Notes
to Consolidated Financial Statements (Unaudited)
NOTE
1 – General
These
unaudited interim consolidated financial statements as of and for the nine months ended September 30, 2021, 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, 2020 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 nine months
ended September 30, 2021, are not necessarily indicative of results for the entire year ending December 31, 2021.
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
With
the vision to combat climate change and create 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 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 executing
our business strategy by increasing our market presence and broadening our product portfolio in the heat to power markets. We are continuing
to design, build and ship products to Europe, US, Canada, South East Pacific regions and plan 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
recently raised $4.0 million in a Regulation A equity offering and plan to continue to raise and additional $6.0 million subject to market
conditions. We plan to use the proceeds from this offering to expand and enhance our existing business, improve our balance sheet and
to expand into new energy-based businesses in the U.S. and China with higher profit margins.
We
entered into a manufacturing and sales agreement to design, build and operate renewable energy and waste recovery facilities. We use
an ablative pyrolysis system for processing of industrial and municipal organic waste in high temperature producing renewable high heating
value fuel gas and value-added chemical. The key benefits of this system are better waste sourcing and mixing flexibility, near-zero
emissions, modular design, zero liquid discharge, and zero solid waste residue waste. We are focusing on applications for industrial
and municipality solid waste, landfill waste, agriculture waste, and forestry waste.
We
plan to build a financial division that combines the customer demand for low carbon energy which we believe will compliment recent investor
trends for funding low carbon energy projects. Low carbon energy is becoming ever more important for sustainable development and we believe
is becoming recognized as a critical path to achieve economic growth globally and sustaining living standards. We believe our efforts
will improve our sales and profitability across low carbon energy projects.”
On
November 8, 2021 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 for $1,500,000 in cash compensation and, if Leading Wave
is able to achieve certain milestones, 200,000,000 shares of Common Stock of the Company.
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 $2,357,537 and
a working capital deficit of $3,447,804 as of September 30, 2021. The company also had an accumulated deficit of $16,812,704 as of September
30, 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.
Plan
of Operation
Our
goal is to position CETY as a worldwide leader in the renewables energy and energy efficiency markets by targeting industries that have
wasted thermal energy, or organic waste which could potentially turn into electricity and other form of renewable energy.
We
plan to leverage our proprietary magnetic bearing turbine technology with over 100 installations and 1 million fleet operating hours
to increase our market share in low to medium temperature waste heat recovery markets.
We
plan to continue establishing partnership with project developers to identify biomass opportunities with long-term feedstock and regional
incentives.
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 expand our core expertise to identify, acquire and develop leading clean energy and clean technology solutions and products.
We expect to 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, solar energy, and government and regional incentives. As prices
increase our products produce a better return on investment for our customers. They are also dependent on regulatory drivers and financial
incentives. In the US a new waste energy recovery property investment tax credit has been introduced for generating power from heat,
which should support additional sales in the US.
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.
We
plan to build a financial division to provide funding to customers who use our products and services.
We
also intent to take advantage of the growing natural gas markets in China through mergers and acquisitions.
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, 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 September 30, 2021,
and December 31, 2020, we had a reserve for potentially un-collectable long-term financing receivables of $247,500 and $247,500 respectively.
Five
(5) customers accounted for approximately 98% of accounts receivable on September 30, 2021. 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, 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 first 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 September 30, 2021 and December 31, 2020, 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:
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 September 30, 2021 and 2020 we had $33,000 and 33,000 of deferred revenue, which is expected to be recognized
in the fourth quarter of year 2021.
Also,
from time to time we require upfront deposits from our customers based on the contract. As of September 30, 2021 and December 31, 2020,
we had outstanding customer deposits of $194,500 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 112% and using a risk free interest rate of 2.54%
|
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, 2021 and December 31, 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 – September 30, 2021
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
274,178
|
|
|
$
|
274,178
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of convertible notes derivative liability – December 31, 2020
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
2,008,802
|
|
|
$
|
2,008,802
|
|
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,
2021, we had outstanding common shares of 923,893,327
used in the calculation of basic earnings per share. Basic Weighted average common shares and equivalents for the three months ended
September 30, 2021 and 2020 were 922,225,702
and 768,031,046
respectively. Basic Weighted average common shares and equivalents for the nine months ended September 30, 2021 and 2020 were 891,312,514
and 762,841,333
respectively. As of September 30, 2021, we had convertible notes, convertible into approximately 480,751,127
of additional common shares, 8,754,720
common stock warrants. Fully diluted weighted average common shares and equivalents were withheld from the calculation for the three
months ended September 30, 2021 and 2020 and the nine months ended September 30, 2020, as they were considered anti-dilutive. Fully
diluted weighted average common shares and equivalents for the nine months ended September 30, 2021 were 1,357,635,219.
