UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT DATED March 31, 2023 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the three months ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
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by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange
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Smaller
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As of May 22, 2023, there were shares of the Registrant’s $0.001 par value common stock issued and outstanding.
Securities registered pursuant to Section 12(b) of the Act
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
CLEAN ENERGY TECHNOLOGIES, INC.
(A Nevada Corporation)
TABLE OF CONTENTS
Page | |||
PART I. FINANCIAL INFORMATION | |||
ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS | 3 | |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 30 | |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 36 | |
ITEM 4. | CONTROLS AND PROCEDURES | 36 | |
PART II. OTHER INFORMATION | |||
ITEM 1. | LEGAL PROCEEDINGS | 36 | |
ITEM 1A. | RISK FACTORS | 36 | |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 36 | |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 37 | |
ITEM 4. | MINE SAFETY DISCLOSURES | 37 | |
ITEM 5. | OTHER INFORMATION | 37 | |
ITEM 6. | EXHIBITS | 37 |
2 |
Part I – Financial Information
Item 1. Financial Statements
Clean Energy Technologies, Inc.
Consolidated Financial Statements
(Expressed in US dollars)
March 31, 2023 (unaudited)
3 |
Clean Energy Technologies, Inc.
Consolidated Balance Sheets
Unaudited | Audited | |||||||
March 31, 2023 | December 31, 2022 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash | $ | $ | ||||||
Accounts receivable - net | ||||||||
Lease receivable asset | ||||||||
Advance to Supplier - Prepayment | ||||||||
Advance to Supplier – Related Party | ||||||||
Deferred Offering Costs | ||||||||
Investment Heze Honguan Natural Gas Co. | ||||||||
Due from – Related party | ||||||||
Loan Receivables | ||||||||
Inventory | ||||||||
Total Current Assets | ||||||||
Property and Equipment - Net | ||||||||
Goodwill | ||||||||
LWL Intangibles | ||||||||
Long Term Investment - Shuya | ||||||||
Long-term financing receivables - net | ||||||||
License | ||||||||
Patents | ||||||||
Right of use asset - long term | ||||||||
Other Assets | ||||||||
Total Non Current assets | ||||||||
Total Assets | $ | |||||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | |||||||
Accrued Expenses | ||||||||
Customer Deposits | ||||||||
Warranty Liability | ||||||||
Deferred Revenue | ||||||||
Derivative Liability | ||||||||
Facility Lease Liability - current | ||||||||
Line of Credit | ||||||||
Convertible Notes Payable (net of discount of | ||||||||
Total Current Liabilities | ||||||||
Long-Term Liability: | ||||||||
Facility Lease Liability - long term | ||||||||
Net Long-Term Liability | ||||||||
Total Liabilities | ||||||||
Commitments and contingencies | $ | |||||||
Stockholders’ Equity | ||||||||
Common stock, $ | par value; shares authorized; and issued and outstanding as of March 31, 2023 and December 31, 2022, respectively||||||||
Shares to be issued | ||||||||
Addition paid-in capital | ||||||||
Accumulated Other Comprehensible Income | ( | ) | ( | ) | ||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total Stock Holders Equity attributable to CETY | ||||||||
Non-controlling interest | ||||||||
Total Stockholders’ Equity | ||||||||
Total Liabilities and Stockholders’ Equity | $ |
The accompanying footnotes are an integral part of these consolidated financial statements
4 |
Clean Energy Technologies, Inc.
Consolidated Statements of Operations
for the three months ended March 31 (Unaudited)
2023 | 2022 | |||||||
Sales | $ | |||||||
Cost of Goods Sold | ||||||||
Gross Profit | ||||||||
General and Administrative | ||||||||
General and Administrative expense | ||||||||
Salaries | ||||||||
Travel | ||||||||
Professional Fees Legal & Accounting | ||||||||
Facility lease and Maintenance | ||||||||
Consulting Engineering | ||||||||
Depreciation and Amortization | ||||||||
Total Expenses | ||||||||
Net Profit / (Loss) From Operations | ( | ) | ||||||
Other Income | ( | ) | ||||||
Change in derivative liability | ||||||||
Interest and Financing fees | ( | ) | ( | ) | ||||
Net Profit / (Loss) Before Income Taxes | ( | ) | ( | ) | ||||
Income Tax Expense | ( | ) | ( | ) | ||||
Net Profit / (Loss) | ( | ) | ( | ) | ||||
Non-controlling interest | ( | ) | ||||||
Net Profit / (Loss) attributable to Clean Energy Technologies, Inc. | ( | ) | ( | ) | ||||
Other Comprehensive Item | ||||||||
Foreign Currency Translation Gain | ||||||||
Total Comprehensible Income / (Loss) | $ | ( | ) | ( | ) | |||
Per Share Information: | ||||||||
Basic and diluted weighted average number of common shares outstanding | ||||||||
Net Profit / (Loss) per common share basic and diluted | $ | ( | ) | ( | ) |
The accompanying footnotes are an integral part of these Consolidated financial statements
5 |
Clean Energy Technologies, Inc.
Consolidated Statements of Stockholders Deficit
March 31, 2022 & 2023 (Unaudited)
Common Stock .001 Par | Preferred Stock | Common Stock to be issued | Additional Paid in | Subscription | Accumulated Comprehensive | Accumulated | Non Controlling | Stock holders’ Deficit/equity | ||||||||||||||||||||||||||||||||||||
Description | Shares | Amount | Shares | Amount | Amount | Capital | Interest | Income | Deficit | interest | Totals | |||||||||||||||||||||||||||||||||
December 31, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
Shares issued for Reg A offering | ||||||||||||||||||||||||||||||||||||||||||||
Shares issued for S1 | ||||||||||||||||||||||||||||||||||||||||||||
- | ||||||||||||||||||||||||||||||||||||||||||||
Subscription Receivable | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
Accumulated Comprehensive | ||||||||||||||||||||||||||||||||||||||||||||
Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
March 31, 2022 | ( | ) | ( | ) | ( | ) | ( | ) |
Common
Stock .001 Par | Preferred Stock | Common Stock to be issued | Additional Paid in | Accumulated Comprehensive | Accumulated | Non Controlling | Stock
Deficit/equity | |||||||||||||||||||||||||||||||||
Description | Shares | Amount | Shares | Amount | Amount | Capital | Income | Deficit | interest | Totals | ||||||||||||||||||||||||||||||
December 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
Warrants issued in conjunction for debt | - | |||||||||||||||||||||||||||||||||||||||
Shares issued for S-1 Registration | - | |||||||||||||||||||||||||||||||||||||||
Offering Cost | (753,781 | ) | (753,781 | ) | ||||||||||||||||||||||||||||||||||||
Shares issued for rounding | - | ( | ) | |||||||||||||||||||||||||||||||||||||
Shares for Pacific Pier and Firstfire conversion | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
Shares issued for Universal Scope Conversion | - | |||||||||||||||||||||||||||||||||||||||
Accumulated Comprehensive | - | |||||||||||||||||||||||||||||||||||||||
Non controlling interest ownership | ||||||||||||||||||||||||||||||||||||||||
Net Loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
March 31, 2023 | ( | ) | ( | ) |
The accompanying footnotes are an integral part of these consolidated financial statements
6 |
Clean Energy Technologies, Inc.
