UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT DATED September 30, 2022 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)
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(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). ☐ Yes ☒
As of November 14, 2022, 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 | 3 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 26 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 31 |
| ITEM 4. | CONTROLS AND PROCEDURES | 31 |
| PART II. OTHER INFORMATION | ||
| ITEM 1. | LEGAL PROCEEDINGS | 31 |
| ITEM 1A. | RISK FACTORS | 31 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 31 |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 32 |
| ITEM 4. | MINE SAFETY DISCLOSURES | 32 |
| ITEM 5. | OTHER INFORMATION | 32 |
| ITEM 6. | EXHIBITS | 32 |
| 2 |
Part I – Financial Information
Item 1. Financial Statements
Clean Energy Technologies, Inc.
Consolidated Financial Statements
(Expressed in US dollars)
September 30, 2022 (unaudited)
| 3 |
Clean Energy Technologies, Inc.
Consolidated Balance Sheets
| Unaudited | Audited | |||||||
| September 30, 2022 | December 31, 2021 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable - net | ||||||||
| Lease receivable asset | ||||||||
| Prepaid | ||||||||
| Heze Hongyuan Natural Gas Co | ||||||||
| Inventory | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment - Net | ||||||||
| Goodwill | ||||||||
| LWL Intangibles | ||||||||
| Long Term Investment - Shuya | ||||||||
| Long-term financing receivables - net | ||||||||
| License | ||||||||
| Patents | ||||||||
| Right of use asset - long term | ||||||||
| Other Assets | ||||||||
| Total Non Current assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ (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 | ||||||||
| Convertible Notes Payable (net of discount of $ | ||||||||
| Related Party Notes Payable | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Debt: | ||||||||
| Related Party Notes Payable (net of discount of $ | ||||||||
| Facility Lease Liability - long term | ||||||||
| Net Long-Term Debt | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | $ | |||||||
| Stockholders’ (Deficit) | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Subscription Receivables | ) | |||||||
| Accumulated Other Comprehensible Income | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| ( | ) | |||||||
| Non-controlling interest | ) | ( | ) | |||||
| Total Stockholders’ Equity | ( | ) | ||||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying footnotes are an integral part of these consolidated financial statements
| 4 |
Clean Energy Technologies, Inc.
Consolidated Statements of Operations
for the three and nine months ended September 30, 2022 and 2021
(Unaudited)
2022 Three Months | 2021 Three Months | 2022 Nine Months | 2021 Nine Months | |||||||||||||
| Sales | $ | $ | $ | |||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| General and Administrative | ||||||||||||||||
| General and Administrative expense | ||||||||||||||||
| Salaries | ||||||||||||||||
| Travel | ||||||||||||||||
| Professional Fees Legal & Accounting | ||||||||||||||||
| Facility lease and Maintenance | ||||||||||||||||
| Subcontractors | ||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||
| Total Expenses | ||||||||||||||||
| Net Profit / (Loss) From Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in derivative liability | ( | ) | ( | ) | ||||||||||||
| Gain / (Loss) on debt settlement and write down | ||||||||||||||||
| Other Income | ||||||||||||||||
| Interest and Financing fees | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Profit / (Loss) Before Income Taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income Tax Expense | ( | ) | ||||||||||||||
| Net Profit / (Loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Net Profit / (Loss) attributable to Clean Energy Technologies, Inc. | ( | ) | ( | ) | ||||||||||||
| Other Comprehensive Item | ||||||||||||||||
| Foreign Currency Translation Gain | ( | ) | ( | ) | ||||||||||||
| Total Comprehensible Income / (Loss) | $ | ( | ) | $ | ( | ) | $ | |||||||||
| Per Share Information: | ||||||||||||||||
| Basic and diluted weighted average number of common shares outstanding | ||||||||||||||||
| Net Profit / (Loss) per common share basic and diluted | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||
The accompanying footnotes are an integral part of these Consolidated financial statements
| 5 |
Clean Energy Technologies, Inc.
