##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005.
 or
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For
the transition period from

to
 Commission File Number 0-29185
 SAVE THE WORLD AIR, INC.
 (Exact name of registrant as specified in its charter)
 Nevada
    
    52-2088326(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 5125 Lankershim Boulevard
North Hollywood, California 91601  (Address, including zip code, of principal executive offices)  (818) 487-8000  (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Exchange Act: None.
 Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.001 par value.
 þ o
 o þ
  o þ




---



SAVE THE WORLD AIR, INC.
 
 PagePART IITEM 1. Financial Statements
    
    
    1Condensed balance sheets
    
    
    2Condensed statements of operations (unaudited)
    
    
    3Condensed statements of changes in stockholders deficiency (unaudited)
    
    
    4Condensed statements of cash flows (unaudited)
    
    
    9Notes to condensed financial statements (unaudited)
    
    
    11ITEM 2. Managements Discussion and Analysis or Plan of Operations
    
    
    24ITEM 3. Controls and Procedures
    
    
    28PART IIITEM 1. Legal Proceedings
    
    
    28ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30ITEM 3. Defaults Upon Senior Securities
    
    
    31ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    31ITEM 5. Other Information
    
    
    31ITEM 6. Exhibits
    
    
    31SIGNATURES
    
    
    32EXHIBIT INDEX
    
    
    33EXHIBIT 10.1EXHIBIT 10.2EXHIBIT 10.3EXHIBIT 10.4EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32Exhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 10.4Exhibit 31.1Exhibit 31.2Exhibit 32
  i




---



##### Table of Contents



PART I
 
 Item 1. Financial Statements.
 SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 
 CONDENSED BALANCE SHEETS
SEPTEMBER 30, 2005 (UNAUDITED) AND DECEMBER 31, 2004
 Sept. 30, 2005
    
    
    December 31,(unaudited)
    
    
    2004ASSETSCurrent assetsCash
    
    $
    429,754
    
    
    $
    84,826Other current assets
    
    
    
    
    
    
    2,602Total current assets
    
    
    429,754
    
    
    
    87,428Property and equipment, net of accumulated depreciation
    
    
    53,868
    
    
    
    35,596Other assets
    
    
    4,500
    
    
    
    $
    488,122
    
    
    $
    123,024
  1




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 CONDENSED BALANCE SHEETS  Continued
SEPTEMBER 30, 2005 (UNAUDITED) AND DECEMBER 31, 2004
 Sept. 30, 2005
    
    
    December 31,(unaudited)
    
    
    2004LIABILITIES AND STOCKHOLDERS DEFICIENCYCurrent liabilitiesAccounts payable
    
    $
    86,758
    
    
    $
    64,089Accrued expenses
    
    
    80,669
    
    
    
    84,420Accrued research and development fees
    
    
    705,000
    
    
    
    50,000Accrued professional fees
    
    
    987,279
    
    
    
    876,452Payable to shareholder
    
    
    20,000
    
    
    
    Payable to related parties
    
    
    179,561
    
    
    
    36,478Finders fees payable
    
    
    1,000
    
    
    
    1,521Convertible debentures, net
    
    
    22,066
    
    
    
    Total current liabilities
    
    
    2,082,333
    
    
    
    1,112,960Advances from founding executive officer
    
    
    1,017,208
    
    
    
    1,017,208Commitments and contingenciesStockholders deficiencyCommon stock,
$.001 par value: 200,000,000
shares
authorized, 39,354,821 and
37,784,821 shares issued
and outstanding at
September 30, 2005 and December
31, 2004, respectively
    
    
    39,355
    
    
    
    37,784Common stock to be issued
    
    
    80,000
    
    
    
    119,000Additional paid-in capital
    
    
    17,654,469
    
    
    
    15,043,028Deferred compensation
    
    
    (203,125
    )
    
    
    (76,068
    )Deficit accumulated during the
development stage
    
    
    (20,182,118
    )
    
    
    (17,130,888
    )Total stockholders deficiency
    
    
    (2,611,419
    )
    
    
    (2,007,144
    )$
    488,122
    
    
    $
    123,024
  2




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 
 CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 AND FOR
THE PERIOD FROM INCEPTION (FEBRUARY 18, 1998) TO SEPTEMBER 30, 2005
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,
    
    
    Cumulative2004
    
    
    
    
    
    
    2004
    
    
    since2005
    
    
    (as restated)
    
    
    2005
    
    
    (as restated)
    
    
    inceptionNet sales
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating expenses
    
    
    759,087
    
    
    
    864,653
    
    
    
    1,983,186
    
    
    
    2,362,205
    
    
    
    14,848,556Research and development expenses
    
    
    452,571
    
    
    
    162,458
    
    
    
    1,066,068
    
    
    
    1,565,177
    
    
    
    3,719,293Non-cash patent settlement costs
    
    
    
    
    
    
    1,610,066
    
    
    
    
    
    
    
    1,610,066
    
    
    
    1,610,066Loss before other income
    
    
    (1,211,658
    )
    
    
    (2,637,177
    )
    
    
    (3,049,254
    )
    
    
    (5,537,448
    )
    
    
    (20,177,915
    )Other incomeInterest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    514
    
    
    
    954Loss before provision for income taxes
    
    
    (1,211,658
    )
    
    
    (2,637,177
    )
    
    
    (3,049,254
    )
    
    
    (5,536,934
    )
    
    
    (20,176,961
    )Provision (benefit) for income taxes
    
    
    
    
    
    
    (4,063
    )
    
    
    1,976
    
    
    
    (3,063
    )
    
    
    5,157Net loss
    
    $
    (1,211,658
    )
    
    $
    (2,633,114
    )
    
    $
    (3,051,230
    )
    
    $
    (5,533,871
    )
    
    $
    (20,182,118
    )Net loss per share, basic and diluted
    
    $
    (0.03
    )
    
    $
    (0.07
    )
    
