Notes
to Consolidated Financial Statements (Unaudited)
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
These
unaudited interim consolidated financial statements as of and for the three months ended September 30, 2020, 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, 2019, 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 and nine months ended September 30, 2020, are not necessarily indicative of results for the entire year
ending December 31, 2020.
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.
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
$5,880,503 and a working capital deficit of $7,392,380 and a net loss of $512,889 for the three months ended September 30,
2020. The company also had an accumulated deficit of $15,271,689 as of September 30, 2020. 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.
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.
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 per commercial bank, at times we may exceed the FDIC limits. 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
We
grant credit to our customers and do not require collateral. 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, 2020, and December 31, 2019, we had a reserve for potentially un-collectable accounts of $82,000
and $82,000 respectively. Historically, our bad debt write-offs related to these trade accounts have been insignificant. The three
and nine months ended September 30, 2020; our bad debt expense was $0 compared to $0 for the same period in 2019.
Lease
asset
As
of September 30, 2020, and December 31, 2019 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 2021 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 September 30, 2020, and December
31, 2019, we had a reserve for potentially obsolete inventory of $250,000.
Property
and Equipment
Property
and equipment are recorded at cost. Assets held under capital leases are recorded at lease inception at the lower of the present
value of the minimum lease payments or the fair market value of the related assets. The cost of ordinary maintenance and repairs
is charged to operations. Depreciation and amortization are computed on the straight-line method over the following estimated
useful lives of the related assets:
Furniture
and fixtures
|
|
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 September 30, 2020, and December 31, 2019 we had $33,000 and $47,750 of deferred revenue, which
is expected to be recognized in the forth quarter of year 2020. There is an additional ~$75,000 to be billed for labor/installation/commissioning
services per the customer contracts outstanding as of September 30, 2020.
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 range of 90% to 112% and using a risk free interest rate of .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, 2020 and December 31, 2019, reflect:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of convertible notes derivative liability – December 31, 2019
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
320,794
|
|
|
$
|
320,794
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of convertible notes derivative liability – September 30, 2020
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
420,687
|
|
|
$
|
420,687
|
|
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 on the basis of the weighted average number of common shares outstanding. At September 30,
2020, we had outstanding common shares of 777,033,772 used in the calculation of basic earnings per share. Basic Weighted average
common shares and equivalents for the three months ended September 30, 2020 and 2019 were 768,031,046 and 666,391,352, respectively.
As of September 30, 2020, we had convertible notes and related party convertible notes, convertible into approximately 544,398,805
of additional common shares, outstanding preferred shares convertible into 5,625,000, calculated @ $.08 of additional common shares
and 8,000,000 common stock warrants convertible into an additional. Fully diluted weighted average common shares and equivalents
were withheld from the calculation as they were considered anti-dilutive.
Research
and Development
We
had no amounts of research and development R&D expense during the three and nine months ended September 30, 2020 and 2019.
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 Engineering and 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.
Prior to December 31, 2015 we only had one reporting segment.
An
operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income
is defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include amortization
of intangibles, stock-based compensation, other charges (income), net and interest and other, net.
