UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31,
2014
OR
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________
to ______________
Commission file number 000-53035
SOLAR WIND ENERGY TOWER INC.
(Exact name of registrant as specified in
its charter)
Nevada |
82-6008752 |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
|
|
1997 Annapolis Exchange Parkway, Annapolis, MD |
21401 |
(Address of Principal Executive Offices) |
(Zip Code) |
(410) 972-4713
(Registrant’s Telephone Number, Including
Area Code)
Securities registered pursuant to Section
12(b) of the Act: None
Securities registered pursuant to Section
12(g) of the Act:
Title of each class |
Name of each exchange on which registered |
Common Stock, $0.0001 par value |
Over the Counter Bulletin Board |
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x
No
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(b) of the Act. o
Yes x No
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. x Yes o
No
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). x Yes o
No
Check if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained in this form, and no disclosure will be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. x
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer o |
|
Accelerated filer o |
|
|
|
Non-accelerated filer o |
|
Smaller reporting company x |
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act) o Yes x No
The aggregate market value of the voting
Common Stock held by non-affiliates (based upon the closing sale price of $0.0305 per share on the (Over the Counter Bulletin Board)
of the registrant as of June 30, 2014: $11,428,322.
Number of issued and outstanding shares
of the registrant’s par value $0.0001 common stock as of March 27, 2015: 730,031,134
SOLAR WIND ENERGY TOWER INC.
FORM 10-K
INDEX
|
|
Page |
Part I |
|
|
|
Item 1. |
Description of Business |
2 |
|
|
|
Item 1A. |
Risk Factors |
11 |
|
|
|
Item 1B. |
Unresolved Staff Comments |
22 |
|
|
|
Item 2. |
Properties |
22 |
|
|
|
Item 3. |
Legal Proceedings |
22 |
|
|
|
Item 4. |
Mine Safety Disclosures |
23 |
|
|
|
Part II |
|
|
|
Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
23 |
|
|
|
Item 6. |
Selected Financial Data |
24 |
|
|
|
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
24 |
|
|
|
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk. |
31 |
|
|
|
Item 8. |
Financial Statements and Supplementary Data |
31 |
|
|
|
Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
31 |
|
|
|
Item 9A. |
Controls and Procedures |
31 |
|
|
|
Part III |
|
|
|
Item 10. |
Directors, Executive Officers and Corporate Governance |
33 |
|
|
|
Item 11. |
Executive Compensation |
|
|
|
|
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
37 |
|
|
|
Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
38 |
|
|
|
Item 14. |
Principal Accounting Fees and Services |
39 |
|
|
|
Part IV |
|
|
|
Item 15. |
Exhibits, Financial Statement Schedules |
40 |
PART I
Cautionary Note Regarding Forward-Looking
Statements
This Annual Report on Form 10-K (this "Annual
Report") contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of
1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). All statements in this Annual Report other than statements of historical fact are “forward-looking statements”
for purposes of these provisions, including any statements of the plan and objectives for future operations and any statement of
assumptions underlying any of the foregoing.
In light of the significant uncertainties
inherent in the forward-looking statements made in this Annual Report, particularly in view of the Company’s early stage
of operations, the inclusion of this information should not be regarded as a representation by the Company or any other person
that its objectives, future results, levels of activity, performance or plans will be achieved. These statements are further qualified
by important factors that could cause actual results to differ materially from those contemplated in the forward-looking statements,
including, without limitation, the following:
|
· |
the Company’s ability to raise sufficient capital; |
|
· |
the passage of adverse or burdensome government regulation; |
|
· |
litigation and legal liability; |
|
· |
the Company’s ability to attract and retain qualified personnel; |
|
· |
reliance on third-party product providers; |
|
· |
the Company’s ability to attract and retain new customers and increase revenues; |
|
· |
the Company’s ability to market, commercialize and achieve market acceptance of its products; |
|
· |
the Company’s ability to protect its intellectual property; |
|
· |
changes in the competitive environment; |
|
· |
the impact of, and potential challenges in complying with, legislation and regulation in the jurisdictions in which the Company plans to operate, particularly given the global scope of the Company’s proposed businesses and the possibility of conflicting regulatory requirements across jurisdictions in which it proposes to do business; |
|
· |
environmental impacts of the Company’s planned operations and possible adverse publicity; and |
|
· |
political, social and economic conditions in the United States in general. |
Forward-looking statements can be identified
by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,”
“expect,” “project,” “intend,” “plan,” “believe” or words of similar
meaning. They may also use words such as “would,” “should,” “could” or “may.” Factors
that may cause the Company’s actual results to differ materially from those described in forward-looking statements include
the risks discussed elsewhere in this Annual Report under the caption “Risk Factors” and risk factors discussed in
the documents filed by the Company with the SEC.
This Annual Report may contain forward-looking
statements that involve risks and uncertainties, including but not limited to the Company's ability to produce a cost-effective
wind energy conversion device. Among the important factors that could cause actual events to differ materially from those indicated
by forward-looking statements in this Annual Report are the failure of the Company to achieve or maintain necessary
zoning approvals with respect to the location of its proposed projects; to successfully complete its proposed projects on time
and remain competitive; the inability of the Company to sell its planned products and/or services in the future, if needed, to
finance the marketing and sales of its planned products and/or services, general economic conditions, and those risk factors detailed
in this Annual Report.
All references in this Form 10-K that refer
to the “Company,” “Solar Wind Energy Tower” , “Solar Wind,” “we,” “us”
or “our” are to Solar Wind Energy Tower Inc. and unless otherwise differentiated, its subsidiary, Solar Wind Energy,
Inc. All references to “Solar Wind Energy (f/k/a Clean Wind Energy, Inc.)” are to our subsidiary, Solar
Wind Energy, Inc.
ITEM 1. DESCRIPTION OF BUSINESS
Corporate History
On December 29, 2010, the Company 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 was incorporated under the
laws of the State of Idaho on January 22, 1962, as Superior Mines Company. In 1964, the Company’s name was changed to Superior
Silver Mines, Inc. On December 27, 2010, the Company reincorporated as a Nevada corporation. Prior to the Merger, the Company had
been dormant for a number of years and had no known mineral reserves. On January 21, 2011, the Company changed its name from Superior
Silver Mines, Inc. 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.
The Company’s executive offices are
located at 1997 Annapolis Exchange Parkway, Suite 300, Annapolis, Maryland 21401.
Overview
Our Company’s core objective and
focus is to become a leading provider of clean efficient green energy to the world communities at a reasonable cost without the
destructive residuals of fossil fuel, while continuing to generate innovative technological solutions for today and tomorrow’s
electrical power needs.
Solar Wind has assembled a team of experienced
business professionals, engineering and scientific consultants with the proven ability to bring the idea to market. Solar Wind
has filed and been issued patents that the Company believes will further enhance this potentially revolutionary technology. Solar
Wind is based in Annapolis, MD, and is traded on the OTCBB under the symbol ‘SWET’.
Solar Wind has, designed, engineered, developed
and is preparing to construct large “Solar Wind Downdraft Towers” that use benevolent, non-toxic natural elements to
generate electricity economically by integrating and synthesizing numerous proven as well as emerging technologies. In addition
to constructing Solar Wind Downdraft Towers in the United States and abroad, the Company intends to establish partnerships at home
and abroad to propagate these systems and meet increasing global demand for electricity.
A Bold New Energy Solution
The United States and other nations are
aggressively pursuing energy independence with clean, sustainable energy solutions. Solar Wind offers a bold new approach to overcome
the current limitations of other known alternative energy sources. The Solar Wind Downdraft Tower combines dry air heated by the
solar rays of the sun with water added as a catalyst to create a powerful natural downdraft.
Hybrid Solar/Wind Technology
We view ourselves as a hybrid solar/wind
technology because the simplicity of our solution is the harnessing of the natural power of a downdraft created when water is introduced
to hot dry air within the confines of our tower structure.
The Solar Wind Downdraft Tower
|
· |
Avoids the adverse effects associated with fossil and nuclear fuels. |
|
· |
Is capable of Operating 24/7 and can outperform solar collectors that produce only when the sun shines in the daytime and wind turbines that produce only when the wind blows |
|
· |
Has the capability of being operated with virtually no carbon footprint, fuel consumption or waste production. |
|
· |
Has the potential to generate clean, cost effective and efficient electrical power without the damaging effects caused by using fossil or nuclear fuels, and other know alternative power sources. |
|
· |
Uses benevolent non-toxic natural elements to generate electricity. |
Technology
Innovative Renewable Energy Technology
The Solar Wind Downdraft Tower is a hollow
cylinder reaching skyward into the hot dry atmosphere heated by the solar rays of the sun. The water introduced by the injection
system evaporates and is absorbed by the hot dry air which has been heated by the solar rays of the sun. The air becomes cooler,
denser and heavier than the outside warmer air and falls through the cylinder at speeds up to and in excess of 50 mph and is diverted
into wind tunnels surrounding the base of the Tower where turbines inside the tunnels power generators to produce electricity.
In geographic areas where atmospheric conditions
are conducive, the exterior of the Solar Wind Downdraft Tower may be constructed with vertical “wind vanes” that capture
the prevailing wind and channel it to produce supplemental electrical power. This dual renewable energy resource enhances the capability
and productivity of the Solar Wind Energy system.
Physical Principles
Evaporating water to create or diminish energy (for cooling)
is a well-understood physical principle. Evaporative coolers are used not just throughout the United States Southwest region (hot
& arid), but widely in the power industry to cool gas, coal and nuclear power plants.
Similarly, cooling towers adorn the roofs of countless buildings
in large cities, providing affordable energy. Airline pilots are very familiar with downdrafts and diligently avoid downdrafts
associated with thunderstorms, especially when near the ground, where downdrafts can force a 200 ton airplane dangerously downward.
Solar Wind’s Energy Tower uses the same fundamental physical
principle of evaporative cooling which creates a downdraft. Cool, moist, dense air always falls through hot dry air. What most
people are unaware of is that the wind speed in an energy tower can exceed 50mph.
In summary, it is clear that Solar Wind’s Energy Tower
creates and harnesses the downdraft, using widely applied and well-understood physical principles, to produce abundant electricity. |
|
|
Abundant, Clean, Affordable Electricity
Production
The Company has successfully managed to
downsize the Tower, reducing capital costs and improving projected financial performance. The Company recently announced the completion
of weather data models that confirm that the first Tower height can be lowered from 3,000 feet down to 2,250 feet. This development
was made possible by utilizing our proprietary software which can calculate and predict energy production by our Solar Wind Downdraft
Towers given local weather data. By feeding the weather data for southwestern Arizona / northern Mexico into the program, the Tower’s
height and diameter can be adjusted along with the amount of water added as fuel to create a desired amount of energy. The outcome
dictates the optimum size of the Tower’s height and width.
Under the most recent design specifications,
the first San Luis Tower has a design capacity on an hourly basis, of up to 1250 megawatt hours, gross. Using a 60% capacity factor,
the Tower’s potential hourly yield would be 600 megawatt hours from which approximately 18. 5% will be used to power its
operations, yielding approximately 500 megawatt hours available for sale to the power grid. Due to lower capacities during winter
days, the average daily output for sale to the grid for the entire year is approximately 435 megawatt hours. Currently in California
avoided costs are running approximately $0.11 per kilowatt hour. As an independent power producer of clean renewable energy the
Company will not be selling power directly to consumers, but rather to the grid.
Intellectual Property
The Company has filed numerous patent
applications with the U.S. Patent and Trademark Office to protect its intellectual property. The Company has been awarded four
patents. The Company has judiciously pursued the patent applications that we feel are instrumental to the core development of
our technology and project:
Patent #8120191 issued 2/21/2012
“Efficient Energy Conversion Devices & Methods
The patent covers a novel hydraulic system
capable of maintaining high efficiency hydraulic to electric conversion under a wide variance of wind speeds, as coupled to a plurality
of wind turbines in wind tunnels.
Patent #8,517,662 B2 issued 8/27/2013
“Atmospheric Energy Extraction Devices & Methods
The patent covers a structure for producing
electricity, specifically a Tower capable of adding moisture at the top of the structure to hot-dry air so as to generate a downdraft
of wind within the interior of the Tower, vanes coupled to the exterior of the Tower that at least partially define a plurality
of elongated pockets to the exterior of the Tower, and flaps located to redirect the incident wind downwards into tunnels to convert
wind to electricity.
Patent #8,643,204 B2 issued 2/4/2014
“Efficient Energy Conversion Devices and Methods”
This application enhances and broadens
previously issued Patent #8120191
Patent #8,727,698 B1 issued 5/20/2014
“Atmospheric Energy Extraction Devices & Methods”
The patent claims are targeted to represent
the advantages of the new Tower structural shape, the configuration of the Tower walls, their composition as well as the wall thicknesses
for a given height, along with more efficient construction methodology and enhanced wind force resistance over prior Tower designs.
Site Requirements
The Company’s planned Downdraft Tower
requires very specific site conditions. The location must provide appropriate climate and atmospheric conditions. The site must
have access to reliable water sources, either fresh or salt water, in which case desalinization may be required. Additionally,
the site should have access to rail service and other logistical ease of access.
Considerations
The Downdraft Tower works best in hot,
dry climates, , and near a reliable water source. Prime production periods are daytime during spring, summer and fall, which closely
aligns with electricity demand patterns.
The External Wind Capture keeps working
24/7 including cold winter months and at night whenever a wind is blowing - from the surface up to 4,000 feet - where much stronger
winds blow far more constantly (at least twice as often as on the surface and at much higher speeds).
There are a number of appropriate sites
around the globe that are hot, dry, and near water adequate to support numerous Energy Towers that efficiently turn the sun’s
energy into electricity.
The Distinct Advantages
The Company enjoys one major advantage
over all other wind energy producers: a constant, high speed downdraft that blows for more than half the year. While ordinary wind
turbine farms struggle with 20% to 30% capacity factors and wind speeds that are often useless or marginal (too low or too high),
the Company’s Energy Tower can continuously channel 50 mph winds (or higher) into a controlled environment where the vast
majority the wind’s energy can be captured to generate electricity.
Power industry experts know that when computing
wind power, the velocity is tripled. Thus a 60 mph wind contains 3 times as much kinetic energy as a 30 mph wind striking a conventional
turbine.
Global Energy Generation Calculator
The Company has developed a software based
analytical program to determine the energy generation capabilities of its Solar Wind Downdraft Towers based on the climate in geographic
locations around the world, and has taken the appropriate steps to protect its intellectual property invention.
This essential tool has been under development
by the Company for over one year and applies “known” scientific meteorology data of a specific area to the Solar Wind
Downdraft Tower’s variables in order to determine and project energy outputs on a daily basis. Advancements in the scientific
community over the last decade that predict and pin-point specific weather conditions provided significant insights to the development
of this innovative tool.
This analytical tool, combined with our
proprietary operating systems technology and existing core patents, clearly provides the Company with a unique opportunity to allow
global positioning of this alternative solution to the world’s energy needs. The Company can now rapidly respond to a request
from virtually any country reasonably suitable to host a project and determine specifically where the Solar Wind Downdraft Tower
should be located, the size of the Tower and the amount of electricity it can produce.
Development
The master development plan for a site
requires a series of steps:
|
· |
explore, select, and qualify site; |
|
· |
negotiate and execute land lease sale (site) and suitability for rights of way (water pipeline, transmission line, highway and railway access); |
|
· |
survey and identify any artifacts and cultural resources that may be impacted by site exploration, project construction or operation; |
|
· |
acquire water rights; |
|
· |
determine and design access to and availability of electrical grid, roads, rail transportation, sewer, water, and power for construction and operation; |
|
· |
create project site plan for offices, storage buildings for construction equipment, etc.; |
|
· |
coordinate and provide, to the extent possible, resource carry-over (i.e., buildings and facilities) to the locale after construction; |
|
· |
determine the type and number of jobs created during study, construction and operational phases; |
|
· |
determine the cost of the project (currently estimated at $1.5 billion); and |
|
· |
determine the electricity produced (currently estimated at 3.7 Million MWH’s). |
Business Model
The business model of our Company is to create an Energy Compound
of Towers to be developed individually with a common water supply and rail/water port for supplies and equipment delivery, and
common component assembly plant and labor force. Energy Compounds could actually be developed simultaneously in North America,
North Africa (to serve the European grid by piping direct current across the Mediterrean), India and the Middle East. The world
market can support all the materials needed and can certainly use the electricity. The cost per kilowatt is similar to that of
a typical coal or gas-fired facility. SWET has positioned itself to take advantage of this solution and bring the first project
to market, thereby setting the stage for a global “game changing” opportunity.
Project Partnering
The Company’s business plan involves “partnering”
with various entities such as utilities, sovereign nations and independent power producers, to provide the ability to bring this
solution to the market as rapidly as possible.
Each Solar Wind Downdraft Tower is its own independent project.
The Company’s involvement in each project is to facilitate the Tower’s development with its expertise, intellectual
property and project management team. The Company will receive development fees, licensing fees, and royalties on power sales from
each project and/or ownership interests.
Coordinated World Class Expertise
The Company is evaluating potential sites for a possible first
Tower here in the United States and received key patents to protect its techniques to extract the energy from the Solar Wind Downdraft
Tower. Some of the best consultants in the world have been and continue to support the Company’s efforts to bring this first
Downdraft Tower to market.
The first site is near San Luis, AZ and the Mexico/US border.
The weather data has been updated for the first site and final reports accurately calculate the Tower's output capacity 24/7. Those
reports now support and validate SWET’s goal to develop its first Tower at the minimum size and design output possible, which
preserves cash flow for adequate debt service coverage.
First Energy Tower Site in United States
The Company made a final site selection within the City of San
Luis, Arizona for the potential development of its first tower. After a substantial evaluation of multiple sites in the southwestern
part of the country over a two and a half year period, including various locations in proximity to San Luis, Arizona, the Company
chose the site location that best met all of its required attributes including climate, geography, zoning, as well as a welcoming
environment.
