Clean Energy Technologies, Inc 10-Q for FY2021 Q3
Clean Energy Technologies, Inc. (CETY)
About this 10-Q
Clean Energy Technologies, Inc filed this 10-Q on November 17, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $575.55K
- up 167.3% from $215.32K a year earlier
- Net income
- $2047
- compared with a net loss of $512.89K a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT DATED SEPTEMBER 30, 2021 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the nine months ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
Growth Company |
If an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of November 15, 2021, there were shares of the Registrant’s $0.001 par value common stock issued and outstanding.
Securities registered pursuant to Section 12(b) of the Act
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| OTCQB |
CLEAN ENERGY TECHNOLOGIES, INC.
(A Nevada Corporation)
TABLE OF CONTENTS
| Page | ||
| PART I. FINANCIAL INFORMATION | ||
| ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS | 4 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 31 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 37 |
| ITEM 4. | CONTROLS AND PROCEDURES | 37 |
| PART II. OTHER INFORMATION | ||
| ITEM 1. | LEGAL PROCEEDINGS | 37 |
| ITEM 1A. | RISK FACTORS | 37 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 37 |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 38 |
| ITEM 4. | MINE SAFETY DISCLOSURES | 39 |
| ITEM 5. | OTHER INFORMATION | 39 |
| ITEM 6. | EXHIBITS | 39 |
Part I – Financial Information
Item 1. Financial Statements
Clean Energy Technologies, Inc.
Consolidated Financial Statements
(Expressed in US dollars)
September 30, 2021 (unaudited)
| 4 |
Clean Energy Technologies, Inc.
Consolidated Balance Sheet
| (unaudited) | ||||||||
| September 30, 2021 | December 31, 2020 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable - net | ||||||||
| Lease receivable asset | ||||||||
| Inventory | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment - Net | ||||||||
| Goodwill | ||||||||
| Long term financing receivables - (net) | ||||||||
| License | ||||||||
| Patents | ||||||||
| Right of use asset - long term | ||||||||
| Other Assets | ||||||||
| Total Non Current assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ (Deficit) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued Expenses | ||||||||
| Customer Deposits | ||||||||
| Warranty Liability | ||||||||
| Deferred Revenue | ||||||||
| Derivative Liability | ||||||||
| Facility Lease Liability - current | ||||||||
| Line of Credit | ||||||||
| Notes payable - GE | ||||||||
| Notes Payable | - | |||||||
| Convertible
Notes Payable (net of discount of $ | ||||||||
| Related Party Notes Payable | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Debt: | ||||||||
| Notes Payable PPL | - | |||||||
| Related Party Notes Payable | ||||||||
| Facility Lease Liability - long term | ||||||||
| Net Long-Term Debt | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | $ | $ | ||||||
| Stockholders’ (Deficit) | ||||||||
| Preferred D stock, stated value $ per share; shares authorized; shares and shares issued and and outstanding as of September 30, 2021 and December 31, 2020, respectively | - | |||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | ||||||||
| Shares to be issued | - | |||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ (Deficit) | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | - | |||||
| Total Stockholders’ (Deficit) | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying footnotes are an integral part of these consolidated financial statements
| 5 |
Clean Energy Technologies, Inc.
Consolidated Statement of Operations
for the three and nine months ended September 30,
(Unaudited)
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| three months | nine months | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| General and Administrative | ||||||||||||||||
| General and Administrative expense | ||||||||||||||||
| Salaries | ||||||||||||||||
| Travel | ||||||||||||||||
| Professional Fees | ||||||||||||||||
| Facility lease and Maintenance | ||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||
| Total Expenses | ||||||||||||||||
| Net Profit / (Loss) From Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in derivative liability | ( | ) | ||||||||||||||
| Gain / (Loss) on debt settlement’ and write down | ||||||||||||||||
| Interest and Financing fees | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Profit / (Loss) Before Income Taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income Tax Expense | - | - | - | - | ||||||||||||
| Net Profit / (Loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net (income) loss attributable to the non-controlling interests | - | - | ||||||||||||||
| - | - | |||||||||||||||
| Net income (loss) attributable to Clean Energy Technologies, Inc. | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Per Share Information: | ||||||||||||||||
| Basic weighted average number of common shares outstanding | ||||||||||||||||
| Net Profit / (Loss) per common share basic | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Per Share Information: | ||||||||||||||||
| Diluted weighted average number of common shares outstanding | ||||||||||||||||
| Net Profit / (Loss) per common share diluted | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
The accompanying footnotes are an integral part of these Consolidated financial statements
| 6 |
Clean Energy Technologies, Inc.
Consolidated Statement of Stockholders Equity
September 30, 2021
| Shares | Amount | Shares | Amount | Amount | Capital | Deficit | interest | Totals | ||||||||||||||||||||||||||||
| Common
Stock .001 Par | Preferred Stock | Common
Stock to be issued | Additional Paid in | Accumulated | Non
Controlling | Stock holders’ Deficit | ||||||||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Amount | Capital | Deficit | interest | Totals | |||||||||||||||||||||||||||
| December 31, 2019 | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||
| Shares issued for debt conversion | - | - | ||||||||||||||||||||||||||||||||||
| Shares issued for cash | - | |||||||||||||||||||||||||||||||||||
| Preferred conversions | (800 | ) | ( | ) | - | - | - | |||||||||||||||||||||||||||||
| Shares issued for S1 commitment | ||||||||||||||||||||||||||||||||||||
| Shares issued for S1 commitment, shares | - | |||||||||||||||||||||||||||||||||||
| Shares issued for S1 puts | ||||||||||||||||||||||||||||||||||||
| Shares issued for S1 puts, Shares | - | |||||||||||||||||||||||||||||||||||
| Conversion of Preferred Series D | ||||||||||||||||||||||||||||||||||||
| Conversion of Preferred Series D, Shares | ||||||||||||||||||||||||||||||||||||
| Shares issued for correction | - | |||||||||||||||||||||||||||||||||||
| Shares issued for correction, Shares | ||||||||||||||||||||||||||||||||||||
| Shares issued for Induement | ||||||||||||||||||||||||||||||||||||
| Shares issued for Induement, Shares | ||||||||||||||||||||||||||||||||||||
| Shares issued for warrant conversion | - | |||||||||||||||||||||||||||||||||||
| Shares issued for warrant conversion, shares | ||||||||||||||||||||||||||||||||||||
| Shares issued for Reg A offering | ||||||||||||||||||||||||||||||||||||
| Shares issued for Reg A offering , shares | ||||||||||||||||||||||||||||||||||||
| Shares issued for acccrued dividend | - | |||||||||||||||||||||||||||||||||||
| Shares issued for acccrued dividend, shares | ||||||||||||||||||||||||||||||||||||
| Shares issued for note conversion | ||||||||||||||||||||||||||||||||||||
| Shares issued for note conversion, shares | - | - | ||||||||||||||||||||||||||||||||||
| Inducement shares | ||||||||||||||||||||||||||||||||||||
| Inducement shares, shares | ||||||||||||||||||||||||||||||||||||
| Common Share subscriptions | - | |||||||||||||||||||||||||||||||||||
| Shares for Conversion | ||||||||||||||||||||||||||||||||||||
| Shares for Conversion, shares | - | - | ||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||
| March 31, 2020 | $ | $ | $ | $ | $ | ( | ) | - | $ | ( | ) | |||||||||||||||||||||||||
| Shares issued for S1 commitment | - | - | ||||||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||
| June 30, 2020 | $ | $ | $ | $ | $ | ( | ) | - | $ | ( | ) | |||||||||||||||||||||||||
| Shares issued for S1 puts | - | - | ||||||||||||||||||||||||||||||||||
| Conversion of Preferred Series D | ( | ) | ( | ) | - | - | - | |||||||||||||||||||||||||||||
| Shares issued for Induement | ||||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||
| September 30, 2020 | $ | $ | $ | $ | $ | ( | ) | - | $ | ( | ) | |||||||||||||||||||||||||
| Shares issued for S1 puts | - | - | - | |||||||||||||||||||||||||||||||||
| Shares issued for Reg A offering | - | |||||||||||||||||||||||||||||||||||
| Shares issued for note conversion | - | |||||||||||||||||||||||||||||||||||
| Inducement shares | ||||||||||||||||||||||||||||||||||||
| Common Share subscriptions | - | |||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||
| December 31, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||
| Shares issued for warrant conversion | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||||
| Shares issued for Reg A offering | ||||||||||||||||||||||||||||||||||||
| Shares issued for acccrued dividend | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Conversion of Preferred Series D | ( | ) | ( | ) | - | - | ||||||||||||||||||||||||||||||
| Inducement shares | ( | ) | - | - | - | |||||||||||||||||||||||||||||||
| Shares issued for cash | - | - | ( | ) | - | |||||||||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||
| Net Income | - | |||||||||||||||||||||||||||||||||||
| March 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||
| Shares issued for warrant conversion | - | - | ( | ) | - | - | - | |||||||||||||||||||||||||||||
| Shares issued for cash | - | |||||||||||||||||||||||||||||||||||
| Shares for Conversion | ||||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||
| June 30, 2021 | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||
| Beginning balance | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||
| Shares issued for correction | - | ( | ) | - | - | |||||||||||||||||||||||||||||||
| Shares issued for inducement | - | - | ||||||||||||||||||||||||||||||||||
| Net Income (Loss) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net Income (Loss) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| September 30, 2021 | $ | $ | - | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Ending balance | $ | $ | - | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
The accompanying footnotes are an integral part of these consolidated financial statements
| 7 |
Clean Energy Technologies, Inc.
