0001493152-22-033625.txt : 20221123 0001493152-22-033625.hdr.sgml : 20221123 20221123173048 ACCESSION NUMBER: 0001493152-22-033625 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 91 FILED AS OF DATE: 20221123 DATE AS OF CHANGE: 20221123 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Clean Energy Technologies, Inc. CENTRAL INDEX KEY: 0001329606 STANDARD INDUSTRIAL CLASSIFICATION: MOTORS & GENERATORS [3621] IRS NUMBER: 202675800 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-266078 FILM NUMBER: 221417218 BUSINESS ADDRESS: STREET 1: 2990 REDHILL AVE CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: (949) 273-4990 MAIL ADDRESS: STREET 1: 2990 REDHILL AVE CITY: COSTA MESA STATE: CA ZIP: 92626 FORMER COMPANY: FORMER CONFORMED NAME: Probe Manufacturing Inc DATE OF NAME CHANGE: 20050608 S-1/A 1 forms-1a.htm
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As filed with the Securities and Exchange Commission on November 23, 2022

 

Registration No. 333-266078

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

AMENDMENT NO.1

To

 

FORM S-1

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

CLEAN ENERGY TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   3990   20-2675800

(State or Other Jurisdiction

of Incorporation)

 

(Primary Standard

Classification Code)

 

(IRS Employer

Identification No.)

 

2990 Redhill Ave,

Costa Mesa, California 92626

Telephone: (949) 273-4990

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

 

Kambiz Mahdi

Chief Executive Officer

Clean Energy Technologies, Inc.

2990 Redhill Ave,

Costa Mesa, California 92626

Telephone: (949) 273-4990

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

Copies to:

 

Robert Newman, Esq.

The Newman Law Firm, PLLC

1872 Pleasantville Road, Suite 177

Briarcliff Manor, NY 10510

Phone: (914) 762-4265

 

Kevin Sun, Esq.

Bevilacqua PLLC

1050 Connecticut Avenue, NW, Suite 500

Washington, D.C. 20036

Telephone: (202) 869-0888

 

Approximate date of commencement of proposed sale to the public:

As soon as practicable and from time to time after the effective date of this Registration Statement.

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.

 

 

 

 
 

 

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to completion. Dated November 23, 2022

 

PRELIMINARY PROSPECTUS

 

 

CLEAN ENERGY TECHNOLOGIES, INC.

 

2,222,222 Shares of Common Stock

 

We are offering to sell up to 2,222,222 shares (assuming a mid-point per share price of $4.50 per share on a post-split basis) of our common stock, $0.001 par value per share, in a firm commitment underwritten offering (the “Underwritten Offering”). We currently estimate that the public offering price will be between $4.00 and $5.00 per share after giving effect to a proposed reverse stock split ratio of 1-for-125, as described elsewhere in this prospectus)

 

The selling shareholders identified in this prospectus are offering an aggregate of 110,007,331 shares (pre-split or approximately 1,760,121 shares post-split) of our common stock, issuable upon conversion of convertible promissory notes and exercise of common stock purchase warrants (the “Selling Shareholder Shares”) held by such selling shareholders (the “Selling Shareholders Offering”). We will not receive any proceeds from the sale of any shares by the selling shareholders.

 

Our common stock is traded on OTCQB Markets under the symbol “CETY”. On November 22, 2022, the reported closing price for our common stock was $0.04 per share. We intend to list our common stock on the Nasdaq Capital Market under the symbol “CETY.” We believe that upon completion of the Underwritten Offering contemplated by this prospectus, we will meet the standards for listing on the Nasdaq Capital Market. However, no assurance can be given that our application will be approved or that the trading prices of our common stock on the OTCQB will be indicative of the prices of our common stock if our common stock were traded on the Nasdaq Capital Market.

 

The offering price of our shares of common stock in the Underwritten Offering will be determined between the underwriters and us at the time of pricing, considering our historical performance and capital structure, prevailing market conditions, and overall assessment of our business, and may be at a discount to the current market price. Therefore, the recent market price of our common stock and the public offering price of the common stock used throughout this prospectus may not be indicative of the actual public offering price for the shares of common stock.

 

INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. BEFORE MAKING ANY INVESTMENT DECISION, YOU SHOULD CAREFULLY REVIEW AND CONSIDER ALL THE INFORMATION IN THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN, INCLUDING THE RISKS AND UNCERTAINTIES DESCRIBED UNDER “RISK FACTORS” BEGINNING ON PAGE 9.

 

The Selling Shareholder Shares may be resold from time to time by the selling shareholders listed in the section titled “Selling Shareholders” beginning on page 60.

 

The selling shareholders, or their respective transferees, pledgees, donees or other successors-in-interest, may sell the Selling Shareholder Shares through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. The selling shareholders may sell any, all or none of the securities offered by this prospectus, and we do not know when or in what amount the selling shareholders may sell their Selling Shareholder Shares hereunder following the effective date of this registration statement. We provide more information about how a selling shareholder may sell its Selling Shareholder Shares in the section titled “Plan of Distribution” on page 64.

 

The Underwritten Offering is being underwritten on a firm commitment basis. We have granted the underwriters an option to buy up to an additional 333,333 shares of common stock to cover over-allotments. The underwriters may exercise this option at any time and from time to time during the 45-day period from the date of this prospectus.

 

   Per Share   Total 
Public offering price  $    $  
Underwriting discounts and commissions(1)(2)  $    $  
Proceeds to us, before expenses  $    $  
Proceeds to the selling stockholders, before expenses  $    $  

 

(1) We have agreed to reimburse the underwriter(s) for certain expenses. Underwriting discounts and commissions do not include a non-accountable expense allowance equal to $100,000 payable to the underwriters at the closing. The underwriters will receive an underwriting discount equal to 7.0% of the gross proceeds in this Underwritten Offering. In addition, we have agreed to pay up to a maximum of $200,000 of accountable out-of-pocket expenses of the underwriters in connection with this Underwritten Offering, which includes the fees and expenses of underwriters’ counsel. See “Underwriting” Section for more information.

 

(2) We have also agreed to issue to Craft Capital Management LLC (the “Representative”) warrants to purchase up to an aggregate 76,666 of shares of our common stock. See “Underwriting” beginning on page 73 for additional information regarding these warrants and underwriting compensation generally.

 

The underwriter is obligated to take and pay for all the shares of common stock offered by this prospectus if the Underwritten Offering is consummated.

 

We have granted the underwriter a 45-day option to purchase up to an additional 333,333 shares of common stock from us at the public offering price, to cover over-allotments, if any (such shares not to exceed, in the aggregate, 15% of the shares offered hereby).

 

For illustration purposes, the share and per share information in this prospectus reflects a proposed reverse stock split of the authorized and outstanding common stock at an anticipated ratio of 1-for-125 to occur either immediately prior to the effectiveness of the Registration Statement of which this prospectus forms a part or at such time that is approved by NASDAQ. However, depending on market conditions, at the sole discretion of the Board of Directors, the final ratio may be less than 1-for-125 but in the range of 1-for-100 and 1-for-125 as authorized by our Board of Directors. (see “Recent Developments” beginning on page 2 for more information about our anticipated reverse stock split). 

 

The underwriter expects to deliver the shares on or about               , 2022.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

CRAFT CAPITAL MANAGEMENT LLC

 

The date of this prospectus is __________, 2022.

 

1

 

 

TABLE OF CONTENTS

 

  Page
Prospectus Summary 3
The Underwritten Offering and Selling Shareholders Offering 7
Risk Factors 9
Special Note Regarding Forward-Looking Statements 25
Market and Industry Data 26
Use of Proceeds 26
Dividend Policy 27
Market Price 27
Capitalization 27
Dilution 28
Management’s Discussion and Analysis of Financial Condition and Results of Operations 29
Description of Business 38
Management 52
Executive Compensation 57
Principal Stockholders 58
Certain Relationships and Related Transactions, and Corporate Governance 58
Selling Shareholders 60
Plan of Distribution 64
Description of Securities 66
Underwriting 73
Disclosure of Commission Position on Indemnification for Securities Act Liabilities 84
Legal Matters 84
Experts 84
Additional Information 85
Financial Statements F-1

 

You should rely only on the information contained in this prospectus. Neither we, the underwriters, nor the selling shareholders have authorized anyone to provide you with different information. We and the selling shareholders are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of shares of our common stock. Our business, financial condition, operating results and prospects may have changed since that date.

 

We have relied on statistics provided by a variety of publicly-available sources. We did not, directly or indirectly, sponsor or participate in the publication of such materials, and these materials are not incorporated in this registration statement other than to the extent specifically cited herein. We have sought to provide current information in this registration statement and believe that the statistics provided in this registration statement remain up-to-date and reliable, and these materials are not incorporated in this registration statement other than to the extent specifically cited in this registration statement.

 

No action is being taken in any jurisdiction outside the United States to permit a public offering of our shares or possession or distribution of this prospectus in any such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to the Underwritten Offering and Selling Shareholders Offering and the distribution of this prospectus applicable to that jurisdiction.

 

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PROSPECTUS SUMMARY

 

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in each case included elsewhere in this prospectus.

 

Unless the context otherwise requires, references to “we,” “our,” “us,” or the “Company” in this prospectus mean Clean Energy Technologies, Inc. on a consolidated basis with its wholly-owned subsidiaries.

 

Overview

 

We develop renewable energy products and solutions and establish partnerships in renewable energy that make environmental and economic sense. Our mission is to be a leader in the “Zero Emission Revolution” by offering recyclable energy solutions, clean energy fuels and alternative electric power for small and mid-sized projects in North America, Europe, and Asia. We target sustainable energy solutions that are profitable for us, profitable for our customers and represent the future of global energy production.

 

Waste Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.

 

Waste to Energy Solutions - we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries to electricity, renewable natural gas (“RNG”), hydrogen and bio char which are sold or used by our customers.

 

Engineering, Consulting and Project Management Solutions – we have expanded our legacy electronics and manufacturing business and plan to manufacture component parts for our Waste Heat Recovery and Waste to Energy business and to provide consulting services to municipal and industrial customers and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean energy solutions in their projects.

 

CETY HK

 

Clean Energy Technologies (H.K.) Limited (“CETY HK”) consists of two business ventures in mainland China:(i) our natural gas (“NG”) trading operations sourcing and suppling NG to industries and municipalities. The NG is principally used for heavy truck refueling stations and urban or industrial users. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are prepaid for in advance at a discount to market. We sell the NG to our customers at prevailing daily spot prices for the duration of the contracts; and (ii) our planned joint venture with a large state-owned gas enterprise in China called Shenzhen Gas (Hong Kong) International Co. Ltd. (“Shenzhen Gas”), acquiring natural gas pipeline operator facilities, primarily located in the southwestern part of China . Our planned joint venture with Shenzhen Gas plans to acquire, with financing from Shenzhen Gas, natural gas pipeline operator facilities with the goal of aggregating and selling the facilities to Shenzhen Gas in the future. According to our Framework Agreement with Shenzhen Gas, we will be required to contribute $8  million to the joint venture which plans to raise in future rounds of financing. The terms of the joint venture are subject to the execution of definitive agreements.

 

Our Business Strategy

 

Our strategy is focused on further developing our existing Waste Heat Recovery business while expanding into the rapidly growing markets for Waste to Energy Solutions and clean energy engineering, consulting and project management services.

