flows of such Person for such period,
and balance sheets of such Person as of the end of such period, setting forth in each case in
comparative form figures for the corresponding period in the preceding fiscal year if such period
is less than a full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding fiscal year, all prepared in reasonable detail and in accordance with generally
accepted accounting principles (except, with respect to quarterly financial statements, for
footnotes and year end adjustments). Unless otherwise indicated, each reference to Financial
Statements of any Person shall be deemed to refer to Financial Statements prepared on a
consolidated basis.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) &#147;Holder&#148; shall mean the Person specified in the introductory paragraph of this Note
or any Person who shall at the time be the holder of this Note, pursuant to a transfer, assignment
or other transaction effected on the terms and subject to the conditions set forth in this Note.
&#147;Holders&#148; shall mean the Holder, together with all other Persons who hold up to $1,000,000.00
maximum principal amount of the Company&#146;s 9% Subordinated Convertible Notes due May&nbsp;31, 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) &#147;Indebtedness&#148; shall mean and include the aggregate amount of, without duplication
(a)&nbsp;all obligations for borrowed money, (b)&nbsp;all obligations evidenced by bonds, debentures, notes
or other similar instruments, (c)&nbsp;all obligations to pay the deferred purchase price of property or
services (other than accounts payable incurred in the ordinary course of business determined in
accordance with generally accepted accounting principals), (d)&nbsp;all obligations with respect to
capital leases, (e)&nbsp;all guaranty obligations; (f)&nbsp;all obligations created or arising under any
conditional sale or other title retention agreement with respect to property acquired by such
Person, (g)&nbsp;all reimbursement and other payment obligations, contingent or otherwise, in respect of
letters of credit and/or taxes or other charges not at the time delinquent or thereafter payable
without penalty or being contested in good faith.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) &#147;Investment&#148; of any Person shall mean any loan or advance of funds by such Person to
any other Person (other than advances to employees of such Person for moving and travel expense,
drawing accounts and similar expenditures in the ordinary course of business), any purchase or
other acquisition of any Equity Securities or Indebtedness of any other Person, any capital
contribution by such Person to or any other investment by such Person in any other Person
(including, without limitation, any Indebtedness incurred by such Person of the type described in
clauses (a)&nbsp;and (b)&nbsp;of the definition of &#147;Indebtedness&#148; on behalf of any other Person); provided,
however, that
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Investments shall not include accounts receivable or other indebtedness owed by customers of such
Person, which are current assets and arose from sales or non-exclusive licensing in the ordinary
course of such Person&#146;s business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) &#147;Lien&#148; shall mean, with respect to any property, any security interest, mortgage,
pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income
therefrom, including, without limitation, the interest of a vendor or lessor under a conditional
sale agreement, capital lease or other title retention agreement, or any agreement to provide any
of the foregoing, and the filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) &#147;Material Adverse Effect&#148; shall mean a material adverse effect on (a)&nbsp;the business,
assets, operations, or financial or other condition of the Company; (b)&nbsp;the ability of the Company
to pay or perform the Obligations in accordance with the terms of this Note and the other
Transaction Documents and to avoid a default or Event of Default under any Transaction Document; or
(c)&nbsp;the rights and remedies, taken as a whole, of Holder under this Note, the other Transaction
Documents or any related document, instrument or agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) &#147;Permitted Indebtedness&#148; means:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Indebtedness of Company in favor of the Holder arising under this Note;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;The existing Indebtedness set forth on the Company&#146;s Form 10-QSB for its quarter
ended June&nbsp;30, 2005 filed by the Company with the Securities and Exchange Commission (the &#147;SEC&#148;),
as the same may have increased or decreased in the ordinary course of the Company&#146;s business after
the date thereof;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;Up to $1,405,000 of the Company&#146;s 9% Convertible Notes due July&nbsp;31, 2006
(collectively, the &#147;Interim Bridge Notes&#148;), of which $953,720 was already closed on September&nbsp;23,
2005, as disclosed on the Company&#146;s Current Report on Form 8-K dated September&nbsp;29, 2005;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;Indebtedness of up to $2,000,000 issued by the Company in connection with the
Company&#146;s offering of its securities after the date of this Note;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;Indebtedness incurred in connection with the financing of the Company&#146;s inventory or
its accounts receivable;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;Indebtedness to trade creditors, including, without limitation, affiliates of and
service providers to the Company, incurred in the ordinary course of business;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)&nbsp;Other Indebtedness of Company, not exceeding $1.0&nbsp;million in the aggregate
outstanding at any time;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)&nbsp;Contingent obligations of Company consisting of guarantees (and other credit
support) of the obligations of vendors and suppliers of Company in respect of transactions entered
into in the ordinary course of business;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)&nbsp;Indebtedness with respect to capital lease obligations and Indebtedness secured by
Permitted Liens;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)&nbsp;Extensions, renewals, refundings, refinancings, modifications, amendments and
restatements of any of the items of Permitted Indebtedness (a)&nbsp;through (f)&nbsp;above, provided that the
principal amount thereof is not increased or the terms thereof are not modified to impose more
burdensome terms upon Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi)&nbsp;Taxes or other charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) &#147;Permitted Investments&#148; shall mean and include: (a)&nbsp;deposits with commercial banks
organized under the laws of the United States or a state thereof to the extent such deposits are
fully insured by the Federal Deposit Insurance Corporation; (b)&nbsp;Investments in marketable
obligations issued or fully guaranteed by the United States and maturing not more than one (1)&nbsp;year
from the date of issuance; (c)&nbsp;Investments in open market commercial paper rated at least &#147;A1&#148; or
&#147;P1&#148; or higher by a national credit rating agency and maturing not more than one (1)&nbsp;year from the
creation thereof; (d)&nbsp;Investments pursuant to or arising under currency agreements or interest rate
agreements entered into in connection with bona fide hedging arrangements; (e)&nbsp;Investments consisting of
deposit accounts of the Company in which the Holder has a perfected security interest and deposit
accounts of its Subsidiaries maintained in the ordinary course of business; (f)&nbsp;Investments
existing on the Closing Date disclosed in the Schedule; (g)&nbsp;Extensions of credit in the nature of
accounts receivable or notes receivable arising from the same or lease of goods or services in the
ordinary course of business; (h)&nbsp;Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary course of business;
(i)&nbsp;Investments (including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of business; (j)&nbsp;Investments consisting of
(i)&nbsp;compensation of employees, officers and directors of borrower so long as the Board of Directors
of Company determines that such compensation is in the best interests of Company, (ii)&nbsp;travel
advances, employee relocation loans and other employee loans and advances in the ordinary course of
business, (iii)&nbsp;loans to employees, officers or directors relating to the purchase of equity
securities of Company, (iv)&nbsp;other loans to officers and employees approved by the Board of
Directors; and (k)&nbsp;other Investments aggregating not in excess of $1,000,000 at any time; (l)
Investments in Subsidiaries of the Company or in joint ventures formed in connection with the
Company&#146;s manufacturing, distribution or sales activities.
</DIV>