    $
    (0.08
    )
    
    $
    (0.16
    )Weighted average shares outstanding, basic and diluted
    
    
    39,115,886
    
    
    
    36,599,887
    
    
    
    38,564,191
    
    
    
    35,328,591
  3




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 
 CONDENSED STATEMENTS OF STOCKHOLDERS DEFICIENCY
FROM INCEPTION (FEBRUARY 18, 1998) TO SEPTEMBER 30, 2005
 Additional
    
    
    
    
    
    
    Deficit accumulated
    
    
    Total stockholdersPrice per
    
    
    Common Stock
    
    
    Common stock
    
    
    paid -in
    
    
    Deferred
    
    
    during the
    
    
    developmentshare
    
    
    Shares
    
    
    Amount
    
    
    to be issued
    
    
    capital
    
    
    compensation
    
    
    development stage
    
    
    stage deficiencyBalance, February 18, 1998
(date of inception)
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Issuance of common stock
on April 18, 1998
    
    
    .0015  .01
    
    
    
    10,030,000
    
    
    
    10,030
    
    
    
    
    
    
    
    14,270
    
    
    
    
    
    
    
    
    
    
    
    24,300Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,307
    )
    
    
    (21,307
    )Balance, December 31, 1998
    
    
    
    
    
    
    10,030,000
    
    
    
    10,030
    
    
    
    
    
    
    
    14,270
    
    
    
    
    
    
    
    (21,307
    )
    
    
    2,993Issuance of common stock
on May 18, 1999
    
    
    1.00  6.40
    
    
    
    198,003
    
    
    
    198
    
    
    
    
    
    
    
    516,738
    
    
    
    
    
    
    
    
    
    
    
    516,936Issuance of common stock
for ZEFS on September
14, 1999
    
    
    .001
    
    
    
    5,000,000
    
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Stock issued for
professional services on
May 18, 1999
    
    
    0.88
    
    
    
    69,122
    
    
    
    69
    
    
    
    
    
    
    
    49,444
    
    
    
    
    
    
    
    
    
    
    
    49,513Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,075,264
    )
    
    
    (1,075,264
    )Balance, December 31, 1999
    
    
    
    
    
    
    15,297,125
    
    
    
    15,297
    
    
    
    
    
    
    
    580,452
    
    
    
    
    
    
    
    (1,096,571
    )
    
    
    (500,822
    )Stock issued for employee
compensation on
February 8, 2000
    
    
    1.03
    
    
    
    20,000
    
    
    
    20
    
    
    
    
    
    
    
    20,580
    
    
    
    
    
    
    
    
    
    
    
    20,600Stock issued for consulting
services on February 8,
2000
    
    
    1.03
    
    
    
    100,000
    
    
    
    100
    
    
    
    
    
    
    
    102,900
    
    
    
    
    
    
    
    
    
    
    
    103,000Stock issued for
professional services on
April 18, 2000
    
    
    3.38
    
    
    
    27,000
    
    
    
    27
    
    
    
    
    
    
    
    91,233
    
    
    
    
    
    
    
    
    
    
    
    91,260Stock issued for directors
fees on April 18, 2000
    
    
    3.38
    
    
    
    50,000
    
    
    
    50
    
    
    
    
    
    
    
    168,950
    
    
    
    
    
    
    
    
    
    
    
    169,000Stock issued for
professional services on
May 19, 2000
    
    
    4.06
    
    
    
    5,000
    
    
    
    5
    
    
    
    
    
    
    
    20,295
    
    
    
    
    
    
    
    
    
    
    
    20,300Stock issued for directors
fees on June 20, 2000
    
    
    4.44
    
    
    
    6,000
    
    
    
    6
    
    
    
    
    
    
    
    26,634
    
    
    
    
    
    
    
    
    
    
    
    26,640Stock issued for
professional services on
June 20, 2000
    
    
    4.44
    
    
    
    1,633
    
    
    
    2
    
    
    
    
    
    
    
    7,249
    
    
    
    
    
    
    
    
    
    
    
    7,251Stock issued for
professional services on
June 26, 2000
    
    
    5.31
    
    
    
    1,257
    
    
    
    1
    
    
    
    
    
    
    
    6,674
    
    
    
    
    
    
    
    
    
    
    
    6,675Stock issued for employee
compensation on June
26, 2000
    
    
    5.31
    
    
    
    22,000
    
    
    
    22
    
    
    
    
    
    
    
    116,798
    
    
    
    
    
    
    
    
    
    
    
    116,820Stock issued for consulting
services on June 26,
2000
    
    
    5.31
    
    
    
    9,833
    
    
    
    10
    
    
    
    
    
    
    
    52,203
    
    
    
    
    
    
    
    
    
    
    
    52,213Stock issued for
promotional services on
July 28, 2000
    
    
    4.88
    
    
    
    9,675
    
    
    
    9
    
    
    
    
    
    
    
    47,205
    
    
    
    
    
    
    
    
    
    
    
    47,214Stock issued for consulting
services on July 28,
2000
    
    
    4.88
    
    
    
    9,833
    
    
    
    10
    
    
    
    
    
    
    
    47,975
    
    
    
    
    
    
    
    
    
    
    
    47,985Stock issued for consulting
services on August 4,
2000
    
    
    2.13
    
    
    
    35,033
    
    
    
    35
    
    
    
    
    
    
    
    74,585
    
    
    
    
    
    
    
    
    
    
    
    74,620Stock issued for
promotional services on
August 16, 2000
    
    
    2.25
    
    
    
    25,000
    
    
    
    25
    
    
    
    
    
    
    
    56,225
    
    
    
    
    
    
    
    
    
    
    
    56,250Stock issued for consulting
services on September
5, 2000
    
    
    2.25
    
    
    
    12,833
    
    
    
    13
    
    
    
    
    
    
    
    28,861
    
    
    
    
    
    
    
    
    
    
    