Consolidated Statements of Cash Flows
for the nine months ended September 30, 2021
(Unaudited)
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Income / ( Loss ) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Gain on debt settlement | ( | ) | ( | ) | ||||
| Shares issued for inducement | ||||||||
| Change in debt discount and Financing fees | ||||||||
| Change in derivative liability | ( | ) | ( | ) | ||||
| Changes in assets and liabilities: | ||||||||
| (Increase) decrease in right of use asset | ||||||||
| (Increase) decrease in lease liability | ( | ) | ( | ) | ||||
| (Increase) decrease in accounts receivable | ( | ) | ||||||
| (Increase) decrease in longterm financing receivables | - | |||||||
| (Increase) decrease in inventory | ( | ) | ||||||
| (Decrease) increase in accounts payable | ( | ) | ||||||
| Other (Decrease) increase in accrued expenses | ||||||||
| Other (Decrease) increase in accrued expenses related party | ( | ) | ||||||
| Other (Decrease) increase in deferred revenue | - | ( | ) | |||||
| Other (Decrease) increase in customer deposits | ( | ) | ||||||
| Net Cash Provided by (Used In) Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase property plant and equipment | - | - | ||||||
| Cash Flows Used In Investing Activities | - | - | ||||||
| Cash Flows from Financing Activities | ||||||||
| Bank Overdraft / (Repayment) | - | ( | ) | |||||
| Payment on notes payable and lines of credit | ( | ) | ( | ) | ||||
| Proceeds from notes payable | ||||||||
| Proceeds from notes payable related party | - | - | ||||||
| Stock issued for cash | ||||||||
| Cash Flows Provided By Financing Activities | ||||||||
| Net (Decrease) Increase in Cash and Cash Equivalents | ||||||||
| Cash and Cash Equivalents at Beginning of Period | ||||||||
| Cash and Cash Equivalents at End of Period | $ | $ | ||||||
| Supplemental Cashflow Information: | ||||||||
| Interest Paid | $ | $ | ||||||
| Taxes Paid | $ | $ | ||||||
| Supplemental Non-Cash Disclosure | ||||||||
| Shares issued for warrant conversion | $ | $ | ||||||
| Discount on derivatives | $ | $ | ||||||
| Shares issued for preferred conversions | $ | $ | ||||||
| Shares issued for debt conversion conversions | $ | $ | ||||||
| Shares issued for debt conversion conversions | $ | $ | ||||||
The accompanying footnotes are an integral part of these consolidated financial statements
| 8 |
Clean Energy Technologies, Inc.
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 – General
These unaudited interim consolidated financial statements as of and for the nine months ended September 30, 2021, reflect all adjustments which, in the opinion of management, are necessary to fairly state the Company’s financial position and the results of its operations for the periods presented, in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.
These unaudited interim consolidated financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s fiscal year end December 31, 2020 report. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the nine months ended September 30, 2021, are not necessarily indicative of results for the entire year ending December 31, 2021.
The summary of significant accounting policies of Clean Energy Technologies, Inc. is presented to assist in the understanding of the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity.
Corporate History
With
the vision to combat climate change and create a better, cleaner and environmentally sustainable future Clean Energy HRS LLC a wholly
owned subsidiary of Clean Energy Technologies, Inc. acquired the assets of Heat Recovery Solutions from General Electric International
on September 11, 2015. The asset acquisition and related financing transactions resulted in a change of control of the Company according
to FASB No. 2014-17 Business Combinations (Topic 805). As a result, the transactions qualify as a business combination. In accordance
with Topic 805, the Company elected to apply pushdown accounting, using the valuation date of December 31, 2015. As a result, we recognized
$
General Electric acquired the rights and 16 global patents to the magnetic bearing technology from Calnetix in October of 2010 and further developed the next generation of the waste heat generators, which was ultimately acquired by Clean Energy Technologies from GE. We completed our production facility post the acquisition in October of 2016. We consolidated our legacy and HRS operations and began our production in early 2017. In early 2018 we engaged with a large institutional equity partner and closed our first round of funding. We are executing our business strategy by increasing our market presence and broadening our product portfolio in the heat to power markets. We are continuing to design, build and ship products to Europe, US, Canada, South East Pacific regions and plan expansion into Asia. We are continuing to build a strong back log and pipeline of opportunities while developing the next disruptive heat to power generators with the support of our new equity partners.
We
recently raised $
We entered into a manufacturing and sales agreement to design, build and operate renewable energy and waste recovery facilities. We use an ablative pyrolysis system for processing of industrial and municipal organic waste in high temperature producing renewable high heating value fuel gas and value-added chemical. The key benefits of this system are better waste sourcing and mixing flexibility, near-zero emissions, modular design, zero liquid discharge, and zero solid waste residue waste. We are focusing on applications for industrial and municipality solid waste, landfill waste, agriculture waste, and forestry waste.
We plan to build a financial division that combines the customer demand for low carbon energy which we believe will compliment recent investor trends for funding low carbon energy projects. Low carbon energy is becoming ever more important for sustainable development and we believe is becoming recognized as a critical path to achieve economic growth globally and sustaining living standards. We believe our efforts will improve our sales and profitability across low carbon energy projects.”
On
November 8, 2021 Clean Energy Technologies (H.K.) Limited., a wholly owned subsidiary of Clean Energy Technologies Inc. acquired
| 9 |
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 deficit of $
Plan of Operation
Our goal is to position CETY as a worldwide leader in the renewables energy and energy efficiency markets by targeting industries that have wasted thermal energy, or organic waste which could potentially turn into electricity and other form of renewable energy.
We plan to leverage our proprietary magnetic bearing turbine technology with over 100 installations and 1 million fleet operating hours to increase our market share in low to medium temperature waste heat recovery markets.
We plan to continue establishing partnership with project developers to identify biomass opportunities with long-term feedstock and regional incentives.
We utilize both a direct sales force and global distribution group with expertise in heat recovery solutions and clean energy markets. We have also established relationships with integrators, consultant and project developers and integrated solution providers.
