UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission File Number:
(Exact name of registrant as specified in its charter)
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| 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. ☐
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As of May 20, 2025, there were shares of the Registrant’s common stock, par value $ per share, issued and outstanding.
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 | 38 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 50 |
| ITEM 4. | CONTROLS AND PROCEDURES | 50 |
| PART II. OTHER INFORMATION | ||
| ITEM 1. | LEGAL PROCEEDINGS | 51 |
| ITEM 1A. | RISK FACTORS | 51 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 51 |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 52 |
| ITEM 4. | MINE SAFETY DISCLOSURES | 52 |
| ITEM 5. | OTHER INFORMATION | 52 |
| ITEM 6. | EXHIBITS | 52 |
| 2 |
Part I – Financial Information
Item 1. Financial Statements
Clean Energy Technologies, Inc.
Consolidated Financial Statements
(Expressed in US dollars)
March 31, 2025 (unaudited)
| 3 |
Clean Energy Technologies, Inc.
Consolidated Balance Sheets
(Unaudited)
| March 31, 2025 | December 31, 2024 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable - net | ||||||||
| Accounts receivable – Related Party | ||||||||
| Advance to Supplier | ||||||||
| Deferred Offering Costs | ||||||||
| Due from related party | ||||||||
| Loan Receivables | ||||||||
| Inventories, net | ||||||||
| Total Current Assets | ||||||||
| Long-Term Assets: | ||||||||
| Property and Equipment - Net | ||||||||
| Goodwill | ||||||||
| LWL Intangibles | ||||||||
| Investment Heze Hongyuan Natural Gas co. | ||||||||
| Investment to Shuya | ||||||||
| Investment to Guangyuan Shuxin New Energy Co. | ||||||||
| Long-term financing receivables - net | ||||||||
| Advance to Supplier - Prepayment | ||||||||
| License | ||||||||
| Patents | ||||||||
| Right -of - use asset | ||||||||
| Other assets | ||||||||
| Total Long-Term Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable – Related Party | ( | ) | ( | ) | ||||
| Accrued expenses | ||||||||
| Customer deposits | ||||||||
| Warranty liability | ||||||||
| Deferred revenue | ||||||||
| Facility lease liability - current | ||||||||
| Line of credit | ||||||||
| Convertible Notes Payable (net of discount of $ | ||||||||
| Notes payable | ||||||||
| Related party notes payable | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Liability: | ||||||||
| Facility lease liability - non-current | ||||||||
| Accrued dividend | ||||||||
| Total Long-Term Liability | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, $ par value; shares authorized; and issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| 15% Series E Convertible preferred stock, $ par value; shares authorized; shares issued and outstanding as of March 31, 2025 and outstanding as of and December 31, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensible income | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity attributable to Clean Energy Technologies, Inc. | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements
| 4 |
Clean Energy Technologies, Inc.
Consolidated Statements of Operations
for the three months ended March 31, (Unaudited)
| 2025 | 2024 | |||||||
| Sales | $ | $ | ||||||
| Sales – related party | ||||||||
| Total sales | ||||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative expense | ||||||||
| Salaries | ||||||||
| Travel | ||||||||
| Professional fees legal & accounting | ||||||||
| Facility lease and maintenance | ||||||||
| Consulting engineering | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Change in derivative liability | ||||||||
| Investment income from Shuya | ||||||||
Loss from deconsolidation of Shuya | ( | ) | ||||||
| Interest and financing fees | ( | ) | ( | ) | ||||
| Total loss | ( | ) | ( | ) | ||||
| Income tax expense | ( | ) | ||||||
| Net (loss) before noncontrolling interest from continuing operations | ( | ) | ( | ) | ||||
| Net loss before noncontrolling interest from discontinued operations | ||||||||
| Accumulative other comprehensive income (loss) | ||||||||
| Foreign currency translation (loss) | ( | ) | ||||||
| Total other comprehensive (loss) | $ | ( | ) | ( | ) | |||
| Basic and diluted weighted average number of common shares outstanding | ||||||||
| Net (loss) per common share basic and diluted | $ | ) | ) | |||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements
| 5 |
Clean Energy Technologies, Inc.
Consolidated Statements of Stockholders’ Equity
for the three months ended March 31, 2025 and 2024 (Unaudited)
Common Stock .001 Par | Preferred Stock | Common Stock to be issued | Additional Paid in | Accumulated Comprehensive | Accumulated | Non Controlling | Stock holders’ Equity | |||||||||||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Amount | Capital | Loss | Deficit | interest | Totals | ||||||||||||||||||||||||||||||
| December 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Shares issued for stock compensation | - | |||||||||||||||||||||||||||||||||||||||
| Shares issued for debt inducement | - | |||||||||||||||||||||||||||||||||||||||
| Shares issued for subscription | - | |||||||||||||||||||||||||||||||||||||||
| Shares issued for series E preferred conversion | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Currency translation adjustments | - | - | ( | ) | ( | |||||||||||||||||||||||||||||||||||
| Non controlling interest ownership | - | - | ( | ) | ( | |||||||||||||||||||||||||||||||||||
| Accrued Series E preferred dividend | - | - | ( | ) | ( | |||||||||||||||||||||||||||||||||||
| Subscription receivable | - | - | ( | ) | ( | |||||||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | |||||||||||||||||||||||||||||||||||
| March 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
Common Stock .001 Par | Preferred Stock | Common Stock to be issued | Additional Paid in | Accumulated Comprehensive | Accumulated | Non Controlling | Stockholders’ Equity | |||||||||||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Amount | Capital | Loss | Deficit | interest | Totals | ||||||||||||||||||||||||||||||
| December 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Shares issued for stock compensation | - | |||||||||||||||||||||||||||||||||||||||
| Shares issued for debt inducement | - | |||||||||||||||||||||||||||||||||||||||
| Shares issued for series E preferred conversion | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Value of the warrants issued for Mast Hill | ||||||||||||||||||||||||||||||||||||||||
| Accumulated comprehensive income | - | - | ||||||||||||||||||||||||||||||||||||||
| Non controlling interest ownership | - | - | ||||||||||||||||||||||||||||||||||||||
| Accrued Series E preferred dividend | - | - | ||||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| March 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
The accompanying footnotes are an integral part of these unaudited consolidated financial statements
| 6 |
Clean Energy Technologies, Inc.
Consolidated Statements of Cash Flows
for the three months ended March 31, 2025 and 2024 (Unaudited)
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Loss from deconsolidation of Shuya | ||||||||
| Stock compensation expense | ||||||||
| Stock issued for stock inducement | ||||||||
| Amortization of debt discount | ||||||||
| Attributable income per equity method - Shuya | ( | ) | ( | ) | ||||
| Reversal of inventory impairment reserve | ( | ) | ||||||
| (Increase)/ decrease in Right – of - use asset | ( | ) | ||||||
| (Decrease) /Increase in Lease liabilities | ( | ) | ||||||
| Increase in accounts receivable | ( | ) | ( | ) | ||||
| Increase in accounts receivable – related party | ( | ) | ( | ) | ||||
| (Increase)/ decrease in prepaid expenses | ( | ) | ||||||
| Decrease in other assets | ||||||||
| (Increase)/ decrease in inventory | ( | ) | ||||||
| Increase in accounts payable | ||||||||
| Increase in accrued interest | ||||||||
| Decrease in accrued expenses | ( | ) | ( | ) | ||||
| Increase/ (Decrease) in customer deposits | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Investment in Heze Hongyuan | ||||||||
| (Increase)/ decrease in Loan receivables | ( | ) | ||||||
| Net cash (used in) provided by continuing operations | ( | ) | ||||||
| Net cash flows (used in) provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Proceeds from notes payable and lines of credit | ||||||||
| Payments on notes payable and line of credit | ( | ) | ( | ) | ||||
| Stock issued for cash | ||||||||
| Net cash provided by continuing operations | ||||||||
| Net cash provided by discontinued operations | ||||||||
| Net cash flows provided by financing activities | ||||||||
| Effect of currency 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 issued for preferred conversions | $ | $ | ||||||
| Dividend accrued | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited 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 three months ended March 31, 2025, 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, 2024 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, 2025 are not necessarily indicative of results for the entire year ending December 31, 2025.
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 1340 Reynolds Avenue, Irvine, CA 92614. Our common stock is listed on the Nasdaq Capital Market under the symbol “CETY.”
Our internet website address is www.cetyinc.com. The information contained on our website is 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, CETY Renewables waste to energy, and engineering, consulting & management services, and CETY HK NG trading.
| 8 |
Going Concern
The
financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets
and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s equity of $
Plan of Operation
CETY is a clean energy technology company providing eco-friendly energy solutions, clean energy fuels, and alternative electric power for small to mid-sized projects across North America, Europe, and Asia. The company harnesses the power of heat and biomass to produce electricity with zero emissions and minimal cost. Additionally, the company offers Waste to Energy Solutions, converting waste materials from manufacturing, agriculture, and wastewater treatment plants into electricity and BioChar. Clean Energy Technologies also provides Engineering, Consulting, and Project Management Solutions, leveraging its expertise to develop clean energy projects for both municipal and industrial customers, as well as Engineering, Procurement, and Construction (EPC) companies.
Our principal businesses
Heat Recovery Solutions – Clean Energy Technologies patented Clean Cycle Generator (CCG) is a heat recovery system that captures waste heat from various sources and converts it into electricity. This system can be integrated into various industrial processes, helping to reduce energy costs and carbon emissions.
Waste to Energy Solutions - Clean Energy Technologies’ waste to energy solutions involve converting organic waste materials, such as agricultural waste and food waste, into clean energy through its proprietary pyrolysis technology that produce a range of products, including electricity, heat, and biochar.
