Global Warming Solutions, Inc. - Quarter Report: 2008 September (Form 10-Q)

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Income taxes are provide for in accordance with Statement of Financial Accounting Standard No. 109 (SFAS 109), Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss Carryforwards. Deferred tax expense (benefit) results from the net change during the year of the deferred tax assets and liabilities.

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Management's Discussion and Analysis contains various "forward looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to "anticipates", "believes", "plans", "expects", "future" and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company's business, including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company.

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled "Risk Factors" in the Company's Form 10 filed in July 2008, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements.

Our plan is to develop and commercialize technologies that management believes will help reduce the extent of Global Warming, focusing on three core areas: Clean Energy, Carbon Control, and Water Purification. Current climate models, in managements opinion, predict that global temperatures will rise sharply over the next century. Many scientists believe that the increase in temperatures can be slowed or eliminated by decreasing the amounts of greenhouse gases released into the Earth's atmosphere. Global Warming Solutions, Inc. seeks to leverage its experience and management to help make a difference in the fight for climate control.

We are principally a technology licensing company that intends to license our technology to retailers, manufacturers, supermarkets, etc. We intend to require, wherever its patents apply, reasonably appropriate annual royalty guarantees and advances from those parties entering into these licensing agreements.

As of the date of this filing, the common stock of Global Warming Solutions, Inc. is listed on the Pink Sheets Electronic OTC Markets under the Trading Symbol "GWSO." Said stock is listed in the Disclosure Category "Current Information."

We intend to require, wherever its patents apply, reasonably appropriate annual royalty guarantees and advances from those parties entering into these licensing agreements, given the value added by its intellectual property.

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We were incorporated in Oklahoma in March of 1999 as Southern Investments, Inc. and changed our name to became Global Warming Solutions, Inc. in July 6, 2007. Global Warming Solutions, Inc. is dedicated to developing, acquiring, and commercializing technologies that are designed to help mitigate the effects of global warming.

          Our principal products cover a wide spectrum of potential solutions aimed at addressing both the causes and effects of global warming. These products are in currently in various stages of development:

• LETG Solar Energetic System
• The LETG (Light Electric Thermal Generator) is a hybrid solar and thermal energy generation technology that works by heating up liquids that circulate on the surface of its solar panels to generate electricity 24 hours a day.
• This system is designed to capture and store sunlight using a hybrid module design, making year-round production of thermal and electric energy feasible. Its spectral-selective thermal liquid circulates on the reception surface of a photoelectric circuit, increasing the quantity and altering the quality of incident solar radiation spectral distribution, while utilizing thermal energy recovery with minimal loss. Accordingly, the LETG Solar Energetic System has the potential, in management's opinion, of increasing electric power by 250% and thermal output by 170%.

• LETG modules, in management's opinion, have proven to be effective in any geographic or climatic zone and can be used in residential or industrial buildings.
• This system's main attributes, if successful, would be more efficient solar energy conversion technology, with an increased efficiency, lower costs and easy integration into existing solar panel manufacturing technologies.
• Global Warming Solutions, Inc. intends to one day apply the LETG technology to building power plants that will connect to existing electricity grids with the goal of producing cheap and renewable energy.

• GEM Hybrid Energy System
• This system utilizes a rotary design that reduces friction and helps eliminate inefficient engine component movements. While conventional piston engines involve separate intake and exhaust cycles, the GEM's rotary design involves continuous cycling with one state naturally segueing into the next. Moreover, compared to conventional combustion engines, the GEM weighs less, releases less vibration, with decreased emissions and lower RPM, resulting in an engine with higher reliability and better fuel efficiency. Accordingly, the patented GEM (Generator/Engine/Motor) can potentially increase engine efficiency by up to 16 times.
• A highly efficient, low-emissions engine has the potential to spark dramatic changes in transportation, heavy industry and many other huge sectors of the world economy. It could revolutionize automobile design, leading to cars with fuel efficiency well in excess of what is currently available. It has multiple applications for small engine uses - from lawnmowers to powerboats to snowmobiles. This efficient design could also be of interest to military logisticians.
• Status of Development: In order to bring the GEM Engine to production status, several phases of development are necessary. We has completed the test-of-principal model successfully and is currently working on creating a Demonstration Model. The entire development stage is anticipated to take anywhere from 1-2 years from now, depending upon many conditions.

