UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                   FORM 10-KSB



(X)      Annual report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the annual period ended December 31, 2000

(  )     Transition report pursuant of Section 13 or 15(d) of the Securities
         Exchange Act of 1939 for the transition period _____ 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              (IRS Employer  Identification No.)
incorporation or organization)


1285 Avenue of the Americas, 35th Floor, New York, NY 10019-6028  (212) 554-4197
--------------------------------------------------------------------------------
        (Address of Principal Executive Offices, including Registrant's
                         zip code and telephone number)

Mandalay Capital Corp.
--------------------------------------------------------------
Former name, former address and former fiscal year, if changed


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports,), and (2) has been subject to such filing
requirements for the past 90 days.
Yes     [ X ]  No  [   ]

The number of shares of the registrant's common stock as of December 31, 2000:
15,645,935 shares.

Documents Incorporated by Reference
         None

Transitional Small Business Disclosure Format (check one):   Yes [ ]   No [X]

                                        1

<PAGE>

                             SAVE THE WORLD AIR INC.

                                   FORM 10-KSB
                          YEAR ENDED DECEMBER 31, 2000
                                TABLE OF CONTENTS

                                     PART I
                                                                            PAGE
                                                                            ----

Item 1.  DESCRIPTION OF BUSINESS                                              3

Item 2.  DESCRIPTION OF PROPERTIES                                            4

Item 3.  LEGAL PROCEEDINGS                                                    4

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                  4

                                     PART II

Item 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED MATTERS        5

Item 6.  MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF
         OPERATIONS                                                           5

Item 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                          6

Item 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS                       15

                                    PART III

Item 9.  MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT                   15

Item 10.  EXECUTIVE COMPENSATION                                             15

Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT     15

Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                     16

                                     PART IV

Item 13.  EXHIBITS AND REPORTS ON FORM 8-K                                   17

SIGNATURES                                                                   18


                                        2
<PAGE>

                           FORWARD-LOOKING STATEMENTS

ALL FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE DEEMED BY THE COMPANY TO BE
COVERED BY AND TO QUALIFY FOR THE SAFE HARBOR PROTECTION PROVIDED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 THE 1995 ACT SHAREHOLDERS AND
PROSPECTIVE SHAREHOLDERS SHOULD UNDERSTAND THAT SEVERAL FACTORS GOVERN WHETHER
ANY FORWARD - LOOKING STATEMENT CONTAINED HEREIN WILL BE OR CAN BE ACHIEVED. ANY
ONE OF THOSE FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED HEREIN. THESE FORWARD - LOOKING STATEMENTS INCLUDE PLANS AND
OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, INCLUDING PLANS AND OBJECTIVES
RELATING TO THE PRODUCTS AND THE FUTURE ECONOMIC PERFORMANCE OF THE COMPANY.
ASSUMPTIONS RELATING TO THE FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG
OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS, FUTURE
BUSINESS DECISIONS, AND THE TIME AND MONEY REQUIRED TO SUCCESSFULLY COMPLETE
DEVELOPMENT PROJECTS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT
ACCURATELY AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. ALTHOUGH THE
COMPANY BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD - LOOKING
STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY OF THOSE ASSUMPTIONS COULD PROVE
INACCURATE AND, THEREFORE, THERE CAN BE NO ASSURANCE THAT THE RESULTS
CONTEMPLATED IN ANY OF THE FORWARD - LOOKING STATEMENTS CONTAINED HEREIN WILL BE
REALIZED. BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENT, THE COMPANY MAY
ALTER ITS MARKETING, CAPITAL EXPENDITURE PLANS OR OTHER BUDGETS, WHICH MAY IN
TURN AFFECT THE COMPANY'S RESULTS OF OPERATIONS. IN LIGHT OF THE SIGNIFICANT
UNCERTAINTIES INHERENT IN THE FORWARD - LOOKING STATEMENTS INCLUDED THEREIN, THE
INCLUSION OF ANY SUCH STATEMENT SHOULD NOT BE REGARDED AS A REPRESENTATION BY
THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES OR PLANS OF THE COMPANY WILL
BE ACHIEVED.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