Engineering, Consulting and Project Management Solutions – Clean Energy Technologies provides power generation, waste to energy, and heat recovery Engineering, Procurement and Construction (EPC) services to municipal and industrial customers and to design and incorporate clean energy solutions in their projects.
Clean Energy Technologies (H.K.)
Limited (“CETY HK”) Clean Energy Technologies (H.K.) Limited (“CETY HK”) consists of two business ventures
in mainland China: (i) our natural gas (“NG”) trading operations sourcing and suppling NG to industries and municipalities,
operated through our PRC Subsidiaries and Shuya. The NG is principally used for heavy truck refueling stations and urban or industrial
users. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are prepaid for in advance at a discount
to market. We sell the NG to our customers at prevailing daily spot prices for the duration of the contracts; and (ii) our planned joint
venture with a large state-owned gas enterprise in China called Shenzhen Gas (Hong Kong) International Co. Ltd. (“Shenzhen Gas”),
acquiring natural gas pipeline operator facilities, primarily located in the southwestern part of China. Our planned joint venture with
Shenzhen Gas plans to acquire, with financing from Shenzhen Gas, natural gas pipeline operator facilities with the goal of aggregating
and selling the facilities to Shenzhen Gas in the future. According to our Framework Agreement with Shenzhen Gas, we will be required
to contribute $
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.
Use of 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.
| 9 |
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 March 31, 2025, and December 31, 2024, we had a reserve for potentially un-collectable accounts receivable
of $
Eight customers accounted for approximately
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, 2025 we had a reserve 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
| 10 |
Long – Lived Assets
Long-lived assets, which include property, plant and equipment and intangible assets with finite lives, and operating lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.
The Company reviews long-lived assets for impairment
whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts
its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.”
ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent
of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows.
If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the
amount by which the carrying amount of the asset group asset group exceeds its fair value based on discounted cash flow analysis or appraisals.
There was
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).
| 11 |
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 |
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. |
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.
| 12 |
Additionally, the above five steps are applied to achieve core principle for our CETY Renewables Division:
Because the CETY Renewables division is presently engaged in the Engineering, Procurement, and Construction (EPC) of biomass power facilities, CETY Renewables has developed a process of executing EPC Agreements with customers for this work. In contracting these engagements, CETY Renewables recognizes revenue according to accounting standards in accordance with ASC 606.
In recognizing this revenue, CETY Renewables first identifies the relevant contract with its customer according to 606-10-25-1.
| ● | The entities, together known as the Parties, approved the contract in writing, through signatures and commitment to the performance of permitting, design, procurement, construction, and commissioning. |
| ● | CETY’s work product includes permits, engineering designs, equipment, and full balance of plant specific to permitting, design, procurement, construction, and commissioning. |
| ● | CETY and customer agree to a total EPC contract price. |
| ● | The contract has commercial substance. The risk associated with this EPC Agreement is that payment of the EPC contract price. |
| ● | Per the EPC Agreement, CETY expects to collect substantially all of the consideration for its goods and services. |
Secondly, CETY identifies the performance obligations of the Parties in performance of the EPC Agreement in accordance with 606-10-25-14. At contract inception, CETY assesses the goods and services necessary to deliver the facility in accordance with its agreement with clients. The agreement specifically laid out all deliverables necessary to achieve the permitting, design, procurement, construction, and commissioning.
CETY also looks at 606-10-25-14(A). A bundle of goods or services is also present, in that CETY is delivering all work products associated with permitting, design, procurement, construction and commissioning of a commercially operable biomass power plant. A biomass power plant is a distinct bundle of goods or services, so the individual goods or services on their own do not lend themselves to a fully integrated or functional system.
CETY in accordance with 606-10-32-1, CETY reviews measurement of the performance obligations. There is no exclusion of any amount of the Contract Price due to constraints associated with 606-10-31-11 through 606-10-32-13.
In review of 606-10-32-2A, CETY did not exclude measurement from the measurement of the transaction price any taxes assessed by a government authority as no such taxes will be due.
In reviewing 606-10-32-3, CETY evaluated the nature, timing, and amount of consideration promised, and whether it impacts the estimate of the transaction price.
Finally, in identifying a single method of measuring progress for each performance obligation satisfied over time, in accordance with 606-10-25-32, CETY applies the methodology of 606-10-25-36. CETY adopted and implemented the input method for revenue recognition in accordance with ASC 606-10-25-33. The company adopts the input method for implementation. CETY recognizes revenue for performance obligations on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation per 606-10-55-20.
For CETY, the contracts with clients for the construction of biomass power plants are the basis for revenue recognition. In each separate EPC Agreement, the performance obligations include permitting, design, procurement, construction, and commissioning of the plant. All of these work products satisfy Section 606-10-25-27(b) as these work products create or enhance an asset under customer’s control. Upon delivery of the work product, the customer takes control of the work products and has full right and ability to direct the use of and obtain substantially all of the remaining benefits of the assets. We recognize revenue over time, using timeline and milestone methods to measure progress towards complete satisfaction of the performance obligation.
| 13 |
During the complexity and duration of the biomass power plant construction projects, CETY will recognize revenue over time, consistent with the criteria for over-time recognition under ASC 606. This approach reflects the continuous transfer of documents, permits, and the equipment over to the customer, which is characteristic of long-term construction contracts.
We have a list of appropriate measures of progress: This is based on milestones achieved, among other measures.
Given the long-term nature of the projects, CETY regularly reviews and, if necessary, updates its estimates of progress towards completion, transaction price, and the allocation of the transaction price to performance obligations.
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 March 31,2025, and December 31, 2024 and, 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, accrued expenses, and convertible notes payable. The estimated fair value of cash, prepaid expenses, investments, accounts payable, accrued expenses and convertible notes payable approximate their carrying amounts due to the short-term nature of these 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.
| 14 |
Change from fair value or equity method to consolidation
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 set up 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.
For the year ended December
31, 2022, the Company has determined that Shuya was not a VIE and has evaluated its consolidation analysis under the voting interest model.
Because the Company does not own greater than
JHJ made a investment of
RMB
However, effective January 1, 2023, JHJ, SSEN and
Chengdu Xiangyueheng Enterprise Management Co., Ltd (“Xiangyueheng), who is the
As a result of Consistent Action Agreement, the Company re-analyzed and determined that Shuya is the variable interest entity (“VIE”) of JHJ because 1) the equity investors at risk, as a group, lack the characteristics of a controlling financial interest, and 2) Shuya is structured with disproportionate voting rights, and substantially all of the activities are conducted on behalf of an investor with disproportionately few voting rights. Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The Company concluded JHJ is deemed the primary beneficiary of the VIE. Accordingly, the Company consolidates Shuya effective on January 1, 2023.
The change of control interest was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification, referred to as ASC, 805, Business Combinations. The management determined that the Company was the acquiror for financial accounting purposes. In identifying the Company as the accounting acquiror, the companies considered the structure of the transaction and other actions contemplated by the Three-Parties Consistent Action Agreement, relative outstanding share ownership and market values, the composition of the combined company’s board of directors, the relative size of Shuya, and the designation of certain senior management positions of the combined company.
In accordance with ASC 805, the Company recorded the acquisition based on the fair value of the consideration transferred and then allocated the purchase price to the identifiable assets acquired and liabilities assumed based on their respective fair values as of the Acquisition Date. The excess of the value of consideration transferred over the aggregate fair value of those net assets was recorded as goodwill. Any identified definite lived intangible assets will be amortized over their estimated useful lives and any identified intangible assets with indefinite useful lives and goodwill will not be amortized but will be tested for impairment at least annually. All intangible assets and goodwill will be tested for impairment when certain indicators are present. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenues and cash flows, discount rates, and selection of comparable companies.
The valuation of purchase considerations was based on preliminary estimates that management believes are reasonable under the circumstances.
| 15 |
As the Consistent Action Agreement did not quantify
any considerations to gain the control, the deemed consideration paid is the fair value of
| Fair value of non-controlling interests | $ | |||
| Fair value of previously held equity investment | ||||
| Subtotal | $ | |||
| Recognized value of 100% of identifiable net assets | ( | ) | ||
| Goodwill Recognized | $ | |||
| Recognized amounts of identifiable assets acquired and liabilities assumed (preliminary): | ||||
| Inventories | $ | |||
| Cash and cash equivalents | ||||
| Trade and other receivables | ||||
| Advanced deposit | ||||
| Net fixed assets | ||||
| Trade and other payables | ( | ) | ||
| Advanced payments | ( | ) | ||
| Salaries and wages payables | ( | ) | ||
| Other receivable | ||||
| Total identifiable net assets | $ |
Under ASC-805-10-50-2, initial consolidation of an investee previously reported using fair value or the equity method should be accounted for prospectively as of the date the entity obtained a controlling financial interest. Therefore, the Company should provide pro forma information as if the consolidation had occurred as of the beginning of each of the current and prior comparative reporting period per
On January 1, 2024, and effective
on the same date, JHJ, SSET and Xiangyueheng entered into the Agreement on the Termination of the Concerted Action Agreement (the “Termination
Agreement”), pursuant to which the parties released each other from any and all obligations under the CAA. Due to the Termination
Agreement, the Company now holds less than
Basic (loss) per share is computed on the basis of the weighted average number of common shares outstanding. At March 31, 2025, we had outstanding common shares of . Basic Weighted average common shares and equivalents for the three months ended March 31, 2025, and March 31, 2024 were and respectively. As of March 31, 2025, we had convertible notes, convertible into approximately of additional common shares and outstanding warrants of shares. Fully diluted weighted average common shares and equivalents were withheld from the calculation for the three months ended March 31, 2025, and March 31, 2024 as they were considered anti-dilutive.
| 16 |
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 three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net Sales | ||||||||
| Manufacturing and Engineering | $ | $ | ||||||
| Heat Recovery Solutions | ||||||||
| NG Trading | ||||||||
| Waste to Energy | ||||||||
| Total Sales | $ | $ | ||||||
| Segment income and reconciliation before tax | ||||||||
| Manufacturing and Engineering | ||||||||
| Heat Recovery Solutions | ||||||||
| LNG Trading | ||||||||
| Waste to Energy | ||||||||
| Total Segment income | ||||||||
| Less: operating expense | ( | ) | ( | ) | ||||
| Less: other income and expenses | ( | ) | ( | ) | ||||
| Net (loss) before income tax | $ | ( | ) | $ | ( | ) | ||
| March 31, 2025 | December 31, 2024 | |||||||
| Total Assets | ||||||||
| Manufacturing and Engineering | $ | $ | ||||||
| Heat Recovery Solutions | ||||||||
| Waste to Energy | ||||||||
| NG Trading | ||||||||
| Total Assets | $ | $ | ||||||
| For the three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| United States | ||||||||
| China | ||||||||
| Other international | ||||||||
| Total Sales | ||||||||
| 17 |
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.