It executed an option agreement to purchase a site encompassing
over 640acres of land within the City of San Luis, Arizona, which was later was recorded in Yuma County, Arizona. Wednesday, April
23, 2014, the city unanimously approved a “Development and Protected Development Rights Agreement” with Solar Wind
Energy Tower Inc. providing assurance of the necessary local entitlements for development of the first tower in the City of San
Luis. The agreement covers a number of items including, but not limited to, land zoning, rights-of-way, utilities and provides
that the City of San Luis will guarantee the supply the water to fuel the Tower Project for a minimum of 50 years. |
|
|
Recently, the government of San Luis Mexico,
coordinated arranging for the Company to option ( a site complete with all of the entitlements including the necessary water allocation
in San Luis Rio Colorado, Sonora, Mexico. The Company and the government are investigating the access, and timing required to connect
to the Mexican electrical grid. We are also investigating other privately owned sites in the same area with comparable attributes.
Customers
Energy produced by the Downdraft Tower
could provide low cost electricity to the power grid. The Company plans to ultimately build and operate wind energy plants and
sell the electricity either through contracts with utilities, which is the traditional method for independent power plants, or
directly into the open market or electricity commodities market like a merchant plant similar to many natural gas fired power plants.
The Company may also sell the power plants themselves to large customers or utilities and/or operate such plants for customers
or utilities.
The sale of electricity to power brokers
is more profitable than selling directly to the electricity commodities market. If the cost of the marketing infrastructure of
selling green energy at a $0.02 per kWh premium is justified as opposed to the wholesale contracting of electricity at a lower
price, then the Company plans to market the electricity to green energy brokers. The green power is energy from clean energy production
sources like wind energy in which consumers are willing to pay a premium in order to promote clean energy. If the Company chooses
to work through power brokers, it believes the potential exists to sell the environmental correct “green” power at
a premium price being higher than conventional fuel sources. Power brokers usually receive a premium of $0.015 per kWh above the
wholesale price paid on the open market. However, the market is new and subject to uncertainty including price fluctuations.
Markets
Wind energy experienced a 39% annual growth
for the past five years according to the American Wind Energy Association, the industry’s trade organization based in Washington,
D.C. Recent national surveys show that approximately 40-70% of the population surveyed indicate a willingness to pay a premium
for renewable energy. Although 10% of the respondents say they will participate in such a program, actual participation is estimated
at 1%. Currently, more than a dozen utilities have green marketing programs. Public Service Company of Colorado, Central and South
West Services Corporation of Texas, and Fort Collins Light and Power Company are leading the effort in wind related green electricity
marketing.
The Company is investigating the feasibility
of locating a Downdraft Tower in California. California has three major regulated investor-owned utilities and many municipal utilities,
all of which are required by state law to have renewable sources of generation in their resource portfolios, whether generated
or purchased. Arizona utilities have similar requirements. Due to federal regulations requiring that transmission owners provide
service on the same terms to all generators requesting service, known as “open access”, independent power producers
(which the Company would be under its business model), are able to develop wind energy projects in areas where such resources are
most prevalent and sell power to anyone interconnected with the transmission grid in California. California’s transmission
grid is operated by a regional transmission organization (“RTO”), the California Independent System Operator (“CAISO”).
Other states belong to other RTOs.
Competition
The Downdraft Tower project requires specific
site and appropriate weather conditions. Given these constraints and the increasing focus on renewable energy to offset the environmental
problems caused by fossil fuels, the renewable energy industry is highly competitive.
In the markets where the Company plans
to conduct its business, it will compete with many energy producers including electric utilities and large independent power producers.
There is also competition from fossil fuel sources such as natural gas and coal, and other renewable energy sources such as solar,
traditional wind, hydro and geothermal. The competition depends on the resources available within the specific markets.
Although the cost to produce clean, reliable,
renewable energy is becoming more competitive with traditional fossil fuel sources, it generally remains more expensive to produce,
and the reliability of its supply is less consistent than traditional fossil fuel. Deregulation and consumer preference are becoming
important factors in increasing the development of alternative energy projects.
The Company believes that governments and
consumers recognize the importance of renewable energy resources in the energy mix, and are facilitating the implementation of
wind and other renewable technologies through renewable portfolio standards and revenue and tax incentives.
Arizona and California are primarily served
by large utilities, such as Southern California Edison Company, Pacific Gas & Electric Company, San Diego Gas & Electric
Company, Arizona Public Service Company (“Arizona Public Service”) and UNS. All of these companies have non-regulated
subsidiaries or sister companies that develop generating facilities. In addition, utilities from other states and countries have
established large wind energy generating companies, such as Florida Power & Light Company, enXco, Inc. and PPM Energy, Inc.
(now part of a large Spanish renewable company, Iberdrola Renovables, S.A.).
According to the Electric Power Research
Institute, the past ten years have seen traditional energy costs increase while wind energy costs have declined. The advances in
technology, larger-scale and more efficient manufacturing processes, and increased experience in wind turbine operations has contributed
substantially to this trend. This cost decline is paralleled with a several hundred fold increase in installed wind energy capacity.
As a result, maintenance costs have fallen significantly. Wind energy sources comprise less than 1% of the current electricity
generating industry.
An assessment released by the National
Renewable Energy Laboratory in 2010 shows that U.S. wind resources are even larger than previously estimated and potential capacity
of the land-based wind resource is more than 10,000 GW, far exceeding the 300 GW required to meet 20% of the nation’s electrical
demand with wind in 2030.This figure does not factor the potential of Downdraft Towers. The estimated levelized cost of new generation
resources by the Energy Information Administration shows the cost of wind energy is competitive to other conventional means of
energy generation. The cumulative capacity-weighted average price of wind power, including the production tax credit, was about
4.4 cents per kilowatt hour in 2009 — a price that competes with fossil fuel-generated electricity.
Environmental
Various parties in the United States and
other nations are pursuing clean energy solutions that use efficient and cost- effective renewable resources to serve society while
avoiding the adverse effects associated with fossil and nuclear fuels, and also the obvious limitations of solar collectors that
work only when the sun shines or wind turbines that work only when the wind blows.
The Solar Wind Downdraft Tower has the
capability of being operated with virtually no carbon footprint, fuel consumption, or waste production. The technology has the
potential to generate clean, cost effective and efficient electrical power without the damaging effects caused by using fossil
or nuclear fuels, and other conventional power sources. The Company also believes that increasing emphasis on green technologies
and governmental incentives in the energy industry should have a positive long-term effect on the Company's planned business and
the wind energy industry in general.
Numerous federal and state environmental
laws can affect the development of renewable energy, such as the California Environmental Quality Act. These laws require that
certain studies be conducted to ensure that there are no significant adverse impacts on wildlife, humans and the environment generally.
The significant impacts of wind energy projects are on visibility, noise, birds, wildlife habitat and soil erosion. Changes in
environmental laws can pose significant expenses on renewable energy development.
International treaties and protocols, such
as the Kyoto Protocol, have significantly impacted the development and implementation of renewable energy technologies. Certain
countries and regions also have established emission trading programs. Under emission trading programs, utilities and factories
are permitted to produce a certain level of emissions. If such an entity produces fewer emissions than its allotment, the entity
may sell its excess allotment to parties exceeding their emissions allotments. To date, these mechanisms are at an early stage
of development within the United States. Credit trading provides the potential for creating additional income for renewable energy
producers, rationalizing of electricity prices for utilities and reducing the overall retail price for green power.
The Company believes that increasing emphasis
on green technologies and governmental incentives in the energy industry should have a positive long-term effect on the Company’s
planned business and the wind energy industry in general.
Industry Analysis
According to the American Wind Energy Association
(“AWEA”), wind energy was the world’s fastest growing energy source during most of the 1990s, expanding at annual
rates ranging from 25% to 35%. The AWEA estimates the global industry growth rate has averaged 32% over the five years from 2004
through 2008, with a growth rate of 39% in 2009. The U.S. wind industry broke all previous records by installing over 10,000 MW
of new wind capacity in 2009. Current installed capacity worldwide at the end of 2009 was 35,086 MW, compared to 25,076 MW at the
end of 2008. The major contributing growth factor is the federal stimulus package passed in 2009 that extended a tax credit and
provided other investment incentives for alternative energy sources. The U.S. Energy Information Administration attributes 1.9%
of total electric generation in the nation to wind power.
Not factoring the Company’s planned
Downdraft Tower product, World Energy Council expects new wind capacity worldwide to continue to grow. The continued evolution
of this technology is evident with the existence of varying wind turbine designs. However, there is division in the wind industry
between those who want to capitalize on the emerging respect the business community has for established, mature wind technology,
and those who seek new technologies designed to bring about significant cost reductions. The Company chooses to seek new horizons
beyond current perception and knowledge by developing new technologies that it believes will be capable of significantly reducing
wind energy costs.
As wind energy technology gains wider acceptance,
competition may increase as large, well-capitalized companies enter the business. Although one or more may be successful, the Company
believes that its technological expertise and early entry will provide a degree of competitive protection.
Licensing and Regulation
In the United States, many state governments
have amended their utility regulations and significantly changed certain competition and marketing rules with respect to generation,
transmission and distribution of electric energy. Among other things, deregulation allows consumers to purchase electricity from
a source of their choice, and requires utilities to purchase electricity from independent power producers and to offer transmission
to independent power producers at reasonable prices.
In California, deregulation legislation,
such as the Assembly Bill 1890 and the Renewable Energy Program, were implemented in the mid-1990s to encourage the development
of renewable power generation projects through various incentives. In addition, Assembly Bill 995 and Senate Bill 1038 were passed
to further facilitate the development of renewable resources. In November 2008, the governor of the State of California signed
Executive Order S-14-08 requiring that California utilities reach a 33% renewable energy goal by 2020, exceeding the previous legislative
mandate that electric utilities supply 20% of their total retail power sales from renewable resources by 2010. In September 2009,
the Governor signed Executive Order S-21-09, requiring the Air Resources Board under the California Environmental Protection Agency
to adopt a regulation by July 1, 2010 requiring California’s load-serving entities to meet the 33% renewable energy goal
through the creation and use of renewable energy sources to ensure reduction of greenhouse gas emissions.
In Arizona, access to the electricity market
has been established through Arizona’s Retail Electric Competition Rules, which, in the Company’s opinion, provide
a favorable environment for renewable energy generators. Electricity producers are subject to the Federal Public Utilities Regulatory
Policies Act (“PURPA”) and state regulations. In addition, power producers must also meet standards set by the Arizona
Corporations Commission (the “ACC”).
The Federal Energy Policy Act of 2005 provided
further benefits to independent power producers by requiring transmission companies to provide access to third parties at a reasonable
price. On October 3, 2008, the President of the United States signed the Emergency Economic Stabilization Act of 2008 into law.
This legislation contains a number of tax incentives designed to encourage both individuals and businesses to make investments
in renewable energy, including an eight-year extension of the business solar investment tax credit (“ITC”). The ITC
is a 30% tax credit on solar property effective through December 31, 2016. The American Recovery and Reinvestment Act of 2009 further
extended the U.S. $0.021/kWh Production Tax Credit (“PTC”) through December 31, 2012, and provide an option to elect
a 30% ITC or an equivalent cash grant from the U.S. Department of Energy.
Employees
As of March 2015, the Company had a total of 3 full time employees.
The Company anticipates that it may need to hire additional staff in the areas of engineering, marketing and administration in
the future.
ITEM 1A. RISK FACTORS
The Company’s results of operations,
financial condition and cash flows can be adversely affected by various risks. These risks include, but are not limited to, the
principal factors listed below and the other matters set forth in this annual report on Form 10-K. You should carefully consider
all of these risks before making an investment decision.
Risks Related to Our Business and the Industry in Which We
Compete
Our independent auditors have expressed
substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
The report of our independent auditors
dated March 31, 2015 on our consolidated financial statements for the year ended December 31, 2014 included an explanatory paragraph
indicating that there is substantial doubt about our ability to continue as a going concern.
Our auditors’ doubts are based on
our inability to generate sufficient cash flow to sustain our operations without securing additional financing, accumulated deficit,
negative cash flows from operations and our limited cash balances and working capital deficit position. Our ability to continue
as a going concern will be determined by our ability to obtain additional funding in the short term to enable us to realize the
commercialization of our planned business operations. Our consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertain.
We are an early development stage
company. We have not yet commenced with the construction of our Downdraft Towers or the production of electricity.
The Company has a limited operating history
and has primarily engaged in operations relating to the development of its business plan. As an early-stage entity, the Company
is subject to many of the risks common to such enterprises, including the ability of the Company to implement its business plan,
market acceptance of its proposed business, under-capitalization, cash shortages, limitations with respect to personnel, financing
and other resources, and uncertainty of the Company’s ability to generate revenues. There can be no assurance that the Company’s
activities will be successful or result in any revenues or profit for the Company, and the likelihood of the Company’s success
must be considered in light of the stage in its development. To date, the Company has generated no revenue and has generated losses.
The Company believes it has engaged professionals
and consultants experienced in the type of business contemplated by the Company; however, there can be no assurance that the predictions,
opinions, analyses, or conclusions of such professionals will prove to be accurate. In addition, no assurance can be given that
the Company will be able to consummate its business strategy and plans or that financial or other limitations may force the Company
to modify, alter, significantly delay, or significantly impede the implementation of such plans or the Company’s ability
to continue operations. If the Company is unable to successfully implement its business strategy and plans, investors may lose
their entire investment in the Company.
Potential investors should also be aware
of the difficulties normally encountered by new renewable energy companies. The likelihood of success must be considered in light
of the problems, expenses, difficulties, complications and delays encountered in connection with the inception of the enterprise
that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to construction,
operation and distribution, and additional costs and expenses that may exceed current estimates.
Future financings will involve a
dilution of the interests of the stockholders of the Company upon the issuance of additional shares of Common Stock or other securities.
We will need to engage in additional financings
in the future. There can be no assurances that such financings will ever be completed, but any such financings will involve a dilution
of the interests of our stockholders upon the issuance of additional shares of Common Stock or other securities. Attaining such
additional financing may not be possible, or if additional capital may be otherwise available, the terms on which such capital
may be available may not be commercially feasible or advantageous to existing shareholders. We expect to issue shares of our Common
Stock and/or other securities in exchange for additional financing.
We anticipate significant future
capital needs and the availability of future capital is uncertain.
The Company has experienced negative cash
flows from operations since its inception. The Company will be required to spend substantial funds to continue research and development.
The Company will need to raise additional capital. The Company’s capital requirements will depend on many factors, primarily
relating to the problems, delays, expenses and complications frequently encountered by development stage companies; the progress
of the Company’s research and development programs; the costs and timing of seeking regulatory approvals of the Company’s
products under development; the Company’s ability to obtain such regulatory approvals; costs in filing, prosecuting, defending,
and enforcing any patent claims and other intellectual property rights; the extent and terms of any collaborative research, manufacturing,
marketing, or other arrangements; and changes in economic, regulatory, or competitive conditions or the Company’s planned
business.
To satisfy its capital requirements, the
Company may seek to raise funds in the public or private capital markets. The Company may seek additional funding through corporate
collaborations and other financing vehicles. There can be no assurance that any such funding will be available to the Company,
or if available, that it will be available on acceptable terms. If adequate funds are not available, the Company may be required
to curtail significantly one or more of its research or development programs or it may be required to obtain funds through arrangements
with future collaborative partners or others that may require the Company to relinquish rights to some or all of its technologies
or products under development. If the Company is successful in obtaining additional financing, the terms of the financing may have
the effect of diluting or adversely affecting the holdings or the rights of the holders of Common Stock.
We have a history of losses.
We expect to incur non-capitalized development
costs and general and administrative expenses prior to the completion of construction and commencement of operation of our proposed
projects. We cannot predict if we will ever achieve profitability and, if we do, we may not be able to sustain or increase our
profitability. If we cannot achieve or maintain profitability, we may not be able to continue to absorb the resulting financial
losses. If we continue to suffer financial losses, our business may be jeopardized and our shareholders may lose all of their investment
in our shares.
The Company’s strategies for
development of the business might not be successful.
The Company is currently evaluating potential
development strategies for its business. It may take several years, if ever, for the Company to achieve cumulative positive cash
flow. The Company could experience significant difficulties in executing its business plan, including: inability to successfully
implement the Company’s business plan; changes in market conditions; inability to obtain necessary financing; delays in completion
of the Company’s projects or their underlying technologies; inaccurate cost estimates; changes in government or political
reform; or the Company may not benefit from the proposed projects as the Company expected. The Company’s inability to develop
and market the Company’s business successfully and to generate positive cash flows from these operations in a timely manner
would have a material adverse effect on the Company’s ability to meet the Company’s working capital requirements.
We expect to rely upon strategic
relationships in order to execute our business plan and the Company may not be able to consummate the strategic relationships necessary
to execute its business plan.
The Company plans to enter into and rely
on strategic relationships with other parties, in particular to acquire rights necessary to develop and build proposed projects
and to develop and build such projects. These strategic relationships could include licensing agreements, partnerships, joint ventures,
or even business combinations. The Company believes that these relationships will be particularly important to the Company’s
future growth and success due to the size and resources of the Company and the resources necessary to complete the Company’s
proposed projects. The Company may, however, not be able to successfully identify potential strategic relationships. Even if the
Company does identify one or more potentially beneficial strategic relationships, it may not be able to consummate these relationships
on favorable terms or at all, obtain the benefits it anticipates from such relationships or maintain such relationships. In addition,
the dynamics of the Company’s relationships with possible strategic partners may require the Company to incur expenses or
undertake activities it would not otherwise be inclined to undertake in order to fulfill the Company’s obligations to these
partners or maintain the Company’s relationships.
To the extent the Company consummates strategic
relationships; it may become reliant on the performance of independent third parties under such relationships. Moreover, certain
potentially critical strategic relationships are only in the early stages of discussion and have not been officially agreed to
and formalized. If strategic relationships are not identified, established or maintained, or are established or maintained on terms
that become unfavorable, the Company’s business prospects may be limited, which could have a negative impact on the Company’s
ability to execute the Company’s business plan, diminish the Company’s ability to conduct the Company’s operations
and/or materially and adversely affect the Company’s business and financial results.