 

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Our strategy focuses on three main elements:

 

  Expanding our Waste Heat Recovery product line to include waste heat recovery ORC systems producing over 1 MW of power so we can qualify for midsized and large heat recovery projects in the United States, China, Southeast Asian and other Pacific Rim countries.
     
  Establishing a Waste to Energy business by selling our ablative thermal processing products based on proprietary High Temperature Ablative Pyrolysis (“HTAP”) technology and developing small and mid-sized waste to energy power plants producing electricity and RNG for the grid and methane, hydrogen and biochar for resale.
     
  Leveraging our engineering, procurement and manufacturing experience in Waste Heat Recovery and Waste to Energy to assist companies and EPCs incorporate clean energy solutions into energy and industrial construction projects.

 

We intend to implement this strategy through:

 

  Adding a new ORC system manufactured by Enertime for Waste Heat Recovery that will enable us to implement projects in the U.S. markets producing between 1 MW and 10 MW of electricity.
     
  Taking advantage of federal investment tax credits and state incentives that now include waste heat recover as a recognized clean energy source making our Clean Cycle Generator and ORC systems more profitable to install. On December 21, 2020, Congress passed the Consolidated Appropriations Act, 2021 enacted waste energy recovery Sec. 48 Investment Tax Credit, which extended Investment Tax Credit of 26% including Waste Heat to Power providing a dollar-for-dollar offset against current liability. In addition, Congress passed the Inflation Reduction Act on August 16, 2022 which increased the investment tax credit to up to 40%.
     
  Benefiting from higher energy costs which provide higher returns on our Waste Heat Recovery and Waste to Energy products and projects.
     
  Improving our balance sheet and capital position to permit us to invest in more products and projects.
     
  Establishing HTAP manufacturing facilities in Turkey for our Waste to Energy products and developing new patent protection on the proprietary technology.
     
  Leveraging our existing marketing channels to sell HTAP Waste to Energy products to industrial companies and government agencies.
     
  Working with clean energy project development and finance companies to establish Waste to Energy power plants producing electricity, RNG, hydrogen, methane and biochar from biomass, municipal waste, timber waste and other biomass and while retaining an equity interest in these facilities to provide re-occurring revenue.
     
  Sourcing NG and selling it to privately owned pipeline companies in China through our newly formed NG Trading company to participate in the rapidly growing clean energy market.
     
  Acquiring natural gas pipeline operators into our planned joint venture with Shenzhen Gas who will hold 51% of the joint venture and agreed to finance these acquisitions pursuant to a framework agreement.
     
  Participate in other minority investments in medium to large clean energy projects being developed in China that may be sourced by our majority stockholder in Hong Kong.
     
  Leveraging the NG trading and investment relationships to create opportunities for us to sell our Waste Recovery and Waste to Energy products in China and to provide engineering, consulting and project management services.
     
  Expanding our NG trading operations in China by acquiring more customers and developing the planned joint venture with Shenzhen Gas by acquiring natural gas pipeline operators’ facilities.

 

Recent Developments

 

On October 7, 2022, we filed a Definitive Information Statement wherein a majority of our stockholders approved an amendment to our Articles of Incorporation to: authorized a reverse stock split ranging between a ratio of 1-for-50 and 1-for-125, to be determined by the Board of Directors prior to the effective time of the amendment to the Articles of Incorporation. For illustration purposes only, we have assumed that we will implement a reverse stock split of our issued and outstanding shares of common stock at a ratio of 1-for-125 prior to the effectiveness of the Registration Statement of which this prospectus forms a part. However, depending on market conditions, at the sole discretion of the Board of Directors, the final ratio may be less than 1-for-125. Fractional shares will not be issued and the final number of shares will be rounded up to the next whole share.

 

Company History

 

We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005 under the name Probe Manufacturing, Inc. We manufactured electronics and provided services to original equipment manufacturers (OEMs) of industrial, automotive, semiconductor, medical, communication, military, and high technology products. On September 11, 2015 Clean Energy HRS, or “CE HRS”, our wholly owned subsidiary acquired the assets of Heat Recovery Solutions from General Electric International. In November 2015, we changed our name to Clean Energy Technologies, Inc.

 

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Our Corporation and Subsidiaries

 

 

Listing on the Nasdaq Capital Market

 

Our common stock is currently quoted on the OTCQB under the symbol “CETY.” In connection with this Underwritten Offering, we plan to apply to list our common stock on the Nasdaq Capital Market (“Nasdaq”) under the symbol “CETY.” If our listing application is approved, we expect to list our common stock on Nasdaq upon consummation of the Underwritten Offering, at which point our common stock will cease to be traded on the OTCQB. No assurance can be given that our listing application will be approved. Nasdaq listing requirements include, among other things, a stock price threshold. As a result, prior to effectiveness, we will need to take the necessary steps to meet Nasdaq listing requirements, which may include, but not limited to, effectuating a reverse split of our common stock at a ratio between 1-for-10 and 1-for-125 (estimated based on the current market price of our common stock).

 

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Risk Factors Summary

 

Our business is subject to a number of risks. You should be aware of these risks before making an investment decision. These risks are discussed more fully in the section of this registration statement titled “Risk Factors”. These risks include, among others, the following:

 

  Our independent accountants have issued a going concern opinion and if we cannot obtain additional financing and/or reduce our operating costs sufficiently, we may have to curtail operations and may ultimately cease to exist.
     
  Our business, results of operations and financial condition may be adversely affected by public health epidemics, including the ongoing coronavirus or covid-19.
     
  We have not made a payment under a material contract, which could result in adverse impacts on our operations and financial results.
     
  We operate in a highly competitive market. If we do not compete effectively, our prospects, operating results, and financial condition could be adversely affected.
     
  Our international operations subject us to risks, which could adversely affect our operating results.
     
  Our sales and contract fulfillment cycles can be long, unpredictable and vary seasonally, which can cause significant variation in revenues and profitability in a particular quarter.
     
  The implementation of our waste to energy joint ventures depends on us finding funding for the projects, which is not guaranteed.
     
  Our waste to energy products have not been tested in the United States and we will need to establish a highly sponsored program in order to gain data and acceptance in the market.
     
  If the spot price of NG in China drops below the purchase price our traders negotiate with our suppliers, we may not be able to sell our NG or may have to sell it at a loss.
     
  Our sales and profitability are dependent on the price of oil, natural gas and electricity, which has been significantly volatile recently.
     
  We have issued a substantial amount of convertible securities which if converted will substantially dilute all of our stockholders.
     
  Our operating results and share price may be volatile and the market price of our common stock after this offering may drop below the price you pay.

 

Corporate Information

 

Our principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. Our telephone number is (949) 273-4990.

 

Our internet website address is www.cetyinc.com and our subsidiary’s web site is www.heatrecoverysolutions.com. Information on our websites is not incorporated by reference into this registration statement, and you should not consider information on our websites to be part of this registration statement

 

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THE UNDERWRITTEN OFFERING AND SELLING SHAREHOLDERS OFFERING

 

Issuer   Clean Energy Technologies, Inc.
     
Common stock outstanding prior to the Underwritten Offering and Selling Stockholders Offering   1,482,977,289 shares (pre-split, or approximately 11,863,818 shares post -split)
     
Common stock offered by us in the Underwritten Offering   2,222,222 shares of our common stock (2,555,555 shares if the underwriters exercise their over-allotment option in full), assuming a mid-point offering price of $4.50 per share.
     
Offering price for shares sold in the Underwritten Offering   We currently estimate that the public offering price will be between $4.00 and $5.00 per share after giving effect to the reverse split.
     
Over-allotment option   The underwriters have an option for a period of 45 days to purchase up to  333,333 additional shares of our common stock (15% of the number of shares sold in the Underwritten Offering) to cover over-allotments, if any, at the public offering price, less underwriting discounts and commissions.
     
Common stock outstanding after completion of the Underwritten Offering (assuming none of the shares offered by the selling shareholders in the Selling Shareholders Offering have been issued)   14,086,040 shares, giving effect to the assumed reverse split at a ratio of 1:125 (14,419,374 shares, if the underwriters exercise their over-allotment option in full).
     
Common stock offered by the selling shareholders in the Selling Shareholders Offering   110,007,331 shares (pre-split or approximately 880,059 shares post-split), consisting of 87,876,109 shares (pre-split, or approximately 703,009 shares post-split) of our common stock issuable upon exercise of outstanding convertible promissory notes held by certain of the selling shareholders, and 22,131,222 shares (pre-split or approximately 177,050 shares post-split) of our common stock issuable upon exercise of outstanding warrants held by certain of the selling shareholders.
     
Common stock outstanding after the Selling Shareholders Offering (assuming all of the shares offered in the Underwritten Offering and Selling Shareholders Offering have been issued and sold)  

14,966,099, giving effect to the assumed reverse split at a ratio of 1:125 (15,299,432 shares, if the underwriters exercise their over-allotment option in full).

     
Common Stock issuable upon the exercise of Underwriter’s Warrants   The registration statement of which this prospectus is a part also registers for sale of common stock underlying warrants (the “Underwriter’s Warrants”) to purchase 66,666 shares issuable to the Representatives), assuming a mid-point offering price of $4.50 per share and no exercise of the over-allotment option by the underwriters, which is equal to 3.0% of the number of shares sold in the Underwritten Offering, as a portion of the underwriting compensation payable to the Representatives in connection with the Underwritten Offering. The Underwriter’s Warrants will be exercisable at any time, and from time to time, in whole or in part, during the four and one-half year period commencing 180 days following the date of commencement of sales of the Underwritten Offering at an exercise price of $ 5.625 per share assuming a mid-point offering price of $4.50 per share (125.0% of the offering price per share in the Underwritten Offering) and after the reverse split.

 

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Lock-up Agreements   We and our directors, officers and certain principal shareholders have agreed with the Underwriter not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our common stock or securities convertible into common stock for a period of 180 days after the date of this prospectus. See “Underwriting – Lock-Up Agreements.”
     
Use of proceeds  

We intend to use the net proceeds from the Underwritten Offering after deducting the estimated underwriting discounts and estimated offering expenses for sales and marketing activities, product development, and capital expenditures, and we may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement our business, and for working capital and general corporate purposes. See “Use of Proceeds” on page 26 of this prospectus.

 

We will not receive any proceeds from the sale of any shares by the selling shareholders in the Selling Shareholders Offering.

     
OTCQB Symbol   CETY
     
Proposed Nasdaq Symbol   CETY
     
Risk factors   Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 9.

 

Unless we indicate otherwise, the number of shares of our common stock that will be outstanding immediately after the Underwritten Offering and the Selling Shareholders Offering is based on 14,966,099 shares of common stock outstanding as of November 22, 2022, giving effect to the assumed reverse stock split at a ratio of 1:125. The number excludes the following:

 

  (i) shares of common stock issuable upon the exercise of outstanding common stock purchase warrants and the conversion of outstanding convertible notes; and
  (ii) 66,666 shares of common stock underlying the warrants to be issued to the Representative in connection with this Underwritten Offering (76,666, if the underwriters exercise the over-allotment option in full).

 

Except as otherwise indicated herein, all information in this prospectus assumes no exercise by the underwriter of its over-allotment option to purchase additional shares.

