Notes
to Consolidated Financial Statements (Unaudited)
NOTE
1 – GENERAL
These
unaudited interim consolidated financial statements as of and for the three months ended March 31, 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, 2022 report. The Company assumes that the users of the interim
financial information herein have read, or have access to, the audited financial statements for the preceding period, and that the adequacy
of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three months
ended March 31, 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 three reportable segments: Clean Energy HRS (HRS), CETY Europe, and the legacy electronic manufacturing services (Electronic
Assembly) division.
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 $507,830
and a working capital deficit of $3,843,110
as of March 31, 2022. The company also had
an accumulated deficit of $17,536,520
as of March 31, 2022. Therefore, there is
substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company
will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity
capital and/or (2) to generate positive cash flow from operations.
Plan
of Operation
We
develop renewable energy products and solutions and establish partnerships in renewable energy that make environmental and economic sense.
Our mission is to be a segment leader in the Zero Emission Revolution by offering recyclable energy solutions, clean energy fuels and
alternative electric power for small and mid-sized projects in North America, Europe, and Asia. We target sustainable energy solutions
that are profitable for us, profitable for our customers and represent the future of global energy production.
Our
principal businesses
Waste
Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities
using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.
Waste
to Energy Solutions - we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries
to electricity, renewable natural gas (“RNG”), hydrogen and bio char which are sold or used by our customers.
Engineering,
Consulting and Project Management Solutions – we bring a wealth of experience in developing clean energy projects for municipal
and industrial customers and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean
energy solutions in their projects.
LNG
Trading Operations
Our
LNG trading operations in China is to source and supply LNG to industries and municipalities located in the southern part of Sichuan
Province and portions of Yunnan Province. 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.
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 $250,000, (which we may exceed from time to time) per commercial bank. For purposes of the statement
of cash flows we consider all cash and highly liquid investments with initial maturities of one year or less to be cash equivalents.
Accounts
Receivable
Our
ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by us. Reserves for
un-collectable amounts are provided, based on past experience and a specific analysis of the accounts. Although we expect to collect
amounts due, actual collections may differ from the estimated amounts. As of March 31, 2022, and December 31, 2021, we had a reserve
for potentially un-collectable accounts receivable of $75,000. Our policy for reserves for our long-term financing receivables is determined
on a contract-by-contract basis and considers the length of the financing arrangement. As of March 31, 2022, and December 31, 2021, we
had a reserve for potentially un-collectable long-term financing receivables of $247,500 and $247,500 respectively.
Four
(4) customers accounted for approximately 98% of accounts receivable on March 31, 2022. Our trade accounts primarily represent unsecured
receivables. Historically, our bad debt write-offs related to these trade accounts have been insignificant.
Lease
asset
As
of March 31, 2022, and December 31, 2021 we had a lease asset that was purchased from General Electric with a value of $1,309,527, however
due the purchase price allocation, we recognized a value of $217,584. The lease is due to be commissioned in the second quarter of 2022
and will generate approximately $20,000 per month for 120 months. See note 3 for additional information.
Inventory
Inventories
are valued at the lower of weighted average cost or market value. Our industry experiences changes in technology, changes in market value
and availability of raw materials, as well as changing customer demand. We make provisions for estimated excess and obsolete inventories
based on regular audits and cycle counts of our on-hand inventory levels and forecasted customer demands and at times additional provisions
are made. Any inventory write offs are charged to the reserve account. As of March 31, 2022, and December 31, 2021, we had a reserve
for potentially obsolete inventory of $321,104.
Property
and Equipment
Property
and equipment are recorded at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value
of the minimum lease payments or the fair market value of the related assets. The cost of ordinary maintenance and repairs is charged
to operations. Depreciation and amortization are computed on the straight-line method over the following estimated useful lives of the
related assets:
SCHEDULE OF PROPERTY AND EQUIPMENT ESTIMATED USEFUL LIVES
| Furniture and fixtures | |
3 to 7 years |
| Equipment | |
7 to 10 years |
| Leasehold Improvements | |
7 years |
Long
–Lived Assets
Our
management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long lived
assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment
if any, is measured based on fair value and is charged to operations in the period in which long-lived assets impairment is determined
by management. There can be no assurance however, that market conditions will not change or demand for our services will continue, which
could result in impairment of long-lived assets in the future.
Revenue
Recognition
The
Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC
606”).
Performance
Obligations Satisfied Over Time
FASB
ASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10
An
entity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one
of the following criteria is met:
a.
The customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB
ASC 606-10-55-5 through 55-6).
b.
The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is
created or enhanced (as described in FASB ASC 606-10-55-7).
c.
The entity’s performance does not create an asset with an alternative use to the entity (see FASB ASC 606-10-25-28), and the entity
has an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).
Performance
Obligations Satisfied at a Point in Time
FASB
ASC 606-10-25-30
If
a performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time. To determine the point
in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should
consider the guidance on control in FASB ASC 606-10-25-23 through 25-26. In addition, it should consider indicators of the transfer of
control, which include, but are not limited to, the following:
a.
The entity has a present right to payment for the asset
b.
The customer has legal title to the asset
c.
The entity has transferred physical possession of the asset
d.
The customer has the significant risks and rewards of ownership of the asset
e.
The customer has accepted the asset
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 |
Also,
from time to time our contracts state that the customer is not obligated to pay a final payment until the units are commissioned, i.e.
a final payment of 10%. As of March 31, 2022 and December 31, 2021 we had $33,000 and 33,000 of deferred revenue, which is expected to
be recognized in the fourth quarter of year 2022.
Also,
from time to time we require upfront deposits from our customers based on the contract. As of March 31, 2022 and December 31, 2021, we
had outstanding customer deposits of $90,516
and $24,040
respectively.
Fair
Value of Financial Instruments
The
Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements
and Disclosures” for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded
disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or
the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between
market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize
the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the
Company uses to measure fair value:
| |
● |
Level
1: Quoted prices in active markets for identical assets or liabilities. |
| |
|
|
| |
● |
Level
2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets
that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full
term of the related assets or liabilities. |
| |
|
|
| |
● |
Level
3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets
or liabilities. The Company’s derivative liabilities have been valued as Level 3 instruments. We value the derivative liability
using a lattice model, with a volatility of 84% and using a risk free interest rate of 0.15% |
The
Company’s financial instruments consist of cash, prepaid expenses, inventory, accounts payable, convertible notes payable, advances
from related parties, and derivative liabilities. The estimated fair value of cash, prepaid expenses, investments, accounts payable,
convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these
instruments.
