Notes
to Consolidated Financial Statements
Notes
1- GENERAL
Corporate
History
We
were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005
under the name Probe Manufacturing, Inc. We manufactured electronics and provided services to original equipment manufacturers (OEMs)
of industrial, automotive, semiconductor, medical, communication, military, and high technology products. On September 11, 2015 Clean
Energy HRS, or “CE HRS”, our wholly owned subsidiary acquired the assets of Heat Recovery Solutions from General Electric
International. In November 2015, we changed our name to Clean Energy Technologies, Inc.
Our
principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. Our telephone number is (949) 273-4990. Our common
stock is listed on the OTCQB Markets under the symbol “CETY.”
Our
internet website address is www.cetyinc.com and our subsidiary’s web site is www.heatrecoverysolutions.com The information
contained on our websites are not incorporated by reference into this document, and you should not consider any information contained
on, or that can be accessed through, our website as part of this document.
The
Company has four reportable segments: Clean Energy HRS (HRS), CETY Europe, and the legacy electronic manufacturing services (Electronic
Assembly) division and CETY Hong Kong.
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 $1,878,196 and
a working capital deficit of $2,245,996 and an accumulated deficit of $17,276,536 as of December 31, 2022 and used $2,244,133 in net
cash from operating activities for the year ended December 31, 2022. Therefore, there is substantial doubt about the ability of the Company
to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable operations and
is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from
operations.
Plan
of Operation
We
develop renewable energy products and solutions and establish partnerships in renewable energy that make environmental and economic sense.
Our mission is to be a segment leader in the Zero Emission Revolution by offering recyclable energy solutions, clean energy fuels and
alternative electric power for small and mid-sized projects in North America, Europe, and Asia. We target sustainable energy solutions
that are profitable for us, profitable for our customers and represent the future of global energy production.
Our
principal businesses
Waste
Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities
using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.
Waste
to Energy Solutions - we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries
to electricity, renewable natural gas (“RNG”), hydrogen and bio char which are sold or used by our customers.
Engineering,
Consulting and Project Management Solutions – We have expanded our legacy electronics
and manufacturing business and plan to manufacture component parts for our Waste Heat Recovery and Waste to Energy business and to provide
consulting services to 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
CETY
HK consists of two business ventures in mainland China:(i) our LNG trading operations sourcing and suppling LNG to industries and municipalities.
The LNG is principally used for heavy truck refueling stations and urban or industrial users in areas that do not have a connection to
local LNG pipeline systems. We purchase large quantities of LNG from large wholesale LNG depots at fixed prices which are prepaid for
in advance at a discount to market. We sell the LNG to our customers at prevailing daily spot prices for the duration of the contracts;
and (ii) our planned joint venture with Shenzhen Gas, acquiring natural gas pipeline operator facilities, each primarily located in the
southern part of Sichuan Province and portions of Yunnan Province. 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. The terms of the joint venture are subject to the execution of definitive agreements.
NOTE
2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The
summary of significant accounting policies of Clean Energy Technologies, Inc. (formerly Probe Manufacturing, Inc.) is presented to assist
in the understanding of the Company’s financial statements. The financial statements and notes are representations of the Company’s
management, who is responsible for their integrity and objectivity.
The
consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in
the United States of America (“US GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. All material
intercompany balances and transactions have been eliminated in consolidation.
Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such
estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets,
the collection of accounts receivable and valuation of inventory and reserves.
Cash
and Cash Equivalents
We
maintain the majority of our cash accounts at a commercial 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 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
un-collectable amounts are provided, based on past experience and a specific analysis of the accounts. Although we expect to collect
amounts due, actual collections may differ from the estimated amounts. As of December 31, 2022, and December 31, 2021, we had a reserve
for potentially un-collectable accounts receivable of $95,000 and $75,000. Our policy for reserves for our long-term financing receivables
is determined on a contract-by-contract basis and takes into account the length of the financing arrangement. As of December 31, 2022,
and December 31, 2021, we had a reserve for potentially un-collectable long-term financing receivables of $247,500 and $247,500 respectively.
Four
(4) customers accounted for approximately 98% of accounts receivable on Decemeber 31, 2022. Our trade accounts primarily represent unsecured
receivables. Historically, our bad debt write-offs related to these trade accounts have been insignificant
Lease
asset
As
of December 31, 2022, and 2021 we had a lease asset that was purchased from General Electric with a value of $1,309,527, however due
the purchase price allocation, we recognized a value of $217,584. The lease is due to be commissioned in the third quarter of 2023 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 market value. Our industry experiences changes in technology, changes in market value
and availability of raw materials, as well as changing customer demand. We make provisions for estimated excess and obsolete inventories
based on regular audits and cycle counts of our on-hand inventory levels and forecasted customer demands and at times additional provisions
are made. Any inventory write offs are charged to the reserve account. As of December 31, 2022 and December 31, 2021, we had a reserve
for potentially obsolete inventory of $321,104.
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:
SCHEDULE OF PROPERTY AND EQUIPMENT ESTIMATED USEFUL LIVES
Furniture and fixtures |
3 to 7 years |
Equipment |
7 to 10 years |
Leasehold Improvements |
7 years |
Long
–Lived Assets
Our
management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long lived
assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment
if any, is measured based on fair value and is charged to operations in the period in which long-lived assets impairment is determined
by management. There can be no assurance however, that market conditions will not change or demand for our services will continue, which
could result in impairment of long-lived assets in the future.
