See the accompanying notes to the unaudited condensed consolidated financial statements
See the accompanying notes to the unaudited condensed consolidated financial statements
See the accompanying notes to the unaudited condensed consolidated financial statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2016
(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”, “us”, “our”) (formerly known as Superior Silver Mines, Inc.) was incorporated in the
State of Idaho on January 22, 1962 as Superior Mines Company and then changed its name to Superior Silver Mines, Inc. The Company
reincorporated as a Nevada corporation on December 27, 2010. The Company has been dormant for a number of years, and has no known
mineral reserves.
On December 29, 2010, Solar Wind Energy Tower,
Inc., a Nevada corporation (the “Company” or "Solar Wind"), completed a reverse merger (the “Merger”)
with Solar Wind Energy, Inc., a corporation formed under the laws of the State of Delaware on July 26, 2010 (“Solar Wind
- Subsidiary”). In connection with the Merger, the Company issued to the stockholders of Solar Wind - Subsidiary
in exchange for their Solar Wind - Subsidiary Common Stock, the right to receive an aggregate of 300,000,000 shares of the Company’s
Common Stock. As a result of the reverse merger, Solar Wind - Subsidiary is now a wholly-owned subsidiary of the Company.
For accounting purposes, Solar Wind - Subsidiary
was the surviving entity. The transaction was accounted for as a recapitalization of Solar Wind - Subsidiary pursuant to which
Solar Wind - Subsidiary was treated as the surviving and continuing entity although the Company is the legal acquirer rather than
a reverse acquisition. Accordingly, the Company’s historical financial statements are those of Solar Wind - Subsidiary immediately
following the consummation of the reverse merger. Also, going forward the business operations of Solar Wind - Subsidiary will become
the Company’s principal business operations.
On January 21, 2011, the Company changed its
name to Clean Wind Energy Tower, Inc. and on March 11, 2013, changed its name to Solar Wind Energy Tower, Inc. along with its wholly-owned
subsidiary, a corporation formed under the laws of the State of Delaware, which changed its name from Clean Wind Energy, Inc. to
Solar Wind Energy, Inc. In addition, effective January 24, 2011, the Company’s quotation symbol on the Over-the-Counter Bulletin
Board was changed from SSVM.OB to CWET.OB and on March 11, 2013, in conjunction with our name change, the Company’s quotation
symbol on the Over-the-Counter Bulletin Board was changed from CWET.OB to SWET.OB.
Until the consummation of the Merger, the Company’s
purpose was to seek, investigate and, if such investigation warranted, acquire an interest in business opportunities presented
to it by persons or firms who, or which, desire to seek the perceived advantages of a publicly registered corporation. Because
the Company had no operations and only nominal assets until the Merger, it was considered a shell company under rules promulgated
by the U.S. Securities and Exchange Commission.
In April 2014, the Company organized Arizona
Green Power, LLC (“AGP”), 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. On November 17, 2015, in connection
with the Company land option agreement modification and equity financing, the Company reduced its ownership to 94.67%.
Interim Financial Statements
The following (a) condensed consolidated balance
sheet as of December 31, 2015, which has been derived from audited financial statements, and (b) the unaudited condensed consolidated
interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the
United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation
have been included.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2016
(unaudited)
Operating results for the three and nine months
ended September 30, 2016 are not necessarily indicative of results that may be expected for the year ending December 31, 2016.
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, 2015 included in the Company’s Annual Report on Form 10-K, filed with the
Securities and Exchange Commission (“SEC”) on March 2, 2017.
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 from operations
of $380,112 and $834,304 for the nine month periods ended September 30, 2016 and 2015, respectively, accumulated deficit of $17,727,174
and total current liabilities in excess of current assets of $4,192,180 as of September 30, 2016.
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 $-0- for
the three and nine months ended September 30, 2016 and $31,533 and $112,446 for the three and nine months ended September 30, 2015,
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.