Save the World Air, Inc. (the "Company") was incorporated on February 18, 1998
under the name "Mandalay Capital Corp.". The Company changed its name to "Save
the World Air, Inc." on February 11, 1999 following the signing of the agreement
by and between the Company and Jeffrey Muller, the Company's officer and
director, with respect to the Company's purchase of "Zero Pollution Emission
Device" (the "Agreement"). Under the terms of the agreement, the Company issued
5,000,000 shares of its common stock to Mr. Muller and agreed to pay him a total
of $500,000 and $10 royalty for every unit of the device sold.

The Company's primary business involves a Zero Pollution-Fuel Saving Device for
motor vehicles or petrol driven engines.

In December, 1998 the Company acquired the worldwide exclusive manufacturing,
marketing and distribution rights for the Zero Pollution Fuel Saving Device (the
"Zero Pollution Device") by entering into the Agreement. The Zero Pollution
Device is an attachment that when fitted to an internal combustion engine
reduces the toxicity of exhaust gas emissions. The Zero Pollution Device is a
product which is fitted to an internal combustion engine and results in a
reduction of carbon monoxide, hydrocarbons and toxic exhaust emissions. The Zero
Pollution Device works on the inlet manifold before the harmful gases are
created and an improvement in fuel economy for the engine may also be achieved.

The Company's main focus has been on the implementation of a business plan with
the Zero Pollution Device as its flagship product.

While the Company is confident that the claims made with respect to the
performance of the Zero Pollution Device are valid, there can be no assurances
that this product will be successful in the marketplace.

The Company's executive offices are located in both the United States and
Australia. The Australian address is 19-21 Garden Grove, Carrara, Queensland,
Australia 4211 and its telephone number is 011-61-7-55945556. Additionally, the
Company's principal office in the United States is located at 1285 Avenue of the
Americas, 35th Floor, New York, NY 10019-6028, telephone number 212-554 4197.

The Company's goal is to sell licenses to manufacture and market its
environmentally safe product throughout the world. As such, importation and
exportation regulations may impact its activities, to some degree. A breach of
such laws or regulations may result in the imposition of penalties, fines,
suspension or revocation of licenses. The Company is not currently involved in
any judicial or administrative proceedings and believes that it is in compliance
with all applicable regulations.

Although it is impossible to predict, with certainty, the effect that additional
importation and exportation requirements may have on future earnings and
operations, the Company is presently unaware of any future regulations that may
have a material effect on the Company's financial position, but cannot rule out
the possibility.

ITEM 2. DESCRIPTION OF PROPERTIES

The Company did not enter into any lease agreements with respect to the offices
used by the Company in Australia and the United States (New York). The Company
entered into oral arrangements with the occupants of such respective offices
pursuant to which agreements, the Company may use and share such offices at no
cost to the Company. The office in Australia is made available to the Company by
one of its shareholders.


ITEM 3. LEGAL PROCEEDINGS

There are no pending legal proceedings to which the Company is a party or to
which the property interests of the Company are subject, as defined in Item 103
of Regulation S-B.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None

                                        4
<PAGE>

                               PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED MATTERS

Save The World Air Inc., common stock trades on so called "pink sheets" under
the symbol "ZERO". The Company's common stock previously traded on the NASD Over
The Counter Bulletin Board (OTCBB)until July 20, 2000, when its trading was
suspended by the Securities and Exchange Commission pending its inquiry of the
accuracy of the Company's public announcement at that time. The Company fully
cooperated with the Commission and it believes that it provided all the
necessary information to the Commission to satisfy its inquiry. The Company has
not received notice of any proposed adverse action and is seeking to resolve any
issues that may arise without prolonged additional investigations. The Company
is currently in a process of reapplying to be quoted on the Bulletin Board.