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• PureRay Water Purification System
• This system is being developed to provide cost effective technology that purifies water and other consumable liquids while maintaining their healthy attributes. It employs a mild process that retains higher levels of natural nutrients. PureRay uses near-infrared light, a non-ionizing radiation that is capable of penetrating plant and animal tissue without harming it. Moreover, management believes it kills spoilage by attacking the pathogenic micro-organisms, such as bacteria, e-coli, lysteria, salmonella, bacillus, fungi aspergillum (mold), penicillin, and yeast. In addition, PureRay may be used on produce products to improve resistance to bacterial and fungi diseases, such as suppression of blue mold growth.
• PureRay zip-up boxes for household application.
• Status of Development: We have three (3) working prototypes for use in different environments:
• Sun rich areas
• Low Sun areas
• For Shelf Life Technology
• All three (3) prototypes have to be tested and tuned (if necessary) to ensure maximal efficacy to kill a number of microorganisms. Management plans to run these tests as soon as the Prototypes are manufactured.
• Wave Power Station

• This system is designed to capture the power of energy of sea waves, generating electricity. Work cells are equipped with unidirectional valves, which allow air and water to flow in one direction only inside the cells. Sea water is oscillating and passing through the cells on one side only, creating an inequality in the gravitational force and causing rotation according to Archimedes' Principle.
• While afloat when there are waves on the sea, the wave power station generates electric current and directs it through a cable to a consumer (a settlement on the sea shore, a vessel or a producing enterprise).
• Unlike most other alternative energy sources, our WPS can produce electricity according to any international electricity standards, which can be used by any existing electrical apparatus without the need for any additional converters and modifications.
• WPS units not only produce electricity but also dissipate the force of storm waves and provide coastline protection.

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CURRENT BUSINESS

"Clear Energy" is the main project of Global Warming Solutions Inc. During the period of 2007-2008, we financed and finished Research and Development for the new solar PV-modules and Light Electric Thermal Generator (LETG). Management believes that this product is currently ready to market and have the prototypes built. At the same time, management was looking for a strategic partner for Clear Energy. GWSO's management was contacted by Italian Company (Vega Energy), which found an interest in Clear Energy products of Global Warming Solutions Inc.

The plan of the joint venture provides for the manufacturing of two kinds of products: (1) PV-modules with enlarged efficiency of light transformation that promise high competitiveness on the solar market, and (2) LETG-modules with extraordinary parameters for households. We plan to manufacture products of both kinds. Management believes that this plan could provide an increase manufacturing capacity tenfold what it is year 1, in the following 2-3 years due to the building of new plants and licensing of technology at solar manufacturers in Europe and North America.

PureRay Water Purification Technology

• Eureka Forbes Limited Co-Operating Agreement. On October 30, 2007 a co-operation agreement was signed between our company and Eureka Forbes Limited (EFL), an Indian company. EFL is engaged in manufacturing and marketing water purifiers and other related water purification products. Eureka Forbes Limited is Asia's largest direct sales organization - its 6,000 strong direct sales force touches 1.50 million Indian homes, adding 1,500 customers daily (http://www.eurekaforbes.com). EFL and Global Warming Solutions, Inc. have agreed to collaborate for the purpose of accelerating the development of the PureRay Water Purification Technology for the purification of water and milk. These development activities are divided into 2 phases:

• Phase 1: Technology development by Global Warming, analyzing test data, development & testing of working prototypes. Secondary Research and data validation by EFL, procurement of components by us, building of technical prototypes with testing and fine tuning of these prototypes by us.

• Phase 2: Building of preliminary and functional prototypes with testing and fine tuning, validation and certification with field trials. Global Warming is to design and develop a product which is commercially viable and can be delivered to various markets by EFL.

• The co-development agreement between EFL and Global Warming became effective in November of 2007, and has a term of 36 months.

• Acuity Brands Lighting Contract. In February 25, 2008, GWSO and Acuity Brands Lighting, Inc. entered into a contract for the development of PureRay lighting systems.
• With fiscal year 2007 net sales of approximately $2.0 billion, Acuity Brands Lighting (NYSE: AYI) is one of the world's leading providers of lighting fixtures, including brands such as Lithonia Lighting®, Holophane®, Peerless®, Mark Architectural Lighting™, Hydrel®, American Electric Lighting®, Gotham®, Carandini®, SpecLight®, MetalOptics® and Antique Street Lamps™. Headquartered in Atlanta, Georgia, Acuity Brands employs approximately 7,000 associates and has operations located throughout North America, Europe and Asia (www.acuitybrandslighting.com).