Research
and Development
We
had no amounts of research and development R&D expense during the three & nine months ended September 30, 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.
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 nine months ended September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Net
Sales
|
|
|
|
|
|
|
|
|
Manufacturing
and Engineering
|
|
|
91,262
|
|
|
|
361,697
|
|
Clean
Energy HRS
|
|
|
602,207
|
|
|
|
823,928
|
|
Cety
Europe
|
|
|
173,234
|
|
|
|
44,506
|
|
Total
Sales
|
|
|
866,703
|
|
|
|
1,230,131
|
|
|
|
|
|
|
|
|
|
|
Segment
income and reconciliation before tax
|
|
|
|
|
|
|
|
|
Manufacturing
and Engineering
|
|
|
72,853
|
|
|
|
124,790
|
|
Clean
Energy HRS
|
|
|
312,118
|
|
|
|
518,965
|
|
Cety
Europe
|
|
|
134,712
|
|
|
|
37,481
|
|
Total
Segment income
|
|
|
519,683
|
|
|
|
681,236
|
|
|
|
|
|
|
|
|
|
|
Reconciling
items
|
|
|
|
|
|
|
|
|
General
and Administrative expense
|
|
|
(529,335
|
)
|
|
|
(394,791
|
)
|
Salaries
|
|
|
(661,634
|
)
|
|
|
(569,734
|
)
|
Travel
|
|
|
(66,735
|
)
|
|
|
(67,861
|
)
|
Professional
Fees
|
|
|
(123,383
|
)
|
|
|
(129,385
|
)
|
Facility
lease and Maintenance
|
|
|
(254,708
|
)
|
|
|
(280,303
|
)
|
Depreciation
and Amortization
|
|
|
(24,219
|
)
|
|
|
(28,329
|
)
|
Change
in derivative liability
|
|
|
1,734,624
|
|
|
|
208,195
|
|
Gain
debt settlement
|
|
|
828,666
|
|
|
|
431,698
|
|
Interest
Expense
|
|
|
(603,240
|
)
|
|
|
(906,696
|
)
|
|
|
September
30, 2021
|
|
|
December
31, 2020
|
|
Total
Assets
|
|
|
|
|
|
|
|
|
Clean
Energy Technologies
|
|
|
2,899,291
|
|
|
|
1,810,595
|
|
Clean
Energy HRS
|
|
|
2,781,035
|
|
|
|
2,271,068
|
|
Cety
Renewables Ashfield
|
|
|
100
|
|
|
|
-
|
|
Cety
Europe
|
|
|
38,823
|
|
|
|
42,008
|
|
Total
Assets
|
|
|
5,719,249
|
|
|
|
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 nine months ended September 30, 2021 and 2020 we had $0 in share-based expense, due to the issuance of common
stock. As of September 30, 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 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, 2020 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 September 30, 2021, we had a net operating loss carry-forward of approximately $(7,982,048) and a deferred tax asset of $2,394,614
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 $(2,394,614). 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, 2021 the Company had not taken any tax positions that would require disclosure under FASB
ASC 740.
SCHEDULE OF DEFERRED TAX ASSET
|
|
September
30, 2021
|
|
|
December
31, 2020
|
|
Deferred
Tax Asset
|
|
$
|
2,394,614
|
|
|
$
|
2,640,529
|
|
Valuation
Allowance
|
|
|
(2,394,614
|
)
|
|
|
(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 302,462,667 restricted shares of the Corporation’s
common stock, par value $.001 per share (the “Common Stock”).
On
February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $939,500 with an interest rate of 10% per annum interest rate and a maturity date of February
13, 2020. The CVL Note is convertible into shares of Common Stock at $0.003 per share, as adjusted as provided therein. This note was
assigned to MGW Investments.
This
resulted in a change in control, which limited the net operating to that date forward. We are subject to taxation in the U.S. and the
states of California. Further, the Company currently has no open tax years’ subject to audit prior to December 31, 2015. The Company
is current on its federal and state tax returns.
