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What changed in Clean Energy Technologies, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Clean Energy Technologies, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+114 added−65 removedSource: 10-K (2024-04-17) vs 10-K (2023-04-17)

Top changes in Clean Energy Technologies, Inc.'s 2023 10-K

114 paragraphs added · 65 removed · 46 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThere have been no material changes in the Company’s risk factors from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. 72 PART III
Biggest changeThere have been no material changes in the Company’s risk factors from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023. 78 PART III

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeManagement believes through streamlined operations and scaling global sales, the Company can maintain long-term profitability and sufficient capitalization. WE HAVE AN ACCUMULATED DEFICIT AND MAY INCUR ADDITIONAL LOSSES; THEREFORE, WE MAY NOT BE ABLE TO OBTAIN THE ADDITIONAL FINANCING NEEDED FOR WORKING CAPITAL, CAPITAL EXPENDITURES AND TO MEET OUR DEBT SERVICE OBLIGATIONS.
Biggest changeWE HAVE AN ACCUMULATED DEFICIT AND MAY INCUR ADDITIONAL LOSSES; THEREFORE, WE MAY NOT BE ABLE TO OBTAIN THE ADDITIONAL FINANCING NEEDED FOR WORKING CAPITAL, CAPITAL EXPENDITURES AND TO MEET OUR DEBT SERVICE OBLIGATIONS. As of December 31, 2023, we had current liabilities of $4,801526,297 and total current asset of 6,750,728.
In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Offering Circular, these factors include: ● the success of competitive products or technologies; ● actual or anticipated changes in our growth rate relative to our competitors; ● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments; ● regulatory or legal developments in the United States and other countries; 27 ● the recruitment or departure of key personnel; ● the level of expenses; ● changes in our backlog in a given period; ● actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; ● variations in our financial results or those of companies that are perceived to be similar to us; ● fluctuations in the valuation of companies perceived by investors to be comparable to us; ● inconsistent trading volume levels of our shares; ● announcement or expectation of additional financing efforts; ● sales of our common stock by us, our insiders or our other stockholders; ● market conditions in the clean energy sector; and ● general economic, industry and market conditions.
In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Offering Circular, these factors include: ● the success of competitive products or technologies; ● actual or anticipated changes in our growth rate relative to our competitors; ● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments; ● regulatory or legal developments in the United States and other countries; ● the recruitment or departure of key personnel; ● the level of expenses; ● changes in our backlog in a given period; ● actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; ● variations in our financial results or those of companies that are perceived to be similar to us; ● fluctuations in the valuation of companies perceived by investors to be comparable to us; ● inconsistent trading volume levels of our shares; ● announcement or expectation of additional financing efforts; ● sales of our common stock by us, our insiders or our other stockholders; ● market conditions in the clean energy sector; and ● general economic, industry and market conditions.
The realization of any of these risks or any of a broad range of other risks, including those described in these “Risk Factors,” could have a dramatic and material adverse impact on the market price of the shares of our common stock. WE MAY BE SUBJECT TO SECURITIES LITIGATION, WHICH IS EXPENSIVE AND COULD DIVERT MANAGEMENT ATTENTION.
The realization of any of these risks or any of a broad range of other risks, including those described in these “Risk Factors,” could have a dramatic and material adverse impact on the market price of the shares of our common stock. 27 WE MAY BE SUBJECT TO SECURITIES LITIGATION, WHICH IS EXPENSIVE AND COULD DIVERT MANAGEMENT ATTENTION.
If the spot prices for LNG drop below our purchase price, we may not be able to sell our LNG to our customers or may have to sell the LNG at a substantial loss. We do not purchase a sufficient volume of LNG to be able to hedge against price declines of this commodity.
If the spot prices for NG drop below our purchase price, we may not be able to sell our NG to our customers or may have to sell the NG at a substantial loss. We do not purchase a sufficient volume of LNG to be able to hedge against price declines of this commodity.
IF THE SPOT PRICE OF LNG IN CHINA DROPS BELIOW THE PURCHASE PRICE OUR TRADERS NETOTIATE WITH OUR SUPPLIERS, WE MAY NOT BE ABLE TO SELL OUR LNG OR MAY HAVE TO SELL IT AT A LOSS. Our traders at JHJ purchase LNG at a fixed price in large volumes.