There were 835 shareholders of record as of December 31,2000. The price of the
Company's common stock as of December 31, 2000 was $0.25 (ask) and $0.23 (bid).

The Company's monthly high and low closing bid and close information for the
fiscal year ended December 31, 2000, is listed below as provided by Commodity
Systems, Inc. historical quotes . Quotations reflect inter-dealer prices,
without retail mark-up, markdown or commission and may not represent actual
transactions.

       Date          Open        High        Low         Close
       ----          ----        ----        ---         -----
       Dec-00        0.25       0.625       0.0625       0.125
       Nov-00       0.875        1.25       0.1875       0.625
       Oct-00         1.5           2        0.625        0.75
       Sep-00       2.625       2.625        1.125         1.5
       Aug-00        0.25         3.5         0.25        2.25
       Jul-00      6.0312          14       4.2812       4.875
       Jun-00           3      6.5625            3           6
       May-00      3.9375       4.625       2.8125      2.8906
       Apr-00      4.3125      4.3125         2.25       3.875
       Mar-00        4.25       4.375        1.375      3.6875

The Company has not paid any cash dividends since its inception and does not
contemplate paying any in the fore-seeable future. It is anticipated that
earnings, if any, will be retained for the operation of the Company's business.


ITEM 6. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

During the period from the Company's inception in February of 1998 to December
31,2000, the Company had revenue of $125,000 from sale of licenses and $9,980
from consulting. The Company has incurred substantial expenses in business
development and marketing of its product.

Over the next year, the Company intends to continue to focus on the business
development and marketing of its Zero Pollution Fuel Saving Device. In addition,
the Company will endeavor to seek opportunities to acquire and develop other
ecologically sound technologies that meet its requirements.

                                        5
<PAGE>

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the Company required to be included in
Item 7 are listed in this index, and follow this page:

Report of Independent Certified Public Accountant
Financial Statements

         Balance Sheet
         Statement of Operations
         Statement of Cash Flows
         Statement of Shareholders' Equity
         Notes to Financial Statements

                                        6




<PAGE>

                                                        HBG Logo
                                                        HOIBERG BUSINESS GROUP
                                                        ACCOUNTANTS & ADVISERS
                                                         Tel. +61 07 5443 7600
                                                         Fax. +61 07 5443 2435
                                                        Email.admin@HBG.com.au
                                                             Web. www.HBG.com.au


                           INDEPENDENT AUDITORS REPORT

The Board of Directors
Save the World Air, Inc.
Suite 3660 120 Broadway
New York, NEW YORK 10271


We have audited the accompanying balance sheets of Save The World Air, Inc. as
at December 31, 2000 and 1999 and the related statements of operations, cash
flows and stockholder's equity for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Save The World Air, Inc. as of
December 31, 2000 and 1999 and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note Basis of
Presentation the Company is in the development stage. The Company's ability to
achieve the foregoing financing, which may be necessary to permit their
realization of assets and satisfaction of liabilities in the ordinary course of
business, is uncertain. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


/s/ Kevin Hoiberg
 .................
AUDITOR

April  , 2001

                                        7


<PAGE>

                             SAVE THE WORLD AIR INC.
                          (A DEVELOPMENT STAGE COMPANY)
                                  BALANCE SHEET
                  AS OF DECEMBER 31, 2000 AND DECEMBER 31, 1999

                                                     December 31,   December 31,
                                                         2000           1999
                                                      ----------     ----------
ASSETS

     Current assets
Cash                                                  $       -      $     595
                                                      ----------     ----------

     Total current assets                                     -            595

     Intangible assets
Marketing and manufacturing rights to Zero
Pollution Fuel Saving Device                            505,000        505,000
                                                      ----------     ----------

     Total assets                                     $ 505,000      $ 505,595
                                                      ==========     ==========