Net Income (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 income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares
of common stock. Diluted net income (loss) per share is computed using the weighted average number of common and common
stock equivalent shares outstanding during the period. There is no effect on diluted loss per share since the common
stock equivalents are anti-dilutive for the three months ended September 30, 2016 and the three and nine months ended
September 30, 2015. 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, 2016 were
21,624,528,337 and 20,944,545,057, respectively, and 8,928,327,806 and 8,580,473,518 for the three and nine months ended
September 30, 2015, respectively. For the nine months ended September 30, 2016, certain common stock equivalents were
excluded from the fully diluted weighted average shares outstanding in calculating the fully diluted earnings per share in
the statement of operations due to anti-dilutive effects.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2016
(unaudited)
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, 2016 was $-0-. For the three and nine months ended September 30, 2015, stock based compensation was $-0-
and $7,144, respectively.
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
There are various updates recently issued,
most of which represented technical corrections to the accounting literature or application to specific industries and are not
expected to a have a material impact on the Company's financial position, results of operations or cash flows.
NOTE 2 – DEPOSITS
Long-term deposits are comprised of aggregate
of $204,209 of which $200,000 are deposits to acquire approximately 640 acres of land in Yuma County, Arizona at $46,500 per acre.
On November 17, 2015, the Company entered into a Fourth Amended Option Agreement (the “Amended Option Agreement”) to
the option agreement dated April 11, 2014 with several investors and current land owners.
Pursuant to the terms of the Amended Option
Agreement, the land owners agreed to invest $600,000 and defer until closing an additional $450,000 due on the option payment in
exchange for a 2.67% equity investment in AGP, Company’s majority owned subsidiary.
Moreover, pursuant to the terms of the option
agreement, the investor has also committed an additional $300,000 in exchange for a 1.33% equity investment, $50,000 which has
been paid and the additional $250,000 conditioned upon the Company and AGP successfully procuring $5,000,000 or more in additional
equity from investors, or such other additional amount as is necessary for the balance of the required pre-development and development
costs to be completed.
Further, if the Company and AGP close the acquisition
of the Property prior to (a) December 1, 2017, the delayed option payment shall be reduced by $200,000 or (b) July 1, 2016, the
delayed option payment shall be reduced by $450,000.
The land owners have the right to terminate
the Amended Option Agreement at any time after July 1, 2016 if the Company and AGP have not completed the equity raise prior to
July 1, 2016.
In addition, the Company has an aggregate of
$4,209 in long term lease deposits.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2016
(unaudited)
NOTE 3 – ACCRUED LIABILITIES AND EXPENSES
Accrued liabilities and expenses as of September
30, 2016 and December 31, 2015 consist of the following:
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
Accrued payroll
|
|
$
|
406,824
|
|
|
$
|
227,015
|
|
Accrued stock purchase warrants
|
|
|
29,400
|
|
|
|
29,400
|
|
Accrued interest and other
|
|
|
310,706
|
|
|
|
241,797
|
|
Total
|
|
$
|
746,930
|
|
|
$
|
498,212
|
|
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.
In addition, during the nine months ended September
30, 2016, an officer and major shareholder advanced $8,000 for working capital purposes. The advance is interest free and payable
on demand.
NOTE 5 – SETTLEMENT PAYABLE
On July 8, 2014, the Company paid $40,179 against
a Typenex note in a scheduled monthly installment followed by a payment on August 11, 2014 of the balance due of $31,078 to pay
the note in full. In as such, Typenex disputed the Company’s right to pay in cash, these final two installments were placed
in escrow account through the Company’s counsel. In 2016, subsequent to these financial statements, the Company settled all
outstanding claims with Typenex for $90,000. During the nine months ended September 30, 2016, the Company issued 700,000,000 shares
of its common stock in payment of $70,000 of the outstanding balance. As of September 30, 2016 and December 31, 2015, the remaining
outstanding balance was $20,000 and $90,000, respectively.