Reclassification
Certain
amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications
had no effect on reported income, total assets, or stockholders’ equity as previously reported.
Recently
Issued Accounting Standards
The
Company is reviewing the effects of following recent updates. The Company has no expectation that any of these items will have a material
effect upon the financial statements.
Update
2021-03—Intangibles—Goodwill And Other (Topic 350): Accounting Alternative For Evaluating Triggering Events.
The
amendments in this Update are effective on a prospective basis for fiscal years beginning after December 15, 2019. Early adoption is
permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30,
2021.
Update
2021-01—Reference Rate Reform (Topic 848):
An
entity may elect to apply the amendments in this Update on a full retrospective basis as of any date from the beginning of an interim
period that includes or is subsequent to March 12, 2020.
In
June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit
Losses [codified as Accounting Standards Codification Topic (ASC) 326]. ASC 326 adds to US generally accepted accounting principles (US
GAAP) the current expected credit loss (CECL) model, a measurement model based on expected losses rather than incurred losses. Under
this new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in
more timely recognition of such losses. This will become effective in January 2023 and will have minimal impact on the company.
Update 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.
We do not expect any material impact on our financials because of the adoption of this update.
NOTE
3 – ACCOUNTS AND NOTES RECEIVABLE
SCHEDULE OF ACCOUNTS AND NOTES RECEIVABLE
|
|
September
30, 2021
|
|
|
December
31, 2020
|
|
Accounts
Receivable
|
|
$
|
852,156
|
|
|
$
|
340,378
|
|
Less
Reserve for uncollectable accounts
|
|
|
(75,000
|
)
|
|
|
(75,000
|
)
|
Accounts
Receivable (Net)
|
|
$
|
777,156
|
|
|
$
|
265,738
|
|
Our
Accounts Receivable is pledged to Nations Interbanc, our line of credit.
SCHEDULE OF LEASE RECEIVABLE ASSET
|
|
September
30, 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 September 30, 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
|
|
September
30, 2021
|
|
|
December
31, 2020
|
|
Long-term
financing receivables
|
|
$
|
932,270
|
|
|
$
|
1,000,000
|
|
Less
Reserve for uncollectable accounts
|
|
|
(247,500
|
)
|
|
|
(247,500
|
)
|
Long-term
financing receivables - net
|
|
$
|
684,770
|
|
|
$
|
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.
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, 2021
|
|
|
December
31, 2020
|
|
Raw
Material
|
|
$
|
975,559
|
|
|
$
|
805,574
|
|
Work
in Process
|
|
|
-
|
|
|
|
2,242
|
|
Total
|
|
|
975,559
|
|
|
|
807,820
|
|
Less
reserve for excess or obsolete inventory
|
|
|
(250,000
|
)
|
|
|
(250,000
|
)
|
Inventory
|
|
$
|
725,559
|
|
|
$
|
557,820
|
|
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, 2021
|
|
|
December
31, 2020
|
|
Capital
Equipment
|
|
$
|
1,354,824
|
|
|
$
|
1,350,794
|
|
Leasehold
improvements
|
|
|
75,436
|
|
|
|
75,436
|
|
Accumulated
Depreciation
|
|
|
(1,392,140
|
)
|
|
|
(1,372,798
|
)
|
Net
Fixed Assets
|
|
$
|
38,120
|
|
|
$
|
53,432
|
|
Our
Depreciation Expense for the three months ended September 30, 2021 and 2020 was $5,104 and $6,474 respectively.
Our
Depreciation Expense for the nine months ended September 30, 2021 and 2020 was $15,312 and $28,329 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, 2021
|
|
|
December
31, 2020
|
|
Goodwill
|
|
$
|
747,976
|
|
|
$
|
747,976
|
|
License
|
|
|
354,322
|
|
|
|
354,322
|
|
Patents
|
|
|
190,789
|
|
|
|
190,789
|
|
Accumulated
Amortization
|
|
|
(72,251
|
)
|
|
|
(63,344
|
)
|
Net
Intangible Assets
|
|
$
|
1,220,836
|
|
|
$
|
1,229,743
|
|
Our
Amortization Expense for three months ended September 30, 2021 and 2020 was $2,969 and $2,969 respectively.
Our
Amortization Expense for nine months ended September 30, 2021 and 2020 was $8,907 and $8,907 respectively.