Consolidated Statements of Cash Flows
for the three months ended March 31 (Unaudited)
2023 | 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net Income / ( Loss ) | $ | ( | ) | ( | ) | |||
Depreciation and amortization | ||||||||
Amortization Debt Discount | ||||||||
Warrant issued to JH Darbie | ||||||||
Financing Fees | ||||||||
Change in derivative liability | ( | ) | ( | ) | ||||
Changes in assets and liabilities: | ||||||||
(Increase) decrease in right of use asset | ( | ) | ||||||
(Increase) decrease in lease liability | ( | ) | ||||||
(Increase) decrease in accounts receivable | ( | ) | ||||||
Accrued Interest | ||||||||
Changes in prepayments | ||||||||
Other Assets | ||||||||
(Increase) decrease in inventory | ( | ) | ( | ) | ||||
(Decrease) increase in accounts payable | ( | ) | ||||||
Other (Decrease) increase in accrued expenses | ( | ) | ( | ) | ||||
Other (Decrease) increase in accrued expenses related party | ||||||||
Other (Decrease) increase in customer deposits | ||||||||
Net Cash Provided by (Used In) Operating Activities | ( | ) | ( | ) | ||||
Cash Flows from Investing Activities | ||||||||
Investment in Heze Hongyuan | ( | ) | ( | ) | ||||
Loan Receivables Net Change Shuya Consolidation | ||||||||
Cash Flows Used In Investing Activities | ( | ) | ||||||
Cash Flows from Financing Activities | ||||||||
Payment on lines of credit | ( | ) | ( | ) | ||||
Proceeds from notes payable and lines of credit | ||||||||
Proceeds from notes payable | ||||||||
Payments on notes payable | ( | ) | ||||||
Stock issued for cash | ||||||||
Cash Flows Provided By Financing Activities | ||||||||
Foreign Currency Transaction | ||||||||
Net (Decrease) Increase in Cash and Cash Equivalents | ||||||||
Cash and Cash Equivalents at Beginning of Period | ||||||||
Cash and Cash Equivalents at End of Period | $ | |||||||
Supplemental Cashflow Information: | ||||||||
Interest Paid | $ | |||||||
Supplemental Non-Cash Disclosure | ||||||||
Discount on new note | $ | |||||||
Universal convertible note issuance | ||||||||
Warrants issued for debt |
The accompanying footnotes are an integral part of these consolidated financial statements
7 |
Clean Energy Technologies, Inc.
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 – GENERAL
These unaudited interim consolidated financial statements as of and for the three months ended March 31, 2023, reflect all adjustments which, in the opinion of management, are necessary to fairly state the Company’s financial position and the results of its operations for the periods presented, in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.
These unaudited interim consolidated financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s fiscal year end December 31, 2022 report. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of results for the entire year ending December 31, 2023.
The summary of significant accounting policies of Clean Energy Technologies, Inc. is presented to assist in the understanding of the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity.
Corporate History
We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005 under the name Probe Manufacturing, Inc. We manufactured electronics and provided services to original equipment manufacturers (OEMs) of industrial, automotive, semiconductor, medical, communication, military, and high technology products. On September 11, 2015 Clean Energy HRS, or “CE HRS”, our wholly owned subsidiary acquired the assets of Heat Recovery Solutions from General Electric International. In November 2015, we changed our name to Clean Energy Technologies, Inc.
Our principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. Our telephone number is (949) 273-4990. Our common stock is listed on the Nasdaq Markets under the symbol “CETY.”
Our internet website address is www.cetyinc.com and our subsidiary’s web site is www.heatrecoverysolutions.com The information contained on our websites are not incorporated by reference into this document, and you should not consider any information contained on, or that can be accessed through, our website as part of this document.
The Company has four reportable segments: Clean Energy HRS (HRS), CETY Europe, and the legacy electronic manufacturing services (Electronic Assembly) division and CETY HK.
8 |
Going Concern
The
financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets
and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s equity of $
Plan of Operation
Our mission is to be a leader in the zero-emission revolution by providing eco-friendly energy solutions, clean energy fuels, and alternative electric power for small to mid-sized projects across North America, Europe, and Asia. The company harnesses the power of heat and biomass to produce electricity with zero emissions and minimal cost. Additionally, the company offers Waste to Energy Solutions, converting waste materials from manufacturing, agriculture, and wastewater treatment plants into electricity and BioChar. Clean Energy Technologies also provides
Engineering, Consulting, and Project Management Solutions, leveraging its expertise to develop clean energy projects for both municipal and industrial customers, as well as Engineering, Procurement, and Construction (EPC) companies.
Our principal businesses
Heat Recovery Solutions – Clean Energy Technologies patented Clean Cycle Generator (CCG) is a heat recovery system that captures waste heat from various sources and converts it into electricity. This system can be integrated into various industrial processes, helping to reduce energy costs and carbon emissions.
Waste to Energy Solutions - Clean Energy Technologies’ waste to energy solutions involve converting organic waste materials, such as agricultural waste and food waste, into clean energy through its proprietary gasification technology that produce a range of products, including electricity, heat, and biochar.
Engineering, Consulting and Project Management Solutions – Clean Energy Technologies offers engineering and manufacturing services to help clients bring their sustainable energy products to market. This includes design, prototyping, testing, and production services. Clean Energy Technologies’ expertise in engineering and manufacturing enables it to provide customized solutions to meet clients’ specific needs.
CETY HK
Clean Energy Technologies (H.K.) Limited (“CETY HK”) consists of two business ventures in mainland China:(i) our natural gas (“NG”) trading operations sourcing and suppling NG to industries and municipalities. NG is principally used for heavy truck refueling stations and urban or industrial users. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are prepaid for in advance at a discount to market. We sell the NG to our customers at fixed prices or prevailing daily spot prices for the duration of the contracts; and (ii) our planned joint venture with a large state-owned gas enterprise in China called Shenzhen Gas (Hong Kong) International Co. Ltd. (“Shenzhen Gas”), acquiring natural gas pipeline operator facilities, primarily located in the southwestern part of China. Our planned joint venture with Shenzhen Gas plans to acquire, with financing from Shenzhen Gas, natural gas pipeline operator facilities with the goal of aggregating and selling the facilities to Shenzhen Gas in the future. According to our Framework Agreement with Shenzhen Gas, we will be required to contribute $8 million to the joint venture which plans to raise those funds in future rounds of financing. The terms of the joint venture are subject to the execution of definitive agreements.
NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The summary of significant accounting policies of Clean Energy Technologies, Inc. (formerly Probe Manufacturing, Inc.) is presented to assist in the understanding of the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity.
The consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets, the collection of accounts receivable and valuation of inventory and reserves.
9 |
Cash and Cash Equivalents
We
maintain the majority of our cash accounts at JP Morgan Chase bank. The total cash balance is insured by the Federal Deposit Insurance
Corporation (“FDIC”) up to $
Accounts Receivable
Our
ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by us. Reserves for
un-collectable amounts are provided, based on past experience and a specific analysis of the accounts. Although we expect to collect
amounts due, actual collections may differ from the estimated amounts. As of March 31, 2023, and December 31, 2022, we had a reserve
for potentially un-collectable accounts receivable of $
Seven
(7) customers accounted for approximately
Lease asset
As
of March 31, 2023, and December 31, 2022 we had a lease asset that was purchased from General Electric with a value of $
Inventory
Inventories
are valued at the lower of weighted average cost or market value. Our industry experiences changes in technology, changes in market value
and availability of raw materials, as well as changing customer demand. We make provisions for estimated excess and obsolete inventories
based on regular audits and cycle counts of our on-hand inventory levels and forecasted customer demands and at times additional provisions
are made. Any inventory write offs are charged to the reserve account. As of March 31, 2023, and December 31, 2022, we had a reserve
for potentially obsolete inventory of $
Property and Equipment
Property and equipment are recorded at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets. The cost of ordinary maintenance and repairs is charged to operations. Depreciation and amortization are computed on the straight-line method over the following estimated useful lives of the related assets:
Furniture and fixtures | ||||
Equipment | ||||
Leasehold Improvements |
10 |
Long –Lived Assets
Our management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long-lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment if any, is measured based on fair value and is charged to operations in the period in which long-lived assets impairment is determined by management. There can be no assurance however, that market conditions will not change or demand for our services will continue, which could result in impairment of long-lived assets in the future.
Revenue Recognition
The Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC 606”).
Performance Obligations Satisfied Over Time
FASB ASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10
An entity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one of the following criteria is met:
a. The customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB ASC 606-10-55-5 through 55-6).
b. The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced (as described in FASB ASC 606-10-55-7).
c. The entity’s performance does not create an asset with an alternative use to the entity (see FASB ASC 606-10-25-28), and the entity has an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).
Performance Obligations Satisfied at a Point in Time
FASB ASC 606-10-25-30
If a performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time. To determine the point in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should consider the guidance on control in FASB ASC 606-10-25-23 through 25-26. In addition, it should consider indicators of the transfer of control, which include, but are not limited to, the following:
a. The entity has a present right to payment for the asset
b. The customer has legal title to the asset
c. The entity has transferred physical possession of the asset
d. The customer has the significant risks and rewards of ownership of the asset
e. The customer has accepted the asset
A principal obtains control over any one of the following (ASC 606-10-55-37A):
a. | A good or another asset from the other party which the entity then transfers to the customer. Note that momentary control before transfer to the customer may not qualify. | |
b. | A right to a service to be performed by the other party, which gives the entity the ability to direct that party to provide the service to the customer on the entity’s behalf. | |
c. | A good or service from the other party that it then combines with other goods or services in providing the specified good or service to the customer. |
If the entity obtains control over one of the above before the good or service is transferred to a customer, the entity could be considered a principal.
