UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒	QUARTERLY REPORT DATED September 30, 2023 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

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: 001-41654

 

CLEAN ENERGY TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		20-2675800
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

2990 Redhill Ave, Costa Mesa, California 92626

(Address of principal executive offices)

 

(949) 273-4990

(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
Common Stock, par value $0.001		CETY		Nasdaq

 

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. ☒ Yes ☐ No

 

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). ☒ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, 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 ☐
Non-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 ☒ No

 

As of November 14, 2023 there were 38,968,955 shares of the Registrant’s common stock, par value $0.001 per share, issued and outstanding.

 

Securities registered pursuant to Section 12(b) of the Act

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common		CETY		Nasdaq

 

 

 

CLEAN ENERGY TECHNOLOGIES, INC.

(A Nevada Corporation)

 

TABLE OF CONTENTS

 

			Page
PART I. FINANCIAL INFORMATION
ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)		3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		32
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		38
ITEM 4.	CONTROLS AND PROCEDURES		38
PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS		38
ITEM 1A.	RISK FACTORS		38
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		38
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		39
ITEM 4.	MINE SAFETY DISCLOSURES		39
ITEM 5.	OTHER INFORMATION		39
ITEM 6.	EXHIBITS		39

 

 

Part I – Financial Information

 

Item 1. Financial Statements

 

Clean Energy Technologies, Inc.

Consolidated Financial Statements

(Expressed in US dollars)

September 30, 2023 (unaudited)

 

Financial Statement Index
Consolidated Balance Sheets September 30, 2023 (unaudited) and December 31, 2022	4
Consolidated Statements of Operations and comprehensive loss (unaudited)	5
Consolidated Statements of Stockholders Deficit (unaudited)	6
Consolidated Statements of Cash Flows (unaudited)	7
Notes to the Consolidated Financial Statements (unaudited)	8

 

 

Clean Energy Technologies, Inc.

Consolidated Balance Sheets

 

		September 30, 2023				December 31, 2022
		(Unaudited)
Assets
Current assets:
Cash		$	263,814			$	149,272
Accounts receivable - net			1,131,679				1,368,567
Accounts receivable - related party			861,007
Accounts receivable			861,007
Lease receivable asset			217,584				217,584
Advance to supplier - prepayment			2,220,077				597,816
Advance to supplier – related party			414,786				-
Deferred offering costs			-				204,556
Investment Heze Hongyuan Natural Gas Co.			858,720				835,756
Due from related party			604,850				-
Loan receivables			-				116,000
Inventory, net			831,586				500,586
Total current assets			7,404,103				3,990,137
Property and equipment- net			43,500				14,816
Goodwill			747,976				747,976
LWL intangibles			1,481,634				1,468,709
Long term investment - Shuya			-				561,656
Long-term financing receivables - net			684,770				684,770
License			354,322				354,322
Patents			94,786				103,693
Right of use asset - long term			249,648				157,359
Other assets			34,763				30,891
Total non current assets			3,691,399				4,124,192
Total Assets		$	11,095,502				8,114,329
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	368,402				860,435
Accounts payable							-
Accrued expenses			327,833				119,030
Customer deposits			770,943				80,475
Warranty liability			100,000				100,000
Deferred revenue			33,000				33,000
Derivative liability			-				588,178
Facility lease liability - current			269,081				186,436
Line of Credit			648,369				998,820
Convertible notes payable (net of discount of 257,582 and $326,805 respectively)			3,110,442				3,092,055
Related party notes payable			-				177,704
Total current liabilities			5,628,070				6,236,132
Long-term Liability:
Facility lease liability - long term			78,381
Total liabilities			5,706,451				6,236,132
Commitments and contingencies			-				-
Stockholders’ equity
Common stock, $.001 par value; 2,000,000,000 shares authorized; 38,968,955 and 37,174,879 issued and outstanding as of September 30, 2023 and December 31, 2022 respectively			38,968				37,175
Addition paid-in capital			24,750,198				19,278,230
Accumulated other comprehensible loss			(272,847	)			(160,673	)
Accumulated deficit			(19,829,422	)			(17,276,536	)
Total stockholders’ equity attributable to CETY			4,686,897				1,878,196
Non-controlling interest			702,154				-
Total stockholders’ equity			5,389,051				1,878,196
Total liabilities and stockholders’ equity		$	11,095,502				8,114,329

 

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

 

 

Clean Energy Technologies, Inc.

Consolidated Statements of Operations and comprehensive loss

for the three and nine months ended September 30, 2023 and 2022 (Unaudited)

 

		2023 Three Months				2022 Three Months				2023 Nine Months				2022 Nine Months
Sales		$	3,637,679				44,629			$	10,921,398			$	2,567,596
Sales from related party			367,038				-				779,720				-
Total Sales, net			4,004,717				44,629				11,701,118				2,567,596
Cost of goods sold			3,251,334				18,716				10,273,489				1,415,693
Gross profit			753,383				25,913				1,427,629				1,151,903
Operating expenses:
General and administrative expense			176,648				79,252				476,078				284,025
Salaries			455,905				197,036				1,040,431				587,928
Travel			126,941				38,990				328,104				126,388
Professional fees legal & accounting			82,039				135,441				259,476				359,636
Facility lease and maintenance			151,155				86,781				347,529				260,262
Consulting engineering			58,933				21,880				244,540				83,931
Depreciation and amortization			4,602				7,519				13,805				22,557
Total operating expenses			1,056,223				566,899				2,709,963				1,724,727
Net loss from operations			(302,840	)			(540,986	)			(1,282,334	)			(572,824	)
Other income (expenses)			34				9,976				81,539				25,790
Change in derivative liability			-				419				326,539				(12,980	)
Gain on debt settlement and write down											130,430				2,920
Interest and financing fees			(358,095	)			(331,177	)			(1,707,690	)			(747,451	)
Total other income (expenses):			(358,061	)			(320,782	)			(1,169,182	)			(731,721	)
Net loss before income taxes			(660,901	)			(861,768	)			(2,451,516	)			(1,304,546	)
Income tax expense			(6,235	)			353				(8,973	)			(18,315	)
Net loss			(667,136	)			(861,415	)			(2,460,489	)			(1,322,861	)
Non-controlling interest			54,259				19,059				92,396				19,059
Net loss attributable to Clean Energy Technologies, Inc.			(721,395	)			(880,474	)			(2,552,885	)			(1,341,920	)
Net loss			(667,136	)			(861,415	)			(2,460,489	)			(1,322,861	)
Other comprehensive item
Foreign currency translation loss			(20,313	)			(134,031	)			(153,367	)			(243,135	)
Total comprehensible income loss		$	(687,449	)			(995,446	)		$	(2,613,856	)		$	(1,565,996	)
Non-controlling interest accumulative other comprehensive income			(5,200	)			-				(41,193	)			-
Total comprehensive income attributable to non-controlling interests		$	(682,249	)			(995,446	)		$	(2,572,663	)		$	(1,565,996	)
Per Share Information:
Basic and diluted weighted average number of common shares outstanding			38,795,160				25,569,891				38,227,965				24,514,942
Net loss per common share basic and diluted		$	(0.02	)			(0.00	)		$	(0.07	)		$	(0.00	)

 

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

 

 

Clean Energy Technologies, Inc.

Consolidated Statements of Stockholders Deficit

September 30, 2022 & 2023 (Unaudited)

 

Description		Shares				Amount				Shares				Amount				Amount				Capital				Interest				Income				Deficit				interest				Totals
		Common Stock .001 Par								Preferred Stock								Common Stock to be issued				Additional Paid in				Subscription				Accumulated Comprehensive				Accumulated				Non Controlling				Stock holders’ Deficit/equity
Description		Shares				Amount				Shares				Amount				Amount				Capital				Interest				Income				Deficit				interest				Totals
December 31, 2021			23,589,229				23,589				-				-				-				15,697,688				-				-				(17,423,931	)			(19,059	)			(1,721,712	)
Shares issued for Reg A offering			375,875				376				-				-				-				1,202,424																				1,202,800
Shares issued for S1			78,897				79																137,831																				137,910
																																											-
Subscription Receivable																											(18,800	)															(18,800	)
Accumulated Comprehensive																															4,562												4,562
Net Loss																																			(112,589	)			-				(112,588	)
March 31, 2022			24,044,000				24,044				-				-				-				17,037,943				(18,800	)			4,562				(17,536,520	)			(19,059	)			(507,830	)
Shares issued for S1			122,898				123				-												153,112																				153,235
Warrants Issued Mast Hill Fund																							168,296																				168,296
Subscription Receivable																											0																0
Accumulated Comprehensive																															(113,666	)											(113,666	)
Net Loss															-				-																(346,943	)			-				(346,943	)
June 30, 2022			24,166,899				24,167				-				-				-				17,359,351				(18,800	)			(109,104	)			(17,883,464	)			(19,059	)			(646,909	)
Shares issued MGW Note Conversion			12,907,534				12,908				-				-				-				1,535,996																				1,548,904
Warrants issued Q3 Bridge Financing																							240,824																				240,824
Subscription Receivable																											18,800																18,800
Accumulated Comprehensive																															(134,031	)											(134,031	)
Net Loss																																			(880,474	)			(19,060	)			(861,415	)
September 30, 2022			37,074,433				37,074				-				-				-				19,136,171				0				(243,136	)			(18,763,939	)			0				166,173

 

Description		Shares				Amount				Shares				Amount				Amount				Capital				Income				Deficit				interest				Totals
		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			37,174,879				37,175				-				-				-				19,278,229				(160,673	)			(17,276,536	)			-				1,878,196
Warrants issued in conjunction for debt							-				-				-				-				609,718								-				-				609,718
Warrants issued for services							-				-				-				-				76,100								-				-				76,100
Shares issued for S-1 Registration			975,000				975				-				-				-				3,899,025								-				-				3,900,000
Offering cost																							(753,781	)															(753,781	)
Shares issued for rounding			3,745				4				-				-				-				(4	)							-				-				-
Shares for Pacific Pier and Firstfire conversion			64,225				64				-				-				-				(68	)							-				-				(4	)
Shares issued for Debt Conversion			277,604				278				-				-				-				665,972								-				-				666,250
Accumulated Comprehensive											-				-				-				-				9,613				-				-				9,613
Noncontrolling interest ownership																																			650,951				650,951
Net loss											-				-				-				-								(1,073,858	)			38,023				(1,035,835	)
March 31, 2023			38,495,453				38,495				-				-				-				23,775,096				(151,060	)			(18,350,395	)			688,974				6,001,109
Warrants issued in Conjunction For cash			220,314				220				-				-				-				352,282																352,503
Reclassification of derivative liabilities due to note repayment																							261,639																261,639
Offering costs																							(51,667	)															(51,667	)
Shares based compensation			40,000				40																71,960																72,000
Accumulated Comprehensive																											(106,674	)							(35,993	)			(142,667	)
Net loss																															(757,632	)			114				(757,518	)
June 30, 2023			38,755,767				38,755				-								-				24,409,310				(257,734	)			(19,108,027	)			653,095				5,735,399
Balance			38,755,767				38,755				-								-				24,409,310				(257,734	)			(19,108,027	)			653,095				5,735,399
Shares issued for warrant conversion			213,188				213																340,888																341,101
Accumulated Comprehensive																											(15,113	)							(5,200	)			(20,313	)
Net loss															-				-												(721,395	)			54,259				(667,136	)
September 30, 2023			38,968,955				38,968				-				-				-				24,750,198				(272,847	)			(19,829,422	)			702,154				5,389,051
Balance			38,968,955				38,968				-				-				-				24,750,198				(272,847	)			(19,829,422	)			702,154				5,389,051

 

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

 

 

Clean Energy Technologies, Inc.