NOTE
7 – ACCRUED EXPENSES
SCHEDULE OF ACCRUED EXPENSES
|
|
September
30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
|
|
|
|
Accrued
Wages
|
|
$
|
64,589
|
|
|
$
|
25,654
|
|
Accrued
Expenses
|
|
|
74,898
|
|
|
|
477,941
|
|
Total accrued expenses
|
|
$
|
139,487
|
|
|
$
|
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
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, 2021, the outstanding balance was $1,160,274
compared to $1,680,350 at December 31, 2020.
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, 2021
|
|
|
December
31, 2020
|
|
Note
payable GE
|
|
$
|
1,200,000
|
|
|
$
|
1,200,000
|
|
Accrued
transition services
|
|
|
972,233
|
|
|
|
972,233
|
|
Accrued
Interest
|
|
|
311,863
|
|
|
|
269,921
|
|
Total
|
|
$
|
2,484,096
|
|
|
$
|
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 and also has the possibility of forgiveness. This note was
forgiven on July 1, 2021.
On
February 4 , 2021 the company entered in to a payroll protection loan, with Comerica bank, guaranteed by the SBA due February 4, 2023
for $89,200, with an interest rate of 1%. This note payment is due in full on February 4, 2023 and also has the possibility of forgiveness.
As of the date of this filing this note has been forgiven. This note was forgiven on July 26, 2021.
On
September 7, 2021 the company entered into a promissory note in the amount of $226,345, with and interest rate of 10% per annum and a
default interest rate of 22% per annum. This note is due in full on September 7, 2022 and has mandatory monthly payments of $23,828.
The note had an OID of $23,345 and recorded as finance fee expense. In the event of the default, at the option of the Investor, the note
may be converted into shares of common stock of the company. The balance on this note as of September 30, 2021 was $226,345.
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. The balance on this note as of September 30, 2021 was $142,720.
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 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 September 30, 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 September 30, 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 six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. This
note was paid in full on May 1, 2020.
On
January 8, 2020 we entered into a convertible note payable for $103,000, with a maturity date of January 8, 2021, which accrues interest
at the rate of 12% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. Subsequently
The fair value of the convertible feature was $87,560, we recorded a debt discount of $87,560. On July 7, 2020 this note was paid in
full.
On
February 19, 2020 we entered into a convertible note payable for $53,000, with a maturity date of February 19, 2021, which accrues interest
at the rate of 12% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. On
August 18, 2020 this note was paid in full.
On
July 6, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $164,800, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and one
million (1,000,000) restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount
of $4,800 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any
time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment. The shares were valued on the date
of issuance using the stock price on that day for a total value of $19,211. We also recognized a debt discount of $17,861. We amortized
$3,234 of the debt discount during the three months ended September 30, 2020. The unamortized debt discount as of September 30, 2020
was $14,267. This note was fully converted as of December 31, 2020. This note was converted into 14,035,202 shares of common stock, for
a total of $171,229 including principal of 164,800 plus a accrued interest of $6,429. Also on January 12, 2021 the company issued 697,861shares
of its common stock as redemptions of $27,914 in cashless warrants.
On
July 15, 2020 we entered into a convertible note payable for $128,000, with a maturity date of July 15, 2021, which accrues interest
at the rate of 12% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. This
note was paid in full on October 16, 2020.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and one
million (1,000,000) restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount
of $3,000 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any
time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment. The shares were valued on the date
of issuance using the stock price on that day for a total value of $19,211. We also recognized a debt discount of $17,861. We amortized
$14,627 of the debt discount during the six months ended June 30, 2021. The unamortized debt discount as of September 30, 2021 was $0.
This note was paid in full on January 8, 2021.
On
September 10, 2020 we entered into a convertible note payable for $63,000, with a maturity date of July 15, 2021, which accrues interest
at the rate of 11% per annum. It is convertible six months after its issuance and has a conversion rate of sixty-five percent (65%) of
the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately
preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. This
note was paid in full on January 15, 2021.
On
October 14, 2020 Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with Firstfire Global Opportunities Fund LLC, (the “Investor”), pursuant to which the Company
issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of $168,000, a Warrant
(the “Warrant”) to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common
Stock”) and 1,250,000 restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue
discount of $8,000 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible
at any time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment. The shares were valued on the
date of issuance using the stock price on that day for a total value of $24,282. We also recognized a debt discount of $24,282. We amortized
$19,093 of the debt discount during the three months ended March 31, 2021. The unamortized debt discount as of September 30, 2021 was
$0. On January 29, 2021 this note was paid in full. Also on January 12, 2021 the company issued 697,861 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.
