See the accompanying notes to the unaudited condensed consolidated financial statements
See the accompanying notes to the unaudited condensed consolidated financial statements
SOLAR WIND ENERGY TOWER, INC.
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
|
|
|
|
From July 26, 2010
|
|
|
|
|
|
|
|
|
|
(date of inception)
|
|
|
|
For the three months ended March 31,
|
|
|
through
|
|
|
|
2014
|
|
|
2013
|
|
|
March 31, 2014
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(700,105
|
)
|
|
$
|
(1,776,082
|
)
|
|
$
|
(9,566,473
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
988
|
|
|
|
1,120
|
|
|
|
12,145
|
|
Amortization of debt discounts
|
|
|
272,057
|
|
|
|
136,560
|
|
|
|
1,396,464
|
|
Amortization of financing costs
|
|
|
5,000
|
|
|
|
7,500
|
|
|
|
98,323
|
|
Non cash interest
|
|
|
14,433
|
|
|
|
94,805
|
|
|
|
695,077
|
|
Stock based compensation
|
|
|
188,163
|
|
|
|
115,824
|
|
|
|
2,561,432
|
|
Fair value of warrants issued in connection with notes payable
|
|
|
–
|
|
|
|
–
|
|
|
|
43,568
|
|
Loss on settlement of debt
|
|
|
–
|
|
|
|
–
|
|
|
|
787,515
|
|
Loss on debt modification
|
|
|
–
|
|
|
|
–
|
|
|
|
88,849
|
|
Gain (loss) from change in fair value of derivative liabilities
|
|
|
(41,408
|
)
|
|
|
1,110,141
|
|
|
|
(1,087,924
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances from stockholders/officers
|
|
|
–
|
|
|
|
(15,000
|
)
|
|
|
–
|
|
Accounts payable and accrued expenses
|
|
|
56,963
|
|
|
|
72,740
|
|
|
|
1,615,606
|
|
Net cash used in operating activates
|
|
|
(203,909
|
)
|
|
|
(252,392
|
)
|
|
|
(3,355,418
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash acquired from reverse merger
|
|
|
–
|
|
|
|
–
|
|
|
|
223,586
|
|
Purchase of property and equipment
|
|
|
–
|
|
|
|
–
|
|
|
|
(13,441
|
)
|
Payment of long term deposit
|
|
|
–
|
|
|
|
–
|
|
|
|
(9,330
|
)
|
Net cash provided by investing activities
|
|
|
–
|
|
|
|
–
|
|
|
|
200,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of subsidiary's common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
75
|
|
Proceeds from sale of common stock
|
|
|
25,000
|
|
|
|
–
|
|
|
|
1,179,700
|
|
Proceeds from exercise of warrants
|
|
|
–
|
|
|
|
–
|
|
|
|
230,000
|
|
Proceeds from issuance of note payable
|
|
|
–
|
|
|
|
–
|
|
|
|
376,500
|
|
Proceeds from issuance of convertible notes payable
|
|
|
125,000
|
|
|
|
264,000
|
|
|
|
1,493,177
|
|
Repayments of convertible notes payable
|
|
|
–
|
|
|
|
–
|
|
|
|
(117,000
|
)
|
Net cash provided by financing activities
|
|
|
150,000
|
|
|
|
264,000
|
|
|
|
3,162,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
|
|
|
(53,909
|
)
|
|
|
11,608
|
|
|
|
7,849
|
|
Cash, beginning of period
|
|
|
61,758
|
|
|
|
13,761
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
7,849
|
|
|
$
|
25,369
|
|
|
$
|
7,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
98,778
|
|
Income taxes paid
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued warrants to be issued referring brokers in connection with PPM subscription at $0.10 per share
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
29,400
|
|
Shares forfeited and cancelled by
some Solar Wind Energy's stockholders acquired in connection with the merger upon resignation
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
12,060
|
|
Notes payable issued in settlement of accounts payable
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
268,270
|
|
Convertible notes payable issued in settlement of accrued officer salaries
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
280,000
|
|
Common stock issued in settlement of debt
|
|
$
|
534,561
|
|
|
$
|
178,865
|
|
|
$
|
2,648,771
|
|
See
the accompanying notes to the unaudited condensed consolidated financial statements
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2014
(unaudited)
NOTE 1 – SUMMARY OF ACCOUNTING
POLICIES
A summary of the significant accounting
policies applied in the preparation of the accompanying unaudited condensed consolidated financial statements follows.
Business and Basis of Presentation
Solar Wind Energy Tower, Inc. (the “Company,”
“we,” “our,” “us”), formerly known as Superior Silver Mines, Inc., was incorporated in the
State of Idaho on January 22, 1962 as Superior Mines Company and then changed its name to Superior Silver Mines, Inc. The
Company reincorporated as a Nevada corporation on December 27, 2010. The Company has been dormant for a number of years,
and has no known mineral reserves.
On December 29, 2010, Solar Wind Energy
Tower Inc., a Nevada corporation (the “Company” or "Solar Wind"), completed a reverse merger (the “Merger”)
with Solar Wind Energy, Inc., a corporation formed under the laws of the State of Delaware on July 26, 2010 (“Solar Wind
- Subsidiary”). In connection with the Merger, the Company issued to the stockholders of Solar Wind - Subsidiary
in exchange for their Solar Wind - Subsidiary Common Stock, the right to receive an aggregate of 300,000,000 shares of the Company’s
Common Stock. As a result of the reverse merger, Solar Wind - Subsidiary is now a wholly-owned subsidiary of the Company.
For accounting purposes, Solar Wind - Subsidiary
was the surviving entity. The transaction was accounted for as a recapitalization of Solar Wind - Subsidiary pursuant to which
Solar Wind - Subsidiary was treated as the surviving and continuing entity although the Company is the legal acquirer rather than
a reverse acquisition. Accordingly, the Company’s historical financial statements are those of Solar Wind - Subsidiary
immediately following the consummation of the reverse merger. Also, going forward the business operations of Solar Wind - Subsidiary
will become the Company’s principal business operations.
The Company plans to design, develop, and
construct large downdraft towers that use benevolent, non-toxic natural elements to generate electricity and clean water economically
(“Downdraft Towers”) by integrating and synthesizing numerous proven as well as emerging technologies. In addition
to constructing Downdraft Towers in the United States and abroad, the Company intends to be prepared to establish partnerships
at home and abroad to propagate these systems and meet increasing global demand for clean water and electricity
On January 21, 2011, the Company changed
its name to Clean Wind Energy Tower, Inc. and on March 11, 2013, changed its name to Solar Wind Energy Tower Inc. along with
its wholly-owned subsidiary, a corporation formed under the laws of the State of Delaware, which changed its name from Clean Wind
Energy, Inc. to Solar Wind Energy, Inc. In addition, effective January 24, 2011, the Company’s quotation symbol on the Over-the-Counter
Bulletin Board was changed from SSVM.OB to CWET.OB and on March 11, 2013, in conjunction with our name change, the Company’s
quotation symbol on the Over-the-Counter Bulletin Board was changed from CWET.OB to SWET.OB.
Interim Financial Statements
The following (a) condensed consolidated
balance sheet as of December 31, 2013, which has been derived from audited financial statements, and (b) the unaudited condensed
consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally
accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule
8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2014
(unaudited)
Operating results for the three months
ended March 31, 2014 are not necessarily indicative of results that may be expected for the year ending December 31, 2014. These
condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and
notes thereto for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K, filed with the Securities
and Exchange Commission (“SEC”) on March 28, 2014.
Going Concern
The accompanying unaudited condensed consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern. However, the Company has reported net losses of $700,105 and
$1,776,082 for the three month periods ended March 31, 2014 and 2013, respectively, accumulated deficit of $9,566,473 and total
current liabilities in excess of current assets of $2,480,842 as of March 31, 2014.
The Company is in a development stage and
does not have any revenues from operations and will be dependent on funds raise to satisfy its ongoing capital requirements for
at least the next 12 months. The Company will require additional financing in order to execute its operating plan and continue
as a going concern. The Company cannot predict whether this additional financing will be in the form of equity or debt, or be in
another form. The Company may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or
at all. In any of these events, the Company may be unable to implement its current plans for expansion or respond to competitive
pressures, any of these circumstances would have a material adverse effect on its business, prospects, financial condition and
results of operations.
The unaudited condensed consolidated financial
statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities
that might be necessary should the Company be unable to continue as a going concern.
Fair Value of Financial Instruments
Our short-term financial instruments, including
cash, other assets and accounts payable and accrued expenses consist primarily of instruments without extended maturities, the
fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of our notes
and advances payable is based on management estimates and reasonably approximates their book value based on their current maturity.
Net loss per Common Share
The Company computes net loss per share
under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Basic net loss per common
share is computed by dividing net loss by the weighted average number of shares of common stock. Diluted net loss per share is
computed using the weighted average number of common and common stock equivalent shares outstanding during the period. There is
no effect on diluted loss per share since the common stock equivalents are anti-dilutive for the three months ended March 31, 2014
and 2013. Dilutive common stock equivalents consist of shares issuable upon conversion of convertible notes and exercise of warrants.
Fully diluted shares for the three ended March 31, 2014 and 2013 were 605,240,364 and 352,069,509, respectively.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2014
(unaudited)
Research and development
In accordance with ASC 730, “Research
and Development”, the Company expenses all research and development costs as incurred. The Company had incurred $9,033 and
$13,893 for the three months ended March 31, 2014 and 2013, respectively and $657,662 research and development costs from July
26, 2010 (date of inception) through March 31, 2014. The Company expects the research and development costs to increase in the
future as it continues to invest in the infrastructure that is critical to achieve our business goals and objectives.
Stock Based Compensation
The Company account for its stock based
awards in accordance with Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”), which requires
a fair value measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors,
including restricted stock awards. We estimate the fair value of stock using the stock price on date of the approval of the award.
The fair value is then expensed over the requisite service periods of the awards, which is generally the performance period and
the related amount recognized in our consolidated statements of operations.
Stock-based compensation expense in connection
with stock granted to consultants in exchange for services rendered for the three months ended March 31, 2014 and 2013 was $188,163
and $115,824, respectively, and $2,561,432 from July 26, 2010 (date of inception) through March 31, 2014.
Derivative financial instruments
Accounting Standards Codification subtopic
815-40, Derivatives and Hedging, Contracts in Entity’s own Equity (“ASC 815-40”) became effective for the Company
on October 1, 2009. The Company’s convertible debt has reset provisions to the exercise price if the Company issues equity
or a right to receive equity, at a price less than the exercise prices. In addition, the Company has the possibility of exceeding
their common shares authorized when considering the number of possible shares that may be issuable to satisfy settlement provisions
of convertible notes after consideration of all existing instruments that could be settled in shares.
Development stage entity
The Company is considered to be a development
stage entity, as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 915. For the period from July 26, 2010 (date of inception) through March 31, 2014, the Company has not generated any revenues
to date, has no significant assets and has incurred losses since inception from developing its business and planned operations.
Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise.
Recently Issued Accounting Pronouncements
There are various updates recently issued,
most of which represented technical corrections to the accounting literature or application to specific industries and are not
expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2014
(unaudited)
NOTE 2 – ACCRUED LIABILITIES AND EXPENSES
Accrued liabilities and expenses as of
March 31, 2014 and December 31, 2013 consist of the following:
|
|
March 31,
2014
|
|
|
December 31,
2013
|
|
Accrued payroll
|
|
$
|
537,138
|
|
|
$
|
505,118
|
|
Accrued stock purchase warrants
|
|
|
29,400
|
|
|
|
29,400
|
|
Accrued lawsuit (Note 10 below)
|
|
|
122,985
|
|
|
|
122,985
|
|
Accrued interest and other
|
|
|
124,062
|
|
|
|
80,461
|
|
Total
|
|
$
|
813,585
|
|
|
$
|
737,964
|
|
NOTE 3 – ADVANCES FROM SHAREHOLDERS/OFFICERS
Advances from shareholders are comprised of the fair value of
common stock pledged as collateral by shareholder (see Note 10 below).
NOTE 4 – NOTE PAYABLE
On June 20, 2012, the Company issued three
promissory notes payable in the aggregate of $268,270 in settlement of outstanding accounts payable. The notes mature earlier of
(1) one year from the date of issuance, (2) completion of any major financing event or events in which the Company receives aggregate
proceeds of $2,000,000 or more, or (3) any liquidation or reorganization, merger or recapitalization of the Company, bear an interest
rate of 8% per annum due at maturity and are unsecured. The notes are currently in default.
On June 6, 2013, the Company issued a secured
promissory note payable with a face amount of $97,500 with an original interest discount (“OID”) of $22,500. The note
was originally due in full on October 3, 2013, subsequently extended to November 15, 2013, and is secured by a Company issued note
to the Company’s CEO for $150,000 (See note 6). The Company is obligated to file by July 5, 2013 a registration statement
on Form S-1 registering an equity line of credit to the benefit of the note holder and to become effective by September 18, 2013.
The Company filed Form S-1 on June 24, 2013 and on October 16, 2013 became effective. Effective November 16, 2013, the promissory
note was in default, the promissory note became due and payable with interest rate at 22% per annum thereafter for any unpaid balance.
NOTE 5 – CONVERTIBLE NOTES PAYABLE
Convertible notes payable are comprised of the following:
|
|
March 31,
2014
|
|
|
December 31,
2013
|
|
Convertible promissory notes, due December 31, 2014, net of unamortized debt discount of $89,864 and $119,274, respectively
|
|
$
|
149,136
|
|
|
|
119,726
|
|
Convertible note payable, due January 24, 2015, net of unamortized debt discount and OID of $17,712
|
|
|
–
|
|
|
|
10,059
|
|
Convertible note payable, due December 19, 2013
|
|
|
–
|
|
|
|
32,500
|
|
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2014
(unaudited)
|
|
March 31,
2014
|
|
|
December 31,
2013
|
|
Convertible note payable, due July 1, 2014, net of unamortized debt discount and OID of $12,478
|
|
$
|
–
|
|
|
$
|
15,492
|
|
Convertible note payable, due April 15, 2014, net of unamortized debt discount of $12,231
|
|
|
–
|
|
|
|
20,269
|
|
Convertible note payable, due May 15, 2014, net of unamortized debt discount of $13,500
|
|
|
–
|
|
|
|
14,000
|
|
Convertible note payable, due January 24, 2015, net of unamortized debt discount of $6,897 and $36,977, respectively
|
|
|
5,236
|
|
|
|
13,023
|
|
Convertible note payable, due August 21, 2014, net of unamortized debt discount and OID of $19,925
|
|
|
–
|
|
|
|
11,287
|
|
Convertible promissory notes, due June 18, 2014, net of unamortized debt discount of $19,973
|
|
|
–
|
|
|
|
12,527
|
|
Convertible promissory note, due July 14, 2014, net with unamortized debt discount and OID of $11,075 and $20,569, respectively
|
|
|
27,425
|
|
|
|
17,931
|
|
Convertible promissory note, due August 16, 2014, net of unamortized debt discount and OID of $14,556 and $24,049, respectively
|
|
|
23,944
|
|
|
|
14,451
|
|
Convertible promissory note, due October 22, 2014, net of unamortized debt discount and OID of $17,530 and $25,226, respectively
|
|
|
13,683
|
|
|
|
5,986
|
|
Convertible promissory note, due November 1, 2014, net of unamortized debt discount and OID of $33,048 and $47,226, respectively
|
|
|
24,452
|
|
|
|
10,274
|
|
Convertible promissory note, due September 10, 2014, net of unamortized debt discount of $24,919 and $38,678, respectively
|
|
|
17,581
|
|
|
|
3,822
|
|
Convertible promissory note, due January 24, 2015, net of unamortized debt discount of $37,375 and $48,625, respectively
|
|
|
12,625
|
|
|
|
1,375
|
|
Convertible promissory note, due October 10, 2014, net of unamortized debt discount of $22,809
|
|
|
9,691
|
|
|
|
–
|
|
Convertible promissory note, due November 14, 2014, net of unamortized debt discount of $22,800
|
|
|
4,700
|
|
|
|
–
|
|
Convertible promissory note, due February 20, 2015, net of unamortized debt discount and OID of $22,291
|
|
|
2,679
|
|
|
|
–
|
|
Convertible promissory note, due January 24, 2015, net of unamortized debt discount of $40,838
|
|
|
9,162
|
|
|
|
–
|
|
Total
|
|
|
300,314
|
|
|
|
302,722
|
|
Less short term portion
|
|
|
(300,314
|
)
|
|
|
(278,266
|
)
|
Long term portion
|
|
$
|
–
|
|
|
$
|
24,456
|
|
Asher notes:
On January 8, 2014, the Company entered
into a Securities Purchase Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in
the principal amount of $32,500 (the "Note"). The financing closed on January 8, 2014. The total net proceeds the Company
received from this Offering was $30,000.