The
carrying amounts of the Company’s financial instruments as of March 31, 2022 and December 31, 2021 reflect:
SCHEDULE OF FAIR VALUE OF CONVERTIBLE NOTES DERIVATIVE LIABILITY
| | |
Level
1 | | |
Level
2 | | |
Level
3 | | |
Total | |
| | |
| | | |
| | | |
| | | |
| | |
| Fair value of convertible notes derivative liability – March 31,
2022 | |
$ | – | | |
$ | – | | |
$ | 240,669 | | |
$ | 240,669 | |
| | |
Level
1 | | |
Level
2 | | |
Level
3 | | |
Total | |
| | |
| | | |
| | | |
| | | |
| | |
| Fair value of convertible notes derivative liability – December
31, 2021 | |
$ | – | | |
$ | – | | |
$ | 256,683 | | |
$ | 256,683 | |
The
carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because
of the short-term nature of these financial instruments.
Foreign Currency Translation and Comprehensive Income (Loss)
We
have no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.
The accounts of the Company’s Chinese entities are maintained in RMB. The accounts of the
Chinese entities were translated into USD in accordance with FASB ASC Topic 830 “Foreign Currency Matters.” All assets and
liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates
and the statements of operations and cash flows are translated at the weighted average exchange rate for the period. The resulting translation
adjustments are reported under other comprehensive income (loss) in accordance with FASB ASC Topic 220, “Comprehensive Income.”
Gains and losses resulting from foreign currency transactions are reflected in the statements of operations.
The
Company follows FASB ASC Topic 220-10, “Comprehensive Income (loss).” Comprehensive income (loss) comprises net income (loss)
and all changes to the statements of changes in stockholders’ equity, except those due to investments by stockholders, changes
in additional paid-in capital and distributions to stockholders.
Net
Profit (Loss) per Common Share
Basic
profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding. At March 31, 2022, we
had outstanding common shares of 961,760,014
used in the calculation of basic earnings per
share. Basic Weighted average common shares and equivalents for the three months ended March 31, 2022 and March 31, 2021 were 952,293,421
and 853,322,779
respectively. As of March 31, 2022, we had
convertible notes, convertible into approximately 480,751,127
of additional common shares, 5,000,000
common stock warrants. Fully diluted weighted
average common shares and equivalents were withheld from the calculation for the three months ended March 31, 2022 and March 31, 2021
as they were considered anti-dilutive.
Research
and Development
We
had no amounts of research and development R&D expense during the three & three months ended March 31, 2022 and 2021.
Segment
Disclosure
FASB
Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an
enterprise’s reportable segments. The Company has three reportable segments: Clean Energy HRS (HRS), CETY Europe and the legacy
electronic manufacturing services division. The segments are determined based on several factors, including the nature of products and
services, the nature of production processes, customer base, delivery channels and similar economic characteristics. Refer to note 1
for a description of the various product categories manufactured under each of these segments.
An
operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is
defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include amortization
of intangibles, stock-based compensation, other charges (income), net and interest and other, net.
Selected
Financial Data:
SCHEDULE OF SEGMENT REPORTING
| | |
2022 | | |
2021 | |
| | |
for
the three months ended March, 31 | |
| | |
2022 | | |
2021 | |
| Net Sales | |
| | | |
| | |
| Manufacturing and Engineering | |
| 32,280 | | |
| 30,229 | |
| Clean Energy HRS | |
| 441,193 | | |
| 66,000 | |
| LNG Trading | |
| 267,966 | | |
| - | |
| Cety Europe | |
| 33,827 | | |
| 39,045 | |
| Total Sales | |
| 775,266 | | |
| 135,274 | |
| | |
| | | |
| | |
| Segment income and reconciliation before tax | |
| | | |
| | |
| Manufacturing and Engineering | |
| 23,986 | | |
| 21,526 | |
| Clean Energy HRS | |
| 400,487 | | |
| 53,828 | |
| LNG Trading | |
| 60,733 | | |
| | |
| Cety Europe | |
| 28,986 | | |
| 36,774 | |
| Total Segment income | |
| 514,193 | | |
| 112,128 | |
| | |
| | | |
| | |
| Reconciling items | |
| | | |
| | |
| General and Administrative
expense | |
| (92,935 | ) | |
| (102,381 | ) |
| Salaries | |
| (191,217 | ) | |
| (221,647 | ) |
| Travel | |
| (27,734 | ) | |
| (15,013 | ) |
| Professional Fees | |
| (64,853 | ) | |
| (45,742 | ) |
| Facility lease and Maintenance | |
| (88,962 | ) | |
| (86,210 | ) |
| Consulting | |
| (25,803 | ) | |
| - | |
| Bad Debt Expense | |
| - | | |
| - | |
| Depreciation and Amortization | |
| (7,519 | ) | |
| (8,073 | ) |
| Change in derivative liability | |
| 16,014 | | |
| 1,749,173 | |
| Other Income | |
| (9,335 | ) | |
| - | |
| Interest and Financing
fees | |
| (132,470 | ) | |
| (313,651 | ) |
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 March 31, 2022 and 2021 we had $0 in share-based expense, due to the issuance of common
stock. As of March 31, 2022, we had no further non-vested expense to be recognized.
Income
Taxes
Federal
Income taxes are not currently due since we have had losses since inception of Clean Energy Technologies.
On
December 22, 2018 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant
changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”)
from 35% to 21% effective January 1, 2018. The Company will compute its income tax expense for the year ended December 31, 2022 using
a Federal Tax Rate of 21% and an estimated state of California rate of 9%.
Income
taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under
this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis
of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred
tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.
Deferred
income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax reporting purposes.
As
of March 31, 2022, we had a net operating loss carry-forward of approximately $(9,090,998) and a deferred tax asset of $2,727,299 using
the statutory rate of 30%. The deferred tax asset may be recognized in future periods, not to exceed 20 years. However, due to the uncertainty
of future events we have booked valuation allowance of $(2,727,299). FASB ASC 740 prescribes recognition threshold and measurement attributes
for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC 740
also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
On March 31, 2022 the Company had not taken any tax positions that would require disclosure under FASB ASC 740.