LIABILITIES AND SHAREHOLDERS' EQUITY

     Current liabilities
Accounts payable                                      $   4,354       $      -
Payable to shareholder                                  857,555        500,000
                                                      ----------     ----------

     Total current liabilities                          861,909        500,000


     Stockholders' equity

Common stock (par value $0.001) 200,000,000 shares
authorized; December 31, 2000- 15,645,935 and
December 31, 1999-15,297,125 shares issued and
outstanding
Par value                                                15,645         15,297
Paid in capital                                          14,270         14,270


Deficit accumulated during development stage           (386,824)       (23,972)
                                                      ----------     ----------

     Total shareholders' equity                        (356,909)         5,595
                                                      ----------     ----------

Total liabilities and shareholders' equity            $ 505,000      $ 505,595
                                                      ==========     ==========

    The accompanying notes are an integral part of these financial statements

                                        8


<PAGE>
<TABLE>

                                      SAVE THE WORLD AIR INC.
                                   (A DEVELOPMENT STAGE COMPANY)
                                      STATEMENT OF OPERATIONS
                          FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
                                 AND FOR THE PERIOD FROM INCEPTION
                                  FEBRUARY 18 TO DECEMBER 31, 2000
<CAPTION>

                                                    Year ended         Year ended       Total (deficit)
                                                   December 31,        December 31,     accumulated in
                                                      2000                 1999        development stage
                                                   -------------      -------------    -----------------
<S>                                                <C>                <C>                <C>
INCOME
Sale of licenses for distributorships              $          -       $    125,000       $    125,000
Consultancy fees                                          9,980                  -              9,980
                                                   -------------      -------------      -------------
  Total income                                            9,980            125,000            134,980
                                                   -------------      -------------      -------------

GENERAL AND ADMINISTRATIVE EXPENSES
    Accommodation                                        69,818                  -             69,818
    Accounting and auditing                              18,375                  -             19,775
    Bank charges                                          4,232                144              4,449
    Car hire                                              7,119                  -              7,119
    Computer service                                     10,568                  -             10,568
    Consulting                                          126,539              3,867            131,406
    Filing fees                                           1,581                  -              4,690
    Internet service                                      3,125                  -              3,125
    Legal fees                                               68                  -                708
    Mineral fees                                              -              1,955              3,151
    Miscellaneous                                         2,152                  -              2,279
    Printing and postage                                    458              1,053              2,896
    Professional fees                                     2,265             62,500             64,765
    Radio and PR fees                                    23,594                  -             23,594
    Rent                                                  1,868                  -              1,868
    Secretarial fees                                        866             11,164             23,471
    Telephone                                            12,589                  -             12,636
    Transfer agent fees                                  18,157                  -             18,357
    Travel costs                                         69,458             46,982            117,129
                                                   -------------      -------------      -------------
       Total expenses                                   372,832            127,665            521,804

Loss from operations before income taxes               (362,852)            (2,665)          (386,824)
Income taxes                                                  -                  -                  -
                                                   -------------      -------------      -------------
Net (loss)                                         $   (362,852)      $     (2,665)      $   (386,824)
                                                   =============      =============      =============

Net (loss) per  share                              $     (0.023)      $     (0.000)
                                                   =============      =============
Weighted average number of shares outstanding
                                                     15,471,530         12,663,562
                                                   =============      =============
</TABLE>

    The accompanying notes are an integral part of these financial statements

                                        9


<PAGE>

                             SAVE THE WORLD AIR INC.
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                    For the year   For the year
                                                       ended          ended
                                                    December 31,    December 31,
                                                       2000           1999
                                                    -----------     -----------

CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) during development stage                  $(362,852)      $  (2,665)
Adjustment to reconcile net income to net cash
     Common shares issued for services                     348             267
(Increase) decrease in operating assets
     Prepaid expenses                                        -           1,000
Increase (Decrease) in operation liabilities
     Accounts payable                                    4,354               -
                                                     ----------      ----------
Net cash from operating activities                    (358,150)         (1,398)