IF THE SPOT PRICE OF NG IN CHINA DROPS BELIOW THE PURCHASE PRICE OUR TRADERS NETOTIATE WITH OUR SUPPLIERS, WE MAY NOT BE ABLE TO SELL OUR LNG OR MAY HAVE TO SELL IT AT A LOSS. Our traders at JHJ purchase NG at a fixed price in large volumes.
If we believe that LNG prices are too high and we are unable to purchase because we believe that prices will drop, we will not have sufficient supply of LNG to conduct trading operations until the market pricing returns to a level at which we can conduct operations.
If we believe that NG prices are too high and we are unable to purchase because we believe that prices will drop, we will not have sufficient supply of NG to conduct trading operations until the market pricing returns to a level at which we can conduct operations.
Our business, results of operations and financial condition may be adversely affected if a public health epidemic, including the coronavirus or COVID-19 interferes with the ability of us, our employees, workers, contractors, suppliers, customers and other business partners to perform our and their respective responsibilities and obligations relative to the conduct of our business.
Our business, results of operations and financial condition may be adversely affected if a public health epidemic such as coronavirus or COVID-19 interferes with the ability of us, our employees, workers, contractors, suppliers, customers and other business partners to perform our and their respective responsibilities and obligations relative to the conduct of our business.
OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY PUBLIC HEALTH EPIDEMICS, INCLUDING THE CORONAVIRUS OR COVID-19.
WE ARE IN DEFAULT IN OUR OBLIGATIONS TO A MAJOR CREDITORS OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY PUBLIC HEALTH EPIDEMICS, INCLUDING THE CORONAVIRUS OR COVID-19.
We have issued a substantial number of convertible securities which, if converted, would result in substantial dilution to our stockholders: Convertible Notes - and Approximate common share equivalents 3,216,678 Warrants and Common Stock equivalent’s 730,507 Total Convertible Common Stock equivalents 3,947,185 25 OUR ISSUANCE OF ADDITIONAL CAPITAL STOCK IN CONNECTION WITH FINANCINGS, ACQUISITIONS, INVESTMENTS, OUR EQUITY INCENTIVE PLANS, OR OTHERWISE WILL DILUTE ALL OTHER STOCKHOLDERS.
We have issued a substantial number of convertible securities which, if converted, would result in substantial dilution to our stockholders: Convertible Notes - and Approximate common share equivalents 1,293,801 Series E preferred shares 1,857,590 Warrants and Common Stock equivalent’s 70,104 Total Convertible Common Stock equivalents 2,376,821 25 OUR ISSUANCE OF ADDITIONAL CAPITAL STOCK IN CONNECTION WITH FINANCINGS, ACQUISITIONS, INVESTMENTS, OUR EQUITY INCENTIVE PLANS, OR OTHERWISE WILL DILUTE ALL OTHER STOCKHOLDERS.
The Company had a total stockholder’s equity of $1,878,196 and a working capital deficit of $2,245,996 and an accumulated deficit of $17,276,536 as of December 31, 2022 and used $2,244,133 in net cash from operating activities for the year ended December 31, 2022. Therefore, there is doubt about the ability of the Company to continue as a going concern.
The Company had a total stockholder’s equity of $5,869,198 and a working capital deficit of $1,949,206 and an accumulated deficit of $22,984,163 as of December 31, 2023 and used $4,783,077 in net cash from operating activities for the year ended December 31, 2023.
Removed
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.
Added
CETY has a clear strategy in place and has the capability to successfully restructure its existing debt and secure additional financing. With its current strategic approach and diversification of its products and solutions, the management has created a favorable environment for the company to transition towards profitability.
Removed
For the year ended December 31, 2022, we had a net profit of $147,395 compared to a net profit of $297,551 for the same period in 2021. The decrease in profit in 2022 was mainly due to the change in derivative liability associated with the convertible debt and higher interest expense from 2022 to 2021.
Added
For the fiscal year closing on December 31, 2023, our company reported a net loss amounting to $5,659,723, to the net profit of $147,395 we achieved during the equivalent period in 2022.
