UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
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
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
As of August 19, 2024, there were shares of the Registrant’s common stock, par value $ per share, issued and outstanding.
CLEAN ENERGY TECHNOLOGIES, INC.
(A Nevada Corporation)
TABLE OF CONTENTS
| Page | ||
| PART I. FINANCIAL INFORMATION | ||
| ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS | 6 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 43 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 53 |
| ITEM 4. | CONTROLS AND PROCEDURES | 53 |
| PART II. OTHER INFORMATION | ||
| ITEM 1. | LEGAL PROCEEDINGS | 54 |
| ITEM 1A. | RISK FACTORS | 54 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 54 |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 56 |
| ITEM 4. | MINE SAFETY DISCLOSURES | 56 |
| ITEM 5. | OTHER INFORMATION | 56 |
| ITEM 6. | EXHIBITS | 56 |
| 2 |
SPECIAL NOTES REGARDING THE COMPANY
Forward-Looking Statements
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this report.
Forward-looking statements include, but are not limited to, statements concerning the following:
| ● | our possible or assumed future results of operations; | |
| ● | our business strategies; | |
| ● | our ability to attract and retain customers; | |
| ● | our ability to sell additional products and services to customers; | |
| ● | our cash needs and financing plans; | |
| ● | our competitive position; | |
| ● | our industry environment; | |
| ● | our potential growth opportunities; | |
| ● | expected technological advances by us or by third parties and our ability to leverage them; | |
| ● | Our inability to predict or anticipate the duration or long-term economic and business consequences of the ongoing COVID-19 pandemic; | |
| ● | the effects of future regulation; | |
| ● | our ability to protect or monetize our intellectual property; | |
| ● | changes in United States and China trade policies and relations, as well as relations with other countries, and/or changes in regulations and/or sanctions; | |
| ● | the impact on us from the actions the Chinese government may take to intervene in or influence our operations; | |
| ● | the impact on us from the uncertainties in the Chinese legal system, such as Chinese regulations regarding acquisitions of companies based in mainland China by foreign investors and the ability of our Chinese subsidiaries to make payments to us; and | |
| ● | approval, filing, or procedural requirements imposed by the China Securities Regulatory Commission (“CSRC”) or other Chinese regulatory authorities in connection with issuing securities to foreign investors under Chinese law. |
| 3 |
You should read any other cautionary statements made in this report as being applicable to all related forward-looking statements wherever they appear in this report. We cannot assure you that the forward-looking statements in this report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. You should read this report completely. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future. We undertake no obligation to revise or update publicly any forward-looking statements for any reason, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements.
Disclosures Relating to Our Chinese Operations
Clean Energy Technologies Inc. is a company incorporated in the State of Nevada with operations in North America, Europe, and Asia, including in China. Our PRC Subsidiaries and Shuya, an entity in which we own a 49% equity interest, operate our natural gas trading operations in China to source and supply natural gas to industries and municipalities located in China. Throughout this report, unless the context requires otherwise, (i) “the Company,” “we,” “us” and “our” refer to Clean Energy Technologies, Inc. on a consolidated basis with its wholly-owned subsidiaries; (ii) “the PRC Subsidiaries” refers specifically to those wholly-owned subsidiaries of ours located in the People’s Republic of China (including Hong Kong), which include Clean Energy Technologies (H.K.) Limited, Meishan Clean Energy Technologies, Inc., Hainan Clean Energy Technologies, Inc., Element Capital International Limited (H.K.), Sichuan Hunya Jieneng New Energy Co. LTD, and Jiangsu Huanya Jieneng New Energy Co., Ltd.; and (iii) “Shuya” refers to Sichuan Hongzuo Shuya Energy Limited.
We face various legal and operational risks and uncertainties due to our operations in China. Our PRC Subsidiaries and Shuya could be adversely affected by uncertainties with respect to the Chinese legal system. Rules and regulations in China can change quickly with little advance notice. The interpretation and enforcement of Chinese laws and regulations involve additional uncertainties. Since administrative and court authorities in China have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. In addition, the Chinese government exercises significant oversight and discretion over the conduct of the business of our PRC Subsidiaries and Shuya and may intervene in or influence their operations as the government deems appropriate to further regulatory, political and societal goals, which could result in a material change in their operations in China and/or the value of the securities we are registering for sale, including causing the value of such securities to significantly decline or become worthless. Furthermore, the Chinese government has recently exerted more oversight and control over overseas securities offerings and other capital markets activities and foreign investment in China-based companies. Any such actions, once taken by the Chinese government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. We do not believe that we, our PRC Subsidiaries or Shuya are directly subject to these regulatory actions or statements; however, because these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative rule making bodies in China will respond to them, or what existing or new laws or regulations will be modified or promulgated, if any, or the potential impact such modified or new laws and regulations will have on the daily business operations or ability to accept foreign investments of our PRC Subsidiaries and Shuya. On December 24, 2021, nine government agencies jointly issued the Opinions on Promoting the Healthy and Sustainable Development of Platform Economy, which provides that, among others, monopolistic agreements, abuse of dominant market position and illegal concentration of business operators in the field of platform economy will be strictly investigated and punished in accordance with the relevant laws. Neither our PRC Subsidiaries nor Shuya hold a dominant market position in their product markets and they have not entered into any monopolistic agreement. Neither have they received any inquiry from the relevant governmental authorities. The Cyberspace Administration of China (“CAC”), together with 12 other Chinese regulatory authorities, released the final version of the Revised Measures for Cybersecurity Review, or the Revised Cybersecurity Measures, in December 2021, which took effect on February 15, 2022. Pursuant to the Revised Cybersecurity Measures, critical information infrastructure operators procuring network products and services and online platform operators carrying out data processing activities, which affect or may affect national security, shall conduct a cybersecurity review pursuant to the provisions therein. In addition, online platform operators possessing personal information of more than one million users seeking to be listed on foreign stock markets must apply for a cybersecurity review. On November 14, 2021, the CAC published the Draft Regulations on the Network Data Security Administration (Draft for Comments) (the “Security Administration Draft”), which provides that data processing operators engaging in data processing activities that affect or may affect national security must be subject to cybersecurity review by the relevant Cyberspace Administration of the PRC. We do not believe that our PRC Subsidiaries or Shuya are “online platform operators” within the meaning of the Revised Cybersecurity Measures, and neither our PRC Subsidiaries nor Shuya currently possess over one million Chinese users’ personal information and do not anticipate that they will be collecting over one million Chinese users’ personal information in the foreseeable future. In addition, neither our PRC Subsidiaries nor Shuya will be subject to Security Administration Draft if the Security Administration Draft is enacted as proposed, since they currently do not collect data that affects or may affect national security and we do not anticipate that our PRC Subsidiaries or Shuya will be collecting data that affects or may affect national security in the foreseeable future.
| 4 |
On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and the relevant five guidelines, which became effective on March 31, 2023. The Trial Measures comprehensively reformed the existing regulatory regime for overseas offering and listing of PRC domestic companies’ securities and will regulate both direct and indirect overseas offering and listing of PRC domestic companies’ securities by adopting a filing-based regulatory regime. Pursuant to the Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information. The Trial Measures provides that if the issuer meets both of the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (ii) the principal parts of the issuer’s business activities are conducted in mainland China, or its principal place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China. If we ever are required by the CSRC to submit and complete the filing procedures for our future offerings of our securities, we cannot assure you that we will be able to complete such filings in a timely manner, or even at all, which could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless. Any failure by us to comply with such filing requirements under the Trial Measures may result in rectification, warnings, and a fine between RMB 1 million and RMB 10 million on our PRC Subsidiaries or Shuya, which could adversely and materially affect our business operations and financial outlook and could cause the value of our common stock to significantly decline or, in extreme cases, become worthless.
As of the date of this report, these new laws and guidelines have not impacted the ability of our PRC Subsidiaries and Shuya to conduct business and accept foreign investments; however, if (i) we inadvertently conclude that permissions or approvals are not required from applicable PRC authorities or (ii) applicable laws, regulations, or interpretations change, and we are required to obtain such permissions or approvals in the future, our ability to conduct our business in China may be materially impacted, the interest of the investors may be materially and adversely affected and our common stock may significantly decrease in value.