 

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RISK FACTORS

 

Investing in our common stock involves a high degree of risk. Before investing in our common stock, you should carefully consider the risks described below, as well as the other information in this prospectus, including our consolidated financial statements and the related notes. In addition, we may face additional risks and uncertainties not currently known to us, or which as of the date of this registration statement we might not consider significant, which may adversely affect our business. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case the trading price of our common stock could decline due to any of these risks or uncertainties, and you may lose part or all of your investment.

 

Risks Related to Our Business and Industry

 

OUR INDEPENDENT ACCOUNTANTS HAVE ISSUED A GOING CONCERN OPINION AND IF WE CANNOT OBTAIN ADDITIONAL FINANCING AND/OR REDUCE OUR OPERATING COSTS SUFFICIENTLY, WE MAY HAVE TO CURTAIL OPERATIONS AND MAY ULTIMATELY CEASE TO EXIST.

 

Our financial statements for the fiscal years ended December 31, 2020 and 2021 have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s deficit of $1,702,653 and a working capital deficit of $4,274,383 and an accumulated deficit of $17,423,930 as of December 31, 2021 and used $2,552,547 in net cash from operating activities for the year ended December 31, 2021. Therefore, there is doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.

 

For the year ended December 31, 2021, we had a net profit of $278,492 compared to a net loss of $3,435,764 for the same period in 2020. The increase in the net profit in 2021 was mainly due to the change in derivative liability associated with the convertible debt and lower interest expense from 2021 to 2020.

 

WE HAVE AN ACCUMULATED DEFICIT AND MAY INCUR ADDITIONAL LOSSES; THEREFORE, WE MAY NOT BE ABLE TO OBTAIN THE ADDITIONAL FINANCING NEEDED FOR WORKING CAPITAL, CAPITAL EXPENDITURES AND TO MEET OUR DEBT SERVICE OBLIGATIONS.

 

As of December 31, 2021, we had current liabilities of $6,865,123. The Company has been able to raise additional capital of approximately $4.78 million and repaid approximately $2.0 million of debt in 2021. Our outstanding debt could limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, or other purposes in the future, as needed; to plan for, or react to, changes in technology and in our business and competition; and to react in the event of an economic downturn.

 

In addition, we may not be able to meet our debt service obligations. The total outstanding balance of indebtedness as of the end of September 30, 2022 was 6,372,817 . Some of these outstanding debts bear a high interest rate. For example, the interest rate for debts due to Nations Interbanc with an outstanding balance of $1,058,127 is 26% per annum as of September 30, 2022. If we are unable to generate sufficient cash flow or obtain funds for required payments, or if we fail to comply with covenants in our revolving lines of credit, we will be in default.

 

WE ARE IN DEFAULT IN OUR OBLIGATIONS TO A MAJOR CREDITOR

 

Currently, we are in default of our notes payable to Cybernaut Zfounder Ventures (“Cybernaut”), which have aggregate outstanding principal and interest of approximately $317,319 as of September 30, 2022. Cybernaut has agreed to pay the prepayment amounts of certain convertible promissory notes on behalf of the company, and as a result, Cybernaut acquired the rights of the original note holder under the notes. The default interest on the notes is 14% per annum. The notes can convert into the common stock of the Company at the variable discount rate of 35%.

 

OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY PUBLIC HEALTH EPIDEMICS, INCLUDING THE COVID-19.

 

A public health epidemic, including the COVID-19, poses the risk that we or our employees, contractors, suppliers, customers and other business partners may be prevented from conducting business activities for an indefinite period of time, due to factors such as shutdowns that may be requested or mandated by governmental authorities. The COVID-19 pandemic continues to rapidly evolve. At this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to it will impact our business, operations and financial results.

 

The extent to which the COVID-19 pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this prospectus, including the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. The pandemic and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.

 

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To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

 

WE HAVE NOT MADE A PAYMENT UNDER A MATERIAL CONTRACT, WHICH COULD RESULT IN ADVERSE IMPACTS ON OUR OPERATIONS AND FINANCIAL RESULTS.

 

As of the date of this prospectus, we have not made a payment of the principal of $1,200,000 with the accrued interest of $325,843 which comprised the balance of the purchase price pursuant to our asset purchase agreement with General Electric International (“GE”), under which we acquired all assets of Heat Recovery Solutions business unit from General Electric International. In addition, we have not paid GE an amount of $972,233 in accrued transitional fees. We believe that the outstanding amounts should have been an offset to purchase price we paid due to a misrepresentation of the values of the disclosed assets as reflected in the principal amount of the outstanding note and in the transition agreements. CETY stopped making payments and informed GE that it had encountered difficulties because of the valuations of the assets that were acquired from GE. Given that the values of the assets were different than GE’s internal reports and as we discussed at the time of the transaction with GE’s management, we proposed a change in the amount the Company owes GE under the purchase agreement, but GE has been non-responsive.

 

IF DEMAND FOR THE PRODUCTS AND SERVICES THAT THE COMPANY OFFERS SLOWS, OUR BUSINESS WOULD BE MATERIALLY AFFECTED.

 

Demand for products which it intends to sell depends on many factors, including:

 

  the economy, and in periods of rapidly declining economic conditions, customers may defer purchases or may choose alternate products;
     
  the cost of oil, gas and solar energy;
     
  the competitive environment in the heat to power sectors may force us to reduce prices below our desired pricing level or increase promotional spending; and
     
  our ability to maintain efficient, timely and cost-effective production and delivery of the products and services.

 

All of these factors could result in immediate and longer term declines in the demand for the products and services that we offer, which could adversely affect our sales, cash flows and overall financial condition.

 

WE OPERATE IN A HIGHLY COMPETITIVE MARKET. IF WE DO NOT COMPETE EFFECTIVELY, OUR PROSPECTS, OPERATING RESULTS, AND FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED.

 

The markets for our products and services are highly competitive, with companies offering a variety of competitive products and services. We expect competition in our markets to intensify in the future as new and existing competitors introduce new or enhanced products and services that are potentially more competitive than our products and services. We believe many of our competitors and potential competitors have significant competitive advantages, including longer operating histories, ability to leverage their sales efforts and marketing expenditures across a broader portfolio of products and services, larger and broader customer bases, more established relationships with a larger number of suppliers, contract manufacturers, and channel partners, greater brand recognition, and greater financial, research and development, marketing, distribution, and other resources than we do and the ability to offer financing for projects. Our competitors and potential competitors may also be able to develop products or services that are equal or superior to ours, achieve greater market acceptance of their products and services, and increase sales by utilizing different distribution channels than we do. Some of our competitors may aggressively discount their products and services in order to gain market share, which could result in pricing pressures, reduced profit margins, lost market share, or a failure to grow market share for us. If we are not able to compete effectively against our current or potential competitors, our prospects, operating results, and financial condition could be adversely affected.

 

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WE MAY LOSE OUT TO LARGER AND BETTER-ESTABLISHED COMPETITORS.

 

The alternative power industry is intensely competitive. Most of our competitors have significantly greater financial, technical, marketing and distribution resources as well as greater experience in the industry than we have. Our products may not be competitive with other technologies, both existing at the current time and in the future. If this happens, our sales and revenues will decline, or fail to develop at all. In addition, our current and potential competitors may establish cooperative relationships with larger companies to gain access to greater development or marketing resources. Competition may result in price reductions, reduced gross margins and loss of market share.

 

OUR INTERNATIONAL OPERATIONS SUBJECT US TO RISKS, WHICH COULD ADVERSELY AFFECT OUR OPERATING RESULTS.

 

Our international operations are exposed to the following risks, several of which are out of our control:

 

  political and economic instability, international terrorism and anti-American sentiment, particularly in emerging markets;
  preference for locally branded products, and laws and business practices favoring local competition;
  unusual or burdensome foreign laws or regulations, and unexpected changes to those laws or regulations;
  |import and export license requirements, tariffs, taxes and other barriers;
  costs of customizing products for foreign countries;
  increased difficulty in managing inventory;
  less effective protection of intellectual property; and
  difficulties and costs of staffing and managing foreign operations.

 

Any or all of these factors could adversely affect our ability to execute any geographic expansion strategies or have a material adverse effect on our business and results of operations.

 

OUR PRODUCTS MAY BE DISPLACED BY NEWER TECHNOLOGY.

 

The alternative power industry is undergoing rapid and significant technological change. Third parties may succeed in developing or marketing technologies and products that are more effective than those developed or marketed by us, or that would make our technology obsolete or non-competitive. Accordingly, our success will depend, in part, on our ability to respond quickly to technological changes. We may not have the resources to do this.

 

WE MUST HIRE QUALIFIED ENGINEERING, DEVELOPMENT AND PROFESSIONAL SERVICES PERSONNEL.

 

We cannot be certain that we can attract or retain a sufficient number of highly qualified mechanical engineers, industrial technology and manufacturing process developers and professional services personnel. To deploy our products quickly and efficiently, and effectively maintain and enhance them, we will require an increasing number of technology developers. We expect customers that license our technology will typically engage our professional engineering staff to assist with support, training, consulting and implementation. We believe that growth in sales depends on our ability to provide our customers with these services and to attract and educate third-party consultants to provide similar services. As a result, we plan to hire professional services personnel to meet these needs. New technical and professional services personnel will require training and education and it will take time for them to reach full productivity. To meet our needs for engineers and professional services personnel, we also may use costlier third-party contractors and consultants to supplement our own staff. Competition for qualified personnel is intense, particularly because our technology is specialized and only a limited number of individuals have acquired the needed skills. Our business may be harmed if we are unable to attract or retain an adequate number of qualified personnel .

 

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WE MAY BE ADVERSELY AFFECTED BY SHORTAGES OF REQUIRED COMPONENTS. IN ADDITION, WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS TO PROCURE OUR PARTS FOR PRODUCTION WHICH IF AVAILABILITY OF PRODUCTS BECOMES COMPROMISED IT COULD ADD TO OUR COST OF GOODS SOLD AND AFFECT OUR REVENUE GROWTH.

 

At various times, there have been shortages of some of the components that we use, as a result of strong demand for those components or problems experienced by suppliers. These unanticipated component shortages have resulted in curtailed production or delays in production, which prevented us from making scheduled shipments to customers in the past and may do so in the future. Our inability to make scheduled shipments could cause us to experience a reduction in our sales and an increase in our costs and could adversely affect our relationship with existing customers as well as prospective customers. Component shortages may also increase our cost of goods sold because we may be required to pay higher prices for components in short supply and redesign or reconfigure products to accommodate substitute components.

 

OUR PRINCIPAL SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS, IN THE AGGREGATE, BENEFICIALLY OWN MORE THAN 50% OF OUR OUTSTANDING COMMON STOCK AND THESE SHAREHOLDERS, IF ACTING TOGETHER, WILL BE ABLE TO EXERT SUBSTANTIAL INFLUENCE OVER ALL MATTERS REQUIRING APPROVAL OF OUR SHAREHOLDERS.

 

Our principal shareholders, directors and executive officers in the aggregate, beneficially own more than 50% our outstanding common stock on a fully diluted basis. These shareholders, if acting together, will be able to exert substantial influence over all matters requiring approval of our shareholders, including amendments to our Articles of Incorporation, fundamental corporate transactions such as mergers, acquisitions, the sale of the company, and other matters involving the direction of our business and affairs and specifically the ability to determine the members of our board of directors. (See “Security Ownership of Certain Beneficial Owners and Managements”).