We plan to expand our core expertise to identify, acquire and develop leading clean energy and clean technology solutions and products. We expect to continue to utilize our relationships and expertise to expand in clean and renewable energy sector through new in-house development of disruptive heat to power technologies, acquisitions, cogeneration, and licensing agreements.
CETY maintains an online presence through our web portal and social media. Our application engineers assist in converting the opportunities into projects. We provide technical support to our Clean Cycle TM generator clients through providing maintenance and product support.
The sales of our products are related to the global prices for oil, gas, coal, solar energy, and government and regional incentives. As prices increase our products produce a better return on investment for our customers. They are also dependent on regulatory drivers and financial incentives. In the US a new waste energy recovery property investment tax credit has been introduced for generating power from heat, which should support additional sales in the US.
CETY has implemented a new Enterprise Resource planning software by Microsoft providing accurate and timely information to support a more robust and efficient supply chain. The operational leadership is continually working on lowering the cost of manufacturing and identifying lower cost regions to support higher margins of our products.
We plan to build a financial division to provide funding to customers who use our products and services.
We also intent to take advantage of the growing natural gas markets in China through mergers and acquisitions.
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.
| 10 |
Cash and Cash Equivalents
We
maintain the majority of our cash accounts at JP Morgan Chase bank. The total cash balance is insured by the Federal Deposit Insurance
Corporation (“FDIC”) up to $
Accounts Receivable
Our
ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by us. Reserves for
un-collectable amounts are provided, based on past experience and a specific analysis of the accounts. Although we expect to collect
amounts due, actual collections may differ from the estimated amounts. As of September 30, 2021, and December 31, 2020, we had a reserve
for potentially un-collectable accounts receivable of $
Five
(5) customers accounted for approximately
Lease asset
As
of September 30, 2021, and 2020 we had a lease asset that was purchased from General Electric with a value of $
Inventory
Inventories
are valued at the lower of weighted average cost or market value. Our industry experiences changes in technology, changes in market value
and availability of raw materials, as well as changing customer demand. We make provisions for estimated excess and obsolete inventories
based on regular audits and cycle counts of our on-hand inventory levels and forecasted customer demands and at times additional provisions
are made. Any inventory write offs are charged to the reserve account. As of September 30, 2021 and December 31, 2020, we had a reserve
for potentially obsolete inventory of $
Property and Equipment
Property and equipment are recorded at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets. The cost of ordinary maintenance and repairs is charged to operations. Depreciation and amortization are computed on the straight-line method over the following estimated useful lives of the related assets:
SCHEDULE OF PROPERTY AND EQUIPMENT ESTIMATED USEFUL LIVES
| Furniture and fixtures | ||||
| Equipment | ||||
| Leasehold Improvements |
| 11 |
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
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 |
| 12 |
Also,
from time to time our contracts state that the customer is not obligated to pay a final payment until the units are commissioned, i.e.
a final payment of
Also,
from time to time we require upfront deposits from our customers based on the contract. As of September 30, 2021 and December 31, 2020,
we had outstanding customer deposits of $
Fair Value of Financial Instruments
The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures” for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. |
| ● | Level
3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets
or liabilities. The Company’s derivative liabilities have been valued as Level 3 instruments. We value the derivative liability
using a lattice model, with a volatility of |
The Company’s financial instruments consist of cash, prepaid expenses, inventory, accounts payable, convertible notes payable, advances from related parties, and derivative liabilities. The estimated fair value of cash, prepaid expenses, investments, accounts payable, convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these instruments.
The carrying amounts of the Company’s financial instruments as of September 30, 2021 and December 31, 2020 reflect:
SCHEDULE OF FAIR VALUE OF CONVERTIBLE NOTES DERIVATIVE LIABILITY
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Fair value of convertible notes derivative liability – September 30, 2021 | $ | $ | $ | $ | ||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Fair value of convertible notes derivative liability – December 31, 2020 | $ | $ | $ | $ | ||||||||||||
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.
Other Comprehensive Income
We have no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.
| 13 |
Basic profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding. At September 30, 2021, we had outstanding common shares of used in the calculation of basic earnings per share. Basic Weighted average common shares and equivalents for the three months ended September 30, 2021 and 2020 were and respectively. Basic Weighted average common shares and equivalents for the nine months ended September 30, 2021 and 2020 were and respectively. As of September 30, 2021, we had convertible notes, convertible into approximately of additional common shares, common stock warrants. Fully diluted weighted average common shares and equivalents were withheld from the calculation for the three months ended September 30, 2021 and 2020 and the nine months ended September 30, 2020, as they were considered anti-dilutive. Fully diluted weighted average common shares and equivalents for the nine months ended September 30, 2021 were .
Research and Development
We
had
Segment Disclosure
FASB
Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an
enterprise’s reportable segments. The Company has
An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include amortization of intangibles, stock-based compensation, other charges (income), net and interest and other, net.
Selected Financial Data:
SCHEDULE OF SEGMENT REPORTING
| 2021 | 2020 | |||||||
| For the nine months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Net Sales | ||||||||
| Manufacturing and Engineering | ||||||||
| Clean Energy HRS | ||||||||
| Cety Europe | ||||||||
| Total Sales | ||||||||
| Segment income and reconciliation before tax | ||||||||
| Manufacturing and Engineering | ||||||||
| Clean Energy HRS | ||||||||
| Cety Europe | ||||||||
| Total Segment income | ||||||||
| Reconciling items | ||||||||
| General and Administrative expense | ( | ) | ( | ) | ||||
| Salaries | ( | ) | ( | ) | ||||
| Travel | ( | ) | ( | ) | ||||
| Professional Fees | ( | ) | ( | ) | ||||
| Facility lease and Maintenance | ( | ) | ( | ) | ||||
| Depreciation and Amortization | ( | ) | ( | ) | ||||
| Change in derivative liability | ||||||||
| Gain debt settlement | ||||||||
| Interest Expense | ( | ) | ( | ) | ||||
| Net Loss before income tax | ( | ) | ||||||
| September 30, 2021 | December 31, 2020 | |||||||
| Total Assets | ||||||||
| Clean Energy Technologies | ||||||||
| Clean Energy HRS | ||||||||
| Cety Renewables Ashfield | - | |||||||
| Cety Europe | ||||||||
| Total Assets | ||||||||
| 14 |
Share-Based Compensation
The Company has adopted the use of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (SFAS No. 123R) (now contained in FASB Codification Topic 718, Compensation-Stock Compensation), which supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance and eliminates the alternative to use Opinion 25’s intrinsic value method of accounting that was provided in Statement 123 as originally issued. This Statement requires an entity to measure the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and stock warrants, based on the fair value of the award, measured at the grant date (with limited exceptions). Under this standard, the fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black-Scholes option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets the requirements of SFAS No. 123R; however, the fair values generated may not reflect their actual fair values, as it does not consider certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility. For the “risk-free interest rate,” we use the Constant Maturity Treasury rate on 90-day government securities. The term is equal to the time until the option expires. The dividend yield is not applicable, as the Company has not paid any dividends, nor do we anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading common stock, on the grant date calculated using a 20-trading-day average. At the time of grant, the share-based compensation expense is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates and the expense is reduced accordingly. It is also adjusted to account for the restricted and thinly traded nature of the shares. The expense is reviewed and adjusted in subsequent periods if actual attrition differs from those estimates.
We re-evaluate the assumptions used to value our share-based awards on a quarterly basis and, if changes warrant different assumptions, the share-based compensation expense could vary significantly from the amount expensed in the past. We may be required to adjust any remaining share-based compensation expense, based on any additions, cancellations or adjustments to the share-based awards. The expense is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. For the nine months ended September 30, 2021 and 2020 we had $ in share-based expense, due to the issuance of common stock. As of September 30, 2021, we had no further non-vested expense to be recognized.
| 15 |
Income Taxes
Federal Income taxes are not currently due since we have had losses since inception of Clean Energy Technologies.
Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.
Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.
As
of September 30, 2021, we had a net operating loss carry-forward of approximately $(
SCHEDULE OF DEFERRED TAX ASSET
| September 30, 2021 | December 31, 2020 | |||||||
| Deferred Tax Asset | $ | $ | ||||||
| Valuation Allowance | ( | ) | ( | ) | ||||
| Deferred Tax Asset (Net) | $ | $ | ||||||
On
February 13, 2018, Clean Energy Technologies, Inc., a Nevada corporation (the “Registrant” or “Corporation”)
entered into a Common Stock Purchase Agreement (“Stock Purchase Agreement”) by and between MGW Investment I Limited (“MGWI”)
and the Corporation. The Corporation received $
On
February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $
This
resulted in a change in control, which limited the net operating to that date forward. We are subject to taxation in the U.S. and the
states of California. Further, the Company currently has no open tax years’ subject to audit prior to
| 16 |
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported income, total assets, or stockholders’ equity as previously reported.
Recently Issued Accounting Standards
The Company is reviewing the effects of following recent updates. The Company has no expectation that any of these items will have a material effect upon the financial statements.
Update 2021-03—Intangibles—Goodwill And Other (Topic 350): Accounting Alternative For Evaluating Triggering Events.
The amendments in this Update are effective on a prospective basis for fiscal years beginning after December 15, 2019. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021.
Update 2021-01—Reference Rate Reform (Topic 848):
An entity may elect to apply the amendments in this Update on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020.
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit Losses [codified as Accounting Standards Codification Topic (ASC) 326]. ASC 326 adds to US generally accepted accounting principles (US GAAP) the current expected credit loss (CECL) model, a measurement model based on expected losses rather than incurred losses. Under this new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses. This will become effective in January 2023 and will have minimal impact on the company.
Update 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.
We do not expect any material impact on our financials because of the adoption of this update.
NOTE 3 – ACCOUNTS AND NOTES RECEIVABLE
SCHEDULE OF ACCOUNTS AND NOTES RECEIVABLE
| September 30, 2021 | December 31, 2020 | |||||||
| Accounts Receivable | $ | $ | ||||||
| Less Reserve for uncollectable accounts | ( | ) | ( | ) | ||||
| Accounts Receivable (Net) | $ | $ | ||||||
Our Accounts Receivable is pledged to Nations Interbanc, our line of credit.
SCHEDULE OF LEASE RECEIVABLE ASSET
| September 30, 2021 | December 31, 2020 | |||||||
| Lease asset | $ | $ | ||||||
The Company is currently modifying the assets subject to lease to meet the provisions of the agreement, and as of September 30, 2021 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
| September 30, 2021 | December 31, 2020 | |||||||
| Long-term financing receivables | $ | $ | ||||||
| Less Reserve for uncollectable accounts | ( | ) | ( | ) | ||||
| Long-term financing receivables - net | $ | $ | ||||||
On a contract by contract basis or in response to certain situations or installation difficulties, the Company may elect to allow non-interest bearing repayments in excess of 1 year.
Our long term financing Receivable are pledged to Nations Interbanc, our line of credit.
| 17 |
NOTE 4 – INVENTORY
Inventories by major classification were comprised of the following at:
SCHEDULE OF INVENTORIES
| September 30, 2021 | December 31, 2020 | |||||||
| Raw Material | $ | $ | ||||||
| Work in Process | - | |||||||
| Total | ||||||||
| Less reserve for excess or obsolete inventory | ( | ) | ( | ) | ||||
| Inventory | $ | $ | ||||||
Our Inventory is pledged to Nations Interbanc, our line of credit.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment were comprised of the following at:
SCHEDULE OF PROPERTY AND EQUIPMENT
| September 30, 2021 | December 31, 2020 | |||||||
| Capital Equipment | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||
| Net Fixed Assets | $ | $ | ||||||
Our
Depreciation Expense for the three months ended September 30, 2021 and 2020 was $
Our
Depreciation Expense for the nine months ended September 30, 2021 and 2020 was $
Our Property Plant and Equipment is pledged to Nations Interbanc, our line of credit.
NOTE 6 – INTANGIBLE ASSETS
Intangible assets were comprised of the following at:
SCHEDULE OF INTANGIBLE ASSETS
| September 30, 2021 | December 31, 2020 | |||||||
| Goodwill | $ | $ | ||||||
| License | ||||||||
| Patents | ||||||||
| Accumulated Amortization | ( | ) | ( | ) | ||||
| Net Intangible Assets | $ | $ | ||||||
Our
Amortization Expense for three months ended September 30, 2021 and 2020 was $
Our
Amortization Expense for nine months ended September 30, 2021 and 2020 was $
| 18 |
NOTE 7 – ACCRUED EXPENSES
SCHEDULE OF ACCRUED EXPENSES
| September 30, 2021 | December 31, 2020 | |||||||
| Accrued Wages | $ | $ | ||||||
| Accrued Expenses | ||||||||
| Total accrued expenses | $ | $ | ||||||
NOTE 8 – NOTES PAYABLE
The
Company issued a short-term note payable to an individual, secured by the assets of the Company, dated September 6, 2013 in the amount
of $
On
November 11, 2013, we entered into an accounts receivable financing agreement with American Interbanc (now Nations Interbanc). Amounts
outstanding under the agreement bear interest at the rate of
On
April 1, 2021, we entered into an amendment to the purchase order financing agreement with DHN Capital, LLC dba Nations Interbanc. Nations
Interbanc has lowered the accrued fees balance by $
On
September 11, 2015, our CE HRS subsidiary issued a promissory note in the initial principal amount $
Total Liability to GE
SCHEDULE OF NOTES PAYABLE
| September 30, 2021 | December 31, 2020 | |||||||
| Note payable GE | $ | $ | ||||||
| Accrued transition services | ||||||||
| Accrued Interest | ||||||||
| Total | $ | $ | ||||||
| 19 |
We are currently in default on the payment of the purchase price pursuant to our asset purchase agreement with General Electric due to our belief that we are entitled to a reduction in purchase price we paid due to the misunderstanding of the asset valuation.
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 $
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 $
On
September 7, 2021 the company entered into a promissory note in the amount of $
On
September 28, 2021 the company entered into a promissory note in the amount of $
Convertible notes
On
May 5, 2017 we entered into a nine-month convertible note payable for $
On
May 24, 2017 we entered into a nine-month convertible note payable for $
On
October 30, 2019 we entered into a convertible note payable for $
On
January 8, 2020 we entered into a convertible note payable for $
On
February 19, 2020 we entered into a convertible note payable for $
| 20 |
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 $
On
July 15, 2020 we entered into a convertible note payable for $
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 $
On
September 10, 2020 we entered into a convertible note payable for $
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 $
On
November 10, 2020 we entered into a convertible note payable for $
| 21 |
On
December 18, 2020 we entered into a convertible note payable for $
Total due to Convertible Notes
SCHEDULE OF CONVERTIBLE NOTES
| September 30, 2021 | December 31, 2020 | |||||||
| Total convertible notes | $ | $ | ||||||
| Accrued Interest | ||||||||
| Debt Discount | - | ( | ) | |||||
| Total | $ | $ | ||||||
Note 9 – 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
SCHEDULE OF FAIR VALUE OF DERIVATIVE LIABILITY
| September 30, 2021 | December 31, 2020 | |||||||
| Derivative Liabilities on Convertible Loans: | ||||||||
| Outstanding Balance | $ | $ | ||||||
NOTE 10 – COMMITMENTS AND CONTINGENCIES
The
company has received an invoice from Oberon Securities for $
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
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
| Year | Lease Payment | |||
| 2021 | ||||
| 2022 | ||||
| 2023 | ||||
| Imputed Interest | ( | ) | ||
| Net Lease Liability | $ | |||
Our
lease expense for the nine months ended September 30, 2021 and 2020 was $
| 22 |
ASB
ASU 2016-02 “Leases (Topic 842)” – In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize
almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained
a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely
similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current
model, but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We have adopted the above ASU
as of January 1, 2019. The right of use asset and lease liability have been recorded at the present value of the future minimum lease
payments, utilizing a
Severance Benefits
Mr. Mahdi will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Mahdi would have been entitled to receive through the remainder or the Employment Period or One (1) year, whichever is greater.