In addition, we face risks associated with the Holding Foreign Companies Accountable Act, or HFCAA. Trading in our securities on U.S. markets, including Nasdaq, may be prohibited under the HFCAA if the Public Company Accounting Oversight Board, or PCAOB, determines that it is unable to inspect or investigate completely our auditor for two consecutive years. Pursuant to the HFCAA, the PCAOB issued a Determination Report on December 16, 2021, which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong because of positions taken by the authorities in those jurisdictions. In addition, the PCAOB’s report identified the specific registered public accounting firms which are subject to these determinations. On August 26, 2022, the PCAOB signed a Statement of Protocol Agreement with the CSRC and the Ministry of Finance (the “MOF”) of the PRC governing inspections and investigations of audit firms based in China or Hong Kong. On December 15, 2022, the PCAOB announced in the 2022 Determination its determination that the PCAOB was able to secure complete access to inspect and investigate accounting firms headquartered in mainland China and Hong Kong, and the PCAOB Board voted to vacate previous determinations to the contrary. Should the PCAOB again encounter impediments to inspections and investigations in mainland China or Hong Kong as a result of positions taken by any authority in either jurisdiction, including by the CSRC or the MOF, the PCAOB will make determinations under the HFCAA as and when appropriate. Both our current auditor, TAAD LLP, and our former auditor, Fruci & Associates II, PLLC, are headquartered in the United States and, as PCAOB-registered public accounting firms, they are required to undergo regular inspections by the PCAOB to assess its compliance with the laws of the U.S. and professional standards. TAAD LLP and Fruci & Associates II, PLLC have been subject to PCAOB inspections and are not among the PCAOB-registered public accounting firms headquartered in the PRC or Hong Kong that are subject to PCAOB’s determination of having been unable to inspect or investigate completely. Notwithstanding the foregoing, if it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China or Hong Kong to the PCAOB for inspection or investigation, or the PCAOB expands the scope of the Determination so that we are subject to the HFCAA, as the same may be amended, you may be deprived of the benefits of such inspection. Any audit reports not issued by auditors that are completely inspected or investigated by the PCAOB, or a lack of PCAOB inspections of audit work undertaken in China that prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate, which could result in limitation or restriction to our access to the U.S. capital markets, and trading of our securities, including trading on the national exchange and trading on “over-the-counter” markets, may be prohibited under the HFCAA and our securities may be delisted by an exchange.
Cash may be transferred within our organization in the following manners: (i) Clean Energy Technologies Inc. may transfer funds to the PRC Subsidiaries and Shuya by way of capital contributions or loans, through intermediate holding subsidiaries or otherwise, as investments or lendings, (ii) the PRC Subsidiaries may make dividends or other distributions to Clean Energy Technologies Inc. through intermediate holding companies or otherwise, and (iii) Shuya may make dividends or other distributions to Clean Energy Technologies Inc., which indirectly owns a 49% equity interest in Shuya, through intermediate holding companies or otherwise. Our abilities to use cash held in PRC or in a PRC entity to fund operations or for other purposes outside of the PRC are subject to restrictions and limitations imposed by the PRC government. Current PRC regulations only permit a wholly foreign-owned enterprise, or WFOE, to pay dividends to its offshore parent company out of their retained earnings, if any, determined in accordance with Chinese accounting standards and regulations. In addition, the majority of the revenues of our PRC Subsidiaries and Shuya are collected in RMB. Thus, foreign exchange shortages and foreign exchange control may also limit their ability to pay dividends or make other payments or otherwise meet our obligations denominated in foreign currencies. Furthermore, we may lose our ability to fund operations or for other uses outside of Hong Kong using cash in Hong Kong or a Hong Kong entity if, in the future, the scope of the current restrictions and limitations applicable to PRC entities were to expand to include Hong Kong or entities based in Hong Kong. Therefore, our ability to transfer cash between PRC entities and entities outside of PRC may be restricted. As of the date of this report, (i) we have transferred $2,671,700 in total to our PRC Subsidiaries, and (ii) JHJ, our wholly-owned subsidiary in the PRC, has transferred $701,836 in total to Shuya as a capital contribution for the formation of Shuya. No other cash flows or transfers of other assets have occurred between us, our PRC Subsidiaries, and Shuya. As of the date of this report, neither any of our PRC Subsidiaries nor Shuya has declared any dividends or made any other distributions to the Company, and no such dividends or distributions are anticipated in the near future.
| 5 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Clean Energy Technologies, Inc.
Consolidated Financial Statements
(Expressed in US dollars)
June 30, 2024 (unaudited)
| 6 |
Clean Energy Technologies, Inc.
Consolidated Balance Sheets
(Unaudited)
| June 30, 2024 | December 31, 2023 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable - net | ||||||||
| Accounts receivable – Related Party | ||||||||
| Advance to Supplier - Prepayment | ||||||||
| Deferred Offering Costs | ||||||||
| Investment Heze Honguan Natural Gas Co. | ||||||||
| Due from related party | ||||||||
| Loan Receivables | ||||||||
| Investment to Guangyuan Shuxin New Energy Co. | ||||||||
| Inventories, net | ||||||||
| Total Current Assets | ||||||||
| Long-Term Assets: | ||||||||
| Property and Equipment - Net | ||||||||
| Goodwill | ||||||||
| LWL Intangibles | ||||||||
| Investment in Shuya | ||||||||
| Long-term financing receivables - net | ||||||||
| License | ||||||||
| Patents | ||||||||
| Right -of - use asset | ||||||||
| Other assets | ||||||||
| Total Long-Term Assets | ||||||||
| Assets from discontinued operations | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable – Related Party | ||||||||
| Accrued expenses | ||||||||
| Customer deposits | ||||||||
| Warranty liability | ||||||||
| Deferred revenue | ||||||||
| Facility lease liability - current | ||||||||
| Line of credit | ||||||||
| Related party note payable | ||||||||
| Convertible notes payable - net | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Liability: | ||||||||
| Facility lease liability - non-current | ||||||||
| Accrued dividend | ||||||||
| Total Long-Term Liability | ||||||||
| Liabilities from discontinued operations | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, $ par value; shares authorized; and issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| 15% Series E Convertible preferred stock, $ par value; shares authorized; shares issued and outstanding as of June 30, 2024 and outstanding as of and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity attributable to Clean Energy Technologies, Inc. | ||||||||
| Non-controlling interest | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
| 7 |
Clean Energy Technologies, Inc.
Consolidated Statements of Operations
for the three and six months ended June 30, 2024 and 2023 (Unaudited)
2024 Three Months | 2023 Three Months | 2024 Six Months | 2023 Six Months | |||||||||||||
| Sales | $ | $ | $ | |||||||||||||
| Sales from related party | ||||||||||||||||
| Total Sales, net | ||||||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expense | ||||||||||||||||
| Salaries | ||||||||||||||||
| Travel | ||||||||||||||||
| Professional fees legal & accounting | ||||||||||||||||
| Facility lease and maintenance | ||||||||||||||||
| Consulting | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Change in derivative liability | ||||||||||||||||
| Investment income (loss) from Shuya | ( | ) | ||||||||||||||
| Gain on debt settlement and write down | ( | ) | ||||||||||||||
| Interest and financing fees | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expenses): | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss before non-controlling interest from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income before non-controlling interest from discontinued operations | ||||||||||||||||
| Non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to Clean Energy Technologies, Inc. | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive item | ||||||||||||||||
| Foreign currency translation loss | ( | ) | ( | ) | ||||||||||||
| Total comprehensive loss | $ | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Per Share Information: | ||||||||||||||||
| Basic and diluted weighted average number of common shares outstanding | ||||||||||||||||
| Net loss per common share basic and diluted | $ | ) | ) | $ | ) | $ | ) | |||||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
| 8 |
Clean Energy Technologies, Inc.
Consolidated Statements of Stockholders’ Equity
June 30, 2024 and 2023 (Unaudited)
| Common Stock .001 Par | Preferred Stock | Common Stock to be issued | Additional Paid in | Accumulated Comprehensive | Accumulated | Non Controlling | Stock Holders’ Equity | |||||||||||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Amount | Capital | Loss | Deficit | Interest | Totals | ||||||||||||||||||||||||||||||
| December 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Shares issued for stock compensation | ||||||||||||||||||||||||||||||||||||||||
| Shares issued for debt inducement | ||||||||||||||||||||||||||||||||||||||||
| Shares issued for subscription | ||||||||||||||||||||||||||||||||||||||||
| Shares issued for series E preferred conversion | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Currency translation adjustments | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Deconsolidation of Shuya | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Accrued Series E preferred dividend | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Subscriotion receivable | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| March 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Shares issued for stock compensation | ||||||||||||||||||||||||||||||||||||||||
| Shares issued for subscription | ||||||||||||||||||||||||||||||||||||||||
| Shares issued for series E preferred conversion | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Currency translation adjustments | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Accrued Series E preferred dividend | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| June 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| 9 |
| Common Stock .001 Par | Preferred Stock | Common Stock to be issued | Additional Paid in | Accumulated Comprehensive | Accumulated | Non Controlling | Stock Holders’ (Deficit)/Equity | |||||||||||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Amount | Capital | Income | Deficit | Interest | Totals | ||||||||||||||||||||||||||||||
| December 31, 2022 | ( | ) | ( | ) | | |||||||||||||||||||||||||||||||||||
| Warrants issued in conjunction for debt | - | |||||||||||||||||||||||||||||||||||||||
| Warrants issued for services | - | |||||||||||||||||||||||||||||||||||||||
| Shares issued for S-1 Registration | - | |||||||||||||||||||||||||||||||||||||||
| Offering cost | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Shares issued for rounding | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Shares for Pacific Pier and Firstfire conversion | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Shares issued for Debt Conversion | - | |||||||||||||||||||||||||||||||||||||||
| Accumulated Comprehensive | - | |||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest ownership | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Warrants issued in Conjunction For cash | ||||||||||||||||||||||||||||||||||||||||
| Reclassification of derivative liabilities due to note repayment | ||||||||||||||||||||||||||||||||||||||||
| Offering costs | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Shares based compensation | ||||||||||||||||||||||||||||||||||||||||
| Accumulated Comprehensive | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
| 10 |
Clean Energy Technologies, Inc.