Removed
Subsequent to the year end results, the company’s equity position has increased substantially during the first quarter of 2023 evidenced by the subsequent events and company’s recent filings, mainly due to the recent public offering with gross proceeds of $3.9 million, the full conversion of a convertible note valued at $666,250, and gain from a $324,000 convertible note payoff.
Added
This downturn in profitability for 2023 can largely be attributed to several key factors: our strategic expansion which included the integration of two new business ventures, a rise in employee compensation and general overhead costs, diminished profit margins within our NG operations, significantly increased overhead expenses following our listing on NASDAQ, and a notable uptick in interest expenses and fees related to convertible debts and bridge loans, marking a higher interest expenditure compared to the previous year.
Removed
The company has demonstrated profitability for two consecutive years and is no longer in default to any major creditors. It is the Management’s opinion that the Company has sufficient operating capital and can continue to deliver profitability in its current state. The Company’s ability to access capital has also significantly improved as it listed on Nasdaq on March 23, 2023.
Added
Following the close of the 2022 fiscal year, the company’s equity for the fiscal year ending in 2023 saw a significant increase, rising from 1,878,196 to 5,869,198.
Removed
As of December 31, 2022, we had current liabilities of $6,236,132. The company has been able to secure bridge financing of approximately $2,180,460 million and repaid approximately $636,494 of debt in 2022.
Added
This remarkable growth is primarily attributed to the success of the company’s public offering, which generated gross proceeds of $3.9 million, and conversion of some of its convertible notes into Series E preferred shares.
Removed
WE ARE IN DEFAULT IN OUR OBLIGATIONS TO A MAJOR CREDITORS We are in default of $323,875 payments of principal and interest on our notes payable to Cybernaut Zfounder Ventures, this not was settled and paid off subsequently as of March 31, 2023.
Added
Looking ahead, the company is poised for further growth with the anticipated launch of its biomass project in Vermont in 2024, which is expected to contribute to both profitability and growth. Additionally, the company’s ability to secure funding has been greatly enhanced following its listing on the Nasdaq on March 23, 2023.
Added
With a focus on optimizing operations and expanding global sales, management is confident in the company’s ability to sustain long-term profitability and maintain a strong capital position.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFuture minimum lease payments for the years ending December 31, are: Year Lease Payment 2023 191,903 Our lease expense for the years ended December 31, 2022, and 2021 was $349,610. and $346,454, respectively, which also included common area maintenance.
Biggest changeThe lease payments for the years ending December 31, are: Year Lease Payment 2023 401,293 Our lease expense for the years ended December 31, 2023, and 2022 was $401,293. and $349, 610, respectively, which also included common area maintenance. We also maintain an 800 sq-ft R&D office located in Alanya city, within the Antalya region of Turkey.
Item 2. Properties. Our corporate headquarters are located at 2990 Redhill Unit A, Costa Mesa, CA. On March 10, 2016, the Company signed a lease agreement for a 18,200-square foot CTU Industrial Building. Lease term is seven years and two months beginning July 1, 2017.
Item 2. Properties. Our corporate headquarters was located at 2990 Redhill Unit A, Costa Mesa, CA., which ended in November 2023. On March 10, 2016, the Company signed a lease agreement for a 18,200-square foot CTU Industrial Building. Lease term were seven years and two months beginning July 1, 2017.
Added
We have relocated our corporate offices 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.
Added
This location is used as CETY’s headquarters and coordination center for all domestic and global business units. 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.
Added
This location is used for Heat Recovery Solutions design, manufacturing, testing, and support. We also signed a temporary storage lease and Due to the short termination clause, we are treating this as a month-to-month lease.
Added
This facility is leased for a duration of two years, with payments made biannually. Our primary activities within this office include conducting marketing research for our CETY renewable business unit, facilitating sales operations, managing sourcing activities, and coordinating support for CETY’s engineering services.