 

IF WE LOSE KEY SENIOR MANAGEMENT PERSONNEL OUR BUSINESS COULD BE NEGATIVELY AFFECTED. FURTHER, WE WILL NEED TO RECRUIT AND RETAIN ADDITIONAL SKILLED MANAGEMENT PERSONNEL AND IF WE ARE NOT ABLE TO DO SO, OUR BUSINESS AND OUR ABILITY TO CONTINUE TO GROW COULD BE HARMED.

 

Our success depends to a large extent upon the continued services of our executive officers. We could be seriously harmed by the loss of any of our executive officers. In order to manage our growth, we will need to recruit and retain additional skilled management personnel and if we are not able to do so, our business and our ability to continue to grow could be harmed. Although a number of companies in our industry have implemented workforce reductions, there remains substantial competition for highly skilled employees.

 

WE ARE SUBJECT TO ENVIRONMENTAL COMPLIANCE RISKS AND UNEXPECTED COSTS THAT WE MAY INCUR WITH RESPECT TO ENVIRONMENTAL MATTERS MAY RESULT IN ADDITIONAL LOSS CONTINGENCIES, THE QUANTIFICATION OF WHICH CANNOT BE DETERMINED AT THIS TIME.

 

We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, storage, discharge and disposal of hazardous substances in the ordinary course of our manufacturing process. If more stringent compliance or cleanup standards under environmental laws or regulations are imposed, or the results of future testing and analyses at our current or former operating facilities indicate that we are responsible for the release of hazardous substances, we may be subject to additional remediation liability. Further, additional environmental matters may arise in the future at sites where no problem is currently known or at sites that we may acquire in the future. Currently unexpected costs that we may incur with respect to environmental matters may result in additional loss contingencies, the quantification of which cannot be determined at this time.

 

OUR SALES AND CONTRACT FULFILLMENT CYCLES CAN BE LONG, UNPREDICTABLE AND VARY SEASONALLY, WHICH CAN CAUSE SIGNIFICANT VARIATION IN REVENUES AND PROFITABILITY IN A PARTICULAR QUARTER.

 

The timing of our sales and related customer contract fulfillment is difficult to predict. Many of our customers are large enterprises, whose purchasing decisions, budget cycles and constraints and evaluation processes are unpredictable and out of our control. Further, the timing of our sales is difficult to predict. The length of our sales cycle, from initial evaluation to payment for our products and services, can range from several months to well over a year and can vary substantially from customer to customer. Our sales efforts involve significant investment in resources in field sales, marketing and educating our customers about the use, technical capabilities and benefits of our products and services. Customers often undertake a prolonged evaluation process. As a result, it is difficult to predict exactly when, or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. Large individual sales have, in some cases, occurred in quarters subsequent to those we anticipated, or have not occurred at all. In addition, the fulfillment of our customer contracts is partially dependent on other factors related to our customers’ businesses that are not in our control. as with the sales cycle, this can also cause revenues and earnings to fluctuate from quarter to quarter. If our sales and/or contract fulfillment cycles lengthen or our substantial upfront investments do not result in sufficient revenue to justify our investments, our operating results could be adversely affected.

 

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We have experienced seasonal and end-of-quarter concentration of our transactions and variations in the number and size of transactions that close in a particular quarter, which impacts our ability to grow revenue over the long term and plan and manage cash flows and other aspects of our business and cost structure. Our transactions vary by quarter, with the fourth quarter typically being our largest. If expectations for our business turn out to be inaccurate, our revenue growth may be adversely affected over time and we may not be able to adjust our cost structure on a timely basis and our cash flows may suffer.

 

OUR OPERATING MARGINS MAY DECLINE AS A RESULT OF INCREASING PRODUCT COSTS.

 

Our business is subject to significant pressure on pricing and costs caused by many factors, including competition, the cost of components used in our products, labor costs, constrained sourcing capacity, inflationary pressure, pressure from customers to reduce the prices we charge for our products and services, and changes in consumer demand. Costs for the raw materials used in the manufacture of our products are affected by, among other things, energy prices, consumer demand, fluctuations in commodity prices and currency, and other factors that are generally unpredictable and beyond our control. Increases in the cost of raw materials used to manufacture our products or in the cost of labor and other costs of doing business in the United States and internationally could have an adverse effect on, among other things, the cost of our products, gross margins, operating results, financial condition, and cash flows.

 

OUR PROPOSED JOINT VENTURE WITH SHENZHEN GAS MAY NOT BE SUCCESSFUL.

 

Our proposed joint venture with Shenzhen Gas (as defined below) is subject to risks that we may not be able to control and therefor may not be successful. CETY Hong Kong has entered into a framework agreement for a future joint venture with the overseas investment arm of Shenzhen Gas. CETY Hong Kong will hold a 49% interest in the joint venture in accordance with the framework agreement. Once established, the joint venture will acquire municipal natural gas operators in China with funds provided by Shenzhen Gas. The framework agreement is not binding upon the parties until definitive agreements are executed, there is no guarantee the joint venture will be established. Further, the joint venture is dependent on both CETY and Shenzhen Gas contributing funds to the joint venture. Shenzhen Gas will be required to loan funds to the joint venture once established. If Shenzhen Gas does not provide capital for the acquisitions of the natural gas operators as planned, we will not be able to execute the business plan and it may result in a loss of our capital investment, if any. The acquisitions are dependent upon the price of gas, our ability to source acquisition targets for the joint venture, successful price negotiations and the profitable operations of the acquired companies. There can be no assurances that we will be able to successfully acquire companies through the joint venture and execute on its business plan.

 

OUR WASTE TO ENERGY BUSINESS, INCLUDING OUR BIOMASS PROJECT IN THE U.S., IS IN AT AN EARLY STAGE AND WE DO NOT MAKE ANY ASSURANCES OF ITS SUCCESS OR ABILITY TO OPERATE PROFITABLY.

 

We are entering into the waste to energy business based on new technology. While the HTAP has not been installed and qualified by an independent engineering study by an engineering, procurement and construction organization for an existing facility in United States or Europe. As a result, we cannot be assured that the equipment or technology will be accepted or adopted by the firms who are typically responsible for developing and building locally based waste to energy facilities. In addition, it is more difficult to obtain standard financing for our projects using HTAP technology until qualified. While we have established our first pilot project for our proposed biomass facility, there can be no assurances we will be able to obtain sufficient financing to complete the project or that once established it will operate profitably.

 

OUR NEW OPERATIONS FOR HTAP TECHNOLOGY HAVE BEEN RELOCATED TO A NEW OFFICE IN TURKEY FOR SALES AND ENGINEERING AND FOR MANUFACTURING OUTSIDE OF RUSSIA. WE CAN NOT MAKE ANY ASSURANCES THAT THE OPERATIONS FOR THE SALES AND MANUFACTURING OF THE HTAP TECHNLOGY WILL BE SUCCESSFUL.

 

As a result of the recent war between Russia and the Ukraine, we have terminated our agreements with ENEX and have established an office in Turkey to run the engineering and sales efforts for the HTAP waste to energy products in Europe. The inventor and owner of ENEX has moved out of Russia, purchased an apartment in Antalya, Turkey, and has applied for permanent citizenship in Turkey. In addition, ENEX is in the process of redomiciling to Turkey and will run its operations out of Antalya to complete its remaining projects in Kazakhstan at which time the operations of ENEX are expected to be wound down. Upon the ENEX owner’s receipt of Turkish citizenship, CETY plans to retain the former owner of ENEX to develop and patent new technology relating the ablative processing of waste material and, after ENEX redomiciles to Turkey, transfer any requisite intellectual property rights to CETY in order to develop new patents on the technology. The former operations in Russia primarily consisted of assembling third party components and engineering modifications on the system required to meet our customer’s needs. We will need to relocate personnel and equipment and obtain an office and manufacturing facility in Turkey to properly establish new manufacturing operations. In addition, we will need to establish relationships with third party manufacturers who are not located in Russia in order to obtain components for the HTAP systems. We cannot assure you that the transition of ENEX from Russia to Turkey will be successful as will require adding new engineers from outside of Russia and developing new material sources and supply chains.

 

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WE CAN NOT ASSURE THAT OUR HTAP TECHNOLOGY WILL BE ABLE TO BE MODIFIED TO ACCOMMODATE THE NEEDS OF OUR CUSTOMERS OR TO PRODUCE ALL OF THE BIOFULES WHICH WE BELIEVE IT IS CAPABLE OF PRODUCING.

 

Our HTAP Technology will need to be modified to burn certain types of fuels, depending on our customer’s needs, and to produce certain types of biofuels that we expect to produce, such as hydrogen. We cannot assure you that we will be able to successfully modify our HTAP systems to accommodate the needs of our customers or to produce all of the biofuels we believe it is capable of producing. While HTAP technology has been used in various waste to energy projects using high temperature ablative technology clients have varying needs with respect to their waste products. For example, some types of sewage waste require pre-treatment and processing before it can be incinerated at high temperatures under pressurized conditions. Additionally, some customers will want to produce different types of biofuels based on their needs and the market. While our HTAP technology has produced biogas and biofuel, we cannot assure you that we will be able to modify and produce equipment that will provide output products that our customers desire. For example, we believe that hydrogen will be used in the future to power electrical generators feeding the grid. Our HTAP system will need to be modified to produce hydrogen and we can make no assurances that we will be able to successfully make such modifications.

 

OUR HTAP TECHNOLOGY FACES MANY COMPETING NEW AND EXISTING TECHNOLOGIES, AND WE CANNOT ASSURE YOU THAT OUR HIGH TEMPERATURE ABLATIVE PROCESS WILL BE ADOPTED BY THE MARKET.

 

Our HTAP technology is an alternative to existing incineration technology which we believe is more efficient and will produce a wider variety of biofuels than existing methods at a more cost-effective price. While processes such as thermal on grate are widespread, we believe that they produce more damaging pollution than our ablative pressurized incineration technology. Systems using thermal on grate have implemented pollution remediation systems reducing the environmental impact of their byproducts. These remediation technologies may improve and become more cost effective thereby reducing the competitiveness of our product. There are also many new technologies that will compete with our HTAP process at a lower cost or with more efficiency that could become the new standard for waste to energy productions. For example, some technologies produce energy by using enzymes to break down organic wastes. Others will grow biological materials that when exposed to sunlight create energy. While these and other technologies are at early stages, we cannot assure you that they will not be developed into commercially viable products that can produce clean energy more efficiently than our product and, in fact, become an industry standard making our technology less attractive.

 

IF WE FAIL TO DEVELOP AND MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL OVER FINANCIAL REPORTING, WE MAY BE UNABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD.

 

As a public company, we have been subject to the Section 404 of the Sarbanes-Oxley Act, or SOX 404, which requires that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 10-K.

 

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Our reporting obligations as a public company place a significant strain on our management and operational and financial resources and systems. Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting may result in the loss of investor confidence in the reliability of our financial statements, which in turn may harm our business and negatively impact the trading price of our stock. Furthermore, we anticipate that we will continue to incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.

 

In connection with the auditing of our consolidated financial statements as of and for the years ended December 31, 2020 and 2021, we identified the following material weaknesses in our internal control over financial reporting:

 

  Inadequate segregation of duties consistent with control objectives due to a small number of employees;
  Lack of formal policies and procedures, but there are integrated systems in place and the procedure are being documented;
  Lack of a functioning audit committee to oversee financial reporting responsibilities, which is being addressed by adding qualified CPA board members; and
  Lack of risk assessment procedures on internal controls to detect financial reporting risks on a timely manner, currently being implemented as part of new procedures and policies.