The Note bears interest at the rate of
8% per annum. All interest and principal must be repaid on October 10, 2014. The Note is convertible into common stock, at Asher’s
option, at a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period
prior to conversion.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2014
(unaudited)
On February 12, 2014, the Company entered
into a Securities Purchase Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in
the principal amount of $27,500 (the "Note"). The financing closed on February 12, 2014. The total net proceeds the Company
received from this Offering was $25,000.
The Note bears interest at the rate of
8% per annum. All interest and principal must be repaid on November 14, 2014. The Note is convertible into common stock, at Asher’s
option, at a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period
prior to conversion.
In the event the Company prepays the Notes
in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 120% if prepaid
during the period commencing on the closing date through 30 days thereafter, (ii) 125% if prepaid 31 days following the closing
through 60 days following the closing, (iii) 130% if prepaid 61 days following the closing through 90 days following the closing
and (iv) 135% if prepaid 91 days following the closing through 120 days following the closing, (v) 140% if prepaid 121 days following
the closing through 150 days following the closing, (vi) 150% if prepaid 121 days following the closing through 180 days following
the closing. After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.
JMJ Financial
On July 11, 2012, the Company issued a
Convertible Promissory Note to JMJ Financial (“JMJ”) providing JMJ with the ability to invest up to $275,000 which
contains a 10% original issue discount (the “JMJ Note”). The transaction closed on July 25, 2012. During the three
months ended March 31, 2014, the Company received tranches of net proceeds in the amounts of $20,000. As of March 31, 2014 and
December 31, 2013, the aggregate principal amount outstanding under the July 11, 2012 issued convertible promissory note was $56,183
and $90,395, respectively.
The maturity dates are one year from the
effective date of each payment by JMJ to the Company (the “Maturity Date”). The conversion price (the “Conversion
Price”) for each portion of consideration paid by JMJ to the Company is lesser of: (1) the closing price of the Company’s
stock on the day the portion of consideration is paid to the Company, or (2) 70% of the lowest trade price in the 25 trading days
previous to the conversion.
The JMJ Notes bear interest at 0% for the
first 60 days and a one-time interest charge of 10% will be applied to the Principal Sum thereafter.
At any time after the Effective Date, the
Company will have the option, upon 20 days business notice to JMJ, to prepay the entire remaining outstanding principal amount
of the Note in cash, provided that (i) the Company will pay JMJ 150% of the principal amount outstanding in repayment, (ii) such
amount must be paid in cash on the next business day following the 20 day business day notice period, and (iii) JMJ may still convert
the Note pursuant to the terms herein during the 20 day business period until such repayment amount has been received in full.
Typenex Co-Investment, LLC
On May 13, 2013, the Company issued a Convertible
Promissory Note to Typenex Co-Investment, LLC (“Typenex”) providing Typenex with the ability to invest up to $555,000
which contains a 10% original issue discount (the “Typenex Note”). The transaction closed on May 13, 2013. All issued
tranches are due 20 months from the date of issuance.
On February 26, 2014, the Company issued
a $50,000 Convertible Promissory Note (the “Note”) to Typenex Co-Investment LLC under the May 13, 2013 described transaction.
The total proceeds the Company received from this offering was $50,000.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2014
(unaudited)
The Note is convertible into common stock,
at holder’s option, at the lower of i) 35% discount to the average of the two lowest closing bid prices of the common stock
during the 20 trading day period prior to conversion or 40% if average of the two lowest bid prices are less than $0.01 or ii)
$0.04.
The Company has identified the embedded
derivatives related to the above described Notes. These embedded derivatives included certain conversion features and reset provisions.
The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as
of the inception date of the Notes and to fair value as of each subsequent reporting date.
At the inception of the 2014 Notes, the
Company determined the aggregate fair value of $139,765 of embedded derivatives. The fair value of the embedded derivatives was
determined using the Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected
volatility of 157.33% to 166.83%, (3) weighted average risk-free interest rate of 0.11 % to 0.23%, (4) expected life of 0.75 to
1.00 years, and (5) estimated fair value of the Company’s common stock of $0.0047 to $0.0075 per share.
The determined fair value of the debt derivatives
of $139,764 was charged as a debt discount up to the net proceeds of the note with the remainder of $14,433 charged to current
period operations as non-cash interest expense.
At March 31, 2014, the Company marked to
market the fair value of the debt derivatives and determined a fair value of $486,777. The Company recorded a gain from change
in fair value of debt derivatives of $4,340 for the three months ended March 31, 2014. The fair value of the embedded derivatives
was determined using Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected
volatility of 159.11%, (3) weighted average risk-free interest rate of 0.05% to 0.13%, (4) expected life of 0.22 to 0.89 years,
and (5) estimated fair value of the Company’s common stock of $0.0048 per share.
The charge of the amortization of debt
discounts and costs for the three months ended March 31, 2014 and 2013 was $229,708 and $104,247, respectively, which was accounted
for as interest expense. Also, the Company has accrued interest expense of $27,963 as of March 31, 2014.
During the three months ended March 31,
2014, the Company issued an aggregate of 86,807,728 shares of its common stock in settlement of the convertible note payable and
related interest.
NOTE 6 – CONVERTIBLE NOTES PAYABLE, RELATED PARTY
During 2012, the Company issued an aggregate
of $280,000 convertible promissory notes to officers and key employees in settlement of accrued salaries.
The convertible promissory notes bear interest
at the rate of 8% per annum. All interest and principal must be repaid on December 31, 2014. The convertible promissory notes are
convertible into common stock, at the holders’ option at $0.015 per common share.
Due to the nature of the notes described
in Note 5 above, the Company has identified the embedded derivatives related to the above described Notes. These embedded derivatives
included certain conversion features and the uncertainty of sufficient authorized shares to meet possible conversion demands. The
accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the
inception date of the notes and to fair value as of each subsequent reporting date.
The fair value of the embedded derivatives
was determined using Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected
volatility of 200.41% to 200.80%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 2.0 years, and (5)
estimated fair value of the Company’s common stock of $0.0165 to $0.0167 per share.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2014
(unaudited)
The determined fair value of the debt derivatives
of $262,285 was charged as a debt discount up to the net proceeds of the note.
At March 31, 2014, the Company marked to
market the fair value of the debt derivatives and determined a fair value of $21,599. The Company recorded a gain from change in
fair value of debt derivatives of $32,100 for the three months ended March 31, 2014. The fair value of the embedded derivatives
was determined using Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected
volatility of 159.11%, (3) weighted average risk-free interest rate of 0.13%, (4) expected life of 0.75 years, and (5) estimated
fair value of the Company’s common stock of $0.0048 per share.
The charge of the amortization of debt
discounts and costs for the three ended March 31, 2014 and 2013 was $32,313 and $32,313, respectively, which was accounted for
as interest expense. Also, the Company has accrued interest expense of $27,956 as of March 31, 2014.
NOTE 7 – DERIVATIVE LIABILITIES
As described in Notes 5 and 6 above, the
Company issued convertible notes that contain conversion features and reset provision. The accounting treatment of derivative financial
instruments requires that the Company record fair value of the derivatives as of the inception date and to fair value as of each
subsequent reporting date. Refer to Notes 5 and 6 for assumptions used to determine fair values.
During the three months ended March 31,
2014, the Company has the possibility of exceeding their common shares authorized when considering the number of possible shares
that may be issuable to satisfy settlement provisions of convertible notes after consideration of all existing instruments that
could be settled in shares. The accounting treatment of derivative financial instruments required that the Company reclassify
the derivative from equity to a liability at their fair values as of the date possible issuable shares exceeded the authorized
level and at fair value as of each subsequent balance sheet date. Any change in fair value was recorded as non-operating,
non-cash income or expense at each reporting date. If the fair value of the derivatives was higher at the subsequent balance
sheet date, the Company recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the
subsequent balance sheet date, the Company recorded non-operating, non-cash income.
The Company determined the previously issued
warrants required reclassification from equity as of January 2014. Accordingly, the Company reclassified the determined fair value
of $13,202 from additional paid in capital to derivative liabilities.
The fair value of the derivative in January
2014 was determined using the Black Sholes Option Pricing model with the following assumptions: dividend yield: 0%; volatility:
157.27%; risk free rate: 1.75%; and expected life: 4.37 years.
At March 31, 2014, the Company marked to
market the fair value of the warrant derivative and determined a fair value of $8,234. The Company recorded a gain from change
in fair value of derivative of $4,968 for the three months ended March 31, 2014. The fair value of the embedded derivatives was
determined using Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected
volatility of 159.11%, (3) weighted average risk-free interest rate of 1.73%, (4) expected life of 4.12 years, and (5) estimated
fair value of the Company’s common stock of $0.0048 per share.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2014
(unaudited)
NOTE 8 – STOCKHOLDERS' EQUITY
Preferred stock
The Company has authorized 10,000,000 shares
of preferred stock, with a par value of $0.0001 per share. As of March 31, 2014 and December 31, 2013, the Company did not have
any preferred stock issued and outstanding.
Common stock
The Company has authorized 500,000,000
shares of common stock, with a par value of $0.0001 per share. As of March 31, 2014 and December 31, 2013, the Company has 464,660,896
and 370,728,168, respectively, shares of common stock issued and outstanding.
In 2013 and 2012, the Company issued an
aggregate of 15,000,000 and 21,500,000 shares of common stock for future services of $328,500 and $1,305,000, respectively. The
Company accretes the fair value of the shares issued as stock based compensation during the requisite service period to operations.
During the three months ended March 31, 2014 and 2013, the Company recorded $188,163 and $115,824, respectively, as stock based
compensation.
NOTE 9 – WARRANTS
Warrants
The following table summarizes the changes
in warrants outstanding and related prices for the shares of the Company’s common stock at March 31, 2014:
Exercise Price
|
|
|
Number
Outstanding
|
|
|
Warrants
Outstanding
Weighted
Average
Remaining
Contractual Life
(years)
|
|
|
Weighted
Average
Exercise price
|
|
|
Number
Exercisable
|
|
|
Warrants
Exercisable
Weighted
Average
Exercise Price
|
|
$
|
0.10
|
|
|
|
2,187,101
|
|
|
|
4.12
|
|
|
$
|
0.10
|
|
|
|
2,187,101
|
|
|
$
|
0.10
|
|
Transactions involving the Company’s warrant issuance
are summarized as follows:
|
|
Number of
Shares
|
|
|
Weighted
Average
Price Per
Share
|
|
Outstanding at December 31, 2012
|
|
|
2,187,101
|
|
|
$
|
0.10
|
|
Granted
|
|
|
–
|
|
|
|
–
|
|
Exercised
|
|
|
–
|
|
|
|
–
|
|
Canceled or expired
|
|
|
–
|
|
|
|
–
|
|
Outstanding at December 31, 2013
|
|
|
2,187,101
|
|
|
|
0.10
|
|
Granted
|
|
|
–
|
|
|
|
–
|
|
Exercised
|
|
|
–
|
|
|
|
–
|
|
Canceled or expired
|
|
|
–
|
|
|
|
–
|
|
Outstanding at March 31, 2014
|
|
|
2,187,101
|
|
|
$
|
0.10
|
|
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2014
(unaudited)
NOTE 10 – CONTINGENCIES
Litigation
Hanover Holdings I, LLC vs Solar Wind Energy Tower Inc.(f/k/a
Clean Wind Energy Tower, Inc.)
On December 27, 2012, we were served with
a Complaint in the matter of Hanover Holdings I, LLC filed with the Supreme Court of the State of New York, stipulating that Solar
Wind Energy Tower Inc. (f/k/a Clean Wind Energy Tower, Inc.) has yet to pay the remaining outstanding balance, related interest
and penalties, as described in a convertible promissory note issued by Solar Wind Energy Tower Inc. (f/k/a Clean Wind Energy Tower,
Inc.) to the benefit of Hanover Holdings I, LLC on February 29, 2012 and has failed to honor a notice of conversion issued by Hanover
Holdings I, LLC on or about September 7, 2012. Total claim amount is for $122,985. The Company does not believe any additional
payments are due to Hanover Holdings I, LLC and will vigorously defend its position. However, the ultimate outcome cannot be determined
at this time.
From time to time, we may become involved
in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently
not party to any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect
on our business, financial condition or operating results.
NOTE 11 – FAIR VALUE MEASUREMENTS
ASC 825-10 defines fair value as the price
that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded
at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions
that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk
of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be
used to measure fair value:
·
|
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
·
|
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
|
·
|
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and are unobservable.
|
Items recorded or measured at fair value
on a recurring basis in the accompanying unaudited condensed consolidated financial statements consisted of the following items
as of March 31, 2014:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Long-term investments
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Total
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Derivative liabilities
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
516,610
|
|
|
$
|
516,610
|
|
Total
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
516,610
|
|
|
$
|
516,610
|
|
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2014
(unaudited)
The table below sets forth a summary of changes in the fair
value of the Company’s Level 3 financial liabilities (derivative liability) for the three months ended March 31, 2014.
Three months ended March 31, 2014:
|
|
Derivative Liabilities
|
|
Balance, December 31, 2013
|
|
$
|
689,093
|
|
|
|
|
|
|
Transfers in (out) at mark-market value on date of payoff or conversion
|
|
|
(284,042
|
)
|
|
|
|
|
|
Transfers in upon reclassification from equity
|
|
|
13,202
|
|
|
|
|
|
|
Transfers in upon initial fair value of derivative liabilities
|
|
|
139,765
|
|
|
|
|
|
|
Gain from change in
fair value of derivative liabilities
|
|
|
(41,408
|
)
|
|
|
|
|
|
Balance, March 31, 2014
|
|
$
|
516,610
|
|
|
|
|
|
|
Total gain for the three month period included in earnings relating to the liabilities held at March 31, 2014
|
|
$
|
41,408
|
|
Level 3 Liabilities were comprised of our bifurcated convertible
debt features on our convertible notes and warrant liabilities.
NOTE 12 – SUBSEQUENT EVENTS
Subsequent issuances of common stock
In April 2014, the Company issued an aggregate
of 11,147,321 shares of common stock in settlement of $31,213 outstanding notes payable.
In May 2014, the Company issued an aggregate
of 27,618,320 shares of common stock in settlement of $77,500 outstanding notes payable.
Amendment to Articles of Incorporation
On April 2, 2014, the Company’s majority
stockholders approved to amend the Articles of Incorporation to increase the number of authorized shares of common stock from 500,000,000
to 900,000,000 shares.
Notes payable, related party
On April 18, 2014, the Company issued an
aggregate of $385,000 promissory notes to officers and key employees in settlement of accrued salaries. The promissory notes bear
interest at the rate of 2% per annum. All interest and principal must be repaid on April 18, 2016. In connection with the issuance
of the notes, the Company issued an aggregate of 59,413,581 warrants to purchase the Company’s common stock at $0.00648 per
share for two years.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2014
(unaudited)
Director Compensation
On April 4, 2014, in recognition of
past services by the two (2) Directors, the Company approved for issuance of an aggregate of 2,495,010 and 5,787,037
warrants to purchase the Company’s common stock at $0.02 and $0.0086 per share for two years.
Development and Protected Rights Agreement
On April 11, 2014, the Company executed
an option agreement (the “Option Agreement’) to purchase a site consisting of approximately 640 acres of land within
the City of San Luis, Arizona, which was recorded in Yuma County, Arizona (the “Property”), for the development of
an alternate energy project. Pursuant to the terms of the Option Agreements, the Company shall have exclusive and irrevocable option
to acquire the Property through December 14, 2014 for the purchase price of $46,500 per acre, which may be extended for periods
of 6 months, but no later than June 30, 2017. The extension fee shall be $250,000 for each 6 month extension and shall be non-refundable
and shall not be credited towards the purchase price for the Property. The closing of the transaction is subject to satisfaction
of due diligence by the Company, as well as obtaining certain permits from the government, including Heavy Industrial Zoning of
Property from the City of San Luis, Arizona, a Development Agreement with the City of San Luis, Arizona to obtain development rights,
municipal services and other necessary entitlements for the project.
On April 23, 2014, the City Council of San Luis, Arizona, approved
the Development and Protected Development Rights Agreement (the “Development Agreement”) for the development of a solar
wind energy tower to generate electricity in the City of San Luis, AZ. on the site under the Option Agreement.
Report of Independent Registered Public Accounting
Firm
To the Board of Directors and Shareholders
Solar Wind Energy Tower, Inc.
