Despite accumulating a massive deficit since inception and failing to generate any sales or revenues in 2008, 2009, 2010 or through September 30, 2011 Save The World Air, Inc. (OTCBB: ZERO), a developer of applied solutions for oil and fuel delivery systems in the multi-billion dollar oil pipeline and diesel engine markets believes they may be on the brink of something big. On Wednesday ZERO announced they had signed a Letter of Intent with LG Partners, LLC, to incorporate their Applied Oil Technology (AOT) oil pipeline efficiency technology into the design and construction of a proposed new non-domestic, multi-national, 900-mile pipeline currently in the planning stage.
That news sent shares of ZERO to a 52-week high of 0.489 on Wednesday, an impressive jump after closing Tuesday’s trading session at 0.365. Just as impressive was the fact that ZERO was able to maintain that momentum through most of the day and closed at 0.460. In early trading on Thursday ZERO has climbed as high as 0.480 and is currently around the 0.470 level, still well above their 50-day moving average of 0.344 and 200-day moving average of 0.310.
Perhaps what caught the eyes of investors in Wednesday’s release was the mention of LG Partners development of a $2.5 billion multi-national pipeline, a pipeline that LG Partners said would be enhanced by the technology behind ZERO’s AOT which would, in essence, improve flow efficiency and in turn create substantial savings through reduced operating costs.
It is important to remember that this pipeline remains in the planning stages and involves a number of factors that could cause problems. First and foremost LG Partners will need to obtain the necessary financing to commence and complete construction of the pipeline. Additionally, this pipeline is subject to governmental approvals and permits and it only takes one refusal to jeopardize the entire project.
Making things more risky is the fact that Wednesday’s release makes no mention of the countries involved or the region in which they are located, only saying it was non-domestic. This would lead many investors to believe that this pipeline could be in a contentious area, one that could produce even more problems during the actual construction stage, if that stage is ever reached.
So the issue at hand with Wednesday’s release isn’t so much about ZERO as much as it is the viability of this planned multi-national pipeline. ZERO has shown their AOT to improve flow efficiency by reducing the viscosity of crude oil and by reducing the friction loss, pipeline operators’ pump systems require less energy to maintain a constant flow rate, thereby directly reducing daily operation costs. That’s all wonderful but the pipelines have to be built and incorporate ZERO’s AOT for it to be beneficial for the company and its shareholders.
Aside from their AOT product line ZERO is also developing their ELEKTRA product line, designed to improve diesel fuel economy in both land and marine diesel engines. At the moment ZERO has preliminary experimental prototypes, which essentially means they have no product yet.
No product means no revenue and that has been a central theme for ZERO over the past several years. This is where things get ugly for the company; since inception ZERO has relied on the sale of stock and convertible debt, as well as proceeds from the exercise of stock purchase warrants to meet expenses. ZERO will likely remain in this boat for some time as they continue their research and development efforts, build a sales and marketing platform and deal with other expenses.
ZERO could find trouble convincing investors to purchase shares when they are carrying an accumulated deficit that neared $66 million through September 30, 2011. That deficit will continue to grow if ZERO’s operating expenses remain at the level they were in their last quarterly filing. For the three month period ended September 30, 2011 ZERO reported operating expenses of $2.1 million, again with no revenue generated.
ZERO has potential with their product line but they are reliant on partnerships and agreements to actually realize revenue. The problem with that is obvious, there is no guarantee that those partnerships or agreements will be made and if they are there is no guarantee that they will actually result in revenue. As of their last quarterly filing ZERO has cash on hand of $4,594; that isn’t going to get it done and with shares at what appears to be a pricey level it would certainly be a risk to start building a position now.