The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. In addition a) the company also does not have an alternative use for the asset if the customer were to cancel the contract, and b.) has a fully enforceable right to receive payment for work performed (i.e., customers are required to pay as various milestones and/or timeframes are met)
The following five steps are applied to achieve that core principle for our HRS and CETY Europe Divisions:
● | Identify the contract with the customer | |
● | Identify the performance obligations in the contract | |
● | Determine the transaction price | |
● | Allocate the transaction price to the performance obligations in the contract | |
● | Recognize revenue when the company satisfies a performance obligation |
The following steps are applied to our legacy engineering and manufacturing division:
● | We generate a quotation | |
● | We receive purchase orders from our customers. | |
● | We build the product to their specification | |
● | We invoice at the time of shipment | |
● | The terms are typically Net 30 days |
11 |
The following step is applied to our CETY HK business unit:
● | CETY HK is primarily responsible for fulfilling the contract / promise to provide the specified good or service. |
Also,
from time to time our contracts state that the customer is not obligated to pay a final payment until the units are commissioned, i.e.
a final payment of
Also,
from time to time we require upfront deposits from our customers based on the contract. As of March 31, 2023 and December 31, 2022, we
had outstanding customer deposits of $
Fair Value of Financial Instruments
The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures” for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:
● | Level 1: Quoted prices in active markets for identical assets or liabilities. | |
● | Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. | |
● | Level
3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets
or liabilities. The Company’s derivative liabilities have been valued as Level 3 instruments. We value the derivative liability
using a lattice model, with a volatility of |
The Company’s financial instruments consist of cash, prepaid expenses, inventory, accounts payable, convertible notes payable, advances from related parties, and derivative liabilities. The estimated fair value of cash, prepaid expenses, investments, accounts payable, convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these instruments.
The carrying amounts of the Company’s financial instruments as of March 31, 2023 and December 31, 2022 reflect:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fair value of convertible notes derivative liability – March 31, 2023 | $ | $ | $ | $ |
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fair value of convertible notes derivative liability – December 31, 2022 | $ | $ | $ | $ |
The carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments.
Foreign Currency Translation and Comprehensive Income (Loss)
We have no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods. The accounts of the Company’s Chinese entities are maintained in RMB. The accounts of the Chinese entities were translated into USD in accordance with FASB ASC Topic 830 “Foreign Currency Matters.” All assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates and the statements of operations and cash flows are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) in accordance with FASB ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from foreign currency transactions are reflected in the statements of operations.
The Company follows FASB ASC Topic 220-10, “Comprehensive Income (loss).” Comprehensive income (loss) comprises net income (loss) and all changes to the statements of changes in stockholders’ equity, except those due to investments by stockholders, changes in additional paid-in capital and distributions to stockholders.
12 |
Change from fair value or equity method to consolidation
In July
2022, JHJ and other three shareholders agreed to form and make total capital contribution of RMB
Shuya was setup as the operating entity for pipeline natural gas (PNG) and compressed natural gas (CNG) trading business, while the other two shareholders of Shuaya have large supply relationships.
For the year ended December 31, 2022, the Company has determined that Shuya was not a VIE and has evaluated its consolidation analysis under the voting interest model. Because the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment in Shuya under the equity method of accounting. Under this method, the investor (“JHJ”) recognizes its share of the profits and losses of the investee (“Shuya”) in the periods when these profits and losses are also reflected in the accounts of the investee. Any profit or loss recognized by the investing entity appears in its income statement. Also, any recognized profit increases the investment recorded by the investing entity, while a recognized loss decreases the investment.
JHJ
made a investment of RMB
However, effective January 1, 2023, JHJ, SSEN and Chengdu Xiangyueheng Enterprise Management Co., Ltd (“Xiangyueheng), who is the 10% shareholder of Shuya, entered a Three-Parties Consistent Action Agreement, wherein these three shareholders (or three parties) will guarantee that the voting rights will be expressed in the same way at the shareholders’ meeting of Shuya to consolidate the controlling position of the three parties in Shuya. The three parties agree that within the validity period of this agreement, before the party intends to propose the motions to the shareholders or the board of directors on the major matters related to the voting rights of the shareholders or the board of directors, the three parties internally will discuss, negotiate and coordinate the motion topics for consistency; in the event of disagreement, the opinions of JHJ shall prevail.
As a result of Consistent Action Agreement, the Company re-analyzed and determined that Shuya is the variable interest entity (“VIE”) of JHJ because 1) the equity investors at risk, as a group, lack the characteristics of a controlling financial interest, and 2) Shuya is structured with disproportionate voting rights, and substantially all of the activities are conducted on behalf of an investor with disproportionately few voting rights. Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The Company concluded JHJ is deemed the primary beneficiary of the VIE. Accordingly, the Company consolidates Shuya effective on January 1, 2023.
Under ASC-805-10-50-2, initial consolidation of an investee previously reported using fair value or the equity method should be accounted for prospectively as of the date the entity obtained a controlling financial interest. And the public business entities should provide pro forma information as if the consolidation had occurred as of the beginning of each of the current and prior comparative reporting period. However, Shuya was incorporated in July 2022, and the actual consolidation was effective on January 1, 2023, therefore, no comparative period adjustments are presented for the three months ended March 31, 2022 as they do not exist.
13 |
Basic profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding. At March 31, 2023, we had outstanding common shares of used in the calculation of basic earnings per share. Basic Weighted average common shares and equivalents for the three months ended March 31, 2023, and March 31, 2022 were and respectively. As of March 31, 2023, we had convertible notes, convertible into approximately of additional common shares, common stock warrants. Fully diluted weighted average common shares and equivalents were withheld from the calculation for the three months ended March 31, 2023, and March 31, 2022 as they were considered anti-dilutive.
Research and Development
We
had
Segment Disclosure
FASB
Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an
enterprise’s reportable segments. The Company has
An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include amortization of intangibles, stock-based compensation, other charges (income), net and interest and other, net.
Selected Financial Data:
for the three months ended March, 31 | ||||||||
2023 | 2022 | |||||||
Net Sales | ||||||||
Manufacturing and Engineering | ||||||||
Clean Energy HRS | ||||||||
CETY HK | ||||||||
CETY Europe | ||||||||
Total Sales | ||||||||
Segment income and reconciliation before tax | ||||||||
Manufacturing and Engineering | ||||||||
Clean Energy HRS | ||||||||
CETY HK | ||||||||
CETY Europe | ||||||||
Total Segment income | ||||||||
Reconciling items | ||||||||
General and Administrative expense | ||||||||
Salaries | ||||||||
Travel | ||||||||
Professional Fees | ||||||||
Facility lease and Maintenance | ||||||||
Consulting | ||||||||
Depreciation and Amortization | ||||||||
Change in derivative liability | ||||||||
Other Income | ( | ) | ||||||
Interest and Financing fees | ( | ) | ( | ) | ||||
Net Loss before income tax | ( | ) | ( | ) |
14 |
Share-Based Compensation
The Company has adopted the use of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (SFAS No. 123R) (now contained in FASB Codification Topic 718, Compensation-Stock Compensation), which supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance and eliminates the alternative to use Opinion 25’s intrinsic value method of accounting that was provided in Statement 123 as originally issued. This Statement requires an entity to measure the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and stock warrants, based on the fair value of the award, measured at the grant date (with limited exceptions). Under this standard, the fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black-Scholes option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets the requirements of SFAS No. 123R; however, the fair values generated may not reflect their actual fair values, as it does not consider certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility. For the “risk-free interest rate,” we use the Constant Maturity Treasury rate on 90-day government securities. The term is equal to the time until the option expires. The dividend yield is not applicable, as the Company has not paid any dividends, nor do we anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading common stock, on the grant date calculated using a 20-trading-day average. At the time of grant, the share-based compensation expense is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates and the expense is reduced accordingly. It is also adjusted to account for the restricted and thinly traded nature of the shares. The expense is reviewed and adjusted in subsequent periods if actual attrition differs from those estimates.