Revenue
Recognition
The
Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC
606”).
Performance
Obligations Satisfied Over Time
FASB
ASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10
An
entity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one
of the following criteria is met:
a.
The customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB
ASC 606-10-55-5 through 55-6).
b.
The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is
created or enhanced (as described in FASB ASC 606-10-55-7).
c.
The entity’s performance does not create an asset with an alternative use to the entity (see FASB ASC 606-10-25-28), and the entity
has an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).
Performance
Obligations Satisfied at a Point in Time
FASB
ASC 606-10-25-30
If
a performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time. To determine the point
in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should
consider the guidance on control in FASB ASC 606-10-25-23 through 25-26. In addition, it should consider indicators of the transfer of
control, which include, but are not limited to, the following:
a.
The entity has a present right to payment for the asset
b.
The customer has legal title to the asset
c.
The entity has transferred physical possession of the asset
d.
The customer has the significant risks and rewards of ownership of the asset
e.
The customer has accepted the asset
A
principal obtains control over any one of the following (ASC 606-10-55-37A):
|
a. |
A good or another asset
from the other party which the entity then transfers to the customer. Note that momentary control before transfer to the customer
may not qualify. |
|
b. |
A right to a service to
be performed by the other party, which gives the entity the ability to direct that party to provide the service to the customer on
the entity’s behalf. |
|
c. |
A good or service from
the other party that it then combines with other goods or services in providing the specified good or service to the customer. |
If
the entity obtains control over one of the above before the good or service is transferred to a customer, the entity could be considered
a principal.
The
core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or
services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration
it is entitled to in exchange for the goods and services transferred to the customer. In addition a) the company also does not have an
alternative use for the asset if the customer were to cancel the contract, and b.) has a fully enforceable right to receive payment for
work performed (i.e., customers are required to pay as various milestones and/or timeframes are met)
The
following five steps are applied to achieve that core principle for our HRS and Cety Europe Divisions:
|
● |
Identify the contract with
the customer |
|
● |
Identify the performance
obligations in the contract |
|
● |
Determine the transaction
price |
|
● |
Allocate the transaction
price to the performance obligations in the contract |
|
● |
Recognize revenue when
the company satisfies a performance obligation |
The
following steps are applied to our legacy engineering and manufacturing division:
|
● |
We generate a quotation |
|
● |
We receive Purchase orders
from our customers. |
|
● |
We build the product to
their specification |
|
● |
We invoice at the time
of shipment |
|
● |
The terms are typically
Net 30 days |
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 December 31, 2022 and 2021 we had $33,000 and 33,000 of deferred revenue, which is expected to be recognized
in the third quarter of year 2023.
Also
from time to time we require upfront deposits from our customers based on the contract. As of December 31, 2022 and 2021, we had outstanding
customer deposits of $80,475 and $24,040 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 56% and using a risk free interest rate of 0.15% |
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 December 31 2022 and 2021, reflect:
SCHEDULE OF FAIR VALUE OF CONVERTIBLE NOTES DERIVATIVE LIABILITY
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| |
| | | |
| | | |
| | | |
| | |
Fair value of convertible notes derivative liability – December 31, 2022 | |
$ | – | | |
$ | – | | |
$ | 588,178 | | |
$ | 588,178 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| |
| | | |
| | | |
| | | |
| | |
Fair value of convertible notes derivative liability – December 31, 2021 | |
$ | – | | |
$ | – | | |
$ | 256,683 | | |
$ | 256,683 | |
Fair value of convertible notes derivative liability | |
$ | – | | |
$ | – | | |
$ | 256,683 | | |
$ | 256,683 | |
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.
Equity
Method Investment
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”), JHK 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 setup as the operating entity for pipeline natural gas (PNG) and compressed natural gas (CNG) trading business, while the other two
shareholders of Shuaya have large supply relationships.
The
Company has determined that Shuya is not a VIE and has evaluated its consolidation analysis under the voting interest model. Because
the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment
in Shuya under the equity method of accounting. Under this method, the investor (“JHJ”) recognizes its share of the profits
and losses of the investee (“Shuya”) in the periods when these profits and losses are also reflected in the accounts of the
investee. Any profit or loss recognized by the investing entity appears in its income statement. Also, any recognized profit increases
the investment recorded by the investing entity, while a recognized loss decreases the investment.
JHJ
made a invetsment 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 $5000
was allocated to the company, reducing the investment by that amount.
Net
Profit (Loss) per Common Share
Basic
profit / (loss) per share is computed based on the weighted average number of common shares outstanding. At December 31, 2022, we had
outstanding common shares of 37,174,879 used in the calculation of basic earnings per share. Basic Weighted average common shares and
equivalents at December 31, 2022 and 2021 were 27,681,722 and 22,519,352, respectively. As of December 31, 2022, we had convertible notes,
convertible into approximately 3,216,678 of additional common shares, and 325,243 common stock warrants. Fully diluted
weighted average common shares and equivalents were 27,681,722 as of December 31, 2022 and were withheld from the calculation as they
were considered anti-dilutive for the year ended December 31, 2022.
Research
and Development
We
had no amounts of research and development R&D expense during the year ended December 31, 2022 and 2021.
