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As
filed with the Securities and Exchange Commission on March 1, 2023
Registration
No. 333-266078
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
AMENDMENT
NO. 4
To
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
CLEAN ENERGY TECHNOLOGIES, INC.
(Exact
name of registrant as specified in its charter)
Nevada |
|
3990 |
|
20-2675800 |
(State
or Other Jurisdiction
of
Incorporation) |
|
(Primary
Standard
Classification
Code) |
|
(IRS
Employer
Identification
No.) |
2990
Redhill Ave,
Costa
Mesa, California 92626
Telephone:
(949) 273-4990
(Address,
including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Kambiz
Mahdi
Chief
Executive Officer
Clean
Energy Technologies, Inc.
2990
Redhill Ave,
Costa
Mesa, California 92626
Telephone:
(949) 273-4990
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Copies
to:
Robert
Newman, Esq.
The
Newman Law Firm, PLLC
1872
Pleasantville Road, Suite 177
Briarcliff
Manor, NY 10510
Phone:
(914) 762-4265
|
|
Kevin
Sun, Esq.
Bevilacqua
PLLC
1050
Connecticut Avenue, NW, Suite 500
Washington,
D.C. 20036
Telephone:
(202) 869-0888 |
Approximate
date of commencement of proposed sale to the public:
As
soon as practicable and from time to time after the effective date of this Registration Statement.
If
any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. ☒
If
this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
☐
If
this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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 |
☐ |
Non-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 to Section 7(a)(2)(B) of the Securities Act. ☐
The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective
in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date
as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.
The
information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject
to completion. Dated March 1, 2023
PRELIMINARY
PROSPECTUS
CLEAN
ENERGY TECHNOLOGIES, INC.
1,111,112 Shares
of Common Stock
We are offering to sell up to 1,111,112 shares
(assuming a mid-point per share price of $4.50 per share ) of our common stock, $0.001 par value per share, in a firm commitment underwritten
offering (the “Underwritten Offering”). We currently estimate that the public offering price will be between $4.00 and $5.00
per share. The company effected a 1-for-40 reverse split on Jan 19, 2023. All per-share references throughout the offering are presented
on a post-split basis.
The
selling shareholders identified in this prospectus are offering an aggregate of 2,916,909 shares of our common stock, issuable
upon conversion of convertible promissory notes and exercise of common stock purchase warrants (the “Selling Shareholder Shares”)
held by such selling shareholders (the “Selling Shareholders Offering”). We will not receive any proceeds from the sale of
any shares by the selling shareholders.
Our
common stock is traded on OTCQB Markets under the symbol “CETY”. On February 28, 2023, the reported closing price
for our common stock was $4.80 per share. We intend to list our common stock on the Nasdaq Capital Market under the symbol “CETY.”
We believe that upon completion of the Underwritten Offering contemplated by this prospectus, we will meet the standards for listing
on the Nasdaq Capital Market. However, no assurance can be given that our application will be approved or that the trading prices of
our common stock on the OTCQB will be indicative of the prices of our common stock if our common stock were traded on the Nasdaq Capital
Market.
The
offering price of our shares of common stock in the Underwritten Offering will be determined between the underwriters and us at the time
of pricing, considering our historical performance and capital structure, prevailing market conditions, and overall assessment of our
business, and may be at a discount to the current market price. Therefore, the recent market price of our common stock and the public
offering price of the common stock used throughout this prospectus may not be indicative of the actual public offering price for the
shares of common stock.
INVESTING
IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. BEFORE MAKING ANY INVESTMENT DECISION, YOU SHOULD CAREFULLY REVIEW AND CONSIDER ALL
THE INFORMATION IN THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN, INCLUDING THE RISKS AND UNCERTAINTIES DESCRIBED
UNDER “RISK FACTORS” BEGINNING ON PAGE 9.
The
Selling Shareholder Shares may be resold from time to time by the selling shareholders listed in the section titled “Selling Shareholders”
beginning on page 60.
The
selling shareholders, or their respective transferees, pledgees, donees or other successors-in-interest, may sell the Selling Shareholder
Shares through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately
negotiated prices. The selling shareholders may sell any, all or none of the securities offered by this prospectus, and we do not know
when or in what amount the selling shareholders may sell their Selling Shareholder Shares hereunder following the effective date of this
registration statement. We provide more information about how a selling shareholder may sell its Selling Shareholder Shares in the section
titled “Plan of Distribution” on page 64.
The
Underwritten Offering is being underwritten on a firm commitment basis. The underwriters may exercise this option at any time and from
time to time during the 45-day period from the date of this prospectus.
| |
Per Share | | |
Total | |
Public offering price | |
$ | | | |
$ | | |
Underwriting discounts and commissions(1)(2) | |
$ | | | |
$ | | |
Proceeds to us, before expenses | |
$ | | | |
$ | | |
Proceeds to the selling stockholders, before expenses | |
$ | | | |
$ | | |
(1)
We have agreed to reimburse the underwriter(s) for certain expenses. Underwriting discounts and commissions do not include a non-accountable
expense allowance equal to $100,000 payable to the underwriters at the closing. The underwriters will receive an underwriting discount
equal to 7.0% of the gross proceeds in this Underwritten Offering. In addition, we have agreed to pay up to a maximum of $200,000 of
accountable out-of-pocket expenses of the underwriters in connection with this Underwritten Offering, which includes the fees and expenses
of underwriters’ counsel. See “Underwriting” Section for more information.
(2)
We have also agreed to issue to Craft Capital Management LLC and R.F. Lafferty & Co., Inc. (the “Representatives”) warrants
to purchase up to an aggregate 38,333 of shares of our common stock (assuming the underwriters exercise the over-allotment
option in full). See “Underwriting” beginning on page 73 for additional information regarding these warrants and underwriting
compensation generally.
The
underwriter is obligated to take and pay for all the shares of common stock offered by this prospectus if the Underwritten Offering is
consummated.
We
have granted the underwriter a 45-day option to purchase up to an additional 166,666 shares of common stock from us at the public
offering price, to cover over-allotments, if any (such shares not to exceed, in the aggregate, 15% of the shares offered hereby).
The
underwriter expects to deliver the shares on or about ,
2023.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
CRAFT
CAPITAL MANAGEMENT LLC | |
R.F.
Lafferty & Co., Inc. |
The
date of this prospectus is ____________, 2023.
TABLE
OF CONTENTS
You
should rely only on the information contained in this prospectus. Neither we, the underwriters, nor the selling shareholders have authorized
anyone to provide you with different information. We and the selling shareholders are offering to sell, and seeking offers to buy, shares
of common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of shares of our common stock. Our
business, financial condition, operating results and prospects may have changed since that date.
We
have relied on statistics provided by a variety of publicly-available sources. We did not, directly or indirectly, sponsor or participate
in the publication of such materials, and these materials are not incorporated in this registration statement other than to the extent
specifically cited herein. We have sought to provide current information in this registration statement and believe that the statistics
provided in this registration statement remain up-to-date and reliable, and these materials are not incorporated in this registration
statement other than to the extent specifically cited in this registration statement.
No
action is being taken in any jurisdiction outside the United States to permit a public offering of our shares or possession or distribution
of this prospectus in any such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United
States are required to inform themselves about and to observe any restrictions as to the Underwritten Offering and Selling Shareholders
Offering and the distribution of this prospectus applicable to that jurisdiction.
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider
in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including
our financial statements and the related notes and the information set forth under the headings “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in each case included elsewhere in this prospectus.
Unless
the context otherwise requires, references to “we,” “our,” “us,” or the “Company” in
this prospectus mean Clean Energy Technologies, Inc. on a consolidated basis with its wholly-owned subsidiaries.
Overview
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 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.
Waste
Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities
using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.
Waste
to Energy Solutions - we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries
to electricity, renewable natural gas (“RNG”), hydrogen and bio char which are sold or used by our customers.
Engineering,
Consulting and Project Management Solutions – we have expanded our legacy electronics and manufacturing business and plan to
manufacture component parts for our Waste Heat Recovery and Waste to Energy business and to provide consulting services to municipal
and industrial customers and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean
energy solutions in their projects.
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. 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 $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.
Our
Business Strategy
Our
strategy is focused on further developing our existing Waste Heat Recovery business while expanding into the rapidly growing markets
for Waste to Energy Solutions and clean energy engineering, consulting and project management services.
Our
strategy focuses on three main elements:
|
● |
Expanding
our Waste Heat Recovery product line to include waste heat recovery ORC systems producing over 1 MW of power so we can qualify for
midsized and large heat recovery projects in the United States, China, Southeast Asian and other Pacific Rim countries. |
|
|
|
|
● |
Establishing
a Waste to Energy business by selling our ablative thermal processing products based on proprietary High Temperature Ablative Pyrolysis
(“HTAP”) technology and developing small and mid-sized waste to energy power plants producing electricity and RNG for
the grid and methane, hydrogen and biochar for resale. |
|
|
|
|
● |
Leveraging
our engineering, procurement and manufacturing experience in Waste Heat Recovery and Waste to Energy to assist companies and EPCs
incorporate clean energy solutions into energy and industrial construction projects. |
We
intend to implement this strategy through:
|
● |
Adding
a new ORC system manufactured by Enertime for Waste Heat Recovery that will enable us to implement projects in the U.S. markets producing
between 1 MW and 10 MW of electricity. |
|
|
|
|
● |
Taking
advantage of federal investment tax credits and state incentives that now include waste heat recover as a recognized clean energy
source making our Clean Cycle Generator and ORC systems more profitable to install. On December 21, 2020, Congress passed the Consolidated
Appropriations Act, 2021 enacted waste energy recovery Sec. 48 Investment Tax Credit, which extended Investment Tax Credit of 26%
including Waste Heat to Power providing a dollar-for-dollar offset against current liability. In addition, Congress passed the
Inflation Reduction Act on August 16, 2022 which increased the investment tax credit to up to 40%. |
|
|
|
|
● |
Benefiting
from higher energy costs which provide higher returns on our Waste Heat Recovery and Waste to Energy products and projects. |
|
|
|
|
● |
Improving
our balance sheet and capital position to permit us to invest in more products and projects. |
|
|
|
|
● |
Establishing
HTAP manufacturing facilities in Turkey for our Waste to Energy products and developing new patent protection on the proprietary
technology. |
|
|
|
|
● |
Leveraging
our existing marketing channels to sell HTAP Waste to Energy products to industrial companies and government agencies. |
|
|
|
|
● |
Working
with clean energy project development and finance companies to establish Waste to Energy power plants producing electricity, RNG,
hydrogen, methane and biochar from biomass, municipal waste, timber waste and other biomass and while retaining an equity interest
in these facilities to provide re-occurring revenue. |
|
|
|
|
● |
Sourcing
NG and selling it to privately owned pipeline companies in China through our newly formed NG Trading company to participate in
the rapidly growing clean energy market. |
|
|
|
|
● |
Acquiring
natural gas pipeline operators into our planned joint venture with Shenzhen Gas who will hold 51% of the joint venture and agreed
to finance these acquisitions pursuant to a framework agreement. |
|
|
|
|
● |
Participate
in other minority investments in medium to large clean energy projects being developed in China that may be sourced by our majority
stockholder in Hong Kong. |
|
|
|
|
● |
Leveraging
the NG trading and investment relationships to create opportunities for us to sell our Waste Recovery and Waste to Energy products
in China and to provide engineering, consulting and project management services. |
|
|
|
|
● |
Expanding our NG trading operations in China by acquiring
more customers and developing the planned joint venture with Shenzhen Gas by acquiring natural gas pipeline operators’ facilities. |
Recent
Developments
On
January 18, 2023, the Company received approval from FINRA to conduct reverse stock split of the Company’s issued and outstanding shares of common stock, par value
$0.001 per share (the “Common Stock”), at a ratio of one (1) share of common stock for every forty (40) shares of common
stock (the “Reverse Stock Split”). The Company filed an Amendment to Articles of Incorporation (the
“Amendment”) with the Secretary of State of the State of Nevada to effectuate the Reverse Stock Split on January 9,
2023. On September 26, 2022, the Board of Directors of the Company and approximately 71% of the shareholders of the Company approved
a reverse stock split in the range of 1:10 – 1:125. On January 6, 2023, the reverse split ratio was fixed at 1:40, by the
unanimous vote of the Board of Directors and approval by approximately 71% of the Company’s shareholders. The Reverse Stock
Split was effective as of the opening of trading on January19, 2023 (the “Effective Time”) and the Company’s
common stock continued trading on the OTCQB market on a post-split basis when the market opened on January 19, 2023, under the symbol
“CETYD” for 20 days after which time the symbol will revert to “CETY.” Fractional shares will not be
issued and the final number of shares will be rounded up to the next whole share.
Company
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
Corporation and Subsidiaries
Listing
on the Nasdaq Capital Market
Our
common stock is currently quoted on the OTCQB under the symbol “CETY.” In connection with this Underwritten Offering, we
plan to apply to list our common stock on the Nasdaq Capital Market (“Nasdaq”) under the symbol “CETY.” If our
listing application is approved, we expect to list our common stock on Nasdaq upon consummation of the Underwritten Offering, at which
point our common stock will cease to be traded on the OTCQB. No assurance can be given that our listing application will be approved.
Nasdaq listing requirements include, among other things, a stock price threshold. As a result, prior to effectiveness, we will need to
take the necessary steps to meet Nasdaq listing requirements.
Risk
Factors Summary
Our
business is subject to a number of risks. You should be aware of these risks before making an investment decision. These risks are discussed
more fully in the section of this registration statement titled “Risk Factors”. These risks include, among others, the following:
|
● |
Our
independent accountants have issued a going concern opinion and if we cannot obtain additional financing and/or reduce our operating
costs sufficiently, we may have to curtail operations and may ultimately cease to exist. |
|
|
|
|
● |
Our
business, results of operations and financial condition may be adversely affected by public health epidemics, including the ongoing
coronavirus or covid-19. |
|
|
|
|
● |
We
have not made a payment under a material contract, which could result in adverse impacts on our operations and financial results. |
|
|
|
|
● |
We
operate in a highly competitive market. If we do not compete effectively, our prospects, operating results, and financial condition
could be adversely affected. |
|
|
|
|
● |
Our
international operations subject us to risks, which could adversely affect our operating results. |
|
|
|
|
● |
Our
sales and contract fulfillment cycles can be long, unpredictable and vary seasonally, which can cause significant variation in revenues
and profitability in a particular quarter. |
|
|
|
|
● |
The
implementation of our waste to energy joint ventures depends on us finding funding for the projects, which is not guaranteed. |
|
|
|
|
● |
Our
waste to energy products have not been tested in the United States and we will need to establish a highly sponsored program in
order to gain data and acceptance in the market. |
|
|
|
|
● |
If
the spot price of NG in China drops below the purchase price our traders negotiate with our suppliers, we may not be able to sell
our NG or may have to sell it at a loss. |
|
|
|
|
● |
Our
sales and profitability are dependent on the price of oil, natural gas and electricity, which has been significantly volatile recently. |
|
|
|
|
● |
We
have issued a substantial amount of convertible securities which if converted will substantially dilute all of our stockholders. |
|
|
|
|
● |
Our
operating results and share price may be volatile and the market price of our common stock after this offering may drop below the
price you pay. |
Corporate
Information
Our
principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. Our telephone number is (949) 273-4990.
Our
internet website address is www.cetyinc.com and our subsidiary’s web site is www.heatrecoverysolutions.com. Information
on our websites is not incorporated by reference into this registration statement, and you should not consider information on our websites
to be part of this registration statement
THE
UNDERWRITTEN OFFERING AND SELLING SHAREHOLDERS OFFERING
Issuer |
|
Clean Energy Technologies, Inc. |
|
|
|
Common stock outstanding prior to the Underwritten Offering and Selling Stockholders Offering |
|
37,178,624 shares |
|
|
|
Common stock offered by us in the Underwritten Offering |
|
1,111,112 shares of our
common stock (1,277,778 shares if the underwriters exercise their over-allotment option in full), assuming a mid-point offering
price of $4.50 per share. |
|
|
|
Offering price for shares sold in the Underwritten Offering |
|
We currently estimate that the public offering price will be between
$4.00 and $5.00 per share. |
|
|
|
Over-allotment option |
|
The underwriters have an option for a period of 45 days to purchase
up to 166,666 additional shares of our common stock (15% of the number of shares sold in the Underwritten Offering) to cover
over-allotments, if any, at the public offering price, less underwriting discounts and commissions. |
|
|
|
Common stock outstanding after completion of the Underwritten Offering (assuming none of the shares offered by the selling shareholders in the Selling Shareholders Offering have been issued) |
|
38,289,736 shares,. (38,456,402
shares, if the underwriters exercise their over-allotment option in full). |
|
|
|
Common stock offered by the selling shareholders in the Selling Shareholders Offering |
|
2,553,403 shares, of our common stock issuable upon exercise of outstanding
convertible promissory notes held by certain of the selling shareholders, and 363,507 shares of our common stock issuable
upon exercise of outstanding warrants held by certain of the selling shareholders. |
|
|
|
Common stock outstanding after the Selling Shareholders Offering (assuming all of the shares offered in the Underwritten Offering and Selling Shareholders Offering have been issued and sold) |
|
41,373,311, if the underwriters exercise their
over-allotment option in full. |
|
|
|
Common Stock issuable upon the exercise of Underwriter’s Warrants |
|
The registration statement of which this prospectus is a part also
registers for sale of common stock underlying warrants (the “Underwriter’s Warrants”) to purchase 33,333
shares issuable to the Representatives), assuming a mid-point offering price of $4.50 per share and no exercise of the over-allotment
option by the underwriters, which is equal to 3.0% of the number of shares sold in the Underwritten Offering, as a portion of the
underwriting compensation payable to the Representatives in connection with the Underwritten Offering. The Underwriter’s Warrants
will be exercisable at any time, and from time to time, in whole or in part, during the four and one-half year period commencing
180 days following the date of commencement of sales of the Underwritten Offering at an exercise price of $5.625 per share assuming
a mid-point offering price of $4.50 per share (125.0% of the offering price per share in the Underwritten Offering). |
Lock-up
Agreements |
|
We
and our directors, officers and certain principal shareholders have agreed with the Underwriter not to offer for sale, issue, sell,
contract to sell, pledge or otherwise dispose of any of our common stock or securities convertible into common stock for a period
of 180 days after the date of this prospectus. See “Underwriting – Lock-Up Agreements.” |
|
|
|
Use
of proceeds |
|
We
intend to use the net proceeds from the Underwritten Offering after deducting the estimated
underwriting discounts and estimated offering expenses for sales and marketing activities,
product development, and capital expenditures, and we may also use a portion of the net proceeds
for the acquisition of, or investment in, technologies, solutions or businesses that complement
our business, and for working capital and general corporate purposes. See “Use of Proceeds”
on page 26 of this prospectus.
We
will not receive any proceeds from the sale of any shares by the selling shareholders in the Selling Shareholders Offering. |
|
|
|
OTCQB
Symbol |
|
CETY |
|
|
|
Proposed
Nasdaq Symbol |
|
CETY |
|
|
|
Risk
factors |
|
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning on page 9. |
Unless
we indicate otherwise, the number of shares of our common stock that will be outstanding immediately after the Underwritten Offering
and the Selling Shareholders Offering is based on 37,178,624 shares of common stock outstanding as of March 1, 2023, excluding
|
(i) |
shares of common stock issuable upon the exercise of outstanding
common stock purchase warrants and the conversion of outstanding convertible notes; and |
|
(ii) |
33,333 shares of common stock underlying the warrants
to be issued to the Representatives in connection with this Underwritten Offering (38,333, if the underwriters exercise the
over-allotment option in full). |
Except
as otherwise indicated herein, all information in this prospectus assumes no exercise by the underwriter of its over-allotment option
to purchase additional shares.
RISK
FACTORS
Investing
in our common stock involves a high degree of risk. Before investing in our common stock, you should carefully consider the risks described
below, as well as the other information in this prospectus, including our consolidated financial statements and the related notes. In
addition, we may face additional risks and uncertainties not currently known to us, or which as of the date of this registration statement
we might not consider significant, which may adversely affect our business. If any of the following risks occur, our business, financial
condition and results of operations could be materially adversely affected. In such case the trading price of our common stock could
decline due to any of these risks or uncertainties, and you may lose part or all of your investment.
Risks
Related to Our Business and Industry
OUR
INDEPENDENT ACCOUNTANTS HAVE ISSUED A GOING CONCERN OPINION AND IF WE CANNOT OBTAIN ADDITIONAL FINANCING AND/OR REDUCE OUR OPERATING
COSTS SUFFICIENTLY, WE MAY HAVE TO CURTAIL OPERATIONS AND MAY ULTIMATELY CEASE TO EXIST.
Our
financial statements for the fiscal years ended December 31, 2020 and 2021 have been prepared on a going concern basis, which contemplates
continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total
stockholder’s deficit of $1,702,653 and a working capital deficit of $4,274,383 and an accumulated deficit of $17,423,930 as of
December 31, 2021 and used $2,552,547 in net cash from operating activities for the year ended December 31, 2021. Therefore, there
is doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its
goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or
(2) to generate positive cash flow from operations.
For
the year ended December 31, 2021, we had a net profit of $278,492 compared to a net loss of $3,435,764 for the same period in
2020. The increase in the net profit in 2021 was mainly due to the change in derivative liability associated with the convertible debt
and lower interest expense from 2021 to 2020.
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.
As
of December 31, 2021, we had current liabilities of $6,865,123. The Company has been able to raise additional capital of approximately
$4.78 million and repaid approximately $2.0 million of debt in 2021. Our outstanding debt could limit our ability to obtain additional
financing for working capital, capital expenditures, debt service requirements, or other purposes in the future, as needed; to plan for,
or react to, changes in technology and in our business and competition; and to react in the event of an economic downturn.
In addition,
we may not be able to meet our debt service obligations. The total outstanding balance of indebtedness as of the end of September
30, 2022 was 6,372,817. Some of these outstanding debts bear a high interest rate. For example, the interest rate for debts
due to Nations Interbanc with an outstanding balance of $1,058,127 is 26% per annum as of September 30, 2022. If we are
unable to generate sufficient cash flow or obtain funds for required payments, or if we fail to comply with covenants in our revolving
lines of credit, we will be in default.
WE
ARE IN DEFAULT IN OUR OBLIGATIONS TO A MAJOR CREDITOR
Currently,
we are in default of our notes payable to Cybernaut Zfounder Ventures (“Cybernaut”), which have aggregate outstanding principal
and interest of approximately $317,319 as of September 30, 2022. Cybernaut has agreed to pay the prepayment amounts of certain
convertible promissory notes on behalf of the company, and as a result, Cybernaut acquired the rights of the original note holder under
the notes. The default interest on the notes is 14% per annum. The notes can convert into the common stock of the Company at the variable
discount rate of 35%.
OUR
BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY PUBLIC HEALTH EPIDEMICS, INCLUDING THE COVID-19.
A
public health epidemic, including the COVID-19, poses the risk that we or our employees, contractors, suppliers, customers and other
business partners may be prevented from conducting business activities for an indefinite period of time, due to factors such as shutdowns
that may be requested or mandated by governmental authorities. The COVID-19 pandemic continues to rapidly evolve. At this time, there
continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses
to it will impact our business, operations and financial results.
The
extent to which the COVID-19 pandemic may impact our results will depend on future developments, which are highly uncertain and cannot
be predicted as of the date of this prospectus, including the effectiveness of vaccines and other treatments for COVID-19, and other
new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact,
among others. The pandemic and the current financial, economic and capital markets environment, and future developments in the global
supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations
and cash flows.
To
the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many
of the other risks described in this “Risk Factors” section.
WE
HAVE NOT MADE A PAYMENT UNDER A MATERIAL CONTRACT, WHICH COULD RESULT IN ADVERSE IMPACTS ON OUR OPERATIONS AND FINANCIAL RESULTS.
As
of the date of this prospectus, we have not made a payment of the principal of $1,200,000 with the accrued interest of $325,843 which
comprised the balance of the purchase price pursuant to our asset purchase agreement with General Electric International (“GE”),
under which we acquired all assets of Heat Recovery Solutions business unit from General Electric International. In addition, we have
not paid GE an amount of $972,233 in accrued transitional fees. We believe that the outstanding amounts should have been an offset to
purchase price we paid due to a misrepresentation of the values of the disclosed assets as reflected in the principal amount of the outstanding
note and in the transition agreements. CETY stopped making payments and informed GE that it had encountered difficulties because of the
valuations of the assets that were acquired from GE. Given that the values of the assets were different than GE’s internal reports
and as we discussed at the time of the transaction with GE’s management, we proposed a change in the amount the Company owes GE
under the purchase agreement, but GE was non-responsive and GE’s entire distributed power vertical has been divested.
Based
on the California Statute of Limitations, the Nevada Statute of Limitations, and the New York Statute of Limitations it is the view of
our legal counsel that the above referenced debt is no longer an enforceable obligation. under California law, Nevada law, and New York
law, as it became past due no later than November 3, 2016, more than Six (6) years ago and last payment made on the debt was on November
3, 2016, which is more than Six (6) years ago.
IF
DEMAND FOR THE PRODUCTS AND SERVICES THAT THE COMPANY OFFERS SLOWS, OUR BUSINESS WOULD BE MATERIALLY AFFECTED.
Demand
for products which it intends to sell depends on many factors, including:
|
● |
the
economy, and in periods of rapidly declining economic conditions, customers may defer purchases or may choose alternate products; |
|
|
|
|
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the
cost of oil, gas and solar energy; |
|
|
|
|
● |
the
competitive environment in the heat to power sectors may force us to reduce prices below our desired pricing level or increase promotional
spending; and |
|
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● |
our
ability to maintain efficient, timely and cost-effective production and delivery of the products and services. |
All
of these factors could result in immediate and longer term declines in the demand for the products and services that we offer, which
could adversely affect our sales, cash flows and overall financial condition.
WE
OPERATE IN A HIGHLY COMPETITIVE MARKET. IF WE DO NOT COMPETE EFFECTIVELY, OUR PROSPECTS, OPERATING RESULTS, AND FINANCIAL CONDITION COULD
BE ADVERSELY AFFECTED.
The
markets for our products and services are highly competitive, with companies offering a variety of competitive products and services.
We expect competition in our markets to intensify in the future as new and existing competitors introduce new or enhanced products and
services that are potentially more competitive than our products and services. We believe many of our competitors and potential competitors
have significant competitive advantages, including longer operating histories, ability to leverage their sales efforts and marketing
expenditures across a broader portfolio of products and services, larger and broader customer bases, more established relationships with
a larger number of suppliers, contract manufacturers, and channel partners, greater brand recognition, and greater financial, research
and development, marketing, distribution, and other resources than we do and the ability to offer financing for projects. Our competitors
and potential competitors may also be able to develop products or services that are equal or superior to ours, achieve greater market
acceptance of their products and services, and increase sales by utilizing different distribution channels than we do. Some of our competitors
may aggressively discount their products and services in order to gain market share, which could result in pricing pressures, reduced
profit margins, lost market share, or a failure to grow market share for us. If we are not able to compete effectively against our current
or potential competitors, our prospects, operating results, and financial condition could be adversely affected.
WE
MAY LOSE OUT TO LARGER AND BETTER-ESTABLISHED COMPETITORS.
The
alternative power industry is intensely competitive. Most of our competitors have significantly greater financial, technical, marketing
and distribution resources as well as greater experience in the industry than we have. Our products may not be competitive with other
technologies, both existing at the current time and in the future. If this happens, our sales and revenues will decline, or fail to develop
at all. In addition, our current and potential competitors may establish cooperative relationships with larger companies to gain access
to greater development or marketing resources. Competition may result in price reductions, reduced gross margins and loss of market share.
OUR
INTERNATIONAL OPERATIONS SUBJECT US TO RISKS, WHICH COULD ADVERSELY AFFECT OUR OPERATING RESULTS.
Our
international operations are exposed to the following risks, several of which are out of our control:
|
● |
political
and economic instability, international terrorism and anti-American sentiment, particularly in emerging markets; |
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● |
preference
for locally branded products, and laws and business practices favoring local competition; |
|
● |
unusual
or burdensome foreign laws or regulations, and unexpected changes to those laws or regulations; |
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|import
and export license requirements, tariffs, taxes and other barriers; |
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costs
of customizing products for foreign countries; |
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● |
increased
difficulty in managing inventory; |
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● |
less
effective protection of intellectual property; and |
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difficulties
and costs of staffing and managing foreign operations. |
Any
or all of these factors could adversely affect our ability to execute any geographic expansion strategies or have a material adverse
effect on our business and results of operations.
OUR
PRODUCTS MAY BE DISPLACED BY NEWER TECHNOLOGY.
The
alternative power industry is undergoing rapid and significant technological change. Third parties may succeed in developing or marketing
technologies and products that are more effective than those developed or marketed by us, or that would make our technology obsolete
or non-competitive. Accordingly, our success will depend, in part, on our ability to respond quickly to technological changes. We may
not have the resources to do this.
WE
MUST HIRE QUALIFIED ENGINEERING, DEVELOPMENT AND PROFESSIONAL SERVICES PERSONNEL.
We
cannot be certain that we can attract or retain a sufficient number of highly qualified mechanical engineers, industrial technology and
manufacturing process developers and professional services personnel. To deploy our products quickly and efficiently, and effectively
maintain and enhance them, we will require an increasing number of technology developers. We expect customers that license our technology
will typically engage our professional engineering staff to assist with support, training, consulting and implementation. We believe
that growth in sales depends on our ability to provide our customers with these services and to attract and educate third-party consultants
to provide similar services. As a result, we plan to hire professional services personnel to meet these needs. New technical and professional
services personnel will require training and education and it will take time for them to reach full productivity. To meet our needs for
engineers and professional services personnel, we also may use costlier third-party contractors and consultants to supplement our own
staff. Competition for qualified personnel is intense, particularly because our technology is specialized and only a limited number of
individuals have acquired the needed skills. Our business may be harmed if we are unable to attract or retain an adequate number of qualified
personnel.
WE
MAY BE ADVERSELY AFFECTED BY SHORTAGES OF REQUIRED COMPONENTS. IN ADDITION, WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS TO PROCURE OUR
PARTS FOR PRODUCTION WHICH IF AVAILABILITY OF PRODUCTS BECOMES COMPROMISED IT COULD ADD TO OUR COST OF GOODS SOLD AND AFFECT OUR REVENUE
GROWTH.
At
various times, there have been shortages of some of the components that we use, as a result of strong demand for those components or
problems experienced by suppliers. These unanticipated component shortages have resulted in curtailed production or delays in production,
which prevented us from making scheduled shipments to customers in the past and may do so in the future. Our inability to make scheduled
shipments could cause us to experience a reduction in our sales and an increase in our costs and could adversely affect our relationship
with existing customers as well as prospective customers. Component shortages may also increase our cost of goods sold because we may
be required to pay higher prices for components in short supply and redesign or reconfigure products to accommodate substitute components.
OUR
PRINCIPAL SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS, IN THE AGGREGATE, BENEFICIALLY OWN MORE THAN 50% OF OUR OUTSTANDING COMMON
STOCK AND THESE SHAREHOLDERS, IF ACTING TOGETHER, WILL BE ABLE TO EXERT SUBSTANTIAL INFLUENCE OVER ALL MATTERS REQUIRING APPROVAL OF
OUR SHAREHOLDERS.
Our
principal shareholders, directors and executive officers in the aggregate, beneficially own more than 50% our outstanding common stock
on a fully diluted basis. These shareholders, if acting together, will be able to exert substantial influence over all matters requiring
approval of our shareholders, including amendments to our Articles of Incorporation, fundamental corporate transactions such as mergers,
acquisitions, the sale of the company, and other matters involving the direction of our business and affairs and specifically the ability
to determine the members of our board of directors. (See “Security Ownership of Certain Beneficial Owners and Managements”).
IF
WE LOSE KEY SENIOR MANAGEMENT PERSONNEL OUR BUSINESS COULD BE NEGATIVELY AFFECTED. FURTHER, WE WILL NEED TO RECRUIT AND RETAIN ADDITIONAL
SKILLED MANAGEMENT PERSONNEL AND IF WE ARE NOT ABLE TO DO SO, OUR BUSINESS AND OUR ABILITY TO CONTINUE TO GROW COULD BE HARMED.
Our
success depends to a large extent upon the continued services of our executive officers. We could be seriously harmed by the loss of
any of our executive officers. In order to manage our growth, we will need to recruit and retain additional skilled management personnel
and if we are not able to do so, our business and our ability to continue to grow could be harmed. Although a number of companies in
our industry have implemented workforce reductions, there remains substantial competition for highly skilled employees.
WE
ARE SUBJECT TO ENVIRONMENTAL COMPLIANCE RISKS AND UNEXPECTED COSTS THAT WE MAY INCUR WITH RESPECT TO ENVIRONMENTAL MATTERS MAY RESULT
IN ADDITIONAL LOSS CONTINGENCIES, THE QUANTIFICATION OF WHICH CANNOT BE DETERMINED AT THIS TIME.
We
are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, storage,
discharge and disposal of hazardous substances in the ordinary course of our manufacturing process. If more stringent compliance or cleanup
standards under environmental laws or regulations are imposed, or the results of future testing and analyses at our current or former
operating facilities indicate that we are responsible for the release of hazardous substances, we may be subject to additional remediation
liability. Further, additional environmental matters may arise in the future at sites where no problem is currently known or at sites
that we may acquire in the future. Currently unexpected costs that we may incur with respect to environmental matters may result in additional
loss contingencies, the quantification of which cannot be determined at this time.
OUR
SALES AND CONTRACT FULFILLMENT CYCLES CAN BE LONG, UNPREDICTABLE AND VARY SEASONALLY, WHICH CAN CAUSE SIGNIFICANT VARIATION IN REVENUES
AND PROFITABILITY IN A PARTICULAR QUARTER.
The
timing of our sales and related customer contract fulfillment is difficult to predict. Many of our customers are large enterprises, whose
purchasing decisions, budget cycles and constraints and evaluation processes are unpredictable and out of our control. Further, the timing
of our sales is difficult to predict. The length of our sales cycle, from initial evaluation to payment for our products and services,
can range from several months to well over a year and can vary substantially from customer to customer. Our sales efforts involve significant
investment in resources in field sales, marketing and educating our customers about the use, technical capabilities and benefits of our
products and services. Customers often undertake a prolonged evaluation process. As a result, it is difficult to predict exactly when,
or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. Large individual sales
have, in some cases, occurred in quarters subsequent to those we anticipated, or have not occurred at all. In addition, the fulfillment
of our customer contracts is partially dependent on other factors related to our customers’ businesses that are not in our control.
as with the sales cycle, this can also cause revenues and earnings to fluctuate from quarter to quarter. If our sales and/or contract
fulfillment cycles lengthen or our substantial upfront investments do not result in sufficient revenue to justify our investments, our
operating results could be adversely affected.
We
have experienced seasonal and end-of-quarter concentration of our transactions and variations in the number and size of transactions
that close in a particular quarter, which impacts our ability to grow revenue over the long term and plan and manage cash flows and other
aspects of our business and cost structure. Our transactions vary by quarter, with the fourth quarter typically being our largest. If
expectations for our business turn out to be inaccurate, our revenue growth may be adversely affected over time and we may not be able
to adjust our cost structure on a timely basis and our cash flows may suffer.
OUR
OPERATING MARGINS MAY DECLINE AS A RESULT OF INCREASING PRODUCT COSTS.
Our
business is subject to significant pressure on pricing and costs caused by many factors, including competition, the cost of components
used in our products, labor costs, constrained sourcing capacity, inflationary pressure, pressure from customers to reduce the prices
we charge for our products and services, and changes in consumer demand. Costs for the raw materials used in the manufacture of our products
are affected by, among other things, energy prices, consumer demand, fluctuations in commodity prices and currency, and other factors
that are generally unpredictable and beyond our control. Increases in the cost of raw materials used to manufacture our products or in
the cost of labor and other costs of doing business in the United States and internationally could have an adverse effect on, among other
things, the cost of our products, gross margins, operating results, financial condition, and cash flows.
OUR
PROPOSED JOINT VENTURE WITH SHENZHEN GAS MAY NOT BE SUCCESSFUL.
Our
proposed joint venture with Shenzhen Gas (as defined below) is subject to risks that we may not be able to control and therefor may not
be successful. CETY Hong Kong has entered into a framework agreement for a future joint venture with the overseas investment arm of Shenzhen
Gas. CETY Hong Kong will hold a 49% interest in the joint venture in accordance with the framework agreement. Once established, the joint
venture will acquire municipal natural gas operators in China with funds provided by Shenzhen Gas. The framework agreement is not binding
upon the parties until definitive agreements are executed, there is no guarantee the joint venture will be established. Further, the
joint venture is dependent on both CETY and Shenzhen Gas contributing funds to the joint venture. Shenzhen Gas will be required to loan
funds to the joint venture once established. If Shenzhen Gas does not provide capital for the acquisitions of the natural gas operators
as planned, we will not be able to execute the business plan and it may result in a loss of our capital investment, if any. The acquisitions
are dependent upon the price of gas, our ability to source acquisition targets for the joint venture, successful price negotiations and
the profitable operations of the acquired companies. There can be no assurances that we will be able to successfully acquire companies
through the joint venture and execute on its business plan.
OUR
WASTE TO ENERGY BUSINESS, INCLUDING OUR BIOMASS PROJECT IN THE U.S., IS IN AT AN EARLY STAGE AND WE DO NOT MAKE ANY ASSURANCES OF ITS
SUCCESS OR ABILITY TO OPERATE PROFITABLY.
We are
entering into the waste to energy business based on new technology. While the HTAP has not been installed and qualified by an
independent engineering study by an engineering, procurement and construction organization for an existing facility in United
States or Europe. As a result, we cannot be assured that the equipment or technology will be accepted or adopted by the firms who
are typically responsible for developing and building locally based waste to energy facilities. In addition, it is more difficult to
obtain standard financing for our projects using HTAP technology until qualified. While we have established our first pilot project for
our proposed biomass facility, there can be no assurances we will be able to obtain sufficient financing to complete the project or that
once established it will operate profitably.
OUR NEW OPERATIONS
FOR HTAP TECHNOLOGY HAVE BEEN RELOCATED TO A NEW OFFICE IN TURKEY FOR SALES AND ENGINEERING AND FOR MANUFACTURING OUTSIDE OF RUSSIA.
WE CAN NOT MAKE ANY ASSURANCES THAT THE OPERATIONS FOR THE SALES AND MANUFACTURING OF THE HTAP TECHNLOGY WILL BE SUCCESSFUL.
As
a result of the recent war between Russia and the Ukraine, we have terminated our agreements with ENEX and have established an office
in Turkey to run the engineering and sales efforts for the HTAP waste to energy products in Europe. The inventor and owner of ENEX has
moved out of Russia, purchased an apartment in Antalya, Turkey, and has applied for permanent citizenship in Turkey. In addition, ENEX
is in the process of redomiciling to Turkey and will run its operations out of Antalya to complete its remaining projects in Kazakhstan
at which time the operations of ENEX are expected to be wound down. Upon the ENEX owner’s receipt of Turkish citizenship, CETY
plans to retain the former owner of ENEX to develop and patent new technology relating the ablative processing of waste material and,
after ENEX redomiciles to Turkey, transfer any requisite intellectual property rights to CETY in order to develop new patents on the
technology. The former operations in Russia primarily consisted of assembling third party components and engineering modifications on
the system required to meet our customer’s needs. We will need to relocate personnel and equipment and obtain an office and manufacturing
facility in Turkey to properly establish new manufacturing operations. In addition, we will need to establish relationships with third
party manufacturers who are not located in Russia in order to obtain components for the HTAP systems. We cannot assure you that the transition
of ENEX from Russia to Turkey will be successful as will require adding new engineers from outside of Russia and developing new material
sources and supply chains.
WE
CAN NOT ASSURE THAT OUR HTAP TECHNOLOGY WILL BE ABLE TO BE MODIFIED TO ACCOMMODATE THE NEEDS OF OUR CUSTOMERS OR TO PRODUCE ALL OF THE
BIOFULES WHICH WE BELIEVE IT IS CAPABLE OF PRODUCING.
Our
HTAP Technology will need to be modified to burn certain types of fuels, depending on our customer’s needs, and to produce certain
types of biofuels that we expect to produce, such as hydrogen. We cannot assure you that we will be able to successfully modify our HTAP
systems to accommodate the needs of our customers or to produce all of the biofuels we believe it is capable of producing. While HTAP
technology has been used in various waste to energy projects using high temperature ablative technology clients have varying needs with
respect to their waste products. For example, some types of sewage waste require pre-treatment and processing before it can be incinerated
at high temperatures under pressurized conditions. Additionally, some customers will want to produce different types of biofuels based
on their needs and the market. While our HTAP technology has produced biogas and biofuel, we cannot assure you that we will be able to
modify and produce equipment that will provide output products that our customers desire. For example, we believe that hydrogen will
be used in the future to power electrical generators feeding the grid. Our HTAP system will need to be modified to produce hydrogen and
we can make no assurances that we will be able to successfully make such modifications.
OUR
HTAP TECHNOLOGY FACES MANY COMPETING NEW AND EXISTING TECHNOLOGIES, AND WE CANNOT ASSURE YOU THAT OUR HIGH TEMPERATURE ABLATIVE PROCESS
WILL BE ADOPTED BY THE MARKET.
Our
HTAP technology is an alternative to existing incineration technology which we believe is more efficient and will produce a wider variety
of biofuels than existing methods at a more cost-effective price. While processes such as thermal on grate are widespread, we believe
that they produce more damaging pollution than our ablative pressurized incineration technology. Systems using thermal on grate have
implemented pollution remediation systems reducing the environmental impact of their byproducts. These remediation technologies may improve
and become more cost effective thereby reducing the competitiveness of our product. There are also many new technologies that will compete
with our HTAP process at a lower cost or with more efficiency that could become the new standard for waste to energy productions. For
example, some technologies produce energy by using enzymes to break down organic wastes. Others will grow biological materials that when
exposed to sunlight create energy. While these and other technologies are at early stages, we cannot assure you that they will not be
developed into commercially viable products that can produce clean energy more efficiently than our product and, in fact, become an industry
standard making our technology less attractive.
IF
WE FAIL TO DEVELOP AND MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL OVER FINANCIAL REPORTING, WE MAY BE UNABLE TO ACCURATELY REPORT
OUR FINANCIAL RESULTS OR PREVENT FRAUD.
As
a public company, we have been subject to the Section 404 of the Sarbanes-Oxley Act, or SOX 404, which requires that we include a report
from management on the effectiveness of our internal control over financial reporting in our annual report on Form 10-K.
Our
reporting obligations as a public company place a significant strain on our management and operational and financial resources and systems.
Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports
and are important to prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting
may result in the loss of investor confidence in the reliability of our financial statements, which in turn may harm our business and
negatively impact the trading price of our stock. Furthermore, we anticipate that we will continue to incur considerable costs and use
significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley
Act.
In
connection with the auditing of our consolidated financial statements as of and for the years ended December 31, 2020 and 2021, we identified
the following material weaknesses in our internal control over financial reporting:
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Inadequate
segregation of duties consistent with control objectives due to a small number of employees; |
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Lack
of formal policies and procedures, but there are integrated systems in place and the procedure are being documented; |
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Lack
of a functioning audit committee to oversee financial reporting responsibilities, which is being addressed by adding qualified CPA
board members; and |
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Lack
of risk assessment procedures on internal controls to detect financial reporting risks on a timely manner, currently being implemented
as part of new procedures and policies. |
As
defined in the rules and regulations adopted by the SEC, a “material weakness” is a deficiency, or combination of deficiencies,
in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual
or interim financial statements will not be prevented or detected on a timely basis.
Management
has been implementing and will continue to implement measures designed to ensure that control deficiencies contributing to the material
weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions planned
include:
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Continue
to search for and evaluate qualified independent outside directors; |
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Identify
gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company;
and |
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Continue
to develop policies and procedures on internal control over financial reporting and monitor the effectiveness of operations on existing
controls and procedures. |
We
have also engaged a third-party financial consulting firm during the year to assist with the preparation of SEC reporting. We are committed
to maintaining a strong internal control environment and believe that these remediation efforts will deliver improvements in our control
environment. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our
internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing
additional enhancements or improvements, as necessary and as funds allow.
However,
the implementation of these measures may not fully address these weaknesses in our internal control over financial reporting, and we
cannot conclude that they have been fully remedied. Our failure to correct these weakness and deficiencies or our failure to discover
and address any other weakness and deficiencies could result in our inability to accurately report our financial results, prevent or
detect fraud or provide timely and reliable financial and other information pursuant to the reporting obligations we have as a public
company, which could have a material adverse effect on our business, financial condition and results of operations. Further, it could
cause our investors to lose confidence in the information we report, which could adversely affect the price of our shares.
WE
HAVE ENGAGED IN TRANSACTIONS WITH RELATED PARTIES, AND SUCH TRANSACTIONS PRESENT POSSIBLE CONFLICTS OF INTEREST THAT COULD HAVE AN ADVERSE
EFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS.
We
have entered into certain transactions with our officers, directors and certain shareholders. See “Certain Relationships and
Related Party Transactions.” We believe the terms obtained or consideration that we paid or received, as applicable, in connection
with these transactions were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length
transactions.
We
may in the future enter into additional transactions in which any of our directors, officers or certain shareholders, or any members
of their immediate family, have a direct or indirect material interest. Such transactions present potential for conflicts of interest,
as the interests of these entities and their shareholders may not align with the interests of the Company and our unaffiliated shareholders
with respect to the negotiation of, and certain other matters related to, our purchases from and other transactions with such entities.
Conflicts of interest may also arise in connection with the exercise of contractual remedies under these transactions, such as for events
of default.
Our
Board of Directors intends to authorize the Audit Committee consisting of independent directors upon its formation to review and approve
all material related party transactions. Nevertheless, we may have achieved more favorable terms if such transactions had not been entered
into with related parties. These transactions, individually or in the aggregate, may have an adverse effect on our business and results
of operations or may result in litigation or enforcement actions by the SEC or other agencies.
OUR
CFO AND DIRECTOR, MR. CALVIN PANG, HOLDS A CONTROLLING INTEREST IN US THROUGH AN ENTITY HE CONTROLS WHICH MAY POSE CONFLICTS OF INTERESTS
AS A RELATED PARTY.
Mr.
Calvin Pang is the beneficial owner of 64.7% of our common stock, or 24,044,101 shares, as of March 1, 2023. While many of Mr.
Pang’s interests are aligned with our business and operations, we cannot assure you that the interests of the Company and Mr. Pang
will always be the same. Under Nevada laws, all directors, including Mr. Pang as a director, owe fiduciary duties to our corporation.
In addition, the Company has taken steps to exclude Mr. Pang from voting as a director on issues that he may be a related party. Further,
our Board of Directors intends to authorize the Audit Committee upon its formation to review and approve all material related party transactions.
Nevertheless, Mr. Pang can exert significant influence on the board and the actions of the Company as being a majority shareholder and
your and other minority shareholders’ ability to influence significant corporate decisions will be limited.
THE
COMPANY DEPENDS ON A LIMITED NUMBER OF CUSTOMERS FOR A LARGE PORTION OF ITS NET SALES.
A
limited number of customers account for a large percentage of the Company’s net sales. The Company’s three largest customers,
Aries Clean Energy, San Giorgio, and Greenverse and its domestic and international affiliated companies, accounted for approximately
75% of the Company’s net sales during fiscal year 2021 and the company’s three largest customers, Ekonams, CEF, and Corycos,
accounted for approximately 96% of the Company’s net sales during fiscal year 2020. The Company expects that a significant portion
of its revenues will continue to be derived from a small number of customers and that these percentages may increase with the growth
of its waste to energy products and services. In addition, the Company’s business is based primarily upon individual sales orders,
and the Company typically does not enter into long-term contracts with its customers. Accordingly, these customers could reduce their
purchasing levels or cease buying products from the Company at any time and for any reason. In addition, since the Company is project
driven, the Company’s sales can be delayed due to the time it takes for its customers with the approval and financing process of
their project which can reduce the sales of the Company’s products and it may have a material adverse effect on the Company’s
business, financial condition and results of operations.
WE
MAY INCUR LIABILITIES THAT ARE NOT COVERED BY INSURANCE.
While
we seek to maintain appropriate levels of insurance, not all claims are insurable and we may experience major incidents of a nature that
are not covered by insurance or not covered adequately by insurance. Furthermore, insurance companies in China currently do not offer
as extensive an array of insurance products for our PRC subsidiaries as insurance companies in more developed economies. In some cases,
we have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially
reasonable terms make it impractical for us to have such insurance. We maintain an amount of insurance protection that we believe is
adequate, but there can be no assurance that such insurance will continue to be available on acceptable terms or that our insurance coverage
will be sufficient or effective under all circumstances and against all liabilities to which we may be subject. If we were to incur substantial
losses or liabilities due to fire, explosions, floods, other natural disasters or accidents or business interruption, our results of
operations could be materially and adversely affected. We could, for example, be subject to substantial claims for damages upon the occurrence
of several events within one calendar year. In addition, our insurance costs may increase over time in response to any negative development
in our claims history or due to material price increases in the insurance market in general.
A
SIGNIFICANT INTERRUPTION IN THE OPERATIONS OF OUR THIRD-PARTY SUPPLIERS COULD POTENTIALLY DISRUPT OUR OPERATIONS.
We
have limited control over the operations of our third-party suppliers and other business partners and any significant interruption in
their operations may have an adverse impact on our operations. For example, a significant interruption in the operations of our supplier’s
manufacturing facilities could cause delay or termination of shipment of the raw materials to our subsidiaries, which may cause delay
or termination of shipment of our products to our customers, thus resulting in penalties or fines due to our breach of contract. If we
could not solve the impact of the interruptions of operations of our third-party suppliers, our business operations and financial results
may be materially and adversely affected.
WE
HAVE A SIGNIFICANT AMOUNT OF ACCOUNTS RECEIVABLE, WHICH COULD BECOME UNCOLLECTIBLE.
As
of December 31, 2021, we had approximately $693,032 in accounts receivable and $684,770 in long term financing receivables. Our accounts
receivable primarily include balance due from customers when our products are sold and delivered to customers. Our customers are required
to make full payment within three to five months from delivery date, although our industry typical payment term is 180 days from delivery.
As a result of the COVID-19 outbreak in January 2020, collection activities from some of our customers affected by the pandemic resulted
in longer payment terms. We impliedly granted extended payment terms until their projects are commissioned and they collect from their
end users. Deteriorating conditions in, bankruptcies, or financial difficulties of a customer or within their industries generally may
impair the financial condition of our customers and hinder their ability to pay us on a timely basis or at all, and accounts receivable
are written off against allowances only after exhaustive collection efforts. The failure or delay in payment by one or more of our customers
could reduce our cash flows and adversely affect our liquidity and results of operations.
OUR
SALES AND PROFITABILITY ARE DEPENDENT ON THE PRICE OF OIL, NATURAL GAS AND ELECTRICITY, WHICH HAS BEEN SIGNIFICANTLY VOLATILE RECENTLY.
Our
Waste Heat Recovery products and Waste to Energy products are dependent on the prices of traditional energy sources. We believe our products
reuse wasted heat and create electricity with zero emission and have potential for receiving clean energy incentives. The process of
converting waste heat to power is referred to as organic Rankine cycle. Our waste to energy products converts organic waste into power
and biochar through a process referred to pyrolysis. As the price of energy increases, the economic justification for our products increases.
At the same time, as the price for traditional fuel decreases, there is less incentive for customers to purchase our products and it
may impair our ability to sell our products.
IF
THE SPOT PRICE OF NG IN CHINA DROPS BELOW THE PURCHASE PRICE OUR TRADERS NEGOTIATE WITH OUR SUPPLIERS, WE MAY NOT BE ABLE TO SELL OUR
NG OR MAY HAVE TO SELL IT AT A LOSS.
Our traders
at JHJ purchase NG at a fixed price in large volumes. If the spot prices for NG in China 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 NG to
be able to hedge against price declines of this commodity. 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.
WE
MAY NOT HAVE SUFFICIENT FUNDS TO CONDUCT OUR TRADING OPERATIONS IN THE PRC.
We
are funding our trading operations through cash flow generated by JHJ and from funds provided by our parent. If we or JHJ does not have
sufficient funds, we may not be able to conduct trading operations.
OUR
WASTE TO ENERGY PRODUCTS FROM ENEX HAVE NOT BEEN TESTED IN THE UNITED STATES.
ENEX’s
HTAP 5 and 10 have not been installed in the United States. In order to commence sales, our purchasers will need to review data
that they may not deem reliable. As a result, we may be required to post large bonds or find an EPC that will guarantee performance of
the ENEX systems. We can not give any assurances that we will be able to finance the bonds or find an EPC willing to guaranty performance.
THE
IMPLEMENTATION OF OUR WASTE TO ENERGY JOINT VENTURES DEPENDS ON US FINDING FUNDING FOR THE PROJECTS.
In
order to implement the ENEX system in our waste to energy joint ventures, we will need to finance directly or obtain third party financing
for these projects. We cannot give any assurances that we will be able to directly finance these projects or be able to find a third
party to provide financing to them. If we are not able to finance the projects we will not be able to implement our business plan in
this sector.
WE
MAY NEED TO RAISE ADDITIONAL CAPITAL REQUIRED TO GROW OUR BUSINESS, AND WE MAY NOT BE ABLE TO RAISE CAPITAL ON TERMS ACCEPTABLE TO US
OR AT ALL.
Growing
and operating our business will require significant cash outlays and capital expenditures and commitments. We have utilized cash on hand
and cash generated from operations as sources of liquidity. If such cash is not sufficient to meet our cash requirements, we will need
to seek additional capital, potentially through equity or debt financing, to fund our growth. Our ability to access the credit and capital
markets in the future as a source of liquidity, and the borrowing costs associated with such financing, are dependent upon market conditions.
In
addition, any equity securities we issue, including any preferred stock, may be on terms that are dilutive or potentially dilutive to
our stockholders, and the prices at which new investors would be willing to purchase our securities may be lower than the offering price
per share of our Common Stock. The holders of any equity securities we issue, including any preferred stock, may also have rights, preferences
or privileges which are senior to those of existing holders of Common Stock. If new sources of financing are required, but are insufficient
or unavailable, we will be required to modify our growth and operating plans based on available funding, if any, which would harm our
ability to grow our business.
OUR
REVENUE GROWTH RATE DEPENDS PRIMARILY ON OUR ABILITY TO EXECUTE OUR BUSINESS PLAN.
We
may not be able to identify and maintain the necessary relationships with customers and labor within our industry. Our ability to execute
our business plan also depends on other factors, including the ability to:
|
● |
Negotiate
and maintain contracts and agreements with acceptable terms; |
|
● |
Hire
and train qualified personnel; |
|
● |
Maintain
marketing and development costs at affordable rates; and |
|
● |
Maintain
an affordable labor force. |
CHINA’S
ECONOMIC, POLITICAL AND SOCIAL CONDITIONS, AS WELL AS GOVERNMENTAL POLICIES, COULD AFFECT THE BUSINESS ENVIRONMENT IN CHINA AND OUR ABILITY
TO OPERATE OUR BUSINESS.