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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) &#147;Permitted Liens&#148; shall mean and include: (i)&nbsp;Liens for taxes or other governmental
charges not at the time delinquent or thereafter payable without penalty or being contested in good
faith, provided provision is made to the reasonable satisfaction of Holder for the eventual payment
thereof if subsequently found payable; (ii)&nbsp;Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords incurred in the ordinary course of business for sums not overdue or being contested in good faith, provided
provision is made to the reasonable satisfaction of Holder for the eventual payment thereof if
subsequently found payable; (iii)&nbsp;deposits under workers&#146; compensation, unemployment insurance and
social security laws or to secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, or to secure statutory obligations of surety or appeal
bonds or to secure indemnity, performance or other similar bonds in the ordinary course of
business; (iv)&nbsp;Liens securing obligations under a capital lease if such Liens do not extend to
property other than the property leased under such capital lease; (v)&nbsp;Liens upon any equipment
acquired or held by Company or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the acquisition of such
equipment; (vi)&nbsp;easements, reservations, rights of way, restrictions, minor defects or
irregularities in title and other similar charges or affecting the value or use of such property;
(vii)&nbsp;Liens in favor of the Holder; (viii)&nbsp;Liens existing on the date hereof in favor of holders of
Senior Indebtedness; (ix)&nbsp;any liens existing as of the date hereof and disclosed in the Schedule;
(x)&nbsp;liens on equipment leased by Company pursuant to an operating lease in the ordinary course of
business (including proceeds thereof and accessions thereto) incurred solely for the purpose of
financing the lease of such equipment (including Liens arising from UCC financing statements
regarding such leases); (xi)&nbsp;liens arising from judgements, decrees or attachments to the extent
and only so long as such judgment, decree or attachment does not constitute an Event of Default
under 7(h); (xii)&nbsp;liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods; (xiii)&nbsp;liens arising
solely by virtue of any statutory or common law provision relating to banker&#146;s liens, rights off
setoff or similar rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; (xiv)&nbsp;liens on the Company&#146;s inventory or accounts receivable to
secure Indebtedness incurred in connection with the financing of such accounts receivable or
inventory; and (xv)&nbsp;liens incurred in connection with the extension, renewal, refunding,
refinancing, modification, amendment or restatement of the indebtedness secured by Liens of the
type described in clauses (i)&nbsp;and (xiv)&nbsp;above, provided that any extension, renewal or replacement
Lien shall be limited to the property encumbered by the existing Lien and the principal amount of
the indebtedness being extended, renewed or refinanced does not increase.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) &#147;Person&#148; shall mean and include an individual, a partnership, a corporation
(including a business trust), a joint stock company, a limited liability company, an unincorporated
association, a joint venture or other entity or a governmental authority.
</DIV>


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</DIV>

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) &#147;Senior Indebtedness&#148; shall mean the principal of, unpaid interest on and other
amounts due in connection with the notes payable and other evidences of indebtedness outstanding at
the time of execution of this Note.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) &#147;Subsidiary&#148; shall mean (a)&nbsp;any corporation of which more than 50% of the issued and
outstanding equity securities having ordinary voting power to elect a majority of the Board of
Directors of such corporation is at the time directly or indirectly owned or controlled by Company,
(b)&nbsp;any partnership, joint venture, or other association of which more than 50% of the equity
interest having the power to vote, direct or control the management of such partnership, joint
venture or other association is at the time directly or indirectly owned and controlled by Company
(c)&nbsp;any other entity included in the financial statements of Company on a consolidated basis.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) &#147;Transaction Documents&#148; shall mean this Note and the Warrant (as defined in Section
11 hereof).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company represents and warrants to the
Holder as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Due Incorporation and Qualification. Each of the Company and its Subsidiaries (i)&nbsp;is
a corporation duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation; (ii)&nbsp;has the power and authority to own, lease and operate its
properties and carry on its business as now conducted and as proposed to be conducted; and (iii)&nbsp;is
duly qualified, licensed to do business and in good standing as a foreign corporation in each
jurisdiction where the failure to be so qualified or licensed could reasonably be expected to have
a Material Adverse Effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Authority. The execution, delivery and performance by Company of each Transaction
Document to be executed by Company and the consummation of the transactions contemplated thereby
(i)&nbsp;are within the corporate power of Company and (ii)&nbsp;have been duly authorized by all necessary
corporate actions on the part of Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Enforceability. Each Transaction Document executed, or to be executed, by Company
has been, or will be, duly executed and delivered by Company and constitutes, or will constitute, a
legal, valid and binding obligation of Company, enforceable against Company in accordance with its
terms, except as limited by bankruptcy, insolvency or other laws of general application relating to
or affecting the enforcement of creditors&#146; rights generally and general principles of equity.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Non-Contravention. The execution and delivery by Company of the Transaction
Documents executed by Company and the performance and consummation of the transactions contemplated
thereby do not and will not (i)&nbsp;violate the Certificate or Bylaws of the Company or any material
judgment, order, writ, decree, statute, rule or regulation applicable to Company; (ii)&nbsp;violate any
provision of, or result in the breach or the acceleration of, or entitle any other Person to
accelerate (whether after the giving of
</DIV>

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</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">notice or lapse of time or both), any material mortgage, indenture, agreement, instrument or
contract to which Company is a party or by which it is bound; or (iii)&nbsp;result in the creation or
imposition of any Lien upon any property, asset or revenue of Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization or
approval applicable to Company, its business or operations, or any of its assets or properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Approvals. No consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority or other Person (including, without
limitation, the shareholders of any Person) is required in connection with the execution and
delivery of the Transaction Documents executed by Company and the performance and consummation of
the transactions contemplated thereby, except for filings and notifications required by federal and
state securities laws in connection with the offer and sale of this Note and the consummation of
the transactions contemplated hereby and thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;No Violation or Default. None of the Company or the Company&#146;s Subsidiaries is in
violation of or in default with respect to (i)&nbsp;its Certificate or Bylaws or equivalent charter
document or any material judgment, order, writ, decree, statute, rule or regulation applicable to
such Person; (ii)&nbsp;any material mortgage, indenture, agreement, instrument or contract to which such
Person is a party or by which it is bound (nor is there any waiver in effect which, if not in
effect, would result in such a violation or default), where, in each case, such violation or
default, individually, or together with all such violations or defaults, could reasonably be
expected to have a Material Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Litigation. Except as described in the Company&#146;s Quarterly Report on Form 10-QSB for
the period ended June&nbsp;30, 2005, no actions (including, without limitation, derivative actions),
suits, proceedings or investigations are pending or, to the knowledge of the Company, threatened
against the Company or the Company&#146;s Subsidiaries at law or in equity in any court or before any
other governmental authority which if adversely determined (i)&nbsp;would (alone or in the aggregate)
have a Material Adverse Effect or (ii)&nbsp;seeks to enjoin, either directly or indirectly, the
execution, delivery or performance by the Company of the Transaction Documents or the transactions
contemplated thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;Title. The Company and the Company&#146;s Subsidiaries own and have good and marketable
title in fee simple absolute to, or a valid leasehold interest in, all their respective real
properties and good title to their other respective assets and properties as reflected in the most
recent Financial Statements delivered to Purchasers (except those assets and properties disposed of
in the ordinary course of business since the date of such Financial Statements) and all respective
assets and properties acquired by Company and Company&#146;s Subsidiaries since such date (except those disposed of in the ordinary course
of business). Such assets and properties are subject to no Lien, except for Permitted Liens.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Equity Securities. The authorized capital stock of the Company may be found in the
Company&#146;s Quarterly Report on Form 10-QSB for the period ended June&nbsp;30, 2005 filed by the Company
with the SEC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;REPRESENTATIONS AND WARRANTIES OF HOLDER. The Holder represents and warrants to the
Company that such Holder has been advised that neither this Note nor the securities which may be
issued upon the conversion hereof have been registered under the Securities Act, or any state
securities laws and, therefore, cannot be resold unless registered under the Securities Act and
applicable state securities laws or unless an exemption from such registration requirements is
available. Such Holder is aware that the Company is under no obligation to effect any such
registration with respect to the Note or to file for or comply with any exemption from
registration. Such Holder has not been formed solely for the purpose of making this investment and
is purchasing the Note to be acquired by such Holder hereunder for its own account for investment,
not as a nominee or agent, and not with a view to, or for resale in connection with, the
distribution thereof. Such Holder has such knowledge and experience in financial and business
matters that such Purchaser is capable of evaluating the merits and risks of such investment, is
able to incur a complete loss of such investment and is able to bear the economic risk of such
investment for an indefinite period of time. Such Holder is an accredited investor as such term is
defined in Rule&nbsp;501 of Regulation&nbsp;D under the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;INTEREST. Accrued interest on the outstanding principal balance on this Note shall
be payable on the Maturity Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;PREPAYMENT. Upon 3 (three)&nbsp;days&#146; prior written notice to the Holder, the Company may
prepay this Note in whole or in part; provided that any such prepayment will be applied first to
the payment of expenses due under this Note, second to interest accrued on this Note and third, if
the amount of prepayment exceeds the amount of all such expenses and accrued interest, to the
payment of principal of this Note.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;CERTAIN COVENANTS. While any amount is outstanding under the Note, without the prior written consent of Holders of 2/3 (two thirds) or more in interest of
then-outstanding principal amount of the Notes, which consent shall not be unreasonably withheld or
delayed:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Indebtedness. Neither Company nor any of its Subsidiaries shall create, incur,
assume or permit to exist any Indebtedness except Senior Indebtedness and Permitted Indebtedness.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Liens. Neither the Company nor any of its Subsidiaries shall create, incur, assume
or permit to exist any Lien on or with respect to any of its assets or property of any character,
whether now owned or hereafter acquired, except for Permitted Liens.
</DIV>