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: Clean Energy HRS (HRS), CETY Europe and the legacy
electronic manufacturing services division and CETY HK. 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
| |
2022 | | |
2021 | |
| |
for the years ended December 31, | |
| |
2022 | | |
2021 | |
Net Sales | |
| | | |
| | |
Manufacturing and Engineering | |
$ | 203,078 | | |
$ | 93,371 | |
CETY HK | |
| 1,890,439 | | |
| - | |
Clean Energy HRS | |
| 488,453 | | |
| 1,014,707 | |
Cety Europe | |
| 81,242 | | |
| 192,361 | |
Total Sales | |
$ | 2,663,212 | | |
$ | 1,300,439 | |
| |
| | | |
| | |
Segment income and reconciliation before tax | |
| | | |
| | |
Manufacturing and Engineering | |
| 124,437 | | |
| (90,328 | ) |
CETY HK | |
| 619,446 | | |
| - | |
Clean Energy HRS | |
| 361,914 | | |
| 547,812 | |
Cety Europe | |
| 68,399 | | |
| 152,923 | |
Total Segment income | |
| 1,174,196 | | |
| 610,407 | |
| |
| | | |
| | |
Reconciling items | |
| | | |
| | |
General and Administrative expense | |
| (400,322 | ) | |
| (488,177 | ) |
Salaries | |
| (782,657 | ) | |
| (772,463 | ) |
Travel | |
| (166,025 | ) | |
| (145,170 | ) |
Professional Fees | |
| (315,361 | ) | |
| (155,241 | ) |
Facility lease and Maintenance | |
| (349,610 | ) | |
| (346,454 | ) |
Consulting | |
| (119,896 | ) | |
| (243,371 | ) |
Bad Debt Expense | |
| | | |
| - | |
Depreciation and Amortization | |
| (30,076 | ) | |
| (32,292 | ) |
Change in derivative liability | |
| (331,495 | ) | |
| 1,752,119 | |
Gain / (Loss) on debt settlement and write down | |
| 2,556,916 | | |
| 868,502 | |
Interest and Financing fees | |
| (1,125,395 | ) | |
| (769,369 | ) |
Other income | |
| 55,403 | | |
| | |
| |
December 31, 2022 | | |
December 31, 2021 | |
Total Assets | |
| | | |
| | |
Manufacturing and Engineering | |
$ | 5,518,460 | | |
$ | 3,836,405 | |
Clean Energy HRS | |
| 2,556,166 | | |
| 2,556,166 | |
Cety Europe | |
| 39,703 | | |
| 39,703 | |
Total Assets | |
$ | 8,114,329 | | |
$ | 6,432,274 | |
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 year ended December 31, 2022 and 2021 we had $0 in share-based expense, due to the issuance of common stock.
As of December 31, 2022, we had no further non-vested expense to be recognized.
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, 2022 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.
As
of December 31, 2022, we had a net operating loss carry-forward of approximately $(8,275,877) and a deferred tax asset of $2,482,763
using the statutory rate of 30%. The deferred tax asset may be recognized in future periods, not to exceed 20 years. However, due to
the uncertainty of future events we have booked valuation allowance of $(2,482,763). FASB ASC 740 prescribes recognition threshold and
measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition. At December 31, 2022 the Company had not taken any tax positions that would require disclosure under FASB
ASC 740.
SCHEDULE OF DEFERRED TAX ASSET
| |
December 31, 2022 | | |
December 31, 2021 | |
Deferred Tax Asset | |
$ | (2,482,763 | ) | |
$ | (2,556,982 | ) |
Valuation Allowance | |
| (2,482,763 | ) | |
| (2,556,982 | ) |
Deferred Tax Asset (Net) | |
$ | - | | |
$ | - | |
On
February 13, 2018, Clean Energy Technologies, Inc., a Nevada corporation (the “Registrant” or “Corporation”)
entered into a Common Stock Purchase Agreement (“Stock Purchase Agreement”) by and between MGW Investment I Limited (“MGWI”)
and the Corporation. The Corporation received $907,388 in exchange for the issuance of 7,561,567 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, 2018. The Company
is current on its federal and state tax returns.
Reclassification
Certain
amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications
had no effect on reported income, total assets, or stockholders’ equity as previously reported.
Recently
Issued Accounting Standards
The
Company is reviewing the effects of following recent updates. The Company has no expectation that any of these items will have a material
effect upon the financial statements.
Update
2021-03—Intangibles—Goodwill and Other (Topic 350): Accounting Alternative For Evaluating Triggering Events.
The
amendments in this Update are effective on a prospective basis for fiscal years beginning after December 15, 2019. Early adoption is
permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30,
2021.
Update
2021-01—Reference Rate Reform (Topic 848):
An
entity may elect to apply the amendments in this Update on a full retrospective basis as of any date from the beginning of an interim
period that includes or is subsequent to March 12, 2020.
In
June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit
Losses [codified as Accounting Standards Codification Topic (ASC) 326]. ASC 326 adds to US generally accepted accounting principles (US
GAAP) the current expected credit loss (CECL) model, a measurement model based on expected losses rather than incurred losses. Under
this new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in
more timely recognition of such losses. This will become effective in January 2023 and will have minimal impact on the company.
Update
2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s
Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. We do not expect
any material impact on our financials because of the adoption of this update.
Deferred Stock Issuance Costs
Deferred stock issuance
costs represent amounts paid for legal, consulting, and other offering expenses in conjunction with the future raising of additional capital
to be performed within one year. These costs are netted against additional paid-in capital as a cost of the stock issuance upon closing
of the respective stock placement. During the year ended December 31, 2022, $204,556 of deferred stock issuance costs were capitalized and will be recognized upon the funding of the offering during
the Q1 of 2023.