Leases
The Company adopted ASC Topic 842, Leases, or ASC 842, using the modified retrospective transition method with a cumulative effect adjustment to be accumulated deficit as of January 1, 2019, and accordingly, modified its policy on accounting for leases as stated below. As described under “Recently Adopted Accounting Pronouncements,” below, the primary impact of adopting ASC 842 for the Company was the recognition in the consolidated balance sheet of certain lease-related assets and liabilities for operating leases with terms longer than 12 months.
The Company’s leases primarily consist of facility leases which are classified as operating leases. The Company assesses whether an arrangement contains a lease at inception. The Company recognizes a lease liability to make contractual payments under all leases with terms greater than twelve months and a corresponding right-of-use asset, representing its right to use the underlying asset for the lease term. The lease liability is initially measured at the present value of the lease payments over the lease term using the collateralized incremental borrowing rate since the implicit rate is unknown. Options to extend or terminate a lease are included in the lease term when it is reasonably certain that the Company will exercise such an option. The right-of-use asset is initially measured as the contractual lease liability plus any initial direct costs and prepaid lease payments made, less any lease incentives. Lease expense is recognized on a straight-line basis over the lease term.
Leased right-of-use assets are subject to impairment testing as a long-lived asset at the asset-group level. The Company monitors its long-lived assets for indicators of impairment. As the Company’s leased right-of-use assets primarily relate to facility leases, early abandonment of all or part of facility as part of a restructuring plan is typically an indicator of impairment. If impairment indicators are present, the Company tests whether the carrying amount of the leased right-of-use asset is recoverable including consideration of sublease income, and if not recoverable, measures impairment loss for the right-of-use asset or asset group.
| 18 |
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 December 31, 2024, we had a net operating loss
carry-forward of approximately $
On February 13, 2018, Clean Energy Technologies, Inc.,
a Nevada corporation (the “Registrant” or “Corporation”) entered into a Common Stock Purchase Agreement (“Stock
Purchase Agreement”) by and between MGW Investment I Limited (“MGWI”) and the Corporation. The Corporation received
$
On February 13, 2018, the Corporation and Confections
Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement (the “Convertible Note Purchase Agreement,”
together with the Stock Purchase Agreement and the transactions contemplated thereunder, the “Financing”) pursuant to which
the Corporation issued to CVL a convertible promissory Note (the “CVL Note”) in the principal amount of $
This resulted in a change in control, which limited the net operating to that date forward. We are subject to taxation in the U.S. and the states of California. Further, the Company currently has no open tax years’ subject to audit prior to 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
Deferred Stock Issuance Costs
Deferred stock issuance costs represent amounts paid for legal, consulting, and other offering expenses in conjunction with the future raising of additional capital to be performed within one year. These costs are netted against additional paid-in capital as a cost of the stock issuance upon closing of the respective stock placement. During the quarter ended March 31, 2024 no stock issuance costs were capitalized.
| 19 |
NOTE 3 – ACCOUNTS AND NOTES RECEIVABLE
| March 31, 2025 | December 31, 2024 | |||||||
| Accounts Receivable | $ | |||||||
| Accounts Receivable Related Party | ||||||||
| Less reserve for uncollectable accounts | ( | ) | ( | ) | ||||
| Total | $ | |||||||
Our Accounts Receivable is pledged to Nations Interbanc, our line of credit.
| March 31, 2025 | December 31, 2024 | |||||||
| Long-term financing receivables | $ | $ | ||||||
| Less Reserve for uncollectable accounts | ( | ) | ( | ) | ||||
| Long-term financing receivables - net | $ | $ | ||||||
The Company is currently modifying the assets subject to lease to meet the provisions of the agreement, and as of March 31, 2025 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.
On a contract by contract basis or projects that require extensive work from multiple contractors or supply chain challenges 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 – INVENTORIES, NET
Inventories by major classification were comprised of the following at:
| March 31, 2025 | December 31, 2024 | |||||||
| Inventory | $ | |||||||
| Less reserve for uncollectable accounts | ( |
( |
) | |||||
| Total | $ | |||||||
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:
| March 31, 2025 | December 31, 2024 | |||||||
| Property and Equipment | $ | |||||||
| Accumulated Depreciation | ( |
( |
) | |||||
| Net Fixed Assets | $ | |||||||
Our
Depreciation Expense for the three months ended March 31, 2025, and 2024 was
Our Property Plant and Equipment is pledged to Nations Interbanc, our line of credit.
NOTE 6 – INTANGIBLE ASSETS
Intangible assets were comprised of the following at:
| March 31, 2025 | December 31, 2024 | |||||||
| Goodwill | $ | |||||||
| LWL Intangibles | ||||||||
| License | ||||||||
| Patents | ||||||||
| Accumulated Amortization | ( |
) | ( |
) | ||||
| Net Intangible Assets | $ | |||||||
Our Amortization Expense for the three months ended
March 31, 2025 and 2024 was $
| 20 |
As of both March 31, 2025, and December 31, 2024,
goodwill amounted to $
The LWL Investment balance of $
The License balance remained unchanged at $
The Patents balance, after amortization, was $
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:
| Consideration: | ||||
| Cash and cash equivalents | $ | |||
| Total purchaser consideration | $ | |||
| Assets acquired: | ||||
| Cash and cash equivalents | $ | |||
| Prepayment | $ | |||
| Other receivable | $ | |||
| Trading Contracts | $ | |||
| Shenzhen Gas Relationship | $ | |||
| Total assets acquired | $ | |||
| Liabilities assumed: | ||||
| Advance Receipts | $ | ( | ||
| Taxes Payable | $ | |||
| Net Assets Acquired: | $ |
| 21 |
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
NOTE 8 – ACCRUED EXPENSES
| March 31, 2025 | December 31, 2024 | |||||||
| Accrued Wages | $ | $ | ||||||
| Sales tax payable | ||||||||
| Accrued Taxes and other | ||||||||
| Total accrued expenses | $ | $ | ||||||
NOTE 9 – LINE OF CREDIT AND NOTES PAYABLE
On November 11, 2013, we entered into an accounts
receivable financing agreement with American Interbanc (now Nations Interbanc). Amounts outstanding under the agreement bear interest
at the rate of 2.5% annually. It is secured by the assets of the Company. In addition, it is personally guaranteed by Kambiz Mahdi, our
Chief Executive Officer. As of March 31, 2025, the outstanding balance was $
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 $
| 22 |
Convertible Notes Payable, Net
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 $
On September 16, 2022, we entered into a Securities
Purchase Agreement with Mast Hill pursuant to which the Company issued to Mast Hill a $
On December 26, 2022, we entered into a Securities
Purchase Agreement with Mast Hill pursuant to which the Company issued to Mast Hill a $
On January 19, 2023, we entered into a Securities
Purchase Agreement with Mast Hill pursuant to which the Company issued to Mast Hill a $
On March 8, 2023, we entered into a Securities Purchase
Agreement with Mast Hill pursuant to which the Company issued to Mast Hill a $
On July 20, 2023, the Company closed the transactions
contemplated by the Securities Purchase Agreement with Mast Hill, dated July 18, 2023, pursuant to which the Company issued to Mast Hill
a $
On October 13, 2023, the company entered into a promissory
note with Diagonal in the amount of $
| 23 |
On November 17, 2023, the Company entered into a promissory
note with Diagonal in the amount of $
On November 30, 2023, the Company entered into a promissory
note with Diagonal in the amount of $
On December 19, 2023, the Company entered into a promissory
note in the amount of $
On January 3, 2024, the Company entered into a securities
purchase agreement with FirstFire, pursuant to which the Company agreed to issue and sell to FirsFire the promissory note of the Company
in the principal amount of $
On February 2, 2024, the Company entered into a securities
purchase agreement with Coventry Enterprises LLC, a Delaware limited liability company Coventry pursuant to which the Company agreed to
issue and sell to the Buyer the promissory note of the Company in the principal amount of $
On March 4, 2024, the Company entered into a securities
purchase agreement with FirstFire, pursuant to which the Company agreed to issue and sell to the FirstFire the promissory note of the
Company in the principal amount of $
| 24 |
On June 21, 2024, Vermont Renewable Gas LLC (“VRG”),
a Vermont limited liability company in which the Company retains
On August 22, 2024, the Company entered into a securities
purchase agreement with Diagonal Lending LLC, a Virginia limited liability company (“Diagonal”), pursuant to which the Company
agreed to issue and sell to Diagonal a convertible promissory note of the Company in the principal amount of $
On September 2, 2024, the Company entered into a securities
purchase agreement with Coventry pursuant to which the Company agreed to issue and sell to Coventry a convertible promissory note of the
Company in the principal amount of $92,000 for a purchase price of $
On September 10, 2024, the Company, and Mast Hill
Fund, L.P., a Delaware limited partnership (“Mast”), entered into (i) an amendment to the promissory note that was issued
by the Company to Mast on May 6, 2022, in the original principal amount of $
On September 10, 2024, the Company entered into a
securities purchase agreement with Mast pursuant to which the Company agreed to issue and sell to Mast a convertible promissory note of
the Company in the principal amount of $
| 25 |
On September 30, 2024, the Company entered into a
securities purchase agreement with Diagonal, pursuant to which the Company agreed to issue and sell to Diagonal a convertible promissory