SCHEDULE OF DEFERRED TAX ASSET
| | |
|
March 31, 2022 | | |
|
December 31, 2021 | |
| Deferred Tax Asset | |
$ | 2,727,299 | | |
$ | 2,683,914 | |
| Valuation Allowance | |
| (2,727,299 | ) | |
| (2,683,914 | ) |
| Deferred Tax Asset
(Net) | |
$ | - | | |
$ | - | |
On
February 13, 2018, Clean Energy Technologies, Inc., a Nevada corporation (the “Registrant” or “Corporation”)
entered into a Common Stock Purchase Agreement (“Stock Purchase Agreement”) by and between MGW Investment I Limited (“MGWI”)
and the Corporation. The Corporation received $907,388 in exchange for the issuance of 302,462,667 restricted shares of the Corporation’s
common stock, par value $.001 per share (the “Common Stock”).
On
February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $939,500 with an interest rate of 10% per annum interest rate and a maturity date of February
13, 2020. The CVL Note is convertible into shares of Common Stock at $0.003 per share, as adjusted as provided therein. This note was
assigned to MGW Investments.
This
resulted in a change in control, which limited the net operating to that date forward. We are subject to taxation in the U.S. and the
states of California. Further, the Company currently has no open tax years’ subject to audit prior to December 31, 2015. The Company
is current on its federal and state tax returns.
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
| | |
|
March 31,2022 | | |
|
December 31, 2021 | |
| Accounts Receivable | |
$ | 1,194,438 | | |
$ | 768,032 | |
| Less reserve for uncollectable accounts | |
| (75,000 | ) | |
| (75,000 | ) |
| Total | |
$ | 1,119,438 | | |
$ | 693,032 | |
Our
Accounts Receivable is pledged to Nations Interbanc, our line of credit.
SCHEDULE OF LEASE RECEIVABLE ASSET
| | |
|
March 31, 2022 | | |
|
December 31, 2021 | |
| Lease asset | |
$ | 217,584 | | |
$ | 217,584 | |
The
Company is currently modifying the assets subject to lease to meet the provisions of the agreement, and as of March 31, 2022 any
collection on the lease payments was not yet considered probable, resulting in no derecognition of the underlying asset and no net lease
investments recognized on the sales-type lease pursuant to ASC 842-30-25-3.
SCHEDULE OF DERECOGNITION OF UNDERLYING ASSETS OF FINANCING RECEIVABLE
| | |
|
March 31, 2022 | | |
|
December 31, 2021 | |
| Long-term financing receivables | |
$ | 932,270 | | |
$ | 932,270 | |
| Less Reserve for uncollectable accounts | |
| (247,500 | ) | |
| (247,500 | ) |
| Long-term financing receivables - net | |
$ | 684,770 | | |
$ | 684,770 | |
On
a contract by contract basis or in response to certain situations or installation difficulties, the Company may elect to allow non-interest
bearing repayments in excess of 1 year.
Our
long term financing Receivable are pledged to Nations Interbanc, our line of credit.
NOTE
4 – INVENTORY
Inventories
by major classification were comprised of the following at:
SCHEDULE OF INVENTORIES
| | |
|
March 31,2022 | | |
|
December 31, 2021 | |
| Inventory | |
$ | 957,167 | | |
$ | 783,296 | |
| Less reserve for uncollectable accounts | |
| (321,104 | ) | |
| (321,104 | ) |
| Total | |
$ | 636,063 | | |
$ | 462,192 | |
Our
Inventory is pledged to Nations Interbanc, our line of credit.
NOTE
5 – PROPERTY AND EQUIPMENT
Property
and equipment were comprised of the following at:
SCHEDULE OF PROPERTY AND EQUIPMENT
| | |
|
March 31,2022 | | |
December
31, 2021 | |
| Property and Equipment | |
$ | 1,354,824 | | |
$ | 1,354,824 | |
| Leasehold Improvements | |
| 75,436 | | |
| 75,436 | |
| Accumulated Depreciation | |
| (1,401,794 | ) | |
| (1,397,244 | ) |
| Net Fixed Assets | |
$ | 28,466 | | |
$ | 33,016 | |
Our
Depreciation Expense for the three months ended March 31, 2022 and 2021 was $4,550 and $5,104 respectively.
Our
Property Plant and Equipment is pledged to Nations Interbanc, our line of credit.
NOTE
6 – INTANGIBLE ASSETS
Intangible
assets were comprised of the following at:
SCHEDULE OF INTANGIBLE ASSETS
| | |
|
March 31,2022 | | |
|
December 31, 2021 | |
| Goodwill | |
$ | 747,976 | | |
$ | 747,976 | |
| LWL Intangibles | |
$ | 1,468,709 | | |
$ | 1,468,709 | |
| License | |
| 354,322 | | |
| 354,322 | |
| Patents | |
| 112,600 | | |
| 115,569 | |
| Accumulated Amortization | |
| (78,189 | ) | |
| (75,220 | ) |
| Net Fixed Assets | |
$ | 2,605,418 | | |
$ | 2,611,356 | |
Our
Amortization Expense for the three months ended March 31, 2022 and 2021 was $2,969 and 2,969 respectively.
Based
on the foregoing analysis of the facts surrounding the Company’s acquisition of LWL, it is the Company’s position that the
Company is the acquirer of LWL, under the acquisition method of accounting.
As
such, as of November 8, 2021 (the acquisition date), the Company recognized, separately from goodwill, the identifiable assets acquired
and the liabilities assumed in the Business combination.
The
following table presents the purchase price allocation:
SCHEDULE OF BUSINESS ACQUISITION PURCHASE PRICE ALLOCATION
| Consideration: | |
| | |
| Cash
and cash equivalents | |
$ | 1,500,000 | |
| | |
| | |
| Total
purchaser consideration | |
$ | 1,500,000 | |
| | |
| | |
| Assets acquired: | |
| | |
| Cash and cash equivalents | |
$ | 6,156 | |
| Prepayment | |
$ | 13,496 | |
| Other receivable | |
$ | 20,000 | |
| Trading Contracts | |
$ | 146,035 | |
| Shenzhen Gas Relationship | |
$ | 1,314,313 | |
| Total
assets acquired | |
$ | 1,508,539 | |
| | |
| | |
| Liabilities assumed: | |
| | |
| Advance Receipts | |
$ | (8539 | |
| Taxes
Payable | |
$ | 179 | |
| Net
Assets Acquired: | |
$ | 1,500,000 | |
If
LWL reach USD 5 million in revenue or net profit of USD 1 million by December 31, 2022, then based on the performance contingency there
will be issuance of 20,000,000 shares of CETY to the Seller.As of the date of the filing the performance contingencies have not been
met.