NOTE 11 – CAPITAL STOCK TRANSACTIONS
On April 21, 2005, our Board of Directors and shareholders approved the re-domicile of the Company in the State of Nevada, in connection with which we increased the number of our authorized common shares to and designated a par value of $ per share.
On May 25, 2006, our Board of Directors and shareholders approved an amendment to our Articles of Incorporation to authorize a new series of preferred stock, designated as Series C, and consisting of authorized shares.
On June 30, 2017, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to and in the number of our authorized preferred shares to . The amendment effecting the increase in our authorized capital was filed and effective on July 5, 2017.
On August 28, 2018, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to . The amendment effecting the increase in our authorized capital was filed and effective on August 23, 2018.
On June 10, 2019, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to . The amendment effecting the increase in our authorized capital was effective on September 27, 2019
Common Stock Transactions
In
the first quarter of 2019, we signed agreements to issue shares of common stock valued at $.015 for a total value of $
We
also recorded a $
On
June 10, 2019 we issued
On
July 19, 2019 we issued
On
September 19, 2019 we entered into a stock purchase agreement for units at a purchase price of $ a unit for an aggregate price
of $
| 23 |
On
December 5, 2019 we issued units at a purchase price of $ per unit for an aggregate price of $
On January 21, 2020 our Registration Statement on Form 1-A was qualified with the Securities and Exchange Commission, under which we may offer up to shares of our common stock at a purchase price of $ per share. As of the date hereof, shares of common stock have been issued thereunder.
On
January 30, 2020 we issued shares of our common stock at a purchase price of $ per share, as settlement in full of a note
payable of in the amount of $
On February 3, 2020 we issued shares of our common stock under our Reg A offering at $ per share. These shares are unrestricted and free trading.
On February 4, 2020 we issued shares of our common stock at a price of $ per share, in exchange for the conversion of shares of our Series D Preferred Stock.
On March 17, 2020 we issued shares of our common stock under our Reg A offering at $ per share. These shares are unrestricted and free trading.
On
June 8, 2020, Clean Energy Technology, Inc., a Nevada corporation
During
the year ended December 30, 2020 we issued shares of common stock, under S-1 registration statement with GHS for a total of
$
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 $
On July 23, 2020 we issued shares of our common stock at a price of $ per share, in exchange for the conversion of shares of our Series D Preferred Stock.
On
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 $
| 24 |
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 $
On February 5, 2021 we issued shares of our common stock at a price of $ per share, in exchange for the conversion of shares of our Series D Preferred Stock.
On
February 9, 2021 we issued shares of our common stock share, in exchange for the conversion of $
On February 9, 2021 we issued shares of our common stock at a price of $.04 per share, in exchange for the conversion of shares of our Series D Preferred Stock.
On
February 23, 2021 we issued
On March 5, 2021 we issued of common stock at a purchase price of $ per share for an aggregate price of $ to an accredited investor in a private sale.
On March 10, 2021 we issued units of common stock at a purchase price of $ per share for an aggregate price of $ to an accredited investor in a private sale.
On March 12, 2021 we issued shares and of our common stock at a price of $ per share, in exchange for the conversion of 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
On September 13, 2021 we issued shares of common stock for a correction of a previous issuance error.
Common Stock
Our Articles of Incorporation authorize us to issue shares of common stock, par value $ per share. As of September 30, 2021 there were shares of common stock outstanding. All outstanding shares of common stock are, and the common stock to be issued will be, fully paid and non-assessable. Each share of our common stock has identical rights and privileges in every respect. The holders of our common stock are entitled to vote upon all matters submitted to a vote of our shareholders and are entitled to one vote for each share of common stock held. There are no cumulative voting rights.
The holders of our common stock are entitled to share equally in dividends and other distributions that our Board of Directors may declare from time to time out of funds legally available for that purpose, if any, after the satisfaction of any prior rights and preferences of any outstanding preferred stock. If we liquidate, dissolve or wind up, the holders of common stock shares will be entitled to share ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities and our obligations to holders of our outstanding preferred stock.
Preferred Stock
Our Articles of Incorporation authorize us to issue shares of preferred stock, par value $ per share. Our Board of Directors has the authority to issue additional shares of preferred stock in one or more series, and fix for each series, the designation of and number of shares to be included in each such series. Our Board of Directors is also authorized to set the powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or restrictions of the shares of each such series.
captital
| 25 |
Unless our Board of Directors provides otherwise, the shares of all series of preferred stock will rank on parity with respect to the payment of dividends and to the distribution of assets upon liquidation. Any issuance by us of shares of our preferred stock may have the effect of delaying, deferring or preventing a change of our control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect the rights and powers, including voting rights, of the holders of common stock.
We previously authorized shares of Series A Convertible Preferred Stock, shares of Series B Convertible Preferred Stock, and shares Series C Convertible Preferred Stock. As of August 20, 2006, all series A, B, and C preferred had been converted into common stock.
Effective
August 7, 2013, our We received an aggregate of $
The
following are primary terms of the Series D Preferred Stock.
In
connection with the subscriptions for the Series D Preferred, we issued series F warrants to purchase an aggregate of
On
August 21, 2014, a holder holding shares of Preferred Series D Preferred agreed to lower the dividend rate to
In
the first quarter of 2019, we signed agreements to issue shares of common stock valued at $ for a total value of $
We
also recorded a $
On February 4, 2020 we issued shares of our common stock at a price of $ per share, in exchange for the conversion of shares of our Series D Preferred Stock.
On July 23, 2020 we issued shares of our common stock at a price of $ per share, in exchange for the conversion of shares of our Series D Preferred Stock.
| 26 |
On February 5, 2021 we issued shares of our common stock at a price of $ per share, in exchange for the conversion of shares of our Series D Preferred Stock.
On
February 9, 2021 we issued shares of our common stock share, in exchange for the conversion of $
On February 9, 2021 we issued shares of our common stock at a price of $ per share, in exchange for the conversion of shares of our Series D Preferred Stock.
On March 12, 2021 we issued shares of our common stock together with accrued preferred dividend at a price of $ per share, in exchange for the conversion of shares of our Series D Preferred Stock and accrued preferred dividend.
Warrants
A summary of warrant activity for the periods is as follows:
On
May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell units (each a “Unit”
and together the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $
On
June 10, 2019 we issued shares of common stock at $ per share to an accredited investor for an aggregate price of $
On
July 18, 2019 we issued shares of common stock at $ per share to an accredited investor for an aggregate price of $10,000
in a private sale. We also issued
On
September 19, 2019 we entered into a stock purchase agreement for units to an accredited investor a private sale. Each unit consist
of share of common stock and one warrant to purchase one share of common stock exercisable at $
On
December 5, 2019 we issued units to an accredited investor a private sale. Each unit consist of one share of common stock and
warrant to purchase one share of common stock exercisable at $
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 $
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 $
| 27 |
On
February 23, 2021 we issued of common stock at a purchase price of $ per share and
SCHEDULE OF WARRANT ACTIVITY
| Warrants - Common Share Equivalents | Weighted Average Exercise price | Warrants exercisable - Common Share Equivalents | Weighted Average Exercise price | |||||||||||||
| Outstanding December 31, 2020 | $ | $ | ||||||||||||||
| Additions | ||||||||||||||||
| Exercised | ||||||||||||||||
| Outstanding September 30, 2021 | $ | $ | ||||||||||||||
Stock Options
We currently have no outstanding stock options.