CASH FLOW FROM INVESTING ACTIVITIES
     Rights to Zero Pollution Fuel Saving Device             -        (500,000)
     Mineral property                                        -           1,955
                                                     ----------      ----------
Net cash from investing activities                           -        (498,045)

CASH FLOW FROM FINANCING ACTIVITIES
     Loans from shareholders                           357,555         500,000
                                                     ----------      ----------

Net cash from all activities                              (595)            557

Cash balance at beginning of year                          595              38
                                                     ----------      ----------

Cash balance at end of year                          $       -       $     595
                                                     ==========      ==========

    The accompanying notes are an integral part of these financial statements

                                       10


<PAGE>
<TABLE>

                                              SAVE THE WORLD AIR INC.
                                           (A DEVELOPMENT STAGE COMPANY)
                                         STATEMENT OF STOCKHOLDERS' EQUITY
                                  FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
<CAPTION>
                                                                    Common Stock
                                         -----------------------------------------------------    Deficit accumulated
                                                                Issued at          Paid in         during development
                                         Number of shares          par             capital               stage
                                         -----------------    -------------     --------------    -------------------
<S>                                            <C>            <C>               <C>               <C>
Balance at December 31, 1998                   10,030,000     $     10,030      $      14,270     $          (21,307)

Common stock issued for acquisition of
rights to Zero Pollution Fuel Saving
Device                                          5,000,000            5,000

Common stock issued for services
rendered at par value $0.001                      267,125              267

Net  (loss) during development stage                                                                          (2,665)
                                         -----------------    -------------     --------------    -------------------
Balance at December 31, 1999                   15,297,125           15,297             14,270                (23,972)

Issuance of Common Stock for services
rendered at par value $0.001                      348,810              348

Net (loss) during development stage                                                                         (362,852)
                                         -----------------    -------------     --------------    -------------------
                                               15,645,935     $     15,645      $      14,270     $         (386,824)
                                         =================    =============     ==============    ===================

                   The accompanying notes are an integral part of these financial statements
</TABLE>
                                                      11


<PAGE>

                             SAVE THE WORLD AIR INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE YEAR ENDED DECEMBER 31, 2000 AND 1999


1.DESCRIPTION OF THE BUSINESS

Save The World Inc. (the "Company")was incorporated in Nevada February 18, 1998
under the name "Mandalay Capital Corporation Inc." and changed to its current
name in February 1999. On December 29, 1998 the company acquired the worldwide
exclusive manufacturing, marketing and distribution rights for the Zero
Pollution-Fuel Saving Device for motor vehicles or petrol driven engines.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in accordance with generally
accepted accounting principles and include the following policies.

         (a) BASIS OF PRESENTATION - GOING CONCERN
         The accompanying financial statements have been prepared on a going
         concern basis, which contemplates the realization of assets and
         satisfaction of liabilities in the normal course of business. The
         company has been engaged in the development of its zero pollution fuel
         saving device. The Company's ability to meet its obligations and
         successfully develop its project and, ultimately, to attain profitable
         operations is dependent upon further developing and marketing the
         device known as Zero Pollution and obtaining additional financing from
         either third parties or its present stockholders.

         (b) ACCOUNTING METHODS
         The Company recognizes income and expenses based on the accrual method
         of accounting.

         (c) DIVIDEND POLICY
         The Company has not yet adopted any policy regarding the payment of
         dividends.

         (d) LOSS PER SHARE
         Primary loss per share amount is computed based on the weighted average
         number of shares actually outstanding during the period reported on.

         (e) INCOME TAXES
         The Company has an operating loss carry-forward incurred from inception
         to December 31 in the amount of $386,824. No tax benefit from the
         operating loss carried forward has been recorded because the future tax
         benefit is uncertain.