note of the Company in the principal amount of $
On October 15, 2024, the Company entered into a securities
purchase agreement with Diagonal, pursuant to which the Company agreed to issue and sell to Diagonal a convertible promissory note of
the Company in the principal amount of $
On November 8, 2024, the Company entered into a securities
purchase agreement with Coventry, pursuant to which the Company agreed to issue and sell to Coventry a convertible promissory note of
the Company in the principal amount of $101,000 for a purchase price of $
On November 18, 2024, as stated in the 3rd
quarter of 2024 10Q filed on November 19, 2024, the Company and Mast, entered into an amendment to that certain promissory note originally
issued by the Company to Mast on September 9, 2024, in the original principal amount of $
On November 29, 2024, the Company entered into a securities
purchase agreement with Lucas Ventures, LLC, a Arizona limited liability company, pursuant to which the Company agreed to issue and sell
to Lender (i) a convertible promissory note of the Company in the principal amount of $
| 26 |
On December 5, 2024, the Company, entered into an
equity purchase agreement (the “Equity Line of Credit Agreement”) with Mast, pursuant to which the Investor agreed to provide
an equity line of up to Five Million Dollars ($
On December 11, 2024, the Company and Mast Hill entered
into an amendment to that certain promissory note originally issued by the Company to Mast on September 10, 2024, in the original principal
amount of $
On December 12, 2024, the Company entered into a securities
purchase agreement with Diagonal, pursuant to which the Company agreed to issue and sell to Diagonal a convertible promissory note of
the Company in the principal amount of $
Effective January 16, 2025,
the Company, entered into a securities purchase agreement with Mast Hill, pursuant to which the Company sold, and Mast Hill purchased,
(i) a junior secured convertible promissory note in the principal amount of $
Effective February 28, 2025,
the Company, entered into a securities purchase agreement with Mast Hill, pursuant to which the Company sold, and Mast Hill purchased,
(i) a junior secured convertible promissory note in the principal amount of $
Total due to Convertible Notes
| March 31, 2025 | December 31, 2024 | |||||||
| Total convertible notes | $ | |||||||
| Accrued Interest | ||||||||
| Debt Discount | ( | ) | ( | ) | ||||
| Total | $ | |||||||
| 27 |
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Operating Rental Leases
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 an average borrowing rate and the company is utilizing the transition relief and “running off” on current leases.
As of May 1, 2017, our corporate headquarters were
located at 2990 Redhill Unit A, Costa Mesa, CA. On March 10, 2017, the Company signed a lease agreement for an
We have relocated our corporate office to 1340 Reynolds Avenue Unit 120, Irvine, CA 92614. On December 1, 2023, the Company signed a lease agreement for a 3000-square foot of office space with Metro Creekside California, LLC. Lease term is thirty-eight months beginning December 1, 2023 and expiring on January 31, 2027. On October 16 of 2023, we signed a sublease agreement to relocate the HRS operations from Costa Mesa to Irvine, California for one year and 7 months commencing December 1, 2023 and ending June 30, 2025. We also signed a temporary storage lease and Due to the short termination clause, we are treating this as a month-to-month lease.
The components of lease costs, lease term and discount rate with respect of these two leases with an initial term of more than 12 months are as the following:
Balance sheet information related to the Company’s operating leases:
As of March 31, 2025 | As of December 31, 2024 | |||||||
| Right-of-used assets | $ | |||||||
| Lease liabilities – current | $ | |||||||
| Lease liabilities – non-current | ||||||||
| Total lease liabilities | $ | |||||||
The weighted-average remaining lease term and the weighted-average discount rate of the above three leases are as follows:
Three Months Ended March 31, 2025 | ||||
| Weighted average remaining lease term (years) | ||||
| Weighted average discount rate | % | |||
The following is a schedule, by year of lease payment for above three leases as of March 31, 2025:
| For the 12 months ending | Lease Payment | |||
| March 31, 2026 | ||||
| March 31, 2027 | ||||
| Total undiscounted cash flows | ||||
| Imputed Interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
Our lease expense for the three months ended March
31, 2025 and 2024 was $
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Severance Benefits
Mr. Mahdi will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Mahdi would have been entitled to receive through the remainder or the Employment Period or One (1) year, whichever is greater.
NOTE 11 – CAPITAL STOCK TRANSACTIONS
On April 21, 2005, our Board of Directors and shareholders approved the re-domicile of the Company in the State of Nevada, in connection with which we increased the number of our authorized common shares to and designated a par value of $ per share.
On May 25, 2006, our Board of Directors and shareholders approved an amendment to our Articles of Incorporation to authorize a new series of preferred stock, designated as Series C, and consisting of authorized shares.
On June 30, 2017, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to and in the number of our authorized preferred shares to . The amendment effecting the increase in our authorized capital was filed and effective on July 5, 2017.
On August 28, 2018, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to . The amendment effecting the increase in our authorized capital was filed and effective on August 23, 2018.
On June 10, 2019, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to . The amendment effecting the increase in our authorized capital was effective on September 27, 2019.
On January 6, 2023, our board of directors and majority
shareholders approved a reverse stock split. Effective upon the filing of our Certificate of Amendment of Articles of Incorporation with
the Secretary of State of the State of Nevada, the shares of the Corporation’s Common Stock issued and outstanding immediately prior
to the Effective Time of January 6, 2023, will be automatically reclassified as and combined into
Common Stock Transactions
On January 19, 2023, the Company entered into a Securities
Purchase Agreement and a warrant agreement with Mast Hill pursuant to which the Company issued to Mast Hill the Company issued Mast Hill
a five-year warrant to purchase
On January 27, 2023 we issued shares of our common stock due to rounding post the reverse stock split.
On March 23, 2023 we sold shares of our common
stock in an underwritten offering to R.F. Lafferty & CO and Phillip US. The initial public offering price per share is $ per share.
Net proceeds from this offering was $
In the second quarter of 2023, the Company issued
shares to a consultant at fair value of $
On March 8, 2023 the Company entered into a Securities
Purchase Agreement and a warrant agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company issued to Mast Hill the
Company issued Mast Hill a five-year warrant to purchase
On April 18, 2023 Mast Hill exercised the right to
purchase
On May 10, 2023 Mast Hill exercised the right to purchase
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On June 14, 2023 Mast Hill
exercised the right to purchase
On June 23, 2023 Mast Hill exercised the right to
purchase
On September 12, 2023 Mast Hill exercised the right
to purchase
On September 13, 2023 Mast Hill exercised the right
to purchase
On October 27, 2023 Mast Hill exercised the right
to purchase
On January 3, 2024, the Company entered into a securities purchase agreement with FirstFire, As a condition to the sale of the Note, the Company issued to the Buyer shares of Common Stock.
On February 2, 2024, the Company entered into a securities purchase agreement (the “Agreement”) with Coventry Enterprises LLC, a Delaware limited liability company (the “Buyer”). As a condition to the sale of the Note, the Company issued to the Buyer shares of Common Stock.
On February 24, 2024, the Company entered into a consulting agreement with Hudson Global Ventures, LLC. As a condition to the agreement, the Company issued shares of Common Stock to the consultant.
On March 4, 2024, the Company entered into a securities purchase agreement with FirstFire. As a condition to the sale of the Note, the Company issued to the Buyer shares of Common Stock.
On March 15, 2024, the Company and certain Subscribers
entered into a subscription agreement pursuant to which the Company agreed to sell up to units to the Subscribers for an aggregate
purchase price of $
On June 18, 2024, the Company and certain Subscribers
entered into a subscription agreement pursuant to which the Company agreed to sell approximately units to the Subscribers for
an aggregate purchase price of $
During the year ended December 31, 2024, the Company
issued shares of common stock for conversion of Series E Preferred share and
On September 2, 2024, Clean Energy Technologies, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”) with Coventry Enterprises LLC, a Delaware limited liability company (the “Buyer”). As a condition to the sale of the Note, the Company issued to the Buyer shares (the “Commitment Shares”) of Common Stock.
On October 20, 2024, Clean Energy Technologies, Inc.,
a Nevada corporation, (the “Company”) and certain individual investors (“Subscribers”) entered into a subscription
agreement pursuant to which the Company agreed to sell approximately units (each a “Unit” and together the “Units”)
to the Subscribers for an aggregate purchase price of $
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On November 8, 2024, Clean Energy Technologies, Inc. (the “Company”) entered into a securities purchase agreement with Coventry Enterprises LLC, a Delaware limited liability company (the “Buyer”). As a condition to the sale of the Note, the Company issued to the Buyer shares (the “Commitment Shares”) of Common Stock.
On November 18, 2024, Clean Energy Technologies, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”) with Mast Hill Fund LP, a Delaware limited liability company (the “Buyer”). As a condition to the sale of the Note, the Company issued to the Buyer shares (the “Commitment Shares”) of Common Stock.