Consolidated Statements of Stockholders Deficit
September 30, 2021 & 2022 (Unaudited)
| 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 | |||||||||||||||||||||||||||||
| 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 Loss | ||||||||||||||||||||||||||||||||||||||
| March 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||
| Shares issued for warrant conversion | ( | ) | ||||||||||||||||||||||||||||||||||||
| Shares issued for cash | ||||||||||||||||||||||||||||||||||||||
| Shares for Conversion | ||||||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Shares issued for correction | ( | ) | ||||||||||||||||||||||||||||||||||||
| Shares issued for inducement | ||||||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| September 30, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| 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, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Shares issued for warrant conversion | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Shares issued for acccrued dividend | - | |||||||||||||||||||||||||||||||||||
| Conversion of Preferred Series D | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Inducement Shares | - | ( | ) | |||||||||||||||||||||||||||||||||
| Shares issued for correction | ( | ) | ||||||||||||||||||||||||||||||||||
| Shares for Conversion | ||||||||||||||||||||||||||||||||||||
| Shares issued for Reg A offering | ||||||||||||||||||||||||||||||||||||
| Shares issued for S1 | ||||||||||||||||||||||||||||||||||||
| Shares issued for cash | - | ( | ) | |||||||||||||||||||||||||||||||||
| Shares issued for Reg A | ||||||||||||||||||||||||||||||||||||
| Starting balance CETY HK | ( | |||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | ||||||||||||||||||||||||||||||||||
| December 31, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Common
Stock .001 Par | Preferred
Stock | Common Stock to be issued | Additional Paid in | Subscription | Accumulated Comprehensive | Accumulated | Non Controlling | Stock holders’ Deficit | ||||||||||||||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Amount | Capital | Interest | Income | Deficit | interest | Totals | |||||||||||||||||||||||||||||||||
| Shares issued for Reg A offering | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for S1 | ||||||||||||||||||||||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||||||||||||||
| Subscription Receivable | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Accumulated Comprehensive | ||||||||||||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Shares issued for Reg A offering | - | |||||||||||||||||||||||||||||||||||||||||||
| Shares issued for S1 | ||||||||||||||||||||||||||||||||||||||||||||
| Warrants issued Mast Hill fund | ||||||||||||||||||||||||||||||||||||||||||||
| Subscription Receivable | ||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Comprehensive | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Shares issued for Reg A offering | - | |||||||||||||||||||||||||||||||||||||||||||
| Shares issued for MGW Note Conversion | ||||||||||||||||||||||||||||||||||||||||||||
| Warrants issued Q3 Bridge Financing | ||||||||||||||||||||||||||||||||||||||||||||
| Subscription Receivable | ||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Comprehensive | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||||||||
| September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
The accompanying footnotes are an integral part of these consolidated financial statements
| 6 |
Clean Energy Technologies, Inc.
Consolidated Statements of Cash Flows
for the nine months ended September 30 (Unaudited)
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Income / ( Loss ) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Financing Fees | ||||||||
| Gain on debt settlement | ( | ) | ( | ) | ||||
| Shares issued for inducement | ||||||||
| Amortization of debt discount | ||||||||
| 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 | ( | ) | ( | ) | ||||
| (Increase) decrease in prepaid expenses | ( | ) | ||||||
| (Decrease) increase in accounts payable | ( | ) | ||||||
| Other (Decrease) increase in accrued expenses | ||||||||
| Other (Decrease) increase in accrued expenses related party | ( | ) | ||||||
| Other (Decrease) increase on equity method investment | ||||||||
| Other (Decrease) increase in customer deposits | ( | ) | ||||||
| Net Cash Provided by (Used In) Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Convertible Note Receivable | ||||||||
| (Increase) decrease in Heze Hongyuan Natural Gas Co | ( | ) | ||||||
| (Increase) decrease in Shuya | ( | ) | ||||||
| Purchase property plant and equipment | ||||||||
| Cash Flows Used In Investing Activities | ( | ) | ||||||
| Cash Flows from Financing Activities | ||||||||
| Bank Overdraft / (Repayment) | ||||||||
| Payment on line of credit | ( | ) | ( | ) | ||||
| Payment on notes payable | ( | ) | ||||||
| Proceeds from notes payable | ||||||||
| Proceeds from notes payable related party | ||||||||
| Stock issued for cash | ||||||||
| Cash Flows Provided By Financing Activities | ||||||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| 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 | ||||||||
| Discount on new notes | $ | $ | ||||||
| Shares to be issued for warrants | $ | $ | ||||||
| Shares issued for debt conversion conversions | $ | $ |
The accompanying footnotes are an integral part of these consolidated financial statements
| 7 |
Clean Energy Technologies, Inc.