Total
due to Convertible Notes
SCHEDULE OF CONVERTIBLE NOTES
|
|
September
30, 2021
|
|
|
December
31, 2020
|
|
Total
convertible notes
|
|
$
|
187,285
|
|
|
$
|
612,355
|
|
Accrued
Interest
|
|
|
103,815
|
|
|
|
99,509
|
|
Debt
Discount
|
|
|
-
|
|
|
|
(170,438
|
)
|
Total
|
|
$
|
291,100
|
|
|
$
|
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 70% to 130%, a risk-free interest rate range of .05% to 0.1%, an exercise
price range of $.0245 to $.0258 and a stock price of $.0485. The remaining derivative liabilities were:
SCHEDULE OF FAIR VALUE OF DERIVATIVE LIABILITY
|
|
September
30, 2021
|
|
|
December
31, 2020
|
|
Derivative
Liabilities on Convertible Loans:
|
|
|
|
|
|
|
|
|
Outstanding
Balance
|
|
$
|
274,178
|
|
|
$
|
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.
Future minimum lease payments for the years ending December 31, are: In October of 2018 we signed a sublease agreement with our facility
in Italy with an indefinite term that may be terminated by either party with a 60-day notice for 1,000 Euro per month. Due to the short
termination clause, we are treating this as a month-to-month lease.
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
Year
|
|
Lease
Payment
|
|
2021
|
|
|
61,377
|
|
2022
|
|
|
256,853
|
|
2023
|
|
|
193,734
|
|
Imputed
Interest
|
|
|
(30,873
|
)
|
Net
Lease Liability
|
|
$
|
481,091
|
|
Our
lease expense for the nine months ended September 30, 2021 and 2020 was $254,708 and $280,303 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
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
In
the first quarter of 2019, we signed agreements to issue 4,000,000 shares of common stock valued at $.015 for a total value of $60,000
for the conversion of 800 preferred series D shares, which were subsequently issued.
We
also recorded a $60,000 commitment fee (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 year ended December 30, 2020 we issued 22,572,272 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 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and one
million (1,000,000) restricted shares of Common Stock (“Commitment fee Shares”). On December 31, 2020 this note was converted
into 14,035,202 shares of common stock, for a total of $171,229 including principal of 164,800 plus a accrued interest of $6,429 as a
result this note was paid in full. Also on January 12, 2021 the company issued 697,861shares of its common stock as redemptions of $27,914
in cashless warrants.
On
July 23, 2020 we issued 3,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 1,200 shares
of our Series D Preferred Stock.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and one
million (1,000,000) restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount
of $3,000 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any
time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment. The shares were valued on the date
of issuance using the stock price on that day for a total value of $19,211. We also recognized a debt discount of $17,861. We amortized
$14,627 of the debt discount during the six months ended June 30, 2021. The unamortized debt discount as of September 30, 2021 was $0.
This note was paid in full on January 8, 2021. Also on February 5, 2021 the company issued 1,100,000 shares of its common stock as redemptions
of $44,000 in cashless warrants.
On
October 14, 2020 Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with Firstfire Global Opportunities Fund LLC, (the “Investor”), pursuant to which the Company
issued to the Investor a convertible promissory note (the “Note”) in the original principal amount of $168,000, a Warrant
(the “Warrant”) to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common
Stock”) and 1,250,000 restricted shares of Common Stock (“Commitment fee Shares”). These shares were issued on February
1, 2021 and 547,468.00 shares were issued as a result of exercise of the warrants on May 28, 2021. This note was paid in full as of January
29, 2021.
On
February 5, 2021 we issued 3,000,000 shares of our common stock at a price of $.08 per share, in exchange for the conversion of 1,200
shares of our Series D Preferred Stock.
On
February 9, 2021 we issued 2,275,662 shares of our common stock share, in exchange for the conversion of $182,052 of accrued dividend
for the series D Preferred Stock.
On
February 9, 2021 we issued 2,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 800 shares
of our Series D Preferred Stock.