    28,874Stock issued for consulting
services on September
10, 2000
    
    
    1.50
    
    
    
    9,833
    
    
    
    10
    
    
    
    
    
    
    
    14,740
    
    
    
    
    
    
    
    
    
    
    
    14,750Stock issued for consulting
services on November
2, 2000
    
    
    0.88
    
    
    
    9,833
    
    
    
    10
    
    
    
    
    
    
    
    8,643
    
    
    
    
    
    
    
    
    
    
    
    8,653
 4




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 CONDENSED STATEMENTS OF STOCKHOLDERS DEFICIENCY
FROM INCEPTION (FEBRUARY 18, 1998) TO SEPTEMBER 30, 2005
 Common Stock
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Deficit accumulated
    
    
    Total stockholdersPrice per
    
    
    
    
    
    
    
    
    
    
    Common stock
    
    
    paid -in
    
    
    Deferred
    
    
    during the
    
    
    developmentshare
    
    
    Shares
    
    
    Amount
    
    
    to be issued
    
    
    capital
    
    
    compensation
    
    
    development stage
    
    
    stage deficiencyStock issued for consulting
services on November
4, 2000
    
    
    0.88
    
    
    
    9,833
    
    
    
    10
    
    
    
    
    
    
    
    8,643
    
    
    
    
    
    
    
    
    
    
    
    8,653Stock issued for consulting
services on December
20, 2000
    
    
    0.50
    
    
    
    19,082
    
    
    
    19
    
    
    
    
    
    
    
    9,522
    
    
    
    
    
    
    
    
    
    
    
    9,541Stock issued for filing
services on December
20, 2000
    
    
    0.50
    
    
    
    5,172
    
    
    
    5
    
    
    
    
    
    
    
    2,581
    
    
    
    
    
    
    
    
    
    
    
    2,586Stock issued for
professional services on
December 26, 2000
    
    
    0.38
    
    
    
    12,960
    
    
    
    13
    
    
    
    
    
    
    
    4,912
    
    
    
    
    
    
    
    
    
    
    
    4,925Other stock issuance on
August 24, 2000
    
    
    2.13
    
    
    
    2,000
    
    
    
    2
    
    
    
    
    
    
    
    4,258
    
    
    
    
    
    
    
    
    
    
    
    4,260Common shares cancelled
    
    
    
    
    
    
    (55,000
    )
    
    
    (55
    )
    
    
    
    
    
    
    (64,245
    )
    
    
    
    
    
    
    
    
    
    
    (64,300
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,270,762
    )
    
    
    (1,270,762
    )Balance, December 31, 2000
    
    
    
    
    
    
    15,645,935
    
    
    
    15,646
    
    
    
    
    
    
    
    1,437,873
    
    
    
    
    
    
    
    (2,367,333
    )
    
    
    (913,814
    )Stock issued for consulting
services on January 8,
2001
    
    
    0.31
    
    
    
    9,833
    
    
    
    10
    
    
    
    
    
    
    
    3,038
    
    
    
    
    
    
    
    
    
    
    
    3,048Stock issued for consulting
services on February 1,
2001
    
    
    0.33
    
    
    
    9,833
    
    
    
    10
    
    
    
    
    
    
    
    3,235
    
    
    
    
    
    
    
    
    
    
    
    3,245Stock issued for consulting
services on March 1,
2001
    
    
    0.28
    
    
    
    9,833
    
    
    
    10
    
    
    
    
    
    
    
    2,743
    
    
    
    
    
    
    
    
    
    
    
    2,753Stock issued for legal
services on March 13,
2001
    
    
    0.32
    
    
    
    150,000
    
    
    
    150
    
    
    
    
    
    
    
    47,850
    
    
    
    
    
    
    
    
    
    
    
    48,000Stock issued for consulting
services on April 3, 2001
    
    
    0.25
    
    
    
    9,833
    
    
    
    10
    
    
    
    
    
    
    
    2,448
    
    
    
    
    
    
    
    
    
    
    
    2,458Stock issued for legal
services on April 4, 2001
    
    
    0.25
    
    
    
    30,918
    
    
    
    31
    
    
    
    
    
    
    
    7,699
    
    
    
    
    
    
    
    
    
    
    
    7,730Stock issued for
professional services on
April 4, 2001
    
    
    0.25
    
    
    
    7,040
    
    
    
    7
    
    
    
    
    
    
    
    1,753
    
    
    
    
    
    
    
    
    
    
    
    1,760Stock issued for consulting
services on April 5, 2001
    
    
    0.25
    
    
    
    132,600
    
    
    
    132
    
    
    
    
    
    
    
    33,018
    
    
    
    
    
    
    
    
    
    
    
    33,150Stock issued for filing fees
on April 30, 2001
    
    
    1.65
    
    
    
    1,233
    
    
    
    1
    
    
    
    
    
    
    
    2,033
    
    
    
    
    
    
    
    
    
    
    
    2,034Stock issued for filing fees
on September 19, 2001
    
    
    0.85
    
    
    
    2,678
    
    
    
    2
    
    
    
    
    
    
    
    2,274
    
    
    
    
    
    
    
    
    
    
    
    2,276Stock issued for
professional services on
September 28, 2001
    
    
    0.62
    
    
    
    150,000
    
    
    
    150
    
    
    
    
    
    
    
    92,850
    
    
    
    
    
    
    
    
    
    
    
    93,000Stock issued for directors
services on October 5,
2001
    
    
    0.60
    
    
    
    100,000
    
    
    
    100
    
    
    
    
    
    
    
    59,900
    
    
    
    
    
    
    
    
    
    
    
    60,000Stock issued for legal
services on October 17,
2001
    
    
    0.60
    
    
    
    11,111
    
    
    
    11
    
    
    
    
    
    
    
    6,655
    
    
    
    
    
    
    
    
    
    
    
    6,666Stock issued for consulting
services on October 18,
2001
    
    
    0.95
    
    
    
