U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For
the quarterly period ended September 30, 2015
OR
[ ]
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 Issuer as specified in its charter)
Nevada |
|
82-6008752 |
(State
or Other Jurisdiction of |
|
(I.R.S.
Employer |
Incorporation
or Organization) |
|
Identification
No.) |
|
|
|
1997
Annapolis Exchange Pkwy., Suite 300, Annapolis, MD |
|
21401 |
(Address
of Principal Executive Offices) |
|
(Zip
Code) |
(410)
972 - 4713
(Registrant’s
Telephone Number, Including Area Code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
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. (Check one):
Large
accelerated filer [ ] |
|
Accelerated
filer [ ] |
|
|
|
Non-accelerated
filer [ ] |
|
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. Yes [ ] No [X]
Indicate
the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 3,033,806,158
shares of Common Stock ($0.0001 par value) as of November 6, 2015.
Solar
Wind Energy Tower, Inc.
FORM
10-Q for the Quarter Ended September 30, 2015
Index
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements.
SOLAR
WIND ENERGY TOWER, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
| |
September
30, 2015 | | |
December
31, 2014 | |
| |
(unaudited) | | |
| |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 12,550 | | |
$ | 88,764 | |
Total current assets | |
| 12,550 | | |
| 88,764 | |
| |
| | | |
| | |
Property and equipment, net | |
| 1,357 | | |
| 1,888 | |
| |
| | | |
| | |
Other assets: | |
| | | |
| | |
Deposits | |
| 204,209 | | |
| 129,259 | |
| |
| | | |
| | |
Total assets | |
$ | 218,116 | | |
$ | 219,911 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 259,818 | | |
$ | 200,391 | |
Accrued liabilities and expenses | |
| 439,336 | | |
| 369,897 | |
Advances from stockholders/officers | |
| 170,000 | | |
| 170,000 | |
Settlement payable | |
| - | | |
| 30,000 | |
Notes payable, net of unamortized debt discount of $793 and $-0-, respectively | |
| 347,477 | | |
| 268,270 | |
Convertible notes payable, net of unamortized debt discount of $395,458 and $650,053, respectively | |
| 604,200 | | |
| 599,457 | |
Convertible notes payable, related party | |
| 280,000 | | |
| 280,000 | |
Derivative liabilities | |
| 1,730,463 | | |
| 1,384,528 | |
Total current liabilities | |
| 3,831,294 | | |
| 3,302,543 | |
| |
| | | |
| | |
Long term debt: | |
| | | |
| | |
Convertible note payable, net of unamortized debt discount of $34,415 | |
| 13,885 | | |
| - | |
Notes payable-related party, net of unamortized debt discount of $162,138 | |
| - | | |
| 222,862 | |
Notes payable, net of unamortized debt discount of $1,945 | |
| - | | |
| 78,055 | |
Total liabilities | |
| 3,845,179 | | |
| 3,603,460 | |
| |
| | | |
| | |
Stockholders’ deficit: | |
| | | |
| | |
Preferred stock, par value $0.0001 per share; 10,000,000 shares authorized | |
| | | |
| | |
Series A Convertible Preferred stock, par value $0.0001 per share, 500,000 shares designated,
393,429 and -0- issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | |
| 39 | | |
| - | |
Common stock, par value $0.0001 per share; 20,000,000,000 and 900,000,000 shares authorized; 2,055,174,818 and 626,745,923
shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | |
| 205,517 | | |
| 62,675 | |
Common stock to be issued | |
| 420,000 | | |
| 420,000 | |
Additional paid in capital | |
| 12,294,286 | | |
| 10,119,764 | |
Accumulated deficit | |
| (16,543,202 | ) | |
| (13,984,186 | ) |
Stockholders’ deficit attributable to Solar Wind Energy Tower, Inc. | |
| (3,623,360 | ) | |
| (3,381,747 | ) |
Non-controlling interest | |
| (3,703 | ) | |
| (1,802 | ) |
Total stockholders’ deficit | |
| (3,627,063 | ) | |
| (3,383,549 | ) |
| |
| | | |
| | |
Total liabilities and stockholders’ deficit | |
$ | 218,116 | | |
$ | 219,911 | |
See
the accompanying notes to the unaudited condensed consolidated financial statements
SOLAR
WIND ENERGY TOWER, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| |
Three months ended
September 30, | | |
Nine months ended
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
OPERATING EXPENSES: | |
| | | |
| | | |
| | | |
| | |
Research and development | |
$ | 31,533 | | |
$ | 82,482 | | |
$ | 112,446 | | |
$ | 92,705 | |
Selling, general and administrative | |
| 213,755 | | |
| 434,818 | | |
| 721,327 | | |
| 1,367,878 | |
Depreciation | |
| 177 | | |
| 367 | | |
| 531 | | |
| 2,343 | |
Total operating expenses | |
| 245,465 | | |
| 517,667 | | |
| 834,304 | | |
| 1,462,926 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (245,465 | ) | |
| (517,667 | ) | |
| (834,304 | ) | |
| (1,462,926 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (470,626 | ) | |
| (555,300 | ) | |
| (1,701,632 | ) | |
| (3,161,325 | ) |
Gain in settlement of debt | |
| - | | |
| 32,985 | | |
| - | | |
| 32,985 | |
(Loss) gain on change in fair value of derivative liabilities | |
| (634,773 | ) | |
| 1,013,068 | | |
| (24,981 | ) | |
| 536,618 | |
| |
| | | |
| | | |
| | | |
| | |
Loss before provision for income taxes | |
| (1,350,864 | ) | |
| (26,914 | ) | |
| (2,560,917 | ) | |
| (4,054,648 | ) |
| |
| | | |
| | | |
| | | |
| | |
Provision for income taxes (benefit) | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
| (1,350,864 | ) | |
| (26,914 | ) | |
| (2,560,917 | ) | |
| (4,054,648 | ) |
| |
| | | |
| | | |
| | | |
| | |
Non-controlling interest | |
| 857 | | |
| 1,111 | | |
| 1,901 | | |
| 1,140 | |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS ATTRIBUTABLE TO SOLAR WIND ENERGY TOWER, INC. | |
$ | (1,350,007 | ) | |
$ | (25,803 | ) | |
$ | (2,559,016 | ) | |
$ | (4,053,508 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per common share, basic and diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of common shares outstanding, basic and diluted | |
| 1,293,495,395 | | |
| 522,749,813 | | |
| 945,641,107 | | |
| 475,426,105 | |
See
the accompanying notes to the unaudited condensed consolidated financial statements
SOLAR
WIND ENERGY TOWER, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
NINE
MONTHS ENDED SEPTEMBER 30, 2015