A
portion of our operations are conducted in China. Accordingly, our business, results of operations, financial condition and prospects
may be influenced to a degree by economic, political, legal and social conditions in China. China’s economy differs from the economies
of other countries in many respects, including with respect to the amount of government involvement, level of development, growth rate,
control of foreign exchange and allocation of resources. In recent years, the Chinese government has implemented measures emphasizing
market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance
in business enterprises. However, a significant portion of productive assets in China are still owned by the Chinese government. The
Chinese government continues to play a significant role in regulating industrial development. It also exercises significant control over
China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting
monetary policies, restricting the inflow and outflow of foreign capital and providing preferential treatment to particular industries
or companies. More generally, if the business environment in China deteriorates from the perspective of domestic or international investment,
the portion of our operations in China may also be adversely affected.
As
the Chinese economy has become increasingly linked with the global economy, China is affected in various respects by downturns and recessions
of major economies around the world. The various economic and policy measures enacted by the Chinese government to forestall economic
downturns or bolster China’s economic growth could materially affect our business. Any adverse change in the economic conditions
in China, policies of the Chinese government or laws and regulations in China could have a material adverse effect on the overall economic
growth of China and, in turn, the portion of our business in China.
UNCERTAINTIES
IN THE CHINA LEGAL SYSTEM COULD MATERIALLY AND ADVERSELY AFFECT US.
In
1979, the Chinese government began to promulgate a comprehensive system of laws and regulations governing economic matters in general.
The overall effect of legislation over the past four decades has significantly enhanced the protections afforded to various forms of
foreign investments in China. However, China has not developed a fully integrated legal system, and recently enacted laws and regulations
may not sufficiently cover all aspects of economic activities in China. In particular, the China legal system is based on written statutes
and prior court decisions have limited value as precedents. Since these laws and regulations are relatively new and the China legal system
continues to rapidly evolve, the interpretations of many laws, regulations and rules may not be uniform and enforcement of these laws,
regulations and rules involves uncertainties. These uncertainties may affect our judgment on the relevance of legal requirements and
our ability to enforce our contractual rights or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited
or frivolous legal actions or threats in attempts to extract payments or benefits from us. Furthermore, the China legal system is based
in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have a retroactive
effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition,
any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management
attention.
PRC
REGULATION OF LOANS TO AND DIRECT INVESTMENT IN PRC ENTITIES BY OFFSHORE HOLDING COMPANIES AND GOVERNMENTAL CONTROL OF CURRENCY CONVERSION
MAY DELAY OR PREVENT US FROM MAKING LOANS OR ADDITIONAL CAPITAL CONTRIBUTIONS TO OUR CHINESE SUBSIDIARIES.
We
are a U.S. based company conducting a portion of our operations in China. We may make loans to our PRC subsidiaries subject to the approval,
registration, and filing with governmental authorities and limitation of amount, or we may make additional capital contributions to our
subsidiaries in China and Hong Kong. Any loans to our wholly foreign-owned subsidiaries in mainland China, which are treated as foreign-invested
enterprises under PRC law, are subject to foreign exchange loan registrations
In
light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies,
we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals
or filings on a timely basis, if at all, with respect to future loans by us to our Hong Kong or PRC subsidiaries or with respect to future
capital contributions by us to our Hong Kong or PRC subsidiaries. If we fail to complete such registrations or obtain such approvals,
our ability to use the proceeds from this Underwritten Offering and to capitalize or otherwise fund our Chinese operations may be negatively
affected.
FLUCTUATIONS
IN EXCHANGE RATES COULD HAVE AN EFFECT ON THE RESULTS OF OPERATIONS OF OUR HONG KONG AND CHINA SUBSIDIARIES.
The
value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political
and economic conditions in China and by China’s foreign exchange policies. Since June 2010, the Renminbi has fluctuated against
the U.S. dollar, at times significantly and unpredictably. In the fourth quarter of 2016, the Renminbi has depreciated significantly
in the backdrop of a surging U.S. dollar and persistent capital outflows of China. This depreciation halted in 2017, and the RMB appreciated
approximately 7% against the U.S. dollar during this one-year period. With the development of the foreign exchange market and progress
towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes
to the exchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against
the U.S. dollar in the future which may impact the profitability of our operations in China.
WE
MAY BE SUBJECT TO GOVERNMENT LAWS AND REGULATIONS PARTICULAR TO OUR OPERATIONS WITH WHICH WE MAY BE UNABLE TO COMPLY.
We
may not be able to comply with all current and future government regulations which are applicable to our business. Our business operations
are subject to all government regulations normally incident to conducting business (e.g., occupational safety and health acts, workmen’s
compensation statutes, unemployment insurance legislation, income tax, and social security laws and regulations, environmental laws and
regulations, consumer safety laws and regulations, etc.) as well as to governmental laws and regulations applicable to small public companies
and their capital formation efforts. Although we will make every effort to comply with applicable laws and regulations, we can provide
no assurance of our ability to do so, nor can we predict the effect of those regulations on our proposed business activities. Our failure
to comply with material regulatory requirements would likely have an adverse effect on our ability to conduct our business and could
result in our cessation of active business operations.
COMPLIANCE
WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE WILL RESULT IN ADDITIONAL EXPENSES.
Changing
laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and
related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with
accessing the public markets and public reporting. Our management team will need to invest significant management time and financial
resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative
expenses and a diversion of management time and attention from revenue generating activities to compliance activities.
Risks
Related to This Offering and Ownership of Our Common Stock
OUR
OPERATING RESULTS AND SHARE PRICE MAY BE VOLATILE AND THE MARKET PRICE OF OUR COMMON STOCK AFTER THIS OFFERING MAY DROP BELOW THE PRICE
YOU PAY.
Our
quarterly operating results have in the past fluctuated and are likely to do so in the future. As a result, the trading price of the
shares of our common stock following this offering is likely to be highly volatile and could be subject to wide fluctuations in response
to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section
and elsewhere in this prospectus, 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 in which we operate; |
|
● |
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. |
These
and other factors, many of which are beyond our control, may cause our operating results and the market price and demand for our shares
to fluctuate substantially. While we believe that operating results for any particular quarter are not necessarily a meaningful indication
of future results, fluctuations in our quarterly operating results could limit or prevent investors from readily selling their shares
and may otherwise negatively affect the market price and liquidity of our shares. In addition, the stock market in general, and companies
in our markets in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common
stock, regardless of our actual operating performance. 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
HAVE ISSUED A SUBSTANTIAL AMOUNT OF CONVERTIBLE SECURITIES WHICH IF CONVERTED WILL SUBSTANTIALLY DILUTE ALL OF OUR STOCKHOLDERS.
So
far we have issued a substantial number of convertible securities, including warrants, which, if converted or exercised, would result
in substantial dilution to our stockholders. See Note 9 of the Notes to the consolidated financial statements for the three and nine
months ended September 30, 2022 included in this prospectus for further information on our outstanding convertible notes.
Our ability to meet pay interest and repay principal for our substantial level of outstanding convertible notes depends on, among other
things, our operating results and financial market conditions. Our cash flow may not be sufficient to allow us to pay principal and interest
on our outstanding convertible notes and meet our other obligations. Our level of indebtedness could have other important consequences.
In addition, conversion of our convertible notes and exercise of warrants could result in significant dilution to our existing stockholders
and cause the market price of our common stock to decline.
WE
HAVE CONSIDERABLE DISCRETION AS TO THE USE OF THE NET PROCEEDS FROM THIS UNDERWRITTEN OFFERING AND WE MAY USE THESE PROCEEDS IN WAYS
WITH WHICH YOU MAY NOT AGREE.
Our
management will have broad discretion in the way that we use the net proceeds of this Underwritten Offering. Pending the final application
of the net proceeds of this Underwritten Offering, we intend to use the net proceeds of this Underwritten Offering primarily to enhance
and expand our business operations and for general corporate purposes. However, the proceeds may not be invested effectively or in a
manner that yields a favorable or any return, and consequently, this could result in financial losses that could have a material adverse
effect on our business, financial condition and results of operations. There can be no assurance that the Company will utilize the net
proceeds in a manner that enhances value of the Company. If the Company fails to spend the proceeds effectively, the Company’s
business and financial condition could be harmed, and there may be the need to seek additional financing sooner than expected.
WE
ARE A SMALLER REPORTING COMPANY, AND WE CANNOT BE CERTAIN IF THE REDUCED REPORTING REQUIREMENTS APPLICABLE TO US WILL MAKE OUR COMMON
STOCK LESS ATTRACTIVE TO INVESTORS.
We
are a “smaller reporting company,” meaning that the market value of our shares held by non-affiliates is less than $700 million
and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting
company after this offering if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our
annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates
is less than $700 million. As a smaller reporting company, we may rely on exemptions from certain disclosure requirements that are available
to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal
years of audited financial statements in our annual report on Form 10-K and we have reduced disclosure obligations regarding executive
compensation. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some
investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our
stock price may be more volatile.
CERTAIN
PROVISIONS OF NEVADA LAW AND IN THE COMPANY’S CHARTER AND BYLAWS MAY HAVE A NEGATIVE EFFECT ON ACQUISITION OF OUR COMPANY.
Certain
provisions of Nevada law and our bylaws, may have the effect of delaying, deferring or discouraging another person from acquiring control
of us. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders
may otherwise consider to be in their best interest or in our best interests, including transactions that might result in a premium over
the market price for our shares. These provisions expected to discourage coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We
believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited
proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals
could result in an improvement of their terms.
OUR
ISSUANCE OF ADDITIONAL CAPITAL STOCK IN CONNECTION WITH FINANCINGS, ACQUISITIONS, INVESTMENTS, OUR EQUITY INCENTIVE PLANS, OR OTHERWISE
WILL DILUTE ALL OTHER STOCKHOLDERS.
We
expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity
awards to employees, directors, and consultants under our equity incentive plans. We may also raise capital through equity financings
in the future. As part of our business strategy, we may acquire or make investments in complementary companies, products, or technologies,
and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders
to experience significant dilution of their ownership interests and the per share value of our common stock to decline.
WE
MAY MAKE ACQUISITIONS THAT ARE DILUTIVE TO EXISTING STOCKHOLDERS. IN ADDITION, OUR LIMITED EXPERIENCE IN ACQUIRING OTHER BUSINESSES,
PRODUCT LINES AND TECHNOLOGIES MAY MAKE IT DIFFICULT FOR US TO OVERCOME PROBLEMS ENCOUNTERED IN CONNECTION WITH ANY ACQUISITIONS WE MAY
UNDERTAKE.
We
intend to evaluate and explore strategic opportunities as they arise, including business combinations, strategic partnerships, and the
purchase, licensing or sale of assets. In connection with any such future transaction, we could issue dilutive equity securities, incur
substantial debt, reduce our cash reserves or assume contingent liabilities.
Our
experience in acquiring other businesses, product lines and technologies is limited. Our inability to overcome problems encountered in
connection with any acquisitions could divert the attention of management, utilize scarce corporate resources and otherwise harm our
business. Any potential future acquisitions also involve numerous risks, including:
|
● |
problems
assimilating the purchased operations, technologies or products; |
|
● |
costs
associated with the acquisition; |
|
● |
adverse
effects on existing business relationships with suppliers and customers; |
|
● |
risks
associated with entering markets in which we have no or limited prior experience; |
|
● |
potential
loss of key employees of purchased organizations; and |
|
● |
potential
litigation arising from the acquired company’s operations before the acquisition. |
Furthermore,
acquisitions may require material charges and could result in adverse tax consequences, substantial depreciation, deferred compensation
charges, in-process research and development charges, the amortization of amounts related to deferred compensation and identifiable purchased
intangible assets or impairment of goodwill, any of which could negatively affect our results of operations.
WE
MAY BE SUBJECT TO SECURITIES LITIGATION, WHICH IS EXPENSIVE AND COULD DIVERT MANAGEMENT ATTENTION.
The
market price of the shares of our common stock may be volatile, and in the past companies that have experienced volatility in the market
price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in
the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other
business concerns, which could seriously harm our business.
IF
YOU PURCHASE SHARES OF COMMON STOCK IN THIS Underwritten OFFERING, YOU WILL INCUR IMMEDIATE
AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF THE SHARES OF OUR COMMON STOCK.
The
proposed public offering price of the shares of our common stock in the Underwritten Offering is substantially higher than the net tangible
book value per share of our common stock after giving effect to the Underwritten Offering. Investors purchasing shares of common stock
in this Underwritten Offering will pay a price per share that substantially exceeds the book value of our tangible assets after subtracting
our liabilities. As a result, investors purchasing shares of common stock in this Underwritten Offering will incur immediate dilution.
Further,
because we may need to raise additional capital to fund our anticipated level of operations, we may in the future sell substantial amounts
of common stock or securities convertible into or exchangeable for common stock. These future issuances of equity or equity-linked securities,
together with the exercise of outstanding convertible notes and warrants and any additional shares issued in connection with future acquisitions,
if any, may result in further dilution to investors. See “Dilution”.
WE
DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE; THEREFORE, YOU MAY NEVER SEE A RETURN ON YOUR INVESTMENT.
We
do not anticipate the payment of cash dividends on our common stock in the foreseeable future. We anticipate that any profits from our
operations will be devoted to our future operations. Any decision to pay dividends will depend upon our profitability at the time, cash
available and other factors.
General
Risk Factors
NATURAL
DISASTERS AND OTHER CATASTROPHIC EVENTS BEYOND OUR CONTROL COULD ADVERSELY AFFECT OUR BUSINESS OPERATIONS AND FINANCIAL PERFORMANCE.
The
occurrence of one or more natural disasters, such as fires, hurricanes, tornados, tsunamis, floods and earthquakes; geo-political events,
such as civil unrest in a country in which our suppliers are located or terrorist or military activities disrupting transportation, communication
or utility systems; or other highly disruptive events, such as nuclear accidents, pandemics, unusual weather conditions or cyber-attacks,
could adversely affect our operations and financial performance. Such events could result, among other things, in operational disruptions,
physical damage to or destruction or disruption of one or more of our properties or properties used by third parties in connection with
the supply of products or services to us, the lack of an adequate workforce in parts or all of our operations and communications and
transportation disruptions. These factors could also cause consumer confidence and spending to decrease or result in increased volatility
in the United States and global financial markets and economy. Such occurrences could have a material adverse effect on us and could
also have indirect consequences such as increases in the costs of insurance if they result in significant loss of property or other insurable
damage.
INCREASES
IN COSTS, DISRUPTION OF SUPPLY OR SHORTAGE OF MATERIALS COULD HARM OUR BUSINESS.
We
may experience increases in the cost or a sustained interruption in the supply or shortage of materials. Any such increase, supply interruption
or shortage could materially and negatively impact our business, prospects, financial condition and operating results. We use various
materials in our business from suppliers.
The
prices for these materials fluctuate, and their available supply may be unstable, depending on market conditions and global demand for
these materials, and could adversely affect our business and operating results.
These
risks include:
|
● |
an
increase in the cost, or decrease in the available supply, of materials used; |
|
|
|
|
● |
disruption
in the supply of materials due to quality issues or recalls by manufacturers; |
|
|
|
|
● |
tariffs
on the materials we source; and |
|
|
|
|
● |
increases
in global shipping costs have gone up due to shipping container shortages and delays at both shipping and receiving ports due to
COVID and lack of appropriate workforce. |
Substantial
increases in the prices for our materials or prices charged to us would increase our operating costs, and could reduce our margins if
we cannot recoup the increased costs through increased prices. Any attempts to increase prices in response to increased material costs
could result in cancellations of orders for our products and services and therefore materially and adversely affect our brand, image,
business, prospects and operating results.
Any
of the above-mentioned factors could affect our business, prospects, financial condition, and operating results. The extent and
duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any
such disruptions may also magnify the impact of other risks described in this registration statement.
WE
MAY EXPERIENCE IN THE FUTURE, DELAYS OR OTHER COMPLICATIONS IN THE MANUFACTURE AND SUPPLY OF PRODUCTS WE USE IN OUR SYSTEMS WHICH COULD
HARM OUR BRAND, BUSINESS, PROSPECTS, FINANCIAL CONDITION AND OPERATING RESULTS.
We
may encounter unanticipated challenges, such as supply chain or logistics constraints, that lead to delays in producing products we use
in our projects. Any significant delay or other complication in the production of such products, including complications associated with
expanding our supply chain or obtaining or maintaining regulatory approvals, and/or coronavirus impacts, could materially damage our
brand, business, prospects, financial condition and operating results.
CHANGES
IN OUR SUPPLY CHAIN MAY RESULT IN INCREASED COST. IF WE ARE UNSUCCESSFUL IN OUR EFFORTS TO CONTROL SUPPLIER COSTS, OUR OPERATING RESULTS
MAY SUFFER.
There
is no assurance that our suppliers will ultimately be able to meet our cost, quality and volume needs, or do so at the times needed.
Furthermore, as the scale of our business increases, we will need to accurately forecast, purchase, warehouse and transport components
at much higher volumes than we have experience with. If we are unable to accurately match the timing and quantities of components purchases
to our actual needs, or successfully implement automation, inventory management and other systems to accommodate the increased complexity
in our supply chain, we may incur unexpected disruption, storage, transportation and write-off costs, which could have a material adverse
effect on our financial condition and operating results.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements
of historical fact, contained in this prospectus, including statements regarding our strategy, future financial position, projected costs,
prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,”
“contemplate,” “could,” “estimate,” “expect,” “intend,” “seek,”
“may,” “might,” “plan,” “potential,” “predict,” “project,” “target,”
“aim,” “should,” ‘will” “would,” or the negative of these words or other similar expressions
are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Forward-looking
statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties.
The
forward-looking statements in this prospectus include, among other things, statements relating to:
|
● |
Our
independent accountants have issued a going concern opinion, |
|
|
|
|
● |
Intense
competition, which may reduce our sales, operating profits, or both, |
|
|
|
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● |
Our
ability to obtain future financing, |
|
|
|
|
● |
Our
ability to execute our strategic plan, |
|
|
|
|
● |
Dilution
due to exercise of Convertible notes |
|
|
|
|
● |
We
are in default of our agreements with General Electric and Cybernaut Zfounder Ventures, |
|
|
|
|
● |
Our
products may be displaced by newer technology, |
|
|
|
|
● |
Our
expectations related to the use of proceeds from this Underwritten Offering; |
|
|
|
|
● |
The
effects of increased competition in our markets and our ability to successfully compete with companies that are currently in, or
may in the future enter, the markets in which we operate; |
|
|
|
|
● |
Our
ability to maintain, protect, and enhance our brand and intellectual property; |
|
|
|
|
● |
Our
estimated market opportunity; |
|
|
|
|
● |
The
potential impact of the COVID-19 outbreak on our business plans; and |
|
|
|
|
● |
Failure
to maintain effective internal controls, |
We
may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place
undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, and expectations
disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this
prospectus, particularly in the “Risk Factor” section, that we believe could cause actual results or events to differ materially
from the forward-statements that we make. Furthermore, we operate in a competitive and rapid changing environment. New risks and uncertainties
emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking
statements contained in this prospectus.
You
should read this prospectus and the documents we reference in this prospectus and have filed as exhibits to the registration statement
of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from
what we expect. The forward-looking statements contained in this prospectus are made as of the date of this prospectus, and we do not
assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except
as required by applicable law.
In
addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These
statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms
a reasonable basis for such statements, such information may be limited or incomplete. Our statements should not be read to indicate
that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are
inherently uncertain and investors are cautioned not to unduly rely upon these statements.
MARKET
AND INDUSTRY DATA
This
prospectus contains estimates, projections and other information concerning our industry, our business and the markets for our products,
including data regarding the estimated size of such markets. We obtained the industry, market and similar data set forth in this prospectus
from our internal estimates and research and from industry research, publications, surveys and studies conducted by third parties. In
some cases, we do not expressly refer to the sources from which this data is derived. Information that is based on estimates, forecasts,
projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ
materially from events and circumstances that are assumed in this information. While we believe our internal research is reliable, such
research has not been verified by any third party. You are cautioned not to give undue weight to any such information, projections and
estimates.
USE OF PROCEEDS
We estimate
that we will receive net proceeds from this Underwritten Offering of approximately $4,324,863, or approximately $5,022,363
if the underwriters exercise their option to purchase additional shares in full, after deducting underwriting discounts and commissions
and the estimated offering expenses payable by us. These estimates are based upon an assumed public offering price of $4.5 per share,
which is the midpoint of the estimated public offering price range set forth on the cover page of this prospectus. A $1.00 increase (decrease)
in the assumed public offering price of $4.50 per share would increase (decrease) the net proceeds to us from this offering by approximately
$1.011 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same
and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.
We
currently plan to use the net proceeds of this Underwritten Offering as follows:
●
approximately 64.5%, or $2,789,537, for expanding our current businesses, such as promoting our sales and marketing activities,
strengthening supply chain and distribution channels, conducting strategic acquisitions or investment in complementary businesses, or
●
approximately 10.75%, or $432,486, for research and development activities; and
●
approximately 25.25%, or $1,092,027, for working capital and general corporate purposes.
The
foregoing represents our current intentions to use and allocate the net proceeds of this Underwritten Offering based upon our present
plans and business conditions. Our management, however, will have broad discretion in the way that we use the net proceeds of this Underwritten
Offering. Pending the final application of the net proceeds of this Underwritten Offering, we intend to use the net proceeds of this
Underwritten Offering primarily to enhance and expand our business operations and for general corporate purposes. See “Risk Factors—Risks
Related to Our Common Stock—We have considerable discretion as to the use of the net proceeds from this Underwritten Offering and
we may use these proceeds in ways with which you may not agree.”
We
will not receive any proceeds from the sales of shares of our common stock by the selling shareholders in the Selling Shareholders Offering.
DIVIDEND
POLICY
We
have never declared or paid any cash dividends on our common stock. We do not anticipate declaring or paying, in the foreseeable future,
any cash dividends on our capital stock. We intend to retain all available funds and future earnings, if any, to fund the development
and expansion of our business. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion
of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual
restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.
We
are obligated to pay dividends to certain holders of our preferred stock which we pay out of legally available funds from time to time
or reach arrangements with our holders of preferred stock to convert limited quantities of preferred stock at favorable conversion prices
in lieu of dividend payments.
See
also “Risk Factors—We Do Not Intend To Pay Dividends In The Foreseeable Future; Therefore, You May Never See A Return On
Your Investment.”
MARKET
PRICE
Market
Information
Our
shares of our common stock are quoted on the OTCQB under the symbol “CETY.” Such quotations reflect inter-dealer prices,
without retail mark-up, mark-down, or commission and do not necessarily represent actual transactions.
The
last reported sales price of our common stock which trades under the symbol “CETY” on the OTCQB on February 28, 2023,
was $4.80.
Holders
As
of February 28, 2023, there were 116 stockholders of record of our common stock.
CAPITALIZATION
The
following table sets forth our cash and cash equivalents and capitalization as of September 30, 2022:
|
● |
on
an actual basis; |
|
|
|
|
● |
on
an as adjusted basis to give effect to the sale by us of 1,111,112 shares of our common stock in this Underwritten Offering at a
public offering price of $4.50 per share, the midpoint of the estimated initial public offering price range set forth on the cover
page of this prospectus, after deducting underwriting discounts and estimated offering expenses payable by us (assuming no exercise
of the underwriter’s over-allotment option); |
|
|
|
|
● |
on an pro forma as adjusted basis to give effect to
(i) the sale by of 1,111,112 shares of our common stock in this Underwritten Offering at a public offering price of $4.50 per share,
the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting
underwriting discounts and estimated offering expenses payable by us (assuming no exercise of the underwriter’s over-allotment
option), and (ii) the debt write-off as of December 31, 2022 as described in more detail below. |
You
should read this information together with our consolidated financial statements and related notes, as well as the information set forth
under the headings “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” appearing elsewhere in this prospectus.
|
|
September 30,
2022 |
|
|
Pro Forma |
|
|
|
Actual |
|
|
As Adjusted |
|
|
As Adjusted |
|
Cash and cash equivalents |
|
$ |
175,772 |
|
|
$ |
4,825,772 |
|
|
|
4,825,772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 2,000,000,000 shares authorized, 37,074,432(iv)
and 23,589,229 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively (presented on a post-split
basis). The company effected a 1-for-40 reverse split on Jan 19, 2023. |
|
|
37,075 |
|
|
|
41,909 |
|
|
|
41,909 |
|
Additional paid-in capital |
|
|
19,136,172 |
|
|
|
24,131,338 |
|
|
|
24,131,338 |
|
Subscription Receivables |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
Accumulated other comprehensive income |
|
|
(243,135) |
|
|
|
(243,135 |
) |
|
|
(243,135 |
) |
Gain / (Loss) on debt settlement and write down |
|
|
|
|
|
|
|
|
|
|
*2,540,016 |
|
Accumulated deficit |
|
|
(18,763,939) |
|
|
|
(19,463,939 |
) |
|
|
(19,463,939 |
) |
Total stockholders’ equity (Deficit) |
|
|
166,173 |
|
|
|
9,466,173 |
|
|
|
7,356,189 |
|
Total Liabilities and Stockholders’ Deficit |
|
$ |
7,964,334 |
|
|
$ |
17,264,334 |
|
|
|
15,154,350 |
|
*As
of the date of this prospectus, we have not made a payment of the principal of $1,200,000 with the accrued interest of $325,843 which
comprised the balance of the purchase price pursuant to our asset purchase agreement with General Electric International (“GE”),
under which we acquired all assets of Heat Recovery Solutions business unit from General Electric International. In addition, we have
not paid GE an amount of $972,233 in accrued transitional fees. We believe that the outstanding amounts should have been an offset to
purchase price we paid due to a misrepresentation of the values of the disclosed assets as reflected in the principal amount of the outstanding
note and in the transition agreements. CETY stopped making payments and informed GE that it had encountered difficulties because of the
valuations of the assets that were acquired from GE. Given that the values of the assets were different than GE’s internal reports
and as we discussed at the time of the transaction with GE’s management, we proposed a change in the amount the Company owes GE
under the purchase agreement, but GE was non-responsive and GE’s entire distributed power vertical has been divested.
Based
on the California Statute of Limitations, the Nevada Statute of Limitations, and the New York Statute of Limitations it is the view of
our legal counsel that the above referenced debt is no longer an enforceable obligation under California law, Nevada law, and New York
law, as it became past due no later than November 3, 2016, more than Six (6) years ago and last payment made on the debt was on November
3, 2016, which is more than Six (6) years ago. As of December 31, 2022, this debt was written off.
The
table above excludes:
|
(i) |
up
to 2,916,910 shares of common stock issuable upon the exercise of outstanding common stock purchase warrants and the conversion
of outstanding convertible notes offered by the Selling Shareholders; |
|
|
|
|
(ii) |
shares of common stock issuable upon the conversion
of outstanding convertible notes issued to 1800 Diagonal Lending, LLC in the total principal amount of $373,371. |
|
|
|
|
(iii) |
33,333
shares of common stock underlying the warrants
to be issued to the Representatives in connection with this Underwritten Offering (38,333, if the underwriters exercise the
over-allotment option in full). |
|
|
|
|
(iv) |
Excludes 100,446 shares of common stock issued on December
28, 2022 upon the exercise of the warrant that the Company issued to Mast Hill on May 6, 2022, and excludes 33,114 shares of common
stock issued on March 1, 2023 upon the exercise of the warrant that the Company issued to First Fire Global Opportunities Fund, LLC
on August 17, 2022. An additional 56 shares of common stock were issued as a result of rounding up fractional shares in the reverse
stock split effective January 19, 2023. |
DILUTION
If
you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the public offering
price per share you will pay in this Underwritten Offering and the adjusted net tangible book value per share of our common stock after
this Underwritten Offering.
The
historical net tangible book value of our common stock as of September 30, 2022 was approximately $(2,729,358), or ($0.073) per
share based upon 37,074,432 shares of common stock outstanding on such date. Historical net tangible book value per share represents
the amount of our total tangible assets reduced by the amount of our total liabilities, divided by the total number of shares of common
stock outstanding.
Following
the Underwritten Offering, our adjusted net tangible book value of our common stock will be $0.12 per share. Adjusted net tangible
book value per share represents adjusted net tangible book value divided by the total number of shares outstanding after giving effect
to the sale of the shares in this Underwritten Offering at the assumed public offering price of $4.50 per share, which is the midpoint
of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts
and commissions and other estimated offering expenses payable by us. This represents an immediate increase in as adjusted net tangible
book value of $0.14 per share to existing stockholders and an immediate dilution of $4.38 per share to investors purchasing
shares of common stock in the Underwritten Offering at the assumed public offering price.
The
following table illustrates this dilution on a per share basis to new investors:
Assumed public offering price per share | |
$ | 4.50 | |
Net tangible book value per share as of September 30, 2022 | |
$ | (0.02 | ) |
Increase in net tangible book value per share attributable to this Underwritten Offering | |
$ | 0.14 | |
As adjusted net tangible book value per share after giving effect to this Underwritten Offering | |
$ | 0.12 | |
Dilution in net tangible book value per share to purchasers in this Underwritten Offering | |
$ | 4.38 | |
If
the underwriters’ over-allotment option is exercised in full, our adjusted net tangible book value following the Underwritten Offering
will be $0.14 per share, and the dilution to investors purchasing shares of common stock in the Underwritten Offering will be
$4.36 per share.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto. The management’s
discussion and analysis contain forward-looking statements, such as statements of our plans, objectives, expectations, and intentions.
Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,”
“plan,” “intend,” “anticipate,” “target,” “estimate,” “expect”
and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,”
etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to
risks and uncertainties, including those under “Risk Factors,” that could cause actual results or events to differ materially
from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially
from those anticipated in these forward-looking statements as a result of several factors. We do not undertake any obligation to update
forward-looking statements to reflect events or circumstances occurring after the date of this prospectus.
Description
of the Company
We
specialize in renewable energy & energy efficiency systems design, manufacturing and project implementation. We were incorporated
in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005 under the name
Probe Manufacturing, Inc. We provided engineering and manufacturing electronics services to original equipment manufacturers (OEMs) of
clean energy, industrial, automotive, semiconductor, medical, communication, military, and high technology products.
With
the vision to combat climate change and creating a better, cleaner and environmentally sustainable future, we formed Clean Energy HRS,
LLC a wholly owned subsidiary 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 11 full time employees. All employees and
overhead are shared between Clean Energy Technologies, Inc. (which still provides the contract electronic manufacturing services) and
Clean Energy HRS, LLC.
Clean
Energy Technologies, Inc. established CETY Europe, SRL (CETY Europe) as a wholly owned subsidiary in 2017. CETY Europe is a sales and
service center located in Silea (Treviso), Italy, which became operational in November 2018. Their offices are located at Alzaia Sul
Sile, 26D, 31057 Silea (TV) and 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.
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
In
December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China and has spread throughout the United States and
the rest of the world. The World Health Organization has declared the outbreak to constitute a “Public Health Emergency of International
Concern.” This contagious disease outbreak, which has not been contained, and is disrupting supply chains and affecting production
and sales across a range of industries in United States and other companies as a result of quarantines, facility closures, and travel
and logistics restrictions in connection with the outbreak, as well as the worldwide adverse effect to workforces, economies and financial
markets, leading to a global economic downturn. Therefore, the Company expects this matter to negatively impact its operating results.
However, the related financial impact and duration cannot be reasonably estimated at this time.
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 leader in the Zero Emission Revolution by offering recyclable energy solutions, clean energy fuels and alternative
electric power for small and mid-sized projects in North America, Europe, and Asia. We target sustainable energy solutions that are profitable
for us, profitable for our customers and represent the future of global energy production.
Our
principal businesses
Waste
Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities
using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.
Waste
to Energy Solutions - we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries
to electricity, renewable natural gas (“RNG”), hydrogen and bio char which are sold or used by our customers.
Engineering,
Consulting and Project Management Solutions – We have expanded our legacy electronics and manufacturing business and plan to
manufacture component parts for our Waste Heat Recovery and Waste to Energy business and to provide consulting services to municipal
and industrial customers and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean
energy solutions in their projects.
CETY
HK
CETY HK consists of two business ventures in mainland
China:(i) our 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. 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 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 $8 million to the joint venture
which the Company expects to raise in future financings. The terms of the joint venture are subject to the execution of definitive
agreements.
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.
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.
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.
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. 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.
Principal
Factors Affecting Our Financial Performance
Our
business requires significant capital for inventory and equipment associated with manufacturing our waste to energy and waste heat recover
products, As a result, the availability of debt and equity capital to finance the sales of our products at reasonable rates is key determinate
of our financial performance. In addition, the financial stability of our clients who purchase our equipment will impact our sales and
ability to price our products at competitive rates. Our business is strongly dependent on federal and state tax and investment incentive
programs for clean energy. If the U.S. and foreign governments reduce these incentives, it will become difficult for us to price our
product at competitive rates. In addition, the price of traditional energy will determine how profitable it is to install our equipment.
As prices rise, the demand for our equipment increases. As they decline, the financial justification for clean energy technology decreases.
Finally, our business is dependent on the global supply chain for parts. If there are disruptions in the supply of our components or
if the prices increase, our margins decrease and our ability to provide clean energy products at competitive prices decrease. The price
of gas and our ability to forecast the future prices when purchasing natural for our gas trading operation in the PRC impact our margins
and ability to operate profitable.
Results of the Nine Months Ended September
30, 2022 Compared to the Nine Months Ended September 30, 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. The Company had a total stockholder’s equity of $166,173 and a working capital deficit of $4,000,686
as of September 30, 2022 The company also had an accumulated deficit of $18,763,939 as of September 30, 2022 and used
$1,016,545 in net cash from operating activities for the three months ended September 30, 2022. Therefore, there is substantial
doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals
and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or
(2) to generate positive cash flow from operations.
The three months ended September 30, 2022; we
had a net loss of $540,986 compared to a net loss of $277,664 for the same period in 2021. The increase in the net loss in 2022 was mainly
due to the increase in professional fees including legal & accounting due to the expenses associated with the IPO up listing to NASDAQ
and lower sales in the quarter. The three months ended September 30, 2022; our revenue was $44,629 compared to $575,545 for the same
period in 2021. For the three months ended September 30, 2022, our gross margin was 58% compared to 52% for the same period in 2021.
For the three months ended September 30, 2022, our operating expense was $566,899 compared to $578,808 for the same period in 2021.
Net
Sales
The Company has four reportable segments: Clean
Energy HRS (HRS), CETY Europe srl, Engineering and Manufacturing Business and CETY HK.
Segment
breakdown
The nine
months ended September 30, 2022, our revenue from Engineering and Manufacturing was $132,316 compared to $91,262 for the same
period in 2021.
The nine
months ended September 30, 2022, our revenue from HRS was $461,292 compared to $602,207 for the same period in 2021. This decrease
was mainly because of delay with the passing of inflation reduction act and the incentives associated with heat recovery solution.
The nine months ended September 30, 2022, our
revenue from CETY Europe was $48,138 compared to $173,234 for the same period in 2021. This decrease was a result of a sell of an equipment
in 2021 vs. just the service revenue.
The nine months ended September 30, 2022, our
revenue from our wholly owned subsidiary CETY HK was $1,925,950 compared to $0 for the same period in 2021. This is a s a result of the
acquisition of JHJ gas company made in November of 2021. We started to generate revenue from this entity in the 1st quarter
of 2022.
Gross Profit
The nine months ended September 30,
2022; our gross profits were $1,151,903 compared to $519,683 for the same period in 2021. The increase in gross profit was due
to higher revenues.
Segment breakdown
The nine
months ended September 30, 2022, our gross profit from Engineering and Manufacturing was $85,352 compared to $72,853 for the same
period in 2021.
The nine
months ended September 30, 2022, our gross profit from HRS was $427,219 compared to $312,118, for the same period in 2021. The
increase from the HRS segment was mainly due to higher revenue in the first quarter of 2022.
The nine
months ended September 30, 2022, our gross profit from CETY Europe was $40,315 compared to $134,712 for the same period in 2021.
The decrease in gross profit was due to revenue generated from the sale of a clean cycle waste heat recovery system.
The nine
months ended September 30, 2022, our gross profit from our wholly owned subsidiary CETY HK was $631,082 compared to $0 for the
same period in 2021. We had zero revenue from CETY HK in 2021.
Selling, General and Administrative (SG&A)
Expenses
The nine months ended September 30,
2022; our SG&A expense was $284,025 compared to $529,335, for the same period in 2021. The decrease was a result of separating
the subcontractor category from SG&A and lower cost of repair.
Salaries Expense
The nine months ended September 30,
2022; our Salaries expense was $587,928 compared to $661,634 for the same period in 2021. The decrease in the quarter ending in
September 30, 2022 was due to less number of employees.
Travel Expense
The nine months ended September 30,
2022; our travel expense was $126,388 compared to $66,735 for the same period in 2021. The increase in the quarter ending in September
30, 2022 was due to additional site assessment surveys of multiple facilities in Europe and global commissioning.
Professional
fees Expense
The nine months ended September 30,
2022; our Professional fees expense was $359,636 compared to $123,383 for the same period in 2021. The increase in legal fees
was due to higher expenses related to a proposed IPO and up listing to NASDAQ.
Facility
Lease and Maintenance Expense
The nine months ended September 30,
2022; our Facility Lease and maintenance expense was $260,262 compared to $254,708 for the same period in 2021.
Depreciation and Amortization Expense
The nine months ended September 30,
2022, our depreciation and amortization expense was $22,557 compared to $24,219 for the same period in 2021, which remained relatively
unchanged.
Change in Derivative Liability
The nine months ended September 30, 2022; we had
a gain on derivative liability of $12,980, compared to a gain of $1,734,624 for the same period in 2021. The gain in derivative liability
was due to paying off several convertible notes in the six months ended June 30, 2021.
Gain on debt settlement
The nine months ended September 30, 2022, we recognized
a gain on debt settlement in the amount of $2920 compared to $828,666 for the nine months ended September 30, 2021.
Interest and Finance Fees
The nine months ended September 30, 2022 interest
and finance fees were $747,451 compared to $603,240 for the same period in 2021.
Net Income / Loss
The nine months
ended September 30, 2022; our loss was $1,341,920 compared to net profit of $819,719 for the same period in 2021. The higher
profits was primarily due to the gain on derivative liability in 2021.
Liquidity
and Capital Resources
Clean Energy Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 2022
(unaudited)
|
|
2022 |
|
|
2021 |
|
Net Cash provided / (Used) In Operating Activities |
|
$ |
(1,929,678 |
) |
|
$ |
(1,964,231 |
) |
Cash Flows Used In Investing Activities |
|
|
(1,388,734 |
) |
|
|
- |
|
Cash Flows Provided / (used) By Financing Activities |
|
|
2,545,003 |
|
|
|
3,104,503 |
|
Net (Decrease) Increase in Cash and Cash Equivalents |
|
$ |
(1,016,545 |
) |
|
$ |
1,140,272 |
|
On
February 21, 2022 the Company completed public and private financing of an aggregate of $1,202,800.
Cash
Flow from Operating Activities
Net
cash used in operating activities was $1,929,678 during the nine months ended September 30, 2022, compared to net cash used in operating
activities of $1,964,231 during the nine months ended September 30, 2021, a slight decrease on cash outflow of $34,553. The decrease
in cash outflow was mainly due to decreased cash outflow on inventory by $101,982, decreased cash outflow on accounts payable by $718,191,
and increased cash inflow on accrued expenses by $29,650, which was partly offset by increased cash outflow on accounts receivable by
$602,342, decreased cash inflow on customer deposits by $135,810, and decreased cash inflow on long-term financing receivable by $67,630.
Cash
Flow from Investing Activities
Net
cash used in investing activities totaled $1,388,734 for the nine months ended September 30, 2022, which consists of short-term loan
to Heze Hongyuan Natural Gas Co of $838,090 and capital contribution to our 49% owned subsidiary Shuya. Net cash used in investing activities
was $0 for the nine months ended September 30, 2021.
Cash
Flow from Financing Activities
Net
cash provided by financing activities was $2,545,003 during the nine months ended September 30, 2022, which was $1,677,300 proceeds from
notes payable, and proceeds from stock issuance of $1,493,945, but partly offset with payment on credit line of $219,656, and payment
on notes payable of $406,586. Net cash provided by financing activities was $3,104,503 during the nine months ended September 30, 2021,
which was $414,200 proceeds from notes payable, and proceeds from stock issuance of $3,584,511, but partly offset with payment on credit
line of $894,208.
Critical
Accounting Policies
Our
financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles
applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
periods.
We
regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these
policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience,
on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and
circumstances. Actual results could differ from those estimates made by management.
Future
Financing
We
will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional
shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity
securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
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.
Results
for the Year Ended December 31, 2021, compared to the Year Ended December 31, 2020
Going
Concern
The
financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets
and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s deficit of $1,702,653 excluding
none controlling interest and a working capital deficit of $4,274,383 and an accumulated deficit of $17,423,930 as of December 31,
2021 and used $2,552,547 in net cash from operating activities for the year ended December 31, 2021. Therefore, there is doubt
about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and
reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to
generate positive cash flow from operations.
For
the year ended December 31, 2021, we had a net profit of $278,492 compared to a net loss of $3,435,764 for the same period in
2020. The increase in the net profit in 2021 was mainly due to the change in derivative liability associated with the convertible debt
and lower interest expense from 2021 to 2020.
The
following table shows key components of our results of operations during the years ended December 31, 2021 and 2020.
| |
For the Year Ended December 31, 2021 | | |
For the Year Ended December 31, 2020 | |
Sales | |
$ | 1,300,439 | | |
$ | 1,406,005 | |
Cost of Goods Sold | |
| 690,032 | | |
| 654,937 | |
Gross Profit | |
| 610,407 | | |
| 751,068 | |
| |
| | | |
| | |
General and Administrative | |
| | | |
| | |
General and Administrative expense | |
| 488,177 | | |
| 480,812 | |
Salaries | |
| 772,463 | | |
| 495,269 | |
Travel | |
| 145,170 | | |
| 86,292 | |
Professional Fees | |
| 155,241 | | |
| 111,318 | |
Facility lease and Maintenance | |
| 346,454 | | |
| 363,643 | |
Consulting | |
| 243,371 | | |
| 157,149 | |
Bad Debt Expense | |
| - | | |
| 259,289 | |
Depreciation and Amortization | |
| 32,292 | | |
| 32,912 | |
Total Expenses | |
| 2,183,167 | | |
| 1,986,684 | |
Net Profit / (Loss) From Operations | |
| (1,572,760 | ) | |
| (1,235,616 | ) |
| |
| | | |
| | |
Change in derivative liability | |
| 1,752,119 | | |
| (1,270,099 | ) |
Gain / (Loss) on debt settlement and write down | |
| 868,502 | | |
| 399,181 | |
Interest and Financing fees | |
| (769,369 | ) | |
| (1,329,230 | ) |
Net Profit / (Loss) Before Income Taxes | |
| 278,492 | | |
| (3,435,764 | ) |
Income Tax Expense | |
| - | | |
| - | |
Net Profit / (Loss) | |
| 278,492 | | |
| (3,435,764 | ) |
| |
| | | |
| | |
Non-controlling interest | |
| (19,059 | ) | |
| - | |
| |
| | | |
| | |
Net Profit / (Loss) attributable to Clean Energy Technologies, Inc. | |
| 297,551 | | |
| (3,435,764 | ) |
| |
| | | |
| | |
Per Share Information: | |
| | | |
| | |
Basic weighted average number of common shares outstanding and diluted | |
| 22,519,352 | | |
| 19,196,529 | |
| |
| | | |
| | |
Net Profit / (Loss) per common share basic and dilluted | |
$ | 0.00 | | |
$ | (0.00 | ) |
Net
Sales
For
the year ended December 31, 2021, our total revenue was $1,300,439 compared to $1,406,005 for the same period in 2020. For the years
ended December 31, 2021 and 2020, the Company had three reportable segments: Clean Energy HRS (HRS), CETY Europe and the legacy engineering
& manufacturing services division.
Segment
breakdown
For
the year ended December 31, 2021, our revenue from Engineering and Manufacturing was $93,371 compared to $422,630 for the same period
in 2020. The decrease was mainly due to CETY’s transition from the legacy business to the core business of Clean Energy Technologies
and solutions.
For
the year ended December 31, 2021, our revenue from HRS was $1,014,707compared to $930,882 for the same period in 2020.
For
the year ended December 31, 2021, our revenue from CETY Europe was $192,361compared to $52,492 for the same period in 2020. The increase
was mainly due to additional product sales.
Gross
Profit
For
the year ended December 31, 2021, our gross profits decreased to $610,407 from $751,068 for the same period in 2020. Our gross profits
could vary from period to period and is affected by several factors, including, production and supply change efficiencies, material costs,
logistics and increase in personnel.
Segment
breakdown
For
the year ended December 31, 2021, our gross profit from Engineering and Manufacturing was ($90,328) compared to $118,412 for the same
period in 2020. This decrease from the Electronic Assembly Segment was mainly due to increase of $71,104 to the inventory reserve.
For
the year ended December 31, 2021, our gross profit from HRS was $547,812compared to $581,903 for the same period in 2020. The decrease
from the HRS segment was mainly due to higher cost of materials due to the supply China issues caused by the pandemic in 2021.
For
the year ended December 31, 2021, our gross profit from CETY Europe was $152,923 compared to $50,753 for the same period in 2020. The
decrease was due to the decrease in revenue in 2020.
Selling,
General and Administrative (SG&A) Expenses
For
the year ended December 31, 2021, our SG&A expense was $488,177compared to $480,812 for the same period in 2020.
Salaries
Expense
For
the year ended December 31, 2021, our Salaries expense was $772,463 compared to $495,269 for the same period in 2020. This increase was
due to the increase of key personnel.
Travel
Expense
For
the year ended December 31, 2021, our travel expense was $145,170 compared to $86,292 for the same period in 2020. The increase was mainly
due to less travel because of COVID 19 travel restrictions in 2020 and increase in service and commissioning of recent installations
in 2020 and 2021.
Facility
Lease Expense
For
the year ended December 31, 2021, our Facility Lease expense was $346,454 compared to $363,643 for the same period in 2020. This increase
was due to the increase as a result of the original contractual agreement in our Costa Mesa facility Lease.
Consulting
Expense
For
the year ended December 31, 2021, our consulting expense was $243,371 compared to $157,149 for the same period in 2020. This increase
was due to the increase in engineering services.
Bad
Debt
For
the year ended December 31, 2021, our bad debt expense was $0 compared to $259,289 for the same period in 2020. This change from 2020
was due to the long-term impairment of accounts receivable.
Depreciation
and Amortization Expense
For
the year ended December 31, 2021, our depreciation and amortization expense was $32,292 compared to $32,912 for the same period in 2020.
Professional
fees Expense
For
the year ended December 31, 2021, our Professional fees expense was $155,241compared to $111,318 for the same period in 2020. The increase
was mainly due to the increase in legal fees associated with our 1A registration and accounting fees in 2020.
Net
(Loss) from operations
For
the year ended December 31, 2021, our net loss from operations was $1,572,760 compared to net loss from operations of $1,235,616 for
the same period in 2020. The increase in the loss in 2021 was mainly due the additional employees and cost of materials due to the pandemic.
Change
in Derivative Liability
For
the year ended December 31, 2021, we had a gain on derivative liability of $1,752,119 compared to a loss of $1,270,099 for the same period
in 2020.
Gain
on debt settlement and write off
For
the year ended December 31, 2021, we recognized a gain on debt settlement of $868,502 compared to $399,181 for the year ended December
31, 2020 due to several liabilities statute of limitations had expired.
Interest
and Finance Fees
As
of December 31, 2021, we had $769,369 of interest expense and financing fees and $1,329,230 for the year ending December 31, 2020.
Liquidity
& Capital Resources
As
of December 31, 2021, we had cash and equivalents of $1,192,316, other current assets of $1,413,188, current liabilities of $6,865,123,
working capital deficit of $4,259,619, a current ratio of 0.38:1. As of December 31, 2020, we had cash and equivalents of $414,885, other
current assets of $1,041,142, current liabilities of $9,785,809, working capital deficit of $8,329,782, a current ratio of 0.15:1. The
following is a summary of cash provided by or used in each of the indicated types of activities during the years ended December 31, 2021,
and 2020, respectively.
| |
2021 | | |
2020 | |
Net cash used in operating activities | |
$ | (2,552,547 | ) | |
$ | (1,430,395 | ) |
Net cash used in investing activities | |
$ | (1,500,000 | ) | |
$ | - | |
Net cash provided by financing activities | |
$ | 4,829,978 | | |
$ | 1,837,874 | |
Net
cash used in operating activities
Net
cash used in operating activities was $2,552,547 for the year ended December 31, 2021, compared to $1,430,395 in 2020. The increase of
cash outflow of $1,122,152 from operating activities for the year ended December 31, 2021 was principally attributable to increased cash
outflow on accrued expense by $434,905, increased cash outflow on accounts payable by $275,055, decreased cash inflow on accounts receivable
by $370,324.
Net
cash used in investing activities
Net
cash used in investing activities was $1,500,000 for the year ended December 31, 2021, compared to $0 in 2020. For the year ended December
31, 2021, we have investment in CETY HK of $1,500,000 for acquiring 100% ownership interests in CETY HK.
Net
cash provided by financing activities
Net
cash provided by financing activities was $4,829,978 for the year ended December 31, 2021, compared to $1,837,874 in 2020. The net cash
provided by financing activities in 2021 consisted of proceeds of $4,761,090 from stock issued, proceeds of $975,000 from loans payable
and lines of credit, but partly offset by repayment of notes payable and lines of credit of 906,112. The net cash provided by financing
activities in 2020 mainly consisted of proceeds of $1,171,020 from stock issued for cash, proceeds of $1,150,502 from notes payable and
lines of credit, proceeds of $60,000 form notes payable from related party, but partly offset by repayment of notes payable and line
of credit of $507,168, repayment of notes payable to related party of $35,000 and bank overdraft of $1,480.
Our
current liabilities exceed current assets at December 31, 2021, and we incurred substantial losses and cash outflows from operating activities
in the periods presented. We may have difficulty to meet upcoming cash requirements. As of December 31, 2021, our principal source of
funds was from stock and notes issuance. In addition to our continuous effort to improve our sales and net profits, we have explored
and continue to explore other options to provide additional financing to fund future operations as well as other possible courses of
action. Such actions may include, but are not limited to, securing lines of credit, sales of debt or equity securities (which may result
in dilution to existing shareholders), loans and cash advances from other third parties or banks, and other similar actions. There can
be no assurance that we will be able to obtain additional funding (if needed), on acceptable terms or at all, through a sale of our common
stock, loans from financial institutions, or other third parties, or any of the actions discussed above. If we cannot sustain profitable
operations, and additional capital is unavailable, lack of liquidity could have a material adverse effect on our business viability,
financial position, results of operations and cash flows.
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.
DESCRIPTION
OF BUSINESS
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 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.
Waste
Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities
using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.
Waste
to Energy Solutions – we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other
industries to electricity, renewable natural gas (“RNG”), hydrogen and bio char which are sold or used by our customers.
Engineering,
Consulting and Project Management Solutions – we have expanded our legacy electronics and manufacturing business and plan to
manufacture component parts for our Waste Heat Recovery and Waste to Energy business and to provide consulting services to municipal
and industrial customers and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean
energy solutions in their projects.
CETY HK – CETY HK consists of two business
ventures in mainland China:(i) our 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. 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 Shenzhen Gas, acquiring natural gas pipeline operator facilities,
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 $8 million to the joint venture
which the Company plans to raise in future fiancings. The terms of the joint venture are subject to the execution of definitive
agreements.
Our
Business Strategy
Our
strategy is focused on further developing our existing Waste Heat Recovery business while expanding into the rapidly growing markets
for Waste to Energy Solutions and clean energy engineering, consulting and project management services.
Our
strategy focuses on three main elements:
|
● |
Expanding
our Clean Energy HRS business’s waste heat recovery product line to include waste heat recovery ORC systems producing over
1 MW of power so we can qualify for midsized and large heat recovery projects in the United States, China, Southeast Asian and Pacific
Rim countries. |
|
|
|
|
● |
Establishing
a Waste to Energy business by selling our ablative thermal processing products based on proprietary HTAP technology and developing
small and mid-sized waste to energy power plants producing electricity and RNG for the grid and methane, hydrogen and biochar for
resale. |
|
|
|
|
●
● |
Leveraging
our engineering, procurement and manufacturing experience in Waste Heat Recovery and Waste
to Energy to assist companies and EPCs incorporate clean energy solutions into energy and
industrial construction projects.
Expanding
our NG trading operations in China by acquiring more customers and developing the planned joint venture with Shenzhen Gas by acquiring
natural gas pipeline operators’ facilities. |
We
intend to implement this strategy through:
|
● |
Adding
a new ORC system manufactured by Enertime for Waste Heat Recovery that will enable us to implement projects in the U.S. markets producing
between 1 MW and 10 MW of electricity. |
|
|
|
|
● |
Taking
advantage of federal investment tax credits and state incentives that now include waste heat recover as a recognized clean energy
source making our Clean Cycle Generator and ORC systems more profitable to install. On December 21, 2020, Congress passed the Consolidated
Appropriations Act, 2021 enacted waste energy recovery Sec. 48 Investment Tax Credit, which extended Investment Tax Credit of 26%
including Waste Heat to Power providing a dollar-for-dollar offset against current liability. |
|
|
|
|
● |
Benefiting
from higher energy costs which provide higher returns on our Waste Heat Recovery and Waste to Energy products and projects. |
|
|
|
|
● |
Improving
our balance sheet and capital position to permit us to invest in more products and projects. |
|
|
|
|
● |
Establishing
HTAP manufacturing facilities in Turkey for our Waste to Energy products and expanding patent protection on the proprietary technology. |
|
|
|
|
● |
Leveraging
our existing marketing channels to sell HTAP Waste to Energy products to industrial companies and government agencies. |
|
● |
Working
with clean energy project development and finance companies to establish Waste to Energy power plants producing electricity, RNG,
hydrogen, methane and biochar from biomass, municipal waste, timber waste and other biomass and while retaining an equity interest
in these facilities to provide re-occurring revenue. |
|
|
|
|
● |
Sourcing
NG and selling it to privately owned pipeline companies in China through our newly formed NG Trading company to participate in
the rapidly growing clean energy market. |
|
|
|
|
● |
Acquiring
natural gas pipeline operators into our planned joint venture with Shenzhen Gas who will hold 51% of the joint venture and agreed
to finance these acquisitions in a framework agreement. |
|
|
|
|
● |
Participate
in other minority investments in medium to large clean energy projects being developed in China that may be sourced by our majority
stockholder in Hong Kong. |
|
|
|
|
● |
Leveraging
the NG trading and investment relationships to create opportunities for us to sell our Waste Recovery and Waste to Energy products
in China and to provide engineering, consulting and project management services. |
|
|
|
|
● |
Expanding our NG trading operations in China by acquiring
more customers and developing the planned joint venture with Shenzhen Gas by acquiring natural gas pipeline operators’ facilities. |
In
2021, we raised $4.78 million in a Regulation A equity offering. The proceeds from this offering were used to expand and enhance our
existing business, improve our balance sheet and to expand into new energy-based businesses in China.