Project development or construction
activities may not be successful and proposed projects may not receive required permits or construction may not proceed as planned.
The development and construction of our
proposed projects will involve numerous risks. We may be required to spend significant sums for preliminary engineering, permitting,
legal, and other expenses before we can determine whether a project is feasible, economically attractive or capable of being built.
Success in developing a particular project is contingent upon, among other things: (i) negotiation of satisfactory engineering,
procurement and construction agreements; (ii) receipt of required governmental permits and approvals, including the right to interconnect
to the electric grid on economically acceptable terms; (iii) payment of interconnection and other deposits (some of which may be
non-refundable); (iv) obtaining construction financing; and (v) timely implementation and satisfactory completion of construction.
Successful completion of a particular project
may be adversely affected by numerous factors, including: (i) delays in obtaining required governmental permits and approvals with
acceptable conditions; (ii) uncertainties relating to land costs for projects on land subject to Bureau of Land Management procedures;
(iii) unforeseen engineering problems; (iv) construction delays and contractor performance shortfalls; (v) work stoppages; (vi)
cost over-runs; (vii) equipment and materials supply; (viii) adverse weather conditions; and (ix) environmental and geological
conditions.
The estimates and projections contained
in this Annual Report may not be realized.
Any estimates or projections in this Annual
Report have been prepared on the basis of assumptions and hypotheses, which the Company believes to be reasonable. However, no
assurance can be given that the potential benefits described in this Annual Report will prove to be available. Such assumptions
are highly speculative and, while based on management’s best estimates of projected sales levels, operational costs, consumer
preferences, and the Company’s general economic and competitive conditions in the industry, there can be no assurance that
the Company will operate profitably or remain solvent. To date, the Company has not operated profitably and has a history of losses.
If the Company’s plans prove unsuccessful, investors could lose all or part of their investment. There can be no assurance
that the Company will be able to generate any revenue or profits.
Our business is subject to significant
government regulation and, as a result, changes to such regulations may adversely affect our business.
Although independent and small power producers
may generate electricity and engage in wholesale sales of energy without being subject to the full panoply of state and/or provincial
and federal regulation to the same extent as a public utility company, our planned operations will nonetheless be subject to changes
in government regulatory requirements, such as regulations related to the environment, zoning and permitting, financial incentives,
taxation, competition, pricing, and FERC and state PUC regulations on competition. The operation of our proposed projects will
be subject to regulation by various U.S. government agencies at the federal, state and municipal level. There is always the risk
of change in government policies and laws, including but not limited to laws and regulations relating to income, capital, sales,
corporate or local taxes, and the removal of tax incentives. Changes in these regulations could have a negative impact on our potential
profitability. Laws and tax policies may change and such changes may be favorable or unfavorable to the Company, which may result
in the cancellation of proposed projects or reduce anticipated revenues and cash flow.
We may be unable to acquire or lease
land and/or obtain the approvals, licenses and permits necessary to build and operate our proposed projects in a timely and cost
effective manner, and regulatory agencies, local communities or labor unions may delay, prevent or increase the cost of construction
and operation of our proposed projects.
In order to construct and operate our proposed
projects, we need to acquire or lease land and obtain all necessary local, county, state and federal approvals, licenses and permits.
We may be unable to acquire the land or lease interests needed, may not receive or retain the requisite approvals, permits and
licenses or may encounter other problems which could delay or prevent us from successfully constructing and operating proposed
projects.
Proposed projects may be located on or
require access through public lands administered by federal and state agencies pursuant to competitive public leasing and right-of-way
procedures and processes. The authorization for the use, construction and operation of our proposed projects and associated transmission
facilities on federal, state and private lands will also require the assessment and evaluation of mineral rights, private rights-of-way
and other easements; environmental, agricultural, cultural, recreational and aesthetic impacts; and the likely mitigation of adverse
impacts to these and other resources and uses. The inability to obtain the required permits and, potentially, excessive delay in
obtaining such permits due, for example, to litigation, could prevent us from successfully constructing and operating our proposed
projects. Moreover, project approvals subject to project modifications and conditions, including mitigation requirements and costs,
could affect the financial success of our proposed projects.
Our ability to manage our growth
successfully is crucial to our future.
We are subject to a variety of risks associated
with a growing business. Our ability to operate successfully in the future depends upon our ability to finance, develop, and construct
future renewable energy projects, implement and improve the administration of financial and operating systems and controls, expand
our technical capabilities and manage our relationships with landowners and contractors. Our failure to manage growth effectively
could have a material adverse effect on our business or results of operations.
Notwithstanding the Recovery Act
and other regulatory incentives, we may not be able to finance the development or the construction costs of building our planned
projects.
We do not have sufficient funds from the
cash flow of our operations to fully finance the development or the construction costs of building our proposed projects. Additional
funds will be required to complete the development and construction of our proposed projects, to find and carry out the development
of properties, and to pay the general and administrative costs of operating our business. Additional financing may not be available
on acceptable terms, if at all. If we are unable to raise additional funds when needed, we may be required to delay development
and construction of our proposed projects, reduce the scope of our proposed projects, and/or eliminate or sell some or all of our
development projects, if any.
We may not be able to obtain access
to the transmission lines necessary to deliver the power we plan to produce and sell.
We will depend on access to transmission
facilities so that we may deliver power to purchasers. If existing transmission facilities do not have available transmission capacity,
we would be required to pay for the upgrade of existing transmission facilities or to construct new ones. There can be no assurance
that we will be able to secure access to transmission facilities at a reasonable cost, or at all. As a result, expected profitability
on a proposed project may be lower than anticipated or, if we have no access to electricity transmission facilities, we may not
be able to fulfill our obligations to deliver power or to construct the project or we may be required to pay liquidated damages.
Changes in interest rates and debt
covenants and increases in turbine and generator prices and construction costs may result in our proposed projects not being economically
feasible.
Increases in interest rates and changes
in debt covenants may reduce the amounts that we can borrow, reduce the cash flow, if any, generated by our proposed projects,
and increase the equity required to complete the construction of our proposed projects. The cost of wind turbines, generators and
construction costs have increased significantly over the last four years. Further increases may increase the cost of our proposed
projects to the point that such projects are not feasible given the prices utilities are willing to pay. There can be no assurance
that we will be able to negotiate power purchase agreements with sufficiently profitable electricity prices in the future.
We may not be able to secure power
purchase agreements.
We may not be able to secure power purchase
agreements for our proposed projects. In the event that we do secure power purchase agreements, if we fail to construct our proposed
projects in a timely manner, we may be in breach of our power purchase agreements and such agreements may be terminated.
The operation of our proposed projects
may be subject to equipment failure.
After the construction of our proposed
projects, the electricity produced may be lower than anticipated because of equipment malfunction. Unscheduled maintenance can
result in lower electricity production for several months or possibly longer depending on the nature of the outage, and correspondingly,
in lower revenues.
Changes in weather patterns may affect
our ability to operate our proposed projects.
Meteorological data we collect during the
development phase of a proposed project may differ from actual results achieved after the project is erected. While long-term precipitation
patterns have not varied significantly, short-term patterns, either on a seasonal or on a year-to-year basis may vary substantially.
These variations may result in lower revenues and higher operating losses.
Environmental damage on our properties
may cause us to incur significant financial expenses.
Environmental damage may result from the
development and operation of our proposed projects. The construction of our proposed initial Downdraft Tower involves, among other
things, land excavation and the installation of concrete foundations. Equipment can be a source of environmental concern, including
noise pollution, damage to the soil as a result of oil spillage, and peril to certain migratory birds and animals that live, feed
on, fly over, or cross the property. In addition, environmental regulators may impose restrictions on our operations, which would
limit our ability to obtain the appropriate zoning or conditional use permits for our project. We may also be assessed significant
financial penalties for any environmental damage caused on properties that are leased, and we may be unable to sell properties
that are owned. Financial losses and liabilities that may result from environmental damage could affect our ability to continue
to do business.
Larger developers have greater resources
and expertise in developing and constructing renewable energy projects.
We face significant competition from large
power project developers, including electric utilities and large independent power producers that have greater project development,
construction, financial, human resources, marketing and management capabilities than the Company. They have a track record of completing
projects and may be able to acquire funding more easily to develop and construct projects. They have also established relationships
with energy utilities, transmission companies, turbine suppliers, and plant contractors that may make our access to such parties
more difficult.
Renewable energy must compete with
traditional fossil fuel sources.
In addition to competition from other industry
participants, we face competition from fossil fuel sources such as natural gas and coal, and other renewable energy sources such
as solar, traditional wind, hydro and geothermal. The competition depends on the resources available within the specific markets.
Although the cost to produce clean, reliable, renewable energy is becoming more competitive with traditional fossil fuel sources,
it generally remains more expensive to produce, and the reliability of its supply is less consistent than traditional fossil fuel.
However, deregulation, legislative mandates for renewable energy, and consumer preference for environmentally more benign energy
sources are becoming important factors in increasing the development of alternative energy projects.
The wind energy industry in California
is highly competitive since wind plays an integral role in the electricity portfolio in California.
The Company is investigating the feasibility
of locating a Downdraft Tower in California. Since wind plays an integral role in the electricity portfolio in California and wind
energy requires a significant amount of land resource, the wind energy industry in California is highly competitive. Wind developers
compete for leased and owned land with favorable wind characteristics, limited supply of turbines and contractors, and for purchasers
and available transmission capacity. There is no guarantee that we will be able to acquire the significant land resources needed
to develop projects in California.
Our ability to hire and retain qualified
personnel and contractors will be an important factor in the success of our business. Our failure to hire and retain qualified
personnel may result in our inability to manage and implement our plans for expansion and growth.
Competition for qualified personnel in
the renewable energy industry is significant. To manage growth effectively, we must continue to implement and improve our management
systems and to recruit and train new personnel. We may not be able to continue to attract and retain the qualified personnel necessary
to carry on our business. If we are unable to retain or hire additional qualified personnel as required, we may not be able to
adequately manage and implement our plans for expansion and growth.
The market in which we operate is
rapidly evolving and we may not be able to maintain our profitability.
As a result of the emerging nature of the
markets in which we plan to compete and the rapidly evolving nature of our industry, it is particularly difficult for us to forecast
our revenues or earnings accurately. Our current and future expense levels are based largely on our investment plans and estimates
of future revenues and are, to a large extent, fixed. We may not be able to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues relative to our planned expenditures would
have an immediate adverse effect on our business, results of operations and financial condition.
We depend on key personnel, the loss
of which could have a material adverse effect on us.
Our performance depends substantially on
the continued services and on the performance of our senior management and other key personnel. Our ability to retain and motivate
these and other officers and employees is fundamental to our performance. The unexpected loss of services of one or more of these
individuals could have a material adverse effect on us. We are not protected by a material amount of key-person or similar life
insurance covering our executive officers and other directors. We have entered into employment agreements with our executive officers,
but the non-compete period with respect to certain executive officers could, in some circumstances in the event of their termination
of employment with the Company, end prior to the employment term set forth in their employment agreements.
Certain legal proceedings and regulatory
matters could adversely impact our results of operations.
We may be subject from time to time to
various claims involving alleged breach of contract claims, intellectual property and other related claims, and other litigations.
Certain of these lawsuits and claims, if decided adversely to us or settled by us, could result in material liability to the Company
or have a negative impact on the Company’s reputation or relations with its employees, customers, licensees or other third
parties. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings could result in substantial
costs and may require that the Company devotes substantial time and resources to defend itself. Further, changes in governmental
regulations in the U.S. could have an adverse impact on our results of operations.
Our results may be adversely affected
by the impact that disruptions in the credit and financial markets have on our customers and the energy industry.
Beginning in late 2008 and continuing
throughout 2009, energy and utility companies faced difficult conditions as a result of significant disruptions in the global
economy, the repricing of credit risk and the deterioration of the financial markets. Continued volatility and further deterioration
in the credit markets may reduce our access to financing. These events could negatively impact our operations and financial condition
and our ability to raise the additional capital necessary to finance our operations.
The effects of the recent global
economic crisis may impact the Company’s business, operating results, or financial condition.
The recent global economic crisis has caused
disruptions and extreme volatility in global financial markets and increased rates of default and bankruptcy, and has impacted
levels of spending. These macroeconomic developments could negatively affect the Company’s business, operating results, or
financial condition in a number of ways. For example, potential clients may delay or decrease spending with the Company or may
not pay the Company.
The Company’s insurance coverage
may not be adequate.
If the Company was held liable for amounts
exceeding the limits of its insurance coverage in place at any given time or for claims outside the scope of that coverage, its
business, results of operations and financial conditions could be materially and adversely affected.
Our business is subject to extensive
governmental regulation that could reduce our profitability, limit our growth, or increase competition.
Our planned businesses are subject to extensive
federal, state and foreign governmental regulation and supervision, which could reduce our potential profitability or limit our
potential growth by increasing the costs of regulatory compliance, limiting or restricting the products or services we plan to
sell or the methods by which we plan to sell our products and services, or subjecting our businesses to the possibility of regulatory
actions or proceedings.
In all jurisdictions the applicable laws
and regulations are subject to amendment or interpretation by regulatory authorities. Generally, such authorities are vested with
relatively broad discretion to grant, renew and revoke licenses and approvals and to implement regulations. Accordingly, we may
be precluded or temporarily suspended from carrying on some or all of our planned activities or otherwise fined or penalized in
a given jurisdiction. No assurances can be given that our business will be allowed to be, or continue to be, conducted in any given
jurisdiction as we plan.
Competition resulting from these developments
could cause the supply of, and demand for, our planned products and services to change, which could adversely affect our results
of operations and financial condition.
Our planned operations will expose
us to various international risks that could adversely affect our business.
We are seeking to reach agreements for
the provision of key aspects of our business with foreign operators, specifically in Mexico. Accordingly, we may become subject
to legal, economic and market risks associated with operating in foreign countries, including:
|
· |
the general economic and political conditions existing in those countries; |
|
· |
devaluations and fluctuations in currency exchange rates; |
|
· |
imposition of limitations on conversion of foreign currencies or remittance of dividends and other payments by foreign subsidiaries; |
|
· |
imposition or increase of withholding and other taxes on remittances and other payments by subsidiaries; |
|
· |
hyperinflation in certain foreign countries; |
|
· |
imposition or increase of investment and other restrictions by foreign governments; |
|
· |
longer payment cycles; |
|
· |
greater difficulties in accounts receivable collection; and |
|
· |
the requirement of complying with a wide variety of foreign laws. |
Our ability to conduct business in
foreign countries may be affected by legal, regulatory, political and economic risks.
Our ability to conduct business in foreign
countries is subject to risks associated with international operations. These include:
|
· |
the burdens of complying with a variety of foreign laws and regulations; |
|
· |
unexpected changes in regulatory requirements; and |
|
· |
new tariffs or other barriers in some international markets. |
We are also subject to general political
and economic risks in connection with our international operations, including:
|
· |
political instability and terrorist attacks; |
|
· |
changes in diplomatic and trade relationships; and |
|
· |
general economic fluctuations in specific countries or markets. |
We cannot predict whether quotas, duties, taxes, or other similar
restrictions will be imposed by the U.S. or foreign countries upon our business in the future, or what effect any of these actions
would have on our business, financial condition or results of operations. Changes in regulatory, geopolitical, social or economic
policies and other factors may have a material adverse effect on our business in the future or may require us to significantly
modify our current business practices.
The occurrence of natural or man-made
disasters could adversely affect our financial condition and results of operations.
We are exposed to various risks arising
out of natural disasters, including earthquakes, hurricanes, fires, floods and tornadoes, and pandemic health events such as H1N1
influenza, as well as man-made disasters, including acts of terrorism and military actions. The continued threat of terrorism and
ongoing military actions may cause significant volatility in global financial markets, and a natural or man-made disaster could
trigger an economic downturn in the areas directly or indirectly affected by the disaster. These consequences could, among other
things, result in a decline in business and increased claims from those areas. Disasters also could disrupt public and private
infrastructure, including communications and financial services, which could disrupt our normal business operations.
Our inability to successfully recover should
we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory
actions, reputational harm or legal liability.
Should we experience a local or regional
disaster or other business continuity problem, such as an earthquake, hurricane, terrorist attack, pandemic, security breach, power
loss, telecommunications failure or other natural or man-made disaster, our continued success will depend, in part, on the availability
of our personnel, our office facilities, and the proper functioning of our computer, telecommunication and other related systems
and operations.
Our operations are dependent upon our ability
to protect our technology infrastructure against damage from business continuity events that could have a significant disruptive
effect on our operations. We could potentially lose operation of our projects or experience material adverse interruptions to our
operations or delivery of services to our clients in a disaster recovery scenario.
We plan to regularly assess and take steps
to improve upon our existing business continuity plans and key management succession. However, a disaster on a significant scale
or affecting certain of our key operating areas within or across regions, or our inability to successfully recover should we experience
a disaster or other business continuity problem, could materially interrupt our business operations and cause material financial
loss, loss of human capital, regulatory actions, reputational harm, damaged client relationships or legal liability.
Assertions by a third party that
the Company infringes its intellectual property could result in costly and time-consuming litigation, expensive licenses or the
inability to operate as planned.
The energy and technology industries are
characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets and by frequent litigation
based on allegations of infringement or other violations of intellectual property rights. There is a possibility of intellectual
property rights claims against the Company. The Company’s technologies may not be able to withstand third-party claims or
rights restricting their use. Companies, organizations or individuals, including the Company’s competitors, may hold or obtain
patents or other proprietary rights that would prevent, limit or interfere with the Company’s ability to provide the Company’s
services or develop new products or services, which could make it more difficult for the Company to operate the Company’s
business. Any litigation or claims, whether or not valid, could be time-consuming, expensive to litigate or settle and could divert
the Company’s managements’ attention and financial resources. If the Company is determined to have infringed upon a
third party’s intellectual property rights, the Company may be required to pay substantial damages, stop using technology
found to be in violation of a third party’s rights or seek to obtain a license from the holder of the infringed intellectual
property right, which license may not be available on reasonable terms, or at all, and may significantly increase the Company’s
operating expenses or may require the Company to restrict the Company’s business activities in one or more respects.