Consolidated Statements of Cash Flows
for the six months ended June 30, 2024 and 2023 (Unaudited)
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss from continuing operation | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Loss from deconsolidation of Shuya | ||||||||
| Stock compensation expense | ||||||||
| Stock issued for debt inducement | ||||||||
| Amortization of debt discount | ||||||||
| Attributable income per equity method - Shuya | ( | ) | ||||||
| Warrant issued | ||||||||
| Gain on debt settlement | ( | ) | ||||||
| Change in derivative liability | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Right – of - use asset | ( | ) | ||||||
| Lease liabilities | ( | ) | ||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Accounts receivable – related party | ( | ) | ||||||
| Tax receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Other assets | ||||||||
| Inventory | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued interest | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Other payable-related party | ( | ) | ||||||
| Customer deposits | ( | ) | ||||||
| Net cash used in continuing operations | ( | ) | ( | ) | ||||
| Net cash used in discontinued operations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of intangible assets | ( | ) | ||||||
| Loan receivables | ||||||||
| Net cash provided by (used in) continuing operations | ( | ) | ||||||
| Net cash provided by discontinued operations | ||||||||
| Net cash flows provided by investing activities | ||||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from notes payable and lines of credit | ||||||||
| Proceeds from warrant exercise | ||||||||
| Payments on notes payable and line of credit | ( | ) | ( | ) | ||||
| Loan to Rongjun | ( | ) | ( | ) | ||||
| Stock issued for cash | ||||||||
| Net cash provided by continuing operations | ||||||||
| Net cash provided by discontinued operations | ||||||||
| Net cash flows provided by financing activities | ||||||||
| Effect of currency exchange rate changes on cash | ( | ) | ||||||
| Net 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 | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
| Supplemental non-cash disclosure | ||||||||
| Discounts on new notes | $ | $ | ||||||
| Shares issued for preferred conversions | $ | $ | ||||||
| Reclass of derivative to additional paid in capital | $ | |||||||
| Dividend accrued | $ | $ | ||||||
| Warrants issued in conjunction for convertible notes payable | $ | $ | ||||||
| Universal convertible note issuance | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
| 11 |
Clean Energy Technologies, Inc.
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 – GENERAL
These unaudited interim consolidated financial statements as of and for the six months ended June 30, 2024, 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 annual report on Form 10-K/A for the fiscal year end December 31, 2023, filed with the SEC on June 20, 2024. 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 six months ended June 30, 2024 are not necessarily indicative of results for the entire year ending December 31, 2024.
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 1340 Reynolds Avenue, Irvine, CA 92614. Our telephone number is (949) 273-4990. Our common stock, par value $ per share, is listed on the Nasdaq Capital Market under the symbol “CETY.”
Our internet website address is www.cetyinc.com. The information contained on our website is 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 Heat Recovery Solutions (HRS) & CETY Europe, CETY Renewables waste to energy, engineering & manufacturing services, and CETY HK NG trading.
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 $
| 12 |
Plan of Operation
CETY is a rising 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.
Clean Energy Technologies (H.K.) Limited (“CETY HK”) – our natural gas (“NG”) trading operations source and supply NG to industries and municipalities in mainland China. 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 the market. We sell the NG to our customers at fixed prices or prevailing daily spot prices for the duration of the contracts.
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.
Use of 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.
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 $
| 13 |
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 June 30, 2024 and December 31, 2023, we had a reserve for
potentially un-collectable accounts receivable of $
8
customers accounted for approximately
Inventory
Inventories
are valued at the lower of weighted average cost or net relizable 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 June 30, 2024 we had a reserve 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 |
Goodwill
The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. Under ASC 350, goodwill is not amortized; rather, it is tested for impairment on at least an annual basis. Goodwill represents the excess of consideration paid over the fair value of underlying identifiable net assets of business acquired.
The Company tests goodwill during the fourth quarter of each fiscal year or more frequently if events arise or circumstances change that indicate that goodwill may be impaired. The Company assesses whether goodwill impairment exists using both qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If based on this qualitative assessment the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, or if the Company elects not to perform a qualitative assessment, a quantitative assessment is performed, as required by ASC 350, to determine whether a goodwill impairment exists.
The quantitative test is used to compare the carrying amount of the reporting unit’s assets to the fair value of the reporting unit. If the fair value exceeds the carrying value, no further evaluation is required, and no impairment loss is recognized. An impairment loss occurs if the amount of the recorded goodwill exceeds the implied goodwill. The determination of the fair value of the Company’s reporting units is based, among other things, on estimates of the future operating performance of the reporting unit being valued. A goodwill impairment test is required to be completed, at minimum, once annually, and any resulting impairment loss recorded upon completion of the assessment. Changes in market conditions, among other factors, may have an impact on these estimates and require interim impairment assessments.
| 14 |
When performing the two-step quantitative impairment test, the Company’s methodology includes the use of an income approach which discounts future net cash flows to their present value at a rate that reflects the Company’s cost of capital, otherwise known as the discounted cash flow method (“DCF”). These estimated fair values are based on estimates of future cash flows of the businesses. Factors affecting these future cash flows include the continued market acceptance of the products and services offered by the businesses, the development of new products and services by the businesses and the underlying cost of development, the future cost structure of the businesses, and future technological changes. The Company also incorporates market multiples for comparable companies in determining the fair value of our reporting units. Any such impairment would be recognized in full in the reporting period in which it has been identified.
Intangible Assets
The Company’s intangible assets consist of customer relationship intangibles, licenses and patents. Upon acquisition, estimates are made in valuing acquired intangible assets, which include but are not limited to, future expected cash flows from customer contracts, customer lists, and estimating cash flows from projects when completed; tradename and market position, as well as assumptions about the period of time that customer relationships will continue; and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from the assumptions used in determining the fair values. All intangible assets are capitalized at their original cost and amortized over their estimated useful lives.
Long-Lived Assets
Long-lived assets, which include property, plant and equipment and intangible assets with finite lives, and operating lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.
The
Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying
amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment
or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against
the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable,
an impairment charge is measured as the amount by which the carrying amount of the asset group asset group exceeds its fair value based
on discounted cash flow analysis or appraisals. There was
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
| 15 |
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
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 |
| 16 |
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. |
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.
Additionally, the above five steps are applied to achieve core principle for our CETY Renewables Division:
Because the CETY Renewables division is presently engaged in the Engineering, Procurement, and Construction (EPC) of biomass power facilities, CETY Renewables has developed a process of executing EPC Agreements with customers for this work. In contracting these engagements, CETY Renewables recognizes revenue according to accounting standards in accordance with ASC 606.
In recognizing this revenue, CETY Renewables first identifies the relevant contract with its customer according to 606-10-25-1.
| ● | The entities, together known as the Parties, approved the contract in writing, through signatures and commitment to the performance of permitting, design, procurement, construction, and commissioning. |
| ● | CETY’s work product includes permits, engineering designs, equipment, and full balance of plant specific to permitting, design, procurement, construction, and commissioning. |
| ● | CETY and customer agree to a total EPC contract price. |
| ● | The contract has commercial substance. The risk associated with this EPC Agreement is that payment of the EPC contract price. |
| ● | Per the EPC Agreement, CETY expects to collect substantially all of the consideration for its goods and services. |
Secondly, CETY identifies the performance obligations of the Parties in performance of the EPC Agreement in accordance with 606-10-25-14. At contract inception, CETY assesses the goods and services necessary to deliver the facility in accordance with its agreement with clients. The agreement specifically laid out all deliverables necessary to achieve the permitting, design, procurement, construction, and commissioning.
CETY also looks at 606-10-25-14(A). A bundle of goods or services is also present, in that CETY is delivering all work products associated with permitting, design, procurement, construction and commissioning of a commercially operable biomass power plant. A biomass power plant is a distinct bundle of goods or services, so the individual goods or services on their own do not lend themselves to a fully integrated or functional system.
CETY in accordance with 606-10-32-1, CETY reviews measurement of the performance obligations. There is no exclusion of any amount of the Contract Price due to constraints associated with 606-10-31-11 through 606-10-32-13.
| 17 |
In review of 606-10-32-2A, CETY did not exclude measurement from the measurement of the transaction price any taxes assessed by a government authority as no such taxes will be due.
In reviewing 606-10-32-3, CETY evaluated the nature, timing, and amount of consideration promised, and whether it impacts the estimate of the transaction price.
Finally, in identifying a single method of measuring progress for each performance obligation satisfied over time, in accordance with 606-10-25-32, CETY applies the methodology of 606-10-25-36. CETY adopted and implemented the input method for revenue recognition in accordance with ASC 606-10-25-33. The company adopts the input method for implementation. CETY recognizes revenue for performance obligations on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation per 606-10-55-20.