Consolidated Statements of Cash Flows

for the nine months ended September 30 (Unaudited)

 

		2023				2022
Cash Flows from Operating Activities:
Net loss		$	(2,460,489	)		$	(1,322,861	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			18,264				22,557
Stock compensation expense			148,100				-
Financing fee							380,000
Gain on debt settlement			(130,430	)			(2,920	)
Amortization of debt discount			918,640				145,632
Change in derivative liability			(326,539	)			12,980
Changes in operating assets and liabilities:
(Increase) decrease in right of use asset			(100,511	)			177,745
(Decrease) increase in lease liability			172,325				(175,172	)
(Increase) decrease in accounts receivable			(617,362	)			(1,113,760	)
(Increase) decrease in prepayments			(1,137,464	)			(194,306	)
(Increase) decrease in equity method investment			-				13,650
(Increase) decrease in other assets			673,030				-
(Increase) decrease in inventory			349,126				(65,757	)
(Decrease) increase in accounts payable			(1,041,509	)			44,955
Other (Decrease) increase in accrued expenses			(422,020	)			171,619
Other (Decrease) increase in accrued interest			104,694				-
Other (Decrease) increase in other payables - related party			(705,560	)			-
Other (Decrease) increase in customer deposits			715,473				(24,040	)
Net cash used in operating activities			(3,842,232	)			(1,929,678	)
Cash Flows from Investing Activities
Cash acquired from consolidation of Shuya			49,495				-
Payment to Heze Hongyuan Natural Gas Co			-				(838,090	)
Investment in Shuya			-				(550,644	)
Purchase of intangible assets			(3,802	)			-
Purchase of property and equipment			(31,582	)			-
Net Cash provided by investing activities			14,111				(1,388,734	)
Cash Flows from Financing Activities
Proceeds from notes payable and lines of credit			1,544,920				1,677,300
Proceeds from warrant exercise			693,603
Payments on notes payables and lines of credit			(1,463,049	)			(626,242	)
Loan receivable			(14,220	)			-
Stock issued for cash			3,145,244				1,493,945
Net Cash provided by financing activities			3,906,498				2,545,003
Foreign currency translation			36,165				(243,136	)
Net Increase (decrease) in cash and cash equivalents			114,542				(1,016,545	)
Cash and cash equivalents at beginning of period			149,272				1,192,316
Cash and Cash Equivalents at End of Period		$	263,814			$	175,771
Supplemental Cash flow information:
Interest paid		$	263,053			$	331,177
Taxes paid		$	-			$	-
Supplemental Non-Cash Disclosure in Investing and Financing activities
Discounts on new notes		$	239,800			$	437,004
Universal convertible note principal and accrued interest conversion		$	666,250			$	-
Warrants issued in conjunction for convertible notes payable		$	609,617			$	-
Shares issued for warrants		$	261,639			$	240,824
Shares issued for debt conversion conversions			-				1,548,904

 

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

 

 

Clean Energy Technologies, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

NOTE 1 – GENERAL

 

These unaudited interim consolidated financial statements as of and for the nine months ended September 30, 2023 reflect all adjustments which, in the opinion of management, are necessary to fairly state the Company’s financial position and the results of its operations for the periods presented, in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.

 

These unaudited interim consolidated financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s fiscal year end December 31, 2022 report. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the nine months ending September 30, 2023 are not necessarily indicative of results for the entire year ending December 31, 2023.

 

A 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 are 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 internet website address is www.cetyinc.com and our subsidiary’s web site is www.heatrecoverysolutions.com The information contained on our websites are not incorporated by reference into this document, and you should not consider any information contained on, or that can be accessed through, our website as part of this document.

 

The Company has four reportable segments: Clean Energy HRS (HRS), CETY Renewables waste to energy solutions, engineering and manufacturing services, and CETY HK natural gas trading business.

 

 

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 $5,389,051 and a working capital of $1,755,468 as of September 30, 2023. The company also had an accumulated deficit of $19,829,422 as of September 30, 2023. Therefore, there is substantial doubt about the ability of the Company to continue as a going concern. CETY has a clear strategy in place and has the capability to successfully restructure its existing debt and secure additional financing. With its current strategic approach and diversification of its products and solutions, the management has created a favorable environment for the company to transition towards profitability.

 

Plan of Operation

 

Our mission is to be a leader in the zero-emission revolution by providing eco-friendly energy solutions, clean energy fuels, and alternative electric power for small to mid-sized projects across North America, Europe, and Asia. The company harnesses the power of heat and biomass to produce electricity with zero emissions and minimal cost. Additionally, the company offers Waste to Energy Solutions, converting waste materials from manufacturing, agriculture, and wastewater treatment plants into electricity and biochar. Clean Energy Technologies also provides engineering, consulting, and project management solutions, leveraging its expertise to develop clean energy projects for both municipal and industrial customers, as well as Engineering, Procurement, and Construction (EPC) companies.

 

Our principal businesses

 

Heat Recovery Solutions – Clean Energy Technologies patented frictionless, lubricant and maintenance free magnetic bearing turbine 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 decomposing organic waste materials, such as agricultural waste and food waste at high temperatures into clean energy through its proprietary gasification technology that produce a range of products, including electricity, heat, and biochar.

 

Engineering, Consulting and Project Management Solutions – Clean Energy Technologies offers engineering and manufacturing services to help clients bring their sustainable energy products to market. This includes design, prototyping, testing, and production services. Clean Energy Technologies’ expertise in engineering and manufacturing enables it to provide customized solutions to meet clients’ specific needs.

 

CETY HK

 

Clean Energy Technologies (H.K.) Limited (“CETY HK”) consists of two business ventures in mainland China:(i) our natural gas (“NG”) trading operations sourcing and suppling NG to industries and municipalities. NG is principally used for heavy truck refueling stations and urban or industrial users. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are prepaid for in advance at a discount to the market. We sell the NG to our customers at fixed prices or prevailing daily spot prices for the duration of the contracts; and (ii) our planned joint venture with a large state-owned gas enterprise in China called Shenzhen Gas (Hong Kong) International Co. Ltd. (“Shenzhen Gas”), acquiring natural gas pipeline operator facilities, primarily located in the southwestern part of China. Our planned joint venture with Shenzhen Gas plans to acquire, with financing from Shenzhen Gas, natural gas pipeline operator facilities with the goal of aggregating and selling the facilities to Shenzhen Gas in the future. According to our Framework Agreement with Shenzhen Gas, we will be required to contribute $8 million to the joint venture which plans to raise those funds in future rounds of financing. The terms of the joint venture are subject to the execution of definitive agreements.

 

NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

 

A summary of significant accounting policies of Clean Energy Technologies, Inc. (formerly Probe Manufacturing, Inc.) is presented to assist in the understanding of the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity.

 

The consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

 

Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets, the collection of accounts receivable and valuation of inventory and reserves.

 

 

Cash and Cash Equivalents

 

We maintain most of our cash accounts at JP Morgan Chase bank. The total cash balance is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000, (which we may exceed from time to time) per commercial bank. For the purposes of the statement of cash flows we consider all cash and highly liquid investments with initial maturities of one year or less to be cash equivalents.

 

Accounts Receivable

 

Our ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by us. Reserves for uncollectable 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 September 30, 2023 and December 31, 2022 we had a reserve for potentially un-collectable accounts receivable of $95,322 and $75,000, respectively. Our policy for reserves for our long-term financing receivables is determined on a contract-by-contract basis and considers the length of the financing arrangement. As of September 30, 2023 and December 31, 2022 we had a reserve for potentially un-collectable long-term financing receivables of $247,500 and $247,500 respectively.

 

Seven (7) customers accounted for approximately 98% of accounts receivable on September 30, 2023. Our trade accounts primarily represent unsecured receivables. Historically, our bad debt write-offs related to these trade accounts have been insignificant. Four (4) customers accounted for approximately 98% of accounts receivable on December 31, 2022. Our trade accounts primarily represent unsecured receivables.

 

Lease asset

 

As of September 30, 2023 and December 31, 2022 we had a lease asset that was purchased from General Electric with a value of $1,309,527, however due to the purchase price allocation, we recognized a value of $217,584. The lease is due to be commissioned in the 1st quarter of 2024 and will generate approximately $20,000 per month for 120 months. See note 3 for additional information.

 

Inventory

 

Inventories are valued at the lower of weighted average cost or net realizable 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 September 30, 2023 and December 31, 2022 we had a reserve for potentially obsolete inventory of $897,808.

 

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:

 PROPERTY AND EQUIPMENT ESTIMATED USEFUL LIVES OF RELATED ASSETS

Furniture and fixtures			3 to 7 years
Equipment			7 to 10 years
Leasehold Improvements			7 years

 

 

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.

 

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.

 

Impairment of 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 no impairment of long-lived assets for the periods ended September 30, 2023 and 2022.

 

 

Revenue Recognition

 

The Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC 606”).

 

Performance Obligations Satisfied Over Time

 

FASB ASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10

 

An entity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one of the following criteria is met:

 

a. The customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB ASC 606-10-55-5 through 55-6).

b. The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced (as described in FASB ASC 606-10-55-7).

c. The entity’s performance does not create an asset with an alternative use to the entity (see FASB ASC 606-10-25-28), and the entity has an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).

 

Performance Obligations Satisfied at a Point in Time

 

FASB ASC 606-10-25-30

 

If a performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time. To determine the point in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should consider the guidance on control in FASB ASC 606-10-25-23 through 25-26. In addition, it should consider indicators of the transfer of control, which include, but are not limited to, the following:

 

a. The entity has a present right to payment for the asset.

b. The customer has legal title to the asset.

c. The entity has transferred physical possession of the asset.

d. The customer has the significant risks and rewards of ownership of the asset.

e. The customer has accepted the asset.

 

A principal obtains control over any one of the following (ASC 606-10-55-37A):

 

	a.	A good or another asset from the other party which the entity then transfers to the customer. Note that momentary control before transfer to the customer may not qualify.
	b.	A right to a service to be performed by the other party, which gives the entity the ability to direct that party to provide the service to the customer on the entity’s behalf.
	c.	A good or service from the other party that it then combines with other goods or services in providing the specified good or service to the customer.

 

If the entity obtains control over one of the above before the good or service is transferred to a customer, the entity could be considered a principal.

 

The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. In addition, a) the company also does not have an alternative use for the asset if the customer were to cancel the contract, and b.) has a fully enforceable right to receive payment for work performed (i.e., customers are required to pay as various milestones and/or timeframes are met)

 

The following five steps are applied to achieve that core principle for our HRS and CETY Europe Divisions:

 

	●	Identify the contract with the customer
	●	Identify the performance obligations in the contract
	●	Determine the transaction price
	●	Allocate the transaction price to the performance obligations in the contract
	●	Recognize revenue when the company satisfies a performance obligation

 

The following steps are applied to our legacy engineering and manufacturing division:

 

	●	We generate a quotation
	●	We receive purchase orders from our customers.
	●	We build the product to their specification
	●	We invoice at the time of shipment
	●	The terms are typically Net 30 days

 

 

The following step is applied to our CETY HK business unit:

 

●

CETY HK is primarily responsible for fulfilling the contract / promise to provide the specified good or service.

 

Also, from time to time our contracts state that the customer is not obligated to pay a final payment until the units are commissioned, i.e., a final payment of 10%. As of September 30, 2023 and December 31, 2022 we had $33,000 and 33,000 of deferred revenue, which is expected to be recognized in the second quarter of year 2024.

 

Also, from time to time we require upfront deposits from our customers based on the contract. As of September 30, 2023 and December 31, 2022 we had outstanding customer deposits of $770,943 and $80,475 respectively.

 

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 91.5% and using a risk free interest rate of 4.5%

 

The Company’s financial instruments consist of cash, prepaid expenses, inventory, accounts payable, convertible notes payable, advances from related parties, and derivative liabilities. The estimated fair value of cash, prepaid expenses, investments, accounts payable, convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these instruments.

 

The carrying amounts of the Company’s financial instruments as of September 30, 2023 and December 31, 2022 reflect:

SCHEDULE OF FAIR VALUE OF CONVERTIBLE NOTES DERIVATIVE LIABILITY 

Level 1

Level 2

Level 3

Total

Fair value of convertible notes derivative liability – September 30, 2023

$

–

$

–

$

–

$

–

 

		Level 1				Level 2				Level 3				Total
Fair value of convertible notes derivative liability – December 31, 2022		$	–			$	–			$	588,178			$	588,178
Fair value of convertible notes derivative liability		$	–			$	–			$	588,178			$	588,178

 

The carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments.

 

Foreign Currency Translation and Comprehensive Income (Loss)

 

We have no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods. The accounts of the Company’s Chinese entities are maintained in RMB. The accounts of the Chinese entities were translated into USD in accordance with FASB ASC Topic 830 “Foreign Currency Matters.” All assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates and the statements of operations and cash flows are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) in accordance with FASB ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from foreign currency transactions are reflected in the statements of operations.

 

The Company follows FASB ASC Topic 220-10, “Comprehensive Income (loss).” Comprehensive income (loss) comprises net income (loss) and all changes to the statements of changes in stockholders’ equity, except those due to investments by stockholders, changes in additional paid-in capital and distributions to stockholders.

 

 

Change from fair value or equity method to consolidation.