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 – GENERAL
These unaudited interim consolidated financial statements as of and for the nine months ended September 30, 2022, 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, 2021 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, 2022 are not necessarily indicative of results for the entire year ending December 31, 2022.
The summary of significant accounting policies of Clean Energy Technologies, Inc. is presented to assist in the understanding of the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity.
Corporate History
We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005 under the name Probe Manufacturing, Inc. We manufactured electronics and provided services to original equipment manufacturers (OEMs) of industrial, automotive, semiconductor, medical, communication, military, and high technology products. On September 11, 2015 Clean Energy HRS, or “CE HRS”, our wholly owned subsidiary acquired the assets of Heat Recovery Solutions from General Electric International. In November 2015, we changed our name to Clean Energy Technologies, Inc.
Our principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. Our telephone number is (949) 273-4990. Our common stock is listed on the OTCQB Markets under the symbol “CETY.”
Our internet website address is www.cetyinc.com and our subsidiary’s web site is www.heatrecoverysolutions.com The information contained on our websites are not incorporated by reference into this document, and you should not consider any information contained on, or that can be accessed through, our website as part of this document.
The Company has four reportable segments: Clean Energy HRS (HRS), CETY Europe, and the legacy electronic manufacturing services (Electronic Assembly) division and CETY Hong Kong.
Going Concern
The
financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets
and liquidation of liabilities in the normal course of business. The Company had a total stockholder equity of $
Plan of Operation
We develop renewable energy products and solutions and establish partnerships in renewable energy that make environmental and economic sense. Our mission is to be a segment leader in the Zero Emission Revolution by offering recyclable energy solutions, clean energy fuels and alternative electric power for small and mid-sized projects in North America, Europe, and Asia. We target sustainable energy solutions that are profitable for us, profitable for our customers and represent the future of global energy production.
Our principal businesses
Waste Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.
Waste to Energy Solutions - we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries to electricity, renewable natural gas (“RNG”), hydrogen and bio char which are sold or used by our customers.
Engineering, Consulting and Project Management Solutions – We have expanded our legacy electronics and manufacturing business and plan to manufacture component parts for our Waste Heat Recovery and Waste to Energy business and to provide consulting services to municipal and industrial customers and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean energy solutions in their projects.
| 8 |
CETY HK
CETY
HK consists of two business ventures in mainland China:(i) our LNG trading operations sourcing and suppling LNG to industries and municipalities.
The LNG is principally used for heavy truck refueling stations and urban or industrial users in areas that do not have a connection to
local LNG pipeline systems. We purchase large quantities of LNG from large wholesale LNG depots at fixed prices which are prepaid for
in advance at a discount to market. We sell the LNG to our customers at prevailing daily spot prices for the duration of the contracts;
and (ii) our planned joint venture with Shenzhen Gas, acquiring natural gas pipeline operator facilities, each primarily located in the
southern part of Sichuan Province and portions of Yunnan Province. Our planned joint venture with Shenzhen Gas plans to acquire, with
financing from Shenzhen Gas, natural gas pipeline operator facilities with the goal of aggregating and selling the facilities to Shenzhen
Gas in the future. According to our Framework Agreement with Shenzhen Gas, we will be required to contribute $
NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The summary of significant accounting policies of Clean Energy Technologies, Inc. (formerly Probe Manufacturing, Inc.) is presented to assist in the understanding of the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity.
The consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets, the collection of accounts receivable and valuation of inventory and reserves.
Cash and Cash Equivalents
We
maintain the majority of our cash accounts at 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, 2022, and December 31, 2021, we had a reserve
for potentially un-collectable accounts receivable of $
Four
(4) customers accounted for approximately
Lease asset
As
of September 30, 2022, and December 31, 2021 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, 2022, and December 31, 2021, we had a reserve
for potentially obsolete inventory of $
Property and Equipment
Property and equipment are recorded at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets. The cost of ordinary maintenance and repairs is charged to operations. Depreciation and amortization are computed on the straight-line method over the following estimated useful lives of the related assets:
| Furniture and fixtures | ||
| Equipment | ||
| Leasehold Improvements |
| 9 |
Long –Lived Assets
Our management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long-lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment if any, is measured based on fair value and is charged to operations in the period in which long-lived assets impairment is determined by management. There can be no assurance however, that market conditions will not change or demand for our services will continue, which could result in impairment of long-lived assets in the future.