Our
principal businesses
Our
Clean Energy HRS Business
Waste
Heat Recovery Solutions
We
provide our customers with power plants that capture wasted heat energy and produce electricity using a unique Organic Rankine Cycle
(ORC) system containing our Clean CycleTM generator. Our magnetic bearing Integrated Power Modules is at the heart of our
Clean CycleTM generator which can fit into a standard cargo container we call our Containerized System Module, producing 140KW
per Clean Cycle generator and can be linked together for projects generating up to 1MW of power.
Our
recent agreement with Enertime now permits us to sell midsized and large ORC systems (between 1 MW and 10 MW) in the United States, allowing
us to offer a full range of ORC systems to our customers. We believe this new capacity will enable us to expand our product offerings
into larger scale waste recovery products in the United States. Enertime is one of the leaders in producing ORC systems in Europe.
ORC
waste heat recycling systems use pressurized working fluids that have a lower boiling point than water which make them ideal to repurpose
waste heat into electricity. While most manufacturing processes do not produce enough heat to turn water into steam, there is enough
heat to generate pressurized refrigerant in our ORC systems which is used to turn a turbine at high speeds to generate electricity.
Each
Clean Cycle Generator can generate up to 1 GWh of electricity per year for every 1 MW of thermal energy from waste heat which we estimate
would reduce up to 5000 metric tons of CO2 production per year in an industrial heat recovery system or the annual equivalent of the
CO2 emissions of approximately 2000 cars per year.
We
believe the most important component in any ORC system is the turbine generator because it converts the steam heat into electricity and
accounts for approximately 60% of the cost of the system. The more efficiently the turbine generator works, the better the ORC power
plant operates. The remaining components consisting of the low boiling point fluid, condensers, which cool the fluids, the feed pumps,
which pressurize the fluids to reduce boiling points and the heat exchangers, which extract the heat from the heat sources. These are
more commoditized products and tend to perform at similar levels of efficiencies at similar price points.
We
believe our Clean CycleTM generator is the most efficient turbine generator in its class and size available in the market
for ORC systems generating up to 1 MW. We estimate that the Clean CycleTM generator has higher efficiency of approximately
15% than our competitors and its magnetic design eliminates the use of oils and lubricants, which we believe significantly reduces down
time, repairs and operating costs. Our Integrated Power Module is compact and fit into a standard cargo container that can be delivered
on a turnkey basis resulting in what we believe are lower installation and implementation costs than on-site assembly.
We
believe these features and benefits give us an important competitive advantage when building heat recovery power plants for our customers
and provide us with the opportunity to compete with and obtain market share from the dominant industrial waste heat to power systems.
Approximately
121 Clean CycleTM generators have been deployed to date with units being used in biomass and waste to energy projects, diesel
electric generators, turbine electric generators and industrial electric production applications. In 2021, we sold CCII units at 3 sites
generating approximately $1.2 million in revenue. We expect to raise additional funds to expand our capacity to install 6-8 units per
year which should approximately double our sales on a year-to-year basis.
We
have a current backlog of two units representing approximately $800,000 in sales revenues.
The
patented technology used in Clean CycleTM generator was purchased from General Electric International, together with over
100 installation sites, making us one of the leading provider of small-scale industrial waste heat to power systems. We have an exclusive
license from Calnetix to use their magnetic turbine for heat waste recovery applications.
|
|
Our
Integrated Power Module |
Our
Clean Cycle TM Generator |
A
complete ORC System with Integrated Power Module housed in a Containerized System Module (CSM)
Our
Waste to Energy Business
Waste
to Energy Solutions
We
are adding a new business line in our clean energy solutions business consisting of Waste to Energy processing equipment, engineering
services and Waste to Energy processing power plant joint ventures where we expect to retain an ownership interest in the project.
Waste-to-Energy
technologies that process non-renewable waste can reduce environmental and health damages while generating sustainable energy. Waste-to-Energy
technologies consist of waste treatment process that creates energy in the form of electricity, heat or fuels from a waste source. These
technologies can be applied to several types of waste: from the biomass (e.g. woodchips) to semi-solid (e.g. thickened sludge from effluent
treatment plants) to liquid (e.g. domestic sewage) and gaseous (e.g. refinery gases) waste.
Waste
to Energy Solutions can be used:
|
● |
In
any town, city or province with established waste management and collection. |
|
● |
Where
there is a consistent supply of solid waste. |
|
● |
Places
where treatment costs increase with shortages of space to store waste. |
|
● |
In
areas with high energy prices to allow for cost of recovery from waste. |
Waste
to Energy Solutions have many benefits:
|
● |
Electricity
from Waste to Energy plants can be generated from small amounts up to 30 MW providing for a wide range of opportunities to sell it
back to the grid. |
|
● |
The
synthetic renewable fuel gas produced from waste can be used for various production recyclable energy such as hot water, thermo-oil or steam, renewable natural gas or hydrogen. |
|
● |
Landfill
waste is reduced and so is leachate and methane released from decomposing landfills. |
|
● |
Waste
is a reliable source of energy and production is typically predictable and low cost whereas fossil fuel prices can fluctuate dramatically. |
But
Traditional Incineration Methods Have Significant Downsides:
|
● |
Air
pollution can increase because scrubbing technologies are very expensive to install. |
|
● |
Many
industrial, agricultural, and mixed municipal solid wastes have high moisture content at source and direct incineration of such waste
requires burning fossil fuel. |
|
● |
to
maintain thermal conversion process. |
|
● |
Carbon
is released into the air which would otherwise be stored in landfill. |
|
● |
Ash
and flue gas cleaning residues from incineration can also cause toxic leachate problems if not properly disposed of which is costly
and causes downstream environmental issues. |
|
● |
Generating
electricity from incineration releases more CO2, SO2, NOx and mercury than natural gas. |
(Source:
https://www.energyforgrowth.org/memo/waste-to-energy-one-solution-for-two-problems/)
The
most common form of waste to energy systems are based on incinerators which simply burn waste using air. The Thermal Treatment on Grate
is the most widespread technology being used by large waste landfills to generate electricity and heat. These systems produce substantial
amounts of ash, heavy metals and carbon dioxide which need to be treated and disposed of to minimize its impact on the environment. They
also require substantial amounts of pre-treatments prior to burning.
We
believe the Thermal on Grate incineration process, while wide-spread, is too expensive and complex for smaller and mid-sized waste to
energy projects creating, what we believe, is a significant market opportunity in small and mid-sized waste processing applications to
create not only electricity but valuable renewable natural gas, bio diesel oil, hydrogen, methane, and biochar.
Our
solution is a patented High Temperature Ablative Pyrolysis (HTAP) Biomass Reactor which we believe is a viable commercial solution to
the costs and environmental problems posed by traditional incarnation methods. We have the exclusive license and right to sell the HTAP10
and HTAP5 and related products manufactured by Enex which has a proven installed commercial base of customers using its waste to energy
solutions. We believe this is an ideal solution to process waste for small to mid-sized waste to energy generation applications needed
for processing industrial and municipality solid waste, agriculture waste, and forestry waste.
Pyrolysis
systems decompose waste without the use of oxygen under varying pressurized conditions and at temperatures ranging from 300 degrees Celsius
and 1,300 degrees Celsius. The major advantage of pyrolysis is that it is a cost-effective technology and helps curb environmental pollution.
Pyrolysis systems are gradually replacing traditional incineration and gaining momentum in the waste to energy processing market addresses
many of the pre-treatment issues and, when using high temperature and high-pressure, substantially reduce or eliminates pollutant. (Source:
“Life Cycle Assessment of Waste-to-Bioenergy Processes: A Review” Pooja Ghosh, ... Arunaditya Sahay, in Bioreactors,
2020)
Pyrolysis
systems can produce hydrogen, renewable natural gas, bio-diesel oil, charcoal, and biochar which are used to power hydrogen, diesel,
and natural gas engines or electrical turbines which can be sold and often are eligible for substantial tax and pricing benefits. When
compared with the conventional incineration plant that runs in the capacity of kilotons per day, the scale of the pyrolysis plant is
more flexible, and the output of pyrolysis can be integrated with other downstream technologies for product upgrading. (Source: Influential
Aspects in Waste Management Practices Karthik Rajendran PhD, Jerry D. Murphy PhD, in Sustainable Resource Recovery and Zero Waste
Approaches, 2019) In addition, BioChar stores and reduces atmospheric CO2 and can be used as a soil conditioner, an organic component
of animal feeds, construction materials, wastewater treatment and in textiles. (Source: https://www.bioenergyconsult.com/applications-of-biochar/)
The
ablative pyrolysis system is a waste to energy process that uses high pressure to generate fast pyrolysis and is designed so that the
heat transferred from a hot reactor wall softens the feedstock under pressure and permits larger feedstock particles to be processed.
These systems create high relative motion between the reactor wall and the feedstock. The process avoids the need of inert gas and hence
the processing equipment is small and the reaction system is more intense. (Source: http://biofuelsacademy.org/index.html%3Fp=608.html)
CETY has licensed
proprietary patented ablative pyrolysis system for commercial use that has been installed in 7 sites for use in waste to energy creating
applications processing including peat, coal, flax waste, sawdust and wood scrap, straw, buckwheat husks, and cardboard, tapes, films
and paper machine sludge. The technology has been implemented over 1,500 onsite power generation projects in Russia working
with major energy production companies such as Gazprom, Rosneft, Lukoil and Rostelecom as well as completing several projects for customers
in the European Union, Middle East and United States. Due to the conflict in the Ukraine, ENEX is redomiciling and relocating key
personnel to Turkey where it will complete an existing project and is expected to wind down its operations. CETY will develop additional
ablative technology and expects to manufacture units in the United States. Sales and European distribution will be run out of a CETY
office that has been established in Turkey.
CETY has global rights (except
Russia and CIS countries) to design, build, manufacture, sell and operate renewable energy and waste recovery facilities HTAP10 and HTAP5
systems and other products and technologies we expect to develop in the future.
HTAP technology utilizes a high temperature that uses a cleaner gas for the heating process and a more efficient biogas turbine.
The units can be customized to produce hydrogen and bio char in varying quantities which can be sold or used to produce electricity.
We believe that the key benefits of the HTAP Biomass Reactor are:
|
● |
Flexibility
in waste sourcing and mixing. |
|
● |
Customized
outputs of hydrogen, synthetic fuels, natural gas, methane, biochar, carbon black, or construction materials. |
|
● |
Better
waste sourcing and mixing flexibility, |
|
● |
Near-zero
emissions, |
|
● |
Modular
design, |
|
● |
Zero
liquid discharge, |
|
● |
Zero
solid waste residue waste. |
|
● |
Modular,
containerize design reducing implementation costs |
|
● |
Proven
commercial implementation. |
We
are targeting industrial and municipality solid waste, landfill waste, agriculture waste (straw, stems, plant biomass, manure, crop wastage),
and forestry waste from tree cuttings and shredded products.
We
are in the process of identifying projects domestically and internationally for the HTAP Biomass Reactor. We believe the first project
where we expect to implement the HTAP10 technology will be with our planned project to co-develop a biomass renewable energy processing
facility
ENEX
HTAP 10 Waste to Energy Processing Plant.
We
established a wholly owned subsidiary called CETY Capital that we expect will help us finance our customers renewable energy projects
producing low carbon energy. CETY Capital, when implemented, should add flexibility to the capacity CETY offers its customers and fund
projects utilizing its products and clean energy solutions. The in-house financing arm is expected to support our sales and build new
renewable energy facilities. To date we have conducted no material operations in this subsidiary.
Our
CETY HK Business
Our
Clean Energy Initiatives in China
Natural
gas is China’s fastest-growing primary fuel with demand quadrupling in the past decade. Developing the natural gas sector is a
critical aspect China’s effort to reduce reliance on coal. According to the International Energy Agency, China is the world’s
sixth-largest natural gas producer, the third-largest consumer, and the second-largest importer. In 2050, the U.S. Energy Information
Administration (EIA) expects China to consume nearly three times as much natural gas as it did in 2018, which was 280.30 b/cm. China’s
natural gas consumption accounted for 8.3% of its total energy mix in 2019. China anticipates boosting the share of natural gas as part
of total energy consumption to 14% by 2030. Before COVID 19, China was expected to account for a third of global demand growth through
2022, thanks in part to the country’s “Blue Skies” policy and the strong drive to improve air quality. China’s
relatively strong economic recovery from the COVID 19 crisis will probably increase that share. Natural gas is imported either through
pipelines or as liquefied natural gas (NG) on ships. According to Reuters, in 2019, the largest sources for Chinese NG imports were
Australia, Qatar, Malaysia, and Indonesia. (Source: U.S. Department of Commerce, International TradeAdministration.https://www.trade.gov/country-commercial-guides/china
energy#:~:text=China%20anticipates%20boosting%20the%20share,drive%20to%20improve%20air%20quality.)
Liquid
Natural Gas in the Chinese energy market produces half as much carbon dioxide, less than a third as much nitrogen oxides, and 1 percent
as much sulfur oxides at the power plant compared to the average air emissions from coal-fired generation. In addition to reduced air
emissions, natural gas has other environmental benefits that make it a smart fuel choice. Natural gas-fired power plants use about 60
percent less water than coal plants and 75 percent less water than nuclear power plants for the same electricity output. (Source: Conoco
Phillips)
In 2021, we acquired through
our subsidiary, CETY Hong Kong, a natural gas trading operation called Jiangsu Huanya Jieneng (“JHJ”) which sources NG from
large NG producers and distributors and sells it to non-state-owned industries and downstream customers in mainland China. In addition,
CETY Hong Kong established a framework agreement for a future joint venture with the overseas investment arm of a large state-owned
gas enterprise in China called Shenzhen Gas (Hong Kong) International Co. Ltd. (“Shenzhen Gas”). CETY Hong Kong will hold
a 49% interest in the joint venture. The joint venture plans to acquire municipal natural gas operators in China with funds provided
by Shenzhen Gas.
CETY
also plans to sell its waste heat recovery and waste to energy products in China as well as provide consulting services relating to the
same to projects in China.
The
JHJ team has more than 10 years of experience in the natural gas and clean energy industry and has maintained relationships and partners
with many natural gas enterprises in China.
CETY
HK
NG
Trading Operations
JHJ’s principal service
is to source and supply NG to industries and municipalities located in the southwestern part of China. The NG is principally
used for heavy truck refueling stations and urban or industrial users in areas that do not have a connection to local NG pipeline systems.
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.
Either our sources or customers
arrange for delivery of the NG. Our profitability depends on our ability to purchase NG at volume discounts at the beginning of a season
and sell it at a delivered price that is higher than the price we pay.
JHJ traders are experienced
NG traders, familiar with the spot and future markets and have relationships with the major users of NG in the areas that we serve. Our
customers may be local or may be as far as 700km from each depot.
We compete with other NG
trading based on availability and price. We target our discount with our sources to partially hedge against falling spot prices and give
us what we believe is a gross profit targeted at substantially higher rate than our competitors. So long as there are no major fluctuations
in the spot market, we believe we can offer more competitive prices due to the discounts we receive from the large volumes purchased
and the prepayments for the NG.
We
are able to purchase NG at what we believe is a significant discount from our suppliers because our prepayments offer suppliers more
certainty with respect to the sales of their inventory, address their cash flow issues, and allow them to better plan for production.
We believe our downstream customers get better prices from us because of our bulk buying power, ease of inventory management and cash
flow.
We
believe that both our suppliers and customers can reduce costs by using JHJ as a centralized procurement center and establishing professional
logistics distribution based on stable supply and downstream demand.
In
addition, at the time of our acquisition of JHJ, JHJ had substantially completed negotiations to enter into an agreement to obtain a
15% equity stake in Heze Hongyuan Natural Gas (HHNG), a local pipeline operator in the Shandong Province, by purchasing a stake through
Chengdu Rongjun Enterprise Consulting Co., Ltd. (CRE) The investment is secured via a share-pledge by the majority shareholder of HHNG,
and in case of a default, JHJ can take over the majority position. JHJ has full transparency to the use of proceeds as well as supervision
of the operations of HHNG. In January 2022, JHJ entered into a convertible promissory note with CRE, at 12% annual interest, in the amount
of Yuan 5,000,000 (approximately USD 787,686), which was funded by, purchases of our stock by PRC investors through an offshore company
under our Regulation A offering at a price of USD .08 per share. The Note is convertible into 15% of HHNG equity interests subject to
dilution by additional equity investment into HHNG by third parties. We do not expect the project to require additional investment from
us, JHJ or HHNG. The project is currently planning and constructing additional pipelines in the Heze area and is expected to generate
cash flow by the first quarter of 2023.
Joint
Venture with Shenzhen Gas
We
are in the process of establishing a joint venture with Shenzhen Gas with plans to acquire natural gas utility companies in China. Shenzhen
Gas is expected to provide a line of credit to the joint venture to fully cover the acquisition costs or otherwise facilitate capital
infusions. We believe our participation in the joint venture will also provide our parent company, CETY and its subsidiaries, with the
opportunity to sell its products and consulting services to the companies acquired by the joint venture.
We
believe that Shenzhen Gas entered into the Joint Venture with us because of the expertise of JHJ in the NG market in southwest China
and their ability to source and complete profitable deals for the joint ventures.
Our
subsidiary, Leading Wave Limited, signed a non-binding “Strategic Cooperation Framework Agreement” with Shenzhen Gas, on
August 30, 2021. According to the agreement, we expect the joint venture will invest up to RMB 3 to 5 billion which will be financed
through a credit line extended by Shenzhen Gas to the joint venture at an interest rate of approximately 5% per annum. JHJ’s team
will be providing the know-how on the joint venture’s acquisition strategy as well as streamlining the operations of the portfolio
companies to increase the overall profitability of the investments.
Engineering,
Consulting and Project Management Services
In
all of our business segments we intend to provide engineering, consulting and project management services.
Engineering.
Our global engineering team supports the design, build, installation, and maintenance of our Clean CycleTM generators,
supports our technology customers and innovative start-ups with a broad range of electrical, mechanical and software engineering services.
CETY has assembled a team of experts from around the globe to assist customers at any point in the design cycle. These services include
design processes from electrical, software, mechanical and Industrial design. Utilization of CETY’s design services will provide
our customers with a complete end to end solution.
Supply
Chain Management. CETY’s supply chain solution provides maximum flexibility and responsiveness through a collaborative
and strategic approach with our customers. CETY can assume supply chain responsibility from component sourcing through delivery of finished
product. CETY’s focus on the supply chain allows us to build internal and external systems and better our relationships with our
customers, which allows us to capitalize on our expertise to align with our partners and customer’s objectives and integrate with
their respective processes.
On
February 3rd, 2023 we entered into a Master Services Agreement by and between RPG Global LLC, an
Indiana limited liability company and Clean energy Technologies, to provide the general terms and conditions upon which CETY will provide
certain energy efficiency and renewable energy consulting, engineering and other services and related products or equipment to RPG Global
LLC in connection with Contractor’s business of providing green energy, energy efficiency and other energy related services and
solutions for its customers, as agreed from time to time by Contractor. This Master Service Agreement with RPG Energy Group is for development
of onsite applications which utilize technologies to create electricity, applicable hydrogen production, and promote decarbonization.
CETY will support RPG Energy’s Fortune 100 customer with locations in Europe, the Middle East, Asia, the U.S., and Mexico. The
initial sites are in Germany, the Czech Republic, Poland, the UK, and the U.S., specifically in the states of Tennessee, Ohio, Iowa,
Kansas, Michigan, and Mississippi. Te project size from each location could range from $500,000 to $10,000,000.
Sales
and Marketing
We
utilize both a direct sales force and global distribution group with expertise in heat recovery solutions and clean energy markets.
CETY
maintains an online presence through our web portal and social media. We also have established cross-sale agreements with synergistic
technology providers promoting our solutions to our respective customers. We utilize email campaigns to keep the marketplace abreast
of the recent developments with our solutions. We work with the municipalities to identify incentive programs that could utilize our
solutions.
Our
application engineers assist in converting the opportunities into projects. We provide technical support to our Clean Cycle TM
generator clients and recently introduced waste to energy plants through providing maintenance and product support.
Our
market focus is segmented by the engine heat recovery, waste to energy plants, engineering & procurement, and renewable energy trade,
Wastewater treatment plants and boiler applications with excess heat.
Our
experienced team of NG traders identify producers and customers for the NG trading business as well as originate acquisition opportunities
for our Shenzhen Gas joint venture.
Suppliers
Our
heat recovery solutions systems are manufactured primarily from components available from multiple suppliers and to a lesser extend from
custom fabricated components available from various sources. We purchase our components from suppliers based on price and availability.
Our significant suppliers in the Waste Heat Recovery business include Powerhouse, Concise Instrument, and Grainger.
Our waste to energy components
are sourced globally. We are in the process of establishing an inhouse center of competence and technology development based out of Turkey
to source these components in Europe and US with the ability to deploy the product globally. Although future impacts cannot be
predicted the company does not foresee any negative impact from the Russa and Ukraine conflict.
The natural gas in China
is obtained from various local production plants in Southeast China based on price and quality. Deliveries of the NG are made through
third party trucking companies. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are discounted
and prepaid for in advance at a discount to market.
Competition
We
believe ORMAT, Exergy, TAS and Turboden are the leaders in ORC system power plants.
The
Waste to Energy Market is dominated by Hitachi Zosen Inova AG, Suez, Veolia, Ramboll Group A/S, Covanta Holding Corporation, China Everbright
International Ltd., Abu Dhabi National Energy Company PJSC, Babcock & Wilcox Enterprises Inc., Whaleboater Technologies Inc., Xcel
Energy Inc. (Source: https://www.mynewsdesk.com/brandessence/pressreleases
/at-cagr-of-7-dot-6-percent-waste-to-energy-market-is-expected-to-reach-usd-52-dot-92-billion-by-2027-3125591)
We
also compete with numerous companies that are smaller than the major companies who are focused on the smaller to medium sized installations
in Waste Heat Recovery and Waste to Energy. We believe our waste to energy products are more efficient for use in small and medium sized
operations than our competitors and provide us with a competitive advantage on that basis.
In
China, our NG trading operations compete with large state-owned NG producers and importers such as Sinopec and many smaller local energy
trading companies in the PRC. We compete based on price and consistency of services. Our planned joint venture with Shenzhen Gas competes
with other large state-owned gas producers and smaller operators that may seek to grow by acquiring additional natural gas operators.
We believe our local relationships maintained by our local trading team and affiliation with Shenzhen Gas, a major supplier in China,
enable us to identify and acquire companies more efficiently than our competitors.
Patents
We currently hold 22
patents in 5 countries and 2 pending applications in 2 countries, which were acquired from General Electric
International relating to our magnetic turbine technology.
Filing Country Code |
|
Application Number |
|
Patent Number |
|
Title |
|
Application Date |
|
Issue Date |
|
Expiration Date |
US |
|
11/735854 |
|
8839622 |
|
FLUID FLOW IN A FLUID EXPANSION SYSTEM |
|
4/16/2007 |
|
9/23/2014 |
|
4/16/2027 |
WO |
|
PCT/US2008/060324 |
|
|
|
Fluid Flow in a Fluid Expansion |
|
4/15/2008 |
|
|
|
|
EP |
|
08745846.9 |
|
2147194 |
|
Fluid Flow in a Fluid Expansion |
|
04/15/2008 |
|
8/5/2015 |
|
4/15/2028 |
IN |
|
2024/MUMNP/2009 |
|
|
|
Fluid Flow in a Fluid Expansion System |
|
10/29/2009 |
|
|
|
4/15/2028 |
DE |
|
08745846.9 |
|
2147194 |
|
Fluid Flow in a Fluid Expansion |
|
04/15/2008 |
|
8/5/2015 |
|
4/15/2028 |
IT |
|
502015000049832 |
|
2147194 |
|
Fluid Flow in a Fluid Expansion |
|
04/15/2008 |
|
8/5/2015 |
|
4/15/2028 |
US |
|
11/735849 |
|
7841306 |
|
RECOVERING HEAT ENERGY |
|
4/16/2007 |
|
11/30/2010 |
|
4/16/2027 |
US |
|
12/859890 |
|
8146360 |
|
RECOVERING HEAT ENERGY |
|
8/20/2010 |
|
4/3/2012 |
|
4/16/2027 |
US |
|
11/735839 |
|
7638892B2 |
|
GENERATING ENERGY FROM FLUID EXPANSION |
|
4/16/2007 |
|
12/29/2009 |
|
4/16/2027 |
US |
|
12/783455 |
|
8400005 |
|
GENERATING ENERGY FROM FLUID EXPANSION |
|
5/19/2010 |
|
3/19/2013 |
|
5/19/2030 |
US |
|
12/790616 |
|
8739538 |
|
|
|
5/28/2010 |
|
6/3/2014 |
|
5/28/2030 |
WO |
|
PCT/US2008/060227 |
|
|
|
GENERATING ENERGY FROM FLUID EXPANSION |
|
4/14/2008 |
|
|
|
|
EP |
|
08745761.0 |
|
2140110 |
|
GENERATING ENERGY FROM FLUID EXPANSION |
|
04/14/2008 |
|
3/5/2014 |
|
4/14/2028 |
IN |
|
6164/DELNP/2009 |
|
327112 |
|
GENERATING ENERGY FROM FLUID EXPANSION |
|
9/25/2009 |
|
|
|
12/11/2019 |
IT |
|
08745761.0 |
|
2140110 |
|
GENERATING ENERGY FROM FLUID EXPANSION |
|
4/14/2008 |
|
3/5/2014 |
|
4/14/2028 |
PL |
|
08745761.0 |
|
2140110 |
|
GENERATING ENERGY FROM FLUID EXPANSION |
|
4/14/2008 |
|
3/5/2014 |
|
4/14/2028 |
DE |
|
08745761.0 |
|
2140110 |
|
GENERATING ENERGY FROM FLUID EXPANSION |
|
4/14/2008 |
|
3/5/2014 |
|
4/14/2028 |
US |
|
13/343466 |
|
8984884 |
|
WASTE HEAT RECOVERY SYSTEMS |
|
1/4/2012 |
|
3/24/2015 |
|
1/4/2032 |
|
|
|
|
|
|
|
|
12/21/2012 |
|
|
|
|
GB |
|
1222997.7 |
|
2498258 |
|
WASTE HEAT RECOVERY SYSTEMS |
|
12/20/2012 |
|
|
|
9/16/20014 |
US |
|
13/343483 |
|
9,018,778 |
|
WASTE HEAT RECOVERY SYSTEM GENERATOR VARNISHING |
|
1/4/2012 |
|
|
|
4/28/2015 |
US |
|
13/343490 |
|
9024460 |
|
WASTE HEAT RECOVERY SYSTEM GENERATOR ENCAPSULATION |
|
1/4/2012 |
|
5/5/2015 |
|
1/4/2032 |
JP | |
2015-116192 | |
| |
SYSTEM AND METHOD FOR THERMAL MANAGEMENT | |
6/9/2015 | |
| |
6/9/2035 |
Intellectual
Property
As
part of our asset acquisition from General Electric International we acquired an exclusive, irrevocable, sublicensable, limited transferable,
royalty free, fully paid, worldwide perpetual license to develop, improve and commercialize Calnetix’s magnetic turbine in any
Organic Rankine Cycle based application where heat is sourced from a reciprocating combustion engine of any type, except marine vessels,
any gas or steam turbine systems for electrical power generation applications or any type of biomass boiler system.
In
August 2020, we entered into a global manufacturing and sales agreement with ENEX to cooperate with each other with respect to designing,
building, and operating renewable energy and waste recovery facilities. ENEX was granted the right to package and resell ORC heat recovery
generators, manufactured by CETY, to customers in Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan,
Turkmenistan, Ukraine, and Uzbekistan (the “CIS Countries”) and CETY was granted the right to package and resell the high
temperature ablative fast pyrolysis reactor, called the ENEX HTAP and manufactured by ENEX, to the customers in the United States and
Asia. Payment terms are handled by each purchase order and contract. Due to the conflict in the Ukraine, we terminated all agreements
with ENEX and plan to absorb key members of their team and acquire key technology after the company and its personnel become citizens
of Turkey.
Facilities
We
operate from a 20,000 sq-ft state of the art facility in Costa Mesa, California USA. We have in-house electro-mechanical assembly and
testing capabilities. Our products are compliant with American Society of Mechanical Engineers and are UL and CE approved. We also have
a 5,000 sq-ft sales and service center located in Treviso, Italy. Our 5,000 sq-ft Engineering consultancy and Natural Gas Trading company
is located in Chengdu, China.
Employees
We
presently have approximately 11 full time employees, including operational, engineering, accounting and marketing personnel. We utilize
extensive number of consultants as well and have never experienced work stoppages and we are not a party to any collective bargaining
agreement.
Government
Regulation
Our
operations are subject to certain foreign, federal, state and local regulatory requirements relating to environmental, waste management,
and health and safety matters. We believe we operate in substantial compliance with all applicable requirements. However, material costs
and liabilities may arise from these requirements or from new, modified or more stringent requirements. Material cost may rise due to
additional manufacturing cost of raw or made parts with the application of new regulations. Our liabilities may also increase due to
additional regulations imposed by foreign, federal, state and local regulatory requirements relating to environmental, waste management,
and health and safety matters. In addition, our past, current and future operations and those of businesses we acquire, may give rise
to claims of exposure by employees or the public or to other claims or liabilities relating to environmental, waste management or health
and safety concerns.
Our
markets can be positively or negatively impacted by the effects of governmental and regulatory matters. We are affected not only by energy
policy, laws, regulations and incentives of governments in the markets into which we sell, but also by rules, regulations and costs imposed
by utilities. Utility companies or governmental entities could place barriers on the installation of our product or the interconnection
of the product with the electric grid. Further, utility companies may charge additional fees to customers who install on-site power generation,
thereby reducing the electricity they take from the utility, or for having the capacity to use power from the grid for back-up or standby
purposes. These types of restrictions, fees or charges could hamper the ability to install or effectively use our products or increase
the cost to our potential customers for using our systems in the future. This could make our systems less desirable, thereby adversely
affecting our revenue and profitability potential. In addition, utility rate reductions can make our products less competitive which
would have a material adverse effect on our future operations. These costs, incentives and rules are not always the same as those faced
by technologies with which we compete. However, rules, regulations, laws and incentives could also provide an advantage to our Heat Recovery
Solutions as compared with competing technologies if we are able to achieve required compliance at a lower cost when our Clean Cycle
TM generators are commercialized. Additionally, reduced emissions and higher fuel efficiency could help our future customers
combat the effects of global warming. Accordingly, we may benefit from increased government regulations that impose tighter emission
and fuel efficiency standards.
Research
and Development
We
had no expenses in Research and Development costs during the years ended December 31, 2021 and 2020.
Seasonality
of Business
There
is no significant seasonality in our business.
Inventory
Inventory
consists of raw materials, work-in-process and finished goods. Because a large percentage of the Company’s orders require products
to be shipped in the same quarter in which the order was received, and because orders in the inventory may be canceled and delivery schedules
may be changed, the Company’s inventory at any particular date is not necessarily indicative of actual sales for any succeeding
period.
Recent
Funding Events.
In
addition to the funding described below in the section titled “Selling Stockholders,” on Dec 5,2022 the company entered into
a promissory note with 1800 Diagonal Lending, LLC (“1800 Diagonal”) in the amount of $191,526 with and interest rate of 10%
per annum and a default interest rate of 22% per annum. This note is due in full on December 5,2023 and has mandatory monthly payments
of $21,067.80 The note had an OID of $19,760.00 and recorded as finance fee expense. In the event of the default, at the option of the
Investor, the note may be converted into shares of common stock of the company. This is note is convertible, but not until a contingent
event of default has taken place, none of which have occurred as of the date of this filing. The balance on this note as of December
31, 2022 was $210,678.00.
On
March 10, 2022 the company entered into a promissory note in the amount of $170,600, with and interest rate of 10% per annum and a
default interest rate of 22% per annum. This note is due in full on March 10, 2023 and has mandatory monthly payments of $18,766.
The note had an OID of $17,060 and recorded as finance fee expense. In the event of the default, at the option of the Investor, the
note may be converted into shares of common stock of the company. This is note is convertible, but not until a contingent event of
default has taken place, none of which have occurred as of the date of this filing. The balance on this note as September 30, 2022
was $75,064. On December 6, 2022, the company
paid off its promissory note with originally named Sixth Street Lending LLC dated March 10, 2022, of $170,600, together with
all interest thereon.
On June 30, 2022 the company entered into a promissory
note in the amount of $252,928.44 with and interest rate of 10% per annum and a default interest rate of 22% per annum. This note is
due in full on June 30, 2023 and has mandatory monthly payments of $27,822.13. The note had an OID of $25,293 and recorded as finance
fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock of the
company. This is note is convertible, but not until a contingent event of default has taken place, none of which have occurred as of
the date of this filing. The balance on this note as of December 31, 2022 was $139,111.30 On February 3, 2023 the company paid off its
promissory note with 1800 Diagonal, of $252,928.44 together with all interest thereon.
On February 10, 2023 the company entered into
a promissory note with 1800 Diagonal Lending, LLC (“1800 Diagonal”) in the amount of $258,521 with and interest rate of 10%
per annum and a default interest rate of 22% per annum. This note is due in full on February 10,2024 and has mandatory monthly payments
of $28,437.30 The note had an OID of $27,698.87 and recorded as finance fee expense. In the event of the default, at the option of the
Investor, the note may be converted into shares of common stock of the company at a conversion price equal to 70% multiplied by the lowest
trading price during the five trading days prior to conversion. This is note is convertible, but not until a contingent event of default
has taken place, none of which have occurred as of the date of this filing. The balance on this note as of February 14, 2023 was $258,521.00.
MANAGEMENT
Directors,
Executive Officers and Corporate Governance
The
following table sets forth information regarding our current directors and executive officers:
Name |
|
Age |
|
Position |
Kambiz
Mahdi |
|
56 |
|
President,
CEO, Director |
Calvin
Pang |
|
37 |
|
CFO,
Director |
Ted
Hsu |
|
60 |
|
Independent
Director Candidate |
Lauren
Morrison |
|
68 |
|
Independent
Director Candidate |
Mathew
Graham Smith |
|
48 |
|
Independent
Director Candidate |
* We intend to appoint
Ted Hsu, Lauren Morrison, and Mathew Graham Smith as our independent directors, effective immediately prior to the listing of our
common stock on Nasdaq.
Biographical
Information
Mr.
Kambiz Mahdi served as President and Chief Executive Officer of the Company from 1996 until December of 2005 and again from July
2009 until present. Mr. Mahdi also started Billet Electronics a global supply chain provider of products, services and solutions in the
technology sector in 2007. Mr. Mahdi has a BS degree in Electrical Engineering from California State University of Northridge. Mr. Mahdi
has not served on any other boards of public companies in the past five years.
Our
Board of Directors selected Mr. Mahdi to serve as a director because he is our Chief Executive Officer and has served in various executive
roles with our company for 14 years, with a focus on electrical design & manufacturing, sales and operations and his insight into
the development, marketing, finance, and operations aspects of our company. He has expansive knowledge of engineering and manufacturing
industry and relationships with chief executives and other senior management at technology companies. Our Board of Directors believes
that Mr. Mahdi brings a unique and valuable perspective to our Board of Directors.
Mr.
Calvin Pang has served as our Chief Financial Officer since March 9, 2020. Since 2015 Mr. Pang has been the Managing Director
of Megawell Capital Limited. From 2007 to 2015, he was a banker at UBS AG managing portfolios of Hong Kong and China based investors.
Mr. Pang graduated from the Olin School of Business at Washington University in St. Louis with a bachelor’s degree in business
and finance. We believe that Mr. Pang is well qualified to serve as a member of our Board of Directors due to his extensive experience
in U.S. and Asian corporate finance and may assist us in developing relationships with financial institutions.
Mr.
Ted Hsu has almost 3 decades of experience as a commercial banker. He joined Preferred Bank in 1992 and currently serves as
the bank’s Executive Vice President. Preferred Bank is one of the largest independent commercial banks in California. He has extensive
experience in servicing clients in various sectors including real estate, construction, commercial and industrial. Recently, Mr. Hsu
began to cover companies in the renewable energy sector as it is the growing trend. We believe Mr. Hsu is well qualified to serve as
a member of our Board of Directors due to his experience in commercial lending.
Ms.
Lauren Morrison is an international business development consultant whose career has had a major focus in the clean energy, smart
building, and sustainability sectors. She has worked with companies of all sizes and areas of specialization, from concept to early-stage
and maturity, on global growth strategies, branding, and product development. Lauren is interested in the integration and optimization
of technologies that measurably increase energy efficiency, and the application of monitoring and data analysis that iteratively improves
building processes, practices, and net functionality. As part of a leading-edge model smart city development in Asia, Lauren saw first-hand
the critical imperative for global collaboration to address climate challenges as they rapidly eclipse geographic boundaries. She is
passionate about expanding the conversation on this topic to include the widest possible audience of stakeholders. Our Board of Directors
believes that Ms. Morrison brings a unique and valuable international perspective and clean energy experience to our Board of Directors
Mr.
Matthew Graham Smith has over a decade of experience working in a range of overseas and domestic roles with the Australian Department
of Foreign Affairs and Trade (DFAT) and has held positions as Product Manager, Major Surface Ships, Department of Defense, Senior
Administrative Officer, Consulate-General, Chengdu, Senior Administrative Officer, Consulate-General, Chengdu, Post Opener, Consulate-General
Surabaya, Indonesia. Mr. Smith is a Certified Practicing Accountant in Australia and will serve as the Chairman of our Audit Committee
upon the listing of our common stock on Nasdaq. Mr. Smith has received a Bachelor of Laws and a Bachelor of Commerce in Finance
from Australian National University and was an exchange student at the Olin Business School, Washington University.
Each
director holds office until the earlier of his or her death, resignation, removal from office by the stockholders, or his or her respective
successor is duly elected and qualified. There are no arrangements or understandings between any of our nominees or directors and any
other person pursuant to which any of our nominees or directors have been selected for their respective positions. No nominee or director
is related to any executive officer or any other nominee or director.
Committees
We
intend to establish three committees under the board of directors immediately prior to the listing of our common stock on Nasdaq: an
audit committee, a compensation committee and a nominating and corporate governance committee. We will adopt a charter for each of the
three committees. Each committee’s members and functions are described below.
Audit
Committee. We expect that our audit committee will consist of Matthew-Graham Smith, Lauren Morrison and Ted Hsu. Matthew-Graham
Smith is the chairperson of the audit committee. We have determined that Matthew-Graham Smith, Lauren Morrison and Ted Hsu each satisfy
the “independence” requirements of Nasdaq Listing Rule 5605(a)(2) and meets the independence standards under Rule 10A-3 under
the Exchange Act. We have determined that Matthew-Graham Smith qualifies as an “audit committee financial expert.” The audit
committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit
committee is responsible for, among other things: (a) representing and assisting the Board in its oversight responsibilities regarding
the Company’s accounting and financial reporting processes, the audits of the Company’s financial statements, including the
integrity of the financial statements, and the independent auditors’ qualifications and independence; (b) overseeing the preparation
of the report required by SEC rules for inclusion in the Company’s annual proxy statement; (c) retaining and terminating the Company’s
independent auditors; (d) approving in advance all audit and permissible non-audit services to be performed by the independent auditors;
and (e) approving related person transactions.
Compensation
Committee. We expect that our compensation committee will consist of Matthew-Graham Smith, Lauren Morrison and Ted Hsu. Ted Hsu
is the chairperson of our compensation committee. We have determined that Matthew-Graham Smith, Lauren Morrison and Ted Hsu each are
“independent,” as such term is defined for directors and compensation committee members in the listing standards of the NASDAQ
Stock Market LLC. Additionally, each qualify as “non-employee directors” for purposes of Rule 16b-3 under the Securities
Exchange Act of 1934 and as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code. The Committee
has been established to: (a) assist the Board in seeing that a proper system of long-term and short-term compensation is in place to
provide performance oriented incentives to attract and retain management, and that compensation plans are appropriate and competitive
and properly reflect the objectives and performance of management and the Company; (b) assist the Board in discharging its responsibilities
relating to compensation of the Company’s executive officers; (c) evaluate the Company’s Chief Executive Officer and set
his or her remuneration package; and (d) make recommendations to the Board with respect to incentive compensation plans and equity-based
plans.
Nominating
and Corporate Governance Committee. We expect that our nominating and corporate governance committee will consist of Matthew-Graham
Smith, Lauren Morrison and Ted Hsu. Lauren Morrison is the chairperson of our nominating and corporate governance committee. We have
determined that each of Matthew-Graham Smith, Lauren Morrison and Ted Hsu qualify as “independent” as that term is defined
by Nasdaq Listing Rule 5605(a)(2). The Committee is responsible for: (a) assisting the Board in determining the desired experience, mix
of skills and other qualities to provide for appropriate Board composition, taking into account the current Board members and the specific
needs of the Company and the Board; (b) identifying qualified individuals meeting those criteria to serve on the Board; (c) proposing
to the Board the Company’s slate of director nominees for election by the shareholders at the Annual Meeting of Shareholders and
nominees to fill vacancies and newly created directorships; (d) reviewing candidates recommended by shareholders for election to the
Board and shareholder proposals submitted for inclusion in the Company’s proxy materials; (e) advising the Board regarding the
size and composition of the Board and its committees; (f) proposing to the Board directors to serve as chairpersons and members on committees
of the Board; (g) coordinating matters among committees of the Board; (h) proposing to the Board the slate of corporate officers of the
Company and reviewing the succession plans for the executive officers; (i) recommending to the Board and monitoring matters with respect
to governance of the Company; and (j) overseeing the Company’s compliance program.
Term
of Office
Our
directors hold office until the next annual meeting of shareholders of the Company and until their successors have been elected and qualified.
Our officers are elected by the board of directors and serve at the discretion of the board of directors.
Family
Relationships
There
are no other family relationships between any of our directors or executive officers. There are no arrangements or understandings between
our directors and directors and any other person pursuant to which they were appointed as an officer and director of the Company.
Code
of Ethics
We
have adopted a written code of ethics and business conduct that applies to our directors, officers and employees, including our principal
executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
A copy of the code of ethics and business conduct has been filed as Exhibit 14.1 to our Current Report on Form 8-K on September 29,
2011 and a copy of which will be provided to any person, without charge, upon written request sent to Clean Energy Technologies, Inc.,
2990 Redhill Avenue, Costa Mesa, CA 92626 Attention: Corporate Secretary. Any amendments
to or waivers of the code of ethics and business conduct will be promptly reported in a Current Report on Form 8-K, as required by applicable
laws.
Involvement
in Certain Legal Proceedings
During
the past ten years no current director, executive officer, promoter or control person of the Company has been involved in the following:
(1)
A petition under the Federal bankruptcy laws or any state insolvency law which was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner
at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer
at or within two years before the time of such filing;
(2)
Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations
and other minor offenses);
(3)
Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
i.
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing,
or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection
with such activity;
ii.
Engaging in any type of business practice; or
iii.
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of
Federal or State securities laws or Federal commodities laws;
(4)
Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State
authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described
in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
(5)
Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State
securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or
vacated;
(6)
Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated
any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated;
(7)
Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged violation of:
i.
Any Federal or State securities or commodities law or regulation; or
ii.
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent
injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or
prohibition order; or
iii.
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
(8)
Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a member.
Shareholder
Communications to the Board
Shareholders
who are interested in communicating directly with members of the Board, or the Board as a group, may do so by writing directly to the
individual Board member c/o Secretary, Clean Energy Technologies, Inc., 2990 Redhill Avenue, Costa
Mesa, CA 92626. The Company’s Secretary will forward communications directly to the appropriate Board member. If the correspondence
is not addressed to the particular member, the communication will be forwarded to a Board member to bring to the attention of the Board.
The Company’s Secretary will review all communications before forwarding them to the appropriate Board member.
Compensation
of Directors
The
key objective of our non-employee directors’ compensation program is to attract and retain highly qualified directors with the
necessary skills, experience and character to oversee our management. We currently use equity-based compensation to compensate our directors
due to our restricted cash flow position; however, we may in the future provide cash compensation to our directors. The use of equity-based
compensation is designed to recognize the time commitment, expertise and potential liability relating to active Board service, while
aligning the interests of our Board of Directors with the long-term interests of our shareholders.
In
addition to the compensation provided to our non-employee director, which is detailed below, each non-employee director is reimbursed
for any reasonable out-of-pocket expenses incurred in connection with attending in-person meetings of the Board of Directors and Board
committees, as well for any fees incurred in attending continuing education courses for directors.
Fiscal
Years 2021 and 2022 Annual Cash Compensation
We
currently do not provide cash compensation to our directors and as such did not provide any cash compensation during the years ended
December 31, 2021 and 2022.
Fiscal
Years 2021 and 2022 Equity Compensation
Yearly
Restricted Share Awards
Under
the terms of the discretionary restricted share unit grant provisions of our 2006 Incentive Stock Plan and our 2011 Omnibus Incentive
Plan, which we refer to as the 2006 Plan and the 2011 Plan, respectively, each non-employee director is eligible to receive grants of
restricted common stock share awards at the discretion of our Board of Directors. These yearly restricted share unit awards vest in full
on the grant date. The 2006 Plan and the 2011 Plan have expired and there are no outstanding grants.
For
the years ended December 31, 2021 and 2022, there were no stock options granted.
Discretionary
Grants
Under
the terms of the discretionary option grant provisions of the 2006 Plan and the 2011 Plan, non-employee directors are eligible to receive
stock options or other stock awards granted at the discretion of the Board of Directors. The 2006 Plan and the 2011 Plan have expired
and there are no outstanding grants. No director received stock awards pursuant to the discretionary grant program during fiscal year
2021 or 2022.
Change
of Control and Termination Provisions
None.
Family
Relationship
We
currently do not have any officers or directors of our Company who are related to each other.
Outstanding
Equity Awards at Fiscal Year-End
None.
Long-Term
Incentive Plan
None.
EXECUTIVE
COMPENSATION
The
following table sets forth the fiscal year 2021 and 2022 compensation for our Chief Executive officer and the other executive
officers with compensation exceeding $100,000 during 2021 and 2022.:
Summary
Compensation Table
Name and Principal | |
| |
Salary | | |
Bonus | | |
Stock Awards | | |
Option Awards | | |
Non-equity Incentive Plan Compensation | | |
Change in Pension Value and Nonqualified Deferred Compensation Earnings | | |
All Other Compensation | | |
Total |
Position | |
Year | |
($) | | |
($)(3) | | |
($)(4) | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) |
Kambiz Mahdi (1) | |
2022 | |
$ | 275,000 | | |
$ | 73,709 - | | |
| $ | | |
| | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$348,709 |
Chief Executive Officer | |
2021 | |
$ | 275,000 | | |
$ | 85,000 | | |
| | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$360,000 |
|
1) |
On
July 1, 2018 we entered into an at will employment agreement with Mr. Mahdi, with an annual salary of $275,000. This agreement may
be terminated at any time. In addition as part of the agreement Mr. Mahdi was to be issued 500,000 shares of our common stock,
as additional compensation. As a result, for the year ended December 31, 2019 we accrued for and subsequently on February 13, 2019,
issued 500,000 shares at a purchase price of $.0131 per share to Mr. Mahdi in the amount of $262,000. |
|
|
|
|
|
There
was a bonus of $85,000 paid to Mr. Mahdi for fiscal year 2021 and $73,709 for fiscal year 2022, Mr. Mahdi is entitled to 50%
of his salary in cash bonus, this bonus was approved by the board of directors. |
Executive
Employment Agreements
On
July 1, 2018 we entered into an at-will employment agreement with Mr. Mahdi, with an annual salary of $275,000. This agreement may be
terminated at any time. In addition as part of the agreement Mr. Mahdi was issued 500,000 shares of our common stock, as additional
compensation.
On February 13, 2023,
we entered into an at-will employment agreement with Mr. Pang, with an annual salary of $150,000. This agreement may be terminated at
any time. Mr. Pang is also entitled to a cash bonus of up to 50% of his base salary.
Potential
Payments upon Termination or Change of Control
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.
PRINCIPAL
STOCKHOLDERS
The
following table shows, as of March 1, 2023, the number of shares of our common stock beneficially owned by (1) any person who
is known by us to be the beneficial owner of more than 5.0% of the outstanding shares of our common stock; (2) our directors and former
directors; (3) our named executive officers; and (4) all of our directors and executive officers as a group. The percentage of common
stock beneficially owned is based on 37,178,624 shares of our common stock outstanding. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes securities over which a person has voting or investment power and securities
that a person has the right to acquire within 60 days. Unless otherwise provided, the address of each beneficial owner listed is c/o
Clean Energy Technologies, Inc., Board of Directors, 2990. Redhill Ave, Costa Mesa, California 92626. We need to footnote how the voting
rights are allocated and add them to the number of shares.
Name of Beneficial Owners | |
Number of Shares of Common Stock Beneficially Owned | | |
Percentage | |
| |
| | |
| |
5% Holders | |
| | | |
| | |
MGW Investments I Limited (1) | |
| 24,044,101 | | |
| 64.7 | % |
Officers and Directors | |
| | | |
| | |
Calvin Pang(1) | |
| 24,044,101 | | |
| 64.7 | % |
Kambiz Mahdi (2) | |
| 2,317,541 | | |
| 6.2 | % |
Ted Hsu (Independent Director Candidate) | |
| - | | |
| * | |
Lauren Morrison (Independent Director Candidate) | |
| - | | |
| * | |
Mathew Graham Smith (Independent Director Candidate) | |
| - | | |
| * | |
All directors and officers as a group | |
| 26,361,642 | | |
| 70.9 | % |
*Less
than 1%.
1) Calvin Pang has voting
and investment power over all of our common stock held by MGW Investments I Limited (“MGWI”). MGWI holds 24,044,101
shares of common stock directly.
2)
The shares of common stock are held directly by
the Kambiz and Bahareh Mahdi Living Trust and indirectly by Kambiz Mahdi and Bahareh Mahdi as Trustees.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Material
Transactions with Related Parties
The
following is a summary of reportable transactions, for the period from the beginning of 2020 through the date of this prospectus, in
which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average
of our total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or
indirect material interest (other than compensation described under “Executive Compensation”).
On
November 2, 2016, we effected the repayment of the convertible note dated March 15, 2016 for an aggregate amount of $84,000. Concurrently,
we entered into an Escrow Funding Agreement with Red Dot Investment, Inc., a California corporation (“Reddot”), pursuant
to which Reddot deposited funds into escrow to fund the repayment and we assigned to Reddot our right to acquire the convertible note
and Reddot acquired the convertible note. Concurrently, we and Reddot amended the convertible note (a) to have a fixed conversion price
of $0.20 per share, subject to potential further adjustment in the event of certain Common Stock issuances, (b) to have a fixed
interest rate of ten percent (10%) per annum with respect to both the redemption amount and including a financing fee and any costs,
expenses, or other fees relating to the convertible note or its enforcement and collection, and any other expense for or on our account
(in each case with a minimum 10% yield in the event of payoff or conversion within the first year), such amounts to constitute additional
principal under the convertible note, as amended, and (c) as otherwise provided in the Escrow Funding Agreement. The March 2016 convertible
note, as so amended, is referred to as the “Master Note.”
Concurrently
with the foregoing note repayments, we entered into a Credit Agreement and Promissory Note (the “Credit Agreement”) with
Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation (“MW I”), pursuant to which
MW I deposited funds into escrow to fund the repayment of the convertible notes and we assigned to MW I our right to acquire the convertible
notes and otherwise agreed that MW I would be subrogated to the rights of each note holder to the extent a note was repaid with funds
advanced by MW I. Concurrently, MW I acquired the Master Note and we agreed that all amounts advanced by MG I to or for our benefit would
be governed by the terms of the Master Note, including the payment of a financing fees, interest, minimum interest, and convertibility.
Reddot is MW I’s agent for purposes of administration of the Credit Agreement and the Master Note and advances thereunder.
On
February 8, 2018, the company issued a convertible promissory Note in the principal amount
of $153,123, due October 8, 2018, with an interest rate of 12% per annum payable to MGWI
(the “MGWI Note”). The MGWI Note is convertible into shares of common stock at
the lower of: (i) a 40% discount to the lowest trading price during the previous twenty (20)
trading days to the date of a conversion notice; or (ii) $0.12. As a result of the
closing of the transactions contemplated by the Stock Purchase Agreement and Convertible
Note Purchase Agreement, the MGWI Note must be redeemed by the Company in an amount that
will permit CVL and MGWI and their affiliates to hold 65% of the issued and outstanding common
stock of the company on a fully diluted basis. The proceeds from the MGWI Note were used
to redeem the convertible note of the company issued to JSJ Investments, Inc. in the principal
amount of $103,000 with an interest rate of 12% per annum, due April 25, 2018. The MGWI Note
was amended on June 21, 2019, to provide for a fixed price conversion of $.12 per
share and remove the 9.9% conversion limitation. This note was converted into 1,359,500
shares of company’s common stock on September 21, 2022.
Subsequently
on May 12, 2021, this note was amended and the maturity date was extended to October 8, 2023, and the restriction on the conversion of
the note was removed if the holder of this note holds over 9.9% of the Company’s common stock. On June 24, 2021, MGWI converted
$75,000 of the outstanding balance of this note into 6,250,000 shares of company’s common stock.
On
February 13, 2018, the Company and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $939,500 with an interest rate of 10% per annum interest rate and a maturity date of February
13, 2020. The CVL Note is convertible into shares of Common Stock at $0.12 per share, as adjusted as provided therein. As a result
we recognized a beneficial conversion feature of $532,383, which is amortized over the life of the note. This note was assigned to MGWI
Investments and they agreed not to convert the $939,500 note in to shares in excess of the 800,000,000
authorized limit until we have increased the authorized amount of shares of common stock to 2 billion shares. This note
converted into 1,154,803 shares of company’s common stock on September 21, 2022.
On
February 15, 2018 we issued 230,000 at a purchase price of .21 per share as additional compensation in the amount of $48,760
to Ms. Li, Guirong in connection with the settlement with ETI.
On
October 18, 2018 we entered into an at will employment agreement with Kambiz Mahdi our CEO. This agreement may be terminated at any time.
As part of the agreement Mr. Mahdi was to be issued 500,000 shares of our common stock, as additional compensation. As a result;
for the year ended December 31, 2019 we accrued for and subsequently on February 13, 2019, issued 500,000 shares at a purchase
price of $0.524 per share to Mr. Mahdi in the amount of $262,000.
On
May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell 4,200,000 units (each a “Unit”
and together the “Units”) to MGWI for an aggregate purchase price of $1,999,200, or $0.476 per Unit, with each unit consisting
of one share of common stock, par value $.001 per share (the “Common Stock”) and a warrant (the “Warrant”) to
purchase one share of common stock. The Common Stock will be issued to MGWI at such time as the Company increases the number of shares
of its authorized Common Stock. The Warrant is exercisable at $1.60 per share of Common Stock and expires one year from the date
of the Agreement.