On November 29, 2024, Clean Energy Technologies, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”) with Lucas Ventures, LLC, a Delaware limited liability company (the “Buyer”). As a condition to the sale of the Note, the Company issued to the Buyer shares (the “Commitment Shares”) of Common Stock.
On December 23, 2024, Clean Energy Technologies, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”) with Coventry Enterprises LLC, a Delaware limited liability company (the “Buyer”). As a condition to the sale of the Note, the Company issued to the Buyer shares (the “Commitment Shares”) of Common Stock.
On January 20, 2025, the Company entered into a consulting agreement with Hudson Global Ventures, LLC. As a condition to the agreement, the Company issued shares of Common Stock to the consultant.
On March 4, 2024, the Company entered into a securities purchase agreement with FirstFire. Pursuant to the agreement, FirstFire accepted shares of the Company’s common stock as final payment on the loan. As of March 31, 2025, the outstanding balance of the loan was zero.
As of March 31, 2025, the
Company has issued shares for the conversion of Series E Preferred shares, with a total value of $
Common Stock
Our Articles of Incorporation authorize us to issue
shares of common stock, par value $ per share. As of March 31, 2025 there were shares of common stock outstanding.
All outstanding shares of common stock are, and the common stock to be issued will be, fully paid and non-assessable.
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.
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Preferred Stock
Our Articles of Incorporation authorize us to issue shares of preferred stock, par value $ per share. Our Board of Directors has the authority to issue additional shares of preferred stock in one or more series, and fix for each series, the designation of and number of shares to be included in each such series. Our Board of Directors is also authorized to set the powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or restrictions of the shares of each such series.
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.
We previously authorized shares of Series A Convertible Preferred Stock, shares of Series B Convertible Preferred Stock, and shares Series C Convertible Preferred Stock. As of August 20, 2006, all series A, B, and C preferred had been converted into common stock.
Effective August 7, 2013, our
The following are primary terms of the Series D Preferred
Stock.
On October 31, 2023, Clean Energy Technologies, Inc.
(the “Company”) filed with the Nevada Secretary of State a certificate of designation designating shares of the
undesignated and authorized preferred stock of the Company, par value $ per share, as the
The Series E Preferred Stock has a stated value of
$ (the “Stated Value”) per share.
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On November 8, 2023, Clean Energy Technologies, Inc.
(the “Company”) entered into an exchange agreement (the “Agreement”) with Mast Hill Fund, L.P., a Delaware limited
partnership (the “Holder”), pursuant to which the Company agreed to issue to the Holder shares of the newly designated
The Company has designated the rights of the Holder
with respect to its shares of Series E Preferred Stocks pursuant to that certain Certificate of Designations, Preferences, and Rights
of Series E Convertible Preferred Stock (the “Certificate of Designation”). Additionally, $
Warrants
A summary of warrant activity for the periods is as follows:
On May 6, 2022, we issued
On August 5, 2022, we issued
On August 17, 2022, we issued
On September 1, 2022, we
issued
On September 16, 2022, we issued
On November 10, 2022 we issued
On November 21, 2022 we issued
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On December 26, 2022, we issued
On January 19, 2023 we issued
On February 13, 2023 we issued
On March 8, 2023 we issued
On March 2023, the company issued Craft Capital Management,
L.L.C. and R.F. Lafferty & Co. Inc. a
On October 25, 2023 Mast Hill exercised the right
to purchase of the shares of Common Stock (“Warrant Shares”) of Clean Energy Technologies, Inc., because of the Common
Stock Purchase Warrant (the “Warrant”) issued on March 08, 2023. The exercise price is $
On March 15, 2024, we issued
On June 18, 2024, we issued
On December 5, 2024, we issued
On January 16, 2025, we issued
On February 28, 2025, we issued
| Warrants - Common Share Equivalents | Weighted Average Exercise price | Warrants exercisable - Common Share Equivalents | Aggregate Intrinsic Value | |||||||||||||
| Outstanding December 31, 2024 | $ | $ | ||||||||||||||
| Expired | ||||||||||||||||
| Additions | - | |||||||||||||||
| Outstanding March 31, 2025 | $ | $ | ||||||||||||||
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Stock Options
We currently have no outstanding stock options.
NOTE 12 – RELATED PARTY TRANSACTIONS
On May 13, 2021, the Company formed CETY Capital LLC
a wholly owned subsidiary of CETY. In addition, the company established VRG with our partner, Synergy Bioproducts Corporation (“SBC”)
The purpose of the joint venture is the development of a pyrolysis plant established to convert wood feedstock into electricity and BioChar
by using high temperature ablative fast pyrolysis reactor for which Clean Energy Technology, Inc. holds the license for. The VRG is in
Lyndon, Vermont. Based upon the terms of the members’ agreement, CETY Capital LLC owns a
On June 2, 2023, CETY Renewables executed a turnkey
agreement with VRG for the design, construction, and delivery of an organics-to-energy plant. As a result of this agreement, CETY invoiced
VRG $
CETY Renewables currently has $
On June 21, 2024, VRG, a Vermont limited liability
company in which the Company retains
The Lender is currently in default and has been served notice of default. The Lender has failed to disburse the first and second Tranche as outlined in the Milestone Schedule of the Agreement. While the Lender has communicated that they are working to cure this default, the company retains the right to amend the agreement once the cure is completed.
Note 13 - WARRANTY LIABILITY
For the quarter ended March 31, 2025 and 2024 there
was
NOTE 14 – NON-CONTROLLING INTEREST
On June 24, 2021 the Company formed CETY Capital LLC
a wholly owned subsidiary of CETY. In addition, on or about the same time 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 was 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
was located in Ashfield, Massachusetts. Based upon the terms of the members’ agreement, the CETY Capital LLC owned
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The consolidated financial statements have deconsolidated
the CRA business unit. The Liabilities of CRA has been transferred to VRG, a newly formed entity. CETY retains
On April 2, 2023 the Company formed CETY Capital LLC
a wholly owned subsidiary of CETY. In addition, the company established VRG with our partner, SBC. The purpose of the joint venture is
the development of a pyrolysis plant established to convert wood feedstock into electricity and BioChar by using high temperature ablative
fast pyrolysis reactor for which Clean Energy Technology, Inc. holds the license for. The VRG is in Lyndon, Vermont. Based upon the terms
of the members’ agreement, CETY Capital LLC owns a
The Company analyzed the transaction under ASC 810 Consolidation, to determine if the joint venture classifies as a Variable Interest Entity (“VIE”). The Company analyzed the transaction under ASC 810 Consolidation, to determine if the joint venture classifies as a VIE. The Joint Venture qualifies as a VIE based on the fact the JV does not have sufficient equity to operate without financial support from both parties. According to ASC 810-25-38, a reporting entity shall consolidate a VIE when that reporting entity has a variable interest (or combination of variable interests) that provides the reporting entity with a controlling financial interest on the basis of the provisions in paragraphs 810-10-25-38A through 25-38J. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. According to the JV operating agreement, the ownership interests are 49/51 and the agreement provides for a Management Committee of 3 members. Two of the three members are from Synergy Bioproducts Corporation, and one is from CETY. Both parties do not have substantial capital at risk and CETY does not have voting interest. However, SBC has controlling interest and more board votes therefore SBC is the beneficiary of the VIE and as a result we record it as an equity investment. Accordingly, the Company has elected to account for the joint venture as an equity method investment in accordance with ASC 323 Investments – Equity Method and Joint Ventures. This decision is a result of the company’s evaluation of its involvement with potential variable interest entities and their respective risk and reward scenarios, which collectively affirm that the conditions necessitating the application of the variable interest model are not present.
NOTE 15 – THE STATUTORY RESERVES
The Company’s ability to pay dividends primarily depends on it receiving funds from its subsidiaries. PRC laws and regulations permit payments of dividends by the Company’s PRC subsidiaries only out of the subsidiary’s retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements prepared in accordance with US GAAP differ from those reflected in the statutory financial statements of the Company’s PRC subsidiaries.
In accordance with the PRC Regulations on Enterprises
with Foreign Investment and their articles of association, a foreign-invested enterprise (“FIE”) established in the PRC is
required to provide statutory reserves, which are appropriated from net profit as reported in the FIE’s PRC statutory accounts.
An FIE is required to allocate at least
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Additionally, in accordance with the Company Laws
of the PRC, a domestic enterprise is required to provide surplus reserve at least 10% of its annual after-tax profit until such reserve
has reached
As a result of these PRC laws and regulations that
require annual appropriations of
In addition, according to Administrative Measures
for the Collection and Utilization of Enterprise Work Safety Funds issued by the PRC Ministry of Finance and the State Administration
of Work Safety, for the companies with dangerous goods production or storage, the company is required to make a special reserve for the
use of enhancing and improving its safe production conditions. Under PRC GAAP, the reserve is recorded as selling expense; however, under
US GAAP, since the expense has not been incurred and the Company will record cost of sales for safety related expenses when it is actually
happened or incurred, this special reserve was recorded as an appropriation of its after-tax income. The reserve is calculated at a rate
of
NOTE 16 – SUBSEQUENT EVENTS
On April 4, 2025, the
Company entered into a securities purchase agreement with Pacific Pier Capital II, LLC, a Delaware limited liability company (“Pacific Pier”),
pursuant to which the Company sold, and Pacific Pier purchased, (i) a convertible promissory note in the principal amount of $
On April 23, 2025, the Company entered into a securities purchase
agreement with Pacific Pier, pursuant to which the Company sold, and Pacific Pier
purchased, (i) a convertible promissory note in the principal amount of $
On May 06, 2025, the Company issued shares of common stock pursuant to the conversion of the note dated May 6, 2022.