Revenue Recognition
The Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC 606”).
Performance Obligations Satisfied Over Time
FASB ASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10
An entity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one of the following criteria is met:
a. The customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB ASC 606-10-55-5 through 55-6).
b. The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced (as described in FASB ASC 606-10-55-7).
c. The entity’s performance does not create an asset with an alternative use to the entity (see FASB ASC 606-10-25-28), and the entity has an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).
Performance Obligations Satisfied at a Point in Time
FASB ASC 606-10-25-30
If a performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time. To determine the point in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should consider the guidance on control in FASB ASC 606-10-25-23 through 25-26. In addition, it should consider indicators of the transfer of control, which include, but are not limited to, the following:
a. The entity has a present right to payment for the asset
b. The customer has legal title to the asset
c. The entity has transferred physical possession of the asset
d. The customer has the significant risks and rewards of ownership of the asset
e. The customer has accepted the asset
A principal obtains control over any one of the following (ASC 606-10-55-37A):
| a. | A good or another asset from the other party which the entity then transfers to the customer. Note that momentary control before transfer to the customer may not qualify. | ||
| b. | A right to a service to be performed by the other party, which gives the entity the ability to direct that party to provide the service to the customer on the entity’s behalf. | ||
| c. | A good or service from the other party that it then combines with other goods or services in providing the specified good or service to the customer. |
If the entity obtains control over one of the above before the good or service is transferred to a customer, the entity could be considered a principal.
The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. In addition a) the company also does not have an alternative use for the asset if the customer were to cancel the contract, and b.) has a fully enforceable right to receive payment for work performed (i.e., customers are required to pay as various milestones and/or timeframes are met)
The following five steps are applied to achieve that core principle for our HRS and CETY Europe Divisions:
| ● | Identify the contract with the customer | |
| ● | Identify the performance obligations in the contract | |
| ● | Determine the transaction price | |
| ● | Allocate the transaction price to the performance obligations in the contract | |
| ● | Recognize revenue when the company satisfies a performance obligation |
| 10 |
The following steps are applied to our legacy engineering and manufacturing division:
| ● | We generate a quotation | |
| ● | We receive purchase orders from our customers. | |
| ● | We build the product to their specification | |
| ● | We invoice at the time of shipment | |
| ● | The terms are typically Net 30 days |
The following step is applied to our CETY HK business unit:
| ● | CETY HK is primarily responsible for fulfilling the contract / promise to provide the specified good or service. |
Also,
from time to time our contracts state that the customer is not obligated to pay a final payment until the units are commissioned, i.e.
a final payment of
Also,
from time to time we require upfront deposits from our customers based on the contract. As of September 30, 2022 and December 31, 2021,
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, 2022 and December 31, 2021 reflect:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Fair value of convertible notes derivative liability – September 30, 2022 | $ | $ | $ | $ | ||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Fair value of convertible notes derivative liability – December 31, 2021 | $ | $ | $ | $ | ||||||||||||
The carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments.
Foreign Currency Translation and Comprehensive Income (Loss)
We have no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods. The accounts of the Company’s Chinese entities are maintained in RMB. The accounts of the Chinese entities were translated into USD in accordance with FASB ASC Topic 830 “Foreign Currency Matters.” All assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates and the statements of operations and cash flows are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) in accordance with FASB ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from foreign currency transactions are reflected in the statements of operations.
| 11 |
The Company follows FASB ASC Topic 220-10, “Comprehensive Income (loss).” Comprehensive income (loss) comprises net income (loss) and all changes to the statements of changes in stockholders’ equity, except those due to investments by stockholders, changes in additional paid-in capital and distributions to stockholders.
Equity Method Investment
In July 2022, JHJ and other three shareholders agreed
to form and make total capital contribution of RMB million ($ million) with latest contribution due date in February 2066 into
Sichuan Hongzuo Shuya Energy Limited (“Shuya”), JHK owns
Shuya was setup as the operating entity for pipeline natural gas (PNG) and compressed natural gas (CNG) trading business, while the other two shareholders of Shuaya have large supply relationships.