(unaudited)
| |
Series A 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, 2015 | |
| - | | |
$ | - | | |
| 626,745,923 | | |
$ | 62,675 | | |
| 6,000,000 | | |
$ | 420,000 | | |
$ | 10,119,764 | | |
$ | (13,984,186 | ) | |
$ | (1,802 | ) | |
$ | (3,383,549 | ) |
Shares issued in settlement of debt | |
| - | | |
| - | | |
| 1,393,333,784 | | |
| 139,333 | | |
| - | | |
| - | | |
| 1,755,211 | | |
| - | | |
| - | | |
| 1,894,544 | |
Shares issued for services rendered | |
| - | | |
| - | | |
| 1,761,111 | | |
| 176 | | |
| - | | |
| - | | |
| 2,113 | | |
| - | | |
| - | | |
| 2,289 | |
Shares issued in settlement of related party salaries | |
| - | | |
| - | | |
| 33,334,000 | | |
| 3,333 | | |
| - | | |
| - | | |
| 16,667 | | |
| - | | |
| - | | |
| 20,000 | |
Preferred shares issued in settlement of related party notes and accrued interest | |
| 393,429 | | |
| 39 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 393,387 | | |
| - | | |
| - | | |
| 393,426 | |
Stock based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 7,144 | | |
| - | | |
| - | | |
| 7,144 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,559,016 | ) | |
| (1,901 | ) | |
| (2,560,917 | ) |
Balance, September 30, 2015 | |
| 393,429 | | |
$ | 39 | | |
| 2,055,174,818 | | |
$ | 205,517 | | |
| 6,000,000 | | |
$ | 420,000 | | |
$ | 12,294,286 | | |
$ | (16,543,202 | ) | |
$ | (3,703 | ) | |
$ | (3,627,063 | ) |
See
the accompanying notes to the unaudited condensed consolidated financial statements
SOLAR
WIND ENERGY TOWER, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| |
Nine months ended
September 30, | |
| |
2015 | | |
2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net loss | |
$ | (2,560,917 | ) | |
$ | (4,054,648 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation | |
| 531 | | |
| 2,343 | |
Amortization of debt discounts | |
| 1,026,413 | | |
| 1,053,063 | |
Amortization of financing costs | |
| 163,290 | | |
| 57,180 | |
Non-cash interest | |
| 435,321 | | |
| 1,895,183 | |
Stock based compensation | |
| 9,433 | | |
| 532,510 | |
Fair value of warrants issued in connection with services | |
| - | | |
| 33,181 | |
Gain on settlement of debt | |
| - | | |
| (32,985 | ) |
(Loss) gain from change in fair value of derivative liabilities | |
| 24,981 | | |
| (536,618 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses | |
| - | | |
| (17,116 | ) |
Settlement payable | |
| (30,000 | ) | |
| (15,000 | ) |
Accounts payable and accrued expenses | |
| 170,684 | | |
| 91,792 | |
Net cash used in operating activates | |
| (760,264 | ) | |
| (991,115 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Purchase of property and equipment | |
| - | | |
| (2,124 | ) |
Payment of long term deposit | |
| - | | |
| (2,700 | ) |
Payment of option to acquire property | |
| (74,950 | ) | |
| - | |
Net cash used in investing activities | |
| (74,950 | ) | |
| (4,824 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds from sale of common stock | |
| - | | |
| 25,000 | |
Proceeds from issuance of notes payable (net) | |
| - | | |
| 80,000 | |
Proceeds from issuance of convertible notes payable | |
| 759,000 | | |
| 1,173,000 | |
Repayments of convertible notes payable | |
| - | | |
| (286,434 | ) |
Net cash provided by financing activities | |
| 759,000 | | |
| 991,566 | |
| |
| | | |
| | |
Net decrease in cash | |
| (76,214 | ) | |
| (4,373 | ) |
Cash, beginning of period | |
| 88,764 | | |
| 61,758 | |
| |
| | | |
| | |
Cash, end of period | |
$ | 12,550 | | |
$ | 57,385 | |
| |
| | | |
| | |
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 | |
$ | - | | |
$ | 253,119 | |
Notes payable issued in settlement of accrued officer salaries | |
$ | - | | |
$ | 385,000 | |
Common stock issued in settlement of related party accrued salaries | |
$ | 20,000 | | |
$ | - | |
Common stock issued in settlement of debt | |
$ | 1,894,544 | | |
$ | 1,779,544 | |
Series A preferred stock issued in settlement of related party notes payable and accrued interest | |
$ | 393,426 | | |
$ | - | |
See
the accompanying notes to the unaudited condensed consolidated financial statements
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
NOTE
1 – SUMMARY OF ACCOUNTING POLICIES
A
summary of the significant accounting policies applied in the preparation of the accompanying unaudited condensed consolidated
financial statements follows.
Business
and Basis of Presentation
Solar
Wind Energy Tower, Inc. (the “Company,” “we,” “our,” “us”), formerly known as
Superior Silver Mines, Inc., was incorporated in the State of Idaho on January 22, 1962 as Superior Mines Company and then changed
its name to Superior Silver Mines, Inc. The Company reincorporated as a Nevada corporation on December 27, 2010. The Company has
been dormant for a number of years, and has no known mineral reserves.
On
December 29, 2010, Solar Wind Energy Tower Inc., a Nevada corporation (the “Company” or “Solar Wind”),
completed a reverse merger (the “Merger”) with Solar Wind Energy, Inc., a corporation formed under the laws of the
State of Delaware on July 26, 2010 (“Solar Wind - Subsidiary”). In connection with the Merger, the Company issued
to the stockholders of Solar Wind - Subsidiary in exchange for their Solar Wind - Subsidiary Common Stock, the right to receive
an aggregate of 300,000,000 shares of the Company’s Common Stock. As a result of the reverse merger, Solar Wind - Subsidiary
is now a wholly-owned subsidiary of the Company.
For
accounting purposes, Solar Wind - Subsidiary was the surviving entity. The transaction was accounted for as a recapitalization
of Solar Wind - Subsidiary pursuant to which Solar Wind - Subsidiary was treated as the surviving and continuing entity although
the Company is the legal acquirer rather than a reverse acquisition. Accordingly, the Company’s historical financial statements
are those of Solar Wind - Subsidiary immediately following the consummation of the reverse merger. Also, going forward the business
operations of Solar Wind - Subsidiary will become the Company’s principal business operations.