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</DIV>

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Asset Dispositions. Neither the Company nor any of its Subsidiaries shall sell,
lease, transfer, license or otherwise dispose of any of its assets or property (collectively, a
&#147;Transfer&#148;), whether now owned or hereafter acquired, except (i)&nbsp;transfers in the ordinary course
of its business consisting of the sale of inventory and sales of worn-out or obsolete equipment and
(ii)&nbsp;transfers not in excess of $1.0&nbsp;million for fair value and other than to any affiliate of the
Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Mergers, Acquisitions, Etc. Neither the Company nor any of its Subsidiaries shall
consolidate with or merge into any other Person or permit any other Person to merge into it, or
acquire all or substantially all of the assets or capital stock of any other Person.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Investments. Neither the Company nor any of its Subsidiaries shall make any
Investment except for Permitted Investments. Without previous notice to Holder, Company will not
sell an amount greater than $100,000 in equity securities, with the exception of (i)&nbsp;up to $10
million offering contemplated in the Private Placement Memorandum; (ii)&nbsp;compensatory and incentive
awards of Equity Securities to employees of and consultants to the Company consistent with its
prior practices; and (iii)&nbsp;for issuances of Equity Securities in connection with the exercise of
conversion rights of the holders of the Interim Bridge Notes and of warrants or options to purchase
Company securities granted by the Company prior to the date hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Dividends, Redemptions, Etc. Neither the Company nor any of its Subsidiaries shall
(i)&nbsp;pay any dividends or make any distributions on its Equity Securities; (ii)&nbsp;purchase, redeem,
retire, decease or otherwise acquire for value any of its Equity Securities; (iii)&nbsp;return any
capital to any holder of its Equity Securities; (iv)&nbsp;make any distribution of assets, Equity
Securities, obligations or securities to any holder of its Equity Securities; or (v)&nbsp;set apart any
sum for any such purpose; other than payments of principal and interest on outstanding Interim
Bridge Notes and repurchases of shares from terminated employees pursuant to the terms of
restricted stock purchase agreements, and provided, however, that any Subsidiary may pay cash
dividends to Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Indebtedness Payments. Neither the Company nor any of its Subsidiaries shall (i)
prepay, redeem, purchase, decrease or otherwise satisfy in any manner prior to the scheduled
repayment thereof any Indebtedness for borrowed money (other than (A)&nbsp;amounts due under this Note
and (B)&nbsp;Senior Indebtedness) or lease obligations, (ii)&nbsp;amend, modify or otherwise change the terms
of any Indebtedness for borrowed money (other than (A)&nbsp;obligations under this Note and (B)&nbsp;Senior
Indebtedness) or lease obligations so as to accelerate the scheduled repayment thereof or (iii)
repay any notes to officers, directors or stockholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;Information Rights; Notices. The Company shall furnish to the Holder the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;SEC Reports. In no event later than five (5)&nbsp;business days after they are sent, made
available or filed, copies of all registration statements and reports filed by
</DIV>

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</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Company with the Securities and Exchange Commission and all reports, proxy statements and financial
statements sent or made available by Company to its stockholders generally; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;Notice of Defaults. Promptly upon the occurrence thereof, written notice of the
occurrence of any Event of Default hereunder or any event of default with respect to any Senior
Indebtedness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Inspection Rights. The Holder and its representatives shall have the right, at any
time during normal business hours, upon reasonable prior notice, and at the expense of the Holder,
to visit and inspect the properties of the Company and its corporate, financial and operating
records, and make abstracts therefrom, and to discuss the Company&#146;s affairs, finances and accounts
with its directors, officers and independent public accountants.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;Use of Proceeds. The Company shall use the proceeds it receives from sales of Notes
to all of the Holders as set forth in the Company&#146;s Private Placement Memorandum dated October&nbsp;10,
2005; provided, however that (i)&nbsp;not more than $25,000 per month of such proceeds may be used by
the Company to pay R&#038;D payables reflected on the Balance Sheet contained in its Quarterly Report on
Form 10-QSB for its period ended June&nbsp;30, 2005 (the &#147;Form&nbsp;10-QSB&#148;) and (ii)&nbsp;not more than $10,000
per month may be used to pay other payables reflected on the Balance Sheet contained in the Form
10-QSB.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an &#147;Event
of Default&#148; under this Note and the other Transaction Documents:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Failure to Pay. The Company shall fail to pay (i)&nbsp;when due any principal payment on
the due date hereunder or (ii)&nbsp;any interest or other payment required under the terms of this Note
or any other Transaction Document on the date due and such payment shall not have been made within
five (5)&nbsp;days of Company&#146;s receipt of the Holder&#146;s written notice to Company of such failure to
pay; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Breaches of Certain Covenants. The Company or any of its Subsidiaries shall fail to
observe or perform any covenant, obligation, condition or agreement set forth in Section&nbsp;6(d), 6(f)
or 6(j) of this Note; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Breaches of Other Covenants. The Company or any of its Subsidiaries shall fail to
observe or perform any other covenant, Transaction Documents (other than those specified in
Sections 7(a) and 7(b)) and (i)&nbsp;such failure shall continue for fifteen (15)&nbsp;days, or (ii)&nbsp;if such
failure does not result from the payment of money or the failure to pay money and is not curable
within such fifteen (15)&nbsp;day period, but is reasonably capable of cure within forty-five (45)&nbsp;days,
either (A)&nbsp;such failure shall continue for forty-five (45)&nbsp;days or (B)&nbsp;the Company or its
Subsidiary shall not have commenced a cure in a manner reasonably satisfactory to the Holders
within the initial fifteen (15)&nbsp;day period; or
</DIV>


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</DIV>

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Representations and Warranties. Any representation, warranty, certificate, or other
statement (financial or otherwise) made or furnished by or on behalf of the Company to the Holder
in writing in connection with this Note or any of the other Transaction Documents, or as an
inducement to the Holder to enter into this Note and the other Transaction Documents, shall be
false, incorrect, incomplete or misleading in any material respect when made or furnished, except
any such false, incorrect, incomplete or misleading statement which will not result in a Material
Adverse Effect on the Company; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Other Payment Obligations. The Company or any of its Subsidiaries shall (i)(A) fail
to make any payment when due under the terms of any bond, debenture, note or other evidence of
Indebtedness, including the Senior Indebtedness, to be paid by such Person (excluding this Note and
the other Transaction Documents but including any other evidence of Indebtedness of Company or any
of its Subsidiaries to the Holder) and such failure shall continue beyond any period of grace
provided with respect thereto, or (B)&nbsp;default in the observance or performance of any other
agreement, term or condition contained in any such bond, debenture, note or other evidence of
Indebtedness, and (ii)&nbsp;the effect of such failure or default is to cause, or permit the holder or
holders thereof to cause, Indebtedness in an aggregate amount of Two Hundred Fifty Thousand Dollars
($250,000) or more to become due prior to its stated date of maturity, unless such acceleration
shall have been rescinded or forgone and such failure to pay cured within thirty (30)&nbsp;days from the
date of such acceleration; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Voluntary Bankruptcy or Insolvency Proceedings. The Company or any of its
Subsidiaries shall (i)&nbsp;apply for or consent to the appointment of a receiver, trustee, liquidator
or custodian of itself or of all or a substantial part of its property, (ii)&nbsp;be unable, or admit in
writing its inability, to pay its debts generally as they mature, (iii)&nbsp;make a general assignment
for the benefit of its or any of its creditors, (iv)&nbsp;be dissolved or liquidated in full or in part,
(v)&nbsp;become insolvent (as such term may be defined or interpreted under any applicable statute),
(vi)&nbsp;commence a voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case or other proceeding commenced
against it, or (vii)&nbsp;take any action for the purpose of effecting any of the foregoing; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of
a receiver, trustee, liquidator or custodian of the Company or any of its Subsidiaries or of all or
a substantial part of the property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to the Company or any of its Subsidiaries
or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in
effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed
or discharged within sixty (60)&nbsp;days of commencement; or
</DIV>