NOTE 7 – CONVERTIBLE NOTE RECEIVABLE
Effective
January 10, 2022, JHJ (“note holder”) entered a convertible note agreement with Chengdu Rongjun Enterprise Consulting Co.,
Ltd (“Rongjun” or “the borrower”) with maturity on January 10, 2025. Under this convertible note, JHJ lent RMB
5,000,000 ($0.78 million) to Rongjun with annual interest rate of 12%, calculated from the Issuance Date until all outstanding interest
and principal is paid in full. The Borrower may pre-pay principal or interest on this Note at any time prior to the maturity date, without
penalty. JHJ has the right to convert this note directly or indirectly into shares or equity interest of Heze Hongyuan Natural Gas Co.,
Ltd (“Heze”) equal to 15% of Heze’s outstanding Equity Interest. Rongjun owns 90% of Heze. During the three months ended,
JHJ recorded $17,961 interest income from this note.
NOTE
8 – ACCRUED EXPENSES
SCHEDULE OF ACCRUED EXPENSES
| | |
|
March 31,2022 | | |
|
December 31, 2021 | |
| Accrued Wages | |
$ | 69,007 | | |
$ | 22,950 | |
| Accrued Interest and other | |
| 53,607 | | |
| 120,897 | |
| Accrued Interest and other | |
$ | 122,614 | | |
$ | 143,847 | |
NOTE
9 – 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 $50,000
and fixed fee amount of $3,500.
As of December 31, 2019, the outstanding balance was $36,500.
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 2021.
On
November 11, 2013, we entered into an accounts receivable financing agreement with American Interbanc (now Nations Interbanc). Amounts
outstanding under the agreement bear interest at the rate of 2.5%
per month. It is secured by the assets of the Company. In addition, it is personally guaranteed by Kambiz Mahdi, our Chief Executive
Officer. As of March 31, 2022, the outstanding balance was $1,153,956
compared to $1,169,638
at December 31, 2021.
On
April 1, 2021, we entered into an amendment to the purchase order financing agreement with DHN Capital, LLC dba Nations Interbanc. Nations
Interbanc has lowered the accrued fees balance by $275,000.00 as well as the accrual rate to 2.25% per 30 days. As a result, CETY has
agreed to remit a minimum monthly payment of $50,000 by the final calendar day of each month.
On
September 11, 2015, our CE HRS subsidiary issued a promissory note in the initial principal amount $1,400,000 and assumed a pension liability
of $100,000, for a total liability of $1,500,000, in connection with our acquisition of the heat recovery solutions, or HRS, assets of
General Electric International, Inc., a Delaware corporation (“GEII”), including intellectual property, patents, trademarks,
machinery, equipment, tooling and fixtures. The note bears interest at the rate of 2.66% per annum. The note is payable on the following
schedule: (a) $200,000 in principal on December 31, 2015 and (b) thereafter, the remaining principal amount of $1,200,000, together with
interest thereon, payable in equal quarterly instalments of principal and interest of $157,609, commencing on December 31, 2016 and continuing
until December 31, 2019, at which time the remaining unpaid principal amount of this note and all accrued and unpaid interest thereon
shall be due and payable in full.
Total
Liability to GE
SCHEDULE OF NOTES PAYABLE
| | |
|
March
31, 2022 | | |
|
December 31, 2021 | |
| Note payable GE | |
$ | 1,200,000 | | |
$ | 1,200,000 | |
| Accrued transition services | |
| 972,233 | | |
| 972,233 | |
| Accrued Interest | |
| 339,823 | | |
| 325,843 | |
| Total | |
$ | 2,512,056 | | |
$ | 2,498,076 | |
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 $110,700,
with an interest rate of 1%. This note payment is due in full on May 4, 2022 and also has the possibility of forgiveness. This note was
forgiven on July 1, 2021.
On
February 4 , 2021 the company entered in to a payroll protection loan, with Comerica bank, guaranteed by the SBA due February 4, 2023
for $89,200, with an interest rate of 1%. This note payment is due in full on February 4, 2023 and also has the possibility of forgiveness.
As of the date of this filing this note has been forgiven. This note was forgiven on July 26, 2021.
On
September 7, 2021 the company entered into a promissory note in the amount of $226,345,
with and interest rate of 10%
per annum and a default
interest rate of 22% per annum. This note is due
in full on September
7, 2022 and has mandatory monthly payments of
$23,828.
The note had an OID of $23,345
and recorded as finance fee expense. In the event
of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This is note
is convertible, but not until a contingent event of default has taken place, none of which have occurred as of the date of this filing.
The balance on this note as of March 31, 2022 was $119,142.
On
September 28, 2021 the company entered into a promissory note in the amount of $142,720,
with and interest rate of 10%
per annum and a default
interest rate of 22% per annum. This note is due
in full on September 28, 2022 and has mandatory monthly payments of $15,003.
The note had an OID of $14,720
and recorded as finance fee expense. In the event
of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This is note
is convertible, but not until a contingent event of default has taken place, none of which have occurred as of the date of this filing.
The balance on this note as of March 31, 2022 was $75,015.
On
March 10, 2022 the company entered into a promissory note in the amount of $170,600,
with and interest rate of 10%
per annum and a default
interest rate of 22% per annum. This note is
due in full on March 10, 2023 and has mandatory monthly payments of $18,766.
The note had an OID of $17,060
and recorded as finance fee expense. In the event
of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This is note
is convertible, but not until a contingent event of default has taken place, none of which have occurred as of the date of this filing.
The balance on this note as of March 31, 2022 was $170,060.