The
Company plans to design, develop, and construct large downdraft towers that use benevolent, non-toxic natural elements to generate
electricity and clean water economically (“Downdraft Towers”) by integrating and synthesizing numerous proven as well
as emerging technologies. In addition to constructing Downdraft Towers in the United States and abroad, the Company intends to
be prepared to establish partnerships at home and abroad to propagate these systems and meet increasing global demand for clean
water and electricity.
On
January 21, 2011, the Company changed its name to Clean Wind Energy Tower, Inc. and on March 11, 2013, changed its name to Solar
Wind Energy Tower Inc. along with its wholly-owned subsidiary, a corporation formed under the laws of the State of Delaware, which
changed its name from Clean Wind Energy, Inc. to Solar Wind Energy, Inc. In addition, effective January 24, 2011, the Company’s
quotation symbol on the Over-the-Counter Bulletin Board was changed from SSVM.OB to CWET.OB and on March 11, 2013, in conjunction
with our name change, the Company’s quotation symbol on the Over-the-Counter Bulletin Board was changed from CWET.OB to
SWET.OB.
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.
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
Interim
Financial Statements
The
following (a) condensed consolidated balance sheet as of December 31, 2014, which has been derived from audited financial statements,
and (b) the unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with
accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions
to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by
GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating
results for the three and nine months ended September 30, 2015 are not necessarily indicative of results that may be expected
for the year ending December 31, 2015. These condensed consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto for the year ended December 31, 2014 included in the Company’s
Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 31, 2015.
Going
Concern
The
accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However,
the Company has reported net losses of $2,559,016 and $4,053,508 for the nine month periods ended September 30, 2015 and 2014,
respectively, accumulated deficit of $16,543,202 and total current liabilities in excess of current assets of $3,818,744 as of
September 30, 2015.
The
Company does not have any revenues from operations and will be dependent on funds raise to satisfy its ongoing capital requirements
for at least the next 12 months. The Company will require additional financing in order to execute its operating plan and continue
as a going concern. The Company cannot predict whether this additional financing will be in the form of equity or debt, or be
in another form. The Company may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms,
or at all. In any of these events, the Company may be unable to implement its current plans for expansion or respond to competitive
pressures, any of these circumstances would have a material adverse effect on its business, prospects, financial condition and
results of operations.
The
unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets
and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
Fair
Value of Financial Instruments
Our
short-term financial instruments, including cash, other assets and accounts payable and accrued expenses consist primarily of
instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate
their book value. The fair value of our notes and advances payable is based on management estimates and reasonably approximates
their book value based on their current maturity.
Research
and development
In
accordance with ASC 730, “Research and Development”, the Company expenses all research and development costs as incurred.
The Company had incurred $31,533 and $112,446 for the three and nine months ended September 30, 2015, respectively, and $82,482
and $92,705 for the three and nine months ended September 30, 2014, respectively, in research and development costs. 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.
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
Net
loss per Common Share
The
Company computes net income (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC
260-10”). Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common
stock. Diluted net loss per share is computed using the weighted average number of common and common stock equivalent shares outstanding
during the period. There is no effect on diluted loss per share since the common stock equivalents are anti-dilutive for the three
and nine months ended September 30, 2015 and 2014. Dilutive common stock equivalents consist of shares issuable upon conversion
of convertible notes, preferred stock and exercise of warrants. Fully diluted shares for the three and nine months ended September
30, 2015 were 8,928,327,806 and 8,580,473,518, respectively, and 701,477,717 and 651,659,009 for the three and nine months ended
September 30, 2014, respectively.
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 grants issued to consultants in exchange for services rendered for the three and
nine months ended September 30, 2015 was $-0- and $7,144, respectively; and $151,844 and $565,691 respectively, for the three
and nine months ended September 30, 2014.
Derivative
financial instruments
Accounting
Standards Codification subtopic 815-40, Derivatives and Hedging, Contracts in Entity’s own Equity (“ASC 815-40”)
became effective for the Company on October 1, 2009. The Company’s convertible debt has reset provisions to the exercise
price if the Company issues equity or a right to receive equity, at a price less than the exercise prices. In addition, the Company
has the possibility of exceeding their common shares authorized when considering the number of possible shares that may be issuable
to satisfy settlement provisions of convertible notes after consideration of all existing instruments that could be settled in
shares.
Recently
Issued Accounting Pronouncements
In
April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) Number 2015-3 entitled “Simplifying
the Presentation of Debt Issuance Costs.” The new guidance specifies that debt issuance costs under the new standard are
to be netted against the carrying value of the financial liability. Under current guidance, debt issuance costs are recognized
as a deferred charge and reported as a separate asset on the balance sheet. The new guidance aligns the treatment of debt issuance
costs and debt discounts in that both reduce the carrying value of the liability. It is important to note that neither the recognition
nor measurement of debt issuance costs is changed as a result of the ASU. Amortization of debt issuance costs is to be recorded
as interest expense on the income statement.
The
effective date of the new guidance is for fiscal years beginning after December 15, 2015, for public business entities and interim
periods within those fiscal years. Early adoption is permitted for financial statements that have not been issued previously.
The Company adoption of this standard this period resulted in the reclassification of debt issuance costs of $164,083 previously
classified as assets to net with the carrying value of the financial liability as of December 31, 2014. There were no effect to
prior period operating results.
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
There
are other 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 financial position, results of
operations or cash flows.
NOTE
2 – DEPOSITS
Long-term deposits are comprised of aggregate
of $204,259 of which $200,000 are deposits to acquire approximately 640 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 March 2015. All deposits are non-refundable.
In
addition, the Company has an aggregate of $4,259 in long term lease deposits.
NOTE
3 – ACCRUED LIABILITIES AND EXPENSES
Accrued
liabilities and expenses as of September 30, 2015 and December 31, 2014 consist of the following:
| |
September 30, 2015 | | |
December 31, 2014 | |
Accrued payroll | |
$ | 172,880 | | |
$ | 140,457 | |
Accrued stock purchase warrants | |
| 29,400 | | |
| 29,400 | |
Accrued interest and other | |
| 237,056 | | |
| 200,040 | |
Total | |
$ | 439,336 | | |
$ | 369,897 | |
NOTE
4 – 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.
NOTE
5 – SETTLEMENT PAYABLE
In
August 2014, the Company settled the litigation with Hanover Holdings I, LLC 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 during the nine months ended September 30, 2015.