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

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;Judgments. A final judgment or order for the payment of money in excess of Two
Hundred Fifty Thousand Dollars ($250,000) (exclusive of amounts covered by insurance issued by an
insurer not an affiliate of Company) shall be rendered against the Company or any of its
Subsidiaries and the same shall remain undischarged for a period of thirty (30)&nbsp;days during which
execution shall not be effectively stayed, or any judgment, writ, assessment, warrant of
attachment, or execution or similar process shall be issued or levied against a substantial part of
the property of the Company or any of its Subsidiaries and such judgment, writ, or similar process
shall not be released, stayed, vacated or otherwise dismissed within thirty (30)&nbsp;days after issue
or levy; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Transaction Documents. Any Transaction Document or any material term thereof shall
cease to be, or be asserted by the Company not to be, a legal, valid and binding obligation of
Company enforceable in accordance with its terms or if the Liens of the Holder in any of the assets
of Company or its Subsidiaries shall cease to be or shall not be valid and perfected Liens or the
Company or any Subsidiary shall assert that such Liens are not valid and perfected Liens.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;RIGHTS OF HOLDER UPON DEFAULT. Upon the occurrence or existence of any Event of
Default (other than an Event of Default referred to in Sections 7(f) and 7(g)) and at any time
thereafter during the continuance of such Event of Default, the Holders may, by written notice to
the Company, declare all outstanding Obligations payable by the Company hereunder to be
immediately due and payable without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived, anything contained herein or in the other Transaction
Documents to the contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 7(f) and 7(g), immediately and without notice, all outstanding
Obligations payable by Company hereunder shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the other Transaction Documents to the contrary
notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any
Event of Default, the Holders may exercise any other right, power or remedy granted to it by the
Transaction Documents or otherwise permitted to it by law, either by suit in equity or by action at
law, or both.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;SUBORDINATION. The indebtedness evidenced by this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the
prior payment in full of the Senior Indebtedness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Insolvency Proceedings. If there shall occur any receivership, insolvency, assignment for
the benefit of creditors, bankruptcy, reorganization, or arrangements with creditors (whether or
not pursuant to bankruptcy or other insolvency laws), sale of all or substantially all of the
assets, dissolution, liquidation, or any other marshaling of the assets and liabilities of the
Company, (i)&nbsp;no amount shall be paid by the Company in respect of the principal of, interest on or
other amounts due with respect to
</DIV>
<P align="center" style="font-size: 10pt">12
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">this Note at the time outstanding, unless and until the principal of and interest on the Senior
Indebtedness then outstanding shall be paid in full, and (ii)&nbsp;no claim or proof of claim shall be
filed with the Company by or on behalf of Holder of this Note which shall assert any right to
receive any payments in respect of the principal of and interest on this Note except subject to the
payment in full of the principal of and interest on all of the Senior Indebtedness then
outstanding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Default on Senior Indebtedness. If there shall occur an event of default which has
been declared in writing with respect to any Senior Indebtedness, as defined therein, or in the
instrument under which it is outstanding, permitting the holder to accelerate the maturity thereof
and the Holder shall have received written notice thereof from the holder of such Senior
Indebtedness, then, unless and until such event of default shall have been cured or waived or shall
have ceased to exist, or all Senior Indebtedness shall have been paid in full, no payment shall be
made in respect of the principal of or interest on this Note, unless within one hundred eighty
(180)&nbsp;days after the happening of such event of default, the maturity of such Senior Indebtedness
shall not have been accelerated. Not more than one notice may be given to Holder pursuant to the
terms of this Section 9(b) during any 360&nbsp;day period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Further Assurances. By acceptance of this Note, the Holder agrees to execute and
deliver customary forms of subordination agreement requested from time to time by holders of Senior
Indebtedness, and as a condition to the Holder&#146;s rights hereunder, the Company may require that the
Holder execute such forms of subordination agreement; provided that such forms shall not impose on
the Holder terms less favorable than those provided herein.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Other Indebtedness. No Indebtedness which does not constitute Senior Indebtedness
shall be senior in any respect to the indebtedness represented by this Note.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Subrogation. Subject to the payment in full of all Senior Indebtedness, the Holder
shall be subrogated to the rights of the holder(s) of such Senior Indebtedness (to the extent of
the payments or distributions made to the holder(s) of such Senior Indebtedness pursuant to the
provisions of this Section&nbsp;9) to receive payments and distributions of assets of the Company
applicable to the Senior Indebtedness. No such payments or distributions applicable to the Senior
Indebtedness shall, as between the Company and its creditors, other than the holders of Senior
Indebtedness and the Holder, be deemed to be a payment by the Company to or on account of this
Note; and for purposes of such subrogation, no payments or distributions to the holders of Senior
Indebtedness to which the Holder would be entitled except for the provisions of this Section&nbsp;9
shall, as between the Company and its creditors, other than the holders of Senior Indebtedness and
the Holder, be deemed to be a payment by the Company to or on account of the Senior Indebtedness.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;No Impairment. Subject to the rights, if any, of the holders of Senior Indebtedness
under this Section&nbsp;9 to receive cash, securities or other properties otherwise payable or
deliverable to the Holder, nothing contained in this Section&nbsp;9 shall impair, as
</DIV>
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</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">between the Company and the Holder, the obligation of the Company, subject to the terms and
conditions hereof, to pay to the Holder the principal hereof and interest hereon as and when the
same become due and payable, or shall prevent the Holder, upon default hereunder, from exercising
all rights, powers and remedies otherwise provided herein or by applicable law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Reliance of Holders of Senior Indebtedness. The Holder, by its acceptance hereof, shall
be deemed to acknowledge and agree that the foregoing subordination provisions are, and are
intended to be, an inducement to and a consideration of each holder of Senior Indebtedness, whether
such Senior Indebtedness was created or acquired before or after the creation of the indebtedness
evidenced by this Note, and each such holder of Senior Indebtedness shall be deemed conclusively to
have relied on such subordination provisions in acquiring and holding, or in continuing to hold,
such Senior Indebtedness.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;CONVERSION.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Conversion by Holder. At any time prior to payment in full of the principal balance
of this Note, the Holder shall have the right, at the Holder&#146;s option, to convert this Note, in
accordance with the provisions of Section 10(c) hereof, in whole or in part, into fully paid and
nonassessable shares of Common Stock, provided that the Holder shall provide at least thirty (15)
days notice to the Company of Holder&#146;s election to convert this Note into shares of SWA&#146;s Common
Stock. The number of shares of SWA&#146;s Common Stock into which this Note may be converted shall be
determined by dividing the aggregate amount of this Note to be converted by the Conversion Price
(as defined below) in effect at the time of such conversion. The initial &#147;Conversion Price&#148; shall
be equal to $0.70 per share. The Conversion Price shall be subject to adjustment from time to time
pursuant to Section&nbsp;12 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Conversion by the Company. The Company shall have the right, but only with the
Holder&#146;s consent, to convert this Note, in accordance with the provisions of Section 10(c) hereof,
in whole or in part, into fully paid and nonassessable shares of SWA&#146;s common stock. The number of
shares of common stock into which this Note may be converted shall be determined by dividing the
aggregate amount of this Note to be converted by the Conversion Price in effect at the time of such
conversion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Conversion Procedure.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Conversion Pursuant to Section&nbsp;10(a). Before the Holder shall be entitled to convert
this Note into shares of SWA&#146;s Common Stock, it shall surrender this Note, duly endorsed, at the
office of the Company and shall give written notice, postage prepaid, to the Company at its
principal corporate office, of the election to convert the same pursuant to Section&nbsp;10(a), and
shall state therein the amount of the unpaid principal amount of this Note, together with accrued
but unpaid interest, to be converted and the name or names in which the certificate or certificates
for shares of SWA&#146;s Common Stock are to be issued, subject to compliance by the Holder of this Note
with the transfer
</DIV>