Convertible
notes
On
May 5, 2017 we entered into a nine-month convertible note payable for $78,000,
which accrues interest at the rate of 12%
per annum. It is not convertible until three months after its issuance and has a conversion rate of sixty one percent (61%) of the lowest
closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15)
Trading Days immediately preceding the date of conversion. On November 6, 2017 this note was assumed and paid in full at a premium for
a total of $116,600
by Cybernaut Zfounder Ventures. An amended term
were added to the original note with the interest rate of 14%. This note matured on February 21st of 2018 and is currently in default.
As of March 31, 2022, the outstanding balance due was $91,600.
On
May 24, 2017 we entered into a nine-month convertible note payable for $32,000, which accrues interest at the rate of 12% per annum.
It is not convertible until three months after its issuance and has a conversion rate of fifty-five eight percent (58%) of the lowest
closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date
of conversion. On November 6, 2017 this note was assumed and paid in full at a premium for a total of $95,685, by Cybernaut Zfounder
Ventures. An amended term was added to the original note with the interest rate of 14%. This note matured on February
26th, 2018 and is currently in default.
As of March 31, 2022, the outstanding balance due was $95,685
On
October 30, 2019 we entered into a convertible note payable for $103,000, with a maturity date of October 30, 2020, which accrues interest
at the rate of 12% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. This
note was paid in full on May 1, 2020.
On
January 8, 2020 we entered into a convertible note payable for $103,000, with a maturity date of January 8, 2021, which accrues interest
at the rate of 12% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. Subsequently
The fair value of the convertible feature was $87,560, we recorded a debt discount of $87,560. On July 7, 2020 this note was paid in
full.
On
February 19, 2020 we entered into a convertible note payable for $53,000, with a maturity date of February 19, 2021, which accrues interest
at the rate of 12% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. On
August 18, 2020 this note was paid in full.
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and one
million (1,000,000) restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount
of $4,800 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any
time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment. The shares were valued on the date
of issuance using the stock price on that day for a total value of $19,211. We also recognized a debt discount of $17,861. We amortized
$3,234 of the debt discount during the three months ended September 30, 2020. The unamortized debt discount as of September 30, 2020
was $14,267. This note was fully converted as of December 31, 2020. This note was converted into 14,035,202 shares of common stock, for
a total of $171,229 including principal of 164,800 plus a accrued interest of $6,429. Also on January 12, 2021 the company issued 697,861shares
of its common stock as redemptions of $27,914 in cashless warrants.
On
July 15, 2020 we entered into a convertible note payable for $128,000, with a maturity date of July 15, 2021, which accrues interest
at the rate of 12% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. This
note was paid in full on October 16, 2020.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and one
million (1,000,000) restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount
of $3,000 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any
time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment. The shares were valued on the date
of issuance using the stock price on that day for a total value of $19,211. We also recognized a debt discount of $17,861. We amortized
$14,627 of the debt discount during the six months ended June 30, 2021. The unamortized debt discount as of March 31, 2022 was $0. This
note was paid in full on January 8, 2021.
On
September 10, 2020 we entered into a convertible note payable for $63,000, with a maturity date of July 15, 2021, which accrues interest
at the rate of 11% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. This
note was paid in full on January 15, 2021.
On
October 14, 2020 Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with Firstfire Global Opportunities Fund LLC, (the “Investor”), pursuant to which the Company
issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of $168,000, a Warrant
(the “Warrant”) to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common
Stock”) and 1,250,000 restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue
discount of $8,000 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible
at any time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment. The shares were valued on the
date of issuance using the stock price on that day for a total value of $24,282. We also recognized a debt discount of $24,282. We amortized
$19,093 of the debt discount during the three months ended March 31, 2021. The unamortized debt discount as of March 31, 2022 was $0.
On January 29, 2021 this note was paid in full. Also on January 12, 2021 the company issued 697,861shares of its common stock as redemptions
of $27,914 in cashless warrants.
On
November 10, 2020 we entered into a convertible note payable for $53,000, with a maturity date of November 10, 2021, which accrues interest
at the rate of 11% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. On
February 11, 2021 this note was paid in full.
On
December 18, 2020 we entered into a convertible note payable for $83,500, with a maturity date of December 18, 2021, which accrues interest
at the rate of 11% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. On
March 11, 2021 this note was paid in full.
On
December 27, 2021, we entered into a convertible note payable with Universal Scope Inc. for $650,000 with a maturity date of June 21,
2022, which accrues interest at the rate of 2% per annum. It is convertible at any time after its issuance and has fix conversion rate
of $0.06 of our common stock.
Total
due to Convertible Notes
SCHEDULE OF CONVERTIBLE NOTES
| | |
|
March 31,2022 | | |
|
December 31, 2021 | |
| Total convertible notes | |
$ | 1,171,818 | | |
$ | 1,109,890 | |
| Accrued Interest | |
| 116,925 | | |
| 110,370 | |
| Debt Discount | |
| - | | |
| - | |
| Total | |
$ | 1,288,742 | | |
$ | 1,220,260 | |
Note
10 – Derivative Liabilities
As
a result of the convertible notes we recognized the embedded derivative liability on the date of note issuance. We also revalued the
remaining derivative liability on the outstanding note balance on the date of the balance sheet. We value the derivative liability using
a binomial lattice model with an expected volatility range of 70%
to 84%,
a risk-free interest rate range of 0.15%,
an exercise price range of $.0245
to $.0258
and a stock price of $.033.
The remaining derivative liabilities were:
SCHEDULE OF FAIR VALUE OF DERIVATIVE LIABILITY
| | |
March
31, 2022 | | |
December
31, 2021 | |
| Derivative Liabilities on
Convertible Loans: | |
| | | |
| | |
| Outstanding Balance | |
$ | 240,669 | | |
$ | 256,683 | |
NOTE
11 – COMMITMENTS AND CONTINGENCIES
Operating
Rental Leases
As
of May 1, 2017, our corporate headquarters are located at 2990 Redhill Unit A, Costa Mesa, CA. On March 10, 2017, the Company signed
a lease agreement for a 18,200-square foot CTU Industrial Building. Lease term is seven years and two months beginning July 1, 2017.
Future minimum lease payments for the years ending December 31, are: In October of 2018 we signed a sublease agreement with our facility
in Italy with an indefinite term that may be terminated by either party with a 60-day notice for 1,000 Euro per month. Due to the short
termination clause, we are treating this as a month-to-month lease.