NOTE
6 – NOTES PAYABLE
| |
September 30, 2015 | | |
December 31, 2014 | |
Promissory notes issued June 20, 2012 | |
$ | 268,270 | | |
$ | 268,270 | |
Note payable issued April 7, 2014, net of unamortized debt discount of $793 and $1,945, respectively | |
| 79,207 | | |
| 78,055 | |
Total | |
| 347,477 | | |
| 346,325 | |
Less current portion | |
| 347,477 | | |
| 268,270 | |
Long term portion | |
$ | - | | |
$ | 78,055 | |
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
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
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
7 – CONVERTIBLE NOTES PAYABLE
Convertible
notes payable are comprised of the following:
| |
September 30, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
Convertible promissory notes, due December 31, 2015 | |
$ | 239,000 | | |
$ | 239,000 | |
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 $-0- and $117,141,
respectively | |
| 28,500 | | |
| 136,359 | |
Convertible promissory note, due October 14, 2015, net of unamortized debt discount of $2,450
and $259,479 | |
| 67,810 | | |
| 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 | |
Convertible promissory note, due January 5, 2016, net of unamortized debt discount of $15,945 | |
| 44,055 | | |
| – | |
Convertible promissory note, due February 19, 2016, net of unamortized debt discount of $6,944 | |
| 10,856 | | |
| – | |
Convertible promissory note, due March 16, 2016, net of unamortized debt discount of $32,176 | |
| 37,922 | | |
| – | |
Convertible promissory note, due March 3, 2017, net of unamortized debt discount of $34,415 | |
| 13,885 | | |
| – | |
Convertible promissory note, due December 27, 2015, net of unamortized debt discount of $26,686 | |
| 57,314 | | |
| - | |
Convertible promissory note, due May 15, 2016, net of unamortized debt discount of $35,760 | |
| 21,740 | | |
| - | |
Convertible promissory note, due May 30, 2016, net of unamortized debt discount of $38,123 | |
| 19,377 | | |
| - | |
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
| |
September 30, 2015 | | |
December 31, 2014 | |
Convertible promissory note, due March 1, 2016, net of unamortized debt discount
of $23,581 | |
| 19,419 | | |
| - | |
Convertible promissory note, due July 1, 2016, net of unamortized debt discount of $43,204 | |
| 14,296 | | |
| - | |
Convertible promissory note, due July 14, 2016, net of unamortized debt discount of $33,025 | |
| 8,975 | | |
| - | |
Convertible promissory note, due July 17, 2016, net of unamortized debt discount of $23,057 | |
| 5,943 | | |
| - | |
Convertible promissory note, due July 30, 2016, net of unamortized debt discount of $23,672 | |
| 4,828 | | |
| - | |
Convertible promissory note, due February 4, 2016, net of unamortized debt discount of $16,554 | |
| 12,446 | | |
| - | |
Convertible promissory note, due May 6, 2016, net of unamortized debt discount of $23,117 | |
| 5,383 | | |
| - | |
Convertible promissory note, due March 4, 2016, net of unamortized debt discount of $24,857 | |
| 4,143 | | |
| - | |
Convertible promissory note, due June 9, 2016, net of unamortized debt discount of $26,307 | |
| 2,193 | | |
| - | |
Total | |
| 618,085 | | |
| 599,457 | |
Less current portion | |
| (604,200 | ) | |
| (599,457 | ) |
Long term portion | |
$ | 13,885 | | |
$ | – | |
2015
Notes:
LG
Capital Funding, LLC
During
the nine months ended September 30, 2015, the Company entered into Securities Purchase Agreements with LG Capital Funding, LLC
(“LG”), for the sale of an 8% convertible notes in the principal amount of $120,750 (the “Notes”). The
total net proceeds the Company received from this Offering was $115,000.
The
Notes bear interest at the rate of 8% per annum. All interest and principal must be repaid one year from the date of issuance
with the last note due July 14, 2016. The Notes are convertible into common stock, at LG’s option, at a 42% discount to
the average three lowest bid prices of the common stock during the 15 trading day period prior to conversion.
Fourth
Man, LLC.
During
the nine months ended September 30, 2015, the Company entered into a Securities Purchase Agreements with Fourth Man, LLC (“Fourth
Man”), for the sale of an 8% convertible notes in the principal amount of $135,500 (the “Notes”). The total
net proceeds the Company received from this Offering was $129,000.
The
Notes bear interest at the rate of 8% per annum. All interest and principal must be repaid approximately nine months from the
date of issuance with the last note due June 6, 2016. The Notes are convertible into common stock, at Fourth Man’s option,
at a 42% discount to the average two or three lowest close prices of the common stock during the 10 trading day period prior to
conversion.
JSJ
Investments, Inc.
On
March 16, 2015, the Company entered into a Securities Purchase Agreement with JSJ Investments, Inc (“JSJ”), for the
sale of an 12% convertible note in the principal amount of $80,000 (the “Note”). The financing closed on March 16,
2015. The total net proceeds the Company received from this Offering was $75,000.
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
The
Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on March 16, 2016. The Note is convertible
into common stock, at JSJ’s option, at a 42% discount to the average three lowest close prices of the common stock during
the 15 trading day period prior to conversion.
JMJ
Financial
On
March 3, 2015, the Company entered into a Securities Purchase Agreement with JMJ Financial, for the sale of an 12% convertible
note in the aggregate principal amount of $400,000 (the “Note”). The financing closed on a $75,000 tranche on March
3, 2015. The total net proceeds the Company received from this Offering was $68,000, net of fees and original interest discount
(“OID”) of $5,000.
The
Note bears interest at the rate of 12% per annum after three months. All interest and principal must be repaid on March 3, 2017.
The Note is convertible into common stock, at JMJ Financial’s option, at a 40% discount to the lowest close price of the
common stock during the 25 trading day period prior to conversion.
Vis
Vires Group, Inc.
During
the nine months ended September 30, 2015, the Company entered into Securities Purchase Agreements with Vis Vira Group, Inc for
the sale of 8% convertible notes in the aggregate principal amount of $127,000 (the “Notes”). The total net proceeds
the Company received from these offerings was $120,000, net of fees of $7,000.
The
Notes bear interest at the rate of 8% per annum. As of the nine months ended September 30, 2015, all interest and principal must
be repaid in approximately months from the issuance date, with the last note being due March 1, 2016. The Notes are convertible
into common stock, at Vis Vira Group, Inc.’s option, at a 42% discount to the average of the three lowest closing bid prices
of the common stock during the 15 trading day period prior to conversion.
JDF
Capital, Inc.
During
the nine months ended September 30, 2015, the Company entered into Securities Purchase Agreements with JDF Capital, Inc. for the
sale of 10% convertible notes in the aggregate principal amount of $259,500 (the “Notes”). The total net proceeds
the Company received from these offerings was $225,000, net of fees and original interest discount (“OID”) of $34,500.