 

As defined in the rules and regulations adopted by the SEC, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

 

Management has been implementing and will continue to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions planned include:

 

  Continue to search for and evaluate qualified independent outside directors;
  Identify gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company; and
  Continue to develop policies and procedures on internal control over financial reporting and monitor the effectiveness of operations on existing controls and procedures.

 

We have also engaged a third-party financial consulting firm during the year to assist with the preparation of SEC reporting. We are committed to maintaining a strong internal control environment and believe that these remediation efforts will deliver improvements in our control environment. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

 

However, the implementation of these measures may not fully address these weaknesses in our internal control over financial reporting, and we cannot conclude that they have been fully remedied. Our failure to correct these weakness and deficiencies or our failure to discover and address any other weakness and deficiencies could result in our inability to accurately report our financial results, prevent or detect fraud or provide timely and reliable financial and other information pursuant to the reporting obligations we have as a public company, which could have a material adverse effect on our business, financial condition and results of operations. Further, it could cause our investors to lose confidence in the information we report, which could adversely affect the price of our shares.

 

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WE HAVE ENGAGED IN TRANSACTIONS WITH RELATED PARTIES, AND SUCH TRANSACTIONS PRESENT POSSIBLE CONFLICTS OF INTEREST THAT COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS.

 

We have entered into certain transactions with our officers, directors and certain shareholders. See “Certain Relationships and Related Party Transactions.” We believe the terms obtained or consideration that we paid or received, as applicable, in connection with these transactions were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

 

We may in the future enter into additional transactions in which any of our directors, officers or certain shareholders, or any members of their immediate family, have a direct or indirect material interest. Such transactions present potential for conflicts of interest, as the interests of these entities and their shareholders may not align with the interests of the Company and our unaffiliated shareholders with respect to the negotiation of, and certain other matters related to, our purchases from and other transactions with such entities. Conflicts of interest may also arise in connection with the exercise of contractual remedies under these transactions, such as for events of default.

 

Our Board of Directors intends to authorize the Audit Committee consisting of independent directors upon its formation to review and approve all material related party transactions. Nevertheless, we may have achieved more favorable terms if such transactions had not been entered into with related parties. These transactions, individually or in the aggregate, may have an adverse effect on our business and results of operations or may result in litigation or enforcement actions by the SEC or other agencies.

 

OUR CFO AND DIRECTOR, MR. CALVIN PANG, HOLDS A CONTROLLING INTEREST IN US THROUGH AN ENTITY HE CONTROLS WHICH MAY POSE CONFLICTS OF INTERESTS AS A RELATED PARTY.

 

Mr. Calvin Pang is the beneficial owner of 64.8% of our common stock, or 961,764,010  shares, as of November 22, 2022. While many of Mr. Pang’s interests are aligned with our business and operations, we cannot assure you that the interests of the Company and Mr. Pang will always be the same. Under Nevada laws, all directors, including Mr. Pang as a director, owe fiduciary duties to our corporation. In addition, the Company has taken steps to exclude Mr. Pang from voting as a director on issues that he may be a related party. Further, our Board of Directors intends to authorize the Audit Committee upon its formation to review and approve all material related party transactions. Nevertheless, Mr. Pang can exert significant influence on the board and the actions of the Company as being a majority shareholder and your and other minority shareholders’ ability to influence significant corporate decisions will be limited.

 

THE COMPANY DEPENDS ON A LIMITED NUMBER OF CUSTOMERS FOR A LARGE PORTION OF ITS NET SALES.

 

A limited number of customers account for a large percentage of the Company’s net sales. The Company’s three largest customers, Aries Clean Energy, San Giorgio, and Greenverse and its domestic and international affiliated companies, accounted for approximately 75% of the Company’s net sales during fiscal year 2021 and the company’s three largest customers, Ekonams, CEF, and Corycos, accounted for approximately 96% of the Company’s net sales during fiscal year 2020. The Company expects that a significant portion of its revenues will continue to be derived from a small number of customers and that these percentages may increase with the growth of its waste to energy products and services. In addition, the Company’s business is based primarily upon individual sales orders, and the Company typically does not enter into long-term contracts with its customers. Accordingly, these customers could reduce their purchasing levels or cease buying products from the Company at any time and for any reason. In addition, since the Company is project driven, the Company’s sales can be delayed due to the time it takes for its customers with the approval and financing process of their project which can reduce the sales of the Company’s products and it may have a material adverse effect on the Company’s business, financial condition and results of operations.

 

WE MAY INCUR LIABILITIES THAT ARE NOT COVERED BY INSURANCE.

 

While we seek to maintain appropriate levels of insurance, not all claims are insurable and we may experience major incidents of a nature that are not covered by insurance or not covered adequately by insurance. Furthermore, insurance companies in China currently do not offer as extensive an array of insurance products for our PRC subsidiaries as insurance companies in more developed economies. In some cases, we have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. We maintain an amount of insurance protection that we believe is adequate, but there can be no assurance that such insurance will continue to be available on acceptable terms or that our insurance coverage will be sufficient or effective under all circumstances and against all liabilities to which we may be subject. If we were to incur substantial losses or liabilities due to fire, explosions, floods, other natural disasters or accidents or business interruption, our results of operations could be materially and adversely affected. We could, for example, be subject to substantial claims for damages upon the occurrence of several events within one calendar year. In addition, our insurance costs may increase over time in response to any negative development in our claims history or due to material price increases in the insurance market in general.

 

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A SIGNIFICANT INTERRUPTION IN THE OPERATIONS OF OUR THIRD-PARTY SUPPLIERS COULD POTENTIALLY DISRUPT OUR OPERATIONS.

 

We have limited control over the operations of our third-party suppliers and other business partners and any significant interruption in their operations may have an adverse impact on our operations. For example, a significant interruption in the operations of our supplier’s manufacturing facilities could cause delay or termination of shipment of the raw materials to our subsidiaries, which may cause delay or termination of shipment of our products to our customers, thus resulting in penalties or fines due to our breach of contract. If we could not solve the impact of the interruptions of operations of our third-party suppliers, our business operations and financial results may be materially and adversely affected.

 

WE HAVE A SIGNIFICANT AMOUNT OF ACCOUNTS RECEIVABLE, WHICH COULD BECOME UNCOLLECTIBLE.

 

As of December 31, 2021, we had approximately $693,032 in accounts receivable and $684,770 in long term financing receivables. Our accounts receivable primarily include balance due from customers when our products are sold and delivered to customers. Our customers are required to make full payment within three to five months from delivery date, although our industry typical payment term is 180 days from delivery. As a result of the COVID-19 outbreak in January 2020, collection activities from some of our customers affected by the pandemic resulted in longer payment terms. We impliedly granted extended payment terms until their projects are commissioned and they collect from their end users. Deteriorating conditions in, bankruptcies, or financial difficulties of a customer or within their industries generally may impair the financial condition of our customers and hinder their ability to pay us on a timely basis or at all, and accounts receivable are written off against allowances only after exhaustive collection efforts. The failure or delay in payment by one or more of our customers could reduce our cash flows and adversely affect our liquidity and results of operations.

 

OUR SALES AND PROFITABILITY ARE DEPENDENT ON THE PRICE OF OIL, NATURAL GAS AND ELECTRICITY, WHICH HAS BEEN SIGNIFICANTLY VOLATILE RECENTLY.

 

Our Waste Heat Recovery products and Waste to Energy products are dependent on the prices of traditional energy sources. We believe our products reuse wasted heat and create electricity with zero emission and have potential for receiving clean energy incentives. The process of converting waste heat to power is referred to as organic Rankine cycle. Our waste to energy products converts organic waste into power and biochar through a process referred to pyrolysis. As the price of energy increases, the economic justification for our products increases. At the same time, as the price for traditional fuel decreases, there is less incentive for customers to purchase our products and it may impair our ability to sell our products.

 

IF THE SPOT PRICE OF NG IN CHINA DROPS BELOW THE PURCHASE PRICE OUR TRADERS NEGOTIATE WITH OUR SUPPLIERS, WE MAY NOT BE ABLE TO SELL OUR NG OR MAY HAVE TO SELL IT AT A LOSS.

 

Our traders at JHJ purchase NG at a fixed price in large volumes. If the spot prices for NG in China drop below our purchase price, we may not be able to sell our NG to our customers or may have to sell the NG at a substantial loss. We do not purchase a sufficient volume of NG to be able to hedge against price declines of this commodity. If we believe that NG prices are too high and we are unable to purchase because we believe that prices will drop, we will not have sufficient supply of NG to conduct trading operations until the market pricing returns to a level at which we can conduct operations.

 

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WE MAY NOT HAVE SUFFICIENT FUNDS TO CONDUCT OUR TRADING OPERATIONS IN THE PRC.

 

We are funding our trading operations through cash flow generated by JHJ and from funds provided by our parent. If we or JHJ does not have sufficient funds, we may not be able to conduct trading operations.

 

OUR WASTE TO ENERGY PRODUCTS FROM ENEX HAVE NOT BEEN TESTED IN THE UNITED STATES.

 

ENEX’s HTAP 5 and 10 have not been installed in the United States. In order to commence sales, our purchasers will need to review data that they may not deem reliable. As a result, we may be required to post large bonds or find an EPC that will guarantee performance of the ENEX systems. We can not give any assurances that we will be able to finance the bonds or find an EPC willing to guaranty performance.

 

THE IMPLEMENTATION OF OUR WASTE TO ENERGY JOINT VENTURES DEPENDS ON US FINDING FUNDING FOR THE PROJECTS.

 

In order to implement the ENEX system in our waste to energy joint ventures, we will need to finance directly or obtain third party financing for these projects. We cannot give any assurances that we will be able to directly finance these projects or be able to find a third party to provide financing to them. If we are not able to finance the projects we will not be able to implement our business plan in this sector.

 

WE MAY NEED TO RAISE ADDITIONAL CAPITAL REQUIRED TO GROW OUR BUSINESS, AND WE MAY NOT BE ABLE TO RAISE CAPITAL ON TERMS ACCEPTABLE TO US OR AT ALL.

 

Growing and operating our business will require significant cash outlays and capital expenditures and commitments. We have utilized cash on hand and cash generated from operations as sources of liquidity. If such cash is not sufficient to meet our cash requirements, we will need to seek additional capital, potentially through equity or debt financing, to fund our growth. Our ability to access the credit and capital markets in the future as a source of liquidity, and the borrowing costs associated with such financing, are dependent upon market conditions.

 

In addition, any equity securities we issue, including any preferred stock, may be on terms that are dilutive or potentially dilutive to our stockholders, and the prices at which new investors would be willing to purchase our securities may be lower than the offering price per share of our Common Stock. The holders of any equity securities we issue, including any preferred stock, may also have rights, preferences or privileges which are senior to those of existing holders of Common Stock. If new sources of financing are required, but are insufficient or unavailable, we will be required to modify our growth and operating plans based on available funding, if any, which would harm our ability to grow our business.

 

OUR REVENUE GROWTH RATE DEPENDS PRIMARILY ON OUR ABILITY TO EXECUTE OUR BUSINESS PLAN.

 

We may not be able to identify and maintain the necessary relationships with customers and labor within our industry. Our ability to execute our business plan also depends on other factors, including the ability to:

 

  Negotiate and maintain contracts and agreements with acceptable terms;
  Hire and train qualified personnel;
  Maintain marketing and development costs at affordable rates; and
  Maintain an affordable labor force.