Added
We also operate offices in Chengdu, China, which serve as operational bases for our NG trading business and a gas storage and pumping station in Chengdu, China as well.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 28 Part II Item 5. Market for Registrant’s Common Equity, related Shareholder Matters and Issuer Purchases of Equity Securities 29 Item 6. Selected Financial Data 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 31 Item 7A. Quantitative and Qualitative Disclosure about Market Risk 36 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 28 Part II Item 5. Market for Registrant’s Common Equity, related Shareholder Matters and Issuer Purchases of Equity Securities 29 Item 6. Selected Financial Data 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 31 Item 7A. Quantitative and Qualitative Disclosure about Market Risk 38 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe high and low bid information for our shares for each quarter for the last two years, so far as information is reported, through the year ended December 31, 2022, as reported by the OTC Markets, are as follows: 2021 FISCAL YEAR High Low First Quarter $ 6.40 $ 1.80 Second Quarter $ 3.44 $ 2.32 Third Quarter $ 2.56 $ 1.64 Fourth Quarter $ 1.96 $ 0.80 2022 FISCAL YEAR High Low First Quarter $ 2.39 $ 0.89 Second Quarter $ 1.59 $ 0.81 Third Quarter $ 2.16 $ 0.81 Fourth Quarter $ 3.11 $ 0.96 Record Holders As of April 14, 2023 there were 38,495,453 shares of the registrant’s $0.001 par value common stock issued and outstanding and were owned by approximately 3,000 holders of record, based on information provided by our transfer agent.
Biggest changeThe high and low bid information for our shares for each quarter for the last two years, so far as information is reported, through the year ended December 31, 2023, as reported by the OTC Markets, are as follows: 2022 FISCAL YEAR High Low First Quarter $ 2.39 $ 0.89 Second Quarter $ 1.59 $ 0.81 Third Quarter $ 2.16 $ 0.81 Fourth Quarter $ 3.11 $ 0.96 2023 FISCAL YEAR High Low First Quarter $ 3.66 $ 3.27 Second Quarter $ 1.93 $ 1.72 Third Quarter $ 1.93 $ 1.82 Fourth Quarter $ 1.59 $ 1.44 Record Holders As of April 15, 2024 there were 42,685,248 shares of the registrant’s $0.001 par value common stock issued and outstanding and were owned by approximately 201 holders of record, based on information provided by our transfer agent.
On December 28, 2022, we issued 100,446 shares of common stock upon the exercise of the cashless warrant that the Company issued to Mast Hill on May 6, 2022.
On December 28, 2022, we issued 100,446 shares of common stock upon the exercise of the cashless warrant that the Company issued to Mast Hill on May 6, 2022. On March 1, 2023 First Fire exercised the warrant in full on a cashless basis to purchase 33,114 shares of common stock.
Added
On March 1, 2023 Pacific Pier exercised the warrant in full on a cashless basis to purchase 31,111 shares of common stock. In the third quarter of 2023, the Company issued 40,000 shares to a consultant at fair value of $72,000. In the second quarter of 2023, the Company issued 213,188 shares and received cash proceed of $341,101..
Added
In the fourth quarter of 2023, the Company issued 213,188 shares and received cash proceeds of $293,600. These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution.
Added
The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

30 edited+53 added−13 removed24 unchanged
Biggest changeThe increase of our gross profit was due to the additional revenue from our newly formed CETY HK. 33 Segment breakdown For the year ended December 31, 2022, our gross profit from Engineering and Manufacturing was $124,437 compared $(90,328) for the same period in 2021. This increase in 2022 was due to higher revenue from the engineering and manufacturing business.
Biggest changeThe decrease in our gross profit for the year can be primarily attributed to the incorporation of additional revenue from our newly formed entity, CETY HK, which operates at lower margins. 33 Segment breakdown.
The Company has four reportable segments: Clean Energy HRS (HRS) and CETY Europe, CETY Renewables, CETY HK and the legacy engineering and manufacturing services division. Business Overview General The Company’s business and operating results are directly affected by changes in overall customer demand, operational costs and performance and leverage of our fixed cost and selling, general and administrative (“SG&A”) infrastructure.
The Company has four reportable segments: Clean Energy HRS (HRS) and CETY Europe, CETY Renewables, CETY HK and engineering and manufacturing services division. Business Overview General The Company’s business and operating results are directly affected by changes in overall customer demand, operational costs and performance and leverage of our fixed cost and selling, general and administrative (“SG&A”) infrastructure.
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.
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 natural gas trading company 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. 32 Summary of Operating Results for the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 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.
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. 32 Summary of Operating Results for the year ended December 31, 2023 Compared to the year ended December 31, 2022 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.
Future Financing We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders.