Selected
Financial Data:
|
|
For
the nine months ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Net Sales
|
|
|
|
|
|
|
|
|
Manufacturing
and Engineering
|
|
|
361,697
|
|
|
|
344,905
|
|
Clean Energy HRS
|
|
|
823,928
|
|
|
|
46,662
|
|
CETY
Europe
|
|
|
44,506
|
|
|
|
64,035
|
|
Total
Sales
|
|
|
1,230,131
|
|
|
|
455,602
|
|
|
|
|
|
|
|
|
|
|
Segment income and
reconciliation before tax
|
|
|
|
|
|
|
|
|
Manufacturing and Engineering
|
|
|
124,790
|
|
|
|
78,314
|
|
Clean Energy HRS
|
|
|
518,965
|
|
|
|
37,463
|
|
CETY
Europe
|
|
|
37,481
|
|
|
|
46,707
|
|
Total Segment income
|
|
|
681,236
|
|
|
|
162,484
|
|
|
|
|
|
|
|
|
|
|
Reconciling items
|
|
|
|
|
|
|
|
|
General
and Administrative expense
|
|
|
(345,629
|
)
|
|
|
(307,260
|
)
|
Salaries
|
|
|
(569,734
|
)
|
|
|
(617,821
|
)
|
Travel
|
|
|
(67,861
|
)
|
|
|
(199,599
|
)
|
Professional
fees
|
|
|
(129,385
|
)
|
|
|
(98,871
|
)
|
Consulting
|
|
|
(49,162
|
)
|
|
|
(42,800
|
)
|
Facility
lease
|
|
|
(280,303
|
)
|
|
|
(243,715
|
)
|
Depreciation
|
|
|
(28,329
|
)
|
|
|
(23,528
|
)
|
Change in derivative
liability
|
|
|
208,195
|
|
|
|
185,811
|
|
Gain debt settlement
|
|
|
431,698
|
|
|
|
-
|
|
Interest
Expense
|
|
|
(906,696
|
)
|
|
|
(1,041,961
|
)
|
Net
Loss before income tax
|
|
|
(1,055,970
|
)
|
|
|
(2,227,260
|
)
|
|
|
|
September
30, 2020
|
|
|
|
December 31, 2019
|
|
Total Assets
|
|
|
|
|
|
|
|
|
Electronics Assembly
|
|
|
1,628,124
|
|
|
|
2,116,907
|
|
Clean Energy HRS
|
|
|
2,271,068
|
|
|
|
1,717,316
|
|
CETY Europe
|
|
|
42,008
|
|
|
|
16,296
|
|
Total Assets
|
|
|
3,941,200
|
|
|
|
3,850,519
|
|
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. The three months ended September 30, 2020 and 2019 we had $0 and $0 respectively, in share-based
expense, due to the issuance of common stock. As of September 30, 2020, 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 months ended September 30,
2020 using a Federal Tax Rate of 21%.
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, 2020, we had a net operating loss carry-forward of approximately $(6,705,252) and a deferred tax asset of $1,408,124
using the statutory rate of 21%. 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 $(1,408,124). 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 September 30, 2020 the Company had not taken any tax positions that would require
disclosure under FASB ASC 740.
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Deferred Tax Asset
|
|
$
|
1,408,124
|
|
|
$
|
1,126,860
|
|
Valuation Allowance
|
|
|
(1,408,124
|
)
|
|
|
(1,126,860
|
)
|
Deferred Tax Asset (Net)
|
|
$
|
-
|
|
|
$
|
-
|
|
On
February 13, 2018 , Clean Energy Technologies, Inc., a Nevada corporation (the “Registrant” or “Corporation”)
entered into a Common Stock Purchase Agreement (“Stock Purchase Agreement”) by and between MGW Investment I Limited
(“MGWI”) and the Corporation. The Corporation received $907,388 in exchange for the issuance of 302,462,667 restricted
shares of the Corporation’s common stock, par value $.001 per share (the “Common Stock”).
On
February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase
Agreement (the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions
contemplated thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory
Note (the “CVL Note”) in the principal amount of $939,500 with an interest rate of 10% per annum interest rate and
a maturity date of February 13, 2020. The CVL Note is convertible into shares of Common Stock at $0.003 per share, as adjusted
as provided therein. This note was assigned to MGW Investments.
This
resulted in a change in control, which limited the net operating to that date forward. We are subject to taxation in the U.S.
and the states of California. Further, the Company currently has no open tax years’ subject to audit prior to December 31,
2015. The Company is current on its federal and state tax returns.
Reclassification
Certain
amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications
had no effect on reported income, total assets, total liabilities or stockholders’ equity as previously reported. We reclassified
accrued interest and other accrued expenses to the respective note’s payable accounts. See Note 8 for the GE liability,
convertible notes payable and note 12 regarding the related party disclosure
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 the impact on the company
is under evaluation.