NOTE 12 – RELATED PARTY TRANSACTIONS
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. Our Board of Directors has approved the transactions between Billet Electronics and the Company.
Pursuant to our 2017 Stock Compensation Program, effective July 1, 2017, we made the following stock option grants to members of our Board of Directors: On the non-employee board members resigned, as disclosed in our 8K filed on February 15, 2018. As a result, all remaining stock options were cancelled.
On
November 2, 2016, we effected the repayment of the convertible note dated March 15, 2016 for an aggregate amount of $
Concurrently with the foregoing note repayments, we entered into a Credit Agreement and Promissory Note (the “Credit Agreement”) with Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation (“MW I”), pursuant to which MW I deposited funds into escrow to fund the repayment of the convertible notes and we assigned to MW I our right to acquire the convertible notes and otherwise agreed that MW I would be subrogated to the rights of each note holder to the extent a note was repaid with funds advanced by MW I. Concurrently, MW I acquired the Master Note and we agreed that all amounts advanced by MG I to or for our benefit would be governed by the terms of the Master Note, including the payment of a financing fees, interest, minimum interest, and convertibility. Reddot is MW I’s agent for purposes of administration of the Credit Agreement and the Master Note and advances thereunder.
| 28 |
On
February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $
On
February 8, 2018 the Corporation entered a Convertible Promissory Note in the principal amount of $
Subsequently
| 29 |
On
June 21, 2018 the corporation entered into a promissory note with MGW Investment I Limited, for the principal amount of $
On
September 21, 2018 the corporation entered into a promissory note with MGW Investment I Limited, for the principal amount of $
On February 15, 2018 we issued at a purchase price of per share as additional compensation in the amount of $.
On October 18, 2018 we entered into an at will employment agreement with Kambiz Mahdi our CEO. This agreement may be terminated at any time. As part of the agreement Mr. Mahdi was to be issued shares of our common stock, as additional compensation. As a result; for the year ended December 31, 2019 we accrued for and subsequently on February 13, 2019, issued shares at a purchase price of $ per share to Mr. Mahdi in the amount of $.
On
January 10, 2019 the corporation entered into a promissory note with MGW Investment I Limited, for the principal amount of $
On
May 1, 2019 we entered into an employment agreement with Mr. Bennett, with an annual salary of $
Subsequently on March 9, 2020, John Bennett notified Clean Energy Technologies, Inc. (the “Company”) of his resignation from his position as the Company’s Chief Financial Officer, effective March 9, 2020. Mr. Bennett will remain as a consultant to the Company and assist with maintaining the financial books and records of the Company.
On
May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell units (each a “Unit”
and together the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $
In
the fourth quarter of 2019 MGW Investment I Limited, advanced $
On
March 24, 2021, the Company transferred $
On
June 24, 2021 MGW I converted $
Note 13 - Warranty Liability
For the quarter ended September 30, 2021, and for the year ended December 31, 2020 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 14 – NON-CONTROLLING INTEREST
On
June 24, 2021 the Company formed CETY Capital LLC a wholly owned subsidiary of CETY. In addition the company established CETY Renewables
Ashfield LLC (“CRA”) a wholly owned subsidiary of Ashfield Renewables Ag Development LLC(“ARA”) with our partner,
Ashfield AG (“AG”). The purpose of the joint venture 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
The consolidated financial statements reflect 100% of the assets and liabilities of CRA and report the current non-controlling interest of AG. The full results of CRA operations are reflected in the statement of income with the elimination of the non-controlling interest identified.
NOTE 15 – SUBSEQUENT EVENTS
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 $
On November 8, 2021 Clean Energy Technologies (H.K.) Limited., a wholly owned subsidiary of Clean Energy Technologies Inc. acquired 100% ownership of Leading Wave Limited a liquid natural gas trading company in China for $ in cash compensation and, if Leading Wave is able to achieve certain milestones, 200,000,000 shares of Common Stock of the Company.
In accordance with ASC 855, the Company has analyzed its operations subsequent to September 30, 2021 through the date these financial statements were issued, and has determined that it does not have any other material subsequent events to disclose in these financial statements.
| 30 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
Description of the Company
We specialize in renewable energy & energy efficiency systems design, manufacturing and project implementation. We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005 under the name Probe Manufacturing, Inc. We provided engineering and manufacturing electronics services to original equipment manufacturers (OEMs) of clean energy, industrial, automotive, semiconductor, medical, communication, military, and high technology products.
With the vision to combat climate change and creating a better, cleaner and environmentally sustainable future, we formed Clean Energy HRS, LLC a wholly owned subsidiary of Clean Energy Technologies, Inc. and acquired the assets of Heat Recovery Solutions from General Electric International on September 11, 2015. In November 2015, we changed our name to Clean Energy Technologies, Inc. Our principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. We have 12 full time employees. All employees and overhead are shared between Clean Energy Technologies, Inc. (which still provides the contract electronic manufacturing services) and Clean Energy HRS, LLC.
Clean Energy Technologies, Inc. established a new company CETY Europe, SRL (Cety Europe) as a wholly owned subsidiary. CETY Europe is a Sales and Service Center in Silea (Treviso), Italy established in 2017. The service center became operational in November 2018. Their offices are located at Alzaia Sul Sile, 26D, 31057 Silea (TV) and the have 1 full time employee.
Clean Energy Technologies, Inc. established a wholly owned subsidiary called CETY Capital, a financing arm of CETY to fund captive renewable energy projects producing low carbon energy. CETY Capital will add flexibility to the capacity CETY offers its customers and fund projects utilizing its products and clean energy solutions.
CETY Capital retains 75% ownership interest in Ashfield Renewables Ag Development LLC, which has established CETY Renewables Ashfield LLC a wholly owned low carbon energy company developing a biomass plant.
Clean Energy Technologies (H.K.) Limited., a wholly owned subsidiary of Clean Energy Technologies Inc. acquired 100% ownership of Leading Wave Limited a liquid natural gas trading company in China.
The Company has four reportable segments: Clean Energy HRS (HRS), CETY Europe, CETY Renewables Ashfield, CETY = HK and the legacy engineering and manufacturing services division.
Business Overview
General
The Company’s business and operating results are directly affected by changes in overall customer demand, operational costs and performance and leverage of our fixed cost and selling, general and administrative (“SG&A”) infrastructure.
Product sales fluctuate in response to several factors including many that are beyond the Company’s control, such as general economic conditions, interest rates, government regulations, consumer spending, labor availability, and our customers’ production rates and inventory levels. Product sales consist of demand from customers in many different markets with different levels of cyclicality and seasonality.
| 31 |
Operating performance is dependent on the Company’s ability to manage changes in input costs for items such as raw materials, labor, and overhead operating costs. Performance is also affected by manufacturing efficiencies, including items such as on time delivery, quality, scrap, and productivity. Market factors of supply and demand can impact operating costs
In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China and has spread throughout the United States and the rest of the world. The World Health Organization has declared the outbreak to constitute a “Public Health Emergency of International Concern.” This contagious disease outbreak, which has not been contained, and is disrupting supply chains and affecting production and sales across a range of industries in United States and other companies as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak, as well as the worldwide adverse effect to workforces, economies and financial markets, leading to a global economic downturn. Therefore, the Company expects this matter to negatively impact its operating results. However, the related financial impact and duration cannot be reasonably estimated at this time.
Clean Energy HRS (HRS)
We design, build and deliver power from wasted heat generated by industrial heating systems, reciprocating engines and waste to energy plants to produce environmentally friendly energy at competitive prices using our Clean CycleTM heat generators acquired from General Electric International. Our initial principal product is the Clean CycleTM heat generator, offered through our wholly owned subsidiary Heat Recovery Solutions, (HRS). The Clean CycleTM generator captures waste heat from a variety of sources and turns it into zero emission electricity. By using our Clean CycleTM generator commercial and industrial heat generators boost their overall energy efficiency and the savings created provide our customers with a fast return on their investment. The Clean CycleTM saves fuel, reduces pollution and requires very little maintenance. Please see a more detailed discussion of the products and services in the Clean Energy HRS Products and services overview business overview below.