NOTE
3 – ACCOUNTS AND NOTES RECEIVABLE
SCHEDULE
OF ACCOUNTS AND NOTES RECEIVABLE
| |
December 31, 2022 | | |
December 31, 2021 | |
Accounts Receivable | |
$ | 1,388,567 | | |
$ | 748,032 | |
Less reserve for uncollectable accounts | |
| (95,000 | ) | |
| (75,000 | ) |
Total | |
$ | 1,293,567 | | |
$ | 673,032 | |
Our
Accounts Receivable is pledged to Nations Interbanc, our line of credit.
SCHEDULE OF LEASE RECEIVABLE ASSET
| |
December 31, 2022 | | |
December 31, 2021 | |
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 December 31, 2022 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 DERECOGNITION OF UNDERLYING ASSETS OF FINANCING RECEIVABLE
| |
December 31, 2022 | | |
December 31, 2021 | |
Long-term financing receivables | |
$ | 1,000,000 | | |
$ | 1,000,000 | |
Less Reserve for uncollectable accounts | |
| (247,500 | ) | |
| (247,500 | ) |
Long-term financing receivables - net | |
$ | 752,500 | | |
$ | 752,500 | |
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
| |
December 31, 2022 | | |
December 31, 2021 | |
Inventory | |
$ | 1,389,394 | | |
$ | 783,296 | |
Less reserve for uncollectable accounts | |
| (897,808 | ) | |
| (321,104 | ) |
Total | |
$ | 500,586 | | |
$ | 462,192 | |
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
| |
December 31, 2022 | | |
December 31, 2021 | |
Property and Equipment | |
$ | 1,354,824 | | |
$ | 1,354,824 | |
Leasehold Improvements | |
| 75,436 | | |
| 75,436 | |
Accumulated Depreciation | |
| (1,415,444 | ) | |
| (1,397,244 | ) |
Net Fixed Assets | |
$ | 14,816 | | |
$ | 33,016 | |
Our
Depreciation Expense for the years ended December 31, 2022 and 2021 was $18,200 and $20,406 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
| |
December 31, 2022 | | |
December 31, 2021 | |
Goodwill | |
$ | 747,976 | | |
$ | 747,976 | |
LWL Intangibles | |
| 1,468,709 | | |
| 1,468,709 | |
License | |
| 354,322 | | |
| 354,322 | |
Patents | |
| 190,789 | | |
| 190,789 | |
Accumulated Amortization | |
| (87,096 | ) | |
| (75,220 | ) |
Net Fixed Assets | |
$ | 2,674,700 | | |
$ | 2,686,576 | |
Our
Amortization Expense for the years ended December 31, 2022 and 2021 was $11,876 and 11,877 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 | |
$ | 13,496 | |
Other receivable | |
$ | 20,000 | |
Trading Contracts | |
$ | 146,035 | |
Shenzhen Gas Relationship | |
$ | 1,314,313 | |
Total assets acquired | |
$ | 1,508,539 | |
| |
| | |
Liabilities assumed: | |
| | |
Advance Receipts | |
$ | (8539 | ) |
Taxes Payable | |
$ | 179 | |
Net Assets Acquired: | |
$ | 1,500,000 | |
If
LWL reach USD 5 million in revenue or net profit of USD 1 million by December 31, 2022, then based on the performance contingency there
will be issuance of 500,000 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 annual interest rate of %,
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. During the year end December 31, 2022, JHJ recorded $81,756
interest income from this note.
NOTE
8 – ACCRUED EXPENSES
SCHEDULE
OF ACCRUED EXPENSES
| |
December 31, 2022 | | |
December 31, 2021 |
|
Accrued Wages | |
$ | - | | |
$ |
22,950 |
|
Accrued Interest and other | |
| 119,030 | | |
|
135,662 |
|
Accrued Interest and other | |
$ | 119,030 | | |
$ |
158,612 |
|
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% per month. It is secured by the assets of the Company. In addition,
it is personally guaranteed by Kambiz Mahdi, our Chief Executive Officer. As of December 31, 2022, the outstanding balance was $998,820
compared to $1,169,638 at December 31, 2021.
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 $275,000.00 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 $50,000 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.
Total
Liability to GE
SCHEDULE OF NOTES PAYABLE
| |
December 31, 2022 | | |
December 31, 2021 | |
Note payable GE | |
$ | 0 | | |
$ | 1,200,000 | |
Accrued transition services | |
| 0 | | |
| 972,233 | |
Accrued Interest | |
| 0 | | |
| 325,843 | |
Total | |
$ | 0 | | |
$ | 2,498,076 | |
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
May 4, 2020 the company entered in to a payroll protection loan, with Comerica bank, guaranteed by the SBA due May 4, 2022
for $110,700, with an interest rate of 1%. This note payment is due in full on May 4, 2022. This note was forgiven on July 1, 2021.
On
February 4 , 2021 the company entered in to a payroll protection loan, with Comerica bank, guaranteed by the SBA due February 4, 2023
for $89,200, with an interest rate of 1%. This note payment is due in full on February 4, 2023 and also has the possibility of forgiveness.
As of the date of this filing this note has been forgiven. This note was forgiven on July 26, 2021.
On
September 7, 2021 the company entered into a promissory note in the amount of $226,345,
with and 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 is 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 July 5, 2022.