For CETY, the contracts with clients for the construction of biomass power plants are the basis for revenue recognition. In each separate EPC Agreement, the performance obligations include permitting, design, procurement, construction, and commissioning of the plant. All of these work products satisfy Section 606-10-25-27(b) as these work products create or enhance an asset under customer’s control. Upon delivery of the work product, the customer takes control of the work products and has full right and ability to direct the use of and obtain substantially all of the remaining benefits of the assets. We recognize revenue over time, using timeline and milestone methods to measure progress towards complete satisfaction of the performance obligation.
During the complexity and duration of the biomass power plant construction projects, CETY will recognize revenue over time, consistent with the criteria for over-time recognition under ASC 606. This approach reflects the continuous transfer of documents, permits, and the equipment over to the customer, which is characteristic of long-term construction contracts.
We have a list of appropriate measures of progress: This is based on milestones achieved, among other measures.
Given the long-term nature of the projects, CETY regularly reviews and, if necessary, updates its estimates of progress towards completion, transaction price, and the allocation of the transaction price to performance obligations.
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 June 30,2024, and December 31, 2023, 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 |
| 18 |
The Company’s financial instruments consist of cash, prepaid expenses, inventory, accounts payable, accrued expenses, and convertible notes payable. The estimated fair value of cash, prepaid expenses, investments, accounts payable, accrued expenses and convertible notes payable approximate their carrying amounts due to the short-term nature of these 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.
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 million ($ million) with
latest contribution due date in February 2066 into Sichuan Hongzuo Shuya Energy Limited (“Shuya”), JHK owns
Shuya was set up 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
JHJ
made a investment of RMB
However,
effective January 1, 2023, JHJ, SSEN and Chengdu Xiangyueheng Enterprise Management Co., Ltd (“Xiangyueheng), who is the
| 19 |
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.
The change of control interest was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification, referred to as ASC, 805, Business Combinations. The management determined that the Company was the acquiror for financial accounting purposes. In identifying the Company as the accounting acquiror, the companies considered the structure of the transaction and other actions contemplated by the Three-Parties Consistent Action Agreement, relative outstanding share ownership and market values, the composition of the combined company’s board of directors, the relative size of Shuya, and the designation of certain senior management positions of the combined company.
In accordance with ASC 805, the Company recorded the acquisition based on the fair value of the consideration transferred and then allocated the purchase price to the identifiable assets acquired and liabilities assumed based on their respective fair values as of the Acquisition Date. The excess of the value of consideration transferred over the aggregate fair value of those net assets was recorded as goodwill. Any identified definite lived intangible assets will be amortized over their estimated useful lives and any identified intangible assets with indefinite useful lives and goodwill will not be amortized but will be tested for impairment at least annually. All intangible assets and goodwill will be tested for impairment when certain indicators are present. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenues and cash flows, discount rates, and selection of comparable companies. The valuation of purchase considerations was based on preliminary estimates that management believes are reasonable under the circumstances.
As
the Consistent Action Agreement did not quantify any considerations to gain the control, the deemed consideration paid is the fair value
of
| Fair value of non-controlling interests | $ | |||
| Fair value of previously held equity investment | ||||
| Subtotal | $ | |||
| Recognized value of 100% of identifiable net assets | ( | ) | ||
| Goodwill Recognized | $ | |||
| Recognized amounts of identifiable assets acquired and liabilities assumed (preliminary): | ||||
| Inventories | $ | |||
| Cash and cash equivalents | ||||
| Trade and other receivables | ||||
| Advanced deposit | ||||
| Net fixed assets | ||||
| Trade and other payables | ( | ) | ||
| Advanced payments | ( | ) | ||
| Salaries and wages payables | ( | ) | ||
| Other receivable | ||||
| Total identifiable net assets | $ |
| 20 |
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. Therefore, the Company 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 per
On
January 1, 2024, and effective on the same date, JHJ, SSET and Xiangyueheng entered into the Agreement on the Termination of the Concerted
Action Agreement (the “Termination Agreement”), pursuant to which the parties released each other from any and all obligations
under the CAA. Due to the Termination Agreement, the Company now holds less than
Basic
(loss) per share is computed on the basis of the weighted average number of common shares outstanding. As of June 30, 2024, we had outstanding
common shares of .
Basic and diluted weighted average common shares and equivalents for the six months ended June 30, 2024, and June 30, 2023, were
and
respectively. As of June 30, 2024, we had convertible
notes convertible into approximately of additional common shares and additional
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 six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net Sales | ||||||||
| Manufacturing and Engineering | $ | $ | ||||||
| Heat Recovery Solutions | ||||||||
| NG Trading | ||||||||
| Waste to Energy | ||||||||
| Discontinued operations | ||||||||
| Total Sales | $ | $ | ||||||
| Segment income and reconciliation before tax | ||||||||
| Manufacturing and Engineering | ||||||||
| Heat Recovery Solutions | ||||||||
| LNG Trading | ||||||||
| Waste to Energy | ||||||||
| Total Segment income | ||||||||
| Less: operating expense | ( | ) | ( | ) | ||||
| Less: other income and expenses | ( | ) | ( | ) | ||||
| Net (loss) before income tax | $ | ( | ) | $ | ( | ) | ||
| 21 |
| June 30, 2024 | December 31, 2023 | |||||||
| Total Assets | ||||||||
| Manufacturing and Engineering | $ | $ | ||||||
| Heat Recovery Solutions | ||||||||
| Waste to Energy | ||||||||
| LNG Trading | ||||||||
| Total Assets | $ | $ | ||||||
The following table represents revenue by geographic area based on the sales location of our products and solutions:
| For the six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| United States | ||||||||
| China (include discontinued operation: $ | ||||||||
| Other international | ||||||||
| Total Sales | ||||||||
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.
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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 six months ended June 30, 2024 and June 30, 2023 we had $ and $ in share-based expense, respectively. As of June 30, 2024 we had no further non-vested expense to be recognized.
Leases
The Company adopted ASC Topic 842, Leases, or ASC 842, using the modified retrospective transition method with a cumulative effect adjustment to be accumulated deficit as of January 1, 2019, and accordingly, modified its policy on accounting for leases as stated below. As described under “Recently Adopted Accounting Pronouncements,” below, the primary impact of adopting ASC 842 for the Company was the recognition in the consolidated balance sheet of certain lease-related assets and liabilities for operating leases with terms longer than 12 months.
The Company’s leases primarily consist of facility leases which are classified as operating leases. The Company assesses whether an arrangement contains a lease at inception. The Company recognizes a lease liability to make contractual payments under all leases with terms greater than twelve months and a corresponding right-of-use asset, representing its right to use the underlying asset for the lease term. The lease liability is initially measured at the present value of the lease payments over the lease term using the collateralized incremental borrowing rate since the implicit rate is unknown. Options to extend or terminate a lease are included in the lease term when it is reasonably certain that the Company will exercise such an option. The right-of-use asset is initially measured as the contractual lease liability plus any initial direct costs and prepaid lease payments made, less any lease incentives. Lease expense is recognized on a straight-line basis over the lease term.
Leased right-of-use assets are subject to impairment testing as a long-lived asset at the asset-group level. The Company monitors its long-lived assets for indicators of impairment. As the Company’s leased right-of-use assets primarily relate to facility leases, early abandonment of all or part of facility as part of a restructuring plan is typically an indicator of impairment. If impairment indicators are present, the Company tests whether the carrying amount of the leased right-of-use asset is recoverable including consideration of sublease income, and if not recoverable, measures impairment loss for the right-of-use asset or asset group.
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.
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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 December 31, 2023, we had a net operating loss carry-forward of approximately $(
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 December 31, 2015. The Company is current on its federal and state tax returns.
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
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.
NOTE 3 – ACCOUNTS AND NOTES RECEIVABLE
| June 30, 2024 | December 31, 2023 | |||||||
| Accounts Receivable | $ | |||||||
| Accounts Receivable Related Party | ||||||||
| Less reserve for uncollectable accounts | ( | ) | ( | ) | ||||
| Total | $ | |||||||
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Our Accounts Receivable is pledged to Nations Interbanc, our line of credit.
| June 30, 2024 | December 31, 2023 | |||||||
| Long-term financing receivables | $ | $ | ||||||
| Less Reserve for uncollectable accounts | ( | ) | ( | ) | ||||
| Long-term financing receivables - net | $ | $ | ||||||
The Company is currently modifying the assets subject to lease to meet the provisions of the agreement, and as of June 30, 2024 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.
On a contract-by-contract basis or projects that require extensive work from multiple contractors or supply chain challenges 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.
NOTE 4 – INVENTORIES, NET
Inventories by major classification were comprised of the following at:
| June 30, 2024 | December 31, 2023 | |||||||
| 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:
| June 30, 2024 | December 31, 2023 | |||||||
| Property and Equipment | $ | |||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||
| Net Fixed Assets | $ | |||||||
Our
Depreciation Expense for the six months ended June 30, 2024, and 2023 was
Our property and equipment is pledged to Nations Interbanc, our line of credit.