 

In July 2022 JHJ, a wholly owned subsidiary of CETY HK and other three shareholders agreed to form and make total capital contribution of RMB 20 million ($2.81 million) with latest contribution due date in February 2066 into Sichuan Hongzuo Shuya Energy Limited (“Shuya”), JHJ owns 20% of Shuya. In August 2022 JHJ purchased 100% ownership of Sichuan Shunengwei Energy Technology Limited (“SSET”) for $0, who owns 29% of Shuya; Shunengwei is a holding company and did not have any operations nor made any capital contribution into Shuya as of the ownership purchase date by JHJ; right after the ownership purchase of SSET, JHJ ultimately owns 49% of Shuya.

 

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 Shuya have large supply relationships.

 

For the year ended December 31, 2022 the Company has determined that Shuya was not a VIE and has evaluated its consolidation analysis under the voting interest model. Because the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment in Shuya under the equity method of accounting. Under this method, the investor (“JHJ”) recognizes its share of the profits and losses of the investee (“Shuya”) in the periods when these profits and losses are also reflected in the accounts of the investee. Any profit or loss recognized by the investing entity appears in its income statement. Also, any recognized profit increases the investment recorded by the investing entity, while a recognized loss decreases the investment.

 

JHJ made an investment of RMB 3.91 million ($0.55 million) into Shuya during the 12 months ended December 31, 2022 recorded in accordance with ASC 323. Shuya had a net loss of approximately $10,750 during the year ending December 31, 2022 of which approximately $5,000 was allocated to the company, reducing the investment by that amount.

 

However, effective January 1, 2023 JHJ, SSET and Chengdu Xiangyueheng Enterprise Management Co., Ltd (“Xiangyueheng”), who is the 10% shareholder of Shuya, entered a Three-Parties Consistent Action Agreement, wherein these three shareholders (or three parties) will guarantee that the voting rights will be expressed in the same way at the shareholders’ meeting of Shuya to consolidate the controlling position of the three parties in Shuya. The three parties agree that within the validity period of this agreement, before the party intends to propose the motions to the shareholders or the board of directors on the major matters related to the voting rights of the shareholders or the board of directors, the three parties internally will discuss, negotiate, and coordinate the motion topics for consistency; in the event of disagreement, the opinions of JHJ shall prevail.

 

As a result of Consistent Action Agreement, the Company re-analyzed and determined that Shuya is the variable interest entity (“VIE”) of JHJ because 1) the equity investors at risk, as a group, lack the characteristics of a controlling financial interest, and 2) Shuya is structured with disproportionate voting rights, and substantially all 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. Basing on preliminary independent valuation, the management decides the difference in the fair value of the consideration paid and book records was immaterial. As Shuya has been operated for less than a year after effective date of control in effective. The management decides that the final purchase price allocation shall be re-valuated subject to change pending to additional operation results and forecast assumptions.

 

As the Consistent Action Agreement did not quantify any considerations to gain the control, the deemed consideration paid is the fair value of 51% non-controlling interest as of January 1, 2023. The following table summarizes the fair value of the consideration paid and the fair value of assets acquired and liabilities assumed on January 1, 2023, the acquisition date.

SCHEDULE OF FAIR VALUE OF ASSETS AND LIABILITIES ACQUIRED 

Fair value of non-controlling interests		$	602,729
Fair value of previously held equity investment			604,318
Subtotal		$	1,207,047
Recognized value of 100% of identifiable net assets			(1,207,047	)
Goodwill Recognized		$	-
Recognized amounts of identifiable assets acquired and liabilities assumed (preliminary):
Inventories		$	505,226
Cash and cash equivalents			50,346
Trade and other receivables			952,384
Advanced deposit			672,597
Net fixed assets			6,704
Intangible asset and Goodwill			10,905
Trade and other payables			(1,021,897	)
Advanced payments			(5,317	)
Salaries and wages payables			(4,692	)
Other receivable			40,791
Total identifiable net assets		$	1,207,047

 

Under ASC-805-10-50-2, initial consolidation of an investee previously reported using fair value or the equity method should be accounted for prospectively as of the date the entity obtained a controlling financial interest. And the public business entities should provide pro forma information as if the consolidation had occurred as of the beginning of each of the current and prior comparative reporting period. However, Shuya was incorporated in July 2022 and the actual consolidation was effective on January 1, 2023 therefore, no comparative period adjustments are presented for the three months ended September 30, 2022 as they do not exist.

 

 

Net Loss per Common Share

 

Basic loss per share is computed on the basis of the weighted average number of common shares outstanding. On September 30, 2023 we had outstanding common shares of 38,968,955 used in the calculation of basic earnings per share. Basic weighted average common shares and equivalents for the nine months ended September 30, 2023 and September 30, 2022 were 38,227,965 and 24,514,942 respectively. As of September 30, 2023 we had convertible notes, convertible into approximately 2,609,143 of additional common shares, 253,604 common stock warrants. Fully diluted weighted average common shares and equivalents were withheld from the calculation for the three months ended September 30, 2023 and September 30, 2022 as they were considered anti-dilutive.

 

Research and Development

 

We had no amounts of research and development R&D expense during the three and nine months ended September 30, 2023 and 2022.

 

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 four reportable segments: Manufacturing & Engineering services, Clean Energy HRS (HRS), CETY HK LNG Trading, and CETY Renewables Waste to Energy. The segments are determined based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics. Refer to note 1 for a description of the various product categories manufactured under each of these segments.

 

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

SCHEDULE OF SEGMENT REPORTING 

		2023				2022
		for the nine months ended September 30
		2023				2022
Net Sales
Manufacturing and Engineering			59,877				132,316
Clean Energy HRS			399,136				509,330
CETY HK LNG Trading			10,462,385				1,925,950
CETY Renewables Waste to Energy			779,720				-
Total Sales			11,701,118				2,567,596
Segment income and reconciliation before tax
Manufacturing and Engineering			16,528				85,352
Clean Energy HRS			148,706				467,534
CETY HK LNG Trading			524,152				631,082
CETY Renewables Waste to Energy			738,243				-
Less: operating expenses			2,709,963				1,724,727
Less: other income and expenses			1,169,182				731,721
Net Profit / (Loss) before income taxes			(2,451,516	)			(1,304,546	)

 

The following table represents revenue by geographic area based on the sales location of our products and solutions:

SCHEDULE OF REVENUE BY GEOGRAPHIC AREAS BASED ON THE SALES LOCATION OF OUR PRODUCTS AND LOCATIONS 

		2023				2022
		for the nine months ended September 30
		2023				2022
United States			1,207,760				509,330
China			10,462,385				1,925,950
Other international			30,973				132,316
Total Sales			11,701,118				2,567,596

 

 

Share-Based Compensation

 

The Company has adopted the use of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (SFAS No. 123R) (now contained in FASB Codification Topic 718, Compensation-Stock Compensation), which supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance and eliminates the alternative to use Opinion 25’s intrinsic value method of accounting that was provided in Statement 123 as originally issued. This Statement requires an entity to measure the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and stock warrants, based on the fair value of the award, measured at the grant date (with limited exceptions). Under this standard, the fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black-Scholes option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets the requirements of SFAS No. 123R; however, the fair values generated may not reflect their actual fair values, as it does not consider certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility. For the “risk-free interest rate,” we use the Constant Maturity Treasury rate on 90-day government securities. The term is equal to the time until the option expires. The dividend yield is not applicable, as the Company has not paid any dividends, nor do we anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading common stock, on the grant date calculated using a 20-trading-day average. At the time of grant, the share-based compensation expense is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates and the expense is reduced accordingly. It is also adjusted to account for the restricted and thinly traded nature of the shares. The expense is reviewed and adjusted in subsequent periods if actual attrition differs from those estimates.

 

We re-evaluate the assumptions used to value our share-based awards on a quarterly basis and, if changes warrant different assumptions, the share-based compensation expense could vary significantly from the amount expensed in the past. We may be required to adjust any remaining share-based compensation expense, based on any additions, cancellations, or adjustments to the share-based awards. The expense is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. For the three and nine months ended September 30, 2023 and 2022 we had $82,100 in share-based expense. As of September 30, 2023 we had no further non-vested expense to be recognized.

 

 

Leases

 

On January 2, 2020, 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.

 

On December 22, 2018, H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective January 1, 2018. The Company will compute its income tax expense for the year ended December 31, 2023 using a Federal Tax Rate of 21% and an estimated state of California rate of 9%.

 

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.

 

Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.

 

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 $907,388 in exchange for the issuance of 302,462,667 restricted shares of the Corporation’s common stock, par value $.001 per share (the “Common Stock”).

 

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 $939,500 with an interest rate of 10% per annum interest rate and a maturity date of February 13, 2020. The CVL Note is convertible into shares of Common Stock at $0.12 per share, as adjusted as provided therein. This note was assigned to MGW Investments.

 

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.

 

 

Recently Issued Accounting Standards

 

The Company’s management reviewed all recently issued ASU’s not yet adopted by the Company and does not believe the future adoptions of any such ASU’s may be expected to cause a material impact on the Company’s consolidated financial condition or the results of its operations.

 

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

SCHEDULE OF ACCOUNTS AND NOTES RECEIVABLE 

		September 30, 2023				December 31, 2022
Accounts Receivable		$	1,131,679				1,443,567
Accounts Receivable Related Party			861,007				-
Less reserve for uncollectable accounts			(95,322	)			(75,000	)
Total		$	1,131,679				1,368,567

 

Our Accounts Receivable is pledged to Nations Interbanc, our line of credit.

SCHEDULE OF LEASE RECEIVABLE ASSET 

		September 30, 2023				December 31, 2022
Lease asset		$	217,584			$	217,584

 

The Company is currently modifying the assets subject to lease to meet the provisions of the agreement, and as of September 30, 2023 any collection on the lease payments was not yet considered probable, resulting in no derecognition of the underlying asset and no net lease investments recognized on the sales-type lease pursuant to ASC 842-30-25-3.

SCHEDULE OF LONG-TERM FINANCING RECEIVABLES 

		September 30, 2023				December 31, 2022
Long-term financing receivables		$	932,270			$	932,270
Less Reserve for uncollectable accounts			(247,500	)			(247,500	)
Long-term financing receivables - net		$	684,770			$	684,770

 

On a contract-by-contract basis or in response to certain situations or installation difficulties, the Company may elect to allow non-interest-bearing repayments in excess of 1 year.

 

Our long-term financing Receivable are pledged to Nations Interbanc, our line of credit.

 

 

NOTE 4 – INVENTORY

 

Inventories by major classification were comprised of the following at:

SCHEDULE OF INVENTORIES 

		September 30, 2023				December 31, 2022
Inventory		$	1,729,394				1,398,394
Less reserve			(897,808	)			(897,808	)
Total		$	831,586				500,586

 

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:

SCHEDULE OF PROPERTY AND EQUIPMENT 

		September 30, 2023				December 31, 2022
Property and Equipment		$	1,388,406				1,354,824
Leasehold Improvements			75,436				75,436
Accumulated Depreciation			(1,420,342	)			(1,415,444	)
Net Fixed Assets		$	43,500				14,816

 

Our Depreciation Expense for the three and nine months ended September 30, 2023 and 2022 was $4,602 and $13,805 respectively.

 

Our Property Plant and Equipment is pledged to Nations Interbanc, our line of credit.

 

NOTE 6 – INTANGIBLE ASSETS

 

Intangible assets were comprised of the following at:

SCHEDULE OF INTANGIBLE ASSETS 

		September 30, 2023				December 31, 2022
Goodwill		$	747,976				747,976
LWL Intangibles		$	1,481,634				1,468,709
License			354,322				354,322
Patents			190,789				190,789
Accumulated amortization			(96,003	)			(87,096	)
Net Fixed Assets		$	2,678,718				2,674,700

 

Our Amortization Expense for the three and nine months ended September 30, 2023 and 2022 was $2,969 and 8,907 respectively.

 

 

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:

SCHEDULE OF BUSINESS ACQUISITION PURCHASE PRICE ALLOCATION 

Consideration:
Cash and cash equivalents		$	1,500,000
Total purchaser consideration		$	1,500,000
Assets acquired:
Cash and cash equivalents		$	6,156
Prepayment		$	22,035
Other receivable		$	20,000
Trading Contracts		$	146,035
Shenzhen Gas Relationship		$	1,314,313
Total assets acquired		$	1,508,539
Liabilities assumed:
Advance Receipts		$	8,539
Net Assets Acquired:		$	1,500,000

 

If LWL reaches USD 5 million in revenue or net profit of USD 1 million by December 31, 2023 then based on the performance contingency there will be issuance of 20,000,000 shares of CETY to the Seller. As of the date of the filing the performance contingencies have not been met.