On
September 28, 2021 the company entered into a promissory note in the amount of $142,720,
with and 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 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 is 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 July 13, 2022.
On
March 10, 2022 the company entered into a promissory note in the amount of $170,600,
with and 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 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 is 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 $252,928.44 with and 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 $27,822.13. 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 is 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. The balance on this note as of December 31, 2022 was $139,111.30 .
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 and 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 $17,539.50. The note
had an OID of $16,447.00 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 is 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. The balance on this note as of December 31, 2022 was $87,697.50.
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 and 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 $12,633.50 The note
had an OID of $11,850.00 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 is 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. The balance on this note as of December 31, 2022 was $113,701.50
On
Dec 5,2022 the company entered into a promissory note in the amount of $191,526
with and 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 $21,067.80
The note had an OID of $19,760.00
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 is 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. The balance on this note as of December 31, 2022 was $210,678.00
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 nine months after its issuance and has a conversion rate of ninety 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 were 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 December 31, 2022, the outstanding balance due was $91,600.
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 nine 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 26th,
2018 and is currently in default. As of December 31, 2022, the outstanding balance due was $95,685
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800, a Warrant (the “Warrant”)
to purchase 37,500 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and 25,000 restricted
shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount of $4,800 with interest of
8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock
at a conversion price equal to $0.8 per share, subject to adjustment. The shares were valued on the date of issuance using the stock
price on that day for a total value of $19,211. We also recognized a debt discount of $17,861. We amortized $3,234 of the debt discount
during the three months ended September 30, 2020. The unamortized debt discount as of September 30, 2020 was $14,267. This note was fully
converted as of December 31, 2021. On December 31, 2020 this note was converted into 350,880 shares of common stock, for a total of $171,229
including principal of 164,800 plus a accrued interest of $6,429. Also on January 12, 2021 the company issued 17,447 shares of its common
stock as redemptions of $27,914 in cashless warrants.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock, par
value $.001
per share (the “Common Stock”) and
25,000
restricted shares of Common Stock (“Commitment
fee Shares”). The Note carried an original issue discount of $3,000
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $3.20
per share, subject to adjustment. The shares
were valued on the date of issuance using the stock price on that day for a total value of $19,211.
We also recognized a debt discount of $17,861.
Subsequently this note was paid in full on January 8, 2021.
On
September 10, 2020 we entered into a convertible note payable for $63,000, with a maturity date of July 15, 2021, which accrues interest
at the rate of 11% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%)
of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. Subsequently
this note was paid in full on January 15, 2021.
On
October 14, 2020 Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with Firstfire Global Opportunities Fund LLC, (the “Investor”), pursuant to which the Company
issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of $168,000,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock, par
value $.001
per share (the “Common Stock”) and
31,250
restricted shares of Common Stock (“Commitment
fee Shares”). The Note carried an original issue discount of $8,000
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.8
per share, subject to adjustment. The shares
were valued on the date of issuance using the stock price on that day for a total value of $24,282.
Subsequently on January 29, 2021 this note was paid in full. Also on January 12, 2021 the company issued 17,447
shares of its common stock as redemptions of
$27,914
in cashless warrants.
On
November 10, 2020 we entered into a convertible note payable for $53,000, with a maturity date of November 10, 2021, which accrues interest
at the rate of 11% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%)
of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. Subsequently
on February 11, 2021 this note was paid in full.
On
December 18, 2020 we entered into a convertible note payable for $83,500,
with a maturity date of December
18, 2021, which accrues interest at the rate
of 11%
per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%)
of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15)
Trading Days immediately preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion
into common stock. Subsequently on March 11, 2021, this note was paid in full.
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 fix conversion rate
of $2.4 of our common stock.
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 $675,000.00 plus
an original issue discount in the amount of $75,000.00, and an interest rate of fifteen percent (15%) per annum. Mast Hill Fund is entitled
to purchase 234,375 shares of commons 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.
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 $125,000.00 plus an original issue discount in the amount of $13,888.88, and an interest rate of fifteen percent (15%) per annum.
Jefferson is entitled to purchase 43,403 shares of commons 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 $187,451.37
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 $135,000.00 plus an original issue discount in the amount of $15,000.00, and an interest rate of fifteen percent
(15%) per annum. Firstfire is entitled to purchase 46,875 shares of commons 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 $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 $125,000.00
plus an original issue discount in the amount of $13,888.88, and an interest rate of fifteen percent (15%) per annum. Pacific is entitled
to purchase 43,403 shares of commons 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 $190,605.67
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 $270,000.00
plus an original issue discount in the amount of $30,000.00, and an interest rate of fifteen percent (15%) per annum. Mast Hill Fund
is entitled to purchase 93,750 shares of commons 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.
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 commons 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.
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 commons 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.
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 commons 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.
Total
due to Convertible Notes
SCHEDULE OF CONVERTIBLE NOTES
| |
December 31, 2022 | | |
December 31, 2021 | |
Total convertible notes | |
$ | 3,156,528 | | |
$ | 1,193,341 | |
Accrued Interest | |
| 262,331 | | |
| 110,370 | |
Debt Discount | |
| (326,804 | ) | |
| (26,919 | ) |
Total | |
$ | 3,092,055 | | |
$ | 1,276,792 | |
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 range of 70% to 84%, a risk-free interest rate range of 0.15%, an exercise price
range of $.98 to $1.03 and a stock price of $1.32. The remaining derivative liabilities were:
SCHEDULE OF FAIR VALUE OF DERIVATIVE LIABILITY
| |
| | | |
| | |
| |
December 31, 2022 | | |
December 31, 2021 | |
Derivative Liabilities on Convertible Loans: | |
| | | |
| | |
Outstanding Balance | |
$ | 588,178 | | |
$ | 256,683 | |
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 a 18,200-square foot CTU Industrial Building. Lease term is seven years and two months beginning July 1, 2017.