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. This was issued in August of 2020 and will become effective for fiscal years beginning after December 15, 2021, including
interim periods within those fiscal years. We are in the process of evaluating the impact to the company.
NOTE
2 – ACCOUNTS AND NOTES RECEIVABLE
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Accounts Receivable
|
|
$
|
1,323,200
|
|
|
$
|
1,370,258
|
|
Less Reserve for uncollectable accounts
|
|
|
(82,000
|
)
|
|
|
(82,000
|
)
|
Accounts Receivable (Net)
|
|
$
|
1,241,200
|
|
|
$
|
1,288,258
|
|
Our
Accounts Receivable is pledged to Nations Interbanc, our line of credit.
Note
3 – Lease Asset
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
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, 2020
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.
NOTE
4 – INVENTORY
Inventories
by major classification were comprised of the following at:
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Raw Material
|
|
$
|
763,928
|
|
|
$
|
848,464
|
|
Work in Process
|
|
|
36,932
|
|
|
|
31,740
|
|
Total
|
|
|
800,860
|
|
|
|
880,204
|
|
Less reserve for excess or obsolete inventory
|
|
|
(250,000
|
)
|
|
|
(250,000
|
)
|
Inventory
|
|
$
|
550,860
|
|
|
$
|
630,204
|
|
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:
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Capital Equipment
|
|
$
|
1,350,794
|
|
|
$
|
1,350,794
|
|
Leasehold improvements
|
|
|
75,436
|
|
|
|
75,436
|
|
Accumulated Depreciation
|
|
|
(1,371,185
|
)
|
|
|
(1,351,763
|
)
|
Net Fixed Assets
|
|
$
|
55,045
|
|
|
$
|
74,467
|
|
Our
Depreciation Expense the three months ended September 30, 2020 and 2019 was $6,474 and $8,794 respectively.
Our
Depreciation Expense the nine months ended September 30, 2020 and 2019 was $ 28,329 and $23,528 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:
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Goodwill
|
|
$
|
747,976
|
|
|
$
|
747,976
|
|
License
|
|
|
354,322
|
|
|
|
354,322
|
|
Patents
|
|
|
190,789
|
|
|
|
190,789
|
|
Accumulated Amortization
|
|
|
(60,375
|
)
|
|
|
(51,467
|
)
|
Net Intangible Assets
|
|
$
|
1,232,712
|
|
|
$
|
1,241,620
|
|
Our
Amortization Expense the three months ended September 30, 2020 and 2019 was $2,969 and $2,969 respectively.
Our
Amortization Expense the nine months ended September 30, 2020 and 2019 was $5,938 and $5,938 respectively.
NOTE
7 – ACCRUED EXPENSES
|
|
September
30, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
Accrued
Payroll
|
|
$
|
222,925
|
|
|
$
|
172,371
|
|
Accrued
VAT Taxes
|
|
|
29,679
|
|
|
|
19,856
|
|
Accrued
Interest
|
|
|
337,670
|
|
|
|
311,620
|
|
Total
accrued expenses
|
|
$
|
590,274
|
|
|
$
|
503,847
|
|
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 September 30, 2020, the outstanding balance was $36,500. Subsequently,
on January 30, 2020 we issued 1,700,000 shares of our common stock at a purchase price of $.02 per share, as settlement in full
of a note payable of in the amount of $36,500 with accrued interest of $19,721. As a result, we recognized a gain in the amount
of $22,221 in the 1st quarter of 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 September 30, 2020, the outstanding
balance was $1,710,127 compared to $1,617,086 at December 31, 2019.
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
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Note payable GE
|
|
$
|
1,200,000
|
|
|
$
|
1,200,000
|
|
Accrued transition services
|
|
|
972,233
|
|
|
|
972,233
|
|
Accrued Interest
|
|
|
255,941
|
|
|
|
214,001
|
|
Total
|
|
$
|
2,428,174
|
|
|
$
|
2,386,234
|
|
We
are currently in default on the payment of the purchase price pursuant to our asset purchase agreement with General Electric due
to a combination of our inability to raise sufficient capital as expected and our belief that we are entitled to a reduction in
purchase price we paid. We are in the process of negotiations with General Electric.