 

 

NOTE 7 – CONVERTIBLE NOTE RECEIVABLE

 

Effective January 10, 2022 JHJ (“note holder”) entered a convertible note agreement with Chengdu Rongjun Enterprise Consulting Co., Ltd (“Rongjun” or “the borrower”) with maturity on January 10, 2025. Under this convertible note, JHJ lent RMB 5,000,000 ($0.78 million) to Rongjun with an annual interest rate of 12%, calculated from the Issuance Date until all outstanding interest and principal is paid in full. The Borrower may pre-pay principal or interest on this Note at any time prior to the maturity date, without penalty. JHJ has the right to convert this note directly or indirectly into shares or equity interest of Heze Hongyuan Natural Gas Co., Ltd (“Heze”) equal to 15% of Heze’s outstanding Equity Interest. Rongjun owns 90% of Heze.

 

NOTE 8 – ACCRUED EXPENSES

SCHEDULE OF ACCRUED EXPENSES 

		September 30, 2023				December 31, 2022
Accrued Wages		$	65,666			$	102,370
Accrued Taxes and other			262,168				16,660
Accrued Wages and Taxes		$	327,833			$	119,030

 

NOTE 9 – NOTES PAYABLE

 

On November 11, 2013, we entered into an accounts receivable financing agreement with American Interbanc (now Nations Interbanc). Amounts outstanding under the agreement bear interest at the rate of 2.5% annually. It is secured by the assets of the Company. In addition, it is personally guaranteed by Kambiz Mahdi, our Chief Executive Officer. As of September 30, 2023 the outstanding balance was $648,369 compared to $998,820 at December 31, 2022.

 

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 $275,000 as well as the accrual rate to 2.25% per 30 days. As a result, CETY has agreed to remit a minimum monthly payment of $25,000 by the final calendar day of each month.

 

On September 11, 2015, our CE HRS subsidiary issued a promissory note in the initial principal amount $1,400,000 and assumed a pension liability of $100,000, for a total liability of $1,500,000, in connection with our acquisition of the heat recovery solutions, or HRS, assets of General Electric International, Inc., a Delaware corporation (“GEII”), including intellectual property, patents, trademarks, machinery, equipment, tooling and fixtures. The note bears interest at the rate of 2.66% per annum. The note is payable on the following schedule: (a) $200,000 in principal on December 31, 2015 and (b) thereafter, the remaining principal amount of $1,200,000, together with interest thereon, payable in equal quarterly instalments of principal and interest of $157,609, commencing on December 31, 2016 and continuing until December 31, 2019, at which time the remaining unpaid principal amount of this note and all accrued and unpaid interest thereon shall be due and payable in full. CETY stopped making payments and informed GE that it had encountered difficulties because of the valuations of the assets that were acquired from GE. Given that the values of the assets were different than GE’s internal reports and as we discussed at the time of the transaction with GE’s management, we proposed a change in the amount the Company owes GE under the purchase agreement, but GE was non-responsive, and GE’s entire distributed power vertical has been divested.

 

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 $2,556,916.

 

 

On September 7, 2021, the company entered into a promissory note in the amount of $226,345, with an interest rate of 10% per annum and a default interest rate of 22% per annum. This note is due in full on September 7, 2022 and has mandatory monthly payments of $23,828. The note had an OID of $23,345 and recorded as finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This note is convertible, but not until a contingent event of default has taken place, none of which has occurred as of the date of this filing. The balance on this note as of March 31, 2022 was $119,142. This note was paid off on June 29, 2022.

 

On September 28, 2021, the company entered into a promissory note in the amount of $142,720, with an interest rate of 10% per annum and a default interest rate of 22% per annum. This note is due in full on September 28, 2022 and has mandatory monthly payments of $15,003. The note had an OID of $14,720 and was recorded as a finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This note is convertible, but not until a contingent event of default has taken place, none of which has occurred as of the date of this filing. This note was paid off as of July 13, 2022.

 

On March 10, 2022 the company entered into a promissory note in the amount of $170,600 with an interest rate of 10% per annum and a default interest rate of 22% per annum. This note is due in full on March 10, 2023 and has mandatory monthly payments of $18,766. The note had an OID of $17,060 and was recorded as finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This note is convertible, but not until a contingent event of default has taken place, none of which have occurred as of the date of this filing. This note was paid off as of Dec 6, 2022.

 

On June 30, 2022 the company entered into a promissory note in the amount of $252,928 with an interest rate of 10% per annum and a default interest rate of 22% per annum. This note is due in full on June 30, 2023 and has mandatory monthly payments of $27,822. The note had an OID of $25,293 and recorded as finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This note is convertible, but not until a contingent event of default has taken place, none of which has occurred as of the date of this filing. The balance on this note as of December 31, 2022 was $139,111. This note was paid off as of Feb 13, 2023.

 

On July 13, 2022 the company entered into a promissory note in the amount of $159,450 with an interest rate of 10% per annum and a default interest rate of 22% per annum. This note is due in full on July 13, 2023 and has mandatory monthly payments of $17,539. The note had an OID of $16,447 and recorded as finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This note is convertible, but not until a contingent event of default has taken place, none of which has occurred as of the date of this filing. The balance on this note as of December 31,2022 was $87,697. This note was paid off as of March 7, 2023.

 

On October 25, 2022 the company entered into a promissory note in the amount of $114,850 with an interest rate of 10% per annum and a default interest rate of 22% per annum. This note is due in full on October 25, 2023 and has mandatory monthly payments of $12,634. The note had an OID of $11,850 and recorded as finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This note is convertible, but not until a contingent event of default has taken place, none of which has occurred as of the date of this filing. The balance on this note as of June 30,2023 was $25,267. This note was paid off as of September 15, 2023.

 

On December 5, 2022 the company entered into a promissory note in the amount of $191,526 with an interest rate of 10% per annum and a default interest rate of 22% per annum. This note is due in full on December 5,2023 and has mandatory monthly payments of $21,068. The note had an OID of $19,760 and recorded as finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This note is convertible, but not until a contingent event of default has taken place, none of which has occurred as of the date of this filing. The balance on this note as of September 30, 2023 was $27,652.

 

On February 10, 2023 the company entered into a promissory note in the amount of $258,521 with an interest rate of 10% per annum and a default interest rate of 22% per annum. This note is due in full on February 10, 2024, and has mandatory monthly payments of $28,437. The note had an OID of $27,698 and recorded as finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This note is convertible, but not until a contingent event of default has taken place, none of which has occurred as of the date of this filing. The balance on this note as of September 30,2023 was $91,898.

 

On March 6, 2023 the company entered into a promissory note in the amount of $135,005 with an interest rate of 10% per annum and a default interest rate of 22% per annum. This note is due in full on March 6, 2024, and has mandatory monthly payments of $13,500. The note had an OID of $14,465 and was recorded as a finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This note is convertible, but not until a contingent event of default has taken place, none of which has occurred as of the date of this filing. The balance on this note as of September 30, 2023 was $65,987.

 

 

Convertible notes

 

On May 5, 2017, we entered into a nine-month convertible note payable for $78,000, which accrues interest at the rate of 12% per annum. It is not convertible until three months after its issuance and has a conversion rate of sixty one percent (61%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. On November 6, 2017, this note was assumed and paid in full at a premium for a total of $116,600 by Cybernaut Zfounder Ventures. An amended term was added to the original note with the interest rate of 14%. This note matured on February 21st of 2018 and is currently in default. As of March 31, 2023 the outstanding balance due was $159,895. As of April 3, 2023 this note was settled and paid off, please see comment below.

 

On May 24, 2017, we entered into a nine-month convertible note payable for $32,000, which accrues interest at the rate of 12% per annum. It is not convertible until three months after its issuance and has a conversion rate of fifty-five eight percent (58%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. On November 6, 2017, this note was assumed and paid in full at a premium for a total of $95,685, by Cybernaut Zfounder Ventures. An amended term was added to the original note with the interest rate of 14%. This note matured on February 26, 2018, and is currently in default. As of March 31, 2023 the outstanding balance due was $163,980. As of April 3, 2023 this note was settled and paid off. On April 3, 2023 Clean Energy Technologies, Inc. reached an agreement with Cybernaut Zfounder Ventures, LLC to pay off the outstanding convertible notes dated May 5, 2017 and May 24, 2017 in amount equal to $330,555 that were in default for a settlement amount of $200,000.

 

On December 27, 2021, we entered into a convertible note payable with Universal Scope Inc. for $650,000 with a maturity date of June 21, 2022 which accrues interest at the rate of 2% per annum. It is convertible at any time after its issuance and has a fixed conversion rate of $0.06 of our common stock. This note was converted into 277,604 of our common shares on March 28, 2023.

 

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 $750,000 Convertible Promissory Note, due May 6, 2023 (the “Note”) for a purchase price of $675,000 plus an original issue discount in the amount of $75,000, and an interest rate of fifteen percent (15%) per annum. Mast Hill Fund is entitled to purchase 234,375 shares of common stock per the warrant agreement at the exercise price of $1.60. The Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Mast Hill as well as providing Mast Hill with registration rights. The principal balance and accrued interest of this as of September 30, 2023 was $907,808.

 

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 $138,888 Convertible Promissory Note, due August 5, 2023 (the “Note”) for a purchase price of $125,000 plus an original issue discount in the amount of $13,888, and an interest rate of fifteen percent (15%) per annum. Jefferson is entitled to purchase 43,403 shares of common stock per the warrant agreement at the exercise price of $1.60. The Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Jefferson as well as providing Jefferson with registration rights. This note was paid off as of March 9, 2023 for the payoff amount of $187,451.

 

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 $150,000 Convertible Promissory Note, due August 17, 2023 (the “Note”) for a purchase price of $135,000 plus an original issue discount in the amount of $15,000, and an interest rate of fifteen percent (15%) per annum. Firstfire is entitled to purchase 46,875 shares of common stock per the warrant agreement at the exercise price of $1.60. The Securities Purchase Agreement provides customary representations, warranties, and covenants of the Company and Firstfire as well as providing Firstfire with registration rights. This note was paid off as of March 9, 2023 for the payoff amount of $215,000.

 

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 $138,888 Convertible Promissory Note, due August 5, 2023 (the “Note”) for a purchase price of $125,000 plus an original issue discount in the amount of $13,888, and an interest rate of fifteen percent (15%) per annum. Pacific is entitled to purchase 43,403 shares of common stock per the warrant agreement at the exercise price of $1.60. The Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Pacific as well as providing Pacific with registration rights. This note was paid off as of March 9, 2023 for the payoff amount of $190,606.

 

 

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 $300,000 Convertible Promissory Note, due September 16, 2023 (the “Note”) for a purchase price of $270,000 plus an original issue discount in the amount of $30,000, and an interest rate of fifteen percent (15%) per annum. Mast Hill Fund is entitled to purchase 93,750 shares of common stock per the warrant agreement at the exercise price of $1.60. The Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Mast Hill as well as providing Mast Hill with registration rights. Mast Hill converted their warrant on April 18, 2023. The principal balance and accrued interest of this as of September 30, 2023 was $346,726.

 

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 $95,000 Convertible Promissory Note, due November 10, 2023 (the “Note”) for a purchase price of $85,500 plus an original issue discount in the amount of $9,500 and an interest rate of fifteen percent (15%) per annum. Mast Hill Fund is entitled to purchase 29,686 shares of common stock per the warrant agreement at the exercise price of $1.60. The Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Mast Hill as well as providing Mast Hill with registration rights. The principal balance and accrued interest of this as of September 30, 2023 was $107,493.

 

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 $95,000 Convertible Promissory Note, due November 21, 2023 (the “Note”) for a purchase price of $85,500 plus an original issue discount in the amount of $9,500, and an interest rate of fifteen percent (15%) per annum. Mast Hill Fund is entitled to purchase 29,686 shares of common stock per the warrant agreement at the exercise price of $1.60. The Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Mast Hill as well as providing Mast Hill with registration rights. The principal balance and accrued interest of this as of September 30, 2023 was $107,220.

 

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 $123,000 Convertible Promissory Note, due December 26, 2023 (the “Note”) for a purchase price of $110,700 plus an original issue discount in the amount of $12,300 and an interest rate of fifteen percent (15%) per annum. Mast Hill Fund is entitled to purchase 38,437 shares of common stock per the warrant agreement at the exercise price of $1.60. The Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Mast Hill as well as providing Mast Hill with registration rights. The principal balance and accrued interest of this as of September 30, 2023 was $137,052.

 

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 $187,000 Convertible Promissory Note, due January 19, 2024 (the “Note”) for a purchase price of $168,300 plus an original issue discount in the amount of $18,700 and an interest rate of fifteen percent (15%) per annum. Mast Hill Fund is entitled to purchase 58,438 shares of common stock per the warrant agreement at the exercise price of $1.60. The Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Mast Hill as well as providing Mast Hill with registration rights. The principal balance and accrued interest of this as of September 30, 2023 was $206,520.