NOTE 6 – INTANGIBLE ASSETS
Intangible assets were comprised of the following at:
| June 30, 2024 | December 31, 2023 | |||||||
| Goodwill | $ | |||||||
| LWL Intangibles | ||||||||
| Intangible assets - Shuya | ||||||||
| License | ||||||||
| Patents | ||||||||
| Accumulated Amortization | ( | ) | ( | ) | ||||
| Net Intangible Assets | $ | |||||||
Our
Amortization Expense for the six months ended June 30, 2024 and 2023 was $
| 25 |
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 | $ | ( | ) | |
| Net Assets Acquired: | $ | |||
NOTE 7 – INVESTMENT – HEZE HONGYUAN NATURAL GAS CO. CONVERTIBLE NOTE RECEIVABLE
Effective
January 10, 2022, JHJ (the “Note Holder”) entered a convertible note agreement with Chengdu Rongjun Enterprise Consulting
Co., Ltd (“Rongjun” or the “Borrower”) with maturity on
| 26 |
NOTE 8 – ACCRUED EXPENSES
| June 30, 2024 | December 31, 2023 | |||||||
| Accrued wages | $ | $ | ||||||
| Sales tax payable | ||||||||
| Accrued taxes and other | ||||||||
| Total accrued expenses | $ | $ | ||||||
NOTE 9 – LINE OF CREDIT
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
March 30, 2023 amendment to the purchase order financing agreement with DHN Capital, LLC dba Nations Interbanc in which Nations
Interbanc lowered the accrual rate to
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 $
Convertible Notes Payable, Net
On
May 5, 2017, we entered into a nine-month convertible note payable for $
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On
May 24, 2017, we entered into a nine-month convertible note payable for $
On
March 10, 2022 the company entered into a promissory note in the amount of $
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
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
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 $
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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 $
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
October 25, 2022 the company entered into a promissory note in the amount of $
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 5,2022, the company entered into a promissory note in the amount of $
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 $
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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
February 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 $
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 $
On
July 20, 2023 Clean Energy Technology, Inc., a Nevada corporation (the “Company”) closed the transactions contemplated by
the Securities Purchase Agreement with Mast Hill, L.P. (Mast Hill”) dated July 18, 2023 (the “Securities Purchase Agreement”)
pursuant to which the Company issued to Mast Hill a $
On
October 13, 2023 the company entered into a promissory note in the amount of $
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On
November 17, 2023 the company entered into a promissory note in the amount of $
On
November 30, 2023 the company entered into a promissory note in the amount of $
On
December 19, 2023 the company entered into a promissory note in the amount of $
On
January 3, 2024, Clean Energy Technologies, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”)
with FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (the “Buyer”), pursuant to which the
Company agreed to issue and sell to the Buyer the promissory note of the Company in the principal amount of $
On
February 2, 2024, Clean Energy Technologies, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”)
with Coventry Enterprises LLC, a Delaware limited liability company (the “Buyer”), pursuant to which the Company agreed to
issue and sell to the Buyer the promissory note of the Company in the principal amount of $
On
March 4, 2024, Clean Energy Technologies, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”)
with FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (the “Buyer”), pursuant to which the
Company agreed to issue and sell to the Buyer the promissory note of the Company in the principal amount of $
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On
June 21, 2024, Vermont Renewable Gas LLC (“VRG”), a Vermont limited liability company in which the Company retains
Total Due to Convertible Notes
| June 30, 2024 | December 31, 2023 | |||||||
| Total convertible notes | $ | |||||||
| Accrued Interest | ||||||||
| Debt Discount | ( | ) | ( | ) | ||||
| Total | $ | |||||||
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Operating Rental Leases
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
| 32 |
As
of May 1, 2017, our corporate headquarters were located at 2990 Redhill Unit A, Costa Mesa, CA. On March 10, 2017, the Company signed
a lease agreement for an
We have relocated our corporate office to 1340 Reynolds Avenue Unit 120, Irvine, CA 92614. On December 1, 2023, the Company signed a lease agreement for a 3000-square foot of office space with Metro Creekside California, LLC. Lease term is thirty-eight months beginning December 1, 2023 and expiring on January 31, 2027. On October 16 of 2023, we signed a sublease agreement to relocate the HRS operations from Costa Mesa to Irvine, California for one year and 7 months commencing December 1, 2023 and ending June 30, 2025. We also signed a temporary storage lease and Due to the short termination clause, we are treating this as a month-to-month lease.
The components of lease costs, lease term and discount rate with respect of these three leases with an initial term of more than 12 months are as the following:
Balance sheet information related to the Company’s operating leases:
| As of June 30, 2024 | ||||
| Right-of-used assets | $ | |||
| Lease liabilities – current | $ | |||
| Lease liabilities – non-current | ||||
| Total lease liabilities | $ | |||
The weighted-average remaining lease term and the weighted-average discount rate of the above leases are as follows:
Six Months Ended June 30, 2024 | ||||
| Weighted average remaining lease term (years) | ||||
| Weighted average discount rate | % | |||
The following is a schedule, by year of lease payment for the above leases as of June 30, 2024:
| For the 12 months ending | Lease Payment | |||
| June 30, 2025 | $ | |||
| June 30, 2026 | ||||
| June 30, 2027 | ||||
| Total undiscounted cash flows | ||||
| Imputed Interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
Our
lease expense for the six months ended June 30, 2024 and 2023 was $
| 33 |
Severance Benefits
Mr. Mahdi will receive a severance benefit consisting of a single lump sum cash payment equal to 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 11 – 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
Common Stock Transactions
On
January 19, 2023, 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 warrant to purchase
On January 27, 2023 we issued shares of our common stock due to rounding post the reverse stock split.
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. Net proceeds from this offering was $
In
the second quarter of 2023, the Company issued shares to a consultant at fair value of $
On
March 8, 2023 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 warrant to purchase
On
April 18, 2023 Mast Hill exercised the right to purchase
On
May 10, 2023 Mast Hill exercised the right to purchase
On
June 14, 2023 Mast Hill exercised the right to purchase
| 34 |
On
June 23, 2023 Mast Hill exercised the right to purchase
On
September 12, 2023 Mast Hill exercised the right to purchase
On
September 13, 2023 Mast Hill exercised the right to purchase
On
October 27, 2023 Mast Hill exercised the right to purchase
On January 3, 2024, Clean Energy Technologies, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”) with FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (the “Buyer”), As a condition to the sale of the Note, the Company issued to the Buyer shares (the “Commitment Shares”) of Common Stock.
On February 2, 2024, Clean Energy Technologies, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”) with Coventry Enterprises LLC, a Delaware limited liability company (the “Buyer”). As a condition to the sale of the Note, the Company issued to the Buyer shares (the “Commitment Shares”) of Common Stock.
On February 24, 2024, Clean Energy Technologies, Inc. (the “Company”) entered into a consulting agreement (the “Agreement”) with Hudson Global Ventures, LLC. As a condition to the agreement, the Company issued to the consultant shares of Common Stock.
On March 4, 2024, Clean Energy Technologies, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”) with FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (the “Buyer”). As a condition to the sale of the Note, the Company issued to the Buyer shares (the “Commitment Shares”) of Common Stock.
On
March 15, 2024, Clean Energy Technologies, Inc., a Nevada corporation, (the “Company”) and certain individual investors (“Subscribers”)
entered into a subscription agreement pursuant to which the Company agreed to sell up to units (each a “Unit” and
together the “Units”) to the Subscribers for an aggregate purchase price of $
On
June 18, 2024, Clean Energy Technologies, Inc., a Nevada corporation, (the “Company”) and certain individual investors (“Subscribers”)
entered into a subscription agreement pursuant to which the Company agreed to sell approximately units (each a “Unit”
and together the “Units”) to the Subscribers for an aggregate purchase price of $
During the six months and three months ended June 30, 2024 and March 30, 2024, the Company issued shares of common stock for conversion of Series E Preferred share and of common stock for conversion of Series E Preferred share.
Common Stock
Our
Articles of Incorporation authorize us to issue shares of common stock, par value $ per share. As of June 30, 2024
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.
| 35 |
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.
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.
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.
| 36 |
On
October 31, 2023, Clean Energy Technologies, Inc. (the “Company”) filed with the Nevada Secretary of State a certificate
of designation designating shares of the undesignated and authorized preferred stock of the Company, par value $ per share,
as the
The
Series E Preferred Stock has a stated value of $ (the “Stated Value”) per share.
On
November 8, 2023, Clean Energy Technologies, Inc. (the “Company”) entered into an exchange agreement (the “Agreement”)
with Mast Hill Fund, L.P., a Delaware limited partnership (the “Holder”), pursuant to which the Company agreed to issue to
the Holder shares of the newly designated
The
Company has designated the rights of the Holder with respect to its shares of Series E Preferred Stocks pursuant to that certain Certificate
of Designations, Preferences, and Rights of Series E Convertible Preferred Stock (the “Certificate of Designation”). Additionally,
$
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
| 37 |
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
Mast Hill exercised this not in full.
On
February 13, 2023, we issued
On
March 2023, the company issued Craft Capital Management, L.L.C. and R.F. Lafferty & Co. Inc. a
On
March 8, 2023, we issued
On
March 15, 2024, we issued
| 38 |
On
June 18, 2024, we issued
| Warrants - Common Share Equivalents | Weighted Average Exercise price | Weighted average remaining contractual life | Aggregate Intrinsic Value | |||||||||||||
| Outstanding December 31, 2023 | $ | $ | ||||||||||||||
| Expired | ||||||||||||||||
| Exercised | ||||||||||||||||
| Additions | ||||||||||||||||
| Outstanding June 30, 2024 | $ | $ | ||||||||||||||
Stock Options
We currently have no outstanding stock options.