NOTE 6 – NOTES PAYABLE
Notes payable as of September 30, 2016 and
December 31, 2015 consist of the following:
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
Promissory notes issued June 20, 2012
|
|
$
|
268,270
|
|
|
$
|
268,270
|
|
Note payable issued April 7, 2014, net of unamortized debt discount of $-0- and $407, respectively
|
|
|
80,000
|
|
|
|
79,593
|
|
Total
|
|
|
348,270
|
|
|
|
347,863
|
|
Less current portion
|
|
|
348,270
|
|
|
|
347,863
|
|
Long term portion
|
|
$
|
–
|
|
|
$
|
–
|
|
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.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2016
(unaudited)
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). This note currently is in default.
NOTE 7 – CONVERTIBLE NOTES PAYABLE
Convertible notes payable as of September 30,
2016 and December 31, 2015 consist of the following:
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
Convertible promissory notes, due December 31, 2015
|
|
$
|
209,000
|
|
|
$
|
239,000
|
|
Convertible promissory note, due October 14, 2015, net of unamortized debt discount of $-0-
|
|
|
–
|
|
|
|
27,164
|
|
Convertible promissory note, due January 5, 2016, net of unamortized debt discount of $323
|
|
|
–
|
|
|
|
23,177
|
|
Convertible promissory note, due March 16, 2016, net of unamortized debt discount of $-0- and $12,066, respectively, in default
|
|
|
75,335
|
|
|
|
63,269
|
|
Convertible promissory note, due December 27, 2015, net of unamortized debt discount of $-0-, in default
|
|
|
41,010
|
|
|
|
78,210
|
|
Convertible promissory note, due May 15, 2016, net of unamortized debt discount of $-0- and $21,267, respectively, in default
|
|
|
57,500
|
|
|
|
36,233
|
|
Convertible promissory note, due May 30, 2016, net of unamortized debt discount of $-0- and $23,630, respectively, in default
|
|
|
57,500
|
|
|
|
33,870
|
|
Convertible promissory note, due March 1, 2016, net of unamortized debt discount of $-0- and $9,401, respectively, in default
|
|
|
43,000
|
|
|
|
33,599
|
|
Convertible promissory note, due July 1, 2016, net of unamortized debt discount of $-0- and $28,750, respectively, in default
|
|
|
57,500
|
|
|
|
28,750
|
|
Convertible promissory note, due July 14, 2016, net of unamortized debt discount of $-0- and $22,438, respectively, in default
|
|
|
42,000
|
|
|
|
19,562
|
|
Convertible promissory note, due July 17, 2016, net of unamortized debt discount of $-0- and $15,768, respectively, in default
|
|
|
29,000
|
|
|
|
13,232
|
|
Convertible promissory note, due July 30, 2016, net of unamortized debt discount of $-0- and $16,508, respectively, in default
|
|
|
28,500
|
|
|
|
11,992
|
|
Convertible promissory note, due February 4, 2016, net of unamortized debt discount of $-0- and $4,562, respectively, in default
|
|
|
29,000
|
|
|
|
24,438
|
|
Convertible promissory note, due May 6, 2016, net of unamortized debt discount of $-0- and $13,406, respectively, in default
|
|
|
13,370
|
|
|
|
15,094
|
|
Convertible promissory note, due March 4, 2016, net of unamortized debt discount of $-0- and $10,198, respectively, in default
|
|
|
29,000
|
|
|
|
18,802
|
|
Convertible promissory note, due June 9, 2016, net of unamortized debt discount of $-0- and $16,703, respectively, in default
|
|
|
28,500
|
|
|
|
11,797
|
|
Convertible promissory note, due March 1, 2016, net of unamortized debt discount of $-0- and $9,148, respectively, in default
|
|
|
20,696
|
|
|
|
11,548
|
|
Convertible promissory note, due October 7, 2016, net of unamortized debt discount of $2,169 and $76,186
|
|
|
97,062
|
|
|
|
23,045
|
|
Convertible promissory note, due May 6, 2016, net of unamortized debt discount of $20,236
|
|
|
–
|
|
|
|
8,764
|
|
Convertible promissory note, due November 9, 2016, net of unamortized debt discount of $3,025 and $23,164, respectively
|
|
|
23,975
|
|
|
|
3,836
|
|
Convertible promissory note, due December 3, 2016, net of unamortized debt discount of $5,372 and $27,936, respectively
|
|
|
24,878
|
|
|
|
2,314
|
|
Convertible promissory note, due January 7, 2017, net of unamortized debt discount of $20,197
|
|
|
53,723
|
|
|
|
–
|
|
Convertible promissory note, due January 11, 2017, net of unamortized debt discount of $21,206
|
|
|
52,714
|
|
|
|
–
|
|
Total
|
|
|
1,013,263
|
|
|
|
727,696
|
|
Less current portion
|
|
|
(1,013,263
|
)
|
|
|
(727,696
|
|
Long term portion
|
|
$
|
–
|
|
|
$
|
–
|
|
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2016
(unaudited)
2016 Notes:
JDF Capital, Inc.