On
February 23, 2021 we issued 3,754,720 of common stock at a purchase price of $.014 per share and 3,754,720 of warrant at purchase price
of 0.04 for an aggregate price of $52,566 to an accredited investor in a private sale. An additional 36,283 shares were issued as a result
of a correction made to the original transaction.
On
March 5, 2021 we issued 8,333,333 of common stock at a purchase price of $.06 per share for an aggregate price of $500,000 to an accredited
investor in a private sale.
On
March 10, 2021 we issued 32,125,000 units of common stock at a purchase price of $.08 per share for an aggregate price of $2,570,000
to an accredited investor in a private sale.
On
March 12, 2021 we issued 1,625,000 shares and 2,068,588 of our common stock at a price of $.08 per share, in exchange for the conversion
of 650 shares of our Series D Preferred Stock and 165,487 of accrued dividend for the series D preferred stock.
On
September 2, 2021, Clean Energy Technology, Inc., a Nevada corporation (the “Company”), entered into an Equity Financing
Agreement (“Equity Financing Agreement”) and Registration Rights Agreement (“Registration Rights Agreement”)
with GHS Investments LLC, a Nevada limited liability company (“GHS”). Under the terms of the Equity Financing Agreement,
GHS agreed to provide the Company with up to $4,000,000 upon effectiveness of a registration statement on Form S-1 (the “Registration
Statement”) filed with the U.S. Securities and Exchange Commission (the “Commission”) As a result we issued 1,142,459
Shares of common stock as an commitment fee, which was valued and expense in the amount of $47,699. On October 14, 2021, this Form S-1
became effective.
On
September 13, 2021 we issued 1,100,630 shares of common stock for a correction of a previous issuance error.
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,
2021 there were 923,893,327 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.
captital
Unless
our Board of Directors provides otherwise, the shares of all series of preferred stock will rank on parity with respect to the payment
of dividends and to the distribution of assets upon liquidation. Any issuance by us of shares of our preferred stock may have the effect
of delaying, deferring or preventing a change of our control or an unsolicited acquisition proposal. The issuance of preferred stock
also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect
the rights and powers, including voting rights, of the holders of common stock.
We
previously authorized 440 shares of Series A Convertible Preferred Stock, 20,000 shares of Series B Convertible Preferred Stock, and
15,000 shares Series C Convertible Preferred Stock. As of August 20, 2006, all series A, B, and C preferred had been converted into common
stock.
Effective
August 7, 2013, our Board of Directors designated a series of our preferred stock as Series D Preferred Stock, authorizing 15,000 shares.
Our Series D Preferred Stock offering terms authorized us to raise up to $1,000,000 with an over-allotment of $500,000 in multiple closings
over the course of six months. We received an aggregate of $750,000 in financing in subscription for Series D Preferred Stock, or 7,500
shares.
The
following are primary terms of the Series D Preferred Stock. The Series D Preferred holders were initially entitled to be paid a special
monthly divided at the rate of 17.5% per annum. Initially, the Series D Preferred Stock was also entitled to be paid special dividends
in the event cash dividends were not paid when scheduled. If the Company does not pay the dividend within five (5) business days from
the end of the calendar month for which the payment of such dividend to owed, the Company will pay the investor a special dividend of
an additional 3.5%. Any unpaid or accrued special dividends will be paid upon a liquidation or redemption. For any other dividends or
distributions, the Series D Preferred Stock participates with common stock on an as-converted basis. The Series D Preferred holders may
elect to convert the Series D Preferred Stock, in their sole discretion, at any time after a one year (1) year holding period, by sending
the Company a notice to convert. The conversion rate is equal to the greater of $0.08 or a 20% discount to the average of the three (3)
lowest closing market prices of the common stock during the ten (10) trading day period prior to conversion. The Series D Preferred Stock
is redeemable from funds legally available for distribution at the option of the individual holders of the Series D Preferred Stock commencing
any time after the one (1) year period from the offering closing at a price equal to the initial purchase price plus all accrued but
unpaid dividends, provided, that if the Company gave notice to the investors that it was not in a financial position to redeem the Series
D Preferred, the Company and the Series D Preferred holders are obligated to negotiate in good faith for an extension of the redemption
period. The Company timely notified the investors that it was not in a financial position to redeem the Series D Preferred and the Company
and the investors have engaged in ongoing negotiations to determine an appropriate extension period. The Company may elect to redeem
the Series D Preferred Stock any time at a price equal to initial purchase price plus all accrued but unpaid dividends, subject to the
investors’ right to convert, by providing written notice about its intent to redeem. Each investor has the right to convert the
Series D Preferred Stock at least ten (10) days prior to such redemption by the Company.