Future Financing We will continue to rely on equity sales of our common shares to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders.
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 mission is to be a segment leader in the Zero Emission Revolution by offering eco-friendly 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.
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. The NG is principally used for heavy truck refueling stations and urban or industrial users.
CETY HK Clean Energy Technologies (H.K.) Limited (“CETY HK”) consists of a ventures in mainland China:(i) our natural gas (“NG”) trading operations sourcing and suppling NG to industries and municipalities. The NG is principally used for heavy truck refueling stations and urban or industrial users.
On September 11, 2015 Clean Energy HRS, or “CE HRS”, our wholly owned subsidiary acquired the assets of Heat Recovery Solutions from General Electric International. In November 2015, we changed our name to Clean Energy Technologies, Inc. Our principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. Our telephone number is (949) 273-4990.
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 Unit 120, Irvine, California 92614. Our telephone number is (949) 273-4990.
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 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.
The Company has four reportable segments: Clean Energy HRS (HRS), CETY Europe, and the legacy electronic manufacturing services (Electronic Assembly) division and CETY HK. 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.
The Company has four reportable segments: Clean Energy HRS (HRS), CETY Renewables waste to energy solutions, engineering and manufacturing services, and CETY HK natural gas trading business. 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.
Condensed Consolidated Statements of Cash Flows For the years ended December 31, 2022 2021 Net Cash provided / (Used) In Operating Activities $ (2,244,133 ) $ (2,552,548 ) Cash Flows Used In Investing Activities (1,437,123 ) (1,500,000 ) Cash Flows Provided / (used) By Financing Activities 2,798,885 4,829,978 Net (Decrease) Increase in Cash and Cash Equivalents $ (1,043,043 ) $ 777,430 35 Capital Requirements for long-term Obligations None.
Condensed Consolidated Statements of Cash Flows For the years ended December 31, 2023 2022 Net Cash provided / (Used) In Operating Activities $ 4,783,077 $ (2,244,133 ) Cash Flows Used In Investing Activities (318,602 ) (1,437,123 ) Cash Flows Provided / (used) By Financing Activities 5,096,483 2,798,885 Net (Decrease) Increase in Cash and Cash Equivalents $ 25,580 $ (1,043,043 ) 35 Capital Requirements for long-term obligations None.
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.
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”).
Our principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. We have 12 full time employees. All employees and overhead are shared between Clean Energy Technologies, Inc. (which still provides the contract electronic manufacturing services) and Clean Energy HRS, LLC.
Our principal executive offices are located at 1340 Reynolds Avenue Unit 120, Irvine, CA 92614. We have 20 full-time employees. All employees and overhead are shared between Clean Energy Technologies, Inc. (which still provides the contract electronic manufacturing services) and Clean Energy HRS, LLC, waste to energy business unit, and our natural gas trading business.
For the year ended December 31, 2022, our gross profit from HRS was $361,914 compared to $547,812 for the same period in 2021, the decrease was due to lower revenue.
For the year ended December 31, 2023, our gross profit from HRS was $157,179 compared to $459,362 for the same period in 2022, the decrease was due to lower revenue. For the year ended December 31, 2023, our gross profit from CETY Renewables was $392,298.
The Company has four reportable segments: Clean Energy HRS (HRS), CETY Europe and the legacy engineering & manufacturing services division, CETY Hong Kong Segment breakdown For the year ended December 31, 2022, our revenue from Engineering and Manufacturing was $203,078 compared to $93,371 for the same period in 2021.
The Company has four reportable segments: Clean Energy HRS (HRS), CETY Europe and the engineering & manufacturing services division, CETY HK. Segment breakdown For the fiscal year ending December 31, 2023, our revenue from Engineering and Manufacturing amounted to $47,091, a decrease from $203,078 for the corresponding period in 2022.
Consulting Expense For the year ended December 31, 2022, our consulting expense was $119,896 compared to $243,371 for the same period in 2021. This decrease was due to lower engineering services. Bad Debt For the year ended December 31, 2022, our bad debt expense was $0 compared to $0 for the same period in 2021..
Bad Debt For the year ended December 31, 2023, our bad debt expense was $0 compared to $0 for the same period in 2022.