We have audited the accompanying consolidated balance sheets
of Solar Wind Energy Tower, Inc. (the “Company”), a development stage company as of December 31, 2013 and 2012, and
the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for each of the two years
in the period ended December 31, 2013 and for the period from July 26, 2010 (date of inception) through December 31, 2013.
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to the above present fairly, in all material respects, the financial position of Solar Wind Energy Tower, Inc. as of December 31,
2013 and 2012, and the consolidated results of operations, and cash flows for each of the two years in the period ended December
31, 2013 and for the period from July 26, 2010 (date of inception) through December 31, 2013 in conformity with accounting
principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the accompanying consolidated financial
statements, the Company is a development stage company and is incapable of generating sufficient cash flow to sustain its operations
without securing additional financing, which raises substantial doubt about its ability to continue as a going concern. Management’s
plans in regard to this matter are described in Note 3. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
New York, New York
March 28, 2014
SOLAR WIND ENERGY TOWER, INC.
(a development stage company)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2013 AND 2012
|
|
2013
|
|
|
2012
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
61,758
|
|
|
$
|
13,761
|
|
Total current assets
|
|
|
61,758
|
|
|
|
13,761
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
2,284
|
|
|
|
6,764
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
2,300
|
|
|
|
2,300
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
66,342
|
|
|
$
|
22,825
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
171,245
|
|
|
$
|
211,487
|
|
Accrued liabilities and expenses
|
|
|
737,964
|
|
|
|
486,596
|
|
Advances from stockholders/officers
|
|
|
170,000
|
|
|
|
185,000
|
|
Notes payable
|
|
|
358,770
|
|
|
|
268,270
|
|
Convertible notes payable, net of unamortized debt discount of $353,129 and $123,525, respectively
|
|
|
278,266
|
|
|
|
68,975
|
|
Convertible notes payable, related party, net of unamortized debt discount of $131,047
|
|
|
148,953
|
|
|
|
–
|
|
Derivative liabilities
|
|
|
689,093
|
|
|
|
529,785
|
|
Total current liabilities
|
|
|
2,554,291
|
|
|
|
1,750,113
|
|
|
|
|
|
|
|
|
|
|
Long term debt:
|
|
|
|
|
|
|
|
|
Convertible notes payable, net of unamortized debt discount of $103,315 and $43,326, respectively
|
|
|
24,456
|
|
|
|
6,674
|
|
Convertible notes payable, related party, net of unamortized debt discount of $262,094
|
|
|
–
|
|
|
|
17,906
|
|
Total long term debt
|
|
|
24,456
|
|
|
|
24,580
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.0001 per share; 10,000,000 shares authorized; none issued and outstanding as of December 31, 2013 and 2012
|
|
|
–
|
|
|
|
–
|
|
Common stock, par value $0.0001 per share; 500,000,000 shares authorized; 370,728,168 and 279,865,011 shares issued and outstanding as of December 31, 2013 and 2012, respectively
|
|
|
37,073
|
|
|
|
27,987
|
|
Common stock to be issued
|
|
|
420,000
|
|
|
|
420,000
|
|
Additional paid in capital
|
|
|
5,896,890
|
|
|
|
4,264,979
|
|
Accumulated deficit during development stage
|
|
|
(8,866,368
|
)
|
|
|
(6,464,834
|
)
|
Total stockholders' deficit
|
|
|
(2,512,405
|
)
|
|
|
(1,751,868
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
66,342
|
|
|
$
|
22,825
|
|
See the accompanying notes to the consolidated financial statements
.
SOLAR WIND ENERGY TOWER, INC.
(a development stage company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
|
|
|
|
From July 26, 2010
|
|
|
|
|
|
|
|
|
|
(date of inception)
|
|
|
|
Year ended December 31,
|
|
|
through
|
|
|
|
2013
|
|
|
2012
|
|
|
December 31, 2013
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
31,304
|
|
|
$
|
180,916
|
|
|
$
|
648,629
|
|
Selling, general and administrative
|
|
|
1,792,769
|
|
|
|
2,021,555
|
|
|
|
6,292,817
|
|
Depreciation
|
|
|
4,480
|
|
|
|
4,480
|
|
|
|
11,157
|
|
Total operating expenses
|
|
|
1,828,553
|
|
|
|
2,206,951
|
|
|
|
6,952,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(1,828,553
|
)
|
|
|
(2,206,951
|
)
|
|
|
(6,952,603
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,355,537
|
)
|
|
|
(545,451
|
)
|
|
|
(2,083,917
|
)
|
Loss on modification of debt
|
|
|
–
|
|
|
|
–
|
|
|
|
(88,849
|
)
|
Loss on settlement of debt
|
|
|
–
|
|
|
|
(787,515
|
)
|
|
|
(787,515
|
)
|
Gain from change in fair value of
derivative liabilities
|
|
|
782,556
|
|
|
|
174,719
|
|
|
|
1,046,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes
|
|
|
(2,401,534
|
)
|
|
|
(3,365,198
|
)
|
|
|
(8,866,368
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes (benefit)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(2,401,534
|
)
|
|
$
|
(3,365,198
|
)
|
|
$
|
(8,866,368
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic and diluted
|
|
|
308,150,223
|
|
|
|
244,446,234
|
|
|
|
|
|
See the accompanying notes to the consolidated financial statements
.
SOLAR WIND ENERGY TOWER, INC.
(a development stage company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For
the Period From July 26, 2010 (date of inception) Through December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
During
|
|
|
|
|
|
|
Preferred stock
|
|
|
Common stock
|
|
|
Common to be Issued
|
|
|
Paid In
|
|
|
Development
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Total
|
|
Balance, date of inception (July 26, 2010) adjusted for recapitalization
|
|
|
–
|
|
|
$
|
–
|
|
|
|
20,955,199
|
|
|
$
|
2,096
|
|
|
|
–
|
|
|
$
|
–
|
|
|
$
|
191,565
|
|
|
$
|
–
|
|
|
$
|
193,661
|
|
Recapitalization and direct costs resulting in reverse merger:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares to be issued to Clean Wind Energy's stockholders
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
300,000,000
|
|
|
|
30,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
30,000
|
|
Shares to be issued for consulting services rendered in connection with reverse merger
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
6,100,000
|
|
|
|
427,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
427,000
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(838,157
|
)
|
|
|
(838,157
|
)
|
Balance, December 31, 2010
|
|
|
–
|
|
|
|
–
|
|
|
|
20,955,199
|
|
|
|
2,096
|
|
|
|
306,100,000
|
|
|
|
457,000
|
|
|
|
191,565
|
|
|
|
(838,157
|
)
|
|
|
(187,496
|
)
|
Recapitalization and direct costs resulting in reverse merger:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to Clean Wind Energy's stockholders
|
|
|
–
|
|
|
|
–
|
|
|
|
300,000,000
|
|
|
|
30,000
|
|
|
|
(300,000,000
|
)
|
|
|
(30,000
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Shares issued for consulting services rendered in connection with reverse merger
|
|
|
–
|
|
|
|
–
|
|
|
|
100,000
|
|
|
|
10
|
|
|
|
(100,000
|
)
|
|
|
(7,000
|
)
|
|
|
6,990
|
|
|
|
–
|
|
|
|
–
|
|
Shares issued for consulting services rendered at $0.20 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
100,000
|
|
|
|
10
|
|
|
|
–
|
|
|
|
–
|
|
|
|
19,990
|
|
|
|
–
|
|
|
|
20,000
|
|
Shares to be issued in connection with PPM Subscription at $0.10 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,200,000
|
|
|
|
120,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
120,000
|
|
Shares issued in connection with PPM Subscription at $0.10 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
1,200,000
|
|
|
|
120
|
|
|
|
(1,200,000
|
)
|
|
|
(120,000
|
)
|
|
|
119,880
|
|
|
|
–
|
|
|
|
–
|
|
Shares issued in connection with PPM Subscription at $0.10 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
7,290,000
|
|
|
|
729
|
|
|
|
–
|
|
|
|
–
|
|
|
|
728,271
|
|
|
|
–
|
|
|
|
729,000
|
|
Accrued warrants to be issued referring brokers in connection with PPM Subscription at $0.10 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(29,400
|
)
|
|
|
–
|
|
|
|
(29,400
|
)
|
Subtotal
|
|
|
–
|
|
|
$
|
–
|
|
|
|
329,645,199
|
|
|
$
|
32,965
|
|
|
|
6,000,000
|
|
|
$
|
420,000
|
|
|
$
|
1,037,296
|
|
|
$
|
(838,157
|
)
|
|
$
|
652,104
|
|
See the accompanying notes to the consolidated financial statements
.
SOLAR WIND ENERGY TOWER, INC.
(a development stage company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For
the Period From July 26, 2010 (date of inception) Through December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
During
|
|
|
|
|
|
|
Preferred stock
|
|
|
Common stock
|
|
|
Common to be Issued
|
|
|
Paid In
|
|
|
Development
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Total
|
|
Balance forward
|
|
|
–
|
|
|
$
|
–
|
|
|
|
329,645,199
|
|
|
$
|
32,965
|
|
|
|
6,000,000
|
|
|
$
|
420,000
|
|
|
$
|
1,037,296
|
|
|
$
|
(838,157
|
)
|
|
$
|
652,104
|
|
Shares issued for consulting services rendered at $0.27 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
24,422
|
|
|
|
2
|
|
|
|
–
|
|
|
|
–
|
|
|
|
6,591
|
|
|
|
–
|
|
|
|
6,593
|
|
Broker's finder’s fees paid in connection with PPM Subscription
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(9,800
|
)
|
|
|
–
|
|
|
|
(9,800
|
)
|
Shares issued for consulting services rendered at $0.20 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
13,787
|
|
|
|
1
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,756
|
|
|
|
–
|
|
|
|
2,757
|
|
Shares to be issued in connection with PPM Subscription at $0.10 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
1,050,000
|
|
|
|
105
|
|
|
|
600,000
|
|
|
|
60,000
|
|
|
|
104,895
|
|
|
|
–
|
|
|
|
165,000
|
|
Shares issued for consulting services rendered at $0.12 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
150,000
|
|
|
|
15
|
|
|
|
–
|
|
|
|
–
|
|
|
|
17,985
|
|
|
|
–
|
|
|
|
18,000
|
|
Shares issued for consulting services rendered at $0.12 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
50,000
|
|
|
|
5
|
|
|
|
–
|
|
|
|
–
|
|
|
|
5,995
|
|
|
|
–
|
|
|
|
6,000
|
|
Shares forfeited and cancelled by some Clean Wind Energy's stockholders acquired in connection with the merger upon resignation
|
|
|
–
|
|
|
|
–
|
|
|
|
(120,600,000
|
)
|
|
|
(12,060
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
12,060
|
|
|
|
–
|
|
|
|
–
|
|
Shares issued for consulting services rendered at $0.18 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
517,111
|
|
|
|
52
|
|
|
|
–
|
|
|
|
–
|
|
|
|
93,057
|
|
|
|
–
|
|
|
|
93,109
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,261,479
|
)
|
|
|
(2,261,479
|
)
|
Balance, December 31, 2011
|
|
|
–
|
|
|
$
|
–
|
|
|
|
210,850,519
|
|
|
$
|
21,085
|
|
|
|
6,600,000
|
|
|
$
|
480,000
|
|
|
$
|
1,270,835
|
|
|
$
|
(3,099,636
|
)
|
|
$
|
(1,327,716
|
)
|
See the accompanying notes to the consolidated financial statements
.
SOLAR WIND ENERGY TOWER, INC.
(a development stage company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For
the Period From July 26, 2010 (date of inception) Through December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
During
|
|
|
|
|
|
|
Preferred stock
|
|
|
Common stock
|
|
|
Common to be Issued
|
|
|
Paid In
|
|
|
Development
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Total
|
|
Balance, December 31, 2011
|
|
|
–
|
|
|
$
|
–
|
|
|
|
210,850,519
|
|
|
$
|
21,085
|
|
|
|
6,600,000
|
|
|
$
|
480,000
|
|
|
$
|
1,270,835
|
|
|
$
|
(3,099,636
|
)
|
|
$
|
(1,327,716
|
)
|
Shares issued in connection with PPM Subscription at $0.10 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
600,000
|
|
|
|
60
|
|
|
|
(600,000
|
)
|
|
|
(60,000
|
)
|
|
|
59,940
|
|
|
|
–
|
|
|
|
–
|
|
Shares issued for accrued expenses at $0.13 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
261,556
|
|
|
|
26
|
|
|
|
–
|
|
|
|
–
|
|
|
|
34,441
|
|
|
|
–
|
|
|
|
34,467
|
|
Shares issued for future services
|
|
|
–
|
|
|
|
–
|
|
|
|
21,500,000
|
|
|
|
2,150
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,150
|
)
|
|
|
|
|
|
|
–
|
|
Shares issued for consulting services rendered
|
|
|
–
|
|
|
|
–
|
|
|
|
7,751,176
|
|
|
|
776
|
|
|
|
–
|
|
|
|
–
|
|
|
|
289,872
|
|
|
|
–
|
|
|
|
290,648
|
|
Sale of common stock at $0.10 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
850,000
|
|
|
|
85
|
|
|
|
–
|
|
|
|
–
|
|
|
|
84,915
|
|
|
|
|
|
|
|
85,000
|
|
Shares issued in connection with the exercise of warrants at $0.10 per share
|
|
|
–
|
|
|
|
–
|
|
|
|
2,300,000
|
|
|
|
230
|
|
|
|
–
|
|
|
|
–
|
|
|
|
229,770
|
|
|
|
–
|
|
|
|
230,000
|
|
Shares issued in settlement of debt
|
|
|
–
|
|
|
|
–
|
|
|
|
35,751,760
|
|
|
|
3,575
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,221,595
|
|
|
|
–
|
|
|
|
1,225,170
|
|
Beneficial conversion feature reclassified to equity upon repayment of convertible notes
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
209,487
|
|
|
|
–
|
|
|
|
209,487
|
|
Stock based compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
866,274
|
|
|
|
–
|
|
|
|
866,274
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(3,365,198
|
)
|
|
|
(3,365,198
|
)
|
Balance, December 31, 2012
|
|
|
–
|
|
|
$
|
–
|
|
|
|
279,865,011
|
|
|
$
|
27,987
|
|
|
|
6,000,000
|
|
|
$
|
420,000
|
|
|
$
|
4,264,979
|
|
|
$
|
(6,464,834
|
)
|
|
$
|
(1,751,868
|
)
|
See the accompanying notes to the consolidated financial statements
.
SOLAR WIND ENERGY TOWER, INC.
(a development stage company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For
the Period From July 26, 2010 (date of inception) Through December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
During
|
|
|
|
|
|
|
Preferred stock
|
|
|
Common stock
|
|
|
Common to be Issued
|
|
|
Paid In
|
|
|
Development
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Total
|
|
Balance, December 31, 2012
|
|
|
–
|
|
|
$
|
–
|
|
|
|
279,865,011
|
|
|
$
|
27,987
|
|
|
|
6,000,000
|
|
|
$
|
420,000
|
|
|
$
|
4,264,979
|
|
|
$
|
(6,464,834
|
)
|
|
$
|
(1,751,868
|
)
|
Shares issued for consulting services rendered
|
|
|
–
|
|
|
|
–
|
|
|
|
19,350,251
|
|
|
|
1,935
|
|
|
|
–
|
|
|
|
–
|
|
|
|
79,985
|
|
|
|
–
|
|
|
|
81,920
|
|
Shares issued in settlement of debt
|
|
|
–
|
|
|
|
–
|
|
|
|
66,073,247
|
|
|
|
6,607
|
|
|
|
–
|
|
|
|
–
|
|
|
|
882,433
|
|
|
|
–
|
|
|
|
889,040
|
|
Sale of common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
5,439,659
|
|
|
|
544
|
|
|
|
–
|
|
|
|
–
|
|
|
|
64,956
|
|
|
|
–
|
|
|
|
65,500
|
|
Stock based compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
560,969
|
|
|
|
–
|
|
|
|
560,969
|
|
Fair value of warrants issued in connection with notes payable
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
43,568
|
|
|
|
–
|
|
|
|
43,568
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,401,534
|
)
|
|
|
(2,401,534
|
)
|
Balance, December 31, 2013
|
|
|
–
|
|
|
$
|
–
|
|
|
|
370,728,168
|
|
|
$
|
37,073
|
|
|
|
6,000,000
|
|
|
$
|
420,000
|
|
|
$
|
5,896,890
|
|
|
$
|
(8,866,368
|
)
|
|
$
|
(2,512,405
|
)
|
See the accompanying notes to the consolidated financial statements.
SOLAR
WIND ENERGY TOWER, INC.