The Company may also be required to develop alternative non-infringing
technology that could require significant effort and expense or may not be feasible. In the event of a successful claim of infringement
against the Company and the Company’s failure or inability to obtain a license to the infringed technology, the Company’s
business and results of operations could be harmed.
The Company’s business will
be adversely affected if the Company is unable to protect its intellectual property rights from unauthorized use or infringement
by third-parties.
The Company intends to rely on a combination
of trademark, patent, trade secret and copyright law, license agreements and contractual restrictions, including confidentiality
agreements, invention assignment agreements and non-disclosure agreements with employees, contractors and suppliers, to protect
the Company’s proprietary rights, all of which provide only limited protection. The Company believes its intellectual property
rights are valuable, and any inability to protect them could reduce the value of the Company’s products, services and brand.
Various events outside of the Company’s control pose a threat to the Company’s intellectual property rights as well
as to the Company’s products and services. The efforts the Company has taken to protect its proprietary rights may not be
sufficient or effective, may not be enforceable or may be capable of being effectively circumvented. Any significant impairment
of the Company’s intellectual property rights could harm the Company’s business or the Company’s ability to compete.
Also, protecting the Company’s intellectual property rights is costly and time consuming. The Company also seeks to maintain
certain intellectual property as trade secrets. The secrecy could be compromised by outside parties, or by the Company’s
employees, which would cause the Company to lose the competitive advantage resulting from these trade secrets.
Risks Related to Our Securities
Our shares of Common Stock are
quoted on the OTCBB and our stock price is likely to be highly volatile.
Our shares of Common
Stock are quoted on the OTCBB. The OTCBB is generally regarded as a less efficient and less prestigious
trading market than other national markets. There is no assurance if or when our Common Stock will be quoted on another more prestigious
exchange or market. The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in
response to various factors, many of which are beyond our control, including the following:
|
· |
changes in the communications technology industry and markets; |
|
· |
volume and timing of subscriptions from major customers; |
|
· |
competitive pricing pressures; |
|
· |
our ability to obtain working capital financing; |
|
· |
technological innovations or new competitors in our market; |
|
· |
additions or departures of key personnel; |
|
· |
our ability to execute our business plan; |
|
· |
operating results that fall below expectations; |
|
· |
loss of any strategic relationship; |
|
· |
industry or regulatory developments; |
|
· |
economic and other external factors; and |
|
· |
period-to-period fluctuations in our financial results. |
In addition, the securities markets have
from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular
companies. These market fluctuations may also materially and adversely affect the market price of our common stock and for some
time there will likely be a thin trading market for the stock, which causes trades of small blocks of stock to have a significant
impact on the stock price.
Because our Common Stock is likely
to be considered a “penny stock,” our trading will be subject to regulatory restrictions.
Our Common Stock is currently, and in the
near future will likely continue to be, considered a “penny stock.” The SEC has adopted rules that regulate broker-dealer
practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price
of less than $5. 00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system,
provided that current price and volume information with respect to transactions in such securities is provided by the exchange
or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those
rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and
the nature and significance of risks of the penny stock market. The broker-dealer also must provide the customer with bid and offer
quotations for the penny stock, the compensation of the broker-dealer and any salesperson in the transaction, and monthly account
statements indicating the market value of each penny stock held in the customer’s account. In addition, the penny stock rules
require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special
written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction. These disclosure and other requirements may adversely affect the trading activity in the secondary
market for our Common Stock.
We have not paid dividends in the
past and do not expect to pay dividends for the foreseeable future, and any return on investment may be limited to potential future
appreciation on the value of our Common Stock.
We currently intend to retain any future
earnings to support the development and expansion of our business and do not anticipate paying cash dividends in the foreseeable
future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various
factors, including without limitation, our financial condition, operating results, cash needs, growth plans and the terms of any
credit agreements that we may be a party to at the time. To the extent we do not pay dividends, our stock may be less valuable
because a return on investment will only occur if and to the extent our stock price appreciates, which may never occur. In addition,
shareholders must rely on sales of their Common Stock after price appreciation as the only way to realize their investment, and
if the price of our stock does not appreciate, then there will be no return on investment. Shareholders seeking cash dividends
should not purchase our Common Stock.
Our officers, directors and principal
stockholders can exert significant influence over us and may make decisions that are not in the best interests of all stockholders.
Our officers, directors and principal stockholders (greater
than 5% stockholders) collectively own a majority of our outstanding Common Stock. As a result of such ownership, these stockholders
will be able to affect the outcome of, or exert significant influence over, all matters requiring stockholder approval, including
the election and removal of directors and any change in control. In particular, this concentration of ownership of our Common
Stock could have the effect of delaying or preventing a change of control of us or otherwise discouraging or preventing a potential
acquirer from attempting to obtain control of us. This, in turn, could have a negative effect on the market price of our Common
Stock. It could also prevent our stockholders from realizing a premium over the market prices for their shares of Common Stock.
Moreover, the interests of this concentration
of ownership may not always coincide with our interests or the interests of other stockholders, and accordingly, they could cause
us to enter into transactions or agreements that we would not otherwise consider.
Anti-takeover provisions may limit
the ability of another party to acquire us, which could cause our stock price to decline.
Our Articles of Incorporation, as amended,
our Bylaws and Nevada law contain provisions that could discourage, delay or prevent a third party from acquiring us, even if doing
so may be beneficial to our stockholders. In addition, these provisions could limit the price investors would be willing to pay
in the future for shares of our Common Stock.
ITEM 1B. UNRESOLVED
STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The Company leases a suite of offices and
shared support services at 1997 Annapolis Exchange Parkway, Suite 300, Annapolis, Maryland 21401 on an annual lease. In addition,
the Company maintains living quarters in Annapolis on an annual lease expiring in 2015.
ITEM 3. LEGAL PROCEEDINGS
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. During the year ended December 31, 2014, the
Company settled the outstanding claim for $90,000, payable in six monthly payments of $15,000 with a gain on settlement of debt
of $32,985. As of December 31, 2014, the unpaid balance was $30,000, which has been repaid subsequent to December 31, 2014.
Typenex Co-Investment, LLC filed suit against
the Company on September 4, 2014 in the United States District Court, Northern District of Illinois, Eastern Division claiming
that the Company breached a contract it entered into with Typenex, and that Typenex was entitled to convert any portion of the
outstanding balance of their monies the Company allegedly owed to Typenex into validly issued, fully paid and non-assessable shares
of Solar Wind Energy Tower Inc. common shares. Typenex seeks money damages and court orders enjoining the Company from further
breaches. In a related suit filed September 9, 2014 in the United States District Court for the District of Idaho, Typenex claims
that the Company’s transfer agent violated certain transfer instructions issued by the Company. The Company has not been
named as a defendant in this suit and the parties have agreed that the transfer agent will be part of the Northern District litigation.
(The Idaho litigation has not yet been dismissed) The Company maintains that it provided cash to retire the debt owed to Typenex,
and denies that Typenex was entitled to the conversion into Company stock.
The Company has retained counsel, has filed
counterclaims against Typenex based upon Typenex’s failure to perform its obligations and intends to vigorously defend itself
and pursue counterclaims.
ITEM 4. MINE SAFETY DISCLOSURE.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market information
The Company’s Common Stock is quoted on the OTC Bulletin
Board under the symbol “SWET”. Historical high and low bid information for the Company’s Common Stock is not
available to the Company. The following table reflects the high and low sales prices for the Company’s Common Stock for
each fiscal quarter during the fiscal years ended December 31, 2014 and 2013. The sales prices were obtained from the OTC Bulletin
Board.
Quarterly period | |
Low | | |
High | |
Fiscal year ended December 31, 2014: | |
| | | |
| | |
First Quarter | |
$ | 0.0040 | | |
$ | 0.0099 | |
Second Quarter | |
$ | 0.0045 | | |
$ | 0.0410 | |
Third Quarter | |
$ | 0.0230 | | |
$ | 0.0320 | |
Fourth Quarter | |
$ | 0.0052 | | |
$ | 0.0205 | |
| |
| | | |
| | |
Fiscal year ended December 31, 2013: | |
| | | |
| | |
First Quarter | |
$ | 0.019 | | |
$ | 0.25 | |
Second Quarter | |
$ | 0.021 | | |
$ | 0.036 | |
Third Quarter | |
$ | 0.016 | | |
$ | 0.024 | |
Fourth Quarter | |
$ | 0.007 | | |
$ | 0.015 | |
Record Holders
As of March 27, 2015, there were approximately 1,411 registered
holders of record of the Company’s Common Stock.
Dividends
The Company has not paid any cash dividends
to date, and has no intention of paying any cash dividends on the Common Stock in the foreseeable future. The declaration
and payment of dividends is subject to the discretion of the Company’s Board of Directors and to certain limitations imposed
under Nevada law. The timing, amount and form of dividends, if any, will depend upon, among other things, the Company’s
results of operations, financial condition, cash requirements, and other factors deemed relevant by the Board of Directors. The
Company intends to retain any future earnings for use in its business. The Company has never paid dividends on its Common
Stock.
Securities Authorized for Issuance under
Equity Compensation Plans
The Company does not maintain any equity
compensation plans.
Unregistered Sales of Equity Securities
and Use of Proceeds
During the year ended December 31, 2014,
the Company issued 7,125,000 shares of Common Stock to private placement investors at $0.0035 per share for aggregate gross proceeds
of $25,000.
Issuance of the above securities are exempt
from the registration requirements under Rule 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 as promulgated under
Regulation D.
ITEM 6. SELECTED FINANCIAL
DATA
This item is not applicable to smaller
reporting companies.
ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Some of the statements contained in this
Annual Report that are not historical facts are “forward-looking statements” which can be identified by the use of
terminology such as “estimates,” “projects,” “plans,” “believes,” “expects,”
“anticipates,” “intends,” or the negative or other variations, or by discussions of strategy that involve
risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained
in this Annual Report, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties
and other factors affecting our operations, market growth, services, products and licenses.
No assurances can be given regarding the
achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may
differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause
actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking
statements include without limitation:
|
· |
our ability to raise capital when needed and on acceptable terms and conditions; |
|
· |
our ability to attract and retain management, and to integrate and maintain technical information and management information systems; |
|
· |
the intensity of competition; |
|
· |
general economic conditions; and |
|
· |
other factors discussed in “Risk Factors.” |
All written and oral forward-looking statements
made in connection with this Annual Report on Form 10-K that are attributable to us or persons acting on our behalf are expressly
qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned
not to place undue reliance on such forward-looking statements.
The following discussion and analysis of
our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements
and related notes thereto.
Overview
Solar Wind Energy Tower Inc. (the “Company”
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 was incorporated under the
laws of the State of Idaho on January 22, 1962, as Superior Mines Company. In 1964, the Company’s name was changed
to Superior Silver Mines, Inc. On December 27, 2010, the Company reincorporated as a Nevada corporation. Prior to the
Merger, the Company had been dormant for a number of years and had no known mineral reserves. On January 21, 2011, the Company
changed its name from Superior Silver Mines, Inc. to Clean Wind Energy Tower, Inc. On March 11, 2013, the Company changed its name
to Solar Wind Energy Tower Inc. On the same day, Company’s wholly-owned subsidiary, a corporation formed under the
laws of the State of Delaware, Clean Wind Energy, Inc. changed its name 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.
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” to” CWET” and in conjunction with the March 11, 2013 name change
the Company’s quotation symbol on the Over-the-Counter Bulletin Board was changed from “CWET” to “SWET.”
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.
Plan of Operation
Our Company’s core objective and
focus is to become a leading provider of clean efficient green energy to the world communities at a reasonable cost without the
destructive residuals of fossil fuel, while continuing to generate innovative technological solutions for today and tomorrow’s
electrical power needs.
As a development stage company, Solar Wind
has yet to earn revenues from its operations. Solar Wind is developing plans to design and construct large Downdraft
Towers that use benevolent, non-toxic natural elements to generate electricity and clean water economically 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. From our inception in July 2010, we have completed the following
milestones, among others
|
· |
The Company has filed numerous patent applications
with the U.S. Patent and Trademark Office to protect its intellectual property. The Company has been awarded four patents.
Patent #8120191 issued 2/21/2012 “Efficient
Energy Conversion Devices & Methods”
The patent covers a novel hydraulic system
capable of maintaining high efficiency hydraulic to electric conversion under a wide variance of wind speeds, as coupled to a plurality
of wind turbines in wind tunnels.
Patent #8,517,662B2 issued 8/27/2013
“Atmospheric Energy Extraction Devices & Methods”
The patent covers a structure for producing
electricity, specifically a Tower capable of adding moisture at the top of the structure to hot-dry air so as to generate a downdraft
of wind within the interior of the Tower, vanes coupled to the exterior of the Tower that at least partially define a plurality
of elongated pockets to the exterior of the Tower, and flaps located to redirect the incident wind downwards into tunnels to convert
wind to electricity.
Patent # 8,643,204 B2 issued 2/4/2014
“Efficient Energy Conversion Devices and Methods”
This application enhances and broadens
previously issued Patent #8120191
Patent #8,727,698 B1 issued 5/20/2014
“Atmospheric Energy Extraction Devices & Methods”
The patent claims are targeted to represent
the advantages of the new Tower structural shape, the configuration of the Tower walls, their composition as well as the wall thicknesses
for a given height, along with more efficient construction methodology and enhanced wind force resistance over prior Tower designs. |
|
· |
Executed agreements with three strategic world class companies with industry experience to assist in developing our Downdraft Tower. |
|
· |
Identified and executed agreements with key industry consultants. |
|
· |
The Company completed a comprehensive meteorological assessment and selected an area located in San Luis, Arizona to pursue the construction of their innovative green renewable energy Downdraft Tower Facility. |
Critical Accounting Policies and
Estimates
Financial Reporting Release No. 60, published
by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their
financial statements. While all these significant accounting policies impact our consolidated financial condition and results of
operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the
most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and
estimates. Actual results may differ from those estimates.
We believe that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect
on our consolidated results of operations, financial position or liquidity for the periods presented in this report.
General
The Company’s Consolidated Financial
Statements are prepared in accordance with U.S. generally accepted accounting principles, which require management to make estimates,
judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue, if any, and expenses, and the disclosure
of contingent assets and liabilities.
Management bases its estimates on historical
experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Senior management has discussed the development, selection and disclosure of these estimates with the Board of Directors. Management
believes that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from
these estimates under different assumptions or conditions. An accounting policy is deemed to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different
estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the
consolidated financial statements. Management believes the following critical accounting policies reflect the significant estimates
and assumptions used in the preparation of the Consolidated Financial Statements.
Basic and diluted net loss per share
We utilize ASC 260, “Earnings Per
Share” for calculating the basic and diluted loss per share. In accordance with ASC 260, the basic and diluted loss per share
is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding.
Diluted net loss per share is computed similar to basic net loss per share except that the denominator is adjusted for the potential
dilution that could occur if stock options, warrants, and other convertible securities were exercised or converted into common
stock. Potentially dilutive securities were not included in the calculation of the diluted net loss per share as their effect would
be anti-dilutive.
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 difference between taxable income reported for financial reporting purposes primarily
relate to the recognition of debt costs and stock based compensation expenses. The adoption of ASC 740 “Income Taxes”
did not have a material impact on the Company’s consolidated results of operations or financial condition.
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. The Company has not yet generated any revenue as of to date.
Fair Value of Financial Instruments
The Company adopted the provisions under
FASB for Fair Value Measurements, which define fair value for accounting purposes, establishes a framework for measuring fair value
and expands disclosure requirements regarding fair value measurements. The Company’s adoption of these provisions did not
have a material impact on its consolidated financial statements. Fair value is defined as an exit price, which is the price that
would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants
at the measurement date. The degree of judgment utilized in measuring the fair value of assets and liabilities generally correlates
to the level of pricing observability. Financial assets and liabilities with readily available, actively quoted prices or for which
fair value can be measured from actively quoted prices in active markets generally have more pricing observability and require
less judgment in measuring fair value. Conversely, financial assets and liabilities that are rarely traded or not quoted have less
price observability and are generally measured at fair value using valuation models that require more judgment. These valuation
techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency
of the asset, liability or market and the nature of the asset or liability. The Company has categorized its financial assets and
liabilities measured at fair value into a three-level hierarchy in accordance with these provisions.
In January 2010 the FASB issued Update
No. 2010-05 “Compensation—Stock Compensation—Escrowed Share Arrangements and Presumption of Compensation”
(“2010-05”). 2010-05 re-asserts that the Staff of the Securities Exchange Commission (the “SEC Staff”)
has stated the presumption that for certain shareholders escrowed share represent a compensatory arrangement. 2010-05 further clarifies
the criteria required to be met to establish a position different from the SEC Staff’s position. The Company does not believe
this pronouncement to have any material impact on its financial position, results of operations or cash flows.
Accounting for Derivatives
In 2013 and 2014, we issued
convertible notes payable that contained certain conversion features which we identified as embedded derivatives. Therefore,
in accordance with ASC 815-40, we reclassified the fair value of the conversion feature from equity to a liability at
the date of issuance. Subsequent to the initial issuance date, we are required to adjust to fair value the derivative as an
adjustment to current period operations.
New 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.
RESULTS OF OPERATIONS
COMPARISON OF THE YEAR ENDED DECEMBER 31, 2014 TO THE YEAR ENDED
DECEMBER 31, 2013
Revenue
The Company has not generated revenue since
inception.
Operating Expenses
Research and Development
During the year ended December 31, 2014,
we incurred $156,251 of research and development expenses as compared to $31,304 for the year ended December 31, 2013; an increase
of $124,947, or 399%. The Company anticipates continued research and development as products are developed dependent
on funding availability.