We re-evaluate the assumptions used to value our share-based awards on a quarterly basis and, if changes warrant different assumptions, the share-based compensation expense could vary significantly from the amount expensed in the past. We may be required to adjust any remaining share-based compensation expense, based on any additions, cancellations or adjustments to the share-based awards. The expense is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. For the three months ended March 31, 2023, and 2022 we had $ in share-based expense, due to the issuance of common stock. As of March 31, 2023, we had no further non-vested expense to be recognized.
15 |
Income Taxes
Federal Income taxes are not currently due since we have had losses since inception of Clean Energy Technologies.
Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.
Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.
As
of March 31, 2023, we had a net operating loss carry-forward of approximately $(
March 31, 2023 | December 31, 2022 | |||||||
Deferred Tax Asset | $ | ( | ) | ( | ) | |||
Valuation Allowance | ( | ) | ( | ) | ||||
Deferred Tax Asset (Net) | $ | $ |
On
February 13, 2018, Clean Energy Technologies, Inc., a Nevada corporation (the “Registrant” or “Corporation”)
entered into a Common Stock Purchase Agreement (“Stock Purchase Agreement”) by and between MGW Investment I Limited (“MGWI”)
and the Corporation. The Corporation received $
On
February 13, 2018, the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $
This
resulted in a change in control, which limited the net operating to that date forward. We are subject to taxation in the U.S. and the
states of California. Further, the Company currently has no open tax years’ subject to audit prior to
16 |
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported income, total assets, or stockholders’ equity as previously reported.
Recently Issued Accounting Standards
The Company is reviewing the effects of following recent updates. The Company has no expectation that any of these items will have a material effect upon the financial statements.
Update 2021-03—Intangibles—Goodwill and Other (Topic 350): Accounting Alternative For Evaluating Triggering Events.
The amendments in this Update are effective on a prospective basis for fiscal years beginning after December 15, 2019. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021.
Update 2021-01—Reference Rate Reform (Topic 848):
An entity may elect to apply the amendments in this Update on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020.
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit Losses [codified as Accounting Standards Codification Topic (ASC) 326]. ASC 326 adds to US generally accepted accounting principles (US GAAP) the current expected credit loss (CECL) model, a measurement model based on expected losses rather than incurred losses. Under this new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses. This will become effective in January 2023 and will have minimal impact on the company.
Update 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. We do not expect any material impact on our financials because of the adoption of this update.
Deferred Stock Issuance Costs
Deferred
stock issuance costs represent amounts paid for legal, consulting, and other offering expenses in conjunction with the future raising
of additional capital to be performed within one year. These costs are netted against additional paid-in capital as a cost of the stock
issuance upon closing of the respective stock placement. During the quarter ended March 31, 2023, $
NOTE 3 – ACCOUNTS AND NOTES RECEIVABLE
March 31, 2023 | December 31, 2022 | |||||||
Accounts Receivable | $ | |||||||
Accounts Receivable Related Party | ||||||||
Less reserve for uncollectable accounts | ( | ) | ( | ) | ||||
Total | $ |
Our Accounts Receivable is pledged to Nations Interbanc, our line of credit.
March 31, 2023 | December 31, 2022 | |||||||
Lease asset | $ | $ |
The Company is currently modifying the assets subject to lease to meet the provisions of the agreement, and as of March 31, 2023 any collection on the lease payments was not yet considered probable, resulting in no derecognition of the underlying asset and no net lease investments recognized on the sales-type lease pursuant to ASC 842-30-25-3.
March 31, 2023 | December 31, 2022 | |||||||
Long-term financing receivables | $ | $ | ||||||
Less Reserve for uncollectable accounts | ( | ) | ( | ) | ||||
Long-term financing receivables - net | $ | $ |
On a contract-by-contract basis or in response to certain situations or installation difficulties, the Company may elect to allow non-interest bearing repayments in excess of 1 year.
Our long-term financing Receivable are pledged to Nations Interbanc, our line of credit.
17 |
NOTE 4 – INVENTORY
Inventories by major classification were comprised of the following at:
March 31, 2023 | December 31, 2022 | |||||||
Inventory | $ | |||||||
Less reserve for uncollectable accounts | ( | ) | ( | ) | ||||
Total | $ |
Our Inventory is pledged to Nations Interbanc, our line of credit.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment were comprised of the following at:
March 31, 2023 | December 31, 2022 | |||||||
Property and Equipment | $ | |||||||
Leasehold Improvements | ||||||||
Accumulated Depreciation | ( | ) | ( | ) | ||||
Net Fixed Assets | $ |
Our
Depreciation Expense for the three months ended March 31, 2023 and 2022 was $
Our Property Plant and Equipment is pledged to Nations Interbanc, our line of credit.
NOTE 6 – INTANGIBLE ASSETS
Intangible assets were comprised of the following at:
March 31, 2023 | December 31, 2022 | |||||||
Goodwill | $ | |||||||
LWL Intangibles | $ | |||||||
License | ||||||||
Patents | ||||||||
Accumulated Amortization | ( | ) | ( | ) | ||||
Net Fixed Assets | $ |
Our
Amortization Expense for the three months ended March 31, 2023 and 2022 was $
18 |
Based on the foregoing analysis of the facts surrounding the Company’s acquisition of LWL, it is the Company’s position that the Company is the acquirer of LWL, under the acquisition method of accounting.
As such, as of November 8, 2021 (the acquisition date), the Company recognized, separately from goodwill, the identifiable assets acquired and the liabilities assumed in the Business combination.
The following table presents the purchase price allocation:
Consideration: | ||||
Cash and cash equivalents | $ | |||
Total purchaser consideration | $ | |||
Assets acquired: | ||||
Cash and cash equivalents | $ | |||
Prepayment | $ | |||
Other receivable | $ | |||
Trading Contracts | $ | |||
Shenzhen Gas Relationship | $ | |||
Total assets acquired | $ | |||
Liabilities assumed: | ||||
Advance Receipts | $ | ( | ||
Taxes Payable | $ | |||
Net Assets Acquired: | $ |
.