(a development stage company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
|
|
|
|
From July 26, 2010
|
|
|
|
|
|
|
|
|
|
(date of inception)
|
|
|
|
For the year ended December 31,
|
|
|
through
|
|
|
|
2013
|
|
|
2012
|
|
|
December 31, 2013
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,401,534
|
)
|
|
$
|
(3,365,198
|
)
|
|
$
|
(8,866,368
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
4,480
|
|
|
|
4,480
|
|
|
|
11,157
|
|
Amortization of debt discounts
|
|
|
816,642
|
|
|
|
255,543
|
|
|
|
1,124,407
|
|
Amortization of financing costs
|
|
|
33,823
|
|
|
|
59,500
|
|
|
|
93,323
|
|
Non cash interest
|
|
|
380,741
|
|
|
|
172,116
|
|
|
|
680,644
|
|
Stock based compensation
|
|
|
642,889
|
|
|
|
1,156,921
|
|
|
|
2,373,269
|
|
Fair value of warrants issued in connection with notes payable
|
|
|
43,568
|
|
|
|
–
|
|
|
|
43,568
|
|
Loss on settlement of debt
|
|
|
–
|
|
|
|
787,515
|
|
|
|
787,515
|
|
Loss on debt modification
|
|
|
–
|
|
|
|
–
|
|
|
|
88,849
|
|
Gain from change in fair value of derivative liabilities
|
|
|
(782,556
|
)
|
|
|
(174,719
|
)
|
|
|
(1,046,516
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances from stockholders/officers
|
|
|
(15,000
|
)
|
|
|
10,000
|
|
|
|
–
|
|
Accounts payable and accrued expenses
|
|
|
265,767
|
|
|
|
216,271
|
|
|
|
1,558,643
|
|
Net cash used in operating activates
|
|
|
(1,011,180
|
)
|
|
|
(877,571
|
)
|
|
|
(3,151,509
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash acquired from reverse merger
|
|
|
–
|
|
|
|
–
|
|
|
|
223,586
|
|
Purchase of property and equipment
|
|
|
–
|
|
|
|
–
|
|
|
|
(13,441
|
)
|
Payment of long term deposit
|
|
|
–
|
|
|
|
–
|
|
|
|
(9,330
|
)
|
Net cash provided by investing activities
|
|
|
–
|
|
|
|
–
|
|
|
|
200,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of subsidiary's common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
75
|
|
Proceeds from sale of common stock
|
|
|
65,500
|
|
|
|
85,000
|
|
|
|
1,154,700
|
|
Proceeds from exercise of warrants
|
|
|
–
|
|
|
|
230,000
|
|
|
|
230,000
|
|
Proceeds from issuance of note payable
|
|
|
75,000
|
|
|
|
301,500
|
|
|
|
376,500
|
|
Proceeds from issuance of convertible notes payable
|
|
|
925,677
|
|
|
|
332,500
|
|
|
|
1,368,177
|
|
Repayments of convertible notes payable
|
|
|
(7,000
|
)
|
|
|
(110,000
|
)
|
|
|
(117,000
|
)
|
Net cash provided by financing activities
|
|
|
1,059,177
|
|
|
|
839,000
|
|
|
|
3,012,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
47,997
|
|
|
|
(38,571
|
)
|
|
|
61,758
|
|
Cash, beginning of period
|
|
|
13,761
|
|
|
|
52,332
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
61,758
|
|
|
$
|
13,761
|
|
|
$
|
61,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
–
|
|
|
$
|
98,778
|
|
|
$
|
98,778
|
|
Income taxes paid
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued warrants to be issued to referring brokers in connection with PPM subscription at $0.10 per share
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
29,400
|
|
Shares forfeited and cancelled by some of Solar Wind Energy's stockholders acquired in connection with the merger upon resignation
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
12,060
|
|
Notes payable issued in settlement of accounts payable
|
|
$
|
–
|
|
|
$
|
268,270
|
|
|
$
|
268,270
|
|
Convertible notes payable issued in settlement of accrued officer salaries
|
|
$
|
–
|
|
|
$
|
280,000
|
|
|
$
|
280,000
|
|
Common stock issued in settlement of debt
|
|
$
|
889,040
|
|
|
$
|
1,225,170
|
|
|
$
|
2,114,210
|
|
See the accompanying notes to the consolidated financial statements.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 1 – NATURE OF OPERATIONS
Solar Wind Energy Tower, Inc.
(the
“Company”, “we”, “us”, “our”) (formerly known as Superior Silver Mines, Inc.) was
incorporated in the State of Idaho on January 22, 1962 as Superior Mines Company and then changed its name to Superior Silver Mines,
Inc. The Company reincorporated as a Nevada corporation on December 27, 2010. The Company has been dormant for a number of years,
and has no known mineral reserves.
On December 29, 2010, Solar Wind Energy
Tower, Inc., a Nevada corporation (the “Company” or "Solar Wind"), completed a reverse merger (the “Merger”)
with Solar Wind Energy, Inc. (f/k/a Clean Wind Energy, Inc.), a corporation formed under the laws of the State of Delaware on July
26, 2010 (“Solar Wind - Subsidiary”). In connection with the Merger, the Company issued to the stockholders
of Solar Wind - Subsidiary in exchange for their Solar Wind - Subsidiary Common Stock, the right to receive an aggregate of 300,000,000
shares of the Company’s Common Stock. As a result of the reverse merger, Solar Wind - Subsidiary is now a wholly-owned
subsidiary of the Company.
For accounting purposes, Solar Wind - Subsidiary
was the surviving entity. The transaction was accounted for as a recapitalization of Solar Wind - Subsidiary pursuant to which
Solar Wind - Subsidiary was treated as the surviving and continuing entity although the Company is the legal acquirer rather than
a reverse acquisition. Accordingly, the Company’s historical financial statements are those of Solar Wind - Subsidiary
immediately following the consummation of the reverse merger. Also, going forward the business operations of Solar Wind - Subsidiary
will become the Company’s principal business operations.
On January 21, 2011, the Company changed
its name to Clean Wind Energy Tower, Inc. and on March 11, 2013, changed its name to Solar Wind Energy Tower, Inc. along with
its wholly-owned subsidiary, a corporation formed under the laws of the State of Delaware, which changed its name from Clean Wind
Energy, Inc. to Solar Wind Energy, Inc. In addition, effective January 24, 2011, the Company’s quotation symbol on the Over-the-Counter
Bulletin Board was changed from SSVM.OB to CWET.OB and on March 11, 2013, in conjunction with our name change, the Company’s
quotation symbol on the Over-the-Counter Bulletin Board was changed from CWET.OB to SWET.OB.
Until the consummation of the Merger, the
Company’s purpose was to seek, investigate and, if such investigation warranted, acquire an interest in business opportunities
presented to it by persons or firms who, or which, desire to seek the perceived advantages of a publicly registered corporation.
Because the Company had no operations and only nominal assets until the Merger, it was considered a shell company under rules promulgated
by the U.S. Securities and Exchange Commission.
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Fair Value of Financial Instruments
Our short-term financial instruments, including
cash, other assets and accounts payable and accrued expenses consist primarily of instruments without extended maturities, the
fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of our notes
and advances payable is based on management estimates and reasonably approximates their book value based on their current maturity.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Long-Lived Assets
We review our long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance
with Topic ASC 360, “Property, Plant and Equipment”. Recoverability is measured by comparison of the carrying amount
to the future net cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future cash
flows arising from the asset using a discount rate determined by management to be commensurate with the risk inherent to our current
business model.
Net Loss per Common Share
The Company computes net loss per share
under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Basic net income (loss)
per common share is computed by dividing net loss by the weighted average number of shares of common stock. Diluted net loss per
share is computed using the weighted average number of common and common stock equivalent shares outstanding during the period.
There is no effect on diluted loss per share since the common stock equivalents are anti-dilutive. Dilutive common stock equivalents
consist of shares issuable upon conversion of convertible notes and the exercise of the Company's stock options and warrants. Fully
diluted shares as of December 31, 2013 and 2012 were 473,674,550 and 286,418,391, respectively.
Use of Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Revenue Recognition
The Company has generated no revenues to
date. It is the Company’s policy that revenue from product sales or services will be recognized in accordance with ASC 605
“Revenue Recognition”. Four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of
an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably
assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling
prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will
defer any revenue for which the product was not delivered or is subject to refund until such time that the Company and the customer
jointly determine that the product has been delivered or no refund will be required.
Stock Based Compensation
The Company account for its stock based
awards in accordance with Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”), which requires
a fair value measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors,
including restricted stock awards. We estimate the fair value of stock using the stock price on date of the approval of the award.
The fair value is then expensed over the requisite service periods of the awards, which is generally the performance period and
the related amount recognized in our consolidated statements of operations.
Stock-based compensation expense in connection
with stock granted to consultants in exchange for services rendered for the years ended December 31, 2013 and 2012 was $642,889
and $1,156,921, respectively.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Income Taxes
The Company utilizes ASC 740 “Income
Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized
for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting
amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Temporary differences between taxable income reported for financial reporting purposes and income
tax purposes primarily relate to the recognition of debt costs and stock based compensation expense. The adoption of ASC 740-10
did not have a material impact on the Company's results of operations or financial condition.
Research and development
In accordance with ASC 730, “Research
and Development”, the Company expenses all research and development costs as incurred. The Company had incurred $31,304,
$180,916 and $648,629 research and development costs for the years ended December 31, 2013, 2012 and for the period from July 26,
2010 (date of inception) through December 31, 2013, respectively. The company expects the research and development costs to increase
in the future as it continues to invest in the infrastructure that is critical to achieve our business goals and objectives.
Property, plant and equipment
Property, plant and equipment are carried
at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of the assets. Gains and losses from the retirement or disposition of property and equipment are
included in operations in the period incurred. Maintenance and repairs are expensed as incurred.
Cash and cash equivalents
For purposes of the statement of cash flows,
cash and cash equivalents includes demand deposits, saving accounts and money market accounts. The Company considers all highly
liquid debt instruments with maturities of three months or less when purchased to be cash and cash equivalents.
Derivative financial instruments
Accounting Standards Codification subtopic
815-40, Derivatives and Hedging, Contracts in Entity’s own Equity (“ASC 815-40”) became effective for the Company
on October 1, 2009. The Company’s convertible debt has reset provisions to the exercise price if the Company issues equity
or a right to receive equity, at a price less than the exercise prices.
Development stage entity
The Company is considered to be a development
stage entity, as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 915. For the period from July 26, 2010 (date of inception) through December 31, 2013, the Company has not generated any revenues
to date, has no significant assets and has incurred losses since inception from developing its business and planned operations.
Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Recently Issued Accounting Pronouncements
There are various updates recently issued,
most of which represented technical corrections to the accounting literature or application to specific industries and are not
expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.
NOTE 3 – GOING CONCERN MATTERS
The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The Company has reported a net loss of $(2,401,534) for the year ended
December 31, 2013, accumulated deficit of $(8,866,368) and total current liabilities in excess of current assets of $(2,492,533)
as of December 31, 2013.
The Company’s ability to continue
existence is dependent upon commencing its planned operations, management’s ability to develop and achieve profitable operations
and/or upon obtaining additional financing to carry out its planned business. The Company intends to fund its business development,
acquisition endeavors and operations through equity and debt financing arrangements. During the year ended December 31, 2013, certain
shareholders of the Company have committed to meeting operating expenses. However, there can be no assurance that these arrangements
will be sufficient to fund its ongoing capital expenditures, working capital, and other cash requirements. The outcome of these
matters cannot be predicted at this time. There can be no assurance that any additional financings will be available to the Company
on satisfactory terms and conditions, if at all. In the event we are unable to continue as a going concern, we may elect or be
required to seek protection from our creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary
petition in bankruptcy. To date, management has not considered this alternative, nor does management view it as a likely occurrence.
The accompanying consolidated financial
statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts
and classification of liabilities that may result should the Company be unable to continue as a going concern.
NOTE 4 – ACCRUED LIABILITIES AND EXPENSES
Accrued liabilities and expenses as of
December 31, 2013 and 2012 consist of the following:
|
|
2013
|
|
|
2012
|
|
Accrued payroll
|
|
$
|
505,118
|
|
|
$
|
292,365
|
|
Accrued payroll taxes payable
|
|
|
–
|
|
|
|
18,330
|
|
Accrued stock purchase warrants
|
|
|
29,400
|
|
|
|
29,400
|
|
Accrued lawsuit (Note 6 below)
|
|
|
122,985
|
|
|
|
122,985
|
|
Accrued interest and other
|
|
|
80,461
|
|
|
|
23,516
|
|
Total
|
|
$
|
737,964
|
|
|
$
|
486,596
|
|
NOTE 5 – ADVANCES FROM SHAREHOLDERS/OFFICERS
Advances from shareholders are comprised of the following:
|
|
2013
|
|
|
2012
|
|
Cash advances
|
|
$
|
–
|
|
|
$
|
15,000
|
|
Fair value of common stock pledged as collateral by shareholder (see below)
|
|
|
170,000
|
|
|
|
170,000
|
|
Total
|
|
$
|
170,000
|
|
|
$
|
185,000
|
|
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
As described below, the Company issued
a Secured Convertible Promissory Note on February 29, 2012. In connection with the issuance, a shareholder pledged 10,000,000 shares
of the Company's common stock. On March 8, 2012, upon notice of default, the escrow agent transferred the pledged common shares
to the note holder. The fair value of the common shares pledged was recorded as a related party obligation as of March 31, 2012
with a corresponding reduction in the carrying value of the Note Payable.
NOTE 6 – NOTE PAYABLE
On June 20, 2012, the Company issued three
promissory notes payable in the aggregate of $268,270 in settlement of outstanding accounts payable. The notes mature earlier of
(1) one year from the date of issuance, (2) completion of any major financing event or events in which the Company receives aggregate
proceeds of $2,000,000 or more, or (3) any liquidation or reorganization, merger or recapitalization of the Company, bear an interest
rate of 8% per annum due at maturity and are unsecured.
On June 6, 2013, the Company issued a secured
promissory note payable with a face amount of $97,500 with an original interest discount (“OID”) of $22,500. The note
was originally due in full on October 3, 2013, subsequently extended to November 15, 2013, and is secured by a Company issued note
to the Company’s CEO for $150,000 (See note 8). The Company is obligated to file by July 5, 2013 a registration statement
on Form S-1 registering an equity line of credit to the benefit of the note holder and to become effective by September 18, 2013.
The Company filed Form S-1 on June 24, 2013 and on October 16, 2013 became effective. Effective November 16, 2013, the promissory
note was in default, the promissory note became due and payable with interest rate at 22% per annum thereafter for any unpaid balance.
NOTE 7 – CONVERTIBLE NOTES PAYABLE
Convertible notes payable are comprised of the following:
|
|
December 31,
2013
|
|
|
December 31,
2012
|
|
Convertible note payable, due March 21, 2013, net of unamortized debt discount of $5,091
|
|
$
|
–
|
|
|
$
|
12,409
|
|
Convertible note payable, due July 11, 2013, net of unamortized debt discount and OID of $26,301
|
|
|
–
|
|
|
|
23,699
|
|
Convertible note payable, due May 6, 2013, net of unamortized debt discount of $15,978
|
|
|
–
|
|
|
|
19,022
|
|
Convertible note payable, due October 3, 2013, net of unamortized debt discount and OID of $18,904
|
|
|
–
|
|
|
|
6,096
|
|
Convertible note payable, due August 13, 2013, net of unamortized debt discount of $26,399
|
|
|
–
|
|
|
|
6,101
|
|
Convertible promissory notes, due December 31, 2014, net of unamortized debt discount of $119,274 and $43,326, respectively
|
|
|
119,726
|
|
|
|
6,674
|
|
Convertible note payable, due September 19, 2013, net of unamortized debt discount of $30,852
|
|
|
–
|
|
|
|
1,648
|
|
Convertible note payable, due January 24, 2015, net of unamortized debt discount and OID of $17,712
|
|
|
10,059
|
|
|
|
–
|
|
Convertible note payable, due December 19, 2013
|
|
|
32,500
|
|
|
|
|
|
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
|
|
December 31,
2013
|
|
|
December 31,
2012
|
|
Convertible note payable, due July 1, 2014, net of unamortized debt discount and OID of $12,478
|
|
$
|
15,492
|
|
|
$
|
–
|
|
Convertible note payable, due April 15, 2014, net of unamortized debt discount of $12,231
|
|
|
20,269
|
|
|
|
–
|
|
Convertible note payable, due May 15, 2014, net of unamortized debt discount of $13,500
|
|
|
14,000
|
|
|
|
–
|
|
Convertible note payable, due January 24, 2015, net of unamortized debt discount of $36,977
|
|
|
13,023
|
|
|
|
–
|
|
Convertible note payable, due August 21, 2014, net of unamortized debt discount and OID of $19,925
|
|
|
11,287
|
|
|
|
–
|
|
Convertible promissory notes, due June 18, 2014, net of unamortized debt discount of $19,973
|
|
|
12,527
|
|
|
|
–
|
|
Convertible promissory note, due July 14, 2014, net with unamortized debt discount and OID of $20,569
|
|
|
17,931
|
|
|
|
–
|
|
Convertible promissory note, due August 16, 2014, net of unamortized debt discount and OID of $24,049
|
|
|
14,451
|
|
|
|
–
|
|
Convertible promissory note, due October 22, 2014, net of unamortized debt discount and OID of $25,226
|
|
|
5,986
|
|
|
|
–
|
|
Convertible promissory note, due November 1, 2014, net of unamortized debt discount and OID of $47,226
|
|
|
10,274
|
|
|
|
–
|
|
Convertible promissory note, due September 10, 2014, net of unamortized debt discount of $38,678
|
|
|
3,822
|
|
|
|
–
|
|
Convertible promissory note, due January 24, 2015, net of unamortized debt discount of $48,625
|
|
|
1,375
|
|
|
|
–
|
|
Total
|
|
|
302,722
|
|
|
|
75,649
|
|
Less short term portion
|
|
|
(278,266
|
)
|
|
|
(68,975
|
)
|
Long term portion
|
|
$
|
24,456
|
|
|
$
|
6,674
|
|
Asher notes:
In 2012 and 2013, the Company entered into
a Securities Purchase Agreements with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the
aggregate principal amounts outstanding as of December 31, 2013 and 2012 of $135,000 and $117,500, respectively.