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.
Future minimum lease payments for the years ending December 31, and 2023 are:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
Year | |
Lease Payment | |
2023 | |
| 191,903 | |
Imputed Interest | |
| (5,467 | ) |
Net Lease Liability | |
$ | 186,436 | |
Our
lease expense for the years ended December 31, 2022 and 2021 was $349,610 and $346,454 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 and the company is utilizing the transition relief and “running off” on current
leases.
Severance
Benefits
Mr.
Mahdi will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Mahdi would have been entitled
to receive through the remainder or the Employment Period or One (1) year, whichever is greater.
NOTE
12 – CAPITAL STOCK TRANSACTIONS
On
April 21, 2005, our Board of Directors and shareholders approved the re-domicile of the Company in the State of Nevada, in connection
with which we increased the number of our authorized common shares to 5,000,000 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 10,000,000
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 20,000,000.
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 50,000,000.
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
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800, a Warrant (the “Warrant”)
to purchase 37,500 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and 25,000 restricted
shares of Common Stock (“Commitment fee Shares”). On December 31, 2020 this note was converted into 350,880 shares of common
stock, for a total of $171,229 including principal of 164,800 plus a accrued interest of $6,429 as a result this note was paid in full
Also on January 12, 2021 the company issued 17,447shares of its common stock as redemptions of $27,914 in cashless warrants.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock, par
value $.001
per share (the “Common Stock”) and
25,000
restricted shares of Common Stock (“Commitment
fee Shares”). The Note carried an original issue discount of $3,000
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.80
per share, subject to adjustment. The shares
were valued on the date of issuance using the stock price on that day for a total value of $19,211.
We also recognized a debt discount of $17,861.
Subsequently this note was paid in full on January 8, 2021. Also on February 5, 2021 the company issued 27,500
shares of its common stock as redemptions of
$44,000
in cashless warrants.
On
October 14, 2020 Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with Firstfire Global Opportunities Fund LLC, (the “Investor”), pursuant to which the Company
issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of $168,000, a Warrant
(the “Warrant”) to purchase 37,500 shares of the Company’s common stock, par value $.001 per share (the “Common
Stock”) and 31,250 restricted shares of Common Stock (“Commitment fee Shares”).
These
shares were issued on February 1, 2021, and 13,687 shares were issued as a result of exercise of the warrants on May 28, 2021. This note
was paid in full as of January 29, 2021.
On
February 5, 2021 we issued 75,000 shares of our common stock at a price of $3.20 per share, in exchange for the conversion of 1,200 shares
of our Series D Preferred Stock.
On
February 9, 2021 we issued 56,892 shares of our common stock share, in exchange for the conversion of $182,052 of accrued dividend for
the series D Preferred Stock.
On
February 9, 2021 we issued 50,000 shares of our common stock at a price of $1.60 per share, in exchange for the conversion of 800 shares
of our Series D Preferred Stock.
On
February 23, 2021 we issued 93,868 of common stock at a purchase price of $.56 per share and 93,868 of warrant at purchase price of 1.60
for an aggregate price of $52,566 to an accredited investor in a private sale. An additional 907 shares were issued as a result of a
correction made to the original transaction.
On
March 5, 2021 we issued 208,333 of common stock at a purchase price of $2.40 per share for an aggregate price of $500,000 to an accredited
investor in a private sale.
On
March 10, 2021 we issued 803,125 units of common stock at a purchase price of $3.20 per share for an aggregate price of $2,570,000 to
an accredited investor in a private sale.
On
March 12, 2021 we issued 40,625 shares and 51,715 of our common stock at a price of $3.20 per share, in exchange for the conversion of
650 shares of our Series D Preferred Stock and 165,487 of accrued dividend for the series D preferred stock.
On
September 2, 2021, Clean Energy Technology, Inc., a Nevada corporation (the “Company”), entered into an Equity Financing
Agreement (“Equity Financing Agreement”) and Registration Rights Agreement (“Registration Rights Agreement”)
with GHS Investments LLC, a Nevada limited liability company (“GHS”). Under the terms of the Equity Financing Agreement,
GHS agreed to provide the Company with up to $4,000,000 upon effectiveness of a registration statement on Form S-1 (the “Registration
Statement”) filed with the U.S. Securities and Exchange Commission (the “Commission”) As a result we issued 28,561
Shares of common stock as an commitment fee, which was valued and expense in the amount of $47,699. On October 14, 2021, this Form S-1
became effective.
On
September 13, 2021, we issued 27,516 shares of common stock for a correction of a previous issuance error.
During
the year ended December 31, 2021, we issued 246,052 shares of common stock, under S-1 registration statement with GHS for a total of
$294,016 in net proceeds and expensed $96,334 in legal and financing fees as a result.
On
December 31, 2021 we issued 245,844 shares of our common stock under our Reg A offering at $3.20 per share. These shares are unrestricted
and free trading.
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
the 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 .