In
the fourth quarter of 2019 MGWI advanced $167,975 to the company, with no terms or interest rate. The outstanding balance on this advance
on December 31, 2021 is $167,975.
Kambiz Mahdi, our Chief
Executive Officer, owns Billet Electronics, which is distributor of electronic components. From time to time, we purchase parts from
Billet Electronics. In addition, Billet was a supplier of parts and had dealings with current and former customers of the Company prior
to joining the company. The amount of parts purchases in 2021 was $10,241. Our Board of Directors has approved the transactions between
Billet Electronics and the Company.
On
March 24, 2021, the Company transferred $500,000 to MGWI, a major stockholder of the Company to hold in trust for our investment in two
planned ventures in China. The two potential investments are still pending.
On
June 24, 2021, MGWI converted $75,000 from the outstanding balance of their convertible note into 625,000 shares of company’s
common stock.
On
September 21, 2022 MGW I converted $1,548,904 from the outstanding balance of their convertible note into 12,907,534 shares of
company’s common stock.
On
November 11, 2013, we entered into an accounts receivable financing agreement with American Interbanc (now Nations Interbanc). The outstanding
amount of this note is personally guaranteed by Kambiz Mahdi, our Chief Executive Officer. As of March 31, 2022, the outstanding balance
was $1,153,956 compared to $1,169,638 at December 31, 2021.
Review,
Approval and Ratification of Related Party Transactions
Given
our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification
of transactions, such as those described above, with our executive officer(s), director(s) and significant stockholders. We intend to
establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional directors, so
that such transactions will be subject to the review, approval or ratification of our Board of Directors, or an appropriate committee
thereof. On a moving forward basis, our directors will continue to approve any related party transaction.
Legal
Proceedings
We
know of no material, active, pending or threatened proceeding against us or our subsidiaries, nor are we, or any subsidiary, involved
as a plaintiff or defendant in any material proceeding or pending litigation.
SELLING
SHAREHOLDERS
This prospectus
covers the resale by the selling shareholders of up to an aggregate of 2,916,910 shares of common stock, which includes
2,553,403 shares of common stock issuable upon the conversion of promissory notes and an aggregate
of 363,507 shares of common stock issuable upon the exercise of the warrants by the
selling shareholders.
On
January 19, 2023 the Company closed the transactions contemplated by the Securities Purchase Agreement with Mast Hill, L.P. (Mast Hill”)
dated January 19, 2023 pursuant to which the Company issued to Mast Hill a $187,000 Convertible Promissory Note, due January 19, 2024
(the “Mast Hill Note VI”) for a purchase price of $168,300 plus an original issue discount in the amount of $18,700.00, and
an interest rate of fifteen percent (15%) per annum.
The
principal and interest of the Mast Hill Note VI may be converted in whole or in part at any time on or following the earlier of (i) upon
an event of default or (ii) the date that the Company consummates an IPO and up listing to a national exchange (the “Up List Offering”),
into common stock of the Company, par value $.001 share (“Common Stock”), subject to anti-dilution adjustments and for certain
other corporate actions subject to a beneficial ownership limitation of 4.99% of Mast Hill and its affiliates. The per share conversion
price into which principal amount and accrued interest may be converted into shares of Common Stock equals $1.00 However if the Company
consummates the Up List Offering on or before July 19, 2023, then the conversion price will equal 75% of the offering price per share
of Common Stock (or units) as set in the Up List Offering. Upon an event of default, the Mast Hill Note VI will become immediately payable
and the Company shall be required to pay a default rate of interest of 15% per annum. If the Company issues an equity security or security
convertible into Common Stock following the issue date of the Mast Hill Note VI, the conversion price of the Mast Hill Note VI will be
lowered to such price. Certain existing convertible debt is excluded from these antidilution provisions. At anytime prior to an event
of default, the Mast Hill Note VI may be prepaid by the Company at a 115% premium. The Mast Hill Note VI contains customary representations,
warranties and covenants of the Company.
The
Company issued Mast Hill a five year warrant (“Mast Hill Warrant VI”) to purchase 58,438 shares of Common Stock in connections
with the transactions described above. The Mast Hill Warrant VI may be exercised, in whole or in part, on the earlier of (i) on or after
July 19, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Mast Hill Warrant VI is $1.60
per share, however, that if the Company consummates an Up List Offering on or before July 19, 2023, then the exercise price equals 120%
of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice is on
or after July 19, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there is an effective
non-stale registration statement the Mast Hill Warrant VI may be exercised on a cashless exercise basis.
On
December 26, 2022 the Company closed the transactions contemplated by the Securities Purchase Agreement with Mast Hill dated December 26, 2022 pursuant to which the Company issued to Mast Hill a $123,000 Convertible Promissory Note, due December 26, 2023
(the “Mast Hill Note V”) for a purchase price of $110,700 plus an original issue discount in the amount of $12,300.00, and
an interest rate of fifteen percent (15%) per annum.
The
principal and interest of the Mast Hill Note V may be converted in whole or in part at any time on or following the earlier of (i) upon
an event of default or (ii) the date that the Company consummates an IPO and up listing to a national exchange (the “Up List Offering”),
into common stock of the Company, par value $.001 share (“Common Stock”), subject to anti-dilution adjustments and for certain
other corporate actions subject to a beneficial ownership limitation of 4.99% of Mast Hill and its affiliates. The per share conversion
price into which principal amount and accrued interest may be converted into shares of Common Stock equals $1.00 However if the Company
consummates the Up List Offering on or before June 24, 2023, then the conversion price will equal 75% of the offering price per share
of Common Stock (or units) as set in the Up List Offering. Upon an event of default, the Mast Hill Note V will become immediately payable
and the Company shall be required to pay a default rate of interest of 15% per annum. If the Company issues an equity security or security
convertible into Common Stock following the issue date of the Mast Hill Note V, the conversion price of the Mast Hill Note IV will be
lowered to such price. Certain existing convertible debt is excluded from these antidilution provisions. At anytime prior to an event
of default, the Mast Hill Note V may be prepaid by the Company at a 115% premium. The Mast Hill Note V contains customary representations,
warranties and covenants of the Company.
The
Company issued Mast Hill a five year warrant (“Mast Hill Warrant V”) to purchase 38,438 shares of Common Stock in connections
with the transactions described above. The Mast Hill Warrant V may be exercised, in whole or in part, on the earlier of (i) on or after
June 24, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Mast Hill Warrant V is $1.60
per share, however, that if the Company consummates an Up List Offering on or before June 24, 2023, then the exercise price equals 120%
of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice is on
or after June 24, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there is an effective
non-stale registration statement the Mast Hill Warrant V may be exercised on a cashless exercise basis.
On
November 22, 2022 the Company closed the transactions contemplated by the Securities Purchase Agreement with Mast Hill dated November 21, 2022 pursuant to which the Company issued to Mast Hill a $95,000 Convertible Promissory Note, due November 21, 2023
(the “Mast Hill Note IV”) for a purchase price of $85,500 plus an original issue discount in the amount of $9,500.00, and
an interest rate of fifteen percent (15%) per annum.
The
principal and interest of the Mast Hill Note IV may be converted in whole or in part at any time on or following the earlier of (i) upon
an event of default or (ii) the date that the Company consummates an IPO and up listing to a national exchange (the “Up List Offering”),
into common stock of the Company, par value $.001 share (“Common Stock”), subject to anti-dilution adjustments and for certain
other corporate actions subject to a beneficial ownership limitation of 4.99% of Mast Hill and its affiliates. The per share conversion
price into which principal amount and accrued interest may be converted into shares of Common Stock equals $1.00 However if the
Company consummates the Up List Offering on or before May 19, 2023, then the conversion price will equal 75% of the offering price per
share of Common Stock (or units) as set in the Up List Offering. Upon an event of default, the Mast Hill Note IV will become immediately
payable and the Company shall be required to pay a default rate of interest of 15% per annum. If the Company issues an equity security
or security convertible into Common Stock following the issue date of the Mast Hill Note IV, the conversion price of the Mast Hill Note
IV will be lowered to such price. Certain existing convertible debt is excluded from these antidilution provisions. At anytime prior
to an event of default, the Mast Hill Note IV may be prepaid by the Company at a 115% premium. The Mast Hill Note IV contains customary
representations, warranties and covenants of the Company.
The
Company issued Mast Hill a five year warrant (“Mast Hill Warrant IV”) to purchase 29,688 shares of Common Stock in
connections with the transactions described above. The Mast Hill Warrant IV may be exercised, in whole or in part, on the earlier of
(i) on or after May 19, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Mast Hill Warrant
IV is $1.60 per share, however, that if the Company consummates an Up List Offering on or before May 19, 2023, then the exercise
price equals 120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise
notice is on or after May 19, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there
is an effective non-stale registration statement the Mast Hill Warrant IV may be exercised on a cashless exercise basis.
On November 14, 2022 the Company closed
the transactions contemplated by the Securities Purchase Agreement with Mast Hill dated November 10,
2022 pursuant to which the Company issued to Mast Hill a $95,000 Convertible Promissory Note, due November 10, 2023
(the “Mast Hill Note III”) for a purchase price of $85,500 plus an original issue discount in the amount
of $9,500.00, and an interest rate of fifteen percent (15%) per annum.
The principal and interest
of the Mast Hill Note III may be converted in whole or in part at any time on or following the earlier of (i) upon an event of default
or (ii) the date that the Company consummates an IPO and up listing to a national exchange (the “Up List Offering”), into
common stock of the Company, par value $.001 share (“Common Stock”), subject to anti-dilution adjustments and for certain
other corporate actions subject to a beneficial ownership limitation of 4.99% of Mast Hill and its affiliates. The per share conversion
price into which principal amount and accrued interest may be converted into shares of Common Stock equals $1.00 However if the
Company consummates the Up List Offering on or before May 9, 2023, then the conversion price will equal 75% of the offering price per
share of Common Stock (or units) as set in the Up List Offering. Upon an event of default, the Mast Hill Note III will become immediately
payable and the Company shall be required to pay a default rate of interest of 15% per annum. If the Company issues an equity security
or security convertible into Common Stock following the issue date of the Mast Hill Note III, the conversion price of the Mast Hill Note
III will be lowered to such price. Certain existing convertible debt is excluded from these antidilution provisions. At anytime prior
to an event of default, the Mast Hill Note III may be prepaid by the Company at a 115% premium. The Mast Hill Note III contains customary
representations, warranties and covenants of the Company.
The Company issued Mast
Hill a five year warrant (“Mast Hill Warrant III”) to purchase 29,688 shares of Common Stock in connections with the
transactions described above. The Mast Hill Warrant III may be exercised, in whole or in part, on the earlier of (i) on or after May
10, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the ast Hill Warrant III is $1.60
per share, however, that if the Company consummates an Up List Offering on or before May 9, 2023, then the exercise price equals
120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice
is on or after May 9, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there is an
effective non-stale registration statement the ast Hill Warrant III may be exercised on a cashless exercise basis.
On September 16, 2022
the Company closed the transactions contemplated by a Securities Purchase Agreement with Mast Hill dated September 16, 2022 pursuant
to which the Company issued to Mast Hill a $300,000 Convertible Promissory Note, due September 16, 2023 (the “Mast Hill Note II”)
for a purchase price of $270,000 plus an original issue discount in the amount of $30,000.00 at an interest rate of fifteen percent (15%)
per annum.
The
principal and interest of the Mast Hill Note II may be converted in whole or in part at any time on or following the earlier of (i) upon
an event of default or (ii) the date that the Company consummates an IPO and up listing to a national exchange (the “Up List Offering”),
into common stock of the Company, subject to anti-dilution adjustments and for certain other corporate actions subject to a beneficial
ownership limitation of 4.99% of Mast Hill and its affiliates. The per share conversion price into which principal amount and accrued
interest may be converted into shares of Common Stock equals $1.00. However, if the Company consummates the Up List Offering on
or before March 15, 2023, then the conversion price will equal 75% of the offering price per share of Common Stock (or units) as set
in the Up List Offering. Upon an event of default, the Note will become immediately payable, and the Company shall be required to pay
a default rate of interest of 15% per annum. If the Company issues an equity security or security convertible into Common Stock following
the issue date of the Note, the conversion price of the Note will be lowered to such price. Certain existing convertible debt is excluded
from these antidilution provisions. At any time prior to an event of default, the Mast Hill Note II may be prepaid by the Company at
a 15% premium. The note contains customary representations, warranties, and covenants of the Company.
The Company
issued Mast Hill a five-year warrant (“MH Warrant”) to purchase 93,750 shares of Common Stock in connections with
the transactions described above. The MH Warrant may be exercised, in whole or in part, on and following the earlier of (i) on or after
March 16, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Warrant is $1.60 per
share; however, that if the Company consummates an Up List Offering on or before March 15, 2023, then the exercise price equals 120%
of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice is on
or after March 16, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there is an effective
non-stale registration statement, the Warrant may be exercised on a cashless exercise basis.
On September 2, 2022,
the Company consummated a funding pursuant to a Securities Purchase Agreement with Pacific Pier Capital, LLC (“Pacific”)
whereby the Company issued to Pacific a $138,888.88 Convertible Promissory Note, due September 1, 2023 (the “Pacific Note”)
for a purchase price of $125,000.00 plus an original issue discount in the amount of $13,888.88, and an interest rate of fifteen percent
(15%) per annum.
The principal and interest
of the Pacific Note may be converted in whole or in part at any time on or following the earlier of (i) upon an event of default or (ii)
the date that the Company consummates an IPO and up listing to a national exchange, into common stock of the Company, subject to anti-dilution
adjustments and for certain other corporate actions subject to a beneficial ownership limitation of 4.99% of Pacific and its affiliates.
The per share conversion price into which principal amount and accrued interest may be converted into shares of Common Stock equals $1.00.
However, if the Company consummates the Up List Offering on or before February 28, 2023, then the conversion price will equal 75%
of the offering price per share of Common Stock (or units) as set in the Up List Offering. Upon an event of default, the Pacific Note
will become immediately payable and the Company shall be required to pay a default rate of interest of 15% per annum. If the Company
issues an equity security or security convertible into Common Stock following the issue date of the Pacific Note, the conversion price
of the Pacific Note will be lowered to such price. Certain existing convertible debt is excluded from these antidilution provisions.
At anytime prior to an event of default, the Pacific Note may be prepaid by the Company at a 15% premium. The Pacific Note contains customary
representations, warranties and covenants of the Company.
The Company
issued Pacific a five-year warrant (“Pacific Warrant”) to purchase 43,403 shares of Common Stock in connections with
the transactions described above. The Pacific Warrant may be exercised, in whole or in part, on and following the earlier of (i) on or
after March 1, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Pacific Warrant is $1.60
per share; however, that if the Company consummates an Up List Offering on or before February 28, 2023, then the exercise price equals
120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice
is on or after March 1, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there is an
effective non-stale registration statement, the Pacific Warrant may be exercised on a cashless exercise basis
On August 23, 2022, the
Company consummated a funding pursuant to a Securities Purchase Agreement with FirstFire Global Opportunities Fund, LLC (FirstFire”)
whereby the Company issued to FirstFire a $150,000 Convertible Promissory Note, due August 17, 2023 (the “FirstFire Note”)
for a purchase price of $135,000.00 plus an original issue discount in the amount of $15,000.00, and an interest rate of fifteen percent
(15%) per annum.
The principal and interest
of the FirstFire Note may be converted in whole or in part at any time on or following the earlier of (i) upon an event of default or
(ii) the date that the Company consummates an IPO and up listing to a national exchange, into common stock of the Company, subject to
anti-dilution adjustments and for certain other corporate actions subject to a beneficial ownership limitation of 4.99% of FirstFire
and its affiliates. The per share conversion price into which principal amount and accrued interest may be converted into shares of Common
Stock equals $1.00. However, if the Company consummates the Up List Offering on or before February 13, 2023, then the conversion
price will equal 75% of the offering price per share of Common Stock (or units) as set in the Up List Offering. Upon an event of default,
the FirstFire Note will become immediately payable and the Company shall be required to pay a default rate of interest of 15% per annum.
If the Company issues an equity security or security convertible into Common Stock following the issue date of the Note, the conversion
price of the FirstFire Note will be lowered to such price. Certain existing convertible debt is excluded from these antidilution provisions.
At anytime prior to an event of default, the FirstFire Note may be prepaid by the Company at a 15% premium. The FirstFire Note contains
customary representations, warranties and covenants of the Company.
The Company
issued FirstFire a five-year warrant (“FirstFire Warrant”) to purchase 46,875 shares of Common Stock in connections with
the transactions described above. The FirstFire Warrant may be exercised, in whole or in part, on and following the earlier of (i) on
or after February 14, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Warrant is $1.60
per share; however, that if the Company consummates an Up List Offering on or before February 13, 2023, then the exercise price equals
120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice
is on or after February 14, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there
is an effective non-stale registration statement, the FirstFire Warrant may be exercised on a cashless exercise basis. On March 1,
2023, FirstFire exercised this warrant issued on August 17, 2022 in full on a cashless basis to purchase 33,114 shares of Common Stock.
On August 12, 2022, the
Company closed a transaction pursuant to a Securities Purchase Agreement with Jefferson Street Capital, LLC (“Jefferson”)
pursuant to which the Company issued to Jefferson a $138,888.88 Convertible Promissory Note, due August 5, 2023 (the “Jefferson
Note”) for a purchase price of $125,000.00 plus an original issue discount in the amount of $13,888.88, and an interest rate of
fifteen percent (15%) per annum.
The principal and interest
of the Jefferson Note may be converted in whole or in part at any time on or following the earlier of (i) upon an event of default or
(ii) the date that the Company consummates an IPO and up listing to a national exchange, into common stock of the Company, subject to
anti-dilution adjustments and for certain other corporate actions subject to a beneficial ownership limitation of 4.99% of Jefferson
and its affiliates. The per share conversion price into which principal amount and accrued interest may be converted into shares of Common
Stock equals $1.00. However, if the Company consummates the Up List Offering on or before February 1, 2023, then the conversion
price will equal 75% of the offering price per share of Common Stock (or units) as set in the Up List Offering. Upon an event of default,
the Jefferson Note will become immediately payable and the Company shall be required to pay a default rate of interest of 15% per annum
and the holder shall have the right to convert the Default Amount into Common at a Conversion Price equal to ninety percent (90%) of
the lowest volume weighted average price of the Common Stock during the preceding five (5) Trading Days prior to the date of conversion.
If the Company issues an equity security or security convertible into Common Stock following the issue date of the Jefferson Note, the
conversion price of the Jefferson Note will be lowered to such price. Certain existing convertible debt is excluded from these antidilution
provisions. At anytime prior to an event of default, the Note may be prepaid by the Company at a 15% premium. The Jefferson Note contains
customary representations, warranties and covenants of the Company.
The Company
issued Jefferson a five-year warrant (“Jefferson Warrant”) to purchase 43,403 shares of Common Stock in connections
with the transactions described above. The Jefferson Warrant may be exercised, in whole or in part, on the earlier of (i) on or after
February 2, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Jefferson Warrant is $1.60
per share; however, that if the Company consummates an Up List Offering on or before February 1, 2023, then the exercise price equals
120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice
is on or after February 2, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there is
an effective non-stale registration statement, the Warrant may be exercised on a cashless exercise basis.
On May 6, 2022, the Company
entered into a Securities Purchase Agreement with Mast Hill pursuant to which the Company issued to Mast Hill a $750,000 Convertible
Promissory Note, due May 6, 2023 (the “Mast Hill Note I”) for a purchase price of $675,000.00 plus an original issue discount
in the amount of $75,000.00, and an interest rate of fifteen percent (15%) per annum. The Securities
Purchase Agreement provides customary representations, warranties and covenants of the Company and Mast Hill as well as providing Mast
Hill with registration rights.
The principal and interest
of the Mast Hill Note I may be converted in whole or in part at any time on or following the earlier of (i) upon an event of default
or (ii) the date that the Company consummates an IPO and up listing to a national exchange (the “Up List Offering”), into
common stock of the Company, subject to anti-dilution adjustments and for certain other corporate actions subject to a beneficial ownership
limitation of 4.99% of Mast Hill and its affiliates. The per share conversion price into which principal amount and accrued interest
may be converted into shares of common stock equals $1.00. However, if the Company consummates the Up List Offering on or before
November 2, 2022, then the conversion price will equal 75% of the offering price per share of common stock (or units) as set in the Up
List Offering. Upon an event of default, the Mast Hill Note I will become immediately payable and the Company shall be required to pay
a default rate of interest of 15% per annum. If the Company issues an equity security or security convertible into common stock following
the issue date of the Note, the conversion price of the Mast Hill Note I will be lowered to such price. Certain existing convertible
debt is excluded from these antidilution provisions. At anytime prior to an event of default, the Mast Hill Note I may be prepaid by
the Company at a 115% premium. The Mast Hill Note I contains customary representations, warranties and covenants of the Company.
In
addition, the Company issued Mast Hill a five-year warrant to purchase 234,375 shares of common stock in connections with the transactions
described above. The Warrant may be exercised, in whole or in part, on the earlier of (i) on or after November 2, 2022 or (ii) the date
that the Company consummates an Up List Offering. The exercise price of the Warrant is $1.60 per share, however, that if the Company
consummates an Up List Offering on or before November 2, 2022, then the exercise price equals 120% of the offering price per share of
Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice is on or after November 2, 2022 and (ii)
the per share price of Common Stock is greater than the exercise price, then, unless there is an effective non-stale registration statement
the Warrant may be exercised on a cashless exercise basis. On December 28, 2022, Mast Hill exercised this warrant issued on May 6,
2022 in full on a cashless basis to purchase 100,446 shares of Common Stock.
On
December 27, 2021, the Company entered into a $650,000 Convertible Promissory Note, due June 21, 2022, with interest at 2% per annum
(the “Note “) with Universal Scope, Inc., a company incorporated in the British Virgin Islands which is convertible into
278,850 of shares of common stock. Under the terms of the Note, principal and interest is to be paid on the maturity date. The
Note is convertible into the Company’s Common Stock at a conversion price of $2.40 per share subject to adjustments for
reorganizations, reclassifications, consolidations, merger, or sale. On June 20, 2022, the Note was amended to extend the maturity date
to June 21, 2023.
In
connection with the sale of the convertible promissory notes to Mast Hill, Jefferson, First Fire and Pacific, J.H. Darbie &
Co., a FINRA registered broker dealer warrants to purchase up to 26,701 shares of our Common Stock which is being registered in
this offering.
None
of the Selling Shareholders nor any of their respective affiliates have held a position or office, or had any other material relationship,
with us or any of our predecessors or affiliates. The selling shareholders have acquired their shares solely for investment and not with
a view to or for resale or distribution of such securities.
Selling Shareholder | |
Beneficial Ownership Before the Selling Shareholders Offering | | |
Number of Shares Being Offered | | |
Beneficial Ownership After the Selling Shareholders Offering | | |
Percentage of Ownership After the Selling Shareholders Offering | |
| |
| | |
| | |
| | |
| |
Mast Hill Fund, L.P. | |
| 2,032,500 | | |
| 2,032,500 | | |
| 0 | | |
| 0 | % |
Universal Scope, Inc | |
| 278,958 | | |
| 278,958 | | |
| 0 | | |
| 0 | % |
Jefferson Street Capital, LLC | |
| 203,125 | | |
| 203,125 | | |
| 0 | | |
| 0 | % |
FirstFire Global Opportunities Fund, LLC | |
| 172,500 | | |
| 172,500 | | |
| 0 | | |
| 0 | % |
Pacific Pier Capital, LLC | |
| 203,125 | | |
| 203,125 | | |
| 0 | | |
| 0 | % |
J.H. Darbie & Co. | |
| 26,701 | | |
| 26,701 | | |
| 0 | | |
| 0 | % |
Material
Relationships with Selling Shareholders
Other
than in connection with the transactions described above, we have not had any material relationships with the Selling Shareholders in
the last three (3) years.
PLAN
OF DISTRIBUTION
The
selling shareholders and any of their respective pledgees, assignees and successors-in-interest may, from time to time, sell any or all
of their securities covered hereby on any trading market, stock exchange or other trading facility on which the securities are traded
or in private transactions. These sales may be at fixed or negotiated prices. The selling shareholders may use any one or more of the
following methods when selling securities:
|
● |
ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
|
● |
block
trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block
as principal to facilitate the transaction; |
|
● |
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account; |
|
● |
an
exchange distribution in accordance with the rules of the applicable exchange; |
|
● |
privately
negotiated transactions; |
|
● |
settlement
of short sales; |
|
● |
in
transactions through broker-dealers that agree with the selling shareholders to sell a specified number of such securities at a stipulated
price per security; |
|
● |
through
the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
|
● |
a
combination of any such methods of sale; or |
|
● |
any
other method permitted pursuant to applicable law. |
The
selling shareholders may also sell securities under Rule 144 under the Securities Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the selling shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser)
in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in
excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or
markdown in compliance with FINRA IM-2440.
In
connection with the sale of the securities covered hereby, the selling shareholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they
assume. The selling shareholders may also sell securities short and deliver these securities to close out their short positions, or loan
or pledge the securities to broker-dealers that in turn may sell these securities. The selling shareholders may also enter into option
or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the
delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer
or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The
selling shareholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. We are requesting that each selling shareholder inform us that it does not have any written or oral agreement
or understanding, directly or indirectly, with any person to distribute the securities. We will pay certain fees and expenses incurred
by us incident to the registration of the securities.
Because
the selling shareholders may be deemed to be an “underwriter” within the meaning of the Securities Act, they will be subject
to the prospectus delivery requirements of the Securities Act, including Rule 172 thereunder. In addition, any securities covered by
this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this
prospectus. We are requesting that each selling shareholder confirm that there is no underwriter or coordinating broker acting in connection
with the proposed sale of the resale securities by the selling shareholders.
We
intend to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the selling shareholders
without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for
us to be in compliance with the current public information requirement under Rule 144 under the Securities Act or any other rule of similar
effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule
of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable
state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered
or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is
complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously
engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M,
prior to the commencement of the distribution. In addition, the selling shareholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the
common stock by the selling shareholders or any other person. We will make copies of this prospectus available to the selling shareholders
and are informing the selling shareholders of the need to deliver a copy of this prospectus to each purchaser at or prior to the time
of the sale (including by compliance with Rule 172 under the Securities Act).
DESCRIPTION
OF SECURITIES
The
following description of our capital stock is only a summary and is qualified in its entirety by the provisions of our articles of incorporation,
as amended and bylaws, which have been filed as exhibits to the registration statement of which this prospectus forms a part.
Common
Stock
Our
Articles of Incorporation authorize us to issue 2,000,000,000 shares of common stock, par value $0.001 per share. As of the date of this
prospectus, we have 37,178,624 shares of common stock issued and outstanding. All outstanding shares of common stock are, and
the common stock to be issued will be, fully paid and non-assessable. Each share of our common stock has identical rights and privileges
in every respect. The holders of our common stock are entitled to vote upon all matters submitted to a vote of our shareholders and are
entitled to one vote for each share of common stock held. There are no cumulative voting rights.
The
holders of our common stock are entitled to share equally in dividends and other distributions that our Board of Directors may declare
from time to time out of funds legally available for that purpose, if any, after the satisfaction of any prior rights and preferences
of any outstanding preferred stock. If we liquidate, dissolve or wind up, the holders of common stock shares will be entitled to share
ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities and our
obligations to holders of our outstanding preferred stock.
Preferred
Stock
Our
Articles of Incorporation authorize us to issue 20,000,000 shares of preferred stock, par value $0.001 per share. Our Board of Directors
has the authority to issue additional shares of preferred stock in one or more series, and fix for each series, the designation of and
number of shares to be included in each such series. Our Board of Directors is also authorized to set the powers, privileges, preferences,
and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or
restrictions of the shares of each such series.
Unless
our Board of Directors provides otherwise, the shares of all series of preferred stock will rank on parity with respect to the payment
of dividends and to the distribution of assets upon liquidation. Any issuance by us of shares of our preferred stock may have the effect
of delaying, deferring or preventing a change of our control or an unsolicited acquisition proposal. The issuance of preferred stock
also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect
the rights and powers, including voting rights, of the holders of common stock.
Effective
August 7, 2013, our Board of Directors designated a series of our preferred stock as Series D Preferred Stock, authorizing 15,000 shares.
Our Series D Preferred Stock offering terms authorized us to raise up to $1,000,000 with an over-allotment of $500,000 in multiple closings
over the course of six months. We received an aggregate of $750,000 in financing in subscription for Series D Preferred Stock, or 7,500
shares. As of the date of the prospectus, we have no shares of Series D Preferred Stock issued and outstanding.
The
following are primary terms of the Series D Preferred Stock. The Series D Preferred holders were initially entitled to be paid a special
monthly divided at the rate of 17.5% per annum. Initially, the Series D Preferred Stock was also entitled to be paid special dividends
in the event cash dividends were not paid when scheduled. If the Company does not pay the dividend within five (5) business days from
the end of the calendar month for which the payment of such dividend to owed, the Company will pay the investor a special dividend of
an additional 3.5%. Any unpaid or accrued special dividends will be paid upon a liquidation or redemption. For any other dividends or
distributions, the Series D Preferred Stock participates with common stock on an as-converted basis. The Series D Preferred holders may
elect to convert the Series D Preferred Stock, in their sole discretion, at any time after a one year (1) year holding period, by sending
the Company a notice to convert. The conversion rate is equal to the greater of $3.20 or a 20% discount to the average of the
three (3) lowest closing market prices of the common stock during the ten (10) trading day period prior to conversion. The Series D Preferred
Stock is redeemable from funds legally available for distribution at the option of the individual holders of the Series D Preferred Stock
commencing any time after the one (1) year period from the offering closing at a price equal to the initial purchase price plus all accrued
but unpaid dividends, provided, that if the Company gave notice to the investors that it was not in a financial position to redeem the
Series D Preferred, the Company and the Series D Preferred holders are obligated to negotiate in good faith for an extension of the redemption
period. The Company timely notified the investors that it was not in a financial position to redeem the Series D Preferred and the Company
and the investors have engaged in ongoing negotiations to determine an appropriate extension period. The Company may elect to redeem
the Series D Preferred Stock any time at a price equal to initial purchase price plus all accrued but unpaid dividends, subject to the
investors’ right to convert, by providing written notice about its intent to redeem. Each investor has the right to convert the
Series D Preferred Stock into common stock at least ten (10) days prior to such redemption by the Company.
Warrants
The Company
issued Mast Hill a five-year warrant (“MH Warrant”) to purchase 234,375 shares of Common Stock. The MH Warrant may
be exercised, in whole or in part, on and following the earlier of (i) on or after March 16, 2023 or (ii) the date that the Company consummates
an Up List Offering. The exercise price of the Warrant is $1.60 per share; however, that if the Company consummates an Up List
Offering on or before March 15, 2023, then the exercise price equals 120% of the offering price per share of Common Stock (or unit) as
set in the Up List Offering. If (i) the date of an exercise notice is on or after March 16, 2023 and (ii) the per share price of Common
Stock is greater than the exercise price, then, unless there is an effective non-stale registration statement, the Warrant may be exercised
on a cashless exercise basis.
The Company
issued Pacific a five year warrant (“Pacific Warrant”) to purchase 43,403 shares of Common Stock. The Pacific Warrant may be exercised, in whole or in part, on and following the earlier of (i) on or
after March 1, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Pacific Warrant is $1.60
per share; however, that if the Company consummates an Up List Offering on or before February 28, 2023, then the exercise price equals
120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice
is on or after March 1, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there is an
effective non-stale registration statement, the Pacific Warrant may be exercised on a cashless exercise basis
The Company
issued FirstFire a five year warrant (“FirstFire Warrant”) to purchase 46,875 shares of Common Stock. The FirstFire Warrant
may be exercised, in whole or in part, on and following the earlier of (i) on or after February 14, 2023 or (ii) the date that the Company
consummates an Up List Offering. The exercise price of the Warrant is $1.60 per share; however, that if the Company consummates an Up
List Offering on or before February 13, 2023, then the exercise price equals 120% of the offering price per share of Common Stock (or
unit) as set in the Up List Offering. If (i) the date of an exercise notice is on or after February 14, 2023 and (ii) the per share price
of Common Stock is greater than the exercise price, then, unless there is an effective non-stale registration statement, the FirstFire
Warrant may be exercised on a cashless exercise basis. On March 1, 2023, Firstfire exercised this warrant issued on August 17, 2022
in full on a cashless basis to purchase 33,114 shares of Common Stock.
The Company
issued Jefferson a five year warrant (“Jefferson Warrant”) to purchase 43,403 shares of Common Stock. The Jefferson Warrant may be exercised, in whole or in part, on the earlier of (i) on or after
February 2, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Jefferson Warrant is $1.60
per share; however, that if the Company consummates an Up List Offering on or before February 1, 2023, then the exercise price equals
120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice
is on or after February 2, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there is
an effective non-stale registration statement, the Warrant may be exercised on a cashless exercise basis.
The Company issued Mast Hill a five year warrant
(the “Mast Hill II Warrant”) to purchase 234,375 shares of common stock in.
The Mast Hill II Warrant may be exercised, in whole or in part, on the earlier of (i) on
or after November 2, 2022 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Mast
Hill II Warrant is $1.60 per share, however, that if the Company consummates an Up List Offering on or before November 2, 2022,
then the exercise price equals 120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i)
the date of an exercise notice is on or after November 2, 2022 and (ii) the per share price of Common Stock is greater than the exercise
price, then, unless there is an effective non-stale registration statement the Mast Hill II
Warrant may be exercised on a cashless exercise basis. On December 28, 2022, Mast Hill exercised this warrant issued on May
6, 2022 in full on a cashless basis to purchase 100,446 shares of Common Stock.
The Company issued Mast
Hill a five year warrant (“Mast Hill Warrant III”) to purchase 29,688 shares of Common Stock. The Mast Hill Warrant III may be exercised, in whole or in part, on the earlier of (i) on or after May
10, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Mast Hill Warrant III is $1.60
per share, however, that if the Company consummates an Up List Offering on or before May 9, 2023, then the exercise price equals
120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice
is on or after May 9, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there is an
effective non-stale registration statement the Mast Hill Warrant III may be exercised on a cashless exercise basis.
On
November 22, 2022, the Company issued Mast Hill a five year warrant (“Mast Hill Warrant IV”) to purchase 29,688 shares
of Common Stock in connections with the transactions described above. The Mast Hill Warrant IV may be exercised, in whole or in part,
on the earlier of (i) on or after May 19, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price
of the Mast Hill Warrant IV is $1.60 per share, however, that if the Company consummates an Up List Offering on or before May
19, 2023, then the exercise price equals 120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering.
If (i) the date of an exercise notice is on or after May 19, 2023 and (ii) the per share price of Common Stock is greater than the exercise
price, then, unless there is an effective non-stale registration statement the Mast Hill Warrant IV may be exercised on a cashless exercise
basis
On
December 26, 2022, the Company issued Mast Hill a five year warrant (“Mast Hill Warrant V”) to purchase 38,438 shares of
Common Stock in connections with the transactions described above. The Mast Hill Warrant V may be exercised, in whole or in part, on
the earlier of (i) on or after June 24, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of
the Mast Hill Warrant V is $1.60 per share, however, that if the Company consummates an Up List Offering on or before June 24, 2023,
then the exercise price equals 120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i)
the date of an exercise notice is on or after June 24, 2023 and (ii) the per share price of Common Stock is greater than the exercise
price, then, unless there is an effective non-stale registration statement the Mast Hill Warrant V may be exercised on a cashless exercise
basis
On
January 19, 2023, the Company issued Mast Hill a five year warrant (“Mast Hill Warrant VI”) to purchase 58,438 shares of
Common Stock in connections with the transactions described above. The Mast Hill Warrant VI may be exercised, in whole or in part, on
the earlier of (i) on or after July 19, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of
the Mast Hill Warrant VI is $1.60 per share, however, that if the Company consummates an Up List Offering on or before July 19, 2023,
then the exercise price equals 120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i)
the date of an exercise notice is on or after July 19, 2023 and (ii) the per share price of Common Stock is greater than the exercise
price, then, unless there is an effective non-stale registration statement the Mast Hill Warrant VI may be exercised on a cashless exercise
basis
Underwriter’s
Warrants
The
registration statement of which this prospectus is a part also registers for sale common stock underlying the Underwriter’s
Warrants, which warrants are a portion of the underwriting compensation payable to the Representatives in connection with this
Underwritten Offering. The Underwriter’s Warrants will be exercisable, in whole or in part, commencing on a date which is one
hundred eighty (180) days after the commencement of sales of the Underwritten Offering until the fifth anniversary of the date of
the commencement of sales of the Underwritten Offering at an exercise price of $ (125.0% of the public offering price of the
shares). Please see “Underwriting—Underwriter’s Warrants” for a description of the warrants we have agreed
to issue to the Representatives in this Underwritten Offering, subject to the completion of the Underwritten Offering. We expect to
enter into a warrant agreement in respect of the Underwriter’s Warrants prior to the closing of this Underwritten
Offering.
Other
Convertible Securities
This
prospectus covers the resale by the selling shareholders of up to an aggregate of 2,916,909 shares
of common stock, which includes 2,553,403 shares of common stock issuable upon the conversion
of promissory notes and an aggregate of 363,507 shares of common stock issuable upon the exercise of the warrants by the selling
shareholders, as described in the section titled “Selling Shareholders” on page 60.
In
addition, the Company has two outstanding convertible notes issued to 1800 Diagonal Lending, LLC in the total principal amount
of $373,371. For more details, see “Recent Funding Events” on page 51.
Registration
Rights
Pursuant
to the terms of each of the Registration Rights Agreements, executed between the Company and the Selling Stockholders, the Company agreed
to file a registration statement with the Commission to register the shares of common stock underlying the Notes and the shares issuable
upon exercise of the Warrants within sixty days from the date of each Registration Rights Agreement. The Company also granted the Lenders
piggyback registration rights on such shares pursuant to the Purchase Agreements.
Transfer
Agent
The
transfer agent for our Common Stock is Colonial Stock Transfer, Inc., 66 Exchange Place, 1st floor, Salt Lake City, UT 84111, (801) 355-5704.
Lock-up
Pursuant
to certain “lock-up” agreements, we, our executive officers, directors, and security holders holding more than 5% of the
Company’s common stock intend to agree, subject to certain exceptions, not to offer, sell, assign, transfer, pledge, contract to
sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or
arrangement that transfers, in whole or in part, the economic risk of ownership of, directly or indirectly, engage in any short selling
of any common stock or securities convertible into or exchangeable or exercisable for any common stock, whether currently owned or subsequently
acquired, without the prior written consent of the Representatives, for a period of 180 days from the date of the final prospectus. In
addition, during such period, except for the registration statement of which this prospectus forms a part or a registration statement
on Form S-8 in connection with the registration of shares of common stock issuable under any employee equity-based compensation plan,
incentive plan, stock plan, dividend reinvestment plan adopted and approved by the Company’s board of directors, we will not file
or cause to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company
or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company.
Anti-Takeover
Provisions
Certain
provisions of Nevada law and our bylaws summarized below, may have the effect of delaying, deferring or discouraging another person from
acquiring control of us.
It
is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise
consider to be in their best interest or in our best interests, including transactions that might result in a premium over the market
price for our shares.
These
provisions expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage
persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection
of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh
the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.
Nevada
Law
The
Nevada Business Corporation Act (the “NBCA”) contains a control-share acquisition statute that provides that a person who
acquires shares in an “issuing public corporation,” as defined in the statute, in excess of certain specified thresholds
generally will not have any voting rights with respect to such shares unless such voting rights are approved by the holders of a majority
of the votes of each class of securities entitled to vote separately, excluding shares held or controlled by the acquiring person.
The
NBCA also provides that an “affiliated transaction” between a Nevada corporation with an “interested shareholder,”
as those terms are defined in the statute, generally must be approved by the affirmative vote of the holders of two-thirds of the outstanding
voting shares, other than the shares beneficially owned by the interested shareholder. The NBCA defines an “interested shareholder”
as any person who is the beneficial owner of 10% or more of the outstanding voting shares of the corporation.
These
laws could delay or prevent an acquisition.
Special
Stockholder Meetings
Our
bylaws provide that a special meeting of stockholders may be called by of the Chairman of our board of directors, our CEO, President
or the Secretary.
Requirements
for Advance Notification of Stockholder Nominations and Proposals
Our
bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors.
MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The
following discussion is a summary of the material U.S. federal income tax consequences to Non-U.S. Holders (as defined below) of the
purchase, ownership and disposition of our common stock, but does not purport to be a complete analysis of all potential tax effects.
The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are
not discussed. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings
and administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”), in each case in effect as of the date
hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied
retroactively in a manner that could adversely affect a Non-U.S. Holder. We have not sought and will not seek any rulings from the IRS
regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed
below regarding the tax consequences of the purchase, ownership, and disposition of our common stock.
This
discussion is limited to Non-U.S. Holders that hold our common stock as a “capital asset” within the meaning of Section 1221
of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant
to a Non-U.S. Holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income
or the alternative minimum tax. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules,
including, without limitation:
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U.S.
expatriates and former citizens or long-term residents of the United States; |
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persons
holding our common stock as part of a hedge, straddle, or other risk reduction strategy or as part of a conversion transaction or
other integrated investment; |
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banks,
insurance companies, and other financial institutions; |
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brokers,
dealers, or traders in securities; |
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“controlled
foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid
U.S. federal income tax; |
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partnerships
or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein); |
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tax-exempt
organizations or governmental organizations; |
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persons
deemed to sell our common stock under the constructive sale provisions of the Code; |
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persons
who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; |
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tax-qualified
retirement plans; |
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“qualified
foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified
foreign pension funds; and |
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persons
subject to special tax accounting rules as a result of any item of gross income with respect to our common stock being taken into
account in an applicable financial statement. |
If
an entity treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the
partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner
level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding
the U.S. federal income tax consequences to them.
THIS
DISCUSSION IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME
TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, AND DISPOSITION OF OUR COMMON STOCK
ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL, OR NON-U.S. TAXING JURISDICTION OR UNDER
ANY APPLICABLE INCOME TAX TREATY.
Definition
of Non-U.S. Holder
For
purposes of this discussion, a “Non-U.S. Holder” is any beneficial owner of our common stock that is neither a “U.S.
person” nor an entity treated as a partnership for U.S. federal income tax purposes. A U.S. person is any person that, for U.S.
federal income tax purposes, is or is treated as any of the following:
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individual who is a citizen or resident of the United States; |
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a
corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia; |
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an
estate, the income of which is subject to U.S. federal income tax regardless of its source; or |
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a
trust that (i) is subject to the primary supervision of a U.S. court and all substantial decisions of which are subject to the control
of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (ii) has a valid election
in effect to be treated as a United States person for U.S. federal income tax purposes. |
Distributions
As
described in the section titled “Dividend Policy,” we do not anticipate declaring or paying any cash dividends in the foreseeable
future. However, if we do make distributions of cash or property on our common stock, such distributions will constitute dividends for
U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal
income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and
first be applied against and reduce a Non-U.S. Holder’s adjusted tax basis in its common stock, but not below zero. Any excess
will be treated as capital gain and will be treated as described below under the subsection titled “ — Sale or Other Taxable
Disposition.”
Subject
to the discussion below on effectively connected income, dividends paid to a Non-U.S. Holder will be subject to U.S. federal withholding
tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided
the Non-U.S. Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the
lower treaty rate). A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty
rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders
should consult their tax advisors regarding their entitlement to benefits under any applicable tax treaties.
If
dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within
the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the
United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described
above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying
that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States.
Any
such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular rates. A Non-U.S.
Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable
income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax
advisors regarding any applicable tax treaties that may provide for different rules.
Sale
or Other Taxable Disposition
Subject
to the discussion below regarding backup withholding, a Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized
upon the sale or other taxable disposition of our common stock unless:
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the
gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required
by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such gain
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the
Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the
disposition and certain other requirements are met; or |
|
|
|
|
● |
our
common stock constitutes a U.S. real property interest (“USRPI”), by reason of our status as a U.S. real property holding
corporation (“USRPHC”), for U.S. federal income tax purposes. |
Gain
described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular rates.
A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by
an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.
A
Non-U.S. Holder described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower
rate specified by an applicable income tax treaty) on any gain realized upon the sale or other taxable disposition, which may be offset
by certain U.S. source capital losses of theNon-U.S. Holder (even though the individual is not considered a resident of the United States),
provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.
With
respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. Because the determination
of whether we are a USRPHC depends, however, on the fair market value of our USRPIs relative to the fair market value of our non-U.S.
real property interests and our other business assets, there can be no assurance we currently are not a USRPHC or will not become one
in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition of our common stock
by a Non-U.S. Holder will not be subject to U.S. federal income tax if our common stock is “regularly traded,” as defined
by applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned, actually and constructively,
5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition
or the Non-U.S. Holder’s holding period.
Non-U.S.
Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.
Information
Reporting and Backup Withholding
Payments
of dividends on our common stock will not be subject to backup withholding, provided the Non-U.S. Holder certifies its non-U.S. status,
such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E, or W-8ECI, or otherwise establishes an exemption. However, information returns
are required to be filed with the IRS in connection with any distributions on our common stock paid to the Non-U.S. Holder, regardless
of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the
United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting
if the applicable withholding agent receives the certification described above or the Non-U.S. Holder otherwise establishes an exemption.
Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker that does not have certain enumerated
relationships with the United States generally will not be subject to backup withholding or information reporting.
Copies
of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement
to the tax authorities of the country in which the Non-U.S. Holder resides or is established.
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit
against a Non-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Additional
Withholding Tax on Payments Made to Foreign Accounts
Withholding
taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance
Act (“FATCA”)) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities.
Specifically, a 30% withholding tax may be imposed on dividends on, or (subject to the proposed Treasury Regulations discussed below)
gross proceeds from the sale or other disposition of, our common stock paid to a “foreign financial institution” or a “non-financial
foreign entity” (each as defined in the Code), unless (i) the foreign financial institution undertakes certain diligence and reporting
obligations, (ii) the non-financial foreign entity either certifies it does not have any “substantial United States owners”
(as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (iii) the foreign financial
institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial
institution and is subject to the diligence and reporting requirements in (i) above, it must enter into an agreement with the U.S. Department
of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States
persons” or “United States owned foreign entities” (each as defined in the Code), annually report certain information
about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders.
Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA
may be subject to different rules.
Under
the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on
our common stock. While withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition
of stock on or after January 1, 2019, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely.
Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.
Prospective
investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our
common stock.
UNDERWRITING
Subject
to the terms and conditions of the underwriting agreement, the underwriters named below, for whom Craft Capital Management LLC and
R.F. Lafferty & Co., Inc. are acting as Representatives of underwriters and the lead underwriter, have agreed to purchase
from us on a firm commitment basis the number of shares of common stock indicated below, at the public offering price set forth on the
cover page of this prospectus, less the underwriting discounts and commissions:
Underwriters | |
Number of Shares | |
Craft Capital Management LLC | |
| | |
R.F. Lafferty & Co., Inc. | |
| | |
Total | |
| | |
A
form of the underwriting agreement has been filed as an exhibit to the registration statement of which this prospectus is part.
The
underwriting agreement provides that the obligation of the underwriters to purchase all of the shares of common stock being offered to
the public is subject to specific conditions, including the absence of any material adverse change in our business or in the financial
markets and the receipt of certain legal opinions, certificates and letters from us, our counsel and the independent auditors. Subject
to the terms of the underwriting agreement, the underwriters will purchase all of the shares being offered to the public, other than
those covered by the over-allotment option described below, if any of these shares are purchased.
We
have granted an option to the underwriters exercisable for forty-five (45) days after the date of this prospectus, to purchase up to
additional shares of common stock equal to 15% of the number of shares of common stock sold in the Underwritten Offering at the public
offering price, less the underwriting discounts and commission. The underwriters may exercise this option only to cover over-allotments
made in connection with the sale of the shares offered by this prospectus. To the extent that the underwriters exercise this option,
the underwriters will become obligated, subject to conditions, to purchase, and we will be obligated to sell, the additional shares.
Offers
and sales for this Underwritten Offering will be conducted both inside and outside the United States through the underwriters and their
respective selling agents. All offers or sales in the United States will be conducted by broker-dealers registered with the Commission
and members of FINRA. The address of Craft Capital Management LLC is 377 Oak St #402, Garden City, NY 11530. The address of R.F. Lafferty
& Co., Inc. is 40 Wall Street, 29th Floor, New York, NY 10005.
Underwriting
Discount and Expenses
The
following table shows, for each of the total without over-allotment option and total with full over-allotment option offering amounts,
the per share and total public offering price, underwriting discounts to be paid to the underwriters by us, and proceeds to us, before
expenses:
| |
| | |
Total | |
| |
Per Share | | |
Without Over-Allotment | | |
With Full Over-Allotment | |
Public offering price | |
$ | | | |
$ | | | |
$ | | |
Underwriting discounts (7.0%) | |
$ | | | |
$ | | | |
$ | | |
Proceeds, before expense, to us | |
$ | | | |
$ | | | |
$ | | |
We
estimate the total expenses payable by us for the Underwritten Offering to be approximately $ , which amount includes (i) various costs
and fees incurred by us in connection with the Underwritten Offering, (ii) the underwriting discount of $(7.0%), (iii) reimbursement
of the accountable, out-of-pocket expenses of the Representatives in connection with the Underwritten Offering, including, but not limited
to, “road show” expenses and fees and expenses of their legal counsel, up to $200,000 in the aggregate, of which $50,000
as initial advance have been paid to the Representatives and an additional advance of $50,000 will be paid to the Representatives upon
the receipt of the “No Objection Letter” from FINRA, and (iv) $100,000 to be paid to the Representatives for their non-accountable
expenses at the closing of the Underwritten Offering.
Underwriter
Warrants
In
addition, we intend to issue warrants to the Representatives to purchase a number of shares of common stock equal to 3.0% of the total
number of shares of common stock (including any shares sold in the Underwritten Offering to cover over-allotments) sold in the Underwritten
Offering at an exercise price equal to 125.0% of the public offering price. These warrants will not be exercised, sold, transferred,
assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result
in the effective economic disposition of the securities for a period of 180 days beginning on the date of commencement of sales of the
Underwritten Offering pursuant to FINRA Rule 5110(e)(1). In addition, these warrants will not be exercisable for more than five years
from the commencement of sales of the Underwritten Offering pursuant to FINRA Rule 5110(g)(8)(A). These warrants do not contain anti-dilution
terms that allow the Representatives to receive more shares or to exercise at a lower price than originally agreed upon at the time of
the Underwritten Offering, when the public shareholders have not been proportionally affected by a stock split, stock dividend, or other
similar event. Nor do these warrants include any anti-dilution terms that allow the Representatives to receive or accrue cash dividends
prior to the exercise of the warrants. With respect to shares of common stock underlying the underwriter’s warrants, we have also
agreed to grant the Representatives a one-time demand registration right at our expense with a duration of no more than five years from
the commencement of sales of the Underwritten Offering and unlimited “piggyback” registration rights with duration of no
more than five years from the commencement of sales of the Underwritten Offering at our expense.
Right of First Refusal
We
have granted the Representatives a right of first refusal, for a period of 12 months from the closing of the Underwritten Offering, to
act as sole and exclusive investment bankers, sole and exclusive book-runners, sole and exclusive financial advisors, sole and exclusive
underwriters and/or sole and exclusive placement agents, at the Representatives’ sole discretion, for each and every future public
and private equity and debt offering, including all equity linked financings, during such 12 month period, on terms and conditions as
mutually agreed by the Company and the Representatives. The foregoing right of first refusal does not apply to any financing transaction
where the Company deals directly with the lender or investor without using any intermediary.
Determination
of Offering Price
Our
common stock is presently quoted on the OTCQB under the symbol “CETY.” On February 28, 2023, the closing price of
our common stock on the OTCQB was $4.80 per share. We applied to list our common stock on the Nasdaq Capital Market under the
symbol “CETY.” We believe that upon the completion of the Underwritten Offering contemplated, we will meet the standards
for listing on the Nasdaq Capital Market or other national exchange. However, there can be no assurance that our common stock will be
approved for listing on the Nasdaq Capital Market. We will not consummate and close this offering without the approval of listing from
Nasdaq.
The
public offering price of the shares of common stock offered by this prospectus will be determined by negotiation between us and the Representatives.
Among the factors to be considered in determining the public offering price of the shares of common stock are:
● |
our
history, capital structure and our business prospects; |
|
|
● |
the
industry in which we operate; |
|
|
● |
our
past and present operating results; |
|
|
● |
the
previous experience of our executive officers; |
|
|
● |
the
recent trading and closing bid prices of our common stock quoted on the OTCQB; and |
|
|
● |
the
general condition of the securities markets at the time of the Underwritten Offering. |
The
offering price stated on the cover page of this prospectus should not be considered an indication of the actual value of the shares of
common stock sold in the Underwritten Offering. The values of such shares of common stock are subject to change as a result of market
conditions and other factors. We offer no assurances that the offering price will correspond to the price at which our shares of common
stock will trade in the public market subsequent to this Underwritten Offering or that an active trading market for our shares will develop
and continue after this Underwritten Offering.
Lock-Up
Agreements
Pursuant
to certain “lock-up” agreements, we, our executive officers, directors, and security holders holding more than 5% of the
Company’s common stock intend to agree, subject to certain exceptions, not to offer, sell, assign, transfer, pledge, contract to
sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or
arrangement that transfers, in whole or in part, the economic risk of ownership of, directly or indirectly, engage in any short selling
of any common stock or securities convertible into or exchangeable or exercisable for any common stock, whether currently owned or subsequently
acquired, without the prior written consent of the Representatives, for a period of 180 days from the date of the final prospectus. In
addition, during such period, except for the registration statement of which this prospectus forms a part or a registration statement
on Form S-8 in connection with the registration of shares of common stock issuable under any employee equity-based compensation plan,
incentive plan, stock plan, dividend reinvestment plan adopted and approved by the Company’s board of directors, we will not file
or cause to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company
or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company
Price
Stabilization, Short Positions and Penalty Bids
In
connection with the Underwritten Offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate
covering transactions and penalty bids in accordance with Regulation M under the Exchange Act:
● |
Stabilizing
transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. |
|
|
● |
Over-allotment
involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which
creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered
short position, the number of shares of common stock over-allotted by the underwriters is not greater than the number of shares that
may be purchased in the over-allotment option. In a naked short position, the number of shares involved is greater than the number
of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising the over-allotment
option and/or purchasing shares of common stock in the open Market. |
● |
Syndicate
covering transactions involve purchases of shares of common stock in the open market after the distribution has been completed
in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters
will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which
it may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment
option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is
more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the
open market after pricing that could adversely affect investors who purchase in the Underwritten Offering. |
|
|
● |
Penalty
bids permit the underwriters to reclaim a selling concession from a syndicate member when the shares of common stock originally
sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
These
stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price
of our shares of common stock or preventing or retarding a decline in the market price of our shares of common stock. As a result, the
price of our shares of common stock may be higher than the price that might otherwise exist in the open market. Neither we nor the underwriters
make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on
the price of our shares of common stock. In addition, neither we nor the underwriters make any representations that the underwriters
will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.