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 in full is due May 4, 2022 and also has the possibility of
forgiveness.
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 September 30, 2020, 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 September 30, 2020, the outstanding balance due was $95,685
On
December 13, 2018 we entered into a convertible note payable for $83,000, with a maturity date of December 13, 2019, which accrues
interest at the rate of 12% per annum. It is convertible nine months after its issuance and has a conversion rate of fifty-eight
percent (65%) of the average of the two lowest trading prices (as reported by Bloomberg LP) of our common stock for the fifteen
(15) Trading Days immediately preceding the date of conversion. On May 28, 2019 this note was paid in full.
On
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 not convertible nine months after its issuance and has a conversion rate of fifty-eight
percent (65%) of the average of the two lowest trading prices (as reported by Bloomberg LP) of our common stock for the fifteen
(15) Trading Days immediately preceding the date of conversion. On August 12, 2019 this note was paid in full. The fair value
of the convertible feature was $513,829, we recorded a debt discount of $138,000 and an additional loss of $375,828. As of September
30, 2020, the un-amortized debt discount was $0. The total amortized debt discount expense was $138,000.
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. This note was paid in full on October 10, 2019. The fair value of the convertible
feature was $55,604, we recorded a debt discount of $53,000 and an additional loss of $2,604. As of September 30, 2020, the un-amortized
debt discount was $0. The total amortized debt discount expense was $53,000.
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. Subsequently that note was paid in full on May 1, 2020. The fair value of the convertible feature
was $97,471, we recorded a debt discount of $97,471 and an additional loss of $0. As of September 30, 2020, the un-amortized debt
discount was $0. The total amortized debt discount expense was $80,647 for the nine months ended September 30, 2020 and $16,824
for the year ended December 31, 2019. On April 28, 2020 this note was paid in full.
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. The fair value of the convertible feature was $87,560, we recorded a debt discount of $87,560. As
of September 30, 2020, the un-amortized debt discount was $45,760. The total amortized debt discount expense was $109,450 for
the nine months ended September 30, 2020. 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. The fair value of the convertible feature was $47,401, we recorded a debt discount of $47,401. As
of September 30, 2020, the un-amortized debt discount was $0. The total amortized debt discount expense was $30,226 for the nine
months ended September 30, 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 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and
one million (1,000,000) restricted shares of Common Stock (“Inducement 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 recognised 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.
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. As of September 30, 2020, the un-amortized debt discount was $61,443. The total amortized debt discount expense
was $43,887 for the nine months ended September 30, 2020. This note was paid in full on October 16, 2020.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the
Investor a convertible promissory note (the “Note”) in the original principal amount of $103,000, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and
one million (1,000,000) restricted shares of Common Stock (“Inducement 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 recognised 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.
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 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. As of September 30, 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.
Total
due to Convertible Notes
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Total convertible notes
|
|
$
|
646,085
|
|
|
$
|
371,785
|
|
Accrued Interest
|
|
$
|
88,620
|
|
|
$
|
82,111
|
|
Debt Discount
|
|
$
|
(146,701
|
)
|
|
$
|
(80,647
|
)
|
Total
|
|
$
|
588,004
|
|
|
$
|
373,249
|
|
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 70% to 92% and a risk-free interest rate range of .15% to
.18%. The remaining derivative liabilities were:
Derivative Liabilities on Convertible Loans:
|
|
|
|
Derivative Liability December 31, 2019
|
|
$
|
320,794
|
|
Additions
|
|
|
308,088
|
|
Fair market value adjustments
|
|
|
(208,195
|
)
|
Derivative Liability September 30, 2020
|
|
$
|
420,687
|
|
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 as of September 30, 2020 are:
Year
|
|
Lease
Payment
|
|
2020
|
|
$
|
60,471
|
|
2021
|
|
$
|
249,132
|
|
2022
|
|
$
|
256,608
|
|
2023
|
|
$
|
44,052
|
|
Imputed
Interest
|
|
$
|
44,312
|
|
Net
Lease Liability
|
|
$
|
654,575
|
|
Our
Building expense for the three months ended September 30, 2020 and 2019 was $83,186 and $80,863 respectively.