On January 7, 2016, the Company entered into
a Securities Purchase Agreement with JDF Capital, Inc ("JDF"), for the sale of an 8% convertible note in the principal
amount of $73,920 (the "Note"). The financing closed on January 7, 2016. The total net proceeds the Company received
from this Offering were $38,000.
The Note bears interest at the rate of 8% per
annum. All interest and principal must be repaid on January 7, 2017. The Note is convertible into common stock, at JDF’s
option, at a 50% discount to lowest bid price of the common stock during the 15 trading day period prior to conversion.
LG Capital Funding, LLC
On January 11, 2016, the Company entered into
a Securities Purchase Agreement with LG Capital Funding, LLC ("LG"), for the sale of an 8% convertible note in the principal
amount of $73,920 (the "Note"). The financing closed on January 11, 2016. The total net proceeds the Company received
from this Offering were $66,000.
The Note bears interest at the rate of 8% per
annum. All interest and principal must be repaid on January 11, 2017. The Note is convertible into common stock, at LG’s
option, at a 50% discount to lowest bid price of the common stock during the 15 trading day period prior to conversion.
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 2016 Notes, the Company
determined the aggregate fair value of $553,093 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 180.14% to 180.45%, (3) weighted average risk-free interest rate of 0.63 % to 0.66%, (4) expected life of 1.00 year, and (5)
estimated fair value of the Company’s common stock of $0.0002 per share.
The determined fair value of the debt derivatives
of $553,093 was charged as a debt discount up to the net proceeds of the notes with the remainder of $443,329 charged to current
period operations as non-cash interest expense.
At September 30, 2016, the Company marked
to market the fair value of the debt derivatives and determined a fair value of $1,254,111. The Company recorded a (loss) gain
from change in fair value of debt derivatives of $(9,073) and $2,759,914 for the three and nine months ended September 30, 2016.
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 185.36%, (3) weighted average risk-free interest rate of 0.29%, (4) expected
life of 0.25 to 0.28 years, and (5) estimated fair value of the Company’s common stock of $0.0001 per share.
The charge of the amortization of debt discounts
and costs for the three and nine months ended September 30, 2016 was $82,261 and $427,325, respectively, and $337,768 and $1,026,413
for the three and nine months ended September 30, 2015, respectively; which was accounted for as interest expense. Also, the Company
has accrued interest expense of $204,652 as of September 30, 2016.
During the nine months ended September 30,
2016, the Company issued an aggregate of 1,496,316,722 shares of its common stock in settlement of the convertible note payable
and related interest. In connection with certain settlements, the Company incurred a $21,938 loss on settlement of debt.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2016
(unaudited)
NOTE 8 – CONVERTIBLE NOTES
PAYABLE, RELATED PARTY
During 2012, the Company issued an aggregate
of $280,000 convertible promissory notes to officers and key employees in settlement of accrued salaries.
The convertible promissory notes bear interest
at the rate of 8% per annum. All interest and principal 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, 2016, the Company marked to
market the fair value of the debt derivatives and determined a fair value of $-0-. The Company did not record a change in fair
value of debt derivatives for the nine months ended September 30, 2016. 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 185.36%, (3) weighted average risk-free interest rate of 0.29%, (4) expected life of 0.25 years, and (5) estimated fair value
of the Company’s common stock of $0.0001 per share.