The Company has determined that Shuya is not a VIE and has evaluated its consolidation analysis under the voting interest model. Because the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment in Shuya under the equity method of accounting. Under this method, the investor (“JHJ”) recognizes its share of the profits and losses of the investee (“Shuya”) in the periods when these profits and losses are also reflected in the accounts of the investee. Any profit or loss recognized by the investing entity appears in its income statement. Also, any recognized profit increases the investment recorded by the investing entity, while a recognized loss decreases the investment.
JHJ made a capital contribution of RMB
Basic profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding. At September 30, 2022, 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, 2022 and September 30, 2021 were and respectively. As of September 30, 2022, 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, 2022 and September 30, 2021 as they were considered anti-dilutive.
Research and Development
We
had
Segment Disclosure
FASB
Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an
enterprise’s reportable segments. The Company has
An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include amortization of intangibles, stock-based compensation, other charges (income), net and interest and other, net.
Selected Financial Data:
| for the nine months ended September 30 | ||||||||
| 2022 | 2021 | |||||||
| Net Sales | ||||||||
| Manufacturing and Engineering | ||||||||
| Clean Energy HRS | ||||||||
| CETY HK | ||||||||
| Cety Europe | ||||||||
| Total Sales | ||||||||
| Segment income and reconciliation before tax | ||||||||
| Manufacturing and Engineering | ||||||||
| Clean Energy HRS | ||||||||
| CETY HK | ||||||||
| Cety Europe | ||||||||
| Total Segment income | ||||||||
| Reconciling items | ||||||||
| General and Administrative expense | ( | ) | ( | ) | ||||
| Salaries | ( | ) | ( | ) | ||||
| Travel | ( | ) | ( | ) | ||||
| Professional Fees | ( | ) | ( | ) | ||||
| Facility lease and Maintenance | ( | ) | ( | ) | ||||
| Consulting Subcontractors | ( | ) | ||||||
| Depreciation and Amortization | ( | ) | ( | ) | ||||
| Change in derivative liability | ( | ) | ||||||
| Other Income | ||||||||
| Gain debt settlement | ||||||||
| Interest Expense | ( | ) | ( | ) | ||||
| Net Loss before income tax | ( | ) | ||||||
| 12 |
Share-Based Compensation
The Company has adopted the use of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (SFAS No. 123R) (now contained in FASB Codification Topic 718, Compensation-Stock Compensation), which supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance and eliminates the alternative to use Opinion 25’s intrinsic value method of accounting that was provided in Statement 123 as originally issued. This Statement requires an entity to measure the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and stock warrants, based on the fair value of the award, measured at the grant date (with limited exceptions). Under this standard, the fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black-Scholes option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets the requirements of SFAS No. 123R; however, the fair values generated may not reflect their actual fair values, as it does not consider certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility. For the “risk-free interest rate,” we use the Constant Maturity Treasury rate on 90-day government securities. The term is equal to the time until the option expires. The dividend yield is not applicable, as the Company has not paid any dividends, nor do we anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading common stock, on the grant date calculated using a 20-trading-day average. At the time of grant, the share-based compensation expense is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates and the expense is reduced accordingly. It is also adjusted to account for the restricted and thinly traded nature of the shares. The expense is reviewed and adjusted in subsequent periods if actual attrition differs from those estimates.
We re-evaluate the assumptions used to value our share-based awards on a quarterly basis and, if changes warrant different assumptions, the share-based compensation expense could vary significantly from the amount expensed in the past. We may be required to adjust any remaining share-based compensation expense, based on any additions, cancellations or adjustments to the share-based awards. The expense is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. For the three months ended September 30, 2022 and 2021 we had $ in share-based expense, due to the issuance of common stock. As of September 30, 2022, we had no further non-vested expense to be recognized.
Income Taxes
Federal Income taxes are not currently due since we have had losses since inception of Clean Energy Technologies.
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, 2022, we had a net operating loss carry-forward of approximately $(
| September 30, 2022 | December 31, 2021 | |||||||
| 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 $