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</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">restrictions applicable to this Note. The Company shall, as soon as practicable thereafter (but in
any event within ten (10)&nbsp;days thereafter), issue and deliver to the Holder of this Note a
certificate or certificates for the number of shares of SWA&#146;s Common Stock to which the Holder
shall be entitled upon conversion (bearing such legends as are required by applicable state and
federal securities laws), together with a replacement Note (if any principal amount is not
converted) and any other securities and property to which the Holder is entitled upon such
conversion under the terms of this Note, including a check payable to Holder for any cash amounts
payable as described in Section&nbsp;10(d). The conversion shall be deemed to have been made
immediately prior to the close of business on the date of the surrender of this Note, and the
Person or Persons entitled to receive the shares of SWA&#146;s Common Stock upon such conversion shall
be treated for all purposes as the record holder or holders of such shares of SWA&#146;s Common Stock as
of such date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;Conversion Pursuant to Section&nbsp;10(b). If this Note is converted by the Company
pursuant to Section&nbsp;10(b), written notice shall be delivered to the Holder notifying the Holder of
the conversion to be effected, specifying the Conversion Price, the principal amount of the Note to
be converted, the date on which such conversion is expected to occur and calling upon such Holder
to surrender to Company, in the manner and at the place designated, the Note. Upon such conversion
of this Note, the Holder shall surrender this Note, duly endorsed, at the principal office of
Company. At its expense, the Company shall, as soon as practicable thereafter (but in any event
within ten (10)&nbsp;days thereafter), issue and deliver to such Holder a certificate or certificates
for the number of shares to which Holder shall be entitled upon such conversion (bearing such
legends as are required by applicable state and federal securities laws), together with any other
securities and property to which the Holder is entitled upon such conversion under the terms of
this Note, including a check payable to the Holder for any cash amounts payable as described in
Section&nbsp;10(d). Any conversion of this Note pursuant to Section 10(b) shall be deemed to have been
made immediately prior to the closing of the issuance and sale of shares as described in Section
10(b) and on and after such date the Person entitled to receive the shares issuable upon such
conversion shall be treated for all purpose as the record Holder of such shares as of such date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Fractional Shares; Interest; Effect of Conversion. No fractional shares shall be
issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to the
Holder upon the conversion of this Note, the Company shall pay to the Holder an amount equal to the
product obtained by multiplying the Conversion Price by the fraction of a share not issued pursuant
to the previous sentence. In addition, the Company shall pay to the Holder any interest accrued on
the amount converted and on the amount to be paid to the Company pursuant to the previous sentence.
Upon conversion of this Note in full and the payment of the amounts specified in this Section
10(d), the Company shall be forever released and discharged from all its obligations and
liabilities under this Note.
</DIV>


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

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;ISSUANCES OF WARRANTS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Holder shall receive, for no additional consideration, a stock purchase warrant
(the &#147;Warrant&#148;) in a form attached to this Note, entitling the Holder to purchase shares of the
Company&#146;s Common Stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Company shall issue to the Holder a Warrant entitling the Holder to purchase a
number of shares of the Company&#146;s Common Stock equal to 150% of the number of shares of Common
Stock into which this Note initially is convertible.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Each Warrant to be issued by the Company pursuant to this Section&nbsp;11 shall have an
initial exercise price of $1.00 per share, and expiration date of 2 (two)&nbsp;years from the date when
it is issued.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;The shares of SWA&#146;s Common Stock issuable upon the exercise of any Warrants issued
pursuant to this Section&nbsp;11 shall be entitled to &#147;piggy back&#148; registration rights.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;CONVERSION PRICE ADJUSTMENTS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Adjustments for Stock Splits and Subdivisions. In the event the Company should at any
time or from time to time after the date of issuance hereof fix a record date for the effectuation
of a split or subdivision of the outstanding shares of SWA&#146;s Common Stock or other distribution
payable in additional shares of SWA&#146;s Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive directly or indirectly, additional shares of SWA&#146;s
Common Stock (hereinafter referred to as &#147;SWA&#146;s Common Stock Equivalents&#148;) without payment of any
consideration by such holder (including the additional shares of SWA&#146;s Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion Price of this Note
shall be appropriately decreased so that the number of shares of SWA&#146;s Common Stock issuable upon
conversion of this Note shall be increased in proportion to such increase of outstanding shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Adjustments for Reverse Stock Splits. If the number of shares of SWA&#146;s Common Stock
outstanding at any time after the date hereof is decreased by a combination of the outstanding
shares of SWA&#146;s Common Stock, then, following the record date of such combination, the Conversion
Price for this Note shall be appropriately increased so that the number of shares of SWA&#146;s Common
Stock issuable on conversion hereof shall be decreased in proportion to such decrease in
outstanding shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Notices of Record Date, etc. In the event of:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Any taking by the Company of a record of the holders of any class of securities of
the Company for the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend payable out of earned surplus
</DIV>

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

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">at the same rate as that of the last such cash dividend theretofore paid) or other distribution, or
any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right; or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;Any capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company or any transfer of all or substantially all of the assets of
the Company to any other Person or any consolidation or merger involving the Company; or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;Any voluntary or involuntary dissolution, liquidation or winding-up of the Company,
the Company will mail to Holder of this Note at least ten (10)&nbsp;days prior to the earliest date
specified therein, a notice specifying (A)&nbsp;the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of such dividend,
distribution or right; and (B)&nbsp;the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding-up is expected to become
effective and the record date for determining stockholders entitled to vote thereon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Reservation of Stock Issuable Upon Conversion. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of SWA&#146;s Common Stock solely
for the purpose of effecting the conversion of this Note such number of its shares of SWA&#146;s Common
Stock as shall from time to time be sufficient to effect the conversion of the Note; and if at any
time the number of authorized but unissued shares of SWA&#146;s Common Stock shall not be sufficient to
effect the conversion of the entire outstanding principal amount of this Note, without limitation
of such other remedies as shall be available to the holder of this Note, the Company will use its
best efforts to take such corporate action as may, in the opinion of counsel, be necessary to
increase its authorized but unissued shares of SWA&#146;s Common Stock to such number of shares as shall
be sufficient for such purposes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;SUCCESSORS AND ASSIGNS. Neither this Note nor any of the rights, interests or
obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by
the Company without the prior written consent of the Holder or by the Holder without the prior
written consent of the Company. Subject to the foregoing and the restrictions on transfer
described in Section&nbsp;15 below, the rights and obligations of the Company and the Holder shall be
binding upon and benefit the successors, assigns, heirs, administrators and transferees of the
parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;WAIVER AND AMENDMENT. Any provision of this Note may be amended, waived or modified
upon the written consent of the Company and the Holder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;TRANSFER OF THIS NOTE OR SECURITIES ISSUABLE ON CONVERSION HEREOF. With respect to any
offer, sale or other disposition of this Note or any securities into which this Note may be
converted, the Holder will give written notice to the Company prior thereto, describing briefly the
manner thereof, together with a written opinion of the Holder&#146;s counsel, to the effect that such
offer, sale
</DIV>