19 |
NOTE 7 – CONVERTIBLE NOTE RECEIVABLE
Effective
January 10, 2022, JHJ (“note holder”) entered a convertible note agreement with Chengdu Rongjun Enterprise Consulting Co.,
Ltd (“Rongjun” or “the borrower”) with maturity on
NOTE 8 – ACCRUED EXPENSES
March 31, 2023 | December 31, 2022 | |||||||
Accrued Wages | $ | $ | ||||||
Accrued Taxes and other | ||||||||
Accrued Wages and Taxes | $ | $ |
NOTE 9 – NOTES PAYABLE
On
November 11, 2013, we entered into an accounts receivable financing agreement with American Interbanc (now Nations Interbanc). Amounts
outstanding under the agreement bear interest at the rate of
On
April 1, 2021, we entered into an amendment to the purchase order financing agreement with DHN Capital, LLC dba Nations Interbanc. Nations
Interbanc has lowered the accrued fees balance by $
On
September 11, 2015, our CE HRS subsidiary issued a promissory note in the initial principal amount $
Based
on the California Statute of Limitations, the Nevada Statute of Limitations, and the New York Statute of Limitations it is the view of
our legal counsel that the above referenced debt is no longer an enforceable obligation. under California law, Nevada law, and New York
law, as it became past due no later than November 3, 2016, more than Six (6) years ago and last payment made on the debt was on November
3, 2016, which is more than Six (6) years ago. The total gain recognized from this write off was $
20 |
On
September 7, 2021, the company entered into a promissory note in the amount of $
On
September 28, 2021, the company entered into a promissory note in the amount of $
On
March 10, 2022, the company entered into a promissory note in the amount of $
On
June 30, 2022, the company entered into a promissory note in the amount of $
On
July 13, 2022, the company entered into a promissory note in the amount of $
On
October 25, 2022, the company entered into a promissory note in the amount of $
On
Dec 5,2022 the company entered into a promissory note in the amount of $
On
Feb 10,2023 the company entered into a promissory note in the amount of $
On
March 6,2023 the company entered into a promissory note in the amount of $
Convertible notes
On
May 5, 2017, we entered into a nine-month convertible note payable for $
On
May 24, 2017, we entered into a nine-month convertible note payable for $
21 |
On
December 27, 2021, we entered into a convertible note payable with Universal Scope Inc. for $
On
May 6, 2022, we entered into a Securities Purchase Agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company issued
to Mast Hill a $
On
August 5, 2022, we entered into a Securities Purchase Agreement with Jefferson Street Capital, LLC (Jefferson) pursuant to which the
Company issued to Jefferson a $
On
August 17, 2022, we entered into a Securities Purchase Agreement with Firstfire Global Opportunities Fund LLC (“Firstfire”)
pursuant to which the Company issued to Mast Hill a $
On
September 1, 2022, we entered into a Securities Purchase Agreement with Pacific Pier Capital, LLC (Pacific) pursuant to which the
Company issued to Pacific a $
22 |
On
September 16, 2022, we entered into a Securities Purchase Agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company
issued to Mast Hill a $
On
November 10, 2022, we entered into a Securities Purchase Agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company
issued to Mast Hill a $
On
November 21, 2022, we entered into a Securities Purchase Agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company
issued to Mast Hill a $
On
December 26, 2022, we entered into a Securities Purchase Agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company
issued to Mast Hill a $
On January 19, 2023, we entered into a Securities
Purchase Agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company issued to Mast Hill a $
On
March 8, 2023, we entered into a Securities Purchase Agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company
issued to Mast Hill a $
Total due to Convertible Notes
March 31, 2023 | December 31, 2022 | |||||||
Total convertible notes | $ | |||||||
Accrued Interest | ||||||||
Debt Discount | ( | ) | ( | ) | ||||
Total | $ |
Note 10 – Derivative Liabilities
As
a result of the convertible notes, we recognized the embedded derivative liability on the date of note issuance. We also revalued the
remaining derivative liability on the outstanding note balance on the date of the balance sheet. We value the derivative liability using
a binomial lattice model with an expected volatility of
March 31, 2023 | December 31, 2022 | |||||||
Derivative Liabilities on Convertible Loans: | ||||||||
Outstanding Balance | $ | $ |
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Operating Rental Leases
As
of May 1, 2017, our corporate headquarters are located at 2990 Redhill Unit A, Costa Mesa, CA. On March 10, 2017, the Company signed
a lease agreement for an
As of March 31, 2023
Year | Lease Payment | |||
2023 | ||||
Imputed Interest | ( | ) | ||
Net Lease Liability | $ |
Our
lease expense for the three months ended March 31, 2023 and 2022 was $
23 |
The following is a schedule, by year of lease payment for Shuya as of March 31, 2023.
For the 12 months ending | Lease Payment | |||
March 31, 2024 | ||||
March 31, 2025 | ||||
March 31, 2026 | ||||
March 31, 2027 | ||||
Total undiscounted cash flows | ||||
Imputed Interest | ( | ) | ||
Present value of lease liabilities | $ |
Our
lease expense of Shuya for the three months ended March 31, 2023 and 2022 was $
ASB
ASU 2016-02 “Leases (Topic 842)” – In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize
almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained
a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely
similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current
model but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We have adopted the above ASU
as of January 1, 2019. The right of use asset and lease liability have been recorded at the present value of the future minimum lease
payments, utilizing a
Severance Benefits
Mr. Mahdi will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Mahdi would have been entitled to receive through the remainder or the Employment Period or One (1) year, whichever is greater.
NOTE 12 – CAPITAL STOCK TRANSACTIONS
On April 21, 2005, our Board of Directors and shareholders approved the re-domicile of the Company in the State of Nevada, in connection with which we increased the number of our authorized common shares to and designated a par value of $ per share.
On May 25, 2006, our Board of Directors and shareholders approved an amendment to our Articles of Incorporation to authorize a new series of preferred stock, designated as Series C, and consisting of authorized shares.
On June 30, 2017, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to and in the number of our authorized preferred shares to . The amendment effecting the increase in our authorized capital was filed and effective on July 5, 2017.
On August 28, 2018, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to . The amendment effecting the increase in our authorized capital was filed and effective on August 23, 2018.
On June 10, 2019, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to . The amendment effecting the increase in our authorized capital was effective on September 27, 2019.
On January 6, 2023, our board of directors and majority shareholders approved a reverse stock split. Effective upon the filing of our Certificate of Amendment of Articles of Incorporation with the Secretary of State of the State of Nevada, the shares of the Corporation’s Common Stock issued and outstanding immediately prior to the Effective Time of January 6, 2023, will be automatically reclassified as and combined into shares of Common Stock such that each (40) shares of Old Common Stock shall be reclassified as and combined into one (1) share of New Common Stock. All per share references to common stock have been retroactively represented throughout the financials.
24 |
Common Stock Transactions
During
the quarter ended March 31, 2022, we issued shares of common stock, under S-1 registration
statement with GHS for a total of $
On February 21, 2022, we issued shares of our common stock under our Reg A offering at $ per share. These shares are unrestricted and free trading.
During
April of 2022, we issued
On
September 21, 2022, MGW I converted $
On May 6, 2022, the Company entered into a Securities Purchase Agreement and a warrant agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company issued to Mast Hill the Company issued Mast Hill a five-year warrant to purchase shares of common stock in connections with the transactions.
On December 28, 2022 Mast Hill exercised their warrant in full on a cashless basis to purchase shares of Common Stock.
On January 27,2023, we issued,
shares of our common stock due to rounding post the reverse stock split.
On August 17, 2022, we issued
On September 1, 2022, we issued
On December 27, 2021, we entered into a convertible
note payable with Universal Scope Inc. for $
On March 23, 2023 we sold
shares of our common stock in an underwritten offering to R.F. Lafferty & CO and Phillip US. The initial public offering price per share is $ per share.
Common Stock
Our Articles of Incorporation authorize us to issue shares of common stock, par value $ per share. As of March 31, 2023 there were shares of common stock outstanding. All outstanding shares of common stock are, and the common stock to be issued will be, fully paid and non-assessable. Each share of our common stock has identical rights and privileges in every respect. The holders of our common stock are entitled to vote upon all matters submitted to a vote of our shareholders and are entitled to one vote for each share of common stock held. There are no cumulative voting rights.
The holders of our common stock are entitled to share equally in dividends and other distributions that our Board of Directors may declare from time to time out of funds legally available for that purpose, if any, after the satisfaction of any prior rights and preferences of any outstanding preferred stock. If we liquidate, dissolve or wind up, the holders of common stock shares will be entitled to share ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities and our obligations to holders of our outstanding preferred stock.
Preferred Stock
Our Articles of Incorporation authorize us to issue shares of preferred stock, par value $ per share. Our Board of Directors has the authority to issue additional shares of preferred stock in one or more series, and fix for each series, the designation of and number of shares to be included in each such series. Our Board of Directors is also authorized to set the powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or restrictions of the shares of each such series.
25 |
Unless our Board of Directors provides otherwise, the shares of all series of preferred stock will rank on parity with respect to the payment of dividends and to the distribution of assets upon liquidation. Any issuance by us of shares of our preferred stock may have the effect of delaying, deferring or preventing a change of our control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect the rights and powers, including voting rights, of the holders of common stock.
We previously authorized shares of Series A Convertible Preferred Stock, shares of Series B Convertible Preferred Stock, and shares Series C Convertible Preferred Stock. As of August 20, 2006, all series A, B, and C preferred had been converted into common stock.
Effective August 7, 2013, our .
The
following are primary terms of the Series D Preferred Stock.
In
connection with the subscriptions for the Series D Preferred, we issued series F warrants to purchase an aggregate of
On
August 21, 2014, a holder holding
In
the first quarter of 2019, we signed agreements to issue
We
also recorded a $
On February 4, 2020, we issued shares of our common stock at a price of $ per share, in exchange for the conversion of shares of our Series D Preferred Stock.
On July 23, 2020, we issued shares of our common stock at a price of $ per share, in exchange for the conversion of shares of our Series D Preferred Stock.
On February 5, 2021, we issued shares of our common stock at a price of $per share, in exchange for the conversion of shares of our Series D Preferred Stock.
On
February 9, 2021, we issued
On February 9, 2021, we issued shares of our common stock at a price of $ per share, in exchange for the conversion of shares of our Series D Preferred Stock.