Selling and Administrative
During the year ended December 31, 2014,
we incurred $1,870,266 of selling and administrative expenses as compared to $1,792,769 for the year ended December 31, 2013; an
increase of $77,497, or 4.33%. The Company’s stock based compensation remained approximately the same from $642,889
to $642,053 from 2013 to 2014.
Depreciation
Depreciation for the year ended December
31, 2014 was $2,520 as compared to $4,480 for the year ended December 31, 2013. The reduced deprecation is due to aging of our
office equipment.
Other Income/Expense
Interest expense
For year ended December 31, 2014, we
incurred $4,212,671 as interest expense relating to our issued notes payable as compared to $1,355,537 for the same period
last year. In connection with the issuances, we incurred noncash charge to interest of $2,272,821 during the year ended
December 31, 2014 due to the excess of fair value of the conversion feature over the note proceeds compared to $380,741 for
the prior year. In addition, we amortized a debt discount associated with the notes of $1,646,605 for the year ended December
31, 2014 compared to $816,642 for the year ended December 31, 2013.
Gain on settlement of debt
During the year ended December 31, 2014,
we settled an outstanding debt obligation for less than our carrying value. Accordingly, we recorded a $32,985 gain on settlement
of debt during the current year.
Gain from change in fair value of derivative
liabilities
Each reporting period, we are required
to adjust to fair value the conversion features of our convertible notes. For the years ended December 31, 2014 and
2013, we reported a gain from change in fair value of $1,089,102 and $782,556, respectively.
Net Loss
As a result of the activities described
above, we incurred a net loss of $5,119,620 for the year ended December 31, 2014 as compared to a net loss of $2,401,534 for the
year ended December 31, 2013.
Liquidity and Capital Resources
We have financed our operations since inception primarily through
private offerings of our equity securities and debt financing.
Working Capital
Our working capital deficit increased by
($594,860) during the year ended December 31, 2014 from a working capital deficit (current liabilities in excess of current assets)
of $2,492,533 at December 31, 2013 to a working capital deficit of $3,087,393 at December 31, 2014. The increase in working capital
deficit for the year ended December 31, 2014 is due to a combination of reasons, of which the significant factors include:
|
· |
Cash had a net increase from working capital by $27,006 for the year ended December 31, 2014. The most significant uses and proceeds of cash were: |
|
· |
Approximately $1,346,000 of cash consumed in operating activities; |
|
· |
Proceeds of $25,000 from sale of our common stock |
|
· |
Proceeds of $1,684,000 from issuance of Convertible Promissory Notes |
|
· |
Proceeds of $80,000 from issuance of Notes Payable |
Of the total current assets of $215,150
as of December 31, 2014, cash represented $88,764 with the remainder was $126,386 capitalized financing costs. Of the total current
assets of $61,758 as of December 31, 2013, cash represented $61,758.
Proceeds from the issuance of common
stock
During the year ended December 31, 2014,
the Company received $25,000 from the issuance of Private Placement Memorandum Subscriptions for the sale of its common stock.
Proceeds from the issuance of convertible
promissory notes
During the year ended December 31, 2014,
the Company received net amount of $1,684,000 from the issuance of Convertible Promissory Notes after paying original interest
discounts (“OID”) and processing fees to the attorneys.
Proceeds from the issuance of notes
payable
During the year ended December 31, 2013,
the Company received a gross amount of $80,000 from the issuance of Notes.
Cash flow analysis
Cash used in operations was $1,345,736
during the year ended December 31, 2014. During the year ended December 31, 2014, our primary capital needs were for operating
expenses, including funds to support our business strategy, which primarily includes working capital necessary to fund operations
and reducing our trade payables.
Cash used in investing activities as $129,824
comprised of payments for an option to acquire property of $125,000, purchase of equipment of $2,124 and payment of a lease deposit
of $2,700.
Cash provided from financing activities
was $1,502,566 comprised of sale of our common stock for net proceeds of $25,000, issuance of notes payable of $80,000 and issuance
of convertible notes payable of $1,684,000, net of repayments of notes of $286,434.
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 ($5,119,620) for the year ended
December 31, 2014, accumulated deficit of ($13,984,186) and total current liabilities in excess of current assets of ($3,087,393)
as of December 31, 2014.
The Company is in a pre-development 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.
Management expects that global economic
conditions will continue to present a challenging operating environment through 2015. To the extent permitted by working capital
resources, management intends to continue making targeted investments in strategic operating and growth initiatives. Working capital
management will continue to be a high priority for 2015.
While we have been able to manage our working
capital needs with the current credit facilities, additional financing is required in order to meet our current and projected cash
flow requirements from operations. We cannot predict whether this new financing will be in the form of equity or debt. We may not
be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. Additional investments are
being sought, but we cannot guarantee that we will be able to obtain such investments.
Financing transactions may include the
issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of
our common stock and the downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the
issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected
costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force
us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional
dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common
stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.
Our independent registered
public accounting firm’s report dated March 31, 2015 on our December 31, 2014 consolidated financial
statements included in this Form 10-K states that our difficulty in generating sufficient cash flow to meet our obligations
and sustain operations raise substantial doubts about the our ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result should the Company be unable to continue as a going
concern.
Inflation
We do not believe that inflation has had
a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant
inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure
to do so could adversely affect our business, financial condition and results of operations.
Off-Balance sheet Arrangements
We do not maintain off-balance sheet arrangements
nor do we participate in any non-exchange traded contracts requiring fair value accounting treatment other than the operating leases
as disclosed in Item 2, Properties and Notes to Consolidated Financial Statements (Note 11).
ITEM 7A. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This item is not applicable to smaller
reporting companies.
ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA.
See the Financial Statements and Notes
thereto commencing on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and
Procedures
The Company has carried out an evaluation
under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures”
as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end
of the period covered by this report. The Company’s disclosure controls and procedures are designed so that information required
to be disclosed in the Company’s reports filed under the Exchange Act, such as this Annual Report on Form 10-K, is recorded,
processed, summarized and reported within the time periods specified in the Commission’s rules and forms. The Company’s
disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to the Company’s
management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including
the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives, and management
necessarily is required to use its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. Based
upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2014,
the Company’s disclosure controls and procedures were not effective to provide reasonable assurance that information required
to be disclosed in the reports that the Corporation files and submits under the Exchange Act is recorded, processed, summarized
and reported as and when required. This determination was due to the lack of segregation of duties and the Company’s failure
to implement the necessary internal controls.
Notwithstanding the existence
of material weaknesses, management concluded that the financial statements in this Annual Report on Form 10-K fairly present in
all material respects the Company’s financial position, results of operations and statement of cash flows for the periods
and dates presented.
Management’s Annual Report on Internal Control over
Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule
13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, a company’s principal
executive and principal financial officers and effected by a company’s board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control
over financial reporting includes those policies and procedures that:
|
· |
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
|
· |
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorization of management and directors; and |
|
· |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with policies or procedures may deteriorate.
Our management assessed the effectiveness
of our internal control over financial reporting as of December 31, 2014. This assessment was based on criteria established in
the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on our assessment, management concluded that our internal control over financial reporting was not effective
as of December 31, 2014.
These control deficiencies could result
in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our financial
statements may not be prevented or detected on a timely basis. Accordingly, we have determined that these control deficiencies
as described above together constitute a material weakness.
In light of this material weakness, we
performed additional analyses and procedures in order to conclude that our financial statements for the year ended December 31,
2014 included in this Annual Report on Form 10-K were fairly stated in accordance with GAAP. Accordingly, management believes that
despite our material weaknesses, our consolidated financial statements for the year ended December 31, 2013 are fairly stated,
in all material respects, in accordance with GAAP.
This annual report does not include an
attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s
report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.
Plan for Remediation of Material Weaknesses
To mitigate the current limited resources
and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting
professionals. As we grow, we expect to increase our number of employees and engage outsourced accounting professionals, which
will enable us to implement adequate segregation of duties within the internal control framework.
Limitations on Effectiveness of Controls
and Procedures
Our management, including our Chief Executive
Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will
prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must
reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Group have been detected. These inherent limitations include, but are not
limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error
or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or
more people, or by management override of the control. The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control over Financial
Reporting
There were no changes in our internal control
over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under
the Exchange Act that occurred during the quarter ended December 31, 2014 that have materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Subsequent issuances
In January 2015, the Company issued an
aggregate of 8,000,000 shares of its common stock in settlement of convertible notes payable of $29,696.
In February 2015, the Company issued an
aggregate of 56,772,987 shares of its common stock in settlement of convertible notes payable and accrued interest of $202,545.
In March 2015, the Company issued an aggregate
of 38,512,224 shares of its common stock in settlement of convertible notes payable of $104,952.
The Company claims an exemption from the
registration requirements of the Securities Act of 1933 (the “Securities Act”) for the private placement of these securities
pursuant to Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder. The investors are accredited investors
as defined in Rule 501 of Regulation D promulgated under the Securities Act.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE.
The following table sets forth the names of the Company’s
directors, executive officers, and key employees, and their positions with the Company, as of December 31, 2014:
Name |
Age |
Position(s) |
Term of Office (Directors) |
Ronald W. Pickett* |
67 |
President, Chief Executive Officer, Chairman and Principal Accounting Officer |
Annual meeting |
Stephen Sadle* |
69 |
Chief Operating Officer and Director |
Annual Meeting |
Robert P. Crabb* |
67 |
Secretary, Chief Marketing Officer and Director |
Annual meeting |
H. James Magnuson |
61 |
Director |
Annual meeting |
Arthur P. Dammarell |
70 |
Director |
Annual meeting |
______________
|
* |
Appointed pursuant to the terms of the Merger Agreement. |
None of the events listed in Item 401(f)
of Regulation S-K has occurred during the past ten years and that is material to the evaluation of the ability or integrity of
any of the Company’s directors, director nominees or executive officers.
The following is a brief account of the
business experience during the past five years (and, in some instances, for prior years) of each director and executive officer.
Ronald W. Pickett, President and Chief
Executive Officer, Chairman and Principal Accounting Officer
Mr. Pickett joined the Company on December
29, 2010 in connection with the Merger. Mr. Pickett brings over 40 years of construction, development and innovative technology
skills and expertise to the team. He has founded numerous companies from startup and including three from inception through the
public ownership process. Mr. Pickett also has an understanding of government, legislative, and permitting practices. Since December,
2007, Mr. Pickett has been an independent real estate development consultant. Until March, 2008, Mr. Pickett was a director of,
and until December, 2007, Mr. Pickett was President and CEO of, Telkonet, Inc. (“Telkonet”) (OTCBB: TKOI.OB), a company
that develops, manufactures and sells energy efficiency and smart grid networking technology. Until January, 2009, Mr. Pickett
was President and a director of Microwave Systems Technology Inc. (“Microwave Systems”), a company that provided Internet/phone/video/wifi
services in the New York City area.
Until February, 2010, Mr. Pickett was Vice
Chairman of Geeks on Call Holdings, Inc. (“Geeks on Call”) (PINK: GOCH.PK), a company that provided quick-response,
on-site computer solutions and remote/telephone technical support. We took into account his prior experience in operating public
and private enterprises in the development and construction of alternative energy projects and believe Mr. Pickett’s past
experience in these fields gives him the qualifications and skill to serve as a director.
Stephen Sadle, Chief Operating Officer,
Director
Mr. Sadle joined the Company on December
29, 2010 in connection with the Merger. Mr. Sadle is an entrepreneur with over 40 years of diversified experience in management,
contracting and heavy infrastructure development, interfacing with both the government and private sectors. He is experienced in
Web-based vertical extranet applications and has developed operating extranets in the construction and transportation industries.
Mr. Sadle served as co-founder, Chief Operating Officer and Director of Telkonet. He was also founder and president of a successful
local construction company and was awarded the Small Businessman of the Year Award for the Washington Metropolitan Area. Since
July, 2007, Mr. Sadle has been an independent real estate consultant. From 2000 until July, 2007, Mr. Sadle was Senior Vice President
and a director of Telkonet. We took into account his prior work with infrastructure construction and development and believe Mr.
Sadle’s past experience in these fields gives him the qualifications and skill to serve as a Chief Operating Officer.
Robert P. Crabb, Secretary and Chief
Marketing Officer, Director
Mr. Crabb joined the Company on December
29, 2010 in connection with the Merger. Mr. Crabb has over 40 years of public and private sector experience including 15years in
the insurance industry including, sales and sales management with MetLife and independent property and casualty brokerage. His
entrepreneurial expertise includes marketing consulting, corporate management and commercial/residential real estate development.
He has served in a corporate governance capacity as secretary to a number of start-up companies. Since September, 2007, Mr. Crabb
has been an independent real estate development consultant. Until September, 2007, Mr. Crabb was Secretary of Telkonet, until February,
2009, Mr. Crabb was Secretary of Microwave Systems, and until October, 2009, Mr. Crabb was Secretary of Geeks on Call. The Company
believes Mr. Crabb’s past experience in corporate compliance gives him the qualifications and skill to serve as a director.
H. James Magnuson, Director
Mr. Magnuson has served as a member of
the Company’s Board of Directors since 2007. Mr. Magnuson resigned as the Company’s Vice President effective December
29, 2010 pursuant to the terms of the Merger Agreement. Since 1979, Mr. Magnuson has been an attorney engaged in the private practice
of law in Coeur d’Alene, Idaho, and received his BS degree from the University of Idaho and his Juris Doctorate from Boston
College. The Company believes Mr. Magnuson’s background in providing legal services gives him the qualifications and skill
to serve as a director.
Arthur P. Dammarell, Director
Mr. Dammarell has served as a member of
the Company’s Board of Directors since 2006. From 2000 through March 2006, Mr. Dammarell was the principal financial officer,
treasurer and a director of Nova Oil, Inc. (now Nova Biosource Fuels, Inc.). He received his BA degree in Urban and Regional Planning
from Eastern Washington University. The Company took into account his prior work in both public and private organizations providing
consulting on development project financing and believes Mr. Dammarell’s past experience in these fields gives him the qualifications
and skill to serve as a director.
Section16(a) Beneficial Ownership Reporting
Based solely upon a review of the copies
of the forms furnished to the Company and written representations from officers and directors of the Company that no other reports
were required, during the year ended December 31, 2014, all filing requirements under Section 16(a) of the Exchange Act applicable
to its officers, directors and greater than 10% beneficial owners were complied with on a timely basis.
Code of Ethics
The Company has adopted a Code of Conduct
and Ethics that applies to all directors, officers and employees of the Company, including its principal executive officer, principal
financial officer and principal accounting officer. The Company does not have a separately-designated standing audit committee
or a committee performing similar functions. Because the Company does not have an audit committee, the company has not yet determined
whether any of its directors qualifies as an audit committee financial expert. Currently, the Company Board of Directors review
the Company’s 10-K and financial statements.
EXECUTIVE COMPENSATION
The following table and related footnotes
show the compensation incurred and or paid during the fiscal years ended December 31, 2014 and 2013, to all individuals serving
as the Company’s principal executive officer or acting in a similar capacity during the last completed fiscal year. No other
executive officers received compensation in excess of $100,000 for such fiscal years.
Summary Compensation Table
Name and principal position |
|
Year |
|
Salary
($) |
|
|
Bonus
($) |
|
Stock awards
($) |
|
Non-equity incentive plan compensation |
|
Nonqualified deferred compensation earnings ($) |
|
All other Compensation
($) |
|
Total ($) |
|
Ronald W. Pickett, |
|
2014 |
|
|
200,000 |
(2) |
|
$ |
– |
|
$ |
– |
|
$ |
– |
|
$ |
– |
|
$ |
– |
|
|
200,000 |
|
President, Chief
Executive Officer, Chairman and Principal Accounting officer (1) |
|
2013 |
|
|
200,000 |
(2) |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
200,000 |
|
Stephen L. Sadle |
|
2014 |
|
|
175,000 |
(4) |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
175,000 |
|
Chief Operating Officer
(3) |
|
2013 |
|
|
175,000 |
(4) |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
175,000 |
|
______________
|
(1) |
Appointed as President, Chief Executive Officer and Chairman effective December 29, 2010 pursuant to the terms of the Merger Agreement. |
|
|
|
|
(2) |
Included in the amount is $29,153 and $218,767 of accrued salaries for Mr. Pickett for the years ended December 31, 2014 and 2013, respectively. In addition, the amount paid during the years ended December 31, 2014 and 2013 amounted to $192,300 and $84,615, respectively. $250,000 of the accrual has been converted into a note payable during the year ended December 31, 2013. |
|
(3) |
Appointed as Chief Operating Officer effective December 29, 2010 pursuant to the terms of the Merger Agreement. |
|
|
|
|
(4) |
Included in the amount is $27,098 and $167,032 of accrued salaries for Mr. Sadle for the years ended December 31, 2014 and 2013, respectively. In addition, the amount paid during the years ended December 31, 2014 and 2013 amounted to $168,300 and $109,939, respectively. $193,750 of the accrual has been converted into a note payable during the year ended December 31, 2013 |
Director Compensation Table
The following table and related footnotes show the compensation
incurred and or paid during the fiscal year ended December 31, 2014 to the Company’s directors for their service as directors.
Name | |
Fees earned or paid
in cash ($) | | |
Stock awards ($) | | |
Option awards
($) | | |
Non-equity incentive
plan compensation ($) | | |
Nonqualified deferred
compensation earnings ($) | | |
All other compensation
($) | | |
Total ($) | |
Robert P. Crabb (1) | |
$ | 60,000 | (2) | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 60,000 | |
H. James Magnuson | |
$ | 0 | | |
$ | 0 | (3) | |
$ | 16,591 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 16,591 | |
Arthur P. Dammarell | |
$ | 0 | | |
$ | 0 | (3) | |
$ | 16,591 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 16,591 | |
______________
|
(1) |
Appointed as director effective December 29, 2010 pursuant to the terms of the Merger Agreement. |
|
(2) |
The Company has accrued salary for Mr. Crabb for his services as an executive officer of the Company for the year ended December 31, 2014 in the amount of $29,153 and the balance at December 31, 2013 amounted to $60,000. |
|
(3) |
The Company issued to Mr. Magnuson and Dammarell two warrants to purchase the Company’s common stock. Each received warrant A is for 1,250,000 shares of the Company’s common stock exercisable at $0.02 per share for 5 years, warrant B is for 2,906,977 shares of the Company’s common stock exercisable at $0.0086 for five years. |
Narrative to Summary Compensation Table and Director Compensation
Table
During the year ended December 31, 2014,
the Company provided no stock options, warrants, or stock appreciation rights. On December 29, 2010, pursuant to the Merger, Solar
Wind Energy, Inc. became a wholly-owned subsidiary of the Company. The Company has employment agreements with its officers as described
below. The Company has accrued salaries for all its executives from inception through December 31, 2014 and the balance amounted
to $84,287 at December 31, 2014, net of issued convertible notes issued in December 2014 as part payment.