 

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 $734,000 Convertible Promissory Note, due March 8, 2024 (the “Note”) for a purchase price of $660,600 plus an original issue discount in the amount of $73,400 and an interest rate of fifteen percent (15%) per annum. Mast Hill Fund is entitled to purchase 367,000 shares of common stock per the warrant agreement at the exercise price of $1.60. The Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Mast Hill as well as providing Mast Hill with registration rights. The principal balance and accrued interest balance of this as of September 30, 2023 was $795,387.

 

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 $556,000 Convertible Promissory Note, due July 18, 2024 (the “Note”) for a purchase price of $ 500,400 plus an original issue discount in the amount of $55,600, and an interest rate of fifteen percent (15%) per annum.

 

The principal and interest of the Note may be converted in whole or in part at any time on or following the issue date, into common stock of the Company, par value $.001 share (“Common Stock”), subject to anti-dilution adjustments and for certain other corporate actions subject to a beneficial ownership limitation of 4.99% of Mast Hill and its affiliates. The per share conversion price into which principal amount and accrued interest may be converted into shares of Common Stock equals $6.00, subject to adjustment as provided in the Note. Upon an event of default, the Note will become immediately payable and the Company shall be required to pay a default rate of interest of 15% per annum. At anytime prior to an event of default, the Note may be prepaid by the Company at a 150% premium. The Note contains customary representations, warranties and covenants of the Company. The principal balance and accrued interest balance of this as of September 30, 2023 was $574,279.

 

Total due to Convertible Notes

SCHEDULE OF CONVERTIBLE NOTES 

		September 30, 2023				December 31, 2022
Total convertible notes		$	3,025,538				3,156,528
Accrued Interest			342,485				262,331
Debt Discount			(257,581	)			(326,804	)
Total		$	3,110,442				3,092,055

 

Note 10 – Derivative Liabilities

 

As a result of the convertible notes, we recognized the embedded derivative liability on the date of note issuance. We also revalued the remaining derivative liability on the outstanding note balance on the date of the balance sheet. We value the derivative liability using a binomial lattice model with an expected volatility of 91.5%, a risk-free interest rate range of 4.5%, and an exercise price of $1.00. The derivative liability as of September 30, 2023 was $0 after the Company paid off the two convertible notes payable in the second quarter of 2023.

 

The remaining derivative liabilities were:

 Schedule of Fair Value of Derivative Liability

		September 30, 2023				December 31, 2022
Derivative Liabilities on Convertible Loans:
Outstanding Balance		$	-			$	588,178

 

 

NOTE 11 – COMMITMENTS AND CONTINGENCIES

 

Operating Rental Leases

 

As of May 1, 2017, our corporate headquarters are located at 2990 Redhill Unit A, Costa Mesa, CA. On March 10, 2017, the Company signed a lease agreement for an 18,200-square foot CTU Industrial Building. Lease term is seven years and two months beginning July 1, 2017. Future minimum lease payments for the years ending December 31, are: In October of 2018 we signed a sublease agreement with our facility in Italy with an indefinite term that may be terminated by either party with a 60-day notice for 1,000 Euro per month. Due to the short termination clause, we are treating this as a month-to-month lease.

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS 

As of September 30, 2023

 

Year		Lease Payment
2023 (3 months)			44,052
September 30, 2024
2024
2025
2026
2027
Total undiscounted cash flows
Imputed Interest			(328	)
Net Lease Liability		$	43,724

 

Effective August 5, 2022 Shuya entered a 48 months lease for a natural gas recycle station from Leishen (the 41% shareholder of Shuya), including the operating right and use right of all the assets and equipment in the station. The annual rent is approximately $76,100, to be paid each year in advance. Effective August 5, 2022 Shuya entered another 48 months lease for leasing sewage treatment land from Leishen for the purpose of operating the natural gas recycling station. The annual rent is approximately $19,540, to be paid each year in advance.

 

The following is a schedule, by year of lease payment for Shuya as of September 30, 2023.

 

Our lease expenses for the nine months ended September 30,2023 and 2022 were $347,529 and $260,262 respectively.

 

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 5% average borrowing rate based on the major banks borrowing rate in China..

 

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 12 – CAPITAL STOCK TRANSACTIONS

 

On April 21, 2005, our Board of Directors and shareholders approved the re-domicile of the Company in the State of Nevada, in connection with which we increased the number of our authorized common shares to 200,000,000 and designated a par value of $.001 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 15,000 authorized shares.

 

On June 30, 2017, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 400,000,000 and in the number of our authorized preferred shares to 10,000,000. 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 800,000,000. 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 2,000,000,000. The amendment effecting the increase in our authorized capital was effective on September 27, 2019.

 

On January 6, 2023 our board of directors and majority shareholders approved a reverse stock split. Effective upon the filing of our Certificate of Amendment of Articles of Incorporation with the Secretary of State of the State of Nevada, the shares of the Corporation’s Common Stock issued and outstanding immediately prior to the Effective Time of January 6, 2023 will be automatically reclassified as and combined into shares of Common Stock such that each (40) shares of Old Common Stock shall be reclassified as and combined into one (1) share of New Common Stock. All per share references to common stock have been retroactively represented throughout the financials.

 

 

Common Stock Transactions

 

On December 27, 2021, we entered into a convertible note payable with Universal Scope Inc. for $650,000 with a maturity date of June 21, 2022 which accrues interest at the rate of 2% per annum. It is convertible at any time after its issuance and has a fixed conversion rate of $2.40 of our common stock. This note and accrued interest was converted into 277,604 of our common shares on March 28, 2023.

 

On February 21, 2022 we issued 375,875 shares of our common stock under our Reg A offering at $.08 per share. These shares are unrestricted and free trading.

 

During the quarter ended March 31, 2022 we issued 78,897 shares of common stock, under S-1 registration statement with GHS for a total of $134,755 in net proceeds and expensed $45,498 in legal and financing fees as a result.

 

During April of 2022 we issued 122,898 shares of common stock, under S-1 registration statement with GHS for a total of $156,188 in net proceeds and expensed $34,500 in legal and financing fees as a result.

 

On December 28, 2022 Mast Hill exercised their warrant in full on a cashless basis to purchase 100,446 shares of Common Stock.

 

On August 17, 2022 we issued 46,875 warrant shares in connection with the issuance of the promissory note in the principal amount of $150,000 to First Fire at the exercise price per share of $1.60. However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the Issuance Date, then the Exercise Price shall equal 120% of the offering price per share of Common Stock. On March 1, 2023 First Fire exercised the warrant in full on a cashless basis to purchase 33,114 shares of common stock.

 

On September 1, 2022 we issued 43,403 warrant shares in connection with the issuance of the promissory note in the principal amount of $138,889 to Pacific Pier at the exercise price per share of $1.60. However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the Issuance Date, then the Exercise Price shall equal 120% of the offering price per share 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.

 

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 five-year warrant to purchase 58,438 shares of common stock in connections with the transactions.

 

On January 27, 2023 we issued 3,745 shares of our common stock due to rounding post the reverse stock split.

 

On March 23, 2023 we sold 975,000 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 $4.00 per share. Net proceeds from this offering was $3,145,244.

 

In the second quarter of 2023, the Company issued 40,000 shares to a consultant at fair value of $72,000.

 

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 five-year warrant to purchase 367,000 shares of common stock in connections with the transactions.

 

On April 18, 2023 Mast Hill exercised the right to purchase 93,750 of the shares of Common Stock (“Warrant Shares”) of Clean Energy Technologies, Inc., because of the Common Stock Purchase Warrant (the “Warrant”) issued on September 16, 2022. The exercise price is $1.60 per share. The total purchase price was $150,000.

 

On May 10, 2023 Mast Hill exercised the right to purchase 58,438 of the shares of Common Stock (“Warrant Shares”) of Clean Energy Technologies, Inc., because of the Common Stock Purchase Warrant (the “Warrant”) issued on January 19, 2023. The exercise price is $1.60 per share. The total purchase price was $93,501.

 

On June 14, 2023 Mast Hill exercised the right to purchase 38,438 of the shares of Common Stock (“Warrant Shares”) of Clean Energy Technologies, Inc., because of the Common Stock Purchase Warrant (the “Warrant”) issued on December 26, 2022. The exercise price is $1.60 per share. The total purchase price was $61,501.

 

On June 23, 2023 Mast Hill exercised the right to purchase 29,688 of the shares of Common Stock (“Warrant Shares”) of Clean Energy Technologies, Inc., because of the Common Stock Purchase Warrant (the “Warrant”) issued on November 21, 2022. The exercise price is $1.60 per share. The total purchase price was $47,501.

 

On September 12, 2023 Mast Hill exercised the right to purchase 29,688 of the shares of Common Stock (“Warrant Shares”) of Clean Energy Technologies, Inc., because of the Common Stock Purchase Warrant (the “Warrant”) issued on November 21, 2022. The exercise price is $1.60 per share. The total purchase price was $47,501.

 

On September 13, 2023 Mast Hill exercised the right to purchase 183,500 of the shares of Common Stock (“Warrant Shares”) of Clean Energy Technologies, Inc., because of the Common Stock Purchase Warrant (the “Warrant”) issued on March 08, 2022. The exercise price is $1.60 per share. The total purchase price was $293,600.

 

 

Common Stock

 

Our Articles of Incorporation authorize us to issue 2,000,000,000 shares of common stock, par value $0.001 per share. As of September 30, 2023 there were 38,968,955 shares of common stock outstanding. All outstanding shares of common stock are, and the common stock to be issued will be, fully paid and non-assessable. Each share of our common stock has identical rights and privileges in every respect. The holders of our common stock are entitled to vote upon all matters submitted to a vote of our shareholders and are entitled to one vote for each share of common stock held. There are no cumulative voting rights.

 

The holders of our common stock are entitled to share equally in dividends and other distributions that our Board of Directors may declare from time to time out of funds legally available for that purpose, if any, after the satisfaction of any prior rights and preferences of any outstanding preferred stock. If we liquidate, dissolve or wind up, the holders of common stock shares will be entitled to share ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities and our obligations to holders of our outstanding preferred stock.

 

Preferred Stock

 

Our Articles of Incorporation authorize us to issue 20,000,000 shares of preferred stock, par value $0.001 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. The issuance of preferred stock also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect the rights and powers, including voting rights, of the holders of common stock.

 

We previously authorized 440 shares of Series A Convertible Preferred Stock, 20,000 shares of Series B Convertible Preferred Stock, and 15,000 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 Board of Directors designated a series of our preferred stock as Series D Preferred Stock, authorizing 15,000 shares. Our Series D Preferred Stock offering terms authorized us to raise up to $1,000,000 with an over-allotment of $500,000 in multiple closings over the course of six months. We received an aggregate of $750,000 in financing in subscription for Series D Preferred Stock, or 7,500 shares.

 

The following are primary terms of the Series D Preferred Stock. The Series D Preferred holders were initially entitled to be paid a special monthly divide at the rate of 17.5% per annum. Initially, the Series D Preferred Stock was also entitled to be paid special dividends in the event cash dividends were not paid when scheduled. If the Company does not pay the dividend within five (5) business days from the end of the calendar month for which the payment of such dividend is owed, the Company will pay the investor a special dividend of an additional 3.5%. Any unpaid or accrued special dividends will be paid upon liquidation or redemption. For any other dividends or distributions, the Series D Preferred Stock participates with common stock on an as-converted basis. The Series D Preferred holders may elect to convert the Series D Preferred Stock, in their sole discretion, at any time after a one-year (1) year holding period, by sending the Company a notice to convert. The conversion rate is equal to the greater of $3.20 or a 20% discount to the average of the three (3) lowest closing market prices of the common stock during the ten (10) trading day period prior to conversion. The Series D Preferred Stock is redeemable from funds legally available for distribution at the option of the individual holders of the Series D Preferred Stock commencing any time after the one (1) year period from the offering closing at a price equal to the initial purchase price plus all accrued but unpaid dividends, provided, that if the Company gave notice to the investors that it was not in a financial position to redeem the Series D Preferred, the Company and the Series D Preferred holders are obligated to negotiate in good faith for an extension of the redemption period. The Company timely notified the investors that it was not in a financial position to redeem the Series D Preferred and the Company and the investors have engaged in ongoing negotiations to determine an appropriate extension period. The Company may elect to redeem the Series D Preferred Stock any time at a price equal to the initial purchase price plus all accrued but unpaid dividends, subject to the investors’ right to convert, by providing written notice about its intent to redeem. Each investor has the right to convert the Series D Preferred Stock at least ten (10) days prior to such redemption by the Company.