NOTE 9 – DERIVATIVE LIABILITIES
As described in Notes 7 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 8 for assumptions used to determine fair values.
NOTE 10 – 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, 2016 and December 31, 2015, the Company has 393,429
shares of preferred stock issued and outstanding.
Common stock
The Company has authorized 20,000,000,000 shares
of common stock, with a par value of $0.0001 per share as of September 30, 2016 and December 31, 2015. As of September 30, 2016
and December 31, 2015, the Company has 6,515,096,338 and 3,628,253,758, respectively, shares of common stock issued and outstanding.
During the nine months ended September 30,
2016, the Company issued an aggregate of 690,525,858 of its common stock in settlement of $82,863 of accrued officer salaries.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2016
(unaudited)
During the nine months ended September
30, 2016, the Company issued an aggregate of 1,496,316,722 shares of its common stock in settlement of the convertible note payable
and related interest of $167,395.
During the nine months ended September 30,
2016, the Company issued 700,000,000 shares of its common stock in payment of $70,000 of the outstanding balance of settlement
payable.
NOTE 11 – 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, 2016:
Exercise Price
|
|
|
Number
Outstanding
|
|
|
Warrants
Outstanding
Weighted
Average
Remaining
Contractual Life
(years)
|
|
|
Weighted
Average
Exercise price
|
|
|
Number
Exercisable
|
|
|
Warrants
Exercisable
Weighted
Average
Exercise Price
|
|
|
0.02000
|
|
|
|
5,000,000
|
|
|
|
0.47
|
|
|
|
0.02000
|
|
|
|
5,000,000
|
|
|
|
0.02000
|
|
|
0.10000
|
|
|
|
2,187,101
|
|
|
|
1.65
|
|
|
|
0.10000
|
|
|
|
2,187,101
|
|
|
|
0.10000
|
|
|
|
|
|
|
7,187,101
|
|
|
|
0.83
|
|
|
|
|
|
|
|
7,187,101
|
|
|
$
|
0.04434
|
|
Transactions involving the Company’s
warrant issuance are summarized as follows:
|
|
Number of
Shares
|
|
|
Weighted
Average
Price Per
Share
|
|
Outstanding at December 31, 2015
|
|
|
20,735,009
|
|
|
|
0.02482
|
|
Granted
|
|
|
–
|
|
|
|
–
|
|
Canceled
|
|
|
–
|
|
|
|
–
|
|
Expired
|
|
|
(13,547,908
|
)
|
|
|
0.016
|
|
Outstanding at September 30, 2016
|
|
|
7,187,101
|
|
|
$
|
0.04434
|
|
NOTE 12 – 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.
On November 17, 2015, the Company entered into
a Fourth Amended Option Agreement (the “Amended Option Agreement”) to the option agreement dated April 11, 2014 with
several investors and current land owners. Pursuant to the terms of the Amended Option Agreement, the land owners agreed to
invest $600,000 and defer until closing an additional $450,000 due on the option payment in exchange for a 2.67% equity investment
in AGP, Company’s majority owned subsidiary.
Moreover, pursuant to the terms of the option
agreement, the investor has also committed an additional $300,000 in exchange for a 1.33% equity investment, $50,000 which has
been paid and the additional $250,000 conditioned upon the Company and AGP successfully procuring $5,000,000 or more in additional
equity from investors, or such other additional amount as is necessary for the balance of the required pre-development and development
costs to be completed.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2016
(unaudited)
A reconciliation of the non-controlling income
(loss) attributable to the Company:
Net loss attributable to non-controlling interest
for the three months ended September 30, 2016:
Net loss
|
|
$
|
3,406
|
|
Average Non-controlling interest percentage
|
|
|
5.333%
|
|
Net loss attributable to the non-controlling interest
|
|
$
|
182
|
|
Net loss attributable to non-controlling interest
for the nine months ended September 30, 2016:
Net loss
|
|
$
|
11,736
|
|
Average Non-controlling interest percentage
|
|
|
5.333%
|
|
Net loss attributable to the non-controlling interest
|
|
$
|
626
|
|
Net loss attributable to non-controlling interest
for the three months ended 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:
Net loss
|
|
$
|
142,591
|
|
Average Non-controlling interest percentage
|
|
|
1.33%
|
|
Net loss attributable to the non-controlling interest
|
|
$
|
1,901
|
|
The following table summarizes the changes
in non-controlling interest from December 31, 2015 to September 30, 2016:
Balance, December 31, 2015
|
|
$
|
(17,570
|
)
|
Net loss attributable to the non-controlling interest
|
|
|
(626
|
)
|
Balance, September 30, 2016
|
|
$
|
(18,196
|
)
|
NOTE 13 – 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.