See note 2 to the notes to the financial statements for a discussion on critical accounting policies RELATED PARTY TRANSACTIONS See note 13 to the notes to the financial statements for a discussion on related party transaction Results for the Year Ended December 31, 2022, compared to the Year Ended December 31, 2021.
RELATED PARTY TRANSACTIONS See note 13 to the notes to the financial statements for a discussion on related party transaction Results for the year ended December 31, 2023, compared to the year ended December 31, 2022. Net Sales For the year ended December 31, 2023, our total revenue was $15,113,463 compared to $2,663,212 for the same period in 2022.
Depreciation and Amortization Expense For the year ended December 31, 2022, our depreciation and amortization expense was $30,076 compared to $32,292 for the same period in 2021. 34 Professional fees Expense For the year ended December 31, 2022, our Professional fees expense was $315,361 compared to $155,241 for the same period in 2021.
Depreciation and Amortization Expense For the year ended December 31, 2023, our depreciation and amortization expense was $26,692 compared to $30,076 for the same period in 2022. 34 Professional fees legal and accounting For the fiscal year ending December 31, 2023, our Professional fees expense totaled $356,785, reflecting an uptick from $315,361 recorded during the same period in 2022.
The decrease in the loss in 2022 was mainly due to higher revenue as a a result of CETY HK incremental revenue. Change in Derivative Liability For the year ended December 31, 2022, we had a loss on derivative liability of $331,495 compared to a gain of $1,752,119 for the same period in 2021.
Change in Derivative Liability For the year ended December 31, 2023, we had a loss on derivative liability of $326,539 compared to a gain of $331,495 for the same period in 2022. The gain in derivative liability was from favorable derivative calculations and payoffs from several convertible notes.
The Company had a total stockholder’s equity of $1,878,196 and a working capital deficit of $2,245,996 and an accumulated deficit of $17,276,536 as of December 31, 2022 and used $2,244,133 in net cash from operating activities for the year ended December 31, 2022. Therefore, there is doubt about the ability of the Company to continue as a going concern.
The Company had a total stockholder’s equity of $5,869,198 and a working capital deficit of $1,949,205 and an accumulated deficit of $22,984,163 as of December 31, 2023 and used $4,783,077 in net cash from operating activities for the year ended December 31, 2023.
Performance is also affected by manufacturing efficiencies, including items such as on time delivery, quality, scrap, and productivity. Market factors of supply and demand can impact operating costs In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China and has spread throughout the United States and the rest of the world.
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 Who We Are We develop renewable energy products and solutions and establish partnerships in renewable energy that make environmental and economic sense.
CETY HK – which is the parent company of our NG trading operations in China that source and supply NG and our planned joint venture to acquire NG distribution systems depots and transmission systems.
CETY HK – The parent company of our NG trading operations in China.
Interest and Finance Fees For the year ended December 31, 2022 interest and finance fees were $1,125,395 compared to $769,369 for the same period in 2021. The increase was mainly due to increase in additional bridge financing and associated. Liquidity and Capital Resources Clean Energy Technologies, Inc.
The increase was mainly due to increase in additional convertible notes, bridge financing fees and interest, and additional a loss of 1,255,084 on convertible conversion preferred shares. Liquidity and Capital Resources Clean Energy Technologies, Inc.
Selling, General and Administrative (SG&A) Expenses For the year ended December 31, 2022, our SG&A expense was $380,322 compared to $488,177 for the same period in 2021. The lower SG&A was due to lower repair charges. Salaries Expense For the year ended December 31, 2022, our Salaries expense was $782,657 compared to $772,463 for the same period in 2021.
For the year ended December 31,2023, our gross profit from CETY HK was $594,041, compared to $631,082 for the same period in 2022. Selling, General and Administrative (SG&A) Expenses For the year ending December 31, 2023, our Selling, General, and Administrative (SG&A) expenses amounted to $684,893, a rise from $400,322 in the corresponding period of 2022.
Gross Profit For the year ended December 31, 2022, our gross profits increased to $1,174,196 from $610,407 for the same period in 2021. Our gross profits could vary from period to period and is affected by several factors, including, production and supply change efficiencies, material costs, logistics and increase in personnel.