On May 6, 2025, the Company entered into a Subscription Agreement with
various investors, pursuant to which the Purchasers acquired in the aggregate shares of Company common stock, at a price of
$ per share, for aggregate gross proceeds of $
On May 7, 2025, the Company received a letter from the Nasdaq Listing Qualifications Department of the Nasdaq Stock Market LLC, granting the Company an additional 180-day period, or until November 3, 2025, to regain compliance with Nasdaq’s minimum $ bid price per share requirement.
On May 8, 2025, the Company entered into a securities
purchase agreement with 1800 Diagonal Lending LLC, a Virginia limited liability company (“1800 Diagonal”), pursuant to which
the Company sold, and 1800 Diagonal purchased, a convertible promissory note in the principal amount of $
On May 19, 2025, the Company
entered into a securities purchase agreement with Lucas Ventures, LLC, an Arizona limited liability company (“Lucas Ventures”),
pursuant to which the Company sold, and Lucas Ventures purchased, (i) a convertible promissory note in the principal amount of $
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements using the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
Description of the Company
We design, produce and market clean energy products and integrated solutions focused on energy efficiency and renewable energy. Our aim is to become a leading provider of renewable and energy efficiency products and solutions by helping commercial companies and municipalities reduce energy waste and emissions, lower energy costs and generate incremental revenue by providing electricity, renewable natural gas and biochar to the grid.
Our principal executive offices are located at 1340 Reynolds Avenue, Irvine, CA 92614. Our telephone number is (949) 273-4990. Our common stock is listed on the NASDAQ Markets under the symbol “CETY.”
Our internet website address is www.cetyinc.com the information contained on our 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.
Segment Information
Our four segments for accounting purposes are:
Clean Energy HRS & CETY Europe – Our Waste Heat Recovery Solutions, converting thermal energy to zero emission electricity.
CETY Renewables Waste to Energy Solutions – Providing Waste to Energy technologies and solutions.
Engineering and Manufacturing Business – providing customers with comprehensive design, manufacturing, and project management solutions.
CETY HK – The parent company of our NG trading operations in China. Prior to the first quarter of 2022 the Company had three reportable segments but added the CETY HK segment to reflect its recent new businesses in China.
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We specialize in renewable energy & energy efficiency systems design, manufacturing and project implementation. We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005 under the name Probe Manufacturing, Inc. We provided engineering and manufacturing electronics services to original equipment manufacturers (OEMs) of clean energy, industrial, automotive, semiconductor, medical, communication, military, and high technology products.
With the vision to combat climate change and creating a better, cleaner and environmentally sustainable future, we formed Clean Energy HRS, LLC a wholly owned subsidiary of Clean Energy Technologies, Inc. and acquired the assets of Heat Recovery Solutions from General Electric International on September 11, 2015. In November 2015, we changed our name to Clean Energy Technologies, Inc. We have 24 full-time employees.
Clean Energy Technologies, Inc. established a new company, CETY Europe, SRL (CETY Europe) as a wholly owned subsidiary. CETY Europe is a Sales and Service Center in Silea (Treviso), Italy established in 2017. The service center became operational in November 2018. Their offices are located at Alzaia Sul Sile, 26D, 31057 Silea (TV) and they have 1 full time employee.
Clean Energy Technologies, Inc. established a wholly owned subsidiary called CETY Capital, a financing arm of CETY to fund captive renewable energy projects producing low carbon energy. CETY Capital will add flexibility to the capacity CETY offers its customers and fund projects utilizing its products and clean energy solutions.
CETY Capital retains 49% ownership interest in Vermont Renewable Gas LLC established to develop a biomass plant in Vermont utilizing CETY’s High Temperature Ablative Pyrolysis system.
Clean Energy Technologies (H.K.) Limited., a wholly owned subsidiary of Clean Energy Technologies Inc. acquired 100% ownership of Leading Wave Limited a liquid natural gas trading company in China.
Business Overview
General
The Company’s business and operating results are directly affected by changes in overall customer demand, operational costs and performance and leverage of our fixed cost and selling, general and administrative (“SG&A”) infrastructure.
Product sales fluctuate in response to several factors including many that are beyond the Company’s control, such as general economic conditions, interest rates, government regulations, consumer spending, labor availability, and our customers’ production rates and inventory levels. Product sales consist of demand from customers in many different markets with different levels of cyclicality and seasonality.
Operating performance is dependent on the Company’s ability to manage changes in input costs for items such as raw materials, labor, and overhead operating costs. Performance is also affected by manufacturing efficiencies, including items such as on time delivery, quality, scrap, and productivity. Market factors of supply and demand can impact operating costs.
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Who We Are
We develop renewable energy products and solutions and establish partnerships in renewable energy that make environmental and economic sense. Our mission is to be a segment leader in the Zero Emission Revolution by offering recyclable energy solutions, clean energy fuels and alternative electric power for small and mid-sized projects in North America, Europe, and Asia. We target sustainable energy solutions that are profitable for us, profitable for our customers and represent the future of global energy production.
Our principal businesses
Waste Heat Recovery Solutions – we recycle 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 biochar which are sold or used by our customers.
Engineering, Consulting and Project Management Solutions – we bring a wealth of experience in developing clean energy projects for municipal and industrial customers and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean energy solutions in their projects.
CETY HK
Clean Energy Technologies (H.K.) Limited (“CETY HK”) consists of two business ventures in mainland China:(i) our natural gas (“NG”) trading operations sourcing and suppling NG to industries and municipalities. Natural Gas is principally used for heavy truck refueling stations and urban or industrial users. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are prepaid for in advance at a discount to the market. We sell the NG to our customers at fixed prices or prevailing daily spot prices for the duration of the contracts.
Business and Segment Information
We design, produce and market clean energy products and integrated solutions focused on energy efficiency and renewable energy. Our aim is to become a leading provider of renewable and energy efficiency products and solutions by helping commercial companies and municipalities reduce energy waste and emissions, lower energy costs and generate incremental revenue by providing electricity, renewable natural gas and biochar to the grid.
Summary of Operating Results the three months Ended March 31, 2025 Compared to the same period in 2024
Going Concern
The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s equity of $2,951,159 and a working capital deficit of 3,320,603 as of March 31, 2025, The company also had an accumulated deficit of $27,731,745 as of March 31, 2025 and used 776,047 in net cash from operating activities for the three months ended March 31, 2025. 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.
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For the quarter ended March 31, 2025, our total revenue was $791,940 compared to $1,513,026 for the same period in 2024. Our total revenue for the first quarter of 2025 was lower compared to the same period in 2024, primarily due to minimal contributions from our China natural gas business.
For the quarter ended March 31, 2025, our gross profit was $728,553 compared to $253,005 for the same period in 2024. Gross profit margins improved due to greater contributions from CETY’s non-NG business in China, where our operations and technologies yield substantially higher margins compared to our NG segment.
For the three months ended March 31, 2025, our operating expense was $824,656 compared to $1,073,926 for the same period in 2024. The decrease in expenses was primarily driven by lower salary costs from our China operations and a reduction in professional fees for legal and accounting services, which were elevated in the prior period due to costs associated with our S-3 registration.
For the quarter ended March 31, 2025, we had a net loss of $331,182 compared to $1,419,400 for the same period in 2024. The improvement was largely attributable to reduced salary expenses in our China operations, lower legal and accounting costs, and stronger margins generated by our U.S.-based businesses.
For the quarter ended March 31, 2025, stockholders’ equity increased by $12,657 to $2,951,159, compared to $2,938,502 as of December 31, 2024, primarily due to higher increase from net income
CETY has successfully repositioned itself as a diversified clean energy solutions provider by establishing four distinct business segments designed to support scalable, stable, and diversified revenue growth. These segments include:
| ● | Clean Energy HRS (Heat Recovery Systems) | |
| ● | Waste-to-Energy (via Pyrolysis Technology) | |
| ● | Engineering, Procurement, and Consulting (EPC) | |
| ● | CETY HK (Natural Gas Trading and Acquisitions) |
Revenue for the first quarter was primarily driven by the Clean Energy HRS and CETY Renewables segments. Looking ahead, the company anticipates stronger revenue contributions from its Waste-to-Energy, Heat Recovery, and EPC segments in the latter half of the year, segments which are expected to deliver higher gross margins.
CETY’s pilot Waste-to-Energy facility in Vermont, which integrates all of the company’s proprietary technologies and operational expertise into a unified, turnkey solution, is currently pending final approval from the Vermont Public Utility Commission.
Meanwhile, demand for Heat Recovery solutions is accelerating across both the U.S. and Europe. In parallel, CETY is actively scaling its Engineering and project management operations to deliver comprehensive self-generation energy solutions on a global scale.
Management believes this 4-segment strategy has created many operational synergies and cross-selling opportunities across different markets. The growth in the non-China operations in the first quarter of 2025 vs. same period in 2024 was a result of this strategy. CETY believes that it will continue to deliver growth on these segments this year. The main macro factor benefiting us is the global commitment to push renewable energy to the forefront from governments across the world. Another catalyst that will potentially help our Company, is a continuously improving our global supply chain and lowering our cost.
CETY expects to and will continue to execute its corporate strategy to build sustained and profitable growth by providing end to end fully integrated solutions and technologies, expand our global sales and marketing, production, research & development, as well as search for synergistic acquisition opportunities.
See note 1 to the notes to the financial statements for a discussion on critical accounting policies
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RELATED PARTY TRANSACTIONS
See note 13 to the notes to the financial statements for a discussion on related party transaction
Results of the three Ended March 31, 2025, Compared to the three ended March 31, 2024
Net Sales
For the quarter ended March 31, 2025, our total revenue was $791,940 compared to 1,513,026 for the same period in 2024. The lower revenue was contributed to primarily due to minimal contributions from our China natural gas business.