Our
Building expense for the nine months ended September 30, 2020 and 2019 was $276,822 and $243,715 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
September 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
In
the first quarter of 2019, we signed agreements to issue 4,000,000 shares of common stock valued at $.015 for a total value of
$60,000 for the conversion of 800 preferred series D shares, which were subsequently issued.
We
also recorded a $60,000 inducement fee (relating to the Preferred series D estoppel agreement and discounted conversion terms)
to account for the difference in the fair value which was offset to retained earnings.
On
June 10, 2019 we issued 500,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $10,000
in a private sale. We also issued 500,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 per share of
Common Stock and expires one year from the date of the Agreement.
On
July 19, 2019 we issued 500,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $10,000
in a private sale. We also issued 500,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 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 250,000 units at a purchase price of $.02 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 $.04 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
December 5, 2019 we issued 5,000,000 units at a purchase price of $.015 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 $.04 per share.
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 $.03 per share. As of the date hereof, 4,523,333
shares of common stock have been issued thereunder.
On
January 30, 2020 we issued 1,700,000 shares of our common stock at a purchase price of $.02 per share, as settlement in full of
a note payable of in the amount of $36,500 with accrued interest of 19,721. As a result we recognized a gain in the amount of
$22,221 in the 1st quarter of 2020.
On
February 3, 2020 we issued 3,690,000 shares of our common stock under our Reg A offering at $.03 per share. These shares are unrestricted
and free trading.
On
February 4, 2020 we issued 2,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of
800 shares of our Series D Preferred Stock.
On
March 17, 2020 we issued 833,333 shares of our common stock under our Reg A offering at $.03 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
764,526 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 three months ended September 30, 2020 we issued 9,138,257 shares of common stock, under S-1 registration statement with GHS
for a total of $137,351 in net proceeds and expensed $83,173 in legal and financing fees as a result.
On
July 23, 2020 we issued 3,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 1,200
shares of our Series D Preferred Stock.
Subsequently
on October 14, 2020 we issued 1,871,783 shares of common stock under S-1 registration statement with GHS for a total of $28,433
in net proceeds and expensed $9,002 in legal and financing fees as a result.
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 September
30, 2020, there were 777,033,772 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 nine months. We received an aggregate of $750,000 in financing in subscription for Series
D Preferred Stock, or 7,500 shares.
The
following are primary terms of the Series D Preferred Stock. The Series D Preferred holders were initially entitled to be paid
a special monthly divided at the rate of 17.5% per annum. Initially, the Series D Preferred Stock was also entitled to be paid
special dividends in the event cash dividends were not paid when scheduled. If the Company does not pay the dividend within five
(5) business days from the end of the calendar month for which the payment of such dividend to owed, the Company will pay the
investor a special dividend of an additional 3.5%. Any unpaid or accrued special dividends will be paid upon a liquidation or
redemption. For any other dividends or distributions, the Series D Preferred Stock participates with common stock on an as-converted
basis. The Series D Preferred holders may elect to convert the Series D Preferred Stock, in their sole discretion, at any time
after a one-year (1) year holding period, by sending the Company a notice to convert. The conversion rate is equal to the greater
of $0.08 or a 20% discount to the average of the three (3) lowest closing market prices of the common stock during the ten (10)
trading day period prior to conversion. The Series D Preferred Stock is redeemable from funds legally available for distribution
at the option of the individual holders of the Series D Preferred Stock commencing any time after the one (1) year period from
the offering closing at a price equal to the initial purchase price plus all accrued but unpaid dividends, provided, that if the
Company gave notice to the investors that it was not in a financial position to redeem the Series D Preferred, the Company and
the Series D Preferred holders are obligated to negotiate in good faith for an extension of the redemption period. The Company
timely notified the investors that it was not in a financial position to redeem the Series D Preferred and the Company and the
investors have engaged in ongoing negotiations to determine an appropriate extension period. The Company may elect to redeem the
Series D Preferred Stock any time at a price equal to initial purchase price plus all accrued but unpaid dividends, subject to
the investors’ right to convert, by providing written notice about its intent to redeem. Each investor has the right to
convert the Series D Preferred Stock at least ten (10) days prior to such redemption by the Company.