These notes bear interest at the rate of
8% per annum. All interest and principal must be repaid approximately nine months from the date of issuances. The Notes are convertible
into common stock, at Asher’s option, at a 42% to 49% discount to the average of the three lowest closing bid prices of the
common stock during the 10 trading day period prior to conversion.
In the event the Company prepays the notes
in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 120% if prepaid
during the period commencing on the closing date through 30 days thereafter, (ii) 125% if prepaid 31 days following the closing
through 60 days following the closing, (iii) 130% if prepaid 61 days following the closing through 90 days following the closing
and (iv) 135% if prepaid 91 days following the closing through 120 days following the closing. (v) 140% if prepaid 121 days following
the closing through 150 days following the closing, (vi) 150% if prepaid 121 days following the closing through 180 days following
the closing. After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
JMJ Financial
On July 11, 2012, the Company issued a
Convertible Promissory Note to JMJ Financial (“JMJ”) providing JMJ with the ability to invest up to $275,000 which
contains a 10% original issue discount (the “JMJ Note”). The transaction closed on July 25, 2012. During the years
ended December 31, 2013 and 2012, the Company received tranches of net proceeds in the amounts of $135,000 and $67,500, respectively.
As of December 31, 2013 and 2012, the aggregate principal amount outstanding under the July 11, 2012 issued convertible promissory
note was $90,395 and $75,000, respectively.
The maturity dates are one year from the
effective date of each payment by JMJ to the Company (the “Maturity Date”). The conversion price (the “Conversion
Price”) for each portion of consideration paid by JMJ to the Company is lesser of: (1) the closing price of the Company’s
stock on the day the portion of consideration is paid to the Company, or (2) 70% of the lowest trade price in the 25 trading days
previous to the conversion.
The JMJ Notes bear interest at 0% for the
first 60 days and a one-time interest charge of 10% will be applied to the Principal Sum thereafter.
At any time after the Effective Date, the
Company will have the option, upon 20 days business notice to JMJ, to prepay the entire remaining outstanding principal amount
of the Note in cash, provided that (i) the Company will pay JMJ 150% of the principal amount outstanding in repayment, (ii) such
amount must be paid in cash on the next business day following the 20 day business day notice period, and (iii) JMJ may still convert
the Note pursuant to the terms herein during the 20 day business period until such repayment amount has been received in full.
Typenex Co-Investment, LLC
On May 13, 2013, the Company issued a Convertible
Promissory Note to Typenex Co-Investment, LLC (“Typenex”) providing Typenex with the ability to invest up to $555,000
which contains a 10% original issue discount (the “Typenex Note”). The transaction closed on May 13, 2013. All issued
tranches are due 20 months from the date of issuance. During the year ended December 31, 2013, the Company received tranches of
net proceeds in the amounts of $205,000. As of December 31, 2013, the aggregate principal amount outstanding under the July 25,
2012 issued convertible promissory note was $127,771.
The Note is convertible into common stock,
at holder’s option, at the lower of i) 35% discount to the average of the two lowest closing bid prices of the common stock
during the 20 trading day period prior to conversion or 40% if average of the two lowest bid prices are less than $0.01 or ii)
$0.04.
In connection with the issuance of the
Convertible Promissory Note on May 13, 2013, the Company issued the note holder a warrant to purchase 2,187,101 shares of the Company’s
common stock at $0.10 per share for five years. The fair value of the issued warrants of $43,568 was determined using the Black-Scholes
option model with the following assumptions:
Expected life (years)
|
|
|
5
|
|
Expected volatility
|
|
|
200.60
|
%
|
Risk-free interest rate
|
|
|
0.40
|
%
|
Dividend yield
|
|
|
–
|
%
|
Phoenix Worldwide Holdings, Inc.
On June 20, 2013, the Company issued an
unsecured Convertible Promissory Note to Phoenix Worldwide Holdings, Inc. ("Phoenix"), in the principal amount of $32,500
(the "Note"). The financing closed on June 20, 2013. The total net proceeds the Company received from this Offering was
$25,000 with an OID of $7,500 and due December 19, 2013.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
The Note is convertible into common stock,
at Phoenix’s option, at a 42% discount to the average of the three lowest closing bid prices of the common stock during the
10 trading day period prior to conversion. As of December 31, 2013, the aggregate principal amount outstanding under the June 20,
2013 issued convertible promissory note was $32,500.
LG Capital Funding, LLC
During the year ended December 31, 2013,
the Company issued two Convertible Redeemable Notes to LG Capital LLC in an aggregate principal amount of $77,000. The notes bear
interest rate of 8% per annum, contain an original issue discount of 10% and are due one year from the date of issuance.
The notes are convertible into common stock,
at holder’s option, at the lower of i) 42% discount to the average of the two lowest closing bid prices of the common stock
during the 10 trading day period prior to conversion. As of December 31, 2013, the aggregate principal amount outstanding was $77,000.
JDF Capital Inc.
On November 1, 2013, the Company issued
an unsecured Convertible Promissory Note to JDF Capital, Inc. ("JDF"), in the principal amount of $57,500 (the "Note").
The total net proceeds the Company received from this Offering was $50,000 with an OID of $5,000 and due November 1, 2014.
The Note is convertible into common
stock, at JDF’s option, at a 42% discount to the average of the lowest closing price of the common stock during the 10
trading day period prior to conversion or the closing price at conversion. As of December 31, 2013, the aggregate principal
amount outstanding under the November 1, 2013 issued convertible promissory note was $57,500.
PPM
During the months of December 2012 and
January 2013, the Company issued an aggregate of thirteen convertible promissory notes to investors in the aggregate principal
amount of $239,000. The total net proceeds the Company received from this Offering was $239,000.
The convertible promissory notes bear interest
at the rate of 8% per annum. All interest and principal must be repaid on December 31, 2014. The Note is convertible into common
stock, at holders’ option, at a conversion rate of $0.015 per common share.
The Company has identified the embedded
derivatives related to the above described Notes. These embedded derivatives included certain conversion features and reset provisions.
The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as
of the inception date of the Notes and to fair value as of each subsequent reporting date.
At the inception of the 2012 Notes, the
Company determined the aggregate fair value of $536,541 of embedded derivatives. The fair value of the embedded derivatives was
determined using the Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected
volatility of 196.08% to 219.80%, (3) weighted average risk-free interest rate of 0.13 % to 0.19%, (4) expected life of 0.75 to
1.00 years, and (5) estimated fair value of the Company’s common stock of $0.015 to $0.043 per share.
The determined fair value of the debt derivatives
of $536,541 was charged as a debt discount up to the net proceeds of the note with the remainder $(172,116) charged to current
period operations as non-cash interest expense.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
At the inception of the 2013 Notes, the
Company determined the aggregate fair value of $1,290,328 of embedded derivatives. The fair value of the embedded derivatives was
determined using the Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected
volatility of 158.78% to 203.63%, (3) weighted average risk-free interest rate of 0.10 % to 0.28%, (4) expected life of 0.75 to
1.95 years, and (5) estimated fair value of the Company’s common stock of $0.0116 to $0.0251 per share.
The determined fair value of the debt derivatives
of $1,290,328 was charged as a debt discount up to the net proceeds of the note with the remainder $350,468 charged to current
period operations as non-cash interest expense.
At December 31, 2013, the Company marked
to market the fair value of the debt derivatives and determined a fair value of $589,558. The Company recorded a gain from change
in fair value of debt derivatives of $618,035 for the year ended December 31, 2013. The fair value of the embedded derivatives
was determined using Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected
volatility of 157.27%, (3) weighted average risk-free interest rate of 0.01% to 0.13%, (4) expected life of 0.01 to 1.07 years,
and (5) estimated fair value of the Company’s common stock of $0.0072 per share.
The charge of the amortization of debt
discounts and costs for the years ended December 31, 2013 and 2012 was $816,642 and $255,352, respectively, which was accounted
for as interest expense. Also, the Company has accrued interest expense of $55,901 as of December 31, 2013.
During the year ended December 31, 2013,
the Company issued an aggregate of 66,073,247 shares of its common stock in settlement of the convertible note payable and related
interest.
NOTE 8 – CONVERTIBLE NOTES PAYABLE, RELATED PARTY
During 2012, the Company issued an aggregate
of $280,000 convertible promissory notes to officers and key employees in settlement of accrued salaries.
The convertible promissory notes bear interest
at the rate of 8% per annum. All interest and principal must be repaid on December 31, 2014. The convertible promissory notes are
convertible into common stock, at the holders’ option at $0.15 per common share.
Due to the nature of the notes described
in Note 7 above, the Company has identified the embedded derivatives related to the above described Notes. These embedded derivatives
included certain conversion features and the uncertainty of sufficient authorized shares to meet possible conversion demands. The
accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the
inception date of the notes and to fair value as of each subsequent reporting date.
The fair value of the embedded derivatives
was determined using Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected
volatility of 200.41% to 200.80%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 2.0 years, and (5)
estimated fair value of the Company’s common stock of $0.0165 to $0.0167 per share.
The determined fair value of the debt derivatives
of $262,285 was charged as a debt discount up to the net proceeds of the notes.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
At December 31, 2013, the Company marked
to market the fair value of the debt derivatives and determined a fair value of $53,699. The Company recorded a gain from change
in fair value of debt derivatives of $140,769 for the year ended December 31, 2013. The fair value of the embedded derivatives
was determined using Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected
volatility of 157.27%, (3) weighted average risk-free interest rate of 0.13%, (4) expected life of 1.00 years, and (5) estimated
fair value of the Company’s common stock of $0.0072 per share.
The charge of the amortization of debt
discounts and costs for the years ended December 31, 2013 and 2012 was $131,047 and $191, respectively, which was accounted for
as interest expense. Also, the Company has accrued interest expense of $22,433 as of December 31, 2013.
NOTE 9 – DERIVATIVE LIABILITIES
As described in Notes 7 and 8 above, the
Company issued convertible notes that contain conversion features and reset provisions. The accounting treatment of derivative
financial instruments requires that the Company record fair value of the derivatives as of the inception date and to fair value
as of each subsequent reporting date. Refer to Notes 7 and 8 for assumptions used to determine fair values.
NOTE 10 – EQUITY FACILITY AGREEMENT
On June 6, 2013, the Company entered into
a Committed Equity Facility Agreement for an aggregate of $3,000,000 expiring the earliest of advances up to the facility amount
($3,000,000), default (as defined) or June 6, 2016.
The Company may request an advance up to
the maximum amount, defined as 200% of the average daily value traded for 10 trading days immediately prior to the date of delivery
of advance notice, by delivering the Company’s common stock at an advance rate of 75% of the lowest volume weighted average
price five consecutive trading days before advance notice.
The Company is required to maintain an
effective registration statement to utilize the equity facility.
As of December 31, 2013, the Company issued
3,406,326 shares of its common stock for an advance of $35,000 under the equity facility agreement.
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Office Leases Obligations
The Company leases a suite of offices and
shared support services at 1997 Annapolis Exchange Parkway, Suite 300, Annapolis, Maryland 21401 month to month basis.
Rental expenses charged to operations for the year ended December
31, 2013 and 2012 was $23,916 and $71,366, respectively.
Employment and Consulting Agreements
The Company has employment agreements with
certain of its key employees which include non-disclosure and confidentiality provisions for protection of the Company’s
proprietary information.
The Company has consulting agreements with
outside contractors to provide marketing and financial advisory services. The Agreements are generally for a term of 12 months
from inception and renewable automatically from year to year unless either the Company or Consultant terminates such engagement
by written notice.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
On December 29, 2010, pursuant to the Merger,
Solar Wind Energy, Inc. became a wholly-owned subsidiary of the Company. Solar Wind has employment agreements with its executive
officers. Each of the employment agreements was entered into on September 22, 2010 and amended on November 22, 2010.
Name
|
|
Position(s)
|
|
Term
|
|
Salary
|
|
Bonus
|
|
Severance
|
Ronald W. Pickett
|
|
President, Chief Executive Officer
|
|
3 years; renewable for 1 year on mutual consent
|
|
$200,000
|
|
Board Discretionary
|
|
Twelve (12) months salary and benefits for termination without cause.
|
Stephen Sadle
|
|
Chief Operating Officer
|
|
3 years; renewable for 1 year on mutual consent
|
|
$175,000
|
|
Board Discretionary
|
|
Twelve (12) months salary and benefits for termination without cause.
|
Robert P. Crabb
|
|
Secretary, Chief Marketing Officer
|
|
3 years; renewable for 1 year on mutual consent
|
|
$60,000
|
|
Board Discretionary
|
|
Twelve (12) months salary and benefits for termination without cause.
|
The foregoing descriptions of the employment
agreements do not purport to be completed and are qualified in their entirety by reference to such employment agreements which
are included as exhibits to this Form 10-K, were filed with the SEC on Form 8-K on December 30, 2010.
In connection with the private placement
subscription the Company has also agreed to issue to the referring brokers, five-year warrants to purchase an aggregate of 98,000
shares of common stock at an exercise price of $0.10 per share. The Company valued the warrants using the Black-Scholes pricing
model and the following assumptions: contractual terms of 5 years, an average risk free interest rate of 2.00%, a dividend yield
of 0%, and volatility of 247%. The amount of $29,400 attributed to the value of the warrants to be issued and has been accrued
for as of December 31, 2013, which is charged to additional paid-in capital.
Litigation
Hanover Holdings I, LLC vs Solar Wind Energy Tower Inc. (f/k/a
Clean Wind Energy Tower, Inc.)
On December 27, 2012, we were served
with a Complaint in the matter of Hanover Holdings I, LLC filed with the Supreme Court of the State of New York, stipulating
that Solar Wind Energy Tower Inc. (f/k/a Clean Wind Energy Tower, Inc.) has yet to pay the remaining outstanding balance,
related interest and penalties, as described in a convertible promissory note issued by Solar Wind Energy Tower Inc. (f/k/a
Clean Wind Energy Tower, Inc.) to the benefit of Hanover Holdings I, LLC on February 29, 2012 and has failed to honor a
notice of conversion issued by Hanover Holdings I, LLC on or about September 7, 2012. Total claim amount is for $122,985. The
Company does not believe any additional payments are due to Hanover Holdings I, LLC and is vigorously defend its position.
However, the ultimate outcome cannot be determined at this time.
From time to time, we may become involved
in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently
not party to any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect
on our business, financial condition or operating results.
NOTE 12 – STOCKHOLDERS' EQUITY
Preferred stock
The Company has authorized 10,000,000 shares
of preferred stock, with a par value of $0.0001 per share. As of December 31, 2013 and 2012, the Company did not have any preferred
stock issued and outstanding.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Common stock
The Company has authorized 500,000,000
shares of common stock, with a par value of $0.0001 per share. As of December 31, 2013 and 2012, the Company has 370,728,168 and
279,865,011, respectively, shares of common stock issued and outstanding.
During the year ended December 31, 2013,
the Company issued an aggregate of 19,350,251 shares of common stock for services rendered of $81,920.