Segment breakdown
For the three months ended March 31, 2025, our revenue from HRS was $612,354 compared to $72,488 for the same period in 2024. We have a large pipeline of opportunities in this segment and are working diligently to complete the engineering and design, enabling us to execute contractual agreements and close these opportunities. The sales cycle for these types of opportunities is long due to cost factors and the integration of the technology. We are also working with financial institutions to assist in financing the projects as customers are increasingly moving towards Independent Power Producer models.
For the three months ended March 31, 2025, revenue from the CETY Renewables segment was $176,105, compared to $211,568 for the same period in 2024. This segment is expected to remain relatively stable until construction activities commence later this year.
For the three months ended March 31, 2025, CETY reported no revenue from its Engineering and Manufacturing segments, compared to $9,342 for the same period in 2024. This segment is still in its early stages and much of the related activity is currently being integrated into the HRS and CETY Renewables segments. However, with a developing pipeline of opportunities, CETY expects to see gradual revenue growth from this segment over the coming quarters.
For the three months ended March 31, 2025, revenue from our natural gas (NG) business was $3,481, a decrease from $1,219,629 for the same period in 2024. This decline is primarily due to macroeconomic factors and our strategic decision to reduce focus on lower-margin business activities.
Gross Profit
In the three months ending March 31, 2025, our gross profits totalled $728,553 marking a favorable increase compared to $253,005 recorded for the corresponding period in 2024. Gross profit margins improved due to greater contributions from CETY’s non-NG business in China, where our operations and technologies yield substantially higher margins compared to our NG segment.
Segment breakdown
For the three months ending March 31, 2025, our gross profit from Engineering and Manufacturing amounted to $0, compared to 7,806 for the same period in 2024. This segment is a recent addition to CETY’s portfolio, currently serving as a support for our ongoing internal projects. Nevertheless, it is anticipated to expand notably as CETY shifts its focus towards providing comprehensive end-to-end power generation and integrated solutions.
For the three months ended March 31, 2025, our gross profit from the HRS segment was $552,331, compared to $51,597 for the same period in 2024. This significant increase in gross profit was primarily driven by higher revenues, which included equipment sales and the sale of products with lower costs, along with engineering services.
For the three months ended March 31, 2025, our gross profit from our wholly owned subsidiary, JHJ, was $115, down from $9,852 for the same period in 2024. This decrease was primarily due to minimal business activity in China, which was partly a result of our strategic decision to reduce focus on lower-margin businesses in the region.
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Selling, General and Administrative (SG&A) Expenses.
For the three months ended March 31, 2025, our SG&A expenses totalled $222,557, compared to $218,658 for the same period in 2024. This slight increase reflects stable and consistent expense management.
Salaries Expense
For the three months ended March 31, 2025, our salaries expense totalled $433,799, compared to $511,111 for the same period in 2024. The decrease was primarily due to reduced activity in our China natural gas business, while salary levels in other areas remained stable.
Travel Expense
For the three months ended March 31, 2025, our travel expenses were $32,377, compared to $29,652 for the same period in 2024. This slight increase reflects stable activity levels within our service and marketing operations.
Professional fees legal and accounting
For the quarter ended March 31, 2025, our professional fees totalled $66,213, compared to $199,053 for the same period in 2024. The decrease was primarily due to reduced legal and consulting activity, as the first quarter of 2024 included higher costs related to our S-3 registration process.
Facility Lease and Maintenance Expense
For the three months ended March 31, 2025, our facility lease and maintenance expenses totalled $66,741, compared to $71,275 for the same period in 2024. This slight decrease reflects normal fluctuations, with no significant changes in underlying operations.
Depreciation and Amortization Expense
For the three months ended March 31, 2025, our depreciation and amortization expense was $2,969, unchanged from the same period in 2024. There were no significant changes, as the majority of our equipment has already been fully depreciated.
Change in Derivative Liability
The three months ended March 31, 2025 and 2024; we had no derivative liability.
Interest and Finance Fees
For the three months ended March 31, 2025, interest and finance fees totalled $339,821, compared to $295,193 for the same period in 2024. The increase was primarily due to two larger interim financings secured to bridge the company through the finalization of funding for the Vermont Renewable Project, aimed at addressing approximately $1.7 million in accounts receivable, and to support the completion of the S-3 registration.
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Net Loss
For the three months ended March 31, 2025, our net loss was $331,231, compared to a net loss of $1,419,400 for the same period in 2024. This significant decrease is primarily attributable to higher-margin revenue from the HRS segment—driven by equipment and technical sales—as well as stable contributions from CETY Renewables in support of the Vermont Renewable Gas Project. Additionally, reduced activity in the lower-margin China NG business contributed to improved overall financial performance.
Liquidity and Capital Resources
Clean Energy Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31,
(unaudited)
| 2025 | 2024 | |||||||
| Net cash (used in) operating activities | $ | (776,047 | ) | $ | (871,636 | ) | ||
| Net cash provided by investing activities | (2.932 | ) | 83,460 | |||||
| Net cash provided by financing activities | 759,002 | 987,871 | ||||||
| Foreign Currency Transaction | 12,241 | 161 | ||||||
| Net increase in cash and cash equivalents | $ | (19,790 | ) | $ | 289,481 | |||
Capital Requirements for Long-Term Obligations
None.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
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).
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The following five steps are applied to achieve that core principle for our business:
| ● | 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 |
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 |
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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. |
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.
During the project development and engineering phase of our CETY Renewable projects such as VRG, we employ the input method of revenue recognition to estimate revenue based on projected costs. This approach involves forecasting future costs and revenues to determine the amount of revenue we recognize in the current period. It’s important to understand, however, that these recognized revenue figures are not final and are subject to adjustments. Changes may occur as we gain more clarity on actual costs compared to our initial projections, affecting the revenue recognized accordingly.
The projected costs of the VRG project is based on estimates and profitability will be impacted depending on actual costs. Using the input method for revenue recognition, the amount of recorded revenue is also affected depending on the estimated total costs. The purchase price allocation for Shuya was also based on estimates and comparable data selected by the Company. The inputs for the valuation of the Series E preferred shares were also based on estimates and comparable data selected by the Company.
Additionally, the above five steps are applied to achieve core principle for our CETY Renewables Division:
Because the CETY Renewables division is presently engaged in the Engineering, Procurement, and Construction (EPC) of biomass power facilities, CETY Renewables has developed a process of executing EPC Agreements with customers for this work. In contracting these engagements, CETY Renewables recognizes revenue according to accounting standards in accordance with ASC 606.
In recognizing this revenue, CETY Renewables first identifies the relevant contract with its customer according to 606-10-25-1.
| ● | The entities, together known as the Parties, approved the contract in writing, through signatures and commitment to the performance of permitting, design, procurement, construction, and commissioning. | |
| ● | CETY’s work product includes permits, engineering designs, equipment, and full balance of plant specific to permitting, design, procurement, construction, and commissioning. | |
| ● | CETY and customer agree to a total EPC Contract price. | |
| ● | The contract has commercial substance. The risk associated with this EPC Agreement is that payment of the EPC contract price. | |
| ● | Per the EPC Agreement, CETY expects to collect substantially all of the consideration for its goods and services. |
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Secondly, CETY identifies the performance obligations of the Parties in performance of the EPC Agreement in accordance with 606-10-25-14. At contract inception, CETY assesses the goods and services necessary to deliver the facility in accordance with the its agreement with its clients. The agreement specifically laid out all deliverables necessary to achieve the permitting, design, procurement, construction, and commissioning.
CETY also looks at 606-10-25-14(A). A bundle of goods or services is also present, in that CETY is delivering all work products associated with permitting, design, procurement, construction and commissioning of a commercially operable biomass power plant. A biomass power plant is a distinct bundle of goods or services, so the individual goods or services on their own do not lend themselves to a fully integrated or functional system.
CETY in accordance with 606-10-32-1, CETY reviews measurement of the performance obligations. There are no exclusion of any amount of the Contract Price due to constraints associated with 606-10-31-11 through 606-10-32-13.
In review of 606-10-32-2A, CETY did not exclude measurement from the measurement of the transaction price any taxes assessed by a government authority as no such taxes will be due.
In reviewing 606-10-32-3, CETY evaluated the nature, timing, and amount of consideration promised, and whether it impacts the estimate of the transaction price.
Finally, in identifying a single method of measuring progress for each performance obligation satisfied over time, in accordance with 606-10-25-32, CETY applies the methodology of 606-10-25-36. CETY adopted and implemented the input method for revenue recognition in accordance with ASC 606-10-25-33. The company adopts the input method for implementation. CETY recognizes revenue for performance obligations on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation per 606-10-55-20.
For CETY, the contracts with clients for the construction of biomass power plants are the basis for revenue recognition. In each separate EPC Agreement, the performance obligations include permitting, design, procurement, construction, and commissioning of the plant. All of these work products satisfy Section 606-10-25-27(b) as these work products create or enhance an asset under customer’s control. Upon delivery of the work product, the customer takes control of the work products and has full right and ability to direct the use of and obtain substantially all of the remaining benefits of the assets. We recognize revenue over time, using timeline and milestone methods to measure progress towards complete satisfaction of the performance obligation.
During the complexity and duration of the biomass power plant construction projects, CETY will recognize revenue over time, consistent with the criteria for over-time recognition under ASC 606. This approach reflects the continuous transfer of documents, permits, and the equipment over to the customer, which is characteristic of long-term construction contracts.
We have a list of appropriate measures of progress: This is based on milestones achieved, among other measures.