Gross Profit For the year ending December 31, 2023, our gross profit was $1,090,254, compared to $1,174,196 for the same period in 2022. It’s important to note that our gross profit margins can fluctuate due to a variety of factors, such as changes in production and supply chain efficiencies, material costs, logistics, and personnel expenses.
Segment Information Our four segments for accounting purposes are: Clean Energy HRS (HRS) – which engages in engineering, manufacturing and installing waste heat recovery solutions incorporating our Clean Cycle Generator. CETY Europe – our subsidiary established in Italy for the purposes of servicing our customers in the EU that we are required to report as a separate accounting entity.
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.
The increase in legal fees was due to higher expenses related to a proposed IPO and up listing to NASDAQ. Net (Loss) from operations For the year ended December 31, 2022, our net loss from operations was $989,751 compared to net loss from operations of $1,572,760 for the same period in 2021.
This increase in fees was primarily driven by elevated expenses associated with engaging a new auditor. Net (Loss) from operations For the fiscal year ending on December 31, 2023, our net loss from operations amounted to $(2,655,408), a notable increase compared to the net loss from operations of $989,751 for the corresponding period in 2022.
Gain on debt settlement and write off For the year ended December 31, 2022, we recognized a gain on debt settlement of $2,556,916 from the GE note write off compared to $868,502 for the year ended December 31, 2021 due to several liabilities statute of limitations had expired.
Gain on debt settlement and write off For the year ended December 31, 2023, we had no gain on debt settlement. Interest and Finance Fees For the year ended December 31, 2023 interest and finance fees were $2,137,649 compared to $1,125,395 for the same period in 2022.
Facility Lease Expense For the year ended December 31, 2022, our Facility Lease expense was $349,610 compared to $346,454 for the same period in 2021. This increase was due to the increase as a result of the original contractual agreement in our Costa Mesa facility Lease.
Facility Lease Expense For the fiscal year concluding on December 31, 2023, our Facility Lease expense totaled $401,293, as opposed to $349,610 for the corresponding period in 2022. This rise can be attributed to the addition of a new lease for our operations in China.
For the year ended December 31, 2022, we had a net profit of $147,395 compared to a $297,551 for the same period in 2021. The decrease in the net profit in 2022 was mainly due to the change in change in derivative liability.
For the fiscal year closing on December 31, 2023, our company reported a net loss amounting to $5,531,762, to the net profit of $147,395 we achieved during the equivalent period in 2022.
Removed
The World Health Organization has declared the outbreak to constitute a “Public Health Emergency of International Concern.” This contagious disease outbreak, which has not been contained, and is disrupting supply chains and affecting production and sales across a range of industries in United States and other companies as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak, as well as the worldwide adverse effect to workforces, economies and financial markets, leading to a global economic downturn.
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CETY has a clear strategy in place and has the capability to successfully restructure its existing debt and secure additional financing. With its current strategic approach and diversification of its products and solutions, the management has created a favorable environment for the company to transition towards profitability.
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Therefore, the Company expects this matter to negatively impact its operating results. However, the related financial impact and duration cannot be reasonably estimated at this time. Who We Are We develop renewable energy products and solutions and establish partnerships in renewable energy that make environmental and economic sense.
Added
This downturn in profitability for 2023 can largely be attributed to several key factors: our strategic expansion which included the integration of two new business ventures, a rise in employee compensation and general overhead costs, diminished profit margins within our NG operations, significantly increased overhead expenses following our listing on NASDAQ, and a notable uptick in interest expenses and fees related to convertible debts and bridge loans, marking a higher interest expenditure compared to the previous year.
Removed
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.
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Following the close of the 2022 fiscal year, the company’s equity for the fiscal year ending in 2023 saw a significant increase, rising from 1,878,196 to 5,111,982.
Removed
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.
Added
This remarkable growth is primarily attributed to the success of the company’s public offering, which generated gross proceeds of $3.9 million, and conversion of some of its convertible notes into Series E preferred shares.
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According to our Framework Agreement with Shenzhen Gas, we will be required to contribute $8 million to the joint venture which plans to raise in future rounds of financing. The terms of the joint venture are subject to the execution of definitive agreements.
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Looking ahead, the company is poised for further growth with the anticipated launch of its biomass project in Vermont in 2024, which is expected to contribute to both profitability and growth. Additionally, the company’s ability to secure funding has been greatly enhanced following its listing on the Nasdaq on March 23, 2023.