Electronic
Offer, Sale and Distribution of Shares
In
connection with the Underwritten Offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic
means, such as e-mail. A prospectus in electronic format may be made available on the websites maintained by one or more underwriters
or selling group members, if any, participating in the Underwritten Offering. The Representatives may agree to allocate a number of shares
of common stock to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions
will be allocated by the Representatives to underwriters and selling group members that may make internet distributions on the same basis
as other allocations. Other than the prospectus in electronic format, the information on the underwriters’ websites and any information
contained in any other website maintained by the underwriters is not part of this prospectus, has not been approved and/or endorsed by
us or the underwriters and should not be relied upon by investors.
Other
Relationships
The
underwriters and their respective affiliates are full-service financial institutions engaged in various activities, which may include
securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment,
hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have provided from time to time,
and may provide in the future, investment and commercial banking and financial advisory services to us and our affiliates in the ordinary
course of business, for which they have received and may continue to receive customary fees and commissions. In the ordinary course of
their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and
actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their
own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments
of ours. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent
research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long
and/or short positions in such securities and instruments.
Indemnification
We
intend to indemnify the underwriters against certain liabilities, including certain liabilities arising under the Securities Act or to
contribute to payments that an underwriter may be required to make for these liabilities.
Offers
Outside the United States
Other
than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the shares of common
stock offered by this prospectus in any jurisdiction where action for that purpose is required. The shares of common stock offered by
this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements
in connection with the offer and sale of any such shares be distributed or published in any jurisdiction, except under circumstances
that will result in compliance with the applicable regulations of that jurisdiction. Persons into whose possession this prospectus
comes are advised to inform themselves about and to observe any restrictions relating to the Underwritten Offering and the distribution
of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any shares of common stock
offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
The
underwriters are expected to make offers and sales both in and outside the United States through their selling agents. Any offers
and sales in the United States will be conducted by broker-dealers registered with the SEC.
Australia
No
placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities
and Investments Commission (“ASIC”), in relation to the Underwritten Offering. This prospectus does not constitute a prospectus,
product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”) and does
not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the
Corporations Act. Any offer in Australia of the shares of common stock may only be made to persons (the “Exempt Investors”)
who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors”
(within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section
708 of the Corporations Act so that it is lawful to offer the shares of common stock without disclosure to investors under Chapter 6D
of the Corporations Act. The shares of common stock applied for by Exempt Investors in Australia must not be offered for sale in Australia
in the period of 12 months after the date of allotment under the Underwritten Offering, except in circumstances where disclosure to investors
under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or
otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person
acquiring shares of common stock must observe such Australian on-sale restrictions. This prospectus contains general information only
and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not
contain any shares of common stock recommendations or financial product advice. Before making an investment decision, investors need
to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary,
seek expert advice on those matters.
Bermuda
The
shares of common stock may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 2003
of Bermuda which regulates the sale of securities in Bermuda. Additionally, non-Bermudian persons (including companies) may not carry
on or engage in any trade or business in Bermuda unless such persons are permitted to do so under applicable Bermuda legislation.
British
Virgin Islands
The
shares of common stock are not being, and may not be offered to the public or to any person in the British Virgin Islands for purchase
or subscription by us or on our behalf. The shares of common stock may be offered to companies incorporated under the BVI Business Companies
Act, 2004 (British Virgin Islands) (each a BVI Company), but only where the offer will be made to, and received by, the relevant BVI
Company entirely outside of the British Virgin Islands.
This
prospectus has not been, and will not be, registered with the Financial Services Commission of the British Virgin Islands. No registered
prospectus has been or will be prepared in respect of the shares of common stock for the purposes of the Securities and Investment Business
Act, 2010, or SIBA or the Public Issuers Code of the British Virgin Islands.
The
shares of common stock may be offered to persons located in the British Virgin Islands who are “qualified investors” for
the purposes of SIBA. Qualified investors include (i) certain entities which are regulated by the Financial Services Commission in the
British Virgin Islands, including banks, insurance companies, licensees under SIBA and public, professional and private mutual funds;
(ii) a company, any securities of which are listed on a recognized exchange; and (iii) persons defined as “professional investors”
under SIBA, which is any person (a) whose ordinary business involves, whether for that person’s own account or the account of others,
the acquisition or disposal of property of the same kind as the property, or a substantial part of our property; or (b) who has signed
a declaration that he, whether individually or jointly with his spouse, has a net worth in excess of US$1,000,000 and that he consents
to being treated as a professional investor. The shares of common stock are not being, and may not be offered to the public or to any
person in the British Virgin Islands for purchase or subscription by or on behalf of the Company. The shares of common stock may be offered
to companies incorporated under the BVI Business Companies Act, 2004 (British Virgin Islands), but only where the offer will be made
to, and received by, the relevant BVI company entirely outside of the British Virgin Islands.
Canada
The
common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined
in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients,
as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the
common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable
securities laws.
Securities
legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus
supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised
by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser
should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars
of these rights or consult with a legal advisor.
Pursuant
to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the
disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this Underwritten Offering.
Cayman
Islands
This
prospectus does not constitute a public offer of the shares of common stock, whether by way of sale or subscription, in the Cayman Islands.
Each underwriter has represented and agreed that it has not offered or sold, and will not offer or sell, directly or indirectly, any
shares of common stock to the public in the Cayman Islands.
Dubai
International Financial Center
This
document relates to an exempt offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority. This document
is intended for distribution only to persons of a type specified in those rules. It must not be delivered to, or relied on by, any other
person. The Dubai Financial Services Authority has no responsibility for reviewing or verifying any documents in connection with exempt
offers. The Dubai Financial Services Authority has not approved this document nor taken steps to verify the information set out in it
and has no responsibility for it. The shares of common stock which are the subject of the Underwritten Offering contemplated by this
document may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares of common stock offered
should conduct their own due diligence on the shares of common stock. If you do not understand the contents of this document, you should
consult an authorized financial advisor.
European
Economic Area
In
relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State),
each underwriter represents and agrees that with effect from and including the date on which the Prospectus Directive is implemented
in that Relevant Member State, it has not made and will not make an offer of shares of common stock which are the subject of the Underwritten
Offering contemplated by this prospectus to the public in that Relevant Member State other than:
● |
to
any legal entity which is a qualified investor as defined in the Prospectus Directive; |
|
|
● |
to
fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural
or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive,
subject to obtaining the prior consent of the representatives for any such offer; or |
|
|
● |
in
any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares of common
stock shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive. |
For
the purposes of this provision, the expression an “offer to the public” in relation to any shares of common stock in any
Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the
shares of common stock to be offered so as to enable an investor to decide to purchase or subscribe the shares of common stock, as the
same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression Prospectus
Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in
the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression “2010
PD Amending Directive” means Directive 2010/73/EU.
United
Kingdom
Each
of the underwriters severally represents warrants and agrees as follows:
● |
it
has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement
to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (FSMA) received
by it in connection with the issue or sale of the shares of common stock in circumstances in which Section 21 of the FSMA does not
apply to us; and |
● |
it
has complied with, and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to
the shares of common stock in, from or otherwise involving the United Kingdom. |
France
Neither
this prospectus nor any other offering material relating to the shares of common stock described in this prospectus has been submitted
to the clearance procedures of the Autorité des Marchés Financiers or of the competent authority of another member state
of the European Economic Area and notified to the Autorité des Marchés Financiers. The shares of common stock have not
been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any
other offering material relating to the shares of common stock has been or will be:
● |
to
any legal entity which is a qualified investor as defined in the Prospectus Directive; |
|
|
● |
to
fewer than 100 or, if the relevant member state has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural
or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive,
subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by us for any such offer; or |
|
|
● |
in
any other circumstances falling within Article 3(2) of the Prospectus Directive; |
|
|
● |
released,
issued, distributed or caused to be released, issued or distributed to the public in France; or |
|
|
● |
used
in connection with any offer for subscription or sale of the shares of common stock to the public in France. |
Such
offers, sales and distributions will be made in France only:
● |
to
qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle
restreint d’investisseurs), in each case investing for their own account, all as defined in, and in accordance with articles
L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier; |
|
|
● |
to
investment services providers authorized to engage in portfolio management on behalf of third parties; or |
|
|
● |
in
a transaction that, in accordance with article L.411-2-II-1°-or-2°-or 3° of the French Code monétaire et financier
and article 211-2 of the General Regulations (Règlement Général) of the Autorité des Marchés
Financiers, does not constitute a public offer (appel public à l’épargne). |
The
shares of common stock may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L.412-1 and L.621-8 through
L.621-8-3 of the French Code monétaire et financier.
Germany
This
prospectus does not constitute a Prospectus Directive-compliant prospectus in accordance with the German Securities Prospectus Act (Wertpapierprospektgesetz)
and does therefore not allow any public offering in the Federal Republic of Germany (“Germany”) or any other Relevant Member
State pursuant to § 17 and § 18 of the German Securities Prospectus Act. No action has been or will be taken in Germany that
would permit a public offering of the shares of common stock, or distribution of a prospectus or any other offering material relating
to the shares of common stock. In particular, no securities prospectus (Wertpapierprospekt) within the meaning of the German Securities
Prospectus Act or any other applicable laws of Germany, has been or will be published within Germany, nor has this prospectus been filed
with or approved by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht)
for publication within Germany.
Each
underwriter will represent, agree and undertake, (i) that it has not offered, sold or delivered and will not offer, sell or deliver the
shares of common stock within Germany other than in accordance with the German Securities Prospectus Act (Wertpapierprospektgesetz)
and any other applicable laws in Germany governing the issue, sale and offering of shares of common stock, and (ii) that it will distribute
in Germany any offering material relating to the shares of common stock only under circumstances that will result in compliance with
the applicable rules and regulations of Germany.
This
prospectus is strictly for use of the person who has received it. It may not be forwarded to other persons or published in Germany.
Hong
Kong
The
shares of common stock may not be offered or sold in Hong Kong by means of any document other than (i) to “professional investors”
as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance, or (ii) in other
circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of
Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document
relating to the shares of common stock may be issued or may be in the possession of any person for the purpose of issue, whether in Hong
Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except
if permitted to do so under the securities laws of Hong Kong) other than with respect to shares of common stock which are or are intended
to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and
Futures Ordinance and any rules made under that Ordinance.
Israel
This
prospectus does not constitute a prospectus under the Israeli Securities Law, 5728-1968, and has not been filed with or approved by the
Israel Securities Authority. In Israel, this prospectus is being distributed only to, and is directed only at, investors listed in the
first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds,
insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters purchasing
for their own account, venture capital funds, entities with equity in excess of NIS 50 million and qualified individuals, each as defined
in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors. Qualified investors may be
required to submit written confirmation that they meet the criteria for one of the categories of investors set forth in the prospectus.
Italy
The
Underwritten Offering of shares of common stock has not been registered with the Commissione Nazionale per le Società e la
Borsa(“CONSOB”) pursuant to Italian securities legislation and, accordingly, no shares of common stock may be offered,
sold or delivered, nor copies of this prospectus or any other documents relating to the shares of common stock may not be distributed
in Italy except:
● |
to
“qualified investors”, as referred to in Article 100 of Legislative Decree No. 58 of 24 February 1998, as amended (the
“Decree No. 58”) and defined in Article 26, paragraph 1, letter d) of CONSOB Regulation No. 16190 of 29 October 2007,
as amended (“Regulation No. 16190”) pursuant to Article 34-ter, paragraph 1, letter b) of CONSOB Regulation No. 11971
of 14 May 1999, as amended (“Regulation No. 11971”); or |
|
|
● |
in
any other circumstances where an express exemption from compliance with the offer restrictions applies, as provided under Decree
No. 58 or Regulation No. 11971. |
Any
offer, sale or delivery of the shares of common stock or distribution of copies of this prospectus or any other documents relating to
the shares of common stock in the Republic of Italy must be:
● |
made
by investment firms, banks or financial intermediaries permitted to conduct such activities in the Republic of Italy in accordance
with Legislative Decree No. 385 of 1 September 1993, as amended (the “Banking Law”), Decree No. 58 and Regulation No.
16190 and any other applicable laws and regulations; |
|
|
● |
in
compliance with Article 129 of the Banking Law, and the implementing guidelines of the Bank of Italy, as amended; and |
|
|
● |
in
compliance with any other applicable notification requirement or limitation which may be imposed, from time to time, by CONSOB or
the Bank of Italy or other competent authority. |
Please
note that, in accordance with Article 100-bis of Decree No. 58, where no exemption from the rules on public offerings applies, the subsequent
distribution of the shares of common stock on the secondary market in Italy must be made in compliance with the public offer and the
prospectus requirement rules provided under Decree No. 58 and Regulation No. 11971.
Furthermore,
the shares of common stock which are initially offered and placed in Italy or abroad to qualified investors only but in the following
year are regularly (“sistematicamente”) distributed on the secondary market in Italy to non-qualified investors become
subject to the public offer and the prospectus requirement rules provided under Decree No. 58 and Regulation No. 11971. Failure to comply
with such rules may result in the sale of the shares of common stock being declared null and void and in the liability of the intermediary
transferring the shares of common stock for any damages suffered by such non-qualified investors.
Japan
The
shares of common stock have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25
of 1948, as amended) and accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese
Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with
all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in
effect at the relevant time. For the purposes of this paragraph, “Japanese Person” shall mean any person resident in Japan,
including any corporation or other entity organized under the laws of Japan.
Kuwait
Unless
all necessary approvals from the Kuwait Ministry of Commerce and Industry required by Law No. 31/1990 “Regulating the Negotiation
of Securities and Establishment of Investment Funds,” its Executive Regulations and the various Ministerial Orders issued pursuant
thereto or in connection therewith, have been given in relation to the marketing and sale of the shares of common stock, these may not
be marketed, offered for sale, nor sold in the State of Kuwait. Neither this prospectus (including any related document), nor any of
the information contained therein is intended to lead to the conclusion of any contract of whatsoever nature within Kuwait.
PRC
This
prospectus has not been and will not be circulated or distributed in the PRC, and the shares of common stock may not be offered or sold,
and will not be offered or sold, directly or indirectly, to any resident of the PRC or to persons for re-offering or resale, directly
or indirectly, to any resident of the PRC except pursuant to applicable laws and regulations of the PRC. For the purpose of this paragraph,
the PRC does not include Taiwan and the Special Administrative Regions of Hong Kong and Macao.
Qatar
The
shares of common stock have not been and will not be offered, sold or delivered at any time, directly or indirectly, in the State of
Qatar (“Qatar”) in a manner that would constitute a public offering. This prospectus has not been reviewed or approved by
or registered with the Qatar Central Bank the Qatar Exchange or the Qatar Financial Markets Authority. This prospectus is strictly private
and confidential, and may not be reproduced or used for any other purpose, nor provided to any person other than the recipient thereof.
Saudi
Arabia
This
prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities
Regulations issued by the Capital Market Authority. The Capital Market Authority does not make any representation as to the accuracy
or completeness of this prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance
upon, any part of this prospectus. Prospective purchasers of the securities offered hereby should conduct their own due diligence on
the accuracy of the information relating to the securities. If you do not understand the contents of this prospectus you should consult
an authorized financial adviser.
Singapore
This
prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other
document or material in connection with the offer or sale, or invitation for subscription or purchase, of shares of common stock may
not be circulated or distributed, nor may the shares of common stock be offered or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to persons in Singapore other than
● |
to
an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), |
|
|
● |
to
a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified
in Section 275, of the SFA, or |
|
|
● |
otherwise
pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. |
Where
the shares of common stock are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
● |
a
corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments
and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
● |
a
trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust
is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’
rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that
trust has acquired the shares of common stock pursuant to an offer made under Section 275 of the SFA except: |
|
(a) |
to
an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred
to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; |
|
|
|
|
(b) |
where
no consideration is or will be given for the transfer; |
|
|
|
|
(c) |
where
the transfer is by operation of law; |
|
|
|
|
(d) |
as
specified in Section 276(7) of the SFA; or |
|
|
|
|
(e) |
as
specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore. |
Switzerland
This
document is not intended to constitute an offer or solicitation to purchase or invest in the shares of common stock described herein.
The shares of common stock may not be publicly offered, sold or advertised, directly or indirectly, in, into or from Switzerland and
will not be listed on the SIX Swiss Exchange or on any other exchange or regulated trading facility in Switzerland. Neither this document
nor any other offering or marketing material relating to the shares of common stock constitutes a prospectus as such term is understood
pursuant to article 652a or article 1156 of the Swiss Code of Obligations or a listing prospectus within the meaning of the listing rules
of the SIX Swiss Exchange or any other regulated trading facility in Switzerland, and neither this document nor any other offering or
marketing material relating to the shares of common stock may be publicly distributed or otherwise made publicly available in Switzerland.
Neither
this document nor any other offering or marketing material relating to the Underwritten Offering, nor the Company nor the shares of common
stock have been or will be filed with or approved by any Swiss regulatory authority. The shares of common stock are not subject to the
supervision by any Swiss regulatory authority, e.g., the Swiss Financial Markets Supervisory Authority FINMA (FINMA), and investors in
the shares of common stock will not benefit from protection or supervision by such authority.
Taiwan
The
shares of common stock have not been and will not be registered or filed with, or approved by, the Financial Supervisory Commission of
Taiwan pursuant to relevant securities laws and regulations and may not be offered or sold in Taiwan through a public offering or in
circumstances which constitute an offer within the meaning of the Securities and Exchange Act of Taiwan or relevant laws and regulations
that require a registration, filing or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has
been authorized to offer or sell the shares of common stock in Taiwan.
United
Arab Emirates
(Excluding
the Dubai International Financial Center)
The
shares of common stock have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (“U.A.E.”)
other than in compliance with the laws of the U.A.E. Prospective investors in the Dubai International Financial Centre should have regard
to the specific selling restrictions on prospective investors in the Dubai International Financial Centre set out below.
The
information contained in this prospectus does not constitute a public offer of shares of common stock in the U.A.E. in accordance with
the Commercial Companies Law (Federal Law No. 8 of 1984 of the U.A.E., as amended) or otherwise and is not intended to be a public offer.
This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Emirates Securities and Commodities
Authority or the Dubai Financial Services Authority, or DFSA. If you do not understand the contents of this prospectus, you should consult
an authorized financial adviser. This prospectus is provided for the benefit of the recipient only, and should not be delivered to, or
relied on by, any other person.
We
have not authorized and do not authorize the making of any offer of securities through any financial intermediary on our behalf, other
than offers made by the underwriters and their respective affiliates, with a view to the final placement of the securities as contemplated
in this document. Accordingly, no purchaser of the shares, other than the underwriters, is authorized to make any further offer of shares
on our behalf or on behalf of the selling stockholders or underwriters.
No
action has been taken by us or the Representatives that would permit a public offering of the shares of common stock in any jurisdiction
outside the United States where action for that purpose is required. None of our shares of common stock included in the Underwritten
Offering may be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in
connection with the offer and sales of any such securities offered hereby be distributed or published in any jurisdiction except under
circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons who receive this
prospectus are advised to inform themselves about and to observe any restrictions relating to the Underwritten Offering of shares of
common stock and the distribution of this prospectus. This prospectus is neither an offer to sell nor a solicitation of any offer to
buy the shares of common stock in any jurisdiction where that would not be permitted or legal.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
In
the opinion of the Securities and Exchange Commission, indemnification for liabilities arising under the Securities Act is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions,
the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
LEGAL
MATTERS
The
Newman Law Firm. has opined on the validity of the shares being offered hereby. Bevilacqua PLLC is acting as counsel to Craft Capital
Management LLC.
EXPERTS
The
consolidated financial statements included in this prospectus and in the registration statement for the fiscal years ended December 31,
2021 and December 31, 2020 have been audited by Fruci & Associates II, PLLC, an independent
registered public accounting firm, and are included in reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
ADDITIONAL
INFORMATION
We
have filed with the SEC this registration statement on Form S-1 under the Securities Act with respect to the shares of common stock being
offered by this prospectus. This prospectus, which constitutes a part of this registration statement, does not contain all of the information
in this registration statement and its exhibits. For further information with respect to us and the common stock offered by this prospectus,
you should refer to this registration statement and the exhibits filed as part of that document. Statements contained in this prospectus
as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you
to the copy of the contract or other document filed as an exhibit to this registration statement. Each of these statements is qualified
in all respects by this reference.
We
are subject to the informational requirements of the Exchange Act and file annual, quarterly and current reports, proxy statements and
other information with the SEC. You can read our SEC filings, including this registration statement, over the Internet at the SEC’s
website at http://www.sec.gov. You may also request a copy of these filings, at no cost, by writing or telephoning us
at: 2990 Redhill Avenue, Costa Mesa, CA 92626. Our telephone number is (949) 273-4990.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
Audited
Financial Statements:
Clean
Energy Technologies, Inc.
Consolidated
Balance Sheets
The
accompanying footnotes are an integral part of these consolidated financial statements
Clean
Energy Technologies, Inc.
Consolidated
Statements of Operations
for
the three and nine months ended September 30, 2022 and 2021
(Unaudited)
The
accompanying footnotes are an integral part of these Consolidated financial statements
Clean
Energy Technologies, Inc.
Consolidated
Statements of Stockholders Deficit
September
30, 2021 & 2022 (Unaudited)
The
accompanying footnotes are an integral part of these consolidated financial statements
Clean
Energy Technologies, Inc.
Consolidated
Statements of Cash Flows
for
the three months ended September 30 (Unaudited)
| |
|
2022 | | |
|
2021 | |
Cash Flows
from Operating Activities: | |
| | | |
| | |
Net Income / (Loss) | |
$ | (1,322,861 | ) | |
$ | 819,719 | |
Adjustments to reconcile net
loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 22,557 | | |
| 24,219 | |
Bad debt expense | |
| - | | |
| - | |
Financing Fees | |
| 380,000 | | |
| 0 | |
Gain on debt settlement | |
| (2,920 | ) | |
| (828,666 | ) |
Shares issued for inducement | |
| | | |
| 54,266 | |
Amortization of debt discount | |
| 145,632 | | |
| | |
Change in debt discount and
Financing fees | |
| 0 | | |
| 730,826 | |
Change in derivative liability | |
| 12,980 | | |
| (1,734,624 | ) |
Changes in assets and liabilities: | |
| | | |
| | |
(Increase) decrease in right
of use asset | |
| 177,745 | | |
| 144,588 | |
(Increase) decrease in lease
liability | |
| (175,172 | ) | |
| (141,153 | ) |
(Increase) decrease in accounts
receivable | |
| (1,113,760 | ) | |
| (511,418 | ) |
(Increase) decrease in longterm
financing receivables | |
| | | |
| 67,730 | |
(Increase) decrease in inventory | |
| (65,757 | ) | |
| (167,739 | ) |
(Increase) decrease in prepaid
expenses | |
| (194,306 | ) | |
| - | |
(Decrease) increase in accounts
payable | |
| 44,955 | | |
| (673,236 | ) |
Other (Decrease) increase
in accrued expenses | |
| 171,619 | | |
| 141,969 | |
Other (Decrease) increase
in accrued expenses related party | |
| 0 | | |
| (2,482 | ) |
Other (Decrease) increase on equity method investment | |
| 13,650 | | |
| - | |
Other (Decrease) increase in deferred revenue | |
| - | | |
| - | |
Other
(Decrease) increase in customer deposits | |
| (24,040 | ) | |
| 111,770 | |
Net
Cash Provided by (Used In) Operating Activities | |
| (1,929,678 | ) | |
| (1,964,231 | ) |
| |
| | | |
| | |
Cash Flows
from Investing Activities | |
| | | |
| | |
Convertible Note Receivable | |
| - | | |
| - | |
(Increase)
decrease in Heze Hongyuan Natural Gas Co | |
| (838,090 | ) | |
| - | |
(Increase) decrease in Shuya | |
| (550,644 | ) | |
| | |
Investment in CETY HK | |
| - | | |
| | |
Purchase property plant and
equipment | |
| | | |
| | |
Cash
Flows Used In Investing Activities | |
| (1,388,734 | ) | |
| - | |
| |
| | | |
| | |
Cash Flows
from Financing Activities | |
| | | |
| | |
Bank Overdraft / (Repayment) | |
| | | |
| | |
Payment on line of credit | |
| (219,656 | ) | |
| (894,208 | ) |
Payment on notes payable | |
| (406,586 | ) | |
| - | |
Proceeds from notes payable | |
| 1,677,300 | | |
| 414,200 | |
Payment on notes payable and lines of credit | |
| - | | |
| - | |
Payment on notes payable related party | |
| - | | |
| - | |
Proceeds from notes payable and lines of credit | |
| - | | |
| - | |
Proceeds from notes payable
related party | |
| - | | |
| - | |
Stock
issued for cash | |
| 1,493,945 | | |
| 3,584,511 | |
Cash
Flows Provided By Financing Activities | |
| 2,545,003 | | |
| 3,104,503 | |
| |
| | | |
| | |
Effect
of exchange rate changes on cash | |
| (243,136 | ) | |
| - | |
| |
| | | |
| | |
Net (Decrease) Increase in
Cash and Cash Equivalents | |
| (1,016,545 | ) | |
| 1,140,272 | |
Cash
and Cash Equivalents at Beginning of Period | |
| 1,192,316 | | |
| 414,885 | |
Cash
and Cash Equivalents at End of Period | |
$ | 175,771 | | |
$ | 1,555,157 | |
| |
| | | |
| | |
Supplemental
Cashflow Information: | |
| | | |
| | |
Interest Paid | |
$ | 331,177 | | |
$ | 145,230 | |
Taxes Paid | |
$ | | | |
$ | - | |
| |
| | | |
| | |
Supplemental
Non-Cash Disclosure | |
| | | |
| | |
Discount on new notes | |
$ | 437,044 | | |
$ | - | |
Shares to be issued for warrants
| |
$ | 240,824 | | |
$ | 450,000 | |
Shares issued for preferred conversions | |
| - | | |
| - | |
Shares issued for debt conversion
conversions | |
$ | 1,548,904 | | |
$ | 423,011 | |
The
accompanying footnotes are an integral part of these consolidated financial statements
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, 2022, reflect all adjustments which, in the opinion of management, are necessary
to fairly state the Company’s financial position and the results of its operations for the periods presented, in accordance with
the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.
These unaudited interim consolidated financial statements
should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s fiscal
year end December 31, 2022 report. The Company assumes that the users of the interim financial information herein have read, or
have access to, the audited financial statements for the preceding period, and that the adequacy of additional disclosure needed for
a fair presentation may be determined in that context. The results of operations for the three months ended March 31, 2022
are not necessarily indicative of results for the entire year ending December 31, 2022.
The
summary of significant accounting policies of Clean Energy Technologies, Inc. is presented to assist in the understanding of the Company’s
financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for
their integrity and objectivity.
Corporate
History
We
were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005
under the name Probe Manufacturing, Inc. We manufactured electronics and provided services to original equipment manufacturers (OEMs)
of industrial, automotive, semiconductor, medical, communication, military, and high technology products. On September 11, 2015 Clean
Energy HRS, or “CE HRS”, our wholly owned subsidiary acquired the assets of Heat Recovery Solutions from General Electric
International. In November 2015, we changed our name to Clean Energy Technologies, Inc.
Our
principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. Our telephone number is (949) 273-4990. Our common
stock is listed on the OTCQB Markets under the symbol “CETY.”
Our
internet website address is www.cetyinc.com and our subsidiary’s web site is www.heatrecoverysolutions.com The information
contained on our websites are not incorporated by reference into this document, and you should not consider any information contained
on, or that can be accessed through, our website as part of this document.
The
Company has three reportable segments: Clean Energy HRS (HRS), CETY Europe, and the legacy electronic manufacturing services (Electronic
Assembly) division.
Going
Concern
The
financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets
and liquidation of liabilities in the normal course of business. The Company had a total stockholder equity of $166,173 and a working
capital deficit of $4,000,686 as of September 30, 2022. The company also had an accumulated deficit of $18,763,939 as of September 30,
2022. Therefore, there is substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance
that the Company will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient
debt and/or equity capital and/or (2) to generate positive cash flow from operations.
Plan
of Operation
We
develop renewable energy products and solutions and establish partnerships in renewable energy that make environmental and economic sense.
Our mission is to be a leader in the Zero Emission Revolution by offering recyclable energy solutions, clean energy fuels and
alternative electric power for small and mid-sized projects in North America, Europe, and Asia. We target sustainable energy solutions
that are profitable for us, profitable for our customers and represent the future of global energy production.
Our
principal businesses
Waste
Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities
using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.
Waste
to Energy Solutions - we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries
to electricity, renewable natural gas (“RNG”), hydrogen and bio char which are sold or used by our customers.
Engineering, Consulting and Project Management
Solutions – we bring a wealth of experience in developing clean energy projects for municipal and industrial customers
and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean energy solutions in
their projects.
NG Trading Operations
Our NG trading operations in China is to
source and supply NG to industries and municipalities located in the southwestern part of China. 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.
NOTE
2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The
summary of significant accounting policies of Clean Energy Technologies, Inc. (formerly Probe Manufacturing, Inc.) is presented to assist
in the understanding of the Company’s financial statements. The financial statements and notes are representations of the Company’s
management, who is responsible for their integrity and objectivity.
The
consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in
the United States of America (“US GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. All material
intercompany balances and transactions have been eliminated in consolidation.
Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such
estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets,
the collection of accounts receivable and valuation of inventory and reserves.
Cash
and Cash Equivalents
We
maintain the majority of our cash accounts at JP Morgan Chase bank. The total cash balance is insured by the Federal Deposit Insurance
Corporation (“FDIC”) up to $250,000, (which we may exceed from time to time) per commercial bank. For purposes of the statement
of cash flows we consider all cash and highly liquid investments with initial maturities of one year or less to be cash equivalents.
Accounts
Receivable
Our
ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by us. Reserves for
un-collectable amounts are provided, based on past experience and a specific analysis of the accounts. Although we expect to collect
amounts due, actual collections may differ from the estimated amounts. As of September 30, 2022, and December 31, 2021, we had a reserve
for potentially un-collectable accounts receivable of $75,000. Our policy for reserves for our long-term financing receivables is determined
on a contract-by-contract basis and considers the length of the financing arrangement. As of September 30, 2022, and December 31, 2021,
we had a reserve for potentially un-collectable long-term financing receivables of $247,500 and $247,500 respectively.
Four
(4) customers accounted for approximately 98% of accounts receivable on September 30, 2022. Our trade accounts primarily represent unsecured
receivables. Historically, our bad debt write-offs related to these trade accounts have been insignificant.
Lease
asset
As
of September 30, 2022, and December 31, 2021 we had a lease asset that was purchased from General Electric with a value of $1,309,527,
however due the purchase price allocation, we recognized a value of $217,584. The lease is due to be commissioned in the first quarter
of 2022 and will generate approximately $20,000 per month for 120 months.
Inventory
Inventories
are valued at the lower of weighted average cost or market value. Our industry experiences changes in technology, changes in market value
and availability of raw materials, as well as changing customer demand. We make provisions for estimated excess and obsolete inventories
based on regular audits and cycle counts of our on-hand inventory levels and forecasted customer demands and at times additional provisions
are made. Any inventory write offs are charged to the reserve account. As of September 30, 2022, and December 31, 2021, we had a reserve
for potentially obsolete inventory of $321,104.
Property
and Equipment
Property
and equipment are recorded at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value
of the minimum lease payments or the fair market value of the related assets. The cost of ordinary maintenance and repairs is charged
to operations. Depreciation and amortization are computed on the straight-line method over the following estimated useful lives of the
related assets:
SCHEDULE OF PROPERTY AND EQUIPMENT ESTIMATED USEFUL LIVES
Furniture and fixtures | |
3 to 7 years |
Equipment | |
7 to 10 years |
Leasehold Improvements | |
7 years |
Long
–Lived Assets
Our
management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long
lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived
asset impairment if any, is measured based on fair value and is charged to operations in the period in which long-lived assets
impairment is determined by management. There can be no assurance however, that market conditions will not change or demand for our
services will continue, which could result in impairment of long-lived assets in the future.
Revenue
Recognition
The
Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC
606”).
Performance
Obligations Satisfied Over Time
FASB
ASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10
An
entity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one
of the following criteria is met:
a.
The customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB
ASC 606-10-55-5 through 55-6).
b.
The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is
created or enhanced (as described in FASB ASC 606-10-55-7).
c.
The entity’s performance does not create an asset with an alternative use to the entity (see FASB ASC 606-10-25-28), and the entity
has an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).
Performance
Obligations Satisfied at a Point in Time
FASB
ASC 606-10-25-30
If
a performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time. To determine the point
in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should
consider the guidance on control in FASB ASC 606-10-25-23 through 25-26. In addition, it should consider indicators of the transfer of
control, which include, but are not limited to, the following:
a.
The entity has a present right to payment for the asset
b.
The customer has legal title to the asset
c.
The entity has transferred physical possession of the asset
d.
The customer has the significant risks and rewards of ownership of the asset
e.
The customer has accepted the asset
The
core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or
services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration
it is entitled to in exchange for the goods and services transferred to the customer. In addition a) the company also does not have an
alternative use for the asset if the customer were to cancel the contract, and b.) has a fully enforceable right to receive payment for
work performed (i.e., customers are required to pay as various milestones and/or timeframes are met)
The
following five steps are applied to achieve that core principle for our HRS and CETY Europe Divisions:
|
● |
Identify the contract with the customer |
|
|
|
|
● |
Identify the performance obligations in the contract |
|
|
|
|
● |
Determine the transaction price |
|
|
|
|
● |
Allocate the transaction price to the performance obligations
in the contract |
|
|
|
|
● |
Recognize revenue when the company satisfies a performance
obligation |
The
following steps are applied to our legacy engineering and manufacturing division:
|
● |
We generate a quotation |
|
|
|
|
● |
We receive purchase orders from our Customers. |
|
|
|
|
● |
We build the product to their specification |
|
|
|
|
● |
We invoice at the time of shipment |
|
|
|
|
● |
The terms are typically Net 30 days |
The
following step is applied to our CETY HK business unit:
|
● |
CETY HK is primarily responsible for fulfilling the
contract / promise to provide the specified good or service. |
Also,
from time to time our contracts state that the customer is not obligated to pay a final payment until the units are commissioned, i.e.
a final payment of 10%. As of September 30, 2022 and December 31, 2021 we had $33,000 and 33,000 of deferred revenue, which is expected
to be recognized in the fourth quarter of year 2022.
Also,
from time to time we require upfront deposits from our customers based on the contract. As of September 30, 2022 and December 31, 2021,
we had outstanding customer deposits of $0 and $24,040 respectively.
Fair
Value of Financial Instruments
The
Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements
and Disclosures” for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded
disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or
the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between
market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize
the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the
Company uses to measure fair value:
|
● |
Level 1: Quoted prices
in active markets for identical assets or liabilities. |
|
|
|
|
● |
Level 2: Observable inputs
other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or
other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related
assets or liabilities. |
|
|
|
|
● |
Level 3: Unobservable inputs
that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company’s
derivative liabilities have been valued as Level 3 instruments. We value the derivative liability using a lattice model, with a volatility
of 84% and using a risk free interest rate of 0.15% |
The
Company’s financial instruments consist of cash, prepaid expenses, inventory, accounts payable, convertible notes payable, advances
from related parties, and derivative liabilities. The estimated fair value of cash, prepaid expenses, investments, accounts payable,
convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these
instruments.
The
carrying amounts of the Company’s financial instruments as of September 30, 2022 and December 31, 2021 reflect:
SCHEDULE OF FAIR VALUE OF CONVERTIBLE NOTES DERIVATIVE LIABILITY
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| |
| | | |
| | | |
| | | |
| | |
Fair value of convertible notes derivative liability – September 30, 2022 | |
$ | – | | |
$ | – | | |
$ | 269,663 | | |
$ | 269,663 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| |
| | | |
| | | |
| | | |
| | |
Fair value of convertible notes derivative liability – December 31, 2021 | |
$ | – | | |
$ | – | | |
$ | 256,683 | | |
$ | 256,683 | |
Fair value of convertible notes derivative liability | |
$ | – | | |
$ | – | | |
$ | 256,683 | | |
$ | 256,683 | |
The
carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because
of the short-term nature of these financial instruments.
Foreign
Currency Translation and Comprehensive Income (Loss)
We
have no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.
The accounts of the Company’s Chinese entities are maintained in RMB. The accounts of the
Chinese entities were translated into USD in accordance with FASB ASC Topic 830 “Foreign Currency Matters.” All assets and
liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates
and the statements of operations and cash flows are translated at the weighted average exchange rate for the period. The resulting translation
adjustments are reported under other comprehensive income (loss) in accordance with FASB ASC Topic 220, “Comprehensive Income.”
Gains and losses resulting from foreign currency transactions are reflected in the statements of operations.
The
Company follows FASB ASC Topic 220-10, “Comprehensive Income (loss).” Comprehensive income (loss) comprises net income (loss)
and all changes to the statements of changes in stockholders’ equity, except those due to investments by stockholders, changes
in additional paid-in capital and distributions to stockholders.
Equity Method Investment
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 setup as the operating entity for pipeline
natural gas (PNG) and compressed natural gas (CNG) trading business, while the other two shareholders of Shuaya have large supply relationships.
The Company has determined
that Shuya is not a VIE and has evaluated its consolidation analysis under the voting interest model. Because the Company does not own
greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment in Shuya
under the equity method of accounting.
Under this method, the investor (“JHJ”) recognizes its share of the profits and losses of the investee (“Shuya”)
in the periods when these profits and losses are also reflected in the accounts of the investee. Any profit or loss recognized by the
investing entity appears in its income statement. Also, any recognized profit increases the investment recorded by the investing entity,
while a recognized loss decreases the investment.
JHJ made a capital contribution of RMB 3.91
million ($0.55
million) into Shuya during the three months ended September 30, 2022. Shuaya did not have any revenue yet but only incurred $27,836
operating expenses as of September 30, 2022; accordingly, JHJ recorded $13,640
investment loss from investment of Shuya for the three months ended September 30, 2022. JHJ’s investment in Shuya
was decreased to $536,994
as of September 30, 2022.
Net
Profit (Loss) per Common Share
Basic
profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding. At September 30, 2022,
we had outstanding common shares of 37,074,432
used in the calculation of basic earnings
per share. Basic Weighted average common shares and equivalents for the three months ended September 30, 2022 and September 30, 2021
were 37,074,432
and 23,589,229
respectively. As of September 30, 2022, we
had convertible notes, convertible into approximately 2,100,402
of additional common shares, 586,806
common stock warrants. Fully diluted weighted
average common shares and equivalents were withheld from the calculation for the three months ended September 30, 2022 and September
30, 2021 as they were considered anti-dilutive.
Research
and Development
We
had no amounts of research and development R&D expense during the three & nine months ended September 30, 2022 and 2021.
Segment
Disclosure
FASB
Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an
enterprise’s reportable segments. The Company previously had three reportable segments but added CETY HK in the first quarter
of 2022 to reflect its recent new ventures in mainland China. The Company has four
reportable segments: Clean Energy HRS (HRS),
CETY Europe, CETY HK and the legacy electronic manufacturing services division. The segments are determined based
on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels
and similar economic characteristics. Refer to note 1 for a description of the various product categories manufactured under each of
these segments.
An
operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is
defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include amortization
of intangibles, stock-based compensation, other charges (income), net and interest and other, net.
Selected
Financial Data:
SCHEDULE OF SEGMENT REPORTING
| |
2022 | | |
2021 | |
| |
for the nine months ended
September 30 | |
| |
2022 | | |
2021 | |
Net Sales | |
| | | |
| | |
Manufacturing and Engineering | |
| 132,316 | | |
| 91,262 | |
Clean Energy HRS | |
| 461,192 | | |
| 602,207 | |
CETY HK | |
| 1,925,950 | | |
| - | |
Cety Europe | |
| 48,138 | | |
| 173,234 | |
Total Sales | |
| 2,567,596 | | |
| 866,703 | |
| |
| | | |
| | |
Segment income and reconciliation before tax | |
| | | |
| | |
Manufacturing and Engineering | |
| 85,352 | | |
| 72,853 | |
Clean Energy HRS | |
| 427,219 | | |
| 312,118 | |
CETY HK | |
| 631,082 | | |
| - | |
Cety Europe | |
| 40,315 | | |
| 134,712 | |
Total Segment income | |
| 1,183,968 | | |
| 519,683 | |
| |
| | | |
| | |
Reconciling items | |
| | | |
| | |
General and Administrative expense | |
| (284,025 | ) | |
| (529,335 | ) |
Salaries | |
| (587,928 | ) | |
| (661,634 | ) |
Travel | |
| (126,388 | ) | |
| (66,735 | ) |
Professional Fees | |
| (359,636 | ) | |
| (123,383 | ) |
Facility lease and Maintenance | |
| (260,262 | ) | |
| (254,708 | ) |
Consulting Subcontractors | |
| (83,931 | ) | |
| | |
Depreciation and Amortization | |
| (22,557 | ) | |
| (24,219 | ) |
Change in derivative liability | |
| (12,980 | ) | |
| 1,734,624 | |
Other Income | |
| 25,790 | | |
| - | |
Gain debt settlement | |
| 2,920 | | |
| 828,666 | |
Interest Expense | |
| (747,451 | ) | |
| (603,240 | ) |
Share-Based
Compensation
The
Company has adopted the use of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (SFAS No. 123R)
(now contained in FASB Codification Topic 718, Compensation-Stock Compensation), which supersedes APB Opinion No. 25, “Accounting
for Stock Issued to Employees,” and its related implementation guidance and eliminates the alternative to use Opinion 25’s
intrinsic value method of accounting that was provided in Statement 123 as originally issued. This Statement requires an entity to measure
the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and
stock warrants, based on the fair value of the award, measured at the grant date (with limited exceptions). Under this standard, the
fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black-Scholes
option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets
the requirements of SFAS No. 123R; however, the fair values generated may not reflect their actual fair values, as it does not consider
certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation
is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and
expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility.
For the “risk-free interest rate,” we use the Constant Maturity Treasury rate on 90-day government securities. The term is
equal to the time until the option expires. The dividend yield is not applicable, as the Company has not paid any dividends, nor do we
anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading
common stock, on the grant date calculated using a 20-trading-day average. At the time of grant, the share-based compensation expense
is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates
and the expense is reduced accordingly. It is also adjusted to account for the restricted and thinly traded nature of the shares. The
expense is reviewed and adjusted in subsequent periods if actual attrition differs from those estimates.
We
re-evaluate the assumptions used to value our share-based awards on a quarterly basis and, if changes warrant different assumptions,
the share-based compensation expense could vary significantly from the amount expensed in the past. We may be required to adjust any
remaining share-based compensation expense, based on any additions, cancellations or adjustments to the share-based awards. The expense
is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service
period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the
requisite service. For the three months ended March 31, 2022 and 2021 we had $0
in share-based expense, due to the issuance of
common stock. As of March 31, 2022, we had no further non-vested expense to be recognized.
Income
Taxes
Federal
Income taxes are not currently due since we have had losses since inception of Clean Energy Technologies.
On
December 22, 2018 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant
changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”)
from 35% to 21% effective January 1, 2018. The Company will compute its income tax expense for the year ended December 31, 2022 using
a Federal Tax Rate of 21% and an estimated state of California rate of %.
Income
taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under
this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis
of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred
tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.
Deferred
income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax reporting purposes.
As
of September 30, 2022, we had a net operating loss carry-forward of approximately $(10,108,327) and a deferred tax asset of $3,032,498
using the statutory rate of 30%. The deferred tax asset may be recognized in future periods, not to exceed 20 years. However, due to
the uncertainty of future events we have booked valuation allowance of $(3,032,498). FASB ASC 740 prescribes recognition threshold and
measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition. On September 30, 2022 the Company had not taken any tax positions that would require disclosure under FASB
ASC 740.
SCHEDULE OF DEFERRED TAX ASSET
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Deferred Tax Asset | |
$ | 3,032,498 | | |
$ | 2,556,982 | |
Valuation Allowance | |
| (3,032,498 | ) | |
| (2,556,982 | ) |
Deferred Tax Asset (Net) | |
$ | - | | |
$ | - | |
On
February 13, 2018, Clean Energy Technologies, Inc., a Nevada corporation (the “Registrant” or “Corporation”)
entered into a Common Stock Purchase Agreement (“Stock Purchase Agreement”) by and between MGW Investment I Limited (“MGWI”)
and the Corporation. The Corporation received $907,388
in exchange for the issuance of 7,561,567
restricted shares of the Corporation’s
common stock, par value $.001
per share (the “Common Stock”).
On
February 13,2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $939,500 with an interest rate of 10% per annum interest rate and a maturity date of February
13, 2020. The CVL Note is convertible into shares of Common Stock at $0.003 per share, as adjusted as provided therein. This note was
assigned to MGW Investments.
This
resulted in a change in control, which limited the net operating to that date forward. We are subject to taxation in the U.S. and the
states of California. Further, the Company currently has no open tax years’ subject to audit prior to December 31, 2015. The Company
is current on its federal and state tax returns.
Reclassification
Certain
amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications
had no effect on reported income, total assets, or stockholders’ equity as previously reported.
Recently
Issued Accounting Standards
The
Company is reviewing the effects of following recent updates. The Company has no expectation that any of these items will have a material
effect upon the financial statements.
Update
2021-03—Intangibles—Goodwill and Other (Topic 350): Accounting Alternative For Evaluating Triggering Events.
The
amendments in this Update are effective on a prospective basis for fiscal years beginning after December 15, 2019. Early adoption is
permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30,
2021.
Update
2021-01—Reference Rate Reform (Topic 848):
An
entity may elect to apply the amendments in this Update on a full retrospective basis as of any date from the beginning of an interim
period that includes or is subsequent to March 12, 2020.
In
June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit
Losses [codified as Accounting Standards Codification Topic (ASC) 326]. ASC 326 adds to US generally accepted accounting principles (US
GAAP) the current expected credit loss (CECL) model, a measurement model based on expected losses rather than incurred losses. Under
this new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in
more timely recognition of such losses. This will become effective in January 2023 and will have minimal impact on the company.
Update
2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s
Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. We do not expect
any material impact on our financials because of the adoption of this update.
NOTE
3 – ACCOUNTS AND NOTES RECEIVABLE
SCHEDULE
OF ACCOUNTS AND NOTES RECEIVABLE
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Accounts Receivable | |
$ | 1,881,792 | | |
$ | 768,032 | |
Less reserve for uncollectable accounts | |
| (75,000 | ) | |
| (75,000 | ) |
Total | |
$ | 1,806,792 | | |
$ | 693,032 | |
Our
Accounts Receivable is pledged to Nations Interbanc, our line of credit.
SCHEDULE OF LEASE RECEIVABLE ASSET
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Lease asset | |
$ | 217,584 | | |
$ | 217,584 | |
The
Company is currently modifying the assets subject to lease to meet the provisions of the agreement, and as of September 30, 2022 any
collection on the lease payments was not yet considered probable, resulting in no derecognition of the underlying asset and no net lease
investments recognized on the sales-type lease pursuant to ASC 842-30-25-3.
SCHEDULE OF DERECOGNITION OF UNDERLYING ASSETS OF FINANCING RECEIVABLE
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Long-term financing receivables | |
$ | 932,270 | | |
$ | 932,270 | |
Less Reserve for uncollectable accounts | |
| (247,500 | ) | |
| (247,500 | ) |
Long-term financing receivables - net | |
$ | 684,770 | | |
$ | 684,770 | |
On
a contract by contract basis or in response to certain situations or installation difficulties, the Company may elect to allow non-interest
bearing repayments in excess of 1 year.
Our
long term financing Receivable are pledged to Nations Interbanc, our line of credit.
NOTE
4 – INVENTORY
Inventories
by major classification were comprised of the following at:
SCHEDULE OF INVENTORIES
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Inventory | |
$ | 849,053 | | |
$ | 783,296 | |
Less reserve | |
| (321,104 | ) | |
| (321,104 | ) |
Total | |
$ | 527,949 | | |
$ | 462,192 | |
Our
Inventory is pledged to Nations Interbanc, our line of credit.
NOTE
5 – PROPERTY AND EQUIPMENT
Property
and equipment were comprised of the following at:
SCHEDULE OF PROPERTY AND EQUIPMENT
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Property and Equipment | |
$ | 1,354,824 | | |
$ | 1,354,824 | |
Leasehold Improvements | |
| 75,436 | | |
| 75,436 | |
Accumulated Depreciation | |
| (1,410,894 | ) | |
| (1,397,244 | ) |
Net Fixed Assets | |
$ | 19,366 | | |
$ | 33,016 | |
Our
Depreciation Expense for the three months ended September 30, 2022 and 2021 was $7,519 and $8,073 respectively.
Our
Property Plant and Equipment is pledged to Nations Interbanc, our line of credit.
NOTE
6 – INTANGIBLE ASSETS
Intangible
assets were comprised of the following at:
SCHEDULE OF INTANGIBLE ASSETS
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Goodwill | |
$ | 747,976 | | |
$ | 747,976 | |
LWL Intangibles | |
$ | 1,468,709 | | |
$ | 1,468,709 | |
License | |
| 354,322 | | |
| 354,322 | |
Patents | |
| 190,789 | | |
| 115,569 | |
Accumulated Amortization | |
| (84,127 | ) | |
| (75,220 | ) |
Net Fixed Assets | |
$ | 2,677,669 | | |
$ | 2,611,356 | |
Our
Amortization Expense for the six months ended June 30, 2022 and 2021 was $2,969
and 2,969 respectively.
Based
on the foregoing analysis of the facts surrounding the Company’s acquisition of LWL, it is the Company’s position that the
Company is the acquirer of LWL, under the acquisition method of accounting.
As
such, as of November 8, 2021 (the acquisition date), the Company recognized, separately from goodwill, the identifiable assets acquired
and the liabilities assumed in the Business combination.
The
following table presents the purchase price allocation:
SCHEDULE OF BUSINESS ACQUISITION PURCHASE PRICE ALLOCATION
| |
| | |
Consideration: | |
| | |
Cash and cash equivalents | |
$ | 1,500,000 | |
| |
| | |
Total purchaser consideration | |
$ | 1,500,000 | |
| |
| | |
Assets acquired: | |
| | |
Cash and cash equivalents | |
$ | 6,156 | |
Prepayment | |
$ | 13,496 | |
Other receivable | |
$ | 20,000 | |
Trading Contracts | |
$ | 146,035 | |
Shenzhen Gas Relationship | |
$ | 1,314,313 | |
Total assets acquired | |
$ | 1,508,539 | |
| |
| | |
Liabilities assumed: | |
| | |
Advance Receipts | |
$ | (8,539 | ) |
Taxes Payable | |
$ | 179 | |
Net Assets Acquired: | |
$ | 1,500,000 | |
If LWL reach USD 5 million in revenue or net profit of USD 1 million by December 31, 2022, then based on the performance contingency there will be issuance of 20,000,000 shares of CETY to the Seller. As of the date of the filing the performance contingencies have not been met.
NOTE
7 – CONVERTIBLE NOTE RECEIVABLE
Effective
January 10, 2022, JHJ (“note holder”) entered a convertible note agreement with Chengdu Rongjun Enterprise Consulting Co.,
Ltd (“Rongjun” or “the borrower”) with maturity on January 10, 2025. Under this convertible note, JHJ lent RMB
5,000,000 ($0.78 million) to Rongjun with annual interest rate of 12%, calculated from the Issuance Date until all outstanding interest
and principal is paid in full. The Borrower may pre-pay principal or interest on this Note at any time prior to the maturity date, without
penalty. JHJ has the right to convert this note directly or indirectly into shares or equity interest of Heze Hongyuan Natural Gas Co.,
Ltd (“Heze”) equal to 15% of Heze’s outstanding Equity Interest. Rongjun owns 90% of Heze. During the three months
ended, JHJ recorded $17,961 interest income from this note.
NOTE
8 – ACCRUED EXPENSES
SCHEDULE
OF ACCRUED EXPENSES
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Accrued Wages | |
$ | 68,219 | | |
$ | 22,950 | |
Accrued Interest and other | |
| 56,612 | | |
| 143,847 | |
Accrued Interest and other | |
$ | 124,830 | | |
$ | 166,797 | |
NOTE
9 – NOTES PAYABLE
The
Company issued a short-term note payable to an individual, secured by the assets of the Company, dated September 6, 2013 in the
amount of $50,000 and
fixed fee amount of $3,500.
As of December 31, 2019, the outstanding balance was $36,500.
On January 30, 2020 we issued 1,700,000 shares
of our common stock at a purchase price of $.80 per
share, as settlement in full of a note payable of in the amount of $36,500 with
accrued interest of $19,721.
As a result, we recognized a gain in the amount of $22,221 in
the 1st quarter of 2021.
On
November 11, 2013, we entered into an accounts receivable financing agreement with American Interbanc (now Nations Interbanc). Amounts
outstanding under the agreement bear interest at the rate of 2.5%
per month. It is secured by the assets of the Company. In addition, it is personally guaranteed by Kambiz Mahdi, our Chief Executive
Officer. As of March 31, 2022, the outstanding balance was $1,153,956
compared to $1,169,638
at December 31, 2021.
On
April 1, 2021, we entered into an amendment to the purchase order financing agreement with DHN Capital, LLC dba Nations Interbanc. Nations
Interbanc has lowered the accrued fees balance by $275,000.00 as well as the accrual rate to 2.25% per 30 days. As a result, CETY has
agreed to remit a minimum monthly payment of $50,000 by the final calendar day of each month.
On
September 11, 2015, our CE HRS subsidiary issued a promissory note in the initial principal amount $1,400,000
and assumed a pension liability of $100,000,
for a total liability of $1,500,000,
in connection with our acquisition of the heat recovery solutions, or HRS, assets of General Electric International, Inc., a
Delaware corporation (“GEII”), including intellectual property, patents, trademarks, machinery, equipment, tooling and
fixtures. The note bears interest at the rate of 2.66% per annum. The note is payable on the following schedule: (a) $200,000 in principal on December 31, 2015 and (b) thereafter, the remaining principal amount of $1,200,000, together with interest thereon, payable in equal quarterly instalments of principal and interest of $157,609, commencing on December 31, 2016 and continuing until December 31, 2019, at which time the remaining unpaid principal amount of this note and all accrued and unpaid interest thereon shall be due and payable in full.