    400,000
    
    
    
    400
    
    
    
    
    
    
    
    379,600
    
    
    
    
    
    
    
    
    
    
    
    380,000Stock issued for consulting
services on October 19,
2001
    
    
    1.25
    
    
    
    150,000
    
    
    
    150
    
    
    
    
    
    
    
    187,350
    
    
    
    
    
    
    
    
    
    
    
    187,500Stock issued for exhibit fees
on October 22, 2001
    
    
    1.35
    
    
    
    5,000
    
    
    
    6
    
    
    
    
    
    
    
    6,745
    
    
    
    
    
    
    
    
    
    
    
    6,751Stock issued for directors
services on November
2, 2001
    
    
    0.95
    
    
    
    1,000,000
    
    
    
    1,000
    
    
    
    
    
    
    
    949,000
    
    
    
    
    
    
    
    
    
    
    
    950,000Stock issued for consulting
services on November
7, 2001
    
    
    0.85
    
    
    
    20,000
    
    
    
    20
    
    
    
    
    
    
    
    16,980
    
    
    
    
    
    
    
    
    
    
    
    17,000
 5




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 CONDENSED STATEMENTS OF STOCKHOLDERS DEFICIENCY
FROM INCEPTION (FEBRUARY 18, 1998) TO SEPTEMBER 30, 2005
 Additional
    
    
    
    
    
    
    Deficit accumulated
    
    
    Total stockholdersPrice per
    
    
    Common Stock
    
    
    Common stock
    
    
    paid-in
    
    
    Deferred
    
    
    during the
    
    
    developmentshare
    
    
    Shares
    
    
    Amount
    
    
    to be issued
    
    
    capital
    
    
    compensation
    
    
    development stage
    
    
    stage deficiencyStock issued for consulting
services on November
20, 2001
    
    
    0.98
    
    
    
    43,000
    
    
    
    43
    
    
    
    
    
    
    
    42,097
    
    
    
    
    
    
    
    
    
    
    
    42,140Stock issued for consulting
services on November
27, 2001
    
    
    0.98
    
    
    
    10,000
    
    
    
    10
    
    
    
    
    
    
    
    9,790
    
    
    
    
    
    
    
    
    
    
    
    9,800Stock issued for consulting
services on November
28, 2001
    
    
    0.98
    
    
    
    187,000
    
    
    
    187
    
    
    
    
    
    
    
    183,073
    
    
    
    
    
    
    
    
    
    
    
    183,260Intrinsic value of options
issued to employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,600,000
    
    
    
    (2,600,000
    )
    
    
    
    
    
    
    Fair value of options issued
to non-employees for
services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,318
    
    
    
    
    
    
    
    
    
    
    
    142,318Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    191,667
    
    
    
    
    
    
    
    191,667Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,735,013
    )
    
    
    (2,735,013
    )Balance, December 31, 2001
    
    
    
    
    
    
    18,085,847
    
    
    
    18,086
    
    
    
    
    
    
    
    6,220,322
    
    
    
    (2,408,333
    )
    
    
    (5,102,346
    )
    
    
    (1,272,271
    )Stock issued for directors
services on December
10, 2002
    
    
    0.40
    
    
    
    2,150,000
    
    
    
    2,150
    
    
    
    
    
    
    
    857,850
    
    
    
    
    
    
    
    
    
    
    
    860,000Common stock paid for, but
not issued (2,305,000
shares)
    
    
    0.15 -0.25
    
    
    
    
    
    
    
    
    
    
    
    389,875
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389,875Fair value of options issued
to non-employees for
services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,909
    
    
    
    (54,909
    )
    
    
    
    
    
    
    Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    891,182
    
    
    
    
    
    
    
    891,182Net loss for the year ended
December 31, 2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,749,199
    )
    
    
    (2,749,199
    )Balance, December 31, 2002
    
    
    
    
    
    
    20,235,847
    
    
    
    20,236
    
    
    
    389,875
    
    
    
    7,133,081
    
    
    
    (1,572,060
    )
    
    
    (7,851,545
    )
    
    
    (1,880,413
    )Common stock issued,
previously paid for
    
    
    0.15
    
    
    
    1,425,000
    
    
    
    1,425
    
    
    
    (213,750
    )
    
    
    212,325
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued,
previously paid for
    
    
    0.25
    
    
    
    880,000
    
    
    
    880
    
    
    
    (220,000
    )
    
    
    219,120
    
    
    
    
    
    
    
    
    
    
    
    Stock issued for cash on
March 20, 2003
    
    
    0.25
    
    
    
    670,000
    
    
    
    670
    
    
    
    
    
    
    
    166,830
    
    
    
    
    
    
    
    
    
    
    
    167,500Stock issued for cash on
April 4, 2003
    
    
    0.25
    
    
    
    900,000
    
    
    
    900
    
    
    
    
    
    
    
    224,062
    
    
    
    
    
    
    
    
    
    
    
    224,962Stock issued for cash on
April 8, 2003
    
    
    0.25
    
    
    
    100,000
    
    
    
    100
    
    
    
    
    
    
    
    24,900
    
    
    
    
    
    
    
    
    
    
    
    25,000Stock issued for cash on
May 8, 2003
    
    
    0.25
    
    
    
    1,150,000
    
    
    
    1,150
    
    
    
    
    
    
    
    286,330
    
    
    
    
    
    
    
    
    
    
    
    287,480Stock issued for cash on
June 16, 2003
    
    
    0.25
    
    
    
    475,000
    
    
    
    475
    
    
    
    
    
    
    
    118,275
    
    
    
    
    
    
    
    
    
    
    
    118,750Stock issued for legal
services on June 27,
2003
    
    
    0.55
    
    
    
    83,414
    
    
    
    83
    
    
    
    
    
    
    
    45,794
    
    
    
    
    
    
    
    
    
    
    