In
connection with the subscriptions for the Series D Preferred, we issued series F warrants to purchase an aggregate of 375,000
shares of our common stock at $.10 per share and series G warrants to purchase an aggregate of 375,000 shares of our common stock
at $.20 per share.
On
August 21, 2014, a holder holding 5,000 shares of Preferred Series D Preferred agreed to lower the dividend rate to 13% on its
Series D Preferred. In September 2015, all holders of Series D Preferred signed and delivered estoppel agreements, whereby the
holders agreed, among other things, that the Series D Preferred was not in default and to reduce (effective as of December 31,
2015) the dividend rate on the Series D Preferred Stock to six percent per annum and to terminate the 3.5% penalty in respect
of unpaid dividends accruing on or after such date.
In
the first quarter of 2019, we signed agreements to issue 4,000,000 shares of common stock valued at $.015 for a total value of
$60,000 for the conversion of 800 preferred series D shares, which were subsequently issued.
We
also recorded a $60,000 inducement fee (in exchange for the “standoff” and estoppel agreement and discounted conversion
terms) to account for the difference in the fair value which we offset to retained earnings.
On
February 4, 2020 we issued 2,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of
800 shares of our Series D Preferred Stock.
On
July 23, 2020 we issued 3,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 1,200
shares of our Series D Preferred Stock.
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 168,000,000 units (each a
“Unit” and together the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $1,999,200,
or $.0119 per Unit, with each unit consisting of one share of common stock, par value $.001 per share (the “Common Stock”)
and a warrant (the “Warrant”) to purchase one share of common stock. The Common Stock will be issued to MGWI at such
time as the Company increases the number of shares of its authorized Common Stock. The Warrant is exercisable at $.04 per share
of Common Stock and, which expired on May 31, 2020.
On
June 10, 2019 we issued 500,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $10,000
in a private sale. We also issued 500,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 per share of
Common Stock and which expired on June 10, 2020.
On
July 18, 2019 we issued 500,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $10,000
in a private sale. We also issued 500,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 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 250,000 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 $.04 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
December 5, 2019 we issued 5,000,000 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 $.04 per share.
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the
Investor a convertible promissory note (the “Note”) in the original principal amount of $164,800, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and
one million (1,000,000) restricted shares of Common Stock (“Inducement Shares”). The Note carried an original issue
discount of $4,800 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible
at any time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the
Investor a convertible promissory note (the “Note”) in the original principal amount of $103,000, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and
one million (1,000,000) restricted shares of Common Stock (“Inducement 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.
|
|
Warrants - Common Share Equivalents
|
|
|
Weighted Average Exercise price
|
|
|
Warrants exercisable - Common Share Equivalents
|
|
|
Weighted Average Exercise price
|
|
Outstanding December 31, 2019
|
|
|
174,250,000
|
|
|
$
|
0.04
|
|
|
|
174,250,000
|
|
|
$
|
0.04
|
|
Additions
|
|
|
3,000,000
|
|
|
|
-
|
|
|
|
3,000,000.00
|
|
|
|
0.04
|
|
Expired
|
|
|
169,250,000
|
|
|
|
-
|
|
|
|
169,250,000
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding September 30, 2020
|
|
|
8,000,000
|
|
|
$
|
0.04
|
|
|
|
8,000,000
|
|
|
$
|
0.04
|
|
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. Our Board of Directors has approved the transactions between Billet Electronics
and the Company.