CETY Renewables Ashfield LLC
A biomass gasification plant (the “Project”) that will convert 16,500 tons/year of feedstock into approximately 14,642 MWh Electricity/year, 1,500 MT/year of BioChar and 26,000 MM BTU/year thermal energy. The facility, called CETY Renewables Ashfield, LLC (the “Project Co.”), will be located on Spruce Corner Road in Ashfield, Massachusetts. The plant will utilize a proprietary high temperature ablative fast pyrolysis reactor (“HTAP”) exclusively licensed to Clean Energy Technologies, Inc. to process the feedstock into renewable energy.
CETY AND ENEX entered into a manufacturing and sales agreement to design, build, and operate renewable energy and waste recovery facilities. Enex’s technology is based on waste treatment in the high temperature ablative pyrolysis reactor (Enex HTAP) with the production of synthetic (renewable) natural gas to be used as fuel for onsite power generation or CNG application. ENEX proprietary technology and expertise will support CETY in securing a long term and profitable recurring revenue.
Cety Europe
CETY Europe Sales and Service Center is the Sales, warranty and service company for CETY’s Clean Cycle™ Heat Recovery Solutions (HRS) and includes a 24/7 Call Center, support Field Service Personnel, including remote access to the Waste Heat Generators and inventory spare parts to support the currently commissioned 65 Clean CycleTM installations in Europe. The service center also provides support services for new European sales. CETY has identified substantial unmet market needs in many European countries including the United Kingdom, Germany, Italy, Ukraine, Croatia, Slovakia, Slovenia, Austria, Belarus and the Czech Republic. Cety Europe will sell and distribute the Clean CycleTM Waste Heat Generators and replacement parts from the Clean Energy HRS line of products. The CETY Europe Sales and Service Center will be well suited to handle any warranty and/or service issues, as well as sell and distribute the Clean energy HRS line of products. Cety Europe has 1 employee.
Engineering and Manufacturing
The Engineering and Manufacturing business was our core legacy business until we acquired the Heat Recovery Solutions technology and business assets from GE. We consolidated the Probe Manufacturing, now named Clean Energy Technologies, Inc with the Clean Energy HRS, LLC. to support a few legacy electronics manufacturing customers and support the electronics manufacturing portion of our newly acquired technology from General Electric by Clean Energy HRS, LLC. Although this is not our core focus nor do we intend to grow this segment, we still derive a revenue stream to help offset a portion of the overhead and it provides in house manufacturing of the Clean Cycle electronics products. This segment also provides manufacturing services to customers in the medical and aerospace industries. The services provided are contract in nature and are built the customers specification. They supply the design and component specifications. We purchase the components and manufacture the assemblies.
| 32 |
Summary of Operating Results the three and nine months Ended September 30, 2021 Compared to the same period in 2020
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 deficit of $2,357,537 and a working capital deficit of $3,447,804 as of September 30, 2021. The company also had an accumulated deficit of $16,812,704 as of September 30, 2021. Therefore, there is 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.
The three months ended September 30, 2021; we had a net loss of $17,012 compared to a net loss of $518,889 for the same period in 2020. For the three months ended September 30, 2021; our revenue was $575,545 compared to $215,318 for the same period in 2020. For the three months ended September 30, 2021, our gross margin was 52% compared to 48% for the same period in 2020. For the three months ended September 30, 2021, our operating expense was $578,809 compared to $502,651 for the same period in 2020. For the three months ended September 30, 2021; we had a loss from operations of $277,664 compared to a net loss from operations of $399,621 for the same period in 2020.
The Nine months ended September 30, 2021; we had a net profit of $819,719 compared to a net loss of $1,055,970 for the same period in 2020. The increase in the net profit in 2021 was mainly due to the increase in gain on derivative in 2021, for the nine months ended September 30, 2021; our revenue was $866,703 compared to $1,230,131 for the same period in 2020. For the nine months ended September 30, 2021, our gross margin was 60% compared to 55% for the same period in 2020. For the nine months ended September 30, 2021, our operating expense was $1,660,015 compared to $1,470,403 for the same period in 2020. For the nine months ended September 30, 2021; we had a loss from operations of $1,140,334 compared to a net loss from operations of $789,167 for the same period in 2020.
See note 1 to the notes to the financial statements for a discussion on critical accounting policies
RELATED PARTY TRANSACTIONS
See note 12 to the notes to the financial statements for a discussion on related party transaction
Results the three and nine months Ended September 30, 2021, Compared to the three and nine months ended September 30, 2020
Net Sales
The Company has five reportable segments: Clean Energy HRS (HRS), Cety Europe srl, Cety Renewables Ashfield, CETY Waste to Energy division and engineering & manufacturing services division (Electronic Assembly).
Segment breakdown
The nine months ended September 30, 2021, our revenue from Engineering and Manufacturing was $91,263 compared to $361,697 for the same period in 2020. The decrease was due to shift of focus on the heat recovery solution business and manufacturing.
The nine months ended September 30, 2021, our revenue from HRS was $602,207 compared to $823,928 for the same period in 2020. This decrease was mainly caused by delays in execution of orders and contracts as a result of the pandemic.
The nine months ended September 30, 2021, our revenue from CETY Europe was $173,234 compared to $44,506 for the same period in 2020. This increase was mainly due to the overall increase in the service revenue and equipment sale.
| 33 |
Gross Profit
The nine months ended September 30, 2021; our gross profits were $591,683 compared to $681,236 for the same period in 2020. Our gross profits could vary from period to period and is affected by several factors, including, production and supply change efficiencies, material costs, and logistics.
Segment breakdown
The nine months ended September 30, 2021, our gross profit from Engineering and Manufacturing was $72,854 compared to $124,790 for the same period in 2020.
The nine months ended September 30, 2021, our gross profit from HRS was $312,118 compared to $518,695, for the same period in 2020. The decrease from the HRS segment was mainly due to no revenue in the first quarter of 2021 and supply chain delays and higher cost of materials.
The nine months ended September 30, 2021, our gross profit from CETY Europe was $134,712 compared to $37,481 for the same period in 2020. This increase was mainly due to the overall increase in the service revenue and equipment sales.
Selling, General and Administrative (SG&A) Expenses
The three months ended September 30, 2021; our SG&A expense was $188,818 compared to $143,490 for the same period in 2020.
Salaries Expense
The three months ended September 30, 2021; our Salaries expense was $228,565 compared to $183,972 for the same period in 2020.
Travel Expense
The three months ended September 30, 2021; our travel expense was $26,381 compared to $27,045 for the same period in 2020.
Professional fees Expense
The three months ended September 30, 2021; our Professional fees expense was $41,174 compared to $52,034 for the same period in 2020.
Facility Lease and Maintenance Expense
The three months ended September 30, 2021; our Facility Lease and maintenance expense was $85,798 compared to $86,667 for the same period in 2020.
Depreciation and Amortization Expense
The three months ended September 30, 2021, our depreciation and amortization expense was $8,073 compared to $9,443 for the same period in 2020, which remained relatively unchanged.
Change in Derivative Liability
The three months ended September 30, 2021; we had a loss on derivative liability of $10,745 compared to a gain of $88,836 for the same period in 2020.
Gain on debt settlement
The three months ended September 30, 2021 we recognized a gain on debt settlement in the amount of $460,568 compared to $191,833 for the three months ended September 30, 2020.
| 34 |
Interest and Finance Fees
The three months ended September 30, 2021 interest and finance fees were $189.171 compared to $393.937 for the same period in 2020.