The
Notes bear interest at the rate of 10% per annum, prepaid as OID. As of the nine months ended September 30, 2015, all interest
and principal must be repaid in approximately nine months to one year from the issuance date, with the last note being due July
1, 2016. The Notes are convertible into common stock, at JDF Capital, Inc.’s option, at a 42% discount to the lowest or
the average of three lowest closing prices of the common stock during the 25 trading day period prior to conversion.
Service
Trading Company, LLC.
On
July 30, 2015, the Company entered into a Securities Purchase Agreement with Service Trading Company, LLC (“Service”),
for the sale of an 12% convertible note in the principal amount of $28,500 (the “Note”). The financing closed on July
30, 2015. The total net proceeds the Company received from this Offering was $27,000.
The
Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on July 30, 2016. The Note is convertible
into common stock, at Service’s option, at a 42% discount to the lowest close price of the common stock during the 12 trading
day period prior to conversion.
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
Summary:
The
Company has identified the embedded derivatives related to the above described Notes. These embedded derivatives included certain
conversion features and reset provisions. The accounting treatment of derivative financial instruments requires that the Company
record fair value of the derivatives as of the inception date of the Notes and to fair value as of each subsequent reporting date.
At
the inception of the 2015 Notes, the Company determined the aggregate fair value of $1,189,305 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 141.48% to 194.56%, (3) weighted average risk-free interest rate of 0.17
% to 0.39%, (4) expected life of 0.50 to 2.00 years, and (5) estimated fair value of the Company’s common stock of $0.0009
to $0.0018 per share.
The
determined fair value of the debt derivatives of $1,189,305 was charged as a debt discount up to the net proceeds of the notes
with the remainder of $435,321 charged to current period operations as non-cash interest expense.
At
September 30, 2015, the Company marked to market the fair value of the debt derivatives and determined a fair value of $1,730,463.
The Company recorded a loss from change in fair value of debt derivatives of $634,828 and $47,488 for the three and nine months
ended September 30, 2015, 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 193.48%, (3) weighted average risk-free
interest rate of 0.01% to 0.33%, (4) expected life of 0.04 to 1.42 years, and (5) estimated fair value of the Company’s
common stock of $0.0003 per share.
The
charge of the amortization of debt discounts and costs for the three and nine months ended September 30, 2015 was $337,768 and
$1,026,413, respectively, and $343,333 and $955,047 for the three and nine months ended September 30, 2014, respectively; which
was accounted for as interest expense. Also, the Company has accrued interest expense of $25,250 as of September 30, 2015.
During
the nine months ended September 30, 2015, the Company issued an aggregate of 1,393,333,784 shares of its common stock in settlement
of the convertible note payable and related interest.
NOTE
8 – 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.
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 charge of the amortization of debt discounts and costs for the three and nine
months ended September 30, 2015 was $-0- and $162,138, respectively, and $31,470 and $56,441 for the three and nine months ended
September 30, 2014, respectively; which was accounted for as interest expense.
On
June 2, 2015, the Company issued 393,429 shares of its Series A Convertible Preferred stock in settlement of the $385,000 above
described notes, accrued interest and the return and cancellation of the 59,413,581 previously issued warrants.
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
NOTE
9 – 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 were to be repaid initially
on December 31, 2014. The convertible promissory notes are convertible into common stock, at the holders’ option at $0.015
per common share. In December 2014, the notes were extended to December 31, 2015 with the interest rate increasing to 12% per
annum.
Due
to the nature of the notes described in Note 7 above, the Company has identified the embedded derivatives related to the above
described Notes. These embedded derivatives included certain conversion features and the uncertainty of sufficient authorized
shares to meet possible conversion demands. The accounting treatment of derivative financial instruments requires that the Company
record fair value of the derivatives as of the inception date of the notes and to fair value as of each subsequent reporting date.
The
fair value of the embedded derivatives was determined using Black Scholes Option Pricing Model based on the following assumptions:
(1) dividend yield of 0%, (2) expected volatility of 200.41% to 200.80%, (3) weighted average risk-free interest rate of 0.25%,
(4) expected life of 2.0 years, and (5) estimated fair value of the Company’s common stock of $0.0165 to $0.0167 per share.
At
the inception of the notes, 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
September 30, 2015, the Company marked to market the fair value of the debt derivatives and determined a fair value of $-0-. The
Company recorded a gain from change in fair value of debt derivatives of $55 and $22,507 for the three and nine months ended September
30, 2015. 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 193.48%, (3) weighted average risk-free interest rate of 0.01%,
(4) expected life of 0.25 years, and (5) estimated fair value of the Company’s common stock of $0.0003 per share.
The
charge of the amortization of debt discounts and costs for the three and nine months ended September 30, 2015 was $-0- and $33,031
and $98,016 for the three and nine months ended September 30, 2014, respectively, which was accounted for as interest expense.
Also, the Company has accrued interest expense of $61,587 as of September 30, 2015.
NOTE
10 – DERIVATIVE LIABILITIES
As
described in Notes 6 and 8 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 7 and 9 for assumptions used to determine
fair values.
NOTE
11 – 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 September 30, 2015 and
December 31, 2014, the Company has 393,429 and -0- shares of preferred stock issued and outstanding.
On
June 2, 2015, the Company designated 500,000 as Series A Convertible Preferred Stock (“Series A preferred”) at $0.0001
par value.
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
Each
Series A preferred share i) shall rank senior in regard to dividend rights, rights of redemption and liquidation to all classes
of common stock and any class or series of capital stock of the Company hereafter creates, ii) receive dividends if and when declared
by the Company’s board of directors, iii) each share of Series A preferred convertible into 154.32 shares of common and
iv) each share of Series A preferred stock is entitled to 20 votes for each share of common stock into which Series A preferred
could then be converted.
On
June 2, 2015, the Company issued 393,429 shares of its Series A Convertible Preferred stock in settlement of related party notes
payable of $385,000, accrued interest and the return and cancellation of the 59,413,581 previously issued warrants.
Common
stock
The
Company has authorized 20,000,000,000 and 900,000,000 shares of common stock, with a par value of $0.0001 per share as of September
30, 2015 and December 31, 2014, respectively. As of September 30, 2015 and December 31, 2014, the Company has 2,055,174,818 and
626,745,923, respectively, shares of common stock issued and outstanding.
On
January 15, 2015, 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 and on June 5, 2015, the Company’s majority stockholders approved
to amend the Articles of Incorporation again to increase of authorized shares of common stock from 1,300,0000 to 5,000,000,000.
On
September 14, 2015, the Company’s majority stockholders approved to amend the Articles of Incorporation to increase of authorized
shares of common stock from 5,000,000,000 to 20,000,000,000.