Given the long-term nature of the projects, CETY regularly reviews and, if necessary, updates its estimates of progress towards completion, transaction price, and the allocation of the transaction price to performance obligations.
Also, from time to time our contracts state that the customer is not obligated to pay a final payment until the units are commissioned, i.e. a final payment of 10%. As of December 31, 2024 and 2023 we had $33,000 and 33,000 of deferred revenue, which is expected to be recognized in the second quarter of year 2025.
Also from time to time we require upfront deposits from our customers based on the contract. As of December 31, 2024 and 2023, we had outstanding customer deposits of $128,134 and $30,061 respectively.
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Change from fair value or equity method to consolidation
In July 2022, JHJ and other three shareholders agreed to form and make total capital contribution of RMB 20 million ($2.81 million) with latest contribution due date in February 2066 into Sichuan Hongzuo Shuya Energy Limited (“Shuya”), JHK owns 20% of Shuya. In August 2022, JHJ purchased 100% ownership of Sichuan Shunengwei Energy Technology Limited (“SSET”) for $0, who owns 29% of Shuya; Shunengwei is a holding company and did not have any operations nor made any capital contribution into Shuya as of the ownership purchase date by JHJ; right after the ownership purchase of SSET, JHJ ultimately owns 49% of Shuya.
Shuya was set up 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.
For the year ended December 31, 2022, the Company has determined that Shuya was not a VIE and has evaluated its consolidation analysis under the voting interest model. Because the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment in Shuya under the equity method of accounting. Under this method, the investor (“JHJ”) recognizes its share of the profits and losses of the investee (“Shuya”) in the periods when these profits and losses are also reflected in the accounts of the investee. Any profit or loss recognized by the investing entity appears in its income statement. Also, any recognized profit increases the investment recorded by the investing entity, while a recognized loss decreases the investment.
JHJ made a investment of RMB 3.91 million ($0.55 million) into Shuya during the 12 months ended December 31, 2022 recorded in accordance with ASC 323. Shuya had a net loss of approximately $10,750 during the year ending December 31, 2022, of which approximately $5,000 was allocated to the company, reducing the investment by that amount.
However, effective January 1, 2023, JHJ, SSET and Chengdu Xiangyueheng Enterprise Management Co., Ltd (“Xiangyueheng), who is the 10% shareholder of Shuya, entered a Three-Parties Consistent Action Agreement, wherein these three shareholders (or three parties) will guarantee that the voting rights will be expressed in the same way at the shareholders’ meeting of Shuya to consolidate the controlling position of the three parties in Shuya. The three parties agree that within the validity period of this agreement, before the party intends to propose the motions to the shareholders or the board of directors on the major matters related to the voting rights of the shareholders or the board of directors, the three parties internally will discuss, negotiate and coordinate the motion topics for consistency; in the event of disagreement, the opinions of JHJ shall prevail.
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As a result of Consistent Action Agreement, the Company re-analyzed and determined that Shuya is the variable interest entity (“VIE”) of JHJ because 1) the equity investors at risk, as a group, lack the characteristics of a controlling financial interest, and 2) Shuya is structured with disproportionate voting rights, and substantially all of the activities are conducted on behalf of an investor with disproportionately few voting rights. Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The Company concluded JHJ is deemed the primary beneficiary of the VIE. Accordingly, the Company consolidates Shuya effective on January 1, 2023.
The change of control interest was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification, referred to as ASC, 805, Business Combinations. The management determined that the Company was the acquiror for financial accounting purposes. In identifying the Company as the accounting acquiror, the companies considered the structure of the transaction and other actions contemplated by the Three-Parties Consistent Action Agreement, relative outstanding share ownership and market values, the composition of the combined company’s board of directors, the relative size of Shuya, and the designation of certain senior management positions of the combined company.
In accordance with ASC 805, the Company recorded the acquisition based on the fair value of the consideration transferred and then allocated the purchase price to the identifiable assets acquired and liabilities assumed based on their respective fair values as of the Acquisition Date. The excess of the value of consideration transferred over the aggregate fair value of those net assets was recorded as goodwill. Any identified definite lived intangible assets will be amortized over their estimated useful lives and any identified intangible assets with indefinite useful lives and goodwill will not be amortized but will be tested for impairment at least annually. All intangible assets and goodwill will be tested for impairment when certain indicators are present. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenues and cash flows, discount rates, and selection of comparable companies. The valuation of purchase considerations was based on preliminary estimates that management believes are reasonable under the circumstances.
As the Consistent Action Agreement did not quantify any considerations to gain the control, the deemed consideration paid is the fair value of 51% non-controlling interest as of January 1, 2023. The following table summarizes the fair value of the consideration paid and the fair value of assets acquired, and liabilities assumed on January 1, 2023, the acquisition date.
| Fair value of non-controlling interests | $ | 650,951 | ||
| Fair value of previously held equity investment | 556,096 | |||
| Subtotal | $ | 1,207,047 | ||
| Recognized value of 100% of identifiable net assets | (1,207,047 | ) | ||
| Goodwill Recognized | $ | - | ||
| Recognized amounts of identifiable assets acquired and liabilities assumed (preliminary): | ||||
| Inventories | $ | 516,131 | ||
| Cash and cash equivalents | 50,346 | |||
| Trade and other receivables | 952,384 | |||
| Advanced deposit | 672,597 | |||
| Net fixed assets | 6,704 | |||
| Trade and other payables | (1,021,897 | ) | ||
| Advanced payments | (5,317 | ) | ||
| Salaries and wages payables | (4,692 | ) | ||
| Other receivable | 40,791 | |||
| Total identifiable net assets | $ | 1,207,047 |
Under ASC-805-10-50-2, initial consolidation of an investee previously reported using fair value or the equity method should be accounted for prospectively as of the date the entity obtained a controlling financial interest. Therefore, the Company should provide pro forma information as if the consolidation had occurred as of the beginning of each of the current and prior comparative reporting period per
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Under ASC-805-10-50-2, initial consolidation of an investee previously reported using fair value or the equity method should be accounted for prospectively as of the date the entity obtained a controlling financial interest. Therefore, the Company should provide pro forma information as if the consolidation had occurred as of the beginning of each of the current and prior comparative reporting period per
On January 1, 2024, and effective on the same date, JHJ, SSET and Xiangyueheng entered into the Agreement on the Termination of the Concerted Action Agreement (the “Termination Agreement”), pursuant to which the parties released each other from any and all obligations under the CAA. Due to the Termination Agreement, the Company now holds less than 50% of the voting rights in Shuya. The Company analyzed whether Shuya should be consolidated under ASC 810 and determined Shuya is no longer required to be consolidated on January 1, 2024 after the execution of the Termination Agreement. Accordingly, the Company will not consolidate Shuya into its consolidated financial statements on or after January 1, 2024.
Series E Valuation
Additionally, the inputs for the valuation of the Series E preferred shares were also based on estimates and comparable data selected by the Company and fair value measurements, furthermore, the purchase price allocation was based on estimates of fair market values.
Future Financing
We will continue to rely on equity sales of our common shares to continue to fund our business operations. Issuance of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial position or results of operations upon adoption.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period ended March 31, 2025, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of March 31, 2025.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company is presently not involved in any legal proceedings which in the opinion of management are likely to have a material adverse effect on the Company’s consolidated financial position or results of operations.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K filed with the SEC on April 14, 2025, and our registration statement on Form S-3 filed with the SEC on March 13, 2025. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Item 2. Unregistered Sales of Equity Securities
Effective January 16, 2025, the Company entered into a securities purchase agreement with Mast Hill Fund, L.P., a Delaware limited partnership (“Mast Hill”), pursuant to which the Company sold, and Mast Hill purchased, (i) a junior secured convertible promissory note in the principal amount of $1,637,833.33, and (ii) warrants to purchase 818,917 shares of Company common stock, for an aggregate purchase price of $1,474,050.
On January 27, 2025, the Company issued 56,100 shares upon the final conversion of a convertible promissory note issued to Firstfire Global Opportunities Fund LLC.
On February 11, 2025, the Company entered into a consulting agreement with a third-party consultant, and as a condition to the agreement, the Company issued 25,000 shares of common stock to the consultant.
Effective February 28, 2025, the Company entered into a securities purchase agreement with Mast Hill pursuant to which the Company sold, and Mast Hill purchased, (i) a junior secured convertible promissory note in the principal amount of $620,000, and (ii) warrants to purchase 310,000 shares of Company common stock, for an aggregate purchase price of $558,000.
The Company issued the foregoing securities pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder, as the shareholders were accredited and/or financially sophisticated and had adequate access, through business or other relationships, to information about the Company, and the sales did not involve a public offering of securities or any general solicitation.
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Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
The following exhibits are filed or furnished as a part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
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| 31.01 | Certification of Principal Executive Officer Pursuant to Rule 13a-14 | Filed herewith. | |
| 31.02 | Certification of Principal Financial Officer Pursuant to Rule 13a-14 | Filed herewith. | |
| 32.01 | Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. | |
| 32.02 | Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. | |
| 101.INS* | Inline XBRL Instance Document | Furnished herewith. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | Furnished herewith. | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Furnished herewith. | |
| 101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document | Furnished herewith. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Furnished herewith. | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | Furnished herewith. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Clean Energy Technologies, Inc. | ||
| REGISTRANT | ||
| /s/ Kambiz Mahdi | ||
| By: | Kambiz Mahdi | |
| Chief Executive Officer and Director | ||
| Date: | May 20, 2025 | |
| /s/ Calvin Pang | ||
| By: | Calvin Pang | |
| Chief Financial Officer and Director | ||
| Date: | May 20, 2025 | |
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