Removed
Engineering and Manufacturing Business – our legacy electronics manufacturing business that do not contribute significantly to our revenues or business plan that we are required to report as a separate accounting entity.
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With a focus on optimizing operations and expanding global sales, management is confident in the company’s ability to sustain long-term profitability and maintain a strong capital position.
Removed
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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This decline can be attributed to the phased closure of our legacy manufacturing operations and a strategic reallocation of resources towards becoming a fully integrated clean energy solution provider, thereby strengthening support for our other technology segments. For the year ended December 31, 2023, our revenue from HRS was $497,584 compared to $488,453 for the same period in 2022.
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Net Sales For the year ended December 31, 2022, our total revenue was $2,663,212 compared to $1,300,439 for the same period in 2021.
Added
However, we’re optimistic that the new government incentives will support an increase in revenue from our heat recovery solutions. For the fiscal year ending December 31, 2023, our revenue from CETY Renewables, our newly launched waste-to-energy business, amounted to $429,999. There was no revenue generated from this segment in the preceding year.
Removed
The increase was mainly due to increase in business from legacy business. For the year ended December 31, 2022, our revenue from HRS was $488,453 compared to $1,014,707 for the same period in 2021. The decrease in revenue was due to slow down in Supply Chain.
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For the fiscal year ending December 31, 2023, our revenue from the NG business reached $14,138,789, a significant rise from $1,890,439 in the corresponding period of 2022. This substantial growth can be attributed to our enhanced capacity to secure additional NG allocations, coupled with the successful consolidation of our newly established joint venture.
Removed
For the year ended December 31, 2022, our revenue from CETY Europe was $81,242.compared to $192,361 for the same period in 2021. The decrease in 2022 was due to lack of revenue from equipment sales. For the year ended December 31, 2022, our revenue from CETY HK was 1,890,439. We had no revenue from CETY HK in 2021.
Added
This increase is largely due to enhanced spending across various sectors, notably in Media and Investor Relations, marketing, sales initiatives, the transition to a new facility, the launch of two new businesses, subscription services, and IT-related costs.
Removed
For the year ended December 31, 2022, our gross profit from CETY Europe was $68,399 compared to $152,923 for the same period in 2021, the decrease was due to lower revenue. For the year ended December 31,2022, our gross profit from CETY HK was $619,446, we had no revenue from CETY HK in 2021.
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Salaries Expense For the fiscal year concluding on December 31, 2023, our total salaries expense amounted to $1,671,071, marking a significant increase from the previous year’s total of $782,657.
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Travel Expense For the year ended December 31, 2022, our travel expense was $166,025 compared to $145,170 for the same period in 2021. The increase was due to additional site assessment surveys of multiple facilities in Europe and global commissioning.
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The escalation in expenses for 2023 can be largely ascribed to the expansion of our team, including the hiring of a Chief Financial Officer, two directors responsible for operations and technology, four engineers, and additional personnel within our NG trading sector.
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The loss in 2022 was as a result of additional bridge loan financing.
Added
Travel Expense For the year concluding on December 31, 2023, our travel expenditure amounted to $405,334, in contrast to $166,025 for the corresponding timeframe in 2022. This increase in expenses is attributed to our efforts in expanding our business in Asia, specifically concerning the NG trading sector.
Added
Consulting Expense For the fiscal year ending December 31, 2023, our consulting expense amounted to $199,594, representing a notable increase from $119,896 recorded during the corresponding period in 2022. This rise can be attributed to the engagement of investor relations and marketing sub-contractors.
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This rise in loss during 2023 can be attributed primarily to the expansion of our team, our uplisting to NASDAQ, and the expansion of our global business operations, as well as a decrease in margin revenue from our NG business.
Added
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.
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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.
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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.
Added
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.
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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.
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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.
Added
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.
Added
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) 36 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.
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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.
Added
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.
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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.
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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.
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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.
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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.
Added
The inputs for the valuation of the Series E preferred shares were also based on estimates and comparable data selected by the Company.
Added
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.
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In contracting these engagements, CETY Renewables recognizes revenue according to accounting standards in accordance with ASC 606.
Added
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.
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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.
Added
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).
Added
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.

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