 

CHINA’S ECONOMIC, POLITICAL AND SOCIAL CONDITIONS, AS WELL AS GOVERNMENTAL POLICIES, COULD AFFECT THE BUSINESS ENVIRONMENT IN CHINA AND OUR ABILITY TO OPERATE OUR BUSINESS.

 

A portion of our operations are conducted in China. Accordingly, our business, results of operations, financial condition and prospects may be influenced to a degree by economic, political, legal and social conditions in China. China’s economy differs from the economies of other countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. In recent years, the Chinese government has implemented measures emphasizing market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises. However, a significant portion of productive assets in China are still owned by the Chinese government. The Chinese government continues to play a significant role in regulating industrial development. It also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policies, restricting the inflow and outflow of foreign capital and providing preferential treatment to particular industries or companies. More generally, if the business environment in China deteriorates from the perspective of domestic or international investment, the portion of our operations in China may also be adversely affected.

 

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As the Chinese economy has become increasingly linked with the global economy, China is affected in various respects by downturns and recessions of major economies around the world. The various economic and policy measures enacted by the Chinese government to forestall economic downturns or bolster China’s economic growth could materially affect our business. Any adverse change in the economic conditions in China, policies of the Chinese government or laws and regulations in China could have a material adverse effect on the overall economic growth of China and, in turn, the portion of our business in China.

 

UNCERTAINTIES IN THE CHINA LEGAL SYSTEM COULD MATERIALLY AND ADVERSELY AFFECT US.

 

In 1979, the Chinese government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past four decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, the China legal system is based on written statutes and prior court decisions have limited value as precedents. Since these laws and regulations are relatively new and the China legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules may not be uniform and enforcement of these laws, regulations and rules involves uncertainties. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us. Furthermore, the China legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.

 

PRC REGULATION OF LOANS TO AND DIRECT INVESTMENT IN PRC ENTITIES BY OFFSHORE HOLDING COMPANIES AND GOVERNMENTAL CONTROL OF CURRENCY CONVERSION MAY DELAY OR PREVENT US FROM MAKING LOANS OR ADDITIONAL CAPITAL CONTRIBUTIONS TO OUR CHINESE SUBSIDIARIES.

 

We are a U.S. based company conducting a portion of our operations in China. We may make loans to our PRC subsidiaries subject to the approval, registration, and filing with governmental authorities and limitation of amount, or we may make additional capital contributions to our subsidiaries in China and Hong Kong. Any loans to our wholly foreign-owned subsidiaries in mainland China, which are treated as foreign-invested enterprises under PRC law, are subject to foreign exchange loan registrations

 

In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals or filings on a timely basis, if at all, with respect to future loans by us to our Hong Kong or PRC subsidiaries or with respect to future capital contributions by us to our Hong Kong or PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds from this Underwritten Offering and to capitalize or otherwise fund our Chinese operations may be negatively affected.

 

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FLUCTUATIONS IN EXCHANGE RATES COULD HAVE AN EFFECT ON THE RESULTS OF OPERATIONS OF OUR HONG KONG AND CHINA SUBSIDIARIES.

 

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China’s foreign exchange policies. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. In the fourth quarter of 2016, the Renminbi has depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. This depreciation halted in 2017, and the RMB appreciated approximately 7% against the U.S. dollar during this one-year period. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the exchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future which may impact the profitability of our operations in China.

 

WE MAY BE SUBJECT TO GOVERNMENT LAWS AND REGULATIONS PARTICULAR TO OUR OPERATIONS WITH WHICH WE MAY BE UNABLE TO COMPLY.

 

We may not be able to comply with all current and future government regulations which are applicable to our business. Our business operations are subject to all government regulations normally incident to conducting business (e.g., occupational safety and health acts, workmen’s compensation statutes, unemployment insurance legislation, income tax, and social security laws and regulations, environmental laws and regulations, consumer safety laws and regulations, etc.) as well as to governmental laws and regulations applicable to small public companies and their capital formation efforts. Although we will make every effort to comply with applicable laws and regulations, we can provide no assurance of our ability to do so, nor can we predict the effect of those regulations on our proposed business activities. Our failure to comply with material regulatory requirements would likely have an adverse effect on our ability to conduct our business and could result in our cessation of active business operations.

 

COMPLIANCE WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE WILL RESULT IN ADDITIONAL EXPENSES.

 

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. Our management team will need to invest significant management time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

 

Risks Related to This Offering and Ownership of Our Common Stock

 

OUR OPERATING RESULTS AND SHARE PRICE MAY BE VOLATILE AND THE MARKET PRICE OF OUR COMMON STOCK AFTER THIS OFFERING MAY DROP BELOW THE PRICE YOU PAY.

 

Our quarterly operating results have in the past fluctuated and are likely to do so in the future. As a result, the trading price of the shares of our common stock following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include:

 

  the success of competitive products or technologies;
  actual or anticipated changes in our growth rate relative to our competitors;
  announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;
  regulatory or legal developments in the United States and other countries in which we operate;
  the recruitment or departure of key personnel;
  the level of expenses;
  changes in our backlog in a given period;

 

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  actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
  variations in our financial results or those of companies that are perceived to be similar to us;
  fluctuations in the valuation of companies perceived by investors to be comparable to us;
  inconsistent trading volume levels of our shares;
  announcement or expectation of additional financing efforts;
  sales of our common stock by us, our insiders or our other stockholders;
  market conditions in the clean energy sector; and
  general economic, industry and market conditions.

 

These and other factors, many of which are beyond our control, may cause our operating results and the market price and demand for our shares to fluctuate substantially. While we believe that operating results for any particular quarter are not necessarily a meaningful indication of future results, fluctuations in our quarterly operating results could limit or prevent investors from readily selling their shares and may otherwise negatively affect the market price and liquidity of our shares. In addition, the stock market in general, and companies in our markets in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. The realization of any of these risks or any of a broad range of other risks, including those described in these “Risk Factors,” could have a dramatic and material adverse impact on the market price of the shares of our common stock.

 

WE HAVE ISSUED A SUBSTANTIAL AMOUNT OF CONVERTIBLE SECURITIES WHICH IF CONVERTED WILL SUBSTANTIALLY DILUTE ALL OF OUR STOCKHOLDERS.

 

So far we have issued a substantial number of convertible securities, including warrants, which, if converted or exercised, would result in substantial dilution to our stockholders. See Note 9 of the Notes to the consolidated financial statements for the three and nine months ended September 30, 2022 included in this prospectus for further information on our outstanding convertible notes. Our ability to meet pay interest and repay principal for our substantial level of outstanding convertible notes depends on, among other things, our operating results and financial market conditions. Our cash flow may not be sufficient to allow us to pay principal and interest on our outstanding convertible notes and meet our other obligations. Our level of indebtedness could have other important consequences. In addition, conversion of our convertible notes and exercise of warrants could result in significant dilution to our existing stockholders and cause the market price of our common stock to decline.

 

WE HAVE CONSIDERABLE DISCRETION AS TO THE USE OF THE NET PROCEEDS FROM THIS UNDERWRITTEN OFFERING AND WE MAY USE THESE PROCEEDS IN WAYS WITH WHICH YOU MAY NOT AGREE.

 

Our management will have broad discretion in the way that we use the net proceeds of this Underwritten Offering. Pending the final application of the net proceeds of this Underwritten Offering, we intend to use the net proceeds of this Underwritten Offering primarily to enhance and expand our business operations and for general corporate purposes. However, the proceeds may not be invested effectively or in a manner that yields a favorable or any return, and consequently, this could result in financial losses that could have a material adverse effect on our business, financial condition and results of operations. There can be no assurance that the Company will utilize the net proceeds in a manner that enhances value of the Company. If the Company fails to spend the proceeds effectively, the Company’s business and financial condition could be harmed, and there may be the need to seek additional financing sooner than expected.

 

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WE ARE A SMALLER REPORTING COMPANY, AND WE CANNOT BE CERTAIN IF THE REDUCED REPORTING REQUIREMENTS APPLICABLE TO US WILL MAKE OUR COMMON STOCK LESS ATTRACTIVE TO INVESTORS.

 

We are a “smaller reporting company,” meaning that the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million. As a smaller reporting company, we may rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our annual report on Form 10-K and we have reduced disclosure obligations regarding executive compensation. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

 

CERTAIN PROVISIONS OF NEVADA LAW AND IN THE COMPANY’S CHARTER AND BYLAWS MAY HAVE A NEGATIVE EFFECT ON ACQUISITION OF OUR COMPANY.

 

Certain provisions of Nevada law and our bylaws, may have the effect of delaying, deferring or discouraging another person from acquiring control of us. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions that might result in a premium over the market price for our shares. These provisions expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.

 

OUR ISSUANCE OF ADDITIONAL CAPITAL STOCK IN CONNECTION WITH FINANCINGS, ACQUISITIONS, INVESTMENTS, OUR EQUITY INCENTIVE PLANS, OR OTHERWISE WILL DILUTE ALL OTHER STOCKHOLDERS.

 

We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards to employees, directors, and consultants under our equity incentive plans. We may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in complementary companies, products, or technologies, and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.

 

WE MAY MAKE ACQUISITIONS THAT ARE DILUTIVE TO EXISTING STOCKHOLDERS. IN ADDITION, OUR LIMITED EXPERIENCE IN ACQUIRING OTHER BUSINESSES, PRODUCT LINES AND TECHNOLOGIES MAY MAKE IT DIFFICULT FOR US TO OVERCOME PROBLEMS ENCOUNTERED IN CONNECTION WITH ANY ACQUISITIONS WE MAY UNDERTAKE.

 

We intend to evaluate and explore strategic opportunities as they arise, including business combinations, strategic partnerships, and the purchase, licensing or sale of assets. In connection with any such future transaction, we could issue dilutive equity securities, incur substantial debt, reduce our cash reserves or assume contingent liabilities.

 

Our experience in acquiring other businesses, product lines and technologies is limited. Our inability to overcome problems encountered in connection with any acquisitions could divert the attention of management, utilize scarce corporate resources and otherwise harm our business. Any potential future acquisitions also involve numerous risks, including:

 

  problems assimilating the purchased operations, technologies or products;
  costs associated with the acquisition;
  adverse effects on existing business relationships with suppliers and customers;
  risks associated with entering markets in which we have no or limited prior experience;
  potential loss of key employees of purchased organizations; and
  potential litigation arising from the acquired company’s operations before the acquisition.

 

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Furthermore, acquisitions may require material charges and could result in adverse tax consequences, substantial depreciation, deferred compensation charges, in-process research and development charges, the amortization of amounts related to deferred compensation and identifiable purchased intangible assets or impairment of goodwill, any of which could negatively affect our results of operations.

 

WE MAY BE SUBJECT TO SECURITIES LITIGATION, WHICH IS EXPENSIVE AND COULD DIVERT MANAGEMENT ATTENTION.

 

The market price of the shares of our common stock may be volatile, and in the past companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

 

IF YOU PURCHASE SHARES OF COMMON STOCK IN THIS Underwritten OFFERING, YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF THE SHARES OF OUR COMMON STOCK.