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
| Year | |
Lease
Payment | |
| 2022 | |
| 249,132 | |
| 2023 | |
| 191,903 | |
| Imputed Interest | |
| (19,792 | ) |
| Net Lease Liability | |
$ | 421,243 | |
As
of March 31, 2022
| Year | |
Lease
Payment | |
| 2022 | |
| 186,849 | |
| 2023 | |
| 191,903 | |
| Imputed Interest | |
| (14,047 | ) |
| Net Lease Liability | |
$ | 364,709 | |
Our
lease expense for the three months ended March 31, 2022 and 2021 was $88,962 and $86,210 respectively.
ASB
ASU 2016-02 “Leases (Topic 842)” – In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize
almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained
a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely
similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current
model, but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We have adopted the above ASU
as of January 1, 2019. The right of use asset and lease liability have been recorded at the present value of the future minimum lease
payments, utilizing a 5% average borrowing rate and the company is utilizing the transition relief and “running off” on current
leases.
Severance
Benefits
Mr.
Mahdi will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Mahdi would have been entitled
to receive through the remainder or the Employment Period or One (1) year, whichever is greater.
NOTE
12 – CAPITAL STOCK TRANSACTIONS
On
April 21, 2005, our Board of Directors and shareholders approved the re-domicile of the Company in the State of Nevada, in connection
with which we increased the number of our authorized common shares to 200,000,000 and designated a par value of $.001 per share.
On
May 25, 2006, our Board of Directors and shareholders approved an amendment to our Articles of Incorporation to authorize a new series
of preferred stock, designated as Series C, and consisting of 15,000 authorized shares.
On
June 30, 2017, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 400,000,000
and in the number of our authorized preferred shares to 10,000,000. The amendment effecting the increase in our authorized capital was
filed and effective on July 5, 2017.
On
August 28, 2018, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 800,000,000.
The amendment effecting the increase in our authorized capital was filed and effective on August 23, 2018.
On
June 10, 2019, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 2,000,000,000.
The amendment effecting the increase in our authorized capital was effective on September 27, 2019
Common
Stock Transactions
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and one
million (1,000,000) restricted shares of Common Stock (“Commitment fee Shares”). On December 31, 2020 this note was converted
into 14,035,202 shares of common stock, for a total of $171,229 including principal of 164,800 plus a accrued interest of $6,429 as a
result this note was paid in full. Also on January 12, 2021 the company issued 697,861shares of its common stock as redemptions of $27,914
in cashless warrants.
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
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and one
million (1,000,000) restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount
of $3,000 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any
time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment. The shares were valued on the date
of issuance using the stock price on that day for a total value of $19,211. We also recognized a debt discount of $17,861. We amortized
$14,627 of the debt discount during the six months ended June 30, 2021. The unamortized debt discount as of March 31, 2022 was $0. This
note was paid in full on January 8, 2021. Also on February 5, 2021 the company issued 1,100,000 shares of its common stock as redemptions
of $44,000 in cashless warrants.
On
October 14, 2020 Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with Firstfire Global Opportunities Fund LLC, (the “Investor”), pursuant to which the Company
issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of $168,000, a Warrant
(the “Warrant”) to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common
Stock”) and 1,250,000 restricted shares of Common Stock (“Commitment fee Shares”). These shares were issued on February
1, 2021 and 547,468.00 shares were issued as a result of exercise of the warrants on May 28, 2021. This note was paid in full as of January
29, 2021.
On
February 5, 2021 we issued 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
February 9, 2021 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
February 23, 2021 we issued 3,754,720 of common stock at a purchase price of $.014 per share and 3,754,720 of warrant at purchase price
of 0.04 for an aggregate price of $52,566 to an accredited investor in a private sale. An additional 36,283 shares were issued as a result
of a correction made to the original transaction.
On
March 5, 2021 we issued 8,333,333 of common stock at a purchase price of $.06 per share for an aggregate price of $500,000 to an accredited
investor in a private sale.
On
March 10, 2021 we issued 32,125,000 units of common stock at a purchase price of $.08 per share for an aggregate price of $2,570,000
to an accredited investor in a private sale.
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
September 2, 2021, Clean Energy Technology, Inc., a Nevada corporation (the “Company”), entered into an Equity Financing
Agreement (“Equity Financing Agreement”) and Registration Rights Agreement (“Registration Rights Agreement”)
with GHS Investments LLC, a Nevada limited liability company (“GHS”). Under the terms of the Equity Financing Agreement,
GHS agreed to provide the Company with up to $4,000,000 upon effectiveness of a registration statement on Form S-1 (the “Registration
Statement”) filed with the U.S. Securities and Exchange Commission (the “Commission”) As a result we issued 1,142,459
Shares of common stock as an commitment fee, which was valued and expense in the amount of $47,699. On October 14, 2021, this Form S-1
became effective.
On
September 13, 2021 we issued 1,100,630 shares of common stock for a correction of a previous issuance error.
During
the year ended December 31, 2021, we issued 9,842,072 shares of common stock, under S-1 registration statement with GHS for a total of
$294,016 in net proceeds and expensed $96,334 in legal and financing fees as a result.
On
December 31, 2021 we issued 9,833,750 shares of our common stock under our Reg A offering at $.08 per share. These shares are unrestricted
and free trading.
During
the quarter ended March 31, 2022, we issued 3,155,865 shares of common stock, under S-1 registration statement with GHS for a total of
$134,755 in net proceeds and expensed $45,498 in legal and financing fees as a result.
On
February 21, 2022, we issued 15,035,000 shares of our common stock under our Reg A offering at $.08 per share. These shares are unrestricted
and free trading.
Common
Stock
Our
Articles of Incorporation authorize us to issue 2,000,000,000 shares of common stock, par value $0.001 per share. As of March 31, 2022
there were 961,760,014 shares of common stock outstanding. All outstanding shares of common stock are, and the common stock to be issued
will be, fully paid and non-assessable. Each share of our common stock has identical rights and privileges in every respect. The holders
of our common stock are entitled to vote upon all matters submitted to a vote of our shareholders and are entitled to one vote for each
share of common stock held. There are no cumulative voting rights.
The
holders of our common stock are entitled to share equally in dividends and other distributions that our Board of Directors may declare
from time to time out of funds legally available for that purpose, if any, after the satisfaction of any prior rights and preferences
of any outstanding preferred stock. If we liquidate, dissolve or wind up, the holders of common stock shares will be entitled to share
ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities and our
obligations to holders of our outstanding preferred stock.