No officer or director has outstanding unexercised options,
stock that has not vested, or equity incentive plan awards. The Company maintains no employee benefits plans.
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 | |
| |
$ | 60,000 | | |
| |
. |
____
|
* |
Terms to modify the 1 year contract extension by mutual consent have been agreed to by the Officers and Directors. Under the modification and extension, the contracts will be extended 4 additional years with current salaries being unchanged. Provisions for automatic salary increases based on specific events related to business development successes, rights for the officers to convert any accrued salary into Company notes, and rights to receive warrants to purchase Company stock at market plus 20% premium at the time of the grant while notes are outstanding will be incorporated in the new contracts. The parties have mutually agreed to a stock option plan, the specific terms to be negotiated as part of the final contract. |
ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security ownership of certain beneficial owners
The following table sets forth, as of March
27, 2015, the beneficial ownership of our common stock by:
|
(1) |
each person or entity who is known by us to beneficially own more than five percent (5%) of our common stock; |
|
(2) |
each of our directors; |
|
(3) |
each Named Executive Officer; and |
|
(4) |
all of our directors and executive officers as a group. |
Set forth below is
certain information, as of March 27, 2015, with respect to each person (including any group as that term is used in Section 13(d)(3)
of the Exchange Act) who is known to the Company to be the beneficial owner of more than five percent of the Company’s Common
Stock. Unless otherwise indicated, the address of each beneficial owner is c/o Solar Wind Energy Tower Inc., 1997 Annapolis Exchange
Parkway, Suite 300, Annapolis, Maryland 21401 and the nature of beneficial ownership is direct.
Name of Beneficial Owner | |
Title of Beneficial Owner | |
Amount and Nature of Beneficial Ownership | | |
Percent of Class (1) | |
Ronald W. Pickett | |
President, Chief Executive Officer and Chairman | |
| 64,655,000 | (3) | |
| 8.8 | % |
Stephen Sadle | |
Chief Operating Officer and Director | |
| 57,816,666 | (3) | |
| 7.9 | % |
Robert P. Crabb | |
Secretary, Chief Marketing Officer and Director | |
| 12,850,000 | (3) | |
| 1.7 | % |
H. James Magnuson | |
Director | |
| 1,811,114 | (2) | |
| * | |
Arthur P. Dammarell | |
Director | |
| 625,500 | | |
| * | |
Directors and executive officers as a group (5 persons) | |
--- | |
| 135,946,666 | | |
| 18.4 | % |
______________
* Less than 1%.
|
(1) |
Based upon 730,031,144 shares of Common Stock outstanding as of March 27, 2015. |
|
|
|
|
(2) |
Includes 1,368,891 shares held in trust for the benefit of Mr. Magnuson’s relatives. As trustee, Mr. Magnuson has the power to vote such shares, but disclaims any beneficial ownership in the shares. |
|
|
|
|
(3) |
Includes common shares issuable upon conversion of convertible notes payable of 10,000,000, 6,666,667 and 2,000,000 shares to Mr. Pickett, Mr. Sadle and Mr. Crabb, respectively. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE.
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.
The warrants were valued using the Black
Sholes option pricing method with the following assumptions: dividend yield $-0-, volatility of 180.09% and risk free rate of 0.43%.
The determined fair value of the warrants of $250,049 is amortized as financing costs of the term of the related notes (2 years).
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.
As
of the date of the 2013 Notes, the Company is obligated on the 2013 Notes issued to the holders in connection with the offering.
The 2013 Notes are debt obligations arising other than in the ordinary course of business, which constitute direct financial obligations
of the Company.
The Company has accrued interest expense
of $5,422 as of December 31, 2014.
Transactions with Related Persons
Except as set forth below, since January
1, 2010, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which the Company
was or will be a party in which the amount involved exceeds the lesser of $120,000 or one percent of the average of the Company’s
total assets at year end for the last two completed fiscal years; and in which any director, executive officer, other stockholders
of more than 5% of the Company’s Common Stock or any member of their immediate family had or will have a direct or indirect
material interest.
Indemnification Agreements
On March 30, 2011, the Company entered
into Indemnification Agreements with directors Thomas Smith, H. James Magnuson and Arthur P. Dammarell, and executive Ronald Pickett,
President and Chief Executive Officer and Chief Financial Officer.
Employment Contracts and Termination
of Employment and Change-In-Control Arrangements
On December 29, 2010, pursuant to the Merger,
Solar Wind Energy (f/k/a Clean Wind Energy) became a wholly-owned subsidiary of the Company. Solar Wind Energy (f/k/a
Clean Wind Energy) 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.
The Indemnification Agreements provide
that the Company will indemnify the Company's officers and directors, to the fullest extent permitted by law, relating to, resulting
from or arising out of any threatened, pending or completed action, suit or proceeding, or any inquiry or investigation by reason
of the fact that such officer or director (i) is or was a director, officer, employee or agent of the Company or (ii) is or was
serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.. In addition, the Indemnification Agreements provide that the Company will make an advance payment of expenses
to any officer or director who has entered into an Indemnification Agreement, in order to cover a claim relating to any fact or
occurrence arising from or relating to events or occurrences specified in this paragraph, subject to receipt of an undertaking
by or on behalf of such officer or director to repay such amount if it shall ultimately be determined that he is not entitled to
be indemnified by the Company as authorized under this Agreement.
Director Independence
We believe that director Arthur P. Dammarell
is “independent” as that term is defined in Rule 303A.02 of the NYSE Listed Company Manual. For such director
there were no transactions, relationships or arrangements not disclosed in Item 13 above, that were considered by the Board of
Directors under the applicable independence definitions in determining that the director is independent.
ITEM 14. PRINCIPAL ACCOUNTING
FEES AND SERVICES.
The aggregate fees billed to us by RBSM
LLP, our independent registered public accounting firm for professional services rendered during the fiscal years ended December
31, 2014 and 2013 are set forth below.
(1) Audit Fees
RBSM LLP (“RBSM”) has
billed us audit fees of $50,000 and $50,000 during 2014 and 2013, respectively. These fees would relate to the audit of our annual
consolidated financial statements and the review of the interim consolidated financial statements and services in connection with
statutory and regulatory filings or engagements.
(2) Audit-Related Fees
RBSM billed us audit-related fees
in the aggregate amount of $13,000 and $13,400 during 2014 and 2013, respectively. These fees relate to the review of the Form
8-K and review of the Company’s registration statements filed with the SEC.
(3) Tax Fees
RBSM billed us for professional services
relating to tax compliance, tax planning, and tax advice in the amount of $12,500 and $ -0- during 2014 and 2013, respectively.
(4) All Other Fees
No fees of this sort were billed by RBSM during
2014 and 2013.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) |
Documents filed as part of this report. |
|
|
|
|
(1) |
Financial Statements. The following consolidated financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K: |
|
|
|
|
|
Report of Independent Registered Public Accounting Firm |
|
|
|
|
|
Consolidated Balance Sheet as of December 31, 2014 and 2013 |
|
|
|
|
|
Consolidated Statements of Operations for the Years ended
December 31, 2014 and 2013. |
|
|
|
|
|
Consolidated Statements of Changes in Stockholders’
Deficit for the two years ended December 31, 2014 |
|
|
|
|
|
Consolidated Statements of Cash Flows for Years ended December
31, 2014 and 2013 |
|
|
|
|
|
Notes to Consolidated Financial Statements |
|
|
|
|
(2) |
Financial Statement Schedules. |
|
|
|
|
|
Additional Schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or related notes. |
|
|
|
|
(3) |
Exhibits required to be filed by Item 601 of Regulation S-K. |
Exhibits Index
Exhibit |
|
Description |
|
|
|
2.1 |
|
Agreement and Plan of Merger, dated as of December 29, 2010, by and among Superior Silver Mines, Inc., Superior Silver Mines Acquisition Corp., and Clean Wind Energy, Inc. (1) |
2.2 |
|
Plan of Domestication of Superior Silver Mines, Inc., dated December 21, 2010 (1) |
2.3 |
|
Nevada Articles of Domestication of Superior Silver Mines, Inc., dated December 27, 2010 (1) |
2.4 |
|
Idaho Statement of Domestication of Superior Silver Mines, Inc., dated December 22, 2010 (1) |
2.5
2.6 |
|
Articles of Merger by and between Clean
Wind Energy Tower, Inc. and Superior Silver Mines, Inc. (2)
Articles of Merger by and between Solar
Wind Energy Tower Inc. and Clean Wind Energy Tower, Inc. (6) |
3.1 |
|
Articles of Incorporation of Clean Wind Energy Tower, Inc. (1) |
3.2 |
|
Amended Bylaws of Clean Wind Energy Tower, Inc. (3) |
4.1 |
|
Form of Common Stock Certificate (4)
|
4.2 |
|
Form of Securities Purchase Agreement
entered with the 2013 Investors (5) |
4.3 |
|
Form of Convertible Debentures (5) |
10.1 |
|
Letter Agreement between Clean Wind Energy, Inc. and Source Capital Group, Inc., dated November 22, 2010 (1) |
10.2 |
|
Deed of Lease, dated December 1, 2010, by and between CKP One, LLC and Clean Wind Energy, Inc. (1) |
10.3 |
|
Lease Agreement, dated October 20, 2010, and effective November 1, 2010, by and between Office Suites PLUS at Annapolis and Clean Wind Energy, Inc. (1) |
10.4 |
|
Director and Executive Employment Agreement, dated September 22, 2010, by and between Clean Wind Energy, Inc. and Ronald Pickett, and Amendment dated November 22, 2010 (1) |
10.5 |
|
Director and Executive Employment Agreement, dated September 22, 2010, by and between Clean Wind Energy, Inc. and Stephen Sadle, and Amendment dated November 22, 2010 (1) |
10.6 |
|
Director and Executive Employment Agreement, dated September 22, 2010, by and between Clean Wind Energy, Inc. and Robert Crabb, and Amendment dated November 22, 2010 (1) |
10.7 |
|
Executive Employment Agreement, dated September 22, 2010, by and between Clean Wind Energy, Inc. and John W. Hanback, and Amendment dated November 22, 2010 (1) |
10.8 |
|
Executive Employment Agreement, dated September 22, 2010, by and between Clean Wind Energy, Inc. and Itzhak Tepper, PE, and Amendment dated November 22, 2010 (1) |
10.9 |
|
Executive Employment Agreement, dated September 22, 2010, by and between Clean Wind Energy, Inc. and Ownkar Persaud, and Amendment dated November 22, 2010 (1) |
10.10 |
|
Form of Director and Officer Indemnification Agreement (4) |
14.1 |
|
Code of Business Conduct and Ethics |
21.1 |
|
Subsidiaries of the Registrant (4) |
31.1 |
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Ronald W. Pickett |
31.2 |
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Ronald W. Pickett |
32.1 |
|
Certification of Ronald W. Pickett pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 |
|
Certification of Ronald W. Pickett pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
101.INS* |
|
XBRL Instance Document |
101.SCH* |
|
XBRL Schema Document |
101.CAL* |
|
XBRL Calculation Linkbase Document |
101.LAB* |
|
XBRL Label Linkbase Document |
101.PRE* |
|
XBRL Presentation Linkbase Document |
101.DEF* |
|
XBRL Definition Linkbase Document |
______________
|
(1) |
Filed with the registrant's Form 8-K filed with the Securities and Exchange Commission on December 30, 2010 and incorporated herein by reference. |
|
(2) |
Filed with the registrant's Form 8-K filed with the Securities and Exchange Commission on January 21, 2011 and incorporated herein by reference. |
|
(3) |
Filed with the registrant's Form 8-K filed with the Securities and Exchange Commission on December 28, 2010 and incorporated herein by reference. |
|
(4)
|
Filed with the registrant's Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission on April 12, 2011 and incorporated herein by reference. |
|
(5) |
Filed with the registrant's Form 8-K filed with the Securities and Exchange Commission on February 13, 2013 and incorporated herein by reference. |
|
(6) |
Filed with the registrant's Form 8-K filed with the Securities and Exchange Commission on March 11, 2013 and incorporated herein by reference. |
|
|
|
|
* |
To be filed by amendment |
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
SOLAR WIND ENERGY TOWER INC. (f/k/a CLEAN WIND ENERGY TOWER, INC.) |
|
|
|
|
|
Dated: March 31, 2015 |
By: |
/s/ Ronald W. Pickett |
|
|
|
Name: Ronald W. Pickett |
|
|
|
President, Chief Executive Officer and Principal Accounting Officer |
|
Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Dated: March 31, 2015 |
By: |
/s/ Ronald W. Pickett |
|
|
|
Name: Ronald W. Pickett |
|
|
|
President, Chief Executive Officer (PEO), Director |
|
Dated: March 31, 2015 |
By: |
/s/ Robert P. Crabb |
|
|
|
Name: Robert P. Crabb |
|
|
|
Director |
|
Dated: March 31, 2015 |
By: |
/s/ Stephen L. Sadle |
|
|
|
Name: Stephen L. Sadle |
|
|
|
Director |
|
Dated: March 31, 2015 |
By: |
/s/ H. James Magnuson |
|
|
|
Name: H. James Magnuson |
|
|
|
Director |
|
Dated: March 31, 2015 |
By: |
/s/ Arthur P. Dammarell |
|
|
|
Name: Arthur P. Dammarell |
|
|
|
Director |
|
Solar Wind Energy Tower Inc.