 

The proposed public offering price of the shares of our common stock in the Underwritten Offering is substantially higher than the net tangible book value per share of our common stock after giving effect to the Underwritten Offering. Investors purchasing shares of common stock in this Underwritten Offering will pay a price per share that substantially exceeds the book value of our tangible assets after subtracting our liabilities. As a result, investors purchasing shares of common stock in this Underwritten Offering will incur immediate dilution.

 

Further, because we may need to raise additional capital to fund our anticipated level of operations, we may in the future sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. These future issuances of equity or equity-linked securities, together with the exercise of outstanding convertible notes and warrants and any additional shares issued in connection with future acquisitions, if any, may result in further dilution to investors. See “Dilution”.

 

WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE; THEREFORE, YOU MAY NEVER SEE A RETURN ON YOUR INVESTMENT.

 

We do not anticipate the payment of cash dividends on our common stock in the foreseeable future. We anticipate that any profits from our operations will be devoted to our future operations. Any decision to pay dividends will depend upon our profitability at the time, cash available and other factors.

 

General Risk Factors

 

NATURAL DISASTERS AND OTHER CATASTROPHIC EVENTS BEYOND OUR CONTROL COULD ADVERSELY AFFECT OUR BUSINESS OPERATIONS AND FINANCIAL PERFORMANCE.

 

The occurrence of one or more natural disasters, such as fires, hurricanes, tornados, tsunamis, floods and earthquakes; geo-political events, such as civil unrest in a country in which our suppliers are located or terrorist or military activities disrupting transportation, communication or utility systems; or other highly disruptive events, such as nuclear accidents, pandemics, unusual weather conditions or cyber-attacks, could adversely affect our operations and financial performance. Such events could result, among other things, in operational disruptions, physical damage to or destruction or disruption of one or more of our properties or properties used by third parties in connection with the supply of products or services to us, the lack of an adequate workforce in parts or all of our operations and communications and transportation disruptions. These factors could also cause consumer confidence and spending to decrease or result in increased volatility in the United States and global financial markets and economy. Such occurrences could have a material adverse effect on us and could also have indirect consequences such as increases in the costs of insurance if they result in significant loss of property or other insurable damage.

 

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INCREASES IN COSTS, DISRUPTION OF SUPPLY OR SHORTAGE OF MATERIALS COULD HARM OUR BUSINESS.

 

We may experience increases in the cost or a sustained interruption in the supply or shortage of materials. Any such increase, supply interruption or shortage could materially and negatively impact our business, prospects, financial condition and operating results. We use various materials in our business from suppliers.

 

The prices for these materials fluctuate, and their available supply may be unstable, depending on market conditions and global demand for these materials, and could adversely affect our business and operating results.

 

These risks include:

 

  an increase in the cost, or decrease in the available supply, of materials used;
     
  disruption in the supply of materials due to quality issues or recalls by manufacturers;
     
  tariffs on the materials we source; and
     
  increases in global shipping costs have gone up due to shipping container shortages and delays at both shipping and receiving ports due to COVID and lack of appropriate workforce.

 

Substantial increases in the prices for our materials or prices charged to us would increase our operating costs, and could reduce our margins if we cannot recoup the increased costs through increased prices. Any attempts to increase prices in response to increased material costs could result in cancellations of orders for our products and services and therefore materially and adversely affect our brand, image, business, prospects and operating results.

 

Any of the above-mentioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this registration statement.

 

WE MAY EXPERIENCE IN THE FUTURE, DELAYS OR OTHER COMPLICATIONS IN THE MANUFACTURE AND SUPPLY OF PRODUCTS WE USE IN OUR SYSTEMS WHICH COULD HARM OUR BRAND, BUSINESS, PROSPECTS, FINANCIAL CONDITION AND OPERATING RESULTS.

 

We may encounter unanticipated challenges, such as supply chain or logistics constraints, that lead to delays in producing products we use in our projects. Any significant delay or other complication in the production of such products, including complications associated with expanding our supply chain or obtaining or maintaining regulatory approvals, and/or coronavirus impacts, could materially damage our brand, business, prospects, financial condition and operating results.

 

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CHANGES IN OUR SUPPLY CHAIN MAY RESULT IN INCREASED COST. IF WE ARE UNSUCCESSFUL IN OUR EFFORTS TO CONTROL SUPPLIER COSTS, OUR OPERATING RESULTS MAY SUFFER.

 

There is no assurance that our suppliers will ultimately be able to meet our cost, quality and volume needs, or do so at the times needed. Furthermore, as the scale of our business increases, we will need to accurately forecast, purchase, warehouse and transport components at much higher volumes than we have experience with. If we are unable to accurately match the timing and quantities of components purchases to our actual needs, or successfully implement automation, inventory management and other systems to accommodate the increased complexity in our supply chain, we may incur unexpected disruption, storage, transportation and write-off costs, which could have a material adverse effect on our financial condition and operating results.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this prospectus, including statements regarding our strategy, future financial position, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “could,” “estimate,” “expect,” “intend,” “seek,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “target,” “aim,” “should,” ‘will” “would,” or the negative of these words or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties.

 

The forward-looking statements in this prospectus include, among other things, statements relating to:

 

  Our independent accountants have issued a going concern opinion,
     
  Intense competition, which may reduce our sales, operating profits, or both,
     
  Our ability to obtain future financing,
     
  Our ability to execute our strategic plan,
     
  Dilution due to exercise of Convertible notes
     
  We are in default of our agreements with General Electric and Cybernaut Zfounder Ventures,
     
  Our products may be displaced by newer technology,
     
  Our expectations related to the use of proceeds from this Underwritten Offering;
     
  The effects of increased competition in our markets and our ability to successfully compete with companies that are currently in, or may in the future enter, the markets in which we operate;
     
  Our ability to maintain, protect, and enhance our brand and intellectual property;
     
  Our estimated market opportunity;
     
  The potential impact of the COVID-19 outbreak on our business plans; and
     
  Failure to maintain effective internal controls,

 

We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly in the “Risk Factor” section, that we believe could cause actual results or events to differ materially from the forward-statements that we make. Furthermore, we operate in a competitive and rapid changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus.

 

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You should read this prospectus and the documents we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this prospectus are made as of the date of this prospectus, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

 

MARKET AND INDUSTRY DATA

 

This prospectus contains estimates, projections and other information concerning our industry, our business and the markets for our products, including data regarding the estimated size of such markets. We obtained the industry, market and similar data set forth in this prospectus from our internal estimates and research and from industry research, publications, surveys and studies conducted by third parties. In some cases, we do not expressly refer to the sources from which this data is derived. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. While we believe our internal research is reliable, such research has not been verified by any third party. You are cautioned not to give undue weight to any such information, projections and estimates.

 

USE OF PROCEEDS

 

We estimate that we will receive net proceeds from this Underwritten Offering of approximately 9,300,000 , or approximately 10,695,000 if the underwriters exercise their option to purchase additional shares in full, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. . These estimates are based upon an assumed public offering price of $4.5 per share, which is the midpoint of the estimated public offering price range set forth on the cover page of this prospectus. A $1.00 increase (decrease) in the assumed public offering price of $4.50 per share would increase (decrease) the net proceeds to us from this offering by approximately $2.066 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

 

We currently plan to use the net proceeds of this Underwritten Offering as follows:

 

● approximately 64.5%, or $6,000,000 million, for expanding our current businesses, such as promoting our sales and marketing activities, strengthening supply chain and distribution channels, conducting strategic acquisitions or investment in complementary businesses, or

 

● approximately 10.75%, or $1,000,000 million, for research and development activities; and

 

● approximately 25.25%, or $2,300,000 million, for working capital and general corporate purposes.

 

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The foregoing represents our current intentions to use and allocate the net proceeds of this Underwritten Offering based upon our present plans and business conditions. Our management, however, will have broad discretion in the way that we use the net proceeds of this Underwritten Offering. Pending the final application of the net proceeds of this Underwritten Offering, we intend to use the net proceeds of this Underwritten Offering primarily to enhance and expand our business operations and for general corporate purposes. See “Risk Factors—Risks Related to Our Common Stock—We have considerable discretion as to the use of the net proceeds from this Underwritten Offering and we may use these proceeds in ways with which you may not agree.”

 

We will not receive any proceeds from the sales of shares of our common stock by the selling shareholders in the Selling Shareholders Offering.

 

DIVIDEND POLICY

 

We have never declared or paid any cash dividends on our common stock. We do not anticipate declaring or paying, in the foreseeable future, any cash dividends on our capital stock. We intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

 

We are obligated to pay dividends to certain holders of our preferred stock which we pay out of legally available funds from time to time or reach arrangements with our holders of preferred stock to convert limited quantities of preferred stock at favorable conversion prices in lieu of dividend payments.

 

See also “Risk Factors—We Do Not Intend To Pay Dividends In The Foreseeable Future; Therefore, You May Never See A Return On Your Investment.”

 

MARKET PRICE

 

Market Information

 

Our shares of our common stock are quoted on the OTCQB under the symbol “CETY.” Such quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and do not necessarily represent actual transactions.

 

The last reported sales price of our common stock which trades under the symbol “CETY” on the OTCQB on November 22, 2022, was $0.04.

 

Holders

 

As of November 22, 2022, there were 120 stockholders of record of our common stock.

 

CAPITALIZATION

 

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2022:

 

  on an actual basis; and
     
  on an as adjusted basis to give effect to the sale by us of 2,222,222 shares of our common stock in this Underwritten Offering at a public offering price of $4.50 per share, the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and estimated offering expenses payable by us (assuming no exercise of the underwriter’s over-allotment option).

 

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You should read this information together with our consolidated financial statements and related notes, as well as the information set forth under the headings “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.

 

   

September 30,

2022

 
    Actual     As Adjusted  
Cash and cash equivalents   $ 175,772     $                  
                 
Stockholders’ equity:                
Common stock, $0.001 par value, 2,000,000,000 shares authorized,1,482,977,289 and 943,569,149 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.     1,482,978,676          
Additional paid-in capital     17,690,269          
Subscription Receivables     0          
Accumulated other comprehensive income     (243,135)          
Accumulated deficit     (18,763,939)          
Total stockholders’ equity (Deficit)     (166,173)          
Total Liabilities and Stockholders’ Deficit   $ 7,964,334     $    

 

The table above excludes:

 

  (i) up to 107,488,298 shares of common stock issuable upon the exercise of outstanding common stock purchase warrants and the conversion of outstanding convertible notes; and
     
  (ii) 66,666 shares of common stock underlying the warrants to be issued to the Representatives in connection with this Underwritten Offering (76,666, if the underwriters exercise the over-allotment option in full).

 

DILUTION

 

If you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the public offering price per share you will pay in this Underwritten Offering and the adjusted net tangible book value per share of our common stock after this Underwritten Offering.

 

The historical net tangible book value of our common stock as of September 30, 2022 was approximately $(2,729,358), or ($0.0018) per share based upon 1,482,977,289 shares of common stock outstanding on such date. Historical net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities, divided by the total number of shares of common stock outstanding.

 

Following the Underwritten Offering, our adjusted net tangible book value of our common stock will be $0.0035 per share. Adjusted net tangible book value per share represents adjusted net tangible book value divided by the total number of shares outstanding after giving effect to the sale of the shares in this Underwritten Offering at the assumed public offering price of $ $4.50 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. This represents an immediate increase in as adjusted net tangible book value of $0.00067 per share to existing stockholders and an immediate dilution of $0.0325 per share to investors purchasing shares of common stock in the Underwritten Offering at the assumed public offering price.