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

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">or other distribution may be effected without registration or qualification under any federal or
state law then in effect. Promptly upon receiving such written notice and reasonably satisfactory
opinion, if so requested and subject to Section&nbsp;13, the Company, as promptly as practicable, shall
notify the Holder that the Holder may sell or otherwise dispose of this Note or such securities,
all in accordance with the terms of the notice delivered to the Company. If a determination has
been made pursuant to this Section&nbsp;15 that the opinion of counsel for the Holder is not reasonably
satisfactory to the Company, the Company shall so notify the Holder promptly after such
determination has been made. Each Note thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with the Act, unless in the opinion of counsel for
the Company such legend is not required in order to ensure compliance with the Act. The Company
may issue stop transfer instructions to its transfer agent in connection with such restrictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;NOTICES. Any notice, request or other communication required or permitted hereunder
shall be in writing and shall be deemed to have been duly given if personally delivered or mailed
by registered or certified mail, postage prepaid, or by recognized overnight courier, or by
facsimile transmission or personal delivery, addressed (i)&nbsp;if to the Holder, at such Holder&#146;s
address set forth at the end of this Agreement, or at such other address as such Holder shall have
furnished the Company in writing, or (ii)&nbsp;if to the Company, at its address or fax number set forth
at the end of this Agreement, or at such other address as the Company shall have furnished to the
Holder in writing. Any party hereto may by notice so given change its address for future notice
hereunder. Notice shall conclusively be deemed to have been given when received.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.&nbsp;PAYMENT. Payment shall be made in lawful tender of the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.&nbsp;DEFAULT RATE; USURY. During any period in which an Event of Default has occurred and
is continuing, the Company shall pay interest on the unpaid principal balance hereof at a rate per
annum equal to the rate otherwise applicable hereunder plus 9% (nine percent) until such time as
the event of default has been cured in its entirety, and the Note Holders will be entitled to
receive additional Warrants to purchase a number of shares of SWA&#146;s Common Stock equal to 25%
(twenty-five percent) of the number of shares of SWA&#146;s Common Stock issuable upon the exercise of
the original Warrants issued hereunder. In the event any interest is paid on this Note which is
deemed to be in excess of the then legal maximum rate, then that portion of the interest payment
representing an amount in excess of the then legal maximum rate shall be deemed a payment of
principal and applied against the principal of this Note.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.&nbsp;EXPENSES; WAIVERS. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation, reasonable
attorneys&#146; fees and costs, incurred by one counsel representing all Holders designated in
accordance with Section&nbsp;21 herein below, in connection with such action. The Company hereby waives
notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor
and all other notices or demands relative to this instrument. The Company shall pay on demand all
reasonable fees and expenses,
</DIV>

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

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">including reasonable attorneys&#146; fees and expenses, incurred by the Holder with respect to the
enforcement or attempted enforcement of any of the obligations of the Company to the Holder under
the Transaction Documents or in preserving any of the Holder&#146;s rights and remedies (including,
without limitation, all such fees and expenses incurred in connection with any &#147;workout&#148; or
restructuring affecting the Transaction Documents or the obligations thereunder or any bankruptcy
or similar proceeding involving Company or any of its Subsidiaries).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.&nbsp;REPLACEMENT NOTE. Upon receipt by the Company of evidence reasonably satisfactory to
it of the ownership of and the loss, theft, destruction or mutilation of any Note and (a)&nbsp;in the
case of loss, theft or destruction, of indemnity reasonably satisfactory to it; or (b)&nbsp;in the case
of mutilation, upon surrender thereof; the Company, at its expense, will execute and deliver in
lieu thereof a new Note executed in the same manner as the Note being replaced, in the same
principal amount as the unpaid principal amount of such Note and dated the date to which interest
shall have been paid on such Note or, if no interest shall have yet been so paid, dated the date of
such Note.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.&nbsp;ACTION OF HOLDERS. Any action required or permitted to be taken by the Holders
of this Note and the other Notes, and any demand, sent, forbearance or waiver, shall be effective
only with the consent or other affirmative action of 2/3 (two thirds) or more in interest of
then-outstanding principal amount of the Notes. No such demand, consent, waiver or forbearance
shall be of any force or effect without such consent or other action.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;remainder of page left blank intentionally&#093;
</DIV>


<P align="center" style="font-size: 10pt">19
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.&nbsp;GOVERNING LAW. This Note and all actions arising out of or in connection with this
Note shall be governed by and construed in accordance with the laws of the State of New York,
without regard to the conflicts of law provisions of the State of New York or of any other state.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first written
above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>SAVE THE WORLD AIR, INC.</B>
</DIV>

<DIV align="LEFT">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="40%">
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<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top" >&nbsp;</TD>

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

    <TD colspan="2" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <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" nowrap><DIV style="margin-left:0px; text-indent:-0px">Fax Number:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(818) 487-8003</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="1" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="LEFT">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="40%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>HOLDER</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <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">Amount:
</DIV></TD>
    <TD>$</TD>
    <TD align="left" valign="top" >&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD colspan="1" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <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">Signature:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD colspan="1" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <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">Name:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD colspan="1" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <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">Address:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD colspan="1" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <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"><!-- Blank Space -->
    <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 valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="1" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <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" nowrap><DIV style="margin-left:0px; text-indent:-0px">Fax Number:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD colspan="1" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.46
<SEQUENCE>6
<FILENAME>v18588exv10w46.htm
<DESCRIPTION>EXHIBIT 10.46
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w46</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 10.46</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">THIS SECURITY HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE SOLD,
ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND THE CORPORATION SHALL HAVE RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF
SUCH EXEMPTION REASONABLY SATISFACTORY TO THE CORPORATION (WHICH MAY INCLUDE, AMONG OTHER
THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION).
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">WARRANT TO PURCHASE SHARES OF COMMON STOCK OF SAVE THE WORLD AIR, INC.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<TR style="font-size: 12pt">    <TD>&nbsp;</TD></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Los Angeles, California
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, 2005</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This is to Certify that, for value received, <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> (the &#147;Holder&#148;), is
entitled to purchase, subject to the provisions of this Warrant, from Save the World Air, Inc., a
Nevada corporation (the &#147;Company&#148;), at any time on or after date hereof, and not later than 5:00
p.m. Eastern Standard Time, two years after <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, 2005, <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
shares of the Common
Stock, US$.001 par value, of the Company (the &#147;Common Stock&#148;) at a purchase price per share equal
to US$1.00, subject to adjustment as to the number of shares and purchase price as hereinafter set
forth. The shares of the Company&#146;s Common Stock issuable upon the exercise of this Warrant are
called herein the &#147;Warrant Stock.&#148; The price per share of the Warrant Stock as adjusted from time
to time as hereinafter set forth is sometimes referred to as the &#147;Exercise Price.&#148; The Holder
hereof may exercise this Warrant as to all or any portion of the shares of the Warrant Stock which
such Holder shall have the right to acquire hereunder. This Warrant is the Warrant referred to in
that certain Subscription Agreement of even date herewith (the &#147;Subscription Agreement&#148;) between
the Company and the Holder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Exercise of Warrant</U>. This Warrant may be exercised by presentation and surrender
hereof to the Company with the Exercise Notice attached hereto as <U>Annex A</U>. The Warrant
shall be deemed to have been exercised when (i)&nbsp;the Company has received this Warrant, together
with a completed Exercise Notice, and (ii)&nbsp;the Company has received payment in the amount of the
applicable Exercise Price, notwithstanding that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. If the stock transfer books of the
Company shall be closed on the date of receipt of this Warrant, the Exercise Notice and the
Exercise Price as aforesaid, the Holder shall be deemed to be the holder of such shares of Common
Stock on the next succeeding day on which the stock transfer books of the Company shall be opened.
If
</DIV>