On
September 6, 2016, we entered into a one-year convertible note payable for $87,500, 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 percent (55%) of
the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the twenty (20) Trading Days immediately preceding
the date of conversion. On December 16, 2016 we issued 1,200,000 shares of common stock at $.0031 for a partial conversion of
this note in the amount of $3,696. January 4, 2018, we issued 2,300,000 shares of common stock at $.002192 for a partial conversion
of this note in the amount of $5,042.
On
November 2, 2016, we effected the repayment of the convertible note dated March 15, 2016 for an aggregate amount of $84,000. Concurrently,
we entered into an Escrow Funding Agreement with Red Dot Investment, Inc., a California corporation (“Reddot”), pursuant
to which Reddot deposited funds into escrow to fund the repayment and we assigned to Reddot our right to acquire the convertible
note and Reddot acquired the convertible note. Concurrently, we and Reddot amended the convertible note (a) to have a fixed conversion
price of $.005 per share, subject to potential further adjustment in the event of certain Common Stock issuances, (b) to have
a fixed interest rate of ten percent (10%) per annum with respect to both the redemption amount and including a financing fee
and any costs, expenses, or other fees relating to the convertible note or its enforcement and collection, and any other expense
for or on our account (in each case with a minimum 10% yield in the event of payoff or conversion within the first year), such
amounts to constitute additional principal under the convertible note, as amended, and (c) as otherwise provided in the Escrow
Funding Agreement. The March 2016 convertible note, as so amended, is referred to as the “Master Note.”
Concurrently
with the foregoing note repayments, we entered into a Credit Agreement and Promissory Note (the “Credit Agreement”)
with Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation (“MW I”), pursuant
to which MW I deposited funds into escrow to fund the repayment of the convertible notes and we assigned to MW I our right to
acquire the convertible notes and otherwise agreed that MW I would be subrogated to the rights of each note holder to the extent
a note was repaid with funds advanced by MW I. Concurrently, MW I acquired the Master Note and we agreed that all amounts advanced
by MG I to or for our benefit would be governed by the terms of the Master Note, including the payment of a financing fees, interest,
minimum interest, and convertibility. Reddot is MW I’s agent for purposes of administration of the Credit Agreement and
the Master Note and advances thereunder.
On
February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase
Agreement (the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions
contemplated thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory
Note (the “CVL Note”) in the principal amount of $939,500 with an interest rate of 10% per annum interest rate and
a maturity date of February 13, 2020. The CVL Note is convertible into shares of Common Stock at $0.003 per share, as adjusted
as provided therein. As a result we recognized a beneficial conversion feature of $532,383, which is amortized over the life of
the note. This note was assigned to Mgw Investments and they agreed not to convert the $939,500 note in to shares in excess of
the 800,000,000 Authorized limit until we have increased the Authorized shares to the Board approved limit of 2 billion shares.
On
February 8, 2018 the Corporation entered a Convertible Promissory Note in the principal amount of $153,123, due October 8, 2018,
with an interest rate of 12% per annum payable to MGWI (the “MGWI Note”). The MGWI Note is convertible into shares
of the Corporation’s common stock at the lower of: (i) a 40% discount to the lowest trading price during the previous twenty
(20) trading days to the date of a Conversion Notice; or (ii) 0.003. As a result of the closing of the transactions contemplated
by the Stock Purchase Agreement and Convertible Note Purchase Agreement, the MGWI Note must be redeemed by the Corporation in
an amount that will permit CVL and MGWI and their affiliates to hold 65% of the issued and outstanding Common Stock of the Corporation
on a fully diluted basis. The proceeds from the MGWI Note were used to redeem the convertible note of the Corporation to JSJ Investments,
Inc. in the principal amount of $103,000 with an interest rate of 12% per annum, due April 25, 2018. At December 31, 2019 the
holder of this note beneficially owned 70% of the company and this note is not convertible if the holder holds more than 9.99%,
as a result, we did not recognize a derivative liability or a beneficial conversion feature.