 

On October 31, 2023, Clean Energy Technologies, Inc. (the “Company”) filed with the Nevada Secretary of State a certificate of designation designating 3,500,000 shares of the undesignated and authorized preferred stock of the Company, par value $0.001 per share, as the 15% Series E Convertible Preferred Stock (the “Series E Preferred Stock”) and setting forth the rights, preferences and limitations of such Series E Preferred Stock.

 

The Series E Preferred Stock has a stated value of $1.00 (the “Stated Value”) per share. Each holder of the Series E Preferred Stock is entitled to receive dividends payable on the Stated Value of the Series E Preferred Stock at a rate of 15% per annum. The Series E Preferred Stock is convertible at the option of the holder thereof into such number of common stocks of the Company, par value $0.001 per share, as is determined by dividing the Stated Value per share plus accrued and unpaid dividends thereon by the conversion price of $1.00, subject to a 4.99% beneficial ownership limitation. Each holder of Series E Preferred Stock also enjoys certain voting rights and preferences upon liquidation.

 

 

Warrants

 

A summary of warrant activity for the periods is as follows:

 

On May 6, 2022 we issued 234,375 warrant shares in connection with the issuance of the promissory note in the principal amount of $750,000 to Mast Hill Fund at the exercise price per share of $1.60. However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the Issuance Date, then the Exercise Price shall equal 120% of the offering price per share of Common Stock. On December 28, 2022 Mast Hill exercised the warrant in full on a cashless basis to purchase 100,446 shares of Common Stock.

 

On August 5, 2022 we issued 43,403 warrant shares in connection with the issuance of the promissory note in the principal amount of $138,889 to Jefferson Street at the exercise price per share of $1.60. However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the Issuance Date, then the Exercise Price shall equal 120% of the offering price per share of Common Stock.

 

On August 17, 2022 we issued 46,875 warrant shares in connection with the issuance of the promissory note in the principal amount of $150,000 to First Fire at the exercise price per share of $1.60. However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the Issuance Date, then the Exercise Price shall equal 120% of the offering price per share of Common Stock. On March 1, 2023 First Fire exercised the warrant in full on a cashless basis to purchase 33,114 shares of common stock.

 

On September 1, 2022 we issued 43,403 warrant shares in connection with the issuance of the promissory note in the principal amount of $138,889 to Pacific Pier at the exercise price per share of $1.60. However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the Issuance Date, then the Exercise Price shall equal 120% of the offering price per share 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.

 

On September 16, 2022 we issued 93,750 warrant shares in connection with the issuance of the promissory note in the principal amount of $300,000 to Mast Hill Fund at the exercise price per share of $1.60. However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the Issuance Date, then the Exercise Price shall equal 120% of the offering price per share of Common Stock. On April 18, 2023 Mast Hill exercised the warrant in full at the exercise price per share of $1.60.

 

On November 10, 2022 we issued 29,687 warrant shares in connection with the issuance of the promissory note in the principal amount of $300,000 to Mast Hill Fund at the exercise price per share of $1.60. However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the Issuance Date, then the Exercise Price shall equal 120% of the offering price per share of Common Stock. On June 23, 2023 Mast Hill exercised the warrant in full at the exercise price per share of $1.60.

 

On November 21, 2022 we issued 29,687 warrant shares in connection with the issuance of the promissory note in the principal amount of $95,000 to Mast Hill Fund at the exercise price per share of $1.60. However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the Issuance Date, then the Exercise Price shall equal 120% of the offering price per share of Common Stock. On September 12, 2023 Mast Hill exercised the warrant in full at the exercise price per share of $1.60.

 

On December 26, 2022 we issued 38,437 warrant shares in connection with the issuance of the promissory note in the principal amount of $123,000 to Mast Hill Fund at the exercise price per share of $1.60. However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the Issuance Date, then the Exercise Price shall equal 120% of the offering price per share of Common Stock. On June 14, 2023 Mast Hill exercised the warrant in full at the exercise price per share of $1.60.

 

On January 19, 2023 we issued 58,438 warrant shares in connection with the issuance of the promissory note in the principal amount of $187,000 to Mast Hill Fund at the exercise price per share of $1.60. However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the Issuance Date, then the Exercise Price shall equal 120% of the offering price per share of Common Stock. On May 19, 2023 Mast Hill exercised the warrant in full at the exercise price per share of $1.60.

 

On February 13, 2023 we issued 26,701 warrant shares to J.H. Darbie & Co., Inc. according to finder agreement we entered into date April 2022 at the exercise price of $5.00.

 

On March 8, 2023 we issued 367,000 warrant shares in connection with the issuance of the promissory note in the principal amount of $734,000 to Mast Hill Fund at the exercise price per share of $1.60. However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the Issuance Date, then the Exercise Price shall equal 120% of the offering price per share of Common Stock. On September 13, 2023 Mast Hill exercised 183,500 shares of the warrant at the exercise price per share of $1.60.

 SCHEDULE OF WARRANT ACTIVITY

		Warrants -				Weighted				Weighted
		Common				Average				Average				Aggregate
		Share				Exercise				Contractual				Intrinsic
		Equivalents				price				Life				Value
Outstanding December 31, 2022			325,243			$	1.60				3.99				-
Expired			-				-				-				-
Additions			425,438				1.60				4.42				-
Additions			26,701				5.00				4.15				-
Exercised			(523,780	)			1.60				-
Outstanding September 30, 2023			253,602				1.96			$	4.31				-

 

 

Stock Options

 

We currently have no outstanding stock options.

 

NOTE 13 – RELATED PARTY TRANSACTIONS

 

From August 2022 through October 2022 Hongzhuo Shuya (Shuya) a 49% owned subsidiary (also is our consolidated VIE) of CETY HK limited engaged in the trading of pipeline gas and CNG processing and sales provided Sichuan Leishen Hongzhuo Energy Development Co., Ltd (Leishen) with approximately total of $700,000 loan with a 4-year term to facilitate building of a natural gas recycling station to provide Shuya with CNG sales. Leishen owns 41% of Shuya and as an entity can obtain the permits and licenses to build and operate the NG Recycling Station to produce CNG. At the end of the 4-year term of the loan, Leishen has the option to either transfer the NG Recycling Station and all permits to Shuya or repay the loan.

 

Additionally, Leishen has relationships with the supply side of the NG business and is able to obtain large amounts of NG. As a result, Shuya also has a supplier relationship with Leishen. The price obtained from Leishen will be better than any unrelated party as their markup is below market. Our Board of Directors has approved the transactions between Leishen and the Company. During the quarter ended September 30, 2023 Shuya made a $1.13 million purchase from Leishen. As of September 30, 2023 we had no account receivable from Leishen, advance to supplier of Leishen of $468,810, accounts payable to Leishen of $91,706. In addition, we lent approximately $700,000 to Leishen as of September 30, 2023 for Leishen to construct a CNG refueling station on behalf of Shuya, the loan term is four years. When the CNG refueling station is ready for operation, Shuya will lease the CNG refueling station from Leishen at a favorabvle price equivalent to the depreciation amount of the station; when the assets are eligible for transfer, Leishen will transfer the assets of CNG refueling station to Shuya at the net asset value.

 

Effective August 5, 2022 Shuya entered a 48 months lease for a natural gas recycle station from Leishen (the 41% shareholder of Shuya), including the operating right and use right of all the assets and equipment in the station. The annual rent is approximately $76,100, to be paid each year in advance. Effective August 5, 2022 Shuya entered another 48 months lease for leasing sewage treatment land from Leishen for the purpose of operating the natural gas recycling station. The annual rent is approximately $19,540, to be paid each year in advance.

 

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 49% interest and SBC owns a 51% interest in Vermont Renewable Gas LLC.

 

On June 2, 2023 CETY 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 invoiced VRG $367,038 in the third quarter of 2023 ($779,720 in total) and recorded as related party revenue.

 

On November 2, 2016, we effected the repayment of the convertible note dated March 15, 2016, for an aggregate amount of $84,000. Concurrently, we entered into an Escrow Funding Agreement with Red Dot Investment, Inc., a California corporation (“Reddot”), pursuant to which Reddot deposited funds into escrow to fund the repayment and we assigned to Reddot our right to acquire the convertible note and Reddot acquired the convertible note. Concurrently, we and Reddot amended the convertible note (a) to have a fixed conversion price of $.20 per share, subject to potential further adjustment in the event of certain Common Stock issuances, (b) to have a fixed interest rate of ten percent (10%) per annum with respect to both the redemption amount and including a financing fee and any costs, expenses, or other fees relating to the convertible note or its enforcement and collection, and any other expense for or on our account (in each case with a minimum 10% yield in the event of payoff or conversion within the first year), such amounts to constitute additional principal under the convertible note, as amended, and (c) as otherwise provided in the Escrow Funding Agreement. The March 2016 convertible note, as so amended, is referred to as the “Master Note.”

 

Concurrently with the foregoing note repayments, we entered into a Credit Agreement and Promissory Note (the “Credit Agreement”) with Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation (“MW I”), pursuant to which MW I deposited funds into escrow to fund the repayment of the convertible notes and we assigned to MW I our right to acquire the convertible notes and otherwise agreed that MW I would be subrogated to the rights of each note holder to the extent a note was repaid with funds advanced by MW I. Concurrently, MW I acquired the Master Note and we agreed that all amounts advanced by MG I to or for our benefit would be governed by the terms of the Master Note, including the payment of a financing fees, interest, minimum interest, and convertibility. Reddot is MW I’s agent for the purposes of administration of the Credit Agreement and the Master Note and advances thereunder.

 

On February 13, 2018, the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement (the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL Note”) in the principal amount of $939,500 with an interest rate of 10% per annum interest rate and a maturity date of February 13, 2020. The CVL Note is convertible into shares of Common Stock at $0.12 per share, as adjusted as provided therein. As a result, we recognized a beneficial conversion feature of $532,383, which is amortized over the life of the note. This note was assigned to MGW Investments, and they agreed not to convert the $939,500 note into shares in excess of the 20,000,000 Authorized limit until we have increased the Authorized shares to the Board approved limit of 50,000,000 shares. This note and the February 8, 2018 note below and the their accrued interest converted into 12,907,534 of company’s common stock on September 21, 2022.

 

On February 8, 2018, the Corporation entered a Convertible Promissory Note in the principal amount of $153,123, due October 8, 2018, with an interest rate of 12% per annum payable to MGWI (the “MGWI Note”). The MGWI Note is convertible into shares of the Corporation’s common stock at the lower of: (i) a 40% discount to the lowest trading price during the previous twenty (20) trading days to the date of a Conversion Notice; or (ii) 0.12. As a result of the closing of the transactions contemplated by the Stock Purchase Agreement and Convertible Note Purchase Agreement, the MGWI Note must be redeemed by the Corporation in an amount that will permit CVL and MGWI and their affiliates to hold 65% of the issued and outstanding Common Stock of the Corporation on a fully diluted basis. The proceeds from the MGWI Note were used to redeem the convertible note of the Corporation to JSJ Investments, Inc. in the principal amount of $103,000 with an interest rate of 12% per annum, due April 25, 2018. At December 31, 2019 the holder of this note beneficially owned 70% of the company and this note is not convertible if the holder holds more than 9.99%, as a result, we did not recognize a derivative liability or a beneficial conversion feature. This note and the February 13, 2018 note below and the their accrued interest converted into 12,907,534 of company’s common stock on September 21, 2022.

 

Subsequently on May 11 this note was amended, and the maturity date was extended to October 8, 2023 and the restriction on the conversion of the note was removed if the holder of this note holds over 9.9% of the Company’s common stock. On June 24, 2021, MGW I converted $75,000 of the outstanding balance of this note into 625,000 shares of company’s common stock.

 

 

On May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell 4,200,000 units (each a “Unit” and together the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $1,999,200, or $.476 per Unit, with each unit consisting of one share of common stock, par value $.001 per share (the “Common Stock”) and a warrant (the “Warrant”) to purchase one share of common stock. The Common Stock will be issued to MGWI at such time as the Company increases the number of shares of its authorized Common Stock. The Warrant is exercisable at $1.60 per share of Common Stock and expires one year from the date of the Agreement.

 

In the fourth quarter of 2019 MGW Investment I Limited, advanced $167,975, with no terms or interest rate. MGW Investment limited forgave $80,000 of this amount in the 4th quarter of 2022. The outstanding balance on this advance on September 30, 2023 is $0.

 

On March 24, 2021, the Company transferred $500,000 to MGWI, an affiliate of the majority stockholder of the Company to hold in trust for our investment in two planned ventures in China. The investment was used for the acquisition of LWL.