NOTE 12 – RELATED PARTY TRANSACTIONS
On
May 13, 2021 the Company formed CETY Capital LLC a wholly owned subsidiary of CETY. In addition, the company established Vermont Renewable
Gas LLC (“VRG”) 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 in Lyndon, Vermont. Based upon the terms
of the members’ agreement, CETY Capital LLC owns a
On
June 2, 2023 CETY Renewables executed a turnkey agreement for the design, construction, and delivery of organics to energy plant with
Vermont Renewable Gas, LLC. As a result, CETY has recognized revenue from VRG of $
On
June 21, 2024, Vermont Renewable Gas LLC (“VRG”), a Vermont limited liability company in which the Company retains
The Lender is currently in default and has been served notice of default. The Lender has failed to disburse the first and second Tranche as outlined in the Milestone Schedule of the Agreement. While the Lender has communicated that they are working to cure this default, the company retains the right to amend the agreement once the cure is completed.
Kambiz
Mahdi, our Chief Executive Officer, owns Billet Electronics, which is 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 amount of parts purchases in 2024 was $
| 39 |
Note 13 - WARRANTY LIABILITY
For
the six months ended June 30, 2024, and for the year ended December 31, 2023, there was
NOTE 14 – NON-CONTROLLING INTEREST
On
June 24, 2021 the Company formed CETY Capital LLC a wholly owned subsidiary of CETY. In addition, the company established CETY Renewables
Ashfield LLC (“CRA”) a wholly owned subsidiary of Ashfield Renewables Ag Development LLC(“ARA”) with our partner,
Ashfield AG (“AG”). The purpose of the joint venture was the development of a pyrolysis plant established to convert woody
feedstock into electricity and BioChar by using high temperature ablative fast pyrolysis reactor for which Clean Energy Technology, Inc.
holds the license for. The CRA was located in Ashfield, Massachusetts. Based upon the terms of the members’ agreement, the CETY
Capital LLC owned
The
consolidated financial statements have deconsolidated the CRA business unit. The Liabilities of CRA has been transferred to Vermont Renewable
Gas LLC (“VRG”), a newly formed entity. CETY retains
On
April 2, 2023 the Company formed CETY Capital LLC a wholly owned subsidiary of CETY. In addition, the company established Vermont Renewable
Gas LLC (“VRG”) 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 in Lyndon, Vermont. Based upon the terms
of the members’ agreement, CETY Capital LLC owns a
The Company analyzed the transaction under ASC 810 Consolidation, to determine if the joint venture classifies as a Variable Interest Entity (“VIE”). The Company analyzed the transaction under ASC 810 Consolidation, to determine if the joint venture classifies as a Variable Interest Entity (“VIE”). The Joint Venture qualifies as a VIE based on the fact the JV does not have sufficient equity to operate without financial support from both parties. According to ASC 810-25-38, a reporting entity shall consolidate a VIE when that reporting entity has a variable interest (or combination of variable interests) that provides the reporting entity with a controlling financial interest on the basis of the provisions in paragraphs 810-10-25-38A through 25-38J. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. According to the JV operating agreement, the ownership interests are 49/51 and the agreement provides for a Management Committee of 3 members. Two of the three members are from Synergy Bioproducts Corporation, and one is from CETY. Both parties do not have substantial capital at risk and CETY does not have voting interest. However, SBC has controlling interest and more board votes therefore SBC is the beneficiary of the VIE and as a result we record it as an equity investment. Accordingly, the Company has elected to account for the joint venture as an equity method investment in accordance with ASC 323 Investments – Equity Method and Joint Ventures. This decision is a result of the company’s evaluation of its involvement with potential variable interest entities and their respective risk and reward scenarios, which collectively affirm that the conditions necessitating the application of the variable interest model are not present.
In
July 2022 JHJ and other three shareholders agreed to form and make total capital contribution of RMB million ($ million) with
latest contribution due date in February 2066 into Sichuan Hongzuo Shuya Energy Limited (“Shuya”), JHJ owns
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On January 1, 2024 and effective on the same date., JHJ, SSET and Xiangyueheng entered into the Agreement on the Termination of the Concerted Action Agreement (the “Termination Agreement”), pursuant to which the parties release each other from any and all obligations under the CAA. Due to the Termination Agreement, the Company now holds less than 50% of the voting rights in Shuya. The Company has determined that Shuya no longer constitutes a VIE and the Company will not consolidate Shuya into its consolidated financial statements on or after January 1, 2024.
NOTE 15 – DECONSOLIDATION OF SUBSIDIARY
On
January 1, 2024 and effective on the same date., JHJ, SSET and Xiangyueheng entered into the Agreement on the Termination of the Concerted
Action Agreement (the “Termination Agreement”), pursuant to which the parties release each other from any and all obligations
under the CAA. Due to the Termination Agreement, the Company now holds less than 50% of the voting rights in Shuya. The Company has determined
that Shuya no longer constitutes a VIE and the Company will not consolidate Shuya into its consolidated financial statements on or after
January 1, 2024. Accordingly, started from January 1, 2024, the Company deconsolidated Shuya. Under ASC 810-10-40-5, deconsolidation
of a VIE generally results in recognition of a gain or loss in the income statement. In addition, any retained equity interest or investment
in the former subsidiary is measured at fair value as of the date of deconsolidation. The consideration for deconsolidating of Shuya
is $
The
Company recalculated the fair value of Shuya as of January 1, 2024 using the income approach at $
The following table summarizes the carrying value of the assets and liabilities of Shuya at December 31, 2023.
| Cash | $ | |||
| Accounts receivable | ||||
| Advance to supplier-prepayment | ||||
| Advance to supplier-related party | ||||
| Due from related party | ||||
| Inventory | ||||
| Total current assets | ||||
| Fixed assets, net | ||||
| Intangible assets, net | ||||
| Right of use assets | ||||
| Total non-current assets | ||||
| Total assets | ||||
| Accounts payable | $ | |||
| Accounts payable-related party | ||||
| Tax payable | ||||
| Due to related party-existing companies | ||||
| Customer deposits | ||||
| Accrued expense | ||||
| Facility lease liability-current | ||||
| Total current liabilities | ||||
| Facility lease liability-long term | ||||
| Total liabilities |
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The following table shows the results of operations relating to discontinued operations Shuya for the six months ended June 30, 2024 and 2023, respectively.
| SIX MONTHS ENDED JUNE 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Selling | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Income from operations | ||||||||
| - | ||||||||
| Other income | ||||||||
| Income before income tax | ||||||||
| Income tax | ||||||||
| Income before noncontrolling interest | ||||||||
| Less: income attributable to noncontrolling interest | ||||||||
| Net gain to the Company | $ | $ | ||||||
NOTE 16 – SUBSEQUENT EVENTS
No subsequent event to report.
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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 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.
Our principal executive offices are located at 1340 Reynolds Avenue, Irvine, CA 92614. 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 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.
Segment Information
Our four segments for accounting purposes are:
Clean Energy HRS & CETY Europe – Our Waste Heat Recovery Solutions, converting thermal energy to zero emission electricity.
CETY Renewables Waste to Energy Solutions – Providing Waste to Energy technologies and solutions.
Engineering and Manufacturing Business – providing customers with comprehensive design, manufacturing, and project management solutions.
CETY HK – The parent company of our NG trading operations in China. 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.
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. We have 24 full-time employees.
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.
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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.
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.
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.
Clean Energy Technologies (H.K.) Limited (“CETY HK”) – our natural gas (“NG”) trading operations source and supply NG to industries and municipalities in mainland China. 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 the market. We sell the NG to our customers at fixed prices or prevailing daily spot prices for the duration of the contracts.
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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.
Summary of Operating Results for the Six Months Ended June 30, 2024 Compared to the Same Period in 2023
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 working capital of $300,071 as of June 30, 2024, The company also had an accumulated deficit of $25,429,293 as of June 30, 2024 and used $1,612,034 in net cash from operating activities for the six months ended June 30, 2024. 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 six months ended June 30, 2024, our total revenue was $1,709,151 compared to $3,274,001 for the same period in 2023. Our first half of 2024’s total revenue was lower than the same period in 2023 due to deconsolidation of our Shuya entity and substantially lower revenue from our NG business in general due to slow down of economy in China.
For the six months ended June 30, 2024, our gross profit was $429,035 compared to $444,018 for the same period in 2023. The increase in gross profit margin was due to higher-margin business from non-NG operations.
For the six months ended June 30, 2024, our operating expense was $2,221,990 compared to $1,498,702 for the same period in 2023. The increase in expenses contributed to salaries expenses and professional fees for legal & accounting.
For the six months ended June 30, 2024, we had a net loss of $2,251,278 compared to net loss of $1,868,163 for the same period in 2023 due to increased in salaries expense contributed to CETY Renewables new engineers and operational and technology directors, fees and marketing campaign expenses attributed to CETY’s expansion plans and loss from deconsolidation of Shuya.