         The net operating loss carryover will expire beginning in the year 2015
         through 2017.

                                       12


<PAGE>

         (f) FOREIGN CURRENCY TRANSLATION
         The transactions of the Company completed in foreign currencies have
         been translated to US dollars. Assets and liabilities are translated at
         the year-end exchange rates and the income and expenses at the average
         rates of exchange prevailing during the period reported on. Any gains
         or loss resulting from the translations would be shown in the Statement
         of Operations.

         (g) START UP EXPENSES
         The Company has expensed all start up expenses in accordance with AICPA
         Statements of Position 98-5.


3. RELATED PARTY TRANSACTIONS

All of the marketing and manufacturing rights for the Zero Pollution Fuel Saving
Device were acquired from Mr. Jeffrey Muller for 5,000,000 shares, $500,000 and
a $10 royalty for each unit sold, per an agreement signed December 31, 1998 and
executed in 1999.

The majority stockholder is active in running the business of the Company. No
compensation is paid and the Company has reflected no expense in the Statement
of Operations.

However, on March 20, 2000 the Company entered into an agreement offering Mr.
Jeff Muller and Mrs. Lyn Muller the rights to purchase five million shares each
at $0.001 per share (par value) as consideration for work done for the Company.
No purchases have been made.

Loans from $357,555 and payment for marketing and manufacturing rights (as
explained in paragraph one of this note) are due to the majority shareholder.
Such amounts are interest free and do not have any due dates of payment.


4. LEASES

The Company has no leases of any property. The Company presently uses the
offices of its attorney at 1285 Avenue of the Americas, 35th Floor, New York,
N.Y. 10019-6029 and the offices of one of its shareholders in Australia at no
cost.


5. RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998 the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. In June 2000 they
issued SAFS No. 138 expanding the scope of SFAS No. 133 and to become effective
after June 15, 2000. The Company has no derivative instruments and is not
engaged in hedging activities. The Company will adopt the statements as
required.

                                       13




<PAGE>

In December 1999 the Securities and Exchange Commission (SEC) released Staff
Accounting Bulletin No. 101--Revenue Recognition. The bulletin expresses the
SEC's views in applying generally accepted accounting principles to selected
revenue recognition issues. The implementation date is December 15, 1999. The
adoption of this pronouncement did not have any effect on the Company's
statements.

                                       14


<PAGE>

ITEM 8. CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

There have been no changes in or disagreements with accountants on accounting
and financial disclosure.


ITEM 9. MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below are the names and ages of and the positions and offices held by
each of the Directors and Executive Officers of the Company.

                                                   Positions and Offices
       Name                               Age      Held With The Company
       ----                               ---      ---------------------

       Jeffrey A. Muller                  48       Director; President

Jeffrey A. Muller, the Company's founder, has been a President and Director of
the Company since February, 1999. In addition to Mr. Muller's involvement with
the Company, Mr. Muller also serves as Chairman of several companies in the
Muller Group in Australia. Mr. Muller has been the co-owner and managing
director of several private real estate investment companies, since 1984.

The Company has no employees (only expert consultants).


ITEM 10. EXECUTIVE COMPENSATION


Jeffrey A. Muller, the President and Director of the Company does not receive
any compensation for his services and none has been reflected in the Statement
of Operations. Mr. Muller and his wife have been granted certain options to
purchase the Company's common stock - See Item 7 Certain Relationships and
Related Transactions.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables contain information, as of December 31, 2000, of all
holders who, to the knowledge of the Company, were the beneficial owners of five
percent (5%) or more of the outstanding shares of the Common Stock of the
Company and of all Directors and Officers.