In
connection with the subscriptions for the Series D Preferred, we issued series F warrants to purchase an aggregate of 375,000 shares
of our common stock at $.10 per share and series G warrants to purchase an aggregate of 375,000 shares of our common stock at $.20 per
share.
On
August 21, 2014, a holder holding 5,000 shares of Preferred Series D Preferred agreed to lower the dividend rate to 13% on its Series
D Preferred. In September 2015, all holders of Series D Preferred signed and delivered estoppel agreements, whereby the holders agreed,
among other things, that the Series D Preferred was not in default and to reduce (effective as of December 31, 2015) the dividend rate
on the Series D Preferred Stock to six percent per annum and to terminate the 3.5% penalty in respect of unpaid dividends accruing on
or after such date.
In
the first quarter of 2019, we signed agreements to issue 4,000,000 shares of common stock valued at $.015 for a total value of $60,000
for the conversion of 800 preferred series D shares , which were subsequently issued.
We
also recorded a $60,000 commitment fee in exchange for the “stand off” and estoppel agreement and discounted conversion terms
to account for the difference in the fair value which we offset to retained earnings.
On
February 4, 2020 we issued 2,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 800 shares
of our Series D Preferred Stock.
On
July 23, 2020 we issued 3,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 1,200 shares
of our Series D Preferred Stock.
On
February 5, 2021 we issued 3,000,000 shares of our common stock at a price of $.08 per share, in exchange for the conversion of 1,200
shares of our Series D Preferred Stock.
On
February 9, 2021 we issued 2,275,662 shares of our common stock share, in exchange for the conversion of $182,052 of accrued dividend
for the series D Preferred Stock.
On
February 9, 2021 we issued 2,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 800 shares
of our Series D Preferred Stock.
On
March 12, 2021 we issued 3,693,588 shares of our common stock together with accrued preferred dividend at a price of $.08 per share,
in exchange for the conversion of 1,300 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 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 expired as of July 18, 2020.
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
expired on September 19, 2020.
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. 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 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and one
million (1,000,000) restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount
of $4,800 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any
time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment. On January 8, 2021, the cashless warrants
were converted into 697,861 shares of our common stock.
On
August 17, 2020, Clean Energy Technologies, Inc. (the “Company) entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with LGH Investments, LLC (the “Investor”), pursuant to which the Company issued to the Investor
a convertible promissory note (the “Note”) in the original principal amount of $103,000, a Warrant (the “Warrant”)
to purchase 1,500,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and one
million (1,000,000) restricted shares of Common Stock (“Commitment fee Shares”). The Note carried an original issue discount
of $3,000 with interest of 8% per annum payable at maturity. The Note matures 8 months from the issue date and is convertible at any
time into the Common Stock at a conversion price equal to $0.02 per share, subject to adjustment. On February 1, 2021 the cashless warrants
were converted into 1,100,000 shares of our common stock.
On
February 23, 2021 we issued 3,754,720 of common stock at a purchase price of $.014 per share and 3,754,720 of warrant at purchase price
of 0.04 for an aggregate price of $52,566 to an accredited investor in a private sale. An additional 36,283 shares were issued as a result
of a correction made to the original transaction.
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
|
|
|
9,500,000
|
|
|
$
|
0.04
|
|
|
|
9,500,000
|
|
|
$
|
0.04
|
|
Additions
|
|
|
3,754,720
|
|
|
|
|
|
|
|
3,754,720.00
|
|
|
|
0.04
|
|
Exercised
|
|
|
4,500,000
|
|
|
|
|
|
|
|
4,500,000
|
|
|
|
|
|
Outstanding
September 30, 2021
|
|
|
8,754,720
|
|
|
$
|
0.04
|
|
|
|
8,754,720
|
|
|
$
|
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.
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 150,000 shares of our common
stock with an exercise price of $.03 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 300,000 shares of
our common stock with an exercise price of $.03 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 $.005 per share, subject to potential further adjustment in the event of certain Common Stock issuances, (b) to have a fixed interest
rate of ten percent (10%) per annum with respect to both the redemption amount and including a financing fee and any costs, expenses,
or other fees relating to the convertible note or its enforcement and collection, and any other expense for or on our account (in each
case with a minimum 10% yield in the event of payoff or conversion within the first year), such amounts to constitute additional principal
under the convertible note, as amended, and (c) as otherwise provided in the Escrow Funding Agreement. The March 2016 convertible note,
as so amended, is referred to as the “Master Note.”