|
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2016
(unaudited)
Items recorded or measured at fair value on
a recurring basis in the accompanying consolidated financial statements consisted of the following items as of September 30, 2016:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Long-term investments
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Total
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Derivative liabilities
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
1,254,111
|
|
|
$
|
1,254,111
|
|
Total
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
1,254,111
|
|
|
$
|
1,254,111
|
|
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, 2016:
|
|
Derivative Liabilities
|
|
Balance, December 31, 2015
|
|
|
3,492,119
|
|
|
|
|
|
|
Transfers in (out) at mark-market value on date of payoff or conversion
|
|
|
(31,187
|
)
|
|
|
|
|
|
Transfers in upon initial fair value of derivative liabilities
|
|
|
553,093
|
|
|
|
|
|
|
Gain from change in fair value of derivative liabilities
|
|
|
(2,759,914
|
)
|
|
|
|
|
|
Balance, September 30, 2016
|
|
$
|
1,254,111
|
|
|
|
|
|
|
Total gain for the nine months included in earnings relating to the liabilities held at September 30, 2016
|
|
$
|
2,759,914
|
|
Level 3 Liabilities were comprised of our bifurcated
convertible debt features on our convertible notes.
NOTE 14 – SUBSEQUENT EVENTS
Common stock issuances:
In October 2016, the Company issued 200,000,000
shares of its common stock as payment of $20,000 towards settlement payable and 1,250,000,000 shares of its common stock in payment
of $150,000 accrued officer compensation.
In November 2016, the Company issued an aggregate
of 1,750,959,177 shares of its common stock in settlement of $315,134 outstanding notes payable and 111,111,111 shares of its common
stock in payment of $20,000 accrued compensation.
In December 2016, the Company issued 300,000,000
shares of its common stock in settlement of $170,000 due to shareholders, 1,193,750,000 shares of its common stock in payment of
$143,250 accrued officer compensation and 686,877,778 shares of its common stock in settlement of $131,759 outstanding notes payable.
In January 2017, the Company issued 125,000,000
shares of its common stock in payment of $30,000 accrued officer compensation.
In January 2017, the Company, on behalf of
Arizona Green Power LLC, authorized a private placement offering consisting of the sale of 5.5% interest in Arizona Green Power
LLC for $137,500 including 1,375,000,000 shares of the Company’s common stock. Eleven existing shareholders participated
in the private placement. The Company also issued, as part of the private placement, warrants to purchase 825,000,000 shares of
the Company’s common stock at $0.0001, the market price at the time of issuance.
In January 2017, the Company’s Chief
Executive Officer exchanged a previous salary accrual of $25,000 for a 1% ownership interest in Arizona Green Power LLC. In addition,
was elected as the Managing Member of Arizona Green Power LLC.
SOLAR WIND ENERGY TOWER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2016
(unaudited)
In March 2017, the Company issued an aggregate
of 119,047,500 shares of its common stock in payment of $50,000 accrued officer salaries.
In April 2017, the Company issued 148,333,333
shares of its common stock in payment of accrued employee compensation.
In April 2017, the Company issued 825,000,000
shares of its common stock in exchange for the exercise of 825,000,000 warrants at an exercise price of $0.0001 per shares, aggregate
of $82,500 proceeds