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 April 14, 2022 there
were 38,495,453 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 divided 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 to 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 a 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 $0.08 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 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.
In
connection with the subscriptions for the Series D Preferred, we issued series F warrants to purchase an aggregate of 9,375 shares
of our common stock at $4.00 per share and series G warrants to purchase an aggregate of 9,375 shares of our common stock at $8.00 per
share.
On
August 21, 2014, a holder holding 5,000 shares of Preferred Series D Preferred agreed to lower the dividend rate to 13% on its Series
D Preferred. In September 2015, all holders of Series D Preferred signed and delivered estoppel agreements, whereby the holders agreed,
among other things, that the Series D Preferred was not in default and to reduce (effective as of December 31, 2015) the dividend rate
on the Series D Preferred Stock to six percent per annum and to terminate the 3.5% penalty in respect of unpaid dividends accruing on
or after such date.
In
the first quarter of 2019, we signed agreements to issue 1,000 shares of common stock valued at $.60 for a total value of $60,000
for the conversion of 800 preferred series D shares, which were subsequently issued.
We
also recorded a $60,000 commitment fee in exchange for the “
standoff”
and estoppel agreement and discounted conversion terms to account for the difference in the fair value which we offset to retained earnings.
On
February 4, 2020 we issued 50,000 shares of our common stock at a price of $1.60 per share, in exchange for the conversion of 800 shares
of our Series D Preferred Stock.
On
July 23, 2020 we issued 75,000 shares of our common stock at a price of $1.60 per share, in exchange for the conversion of 1,200 shares
of our Series D Preferred Stock.
On
February 5, 2021 we issued 75,000 shares of our common stock at a price of $3.2 per share, in exchange for the conversion of 1,200 shares
of our Series D Preferred Stock.
On
February 9, 2021 we issued 56,892 shares of our common stock share, in exchange for the conversion of $182,052 of accrued dividend for
the series D Preferred Stock.
On
February 9, 2021 we issued 50,000 shares of our common stock at a price of $1.60 per share, in exchange for the conversion of 800 shares
of our Series D Preferred Stock.
On
March 12, 2021 we issued 92,340 shares of our series D preferred stock together with accrued preferred dividend at a price of $.08 per
share, in exchange for the conversion of 1300 shares of our Series D Preferred Stock and accrued preferred dividend.
Warrants
A
summary of warrant activity for the periods is as follows:
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800, a Warrant (the “Warrant”)
to purchase 37,500 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and 25,000 restricted
shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount of $4,800 with interest of
8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock
at a conversion price equal to $0.80 per share, subject to adjustment. On January 8, 2021, the cashless warrants were converted into
17,447
shares
of our common stock.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000, a Warrant (the “Warrant”)
to purchase 37,500 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and 25,000 restricted
shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount of $3,000 with interest of
8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock
at a conversion price equal to $0.8 per share, subject to adjustment. On February 1, 2021 the cashless warrants were converted into 27,500
shares of our common stock.
On
February 23, 2021 we issued 93,868 of common stock at a purchase price of $.56 per share and 93,868 of warrant at purchase price of 1.60
for an aggregate price of $52,566 to an accredited investor in a private sale. An additional 907 shares were issued as a result of a
correction made to the original transaction. . These warrants expire on February 23, 2022.
On
May 6, 2022, we issued 234,375 of warrant shares in connection with the issuance of the promissory note in the principal amount of $750,000.00
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 of 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 of 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 of 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 of 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
November 10, 2022 we issued 29,687 of 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
November 21, 2022 we issued 29,687 of 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
December 26, 2022, we issued 38,437 of 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.
SCHEDULE OF WARRANT ACTIVITY
| |
Warrants - Common Share Equivalents | | |
Weighted Average Exercise price | | |
Warrants exercisable - Common Share Equivalents | | |
Weighted Average Exercise price | |
Outstanding December 31, 2021 | |
| 218,868 | | |
$ | 1.60 | | |
| 218,868 | | |
$ | 1.60 | |
Additions | |
| 559,618 | | |
| | | |
| 559,618 | | |
| 1.60 | |
Expired | |
| (218,868 | ) | |
| | | |
| | | |
| | |
Exercised | |
| (234,375 | ) | |
| | | |
| 234,375 | | |
| | |
Outstanding December 31, 2022 | |
| 325,243 | | |
$ | 1.60 | | |
| 325,243 | | |
$ | 1.60 | |
Stock
Options
We
currently have no outstanding stock options
NOTE
13 – RELATED PARTY TRANSACTIONS
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 $.2 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 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 in to 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. This note converted into 34,644 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 was converted into 33,987 of company’s common stock on September 21, 2022.
Subsequently
on May 11th 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 December 31, 2022 is $87,975
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 distributor of electronic components. From time to time, we purchase
parts from Billet Electronics. In addition, Billet was a supplier of parts and had dealings with current and former customers of the
Company prior to joining the company. The amount of parts purchases in 2022 was $49,544. Our Board of Directors has approved the transactions
between Billet Electronics and the Company.
Note
14 - Warranty Liability
For
the year ended December 31, 2022 and 2021 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.