 

On September 21, 2022 MGW I converted $1,548,904 from the outstanding balance of their convertible note into 12,907,534 shares of company’s common stock.

 

Kambiz Mahdi, our Chief Executive Officer, owns Billet Electronics, which is a distributor of electronic components. From time to time, we purchase parts from Billet Electronics. In addition, Billet was a supplier of parts and had dealings with current and former customers of the Company prior to joining the company. The number of parts purchases in the 1st, 2nd, and 3rd quarter of 2023 was $6,187.00. Our Board of Directors has approved the transactions between Billet Electronics and the Company. The outstanding balance as of September 30, 2023 was $0.

 

NOTE 14 - WARRANTY LIABILITY

 

For the quarter ended September 30, 2023 and for the year ended December 31, 2022 there was no change in our warranty liability. We estimate our warranty liability based on past experiences and estimated replacement cost of material and labor to replace the critical turbine in the units that are still under warranty. The outstanding balance as of September 30, 2023 and December 31, 2022 was 100,000.

 

NOTE 15 – NON-CONTROLLING INTEREST

 

On April 2, 2023 the Company formed CETY Capital LLC a wholly owned subsidiary of CETY. In addition, the company 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 49% interest and SBC owns a 51% interest in Vermont Renewable Gas LLC.

 

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 20 million ($2.81 million) with latest contribution due date in February 2066 into Sichuan Hongzuo Shuya Energy Limited (“Shuya”), JHJ owns 20% of Shuya. In August 2022 JHJ purchased 100% ownership of Sichuan Shunengwei Energy Technology Limited (“SSET”) for $0, who owns 29% of Shuya; Shunengwei is a holding company and did not have any operations nor made any capital contribution into Shuya as of the ownership purchase date by JHJ; right after the ownership purchase of SSET, JHJ ultimately owns 49% of Shuya. As a result of Consistent Action Agreement entered on December 31, 2022 the Company re-analyzed and determined that Shuya is the variable interest entity (“VIE”) of JHJ, and the Company consolidates Shuya into its consolidated financial statements effective on January 1, 2023. The non-controlling interest of Shuya represents the 41% equity ownership that is owned by Leishen, and 10% equity ownership owned by another shareholder.

 

 

NOTE 16 – THE STATUTORY RESERVES

 

The Company’s ability to pay dividends primarily depends on it receiving funds from its subsidiaries. PRC laws and regulations permit payments of dividends by the Company’s PRC subsidiaries only out of the subsidiary’s retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements prepared in accordance with US GAAP differ from those reflected in the statutory financial statements of the Company’s PRC subsidiaries.

 

In accordance with the PRC Regulations on Enterprises with Foreign Investment and their articles of association, a foreign-invested enterprise (“FIE”) established in the PRC is required to provide statutory reserves, which are appropriated from net profit as reported in the FIE’s PRC statutory accounts. An FIE is required to allocate at least 10% of its annual after-tax profit to the surplus reserve until such reserve reaches 50% of its respective registered capital based on the FIE’s PRC statutory accounts. Appropriations to other funds are at the discretion of the BOD for all FIEs. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. Additionally, shareholders of an FIE are required to contribute capital to satisfy the registered capital requirement of the FIE. Until such a contribution of capital is satisfied, the FIE is not allowed to repatriate profits to its shareholders, unless otherwise approved by the State Administration of Foreign Exchange.

 

Additionally, in accordance with the Company Laws of the PRC, a domestic enterprise is required to provide surplus reserve at least 10% of its annual after-tax profit until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. A domestic enterprise is also required to have a discretionary surplus reserve, at the discretion of the BOD, from the profits determined in accordance with the enterprise’s PRC statutory accounts. Appropriation to such reserve by the Company is based on profit arrived at under PRC accounting standards for business enterprises for each year. The profit arrived at must be set off against any accumulated losses sustained by the Company in prior years before allocation is made to the statutory reserve. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. Technology was established as domestic enterprises and therefore is subject to the above-mentioned restrictions on distributable profits.

 

As a result of these PRC laws and regulations that require annual appropriations of 10% of after-tax income to be set aside prior to payment of dividends as general reserve fund, the Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company as a dividend.

 

In addition, according to Administrative Measures for the Collection and Utilization of Enterprise Work Safety Funds issued by the PRC Ministry of Finance and the State Administration of Work Safety, for the companies with dangerous goods production or storage, the company is required to make a special reserve for the use of enhancing and improving its safe production conditions. Under PRC GAAP, the reserve is recorded as selling expense; however, under US GAAP, since the expense has not been incurred and the Company will record cost of sales for safety related expenses when it is actually happened or incurred, this special reserve was recorded as an appropriation of its after-tax income. The reserve is calculated at a rate of 15% of total sales.

 

NOTE 17 – SUBSEQUENT EVENTS

 

On October 6, 2023, Clean Energy Technologies, Inc. (the “Company”) entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC, as sales agent (“Roth”), pursuant to which the Company may offer and sell from time to time up to $25,000,000 of shares (the “ATM Offering”) of the Company’s common stock, par value $0.001 per share (“Shares”), through Roth. The offer and sale of the Shares will be made pursuant to a prospectus supplement to the Company’s base shelf prospectus to be filed under the Securities Act of 1933, as amended.

 

On October 25, 2023 Mast Hill exercised the right to purchase 183,500 of the shares of Common Stock (“Warrant Shares”) of Clean Energy Technologies, Inc., because of the Common Stock Purchase Warrant (the “Warrant”) issued on March 08, 2023. The exercise price is $1.60 per share. The total purchase price was $293,600.

 

On October 13, 2023 the company entered into a promissory note in the amount of $197,196 with an interest rate of 10% per annum and a default interest rate of 22% per annum. This note is due in full on August 24, 2024 and has mandatory monthly payments of $21,691.50. The note had an OID of $19,719 and recorded as finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This note is convertible, but not until a contingent event of default has taken place, none of which has occurred as of the date of this filing. The balance on this note as of date of this filing was $216,915.

 

On October 31, 2023, Clean Energy Technologies, Inc. (the “Company”) filed with the Nevada Secretary of State a certificate of designation designating 3,500,000 shares of the undesignated and authorized preferred stock of the Company, par value $0.001 per share, as the 15% Series E Convertible Preferred Stock (the “Series E Preferred Stock”) and setting forth the rights, preferences and limitations of such Series E Preferred Stock.

 

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 2,199,387 shares of the newly designated 15% Series E Convertible Preferred Stock of the Company, par value $0.001 per share (the “Series E Preferred Stock”), in exchange for the outstanding balances of $1,955,122.43, as of November 8, 2023, under the six promissory notes the Company issued to the Holder from November 2022 to July 2023.

 

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”). The terms of the Certificate of Designation are summarized in the Company’s report on Form 8-K filed by the Company on November 3, 2023, and a copy of the Certificate of Designation is set forth in the Exhibit 4.1 to such previous current report.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

 

FORWARD-LOOKING STATEMENTS

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements using the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

 

Description of the Company

 

We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005 under the name Probe Manufacturing, Inc. We manufactured electronics and provided services to original equipment manufacturers (OEMs) of industrial, automotive, semiconductor, medical, communication, military, and high technology products. On September 11, 2015, Clean Energy HRS, or “CE HRS”, our wholly owned subsidiary acquired the assets of Heat Recovery Solutions from General Electric International. In November 2015, we changed our name to Clean Energy Technologies, Inc.

 

Our principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. Our telephone number is (949) 273-4990. Our common stock is listed on the NASDAQ Markets under the symbol “CETY.”

 

Our internet website address is www.cetyinc.com the information contained on our website are not incorporated by reference into this document, and you should not consider any information contained on, or that can be accessed through, our website as part of this document.

 

The Company has four reportable segments: Clean Energy HRS, the engineering & manufacturing services, CETY Renewables waste to energy solutions, and CETY HK natural gas trading business.

 

We specialize in renewable energy & energy efficiency systems design, manufacturing, and project implementation. We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005 under the name Probe Manufacturing, Inc. We provided engineering and manufacturing electronics services to original equipment manufacturers (OEMs) of clean energy, industrial, automotive, semiconductor, medical, communication, military, and high technology products.

 

With the vision to combat climate change and creating a better, cleaner, and environmentally sustainable future, we formed Clean Energy HRS, LLC a wholly owned subsidiary of Clean Energy Technologies, Inc. and acquired the assets of Heat Recovery Solutions from General Electric International on September 11, 2015. In November 2015, we changed our name to Clean Energy Technologies, Inc. Our principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. We have 15 full-time employees. All employees and overheads are shared between Clean Energy Technologies, Inc.

 

Clean Energy Technologies, Inc. established a new company, CETY Europe, SRL (CETY Europe) as a wholly owned subsidiary. CETY Europe is a Sales and Service Center in Silea (Treviso), Italy established in 2017. The service center became operational in November 2018. Their offices are located at Alzaia Sul Sile, 26D, 31057 Silea (TV) and they have 1 full-time employee.

 

Clean Energy Technologies, Inc. established a wholly owned subsidiary called CETY Capital, a financing arm of CETY to fund captive renewable energy projects producing low carbon energy. CETY Capital will add flexibility to the capacity CETY offers its customers and fund projects utilizing its products and clean energy solutions.

 

CETY Capital retains 49% ownership interest in Vermont Renewable Gas LLC established to develop a biomass plant in Vermont utilizing CETY’s High Temperature Ablative Pyrolysis system.

 

Clean Energy Technologies (H.K.) Limited., a wholly owned subsidiary of Clean Energy Technologies Inc. acquired 100% ownership of Leading Wave Limited a liquid natural gas trading company in China.

 

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 waste heat produced in manufacturing, waste to energy and power generation facilities using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.

 

Waste to Energy Solutions - we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries to electricity, renewable natural gas (“RNG”), hydrogen and biochar which are sold or used by our customers.

 

Engineering, Consulting and Project Management Solutions – we bring a wealth of experience in developing clean energy projects for municipal and industrial customers and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean energy solutions in their projects.

 

CETY HK

 

Clean Energy Technologies (H.K.) Limited (“CETY HK”) consists of two business ventures in mainland China:(i) our natural gas (“NG”) trading operations sourcing and suppling NG to industries and municipalities. Natural Gas is principally used for heavy truck refueling stations and urban or industrial users. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are prepaid for in advance at a discount to the market. We sell the NG to our customers at fixed prices or prevailing daily spot prices for the duration of the contracts; and (ii) our planned joint venture with a large state-owned gas enterprise in China called Shenzhen Gas (Hong Kong) International Co. Ltd. (“Shenzhen Gas”), acquiring natural gas pipeline operator facilities, primarily located in the southwestern part of China. Our planned joint venture with Shenzhen Gas plans to acquire, with financing from Shenzhen Gas, natural gas pipeline operator facilities with the goal of aggregating and selling the facilities to Shenzhen Gas in the future. According to our Framework Agreement with Shenzhen Gas, we will be required to contribute $8 million to the joint venture which plans to raise in future rounds of financing. The terms of the joint venture are subject to the execution of definitive agreements.

 

Business and Segment Information

 

We design, produce and market clean energy products and integrated solutions focused on energy efficiency and renewable energy. Our aim is to become a leading provider of renewable and energy efficiency products and solutions by helping commercial companies and municipalities reduce energy waste and emissions, lower energy costs and generate incremental revenue by providing electricity, renewable natural gas and biochar to the grid.

 

Segment Information

 

Our four segments for accounting purposes are:

 

Clean Energy 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 & Manufacturing Services – providing customers with comprehensive design, manufacturing, and project management solutions.

 

 

CETY HK – The parent company of our NG trading operations in China, as well as our planned joint venture to acquire NG distribution systems depots and transmission systems. Prior to the first quarter of 2022 the Company had three reportable segments but added the CETY HK segment to reflect its recent new businesses in China.

 

Summary of Operating Results the nine months ended September 30, 2023 compared to the same period in 2022.

 

Going Concern

 

The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s equity of $5,389,051 and a working capital of $1,755,468 as of September 30, 2023 the company also had an accumulated deficit of $19,829,422 as of September 30, 2023 and used $3,842,232 in net cash from operating activities for the nine months ended September 30, 2023. CETY has a clear strategy in place and has the capability to successfully restructure its existing debt and secure additional financing. With its current strategic approach and diversification of its products and solutions, the management has created a favorable environment for the company to transition towards profitability.

 

For the nine months ended September 30, 2023, our total revenue amounted to $11,701,118, a substantial increase from the $2,567,596 recorded during the same period in 2022, reflecting a remarkable revenue growth of 356%. This also represents a remarkable 339% growth over our total revenue in 2022. This impressive increase can be attributed to the success of the Vermont Renewable Gas Biomass project in Lyndon and the substantial anticipated growth in Natural Gas (NG) trading from CETY HK.