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• European Union Business Operations. On March 26, 2008, Mr. Antonino Adamo was appointment to Global Warming's Board of Directors. Mr. Adamo, an Italian citizen, will serve as the European Sales Manager of Global Warming. Mr. Adamo will be responsible for all business operations and sales efforts in the countries of the European Union. The Italian website for the company is (http://www.gwso-italy.com); French, German and Spanish versions of the official website of GWSO will be published soon.

• As the European Sales Manager, Mr. Adamo will be responsible for identifying new business partners and customers for LETG, PureRay Water Purification and the Shelf Life Technology in Italy and other countries of the European Union. Currently, he is styling presentations embracing GWSO technologies in Italian and other European languages.

• The following plan of action has been prepared in concert with the European Sales Manager:

• Find one or more companies which already produce LED lights as close as possible to the PureRay design (Red/NIR+Blue or White lights as an option). Alternately, it could be a company who has the capability of building the systems in accordance with a customer's need;
• Obtain all necessary data on safety regulations for both commercial and household lights. The proposed manufacturing company must provide us with this data;
• Present the PureRay SLF technology to representatives of a large grocery or food retailer who could then share their specific needs;
• Bring the information from the fact-finding presentation to the company/companies identified in Task 1, and buy several lighting systems from them (or have them construct several testing prototypes for GWSO);
• Assemble the PureRay system at GWSO and make the testing prototypes for the grocery or food retailer;
• Deliver and install the PureRay light system at the grocery or food retailer; and
• Collect the necessary marketing data in order to make an informed decision regarding the marketing value of PureRay SLT technology.

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LETG Solar Energetic System

          This type of product is not currently available on the market; therefore, it is unique and may be suitable for all power supply markets. The special feature of this product is the possibility of generating contemporaneous production of heat and electric power. The market segment for this product will depend upon an area with wide geographical dispersion where the efficiency of the work does not depend on climatic conditions.

          The hybrid module prototype was produced by our company at the price of 900 USD (costs of research excluded). During this time, the cost of the received electrical power was 5.50 USD per Watt and the cost of the heat power was 0.07 USD per Watt.

          If the contemporary growth rate of solar energy systems production is maintained, the total area of installed solar collectors through the year 2010 may total 80 million. Technological innovations applied in the LETG module protect photovoltaic cells from the influence of the harmful short-wave component of solar radiation, prolonging the service life as compared to usual photoelectric modules. Additional anti-glare surface requirements (a component of anti-terrorist programs) of European and North American markets are also included. Management believes the quantity of the modules which can be supplied to the market is virtually unlimited due to the absence of its saturation. Market assortment will be determined by the demands of consumers.

          The forecast of sales volume in Table Three, below, depends upon the consumer market, which we will try to estimate during the stages of development and transition to full production capacity. We estimate that a planning period of two years is sufficient to generate and make available the necessary funds to do fulfill our business plan.

          Accordingly, the forecast of the availability of incoming funds and their amount consistently surpasses cash payments without the involvement of external funding sources. Pursuant to our estimations, profitability of the enterprise should be achievable by the second year of its operation. The latter projection pre-supposes the sale of no less than 3,000 units.

          The production process will require renting industrial premises with a floor area appropriate for the performance of highly technological operations at a substantial cost. Although not implemented as yet, a monthly time schedule for the first year of the enterprise is set forth below in Table One

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          The Production process will be preceded by the creation of working drawings of three prototypes, manufacturing of experimental-industrial models, testing, certification and patenting. Simultaneously, the adjustment of the production cycle, recruitment and staff training will be carried out.

          Purchase of equipment will be in accordance with the calendar plan. In the development stage, only equipment essential for production will be bought. During the stage of transition to full production capacity, the equipment required for expansion of production through its automation will be purchased.

          Purchase of equipment in the development stage of production:

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          Inasmuch as the enterprise must have a quality control system, the appropriate equipment should be purchased. While entering the planned productive capacity, the estimated expenditures ratio (i.e. costs/output) must be constant.