NOTE
15 – NON-CONTROLLING INTEREST
On
June 24, 2021 the Company formed CETY Capital LLC a wholly owned subsidiary of CETY. In addition the company established CETY Renewables
Ashfield LLC (“CRA”) a wholly owned subsidiary of Ashfield Renewables Ag Development LLC(“ARA”) with our partner,
Ashfield AG (“AG”). The purpose of the joint venture is the development of a pyrolysis plant established to convert woody
feedstock into electricity and BioChar by using high temperature ablative fast pyrolysis reactor for which Clean Energy Technology, Inc.
holds the license for. The CRA is located in Ashfield, Massachusetts. Based upon the terms of the members’ agreement, the CETY
Capital LLC owns a 75% interest and AG owns a 25% interest in Ashfield Renewables Ag Development LLC. The agreement with CETY Renewables
Ashfield has been terminated.
The
consolidated financial statements have deconsolidated the CRA business unit. The Liabilities of CRA has been transferred to Vermont Renewable
Gas LLC (“VRG”), a newly formed entity. CETY retains 49% equity in VRG.
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 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 are 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
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 $168,300.00
plus an original issue discount in the amount of $18,700.00, and an interest rate of fifteen percent (15%) per annum. Mast Hill Fund
is entitled to purchase 58,938 shares of commons 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.
On
Feb 10, 2023 the company entered into a promissory note in the amount of $258,521 with and interest rate of 10% per annum and a default
interest rate of 22% per annum. This note is due in full on Feb 10, 2024 and has mandatory monthly payments of $28,437.3 The note had
an OID of $27,698.87 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 is 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. The balance on this note as of March 31, 2023 was $255,935.70
On
March 6, 2023 the company entered into a promissory note in the amount of $135,005 with and 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 $14,850.50 The note had
an OID of $14,465 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 is 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. The balance on this note as of March 31, 2023 was $148,505.00
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 commons stock per the warrant agreement at the exercise price of $1.00. 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.
On
February 13, 2023 the company paid off its promissory note with 1800 Diagonal dated June 30, 2022, of $252,928,44 together with all interest
thereon.
On
February 10, 2023 the company entered into a promissory note with 1800 Diagonal Lending, LLC (“1800 Diagonal”) in the
amount of $258,521
with and 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 $25,852.00
The note had an OID of $27,698.87
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 is 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. The balance on this note as of February 28, 2023 was $258,521.00.
On
August 17, 2022, we issued 46,875 of 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 of 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
March 28, 2023 we have elected three new board members:
Mr.
Ted Hsu has almost 3 decades of experience as a commercial banker. He joined Preferred Bank in 1992 and currently serves as the
bank’s Executive Vice President. Preferred Bank is one of the largest independent commercial banks in California. He has extensive
experience in servicing clients in various sectors including real estate, construction, commercial and industrial. Recently, Mr. Hsu
began to cover companies in the renewable energy sector as it is the growing trend. We believe Mr. Hsu is well qualified to serve as
a member of our Board of Directors due to his experience in commercial lending.
Ms.
Lauren Morrison is an international business development consultant whose career has had a major focus in the clean energy, smart
building, and sustainability sectors. She has worked with companies of all sizes and areas of specialization, from concept to early-stage
and maturity, on global growth strategies, branding, and product development. Lauren is interested in the integration and optimization
of technologies that measurably increase energy efficiency, and the application of monitoring and data analysis that iteratively improves
building processes, practices, and net functionality. As part of a leading-edge model smart city development in Asia, Lauren saw first-hand
the critical imperative for global collaboration to address climate challenges as they rapidly eclipse geographic boundaries. She is
passionate about expanding the conversation on this topic to include the widest possible audience of stakeholders. Our Board of Directors
believes that Ms. Morrison brings a unique and valuable international perspective and clean energy experience to our Board of Directors
Mr.
Matthew Graham Smith has over a decade of experience working in a range of overseas and domestic roles with the Australian Department
of Foreign Affairs and Trade (DFAT) and has held positions as Product Manager, Major Surface Ships, Department of Defense, Senior Administrative
Officer, Consulate-General, Chengdu, Senior Administrative Officer, Consulate-General, Chengdu, Post Opener, Consulate-General Surabaya,
Indonesia. Mr. Smith is a Certified Practicing Accountant in Australia and will serve as the Chairman of our Audit Committee upon the
listing of our common stock on Nasdaq. Mr. Smith has received a Bachelor of Laws and a Bachelor of Commerce in Finance from Australian
National University and was an exchange student at the Olin Business School, Washington University.
A
registration statement on Form S-1 (File No. 333-266078) relating to the securities being sold in this Offering was declared effective
by the Securities and Exchange Commission (the “SEC”) on March 22, 2023. Copies of the registration statement can be accessed
through the SEC’s website at www.sec.gov.
The
closing of its public offering of 975,000 shares of common stock at a price of $4.00 per share for a total gross proceeds of $3.9 million
before deducting underwriting discounts and commissions and offering expense (the “Offering”).
In
addition, the Company has granted the underwriters an option, exercisable within 45 days from the date of the underwriting agreement,
to purchase up to an additional 146,250 shares at the public offering price, less underwriting discounts and commissions. The Offering
was closed on March 27, 2023 and was conducted on a firm commitment basis. The shares began trading on March 23, 2023 on NASDAQ Capital
Market
Om
March 3/28/2023, Universal Scope Inc. converted in full $666,250 of their note into 277,604 shares of our common stock.
On
March 3, 2023, Clean Energy Technologies, Inc. reached an agreement with Cybernaut Zfounder Ventures, LLC to pay off the outstanding
convertible notes [in amount equal to $324,000 that were in default for a settlement amount of $200,000.