Index to Consolidated Financial Statements
|
|
Page |
|
|
|
Report of Independent Registered Public Accounting Firm |
|
F-2 |
|
|
|
Consolidated Balance Sheets as of December 31, 2014 and 2013 |
|
F-3 |
|
|
|
Consolidated Statements of Operations for the years ended December 31, 2014 and 2013 |
|
F-4 |
|
|
|
Consolidated Statements of Changes in Stockholders’ Deficit for the two years ended December 31, 2014 |
|
F-5 |
|
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013 |
|
F-7 |
|
|
|
Notes to Consolidated Financial Statements |
|
F-8 to F-2 |
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”) as of December 31, 2014 and 2013, and the related consolidated statements
of operations, changes in deficit and cash flows for each of the two years in the period ended December 31,
2014. 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,
2014 and 2013, and the consolidated results of operations, and cash flows for each of the two years in the period ended December
31, 2014 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 has not yet generated any revenue and is incapable of generating sufficient cash flow to sustain its current
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 31, 2015
SOLAR WIND ENERGY TOWER, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2014 AND 2013
| |
2014 | | |
2013 | |
ASSETS | |
| | |
| |
Current assets: | |
| | | |
| | |
Cash | |
$ | 88,764 | | |
$ | 61,758 | |
Capitalized financing costs, net | |
| 126,386 | | |
| – | |
Total current assets | |
| 215,150 | | |
| 61,758 | |
| |
| | | |
| | |
Property and equipment, net | |
| 1,888 | | |
| 2,284 | |
| |
| | | |
| | |
Other assets: | |
| | | |
| | |
Capitalized financing costs, net | |
| 37,697 | | |
| – | |
Deposits | |
| 129,259 | | |
| 2,300 | |
| |
| | | |
| | |
Total assets | |
$ | 383,994 | | |
$ | 66,342 | |
| |
| | | |
| | |
LIABILITIES AND DEFICIT | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 200,391 | | |
$ | 171,245 | |
Accrued liabilities and expenses | |
| 369,897 | | |
| 737,964 | |
Advances from stockholders/officers | |
| 170,000 | | |
| 170,000 | |
Settlement payable | |
| 30,000 | | |
| – | |
Notes payable | |
| 268,270 | | |
| 358,770 | |
Convertible notes payable, net of unamortized debt discount of $650,053 and $353,129, respectively | |
| 599,457 | | |
| 278,266 | |
Convertible notes payable, related party, net of unamortized debt discount of $-0- and $131,047, respectively | |
| 280,000 | | |
| 148,953 | |
Derivative liabilities | |
| 1,384,528 | | |
| 689,093 | |
Total current liabilities | |
| 3,302,543 | | |
| 2,554,291 | |
| |
| | | |
| | |
Long term debt: | |
| | | |
| | |
Notes payable, related party | |
| 385,000 | | |
| – | |
Notes payable | |
| 80,000 | | |
| – | |
Convertible notes payable, net of unamortized debt discount of $103,315 | |
| – | | |
| 24,456 | |
Total liabilities | |
| 3,767,543 | | |
| 2,578,747 | |
| |
| | | |
| | |
Commitments and contingencies | |
| – | | |
| – | |
| |
| | | |
| | |
Deficit: | |
| | | |
| | |
Preferred stock, par value $0.0001 per share; 10,000,000 shares authorized; none issued and outstanding as of December 31, 2014 and 2013 | |
| – | | |
| – | |
Common stock, par value $0.0001 per share; 900,000,000 and 500,000,000 shares authorized as of December 31, 2014 and 2013, respectively; 626,745,923 and 370,728,168 shares issued and outstanding as of December 31, 2014 and 2013, respectively | |
| 62,675 | | |
| 37,073 | |
Common stock to be issued | |
| 420,000 | | |
| 420,000 | |
Additional paid in capital | |
| 10,119,764 | | |
| 5,896,890 | |
Accumulated deficit | |
| (13,984,186 | ) | |
| (8,866,368 | ) |
Deficit attributable to Solar Wind Energy Tower, Inc. | |
| (3,381,747 | ) | |
| (2,512,405 | ) |
Non-controlling interest | |
| (1,802 | ) | |
| – | |
Total deficit | |
| (3,383,549 | ) | |
| (2,512,405 | ) |
| |
| | | |
| | |
Total liabilities and stockholders' deficit | |
$ | 383,994 | | |
$ | 66,342 | |
See the accompanying notes to the consolidated financial statements
SOLAR WIND ENERGY TOWER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| |
Years ended December 31, | |
| |
2014 | | |
2013 | |
OPERATING EXPENSES: | |
| | | |
| | |
Research and development | |
$ | 156,251 | | |
$ | 31,304 | |
Selling, general and administrative | |
| 1,870,266 | | |
| 1,792,769 | |
Depreciation | |
| 2,520 | | |
| 4,480 | |
Total operating expenses | |
| 2,029,037 | | |
| 1,828,553 | |
| |
| | | |
| | |
Loss from operations | |
| (2,029,037 | ) | |
| (1,828,553 | ) |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
Interest expense | |
| (4,212,671 | ) | |
| (1,355,537 | ) |
Gain on settlement of debt | |
| 32,985 | | |
| – | |
Gain on change in fair value of derivative liabilities | |
| 1,089,103 | | |
| 782,556 | |
| |
| | | |
| | |
Loss before provision for income taxes | |
| (5,119,620 | ) | |
| (2,401,534 | ) |
| |
| | | |
| | |
Provision for income taxes (benefit) | |
| – | | |
| – | |
| |
| | | |
| | |
Net loss | |
| (5,119,620 | ) | |
| (2,401,534 | ) |
| |
| | | |
| | |
Non-controlling interest | |
| 1,802 | | |
| – | |
| |
| | | |
| | |
NET LOSS ATTRIBUTABLE TO SOLAR WIND ENERGY TOWER, INC. | |
$ | (5,117,818 | ) | |
$ | (2,401,534 | ) |
| |
| | | |
| | |
Net loss per common share, basic and diluted | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | |
Weighted average number of common shares outstanding, basic and diluted | |
| 497,356,871 | | |
| 308,150,223 | |
See the accompanying notes to the consolidated financial statements
SOLAR WIND ENERGY TOWER, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
TWO YEARS ENDED DECEMBER 31, 2014
| |
Preferred stock | | |
Common stock | | |
Common to be Issued | | |
Additional Paid In | | |
Accumulated | | |
Non controlling | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Interest | | |
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.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
TWO YEARS ENDED DECEMBER 31, 2014
| |
Preferred stock | | |
Common stock | | |
Common to be Issued | | |
Additional Paid In | | |
Accumulated | | |
Non-controlling | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Interest | | |
Total | |
Balance, January
1, 2014 | |
| – | | |
$ | – | | |
| 370,728,168 | | |
$ | 37,073 | | |
| 6,000,000 | | |
$ | 420,000 | | |
$ | 5,896,890 | | |
$ | (8,866,368 | ) | |
$ | – | | |
$ | (2,512,405 | ) |
Shares issued in settlement
of debt | |
| – | | |
| – | | |
| 248,392,755 | | |
| 24,840 | | |
| – | | |
| – | | |
| 2,836,298 | | |
| – | | |
| – | | |
| 2,861,138 | |
Shares issued for consulting
services rendered | |
| – | | |
| – | | |
| 500,000 | | |
| 50 | | |
| – | | |
| – | | |
| 2,200 | | |
| – | | |
| – | | |
| 2,250 | |
Sale of common stock | |
| – | | |
| – | | |
| 7,125,000 | | |
| 712 | | |
| – | | |
| – | | |
| 24,288 | | |
| – | | |
| – | | |
| 25,000 | |
Reclassify fair value of warrants
from equity to liability | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (13,202 | ) | |
| – | | |
| – | | |
| (13,202 | ) |
Fair value of warrants issued
in connection with notes payable | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 310,969 | | |
| – | | |
| – | | |
| 310,969 | |
Fair value of warrants issued
as director compensation | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 34,567 | | |
| – | | |
| – | | |
| 34,567 | |
Reclassify fair value of warrants
from liability to equity | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 7,677 | | |
| – | | |
| – | | |
| 7,677 | |
Reclassify fair value of debt
derivative to equity upon note extinguishment | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 308,198 | | |
| – | | |
| – | | |
| 308,198 | |
Fair value of warrants issued
for services | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 72,076 | | |
| – | | |
| – | | |
| 72,076 | |
Stock based compensation | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 639,803 | | |
| – | | |
| – | | |
| 639,803 | |
Net loss | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (5,117,818 | ) | |
| (1,802 | ) | |
| (5,119,620 | ) |
Balance,
December 31, 2014 | |
| – | | |
$ | – | | |
| 626,745,923 | | |
$ | 62,675 | | |
| 6,000,000 | | |
$ | 420,000 | | |
$ | 10,119,764 | | |
$ | (13,984,186 | ) | |
$ | (1,802 | ) | |
$ | (3,383,549 | ) |
See the accompanying
notes to the consolidated financial statements
SOLAR WIND ENERGY TOWER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| |
Year ended December 31, | |
| |
2014 | | |
2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net loss | |
$ | (5,119,620 | ) | |
$ | (2,401,534 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation | |
| 2,520 | | |
| 4,480 | |
Amortization of debt discounts | |
| 1,646,605 | | |
| 816,642 | |
Amortization of financing costs | |
| 89,036 | | |
| 33,823 | |
Non cash interest | |
| 2,272,821 | | |
| 380,741 | |
Stock based compensation | |
| 642,053 | | |
| 642,889 | |
Fair value of warrants issued in connection with services and notes payable, respectively | |
| 106,643 | | |
| 43,568 | |
Gain on settlement of debt | |
| (32,985 | ) | |
| – | |
Gain from change in fair value of derivative liabilities | |
| (1,089,102 | ) | |
| (782,556 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Advances from stockholders/officers | |
| – | | |
| (15,000 | ) |
Prepaid expenses | |
| – | | |
| – | |
Settlement payable | |
| (60,000 | ) | |
| – | |
Accounts payable and accrued expenses | |
| 196,293 | | |
| 265,767 | |
Net cash used in operating activates | |
| (1,345,736 | ) | |
| (1,011,180 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Purchase of property and equipment | |
| (2,124 | ) | |
| – | |
Payment of option to acquire property | |
| (125,000 | ) | |
| – | |
Payment of long term deposit | |
| (2,700 | ) | |
| – | |
Net cash used in investing activities | |
| (129,824 | ) | |
| – | |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds from sale of common stock | |
| 25,000 | | |
| 65,500 | |
Proceeds from issuance of note payable | |
| 80,000 | | |
| 75,000 | |
Proceeds from issuance of convertible notes payable | |
| 1,684,000 | | |
| 925,677 | |
Repayments of convertible notes payable | |
| (286,434 | ) | |
| (7,000 | ) |
Net cash provided by financing activities | |
| 1,502,566 | | |
| 1,059,177 | |
| |
| | | |
| | |
Net increase in cash | |
| 27,006 | | |
| 47,997 | |
Cash, beginning of period | |
| 61,758 | | |
| 13,761 | |
| |
| | | |
| | |
Cash, end of period | |
$ | 88,764 | | |
$ | 61,758 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | |
| | |
| |
| | | |
| | |
Interest paid | |
$ | – | | |
$ | – | |
Income taxes paid | |
$ | – | | |
$ | – | |
| |
| | | |
| | |
Non cash investing and financing activities: | |
| | | |
| | |
Fair value of warrants issued in connection with notes payable | |
$ | 310,969 | | |
$ | – | |
Notes payable issued in settlement of accrued officer salaries | |
$ | 385,000 | | |
$ | – | |
Common stock issued in settlement of debt | |
$ | 2,861,138 | | |
$ | 889,040 | |
See the accompanying notes to the consolidated financial statements
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
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., 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.
In April 2014, the Company organized Arizona
Green Power, LLC, an Arizona limited liability company for the purpose to acquire development property from the City of San Luis,
Arizona. In connection with financing of the project, the Company reduced its ownership interest to 98.67% in connection with the
issuance of a note payable by Arizona Green Power, LLC on April 7, 2014.
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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
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.
Long-Lived Assets
The Company reviews its 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, 2014 and 2013 were 874,144,912 and 473,674,550, respectively.
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, 2014 and 2013 was $642,053
and $642,889, respectively.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
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 $156,251
and $31,304 research and development costs for the years ended December 31, 2014 and 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.
Capitalized Financing Costs
Capitalized financing costs represent costs
incurred in connection with obtaining the debt financing. These costs are amortized ratably and charged to financing
expenses over the term of the related debt. The amortization for the year ended December 31, 2014 was $89,036 and $33,823, respectively.
Accumulated amortization of deferred financing costs was $89,036 at December 31, 2014. The capitalized financing costs related
to 2013 has been fully amortized as of December 31, 2013.
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.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
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 $(5,119,620) for the year ended
December 31, 2014, accumulated deficit of $(13,984,186) and total current liabilities in excess of current assets of $(3,087,393)
as of December 31, 2014.
The Company has not yet generated any revenue
and is incapable of generating sufficient cash flows to sustain its current operations. 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, 2014, 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 – DEPOSITS
Long-term deposits are comprised of a $125,000 deposit to acquire
approximately 40 acres of land in Yuma County, Arizona at $46,500 per acre. The option requires monthly payments of $12,500 for
ten months beginning in June 2015 and may be extended an additional six months with a $250,000 extension fee. All deposits are
non-refundable.
In addition, the Company has an aggregate of $4,259 in long
term lease deposits.
NOTE 5 – ACCRUED LIABILITIES AND EXPENSES
Accrued liabilities and expenses as of
December 31, 2014 and 2013 consist of the following:
| |
2014 | | |
2013 | |
Accrued payroll | |
$ | 140,457 | | |
$ | 505,118 | |
Accrued stock purchase warrants | |
| 29,400 | | |
| 29,400 | |
Accrued lawsuit (Notes 7 and 12 below) | |
| – | | |
| 122,985 | |
Accrued interest and other | |
| 200,040 | | |
| 80,461 | |
Total | |
$ | 369,897 | | |
$ | 734,964 | |
NOTE 6 – ADVANCES FROM SHAREHOLDERS/OFFICERS
Advances from shareholders are comprised of the fair value
of common stock pledged as collateral by shareholder. As disclosed 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 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.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 7 – SETTLEMENT PAYABLE
In August 2014, the Company settled the
litigation with Hanover Holdings I, LLC, described in Note 14 below, for a cash of $90,000 payable in six equal monthly installments
of $15,000 beginning September 5, 2014. In connection with the settlement, the Company recognized a gain on settlement of debt
of $32,985 during the year ended December 31, 2014. As of December 31, 2014, the outstanding balance was $30,000, which has been
repaid subsequent to December 31, 2014.
NOTE 8 – NOTES PAYABLE
| |
2014 | | |
2013 | |
Promissory notes issued June 20, 2012 | |
$ | 268,270 | | |
$ | 268,270 | |
Promissory note issued June 6, 2013 | |
| – | | |
| 90,500 | |
Note payable issued April 7, 2014 | |
| 80,000 | | |
| – | |
Total | |
| 348,270 | | |
| 358,770 | |
Less current portion | |
| 268,270 | | |
| 358,770 | |
Long term portion | |
$ | 80,000 | | |
$ | – | |
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 11). 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 remaining
unpaid balance was $90,500. On July 11, 2014, the Company issued 7,066,131 shares of its common stock in fully settlement of the
outstanding obligation.
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).
NOTE 9 – CONVERTIBLE NOTES PAYABLE
Convertible notes payable are comprised of the following:
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
| |
2014 | | |
2013 | |
Convertible promissory notes, due December 31, 2014, net of unamortized debt discount of $-0- and $119,274, respectively | |
$ | 239,000 | | |
$ | 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 | |
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 | |
Convertible promissory note, due April 4, 2015, net of unamortized debt discount of $4,773 | |
| 12,727 | | |
| – | |
Convertible promissory note, due June 9, 2015, net of unamortized debt discount of $83,184 | |
| 106,576 | | |
| – | |
Convertible promissory note, due May 11, 2015, net of unamortized debt discount of $117,141 | |
| 136,359 | | |
| – | |
Convertible promissory note, due October 14, 2015, net of unamortized debt discount of $259,479 | |
| 70,521 | | |
| – | |
Convertible promissory note, due July 10, 2015, net of unamortized debt discount of $37,158 | |
| 16,342 | | |
| – | |
Convertible promissory note, due October 10, 2015, net of unamortized debt discount of $61,058 | |
| 17,692 | | |
| – | |
Convertible promissory note, due December 30, 2015, net of unamortized debt discount of $87,260 | |
| 240 | | |
| – | |
Total | |
| 599,457 | | |
| 302,722 | |
Less current portion | |
| (599,457 | ) | |
| (278,266 | ) |
Long term portion | |
$ | – | | |
$ | 24,456 | |
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
Asher notes:
In 2013 and 2014, 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, 2014 and 2013 of $-0- and $135,000, 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% 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 nine months
ended September 30, 2014, the Company received two tranches of net proceeds in the amount of $70,000, of which $50,000 was repaid.
As of December 31, 2014 and 2013, the aggregate principal amount outstanding under the July 11, 2012 issued convertible promissory
note was $-0- and $90,395, respectively. On July 11, 2014, the Company issued 4,624,074 shares of its common stock in full settlement.
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.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 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.
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.
On July 8, 2014, the Company paid $40,178.82
against the note in a scheduled monthly installment followed by a payment on August 11, 2014 of the balance due of $31,078.45 to
pay the note in full. In as such as Typenex was disputing the Company’s right to pay in cash, these final two installments
were placed in escrow account through the Company’s counsel.
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 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.
During the year ended December 31, 2014,
the Company issued an aggregate of 3,249,513 shares of common stock in full settlement.
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.
During the year ended December 31, 2014,
the Company issued an aggregate of 10,375,260 shares of common stock in full settlement.
On August 7, 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 $253,500 (the "Note"). The financing closed on August 7, 2014. The total net proceeds the Company
received from this Offering was $250,000.
The Note bears interest at the rate of
8% per annum. All interest and principal must be repaid on May 11, 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. As of December 31, 2014, the aggregate principal amount outstanding was $253,500.
On October 8, 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 $53,500 (the "Note"). The financing closed on October 8, 2014. The total net proceeds the Company
received from this Offering was $50,000.
The Note bears interest at the rate of
8% per annum. All interest and principal must be repaid on July 10, 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. As of December 31, 2014, the aggregate principal amount outstanding was $53,500.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
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.
During the year ended December 31, 2014,
the Company issued an aggregate of 4,299,201 shares of common stock in full settlement.
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.
During the year ended December 31, 2014,
the Company issued an aggregate of 6,857,975 shares of common stock in full settlement.
WHC Capital, LLC
On December 30, 2014, the Company entered
into a Securities Purchase Agreement with WHC Capital LLC ("WHC"), for the sale of an 8% convertible note in the principal
amount of $87,500 (the "Note"). The financing closed on December 30, 2014. The total net proceeds the Company received
from this Offering was $82,000.
The Note bears interest at the rate of
8% per annum. All interest and principal must be repaid on December 30, 2015. The Note is convertible into common stock, at Adar’s
option, at a 42% discount to the average three lowest closing prices of the common stock during the 10 trading day period prior
to conversion. As of December 31, 2014, the aggregate principal amount outstanding was $87,500.
LG Capital Funding, LLC
On April 4, 2014, the Company entered into
a Securities Purchase Agreement with LG Capital Funding, LLC ("LG"), for the sale of an 8% convertible note in the principal
amount of $35,000 (the "Note"). The financing closed on April 4, 2015. The total net proceeds the Company received from
this Offering was $32,000.
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. 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.
During the year ended December 31, 2014,
the Company issued 6,135,586 shares of its common stock in settlement of $17,500 principal. As of December 31, 2014, the aggregate
principal amount outstanding was $17,500.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
On October 10, 2014, the Company entered
into a Securities Purchase Agreement with LG Capital Funding, LLC ("LG"), for the sale of an 8% convertible note in the
principal amount of $78,750 (the "Note"). The financing closed on October 10, 2014. The total net proceeds the Company
received from this Offering was $75,000.
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, 2014, the aggregate principal amount outstanding was $78,750.
JDF Financial Capital, Inc.
On June 9, 2014, the Company entered a
financing transaction by entering into a Purchase agreement dated June 3, 2014 (the “Purchase Agreement”) with JDF
Capital Inc. (the “Purchaser”) for an aggregate principal amount of $885,000 (the “Purchase Price”). Pursuant
to the Purchase Agreement, the Company issued the following to the Purchaser: (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 $0.0001 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
$0.0001 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 exercise price and number of shares
of the Company’s common stock issuable under the Warrants are subject to adjustments for stock dividends, splits, combinations,
subsequent rights offerings, pro rata distributions and any issuance of securities below the exercise price of the Warrants. Any
adjustment to the exercise price shall similarly cause the number of warrant shares to be adjusted proportionately so that the
total value of the Warrants shall remain the same.
The Notes earn an interest rate of 10%
per annum and a maturity date of 12 months from the date of the principal amount advanced. The Notes are convertible any time after
the issuance date of the Note, and the Purchaser has the right to convert the Note into shares of the Company’s common stock
at a conversion price equal to 42% discount to the lowest closing price of the common stock for the 15 trading days immediately
prior the conversion date, subject to a maximum conversion price of $0.03 per share.
In the event of default, the Purchaser
has the right to require the Company to repay in cash all or a portion of the Note at a price equal to 120% of the aggregate principal
amount of the Note plus all accrued but unpaid interest. In addition, in the event of a Major Transaction (as defined in the Note),
the Purchaser has the right to require the Company to prepaid all or a portion of the Note at a price equal to 110% of the aggregate
principal amount plus all accrued but unpaid interest. In the event of a Triggering Event (as defined in the Note), the Purchaser
has the right to require the Company to prepaid all or a portion of the Note at a price equal to the sum of (i) the greater of
(a) 120% of the aggregate principal amount plus all accrued but unpaid interest and (ii) all other costs, expenses and liquidated
damages due in respect of the Note and other transaction documents under the Purchase Agreement.