During the year ended December 31, 2013,
the Company issued an aggregate of 66,073,247 shares of common stock in settlement of $532,967 of convertible notes payable and
related accrued interest.
During the year ended December 31, 2013,
the Company issued 2,033,333 of common stock for net proceeds of $30,500.
During the year ended December 31, 2013,
the Company issued 3,406,326 of common stock for net proceeds of $35,000 under an equity facility agreement.
In 2013 and 2012, the Company issued an
aggregate of 15,000,000 and 21,500,000 shares of common stock for future services of $328,500 and $1,745,690, respectively. The
Company accretes the fair value of the shares issued as stock based compensation during the requisite service period to operations.
During the years ended December 31, 2013 and 2012, the Company recorded $560,968 and $866,274, respectively, as stock based compensation.
During the years ended December 31, 2012,
the Company issued an aggregate of 261,556 shares of common stock for accrued expenses of $34,467.
During the year ended December 31, 2012,
the Company issued an aggregate of 7,751,176 shares of common stock for services rendered of $290,647.
During the year ended December 31, 2012,
the Company issued an aggregate of 22,500,000 shares of common stock in settlement of $150,000 previous incurred payables. In connection
with the issuance, the Company recorded a loss on settlement of debt of $822,500.
During the year ended December 31, 2012,
the Company issued an aggregate of 13,251,760 shares of common stock in settlement of $126,000 of convertible notes payable and
related accrued interest.
During the year ended December 31, 2012,
the Company issued an aggregate of 600,000 shares of common stock for common stock subscriptions for $60,000 proceeds, which received
in 2011 and 2,300,000 shares of common stock for in connection with a warrant agreement entered into on January 12, 2012 for $230,000.
During the year ended December 31, 2012,
the Company issued 850,000 of common stock for net proceeds of $85,000.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 13 – WARRANTS
Warrants
The following table summarizes the changes
in warrants outstanding and related prices for the shares of the Company’s common stock at December 31, 2013:
Exercise Price
|
|
|
Number
Outstanding
|
|
|
Warrants
Outstanding
Weighted
Average
Remaining
Contractual Life
(years)
|
|
|
Weighted
Average
Exercise price
|
|
|
Number
Exercisable
|
|
|
Warrants
Exercisable
Weighted
Average
Exercise Price
|
|
$
|
0.10
|
|
|
|
2,187,101
|
|
|
|
4.37
|
|
|
$
|
0.10
|
|
|
|
2,187,101
|
|
|
$
|
0.10
|
|
Transactions involving the Company’s warrant issuance
are summarized as follows:
|
|
Number of
Shares
|
|
|
Weighted
Average
Price Per
Share
|
|
Outstanding at December 31, 2011
|
|
|
–
|
|
|
$
|
–
|
|
Granted
|
|
|
–
|
|
|
|
–
|
|
Exercised
|
|
|
–
|
|
|
|
–
|
|
Canceled or expired
|
|
|
–
|
|
|
|
–
|
|
Outstanding at December 31, 2012
|
|
|
–
|
|
|
|
–
|
|
Granted
|
|
|
2,187,101
|
|
|
|
0.10
|
|
Exercised
|
|
|
–
|
|
|
|
–
|
|
Canceled or expired
|
|
|
–
|
|
|
|
–
|
|
Outstanding at December 31, 2013
|
|
|
2,187,101
|
|
|
$
|
0.10
|
|
As described in Note 7, in connection with
the issuance of the Convertible Promissory Note on May 13, 2013, the Company issued the note holder a warrant to purchase 2,187,101
shares of the Company’s common stock at $0.10 per share for five years.
On January 12, 2012, the Company entered
into a Warrant Agreement with Paradigm Concepts, Inc. (the "Warrant Holder"), pursuant to which the Company issued to
Warrant Holder one certificate (the “Warrant Certificate”) providing the Warrant Holder with the right to purchase,
at any time until the earliest occurrence of either (a) after the underlying common stock issuable in the exercise of the warrants
being declared registered and effective by the SEC on a registration statement filed by the Company, or, (b) 5:30 P.M. Pacific
Daylight Savings Time on July 12, 2012. The Warrant Certificate is exercisable up to $1,000,000 worth of restricted shares of common
stock of the Company (the “Warrant Shares”) valued at exercise price calculated by taking the daily closing bid price
of the Company’s common stock as reported on the OTCBB, on the date of the exercise of the warrants, and discounting that
closing bid price by 20%; provided, however, the exercise price may in no event be lower than $0.10 per share nor greater than
$0.40 per share. The Warrant is non-cancelable by the Company and non-callable.
On December 31, 2012, Warrant Agreement
expired.
NOTE 14 – INCOME TAXES
The Company utilizes ASC 740 “Income
Taxes”, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the consolidated financial statement or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between consolidated financial statements and tax bases of assets and liabilities
using enacted tax rates in effect for the year in which the differences are expected to reverse.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
For the period from July 26, 2010 (date
of inception) through December 31, 2013, the Company had available for U.S federal income tax purposes net operating loss carryovers
of approximately $5,600,000, which expiring through the year of 2033. The net operating loss carryovers may be subject to limitations
under Internal Revenue Code due to significant changes in the Company’s ownership. The Company has provided a full valuation
allowance against the full amount of the net operating loss benefit, since, in the opinion of management, based upon the earnings
history of the Company it is more likely than not that the benefits will not be realized.
The income tax provision (benefit) for
the years ended December 31, 2013 and 2012 consists of the following:
|
|
2012
|
|
|
2012
|
|
Federal:
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
–
|
|
|
$
|
–
|
|
Deferred
|
|
|
1,266,000
|
|
|
|
1,209,000
|
|
|
|
|
1,266,000
|
|
|
|
1,209,000
|
|
State and local:
|
|
|
|
|
|
|
|
|
Current
|
|
|
–
|
|
|
|
–
|
|
Deferred
|
|
|
196,000
|
|
|
|
187,000
|
|
|
|
|
196,000
|
|
|
|
187,000
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
|
(1,462,000
|
)
|
|
|
(1,396,000
|
)
|
|
|
|
|
|
|
|
|
|
Income tax provision (benefit)
|
|
$
|
–
|
|
|
$
|
–
|
|
The provision for income taxes differ from
the amount of income tax determined by applying the applicable U.S statutory rate to losses before income tax expense for the year
ended December 31, 2013 and 2012as follows:
|
|
December 31,
2013 and 2012
|
|
Statutory federal income tax rate
|
|
|
(35.0%)
|
|
Statutory state and local income tax rate (8.25%), net of federal benefit
|
|
|
(5.4%)
|
|
Change in valuation allowance
|
|
|
40.4%
|
|
Effective tax rate
|
|
|
0.00%
|
|
Deferred income taxes result from temporary
differences in the recognition of income and expenses for financial reporting purposes and for tax purposes. The tax effect of
these temporary differences representing deferred tax asset and liabilities result principally from the following:
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Deferred tax assets (liabilities):
|
|
|
|
|
|
|
|
|
Stock based compensation issued and to be issued for services rendered
|
|
$
|
817,000
|
|
|
$
|
1,157,000
|
|
Net operating loss carry forward
|
|
|
449,000
|
|
|
|
1,108,000
|
|
Less: valuation allowance
|
|
|
(1,266,000
|
)
|
|
|
(2,265,000
|
)
|
Net deferred tax asset
|
|
$
|
–
|
|
|
$
|
–
|
|
The Company has not yet filed its tax returns
for the period from July 26, 2010 (date of inception) through December 31, 2013.
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
The provisions of ASC 740 require companies
to recognize in their financial statements the impact of a tax position if that position is more likely than not to be sustained
upon audit, based upon the technical merits of the position. ASC 740 prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. ASC 740
also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure.
Management does not believe that the Company
has any material uncertain tax positions requiring recognition or measurement in accordance with the provisions of ASC 740. Accordingly,
the adoption of these provisions of ASC 740 did not have a material effect on the Company’s consolidated financial statements.
The Company’s policy is to record interest and penalties on uncertain tax positions, if any, as income tax expense.
All tax years for the Company remain subject
to future examinations by the applicable taxing authorities.
NOTE 15 – FAIR VALUE MEASUREMENTS
ASC 825-10 defines fair value as the price
that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded
at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions
that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk
of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be
used to measure fair value:
|
·
|
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted
assets or liabilities;
|
|
·
|
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly
or indirectly, for substantially the full term of the asset or liability; or
|
|
·
|
Level 3: Prices or valuation techniques that require inputs that are both significant to the
fair value measurement and are unobservable.
|
Items recorded or measured at fair value
on a recurring basis in the accompanying unaudited condensed consolidated financial statements consisted of the following items
as of December 31, 2013:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Long-term investments
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Total
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Derivative liabilities
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
689,093
|
|
|
$
|
689,093
|
|
Total
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
689,093
|
|
|
$
|
689,093
|
|
SOLAR WIND ENERGY TOWER, INC.
(a development stage
company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Years ended December 31, 2013 and 2012:
|
|
Derivative Liability
|
|
|
Balance, December 31, 2011
|
|
$
|
237,395
|
|
|
|
|
|
|
|
|
Transfers out at mark-market value on date of payoff or conversion
|
|
|
(331,717
|
)
|
|
|
|
|
|
|
|
Transfers in upon initial fair value of derivative liability
|
|
|
798,826
|
|
|
|
|
|
|
|
|
Gain from change in fair value of derivative liability
|
|
|
(174,719
|
)
|
|
|
|
|
|
|
|
Balance, December 31, 2012
|
|
$
|
529,785
|
|
|
|
|
|
|
|
|
Transfers out at mark-market value on date of payoff or conversion
|
|
|
(348,464
|
)
|
|
|
|
|
|
|
|
Transfers in upon initial fair value of derivative liability
|
|
|
1,290,328
|
|
|
|
|
|
|
|
|
Gain from change in fair value of derivative liability
|
|
|
(782,556
|
)
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
|
|
689,093
|
|
|
|
|
|
|
|
|
Total gain for the period included in earnings relating
to the derivative liabilities held at December 31, 2013
|
|
$
|
782,556
|
|
|
Level 3 Liabilities were comprised of our
bifurcated convertible debt features on our convertible notes.
NOTE 16 – SUBSEQUENT EVENTS
Subsequent issuances of common stock
In January 2014, the Company issued an aggregate
of 33,092,007 shares of common stock in settlement of $109,407 outstanding notes payable and accrued interest.
In February 2014, the Company issued an aggregate
of 16,432,275 shares of common stock in settlement of $56,100 outstanding notes payable and accrued interest.
In March 2014, the Company issued an aggregate
of 31,533,446 shares of common stock in settlement of $87,961 outstanding notes payable.
In March 2014, the Company sold 7,125,000 shares of its common stock
for net proceeds of $25,000.
Subsequent financing
Asher Enterprises, Inc.
On January 8, 2014, the Company entered into
a Securities Purchase Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the
principal amount of $32,500 (the "Note"). The total net proceeds the Company received from this Offering was $30,000.
The Note bears interest at the rate of 8% per
annum. All interest and principal must be repaid on October 10, 2014. The Note is convertible into common stock, at Asher’s
option, at a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period
prior to conversion. In the event the Company prepays the Note in full, the Company is required to pay off all principal, interest
and any other amounts owing multiplied by (i) 120% if prepaid during the period commencing on the closing date through 30 days
thereafter, (ii) 125% if prepaid 31 days following the closing through 60 days following the closing, (iii) 130% if prepaid 61
days following the closing through 90 days following the closing and (iv) 135% if prepaid 91 days following the closing through
120 days following the closing. (v) 140% if prepaid 121 days following the closing through 150 days following the closing, (vi)
150% if prepaid 121 days following the closing through 180 days following the closing. After the expiration of 180 days following
the date of the Note, the Company has no right of prepayment.
On February 12, 2014, the Company entered into
a Securities Purchase Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the
principal amount of $27,500 (the "Note"). The total net proceeds the Company received from this Offering was $25,000.
The Note bears interest at the rate of 8% per
annum. All interest and principal must be repaid on November 14, 2014. The Note is convertible into common stock, at Asher’s
option, at a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period
prior to conversion. In the event the Company prepays the Note in full, the Company is required to pay off all principal, interest
and any other amounts owing multiplied by (i) 120% if prepaid during the period commencing on the closing date through 30 days
thereafter, (ii) 125% if prepaid 31 days following the closing through 60 days following the closing, (iii) 130% if prepaid 61
days following the closing through 90 days following the closing and (iv) 135% if prepaid 91 days following the closing through
120 days following the closing. (v) 140% if prepaid 121 days following the closing through 150 days following the closing, (vi)
150% if prepaid 121 days following the closing through 180 days following the closing. After the expiration of 180 days following
the date of the Note, the Company has no right of prepayment.
Typenex Co-Investment, LLC
On February 26, 2014, the Company received
a $50,000 tranche under the May 13, 2013 Convertible Promissory Note to Typenex Co-Investment, LLC (“Typenex”). (See
Note 7). All issued tranches are due 20 months from the date of issuance.
The Note is convertible into common stock,
at holder’s option, at the lower of i) 35% discount to the average of the two lowest closing bid prices of the common stock
during the 20 trading day period prior to conversion or 40% if average of the two lowest bid prices are less than $0.01 or ii)
$0.04.
125,000,000 Shares of Common Stock
SOLAR WIND ENERGY TOWER, INC.
PROSPECTUS
______________, 2014
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The Company is paying all expenses of the offering. No portion of
these expenses will be borne by the Selling Security Holders. The Selling Security Holders, however, will pay any other expenses
incurred in selling their Common Stock, including any brokerage commissions or costs of sale. Following is an itemized statement
of all expenses in connection with the issuance and distribution of the securities to be registered:
Type
|
|
Amount *
|
|
SEC Registration Fee
|
|
$
|
512
|
.31
|
Legal Fees and Expenses
|
|
$
|
15,000
|
|
Accounting Fees and Expenses
|
|
$
|
2,500
|
|
Miscellaneous Expenses
|
|
$
|
1,000
|
|
Total
|
|
$
|
19,012
|
.31
|
*All amounts are estimates, other than the SEC’s registration
fee.
Item 14. Indemnification of Directors and Officers.
Articles of Incorporation
The Company’s Articles of Incorporation do not address the
indemnification or insurance of controlling persons, directors or officers against liability in their capacity as such.
Bylaws
The Company’s Bylaws provide as follows with respect to the
indemnification and insurance of controlling persons, directors or officers against liability in their capacity as such.
The Company must indemnify any person made a party to
any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (“Proceeding”) by reason of the fact that he is or was a director, against judgments, penalties,
fines, settlements and reasonable expenses (including attorney’s fees) (“Expenses”) actually incurred by
him in connection with such Proceeding if:(a) he conducted himself in good faith, and: (i) in the case of conduct in his
own official capacity with the Company, he reasonably believed his conduct to be in the Company’s best interests, or
(ii) in all other cases, he reasonably believes his conduct to be at least not opposed to the Company’s best interests;
and (b) in the case of any criminal Proceeding, he had no reasonable cause to believe his conduct was unlawful.
The Company must indemnify any person made a party to any Proceeding
by or in the right of the Company, by reason of the fact that he is or was a director, against reasonable expenses actually incurred
by him in connection with such proceeding if he conducted himself in good faith, and: (a) in the case of conduct in his official
capacity with the Company, he reasonably believed his conduct to be in its best interests; or (b) in all other cases, he reasonably
believed his conduct to be at least not opposed to its best interests; provided that no such indemnification may be made in respect
of any proceeding in which such person shall have been adjudged to be liable to the Company.
A director will not be indemnified in respect to any Proceeding
charging improper personal benefit to him, whether or not involving action in his official capacity, in which he shall have been
adjudged to be liable on the basis that personal benefit was improperly received by him. No indemnity will indemnify any director
from or on account of acts or omissions of such director finally adjudged to be intentional misconduct or a knowing violation of
law, or from or on account of conduct of such director finally adjudged to be in violation of, from or on account of any transaction
with respect to which it was finally adjudged that such director personally received a benefit in money, property, or services
to which the director was not legally entitled.
No indemnification will be made by unless authorized in the specific
case after a determination that indemnification of the director is permissible in the circumstances because he has met the applicable
standard of conduct.
Reasonable expenses incurred by a director who is party to a proceeding
may be paid or reimbursed by the Company in advance of the final disposition of such Proceeding in certain cases.
The Company has the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of the Company or is or was serving at the request of
the Company as an officer, employee or agent of another corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan against any liability asserted against him and incurred by him in any such capacity or arising out of his status as
such, whether or not the Company would have the power to indemnify him against such liability under the provisions of the Bylaws.