In
2013 and 2012, the Company issued an aggregate of 15,000,000 and 21,500,000 shares of common stock for future services of $328,500
and $1,305,000, respectively. The Company accretes the fair value of the shares issued as stock based compensation during the
requisite service period to operations. During the three and nine months ended September 30, 2015, the Company recorded $-0- and
$7,144, respectively; ($151,844 and $530,259 for the three and nine months ended September 30, 2014, respectively) as stock based
compensation.
NOTE
12 – WARRANTS
Warrants
The
following table summarizes the changes in warrants outstanding and related prices for the shares of the Company’s common
stock at September 30, 2015:
Exercise Price | | |
Number Outstanding | | |
Warrants Outstanding Weighted
Average Remaining Contractual Life (years) | | |
Weighted Average Exercise price | | |
Number Exercisable | | |
Warrants Exercisable Weighted
Average Exercise Price | |
$ | 0.00860 | | |
| 11,627,908 | | |
| 0.51 | | |
| 0.00860 | | |
| 11,627,908 | | |
| 0.00860 | |
| 0.02000 | | |
| 5,000,000 | | |
| 1.72 | | |
| 0.02000 | | |
| 5,000,000 | | |
| 0.02000 | |
| 0.05000 | | |
| 1,920,000 | | |
| 0.44 | | |
| 0.05000 | | |
| 1,920,000 | | |
| 0.05000 | |
| 0.10000 | | |
| 2,187,101 | | |
| 2.65 | | |
| 0.10000 | | |
| 2,187,101 | | |
| 0.10000 | |
| | | |
| 20,735,009 | | |
| 1.07 | | |
| | | |
| 20,735,009 | | |
$ | 0.02482 | |
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
Transactions
involving the Company’s warrant issuance are summarized as follows:
| |
Number of Shares | | |
Weighted Average Price Per Share | |
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 | |
Granted | |
| – | | |
| – | |
Canceled | |
| (59,413,581 | ) | |
| 0.00648 | |
Expired | |
| (15,750,000 | ) | |
| 0.04 | |
Outstanding at September 30, 2015 | |
| 20,735,009 | | |
$ | 0.02482 | |
NOTE
13 – 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 three months ended September 30, 2015:
| |
September 30, 2015 | |
Net loss | |
$ | 64,278 | |
Average Non-controlling interest percentage | |
| 1.33 | % |
Net loss attributable to the non-controlling interest | |
$ | 857 | |
Net
loss attributable to non-controlling interest for the nine months ended September 30, 2015:
| |
September 30, 2015 | |
Net loss | |
$ | 142,591 | |
Average Non-controlling interest percentage | |
| 1.33 | % |
Net loss attributable to the non-controlling interest | |
$ | 1,901 | |
Net
loss attributable to non-controlling interest for the three months ended September 30, 2014:
| |
September 30, 2014 | |
Net loss | |
$ | 83,336 | |
Average Non-controlling interest percentage | |
| 1.33 | % |
Net loss attributable to the non-controlling interest | |
$ | 1,111 | |
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
Net
loss attributable to non-controlling interest for the nine months ended September 30, 2014:
| |
September 30, 2014 | |
Net loss | |
$ | 85,530 | |
Average Non-controlling interest percentage | |
| 1.33 | % |
Net loss attributable to the non-controlling interest | |
$ | 1,140 | |
The
following table summarizes the changes in non-controlling interest from December 31, 2014 to September 30, 2015:
Balance, December 31, 2014 | |
$ | (1,802 | ) |
Transfer (to) from the non-controlling interest as a result of change in ownership | |
| – | |
Net loss attributable to the non-controlling interest | |
| (1,901 | ) |
Balance, September 30, 2015 | |
$ | (3,703 | ) |
NOTE
14 – 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 September 30, 2015:
| |
Level
1 | | |
Level
2 | | |
Level
3 | | |
Total
| |
Long-term investments | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | |
Total | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | |
Derivative liabilities | |
$ | – | | |
$ | – | | |
$ | 1,730,463 | | |
$ | 1,730,463 | |
Total | |
$ | – | | |
$ | – | | |
$ | 1,730,463 | | |
$ | 1,730,463 | |
The
table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (derivative
liability) for the nine months ended September 30, 2015.
SOLAR
WIND ENERGY TOWER, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2015
(unaudited)
Nine
months ended September 30, 2015:
| |
Derivative Liabilities | |
Balance, December 31, 2014 | |
$ | 1,384,528 | |
| |
| | |
Transfers in (out) at mark-market value on date of payoff or conversion | |
| (868,351 | ) |
| |
| | |
Transfers in upon initial fair value of derivative liabilities | |
| 1,189,305 | |
| |
| | |
Loss from change in fair value of derivative liabilities | |
| 24,981 | |
| |
| | |
Balance, September 30, 2015 | |
$ | 1,730,463 | |
| |
| | |
Total loss for the nine month period included in earnings relating to the liabilities held at
September 30, 2015 | |
$ | 609,792 | |
Level
3 Liabilities were comprised of our bifurcated convertible debt features on our convertible notes.
NOTE
15 – SUBSEQUENT EVENTS
Subsequent
issuances of common stock
In
October 2015, the Company issued an aggregate of 766,731,340 shares of its common stock in settlement of convertible notes payable
and accrued interest of $79,351.
In
November 2015, the Company issued 211,900,000 shares of its common stock in settlement of convertible notes payable of $21,900.
Subsequent
financing
On
October 7, 2015, the Company entered into a Securities Purchase Agreement with LG Capital Funding LLC. (“LG Capital”),
for the sale of convertible note in the principal amount of $99,231 (the “Note”). The total net proceeds the Company
received from this Offering was $75,000 after deducting a $16,714 payment against a previous note payable and $7,516 legal fees.
The
Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on October 7, 2016. The Note is convertible
into common stock, at LG Capital’s option, at a 42% discount to the lowest closing bid prices of the common stock during
the 10 trading day period prior to conversion.
On
October 15, 2015, the Company entered into a Securities Purchase Agreement with JDF Capital Inc. (“JDF”), for the
sale of convertible note in the principal amount of $20,696.20 (the “Note”). The total net proceeds the Company received
from this Offering was $20,000 after $696.20 in legal fees.
The
Note bears interest at the rate of 8% per annum, prepaid by OID. All interest and principal must be repaid on March 1, 2016. The
Note is convertible into common stock, at JDFs option, at a 42% discount to the average three lowest close prices of the common
stock during the 15 trading day period prior to conversion.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction
with the accompanying financial statements and related notes thereto for the quarter ended September 30, 2015, as well as the
Company’s consolidated financial statements and related notes thereto and management’s discussion and analysis of
financial condition and results of operations in the Company’s Form 10-K for the year ended December 31, 2014 filed on March
31, 2015.