Net Income / Loss
The three months ended September 30, 2021; our net loss was $17.012 compared to net loss of $512.889 for the same period in 2020. This increase was primarily due to the gain on derivative liability in 2021.
Selling, General and Administrative (SG&A) Expenses
The nine months ended September 30, 2021; our SG&A expense was $529,336 compared to $394,791 for the same period in 2020.
Salaries Expense
The nine months ended September 30, 2021; our Salaries expense was $661,634 compared to $569,734 for the same period in 2020.
Travel Expense
The nine months ended September 30, 2021; our travel expense was $66,735 compared to $67,861 for the same period in 2020.
Professional fees Expense
The nine months ended September 30, 2021; our Professional fees expense was $123,383 compared to $129,385 for the same period in 2020.
Facility Lease and Maintenance Expense
The nine months ended September 30, 2021; our Facility Lease and maintenance expense was $254,708 compared to $280,303 for the same period in 2020.
Depreciation and Amortization Expense
The nine months ended September 30, 2021, our depreciation and amortization expense was $24,219 compared to $28,329 for the same period in 2020.
Change in Derivative Liability
The nine months ended September 30, 2021; we had a gain on derivative liability of $1,734,624 compared to a gain of $208,195 for the same period in 2020.
Gain on debt settlement
The nine months ended September 30, 2021 we recognized a gain on debt settlement in the amount of $828,666 compared to $431,698 for the same period in 2020.
| 35 |
Interest and Finance Fees
The nine months ended September 30, 2021 interest and finance fees were $603,240 compared to $906,696 for the same period in 2020.
Net Income / Loss
The nine months ended September 30, 2021; our net profit was $819,719 compared to net loss of $1,055,970 for the same period in 2020. This increase was primarily due to the gain on derivative liability in 2021.
Liquidity and Capital Resources
Clean Energy Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 2021
(unaudited)
| 2021 | 2020 | |||||||
| Net Cash provided / (Used) In Operating Activities | $ | (1,964,231 | ) | $ | (986,361 | ) | ||
| Cash Flows Used In Investing Activities | - | - | ||||||
| Cash Flows Provided / (used) By Financing Activities | 3,104,503 | 1,006,585 | ||||||
| Net (Decrease) Increase in Cash and Cash Equivalents | $ | 1,140,272 | $ | 20,224 | ||||
On February 25 and 26, 2021, and March 2, 2021, the Company completed public and private financing of an aggregate of $2,570,000. The Company plans to utilize up to $2,000,000 for two joint ventures or direct investments, to enter the China market. One joint venture is to establish an engineering company based in Chengdu to promote distributed power and clean energy design and the other is a natural gas company joint venture based in Shenzhen. On March 24, 2021, April 30, 2021, and May 5, 2021, the Company transferred $1,500,000, in connection with its obligations to these ventures pending execution of definitive documents, this is included in the cash balance in the custodial account.
Capital Requirements for long-term Obligations
None.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Future Financing
We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
| 36 |
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial position or results of operations upon adoption.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2021, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K as filed with the SEC on April 15, 2021, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.
Changes in Internal Control over Financial Reporting
Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company is presently not involved in any legal proceedings which in the opinion of management are likely to have a material adverse effect on the Company’s consolidated financial position or results of operations.
Item 1A. Risk Factors.
There have been no material changes in the Company’s risk factors from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 2. Unregistered Sales of Equity Securities
On May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell 168,000,000 units (each a “Unit” and together the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $1,999,200, or $.0119 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 $.04 per share of Common Stock and expired on May 31, 2020.
| 37 |
On September 10, 2019 we issued 500,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $10,000 in a private sale. We also issued 500,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.
On July 18, 2019 we issued 500,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $10,000 in a private sale. We also issued 500,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.
October 15, 2019, we issued 250,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $250,000 in a private sale. We also issued 250,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.
On December 5, 2019 we issued 5,000,000 units at a purchase price of $.015 per unit for an aggregate price of $75,000 to an accredited investor in a private sale. Each unit consist of one share of common stock and one warrant to purchase one share of common stock exercisable at $.04 per share.
On February 4, 2020 we issued 2,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 800 shares of our Series D Preferred Stock.
On January 21, 2020, our Registration Statement on Form 1-A was qualified with the Securities and Exchange Commission, under which we may offer up to 300,000,000 shares of our common stock at a purchase price of $.03 per share. As of the date hereof, 4,523,333 shares of common stock have been issued thereunder.
On January 30, 2020 we issued 1,700,000 shares of our common stock at a purchase price of $.02 per share, as settlement in full of a note payable of in the amount of $36,500 with accrued interest of 19,721. As a result we recognized a gain in the amount of $22,221 in the 1st quarter of 2020.
On February 4, 2020 we issued 2,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 800 shares of our Series D Preferred Stock.
On July 23, 2020 we issued 3,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 1,200 shares of our Series D Preferred Stock.
On February 5, 2021 we issued 3,000,000 shares of our common stock at a price of $.08 per share, in exchange for the conversion of 1,200 shares of our Series D Preferred Stock.
On February 9, 2021 we issued 2,275,662 shares of our common stock share, in exchange for the conversion of $182,052 of accrued dividend for the series D Preferred Stock.
On March 12, 2021 we issued 1,625,000 shares and 2,068,588 of our common stock at a price of $.08 per share, in exchange for the conversion of 650 shares of our Series D Preferred Stock and 165,487 of accrued dividend for the series D preferred stock.
On June 28 , 2021 MGW I converted $75,000 from the outstanding balance of their convertible note into 25,000,000 shares of company’s common stock.
On September 2, 2021 the company issued 1,142,459 as inducement shares. To GHS Investment for the equity line of credit at $0.0475 per share.
On September 13, 2021 the company issued 1,100,630 as issuance correction. To GHS Investment for the equity line of credit at $0.0475 per share.
These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
Item 3. Defaults upon Senior Securities
We are currently in default on the payment of $1,200,000, to the balance of the purchase price pursuant to our asset purchase agreement with General Electric International, due to a combination of our inability to raise sufficient capital as expected and our belief that we are entitled to a reduction in purchase price we paid.
| 38 |
We are also in default of $187,285 payments of principal and interest on our notes payable to Cybernaut Zfounder Ventures.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
The exhibit listed on the Exhibit Index (following the signatures section of this quarterly report dated September 30, 2021 on Form 10-Q are included, or incorporated by reference, in this six months ended September 30, 2021 Report on Form 10-Q.
EXHIBIT NUMBER |
DESCRIPTION | |||
| 31.01 | Certification of Principal Executive Officer Pursuant to Rule 13a-14 | Filed herewith. | ||
| 31.02 | Certification of Principal Financial Officer Pursuant to Rule 13a-14 | Filed herewith. | ||
| 32.01 | Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. | ||
| 32.02 | Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. | ||
| 101.INS* | XBRL Instance Document | Furnished herewith. | ||
| 101.SCH* | XBRL Taxonomy Extension Schema Document | Furnished herewith. | ||
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | Furnished herewith. | ||
| 101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document | Furnished herewith. | ||
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | Furnished herewith. | ||
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | Furnished herewith. |
*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
| 39 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Costa Mesa, State of California on the 12th day of November 2020
| Clean Energy Technologies, Inc. | ||
| REGISTRANT | ||
| /s/ Kambiz Mahdi | ||
| By: | Kambiz Mahdi | |
| Chief Executive Officer | ||
| Date: November 16, 2021 | ||
| /s/ Calvin Pang | ||
| By: | Calvin Pang | |
| Chief Financial Officer | ||
| Date: November 16, 2021 | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
| Signature | Title | ||
| /s/ Kambiz Mahdi | Chief Executive Officer and Director | ||
| By: | Kambiz Mahdi | (Principal executive officer) | |
| Date: November 16, 2021 | |||
| 40 |