    45,877Debt converted to stock on
June 27, 2003
    
    
    0.25
    
    
    
    2,000,000
    
    
    
    2,000
    
    
    
    
    
    
    
    498,000
    
    
    
    
    
    
    
    
    
    
    
    500,000Stock and warrants issued
for cash on July 11,
2003
    
    
    0.25
    
    
    
    519,000
    
    
    
    519
    
    
    
    
    
    
    
    129,231
    
    
    
    
    
    
    
    
    
    
    
    129,750Stock and warrants issued
for cash on September
29, 2003
    
    
    0.25
    
    
    
    1,775,000
    
    
    
    1,775
    
    
    
    
    
    
    
    441,976
    
    
    
    
    
    
    
    
    
    
    
    443,751Stock and warrants issued
for cash on October 21,
2003
    
    
    0.25
    
    
    
    1,845,000
    
    
    
    1,845
    
    
    
    
    
    
    
    459,405
    
    
    
    
    
    
    
    
    
    
    
    461,250Stock and warrants issued
for cash on October 28,
2003
    
    
    0.25
    
    
    
    1,570,000
    
    
    
    1,570
    
    
    
    
    
    
    
    390,930
    
    
    
    
    
    
    
    
    
    
    
    392,500Stock and warrants issued
for cash on November
19, 2003
    
    
    0.25
    
    
    
    500,000
    
    
    
    500
    
    
    
    
    
    
    
    124,500
    
    
    
    
    
    
    
    
    
    
    
    125,000
 6




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 CONDENSED STATEMENTS OF STOCKHOLDERS DEFICIENCY
FROM INCEPTION (FEBRUARY 18, 1998) TO SEPTEMBER 30, 2005
 Additional
    
    
    
    
    
    
    Deficit accumulated
    
    
    Total stockholdersPrice per
    
    
    Common Stock
    
    
    Common stock
    
    
    paid-in
    
    
    Deferred
    
    
    during the
    
    
    developmentshare
    
    
    Shares
    
    
    Amount
    
    
    to be issued
    
    
    capital
    
    
    compensation
    
    
    development stage
    
    
    stage deficiencyFinders fees related to
stock issuances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,875
    
    
    
    (312,582
    )
    
    
    
    
    
    
    
    
    
    
    (268,707
    )Common stock paid for, but
not issued (25,000
shares)
    
    
    0.25
    
    
    
    
    
    
    
    
    
    
    
    6,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,250Amortization of deferred
comp
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    863,727
    
    
    
    
    
    
    
    863,727Net loss for year ended
December 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,476,063
    )
    
    
    (2,476,063
    )Balance, December 31, 2003
    
    
    
    
    
    
    34,128,261
    
    
    
    34,128
    
    
    
    6,250
    
    
    
    10,162,177
    
    
    
    (708,333
    )
    
    
    (10,327,608
    )
    
    
    (833,386
    )Common stock issued,
previously paid for
    
    
    0.25
    
    
    
    25,000
    
    
    
    25
    
    
    
    (6,250
    )
    
    
    6,225
    
    
    
    
    
    
    
    
    
    
    
    Stock issued for director
services on March 31,
2004
    
    
    1.50
    
    
    
    50,000
    
    
    
    50
    
    
    
    
    
    
    
    74,950
    
    
    
    
    
    
    
    
    
    
    
    75,000Stock issued for finders
fees on March 31, 2004
    
    
    0.15
    
    
    
    82,500
    
    
    
    82
    
    
    
    
    
    
    
    12,293
    
    
    
    
    
    
    
    
    
    
    
    12,375Stock issued for finders
fees on March 31, 2004
    
    
    0.25
    
    
    
    406,060
    
    
    
    407
    
    
    
    
    
    
    
    101,199
    
    
    
    
    
    
    
    
    
    
    
    101,606Stock issued for services
on
April 2, 2004
    
    
    1.53
    
    
    
    65,000
    
    
    
    65
    
    
    
    
    
    
    
    99,385
    
    
    
    
    
    
    
    
    
    
    
    99,450Debt converted to stock on
April 2, 2004
    
    
    1.53
    
    
    
    60,000
    
    
    
    60
    
    
    
    
    
    
    
    91,740
    
    
    
    
    
    
    
    
    
    
    
    91,800Stock issued upon exercise
of warrants on May 21,
2004
    
    
    0.20
    
    
    
    950,000
    
    
    
    950
    
    
    
    
    
    
    
    189,050
    
    
    
    
    
    
    
    
    
    
    
    190,000Stock issued for directors
services on June 8,
2004
    
    
    1.70
    
    
    
    600,000
    
    
    
    600
    
    
    
    
    
    
    
    1,019,400
    
    
    
    
    
    
    
    
    
    
    
    1,020,000Stock issued for cash on
August 25, 2004
    
    
    1.00
    
    
    
    550,000
    
    
    
    550
    
    
    
    
    
    
    
    549,450
    
    
    
    
    
    
    
    
    
    
    
    550,000Stock issued upon exercise
of options on August
30,
2004
    
    
    0.40
    
    
    
    4,000
    
    
    
    4
    
    
    
    
    
    
    
    1,596
    
    
    
    
    
    
    
    
    
    
    
    1,600Stock issued for cash on
September 8, 2004
    
    
    1.00
    
    
    
    25,000
    
    
    
    25
    
    
    
    
    
    
    
    24,975
    
    
    
    
    
    
    
    
    
    
    
    25,000Stock issued for consulting
services on September
15, 2004
    
    
    1.31
    
    
    
    50,000
    
    
    
    49
    
    
    
    
    
    
    
    65,451
    
    
    
    
    
    
    
    
    
    
    
    65,500Stock issued for patent
settlement on
September 22, 2004
    
    
    1.24
    
    
    
    20,000
    
    
    
    20
    
    
    
    
    
    
    
    24,780
    
    
    
    
    
    
    
    
    
    
    