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.
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.
Forward
Looking Statements
This
report may contain “forward-looking statements,” which represent the Company’s expectations or beliefs, including,
but not limited to, statements concerning industry performance and the Company’s results, operations, performance, financial
condition, plans, growth and strategies, which include, without limitation, statements preceded or followed by or that include
the words “may,” “will,” “expect,” “anticipate,” “intend,” “could,”
“estimate,” or “continue” or the negative or other variations thereof or comparable terminology. Any statements
contained in this report or the information incorporated by reference that are not statements of historical fact may be deemed
to be forward-looking statements.
These
statements by their nature involve substantial risks and uncertainties, some of which are beyond the Company’s control,
and actual results may differ materially depending on a variety of important factors, including those risk factors discussed under
“Trends, Risks and Uncertainties”, many of which are also beyond the Company’s control. You should not place
undue reliance on these forward-looking statements, which speak only as of the date of this report. The Company does not undertake
any obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after
the date of this report or to reflect the occurrence of unanticipated events, except to the extent such updates and/or revisions
are required by applicable law.
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.
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 did not have any revenue during the period ended
September 30, 2015.
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
2014 and 2015, we issued convertible notes payable that contained certain conversion features which we identified as embedded
derivatives. In addition, the Company has the possibility of exceeding their common shares authorized when considering the number
of possible shares that may be issuable to satisfy settlement provisions of convertible notes after consideration of all existing
instruments that could be settled in shares. 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
In
April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) Number 2015-3 entitled “Simplifying
the Presentation of Debt Issuance Costs.” The new guidance specifies that debt issuance costs under the new standard are
to be netted against the carrying value of the financial liability. Under current guidance, debt issuance costs are recognized
as a deferred charge and reported as a separate asset on the balance sheet. The new guidance aligns the treatment of debt issuance
costs and debt discounts in that both reduce the carrying value of the liability. It is important to note that neither the recognition
nor measurement of debt issuance costs is changed as a result of the ASU. Amortization of debt issuance costs is to be recorded
as interest expense on the income statement.
The
effective date of the new guidance is for fiscal years beginning after December 15, 2015, for public business entities and interim
periods within those fiscal years. Early adoption is permitted for financial statements that have not been issued previously.
The Company adoption of this standard this period resulted in the reclassification of debt issuance costs of $164,083 previously
classified as assets to net with the carrying value of the financial liability as of December 31, 2014. There were no effect to
prior period operating results.
There
are other 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 financial position, results of
operations or cash flows.
RESULTS
OF OPERATIONS
Three
months ended September 30, 2015 as compared to three months ended September 30, 2014.
Revenue
The
Company has not generated revenue since inception.
Operating
Expenses
Research
and development
During
the three months ended September 30, 2015, research and development costs were $31,533 compared to $82,482 for the same period
last year. The Company’s expenditures for research and development is dependent on available resources and future expenditures
are expected to increase with additional financing.
Selling,
general and administrative
During
the three months ended September 30, 2015, selling, general and administrative expenses were $213,755 as compared to $434,818
for the same period last year, a 51% decrease. The primary decrease is due to reduction in stock based compensation incurred in
the current period as compared to same period last year.
Depreciation
Depreciation
expense for the three months ended September 30, 2015 was $177 as compared to $367 for the same period last year due to the aging
of our equipment.
Other
income (expense)
Interest
expense
Interest
expense for the three months ended September 30, 2015 was $470,626 compared to $555,300 for the same period last year. In the
current period, we incurred $337,768 non-cash debt discount and OID amortization and $100,591 in non-cash interest expense on
issued convertible debt as compared to $392,167 and $73,946, respectively for the same period last year.
Gain
(loss) on change in fair value of derivative liabilities
During
2014 and 2015, we issued convertible promissory notes with an embedded derivative, all requiring us to fair value the derivatives
each reporting period and mark to market as a non-cash adjustment to our current period operations. This resulted in a (loss)
gain of $(634,773) and $1,013,068 on change in fair value of derivative liabilities for the three months ended September 30, 2015
and 2014, respectively.
Nine
months ended September 30, 2015 as compared to nine months ended September 30, 2014.
Revenue
The
Company has not generated revenue since inception.
Operating
Expenses
Research
and development
During
the nine months ended September 30, 2015, research and development costs were $112,446 compared to $92,705 for the same period
last year. The Company’s expenditures for research and development is dependent on available resources and future expenditures
are expected to increase with additional financing.
Selling,
general and administrative
During
the nine months ended September 30, 2015, selling, general and administrative expenses were $721,327 as compared to $1,367,878
for the same period last year, a 47% decrease. The primary decrease is due to reduction in stock based compensation incurred in
the current period as compared to same period last year.
Depreciation
Depreciation
expense for the nine months ended September 30, 2015 was $531 as compared to $2,343 for the same period last year due to the aging
of our equipment.
Other
income (expense)
Interest
expense
Interest
expense for the nine months ended September 30, 2015 was $1,701,632 compared to $3,161,325 for the same period last year. In the
current period, we incurred $1,026,413 non-cash debt discount and OID amortization and $435,321 in non-cash interest expense on
issued convertible debt as compared to $1,053,063 and $1,895,183, respectively for the same period last year.
Gain
(loss) on change in fair value of derivative liabilities
During
2014 and 2015, we issued convertible promissory notes with an embedded derivative, all requiring us to fair value the derivatives
each reporting period and mark to market as a non-cash adjustment to our current period operations. This resulted in a (loss)
gain of $(24,981) and $536,618 on change in fair value of derivative liabilities for the nine months ended September 30, 2015
and 2014, respectively.
Liquidity
and Capital Resources
We
have financed our operations since inception primarily through private offerings of our equity securities and issuance of convertible
notes.
Working
Capital
Our
working capital deficit increased by $604,965 during the nine months ended September 30, 2015 from a working capital deficit (current
liabilities in excess of current assets) of $3,213,779 at December 31, 2014 to a working capital deficit of $3,818,744 at September
30, 2015. The increase in working capital deficit for the nine months ended September 30, 2015 is due to a combination of reasons,
of which the significant factors include:
|
● |
Cash
had a net decrease in working capital by $76,214 for the nine months ended September 30, 2015. The most significant uses and
proceeds of cash were: |
|
● |
Approximately
$760,000 of cash consumed in operating activities; |
|
|
|
|
● |
Proceeds of $759,000
from issuance of convertible notes payable |
Total
current assets of $12,500 and $88,764 as of September 30, 2015 and December 31, 2014, respectively, cash representing 100% as
of September 30, 2015 and December 31, 2014.