Nevada Law
Nevada law provides as follows with respect to the indemnification
and insurance of controlling persons, directors or officers against liability in their capacity as such.
Indemnification. Pursuant to NRS 78.7502 (Discretionary and mandatory
indemnification of officers, directors, employees and agents: General provisions), a corporation may indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by
the person in connection with the action, suit or proceeding if the person: (a) is not liable pursuant to Nevada Revised Statutes
79.138 (breach of good faith); or (b) acted in good faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause
to believe the conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction
or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person is liable pursuant
to Nevada Revised Statutes 79.138 or did not act in good faith and in a manner which he or she reasonably believed to be in or
not opposed to the best interests of the corporation, or that, with respect to any criminal action or proceeding, he or she had
reasonable cause to believe that the conduct was unlawful.
A corporation may also indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’
fees actually and reasonably incurred by the person in connection with the defense or settlement of the action or suit if the person:
(a) is not liable pursuant to Nevada Revised Statutes 79.138; or (b) acted in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue
or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court
in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all
the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to above, or in defense of
any claim, issue or matter therein, the corporation must indemnify him or her against expenses, including attorneys’ fees,
actually and reasonably incurred by him or her in connection with the defense.
Insurance. Pursuant to NRS 78.752 (Insurance and other financial
arrangements against liability of directors, officers, employees and agents), a corporation may purchase and maintain insurance
or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise for any liability asserted against the person and liability and expenses incurred by the
person in his or her capacity as a director, officer, employee or agent, or arising out of his or her status as such, whether or
not the corporation has the authority to indemnify such a person against such liability and expenses. No such financial arrangement
may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement of expenses or
indemnification ordered by a court.
The SEC’s Position on Indemnification for Securities Act
Liabilities
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to the Company’s directors, officers or controlling persons, the Company has been
advised that in the opinion of the Commission this indemnification is against public policy as expressed in the Securities Act
of 1933, as amended, and is, therefore, unenforceable.
Item 15. Recent Sales of Unregistered Securities.
Issuance of Shares of Common Stock
During the year ended December 31, 2011, the Company issued 955,320
shares of Common Stock to consultants for services performed and rendered; 855,320 shares were expense in the year ended December
31, 2011 and 100,000 shares were accrued for in fiscal year 2010. These shares were valued at $153,459, which approximated the
fair value of the shares when they were issued; the expense recognized in the year ended December 31, 2011 is $146,459 and $7,000
of expenses were recognized in fiscal year 2010.
During the year ended December 31, 2011, the Company issued 9,540,000
shares of Common Stock to private placement investors at $0.10 per share for aggregate gross proceeds of $954,000. In connection
with the private placement subscription the Company has also agreed to issue to the referring brokers, five-year warrants to purchase
an aggregate of 98,000 shares of common stock at an exercise price of $0.10 per share. The Company valued the warrants using the
Black-Scholes pricing model and the following assumptions: contractual terms of 5 years, an average risk free interest rate of
2. 00%, a dividend yield of 0%, and volatility of 247%. The amount of $29,400 attributed to the value of the warrants to be issued
and has been accrued for as of December 31, 2011, which is charged to additional paid-in capital.
Also, during the year ended December 31, 2011, the Company received
$60,000 from an investors in connection with the private placement subscription. The equivalent 600,000 shares of Common Stock
at $0.10 were not yet issued at the end of the year ended December 31, 2011.
During the year ended December 31, 2011, the Company issued 300,000,000
shares of common stock to the shareholders of its subsidiary, pursuant to the Merger on December 29, 2010, in exchange for their
Solar Wind – Subsidiary common stock. These issuances of shares were made in reliance upon an exemption from registration
under Section 4 (2) of the Securities Act, and Regulation D promulgated thereunder.
During the years ended December 31, 2012, the Company issued an
aggregate of 261,556 shares of common stock for accrued expenses of $34,467.
During the year ended December 31, 2012, the Company issued an aggregate
of 21,500,000 shares of common stock for future services of $1,745,690. The Company accretes the fair value of the shares issued
as stock based compensation during the requisite service period to operations. During the year ended December 31, 2012, the Company
recorded $866,274 as stock based compensation.
During the year ended December 31, 2012, the Company issued an aggregate
of 7,751,176 shares of common stock for services rendered of $290,647.
During the year ended December 31, 2012, the Company issued an aggregate
of 22,500,000 shares of common stock in settlement of $150,000 previous incurred payables. In connection with the issuance, the
Company recorded a loss on settlement of debt of $822,500.
During the year ended December 31, 2012, the Company issued an aggregate
of 13,251,760 shares of common stock in settlement of $126,000 of convertible notes payable and related accrued interest.
During the year ended December 31, 2012, the Company issued an aggregate
of 600,000 shares of common stock for common stock subscriptions for $60,000 proceeds, which received in 2011 and 2,300,000 shares
of common stock for in connection with a warrant agreement entered into on January 12, 2012 for $230,000.
During the year ended December 31, 2012, the Company issued 850,000
of common stock for net proceeds of $85,000.
In 2013 and 2012, the Company issued an aggregate of 15,000,000
and 21,500,000 shares of common stock for future services of $328,500 and $1,745,690, respectively. The Company accretes the fair
value of the shares issued as stock based compensation during the requisite service period to operations. During the years ended
December 31, 2013 and 2012, the Company recorded $560,968 and $866,274, respectively, as stock based compensation.
During the year ended December 31, 2013, the Company issued
an aggregate of 19,350,251 shares of common stock for services rendered of $81,920.
During
the year ended December 31, 2013, the Company issued an aggregate of 66,073,247 shares of common stock in settlement of $889,040
of convertible notes payable and related accrued interest.
During the year ended December 31, 2013, the Company issued
2,033,333 of common stock for net proceeds of $30,500.
During the year ended December 31, 2013, the Company issued
3,406,326 of common stock for net proceeds of $35,000 under an equity facility agreement.
In March 2014, the Company sold 7,125,000 shares of its common
stock for net proceeds of $25,000.
During the three months ended March 31, 2014, the Company issued
86,807,728 shares of common stock in settlement of $534,561 of convertible notes payable and related interest.
In April 2014, the Company issued an aggregate of 11,147,321
shares of common stock in settlement of $85,834 of convertible notes payable and related interest.
In May 2014, the Company issued an aggregate of 27,618,320 shares
of common stock in settlement of $650,338 convertible notes payable and related interest.
On May 20, 2014, the Company issued 500,000 shares of its
common stock for investor relations services valued at $2,250.
In May and June 2014, the Company issued 8,530,813 shares
of its common stock in settlement of $194,345 of convertible notes payable and related interest.
Issuances of Convertible Notes
Asher Enterprises, Inc.
On July 27, 2011, the Company entered into a Securities Purchase
Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the principal amount of $45,000
(the "Note"). The financing closed on August 8, 2011. The total net proceeds the Company received from this Offering
on August 8, 2011 was $42,500.
The Note bears interest at the rate of 8% per annum. All interest
and principal must be repaid on April 30, 2012. The Note is convertible into common stock, at Asher’s option, at a 42% discount
to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.
In the event the Company prepays the Note in full, the Company is required to pay off all principal, interest and any other amounts
owing multiplied by (i) 135% if prepaid during the period commencing on the closing date through 90 days thereafter, (ii) 135%
if prepaid 91 days following the closing through 120 days following the closing, (iii) 140% if prepaid 121 days following the closing
through 151 days following the closing and (iv) 150% if prepaid 151 days following the closing through 180 days following the closing.
After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.
On August 31, 2011, the Company entered into a Securities Purchase
Agreement with Asher for the sale of an 8% convertible note in the principal amount of $32,500 (the "August 2011 Note").
The financing closed on August 31, 2011. The total net proceeds the Company received from this Offering was $30,000.
The August 2011 Note bears interest at the rate of 8% per annum.
All interest and principal must be repaid on April 30, 2012. The Note is convertible into common stock, at Asher’s option,
at a 52% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior
to conversion. In the event the Company prepays the August 2011 Note in full, the Company is required to pay off all principal,
interest and any other amounts owing multiplied by (i) 135% if prepaid during the period commencing on the closing date through
90 days thereafter, (ii) 140% if prepaid 91 days following the closing through 120 days following the closing, (iii) 145% if prepaid
121 days following the closing through 150 days following the closing and (iv) 150% if prepaid 151 days following the closing through
180 days following the closing. After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.
The October 2011 Note bears interest at the rate of 8% per annum.
All interest and principal must be repaid on July 5, 2012. The October 2011 Note is convertible into common stock, at Asher’s
option, at a 69% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period
prior to conversion. In the event the Company prepays the October 2011 Note in full, the Company is required to pay off all principal,
interest and any other amounts owing multiplied by (i) 135% if prepaid during the period commencing on the closing date through
90 days thereafter, (ii) 140% if prepaid 91 days following the closing through 120 days following the closing, (iii) 145% if prepaid
121 days following the closing through 150 days following the closing and (iv) 150% if prepaid 151 days following the closing through
180 days following the closing. After the expiration of 180 days following the date of the October 2011 Note, the Company has no
right of prepayment.
Asher has agreed to restrict its ability to convert the October
2011 Notes and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and
their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.
On April 10, 2012, the Company entered into a Securities Purchase
Agreement with Asher, for the sale of an 8% convertible note in the principal amount of $68,500 (the "April 2012 Note").
The financing closed on April 18, 2012. The total net proceeds the Company received from this Offering was $65,000.
The April 2012 Note bears interest at the rate of 8% per annum.
All interest and principal must be repaid on January 12, 2013. The April 2012 Note is convertible into common stock, at Asher’s
option, at a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day
period prior to conversion. In the event the Company prepays the April 2012 Note in full, the Company is required to pay off all
principal, interest and any other amounts owing multiplied by (i) 120% if prepaid during the period commencing on the closing
date through 30 days thereafter, (ii) 125% if prepaid 31 days following the closing through 60 days following the closing, (iii)
130% if prepaid 61 days following the closing through 90 days following the closing and (iv) 135% if prepaid 91 days following
the closing through 120 days following the closing. (v) 140% if prepaid 121 days following the closing through 150 days following
the closing, (vi) 150% if prepaid 121 days following the closing through 180 days following the closing. After the expiration
of 180 days following the date of the April 2012 Note, the Company has no right of prepayment.
On May 3, 2012, the Company entered into a Securities Purchase
Agreement with Asher, for the sale of an 8% convertible note in the principal amount of $42,500 (the "May 2012 Note").
The financing closed on May 15, 2012. The total net proceeds the Company received from this Offering was $40,000.
The May 2012 Note bears interest at the rate of 8% per annum.
All interest and principal must be repaid on February 7, 2013. The May 2012 Note is convertible into common stock, at Asher’s
option, at a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period
prior to conversion. In the event the Company prepays the May 2012 Note in full, the Company is required to pay off all principal,
interest and any other amounts owing multiplied by (i) 120% if prepaid during the period commencing on the closing date through
30 days thereafter, (ii) 125% if prepaid 31 days following the closing through 60 days following the closing, (iii) 130% if prepaid
61 days following the closing through 90 days following the closing and (iv) 135% if prepaid 91 days following the closing through
120 days following the closing. (v) 140% if prepaid 121 days following the closing through 150 days following the closing, (vi)
150% if prepaid 121 days following the closing through 180 days following the closing. After the expiration of 180 days following
the date of the May 2012 Note, the Company has no right of prepayment.
On June 19, 2012, the Company entered into a Securities Purchase
Agreement with Asher, for the sale of an 8% convertible note in the principal amount of $32,500 (the "June 2012 Note").
The financing closed on June 27, 2012. The total net proceeds the Company received from this Offering was $25,000.
The June 2012 Note bears interest at the rate of 8% per annum.
All interest and principal must be repaid on March 21, 2013. The Note is convertible into common stock, at Asher’s option,
at a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior
to conversion. In the event the Company prepays the June 2012 Note in full, the Company is required to pay off all principal, interest
and any other amounts owing multiplied by (i) 120% if prepaid during the period commencing on the closing date through 30 days
thereafter, (ii) 125% if prepaid 31 days following the closing through 60 days following the closing, (iii) 130% if prepaid 61
days following the closing through 90 days following the closing and (iv) 135% if prepaid 91 days following the closing through
120 days following the closing. (v) 140% if prepaid 121 days following the closing through 150 days following the closing, (vi)
150% if prepaid 121 days following the closing through 180 days following the closing. After the expiration of 180 days following
the date of the June 2012 Note, the Company has no right of prepayment.
On August 3, 2012, the Company entered into a Securities Purchase
Agreement with Asher, for the sale of an 8% convertible note in the principal amount of $32,500 (the "August 2012 Note").
The financing closed on May 15, 2012. The total net proceeds the Company received from this Offering was $30,000.
The August 2012 Note bears interest at the rate of 8% per annum.
All interest and principal must be repaid on February 7, 2013. The August 2012 Note is convertible into common stock, at Asher’s
option, at a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period
prior to conversion. In the event the Company prepays the August 2012 Note in full, the Company is required to pay off all principal,
interest and any other amounts owing multiplied by (i) 120% if prepaid during the period commencing on the closing date through
30 days thereafter, (ii) 125% if prepaid 31 days following the closing through 60 days following the closing, (iii) 130% if prepaid
61 days following the closing through 90 days following the closing and (iv) 135% if prepaid 91 days following the closing through
120 days following the closing. (v) 140% if prepaid 121 days following the closing through 150 days following the closing, (vi)
150% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following
the date of the August 2012 Note, the Company has no right of prepayment.
On November 9, 2012, the Company entered into a Securities
Purchase Agreement with Asher for the sale of an 8% convertible note in the principal amount of $32,500 (the "November
2012 Note"). The financing closed on November 21, 2012.
The November 2012 Note bears interest at
the rate of 8% per annum. All interest and principal must be repaid on August 13, 2013. The Note is convertible
into common stock, at Asher’s option, at a 42% discount to the average of the three lowest closing bid prices
of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the
November 2012 Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied
by (i) 120% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 125% if prepaid 31 days
following the closing through 60 days following the closing and (iii) 130% if prepaid 61 days following the closing through 90
days following the closing and (iv) 135% if prepaid 91 days following the closing through 120 days following the closing and (v)
140% if prepaid 121 days following the closing through 150 days following the closing and (vi) 150% if prepaid 151 days following
the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, the Company
has no right of prepayment.
Asher has agreed to restrict its ability to convert the
November 2012 Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and
their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares
of common stock. The total net proceeds the Company received from this Offering was $32,500, less attorneys fees.
As
of the date of the
November 2012
Note, the Company is obligated on the
November
2012
Note issued to Asher in connection with the offering. The
November 2012
Note
is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of
the Company.
On March 25, 2013, the
Company entered into a Securities Purchase Agreement with Asher for the sale of an 8% convertible note in the principal
amount of $32,500 (the " March Note"). The financing closed on April 1, 2013.
The March Note bears interest at
the rate of 8% per annum. All interest and principal must be repaid on December 27, 2013. The March Note
is convertible into common stock, at Asher’s option, at a 49% discount to the average of the three lowest
closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event the
Company prepays the March Note in full, the Company is required to pay to Asher an amount in cash equal to 175% multiplied by
the sum of all principal, interest and any other amounts owing. After the expiration of 180 days following the date of the March
Note, the Company has no right of prepayment.
Asher has agreed
to restrict its ability to convert the March Note and receive shares of common stock such that the number of shares of common stock
held by them in the aggregate and their affiliates after such conversion or exercise does not exceed
4.99% of the then issued and outstanding shares of common stock. The total net proceeds the Company received from
this Offering was $32,500, less attorneys fees. As of the date of the March Note, the Company is obligated on the March Note issued
to Asher in connection with the offering. The March Note is a debt obligation arising other than in the ordinary course of business,
which constitutes a direct financial obligation of the Company.
On May 28, 2013, the Company
entered into a securities purchase agreement (the “Asher Agreement”) with Asher, whereby the Company
agreed to issue and Asher agreed to purchase convertible promissory note (the “Asher Note”) in the principal amount
Seventy Eight Thousand Five Hundred Dollars ($78,500.00) with an interest rate of eight percent (8%). The Asher Note matures on
March 3, 2014 (the “Maturity Date”). The financing closed on June 11, 2013.
The Asher Note may be
prepaid in whole or in part, at any time during the period beginning on the Closing Date and ending on the date which is 180 days
following the issue date, beginning at 120% of the outstanding principal and increasing by 5% every 30 days up to 140% of the outstanding
principal, accrued interest and certain other amounts that may be due and owing under the Asher Note. Beginning on the 151
st
day until the 180
th
day following the Closing Date, the Asher Note may be prepaid in whole or in part at 150% of the
outstanding principal, accrued interest and certain other amounts that may be due and owing under the Asher Note.