<P align="center" style="font-size: 10pt">1
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant
for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase
the balance of the shares purchasable hereunder. In the event this Warrant shall not be exercised
on or before 2 (two)&nbsp;years after the date of issue, this Warrant shall become void and all rights
hereunder shall cease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) <U>Method of Payment</U>. Holder may pay the applicable Exercise Price by cash, check or
cash equivalent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) <U>Expenses of Issuance</U>. The Company shall issue the shares of Common Stock upon
exercise of this Warrant without charge to Holder for any issuance tax or other cost incurred by
the Company in connection with such exercise and the related issuance of the shares of Common
Stock. Each of the shares of Common Stock shall, upon payment of the Exercise Price therefor, be
fully paid and nonassessable and free from all liens and charges with respect to the issuance
thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) <U>Withholding Taxes</U>. Holder shall satisfy any federal, state, local or foreign
withholding tax obligations arising from the exercise of the Warrant or the subsequent disposition
of the Shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Reservation of Shares</U>. The Company agrees that at all times there shall be
authorized and reserved for issuance upon exercise of this Warrant such number of shares of its
Common Stock as shall be required for issuance or delivery upon exercise of this Warrant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>Fractional Shares</U>. This Warrant shall be exercisable in such manner as not to
require the issuance of fractional shares or scrip representing fractional shares. If, as a result
of adjustment in the Exercise Price or the number of shares of Common Stock to be received upon
exercise of this Warrant fractional shares would be issuable, no such fractional shares shall be
issued. In lieu thereof the Company shall pay the Holder an amount in cash equal to such fraction
multiplied by the current market value of one share of Common Stock. The current value shall be an
amount, not less than twice book value, determined in such reasonable manner as may be prescribed
by the Board of Directors of the Company, such determination to be final and binding on the Holder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;<U>Exchange or Assignment of Warrant</U>. Holder may not, directly or indirectly,
voluntarily or involuntarily, sell, assign, transfer, pledge, hypothecate, encumber or otherwise
dispose of, voluntarily or involuntarily, directly or indirectly (each, a &#147;Transfer&#148;) this Warrant,
except that Holder may transfer the Warrant to Holder&#146;s spouse and direct descendants of Holder,
and the heirs, executors, administrators, testamentary trustees, legatees or beneficiaries of
Holder&#146;s estate upon death (each, a &#147;Permitted Transferee&#148;); provided, however, that (x)&nbsp;any such
Permitted Transferee shall have agreed in writing to be bound by the terms of this Agreement with
respect to the Shares and (y)&nbsp;any transfer to a Permitted Transferee shall not be in violation of
applicable federal or state securities laws.
</DIV>

<P align="center" style="font-size: 10pt">2
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;<U>Rights of the Holder; Limitation on Liability</U>. The Holder shall not, prior to
exercise of this Warrant, by virtue hereof, be entitled to any rights of a shareholder in the
Company, either at law or equity, and the rights of the Holder are limited to those expressed in
the Warrant. No provision hereof, in absence of an affirmative action by the Holder to purchase
the Warrant Stock, and no enumeration herein of rights or privileges by the Holder, shall give rise
to any liability of the Holder for the Exercise Price of the Warrant Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;<U>Adjustment of Exercise Rights</U>. The Exercise Price or the number of shares of
Common Stock to be received upon the exercise of this Warrant, or both shall be subject to
adjustment from time to time as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) <U>Dividends</U>. In case any additional shares of Common Stock or any obligation or
stock convertible into or exchangeable for shares of Common Stock (such convertible or exchangeable
obligations or stock being hereinafter called &#147;Convertible Securities&#148;) shall be issued as a
dividend on any class of stock of the Company, such shares or Convertible Securities, the Exercise
Price then in effect shall be increased proportionately and the number of shares of Warrant Stock
then exercisable hereunder shall be decreased proportionately. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment in the Exercise Price in
the case of the issuance at any time or from time to time of any shares of Common Stock pursuant to
any exercise of this Warrant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) <U>Effect of &#147;Split-ups&#148; and &#147;Split-down&#148; and Certain Dividends</U>. In case at any time
or from time to time the Company shall subdivide as a whole, by reclassification, by the issuance
of a stock dividend on the Common Stock payable in Common Stock, or otherwise, the number of shares
of Common Stock then outstanding into a greater number of shares of Common Stock, with or without
par value, the Exercise Price then in effect shall be reduced proportionately, and the number of
shares of Warrant Stock then exercisable hereunder shall be increased proportionately. In case at
any time or from time to time the Company shall consolidate as a whole, by reclassification or
otherwise, the number of shares of Common Stock then outstanding into a lesser number of shares of
Common Stock, with or without par value, the Exercise Price then in effect shall be increased
proportionately and the number of shares of Warrant Stock then exercisable hereunder shall be
decreased proportionately.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) <U>Statement of Adjusted Exercise Price</U>. Whenever the Exercise Price is adjusted
pursuant to any of the foregoing provisions of this Section (f), the Company shall forthwith
prepare a written statement signed by the President or the Treasurer of the Company, setting forth
the adjusted Exercise Price and any adjustment in the number of shares purchasable hereunder,
determined as provided in this Section (f), and in reasonable detail the facts requiring such
adjustment. Such statement shall be filed among the permanent records of the Company, shall be
furnished to the Holder of each Warrant upon request, and shall be open to inspection by the
Holders of the Warrants during normal business hours.
</DIV>


<P align="center" style="font-size: 10pt">3
</DIV>

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) <U>Effect of Merger or Consolidation</U>. In case the Company shall enter into any
consolidation with or merger into any other corporation wherein the Company is not the surviving
corporation, or sell or convey its property as an entirety or substantially as an entirety and in
connection with such consolidation, merger, sale or conveyance shares of stock or other securities
shall be issuable or deliverable in exchange for the Common Stock of the Company, the Holder of any
Warrant shall thereafter be entitled to purchase pursuant to such Warrant (in lieu of the number of
shares of Common Stock which such Holder would have been entitled to purchase immediately prior to
such consolidation, merger, sale or conveyance) the shares of stock or other securities to which
such number of shares of Common Stock would have been entitled at the time of such consolidation,
merger sale or conveyance, at an aggregate Exercise Price equal to that which would have been
payable if such number of shares of Common Stock had been purchased immediately prior thereto. In
case of any such consolidation, merger, sale or conveyance, appropriate provision (as determined by
resolution of the Board of Directors of the Company with the approval of the Holder) shall be made
with respect to the rights and interests thereafter of the Holders of Warrants, to the end that all
the provisions of the Warrants (including adjustment provisions) shall thereafter be applicable, as
nearly as reasonably practicable, in relation to such stock or other securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) <U>Reorganization and Reclassification</U>. In case of any capital reorganization or any
reclassification of the capital stock of the Company (except as provided in Subsection (2)&nbsp;of this
Section (f)); the Holder of any Warrant shall thereafter be entitled to purchase pursuant to such
Warrant (in lieu of the number of shares of Common Stock which such Holder would have been entitled
to purchase immediately prior to such reorganization or reclassification) the shares of stock of
any class or classes or other securities or property to which the holder of such number of shares
of Common Stock would have been entitled at the time of such reorganization or reclassification, at
an aggregate Exercise Price equal to that which would have been payable if such number of shares of
Common Stock had been purchased immediately prior to such reorganization or reclassification,
appropriate provision (as determined by resolution of the Board of Directors of the Company with
the approval of the Holder) shall be made with respect to the rights and interest thereafter of the
Warrants (including adjustment provisions) shall thereafter be applicable, as nearly as reasonably
practicable, in relation to such stock or other securities or property.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) <U>Distributions</U>. In case the Company shall make any distribution of its assets to
holders of its Common Stock as a liquidation or partial liquidation dividend or by way of return of
capital, or other than as a dividend payable out of earnings or any surplus legally available for
dividends under the laws of the State of California, then the Holder of this Warrant who thereafter
exercises the same as herein provided after the date of record for the determination of those
holders of Common Stock entitled to such distribution of assets, shall be entitled to receive for
the purchase price of the shares of Common Stock stated in this Warrant, in addition to the Shares
of Common Stock, the amount of such assets (or at the option of the Company, a sum equal to the
value thereof at the time of such distribution to holders of Common Stock, as such value