Proceeds
from the issuance of convertible promissory notes
During
the nine months ended September 30, 2015, the Company received proceeds of $759,000 from the issuance of Convertible Promissory
Notes.
Cash
flow analysis
Cash
used in operations was $760,264 during the nine month period ended September 30, 2015. During the nine month period ended September
30, 2015, 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 account payables.
During
the nine months ended September 30, 2015, we utilized $74,950 cash for investing activities comprised of payment of long term
deposit.
Cash
provided by financing activities was a total net proceeds of $759,000 from the issuance of Convertible Promissory Notes.
The
accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company
has reported a net loss of $2,559,016 for the nine month period ended September 30, 2015, accumulated deficit of $16,543,202 and
total current liabilities in excess of current assets of $3,818,744 as of September 30, 2015.
The
Company 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.
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.
Number
of Employees
As
of September 30, 2015, the Company had 3 full time employees.
Disclosure
of Contractual Obligations
The
Company does not have any significant contractual obligations which could negatively impact our results of operations and financial
condition.
Item
3. Quantitative and Qualitative Disclosures About Material Risk.
As
a smaller reporting company, we are not required to include disclosure under this item.
Item
4. Controls and Procedures.
As
of September, 2015, the Company performed an evaluation, under the supervision and with the participation of management, including
the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Accounting Officer), of the effectiveness
of the design and operation of its disclosure controls and procedures as defined in Rules 13a - 15(e) or 15d - 15(e) promulgated
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation and due to the
lack of segregation of duties and failure to implement accounting controls, our principal executive officer and principal financial
officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.
The
reason for the ineffectiveness of our disclosure controls and procedures was the result of having a limited number of employees
and not having proper segregation of duties based on the cost benefit of hiring additional employees solely to address the segregation
of duties issue. We compensate for the lack of segregation of duties by employing close involvement of management in day-to-day
operations.
Limitations
on Effectiveness of Controls and Procedures
Our
management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial
Officer), does not expect that our disclosure controls and procedures 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 Company 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.
Remediation
of Material Weaknesses in Internal Control over Financial Reporting
As
a small business, without a viable business and revenues, the Company does not have the resources to install a dedicated staff
with deep expertise in all facets of SEC disclosure and GAAP compliance. As is the case with many small businesses, the Company
will continue to work with its external consultants and attorneys as it relates to new accounting principles and changes to SEC
disclosure requirements. The Company has found that this approach worked well in the past and believes it to be the most cost
effective solution available for the foreseeable future.
The
Company will conduct a review of existing sign-off and review procedures as well as document control protocols for critical accounting
spreadsheets. The Company will also increase management’s review of key financial documents and records.
As
a small business, the Company does not have the resources to fund sufficient staff to ensure a complete segregation of responsibilities
within the accounting function. However, Company management does review, and will increase the review of, financial statements
on a monthly basis. These actions, in addition to the improvements identified above, will minimize any risk of a potential material
misstatement occurring.
Changes
in Internal Controls
During
the fiscal quarter ended September 30, 2015, there have been no changes in our internal control over financial reporting that
have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
PART
II. OTHER INFORMATION
Item
1. Legal Proceedings.
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
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 quarterly report on
Form 10-Q. You should carefully consider all of these risks.
The
Company has a history of operating losses and an accumulated deficit and expects to continue to incur losses for the foreseeable
future.
Since
inception through September 30, 2015, the Company has incurred cumulative losses of $16,543,202 and has never generated enough
funds through operations to support its business. The Company has a limited operating history and has primarily engaged in operations
relating to the development of its business plan. Additional capital may be required in order to provide working capital requirements
for the next twelve months.
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.
In
their report dated March 31, 2015, our independent auditors stated that our financial statements for the year ended December 31,
2014 were prepared assuming that we would continue as a going concern, and that they have substantial doubt about our ability
to continue as a going concern. Our auditors’ doubts are based on our net losses and deficits in cash flows. We continue
to experience net operating losses since the Company is still in a development stage. Our ability to continue as a going concern
is subject to our ability to generate a profit and/or obtain necessary funding from outside sources, including by the sale of
our securities, or obtaining loans from financial institutions, where possible. Our continued net operating losses and our auditors’
doubts increase the difficulty of our meeting such goals. If we are not successful in raising sufficient additional capital, we
may not be able to continue as a going concern and our stockholders may lose their entire investment.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item
3. Defaults Upon Senior Securities.
None.
Item
4. Mine Safety Disclosures.
Not
applicable.
Item
5. Other Information.
None.
Item
6. Exhibits.
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 |
|
Articles
of Merger by and between Clean Wind Energy Tower, Inc. and Superior Silver Mines, Inc. (2) |
|
|
|
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) |
|
|
|
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) |
|
|
|
10.11 |
|
Exchange
of related party notes and warrants for Series A Preferred Stock (incorporated by reference to Exhibit 10.1 to the Company’s
Form 8-K filed on June 2, 2015). |
|
|
|
10.12 |
|
Designation
of Series A Convertible Preferred Stock incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on
June 2, 2015). |
|
|
|
14.1 |
|
Code
of Business Conduct and Ethics (5) |
|
|
|
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 (President/Chief Executive Officer) |
|
|
|
31.2 |
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Ronald W. Pickett (Chief Financial Officer) |
|
|
|
32.1 |
|
Certification
of Ronald W. Pickett (President/Chief Executive Officer) 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 (Chief Financial Officer) 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, 2010 filed with the Securities and Exchange Commission
on April 12, 2011 and incorporated herein by reference. |
|
|
(5) |
Filed
with the registrant’s Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission
on April 2, 2012 and incorporated herein by reference. |
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
Solar
Wind Energy Tower, Inc. |
|
Registrant |
|
|
|
Date:
November 13, 2015 |
By: |
/s/
Ronald Pickett |
|
|
Ronald Pickett |
|
|
Chief Executive
|
|
|
Officer (Principal
Executive Officer) and Principal |
|
|
Accounting and
Financial Officer |
EXHIBIT
31.1
CERTIFICATION
I,
Ronald W. Pickett, certify that:
1.
I have reviewed this quarterly report on Form 10-Q 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:
November 13, 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 quarterly report on Form 10-Q 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:
November 13, 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 Quarter Report of Solar Wind Energy Tower, Inc. (the “Company”) on Form 10-Q for the quarter ended
September 30, 2015 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:
November 13, 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 Quarter Report of Solar Wind Energy Tower Inc. (the “Company”) on Form 10-Q for the period ended
September 30, 2015 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:
November 13, 2015