Preferred
Stock
Our
Articles of Incorporation authorize us to issue 20,000,000 shares of preferred stock, par value $0.001 per share. Our Board of Directors
has the authority to issue additional shares of preferred stock in one or more series, and fix for each series, the designation of and
number of shares to be included in each such series. Our Board of Directors is also authorized to set the powers, privileges, preferences,
and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or
restrictions of the shares of each such series.
Unless
our Board of Directors provides otherwise, the shares of all series of preferred stock will rank on parity with respect to the payment
of dividends and to the distribution of assets upon liquidation. Any issuance by us of shares of our preferred stock may have the effect
of delaying, deferring or preventing a change of our control or an unsolicited acquisition proposal. The issuance of preferred stock
also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect
the rights and powers, including voting rights, of the holders of common stock.
We
previously authorized 440 shares of Series A Convertible Preferred Stock, 20,000 shares of Series B Convertible Preferred Stock, and
15,000 shares Series C Convertible Preferred Stock. As of August 20, 2006, all series A, B, and C preferred had been converted into common
stock.
Effective
August 7, 2013, our Board of Directors designated a series of our preferred stock as Series D Preferred Stock, authorizing 15,000 shares.
Our Series D Preferred Stock offering terms authorized us to raise up to $1,000,000 with an over-allotment of $500,000 in multiple closings
over the course of six months. We received an aggregate of $750,000 in financing in subscription for Series D Preferred Stock, or 7,500
shares.
The
following are primary terms of the Series D Preferred Stock. The Series D Preferred holders were initially entitled to be paid a special
monthly divided at the rate of 17.5% per annum. Initially, the Series D Preferred Stock was also entitled to be paid special dividends
in the event cash dividends were not paid when scheduled. If the Company does not pay the dividend within five (5) business days from
the end of the calendar month for which the payment of such dividend to owed, the Company will pay the investor a special dividend of
an additional 3.5%. Any unpaid or accrued special dividends will be paid upon a liquidation or redemption. For any other dividends or
distributions, the Series D Preferred Stock participates with common stock on an as-converted basis. The Series D Preferred holders may
elect to convert the Series D Preferred Stock, in their sole discretion, at any time after a one year (1) year holding period, by sending
the Company a notice to convert. The conversion rate is equal to the greater of $0.08 or a 20% discount to the average of the three (3)
lowest closing market prices of the common stock during the ten (10) trading day period prior to conversion. The Series D Preferred Stock
is redeemable from funds legally available for distribution at the option of the individual holders of the Series D Preferred Stock commencing
any time after the one (1) year period from the offering closing at a price equal to the initial purchase price plus all accrued but
unpaid dividends, provided, that if the Company gave notice to the investors that it was not in a financial position to redeem the Series
D Preferred, the Company and the Series D Preferred holders are obligated to negotiate in good faith for an extension of the redemption
period. The Company timely notified the investors that it was not in a financial position to redeem the Series D Preferred and the Company
and the investors have engaged in ongoing negotiations to determine an appropriate extension period. The Company may elect to redeem
the Series D Preferred Stock any time at a price equal to initial purchase price plus all accrued but unpaid dividends, subject to the
investors’ right to convert, by providing written notice about its intent to redeem. Each investor has the right to convert the
Series D Preferred Stock at least ten (10) days prior to such redemption by the Company.
In
connection with the subscriptions for the Series D Preferred, we issued series F warrants to purchase an aggregate of 375,000 shares
of our common stock at $.10 per share and series G warrants to purchase an aggregate of 375,000 shares of our common stock at $.20 per
share.
On
August 21, 2014, a holder holding 5,000 shares of Preferred Series D Preferred agreed to lower the dividend rate to 13% on its Series
D Preferred. In September 2015, all holders of Series D Preferred signed and delivered estoppel agreements, whereby the holders agreed,
among other things, that the Series D Preferred was not in default and to reduce (effective as of December 31, 2015) the dividend rate
on the Series D Preferred Stock to six percent per annum and to terminate the 3.5% penalty in respect of unpaid dividends accruing on
or after such date.
In
the first quarter of 2019, we signed agreements to issue 4,000,000 shares of common stock valued at $.015 for a total value of $60,000
for the conversion of 800 preferred series D shares , which were subsequently issued.
We
also recorded a $60,000 commitment fee in exchange for the “stand off” and estoppel agreement and discounted conversion terms
to account for the difference in the fair value which we offset to retained earnings.
On
February 4, 2020 we issued 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
February 9, 2021 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
March 12, 2021 we issued 3,693,588 shares of our common stock together with accrued preferred dividend at a price of $.08 per share,
in exchange for the conversion of 1300 shares of our Series D Preferred Stock and accrued preferred dividend.
Warrants
A
summary of warrant activity for the periods is as follows:
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and one
million (1,000,000) restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount
of $4,800 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any
time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment. On January 8, 2021, the cashless warrants
were converted into 697,861 shares of our common stock.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and one
million (1,000,000) restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount
of $3,000 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any
time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment. On February 1, 2021 the cashless warrants
were converted into 1,100,000 shares of our common stock.
On
February 23, 2021 we issued 3,754,720 of common stock at a purchase price of $.014 per share and 3,754,720 of warrant at purchase price
of 0.04 for an aggregate price of $52,566 to an accredited investor in a private sale. An additional 36,283 shares were issued as a result
of a correction made to the original transaction. These warrants expire on February 23, 2022.
SCHEDULE
OF WARRANT ACTIVITY
| | |
Warrants
- Common Share Equivalents | | |
Weighted
Average Exercise price | | |
Warrants
exercisable - Common Share Equivalents | | |
Weighted
Average Exercise price | |
| Outstanding December 31, 2021 | |
| 8,754,720 | | |
$ | 0.04 | | |
| 8,754,720 | | |
$ | 0.04 | |
| Expired | |
| 3,754,720 | | |
| | | |
| 3,754,720 | | |
| 0.04 | |
| Exercised | |
| | | |
| | | |
| | | |
| | |
| Outstanding March 31, 2022 | |
| 5,000,000 | | |
$ | 0.04 | | |
| 5,000,000 | | |
$ | 0.04 | |
Stock
Options
We
currently have no outstanding stock options.