    24,800Stock issued for research
and development on
October 6, 2004
    
    
    1.40
    
    
    
    65,000
    
    
    
    65
    
    
    
    
    
    
    
    90,935
    
    
    
    
    
    
    
    
    
    
    
    91,000Stock issued for cash on
October 6, 2004
    
    
    1.00
    
    
    
    25,000
    
    
    
    25
    
    
    
    
    
    
    
    24,975
    
    
    
    
    
    
    
    
    
    
    
    25,000Stock issued for cash on
October 15, 2004
    
    
    1.00
    
    
    
    150,000
    
    
    
    150
    
    
    
    
    
    
    
    149,850
    
    
    
    
    
    
    
    
    
    
    
    150,000Stock issued upon exercise
of stock options on
October 21, 2004
    
    
    0.40
    
    
    
    6,500
    
    
    
    6
    
    
    
    
    
    
    
    2,594
    
    
    
    
    
    
    
    
    
    
    
    2,600Stock issued for cash on
November 3, 2004
    
    
    1.00
    
    
    
    25,000
    
    
    
    25
    
    
    
    
    
    
    
    24,975
    
    
    
    
    
    
    
    
    
    
    
    25,000Stock issued for cash on
November 18, 2004
    
    
    1.00
    
    
    
    172,500
    
    
    
    173
    
    
    
    
    
    
    
    172,327
    
    
    
    
    
    
    
    
    
    
    
    172,500Stock issued for cash on
December 9, 2004
    
    
    1.00
    
    
    
    75,000
    
    
    
    75
    
    
    
    
    
    
    
    74,925
    
    
    
    
    
    
    
    
    
    
    
    75,000Stock issued for cash on
December 23, 2004
    
    
    1.00
    
    
    
    250,000
    
    
    
    250
    
    
    
    
    
    
    
    249,750
    
    
    
    
    
    
    
    
    
    
    
    250,000Finders fees related to
stock issuances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88,384
    )
    
    
    
    
    
    
    
    
    
    
    (88,384
    )Common stock paid for, but
not issued (119,000
shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    119,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    119,000
 7




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 CONDENSED STATEMENTS OF STOCKHOLDERS DEFICIENCY
FROM INCEPTION (FEBRUARY 18, 1998) TO SEPTEMBER 30, 2005
 Additional
    
    
    
    
    
    
    Deficit accumulated
    
    
    Total stockholdersPrice per
    
    
    Common Stock
    
    
    Common stock
    
    
    paid-in
    
    
    Deferred
    
    
    during the
    
    
    developmentshare
    
    
    Shares
    
    
    Amount
    
    
    to be issued
    
    
    capital
    
    
    compensation
    
    
    development stage
    
    
    stage deficiencyIntrinsic value of options
issued to employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248,891
    
    
    
    (248,891
    )
    
    
    
    
    
    
    Fair value of options issued
to non-employees for
services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,381
    
    
    
    (55,381
    )
    
    
    
    
    
    
    Fair value of warrants
issued for settlement
costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,585,266
    
    
    
    
    
    
    
    
    
    
    
    1,585,266Fair value of warrants
issued to non-
employees for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,872
    
    
    
    
    
    
    
    
    
    
    
    28,872Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    936,537
    
    
    
    
    
    
    
    936,537Net loss for year ended
December 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,803,280
    )
    
    
    (6,803,280
    )Balance, December 31, 2004
    
    
    
    
    
    
    37,784,821
    
    
    
    37,784
    
    
    
    119,000
    
    
    
    15,043,028
    
    
    
    (76,068
    )
    
    
    (17,130,888
    )
    
    
    (2,007,144
    )Common stock issued,
previously paid for
    
    
    1.00
    
    
    
    69,000
    
    
    
    69
    
    
    
    (69,000
    )
    
    
    68,931
    
    
    
    
    
    
    
    
    
    
    
    Stock issued upon exercise
of warrants, previously
paid for
    
    
    1.00
    
    
    
    50,000
    
    
    
    50
    
    
    
    (50,000
    )
    
    
    49,950
    
    
    
    
    
    
    
    
    
    
    
    Stock issued for cash on
January 20, 2005
    
    
    1.00
    
    
    
    25,000
    
    
    
    25
    
    
    
    
    
    
    
    24,975
    
    
    
    
    
    
    
    
    
    
    
    25,000Stock issued upon exercise
of warrants on January
31, 2005
    
    
    0.40
    
    
    
    500
    
    
    
    1
    
    
    
    
    
    
    
    199
    
    
    
    
    
    
    
    
    
    
    
    200Stock issued for cash on
February 17, 2005
    
    
    1.00
    
    
    
    325,000
    
    
    
    325
    
    
    
    
    
    
    
    324,675
    
    
    
    
    
    
    
    
    
    
    
    325,000Stock issued for cash on
March 31, 2005
    
    
    1.00
    
    
    
    215,000
    
    
    
    215
    
    
    
    
    
    
    
    214,785
    
    
    
    
    
    
    
    
    
    
    
    215,000Stock issued for cash on
May 17, 2005
    
    
    1.00
    
    
    
    5,000
    
    
    
    5
    
    
    
    
    
    
    
    4,995
    
    
    
    
    
    
    
    
    
    
    
    5,000Stock issued for cash on
June 7, 2005
    
    
    1.00
    
    
    
    300,000
    
    
    
    300
    
    
    
    
    
    
    
    299,700
    
    
    
    
    
    
    
    
    
    
    
    300,000Stock issued for cash on
August 5, 2005
    
    
    1.00
    
    
    
    480,500
    
    
    
    481
    
    
    
    
    
    
    
    480,019
    
    
    
    
    
    
    
    
    
    
    
    480,500Stock issued for cash on
August 9, 2005
    
    
    1.00
    
    
    
    100,000
    
    
    
    100
    
    
    
    
    
    
    
    99,900
    
    
    
    
    