On March 12, 2021, we issued shares of our common stock together with accrued preferred dividend at a price of $ per share, in exchange for the conversion of shares of our Series D Preferred Stock and accrued preferred dividend.
26 |
Warrants
A summary of warrant activity for the periods is as follows:
On
May 6, 2022, we issued
On
August 5, 2022, we issued
On
August 17, 2022, we issued
On
September 1, 2022, we issued
On
September 16, 2022, we issued
On
November 10, 2022, we issued
On
November 21, 2022, we issued
On
December 26, 2022, we issued
On January 19, 2023, we issued
On
Feb 13, 2023, we issued
On
March 8, 2023, we issued
Warrants - Common Share Equivalents | Weighted Average Exercise price | Warrants exercisable - Common Share Equivalents | Weighted Average Exercise price | |||||||||||||
Outstanding December 31, 2022 | $ | $ | ||||||||||||||
Expired | ||||||||||||||||
Additions | ||||||||||||||||
Additions | ||||||||||||||||
Exercised | ( | ) | ( | ) | ||||||||||||
Outstanding March 31, 2023 | $ | $ | 3.73 |
27 |
Stock Options
We currently have no outstanding stock options.
NOTE 13 – RELATED PARTY TRANSACTIONS
From August 2022 through October 2022, Hongzhuo
Shuya (Shuya) a 49% owned subsidiary (also is our consolidated VIE) of CETY HK limited engaged in the trading of pipeline gas
and CNG processing and sales provided Sichuan Leishen Hongzhuo Energy Development Co., Ltd (Leishen) with approximately total of
$
Additionally, Leishen has relationships with the
supply side of the NG business and is able to obtain large amounts of NG. As a result, Shuya also has a supplier relationship with
Leishen. The price obtained from Leishen will be better than any unrelated party as their markup is below market. Our Board of
Directors has approved the transactions between Leishen and the Company. During the quarter ended March 31, 2023, Shuya made $
Effective August 5, 2022, Shuya entered a 48 months
lease for a natural gas recycle station from Leishen, including the operating right and use right of all the assets and equipment in
the station. The annual rent is approximately $
On
November 2, 2016, we effected the repayment of the convertible note dated March 15, 2016 for an aggregate amount of $
Concurrently with the foregoing note repayments, we entered into a Credit Agreement and Promissory Note (the “Credit Agreement”) with Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation (“MW I”), pursuant to which MW I deposited funds into escrow to fund the repayment of the convertible notes and we assigned to MW I our right to acquire the convertible notes and otherwise agreed that MW I would be subrogated to the rights of each note holder to the extent a note was repaid with funds advanced by MW I. Concurrently, MW I acquired the Master Note and we agreed that all amounts advanced by MG I to or for our benefit would be governed by the terms of the Master Note, including the payment of a financing fees, interest, minimum interest, and convertibility. Reddot is MW I’s agent for purposes of administration of the Credit Agreement and the Master Note and advances thereunder.
On
February 13, 2018, the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $
On
February 8, 2018, the Corporation entered a Convertible Promissory Note in the principal amount of $
Subsequently
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On
May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell
In
the fourth quarter of 2019 MGW Investment I Limited, advanced $
On March 24, 2021, the Company transferred $ to MGWI, an affiliate of the majority stockholder of the Company to hold in trust for our investment in two planned ventures in China. The investment was used for the acquisition of LWL.
On
September 21, 2022, MGW I converted $
Kambiz
Mahdi, our Chief Executive Officer, owns Billet Electronics, which is a distributor of electronic components. From time to time, we purchase
parts from Billet Electronics. In addition, Billet was a supplier of parts and had dealings with current and former customers of the
Company prior to joining the company. The number of parts purchases in the 1st quarter of 2023 was $
Note 14 - WARRANTY LIABILITY
For
the quarter ended March 31, 2023, and for the year ended December 31, 2022, there was
NOTE 15 – NON-CONTROLLING INTEREST
On
April 2, 2023, the Company formed CETY Capital LLC a wholly owned subsidiary of CETY. In addition, the company with established Vermont
Renewable Gas LLC (“VRG”) C with our partner, Synergy Bioproducts Corporation (“SBC”) The purpose of the joint
venture is the development of a pyrolysis plant established to convert wood feedstock into electricity and BioChar by using high temperature
ablative fast pyrolysis reactor for which Clean Energy Technology, Inc. holds the license for. The VRG is located in Lyndon, Vermont.
Based upon the terms of the members’ agreement, CETY Capital LLC owns a
In
July 2022, JHJ and other three shareholders agreed to form and make total capital contribution of RMB
NOTE 16 – THE STATUTORY RESERVES
The Company’s ability to pay dividends primarily depends on it receiving funds from its subsidiaries. PRC laws and regulations permit payments of dividends by the Company’s PRC subsidiaries only out of the subsidiary’s retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements prepared in accordance with US GAAP differ from those reflected in the statutory financial statements of the Company’s PRC subsidiaries.
In
accordance with the PRC Regulations on Enterprises with Foreign Investment and their articles of association, a foreign-invested enterprise
(“FIE”) established in the PRC is required to provide statutory reserves, which are appropriated from net profit as reported
in the FIE’s PRC statutory accounts. An FIE is required to allocate at least
Additionally,
in accordance with the Company Laws of the PRC, a domestic enterprise is required to provide surplus reserve at least
As
a result of these PRC laws and regulations that require annual appropriations of
In
addition, according to Administrative Measures for the Collection and Utilization of Enterprise Work Safety Funds issued by the PRC Ministry
of Finance and the State Administration of Work Safety, for the companies with dangerous goods production or storage, the company is
required to make a special reserve for the use of enhancing and improving its safe production conditions. Under PRC GAAP, the reserve
is recorded as selling expense; however, under US GAAP, since the expense has not been incurred and the Company will record cost of sales
for safety related expenses when it is actually happened or incurred, this special reserve was recorded as an appropriation of its after-tax
income. The reserve is calculated at a rate of
NOTE 17 – SUBSEQUENT EVENTS
On
April 3, 2023, Clean Energy Technologies, Inc. reached an agreement with Cybernaut Zfounder Ventures, LLC to pay off the outstanding
convertible notes in amount equal to $
On
April 18, 2023, Mast Hill exercised the right to purchase
On January 19, 2023, we issued
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements using the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
Description of the Company
We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005 under the name Probe Manufacturing, Inc. We manufactured electronics and provided services to original equipment manufacturers (OEMs) of industrial, automotive, semiconductor, medical, communication, military, and high technology products. On September 11, 2015, Clean Energy HRS, or “CE HRS”, our wholly owned subsidiary acquired the assets of Heat Recovery Solutions from General Electric International. In November 2015, we changed our name to Clean Energy Technologies, Inc.
Our principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. Our telephone number is (949) 273-4990. Our common stock is listed on the NASDAQ Markets under the symbol “CETY.”
Our internet website address is www.cetyinc.com and our subsidiary’s web site is www.heatrecoverysolutions.com The information contained on our websites are not incorporated by reference into this document, and you should not consider any information contained on, or that can be accessed through, our website as part of this document.
The Company has four reportable segments: Clean Energy HRS (HRS), CETY Europe, the legacy electronic manufacturing services (Electronic Assembly) division and CETY HK.
We specialize in renewable energy & energy efficiency systems design, manufacturing and project implementation. We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005 under the name Probe Manufacturing, Inc. We provided engineering and manufacturing electronics services to original equipment manufacturers (OEMs) of clean energy, industrial, automotive, semiconductor, medical, communication, military, and high technology products.
With the vision to combat climate change and creating a better, cleaner and environmentally sustainable future, we formed Clean Energy HRS, LLC a wholly owned subsidiary of Clean Energy Technologies, Inc. and acquired the assets of Heat Recovery Solutions from General Electric International on September 11, 2015. In November 2015, we changed our name to Clean Energy Technologies, Inc. Our principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. We have 14 full-time employees. All employees and overheads are shared between Clean Energy Technologies, Inc. (which still provides the contract electronic manufacturing services) and Clean Energy HRS, LLC.