NOTE
13 – 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. The amount of parts purchases in the 1st quarter of 2022 was $8,180.
Our Board of Directors has approved the transactions between Billet Electronics and the Company.
On
November 2, 2016, we effected the repayment of the convertible note dated March 15, 2016 for an aggregate amount of $84,000. Concurrently,
we entered into an Escrow Funding Agreement with Red Dot Investment, Inc., a California corporation (“Reddot”), pursuant
to which Reddot deposited funds into escrow to fund the repayment and we assigned to Reddot our right to acquire the convertible note
and Reddot acquired the convertible note. Concurrently, we and Reddot amended the convertible note (a) to have a fixed conversion price
of $.005 per share, subject to potential further adjustment in the event of certain Common Stock issuances, (b) to have a fixed interest
rate of ten percent (10%) per annum with respect to both the redemption amount and including a financing fee and any costs, expenses,
or other fees relating to the convertible note or its enforcement and collection, and any other expense for or on our account (in each
case with a minimum 10% yield in the event of payoff or conversion within the first year), such amounts to constitute additional principal
under the convertible note, as amended, and (c) as otherwise provided in the Escrow Funding Agreement. The March 2016 convertible note,
as so amended, is referred to as the “Master Note.”
Concurrently
with the foregoing note repayments, we entered into a Credit Agreement and Promissory Note (the “Credit Agreement”) with
Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation (“MW I”), pursuant to which
MW I deposited funds into escrow to fund the repayment of the convertible notes and we assigned to MW I our right to acquire the convertible
notes and otherwise agreed that MW I would be subrogated to the rights of each note holder to the extent a note was repaid with funds
advanced by MW I. Concurrently, MW I acquired the Master Note and we agreed that all amounts advanced by MG I to or for our benefit would
be governed by the terms of the Master Note, including the payment of a financing fees, interest, minimum interest, and convertibility.
Reddot is MW I’s agent for purposes of administration of the Credit Agreement and the Master Note and advances thereunder.
On
February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $939,500 with an interest rate of 10% per annum interest rate and a maturity date of February
13, 2020. The CVL Note is convertible into shares of Common Stock at $0.003 per share, as adjusted as provided therein. As a result we
recognized a beneficial conversion feature of $532,383, which is amortized over the life of the note. This note was assigned to Mgw Investments
and they agreed not to convert the $939,500 note in to shares in excess of the 800,000,000 Authorized
limit until we have increased the Authorized shares to the Board approved limit of 2 billion shares.
On
February 8, 2018 the Corporation entered a Convertible Promissory Note in the principal amount of $153,123, due October 8, 2018, with
an interest rate of 12% per annum payable to MGWI (the “MGWI Note”). The MGWI Note is convertible into shares of the Corporation’s
common stock at the lower of: (i) a 40% discount to the lowest trading price during the previous twenty (20) trading days to the date
of a Conversion Notice; or (ii) 0.003. As a result of the closing of the transactions contemplated by the Stock Purchase Agreement and
Convertible Note Purchase Agreement, the MGWI Note must be redeemed by the Corporation in an amount that will permit CVL and MGWI and
their affiliates to hold 65% of the issued and outstanding Common Stock of the Corporation on a fully diluted basis. The proceeds from
the MGWI Note were used to redeem the convertible note of the Corporation to JSJ Investments, Inc. in the principal amount of $103,000
with an interest rate of 12% per annum, due April 25, 2018. At December 31, 2019 the holder of this note beneficially owned 70% of the
company and this note is not convertible if the holder holds more than 9.99%, as a result, we did not recognize a derivative liability
or a beneficial conversion feature.
Subsequently
on May 11th this note was amended and the maturity date was extended to October 8, 2023, and the restriction on the conversion
of the note was removed if the holder of this note holds over 9.9% of the Company’s common stock. On June 24, 2021 MGW I converted
$75,000 of the outstanding balance of this note into 25,000,000 shares of company’s common stock
On
May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell 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 expires one year
from the date of the Agreement.
In
the fourth quarter of 2019 MGW Investment I Limited, advanced $167,975, with no terms or interest rate. The outstanding balance on this
advance on March 31, 2022 is $167,975
On
March 24, 2021, the Company transferred $500,000 to MGWI, an affiliate of the majority stockholder of the Company to hold in trust for
our investment in two planned ventures in China. The two potential investments are still pending.
On
June 24, 2021 MGW I converted $75,000 from the outstanding balance of their convertible note into 25,000,000 shares of company’s
common stock.
Note
14 - WARRANTY LIABILITY
For
the quarter ended March 31, 2022, and for the year ended December 31, 2021 there was no
change in our warranty liability. We estimate
our warranty liability based on past experiences and estimated replacement cost of material and labor to replace the critical turbine
in the units that are still under warranty.
NOTE
15 – NON-CONTROLLING INTEREST
On
June 24, 2021 the Company formed CETY Capital LLC a wholly owned subsidiary of CETY. In addition, the company established CETY Renewables
Ashfield LLC (“CRA”) a wholly owned subsidiary of Ashfield Renewables Ag Development LLC(“ARA”) with our partner,
Ashfield AG (“AG”). The purpose of the joint venture is the development of a pyrolysis plant established to convert woody
feedstock into electricity and BioChar by using high temperature ablative fast pyrolysis reactor for which Clean Energy Technology, Inc.
holds the license for. The CRA is located in Ashfield, Massachusetts. Based upon the terms of the members’ agreement, the CETY
Capital LLC owns a 75% interest and AG owns a 25% interest in Ashfield Renewables Ag Development LLC.
The
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
16 – SUBSEQUENT EVENTS
During
the April of 2022, we issued 4,915,644 shares of common stock, under S-1 registration statement with GHS for a total of $153,324 in net
proceeds and expensed $34,500 in legal and financing fees as a result.
On
May 6, 2022, we entered into a Securities Purchase Agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company issued
to Mast Hill a $750,000 Convertible Promissory Note, due May 6, 2023 (the “Note”) for a purchase price of $675,000.00 plus
an original issue discount in the amount of $75,000.00, and an interest rate of fifteen percent (15%) per annum. In addition, the Company
issued Mast Hill a five-year warrant (“Warrant”) to purchase 9,375,000 shares of Common Stock in connections with this transactions.