          Local infrastructure, e.g. proximity to mainline railroads, commercial ports, energy and water supplies will ensure the opportunity for normal production processes. The proposed square footage will need to allow for repair work, and the presence of a parking lot, and will need a place on local surface roads.

          Physical capital investment includes: charges for delivery (packing, customs, freight, insurance of delivery), installation and warranty service, fine tuning, foreign currency conversion and advance payment interests.

          The production schedule and estimated output assumes limited output in the developing period and gradual growth of productive capacity until the enterprise enters the estimated capacity. When considering production factors, management will take into account:

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• Primary raw materials
• Photovoltaic cells
• Glass
• Polycarbonate
• Laminating film
• Special colorants
• Propylene glycol
• Spirits and chemical agents
• Electricity
• Packaging materials

• Energy conserving selective film for window technologies and greenhouses

• Staff wages
• Insurance
• Equipments maintenance labor costs
• Mobile equipment

          Power outages could limit production; therefore, management deems it prudent to create an emergency power-supply system on the basis of LETG.

          The forecast of sales volume depends upon the consumer market, which we can penetrate during the stages of development, transitioning to full production capacity. One should note that advanced technology production requires thorough refinement of production processes, especially in the methodology of the application of light-converting covering. Therefore, we provided a considerable period of time (12 months) for the manufacturing, testing, certification of industrial standards of the module, and preproduction.

          Management plans to prepare for expanded production and guarantee of order stock for the next year, thus decreasing the receipt of profits during the first year of development. The production volume in the third year of enterprise functioning may be enlarged depending on market requirements/demands.

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          The balance of expenses and income as projected by Management during the first and second year is displayed in Table Three. The balance of the first year of development is negative and comprises approximately 300,000 USD, whereas the positive balance is potentially achieved in the second year of functioning and comprises 585,000 USD for one-sided modules (pessimistic variant), and 945,000 USD for two-sided ones (optimistic variant).

RESULTS OF OPERATIONS

          The Company generated no revenues for the three and six months ended September 30, 2008.

          The Company had total expenses of $834,838 and $970,583 for the three and six months ended September 30, 2008 respectively, most of the expenses consisting of Wave Technology expense of $800,000.

          The Company is continuing to inquire into new investments to provide for further research and development capital and to assist with further acquisitions over the next twelve months.

          Historically, we have funded our operations through financing activities consisting primarily of private placements of debt and equity securities with existing shareholders and outside investors. Our principal use of funds has been for the further development of our LETG project, PureRay Project and for general corporate expenses.

          We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

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We do not hold any derivative instruments and do not engage in any hedging activities.

ITEM 4.  CONTROLS AND PROCEDURES

          (a)   Evaluation of Disclosure Controls and Procedures.  Our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our President, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

          Management's Report on Internal Control over Financial Reporting.  Our Chief Executive Officer and Chief Financial Officer is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

          Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations.  Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties.  Often, one or two individuals control every aspect of the Company's operation and are in a position to override any system of internal control.  Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

          Our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's internal control over financial reporting as of September 30, 2008.  In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework.  Based on this evaluation, our management, with the participation of the President, concluded that, as of September 30, 2008, our internal control over financial reporting was effective.

          (b)   Changes in Internal Control over Financial Reporting.  There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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The Company is not a party to any litigation and, to its knowledge, no action, suit or proceeding has been threatened against the Company except with threatened litigation in regard to unpaid debt obligations, and one employee claiming unlawful termination. No actions regarding the unpaid debt have been initiated as of this date. The Company also believes that the wrongful termination suit has no merit. There are no material proceedings to which any director, officer or affiliate of the Company or security holder is a party adverse to the Company or has a material interest adverse to the Company.

We are subject to various risks that may materially harm our business, financial condition and results of operations. You should carefully consider the risks and uncertainties described below and the other information in this filing before deciding to purchase our common stock. If any of these risks or uncertainties actually occurs, our business, financial condition or operating results could be materially harmed. In that case, the trading price of our common stock could decline and you could lose all or part of your investment.

The Company has not generated any revenues from operations and does not currently have any products ready to go to market from which revenues can be generated. There can be no assurance that the Company will generate revenues in the future or that we will be able to generate sufficient cash flow to meet our expenses. Although management believes in the profit potential of the business model, there can be no assurance our results of operations or business strategy will achieve significant revenue or profitability.