Clean Energy Technologies, Inc. established a new company, CETY Europe, SRL (CETY Europe) as a wholly owned subsidiary. CETY Europe is a Sales and Service Center in Silea (Treviso), Italy established in 2017. The service center became operational in November 2018. Their offices are located at Alzaia Sul Sile, 26D, 31057 Silea (TV) and they have 1 full time employee.
Clean Energy Technologies, Inc. established a wholly owned subsidiary called CETY Capital, a financing arm of CETY to fund captive renewable energy projects producing low carbon energy. CETY Capital will add flexibility to the capacity CETY offers its customers and fund projects utilizing its products and clean energy solutions.
CETY Capital retains 49% ownership interest in Vermont Renewable Gas LLC established to develop a biomass plant in Vermont utilizing CETY’s High Temperature Ablative Pyrolysis system.
Clean Energy Technologies (H.K.) Limited., a wholly owned subsidiary of Clean Energy Technologies Inc. acquired 100% ownership of Leading Wave Limited a liquid natural gas trading company in China.
The Company has four reportable segments: Clean Energy HRS (HRS) and CETY Europe, CETY Renewables, CETY HK and the legacy engineering and manufacturing services division.
Business Overview
General
The Company’s business and operating results are directly affected by changes in overall customer demand, operational costs and performance and leverage of our fixed cost and selling, general and administrative (“SG&A”) infrastructure.
Product sales fluctuate in response to several factors including many that are beyond the Company’s control, such as general economic conditions, interest rates, government regulations, consumer spending, labor availability, and our customers’ production rates and inventory levels. Product sales consist of demand from customers in many different markets with different levels of cyclicality and seasonality.
Operating performance is dependent on the Company’s ability to manage changes in input costs for items such as raw materials, labor, and overhead operating costs. Performance is also affected by manufacturing efficiencies, including items such as on time delivery, quality, scrap, and productivity. Market factors of supply and demand can impact operating costs.
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Who We Are
We develop renewable energy products and solutions and establish partnerships in renewable energy that make environmental and economic sense. Our mission is to be a segment leader in the Zero Emission Revolution by offering recyclable energy solutions, clean energy fuels and alternative electric power for small and mid-sized projects in North America, Europe, and Asia. We target sustainable energy solutions that are profitable for us, profitable for our customers and represent the future of global energy production.
Our principal businesses
Waste Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.
Waste to Energy Solutions - we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries to electricity, renewable natural gas (“RNG”), hydrogen and biochar which are sold or used by our customers.
Engineering, Consulting and Project Management Solutions – we bring a wealth of experience in developing clean energy projects for municipal and industrial customers and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean energy solutions in their projects.
CETY HK
Clean Energy Technologies (H.K.) Limited (“CETY HK”) consists of two business ventures in mainland China:(i) our natural gas (“NG”) trading operations sourcing and suppling NG to industries and municipalities. Natural Gas is principally used for heavy truck refueling stations and urban or industrial users. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are prepaid for in advance at a discount to the market. We sell the NG to our customers at fixed prices or prevailing daily spot prices for the duration of the contracts; and (ii) our planned joint venture with a large state-owned gas enterprise in China called Shenzhen Gas (Hong Kong) International Co. Ltd. (“Shenzhen Gas”), acquiring natural gas pipeline operator facilities, primarily located in the southwestern part of China. Our planned joint venture with Shenzhen Gas plans to acquire, with financing from Shenzhen Gas, natural gas pipeline operator facilities with the goal of aggregating and selling the facilities to Shenzhen Gas in the future. According to our Framework Agreement with Shenzhen Gas, we will be required to contribute $8 million to the joint venture which plans to raise in future rounds of financing. The terms of the joint venture are subject to the execution of definitive agreements.
Business and Segment Information
We design, produce and market clean energy products and integrated solutions focused on energy efficiency and renewable energy. Our aim is to become a leading provider of renewable and energy efficiency products and solutions by helping commercial companies and municipalities reduce energy waste and emissions, lower energy costs and generate incremental revenue by providing electricity, renewable natural gas and biochar to the grid.
Segment Information
Our four segments for accounting purposes are:
Clean Energy Solutions - our Waste Heat Recovery Solutions, Waste to Energy Solutions, China LNG initiatives and Engineering and Consulting Services which are the core offerings of our business.
CETY Europe – our subsidiary established in Italy for the purposes of servicing our customers in the EU that we are required to report as a separate accounting entity.
Electronic Manufacturing Business - our legacy electronics manufacturing business that do not contribute significantly to our revenues or business plan that we are required to report as a separate accounting entity.
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CETY HK
Which is the parent company of our NG trading operations in China, as well as our planned joint venture to acquire NG distribution systems depots and transmission systems. Prior to the first quarter of 2022, the Company had three reportable segments but added the CETY HK segment to reflect its recent new businesses in China.
Summary of Operating Results the three months Ended March 31, 2023 Compared to the same period in 2022
Going Concern
The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s equity of $6,001,109 and a working capital of $2,377,048 as of March 31, 2023, The company also had an accumulated deficit of $18,350,395 as of March 31, 2023 and used $641,092 in net cash from operating activities for the three months ended March 31, 2023. Therefore, there is substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.
For the quarter ended March 31, 2023, our total revenue was $2,897,007 compared to $775,266 for the same period in 2022, which represents revenue growth of 373%. Our first quarter 2023 total revenue has already exceeded the total revenue of the entire year of 2022.
For the quarter ended March 31, 2023, our gross profit was $160,569 compared to $514,192 for the same period in 2022. Despite highly volatile natural gas (NG) prices, CETY was able to protect downside risks while scaling up the NG trading operations.
For the three months ended March 31, 2023, our operating expense was $763,412 compared to $499,023 for the same period in 2022.
For the quarter ended March 31, 2023, we had a net loss of $1,073,858 compared to $112,588 for the same period in 2022 due to increased interest and financing fees and marketing campaign expenses attributed to CETY’s Nasdaq up-listing efforts.
For the quarter ended March 31, 2023, stockholder’s equity was $6,001,109 compared to $1,878,196 in December 31, 2022. This is a result of the offering related to the Nasdaq up-list as well as debt conversions and write-offs.
CETY has successfully repositioned itself and created 4 different business segments to create a larger, more stable, and more diversified revenue stream that could scale up. The 4 segments are Clean Energy HRS (Heat Recovery), Waste-to-Energy (Pyrolysis Plant), Engineering Procurement and Consulting (EPC), and CETY HK (NG trading and acquisitions). First quarter revenue was mainly contributed by NG trading. The revenue in this segment is expected to continue to scale up which will help establish CETY as a player in the China market and allows cross-selling of CETY products and solutions. CETY expects larger revenue contribution from Waste-to-Energy, Heat Recovery, and EPC in the latter of this year which are higher gross margin segments. Our pilot Waste-to-Energy plant in Vermont which integrates all of CETY’s technologies and expertise into a single solution, is progressing steadily with updates coming soon. There is a growing market for Heat Recovery in the U.S. and Europe, and CETY HK has begun cross-selling Heat Recovery products in China. CETY is also gearing up for the EPC segment to implement holistic self-generation solutions globally.
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Management believes this 4 segment strategy has created many operational synergies and cross-selling opportunities across different markets. The breakneck revenue growth that was demonstrated this quarter is a direct result of this strategy as we have exceeded the revenues of the entire year of 2022. CETY believes that it will continue to deliver growth on all segments this year due to our belief that there is an optimistic industry macro backdrop. The main macro factor benefiting us is the global commitment to push renewable energy to the forefront from governments across the world. This is evidenced by the Paris Agreement and COP26. The Inflation Reduction Act passed by Congress in August 2022 had specific provisions that can take advantage of CETY’s products and solutions. Another catalyst that will potentially help our Company, is a continuously improving global supply chain as U.S. and European markets have begun to return normal levels post COVID and China has reopened its borders. The European energy crisis has given rise to the opportunity for CETY to sell more of its products and solutions as customers are in search of self-generation capabilities in renewable energy. And lastly, as China ends its draconian COVID lockdown policies, CETY was able to resume its growing business in that region.
CETY reached a momentous milestone in its corporate history on March 23, 2023, when the company was able to meet all the Nasdaq listing standards and began trading on Nasdaq. Nasdaq trading status increases CETY’s reputation greatly and benefits CETY’s sales plans globally. This also improves the company’s ability to access capital with better terms.