Total
Liability to GE
SCHEDULE OF NOTES PAYABLE
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Note payable GE | |
$ | 1,200,000 | | |
$ | 1,200,000 | |
Accrued transition services | |
| 972,233 | | |
| 972,233 | |
Accrued Interest | |
| 367,783 | | |
| 325,843 | |
Total | |
$ | 2,540,016 | | |
$ | 2,498,076 | |
We
are currently in default on the payment of the purchase price pursuant to our asset purchase agreement with General Electric due to our
belief that we are entitled to a reduction in purchase price we paid due to the misunderstanding of the asset valuation.
On
May 4, 2020 the company entered in to a payroll protection loan, with Comerica bank, guaranteed by the SBA due May 4, 2022 for $110,700,
with an interest rate of 1%. This note payment is due in full on May 4, 2022 and also has the possibility of forgiveness. This note was
forgiven on July 1, 2021.
On
February 4, 2021 the company entered in to a payroll protection loan, with Comerica bank, guaranteed by the SBA due February 4, 2023
for $89,200, with an interest rate of 1%. This note payment is due in full on February 4, 2023 and also has the possibility of forgiveness. This note was forgiven on July 26, 2021.
On
September 7, 2021 the company entered into a promissory note in the amount of $226,345,
with and interest rate of 10%
per annum and a default
interest rate of 22% per annum. This note is due
in full on September
7, 2022 and has mandatory monthly payments of
$23,828.
The note had an OID of $23,345
and recorded as finance fee expense. In the event
of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This is note is
convertible, but not until a contingent event of default has taken place, none of which have occurred as of the date of this filing.
The balance on this note as of March 31, 2022 was $119,142.
On
September 28, 2021 the company entered into a promissory note in the amount of $142,720,
with and interest rate of 10%
per annum and a default
interest rate of 22% per annum. This note is due
in full on September
28, 2022 and has mandatory monthly payments of
$15,003.
The note had an OID of $14,720
and recorded as finance fee expense. In the event
of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This is note is
convertible, but not until a contingent event of default has taken place, none of which have occurred as of the date of this filing.
The balance on this note as of March 31, 2022 was $75,015.
On
March 10, 2022 the company entered into a promissory note in the amount of $170,600,
with and interest rate of 10%
per annum and a default
interest rate of 22% per annum. This note is due
in full on March
10, 2023 and has mandatory monthly payments of
$18,766.
The note had an OID of $17,060
and recorded as finance fee expense. In the event
of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This is note is
convertible, but not until a contingent event of default has taken place, none of which have occurred as of the date of this filing.
The balance on this note as of March 31, 2022 was $170,060.
Convertible
notes
On
May 5, 2017 we entered into a nine-month convertible note payable for $78,000,
which accrues interest at the rate of 12%
per annum. It is not convertible until three months after its issuance and has a conversion rate of sixty one percent (61%)
of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15)
Trading Days immediately preceding the date of conversion. On November 6, 2017 this note was assumed and paid in full at a premium for
a total of $116,600
by Cybernaut Zfounder Ventures. An amended term
were added to the original note with the interest rate of 14%.
This note matured on February 21st of 2018 and is currently in default. As of March 31, 2022, the outstanding balance
due was $91,600.
On
May 24, 2017 we entered into a nine-month convertible note payable for $32,000,
which accrues interest at the rate of 12%
per annum. It is not convertible until three months after its issuance and has a conversion rate of fifty-five eight percent (58%)
of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15)
Trading Days immediately preceding the date of conversion. On November 6, 2017 this note was assumed and paid in full at a premium for
a total of $95,685,
by Cybernaut Zfounder Ventures. An amended term was added to the original note with the interest rate of 14%.
This note matured on February 26th, 2018 and is currently in default. As of March 31, 2022, the outstanding balance
due was $95,685
On
October 30, 2019 we entered into a convertible note payable for $103,000, with a maturity date of October 30, 2020, which accrues interest
at the rate of 12% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. This
note was paid in full on May 1, 2020.
On
January 8, 2020 we entered into a convertible note payable for $103,000, with a maturity date of January 8, 2021, which accrues interest
at the rate of 12% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. Subsequently
The fair value of the convertible feature was $87,560, we recorded a debt discount of $87,560. On July 7, 2020 this note was paid in
full.
On
February 19, 2020 we entered into a convertible note payable for $53,000, with a maturity date of February 19, 2021, which accrues interest
at the rate of 12% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. On
August 18, 2020 this note was paid in full.
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001
per share (the “Common Stock”) and
25,000
restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount
of $4,800
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.02
per share, subject to adjustment. The shares were valued on the date of issuance using the stock price on that day for a total
value of $19,211.
We also recognized a debt discount of $17,861.
We amortized $3,234
of the debt discount during the three months ended September 30, 2020. The unamortized debt discount as of September 30, 2020
was $14,267.
This note was fully converted as of December 31, 2020. This note was converted into 350,880
shares of common stock, for a total of $171,229
including principal of 164,800
plus a accrued interest of $6,429.
Also on January 12, 2021 the company issued 697,861shares
of its common stock as redemptions of $27,914
in cashless warrants.
On
July 15, 2020 we entered into a convertible note payable for $128,000, with a maturity date of July 15, 2021, which accrues interest
at the rate of 12% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. This
note was paid in full on October 16, 2020.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001
per share (the “Common Stock”) and
one million 25,000 restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue
discount of $3,000
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.02
per share, subject to adjustment. The shares
were valued on the date of issuance using the stock price on that day for a total value of $19,211.
We also recognized a debt discount of $17,861.
We amortized $14,627
of the debt discount during the six months ended
June 30, 2021. The unamortized debt discount as of March 31, 2022 was $0.
This note was paid in full on January 8, 2021.
On
September 10, 2020 we entered into a convertible note payable for $63,000, with a maturity date of July 15, 2021, which accrues interest
at the rate of 11% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. This
note was paid in full on January 15, 2021.
On
October 14, 2020 Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the
“Securities Purchase Agreement”) with Firstfire Global Opportunities Fund LLC, (the “Investor”), pursuant to
which the Company issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of
$168,000,
a Warrant (the “Warrant”) to purchase 37,500 shares
of the Company’s common stock, par value $.001 per
share (the “Common Stock”) and 31,250 restricted
shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount of $8,000 with
interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.80 per
share, subject to adjustment. The shares were valued on the date of issuance using the stock price on that day for a total value of
$24,282.
We also recognized a debt discount of $24,282.
We amortized $19,093 of
the debt discount during the three months ended March 31, 2021. The unamortized debt discount as of March 31, 2022 was $0.
On January 29, 2021 this note was paid in full. Also on January 12, 2021 the company issued 17,447 shares
of its common stock as redemptions of $27,914 in
cashless warrants.
On
November 10, 2020 we entered into a convertible note payable for $53,000, with a maturity date of November 10, 2021, which accrues interest
at the rate of 11% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. On
February 11, 2021 this note was paid in full.
On
December 18, 2020 we entered into a convertible note payable for $83,500, with a maturity date of December 18, 2021, which accrues interest
at the rate of 11% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. On
March 11, 2021 this note was paid in full.
On
December 27, 2021, we entered into a convertible note payable with Universal Scope Inc. for $650,000
with a maturity date of June
21, 2022, which accrues interest at the rate
of 2%
per annum. It is convertible at any time after its issuance and has fix conversion rate of $2.40
of our common stock.
On
May 6, 2022, we entered into a Securities Purchase Agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the Company issued
to Mast Hill a $750,000
Convertible Promissory Note, due May
6, 2023 (the “Note”) for a purchase
price of $675,000.00
plus an original issue discount in the amount
of $75,000.00,
and an interest rate of fifteen percent (15%)
per annum. Mast Hill Fund is entitled to purchase 234,375
shares of commons stock per the warrant agreement
at the exercise price of $1.60.
The Securities Purchase Agreement provides customary representations, warranties and covenants
of the Company and Mast Hill as well as providing Mast Hill with registration rights.
On
August 5, 2022, we entered into a Securities Purchase Agreement with Jefferson Street Capital, LLC (Jefferson) pursuant to which the
Company issued to Jefferson a $138,888
Convertible Promissory Note, due August
5, 2023 (the “Note”) for a purchase
price of $125,000.00
plus an original issue discount in the amount
of $13,888.88,
and an interest rate of fifteen percent (15%)
per annum. Jefferson is entitled to purchase 43,403
shares of commons stock per the warrant agreement
at the exercise price of $1.60.
The Securities Purchase Agreement provides customary representations, warranties and covenants
of the Company and Jefferson as well as providing Jefferson with registration rights.
On
August 17, 2022, we entered into a Securities Purchase Agreement with Firstfire Global Opportunities Fund LLC (“Firstfire”)
pursuant to which the Company issued to Mast Hill a $150,000
Convertible Promissory Note, due August
17, 2023 (the “Note”) for a purchase
price of $135,000.00
plus an original issue discount in the amount
of $15,000.00,
and an interest rate of fifteen percent (15%)
per annum. Firstfire is entitled to purchase 46,875
shares of commons stock per the warrant agreement
at the exercise price of $1.60.
The Securities Purchase Agreement provides customary representations, warranties and covenants
of the Company and Firstfire as well as providing Firstfire with registration rights.
On
September 1, 2022, we entered into a Securities Purchase Agreement with Pacific Pier Capital, LLC (Pacific) pursuant to which the Company
issued to Pacific a $138,888
Convertible Promissory Note, due August
5, 2023 (the “Note”) for a purchase
price of $125,000.00
plus an original issue discount in the amount
of $13,888.88,
and an interest rate of fifteen percent (15%)
per annum. Pacific is entitled to purchase 43,403
shares of commons stock per the warrant agreement
at the exercise price of $1.60.
The Securities
Purchase Agreement provides customary representations, warranties and covenants of the Company and Pacific as well as providing Pacific
with registration rights.
On
September 16, 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 $300,000
Convertible Promissory Note, due September
16, 2023 (the “Note”) for a purchase
price of $270,000.00
plus an original issue discount in the amount
of $30,000.00,
and an interest rate of fifteen percent (15%)
per annum. Mast Hill Fund is entitled to purchase 93,750
shares of commons stock per the warrant agreement
at the exercise price of $1.60.
The Securities Purchase Agreement provides customary representations, warranties and covenants
of the Company and Mast Hill as well as providing Mast Hill with registration rights.
Total
due to Convertible Notes
SCHEDULE OF CONVERTIBLE NOTES
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Total convertible notes | |
$ | 2,301,053 | | |
$ | 1,109,890 | |
Accrued Interest | |
| 194,105 | | |
| 110,370 | |
Debt Discount | |
| (437,044 | ) | |
| (26,919 | ) |
Total | |
$ | 2,495,158 | | |
$ | 1,193,341 | |
Note
10 – Derivative Liabilities
As
a result of the convertible notes we recognized the embedded derivative liability on the date of note issuance. We also revalued the
remaining derivative liability on the outstanding note balance on the date of the balance sheet. We value the derivative liability using
a binomial lattice model with an expected volatility range of 70%
to 84%,
a risk-free interest rate range of 0.15%,
an exercise price range of $.98
to $1.032
and a stock price of $1.32.
The remaining derivative liabilities were:
SCHEDULE OF FAIR VALUE OF DERIVATIVE LIABILITY
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Derivative Liabilities on Convertible Loans: | |
| | | |
| | |
Outstanding Balance | |
$ | 269,663 | | |
$ | 256,683 | |
NOTE
11 – COMMITMENTS AND CONTINGENCIES
Operating
Rental Leases
As
of May 1, 2017, our corporate headquarters are located at 2990 Redhill Unit A, Costa Mesa, CA. On March 10, 2017, the Company signed
a lease agreement for a 18,200-square foot CTU Industrial Building. Lease term is seven years and two months beginning July 1, 2017.
Future minimum lease payments for the years ending December 31, are: In October of 2018 we signed a sublease agreement with our facility in Italy with an indefinite term that may be terminated by either party with a 60-day notice for 1,000 Euro per month. Due to the short termination clause, we are treating this as a month-to-month lease.
As
of September 30, 2022
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
| | |
| |
Year | | |
Lease Payment | |
2022 | | |
| 61,922 | |
2023 | | |
| 191,903 | |
Imputed Interest | | |
| (7,024 | ) |
Net Lease Liability | | |
$ | 246,801 | |
Our
lease expense for the nine months ended September 30, 2022, and 2021 was $260,262 and $254,708 respectively.
ASB
ASU 2016-02 “Leases (Topic 842)” – In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize
almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained
a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely
similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current
model, but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We have adopted the above ASU
as of January 1, 2019. The right of use asset and lease liability have been recorded at the present value of the future minimum lease
payments, utilizing a 5% average borrowing rate and the company is utilizing the transition relief and “running off” on current
leases.
Severance
Benefits
Mr.
Mahdi will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Mahdi would have been entitled
to receive through the remainder or the Employment Period or One (1) year, whichever is greater.
NOTE
12 – CAPITAL STOCK TRANSACTIONS
On
April 21, 2005, our Board of Directors and shareholders approved the re-domicile of the Company in the State of Nevada, in connection
with which we increased the number of our authorized common shares to 200,000,000 and designated a par value of $.001 per share.
On
May 25, 2006, our Board of Directors and shareholders approved an amendment to our Articles of Incorporation to authorize a new series
of preferred stock, designated as Series C, and consisting of 15,000 authorized shares.
On
June 30, 2017, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 400,000,000
and in the number of our authorized preferred shares to 10,000,000. The amendment effecting the increase in our authorized capital was
filed and effective on July 5, 2017.
On
August 28, 2018, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 800,000,000.
The amendment effecting the increase in our authorized capital was filed and effective on August 23, 2018.
On
June 10, 2019, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 2,000,000,000.
The amendment effecting the increase in our authorized capital was effective on September 27, 2019
Common
Stock Transactions
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001
per share (the “Common Stock”) and
25,000 restricted shares of Common Stock (“Commitment fee Shares”). On December 31, 2020 this note was converted into
350,880
shares of common stock, for a total of $171,229
including principal of 164,800
plus a accrued interest of $6,429
as a result this note was paid in full. Also
on January 12, 2021 the company issued 17,447
shares of its common stock as redemptions
of $27,914
in cashless warrants.
On
July 23, 2020 we issued 75,000
shares of our common stock at a price of
$1.60
per share, in exchange for the conversion
of 1,200
shares of our Series D Preferred Stock.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001
per share (the “Common Stock”) and
25,000 restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount of
$3,000
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.80
per share, subject to adjustment. The shares
were valued on the date of issuance using the stock price on that day for a total value of $19,211.
We also recognized a debt discount of $17,861.
We amortized $14,627
of the debt discount during the six months ended
June 30, 2021. The unamortized debt discount as of March 31, 2022 was $0.
This note was paid in full on January 8, 2021. Also on February 5, 2021 the company issued 27,500
shares of its common stock as redemptions
of $44,000
in cashless warrants.
On
October 14, 2020 Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with Firstfire Global Opportunities Fund LLC, (the “Investor”), pursuant to which the Company
issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of $168,000,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001
per share (the “Common Stock”) and
31,250
restricted shares of Common Stock (“Commitment
fee Shares”). These shares were issued on February 1, 2021 and 13,687
shares were issued as a result of exercise
of the warrants on May 28, 2021. This note was paid in full as of January 29, 2021.
On
February 5, 2021 we issued 75,000
shares of our common stock at a price of
$3.20
per share, in exchange for the conversion
of 1,200
shares of our Series D Preferred Stock.
On
February 9, 2021 we issued 56,892
shares of our common stock share, in exchange
for the conversion of $182,052
of accrued dividend for the series D Preferred
Stock.
On
February 9, 2021 we issued 50,000
shares of our common stock at a price of
$1.60
per share, in exchange for the conversion
of 800
shares of our Series D Preferred Stock.
On
February 23, 2021 we issued 93,868
of common stock at a purchase price of $0.56
per share and 93,868
of warrant at purchase price of 1.60
for an aggregate price of $52,566
to an accredited investor in a private sale.
An additional 907
shares were issued as a result of a correction
made to the original transaction.
On
March 5, 2021 we issued 208,333
of common stock at a purchase price of $2.40
per share for an aggregate price of $500,000
to an accredited investor in a private sale.
On
March 10, 2021 we issued 803,125
units of common stock at a purchase price
of $3.20
per share for an aggregate price of $2,570,000
to an accredited investor in a private sale.
On
March 12, 2021 we issued 40,625
shares and 51,715
of our common stock at a price of $3.20
per share, in exchange for the conversion
of 650
shares of our Series D Preferred Stock and 165,487
of accrued dividend for the series D preferred
stock.
On
September 2, 2021, Clean Energy Technology, Inc., a Nevada corporation (the
“Company”), entered into an Equity Financing Agreement (“Equity Financing Agreement”) and Registration Rights
Agreement (“Registration Rights Agreement”) with GHS Investments LLC, a Nevada limited liability company (“GHS”).
Under the terms of the Equity Financing Agreement, GHS agreed to provide the Company with up to $4,000,000
upon
effectiveness of a registration statement on Form S-1 (the “Registration Statement”) filed with the U.S. Securities and Exchange
Commission (the “Commission”) As a result we issued 28,562
Shares
of common stock as an commitment fee, which was valued and expense in the amount of $47,699.
On October 14, 2021, this Form S-1 became effective.
On
September 13, 2021 we issued 27,516
shares of common stock for a correction of a previous issuance
error.
During
the year ended December 31, 2021, we issued 246,052
shares of common stock, under S-1 registration
statement with GHS for a total of $294,016
in net proceeds and expensed $96,334
in legal and financing fees as a result.
On
December 31, 2021 we issued 245,844
shares of our common stock under our Reg A offering at $3.20
per share. These shares are unrestricted
and free trading.
During
the quarter ended March 31, 2022, we issued 78,897
shares of common stock, under S-1 registration
statement with GHS for a total of $134,755
in net proceeds and expensed $45,498
in legal and financing fees as a result.
On
February 21, 2022, we issued 375,875
shares of our common stock under our Reg A offering at $3.20
per share. These shares are unrestricted
and free trading.
During
the April of 2022, we issued 122,891
shares of common stock, under S-1 registration
statement with GHS for a total of $153,324
in net proceeds and expensed $34,500
in legal and financing fees as a result.
On September 21, 2022 MGW I converted $1,548,904
from the outstanding balance of their convertible note into 12,907,534
shares of company’s common stock.
Common
Stock
Our
Articles of Incorporation authorize us to issue 2,000,000,000
shares of common stock, par value $0.001
per share. As of Sept 30, 2022 there were 37,074,432
shares of common stock outstanding. All outstanding
shares of common stock are, and the common stock to be issued will be, fully paid and non-assessable. Each share of our common stock
has identical rights and privileges in every respect. The holders of our common stock are entitled to vote upon all matters submitted
to a vote of our shareholders and are entitled to one vote for each share of common stock held. There are no cumulative voting rights.
The
holders of our common stock are entitled to share equally in dividends and other distributions that our Board of Directors may declare
from time to time out of funds legally available for that purpose, if any, after the satisfaction of any prior rights and preferences
of any outstanding preferred stock. If we liquidate, dissolve or wind up, the holders of common stock shares will be entitled to share
ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities and our
obligations to holders of our outstanding preferred stock.
Preferred
Stock
Our
Articles of Incorporation authorize us to issue 20,000,000 shares of preferred stock, par value $0.001 per share. Our Board of Directors
has the authority to issue additional shares of preferred stock in one or more series, and fix for each series, the designation of and
number of shares to be included in each such series. Our Board of Directors is also authorized to set the powers, privileges, preferences,
and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or
restrictions of the shares of each such series.
Unless
our Board of Directors provides otherwise, the shares of all series of preferred stock will rank on parity with respect to the payment
of dividends and to the distribution of assets upon liquidation. Any issuance by us of shares of our preferred stock may have the effect
of delaying, deferring or preventing a change of our control or an unsolicited acquisition proposal. The issuance of preferred stock
also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect
the rights and powers, including voting rights, of the holders of common stock.
We
previously authorized 440 shares of Series A Convertible Preferred Stock, 20,000 shares of Series B Convertible Preferred Stock, and
15,000 shares Series C Convertible Preferred Stock. As of August 20, 2006, all series A, B, and C preferred had been converted into common
stock.
Effective
August 7, 2013, our Board of Directors designated a series of our preferred stock as Series D Preferred Stock, authorizing 15,000 shares.
Our Series D Preferred Stock offering terms authorized us to raise up to $1,000,000 with an over-allotment of $500,000 in multiple closings
over the course of six months. We received an aggregate of $750,000 in financing in subscription for Series D Preferred Stock, or 7,500
shares.
The
following are primary terms of the Series D Preferred Stock. The Series D Preferred holders were initially entitled to be paid a special
monthly divided at the rate of 17.5% per annum. Initially, the Series D Preferred Stock was also entitled to be paid special dividends
in the event cash dividends were not paid when scheduled. If the Company does not pay the dividend within five (5) business days from
the end of the calendar month for which the payment of such dividend to owed, the Company will pay the investor a special dividend of
an additional 3.5%. Any unpaid or accrued special dividends will be paid upon a liquidation or redemption. For any other dividends or
distributions, the Series D Preferred Stock participates with common stock on an as-converted basis. The Series D Preferred holders may
elect to convert the Series D Preferred Stock, in their sole discretion, at any time after a one year (1) year holding period, by sending
the Company a notice to convert. The conversion rate is equal to the greater of $0.08 or a 20% discount to the average of the three (3)
lowest closing market prices of the common stock during the ten (10) trading day period prior to conversion. The Series D Preferred Stock
is redeemable from funds legally available for distribution at the option of the individual holders of the Series D Preferred Stock commencing
any time after the one (1) year period from the offering closing at a price equal to the initial purchase price plus all accrued but
unpaid dividends, provided, that if the Company gave notice to the investors that it was not in a financial position to redeem the Series
D Preferred, the Company and the Series D Preferred holders are obligated to negotiate in good faith for an extension of the redemption
period. The Company timely notified the investors that it was not in a financial position to redeem the Series D Preferred and the Company
and the investors have engaged in ongoing negotiations to determine an appropriate extension period. The Company may elect to redeem
the Series D Preferred Stock any time at a price equal to initial purchase price plus all accrued but unpaid dividends, subject to the
investors’ right to convert, by providing written notice about its intent to redeem. Each investor has the right to convert the
Series D Preferred Stock at least ten (10) days prior to such redemption by the Company.
In
connection with the subscriptions for the Series D Preferred, we issued series F warrants to purchase an aggregate of 9,375
shares of our common stock at $4.00
per share and series G warrants to purchase
an aggregate of 9,375
shares of our common stock at $8.00
per share.
On
August 21, 2014, a holder holding 5,000 shares of Preferred Series D Preferred agreed to lower the dividend rate to 13% on its Series
D Preferred. In September 2015, all holders of Series D Preferred signed and delivered estoppel agreements, whereby the holders agreed,
among other things, that the Series D Preferred was not in default and to reduce (effective as of December 31, 2015) the dividend rate
on the Series D Preferred Stock to six percent per annum and to terminate the 3.5% penalty in respect of unpaid dividends accruing on
or after such date.
In
the first quarter of 2019, we signed agreements to issue 100,000
shares of common stock valued at $0.60
for a total value of $60,000
for the conversion of 800
preferred series D shares, which were subsequently
issued.
We
also recorded a $60,000 commitment fee in exchange for the “stand off” and estoppel agreement and discounted conversion terms
to account for the difference in the fair value which we offset to retained earnings.
On
February 4, 2020 we issued 12,500
shares of our common stock at a price of
$1.60
per share, in exchange for the conversion
of 800
shares of our Series D Preferred Stock.
On
July 23, 2020 we issued 75,000
shares of our common stock at a price of
$1.60
per share, in exchange for the conversion
of 1,200
shares of our Series D Preferred Stock.
On
February 5, 2021 we issued 75,000
shares of our common stock at a price of
$3.20
per share, in exchange for the conversion
of 1,200
shares of our Series D Preferred Stock.
On
February 9, 2021 we issued 56,892
shares of our common stock share, in exchange
for the conversion of $182,052
of accrued dividend for the series D Preferred
Stock.
On
February 9, 2021 we issued 50,000
shares of our common stock at a price of
$1.60
per share, in exchange for the conversion
of 800
shares of our Series D Preferred Stock.
On
March 12, 2021 we issued 92,340
shares of our common stock together with
accrued preferred dividend at a price of $3.20
per share, in exchange for the conversion
of 1300
shares of our Series D Preferred Stock and accrued
preferred dividend.
Warrants
A
summary of warrant activity for the periods is as follows:
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001
per share (the “Common Stock”) and
25,000 restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount of
$4,800
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.80
per share, subject to adjustment. On January
8, 2021, the cashless warrants were converted into 17,447
shares of our common stock.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001
per share (the “Common Stock”) and
25,000 restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount of
$3,000
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.80
per share, subject to adjustment. On February
1, 2021 the cashless warrants were converted into 27,500
shares of our common stock.
On
February 23, 2021 we issued 93,868
of common stock at a purchase price of $0.56
per share and 93,868
of warrant at purchase price of 1.60
for an aggregate price of $52,566
to an accredited investor in a private sale.
An additional 907
shares were issued as a result of a correction
made to the original transaction. These warrants expire on February
23, 2022.
On
May 6, 2022, we issued 234,375
of warrant shares in connection with the
issuance of the promissory note in the principal amount of $750,000.00
to Mast Hill Fund at the exercise price per share
of 1.60.
However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after
the Issuance Date, then the Exercise Price shall equal 120%
of the offering price per share of Common Stock.
On August 5, 2022, we issued 43,403
of warrant shares in connection with the issuance of the promissory note in the principal amount of $138,889
to Jefferson Street at the exercise price per share of 1.60.
However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after
the Issuance Date, then the Exercise Price shall equal 120%
of the offering price per share of Common Stock.
On August 17, 2022, we issued 46,875
of warrant shares in connection with the issuance of the promissory note in the principal amount of $150,000
to First Fire at the exercise price per share of 1.60.
However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after
the Issuance Date, then the Exercise Price shall equal 120%
of the offering price per share of Common Stock.
On September 1, 2022, we issued 43,403
of warrant shares in connection with the issuance of the promissory note in the principal amount of $138,889
to Pacific Pier at the exercise price per share of 1.60.
However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after
the Issuance Date, then the Exercise Price shall equal 120%
of the offering price per share of Common Stock.
On September 16, 2022, we issued 93,750
of warrant shares in connection with the issuance of the promissory note in the principal amount of $300,000
to Mast Hill Fund at the exercise price per share of 1.60.
However, that if the Company consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after
the Issuance Date, then the Exercise Price shall equal 120%
of the offering price per share of Common Stock.
SCHEDULE
OF WARRANT ACTIVITY
| | |
Warrants - Common Share Equivalents | | |
Weighted Average Exercise price | | |
Warrants exercisable - Common Share Equivalents | | |
Weighted Average Exercise price | |
Outstanding December 31, 2021 | | |
| 218,868 | | |
$ | 1.60 | | |
| 218,868 | | |
$ | 1.60 | |
Expired | | |
| 93,868 | | |
| | | |
| 93,868 | | |
| 1.60 | |
Exercised | | |
| | | |
| | | |
| | | |
| | |
Issued | | |
| 461,806 | | |
| | | |
| | | |
| | |
Outstanding September 30, 2022 | | |
| 586,805 | | |
$ | 1.60 | | |
| 125,000 | | |
$ | 1.60 | |
Stock
Options
We
currently have no outstanding stock options.
NOTE
13 – RELATED PARTY TRANSACTIONS
Kambiz
Mahdi, our Chief Executive Officer, owns Billet Electronics, which is distributor of electronic components. From time to time, we purchase
parts from Billet Electronics. In addition, Billet was a supplier of parts and had dealings with current and former customers of the
Company prior to joining the company. The amount of parts purchases in the 3rd quarter of 2022 was $9,351.
Our Board of Directors has approved the transactions
between Billet Electronics and the Company.
On
November 2, 2016, we effected the repayment of the convertible note dated March 15, 2016 for an aggregate amount of $84,000.
Concurrently, we entered into an Escrow Funding Agreement with Red Dot Investment, Inc., a California corporation (“Reddot”),
pursuant to which Reddot deposited funds into escrow to fund the repayment and we assigned to Reddot our right to acquire the convertible
note and Reddot acquired the convertible note. Concurrently, we and Reddot amended the convertible note (a) to have a fixed conversion
price of $.20
per share, subject to potential further adjustment
in the event of certain Common Stock issuances, (b) to have a fixed interest rate of ten percent (10%)
per annum with respect to both the redemption amount and including a financing fee and any costs, expenses, or other fees relating to
the convertible note or its enforcement and collection, and any other expense for or on our account (in each case with a minimum 10%
yield in the event of payoff or conversion within the first year), such amounts to constitute additional principal under the convertible
note, as amended, and (c) as otherwise provided in the Escrow Funding Agreement. The March 2016 convertible note, as so amended, is referred
to as the “Master Note.”
Concurrently
with the foregoing note repayments, we entered into a Credit Agreement and Promissory Note (the “Credit Agreement”) with
Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation (“MW I”), pursuant to which
MW I deposited funds into escrow to fund the repayment of the convertible notes and we assigned to MW I our right to acquire the convertible
notes and otherwise agreed that MW I would be subrogated to the rights of each note holder to the extent a note was repaid with funds
advanced by MW I. Concurrently, MW I acquired the Master Note and we agreed that all amounts advanced by MG I to or for our benefit would
be governed by the terms of the Master Note, including the payment of a financing fees, interest, minimum interest, and convertibility.
Reddot is MW I’s agent for purposes of administration of the Credit Agreement and the Master Note and advances thereunder.
On
February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $939,500
with an interest rate of 10%
per annum interest rate and a maturity date of February
13, 2020. The CVL Note is convertible into shares
of Common Stock at $0.12
per share, as adjusted as provided therein.
As a result we recognized a beneficial conversion feature of $532,383,
which is amortized over the life of the note. This note was assigned to Mgw Investments and they agreed
not to convert the $939,500
note in to shares
in excess of the 800,000,000
Authorized limit until
we have increased the Authorized shares to the Board approved limit of 2 billion shares.
On
February 8, 2018 the Corporation entered a Convertible Promissory Note in the principal amount of $153,123,
due October 8, 2018, with an interest rate of 12%
per annum payable to MGWI (the “MGWI Note”). The
MGWI Note is convertible into shares of the Corporation’s common stock at the lower of: (i) a 40% discount to the lowest trading
price during the previous twenty (20) trading days to the date of a Conversion Notice; or (ii) 0.12. As a result of the closing of the
transactions contemplated by the Stock Purchase Agreement and Convertible Note Purchase Agreement, the MGWI Note must be redeemed by
the Corporation in an amount that will permit CVL and MGWI and their affiliates to hold 65% of the issued and outstanding Common Stock
of the Corporation on a fully diluted basis. The
proceeds from the MGWI Note were used to redeem the convertible note of the Corporation to JSJ Investments, Inc. in the principal amount
of $103,000
with an interest rate of 12%
per annum, due April 25, 2018. The
MGWI Note was amended on June 21, 2019 to provide for a fixed price conversion of $.12 per share and remove the 9.9% conversion limitation.
Subsequently
on
May 11th this note was amended and the maturity date was extended to October 8, 2023, and the restriction on the conversion
of the note was removed if the holder of this note holds over 9.9% of the Company’s common stock. On June 24, 2021 MGW I converted
$75,000 of the outstanding balance of this note into 625,000 shares of company’s common stock
On
May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell 4,200,000
units (each a “Unit” and together
the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $1,999,200,
or $.476
per Unit, with each unit consisting of one
share of common stock, par value $.001
per share (the “Common Stock”) and
a warrant (the “Warrant”) to purchase one share of common stock. The Common Stock will be issued to MGWI at such time as
the Company increases the number of shares of its authorized Common Stock. The Warrant is exercisable at $1.60
per share of Common Stock and expires one
year from the date of the Agreement.
In
the fourth quarter of 2019 MGW Investment I Limited, advanced $167,975,
with no terms or interest rate. The outstanding
balance on this advance on March 31, 2022 is $167,975
On
March 24, 2021, the Company transferred $500,000
to MGWI, an affiliate of the majority stockholder
of the Company to hold in trust for our investment in two planned ventures in China. The two potential investments are still pending.
On June 24, 2021 MGW I converted $75,000 from the
outstanding balance of their convertible note into 625,000 shares of company’s common stock.
Note
14 - WARRANTY
LIABILITY
For
the quarter ended September 30, 2022, and for the year ended December 31, 2021 there was no change in our warranty liability. We estimate
our warranty liability based on past experiences and estimated replacement cost of material and labor to replace the critical turbine
in the units that are still under warranty.
NOTE
15 – NON-CONTROLLING INTEREST
On
June 24, 2021 the Company formed CETY Capital LLC a wholly owned subsidiary of CETY. In addition, the company established CETY Renewables
Ashfield LLC (“CRA”) a wholly owned subsidiary of Ashfield Renewables Ag Development LLC(“ARA”) with our partner,
Ashfield AG (“AG”). The purpose of the joint venture was for the development of a pyrolysis plant established to convert
woody feedstock into electricity and BioChar by using high temperature ablative fast pyrolysis reactor for which Clean Energy Technology,
Inc. holds the license for. The CRA is located in Ashfield, Massachusetts. Based upon the terms of The members’ agreement, the
CETY Capital LLC owned a 75% interest and AG owned a 25% interest in Ashfield Renewables Ag Development LLC. The agreement with CETY
Renewables Ashfield has been terminated.
The
consolidated financial statements have deconsolidated the CRA business unit. The Liabilities of CRA has been transferred to Vermont
Renewable Gas LLC (“VRG”), a newly formed entity. CETY retains 49% equity in VRG.
NOTE
16 – 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 10% of its annual after-tax profit to the surplus
reserve until such reserve reaches 50% of its respective registered capital based on the FIE’s PRC statutory accounts. Appropriations
to other funds are at the discretion of the BOD for all FIEs. The aforementioned reserves can only be used for specific purposes and
are not distributable as cash dividends. Additionally, shareholders of an FIE are required to contribute capital to satisfy the registered
capital requirement of the FIE. Until such contribution of capital is satisfied, the FIE is not allowed to repatriate profits to its
shareholders, unless otherwise approved by the State Administration of Foreign Exchange.
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 50% of its respective registered capital based on the enterprise’s PRC statutory
accounts. A domestic enterprise is also required to have a discretionary surplus reserve, at the discretion of the BOD, from the profits
determined in accordance with the enterprise’s PRC statutory accounts. Appropriation to such reserve by the Company is based on
profit arrived at under PRC accounting standards for business enterprises for each year. The profit arrived at must be set off against
any accumulated losses sustained by the Company in prior years, before allocation is made to the statutory reserve. The aforementioned
reserves can only be used for specific purposes and are not distributable as cash dividends. Technology was established as domestic enterprises
and therefore are subject to the above-mentioned restrictions on distributable profits.
As
a result of these PRC laws and regulations that require annual appropriations of 10% of after-tax income to be set aside prior to payment
of dividends as general reserve fund, the Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their
net assets to the Company as a dividend.
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 15% of total sales.
NOTE
17 – SUBSEQUENT EVENTS
On
October 25, 2022 the company entered into a promissory note in the amount of $114,850
with and interest rate of 10%
per annum and a default
interest rate of 22% per annum. This note is due
in full on October
25, 2023 and has mandatory monthly payments of
$12,633.50.
The note had an OID of $11,850.00
and recorded as finance fee expense. In the event
of the default, at the option of the Investor, the note may be converted into shares of common stock of the company. This is note is
convertible, but not until a contingent event of default has taken place, none of which have occurred as of November 14, 2022.
The balance on this note as of September 30, 2022 was $114,850.
On November 11, 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 $95,000
Convertible Promissory Note, due November
11, 2023 (the “Note”) for a purchase price of $85,500.00
plus an original issue discount in the amount of $9,500.00,
and an interest rate of fifteen percent (15%)
per annum. Mast Hill Fund is entitled to purchase, 29,688
shares of commons stock per the warrant agreement at the exercise price of $1.60.
The Securities Purchase Agreement provides customary representations, warranties and covenants
of the Company and Mast Hill as well as providing Mast Hill with registration rights.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of Clean Energy Technologies, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Clean Energy Technologies, Inc. and Subsidiaries (“the Company”)
as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ equity, and cash flows for
each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the financial statements).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2021, and 2020 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31,
2021, in conformity with accounting principles generally accepted in the United States of America.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company has an accumulated deficit, net losses, and working capital deficit from operations. These
factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard
to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical
Audit Matters
The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation
for Intangibles from a Business Combination – Refer to Note 1 and Note 6 to the financial statements
Description
of the Critical Audit Matter
As
discussed in Note 6 to the consolidated financial statements, the Company entered into a Conditional Purchase Agreement with Leading
Wave Limited for consideration of $1,500,000 million in cash and contingent 500,000 shares of common stock once certain conditions
have been met. The Company recognizes valuation based on allocation of consideration price to assets less liabilities acquired and intangibles.
Significant judgment is needed in determining the allocation of the remaining acquisition amount between intangible assets acquired.
We
identified the estimation of the identifiable intangible assets and purchase price allocations as a critical audit matter. Auditing management’s
valuation for intangibles was highly judgmental due to significant estimation required to determine the allocation acquisition price
to intangibles acquired in the business combination.
How
the Critical Audit Matter Was Addressed in the Audit
Our
principal audit procedures to evaluate management’s valuation of intangibles from business combination consisted of the following,
among others:
|
● |
Obtaining
an understanding over the Company’s business combinations process, including management’s review of the significant assumptions
and determination of allocation methods utilized. |
|
● |
Testing
the completeness and accuracy of the underlying data used by management. |
|
● |
Evaluating
the reasonableness of the purchase price allocation methodology used by management to determine the allocated value of identifiable
intangible assets acquired. |
|
|
We
have served as the Company’s auditor since 2015. |
|
|
|
Spokane,
Washington |
|
April
15, 2022, except for Note 16, to which the date is January 27, 2023. |
|
Clean
Energy Technologies, Inc.
Consolidated
Balance Sheet
The
accompanying footnotes are an integral part of these financial statements
Clean
Energy Technologies, Inc.
Consolidated
Statement of Operations
for
the years ended December 31,
The
accompanying footnotes are an integral part of these financial statements
Clean
Energy Technologies, Inc.
Consolidated
Statement of Stockholders Equity
December
31, 2021
The
accompanying footnotes are an integral part of these financial statements
Clean
Energy Technologies, Inc.
Consolidated
Statements of Cash Flows
for
the years ended December 31,
The
accompanying footnotes are an integral part of these financial statements
Clean
Energy Technologies, Inc.
Notes
to Consolidated Financial Statements
Notes
1- GENERAL
Corporate
History
With
the vision to combat climate change and creating a better, cleaner and environmentally sustainable future Clean Energy HRS LLC a wholly
owned subsidiary of Clean Energy Technologies, Inc. acquired the assets of Heat Recovery Solutions from General Electric International
on September 11, 2015. The GE HRS asset acquisition and related financing transactions resulted in a change of control of the Company
according to FASB No. 2014-17 Business Combinations (Topic 805). As a result, the transactions qualify as a business combination. In
accordance with Topic 805, the Company elected to apply pushdown accounting, using the valuation date of December 31, 2015. As a result
we recognized $747,976 in goodwill.
General
Electric acquired the rights and 16 global patents to the magnetic bearing technology from Calnetix in October of 2010 and further developed
the next generation of the waste heat generators, which was ultimately acquired by Clean Energy Technologies from GE. We completed our
production facility post the acquisition in October of 2016. We consolidated our legacy and HRS operations and began our production in
early 2017. In early 2018 we engaged with a large institutional equity partner and closed our first round of funding. We are successfully
executing on our business strategy by increasing our market presence and broadening our product portfolio in the heat to power markets.
We’re continuing to design, build and ship products to Europe, US, Canada, South East Pacific regions and planned expansion into
Asia. We are continuing to build a strong back log and pipeline of opportunities while developing the next disruptive heat to power generators
with the support of our new equity partners.
We
have a sales and service center in Europe supporting new sales and existing installations in Europe.
We
have also established a wholly owned subsidiary in Hong Kong for the purpose of acquiring and investing in China’s growing clean
energy markets.
Going
Concern
The
financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets
and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s deficit of $1,702,653 and
a working capital deficit of $4,274,383 and
an accumulated deficit of $17,423,930 as
of December 31, 2021 and used $2,552,547 in
net cash from operating activities for the year ended December 31, 2021. Therefore, there is substantial doubt about the ability of
the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable
operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate
positive cash flow from operations.
Plan
of Operation
Our
marketing approach is to position CETY as a worldwide leader in the heat to power & energy efficiency markets by targeting industries
that have wasted heat which could potentially turn into electricity.
We
are leveraging our proprietary magnetic bearing turbine technology and over 100 installation with 1 million fleet operating to increase
our market share in low to medium temperature waste heat recovery markets.
We
utilize both a direct sales force and global distribution group with expertise in heat recovery solutions and clean energy markets. We
have also established relationships with integrators, consultant and project developers and integrated solution providers.
We
plan to leverage our core expertise to identify, acquire and develop leading clean energy and clean technology solutions and products.
We will continue to utilize our relationships and expertise to expand in clean and renewable energy sector through new in-house development
of disruptive heat to power technologies, acquisitions, cogeneration, and licensing agreements.
CETY
maintains an online presence through our web portal and social media. Our application engineers assist in converting the opportunities
into projects. We provide technical support to our Clean Cycle TM generator clients through providing maintenance and product
support.
The
sales of our products are related to the global prices for oil, gas, coal and solar energy. As prices increase our products produce a
better return on investment for our customers. They are also dependent on regulatory drivers and financial incentives.
CETY
has implemented a new Enterprise Resource planning software by Microsoft providing accurate and timely information to support a more
robust and efficient supply chain. The operational leadership is continually working on lowering the cost of manufacturing and identifying
lower cost regions to support higher margins of our products.
NOTE
2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The
summary of significant accounting policies of Clean Energy Technologies, Inc. (formerly Probe Manufacturing, Inc.) is presented to assist
in the understanding of the Company’s financial statements. The financial statements and notes are representations of the Company’s
management, who is responsible for their integrity and objectivity.
The
consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in
the United States of America (“US GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. All material
intercompany balances and transactions have been eliminated in consolidation.
Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such
estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets,
the collection of accounts receivable and valuation of inventory and reserves.
Cash
and Cash Equivalents
We
maintain the majority of our cash accounts at a commercial bank. The total cash balance is insured by the Federal Deposit Insurance Corporation
(“FDIC”) up to $250,000, (which we may exceed from time to time) per commercial bank. For purposes of the statement of cash
flows we consider all cash and highly liquid investments with initial maturities of one year or less to be cash equivalents.
Accounts
Receivable
Our
ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by us. Reserves for
un-collectable amounts are provided, based on past experience and a specific analysis of the accounts. Although we expect to collect
amounts due, actual collections may differ from the estimated amounts. As of December 31, 2021, and December 31, 2020, we had a reserve
for potentially un-collectable accounts receivable of $75,000
and $75,000.
Our policy for reserves for our long-term financing receivables is determined on a contract-by-contract basis and takes into account
the length of the financing arrangement. As of December 31, 2021, and December 31, 2020, we had a reserve for potentially un-collectable
long-term financing receivables of $247,500
and $247,500
respectively.
Our
trade accounts primarily represent unsecured receivables. Historically, our bad debt write-offs related to these trade accounts have
been insignificant.
Lease
asset
As
of December 31, 2021, and 2020 we had a lease asset that was purchased from General Electric with a value of $1,309,527,
however due the purchase price allocation, we recognized a value of $217,584.
The lease is due to be commissioned in the second quarter of 2022 and will generate approximately $20,000
per month for 120 months. See note 3 for
additional information.
Inventory
Inventories
are valued at the lower of weighted average cost or market value. Our industry experiences changes in technology, changes in market value
and availability of raw materials, as well as changing customer demand. We make provisions for estimated excess and obsolete inventories
based on regular audits and cycle counts of our on-hand inventory levels and forecasted customer demands and at times additional provisions
are made. Any inventory write offs are charged to the reserve account. As of December 31, 2021 and December 31, 2020, we had a reserve
for potentially obsolete inventory of $321,104
and $250,000
respectively.
Property
and Equipment
Property
and equipment are recorded at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value
of the minimum lease payments or the fair market value of the related assets. The cost of ordinary maintenance and repairs is charged
to operations. Depreciation and amortization are computed on the straight-line method over the following estimated useful lives of the
related assets:
SCHEDULE OF PROPERTY AND EQUIPMENT ESTIMATED USEFUL LIVES
Furniture
and fixtures |
|
3
to 7
years |
Equipment |
|
7
to 10
years |
Leasehold
Improvements |
|
7
years |
Long
–Lived Assets
Our
management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long lived
assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment
if any, is measured based on fair value and is charged to operations in the period in which long-lived assets impairment is determined
by management. There can be no assurance however, that market conditions will not change or demand for our services will continue, which
could result in impairment of long-lived assets in the future.
Revenue
Recognition
The
Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC
606”).
Performance
Obligations Satisfied Over Time
FASB
ASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10
An
entity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one
of the following criteria is met:
a.
The customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB
ASC 606-10-55-5 through 55-6).
b.
The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is
created or enhanced (as described in FASB ASC 606-10-55-7).
c.
The entity’s performance does not create an asset with an alternative use to the entity (see FASB ASC 606-10-25-28), and the entity
has an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).
Performance
Obligations Satisfied at a Point in Time
FASB
ASC 606-10-25-30
If
a performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time. To determine the point
in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should
consider the guidance on control in FASB ASC 606-10-25-23 through 25-26. In addition, it should consider indicators of the transfer of
control, which include, but are not limited to, the following:
a.
The entity has a present right to payment for the asset
b.
The customer has legal title to the asset
c.
The entity has transferred physical possession of the asset
d.
The customer has the significant risks and rewards of ownership of the asset
e.
The customer has accepted the asset
The
core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or
services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration
it is entitled to in exchange for the goods and services transferred to the customer. In Addition a) the company also does not have an
alternative use for the asset if the customer were to cancel the contract, and b.) has a fully enforceable right to receive payment for
work performed (i.e., customers are required to pay as various milestones and/or timeframes are met)
The
following five steps are applied to achieve that core principle for our HRS and Cety Europe Divisions:
|
● |
Identify
the contract with the customer |
|
● |
Identify
the performance obligations in the contract |
|
● |
Determine
the transaction price |
|
● |
Allocate
the transaction price to the performance obligations in the contract |
|
● |
Recognize
revenue when the company satisfies a performance obligation |
The
following steps are applied to our legacy engineering and manufacturing division:
|
● |
We
generate a quotation |
|
● |
We
receive Purchase orders from our customers. |
|
● |
We
build the product to their specification |
|
● |
We
invoice at the time of shipment |
|
● |
The
terms are typically Net 30 days |
Also,
from time to time our contracts state that the customer is not obligated to pay a final payment until the units are commissioned, i.e.
a final payment of 10%. As of December 31, 2021 and 2020 we had $33,000 and 33,000 of deferred revenue, which is expected to be recognized
in the third quarter of year 2021.
Also
from time to time we require upfront deposits from our customers based on the contract. As of December 31, 2021 and 2020, we had outstanding
customer deposits of $24,040 and $82,730 respectively.
Fair
Value of Financial Instruments
The
Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements
and Disclosures” for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded
disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or
the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between
market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize
the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the
Company uses to measure fair value:
|
● |
Level
1: Quoted prices in active markets for identical assets or liabilities. |
|
● |
Level
2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets
that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full
term of the related assets or liabilities. |
|
● |
Level
3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets
or liabilities. The Company’s derivative liabilities have been valued as Level 3 instruments. We value the derivative liability
using a lattice model, with a volatility of 56%
and using a risk free interest rate of 0.15% |
The
Company’s financial instruments consist of cash, prepaid expenses, inventory, accounts payable, convertible notes payable, advances
from related parties, and derivative liabilities. The estimated fair value of cash, prepaid expenses, investments, accounts payable,
convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these
instruments.
The
carrying amounts of the Company’s financial instruments as of December 31 2021 and 2020, reflect:
SCHEDULE OF FAIR VALUE OF CONVERTIBLE NOTES DERIVATIVE LIABILITY
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| |
| | | |
| | | |
| | | |
| | |
Fair value of convertible notes derivative liability – December 31, 2020 | |
$ | – | | |
$ | – | | |
$ | 2,008,802 | | |
$ | 2,008,802 | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| |
| | | |
| | | |
| | | |
| | |
Fair value of convertible notes derivative liability – December 31, 2021 | |
$ | – | | |
$ | – | | |
$ | 256,683 | | |
$ | 256,683 | |
The
carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because
of the short-term nature of these financial instruments.
Other
Comprehensive Income
We
have no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.
Net
Profit (Loss) per Common Share
Basic
profit / (loss) per share is computed based on the weighted average number of common shares outstanding. At December 31, 2021, we
had outstanding common shares of 23,589,229 used
in the calculation of basic earnings per share. Basic Weighted average common shares and equivalents at December 31, 2021 and 2020
were 22,519,352 and 19,196,529, respectively.
As of December 31, 2021, we had convertible notes, convertible into approximately 12,071,756 of
additional common shares, and 218,868 common
stock warrants. Fully diluted weighted average common shares and equivalents were 34,188,222 as
of December 31, 2021 and were withheld from the calculation as they were considered anti-dilutive for the year ended December 31,
2021.
Research
and Development
We
had no amounts of research and development R&D expense during the year ended December 31, 2021 and 2020.
Segment
Disclosure
FASB
Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an
enterprise’s reportable segments. The Company has three
reportable segments: Clean Energy HRS (HRS),
CETY Europe and the legacy electronic manufacturing services division. The segments are determined based on several factors, including
the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics.
Refer to note 1 for a description of the various product categories manufactured under each of these segments. As of December 31,
2021, CETY does not consider CETY HK a segment given there’s limited operations and the results are not reviewed separately by
a CODM.
An
operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is
defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include amortization
of intangibles, stock-based compensation, other charges (income), net and interest and other, net.
Selected
Financial Data:
SCHEDULE OF SEGMENT REPORTING
| |
2021 | | |
2020 | |
| |
for
the years ended December 31, | |
| |
2021 | | |
2020 | |
Net
Sales | |
| | | |
| | |
Manufacturing
and Engineering | |
$ | 93,371 | | |
$ | 422,631 | |
Clean
Energy HRS | |
| 1,014,707 | | |
| 930,882 | |
Cety
Europe | |
| 192,361 | | |
| 52,492 | |
Total
Sales | |
$ | 1,300,439 | | |
$ | 1,406,005 | |
| |
| | | |
| | |
Segment
income and reconciliation before tax | |
| | | |
| | |
Manufacturing
and Engineering | |
| (90,328 | ) | |
| 118,412 | |
Clean
Energy HRS | |
| 547,812 | | |
| 581,903 | |
Cety
Europe | |
| 152,923 | | |
| 50,753 | |
Total
Segment income | |
| 610,407 | | |
| 751,068 | |
| |
| | | |
| | |
Reconciling
items | |
| | | |
| | |
General
and Administrative expense | |
| (488,177 | ) | |
| (480,812 | ) |
Salaries | |
| (772,463 | ) | |
| (495,269 | ) |
Travel | |
| (145,170 | ) | |
| (86,292 | ) |
Professional
Fees | |
| (155,241 | ) | |
| (111,318 | ) |
Facility
lease and Maintenance | |
| (346,454 | ) | |
| (363,643 | ) |
Consulting | |
| (243,371 | ) | |
| (157,149 | ) |
Bad
Debt Expense | |
| - | | |
| (259,289 | ) |
Depreciation
and Amortization | |
| (32,292 | ) | |
| (32,912 | ) |
Change
in derivative liability | |
| 1,752,119 | | |
| (1,270,099 | ) |
Gain
/ (Loss) on debt settlement and write down | |
| 868,502 | | |
| 399,181 | |
Interest
and Financing fees | |
| (769,369 | ) | |
| (1,329,230 | ) |
| |
December 31,
2021 | | |
December 31, 2020 | |
Total Assets | |
| | | |
| | |
Manufacturing and Engineering | |
$ | 3,836,405 | | |
$ | 1,922,648 | |
Clean Energy HRS | |
| 2,556,166 | | |
| 2,166,478 | |
Cety Europe | |
| 39,703 | | |
| 34,545 | |
Total Assets | |
$ | 6,432,274 | | |
$ | 4,123,671 | |
Share-Based
Compensation
The
Company has adopted the use of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (SFAS No. 123R)
(now contained in FASB Codification Topic 718, Compensation-Stock Compensation), which supersedes APB Opinion No. 25, “Accounting
for Stock Issued to Employees,” and its related implementation guidance and eliminates the alternative to use Opinion 25’s
intrinsic value method of accounting that was provided in Statement 123 as originally issued. This Statement requires an entity to measure
the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and
stock warrants, based on the fair value of the award, measured at the grant date (with limited exceptions). Under this standard, the
fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black-Scholes
option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets
the requirements of SFAS No. 123R; however, the fair values generated may not reflect their actual fair values, as it does not consider
certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation
is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and
expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility.
For the “risk-free interest rate,” we use the Constant Maturity Treasury rate on 90-day government securities. The term is
equal to the time until the option expires. The dividend yield is not applicable, as the Company has not paid any dividends, nor do we
anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading
common stock, on the grant date calculated using a 20-trading-day average. At the time of grant, the share-based compensation expense
is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates
and the expense is reduced accordingly. It is also adjusted to account for the restricted and thinly traded nature of the shares. The
expense is reviewed and adjusted in subsequent periods if actual attrition differs from those estimates.
We
re-evaluate the assumptions used to value our share-based awards on a quarterly basis and, if changes warrant different assumptions,
the share-based compensation expense could vary significantly from the amount expensed in the past. We may be required to adjust any
remaining share-based compensation expense, based on any additions, cancellations or adjustments to the share-based awards. The expense
is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service
period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the
requisite service. For the year ended December 31, 2021 and 2020 we had $0
in share-based expense, due to the issuance of
common stock. As of December 31, 2021, we had no further non-vested expense to be recognized.
Income
Taxes
Federal
Income taxes are not currently due since we have had losses since inception.
On
December 22, 2018 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant
changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”)
from 35% to 21% effective January 1, 2018. The Company will compute its income tax expense for the year ended December 31, 2021 using
a Federal Tax Rate of 21% and an estimated state of California rate of 9%.
Income
taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under
this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis
of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred
tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.
Deferred
income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax reporting purposes.
As
of December 31, 2021, we had a net operating loss carry-forward of approximately $(8,523,272) and a deferred tax asset of $2,556,982
using the statutory rate of 30%. The deferred tax asset may be recognized in future periods, not to exceed 20 years. However, due to
the uncertainty of future events we have booked valuation allowance of $(2,556,982). FASB ASC 740 prescribes recognition threshold and
measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition. At December 31, 2021 the Company had not taken any tax positions that would require disclosure under FASB
ASC 740.