The first tranche of the Note has been
funded to the Company by the Purchaser upon execution of the Purchase Agreement, in the principal amount of $555,000, consisting
of the aggregate principal sum of $500,000 advanced by the Holder, $5,000 in expenses incurred by the Purchaser and 10% prepaid
interest per annum over 12 months. The Purchaser also agreed to fund the Company the second tranche of the Note in the principal
amount of $330,000, consisting of a cash payment of $300,000 and 10% pre-paid interest, within 15 business days of effectiveness
of the registration statement.
The Second tranche of the Note has been
funded to the Company by the Purchaser upon execution of the Purchase Agreement, in the principal amount of $330,000, consisting
of the aggregate principal sum of $300,000 advanced by the Holder 10% prepaid interest per annum over 12 months.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
Pursuant to the Purchase Agreement, the
Company is obligated to file a registration statement with the Securities and Exchange Commission (the “SEC”), not
later than 60 days after the closing date, to cover the shares to be issued upon conversion of the Note and upon exercise of the
Warrants. In the event the Company did not (i) file the registration statement within the required timeframe, (ii) cause the registration
statement to be declared effective by the SEC within 120 days following the closing date, (iii) cause the registration statement
to be declared effective by the SEC within 5 trading days following the date on which the Company is notified by the SEC that the
registration statement will not be reviewed or is no longer subject to further review and comments, or (iv) the registration statement
ceases to be effective for over 20 trading days, then the Company shall pay to the Purchaser liquidated damages equal to 2% of
the purchase price per month, not to exceed a total of 6% of the purchase price paid by the Purchaser. On October 8, 2014, the
Company’s filed registration statement became effective.
During the year ended December 31, 2014,
the Company issued 67,076,054 shares of its common stock in settlement of $365,240 principal. As of December 31, 2014, the aggregate
principal amount outstanding was $519,760.
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.
Derivative summary:
At the inception of the 2014 Notes, the
Company determined the aggregate fair value of $3,821,420 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 197.94%, (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 $0.0025 to $0.0271 per share.
The determined fair value of the debt derivatives
of $3,821,420 was charged as a debt discount up to the net proceeds of the note with the remainder of $2,272,821 charged to current
period operations as non-cash interest expense.
At December 31, 2014, the Company marked
to market the fair value of the debt derivatives and determined a fair value of $1,342,810. The Company recorded a gain from change
in fair value of debt derivatives of $1,057,354 and $817,243 for the year ended December 31, 2014 and 2013, respectively. 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 194.66%, (3) weighted average risk-free interest rate of 0.04% to 0.25%, (4) expected
life of 0.09 to 1.0 years, and (5) estimated fair value of the Company’s common stock of $0.0071 per share.
The charge of the amortization of debt
discounts and costs for the year ended December 31, 2014 and 2013 was $1,515,558 and $816,642, respectively. which was accounted
for as interest expense. Also, the Company has accrued interest expense of $52,326 as of December 31, 2014.
During the year ended December 31, 2014,
the Company issued an aggregate of 248,392,755 shares of its common stock in settlement of the convertible note payable and related
interest.
NOTE 10 – 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
The warrants were valued using the Black
Sholes option pricing method with the following assumptions: dividend yield $-0-, volatility of 180.09% and risk free rate of 0.43%.
The determined fair value of the warrants of $250,049 is amortized as financing costs of the term of the related notes (2 years).
The Company has accrued interest expense
of $5,422 as of December 31, 2014.
NOTE 11 – 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. The Notes currently in default
Due to the nature of the notes described
in Note 9 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 note.
At December 31, 2014, the Company marked
to market the fair value of the debt derivatives and determined a fair value of $41,718. The Company recorded a gain from change
in fair value of debt derivatives of $31,192 for the year ended December 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 194.66%, (3) weighted average risk-free interest rate of 0.04%, (4) expected life of 0.25 years, and (5) estimated
fair value of the Company’s common stock of $0.0071 per share.
The charge of the amortization of debt
discounts and costs for the years ended December 31, 2014 was $131,047 and $131,047, respectively; which was accounted for as interest
expense. Also, the Company has accrued interest expense of $44,833 as of December 31, 2014.
NOTE 12 – DERIVATIVE LIABILITIES
As described in Notes 9 and 11 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 6 and 8 for assumptions used to determine fair values.
During the year ended December 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.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
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. On April 2, 2014, the Company increased its authorized shares
to 900,000,000. Accordingly, the fair value of the warrants at April 2, 2014 of $7,677 was reclassified from derivative liabilities
to additional paid in capital.
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 April 2, 2014, the Company marked to
market the fair value of the warrant derivative and determined a fair value of $7,677. The Company recorded a gain from change
in fair value of derivative of $557 and $5,524 for the year ended December 31, 2014 and 2013, respectively. 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 159.32%, (3) weighted average risk-free interest rate of 1.62%, (4) expected life of 4.10 years,
and (5) estimated fair value of the Company’s common stock of $0.0045 per share.
NOTE 13 – 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 14 – COMMITMENTS AND CONTINGENCIES
Lease Obligations
The Company leases a suite of offices
and shared support services at 1997 Annapolis Exchange Parkway, Suite 300, Annapolis, Maryland 21401 annual lease. In addition, the Company maintains living quarters in Annapolis on an annual lease expiring in 2015.
Rental expenses charged to operations for
the year ended December 31, 2014 and 2013 was $37,651 and $23,916, 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.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
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.
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) month 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) month salary and benefits for termination without cause. |
Robert P. Crabb | |
Secretary, Chief Marketing Officer | |
| |
$ | 60,000 | | |
| |
|
Terms
to modify the 1 year contract extension by mutual consent have been agreed to by the Officers and Directors. Under
the modification and extension, the contracts will be extended 4 additional years with current salaries being unchanged.
Provisions for automatic salary increases based on specific events related to business development successes, rights for the
officers to convert any accrued salary into Company notes, and rights to receive warrants to purchase Company stock at market
plus 20% premium at the time of the grant while notes are outstanding will be incorporated in the new contracts. The parties
have mutually agreed to a stock option plan, the specific terms to be negotiated as part of the final contract.
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. During the year ended December 31, 2014, the
Company settled the outstanding claim for $90,000, payable in six monthly payments of $15,000 with a gain on settlement of debt
of $32,985. As of December 31, 2014, the unpaid balance was $30,000, which has been repaid subsequent to December 31, 2014.
Typenex Co-Investment, LLC filed suit against
the Company on September 4, 2014 in the United States District Court, Northern District of Illinois, Eastern Division claiming
that the Company breached a contract it entered into with Typenex, and that Typenex was entitled to convert any portion of the
outstanding balance of their monies the Company allegedly owed to Typenex into validly issued, fully paid and non-assessable shares
of Solar Wind Energy Tower Inc. common shares. Typenex seeks money damages and court orders enjoining the Company from further
breaches. In a related suit filed September 9, 2014 in the United States District Court for the District of Idaho, Typenex claims
that the Company’s transfer agent violated certain transfer instructions issued by the Company. The Company has not been
named as a defendant in this suit and the parties have agreed that the transfer agent will be part of the Northern District litigation.
(The Idaho litigation has not yet been dismissed) The Company maintains that it provided cash to retire the debt owed to Typenex,
and denies that Typenex was entitled to the conversion into Company stock.
The Company has retained counsel, has filed
counterclaims against Typenex based upon Typenex’s failure to perform its obligations and intends to vigorously defend itself
and pursue counterclaims.
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.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 15 – 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, 2014 and 2013, the Company did not have any preferred
stock issued and outstanding.
Common stock
The Company has authorized 900,000,000
and 500,000,000 shares of common stock, with a par value of $0.0001 per share as of December 31, 2014 and 2013, respectively. As
of December 31, 2014 and 2013, the Company has 599,033,920 and 370,728,168, respectively, shares of common stock issued and outstanding.
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.
On January 15, 2015, subsequent to the
financial statements, the Company’s majority stockholders approved to amend the Articles of Incorporation to increase of
authorized shares of common stock from 900,000,000 to 1,300,000,000.
During the year ended December 31, 2014,
the Company issued an aggregate of 500,000 shares of common stock for services rendered of $2,250.
During the year ended December 31, 2014,
the Company issued an aggregate of 248,392,755 shares of common stock in settlement of $1,125,194 of convertible notes payable
and related accrued interest.
During the year ended December 31, 2014,
the Company issued 7,125,000 of common stock for net proceeds of $25,000.
On May 20, 2014, the Company issued 500,000
shares of its common stock for investor relations services valued at $2,250.
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, 2014 and 2013, the Company recorded $639,803 and $560,969, respectively, as stock based compensation.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 16 – 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, 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 | |
$ | 0.00648 | | |
| 59,413,581 | | |
| 1.30 | | |
$ | 0.00648 | | |
| 59,413,581 | | |
$ | 0.00648 | |
| 0.00860 | | |
| 11,627,908 | | |
| 1.26 | | |
| 0.00860 | | |
| 11,627,908 | | |
| 0.00860 | |
| 0.02000 | | |
| 5,000,000 | | |
| 2.47 | | |
| 0.02000 | | |
| 5,000,000 | | |
| 0.02000 | |
| 0.04000 | | |
| 8,750,000 | | |
| 0.02 | | |
| 0.04000 | | |
| 8,750,000 | | |
| 0.04000 | |
| 0.05000 | | |
| 1,920,000 | | |
| 1.19 | | |
| 0.05000 | | |
| 1,920,000 | | |
| 0.05000 | |
| 0.05000 | | |
| 7,000,000 | | |
| 0.18 | | |
| 0.05000 | | |
| 7,000,000 | | |
| 0.05000 | |
| 0.10000 | | |
| 2,187,101 | | |
| 3.40 | | |
| 0.10000 | | |
| 2,187,101 | | |
| 0.10000 | |
| | | |
| 95,898,590 | | |
| 1.28 | | |
| | | |
| 95,898,590 | | |
$ | 0.01737 | |
Transactions involving the Company’s warrant issuance
are summarized as follows:
| |
Number of Shares | | |
Weighted Average Price Per Share | |
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 | |
Granted | |
| 93,711,489 | | |
| 0.01 | |
Exercised | |
| – | | |
| – | |
Canceled or expired | |
| – | | |
| – | |
Outstanding at December 31, 2014 | |
| 95,898,590 | | |
$ | 0.02 | |
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 April 4, 2014, in recognition of past
services by the two (2) Directors, the Company approved for issuance of an aggregate of 2,500,000 and 5,813,954 warrants to purchase
the Company’s common stock at $0.02 and $0.0086 per share for the vesting period of two years.
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
0.43%. The determined fair value of the warrants of $33,181 was charged to current period operations.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
As described in Note 8 on April 7, 2014,
the Company issued 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 in connection with the issuance of a note. 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).
As described in Note 10, 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 in connection
with the issuance of notes payable.
The warrants were valued using the Black
Sholes option pricing method with the following assumptions: dividend yield $-0-, volatility of 180.09% and risk free rate of 0.43%.
The determined fair value of the warrants of $250,049 is amortized as financing costs of the term of the related notes (2 years).
As described in Note 9, the Company (ii)
issued a warrant to purchase an aggregate of 7,000,000 shares of the Company’s common stock, par value $0.0001 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) issued a warrant to purchase an aggregate of 8,750,000 shares of the Company’s common stock, par
value $0.0001 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. On October 8, 2014, upon effectiveness of the registration statement, the warrants were valued using the Black Sholes
option pricing method with the following assumptions: dividend yield $-0-, volatility of 189.33% and risk free rate of 0.01% to
0.05%. The determined fair value of the warrants of $57,850 was charged to current period operations.
On November 25, 2014, the Company issued
2,500,000 and 5,813,954 warrants to purchase the Company’s common stock for services, exercisable at $0.02 and $0.0086 per
share for five years, respectively.
The warrants were valued using the Black
Sholes option pricing method with the following assumptions: dividend yield $-0-, volatility of 190.27% and risk free rate of 0.94%.
The determined fair value of the warrants of $72,076 was charged to current period operations.
NOTE 17- NON CONTROLLING INTEREST
In April 2014, the Company organized Arizona
Green Power, LLC, an Arizona limited liability company for the purpose to acquire development property from the City of San Luis,
Arizona. At the time of formation, Arizona Green Power, LLC did not have any significant assets or liabilities. In connection with
financing of the project, the Company reduced its ownership interest to 98.67% in connection with the issuance of a note payable
by Arizona Green Power, LLC on April 7, 2014.
A reconciliation of the non-controlling
loss attributable to the Company:
Net loss attributable to non-controlling
interest for the year ended December 31, 2014:
| |
2014 | |
Net loss | |
$ | 135,117 | |
Average Non-controlling interest percentage | |
| 1.33 | % |
Net loss attributable to the non-controlling interest | |
$ | 1,802 | |
The following table summarizes the changes in non-controlling
interest from December 31, 2013 to December 31, 2014:
Balance, December 31, 2013 | |
$ | – | |
Transfer (to) from the non-controlling interest as a result of change in ownership | |
| – | |
Net loss attributable to the non-controlling interest | |
| (1,802 | ) |
Balance, December 31, 2014 | |
$ | (1,802 | ) |
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 18 – 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.
For the period from July 26,
2010 (date of inception) through December 31, 2014, the Company had available for U.S federal income tax purposes net
operating loss carryovers of approximately $11,820,000, which expiring through the year of 2034. The net operating loss
carryovers may be subject to limitations under Internal Revenue Code “Section 382”, 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 carryforward, 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, 2014 and 2013 consists of the following:
| |
2014 | | |
2013 | |
Federal: | |
| | | |
| | |
Current | |
$ | – | | |
$ | – | |
Deferred | |
| 1,481,000 | | |
| 1,266,000 | |
| |
| 1,481,000 | | |
| 1,266,000 | |
State and local: | |
| | | |
| | |
Current | |
| – | | |
| – | |
Deferred | |
| 329,000 | | |
| 196,000 | |
| |
| 329,000 | | |
| 196,000 | |
| |
| | | |
| | |
Change in valuation allowance | |
| (1,810,000 | ) | |
| (1,462,000 | ) |
| |
| | | |
| | |
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, 2014 and 2013 as follows:
| |
December 31, 2014 and 2013 | |
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, | |
| |
2014 | | |
2013 | |
Deferred tax assets (liabilities): | |
| | | |
| | |
Stock based compensation issued and to be issued for services rendered | |
$ | 642,054 | | |
$ | 817,000 | |
Net operating loss carry forward | |
| 838,946 | | |
| 449,000 | |
Less: valuation allowance | |
| (1,481,000 | ) | |
| (1,266,000 | ) |
Net deferred tax asset | |
$ | – | | |
$ | – | |
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
The Company has not yet filed its tax returns
for the period from July 26, 2010 (date of inception) through December 31, 2014.
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 19 – 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, 2014:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Long-term investments |
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
Total |
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
Derivative liabilities |
|
$ |
– |
|
|
$ |
– |
|
|
$ |
1,384,528 |
|
|
$ |
1,384,528 |
|
Total |
|
$ |
– |
|
|
$ |
– |
|
|
$ |
1,384,528 |
|
|
$ |
1,384,528 |
|
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
Years ended December 31, 2014 and 2013:
| |
Derivative Liability | |
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 | |
| |
| | |
Transfers out at mark-market value on date of payoff or conversion | |
| (2,042,407 | ) |
| |
| | |
Transfers in (out) upon reclassification from (to) equity | |
| 5,525 | |
| |
| | |
Transfers in upon initial fair value of derivative liability | |
| 3,821,420 | |
| |
| | |
Gain from change in fair value of derivative liability | |
| (1,089,103 | ) |
| |
| | |
Balance, December 31, 2014 | |
| 1,384,528 | |
| |
| | |
Total gain for the period included in earnings relating to the derivative liabilities held at December 31, 2014 | |
$ | 1,089,103 | |
Level 3 Liabilities were comprised of our
bifurcated convertible debt features on our convertible notes.
NOTE 20 – SUBSEQUENT EVENTS
In January 2015, the Company issued an
aggregate of 8,000,000 shares of its common stock in settlement of convertible notes payable of $29,696.
In February 2015, the Company issued an
aggregate of 56,772,987 shares of its common stock in settlement of convertible notes payable and accrued interest of $202,545.
In March 2015, the Company issued an aggregate
of 38,512,224 shares of its common stock in settlement of convertible notes payable of $104,952.
The Company claims an exemption from the
registration requirements of the Securities Act of 1933 (the “Securities Act”) for the private placement of these securities
pursuant to Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder. The investors are accredited investors
as defined in Rule 501 of Regulation D promulgated under the Securities Act.
EXHIBIT 31.1
CERTIFICATION
I, Ronald W. Pickett, certify that:
1. I
have reviewed this annual report on Form 10-K of Solar Wind Energy Tower, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The
registrant other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 31, 2015
By: /s/ Ronald W. Pickett
Ronald W. Pickett
President/Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION
I, Ronald W. Pickett, certify that:
1. I
have reviewed this annual report on Form 10-K of Solar Wind Energy Tower, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The
registrant other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 31, 2015
By: /s/ Ronald W. Pickett
Ronald W. Pickett
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Annual Report of Solar Wind Energy Tower,
Inc. (the "Company") on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), I, Ronald W. Pickett, President/Chief Executive Officer of Solar Wind Energy Tower,
certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company.
/s/ Ronald W. Pickett
Ronald W. Pickett
President/Chief Executive Officer
Date: March 31, 2015
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Annual Report of Solar Wind Energy Tower
Inc. (the "Company") on Form 10-K for the period ended December 31, 2014 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), I, Ronald W. Pickett, Chief Financial Officer of Solar Wind Energy Tower, certify,
pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company.
/s/ Ronald W. Pickett
Ronald W. Pickett
Chief Financial Officer
Date: March 31, 2015