On
June 21, 2018 the corporation entered into a promissory note with MGW Investment I Limited, for the principal amount of $250,000,
with an interest rate of Eight Percent (8%) per annum and a maturity date of June 21, 2019. On May 28, 2019 this note was paid
in full.
On
September 21, 2018 the corporation entered into a promissory note with MGW Investment I Limited, for the principal amount of $100,000,
with an interest rate of Eight Percent (8%) per annum and a maturity date of September 21, 2019. On May 28, 2019 this note was
paid in full.
On
February 15, 2018 we issued 9,200,000 at a purchase price of .0053 per share as additional compensation in the amount of $48,760.
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 20,000,000 shares of our common stock, as additional compensation.
As a result, the three months ended December 31, 2019 we accrued for and subsequently on February 13, 2019, issued 20,000,000
shares at a purchase price of $.0131 per share to Mr. Mahdi in the amount of $262,000.
On
January 10, 2019 the corporation entered into a promissory note with MGW Investment I Limited, for the principal amount of $25,000,
with an interest rate of Eight Percent (8%) per annum and a maturity date of January 10, 2020. On May 28, 2019 this note was paid
in full.
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 168,000,000 units (each a
“Unit” and together the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $1,999,200,
or $.0119 per Unit, with each unit consisting of one share of common stock, par value $.001 per share (the “Common Stock”)
and a warrant (the “Warrant”) to purchase one share of common stock. The Common Stock will be issued to MGWI at such
time as the Company increases the number of shares of its authorized Common Stock. The Warrant is exercisable at $.04 per share
of Common Stock and expires, which expired on May 31, 2020.
In
the fourth quarter of 2019 MGW Investment I Limited, advanced $142,975, with no terms or interest rate. In the first quarter of
2020 they advanced an additional $60,000, and in the second quarter of 2020, were re-paid $35,000 The outstanding balance on these
advances on September 30, 2020 is $167,975.
Total
Related Party Debt
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Total related party notes
|
|
$
|
1,325,572
|
|
|
$
|
1,260,572
|
|
Accrued Interest
|
|
$
|
338,153
|
|
|
$
|
248,838
|
|
Debt Discount
|
|
$
|
-
|
|
|
$
|
(29,227
|
)
|
Total
|
|
$
|
1,663.725
|
|
|
$
|
1,480,183
|
|
NOTE
13 - WARRANTY LIABILITY
For
the three and nine months ended September 30, 2020 and 2019 there was no change in our warranty liability. Due to the lack of
historical warranty cost, any potential change to the warranty accrual is not material.
NOTE
14 – SUBSEQUENT EVENTS
On
October 14, 2020 we issued 1,871,783 shares of common stock under S-1 registration statement with GHS for a total of $28,433 in
net proceeds and expensed $9,002 in legal and financing fees as a result.
On
October 14, 2020 Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with Firstfire Global Opportunities Fund LLC, (the “Investor”), pursuant to which the Company
issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of $168,000, a
Warrant (the “Warrant”) to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share
(the “Common Stock”) and 1,250,000 restricted shares of Common Stock (“Inducement Shares”). The Note carried
an original issue discount of $8,000 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue
date and is convertible at any time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment.
On
October 29, 2020 we issued 2,412,698 shares of common stock under S-1 registration statement with GHS for a total of $30 ,592
in net proceeds and expensed $12,836 in legal and financing fees as a result.
On
November 12, 2020 we issued 1,241,796 shares of common stock under S-1 registration statement with GHS for a total of $15,909
in net proceeds and expensed $7,684 in legal and financing fees as a result.
In
accordance with ASC 855, the Company has analyzed its operations subsequent to September 30, 2020 through the date these financial
statements were issued, and has determined that it does not have any other material subsequent events to disclose in these financial
statements.