SCHEDULE OF DEFERRED TAX ASSET
| |
December
31, 2021 | | |
December
31, 2020 | |
Deferred
Tax Asset | |
$ | 2,556,982 | | |
$ | 2,640,529 | |
Valuation
Allowance | |
| (2,556,982 | ) | |
| (2,640,529 | ) |
Deferred
Tax Asset (Net) | |
$ | - | | |
$ | - | |
On
February 13, 2018, Clean Energy Technologies, Inc., a Nevada corporation (the “Registrant” or “Corporation”)
entered into a Common Stock Purchase Agreement (“Stock Purchase Agreement”) by and between MGW Investment I Limited
(“MGWI”) and the Corporation. The Corporation received $907,388 in
exchange for the issuance of 7,561,567 restricted
shares of the Corporation’s common stock, par value $.001 per
share (the “Common Stock”).
On
February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $939,500
with an interest rate of 10%
per annum interest rate and a maturity date of February 13, 2020. The CVL Note is convertible into shares of Common Stock at $0.12
per share, as adjusted as provided therein.
This note was assigned to MGW Investments.
This
resulted in a change in control, which limited the net operating to that date forward. We are subject to taxation in the U.S. and the
states of California. Further, the Company currently has no open tax years’ subject to audit prior to December 31, 2018.
The Company is current on its federal and state tax returns.
Reclassification
Certain
amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications
had no effect on reported income, total assets, or stockholders’ equity as previously reported.
Recently
Issued Accounting Standards
The
Company is reviewing the effects of following recent updates. The Company has no expectation that any of these items will have a material
effect upon the financial statements.
In
June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit
Losses [codified as Accounting Standards Codification Topic (ASC) 326]. ASC 326 adds to US generally accepted accounting principles
(US GAAP) the current expected credit loss (CECL) model, a measurement model based on expected losses rather than incurred losses. Under
this new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in
more timely recognition of such losses. This will become effective in January 2023 and will have minimal impact on the company.
|
● |
Update
2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in
Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.
We are still evaluating the impact of this standard and don’t believe that it will have material impact on this financial
statement. |
NOTE
3 – ACCOUNTS AND NOTES RECEIVABLE
SCHEDULE OF ACCOUNTS AND NOTES RECEIVABLE
| |
December
31, 2021 | | |
December
31, 2020 | |
Accounts
Receivable | |
$ | 748,032 | | |
$ | 340,378 | |
Less
reserve for uncollectable accounts | |
| (75,000 | ) | |
| (75,000 | ) |
Total | |
$ | 673,032 | | |
$ | 265,378 | |
Our
Accounts Receivable is pledged to Nations Interbanc, our line of credit.
SCHEDULE OF LEASE RECEIVABLE ASSET
| |
December
31, 2021 | | |
December
31, 2020 | |
Lease
asset | |
$ | 217,584 | | |
$ | 217,584 | |
The
Company is currently modifying the assets subject to lease to meet the provisions of the agreement, and as of December 31, 2021
any collection on the lease payments was not yet considered probable, resulting in no derecognition of the underlying asset and no net
lease investments recognized on the sales-type lease pursuant to ASC 842-30-25-3.
SCHEDULE OF DERECOGNITION OF UNDERLYING ASSETS OF FINANCING RECEIVABLE
| |
December
31, 2021 | | |
December
31, 2020 | |
Long-term
financing receivables | |
$ | 1,000,000 | | |
$ | 1,000,000 | |
Less
Reserve for uncollectable accounts | |
| (247,500 | ) | |
| (247,500 | ) |
Long-term
financing receivables - net | |
$ | 752,500 | | |
$ | 752,500 | |
On
a contract by contract basis or in response to certain situations or installation difficulties, the Company may elect to allow non-interest
bearing repayments in excess of 1 year. The delay for commissioning has been due to Covid pandemic and engineering delays.
Our
long term financing Receivable are pledged to Nations Interbanc, our line of credit.
NOTE
4 – INVENTORY
Inventories
by major classification were comprised of the following at:
SCHEDULE OF INVENTORIES
| |
December
31, 2021 | | |
December
31, 2020 | |
Inventory | |
$ | 783,296 | | |
$ | 807,820 | |
Less
reserve for uncollectable accounts | |
| (321,104 | ) | |
| (250,000 | ) |
Total | |
$ | 462,192 | | |
$ | 557,820 | |
Our
Inventory is pledged to Nations Interbanc, our line of credit. As of December 31, 2021 inventory consisted of $78,629 of finished
goods, $2,425 of WIP and $381,138 of raw materials.
NOTE
5 – PROPERTY AND EQUIPMENT
Property
and equipment were comprised of the following at:
SCHEDULE OF PROPERTY AND EQUIPMENT
| |
December
31, 2021 | | |
December
31, 2020 | |
Property
and Equipment | |
$ | 1,354,824 | | |
$ | 1,350,794 | |
Leasehold
Improvents | |
| 75,436 | | |
| 75,436 | |
Accumulated
Depreciation | |
| (1,397,244 | ) | |
| (1,372,798 | ) |
Net
Fixed Assets | |
$ | 33,016 | | |
$ | 53,432 | |
Our
Depreciation Expense for the years ended December 31, 2021 and 2020 was $20,406
and $21,035
respectively.
Our
Property Plant and Equipment is pledged to Nations Interbanc, our line of credit.
NOTE
6 – INTANGIBLE ASSETS
Intangible
assets were comprised of the following at:
SCHEDULE OF INTANGIBLE ASSETS
| |
December
31, 2021 | | |
December
31, 2020 | |
Goodwill | |
$ | 747,976 | | |
$ | 747,976 | |
LWL Inatigbles | |
| 1,468,709 | | |
| - | |
License | |
| 354,322 | | |
| 354,322 | |
Patents | |
| 190,789 | | |
| 190,789 | |
Accumulated
Amortization | |
| (75,220 | ) | |
| (63,344 | ) |
Net
Fixed Assets | |
$ | 2,686,576 | | |
$ | 1,229,743 | |
Our
Amortization Expense for the years ended December 31, 2021 and 2020 was $11,877 and 11,877 respectively.
Based
on the foregoing analysis of the facts surrounding the Company’s acquisition of LWL, it is the Company’s position that the
Company is the acquirer of LWL, under the acquisition method of accounting.
As
such, as of November 8, 2021 (the acquisition date), the Company recognized, separately from goodwill, the identifiable assets acquired
and the liabilities assumed in the Business combination.
The
following table presents the purchase price allocation:
SCHEDULE OF BUSINESS ACQUISITION PURCHASE PRICE ALLOCATION
| |
| | |
Consideration: | |
|
Cash and cash equivalents | |
$ | 1,500,000 | |
| |
| | |
Total purchaser consideration | |
$ | 1,500,000 | |
| |
| | |
Assets acquired: | |
| | |
Cash and cash equivalents | |
$ | 6,156 | |
Prepayment | |
$ | 13,496 | |
Other receivable | |
$ | 20,000 | |
Trading Contracts | |
$ | 146,035 | |
Shenzhen Gas Relationship | |
$ | 1,314,313 | |
Total assets acquired | |
$ | 1,508,539 | |
| |
| | |
Liabilities assumed: | |
| | |
Advance Receipts | |
$ | (8539 | ) |
Taxes Payable | |
$ | 179 | |
Net Assets Acquired: | |
$ | 1,500,000 | |
If
LWL reach USD 5 million in revenue or net profit of USD 1 million by December 31, 2022, then based on the performance contingency there
will be issuance of 500,000 shares of CETY to the Seller. As of November 14, 2022, the performance contingencies have not been
met.
NOTE
7 – ACCRUED EXPENSES
SCHEDULE OF ACCRUED EXPENSES
| |
December
31, 2021 | | |
December
31, 2020 | |
Accrued
Wages | |
$ | 22,950- | | |
$ | 25,654 | |
Accrued
Interest and other | |
| 135,662 | | |
| 477,941 | |
Accrued
Interest and other | |
$ | 158,612 | | |
$ | 503,595 | |
NOTE
8 – NOTES PAYABLE
The
Company issued a short-term note payable to an individual, secured by the assets of the Company, dated September 6, 2013 in the amount
of $50,000
and fixed fee amount of $3,500.
As of December 31, 2019, the outstanding balance was $36,500.
On January 30, 2020 we issued 42,500
shares of our common stock at a purchase
price of $.80
per share, as settlement in full of a note
payable of in the amount of $36,500
with accrued interest of $19,721.
As a result, we recognized a gain in the amount of $22,221
in the 1st quarter of 2020.
On
November 11, 2013, we entered into an accounts receivable financing agreement with American Interbanc (now Nations Interbanc). Amounts
outstanding under the agreement bear interest at the rate of 2.5% per month. It is secured by the assets of the Company. In addition,
it is personally guaranteed by Kambiz Mahdi, our Chief Executive Officer. As of December 31, 2020, the outstanding balance was $1,680,350
compared to $1,169,638 at December 31, 2021.
On
September 11, 2015, our CE HRS subsidiary issued a promissory note in the initial principal amount $1,400,000
and assumed a pension liability of $100,000,
for a total liability of $1,500,000,
in connection with our acquisition of the heat recovery solutions, or HRS, assets of General Electric International, Inc., a
Delaware corporation (“GEII”), including intellectual property, patents, trademarks, machinery, equipment, tooling and
fixtures. The note bears interest at the rate of 2.66% per annum. The note is payable on the following schedule: (a) $200,000 in principal on December 31, 2015 and (b) thereafter, the remaining principal amount of $1,200,000, together with interest thereon, payable in equal quarterly instalments of principal and interest of $157,609, commencing on December 31, 2016 and continuing until December 31, 2019, at which time the remaining unpaid principal amount of this note and all accrued and unpaid interest thereon shall be due and payable in full.
Total
Liability to GE
SCHEDULE OF NOTES PAYABLE
| |
December
31, 2021 | | |
December
31, 2020 | |
Note
payable GE | |
$ | 1,200,000 | | |
$ | 1,200,000 | |
Accrued
transition services | |
| 972,233 | | |
| 972,233 | |
Accrued
Interest | |
| 325,843 | | |
| 269,921 | |
Total | |
$ | 2,498,076 | | |
$ | 2,442,154 | |
We
are currently in default on the payment of the purchase price pursuant to our asset purchase agreement with General Electric due to our
belief that we are entitled to a reduction in purchase price we paid due to the misunderstanding of the asset valuation.
On
May 4, 2020 the company entered in to a payroll protection loan, with Comerica bank, guaranteed by the SBA due May 4, 2022
for $110,700, with an interest rate of 1%. This note payment is due in full on May 4, 2022. This note was forgiven on July 1, 2021.
Convertible
notes
On
May 5, 2017 we entered into a nine-month convertible note payable for $78,000,
which accrues interest at the rate of 12%
per annum. It is not convertible until nine months after its issuance and has a conversion rate of ninety one percent (61%)
of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15)
Trading Days immediately preceding the date of conversion. On November 6, 2017 this note was assumed and paid in full at a premium for
a total of $116,600
by Cybernaut Zfounder Ventures. An amended term
were added to the original note with the interest rate of 14%. This note matured on February
21st of 2018 and is currently in default.
As of December 31, 2021, the outstanding balance due was $91,600.
On
May 24, 2017 we entered into a nine-month convertible note payable for $32,000,
which accrues interest at the rate of 12%
per annum. It is not convertible until nine months after its issuance and has a conversion rate of fifty-five eight percent (58%)
of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15)
Trading Days immediately preceding the date of conversion. On November 6, 2017 this note was assumed and paid in full at a premium for
a total of $95,685,
by Cybernaut Zfounder Ventures. An amended term was added to the original note with the interest rate of 14%. This note matured on February
26th, 2018 and is currently in default. As of December 31, 2021, the outstanding balance due was $95,685
On
October 30, 2019 we entered into a convertible note payable for $103,000, with a maturity date of October 30, 2020, which accrues interest
at the rate of 12% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%)
of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. This
note was paid in full on May 1, 2020.
On
January 8, 2020 we entered into a convertible note payable for $103,000, with a maturity date of January 8, 2021, which accrues interest
at the rate of 12% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%)
of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. Subsequently
The fair value of the convertible feature was $87,560, we recorded a debt discount of $87,560. On July 7, 2020 this note was paid in
full.
On
February 19, 2020 we entered into a convertible note payable for $53,000, with a maturity date of February 19, 2021, which accrues interest
at the rate of 12% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%)
of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. On
August 18, 2020 this note was paid in full.
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001
per share (the “Common Stock”) and
25,000
restricted shares of Common Stock (“Commitment
fee Shares”). The Note carried an original issue discount of $4,800
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.80
per share, subject to adjustment. The shares
were valued on the date of issuance using the stock price on that day for a total value of $19,211.
We also recognized a debt discount of $17,861.
We amortized $3,234
of the debt discount during the three months
ended September 30, 2020. The unamortized debt discount as of September 30, 2020 was $14,267.
This note was fully converted as of December 31, 2021. On December 31, 2020 this note was converted into 14,035,202
shares of common stock, for a total of $171,229
including principal of 164,800
plus a accrued interest of $6,429.
Also on January 12, 2021 the company issued 17,447shares
of its common stock as redemptions of $27,914
in cashless warrants.
On
July 15, 2020 we entered into a convertible note payable for $128,000, with a maturity date of July 15, 2021, which accrues interest
at the rate of 12% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%)
of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. This
note was paid in full on October 16, 2020.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001
per share (the “Common Stock”) and
25,000
restricted shares of Common Stock (“Commitment
fee Shares”). The Note carried an original issue discount of $3,000
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.80
per share, subject to adjustment. The shares
were valued on the date of issuance using the stock price on that day for a total value of $19,211.
We also recognized a debt discount of $17,861.
We amortized $3,234
of the debt discount during the three months
ended September 30, 2020. The unamortized debt discount as of December 31, 2020 was $14,267.
Subsequently this note was paid in full on January 8, 2021.
On
September 10, 2020 we entered into a convertible note payable for $63,000, with a maturity date of July 15, 2021, which accrues interest
at the rate of 11% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%)
of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. Subsequently
this note was paid in full on January 15, 2021.
On
October 14, 2020 Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with Firstfire Global Opportunities Fund LLC, (the “Investor”), pursuant to which the Company
issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of $168,000,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001
per share (the “Common Stock”) and
31,250
restricted shares of Common Stock (“Commitment
fee Shares”). The Note carried an original issue discount of $8,000
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.80
per share, subject to adjustment. The shares
were valued on the date of issuance using the stock price on that day for a total value of $24,282.
We also recognized a debt discount of $24,282.
We amortized $5,189
of the debt discount during the three months
ended December 31, 2020. The unamortized debt discount as of December 31, 2020 was $19,093.
Subsequently on January 29, 2021 this note was paid in full. Also on January 12, 2021 the company issued 17,447
shares of its common stock as redemptions
of $27,914
in cashless warrants.
On
November 10, 2020 we entered into a convertible note payable for $53,000, with a maturity date of November 10, 2021, which accrues interest
at the rate of 11% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%)
of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. Subsequently
on February 11, 2021 this note was paid in full.
On
December 18, 2020 we entered into a convertible note payable for $83,500, with a maturity date of December 18, 2021, which accrues interest
at the rate of 11% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%)
of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. As
of March 11, 2020, the un-amortized debt discount was $56,000. The total amortized debt discount expense was $7,000 for the nine months
ended September 30, 2020. Subsequently on March 11, 2021, this note was paid in full.
On
December 27, 2021, we entered into a convertible note payable with Universal Scope Inc. for $650,000 with
a maturity date of June 21, 2022, which accrues interest at the rate of 2%
per annum. It is convertible at any time after its issuance and has fix conversion rate of $2.40 of
our common stock.
Total
due to Convertible Notes
SCHEDULE OF CONVERTIBLE NOTES
| |
December
31, 2021 | | |
December
31, 2020 | |
Total
convertible notes | |
$ | 1,109,890 | | |
$ | 612,355 | |
Accrued
Interest | |
| 110,370 | | |
| 99,509 | |
Debt
Discount | |
| (26,919 | ) | |
| (170,438 | ) |
Total | |
$ | 1,193,341 | | |
$ | 541,426 | |
Note
9 – Derivative Liabilities
As
a result of the convertible notes we recognized the embedded derivative liability on the date of note issuance. We also revalued the
remaining derivative liability on the outstanding note balance on the date of the balance sheet. We value the derivative liability using
a binomial lattice model with an expected volatility range of 39%
to 56%
and a risk-free interest rate of 0.15%
The remaining derivative liabilities were:
SCHEDULE OF FAIR VALUE OF DERIVATIVE LIABILITY
| |
December
31, 2021 | | |
December
31, 2020 | |
Derivative
Liabilities on Convertible Loans: | |
| | | |
| | |
Outstanding
Balance | |
$ | 256,683 | | |
$ | 2,008,802 | |
NOTE
10 – COMMITMENTS AND CONTINGENCIES
The
company has received an invoice from Oberon Securities for $291,767 which is in dispute. The company believes it has defenses to the
claim for compensation and plans to assert appropriate counterclaims and actions as permitted by law. No liability has been recorded
for this claim as the Company believes there is a greater than not probability that our Company will prevail in defending against the
claim.
Operating
Rental Leases
As
of May 1, 2017, our corporate headquarters are located at 2990 Redhill Unit A, Costa Mesa, CA. On March 10, 2017, the Company signed
a lease agreement for a 18,200-square
foot CTU Industrial Building. Lease term is seven years and two months beginning July 1, 2017. In October of 2018 we signed a sublease agreement with our facility in Italy with an indefinite term that may be terminated by either party with a 60-day notice for 1,000 Euro per month. Due to the short termination clause, we are treating this as a month-to-month lease. Future minimum lease payments for the years ending December 31, 2022 and 2023 are:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
Year | |
Lease
Payment | |
2022 | |
| 249,132 | |
2023 | |
| 191,903 | |
Imputed
Interest | |
| (19,792 | ) |
Net
Lease Liability | |
$ | 421,243 | |
Our
lease expense for the years ended December 31, 2020 and 2021 was $363,643
and $346,454
respectively.
ASB
ASU 2016-02 “Leases (Topic 842)” – In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize
almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained
a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely
similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current
model, but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We have adopted the above ASU
as of January 1, 2019. The right of use asset and lease liability have been recorded at the present value of the future minimum lease
payments, utilizing a 5% average borrowing rate and the company is utilizing the transition relief and “running off” on current
leases.
Severance
Benefits
Mr.
Mahdi will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Mahdi would have been entitled
to receive through the remainder or the Employment Period or One (1) year, whichever is greater.
Mr.
Bennett will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Bennett would have been
entitled to receive through the remainder or the Employment Period or One (1) year, whichever is greater. Subsequently on March
9, 2020, John Bennett notified Clean Energy Technologies, Inc. (the “Company”) of his resignation from his position as the
Company’s Chief Financial Officer, effective March 9, 2020. Mr. Bennett will remain as a consultant to the Company and assist with
maintaining the financial books and records of the Company. As a result, Mr. Bennett is no longer entitled to any severance benefits.
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 200,000,000 and designated a par value of $.001 per share.
On
May 25, 2006, our Board of Directors and shareholders approved an amendment to our Articles of Incorporation to authorize a new series
of preferred stock, designated as Series C, and consisting of 15,000 authorized shares.
On
June 30, 2017, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 400,000,000
and in the number of our authorized preferred shares to 10,000,000. The amendment effecting the increase in our authorized capital was
filed and effective on July 5, 2017.
On
August 28, 2018, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 800,000,000.
The amendment effecting the increase in our authorized capital was filed and effective on August 23, 2018.
On
June 10, 2019, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 2,000,000,000.
The amendment effecting the increase in our authorized capital was effective on September 27, 2019
Common
Stock Transactions
On
January 21, 2020 our Registration Statement on Form 1-A was qualified with the Securities and Exchange Commission, under which we
may offer up to 300,000,000 shares
of our common stock at a purchase price of $1.20 per
share. As of the date hereof, 113,083 shares
of common stock have been issued thereunder.
On
January 30, 2020 we issued 42,500 shares
of our common stock at a purchase price of $0.80 per
share, as settlement in full of a note payable of in the amount of $36,500 with
accrued interest of 19,721.
As a result we recognized a gain in the amount of $22,221 in
the 1st quarter of 2020.
On
February 3, 2020 we issued 92,250
shares of our common stock under our Reg
A offering at $1.20
per share. These shares are unrestricted
and free trading.
On
February 4, 2020 we issued 50,000 shares
of our common stock at a price of $1.60 per
share, in exchange for the conversion of 800 shares
of our Series D Preferred Stock.
On
March 17, 2020 we issued 20,833 shares
of our common stock under our Reg A offering at $1.20 per
share. These shares are unrestricted and free trading.
On
June 8, 2020, Clean Energy Technology, Inc., a Nevada corporation (the
“Company”), entered into an Equity Financing Agreement (“Equity Financing Agreement”) and Registration
Rights Agreement (“Registration Rights Agreement”) with GHS Investments LLC, a Nevada limited liability company
(“GHS”). Under the terms of the Equity Financing Agreement, GHS agreed to provide the Company with up to $2,000,000 upon
effectiveness of a registration statement on Form S-1 (the “Registration Statement”) filed with the U.S. Securities and
Exchange Commission (the “Commission”) As a result we issued 19,113 Shares
of common stock as an commitment fee, which was valued and expense in the amount of $10,000.
On July 23, 2020, this Form S-1 became effective.
During
the year ended December 31, 2020 we issued 564,307 shares
of common stock, under S-1 registration statement with GHS for a total of $321,951 in
net proceeds and expensed $171,794 in
legal and financing fees as a result.
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001
per share (the “Common Stock”) and
25,000
restricted shares of Common Stock (“Commitment
fee Shares”). On December 31, 2020 this note was converted into 350,880
shares of common stock, for a total of $171,229
including principal of 164,800
plus a accrued interest of $6,429.
Also on January 12, 2021 the company issued 17,447
shares of its common stock as redemptions
of $27,914
in cashless warrants.
On
July 23, 2020 we issued 75,000
shares of our common stock at a price of
$1.60
per share, in exchange for the conversion
of 1,200
shares of our Series D Preferred Stock.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001
per share (the “Common Stock”) and
25,000 restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount of
$3,000
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.02
per share, subject to adjustment. The shares
were valued on the date of issuance using the stock price on that day for a total value of $19,211.
We also recognized a debt discount of $17,861.
We amortized $3,234
of the debt discount during the three months
ended September 30, 2020. The unamortized debt discount as of December 31, 2020 was $14,267.
Subsequently this note was paid in full on January 8, 2021.
On
October 14, 2020 Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the
“Securities Purchase Agreement”) with Firstfire Global Opportunities Fund LLC, (the “Investor”), pursuant to
which the Company issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of
$168,000, a Warrant (the “Warrant”) to purchase 37,500 shares
of the Company’s common stock, par value $.001 per
share (the “Common Stock”) and 31,250 restricted
shares of Common Stock (“Commitment fee Shares”).
These
shares were issued on February 1, 2021, and 13,387 shares
were issued as a result of exercise of the warrants on May 28, 2021. This note was paid in full as of January 29, 2021.
On
February 5, 2021 we issued 75,000
shares of our common stock at a price of
$3.08
per share, in exchange for the conversion
of 1,200
shares of our Series D Preferred Stock.
On
February 9, 2021 we issued 56,892 shares
of our common stock share, in exchange for the conversion of $182,052 of
accrued dividend for the series D Preferred Stock.
On
February 9, 2021 we issued 50,000
shares of our common stock at a price of
$1.60
per share, in exchange for the conversion
of 800
shares of our Series D Preferred Stock.
On
February 23, 2021 we issued 93,868 of
common stock at a purchase price of $.56 per
share and 93,868 of
warrant at purchase price of 1.60 for
an aggregate price of $52,566 to
an accredited investor in a private sale. An additional 36,283 shares
were issued as a result of a correction made to the original transaction.
On
March 5, 2021 we issued 208,333 of
common stock at a purchase price of $2.40 per
share for an aggregate price of $500,000 to
an accredited investor in a private sale.
On
March 10, 2021 we issued 803,125 units
of common stock at a purchase price of $3.20 per
share for an aggregate price of $2,570,000 to
an accredited investor in a private sale.
On
March 12, 2021 we issued 40,625 shares
and 51,715 of
our common stock at a price of $3.20 per
share, in exchange for the conversion of 650 shares
of our Series D Preferred Stock and 165,487 of
accrued dividend for the series D preferred stock.
On
May 28, 2021 we issued 13,687 shares
for warrant conversion from a previous note holder.
On
June 16, 2021 we issued 907 for
previously share issued correction.
On
September 2, 2021, Clean Energy Technology, Inc., a Nevada corporation (the
“Company”), entered into an Equity Financing Agreement (“Equity Financing Agreement”) and Registration Rights
Agreement (“Registration Rights Agreement”) with GHS Investments LLC, a Nevada limited liability company (“GHS”).
Under the terms of the Equity Financing Agreement, GHS agreed to provide the Company with up to $4,000,000 upon effectiveness of a registration
statement on Form S-1 (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the “Commission”)
As a result we issued 28,561 Shares
of common stock as an commitment fee, which was valued and expense in the amount of $47,699.
On October 14, 2021, this Form S-1 became effective.
On
September 13, 2021, we issued 27,516 shares
of common stock for a correction of a previous issuance error.
During
the year ended December 31, 2021, we issued 246,052 shares
of common stock, under S-1 registration statement with GHS for a total of $294,016 in
net proceeds and expensed $96,334 in
legal and financing fees as a result.
On
December 31, 2021 we issued 245,844
shares of our common stock under our Reg
A offering at $3.20 per
share. These shares are unrestricted and free trading.
Common
Stock
Our
Articles of Incorporation authorize us to issue 2,000,000,000
shares of common stock, par value $0.001
per share. As of March 1, 2023, there
were 37,178,624
shares of common stock outstanding. All outstanding
shares of common stock are, and the common stock to be issued will be, fully paid and non-assessable. Each share of our common stock
has identical rights and privileges in every respect. The holders of our common stock are entitled to vote upon all matters submitted
to a vote of our shareholders and are entitled to one vote for each share of common stock held. There are no cumulative voting rights.
The
holders of our common stock are entitled to share equally in dividends and other distributions that our Board of Directors may declare
from time to time out of funds legally available for that purpose, if any, after the satisfaction of any prior rights and preferences
of any outstanding preferred stock. If we liquidate, dissolve or wind up, the holders of common stock shares will be entitled to share
ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities and our
obligations to holders of our outstanding preferred stock.
Preferred
Stock
Our
Articles of Incorporation authorize us to issue 20,000,000 shares of preferred stock, par value $0.001 per share. Our Board of Directors
has the authority to issue additional shares of preferred stock in one or more series, and fix for each series, the designation of and
number of shares to be included in each such series. Our Board of Directors is also authorized to set the powers, privileges, preferences,
and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or
restrictions of the shares of each such series.
Unless
our Board of Directors provides otherwise, the shares of all series of preferred stock will rank on parity with respect to the payment
of dividends and to the distribution of assets upon liquidation. Any issuance by us of shares of our preferred stock may have the effect
of delaying, deferring or preventing a change of our control or an unsolicited acquisition proposal. The issuance of preferred stock
also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect
the rights and powers, including voting rights, of the holders of common stock.
We
previously authorized 440 shares of Series A Convertible Preferred Stock, 20,000 shares of Series B Convertible Preferred Stock, and
15,000 shares Series C Convertible Preferred Stock. As of August 20, 2006, all series A, B, and C preferred had been converted into common
stock.
Effective
August 7, 2013, our Board of Directors designated a series of our preferred stock as Series D Preferred Stock, authorizing 15,000 shares.
Our Series D Preferred Stock offering terms authorized us to raise up to $1,000,000 with an over-allotment of $500,000 in multiple closings
over the course of six months. We received an aggregate of $750,000 in financing in subscription for Series D Preferred Stock, or 7,500
shares.
The
following are primary terms of the Series D Preferred Stock. The
Series D Preferred holders were initially entitled to be paid a special monthly divided at the rate of 17.5%
per annum. Initially, the Series D Preferred Stock was also entitled to be paid special dividends in the event cash dividends were not
paid when scheduled. If the Company does not pay the dividend within five (5) business days from the end of the calendar month for which
the payment of such dividend to owed, the Company will pay the investor a special dividend of an additional 3.5%. Any unpaid or accrued
special dividends will be paid upon a liquidation or redemption. For any other dividends or distributions, the Series D Preferred Stock
participates with common stock on an as-converted basis. The Series D Preferred holders may elect to convert the Series D Preferred Stock,
in their sole discretion, at any time after a one year (1) year holding period, by sending the Company a notice to convert. The conversion
rate is equal to the greater of $3.20 or a 20% discount to the average of the three (3) lowest closing market prices of the common stock
during the ten (10) trading day period prior to conversion. The Series D Preferred Stock is redeemable from funds legally available for
distribution at the option of the individual holders of the Series D Preferred Stock commencing any time after the one (1) year period
from the offering closing at a price equal to the initial purchase price plus all accrued but unpaid dividends, provided, that if the
Company gave notice to the investors that it was not in a financial position to redeem the Series D Preferred, the Company and the Series
D Preferred holders are obligated to negotiate in good faith for an extension of the redemption period. The Company timely notified
the investors that it was not in a financial position to redeem the Series D Preferred and the Company and the investors have engaged
in ongoing negotiations to determine an appropriate extension period.
The Company may elect to redeem the Series D Preferred Stock any time at a price equal to initial purchase price plus all accrued but
unpaid dividends, subject to the investors’ right to convert, by providing written notice about its intent to redeem. Each investor
has the right to convert the Series D Preferred Stock at least ten (10) days prior to such redemption by the Company.
In
connection with the subscriptions for the Series D Preferred, we issued series F warrants to purchase an aggregate of 9,375
shares of our common stock at $.40
per share and series G warrants to purchase
an aggregate of 9,375
shares of our common stock at $8.00
per share.
On
August 21, 2014, a holder holding 5,000 shares of Preferred Series D Preferred agreed to lower the dividend rate to 13% on its Series
D Preferred. In September 2015, all holders of Series D Preferred signed and delivered estoppel agreements, whereby the holders agreed,
among other things, that the Series D Preferred was not in default and to reduce (effective as of December 31, 2015) the dividend rate
on the Series D Preferred Stock to six percent per annum and to terminate the 3.5% penalty in respect of unpaid dividends accruing on
or after such date.
In
the first quarter of 2019, we signed agreements to issue 100,000
shares of common stock valued at $0.60
for a total value of $60,000
for the conversion of 800
preferred series D shares, which were subsequently
issued.
We
also recorded a $60,000 commitment fee in exchange for the “stand off” and estoppel agreement and discounted conversion terms
to account for the difference in the fair value which we offset to retained earnings.
On
February 4, 2020 we issued 50,000
shares of our common stock at a price of
$1.60
per share, in exchange for the conversion
of 800
shares of our Series D Preferred Stock.
On
July 23, 2020 we issued 75,000
shares of our common stock at a price of
$1.60
per share, in exchange for the conversion
of 1,200
shares of our Series D Preferred Stock.
On
February 5, 2021 we issued 75,000 shares
of our common stock at a price of $3.20 per
share, in exchange for the conversion of 1,200 shares
of our Series D Preferred Stock.
On
February 9, 2021 we issued 56,892 shares
of our common stock share, in exchange for the conversion of $182,052 of
accrued dividend for the series D Preferred Stock.
On
February 9, 2021 we issued 50,000
shares of our common stock at a price of
$1.60
per share, in exchange for the conversion
of 800
shares of our Series D Preferred Stock.
On
March 12, 2021 we issued 92,340
shares of our series D preferred stock together
with accrued preferred dividend at a price of $3.20
per share, in exchange for the conversion
of 1300
shares of our Series D Preferred Stock and accrued
preferred dividend.
Warrants
A
summary of warrant activity for the periods is as follows:
On
May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell 4,200,00
units (each a “Unit” and together
the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $1,999,200,
or $0.476
per Unit, with each unit consisting of one
share of common stock, par value $.001
per share (the “Common Stock”) and
a warrant (the “Warrant”) to purchase one share of common stock. The Common Stock will be issued to MGWI at such time as
the Company increases the number of shares of its authorized Common Stock. The Warrant is exercisable at $3.20
per share of Common Stock and, which expired
on May 31, 2020.
On
June 10, 2019 we issued 12,500
shares of common stock at $0.80
per share to an accredited investor for an
aggregate price of $10,000
in a private sale. We also issued 12,500
warrants as part of the transaction. Each
Warrant is exercisable at $1.60
per share of Common Stock and which expired
on June 10, 2020.
On
July 18, 2019 we issued 12,500
shares of common stock at $0.80
per share to an accredited investor for an
aggregate price of $10,000
in a private sale. We also issued 12,500
warrants as part of the transaction. Each
Warrant is exercisable at $1.60 per share of Common Stock and expired as of July 18, 2020.
On
September 19, 2019 we entered into a stock purchase agreement for 6,250 units
to an accredited investor a private sale. Each unit consist of one share
of common stock and one warrant to purchase one share of common stock exercisable at $1.60
per share of Common Stock and expired on September 19, 2020.
On
December 5, 2019 we issued 125,000
units to an accredited investor a private
sale. Each unit consist of one share of common stock and one
warrant to purchase one share of common stock
exercisable at $1.60
per share. These warrants expire on December
5, 2020.
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the
“Securities Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company
issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of $164,800,
a Warrant (the “Warrant”) to purchase 37,500 shares
of the Company’s common stock, par value $.001 per
share (the “Common Stock”) and 25,000 restricted
shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount of $4,800 with
interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.80 per
share, subject to adjustment. On January 8, 2021, the cashless warrants were converted into 17,446 shares
of our common stock.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000,
a Warrant (the “Warrant”) to purchase 37,500
shares of the Company’s common stock,
par value $.001 per share (the “Common Stock”) and 25,000
restricted shares of Common Stock (“Commitment
fee Shares”). The Note carried an original issue discount of $3,000
with interest of 8%
per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any time into the Common Stock at
a conversion price equal to $0.80
per share, subject to adjustment. On February
1, 2021 the cashless warrants were converted into 27,500
shares of our common stock.
On
February 23, 2021 we issued 93,868 of
common stock at a purchase price of $0.56 per
share and 93,868 of
warrant at purchase price of 1.60 for
an aggregate price of $52,566 to
an accredited investor in a private sale. An additional 907 shares
were issued as a result of a correction made to the original transaction. The weighted average life remaining in the table below is
approximately 1 year.
SCHEDULE OF WARRANT ACTIVITY
| |
Warrants
- Common Share Equivalents | | |
Weighted
Average Exercise price | | |
Warrants
exercisable - Common Share Equivalents | | |
Weighted
Average Exercise price | |
Outstanding
December 31, 2020 | |
| 237,500 | | |
$ | 1.60 | | |
| 237,500 | | |
$ | 1.60 | |
Additions | |
| 93,868 | | |
| | | |
| 93,868 | | |
| 1.60 | |
Exercised | |
| 112,500 | | |
| | | |
| 112,500 | | |
| | |
Outstanding
December 31, 2021 | |
| 218,868 | | |
$ | 1.60 | | |
| 218,868 | | |
$ | 1.60 | |
Stock
Options
We
currently have no outstanding stock options
NOTE
12 – RELATED PARTY TRANSACTIONS
Kambiz
Mahdi, our Chief Executive Officer, owns Billet Electronics, which is distributor of electronic components. From time to time, we purchase
parts from Billet Electronics. In addition, Billet was a supplier of parts and had dealings with current and former customers of the
Company prior to joining the company. The amount of parts purchases in 2021 was $10,241. Our Board of Directors has approved the
transactions between Billet Electronics and the Company.
Pursuant
to our 2017 Stock Compensation Program, effective July 1, 2017, we made the following stock option grants to members of our Board of
Directors: (a) we issued to each of our non-employee members of our Board of Directors first joining the Board in October 2015 and who
had not received any compensation for serving as directors of the Company (five persons) options to purchase 3,750
shares of our common stock with an exercise
price of $1.20
per share, the last sale price of our common
stock on June 29, 2017 and (b) we issued to each of our non-employee members of our Board of Directors currently serving on the Board
(six persons) options to purchase 7,500
shares of our common stock with an exercise
price of $1.20
per share. On the non-employee board members
resigned, as disclosed in our 8K filed on February 15, 2018. As a result, all remaining stock options were cancelled.
On
November 2, 2016, we effected the repayment of the convertible note dated March 15, 2016 for an aggregate amount of $84,000.
Concurrently, we entered into an Escrow Funding Agreement with Red Dot Investment, Inc., a California corporation
(“Reddot”), pursuant to which Reddot deposited funds into escrow to fund the repayment and we assigned to Reddot our
right to acquire the convertible note and Reddot acquired the convertible note. Concurrently, we and Reddot amended the convertible
note (a) to have a fixed conversion price of $0.20 per
share, subject to potential further adjustment in the event of certain Common Stock issuances, (b) to have a fixed interest rate of
ten percent (10%)
per annum with respect to both the redemption amount and including a financing fee and any costs, expenses, or other fees relating
to the convertible note or its enforcement and collection, and any other expense for or on our account (in each case with a minimum
10% yield in the event of payoff or conversion within the first year), such amounts to constitute additional principal under the
convertible note, as amended, and (c) as otherwise provided in the Escrow Funding Agreement. The March 2016 convertible note, as so
amended, is referred to as the “Master Note.”
Concurrently
with the foregoing note repayments, we entered into a Credit Agreement and Promissory Note (the “Credit Agreement”) with
Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation (“MW I”), pursuant to which
MW I deposited funds into escrow to fund the repayment of the convertible notes and we assigned to MW I our right to acquire the convertible
notes and otherwise agreed that MW I would be subrogated to the rights of each note holder to the extent a note was repaid with funds
advanced by MW I. Concurrently, MW I acquired the Master Note and we agreed that all amounts advanced by MG I to or for our benefit would
be governed by the terms of the Master Note, including the payment of a financing fees, interest, minimum interest, and convertibility.
Reddot is MW I’s agent for purposes of administration of the Credit Agreement and the Master Note and advances thereunder.
On
February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $939,500
with an interest rate of 10%
per annum interest rate and a maturity date of February
13, 2020. The CVL Note is convertible into shares
of Common Stock at $0.12
per share, as adjusted as provided therein.
As a result we recognized a beneficial conversion feature of $532,383,
which is amortized over the life of the note. This note was assigned to Mgw Investments and they agreed
not to convert the $939,500
note in to shares
in excess of the 800,000,000
Authorized limit until
we have increased the Authorized shares to the Board approved limit of 2 billion shares.
On
February 8, 2018 the Corporation entered a Convertible Promissory Note in the principal amount of $153,123,
due October 8, 2018, with an interest rate of 12%
per annum payable to MGWI (the “MGWI Note”). The
MGWI Note is convertible into shares of the Corporation’s common stock at the lower of: (i) a 40% discount to the lowest trading
price during the previous twenty (20) trading days to the date of a Conversion Notice; or (ii) 0.12. As a result of the closing of the
transactions contemplated by the Stock Purchase Agreement and Convertible Note Purchase Agreement, the MGWI Note must be redeemed by
the Corporation in an amount that will permit CVL and MGWI and their affiliates to hold 65% of the issued and outstanding Common Stock
of the Corporation on a fully diluted basis. The
proceeds from the MGWI Note were used to redeem the convertible note of the Corporation to JSJ Investments, Inc. in the principal amount
of $103,000 with an interest rate of 12%
per annum, due April 25, 2018. The MGWI Note was amended on June 21, 2019 to provide for a fixed price conversion of $0.12
per share and remove the 9.9%
conversion limitation.
Subsequently
on May 11th this note was amended and the maturity date was extended to October 8, 2023, and the restriction on the conversion of the note was removed if the holder of this note holds over 9.9% of the Company’s common
stock. On June 24, 2021, MGW I converted $75,000 of the outstanding balance of this note into 625,000 shares of company’s common stock
On
February 15, 2018 we issued 230,000
at a purchase price of 0.212
per share as additional compensation in the
amount of $48,760
to Ms. Li, Guirong in connection with the settlement
with ETI.
On
October 18, 2018 we entered into an at will employment agreement with Kambiz Mahdi our CEO. This agreement may be terminated at any time.
As part of the agreement Mr. Mahdi was to be issued 500,000
shares of our common stock, as additional
compensation. As a result; for the year ended December 31, 2019 we accrued for and subsequently on February 13, 2019, issued 500,000
shares at a purchase price of $.0131
per share to Mr. Mahdi in the amount of $262,000.
On
May 1, 2019 we entered into an employment agreement with Mr. Bennett, with an annual salary of $175,000. Subsequently on March
9, 2020, John Bennett notified Clean Energy Technologies, Inc. (the “Company”) of his resignation from his position as the
Company’s Chief Financial Officer, effective March 9, 2020. Mr. Bennett will remain as a consultant to the Company and assist with
maintaining the financial books and records of the Company.
On
May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell 4,200,000
units (each a “Unit” and together
the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $1,999,200,
or $0.476
per Unit, with each unit consisting of one
share of common stock, par value $.001
per share (the “Common Stock”) and
a warrant (the “Warrant”) to purchase one share of common stock. The Common Stock will be issued to MGWI at such time as
the Company increases the number of shares of its authorized Common Stock. The Warrant is exercisable at $1.60
per share of Common Stock and expires one
year from the date of the Agreement.
In
the fourth quarter of 2019 MGW Investment I Limited, advanced $167,975,
with no terms or interest rate. The outstanding balance on this advance on December 31, 2021 is $167,975
On
March 24, 2021, the Company transferred $500,000 to MGWI, an affiliate of the majority stockholder of the Company to hold in trust for
our investment in two planned ventures in China. The two potential investments are still pending.
On
June 24, 2021 MGW I converted $75,000 from
the outstanding balance of their convertible note into 625,000 shares
of company’s common stock.
Note
13 - Warranty Liability WARRANTY
LIABILITY
For
the year ended December 31, 2021 and 2020 there was no change in our warranty liability.
We
estimate our warranty liability based on past experiences and estimated replacement cost of material and labor to replace the critical
turbine in the units that are still under warranty.
NOTE
14 – NON-CONTROLLING INTEREST
On
June 24, 2021 the Company formed CETY Capital LLC a wholly owned subsidiary of CETY. In addition the company established CETY Renewables
Ashfield LLC (“CRA”) a wholly owned subsidiary of Ashfield Renewables Ag Development LLC(“ARA”) with our partner,
Ashfield AG (“AG”). The purpose of the joint venture is the development of a pyrolysis plant established to convert woody
feedstock into electricity and BioChar by using high temperature ablative fast pyrolysis reactor for which Clean Energy Technology, Inc.
holds the license for. The CRA is located in Ashfield, Massachusetts. Based upon the terms of the members’ agreement, the CETY
Capital LLC owns a 75% interest and AG owns a 25% interest in Ashfield Renewables Ag Development LLC.
The
consolidated financial statements reflect 100% of the assets and liabilities of CRA and report the current non-controlling interest of
AG. The full results of CRA operations are reflected in the statement of income with the elimination of the non-controlling interest
identified.
NOTE
15 – SUBSEQUENT EVENTS
Investment
On
January 10, 2022 CETY has made an investment in the form of a 12% convertible promissory note with a maturity date of January 10, 2025
in a natural gas pipeline project that is estimated to supply up to 50 million cubic meters per year to a region with a population of
approximately 130k people, and a focus on industrial use. This note shall be convertible directly into shares or equity interest equal
to 15% outstanding equity interest.
On
January 27, March 31, 2022, and April 14 we issued 164,179 shares
of common stock, under S-1 registration statement with GHS for a total of $176,678 in
net proceeds and expensed $70,102 in
legal and financing fees as a result.
On
February 21, 2022 we issued 375,875 shares
of common stock, under Regulation A registration statement a total of $1,202,800 in
net proceeds.
NOTE
16 – REVERSE STOCK SPLIT
On
October 7, 2022, we filed a Definitive Information Statement wherein a majority of our stockholders approved an amendment to our Articles
of Incorporation to: authorized a reverse stock split ranging between a ratio of 1-for-50 and 1-for-125, to be determined by the Board
of Directors prior to the effective time of the amendment to the Articles of Incorporation. On January 18, 2023, Clean Energy Technologies,
In, a Nevada corporation (the “Company”) received approval from FINRA to conduct reverse stock split of the Company’s
issued and outstanding shares of common stock, par value $0.001 per share (the “Common Stock”), at a ratio of one (1) share
of common stock for every forty (40) shares of common stock (the “Reverse Stock Split”). The Company filed an Amendment to
Articles of Incorporation (the “Amendment”) with the Secretary of State of the State of Nevada to effectuate the Reverse
Stock Split on January 9, 2023. On September 26, 2022, the Board of Directors of the Company and approximately 71% of the shareholders
of the Company approved a reverse stock split in the range of 1:10 – 1:125. On January 6, 2023 the reverse split ratio was fixed
at 1:40, by the unanimous vote of the Board of Directors and approval by approximately 71% of the Company’s shareholders. The Reverse
Stock Split was effective as of the opening of trading on January19, 2023 (the “Effective Time”) and the Company’s
common stock continued trading on the OTCQB market on a post-split basis when the market opened on January 19, 2023 under the symbol
“CETYD” for 20 days after which time the symbol will revert to “CETY.” Fractional shares will not be issued and
the final number of shares will be rounded up to the next whole share.
The
company effected a 1-for-40 reverse split on Jan 19, 2023. All per-share references throughout the offering are presented on a
post-split basis.
___________
Shares of Common Stock
CLEAN
ENERGY TECHNOLOGIES, INC.
PROSPECTUS
CRAFT CAPITAL
MANAGEMENT LLC |
R.F.
Lafferty & Co., Inc. |
________,
2023
Through and including (the 25th day after the
date of this prospectus), all dealers that effect transactions in our shares of common stock, whether or not participating in this offering,
may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus
when acting as an underwriter and with respect to unsold allotments or subscriptions.
PART
II
INFORMATION
NOT REQUIRED IN A PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
The
following table sets forth the costs and expenses, other than the underwriting discounts and commissions, payable by the registrant in
connection with the sale of common stock being registered. All amounts are estimates except for the SEC registration fee, the FINRA filing
fee and the NASDAQ Capital Market listing fee.
Item | |
| Amount
| |
SEC
registration fee | |
$ | 2,163.88 | |
FINRA
filing fee | |
| 13,024.51 | |
NASDAQ
Capital Market listing fee | |
| 5,000 | |
Legal
fees and expenses | |
| 250,000 | |
Accounting
fees and expenses | |
| 50,000 | |
Miscellaneous
expenses | |
| 5,000 | |
Total | |
$ | 325,188.39 | |
Item
14. Indemnification of Directors and Officers.
Our
directors and officers are indemnified as provided by the Nevada Business Corporation Act (the “NBCA”) and our Bylaws.
Nevada
Business Corporation Act
The
NBCA provides that a corporation may indemnify a director or officer against liability if the director or officer acted in good faith,
the director or officer acted in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation,
and in the case of any criminal proceeding, the director or officer had no reasonable cause to believe his or her conduct was unlawful.
A corporation may not indemnify a director or an officer except for expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expense of litigating the proceeding to conclusion, actually and reasonably incurred in connection
with the defense or settlement of such proceeding, including any appeal thereof, where such person acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests of the corporation.
The
NBCA provides that a corporation must indemnify a director or officer who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which the individual was a party because he or she is or was a director or officer of the corporation against expenses
incurred by the individual in connection with the proceeding.
A
corporation may, before final disposition of a proceeding, advance funds to pay for or reimburse expenses incurred in connection with
the proceeding by a director or an officer if the director or officer delivers to the corporation a signed written undertaking of the
director or officer to repay any funds advanced if such director or officer is not entitled to indemnification.
Bylaws
Our
Bylaws provide that the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or
in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or, while a director
or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, association or other enterprise, against expenses (including attorneys fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in connection with which action, suit or proceeding, if
he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation and, with respect to any criminal action or proceeding, that he had reasonable cause to believe
that his conduct was unlawful.
Except
as provided above, our Certificate of Incorporation provides that a Director shall be liable to the extent provided by applicable law,
(i) for breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Nevada Corporation
Law or (iv) for any transaction from which the director derived an improper personal benefit. If the Nevada Corporation Law hereafter
is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the
Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by
the amended Nevada Corporation Law. Neither any amendment to or repeal of this Article 7, nor the adoption of any provision hereof inconsistent
with this Article 7, shall adversely affect any right or protection of any director of the Corporation existing at the time of, or increase
the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring
prior to or at the time of such amendment.
Neither
our Bylaws, nor our Certificate of Incorporation include any specific indemnification provisions for our officers or Directors against
liability under the Securities Act of 1933, as amended. Additionally, insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the “Act”) may be permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
Item
15. Recent Sales of Unregistered Securities.
Over
the past three years, we have issued and sold the following securities without registration under the Securities Act:
On
February 13, 2019 we issued 500,000 at a purchase price of $0.524 per share to Kambiz Mahdi our CEO as additional compensation
accrued for in 2018 in the amount of $262,000.
February
13, 2019, we entered into a convertible note payable for $138,000, with a maturity date of February 13, 2020, which accrues interest
at the rate of 12% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%)
of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. This Note was paid in full on August 12, 2019.
On
April 9, 2019 we entered into a convertible note payable for $53,000, with a maturity date of April 9, 2020, which accrues interest at
the rate of 12% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. Subsequently that note was paid in full on October 10, 2019.
On
May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell 4,200,000 units (each a “Unit”
and together the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $1,999,200, or $0.476
per Unit, with each unit consisting of one share of common stock, par value $.001 per share (the “Common Stock”) and a warrant
(the “Warrant”) to purchase one share of common stock. The Common Stock will be issued to MGWI at such time as the Company
increases the number of shares of its authorized Common Stock. The Warrant is exercisable at $1.60 per share of Common Stock and
expires one year from the date of the Agreement. The shares were issued on August 15, 2019.
On
June 10, 2019 we issued 12,500 shares of common stock at $.80 per share to an accredited investor for an aggregate price
of $10,000 in a private sale. We also issued 12,000 warrants as part of the transaction. Each Warrant is exercisable at $1.60
per share of Common Stock and expires one year from the date of the Agreement.
On
July 19, 2019 we issued 12,500 shares of common stock at $.80 per share to an accredited investor for an aggregate price
of $10,000 in a private sale. We also issued 12,500 warrants as part of the transaction. Each Warrant is exercisable at $1.60
per share of Common Stock and expires one year from the date of the Agreement.
On
September 19, 2019 we entered into a stock purchase agreement for 6,250 units at a purchase price of $.80 a unit for an
aggregate price of $5,000 to an accredited investor a private sale. Each unit consist of one share of common stock and one warrant to
purchase one share of common stock exercisable at $1.60 per share of Common Stock and expires one year from the date of the Agreement.
The shares were included in the shares to be issued as of September 30, 2019 and were subsequently issued on October 15, 2019.
On
October 30, 2019 we entered into a convertible note payable for $103,000, with a maturity date of October 30, 2020, which accrues interest
at the rate of 12% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%)
of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. This
note was paid in full on April 28, 2020.
On
December 5, 2019 we issued 125,000 units at a purchase price of $0.60 per unit for an aggregate price of $75,000 to an
accredited investor in a private sale. Each unit consist of one share of common stock and one warrant to purchase one share of common
stock exercisable at $1.60 per share.
On
January 30, 2020 we issued 42,500 shares of our common stock at a purchase price of $.80 per share, as settlement in full
of a note payable of in the amount of $36,500 with accrued interest of 19,721. As a result, we recognized a gain in the amount of $22,221
in the 1st quarter of 2020.
On
February 4, 2020 we issued 500,000 shares of our common stock at a price of $1.60 per share, in exchange for the conversion
of 800 shares of our Series D Preferred Stock.
On
July 23, 2020 we issued 75,000 shares of our common stock at a price of $1.60 per share, in exchange for the conversion
of 1,200 shares of our Series D Preferred Stock.
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800, a Warrant (the “Warrant”)
to purchase 37,500 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and
25,000 restricted shares of Common Stock (“commitment fee Shares”). On December 31, 2020 this note was converted into
350,880 shares of common stock, for a total of $171,229 including principal of $164,800 plus accrued interest of $6,429.
Also on February 5, 2021 the company issued 27,500 shares of its common stock as redemptions of 37,500 cashless warrants.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the
“Securities Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company
issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of $103,000, a
Warrant (the “Warrant”) to purchase 37,500 shares of the Company’s common stock, par value $.001 per share
(the “Common Stock”) and 25,000 restricted shares of Common Stock (“commitment fee Shares”). Also on
January 12, 2021 the company issued 17,447 shares of its common stock as redemptions of $27,914 in cashless warrants. This
note was paid off as of January 8, 2021.
On
October 14, 2020 Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with Firstfire Global Opportunities Fund LLC, (the “Investor”), pursuant to which the Company
issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of $168,000, a Warrant
(the “Warrant”) to purchase 37,500 shares of the Company’s common stock, par value $.001 per share (the “Common
Stock”) and 31,250 restricted shares of Common Stock (“commitment fee shares”). This note was paid off as
January 29, 2021.
On
February 5, 2021 we issued 75,000 shares of our common stock at a price of $3.20 per share, in exchange for the conversion
of 1,200 shares of our Series D Preferred Stock.
On
February 9, 2021 we issued 56,892 shares of our common stock share, in exchange for the conversion of $182,052 of accrued dividend
for the series D Preferred Stock.
On
February 17, 2021 we issued 50,000 shares of our common stock at a price of $1.60 per share, in exchange for the conversion
of 800 shares of our Series D Preferred Stock.
On
March 12, 2021 we issued 92,340 shares of our series D preferred stock together with accrued preferred dividend at a price of
$3.20 per share, in exchange for the conversion of 1300 shares of our Series D Preferred Stock and accrued preferred dividend.
On
February 23, 2021 we issued 94,775 units at a purchase price of $0.56 per unit per the subscription agreement executed
in November of 2020 for an aggregate price of $52,566 to an accredited investor in a private sale.
On
June 28, 2021 MGW I converted $75,000 from the outstanding balance of their convertible note into 625,000 shares of company’s
common stock.
On
September 2, 2021 the company issued 28,561 as inducement shares. To GHS Investment for the equity line of credit at $1.90
per share.
On
September 13, 2021 the company issued 27,516 as issuance correction. To GHS Investment for the equity line of credit at $1.90
per share.
On December 27, 2021,
the Company entered into a $650,000 Convertible Promissory Note, due June 21, 2022, with interest at 2% per annum (the “Note “)
with Universal Scope, Inc., a company incorporated in the British Virgin Islands which is convertible into 278,850 of shares of common
stock. Under the terms of the Note, principal and interest is to be paid on the maturity date. The Note is convertible into the Company’s
Common Stock at a conversion price of $2.40 per share subject to adjustments for reorganizations, reclassifications, consolidations,
merger, or sale. On June 20, 2022, the Note was amended to extend the maturity date to June 21, 2023.
On
December 31,2021 the company issued 245,844 at a purchase price of $3.20 pre the 1A subscription agreement.