 

For the nine months ending on September 30, 2023, our gross profit amounted to $1,427,629, as compared to $1,151,903 for the corresponding period in 2022. The substantial fluctuations in natural gas (NG) prices during both the winter and summer seasons had a notable impact on our profit margins. Nevertheless, the sale of CETY’s waste-to-energy and waste-heat to power systems significantly bolstered our profit margins.

 

For the nine months ending on September 30, 2023, our operating expenses totaled $2,709,963, compared to $1,724,727 for the corresponding period in 2022. This increase can be attributed to CETY’s expansion in 2023, along with additional costs related to marketing and business development, professional fees for legal and accounting services, increased expenses for investor relations, higher salaries for the new executives and directors, and additional consulting engineering expenses.

 

For the nine months ended September 30, 2023, we incurred a net loss of $2,460,489, as compared to $1,322,861 for the corresponding period in 2022. This increase in net loss can be attributed to the rise in operating expenses stemming from our recent expansion, as well as interest and financing fees amounting to $1,707,690, which includes financing fees and debt discount calculations associated with the warrant.

 

For the period ending September 30, 2023, the stockholder’s equity amounted to $5,389,051, representing a significant increase from the $1,878,196 reported on December 31, 2022. This substantial growth is attributable to the offering associated with the Nasdaq up-listing, along with debt conversions and write-offs.

 

CETY has successfully repositioned itself and created 4 different business segments to create a larger, more stable, and more diversified revenue stream that could scale up. The 4 segments are Clean Energy HRS (Heat Recovery), Waste-to-Energy (Pyrolysis Plant), Engineering Procurement and Consulting (EPC), and CETY HK (NG trading and acquisitions). The revenue in the CETY HK fuel segment is expected to continue to scale up which will help establish CETY as a player in the Asian market and allows cross-selling of CETY products and solutions. CETY expects larger revenue contribution from Waste-to-Energy, 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.

 

 

Management believes this 4-segment strategy has created many operational synergies and cross-selling opportunities across different markets. The breakneck revenue growth that was demonstrated this quarter is a direct result of this strategy as we have exceeded the revenues for the entire year of 2022. CETY believes that it will continue to deliver growth in all segments this year due to our belief that there is an optimistic industry macro backdrop. The main macro factor benefiting us is the global commitment to push renewable energy to the forefront from governments across the world. This is evidenced by the Paris Agreement and COP26. The Inflation Reduction Act passed by Congress in August 2022 had specific provisions that can take advantage of CETY’s products and solutions. Another catalyst that will potentially help our Company, is a continuously improving global supply chain as U.S. and European markets have begun to return normal levels post COVID and China has reopened its borders. The European energy crisis has given rise to the opportunity for CETY to sell more of its products and solutions as customers are in search of self-generation capabilities in renewable energy. And lastly, as China ends its draconian COVID lockdown policies, CETY was able to resume its growing business in that region.

 

CETY reached a momentous milestone in its corporate history on March 23, 2023 when the company was able to meet all the Nasdaq listing standards and began trading on Nasdaq. Nasdaq trading status increases CETY’s reputation greatly and benefits CETY’s sales plans globally. This also improves the company’s ability to access capital with better terms.

 

CETY expects to and will continue to execute its corporate strategy to build sustained and profitable growth by providing end to end fully integrated solutions and technologies, expand our global sales and marketing, production, research & development, as well as search for synergistic acquisition opportunities.

 

See note 1 to the notes to the financial statements for a discussion on critical accounting policies.

 

RELATED PARTY TRANSACTIONS

 

See note 13 to the notes to the financial statements for a discussion on related party transaction.

 

Results of the nine-month ended September 30, 2023 compared to the nine-month ended September 30, 2022

 

Net Sales

 

For the nine months ended September 30, 2023 our total revenue was $11,701,118 compared to $2,567,596 for the same period in 2022. The Company has four reportable segments: Clean Energy HRS (HRS), CETY Renewables waste to energy solutions, the engineering and manufacturing services, and CETY HK Natural gas trading business.

 

Segment breakdown

 

The nine months ended September 30, 2023 our revenue from Engineering and Manufacturing was $59,877 compared to $132,316 for the same period in 2022. Our engineering team was 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 has started work on the Vermont projects in the second quarter of 2023. We expect continued growth from this segment with the revenue being recognized within the waste to energy business segment.

 

 

The nine months ended September 30, 2023 our revenue from HRS was $399,136 compared to $509,330 for the same period in 2022. The revenue from this segment in 2023 was from service fees vs. Equipment sale in 2022. We are in the process of securing long lead materials to complete several units over the next few months and be able to recognize unit sales by the end of the year.

 

The nine months ended September 30, 2023 our revenue from our wholly owned subsidiary CETY HK was $10,462,385 compared to $1,925,950 for the same period in 2022. The increase was as a result of the ability to secure larger amounts of gas and growth from the newly formed joint venture.

 

The nine months ended September 30, 2023 our revenue from our wholly owned subsidiary CETY Renewables Waste to Energy was $779,720, this was as a result of commencement of the design, sourcing and permitting of the Vermont Renewable Gas project.

 

Gross Profit

 

The nine months ended September 30, 2023; our gross profits were $1,427,629 compared to $1,151,903 for the same period in 2022. The lower gross profit percentage was due to lower margins from the NG business offset by higher revenue from the HRS and Engineering services.

 

Segment breakdown

 

The nine months ended September 30, 2023 our gross profit from Engineering and Manufacturing was $16,528 compared to $85,352 for the same period in 2022. This was as a result of higher revenue in this segment.

 

The nine months ended September 30, 2023 our gross profit from HRS was $148,706 compared to $467,534 for the same period in 2022. The higher revenue from the same period in 2022 was a result of more unit sales and higher margin product sale.

 

The nine months ended September 30, 2023 our gross profit from CETY HK was $524,152 compared to $631,082 for the same period in 2022. The lower margin was due to lower gas prices in winter and spring and higher volume.

 

In the nine months ending September 30, 2023, our gross profit from our waste-to-energy solutions amounted to $738,243, in contrast to no revenue for the same period in 2022. The improved margins were primarily driven by increased sales and the launch of the Vermont Renewable Gas project.

 

Selling, General and Administrative (SG&A) Expenses

 

In September 30, 2023, after nine months, our SG&A expense amounted to $476,078, marking a significant increase from the $284,025 recorded for the corresponding period in 2022. This uptick can be attributed to heightened expenditures in several areas, including Media and Investor Relations activities, marketing, sales efforts, subscription services, and IT-related expenses.

 

Salaries Expense

 

For the nine months concluding on September 30, 2023, our salaries expense totaled $1,040,431, reflecting a substantial rise from the $587,928 incurred during the equivalent period in 2022. This increase in 2023 was primarily attributable to the addition of new executive hires.

 

Travel Expense

 

The nine months ended September 30, 2023; our travel expense was $328,104 compared to $126,388 for the same period in 2022. The increase was due to travel expenses related to Europe for the MSA development and increased site visits due to an increase in the sales opportunities and commissioning, and customer visits in China related to the LNG trading business.

 

Professional fees legal and accounting

 

In the nine-month period ending on September 30, 2023, our professional fees expense amounted to $259,476, as opposed to $359,636 for the corresponding period in 2022. This reduction in legal and accounting fees can be attributed to a decreased workload associated with the registration and uplisting process to NASDAQ.

 

Facility Lease and Maintenance Expense

 

For the nine-month period ending on September 30, 2023, our Facility Lease and maintenance expense amounted to $347,529, showing an increase compared to the $260,262 spent during the same period in 2022. This rise can be attributed to the inclusion of Shuya’s new facility in Chengdu, China.

 

Depreciation and Amortization Expense

 

For the nine months ending on September 30, 2023, our depreciation and amortization expense amounted to $13,805, compared to $22,557 for the corresponding period in 2022, showing a relatively unchanged figure.

 

Change in Derivative Liability

 

The nine months ended September 30, 2023; we had a gain on derivative liability of $326,539 compared to a gain of $(12,980) for the same period in 2022. The gain in derivative liability was from a favorable derivative calculations and payoffs from several convertible notes in the nine months ended September 30, 2023.

 

 

Interest and Finance Fees

 

The nine months ended September 30, 2023 interest and finance fees were $1,707,690 compared to $747,451 for the same period in 2022. The increase was due to several new notes to assist with the uplist to Nasdaq.

 

Net Loss

 

For the nine months ending on September 30, 2023, our loss amounted to $2,460,489, which is an increase compared to a loss of $1,322,861 for the same period in 2022. This increase can be primarily attributed to $1,707,690 in financing fees. We incurred these additional financing fees due to our commitment to paying more for financing in order to safeguard our investors, thereby preventing dilution at a lower valuation.

 

Liquidity and Capital Resources

 

Clean Energy Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

for the nine months ended September 30, 2023

(unaudited)

 

		2023				2022
Net Cash used in operating activities		$	(3,842,232	)		$	(1,929,678	)
Cash Flows provided by/ (used in) investing activities			14,111				(1,388,734	)
Cash Flows Provided by financing activities			3,906,498				2,545,003
Net Increase (decrease) in Cash and Cash Equivalents		$	114,542			$	(1,016,545	)

 

Capital Requirements for long-term Obligations.

 

None.

 

Critical Accounting Policies

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

Future Financing

 

We will continue to rely on equity sales of our common shares to continue to fund our business operations. Issuance of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

 

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 September 30, 2023 due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K filed with the SEC on April 17, 2022 for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.

 

Changes in Internal Control over Financial Reporting

 

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.

 

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company is presently not involved in any legal proceedings which in the opinion of management are likely to have a material adverse effect on the Company’s consolidated financial position or results of operations.

 

Item 1A. Risk Factors.

 

There have been no material changes in the Company’s risk factors from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

Item 2. Unregistered Sales of Equity Securities

 

During the quarter ended March 31, 2022 we issued 78,896 shares of common stock, under S-1 registration statement with GHS for a total of $134,755 in net proceeds and expensed $45,498 in legal and financing fees as a result.

 

On February 21, 2022 we issued 375,875 shares of our common stock under our Reg A offering at $3.20 per share. These shares are unrestricted and free trading.

 

 

During April of 2022 we issued 122,891 shares of common stock, under S-1 registration statement with GHS for a total of $153,324 in net proceeds and expensed $34,500 in legal and financing fees as a result.

 

On September 21, 2022 MGW I converted $1,548,904 from the outstanding balance of their convertible note into 12,907,534 shares of company’s common stock.

 

On May 6, 2022 the Company entered into a Securities Purchase Agreement and a warrant agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company issued to Mast Hill the Company issued Mast Hill a five-year warrant to purchase 234,375 shares of common stock in connections with the transactions.

 

On December 28, 2022 Mast Hill exercised their warrant in full on a cashless basis to purchase 100,446 shares of Common Stock.

 

On December 27, 2021, we entered into a convertible note payable with Universal Scope Inc. for $650,000 with a maturity date of June 21, 2022 which accrues interest at the rate of 2% per annum. IThis note and accrued interest was converted into 277,604 of our common shares on March 28, 2023.

 

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 second quarter of 2023, the Company issued 40,000 shares to a consultant at fair value of $72,000.

 

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

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		Furnished herewith.
32.02		Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act		Furnished 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 Link Base Document		Furnished herewith.
101.LAB*		Inline XBRL Taxonomy Extension Labels Link Base Document		Furnished herewith.
101.PRE*		Inline XBRL Taxonomy Extension Presentation Link Base Document		Furnished herewith.
101.DEF*		Inline XBRL Taxonomy Extension Definition Link Base 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.

 

 

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 14th day November 2023

 

Clean Energy Technologies, Inc.
REGISTRANT
	/s/ Kambiz Mahdi
By:	Kambiz Mahdi
	Chief Executive Officer
Date:	November 14, 2023 update all dates to signing to signing date
	/s/ Calvin Pang
By:	Calvin Pang
	Chief Financial Officer
Date:	November 14, 2023

 

	/s/ Mr. Ted Hsu
By:	Ted Hsu
	Director
Date:	November 14, 2023 update all dates to signing to signing date
	/s/ Ms. Lauren Morrison
By:	Lauren Morrison
	Director
Date:	November 14, 2023

 

	/s/ Mr. Matthew Graham Smith
By:	Matthew Graham Smith
	Director
Date:	November 14, 2023 update all dates to signing to signing date

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

 

Signature			Title
	/s/ Kambiz Mahdi		Chief Executive Officer and Director
By:	Kambiz Mahdi		(Principal executive officer)
	November 14, 2023