------------------------------ ----------------- ----------- ---------
BENEFICIAL OWNER               NUMBER OF SHARES  PERCENT     NOTES
------------------------------ ----------------- ----------- ---------
JEFFREY A. MULLER              4,157,256         26.7%       (1)
PRESIDENT AND DIRECTOR
------------------------------ ----------------- ----------- ---------
TOTAL OWNERSHIP OF 5%
SHAREHOLDERS, OFFICERS AND
DIRECTORS (2)                  4,157,256         26.7%       (1)
------------------------------ ----------------- ----------- ---------

Notes:

(1) Mr. Muller's address is 19-21 Garden Grove, Carrara, Queensland, Australia
4211. Mr. Muller is a director and officer of the Company. The number of shares
disclosed in the Beneficial Ownership Table does not include the option to
purchase 5,000,000 shares of common stock at $0.10 exercise price per share
which was granted to Mr. Muller, nor the option to purchase 5,000,0000 shares of
common stock at $0.10 exercise price per share which was granted to Lynn Muller,
Mr. Muller's wife and subsequently transferred to Mr. Muller, who now holds an
option to purchase a total of 10 million shares of common stock. Also, does not
include 79,472 shares of common stock of Lynn Muller, Jeff Muller's wife, as to
which he disclaims his beneficial ownership.

                                       15




<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

All of the marketing and manufacturing rights for the Zero Pollution Fuel Saving
Device were acquired from Jeffrey Muller, the Company's officer and sole
director for 5,000,000 shares, $500,000 and a $10 royalty for each unit sold,
pursuant to the agreement entered into in December, 1998, by and between the
Company and Mr. Muller. Loans in the amount of $357,555 and payment for
marketing and manufacturing rights are due to Jeffrey Muller, the majority
shareholder officer and director of the Company. Such amounts are interest free
and do not have any due dates of payment.

In January, 2000 the Company entered into an agreement offering Jeffrey Muller
and Lynne Muller, Mr. Muller's wife, the rights to purchase five million shares
each at $0.10 per share (current market price as of the date of grant) as
consideration for work done for the Company. Ms. Muller subsequently transferred
her option to Mr. Muller. See "Beneficial Ownership Table".

The forgoing transaction between the Company and the members of management was,
and any future transactions will be, on terms no less favorable to the Company
than which could be obtained from unaffiliated third parties. In addition, any
future transactions entered into between the Company and members of management
or principal shareholders regarding such transactions are to be approved by the
Board of Directors.

                                       16




<PAGE>

                                     PART IV


ITEM 13. EXHIBITS AND REPORTS ON 8-K

A. Financial Statements

         Balance sheet of the Company as of December 31, 2000, and related
         statements of operations, stockholders' equity, and cash flows for the
         fiscal years ended December 31, 1999 and 2000.

B. Reports on Form 8-K

         None.

C. Other exhibits


3.1      Articles of Incorporation*

3.2      Certificate of Amendment of Articles of Incorporation*

3.3      Bylaws of the Registrant*

10.1     Agreement for the acquisition of the Zero Pollution Emission
         Device*

23.      Consent of Kevin Hoiberg, CPA
------------
Previously filed with the Securities and Exchange Commission on Form 10-SB, as
amended.


DOCUMENTS INCORPORATED BY REFERENCE

The Company is currently subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington D. C. 20549; at its New York
Regional Office, Suite 1300, 7 World Trade Center, New York, New York, 10048;
and its Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and copies of such materials can be obtained from the Public
Reference Section of the Commission at its principal office in Washington, D.C.,
at prescribed rates. In addition, such materials may be accessed electronically
at the Commission's site on the World Wide Web, located at
http://www.sec.gov.com. The Company intends to furnish its stockholders with
annual reports containing audited financial statements and such other periodic
reports as the company may determine to be appropriate or as may be required by
law.

                                       17




<PAGE>


SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.


                            SAVE THE WORLD AIR, INC.
                                  (REGISTRANT)

Signature                        Title                             Date


/s/ Jeffrey A. Muller            Chairman and President                 , 2000
---------------------------
(Jeffrey A. Muller)

                                       18