    
    
    
    
    
    
    100,000Common stock paid for, but
not issued (80,000
shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,000Finders fees related to
stock issuances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (108,840
    )
    
    
    
    
    
    
    
    
    
    
    (108,840
    )Intrinsic value of options
issued to employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    243,750
    
    
    
    (243,750
    )
    
    
    
    
    
    
    Fair value of options issued
for settlement costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,500
    
    
    
    
    
    
    
    
    
    
    
    31,500Fair value of warrants
issued for settlement
costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,957
    
    
    
    
    
    
    
    
    
    
    
    4,957Fair value of warrants
issued to non-
employees for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,505
    
    
    
    
    
    
    
    
    
    
    
    13,505Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,693
    
    
    
    
    
    
    
    116,693Warrants issued with
convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    427,703
    
    
    
    
    
    
    
    
    
    
    
    427,703Intrinsic value of beneficial
conversion associated
with convertible
debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    430,737
    
    
    
    
    
    
    
    
    
    
    
    430,737Net loss for nine months
ended September 30,
2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,051,230
    )
    
    
    (3,051,230
    )Balance, September 30, 2005
(unaudited)
    
    
    
    
    
    
    39,354,821
    
    
    $
    39,355
    
    
    $
    80,000
    
    
    $
    17,654,469
    
    
    $
    (203,125
    )
    
    $
    (20,182,118
    )
    
    $
    (2,611,419
    )
 8




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 
 CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
 NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 AND
FOR THE PERIOD FROM INCEPTION (FEBRUARY 18, 1998)
TO SEPTEMBER 30, 2005
 September 30,
    
    
    CumulativeSeptember 30,
    
    
    2004
    
    
    since2005
    
    
    (as restated)
    
    
    inceptionCash flows from operating activitiesNet loss
    
    $
    (3,051,230
    )
    
    $
    (5,533,871
    )
    
    $
    (20,182,118
    )Adjustments to reconcile net loss to net cash
used in operating activities:Write off of intangible assets
    
    
    
    
    
    
    
    
    
    
    505,000Fair value of options issued for services
    
    
    
    
    
    
    
    
    
    
    171,190Issuance of common stock for services
    
    
    
    
    
    
    1,361,550
    
    
    
    5,280,623Issuance of options for legal settlement
    
    
    31,500
    
    
    
    
    
    
    
    31,500Issuance of warrants for legal settlement
    
    
    4,957
    
    
    
    
    
    
    
    4,957Issuance of warrants for services
    
    
    13,505
    
    
    
    
    
    
    
    13,505Patent acquisition cost
    
    
    
    
    
    
    1,585,266
    
    
    
    1,610,066Amortization of issuance costs
    
    
    22,066
    
    
    
    
    
    
    
    22,066Amortization of deferred compensation
    
    
    116,693
    
    
    
    789,636
    
    
    
    2,999,806Depreciation
    
    
    6,987
    
    
    
    6,323
    
    
    
    21,404Changes in operating assets and liabilities:Prepaid expenses and other
    
    
    (1,898
    )
    
    
    (50,000
    )
    
    
    (4,500
    )Income taxes payable
    
    
    
    
    
    
    (5,991
    )
    
    
    Accounts payable and accrued expenses
    
    
    789,624
    
    
    
    157,999
    
    
    
    1,980,087Net cash used in operating activities
    
    
    (2,067,796
    )
    
    
    (1,689,088
    )
    
    
    (7,546,414
    )Cash flows from investing activitiesPurchase of property and equipment
    
    
    (25,259
    )
    
    
    (9,037
    )
    
    
    (71,722
    )Net cash used in investing activities
    
    
    (25,259
    )
    
    
    (9,037
    )
    
    
    (71,722
    )Cash flows from financing activitiesIncrease (decrease) in payables to related
parties and shareholder
    
    
    163,083
    
    
    
    (6,425
    )
    
    
    711,011Advances from founding executive officer
    
    
    
    
    
    
    
    
    
    
    517,208Net proceeds from convertible debentures
    
    
    858,440
    
    
    
    
    
    
    
    858,440Issuance of common stock for cash
    
    
    1,342,860
    
    
    
    766,600
    
    
    
    5,887,631Common stock issuable
    
    
    73,600
    
    
    
    235,000
    
    
    
    73,600Net cash provided by financing activities
    
    
    2,437,983
    
    
    
    995,175
    
    
    
    8,047,890Net increase (decrease) in cash
    
    
    344,928
    
    
    
    (702,950
    )
    
    
    429,754Cash, beginning of period
    
    
    84,826
    
    
    
    926,052
    
    
    
    Cash, end of period
    
    $
    429,754
    
    
    $
    223,102
    
    
    $
    429,754
  9




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 CONDENSED STATEMENTS OF CASH FLOWS  Continued (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 AND
FOR THE PERIOD FROM INCEPTION (FEBRUARY 18, 1998)
TO SEPTEMBER 30, 2005
 CumulativeSeptember 30,
    
    
    September 30,
    
    
    since2005
    
    
    2004
    
    
    inceptionSupplemental disclosures of cash flow
informationCash paid during the year forInterest
    
    $
    
    
    
    $
    
    
    
    $
    Income taxes
    
    $
    1,976
    
    
    $
    
    
    
    $
    5,157Non-cash investing and financing
activitiesAcquisition of intangible asset through
advance from related party and issuance
of common stock
    
    $
    
    
    
    $
    
    
    
    $
    505,000Deferred compensation for stock options
issued for services
    
    
    243,750
    
    
    
    304,272
    
    
    
    3,202,931Purchase of property and equipment
financed by advance from related party
    
    
    
    
    
    
    
    
    
    
    3,550Conversion of related party debt to equity
    
    
    
    
    
    
    15,000
    
    
    
    515,000Issuance of common stock in settlement of
payable
    
    
    
    
    
    
    113,981
    
    
    
    113,981Common stock, previously paid for
    
    
    119,000
    
    
    
    6,250
    
    
    
    119,000Finders fees accrued for issuance of
common stock
    
    
    1,000
    
    
    
    64,928
    
    
    
    1,000Value of warrants and beneficial conversion
feature of convertible notes
    
    
    858,440
    
    
    
    
    
    
    
    858,440
  10




---



##### Table of Contents



SAVE THE WORLD AIR, INC.