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

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

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">is determined by the Board of Directors of the Company in good faith), which would have been
payable to such Holder had he been the holder of record of such shares of Common Stock on the
record date for the determination of those entitled to such distribution.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) <U>Dissolution or Liquidation</U>. In case the Company shall liquidate or wind up its
affairs, the Holder of this Warrant shall be entitled, upon the exercise thereof, to receive, in
lieu of the shares of Common Stock of the Company which it would have been entitled to receive, the
same kind and amount of assets as would have been issued, distributed or paid to it upon any such
dissolution, liquidation or winding up with respect to such shares of Common Stock of the Company,
had it been the holder of record of such shares of Common Stock on the record date for the
determination of those entitled to receive any such liquidating distribution; provided, however,
that all rights under this Warrant shall terminate on a date fixed by the Company, such date to be
not earlier than the date of commencement of proceedings for dissolution, liquidation or winding up
and not later than 30&nbsp;days after such commencement date, unless the Holder shall have, prior to
such termination date, exercised this Warrant. Notice of such termination of rights under this
Warrant shall be given to the last registered Holder hereof, as the same shall appear on the books
of the Company, by mail at least 30&nbsp;days prior to such termination date. In the event of such
notice the Holder may exercise this Warrant prior to the fifth anniversary hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;<U>Limitations on Transfer of Warrant Stock</U>. The Warrant Stock issuable pursuant
hereto has not been registered under the Act. Accordingly, by acceptance hereof the Holder agrees
that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;It will acquire the Warrant Stock issuable pursuant hereto to be held as an investment and
that it will not attempt to sell, distribute or dispose of the same except pursuant to this
agreement and:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 8%">(a)&nbsp;pursuant to a registration statement filed and rendered effective under the
Act; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 8%">(b)&nbsp;pursuant to a specific exemption from registration under the Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;There shall appear on the certificate or certificates evidencing any Warrant Stock issued
pursuant hereto a legend as follows:
</DIV>


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

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">THIS SECURITY HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE SOLD,
ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND THE CORPORATION SHALL HAVE RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF
SUCH EXEMPTION REASONABLY SATISFACTORY TO THE CORPORATION (WHICH MAY INCLUDE, AMONG OTHER
THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;Company shall cover all shares which may be issued to the Holder under the terms of this
Warrant in the registration statement to be filed by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;<U>Notices</U>. All notices, payments, requests and demands and other communications
required or permitted under this Warrant shall be deemed to have been duly given, delivered and
made if in writing and if served either by personal delivery to the party for whom it is intended
or by being deposited, postage prepaid, certified or registered mail return receipt requested to
the address shown below or such other address as may be designated in writing hereafter by such
party:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>If to the Company:</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Save The World Air, Inc.<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eugene E. Eichler, CEO<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5125 Lankershim Boulevard<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;North Hollywood, California 91601

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>With a copy to:</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lance Jon Kimmel, Esq.<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SEC Law Firm<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11693 San Vicente Boulevard, Suite&nbsp;357<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Los Angeles, California 90049

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>If to the Holder:</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>

</DIV>

<P align="center" style="font-size: 10pt">6
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With a copy to:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;<U>Governing Law</U>. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;<U>Controversy</U>. In the event of any controversy, claim or dispute between the parties
hereto, arising out of or relating to this Warrant, the prevailing party shall be entitled to
recover from the non-prevailing party reasonable expenses, attorneys&#146; fees, and costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;<U>Further Assurances</U>. The parties agree to execute, acknowledge and deliver any and
all such other documents and to take any and all such of the action as may, in the reasonable
opinion of either of the parties hereto be necessary or convenient to efficiently carry out any or
all of the purposes of this Warrant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;<U>Severability</U>. Each and all provisions of this Warrant deemed to be prohibited by
law or otherwise held invalid shall be ineffective only to the extent of such prohibition or
invalidity and shall not invalidate or otherwise render ineffective any or all of the remaining
provisions of this Warrant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;<U>Parties in Interest. Assignment</U>. The Company may assign any and all of its rights
under this Agreement to its successors, and this Agreement shall inure to the benefit of, and be
binding on, the successors of the Company. Subject to the restrictions on transfer herein set
forth, this Agreement shall be binding upon the Holder and his heirs, executors, administrators,
successors and assigns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;<U>Entire Agreement</U>. This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and supercedes in its entirety all prior undertakings and
agreements of the Company and the Holder with respect to the subject matter hereof, and may not be
modified adversely to the Holder interest except by means of a writing signed by the Company and
the Holder.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;Remainder of Page Intentionally Left Blank&#093;
</DIV>


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

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the Company has caused this instrument to be signed as of the
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>SAVE THE WORLD AIR, INC.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">By: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Its: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>


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

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<TYPE>EX-23.1
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<FILENAME>v18588exv23w1.htm
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;23.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Board of Directors<BR>
Save The World Air, Inc.

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We hereby consent to the incorporation by reference in the previously filed Registration Statement
of Save The World Air, Inc (a Development Stage Enterprise) on Form S-8 (File No.&nbsp;333-122210) of
our report, dated March&nbsp;22, 2006, appearing in this Annual Report on Form 10-KSB of Save The World
Air, Inc (a Development Stage Enterprise) for the year ended December&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/s/ WEINBERG &#038; COMPANY, P.A.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">WEINBERG &#038; COMPANY, P.A.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Los
Angeles, California<BR>
March&nbsp;31, 2006

</DIV>

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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>8
<FILENAME>v18588exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit 31.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER<BR>
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 AND<BR>
RULES 13A-14 AND 15D-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Eugene E. Eichler, Chief Executive Officer, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this 10-KSB of Save the World Air, Inc. (the &#147;Company&#148;);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the Company&#146;s as of, and for, the periods presented ire this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. The Company&#146;s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and
15d-15(f)) for the Company&#146;s and have:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the Company&#146;s, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;Evaluated the effectiveness of the Company&#146;s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;Disclosed in this report any change in the Company&#146;s internal control over financial
reporting that occurred during the Company&#146;s most recent fiscal quarter (the Company&#146;s fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the Company&#146;s internal control over financial reporting; and
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. The Company&#146;s other certifying officer and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the Company&#146;s auditors and the audit committee of
the Company&#146;s board of directors (or persons performing the equivalent functions):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the Company&#146;s
ability to record, process, summarize and report financial information; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;Any fraud, whether or not material, that involves management or other employees who have a
significant role in the Company&#146;s internal control over financial reporting.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date:
March&nbsp;31, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U>/s/ EUGENE E. EICHLER&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></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">Eugene E. Eichler</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">Chief Executive Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>9
<FILENAME>v18588exv31w2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit 31.2
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION OF THE CHIEF FINANCIAL OFFICER<BR>
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 AND<BR>
RULES 13A-14 AND 15D-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Eugene E. Eichler, Chief Financial Officer, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this 10-KSB of Save the World Air, Inc. (the &#147;Company&#148;);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the Company&#146;s as of, and for, the periods presented ire this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. The Company&#146;s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and
15d-15(f)) for the Company&#146;s and have:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the Company&#146;s, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;Evaluated the effectiveness of the Company&#146;s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;Disclosed in this report any change in the Company&#146;s internal control over financial
reporting that occurred during the Company&#146;s most recent fiscal quarter (the Company&#146;s fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the Company&#146;s internal control over financial reporting; and
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. The Company&#146;s other certifying officer and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the Company&#146;s auditors and the audit committee of
the Company&#146;s board of directors (or persons performing the equivalent functions):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the Company&#146;s
ability to record, process, summarize and report financial information; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;Any fraud, whether or not material, that involves management or other employees who have a
significant role in the Company&#146;s internal control over financial reporting.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date:
March&nbsp;31, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U>/s/ EUGENE E. EICHLER&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></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">Eugene E. Eichler</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">Chief Financial Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>10
<FILENAME>v18588exv32w1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;32.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Certification of Periodic Financial Report by the Chief Executive Officer and<BR>
Chief Financial Officer Pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Solely for the purposes of complying with 18 U.S.C. &#167;1350, as adopted pursuant to Section&nbsp;906
of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial
Officer of Save the World Air, Inc. (the &#147;Company&#148;), hereby certify, based on our knowledge, that
the Annual Report on Form 10-KSB of the Company for the year ended December&nbsp;31, 2004 (the &#147;Report&#148;)
fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and
that the information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dated:
March&nbsp;31, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ EUGENE E. EICHLER
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Eugene E. Eichler</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">Dated: March&nbsp;31, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ EUGENE E. EICHLER</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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Eugene E. Eichler</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
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<TYPE>GRAPHIC
<SEQUENCE>11
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<DESCRIPTION>GRAPHIC
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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