The Asher Note is convertible
into common stock, at Asher’s option, at a forty-two percent discount to the market price, which is defined as the average
of the lowest three (3) closing bid prices for the Common Stock during the ten (10) trading days prior to the conversion date.
Asher has agreed to restrict
its ability to convert the Asher Note and receive shares of common stock such that the number of shares of common stock held by
them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding
shares of common stock. As of the date of the Asher Note, the Company is obligated on the Asher Note issued to Asher. The Asher
Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation
of the Company. The Asher Note also provides for penalties and rescission rights if we do not deliver shares of our common stock
upon conversion with the require timeframes.
On August 23, 2013 (the “Closing Date”), the Company
entered into and closed a securities purchase agreement (the “August Agreement”) with Asher, whereby the Company agreed
to issue and Asher agreed to purchase convertible promissory note (the “August Note”) in the principal amount Twenty
Seven Thousand Five Hundred Dollars ($27,500.00) with an interest rate of eight percent (8%). The August Note matures on May 23,
2014 (the “Maturity Date”).
The August Note may be prepaid in whole
or in part, at any time during the period beginning on the Closing Date and ending on the date which is 180 days following the
issue date, beginning at 120% of the outstanding principal and increasing by 5% every 30 days up to 140% of the outstanding principal,
accrued interest and certain other amounts that may be due and owing under the August Note. Beginning on the 151
st
day
until the 180th day following the Closing Date, the August Note may be prepaid in whole or in part at 150% of the outstanding principal,
accrued interest and certain other amounts that may be due and owing under the August Note.
The August Note is convertible into common stock, at Asher’s
option, at a forty-two percent discount to the market price, which is defined as the average of the lowest three (3) closing bid
prices for the Common Stock during the ten (10) trading days prior to the conversion date.
Asher has agreed to restrict its ability to convert the Asher
Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their
affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. As
of the date of the August Note, the Company is obligated on the August Note issued to Asher. The August Note is a debt obligation
arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company. The August
Note also provides for penalties and rescission rights if we do not deliver shares of our common stock upon conversion with the
require timeframes.
On September 16, 2013 (the “Closing Date”), the
Company entered into a securities purchase agreement (the “Asher Agreement”) with Asher Enterprises, Inc. ("Asher"),
a Delaware corporation, whereby the Company agreed to issue and Asher agreed to purchase convertible promissory note (the “Asher
Note”) in the principal amount Thirty Two Thousand Five Hundred Dollars ($32,500.00) with an interest rate of eight percent
(8%). The Asher Note was funded on September 24, 2013. The Asher Note matures on June 18, 2014 (the “Maturity Date”).
The Asher Note may be prepaid in whole
or in part, at any time during the period beginning on the Closing Date and ending on the date which is 180 days following the
issue date, beginning at 120% of the outstanding principal and increasing by 5% every 30 days up to 140% of the outstanding principal,
accrued interest and certain other amounts that may be due and owing under the Asher Note. Beginning on the 151
st
day
until the 180
th
day following the Closing Date, the Asher Note may be prepaid in whole or in part at 150% of the outstanding
principal, accrued interest and certain other amounts that may be due and owing under the Asher Note.
The Asher Note is convertible into common stock, at Asher’s
option, at a forty-two percent discount to the market price, which is defined as the average of the lowest three (3) closing bid
prices for the Common Stock during the ten (10) trading days prior to the conversion date.
Asher has agreed to restrict its ability to convert the Asher
Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their
affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.
As
of the date of the Asher Note, the Company is obligated on the Asher Note issued to Asher. The Asher Note is a debt obligation
arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.
The
Asher Note also provides for penalties and rescission rights if we do not deliver shares of our common stock upon conversion with
the require timeframes.
On January 8, 2014, the Company entered into a Securities Purchase
Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the principal amount of $32,500
(the "Note"). The financing closed on January 8, 2014. The total net proceeds the Company received from this Offering
was $30,000.
The Note bears interest at the rate of 8% per annum. All interest
and principal must be repaid on October 10, 2014. The Note is convertible into common stock, at Asher’s option, at a 42%
discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.
On February 12, 2014, the Company entered into a Securities
Purchase Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the principal amount
of $27,500 (the "Note"). The financing closed on February 12, 2014. The total net proceeds the Company received from
this Offering was $25,000.
The Note bears interest at the rate of 8% per annum. All interest
and principal must be repaid on November 14, 2014. The Note is convertible into common stock, at Asher’s option, at a 42%
discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.
In the event the Company prepays the Notes in full, the Company
is required to pay off all principal, interest and any other amounts owing multiplied by (i) 120% if prepaid during the period
commencing on the closing date through 30 days thereafter, (ii) 125% if prepaid 31 days following the closing through 60 days following
the closing, (iii) 130% if prepaid 61 days following the closing through 90 days following the closing and (iv) 135% if prepaid
91 days following the closing through 120 days following the closing. (v) 140% if prepaid 121 days following the closing through
150 days following the closing, (vi) 150% if prepaid 121 days following the closing through 180 days following the closing. After
the expiration of 180 days following the date of the Note, the Company has no right of prepayment.
JMJ Financial
On July 25, 2012, the
Company issued a Convertible Promissory Note to JMJ Financial (“JMJ”) providing JMJ with the ability to invest up to
$275,000 which contains a 10% original issue discount (the “JMJ Note”). The transaction closed on July 25, 2012. JMJ
provided $50,000 to the Company on the Effective Date.
The maturity date is one
year from the effective date of each payment by JMJ to the Company (the “Maturity Date”). The conversion price (the
“Conversion Price”) for each portion of consideration paid by JMJ to the Company is lesser of: (1) the closing price
of the Company’s stock on the day the portion of consideration is paid to the Company, or (2) 70% of the lowest trade price
in the 25 trading days previous to the conversion.
The JMJ Note bears interest
at 0% for the first 60 days and a one-time interest charge of 10% will be applied to the Principal Sum thereafter.
At any time after the
Effective Date, the Company will have the option, upon 20 days business notice to JMJ, to prepay the entire remaining outstanding
principal amount of the Note in cash, provided that (i) the Company will pay JMJ 150% of the principal amount outstanding in repayment,
(ii) such amount must be paid in cash on the next business day following the 20 day business day notice period, and (iii) JMJ may
still convert the Note pursuant to the terms herein during the 20 day business period until such repayment amount has been received
in full.
Certain
Other Investors
On January 31, 2013, the Company entered
into Securities Purchase Agreements with six accredited investors (the “2013 Investors”) providing for the sale by
the Company to the 2013 Investors of Convertible Debentures (the "2013 Notes") in the aggregate amount of $239,000. In
addition, as previously disclosed in the Form 8-K Current Report filed on January 3, 2013, Ronald W. Pickett, Stephen L. Sadle
and Robert P. Crabb, officers and directors of the Company, converted accrued salary in the aggregate amount of $280,000 into the
2013 Notes resulting in a total offering of $519,000. The financing closed on January 31, 2013.
The 2013 Notes mature December 31,
2014 (the "Maturity Date") and interest associated with the 2013 Notes is 8% per annum, which is payable on the Maturity
Date. The 2013 Notes are convertible into shares of common stock of the Company, at the 2013 Investors’ option,
at a conversion price of $0.015.
Typenex Co-Investment, LLC
On May 13, 2013, the Company entered into a Securities
Purchase Agreement with Typenex Co-Investment, LLC ("Typenex"), for the sale of an 8% convertible note in the principal
amount of $555,000 (which includes Typenex legal expenses in the amount of $5,000 and a $50,000 original issue discount) (the “Company
Note”) for $500,000, consisting of $100,000 paid in cash at closing and four secured promissory notes, aggregating $400,000,
bearing interest at the rate of 8% per annum, each maturing sixty (60) days following the occurrence of the Maturity Date (the
“Investor Notes”). The Investor Notes may be prepaid, without penalty, all or portion of the outstanding balance along
with accrued but unpaid interest at any time prior to maturity. The cash funds for the Company Note are to be delivered in five
(5) equal tranches (comprised of a $50,000 original issue discount to be allocated prorate to each tranche paid by Typenex). Typenex
has no obligation to lend us the remaining $400,000 of available principal amount under the Note and may never do so. We have no
obligation to pay Typenex any amounts on the unfunded portion of the Note. The financing closed on May 16, 2013.
On February 26, 2014, the Company issued a $50,000 Convertible
Promissory Note (the “Note”) to Typenex Co-Investment LLC under the May 13, 2013 described transaction. The total proceeds
the Company received from this offering was $50,000.
Additionally, the Company granted Typenex five warrants, corresponding
to the delivery of five tranches of cash funds, to purchase shares of the Company’s common stock, par value $0.0001 per share
equal to $55,000 divided by 65% of the arithmetic average of the two (2) lowest closing bid prices of the shares of Common Stock
during the twenty (20) consecutive trading day period immediately preceding the date of such determination or 60% if average of
the two lowest bid prices are less than $0.01; as such number may be adjusted from time to time pursuant to the terms of the Note.
Each warrant is not exercisable until each corresponding tranche is funded.
The Company Note bears interest at the rate of 8% per annum.
All interest and principal must be repaid on June 16, 2014. The Company Note is convertible into common stock, at Typenex’s
option, at a price of $0.04 per share. In the event the Company elects to prepay all or any portion of the Note, the
Company is required to pay to Typenex an amount in cash equal to 125% multiplied by the sum of all principal, interest and any
other amounts owing.
Typenex has agreed to restrict its ability to convert the Company
Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and
their affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock.
The total net proceeds the Company received from this Note was $105,000, less attorneys fees.
As of the date of the Company Note, the Company is obligated on the Company Note issued to Typenex. The Company Note is a debt
obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.
The
Company Note also provides for penalties and rescission rights if we do not deliver shares of our common stock upon conversion
with the require timeframes.
Phoenix Worldwide Holdings, Inc.
On June 20, 2013, the Company issued an unsecured Convertible
Promissory Note to Phoenix Worldwide Holdings, Inc. ("Phoenix"), in the principal amount of $32,500 (the "Note").
The financing closed on June 20, 2013. The total net proceeds the Company received from this Offering was $25,000 with an OID of
$7,500 and due December 19, 2013.
The Note is convertible into common stock, at Phoenix’s
option, at a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period
prior to conversion.
KBM Worldwide, Inc.
On April 1, 2014, the Company entered into a Securities Purchase
Agreement with KBM Worldwide, Inc. ("KBM"), for the sale of an 8% convertible note in the principal amount of $37,500
(the "Note"). The financing closed on April 1, 2014. The total net proceeds the Company received from this Offering was
$35,000.
The Note bears interest at the rate of 8% per annum. All interest
and principal must be repaid on January 7, 2015. The Note is convertible into common stock, at Asher’s option, at a 42% discount
to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.
On April 29, 2014, the Company entered into a Securities Purchase
Agreement with KBM Worldwide, Inc. ("KBM"), for the sale of an 8% convertible note in the principal amount of $63,000
(the "Note"). The financing closed on April 29, 2014. The total net proceeds the Company received from this Offering
was $60,000.
The Note bears interest at the rate of 8% per annum. All interest
and principal must be repaid on February 2, 2015. The Note is convertible into common stock, at KBM’s option, at a 42% discount
to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion.
Union Capital LLC
On May 2, 2014, the Company entered into a Securities Purchase
Agreement with Union Capital LLC. ("Union"), for the sale of an 8% convertible note in the principal amount of $40,000
(the "Note"). The financing closed on May 2, 2014. The total net proceeds the Company received from this Offering was
$35,000.
The Note bears interest at the rate of 8% per annum. All interest
and principal must be repaid on May 2, 2015. The Note is convertible into common stock, at Unions option, at a 42% discount to
the lowest closing price of the common stock during the 10 trading day period prior to conversion.
Adar Bays, LLC
On May 2, 2014, the Company entered into a Securities Purchase
Agreement with Adar Bays, LLC. ("Adar"), for the sale of an 8% convertible note in the principal amount of $40,000 (the
"Note"). The financing closed on May 2, 2014. The total net proceeds the Company received from this Offering was $35,000.
The Note bears interest at the rate of 8% per annum. All interest
and principal must be repaid on May 2, 2015. The Note is convertible into common stock, at Adar’s option, at a 42% discount
to the lowest closing price of the common stock during the 10 trading day period prior to conversion.
LG Capital Funding, LLC
During the year ended December 31, 2013, the Company issued two
Convertible Redeemable Notes to LG Capital LLC in an aggregate principal amount of $77,000. The notes bear interest rate of 8%
per annum, contain an original issue discount of 10% and are due one year from the date of issuance.
The notes are convertible into common stock, at holder’s
option, at the lower of i) 42% discount to the average of the two lowest closing bid prices of the common stock during the 10
trading day period prior to conversion. As of December 31, 2013, the aggregate principal amount outstanding was $77,000.
JDF Financial
On November 1, 2013, the Company issued an unsecured Convertible
Promissory Note to JDF Capital, Inc. ("JDF"), in the principal amount of $57,500 (the "Note"). The total net
proceeds the Company received from this Offering was $50,000 with an OID of $5,000 and due November 1, 2014.
The Note is convertible into common stock, at JDF’s option,
at a 42% discount to the average of the lowest closing price of the common stock during the 10 trading day period prior to conversion
or the closing price at conversion. As of December 31, 2013, the aggregate principal amount outstanding under the November 1, 2013
issued convertible promissory note was $57,500.
On June 9, 2014, the Company closed a financing transaction
by entering into a Purchase Agreement dated June 3, 2014 with JDF for an aggregate principal amount of $885,000. Pursuant to the
Purchase Agreement, the Company issued the following to JDF: (i) a 10% Convertible Promissory Note (the “Note”), (ii)
a warrant to purchase an aggregate of 7,000,000 shares of the Company’s common stock, par value $0.001 per share, for an
exercise price of $0.05 per share for a period of 150 days from the effective date of the registration statement (the “First
Warrant”), and (iii) a warrant to purchase an aggregate of 8,750,000 shares of the Company’s common stock, par value
$0.001 per share, for an exercise price of $0.04 per share for a period of 90 days from the effective date of the registration
statement (the “Second Warrant” and collectively, the “Warrants”).
The foregoing securities under Purchase Agreement were offered
and sold without registration under the Securities Act of 1933 (the “Securities Act”) in reliance on the exemptions
provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder and in reliance on similar exemptions
under applicable state laws.
Issuance of Promissory Note
On June 6, 2013, the Company issued Beaufort Ventures PLC
("Beaufort"), a Nevada corporation, an original issue discount secured promissory note (the “ Beaufort Note”)
in the principal amount of Ninety Seven Thousand Five Hundred Dollars ($97,500.00) for a purchase price of Seventy Five Thousand
Dollars ($75,000.00). The Beaufort Note is to be funded in cash, in the amount of Seventy Five Thousand Dollars ($75,000.00) upon
the Closing Date, which closed on June 5, 2013. The Beaufort Note matures four months from the issuance date (the “Maturity
Date”).
As collateral for the Beaufort Note, Mr. Ronald W. Pickett,
President of the Company, has agreed to pledge a convertible debenture in the principal amount of One Hundred and Fifty Thousand
Dollars ($150,000.00) to Beaufort as security for the payment in full of principal and performance under the Beaufort Note (“Pledge
and Security Agreement”).
On April 7, 2014, Arizona Green Power, LLC, a majority owned
subsidiary of the Company, issued a note payable for $80,000 with interest at 10% per annum, due at maturity of April 6, 2016.
In connection with the issuance of the note, the Company granted i) a 1.33% ownership interest in Arizona Green Power, LLC and
ii) a warrant to purchase 1,920,000 shares of the Company’s common stock exercisable at $0.05 per share expiring on March
7, 2016. The warrants were valued using the Black Sholes option pricing method with the following assumptions: dividend yield $-0-,
volatility of 158.38% and risk free rate of 0.41. The determined fair value of the warrant of $3,070 is amortized as financing
costs of the term of the related note (2 years).
On April 18, 2014, the Company issued an aggregate of $385,000
promissory notes to officers and key employees in settlement of accrued salaries. The promissory notes bear interest at the rate
of 2% per annum. All interest and principal must be repaid on April 18, 2016. In connection with the issuance of the notes, the
Company issued an aggregate of 59,413,581 warrants to purchase the Company’s common stock at $0.00648 per share for two years.
All of the above securities were offered and sold to the investors
in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities
Act of 1933, as amended (the “Securities Act”) and/or Rule 506 promulgated under the Securities Act. The investors
are accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act.
Item 16. Exhibits