Concurrently
with the foregoing note repayments, we entered into a Credit Agreement and Promissory Note (the “Credit Agreement”) with
Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation (“MW I”), pursuant to which
MW I deposited funds into escrow to fund the repayment of the convertible notes and we assigned to MW I our right to acquire the convertible
notes and otherwise agreed that MW I would be subrogated to the rights of each note holder to the extent a note was repaid with funds
advanced by MW I. Concurrently, MW I acquired the Master Note and we agreed that all amounts advanced by MG I to or for our benefit would
be governed by the terms of the Master Note, including the payment of a financing fees, interest, minimum interest, and convertibility.
Reddot is MW I’s agent for purposes of administration of the Credit Agreement and the Master Note and advances thereunder.
On
February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement
(the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated
thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL
Note”) in the principal amount of $939,500 with an interest rate of 10% per annum interest rate and a maturity date of February
13, 2020. The CVL Note is convertible into shares of Common Stock at $0.003 per share, as adjusted as provided therein. As a result we
recognized a beneficial conversion feature of $532,383, which is amortized over the life of the note. This note was assigned to Mgw Investments
and they agreed not to convert the $939,500 note in to shares in excess of the 800,000,000 Authorized
limit until we have increased the Authorized shares to the Board approved limit of 2 billion shares.
On
February 8, 2018 the Corporation entered a Convertible Promissory Note in the principal amount of $153,123, due October 8, 2018, with
an interest rate of 12% per annum payable to MGWI (the “MGWI Note”). The MGWI Note is convertible into shares of the Corporation’s
common stock at the lower of: (i) a 40% discount to the lowest trading price during the previous twenty (20) trading days to the date
of a Conversion Notice; or (ii) 0.003. As a result of the closing of the transactions contemplated by the Stock Purchase Agreement and
Convertible Note Purchase Agreement, the MGWI Note must be redeemed by the Corporation in an amount that will permit CVL and MGWI and
their affiliates to hold 65% of the issued and outstanding Common Stock of the Corporation on a fully diluted basis. The proceeds from
the MGWI Note were used to redeem the convertible note of the Corporation to JSJ Investments, Inc. in the principal amount of $103,000
with an interest rate of 12% per annum, due April 25, 2018. At December 31, 2019 the holder of this note beneficially owned 70% of the
company and this note is not convertible if the holder holds more than 9.99%, as a result, we did not recognize a derivative liability
or a beneficial conversion feature.
Subsequently
on
May 11th this note was amended and the maturity date was extended to October 8, 2023, and the restriction on the conversion
of the note was removed if the holder of this note holds over 9.9% of the Company’s common stock.
On June 24, 2021 MGW I converted $75,000 of the outstanding balance of this note into 25,000,000 shares of company’s common stock
On
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; for
the year 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 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 September 30, 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 25,000,000 shares of company’s
common stock.
Note
13 - Warranty
Liability
For
the quarter ended September 30, 2021, and for the year ended December 31, 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
On September 2, 2021, Clean Energy Technology,
Inc., a Nevada corporation (the “Company”), entered into an Equity Financing Agreement (“Equity Financing Agreement”)
and Registration Rights Agreement (“Registration Rights Agreement”) with GHS Investments LLC, a Nevada limited liability
company (“GHS”). Under the terms of the Equity Financing Agreement, GHS agreed to provide the Company with up to $4,000,000
upon effectiveness of a registration statement on Form S-1 (the “Registration Statement”) filed with the U.S. Securities
and Exchange Commission (the “Commission”) As a result we issued 1,142,459 Shares of common stock as an commitment fee, which
was valued and expense in the amount of $47,699. On October 14, 2021, this Form S-1 became effective. From October 14, 2021 through the
date of this filing we issued 5,284,001 shares of our common stock under this registration.
On
November 8, 2021 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 for $1,500,000 in cash compensation and, if Leading Wave
is able to achieve certain milestones, 200,000,000 shares of Common Stock of the Company.
In
accordance with ASC 855, the Company has analyzed its operations subsequent to September 30, 2021 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.