CETY expects to and will continue to execute its corporate strategy to build sustained and profitable growth by providing end to end fully integrated solutions and technologies, expand our global sales and marketing, production, research & development, as well as search for synergistic acquisition opportunities.
See note 1 to the notes to the financial statements for a discussion on critical accounting policies
RELATED PARTY TRANSACTIONS
See note 13 to the notes to the financial statements for a discussion on related party transaction
Results of the three Ended March 31, 2023, Compared to the three ended March 31, 2022
Net Sales
For the quarter ended March 31, 2023, our total revenue was $2,897,007 compared to $775,266 for the same period in 2022. The Company has four reportable segments: Clean Energy HRS (HRS), CETY Europe and the legacy engineering & manufacturing services division, and CETY HK.
Segment breakdown
The three months ended March 31, 2023, our revenue from Engineering and Manufacturing was $0 compared to $32,280 for the same period in 2022. Our engineering team is in transition to establish the innovation center in Europe and has executed a master services agreement with RPG to support its fortune 500 customers with its sustainability goals. Additionally, our engineering team will be commencing work on the Vermont project starting in the second quarter of 2023.
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The three months ended March 31, 2023, our revenue from HRS was $5,194 compared to $441,193 for the same period in 2022. We are in the process of securing long lead materials to complete several units over the next 6 months and be able to recognize revenue by the end of the year.
The three months ended March 31, 2023, our revenue from CETY Europe was $5,748 compared to $33,827 for the same period in 2022.
The three months ended March 31, 2023, our revenue from our wholly owned subsidiary JHJ was $2,886,065 compared to $267,966 for the same period in 2021. The increase was as a result of the ability to secure larger amounts of gas.
Gross Profit
The three months ended March 31, 2023; our gross profits were $160,628 compared to $514,192 for the same period in 2022. The decrease in gross profit was due to lower margins from the NG business and lower revenue from the HRS and Engineering services.
Segment breakdown
The three months ended March 31, 2023, our gross profit from Engineering and Manufacturing was $0 compared to $23,986 for the same period in 2022.
The three months ended March 31, 2023, our gross profit from HRS was $90 compared to $400,487, for the same period in 2022. We only had service revenue from HRS segment in the first quarter of 2023.
The three months ended March 31, 2023, our gross profit from CETY Europe was $5,097 compared to $28,986 for the same period in 2022.
The three months ended March 31, 2023, our gross profit from our wholly owned subsidiary JHJ was $155,441 compared to $60,733 for the same period in 2022.
Selling, General and Administrative (SG&A) Expenses
The three months ended March 31, 2023; our SG&A expense was $88,891 compared to $92,935 for the same period in 2022.
Salaries Expense
The three months ended March 31, 2023; our Salaries expense was $218,237 compared to $191,217 for the same period in 2022. The increase in the quarter ending in March 31, 2023 was due to new hires.
Travel Expense
The three months ended March 31, 2023; our travel expense was $71,662 compared to $27,734 for the same period in 2022. The increase was due to travel expenses related to Europe for the MSA development and increased site visits due to an increase in the sales opportunities and commissioning.
Professional fees legal and accounting
The three months ended March 31, 2023; our Professional fees expense was $88,210 compared to $64,853 for the same period in 2022. The increase in legal fees was due to more contract and agreement-related work and additional accounting work related to new foreign entities.
Facility Lease and Maintenance Expense
The three months ended March 31, 2023; our Facility Lease and maintenance expense was $122,779 compared to $88,962 for the same period in 2022.
Depreciation and Amortization Expense
The three months ended March 31, 2023, our depreciation and amortization expense was $5,949 compared to $7,519 for the same period in 2022, which remained relatively unchanged.
Change in Derivative Liability
The three months ended March 31, 2023; we had a gain on derivative liability of $326,539 compared to a gain of $16,014 for the same period in 2022. The gain in derivative liability was from a favorable derivative calculations from several convertible notes in the three months ended March 31, 2023.
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Interest and Finance Fees
The three months ended March 31, 2023, interest and finance fees were $837,391 compared to $132,470 for the same period in 2022. The increase was due to several new notes to assist with the uplist to Nasdaq.
Net Income / Loss
The three months ended March 31, 2023; our loss was $1,073,858 compared to loss of $112,588 for the same period in 2022. This increase was primarily due to financing fees.
Liquidity and Capital Resources
Clean Energy Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2023
(unaudited)
2023 | 2022 | |||||||
Net Cash provided / (Used) In Operating Activities | $ | (641,092 | ) | $ | (538,065 | ) | ||
Cash Flows Used In Investing Activities | 39,797 | (805,751 | ) | |||||
Cash Flows Provided / (used) By Financing Activities | 3,247,540 | 1,368,157 | ||||||
Net (Decrease) Increase in Cash and Cash Equivalents | $ | 2,709,557 | $ | 28,903 |
Capital Requirements for long-term Obligations
None.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Future Financing
We will continue to rely on equity sales of our common shares to continue to fund our business operations. Issuance of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
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Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial position or results of operations upon adoption.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2023, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K as filed with the SEC on April 17, 2022, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.
Changes in Internal Control over Financial Reporting
Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company is presently not involved in any legal proceedings which in the opinion of management are likely to have a material adverse effect on the Company’s consolidated financial position or results of operations.
Item 1A. Risk Factors.
There have been no material changes in the Company’s risk factors from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.
Item 2. Unregistered Sales of Equity Securities
During the quarter ended March 31, 2022, we issued 78,896 shares of common stock, under S-1 registration statement with GHS for a total of $134,755 in net proceeds and expensed $45,498 in legal and financing fees as a result.
On February 21, 2022, we issued 375,875 shares of our common stock under our Reg A offering at $3.20 per share. These shares are unrestricted and free trading.
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During April of 2022, we issued 122,891 shares of common stock, under S-1 registration statement with GHS for a total of $153,324 in net proceeds and expensed $34,500 in legal and financing fees as a result.
On September 21, 2022, MGW I converted $1,548,904 from the outstanding balance of their convertible note into 12,907,534 shares of company’s common stock.
On May 6, 2022, the Company entered into a Securities Purchase Agreement and a warrant agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company issued to Mast Hill the Company issued Mast Hill a five-year warrant to purchase 234,375 shares of common stock in connections with the transactions.
On December 28, 2022, Mast Hill exercised their warrant in full on a cashless basis to purchase 100,446 shares of Common Stock.
These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
The exhibit listed on the Exhibit Index (following the signatures section of this quarterly report dated March 31, 2023 on Form 10-Q are included, or incorporated by reference, in this three months ended March 31, 2023 Report on Form 10-Q.
EXHIBIT NUMBER |
DESCRIPTION | |||
31.01 | Certification of Principal Executive Officer Pursuant to Rule 13a-14 | Filed herewith. | ||
31.02 | Certification of Principal Financial Officer Pursuant to Rule 13a-14 | Filed herewith. | ||
32.01 | Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. | ||
32.02 | Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. | ||
101.INS* | Inline XBRL Instance Document | Furnished herewith. | ||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | Furnished herewith. | ||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Furnished herewith. | ||
101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document | Furnished herewith. | ||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Furnished herewith. | ||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | Furnished herewith. | ||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Costa Mesa, State of California on the 15th day May, 2023
Clean Energy Technologies, Inc. | ||
REGISTRANT | ||
/s/ Kambiz Mahdi | ||
By: | Kambiz Mahdi | |
Chief Executive Officer | ||
Date: | May 22, 2023, Update all dates to signing to signing date | |
/s/ Calvin Pang | ||
By: | Calvin Pang | |
Chief Financial Officer | ||
Date: | May 22, 2023 |
/s/ Mr. Ted Hsu | ||
By: | Ted Hsu | |
Director | ||
Date: | May 22, 2023, Update all dates to signing to signing date | |
/s/ Ms. Lauren Morrison | ||
By: | Lauren Morrison | |
Director | ||
Date: | May 22, 2023 |
/s/ Mr. Matthew Graham Smith | ||
By: | Matthew Graham Smith | |
Director | ||
Date: | May 22, 2023, Update all dates to signing to signing date |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signature | Title | ||
/s/ Kambiz Mahdi | Chief Executive Officer and Director | ||
By: | Kambiz Mahdi | (Principal executive officer) | |
Date: | May 22, 2023 |
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