On March 10, 2022 the company entered into a promissory
note with Sixth Street Lending LLC in the amount of $170,600, with and interest rate of 10% per annum and a default interest rate of
22% per annum. This note is due in full on March 10, 2023 and has mandatory monthly payments of $18,766. The note had an OID of $17,060
and recorded as finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares
of common stock of the company. This is note is convertible, but not until a contingent event of default has taken place, none of which
have occurred as of the date of this filing. The balance on this note as September 30, 2022 was $75,064 This note was paid off as of
Dec 6, 2022.
On
May 6, 2022, the Company entered into a Securities Purchase Agreement with Mast Hill, L.P. (Mast Hill”) pursuant to which the
Company issued to Mast Hill a $750,000 Convertible Promissory Note, due May 6, 2023 (the “Note”) for a purchase price of
$675,000.00 plus an original issue discount in the amount of $75,000.00, and an interest rate of fifteen percent (15%) per annum. The
principal and interest of the Note may be converted in whole or in part at any time on or following the earlier of (i) upon an event
of default or (ii) the date that the Company consummates an IPO and up listing to a national exchange (the “Up List Offering”),
into common stock of the Company, subject to anti-dilution adjustments and for certain other corporate actions subject to a beneficial
ownership limitation of 4.99% of Mast Hill and its affiliates. The per share conversion price into which principal amount and accrued
interest may be converted into shares of common stock equals $1.00. However, if the Company consummates the Up List Offering
on or before November 2, 2022, then the conversion price will equal 75% of the offering price per share of common stock (or units) as
set in the Up List Offering.
In
addition, the Company issued Mast Hill a five-year warrant to purchase 234,375 shares of common stock in connections with the transactions
described above. The Warrant may be exercised, in whole or in part, on the earlier of (i) on or after November 2, 2022 or (ii) the date
that the Company consummates an Up List Offering. The exercise price of the Warrant is $1.60 per share, however, that if the Company
consummates an Up List Offering on or before November 2, 2022, then the exercise price equals 120% of the offering price per share of
Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice is on or after November 2, 2022 and (ii)
the per share price of Common Stock is greater than the exercise price, then, unless there is an effective non-stale registration statement
the Warrant may be exercised on a cashless exercise basis. On December 28, 2022, Mast Hill exercised the warrant in full on a
cashless basis to purchase 100,446 shares of Common Stock .
On June 30, 2022 the company entered into a promissory
note with 1800 Diagonal in the amount of $252,928.44 with and interest rate of 10% per annum and a default interest rate of 22% per annum.
This note is due in full on June 30, 2023 and has mandatory monthly payments of $27,822.13. The note had an OID of $25,293 and recorded
as finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock
of the company. This is note is convertible, but not until a contingent event of default has taken place, none of which have occurred
as of the date of this filing. The balance on this note as of December 31, 2022 was $139,111.30. This note was paid off as of February
3, 2023.
On August 5, 2022, we entered
into a Securities Purchase Agreement with Jefferson Street Capital, LLC (Jefferson) pursuant to which the Company issued to Jefferson
a $138,888 Convertible Promissory Note, due August 5, 2023 (the “Note”) for a purchase price of $125,000.00 plus an original
issue discount in the amount of $13,888.88, and an interest rate of fifteen percent (15%) per annum. Jefferson is entitled to purchase
43,403 shares of commons stock per the warrant agreement at the exercise price of $1.60. The
Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Jefferson as well as providing
Jefferson with registration rights.
On August 17, 2022, we entered
into a Securities Purchase Agreement with Firstfire Global Opportunities Fund LLC (“Firstfire”) pursuant to which the Company
issued to Mast Hill a $150,000 Convertible Promissory Note, due August 17, 2023 (the “Note”) for a purchase price of $135,000.00
plus an original issue discount in the amount of $15,000.00, and an interest rate of fifteen percent (15%) per annum. Firstfire is entitled
to purchase 46,875 shares of commons stock per the warrant agreement at the exercise price of $1.60. The
Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Firstfire as well as providing
Firstfire with registration rights. On March 1, 2023, Firstfire exercised this warrant issued on August 17, 2022 in full on a cashless
basis to purchase 33,114 shares of Common Stock
On September 1, 2022, we
entered into a Securities Purchase Agreement with Pacific Pier Capital, LLC (Pacific) pursuant to which the Company issued to Pacific
a $138,888 Convertible Promissory Note, due August 5, 2023 (the “Note”) for a purchase price of $125,000.00 plus an original
issue discount in the amount of $13,888.88, and an interest rate of fifteen percent (15%) per annum. Pacific is entitled to purchase
43,403 shares of commons stock per the warrant agreement at the exercise price of $1.60. The
Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Pacific as well as providing
Pacific with registration rights.
On September 16, 2022, we
entered into a Securities Purchase Agreement with Mast Hill pursuant to which the Company issued to Mast Hill
a $300,000 Convertible Promissory Note, due September 16, 2023 for a purchase price of $270,000.00 plus an original
issue discount in the amount of $30,000.00, and an interest rate of fifteen percent (15%) per annum. Mast Hill Fund is entitled to purchase
93,750 shares of commons stock per the warrant agreement at the exercise price of $1.60. The
Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Mast Hill as well as providing
Mast Hill with registration rights.
On October 25, 2022 the company entered into a
promissory note in the amount of $114,850 with and interest rate of 10% per annum and a default interest rate of 22% per annum. This
note is due in full on October 25, 2023 and has mandatory monthly payments of $12,633.50. The note had an OID of $11,850.00 and recorded
as finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares of common stock
of the company. This is note is convertible, but not until a contingent event of default has taken place, none of which have occurred
as of the date of this filing. The balance on this note as of September 30, 2022 was $114,850.
On November 11, 2022,
we entered into a Securities Purchase Agreement with Mast Hill pursuant to which the Company issued to Mast
Hill a $95,000 Convertible Promissory Note, due November 11, 2023 (the for a purchase price of $85,500.00 plus
an original issue discount in the amount of $9,500.00, and an interest rate of fifteen percent (15%) per annum. Mast Hill Fund is
entitled to purchase, 29,688 shares of commons stock per the warrant agreement at the exercise price of $1.60. The
Securities Purchase Agreement provides customary representations, warranties and covenants of the Company and Mast Hill as well as
providing Mast Hill with registration rights.
On
November 22, 2022 the Company closed the transactions contemplated by the Securities Purchase Agreement with Mast Hill dated November 21, 2022 pursuant to which the Company issued to Mast Hill a $95,000 Convertible Promissory Note, due November 21, 2023
(the “Mast Hill Note IV”) for a purchase price of $85,500 plus an original issue discount in the amount of $9,500.00, and
an interest rate of fifteen percent (15%) per annum.
The
principal and interest of the Mast Hill Note IV may be converted in whole or in part at any time on or following the earlier of (i) upon
an event of default or (ii) the date that the Company consummates an IPO and up listing to a national exchange (the “Up List Offering”),
into common stock of the Company, par value $.001 share (“Common Stock”), subject to anti-dilution adjustments and for certain
other corporate actions subject to a beneficial ownership limitation of 4.99% of Mast Hill and its affiliates. The per share conversion
price into which principal amount and accrued interest may be converted into shares of Common Stock equals $1.00 However if the
Company consummates the Up List Offering on or before May 19, 2023, then the conversion price will equal 75% of the offering price per
share of Common Stock (or units) as set in the Up List Offering. Upon an event of default, the Mast Hill Note III will become immediately
payable and the Company shall be required to pay a default rate of interest of 15% per annum. If the Company issues an equity security
or security convertible into Common Stock following the issue date of the Mast Hill Note III, the conversion price of the Mast Hill Note
IV will be lowered to such price. Certain existing convertible debt is excluded from these antidilution provisions. At anytime prior
to an event of default, the Mast Hill Note III may be prepaid by the Company at a 115% premium. The Mast Hill Note IV contains customary
representations, warranties and covenants of the Company.
The
Company issued Mast Hill a five year warrant (“Mast Hill Warrant IV”) to purchase 29,688 shares of Common Stock
in connections with the transactions described above. The Mast Hill Warrant IV may be exercised, in whole or in part, on the earlier
of (i) on or after May 19, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Mast Hill
Warrant IV is $1.60 per share, however, that if the Company consummates an Up List Offering on or before May 19, 2023, then the
exercise price equals 120% of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date
of an exercise notice is on or after May 19, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then,
unless there is an effective non-stale registration statement the Mast Hill Warrant IV may be exercised on a cashless exercise basis
On
December 26, 2022 the Company closed the transactions contemplated by the Securities Purchase Agreement with Mast Hill dated December
26, 2022 pursuant to which the Company issued to Mast Hill a $123,000 Convertible Promissory Note, due December 26, 2023 (the “Mast
Hill Note V”) for a purchase price of $110,700 plus an original issue discount in the amount of $12,300.00, and an interest rate
of fifteen percent (15%) per annum.
The
principal and interest of the Mast Hill Note V may be converted in whole or in part at any time on or following the earlier of (i) upon
an event of default or (ii) the date that the Company consummates an IPO and up listing to a national exchange (the “Up List Offering”),
into common stock of the Company, par value $.001 share (“Common Stock”), subject to anti-dilution adjustments and for certain
other corporate actions subject to a beneficial ownership limitation of 4.99% of Mast Hill and its affiliates. The per share conversion
price into which principal amount and accrued interest may be converted into shares of Common Stock equals $1.00 However if the Company
consummates the Up List Offering on or before June 24, 2023, then the conversion price will equal 75% of the offering price per share
of Common Stock (or units) as set in the Up List Offering. Upon an event of default, the Mast Hill Note V will become immediately payable
and the Company shall be required to pay a default rate of interest of 15% per annum. If the Company issues an equity security or security
convertible into Common Stock following the issue date of the Mast Hill Note V, the conversion price of the Mast Hill Note V will be
lowered to such price. Certain existing convertible debt is excluded from these antidilution provisions. At anytime prior to an event
of default, the Mast Hill Note V may be prepaid by the Company at a 115% premium. The Mast Hill Note V contains customary representations,
warranties and covenants of the Company.
The
Company issued Mast Hill a five year warrant (“Mast Hill Warrant V”) to purchase 38,438 shares of Common Stock in connections
with the transactions described above. The Mast Hill Warrant V may be exercised, in whole or in part, on the earlier of (i) on or after
June 24, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Mast Hill Warrant V is $1.60
per share, however, that if the Company consummates an Up List Offering on or before June 24, 2023, then the exercise price equals 120%
of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice is on
or after June 24, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there is an effective
non-stale registration statement the Mast Hill Warrant V may be exercised on a cashless exercise basis.
On
January 19, 2023 the Company closed the transactions contemplated by the Securities Purchase Agreement with Mast Hill dated January 19,
2023 pursuant to which the Company issued to Mast Hill a $187,000 Convertible Promissory Note, due January 19, 2024 (the “Mast
Hill Note VI”) for a purchase price of $168,300 plus an original issue discount in the amount of $18,700.00, and an interest rate
of fifteen percent (15%) per annum.
The
principal and interest of the Mast Hill Note VI may be converted in whole or in part at any time on or following the earlier of (i) upon
an event of default or (ii) the date that the Company consummates an IPO and up listing to a national exchange (the “Up List Offering”),
into common stock of the Company, par value $.001 share (“Common Stock”), subject to anti-dilution adjustments and for certain
other corporate actions subject to a beneficial ownership limitation of 4.99% of Mast Hill and its affiliates. The per share conversion
price into which principal amount and accrued interest may be converted into shares of Common Stock equals $1.00 However if the Company
consummates the Up List Offering on or before July 19, 2023, then the conversion price will equal 75% of the offering price per share
of Common Stock (or units) as set in the Up List Offering. Upon an event of default, the Mast Hill Note IV will become immediately payable
and the Company shall be required to pay a default rate of interest of 15% per annum. If the Company issues an equity security or security
convertible into Common Stock following the issue date of the Mast Hill Note VI, the conversion price of the Mast Hill Note VI will be
lowered to such price. Certain existing convertible debt is excluded from these antidilution provisions. At anytime prior to an event
of default, the Mast Hill Note VI may be prepaid by the Company at a 115% premium. The Mast Hill Note VI contains customary representations,
warranties and covenants of the Company.
The
Company issued Mast Hill a five year warrant (“Mast Hill Warrant VI”) to purchase 58,438 shares of Common Stock in connections
with the transactions described above. The Mast Hill Warrant VI may be exercised, in whole or in part, on the earlier of (i) on or after
July 19, 2023 or (ii) the date that the Company consummates an Up List Offering. The exercise price of the Mast Hill Warrant VI is $1.60
per share, however, that if the Company consummates an Up List Offering on or before July 19, 2023, then the exercise price equals 120%
of the offering price per share of Common Stock (or unit) as set in the Up List Offering. If (i) the date of an exercise notice is on
or after July 19, 2023 and (ii) the per share price of Common Stock is greater than the exercise price, then, unless there is an effective
non-stale registration statement the Mast Hill Warrant VI may be exercised on a cashless exercise basis.
On Dec 5, 2022, the company entered into a promissory
note with 1800 Diagonal Lending, LLC (“1800 Diagonal”) in the amount of $191,526 with and interest rate of 10% per annum
and a default interest rate of 22% per annum. This note is due in full on December 5, 2023 and has mandatory monthly payments of $21,067.80.
The note had an OID of $19,760.00 and recorded as finance fee expense. In the event of the default, at the option of the Investor, the
note may be converted into shares of common stock of the company at a conversion price equal to 70% multiplied by the lowest trading
price during the five trading days prior to conversion. This is note is convertible, but not until a contingent event of default has
taken place, none of which have occurred as of the date of this filing. The balance on this note as of December 31, 2022 was $210,678.00.
On February 10, 2023 the company entered into
a promissory note with 1800 Diagonal in the amount of $258,521 with and interest rate of 10% per annum and a default interest rate of
22% per annum. This note is due in full on February 10,2024 and has mandatory monthly payments of $28,437.30 The note had an OID of $27,698.87
and recorded as finance fee expense. In the event of the default, at the option of the Investor, the note may be converted into shares
of common stock of the company at a conversion price equal to 70% multiplied by the lowest trading price during the five trading days
prior to conversion. This is note is convertible, but not until a contingent event of default has taken place, none of which have occurred
as of the date of this filing. The balance on this note as of February 14, 2023 was $258,521.00.
Item
16. Exhibits and Financial Statement Schedules.
(a)
Exhibits
EXHIBIT
INDEX
EXHIBIT
NUMBER |
|
DESCRIPTION |
1.1 |
|
Form
of Underwriting Agreement (included as exhibit 1.1 to the Form S-1/A filed on January 31, 2023). |
|
|
|
3.1 |
|
Articles of Incorporation (included as exhibit 3.1 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
3.2 |
|
Certificate of Amendment of Articles of Incorporation, dated November 13, 2015, filed with the Nevada Secretary of State (included as exhibit 3.1 to our Current Report on Form 8-K dated January 12, 2016). |
|
|
|
3.3 |
|
Amended and Restated Articles dated June 30, 2016, filed with the Nevada Secretary of State (included as exhibit 3.1 to our Current Report on Form 8-K dated July 6, 2016). |
|
|
|
3.4 |
|
Certificate of Amendment of Articles of Incorporation filed with the Nevada Secretary of State on August 23, 2017 (included as exhibit 10.1 to the Form S-8 filed on August 28, 2017) |
|
|
|
3.5 |
|
Form of Certificate of Amendment of Articles of Incorporation filed with the Nevada Secretary of State on July 26, 2019 (included as Appendix A to the Definitive Schedule 14C filed on June 3, 2019) |
|
|
|
3.6 |
|
Amended Bylaws (included as exhibit 3.03 to our Current Report on Form 8-K dated February 15, 2018) |
|
|
|
3.7 |
|
Amendment
to Articles of Incorporation of filed with the Secretary of State of the State of Nevada on January 9, 2023 (effective as of January
9, 2023) (included as exhibit 3.7 to the Form 8-K filed on January 19, 2023) |
|
|
|
3.8 |
|
Amended
and Restated Bylaws (included as exhibit 3.8 to the Form S-1/A filed on January 31, 2023). |
|
|
|
4.1 |
|
Certificate of Designation for Series A Convertible Preferred Stock, dated May 20, 2004 (included as exhibit 4.2 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
4.3 |
|
Certificate of Designation for Series B Convertible Preferred Stock dated December 31, 2004 (included as exhibit 4.2 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
4.4 |
|
Sample Series A Warrant Purchase Agreement (included as exhibit 4.3 to the Form SB-2/A filed on October 26, 2005). |
|
|
|
4.5 |
|
Sample Series B Warrant Purchase Agreement (included as exhibit 4.4 to the Form SB-2/A filed on October 26, 2005). |
|
|
|
4.6 |
|
Sample Amended Series A Warrant Purchase Agreement (included as exhibit 4.5 to the Form SB-2/A filed on November 25, 2005). |
|
|
|
4.7 |
|
Sample Amended Series B Warrant Purchase Agreement (included as exhibit 4.6 to the Form SB-2/A filed on November 25, 2005). |
|
|
|
4.8 |
|
Amended Series A Warrant Agreement (included as exhibit 4.1 to the Form 8-K filed on November 10, 2008 and amended on November 18, 2008). |
|
|
|
4.9 |
|
Amended Series B Warrant Agreement (included as exhibit 4.2 to the Form 8-K filed on November 10, 2008 and amended on November 18, 2008). |
|
|
|
4.10 |
|
Probe Manufacturing, Inc. 2011 Omnibus Incentive Plan (included as exhibit 4.2 to the Form S-8 filed on April 18, 2011). |
4.11 |
|
Voting Agreement, dated February 13, by and among, the Corporation, ETI IV, Kambiz Mahadi, John Bennett and the The Kambiz & Bahareh Mahdi Living Trust (included as exhibit 4.24 to the Form 8-K filed on February 14, ). |
|
|
|
4.12 |
|
Description of Securities (included as Exhibit 4.13 of the Annual Report on Form 10-K filed on May 28, 2020). |
|
|
|
4.13 |
|
Subscription Agreement (included as exhibit 4.13 to the Form 1-A/A filed on December 19, 2019). |
|
|
|
4.14 |
|
Form
of Representative Warrant (included as exhibit 4.14 to the Form S-1/A filed on January 31, 2023). |
|
|
|
5.1 |
|
Legal
Opinion of The Newman Law Firm, PLLC (included as exhibit 5.1 to the Form S-1/A filed on January 31, 2023). |
|
|
|
10.1 |
|
Lease Agreement between Probe Manufacturing, Inc. (F.K.A. Probe Manufacturing Industries, Inc. and Reza Zarif and Kambiz Mahdi, dated May 2, 1997 (included as exhibit 10.1 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.2 |
|
Consulting Agreement between Probe Manufacturing Industries and Anthony Reed dated December 31, 2004 (included as exhibit 10.2 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.3 |
|
Legal Retainer Agreement between Probe Manufacturing, Inc. and Jeffrey Conrad dated May 20, 2004 (included as exhibit 10.3 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.4 |
|
Line of Credit agreement between Probe Manufacturing, Inc. and eFund Capital Partners, LLC dated January 1, 2005 (included as exhibit 10.4 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.5 |
|
Line of Credit agreement between Probe Manufacturing, Inc. and Ashford Capital, LLC dated January 1, 2005 (included as exhibit 10.5 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.6 |
|
Line of Credit agreement between Probe Manufacturing, Inc. and Benner Exemption Trust dated March 8, 2005 (included as exhibit 10.6 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.7 |
|
Line of Credit agreement between Probe Manufacturing, Inc. and Edward Lassiter dated March 22, 2005 (included as exhibit 10.7 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.8 |
|
Line of Credit agreement between Probe Manufacturing, Inc. and Rufina V. Paniego dated January 1, 2005 (included as exhibit 10.8 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.9 |
|
Promissory Note between Probe Manufacturing, Inc and Ashford Transitional Fund, L.P. dated September 20, 2004 (included as exhibit 10.10 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.10 |
|
Engagement Letter between Probe Manufacturing, Inc. and eFund Capital Partners, LLC dated May 20, 2004 (included as exhibit 10.11 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.11 |
|
Series A Convertible Preferred Stock Purchase Agreement with eFund Capital Partners, LLC dated May 20, 2004 (included as exhibit 10.12 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.12 |
|
Series A Convertible Preferred Stock Purchase Agreement with Reza Zarif dated May 20, 2004 (included as exhibit 10.13 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.13 |
|
Series A Convertible Preferred Stock Purchase Agreement with Kambiz Mahdi dated May 20, 2004. (included as exhibit 10.14 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.14 |
|
Series B Convertible Preferred Stock Purchase Agreement with eFund Capital Partners, LLC dated December 31, 2004 (included as exhibit 10.15 to the Form SB-2/A filed on June 10, 2005). |
10.15 |
|
Series B Convertible Preferred Stock Purchase Agreement with Reza Zarif dated December 31, 2004 (included as exhibit 10.16 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.16 |
|
Series B Convertible Preferred Stock Purchase Agreement with Kambiz Mahdi dated December 31, 2004 (included as exhibit 10.17 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.17 |
|
Agreement to Cancel and Return shares of common stock between Probe and eFund Capital Partners, LLC, Ashford Capital, LLC, Reza Zarif, Kambiz Mahdi, dated December 31, 2004 (included as exhibit 10.18 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.18 |
|
Promissory note with eFund Capital Partners, LLC dated October 12, 2004 (included as exhibit 10.19 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.19 |
|
Promissory note with Rufina V. Paniego dated July 14, 2004 (included as exhibit 10.20 to the Form SB-2/A filed on June 10, 2005). |
|
|
|
10.20 |
|
Sample purchase order agreement with Celerity, Inc (included as exhibit 10.20 to the Form SB-2/A filed on October 26, 2005). |
|
|
|
10.21 |
|
Sample purchase order agreement with Newport Corporation (included as exhibit 10.21 to the Form SB-2/A filed on October 26, 2005). |
|
|
|
10.22 |
|
Sample purchase order agreement with Asymteck Corporation (included as exhibit 10.22 to the Form SB-2/A filed on October 26, 2005). |
|
|
|
10.23 |
|
Sample purchase order agreement with Jetline Engineering Corporation (included as exhibit 10.23 to the Form SB-2/A filed on October 26, 2005). |
|
|
|
10.24 |
|
Sample purchase order agreement with our supplier Future Active, Inc (included as exhibit 10.24 to the Form SB-2/A filed on October 26, 2005). |
|
|
|
10.25 |
|
Sample purchase order agreement with our supplier Arrow Electronics, Inc. (included as exhibit 10.25 to the Form SB-2/A filed on October 26, 2005). |
|
|
|
10.26 |
|
Intentionally
Omitted |
|
|
|
10.27 |
|
Sublease Agreement with Quantum Fuel System Technologies, Inc. (included as exhibit 10.1 to the Form 8-K filed on September 21, 2006). |
|
|
|
10.28 |
|
Form Of Stock Subscription Agreement By And Between Quantum Fuel Systems Technologies Worldwide, Inc. And Probe Manufacturing, Inc. (included as exhibit 99 to our definitive 14D filed on October 5, 2006). |
|
|
|
10.29 |
|
Employment Agreement with Reza Zarif, Chief Executive Officer of Probe Manufacturing, Inc. (included as exhibit 10.1 to Form 8-K filed on June 14, 2006). |
|
|
|
10.30 |
|
Series C Convertible Preferred Exchange Agreement with eFund Capital Partners, LLC (included as exhibit 10.2 to Form 8-K filed on June 14, 2006). |
|
|
|
10.31 |
|
Series C Convertible Preferred Exchange Agreement with Reza Zarif (included as exhibit 10.3 to Form 8-K filed on June 14, 2006). |
|
|
|
10.32 |
|
Series C Convertible Preferred Exchange Agreement with Kambiz Mahdi (included as exhibit 10.4 to Form 8-K filed on June 14, 2006). |
10.33 |
|
Amended Series C Convertible Preferred Exchange Agreement with eFund Capital Partners, LLC (included as exhibit 10.1 to Form 8-K filed on August 14, 2006). |
|
|
|
10.34 |
|
Amended Series C Convertible Preferred Exchange Agreement with Reza Zarif (included as exhibit 10.2 to Form 8-K filed on August 14, 2006). |
|
|
|
10.35 |
|
Amended Series C Convertible Preferred Exchange Agreement with Kambiz Mahdi (included as exhibit 10.3 to Form 8-K filed on August 14, 2006). |
|
|
|
10.36 |
|
Amended Line of Credit agreement between Probe Manufacturing, Inc. and Kambiz Mahdi dated August 10, 2006 (included as exhibit 10.1 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.37 |
|
Amended Line of Credit agreement between Probe Manufacturing, Inc. and Reza Zarif dated August 10, 2006 (included as exhibit 10.2 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.38 |
|
Amended Line of Credit agreement between Probe Manufacturing, Inc. and Frank Kavanaugh dated August 10, 2006 (included as exhibit 10.3 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.39 |
|
Amended Line of Credit agreement between Probe Manufacturing, Inc. and Kambiz Mahdi dated August 10, 2006 (included as exhibit 10.4 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.40 |
|
Amended Line of Credit agreement between Probe Manufacturing, Inc. and Reza Zarif dated August 10, 2006 (included as exhibit 10.5 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.41 |
|
Amended Line of Credit agreement between Probe Manufacturing, Inc. and Rufina Paniego dated August 10, 2006 (included as exhibit 10.6 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.42 |
|
Amended Line of Credit agreement between Probe Manufacturing, Inc. and eFund Capital Partners, LLC dated August 10, 2006 (included as exhibit 10.7 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.43 |
|
Amended Line of Credit agreement between Probe Manufacturing, Inc. and Benner Exemption Trust dated August 10, 2006 (included as exhibit 10.8 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.44 |
|
Amended Line of Credit agreement between Probe Manufacturing, Inc. and Ed Lassiter dated August 10, 2006 (included as exhibit 10.9 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.45 |
|
Amended Line of Credit agreement between Probe Manufacturing, Inc. and William Duncan dated August 10, 2006 (included as exhibit 10.10 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.46 |
|
Amended Line of Credit agreement between Probe Manufacturing, Inc. and Hoa Mai dated August 10, 2006 (included as exhibit 10.11 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.47 |
|
Amended Line of Credit agreement between Probe Manufacturing, Inc. and Ashford Transition Fund dated August 10, 2006 (included as exhibit 10.12 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.48 |
|
Employee Profit Sharing Plan (included as exhibit 10.13 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.49 |
|
Probe Manufacturing 2006 Employee Incentive Stock Option Plan (included as exhibit 10.14 to the Form 8-K filed on August 23, 2006). |
|
|
|
10.50 |
|
Amended and Restated Series A Warrant Agreement (included as exhibit 10.1 to the Form 8-K filed on November 15, 2006). |
|
|
|
10.51 |
|
Amended and Restated Series B Warrant Agreement (included as exhibit 10.2 to the Form 8-K filed on November 15, 2006). |
10.52 |
|
Contract Services Agreement for purchase order No. 43103 between Probe Manufacturing, Inc. and Mettler Electronics Corp. dated May 8, 2007. (included as exhibit 10.1 to the Form 8-K filed on May 22, 2007). |
|
|
|
10.53 |
|
Contract Services Agreement for purchase order No. 43104 between Probe Manufacturing, Inc. and Mettler Electronics Corp. dated May 8, 2007. (included as exhibit 10.1 to the Form 8-K filed on May 22, 2007). |
|
|
|
10.55 |
|
Contract Services Agreement for purchase order No. 43104 between Probe Manufacturing, Inc. and Mettler Electronics Corp. dated May 8, 2007. (included as exhibit 10.1 to the Form 8-K filed on May 22, 2007) |
|
|
|
10.56 |
|
Probe Manufacturing, Inc. 2008 Directors Stock Compensation Plan (included as attachment to PRE14A Form 8-K filed on November 19, 2007). |
|
|
|
10.57 |
|
Employment Letter of John Bennett date February 28, 2008 (included as exhibit 10.1 to the Form 8-K filed on February 29, 2008 and March 27, 2008). |
|
|
|
10.58 |
|
Amended Sublease Agreement dated May 19, 2008 (included as exhibit 10.1 to the Form 8-K filed on May 23, 2008). |
|
|
|
10.59 |
|
Letter of Intent between Probe Manufacturing and Solar Masters (included as exhibit 10.1 to the Form 8-K filed on July 28, 2008). |
|
|
|
10.60 |
|
Amended Letter of intent to acquire the assets of Solar Master Company (included as exhibit 10.1 to the Form 10-Q filed on August12, 2008). |
|
|
|
10.61 |
|
Agreement for the sale and purchase of business assets of Solar Masters, LLC date August 13, 2008 (included as exhibit 10.1 to the Form 8-K filed on August 21, 2008). |
|
|
|
10.62 |
|
Executive Consulting Agreement with Barrett Evans (included as exhibit 10.1 to the Form 8-K filed on September 12, 2008). |
|
|
|
10.63 |
|
Engagement Letter of W. T. Uniack & Co. CPA’s P.C. (included as exhibit 10.1 to the Form 8-K filed on November 10, 2008 and amended on November 18, 2008). |
|
|
|
10.64 |
|
Letter to Reza Zarif regarding Resignation Letter (included as exhibit 10.2 to the Form 8-K filed on November 10, 2008 and amended on November 18, 2008). |
|
|
|
10.65 |
|
Resignation letter from Board of Directors. (included as exhibit 10.3 to the Form 8-K filed on November 10, 2008 and amended on November 18, 2008). |
|
|
|
10.66 |
|
Response from Reza Zarif Regarding 8-K dated September 25, 2008 (included as exhibit 10.4 to the Form 8-K filed on November 10, 2008 and amended on November 18, 2008). |
|
|
|
10.67 |
|
Settlement Agreement and General release with Reza Zarif, dated June 2009. (included as exhibit 10.1 to the Form 8-K filed on August 12, 2009). |
|
|
|
10.68 |
|
Sale of Solar Masters to Solar Masters Acquisition Company dated July 2009 (included as exhibit 10.2 to the Form 8-K filed on August 12, 2009). |
|
|
|
10.69 |
|
Sale of Common Stock to KB Development Group, LLC (included as exhibit 10.3 to the Form 8-K filed on August 12, 2009). |
|
|
|
10.70 |
|
Resignation Letters of Barrett Evans and Jeffrey Conrad (included as exhibit 10.4 to the Form 8-K filed on August 12, 2009). |
10.71 |
|
Summary of lease terms regarding Lease Agreement between Probe Manufacturing, Inc. and Benhard Family Trust dated October 14, 2009 (included as exhibit 10.1 to the Form 8-K filed on November 20, 2009). |
|
|
|
10.72 |
|
Accounts Receivable Purchasing Agreement by and between Probe Manufacturing, Inc. and DSCH Capital Partners, LLC d/b/a Far West Capital, dated February 17, 2011 and effective as of February 18, 2011 (included as exhibit 10.1 to the Form 8-K filed on February 24, 2011). |
|
|
|
10.73 |
|
Inventory Finance Rider to Accounts Receivable Purchasing Agreement by and between Probe Manufacturing, Inc. and DSCH Capital Partners, LLC d/b/a Far West Capital, dated February 17, 2011 and effective as of February 18, 2011. (included as exhibit 10.2 to the Form 8-K filed on February 24, 2011). |
|
|
|
10.74 |
|
Agreement and Plan of Acquisition between Probe Manufacturing, Inc., Trident Manufacturing, Inc. and the Shareholders of Trident Manufacturing, Inc., dated March 13, 2013 (included as exhibit 10.1 to the Form 8-K filed on March 15, 2013). |
|
|
|
10.75 |
|
Form of Series D Preferred Stock Purchase Agreement. (included as exhibit 10.1 to the Form 8-K filed on August 8, 2013). |
|
|
|
10.76 |
|
Form of Series F Warrant Agreement (included as exhibit 10.2 to the Form 8-K filed on August 8, 2013). |
|
|
|
10.77 |
|
Form of Series G Warrant Agreement (included as exhibit 10.3 to the Form 8-K filed on August 8, 2013). |
|
|
|
10.78 |
|
OEM Agreement between the Company and S-Ray, Incorporated, dated November 21, 2014 (included as exhibit 10.1 to the Form 8-K filed on November 24, 2014). |
|
|
|
10.79 |
|
Form of Stock Purchase Agreement (included as exhibit 10.1 to the Form 8-K filed on December 17, 2014). |
|
|
|
10.80 |
|
Registration Rights Agreement, by and between the Company and ETI Partners IV LLC, dated as of September 11, 2015 (included as exhibit 4.1 to the Form 8-K filed on September 21, 2015). |
|
|
|
10.81 |
|
Asset Purchase Agreement, by and between the Company and General Electric International, Inc., dated as of September 11, 2015 (included as exhibit 10.1 to the Form 8-K filed on September 21, 2015) |
|
|
|
10.82 |
|
Transaction Completion and Financing Agreement, by and between the Company and ETI Partners IV LLC, dated as of September 11, 2015 (included as exhibit 10.2 to the Form 8-K filed on September 21, 2015). |
|
|
|
10.83 |
|
Loan, Guarantee, and Collateral Agreement, by and between the Company and ETI Partners IV LLC, dated as of September 11, 2015. (included as exhibit 10.3 to the Form 8-K filed on September 21, 2015). |
|
|
|
10.84 |
|
Securities Purchase agreement between the company and Peak One Opportunity Fund, LP (included as exhibit 10.4 to the Form 10-Q filed on August 22, 2016). |
|
|
|
10.85 |
|
Subscription Agreement by and between the Company and Cyberfuture One LP, dated October 31, 2016. (included as exhibit 10.1 to the Form 8-K/A filed on April 20, 2017). |
|
|
|
10.86 |
|
Securities Purchase agreement between the company and Peak One Opportunity Fund, LP (included as exhibit 10.4 to the Form 10-Q filed on November 18, 2016). |
|
|
|
10.87 |
|
Subscription Agreement by and between the Company and Cyberfuture One LP, dated October 31, 2016 (included as exhibit 10.1 to the Form 8-K/A filed on April 20, 2017). |
10.88 |
|
Escrow Funding Agreement dated November 1, 2016 between Red Dot Investment, Inc., a California corporation and the Registrant (included as exhibit 10.2 to the Form 8-K/A filed on April 20, 2018). |
|
|
|
10.89 |
|
Partial Debt Settlement Agreement by and between EMA Financial, LLC, a Delaware limited liability company and the Registrant, dated January 9, 2017 (included as exhibit 10.1 to the Form 8-K filed on April 20, 2017). |
|
|
|
10.90 |
|
Payoff Agreement by and between the Registrant and JSJ Investments, Inc., dated February 13, 2017 (included as exhibit 10.2 to the Form 8-K filed on April 20, 2017). |
|
|
|
10.91 |
|
Credit Agreement and Promissory Note by and between Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation and the Registrant, dated December 31, 2016 (included as exhibit 10.3 to the Form 8-K filed on April 20, 2017). |
|
|
|
10.92 |
|
Common Stock Purchase Agreement by and between MGW Investment I Limited and the Registrant, dated February 13, 2018 (included as exhibit 10.20 to the Form 8-K filed on February 15, 2018). |
|
|
|
10.93 |
|
Convertible Note Stock Purchase Agreement by and between the Registrant and Confections Ventures, Inc., dated February 13, 2018 (included as exhibit 10.21 to the Form 8-K filed on February 15, 2018). |
|
|
|
10.94 |
|
$939,500 Convertible Promissory Note by and between Confections Ventures, Inc. and the Registrant, dated February 13, 2018 (included as exhibit 10.22 to the Form 8-K filed on February 15, 2018). |
|
|
|
10.95 |
|
ETI IV LLC Settlement Agreement by and between the Registrant and ETI IV LLC, dated February 13, 2018 (included as exhibit 10.23 to the Form 8-K filed on February 15, 2018). |
|
|
|
10.96 |
|
Reddot Settlement Agreement by and between the Registrant and Reddot Investment Inc., dated February 13, 2018 (included as exhibit 10.24 to the Form 8-K filed on February 15, 2018). |
|
|
|
10.97 |
|
$153,123 Convertible Promissory Note of the Corporation to MGW Investment I Limited, dated February 8, 2018 (included as exhibit 10.25 to the Form 8-K filed on February 15, 2018). |
|
|
|
10.98 |
|
Form of $83,000 Convertible Promissory Note, dated 13, 2018 of Clean Energy Technologies Inc to Power Up Lending Group LTD. (Included as exhibit 10.98 to the Form 1-A/A filed on September 27, 2019) |
|
|
|
10.99 |
|
Form of $138,000 Convertible Promissory Note of Clean Energy Technologies, Inc. to Power Up Lending LTD dated February 13, 2019. (Included as exhibit 10.99 to the Form 1-A/A filed on September 27, 2019) |
|
|
|
10.100 |
|
Form of Executive Employment Agreement between Clean Energy Technologies, Inc and John Bennett dated May 17, 2019 and effective May 1, 2019. (Included as exhibit 10.100 to the Form 1-A/A filed on September 27, 2019) |
|
|
|
10.101 |
|
Form of Subscription Agreement between Clean Energy Technologies, Inc. and MGW Investment I Limited, dated May 31, 2019. (Included as exhibit 10.101 to the Form 8-K filed on June 5, 2019). |
|
|
|
10.102 |
|
Form of Securities Purchase Agreement between Power-Up Lending Group Ltd. and Clean Energy Technologies, Inc., dated October 29, 2019 (Included as exhibit 10.102 to the Form 8-K filed on November 4, 2019). |
|
|
|
10.103 |
|
Form of Convertible Promissory Note between Power-Up Lending Group Ltd. and Clean Energy Technologies, Inc., dated October 29, 2019 (Included as exhibit 10.102 to the Form 8-K filed on November 4, 2019). |
10.104 |
|
Form of Securities Purchase Agreement between Power-Up Lending Group Ltd. and Clean Energy Technologies, Inc., dated January 8, 2020 (included as Exhibit 10.104 of the Annual Report on Form 10-K filed on May 28, 2020). |
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10.105 |
|
Form of Convertible Promissory Note between Power-Up Lending Group Ltd. and Clean Energy Technologies, Inc., dated January 8, 2020 (included as Exhibit 10.105 of the Annual Report on Form 10-K filed on May 28, 2020). |
|
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10.106 |
|
Form of Securities Purchase Agreement between Power-Up Lending Group Ltd. and Clean Energy Technologies, Inc., dated February 20, 2020 (included as Exhibit 10.106 of the Annual Report on Form 10-K filed on May 28, 2020) |
|
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10.107 |
|
Form of Convertible Promissory Note between Power-Up Lending Group Ltd. and Clean Energy Technologies, Inc., dated October 29, 2019 (included as Exhibit 10.107 of the Annual Report on Form 10-K filed on May 28, 2020). |
|
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10.108 |
|
Employment Agreement between Kambiz Mahdi and Form of Convertible Promissory Note between Power-Up Lending Group Ltd. and Clean Energy Technologies, Inc., effective July 1, 2019 (included as Exhibit 10.108 of the Annual Report on Form 10-K filed on May 28, 2020). |
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10.109 |
|
Equity Financing Agreement with GHS Investments, LLC, dated as of June 8, 2020, (included as Exhibit 10.109 to the Form 8-K filed on June 10, 2020. |
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|
10.110 |
|
Registration Rights Agreement with GHS Investments, LLC, dated as of June 8, 2020, (included as Exhibit 10.110 to the Form 8-K filed on June 10, 2020. |
|
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10.111 |
|
Form of Securities Purchase Agreement, dated July 6, 2020, by and between Clean Energy Technologies, Inc. and LGH Investments, LLC (included as Exhibit 10.111 to the Form 8-K filed on July 8, 2020.) |
|
|
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10.112 |
|
Form of $164,800 Convertible Promissory Note, dated July 6, 2020, issued by Clean Energy Technologies, Inc. to LGH Investments, LLC (included as Exhibit 10.112 to the Form 8-K filed on July 8, 2020.) |
|
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10.113 |
|
Form of Common Stock Purchase Warrant, dated July 6, 2020, issued by Clean Energy Technologies, Inc. to LGH Investments, LLC (included as Exhibit 10.113 to the Form 8-K filed on July 8, 2020.) |
|
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10.114 |
|
Form of Securities Purchase Agreement, dated August 18, 2020, by and between Clean Energy Technologies, Inc. and LGH Investments, LLC. (Included as exhibit 10.114 to the Form 8-K filed on August 25, 2020) |
|
|
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10.115 |
|
Form of Promissory Note, dated August 18, 2020, issued by Clean Energy Technologies, Inc. to LGH Investments, LLC (Included as exhibit 10.115 to the Form 8-K filed on August 25, 2020). |
|
|
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10.116 |
|
Form of Common Stock Purchase Warrant, dated August 18, 2020, issued by Clean Energy Technologies, Inc. to LGH Investments, LLC (Included as exhibit 10.116 to the Form 8-K filed on August 25, 2020). |
|
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10.117 |
|
Form of Securities Purchase Agreement between PowerUp Lending Group Ltd. and Clean Energy Technologies, Inc., dated July 15, 2020 (Included as exhibit 10.117 to the Form 8-K filed on August 25, 2020). |
|
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10.118 |
|
Form of Convertible $128,000 Promissory Note between PowerUp Lending Group Ltd. and Clean Energy Technologies, Inc., dated July 15, 2020. (Included as exhibit 10.118 to the Form 8-K filed on August 25, 2020).
|
10.119 |
|
Form of Securities Purchase Agreement, dated October 14, 2020, by and between Clean Energy Technologies, Inc. and LGH Investments, LLC (Included as exhibit 10.119 to the Form 8-K filed on October 19, 2020). |
10.120 |
|
Form of $164,800 Convertible Promissory Note, dated October 14, 2020, issued by Clean Energy Technologies, Inc. to LGH Investments, LLC. (Included as exhibit 10.120 to the Form 8-K filed on October 19, 2020). |
|
|
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10.121 |
|
Form of Common Stock Purchase Warrant, dated October 14, 2020, issued by Clean Energy Technologies, Inc. to LGH Investments, LLC. (Included as exhibit 10.121 to the Form 8-K filed on October 19, 2020). |
|
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10.122 |
|
Form of Securities Purchase Agreement between PowerUp Lending Group Ltd. and Clean Energy Technologies, Inc., dated September 9, 2020. (Included as exhibit 10.122 to the Form 8-K filed on October 19, 2020) |
|
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10.123 |
|
Form of Convertible $63,000 Promissory Note between PowerUp Lending Group Ltd. and Clean Energy Technologies, Inc., dated September 9, 2020. (Included as exhibit 10.123 to the Form 8-K filed on October 19, 2020). |
|
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10.124 |
|
Form of Securities Purchase Agreement between Power Up Lending Group Ltd. and Clean Energy Technologies, Inc., dated as of November 10, 2020. (Included as exhibit 10.124 to the Form 8-K filed on November 20, 2020) |
|
|
|
10.125 |
|
Form of Convertible $53,000 Promissory Note between Power Up Lending Group Ltd. and Clean Energy Technologies, Inc., dated as of November 10, 2020 (Included as exhibit 10.125 to the Form 8-K filed on November 20, 2020). |
|
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10.126 |
|
Form of Securities Purchase Agreement between Power Up Lending Group Ltd. and Clean Energy Technologies, Inc., dated as of December 18, 2020. (Included as exhibit 10.126 to the Form 8-K filed on December 23, 2020) |
|
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10.127 |
|
Form of Convertible $53,000 Promissory Note between Power Up Lending Group Ltd. and Clean Energy Technologies, Inc., dated as of December 18, 2020. (Included as exhibit 10.126 to the Form 8-K filed on December 23, 2020). |
|
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10.128 |
|
Form of Equity Financing Agreement with GHS Investments, LLC, dated as of August 31, 2021 (Included as exhibit 10.128 to the Form 8-K filed on September 9, 2021). |
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10.129 |
|
Form of Registration Rights Agreement with GHS Investments, LLC, dated as of August 31, 2021 (Included as exhibit 10.129 to the Form 8-K filed on September 9, 2021). |
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10.130 |
|
Form of Securities Purchase Agreement between Geneva Roth Remark Holdings Inc. and Clean Energy Technologies, Inc., dated as of November 10, 2020. (Included as exhibit 10.130 to the Form 8-K filed on September 10, 2021) |
|
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10.131 |
|
Form of $226,345 Promissory Note between Geneva Roth Remark Holdings Inc. and Clean Energy Technologies, Inc., dated September 7, 2020 (Included as exhibit 10.131 to the Form 8-K filed on September 10, 2021). |
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10.132 |
|
Form of $226,345 Original Issue Discount Note, due September 7, 2022, with Geneva Roth Remark Holdings Inc. carrying 10% interest per annum dated September 28, 2021 (Included as exhibit 10.132 to the Form 8-K filed on October 5, 2021). |
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10.133 |
|
Form of Securities Purchase Agreement with Geneva Roth Remark Holdings Inc., dated as of August 31, 2021 (Included as exhibit 10.133 to the Form 8-K filed on October 5, 2021). |
10.134 |
|
Form of The Conditional Stock Purchase Agreement between Clean Energy Technologies (H.K.) Limited., a wholly owned subsidiary of Clean Energy Technologies Inc. and Mr. Li Chin-kun, dated as of November 8, 2020. (Included as exhibit 10.134 to Form 10-K filed on April 15, 2022) |
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10.135 |
|
Form of Convertible $650,000 Promissory Note between Universal Scope, Inc. and Clean Energy Technologies, Inc., dated as of December 18, 2020. (Included as exhibit 10.135 to Form 10-K filed on April 15, 2022) |
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10.136 |
|
Translated Form of Strategic Cooperation Framework Agreement between Shenzhen Gas between Shenzhen Gas (Hong Kong) International Co., Limited and Leading Wave Limited, dated August 20, 2021 (Included as exhibit 10.136 to Form 10-K filed on April 15, 2022) |
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10.137 |
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Translated Form of 12% Convertible Promissory Note of Chengdu Rongjun Enterpirse Consulting Co., Ltd to Jiangsu Huanya Jieneng New Energy Co., Ltd. Yuan 5,000,000 (Included as exhibit 10.137 to the Form 10-K filed on December 31, 2022). |
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10.138 |
|
Form of Securities Purchase Agreement between Clean Energy Technologies, Inc. and Mast Hill Fund, L.P. dated May 6, 2022. (Included as exhibit 10.138 to the Form 8-K filed on May 9, 2022) |
|
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10.139 |
|
Form of $750,000 Convertible Promissory Note dated May 6, 2022. (Included as exhibit 10.139 to the Form 8-K filed on May 9, 2022) |
|
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10.140 |
|
Form of Warrant (Included as exhibit 10.140 to the Form 8-K filed on May 9, 2022) |
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10.141 |
|
2006 Incentive Stock Plan of the Company (Included as Exhibit 10.14 of Probe Manufacturing to the Form 8-K filed on August 23, 2006) |
|
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10.142 |
|
Form of Securities Purchase Agreement between Clean Energy Technologies, Inc. and Jefferson Street Capital, LLC. dated August 5, 2022. (Included as Exhibit 10.142 of the Company on Form 8-K filed on August 16, 2022) |
|
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10.143 |
|
Form of $138,888.88 Convertible Promissory Note dated August 5, 2022. (Included as Exhibit 10.143 of the Company on Form 8-K filed on August 16, 2022) |
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10.144 |
|
Form of Jefferson Warrant (Included as Exhibit 10.144 of the Company on Form 8-K filed on August 16, 2022) |
|
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10.145 |
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Form of $750,000 Convertible Promissory Note dated August 17, 2022. (Included as Exhibit 10.145 of the Company on Form 8-K filed on August 26, 2022) |
|
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10.146 |
|
Form of Securities Purchase Agreement between Clean Energy Technologies, Inc. and FirstFire Global Opportunities Fund, LLC. dated August 17, 2022. (Included as Exhibit 10.146 of the Company on Form 8-K filed on August 25, 2022) |
|
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10.147 |
|
Form of First Fire Warrant (Included as Exhibit 10.147 of the Company on Form 8-K filed on August 25, 2022) |
|
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10.148 |
|
Form of Securities Purchase Agreement between Clean Energy Technologies, Inc. and Pacific Global Opportunities Fund, LLC. dated September 1, 2022. (Included as Exhibit 10.148 of the Company on Form 8-K filed on September 9, 2022) |
|
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10.149 |
|
Form of $138,888.88 Convertible Promissory Note dated September 1, 2022. (Included as Exhibit 10.149 of the Company on Form 8-K filed on September 9, 2022) |
|
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10.150 |
|
Form of Warrant (Included as Exhibit 10.150 of the Company on Form 8-K filed on September 9, 2022) |
|
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10.151 |
|
Form of Securities Purchase Agreement between Clean Energy Technologies, Inc. and Mast Hill Fund, L.P. dated September 16, 2022. (Included as Exhibit 10.151 of the Company on Form 8-K filed on September 23, 2022) |
|
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10.152 |
|
Form of $300,000 Convertible Promissory Note dated September 23, 2022. (Included as Exhibit 10.152 of the Company on Form 8-K filed on September 9, 2022) |
|
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10.153 |
|
Form of Warrant (Included as Exhibit 10.153 of the Company on Form 8-K filed on September 23, 2022) |
|
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10.154 |
|
Form of Securities Purchase Agreement between Clean Energy Technologies, Inc. and Mast Hill Fund, L.P. dated October 25, 2022. (Included as Exhibit 10.154 of the Company on Form 8-K filed on October 28, 2022) |
|
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10.155 |
|
Form of Promissory Note dated October 25, 2022. (Included as Exhibit 10.155 of the Company on Form 8-K filed on October 28, 2022) |
|
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10.156 |
|
Form of Warrant (Included as Exhibit 10.155 of the Company on Form 8-K filed on October 28, 2022) |
|
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10.157 |
|
Form of Securities Purchase Agreement between Clean Energy Technologies, Inc. and Mast Hill Fund, L.P. dated October 25, 2022. (Included as Exhibit 10.157 of the Company on Form 8-K filed on November 18, 2022) |
|
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10.158 |
|
Form of Promissory Note dated October 25, 2022. (Included as Exhibit 10.158 of the Company on Form 8-K filed on November 18, 2022) |
|
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10.159 |
|
Form of Warrant (Included as Exhibit 10.159 of the Company on Form 8-K filed on November 18, 2022) |
|
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10.160 |
|
Form of Securities Purchase Agreement between Clean Energy Technologies, Inc. and 1800 Diagonal Lending, LLC dated December 5, 2022 (Included as Exhibit 10.160 of the Company on Form 8-K filed on December 12, 2022). |
|
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10.161 |
|
Form of Promissory Note dated December 5, 2022 (Included as Exhibit 10.161 of the Company on Form 8-K filed on December 12, 2022). |
|
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10.162 |
|
Form of Operating Agreement between CETY Capital LLC and Synergy Bioproducts Corporation, dated December 14, 2022 (Included as Exhibit 10.162 of the Company on Form 8-K filed on December 15, 2022). |
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10.163 |
|
Form of Securities Purchase Agreement between Clean Energy Technologies, Inc. and Mast Hill Fund, L.P. dated December 26, 2022 (Included as Exhibit 10.163 of the Company on Form 8-K filed on January 3, 2023). |
|
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10.164 |
|
Form of $123,000 Convertible Promissory Note dated December 26, 2022 (Included as Exhibit 10.164 of the Company on Form 8-K filed on January 3, 2023). |
|
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10.165 |
|
Form of Warrant (Included as Exhibit 10.165 of the Company on Form 8-K filed on January 3, 2023). |
|
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10.166 |
|
Form of Securities Purchase Agreement between Clean Energy Technologies, Inc. and Mast Hill Fund, L.P. dated January 19, 2023 (Included as Exhibit 10.166 of the Company on Form 8-K filed on January 25, 2023).
|
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10.167 |
|
Form of $187,000 Convertible Promissory Note dated January 19, 2023 (Included as Exhibit 10.167 of the Company on Form 8-K filed on January 25, 2023). |
|
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10.168 |
|
Form
of Warrant(Included as Exhibit 10.168 of the Company on Form 8-K filed on January 25, 2023) |
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10.169 |
|
Form of Calvin Pang Employment Agreement |
|
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10.170 |
|
Securities Purchase Agreement between Clean Energy Technologies, Inc. and 1800 Diagonal Lending LLC, dated February 10, 2023 |
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10.171 |
|
Form of $258,521 Promissory Note of Clean Energy Technologies to 1800 Diagonal Lending LLC, February 10, 2023 |
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10.172 |
|
Form of Master Services Agreement between RPG Global LLC and Clean Energy Technologies, Inc. |
14.1 |
|
Code of Ethics (included as exhibit 14.1 to the Form 10-KSB on April 17, 2006). |
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14.2 |
|
Amended and Restated Code of Business Conduct and Ethics, adopted September 23, 2011 (included as exhibit 14.1 to the Form 8-K filed on September 29, 2011). |
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21.1 |
|
List of subsidiaries of the Company (included as Exhibit 21.1 to Form 10-K filed on April 15, 2022) |
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23.1 |
|
Consent
of the Newman Law Firm, PLLC (included in Exhibit 5.1) |
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23.2* |
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Consent of Fruci & Associates II, PLLC Independent Registered Accounting Firm |
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24.1 |
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Power of Attorney |
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99.1 |
|
Consent
of Ted Hsu (Director Nominee) (included as exhibit 99.1 to the Form S-1/A filed on January 31, 2023). |
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99.2 |
|
Consent
of Lauren Morrison (Director Nominee) (included as exhibit 99.2 to the Form S-1/A filed on January 31, 2023). |
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99.3 |
|
Consent
of Mathew Graham Smith (Director Nominee) (included as exhibit 99.3 to the Form S-1/A filed on January 31, 2023). |
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107* |
|
Filing Fee Table |
*
Filed herein.
Item
17. UNDERTAKINGS
The
undersigned registrant hereby undertakes:
1.
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
i.
To include any Prospectus required by section 10(a)(3) of the Securities Act of 1933;
ii.
To reflect in the Prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of Prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration
Fee” table in the effective registration statement.
iii.
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
2.
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
3.
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.
4.
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution
of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to
the purchaser and will be considered to offer or sell such securities to such purchaser:
i.
Any Preliminary Prospectus or Prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule
424;
ii.
Any free writing Prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by
the undersigned registrant;
iii.
The portion of any other free writing Prospectus relating to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and
iv.
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
5.
The undersigned Registrant hereby undertakes that:
i.
for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared
effective.
ii.
for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
6.
That, for the purpose of determining liability under the Securities Act to any purchaser:
(1)
if the issuer is relying on Rule 430B:
(i)
each prospectus filed by the undersigned issuer pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as
of the date the filed prospectus was deemed part of and included in the registration statement; and
(ii)
each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on
Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required
by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of
the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offerings
described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter,
such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement
to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify
any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such
document immediately prior to such effective date; or
(2)
if the issuer is relying on Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to
an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall
be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however,
that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated
or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as
to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first
use.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the in Costa Mesa, California on March 1, 2023.
CLEAN
ENERGY TECHNOLOGIES, INC.
By: |
/s/
Kambiz Mahdi |
|
|
Kambiz
Mahdi |
|
|
Chief
Executive Officer |
|
Date: |
March
1, 2023 |
|
Clean Energy Technologies (QB) (USOTC:CETY)
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