For the quarter ended June 30, 2024, stockholder’s equity was $4,579,726, compared to $5,869,198 as of December 31, 2023. This decrease in stockholder’s equity can be attributed to net loss for the year-to-date results.
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 and manufacturing services, and CETY HK (NG trading and acquisitions). Revenue for the six months ended June 30, 2024 was mainly contributed by NG trading and waste to energy project. The revenue in this segment is expected to continue to stay stable which will help establish CETY as a player in the China market and allows cross-selling of CETY products and solutions and transfer of advanced clean energy with lower cost technologies. 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 growth in the year ended in 2023 was a result of this strategy. 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. 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.
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 Six Months Ended June 30, 2024, Compared to the Six Months Ended June 30, 2023
Net Sales
For the six months ended June 30, 2024, our total revenue was $1,709,151 compared to $3,274,001 for the same period in 2023. The decrease in revenue was primarily due to the lower revenue form the NG business and delays in funding for the Vermont Renewable Gas project, which supports the $12 million backlog.
Segment breakdown
For the six months ended June 30, 2024, our revenue from Engineering and Manufacturing was $9,341 compared to $36,332 for the same period in 2023. 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. Additionally, some of our engineering revenue is rolled up into our waste heat to power and waste to energy contracts.
For the six months ended June 30, 2024, our revenue from HRS was $120,874 compared to $28,338 for the same period in 2023. We have a large pipeline of opportunities in this segment and are working diligently to complete the engineering and design, enabling us to execute contractual agreements and close these opportunities. The sales cycle for these types of opportunities is long due to cost factors and the integration of the technology. We are also working with financial institutions to assist in financing the projects as we increasingly move towards Independent Power Producer models.
For the six months ended June 30, 2024, our revenue from our waste to energy segment was $331,487 compared to $385,404 for the same period in 2023. We have a large $12M contract with Vermont Renewable Gas in this segment and are currently finalizing the engineering and design, and permitting to start the construction. We anticipate exponentially higher revenue driven from this segment.
For the six months ended June 30, 2024, our revenue from our natural gas (NG) business amounted to $1,219,629, down from $2,796,649 for the corresponding period in 2023. This decrease can be attributed to the deconsolidation of Shuya’s revenue, overall substantial lower revenue from China operations due to slow down in economy and our strategic decision to prioritize non-Chinese markets over expansion into the ASEAN region.
Gross Profit
For the six months ended June 30, 2024, our gross profits totaled $429,035, marking higher margins compared to $444,018 recorded for the corresponding period in 2023. This higher gross profit can be attributed to higher revenue and margins from none Chinese NG business.
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Segment breakdown
For the six months ended June 30, 2024, our gross profit from Engineering and Manufacturing amounted to $7,806, compared to $18,355for the same period in 2023. This segment is a recent addition to CETY’s portfolio, currently serving as a support for our ongoing internal projects. Nevertheless, it is anticipated to expand notably as CETY shifts its focus towards providing comprehensive end-to-end integrated solutions.
For the six months ended June 30, 2024, our gross profit from HRS was $79,889, compared to $18,355 for the corresponding period in 2023. This increase in margins primarily stemmed from increased service activities, which did not include equipment sales.
For the six months ended June 30, 2024, our gross profit from waste to energyt was $331,487, compared to $385,404 for the corresponding period in 2023. Our waste to energy segment will be driving higher margins that our other segments.
During the six months ended June 30, 2024, our gross profit from our wholly owned subsidiary, JHJ, was $9,853, a decrease from $385,404 recorded for the corresponding period in 2023. It’s worth noting that our NG business typically operates on slim margins. Looking ahead, we intend to leverage our presence in China to foster synergistic partnerships and facilitate technology transfers, particularly in the growing EV charging sector. Additionally, we aim to explore cross-selling opportunities for our waste heat recovery and waste-to-energy products within the Chinese market.
Selling, General and Administrative (SG&A) Expenses.
For the six months ended June 30, 2024, our SG&A expenses totaled $487,391, an increase from $267,062 for the same period in 2023. This increase can be attributed to increased spending in one-time JHJ misc. expense, IT, insurance expenditures particularly the D&O policy, and increased spending on repairs and maintenance, largely driven by the recent relocation of our HRS operations.
Salaries Expense
For the six months ended June 30, 2024, our Salaries expense totaled $966,843, marking a significant increase from $535,237 recorded during the same period in 2023. This surge in expenses can be attributed to the inclusion of key personnel such as our CFO, director of operations, director of technology, and the recruitment of four additional engineers, and increased in work force in our NG operations. Our strategy involves fortifying our team from the ground up to establish a robust foundation for scalable growth, reinforced by cutting-edge technology and streamlined systems. We hold strong conviction in the capabilities of our assembled team, envisioning their collective efforts leading us to a position of leadership within the clean energy sector.
Travel Expense
For the six months ended June 30, 2024, our travel expense was $81,224 compared to $200,139 for the same period in 2023. The decrease was due to lower travel expenses related to China NG business development.
Professional fees legal and accounting
For the six months ended June 30, 2024, our Professional Fees expense totaled $353,065, marking an increase from $177,437 in the corresponding period of 2023. This rise in accounting fees can be attributed directly to engaging a new audit firm, which incurred higher costs.
Facility Lease and Maintenance Expense
For the six months ended June 30, 2024, our Facility Lease and maintenance expenses totaled $150,883, marking a significant decrease from the $126,766 incurred during the same period in 2023. This increase in cost can be attributed to the NG operations increased in rent.
Depreciation and Amortization Expense
For the six months ended June 30, 2024, our depreciation and amortization expense was $5,938 compared to $6,454 for the same period in 2023.
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Change in Derivative Liability
For the six months ended June 30, 2024, we had [no] derivative liability compared to a gain of $326,539 for the same period in 2023. The gain in derivative liability was from a favorable derivative calculation from several convertible notes in the three months ended March 31, 2023.
Interest and Finance Fees
For the six months ended June 30, 2024, interest and finance fees amounted to $422,863, as opposed to $1,349,594 for the corresponding period in 2023. The decrease in interest and fees can be attributed to less number of notes and bridge financing aimed at facilitating the uplisting to Nasdaq. Despite the decrease in interest and fees for the June 30, 2024 period, we believe that the cost of capital for CETY remains elevated. The delay in securing affordable financing for our Vermont project resulted in our reliance on high-cost financing options. We are working diligently to finalize our financing in the third quarter of 2024.
Net Loss
For the six months ended June 30, 2024, our loss amounted to $2,251,278, representing an increase from the loss of $1,868,163 incurred during the corresponding period in 2023. This increase is attributed to expenditures in salaries, IT, relocation, and legal and professional fees.
Liquidity and Capital Resources
Clean Energy Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30,
(unaudited)
| 2024 | 2023 | |||||||
| Net cash (used in) operating activities | $ | (1,612,034 | ) | $ | (2,620,809 | ) | ||
| Net cash provided by investing activities | 83,160 | 14,319 | ||||||
| Net cash provided by financing activities | 1,828,380 | 3,159,324 | ||||||
| Foreign Currency Transaction | (1,188 | ) | - | |||||
| Net increase in cash and cash equivalents | $ | 298,318 | $ | 583,899 | ||||
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.
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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.
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).
The following five steps are applied to achieve that core principle for our business:
| ● | 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 |
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
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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 |
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. |
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.
During the project development and engineering phase of our CETY Renewable projects such as VRG, we employ the input method of revenue recognition to estimate revenue based on projected costs. This approach involves forecasting future costs and revenues to determine the amount of revenue we recognize in the current period. It’s important to understand, however, that these recognized revenue figures are not final and are subject to adjustments. Changes may occur as we gain more clarity on actual costs compared to our initial projections, affecting the revenue recognized accordingly.
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The projected costs of the VRG project is based on estimates and profitability will be impacted depending on actual costs. Using the input method for revenue recognition, the amount of recorded revenue is also affected depending on the estimated total costs. The purchase price allocation for Shuya was also based on estimates and comparable data selected by the Company. The inputs for the valuation of the Series E preferred shares were also based on estimates and comparable data selected by the Company.
Additionally, the above five steps are applied to achieve core principle for our CETY Renewables Division:
Because the CETY Renewables division is presently engaged in the Engineering, Procurement, and Construction (EPC) of biomass power facilities, CETY Renewables has developed a process of executing EPC Agreements with customers for this work. In contracting these engagements, CETY Renewables recognizes revenue according to accounting standards in accordance with ASC 606.
In recognizing this revenue, CETY Renewables first identifies the relevant contract with its customer according to 606-10-25-1.
| ● | The entities, together known as the Parties, approved the contract in writing, through signatures and commitment to the performance of permitting, design, procurement, construction, and commissioning. | |
| ● | CETY’s work product includes permits, engineering designs, equipment, and full balance of plant specific to permitting, design, procurement, construction, and commissioning. | |
| ● | CETY and customer agree to a total EPC Contract price. | |
| ● | The contract has commercial substance. The risk associated with this EPC Agreement is that payment of the EPC contract price. | |
| ● | Per the EPC Agreement, CETY expects to collect substantially all of the consideration for its goods and services. |
Secondly, CETY identifies the performance obligations of the Parties in performance of the EPC Agreement in accordance with 606-10-25-14. At contract inception, CETY assesses the goods and services necessary to deliver the facility in accordance with the its agreement with its clients. The agreement specifically laid out all deliverables necessary to achieve the permitting, design, procurement, construction, and commissioning.