 (A DEVELOPMENT STAGE ENTERPRISE)
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 1. Organization and basis of presentation
     11




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 NOTES TO CONDENSED FINANCIAL STATEMENTS  Continued
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 1. Organization and basis of presentation  continued
      12




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 NOTES TO CONDENSED FINANCIAL STATEMENTS  Continued
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 2. Net loss per share
  3. Recent accounting pronouncements
   13




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 NOTES TO CONDENSED FINANCIAL STATEMENTS  Continued
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 3. New accounting pronouncements  continued
  4. Certain relationships and related transactions
    14




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 NOTES TO CONDENSED FINANCIAL STATEMENTS  Continued
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 4. Certain relationships and related transactions  continued
     5. Convertible debentures and warrants
  15




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 NOTES TO CONDENSED FINANCIAL STATEMENTS  Continued
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 5. Convertible debentures and warrants  continued
     6. Capital stock
    16




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 NOTES TO CONDENSED FINANCIAL STATEMENTS  Continued
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 6. Capital stock  continued
       7. Research and development
  17




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 NOTES TO CONDENSED FINANCIAL STATEMENTS  Continued
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 8. Going concern
  9. Commitments and contingencies
   18




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 NOTES TO CONDENSED FINANCIAL STATEMENTS  Continued
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 9. Commitments and contingencies   continued
    19




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 NOTES TO CONDENSED FINANCIAL STATEMENTS  Continued
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 9. Commitments and contingencies   continued
      20




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 NOTES TO CONDENSED FINANCIAL STATEMENTS  Continued
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 9. Commitments and contingencies  continued
     21




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 NOTES TO CONDENSED FINANCIAL STATEMENTS  Continued
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 9. Commitments and contingencies  continued
      22




---



##### Table of Contents



SAVE THE WORLD AIR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 NOTES TO CONDENSED FINANCIAL STATEMENTS  Continued
NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED)
 10. Restatement
   As previously
    
    
    
    
    
    
    As previouslyreported
    
    
    
    
    
    
    reportedThree months ending
    
    
    
    
    
    
    Nine months endingSept. 30, 2004
    
    
    Restated
    
    
    Sept. 30, 2004
    
    
    RestatedNet loss
    
    $
    2,661,971
    
    
    $
    2,633,114
    
    
    $
    4,602,129
    
    
    $
    5,533,871Paid in capital
    
    $
    13,270,211
    
    
    $
    14,247,281
    
    
    $
    13,270,211
    
    
    $
    14,247,281Loss per share
    
    $
    0.07
    
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.16
 23




---



##### Table of Contents



Item 2. Managements Discussion and Analysis or Plan of Operations
  
    
    revenues and profits;
    
    customers;
    
    research and development expenses and efforts;
    
    scientific test results;
    
    sales and marketing expenses and efforts;
    
    liquidity and sufficiency of existing cash;
    
    pending and future financings;
    
    technology and products;
    
    the outcome of pending or threatened litigation; and
    
    the effect of recent accounting pronouncements on our financial condition and results of operations.
   Overview
     24




---



##### Table of Contents



Results of Operations
        25




---



##### Table of Contents



Liquidity and Capital Resources
         26




---



##### Table of Contents



Critical Accounting Policies and Estimates
    Stock-Based Compensation
   New Accounting Pronouncements
   27




---



##### Table of Contents



Item 3. Controls and Procedures
 Evaluation of disclosure controls and procedures:
 Changes in internal control over financial reporting:
 
 PART II
 
 Item 1. Legal Proceedings
  28




---



##### Table of Contents



29




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   30




---



##### Table of Contents



Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibit No.
    
    Description10.1
    
    Employment Agreement dated July 1, 2005 between the Company and John R. Bautista.10.2
    
    Lease dated August 15, 2005 between the Company and Thomas L. Jackson.10.3
    
    Form of the Companys 9% convertible note issued in the Interim Financing.10.4
    
    Form of the Companys stock purchase warrant issued in the Interim Financing.31.1
    
    Certification of Chief Executive Officer of Quarterly Report
Pursuant to Rule 13(a)-15(e) or Rule 15(d)-15(e)31.2
    
    Certification of Chief Financial Officer of Quarterly Report
Pursuant to 18 U.S.C. Section 135032
    
    Certification of Chief Executive Officer and Chief Financial
Officer of Quarterly Report pursuant to Rule 13(a)-15(e) or Rule
15(d)-15(e)
 31




---



##### Table of Contents



SIGNATURES
  Date: November 11, 2005
    SAVE THE WORLD AIR, INC.By:
    /s/ EUGENE E. EICHLEREugene E. EichlerChief Executive Officer 32




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description10.1
    
    Employment Agreement dated July 1, 2005 between the Company and John R. Bautista.10.2
    
    Lease dated August 15, 2005 between the Company and Thomas L. Jackson.10.3
    
    Form of 9% convertible note issued in the Companys Interim Financing.10.4
    
    Form of stock purchase warrant issued in the Companys Interim Financing.31.1
    
    Certification of Chief Executive Officer of Quarterly Report
Pursuant to Rule 13(a)-15(e) or Rule 15(d)-15(e)31.2
    
    Certification of Chief Financial Officer of Quarterly Report
Pursuant to 18 U.S.C. Section 135032
    
    Certification of Chief Executive Officer and Chief Financial
Officer of Quarterly Report pursuant to Rule 13(a)-15(e) or Rule
15(d)-15(e)
 33