CETY also looks at 606-10-25-14(A). A bundle of goods or services is also present, in that CETY is delivering all work products associated with permitting, design, procurement, construction and commissioning of a commercially operable biomass power plant. A biomass power plant is a distinct bundle of goods or services, so the individual goods or services on their own do not lend themselves to a fully integrated or functional system.
CETY in accordance with 606-10-32-1, CETY reviews measurement of the performance obligations. There are no exclusion of any amount of the Contract Price due to constraints associated with 606-10-31-11 through 606-10-32-13.
In review of 606-10-32-2A, CETY did not exclude measurement from the measurement of the transaction price any taxes assessed by a government authority as no such taxes will be due.
In reviewing 606-10-32-3, CETY evaluated the nature, timing, and amount of consideration promised, and whether it impacts the estimate of the transaction price.
Finally, in identifying a single method of measuring progress for each performance obligation satisfied over time, in accordance with 606-10-25-32, CETY applies the methodology of 606-10-25-36. CETY adopted and implemented the input method for revenue recognition in accordance with ASC 606-10-25-33. The company adopts the input method for implementation. CETY recognizes revenue for performance obligations on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation per 606-10-55-20.
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For CETY, the contracts with clients for the construction of biomass power plants are the basis for revenue recognition. In each separate EPC Agreement, the performance obligations include permitting, design, procurement, construction, and commissioning of the plant. All of these work products satisfy Section 606-10-25-27(b) as these work products create or enhance an asset under customer’s control. Upon delivery of the work product, the customer takes control of the work products and has full right and ability to direct the use of and obtain substantially all of the remaining benefits of the assets. We recognize revenue over time, using timeline and milestone methods to measure progress towards complete satisfaction of the performance obligation.
During the complexity and duration of the biomass power plant construction projects, CETY will recognize revenue over time, consistent with the criteria for over-time recognition under ASC 606. This approach reflects the continuous transfer of documents, permits, and the equipment over to the customer, which is characteristic of long-term construction contracts.
We have a list of appropriate measures of progress: This is based on milestones achieved, among other measures.
Given the long-term nature of the projects, CETY regularly reviews and, if necessary, updates its estimates of progress towards completion, transaction price, and the allocation of the transaction price to performance obligations.
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 10%. As of June 30, 2024 and December 31, 2023, we had $33,000 and $33,000 of deferred revenue, which is expected to be recognized in the fourth quarter of year 2024.
Also from time to time we require upfront deposits from our customers based on the contract. As of June 30,2024, and December 31, 2023, we had outstanding customer deposits of $41,462 and $210,310 respectively.
Change from fair value or equity method to consolidation
Chengdu Xiangyueheng Enterprise Management Co., Ltd (the “Xiangyueheng”), which owns a 10% equity interest in Shuya, entered a three-party Concerted Action Agreement (the “CAA”), wherein the parties agreed to vote in unison at the shareholders’ meeting of Shuya to consolidate the controlling position of the three parties in Shuya. The three parties agreed that during the term of the CAA, before any of the three parties intends to propose motions to the shareholders’ meetings or the board of directors, or exercise their voting rights on any matter that shall be presented to and resolved through the shareholders’ meeting in accordance with the laws, regulations, Articles of Association of Shuya or any relevant shareholders’ agreements, the three parties 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 the CAA, the Company re-analyzed and determined that Shuya is the variable interest entity (the “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 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 into its consolidated financial statements effective on January 1, 2023.
On January 1, 2024, and effective on the same date, JHJ, SSET and Xiangyueheng entered into the Agreement on the Termination of the Concerted Action Agreement (the “Termination Agreement”), pursuant to which the parties released each other from any and all obligations under the CAA. Due to the Termination Agreement, the Company now holds less than 50% of the voting rights in Shuya. The Company analyzed whether Shuya should be consolidated under ASC 810 and determined Shuya is no longer required to be consolidated on January 1, 2024 after the execution of the Termination Agreement. Accordingly, the Company will not consolidate Shuya into its consolidated financial statements on or after January 1, 2024.
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Series E Valuation
Additionally, the inputs for the valuation of the Series E preferred shares were also based on estimates and comparable data selected by the Company and fair value measurements, furthermore, the purchase price allocation was based on estimates of fair market values.
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.
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 June 30, 2024, 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, 2024, 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 during the six months ended June 30, 2024 in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.
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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/A for the year ended December 31, 2024, filed with the SEC on June 20, 2024.
Item 2. Unregistered Sales of Equity Securities
On February 5, 2021 we issued 75,000 shares of our common stock at a price of $3.2 per share, in exchange for the conversion of 1,200 shares of our Series D Preferred Stock.
On February 9, 2021 we issued 56,892 shares of our common stock share, in exchange for the conversion of $182,052 of accrued dividend for the series D Preferred Stock.
On March 12, 2021 we issued 40,625 shares and 51,715 of our common stock at a price of $3.2 per share, in exchange for the conversion of 650 shares of our Series D Preferred Stock and $165,487 of accrued dividend for the series D preferred stock.
On June 28, 2021 MGW I converted $75,000 from the outstanding balance of their convertible note into 625,000 shares of company’s common stock.
On September 2, 2021 the company issued 28,561 as inducement shares. To GHS Investment for the equity line of credit at $1.9 per share.
On September 13, 2021 the company issued 27,516 as issuance correction. To GHS Investment for the equity line of credit at $1.9 per share.
On December 31, 2021 we issued 245,844 shares of our common stock under our Reg A offering at $3.2 per share. These shares are unrestricted and free trading.
On February 21, 2022, we issued 375,875 shares of our common stock under our Reg A offering at $3.2 per share. These shares are unrestricted and free trading.
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.
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On December 28, 2022, we issued 100,446 shares of common stock upon the exercise of the cashless warrant that the Company issued to Mast Hill on May 6, 2022.
On March 1, 2023 First Fire exercised the warrant in full on a cashless basis to purchase 33,114 shares of common stock.
On March 1, 2023 Pacific Pier exercised the warrant in full on a cashless basis to purchase 31,111 shares of common stock.
In the third quarter of 2023, the Company issued 40,000 shares to a consultant at fair value of $72,000.
In the second quarter of 2023, the Company issued 220,314 shares and received cash proceed of $352,502.
In the third quarter of 2023, the Company issued 213,188 shares and received cash proceed of $341,101.
In the fourth quarter of 2023, the Company issued 183,500 shares and received cash proceeds of $293,600.
In the first quarter of 2024, the Company issued 1,333,600 shares for conversion of Series E Preferred share valued at $565,178.
On January 3, 2024, the Company entered into a securities purchase agreement as a condition to the sale of the Note, the Company issued to the Buyer 10,000 shares of Common Stock.
On February 2, 2024, the Company entered into a securities purchase agreement as a condition to the sale of the Note, the Company issued to the Buyer 20,000 shares of Common Stock.
On February 24, 2024, the Company entered into a consulting agreement as a condition to the agreement, the Company issued to the consultant 15,000 shares of Common Stock.
On March 4, 2024, the Company entered into a securities purchase agreement. As a condition to the sale of the Note, the Company issued to the Buyer 20,000 shares of Common Stock.
On March 15, 2024, the Company entered into a subscription agreement pursuant to which the Company agreed to sell up to 2,000,000 units to the Subscribers for an aggregate purchase price of $900,000.
On June 18, 2024, the Company and certain individual investors (“Subscribers”) entered into a subscription agreement pursuant to which the Company agreed to sell approximately 1,203,333 units (each a “Unit” and together the “Units”) to the Subscribers for an aggregate purchase price of $1,083,000, or $0.90 per Unit, with each unit consisting of one share of common stock, par value $0.001 per share (the “Common Stock”) and a warrant (the “Warrant”) to purchase one share of Common Stock. The Warrant is exercisable at the price of $2.00 per share, expiring one year from the date of issuance.
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.
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Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
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 twentieth day May, 2024
| Clean Energy Technologies, Inc. | ||
| REGISTRANT | ||
| /s/ Kambiz Mahdi | ||
| By: | Kambiz Mahdi | |
| Chief Executive Officer and Director | ||
| Date: | August 19, 2024 | |
| /s/ Calvin Pang | ||
| By: | Calvin Pang | |
| Chief Financial Officer and Director | ||
| Date: | August 19, 2024 | |
| /s/ Ted Hsu | ||
| By: | Ted Hsu | |
| Director | ||
| Date: | August 19, 2024 | |
| /s/ Lauren Morrison | ||
| By: | Lauren Morrison | |
| Director | ||
| Date: | August 19, 2024 | |
| /s/ Xiaotian Xiao | ||
| By: | Xiaotian Xiao | |
| Director | ||
| Date: | August 19, 2024 | |
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: | August 19, 2024 | ||
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