 

The following table illustrates this dilution on a per share basis to new investors:

 

Assumed public offering price per share  $4.50 
Net tangible book value per share as of September 30, 2022  $(0.0027)
Increase in net tangible book value per share attributable to this Underwritten Offering  $0.0062 
As adjusted net tangible book value per share after giving effect to this Underwritten Offering  $0.0035 
Dilution in net tangible book value per share to purchasers in this Underwritten Offering  $0.0235 

 

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If the underwriters’ over-allotment option is exercised in full, our adjusted net tangible book value following the Underwritten Offering will be $0.00421 per share, and the dilution to investors purchasing shares of common stock in the Underwritten Offering will be $0.0318 per share.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto. The management’s discussion and analysis contain forward-looking statements, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors,” that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this prospectus.

 

Description of the Company

 

We specialize in renewable energy & energy efficiency systems design, manufacturing and project implementation. We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005 under the name Probe Manufacturing, Inc. We provided engineering and manufacturing electronics services to original equipment manufacturers (OEMs) of clean energy, industrial, automotive, semiconductor, medical, communication, military, and high technology products.

 

With the vision to combat climate change and creating a better, cleaner and environmentally sustainable future, we formed Clean Energy HRS, LLC a wholly owned subsidiary and acquired the assets of Heat Recovery Solutions from General Electric International on September 11, 2015. In November 2015, we changed our name to Clean Energy Technologies, Inc. We have 12 full time employees. All employees and overhead are shared between Clean Energy Technologies, Inc. (which still provides the contract electronic manufacturing services) and Clean Energy HRS, LLC.

 

Clean Energy Technologies, Inc. established CETY Europe, SRL (CETY Europe) as a wholly owned subsidiary in 2017. CETY Europe is a sales and service center located in Silea (Treviso), Italy, which became operational in November 2018. Their offices are located at Alzaia Sul Sile, 26D, 31057 Silea (TV) and have 1 full time employee.

 

Clean Energy Technologies, Inc. established a wholly owned subsidiary called CETY Capital, a financing arm of CETY to fund captive renewable energy projects producing low carbon energy. CETY Capital will add flexibility to the capacity CETY offers its customers and fund projects utilizing its products and clean energy solutions.

 

Clean Energy Technologies (H.K.) Limited., a wholly owned subsidiary of Clean Energy Technologies Inc. acquired 100% ownership of Leading Wave Limited a liquid natural gas trading company in China.

 

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Business Overview

 

General

 

The Company’s business and operating results are directly affected by changes in overall customer demand, operational costs and performance and leverage of our fixed cost and selling, general and administrative (“SG&A”) infrastructure.

 

Product sales fluctuate in response to several factors including many that are beyond the Company’s control, such as general economic conditions, interest rates, government regulations, consumer spending, labor availability, and our customers’ production rates and inventory levels. Product sales consist of demand from customers in many different markets with different levels of cyclicality and seasonality.

 

Operating performance is dependent on the Company’s ability to manage changes in input costs for items such as raw materials, labor, and overhead operating costs. Performance is also affected by manufacturing efficiencies, including items such as on time delivery, quality, scrap, and productivity. Market factors of supply and demand can impact operating costs

 

In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China and has spread throughout the United States and the rest of the world. The World Health Organization has declared the outbreak to constitute a “Public Health Emergency of International Concern.” This contagious disease outbreak, which has not been contained, and is disrupting supply chains and affecting production and sales across a range of industries in United States and other companies as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak, as well as the worldwide adverse effect to workforces, economies and financial markets, leading to a global economic downturn. Therefore, the Company expects this matter to negatively impact its operating results. However, the related financial impact and duration cannot be reasonably estimated at this time.

 

Who We Are

 

We develop renewable energy products and solutions and establish partnerships in renewable energy that make environmental and economic sense. Our mission is to be a leader in the Zero Emission Revolution by offering recyclable energy solutions, clean energy fuels and alternative electric power for small and mid-sized projects in North America, Europe, and Asia. We target sustainable energy solutions that are profitable for us, profitable for our customers and represent the future of global energy production.

 

Our principal businesses

 

Waste Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.

 

Waste to Energy Solutions - we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries to electricity, renewable natural gas (“RNG”), hydrogen and bio char which are sold or used by our customers.

 

Engineering, Consulting and Project Management Solutions – We have expanded our legacy electronics and manufacturing business and plan to manufacture component parts for our Waste Heat Recovery and Waste to Energy business and to provide consulting services to municipal and industrial customers and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean energy solutions in their projects.

 

CETY HK

 

CETY HK consists of two business ventures in mainland China:(i) our NG trading operations sourcing and suppling NG to industries and municipalities. The NG is principally used for heavy truck refueling stations and urban or industrial users. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are prepaid for in advance at a discount to market. We sell the NG to our customers at prevailing daily spot prices for the duration of the contracts; and (ii) our planned joint venture with Shenzhen Gas, acquiring natural gas pipeline operator facilities, primarily located in the southwestern part of China. Our planned joint venture with Shenzhen Gas plans to acquire, with financing from Shenzhen Gas, natural gas pipeline operator facilities with the goal of aggregating and selling the facilities to Shenzhen Gas in the future. According to our Framework Agreement with Shenzhen Gas, we will be required to contribute $8 million to the joint venture which the Company expects to raise in future financings. The terms of the joint venture are subject to the execution of definitive agreements.

 

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Segment Information

 

We design, produce and market clean energy products and integrated solutions focused on energy efficiency and renewable energy. Our aim is to become a leading provider of renewable and energy efficiency products and solutions by helping commercial companies and municipalities reduce energy waste and emissions, lower energy costs and generate incremental revenue by providing electricity, renewable natural gas and biochar to the grid.

 

Our four segments for accounting purposes are:

 

Clean Energy HRS (HRS) – which engages in engineering, manufacturing and installing waste heat recovery solutions incorporating our Clean Cycle Generator.

 

CETY Europe – our subsidiary established in Italy for the purposes of servicing our customers in the EU that we are required to report as a separate accounting entity.

 

Engineering and Manufacturing Business – our legacy electronics manufacturing business that do not contribute significantly to our revenues or business plan that we are required to report as a separate accounting entity.

 

CETY HK – which is the parent company of our NG trading operations in China that source and supply NG and our planned joint venture to acquire NG distribution systems depots and transmission systems. Prior to the first quarter of 2022, the Company had three reportable segments but added the CETY HK segment to reflect its recent new businesses in China.

 

Principal Factors Affecting Our Financial Performance

 

Our business requires significant capital for inventory and equipment associated with manufacturing our waste to energy and waste heat recover products, As a result, the availability of debt and equity capital to finance the sales of our products at reasonable rates is key determinate of our financial performance. In addition, the financial stability of our clients who purchase our equipment will impact our sales and ability to price our products at competitive rates. Our business is strongly dependent on federal and state tax and investment incentive programs for clean energy. If the U.S. and foreign governments reduce these incentives, it will become difficult for us to price our product at competitive rates. In addition, the price of traditional energy will determine how profitable it is to install our equipment. As prices rise, the demand for our equipment increases. As they decline, the financial justification for clean energy technology decreases. Finally, our business is dependent on the global supply chain for parts. If there are disruptions in the supply of our components or if the prices increase, our margins decrease and our ability to provide clean energy products at competitive prices decrease. The price of gas and our ability to forecast the future prices when purchasing natural for our gas trading operation in the PRC impact our margins and ability to operate profitable.

 

Results of the Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

 

Going Concern

 

The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s equity of $166,173 and a working capital deficit of $4,000,686 as of September 30, 2022 The company also had an accumulated deficit of $18,763,939 as of September 30, 2022 and used $1,016,545 in net cash from operating activities for the three months ended September 30, 2022. Therefore, there is substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.

 

The three months ended September 30, 2022; we had a net loss of $540,986 compared to a net loss of $277,664 for the same period in 2021. The increase in the net loss in 2022 was mainly due to the increase in professional fees including legal & accounting due to the expenses associated with the IPO up listing to NASDAQ and lower sales in the quarter. The three months ended September 30, 2022; our revenue was $44,629 compared to $575,545 for the same period in 2021. For the three months ended September 30, 2022, our gross margin was 58% compared to 52% for the same period in 2021. For the three months ended September 30, 2022, our operating expense was $566,899 compared to $578,808 for the same period in 2021.

 

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Net Sales

 

The Company has four reportable segments: Clean Energy HRS (HRS), CETY Europe srl, Engineering and Manufacturing Business and CETY HK.

 

Segment breakdown

 

The nine months ended September 30, 2022, our revenue from Engineering and Manufacturing was $132,316 compared to $91,262 for the same period in 2021.

 

The nine months ended September 30, 2022, our revenue from HRS was $461,292 compared to $602,207 for the same period in 2021. This decrease was mainly because of delay with the passing of inflation reduction act and the incentives associated with heat recovery solution.

 

The nine months ended September 30, 2022, our revenue from CETY Europe was $48,138 compared to $173,234 for the same period in 2021. This decrease was a result of a sell of an equipment in 2021 vs. just the service revenue.

 

The nine months ended September 30, 2022, our revenue from our wholly owned subsidiary CETY HK was $1,925,950 compared to $0 for the same period in 2021. This is a s a result of the acquisition of JHJ gas company made in November of 2021. We started to generate revenue from this entity in the 1st quarter of 2022.

 

Gross Profit

 

The nine months ended September 30, 2022; our gross profits were $1,151,903 compared to $519,683 for the same period in 2021. The increase in gross profit was due to higher revenues.

 

Segment breakdown

 

The nine months ended September 30, 2022, our gross profit from Engineering and Manufacturing was $85,352 compared to $72,853 for the same period in 2021.

 

The nine months ended September 30, 2022, our gross profit from HRS was $427,219 compared to $312,118, for the same period in 2021. The increase from the HRS segment was mainly due to higher revenue in the first quarter of 2022.

 

The nine months ended September 30, 2022, our gross profit from CETY Europe was $40,315 compared to $134,712 for the same period in 2021. The decrease in gross profit was due to revenue generated from the sale of a clean cycle waste heat recovery system.

 

The nine months ended September 30, 2022, our gross profit from our wholly owned subsidiary CETY HK was $631,082 compared to $0 for the same period in 2021. We had zero revenue from CETY HK in 2021.

 

Selling, General and Administrative (SG&A) Expenses

 

The nine months ended September 30, 2022; our SG&A expense was $284,025 compared to $529,335, for the same period in 2021. The decrease was a result of separating the subcontractor category from SG&A and lower cost of repair.

 

Salaries Expense

 

The nine months ended September 30, 2022; our Salaries expense was $587,928 compared to $661,634 for the same period in 2021. The decrease in the quarter ending in September 30, 2022 was due to less number of employees.

 

Travel Expense

 

The nine months ended September 30, 2022; our travel expense was $126,388 compared to $66,735 for the same period in 2021. The increase in the quarter ending in September 30, 2022 was due to additional site assessment surveys of multiple facilities in Europe and global commissioning.

 

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Professional fees Expense

 

The nine months ended September 30, 2022; our Professional fees expense was $359,636 compared to $123,383 for the same period in 2021. The increase in legal fees was due to higher expenses related to a proposed IPO and up listing to NASDAQ.

 

Facility Lease and Maintenance Expense

 

The nine months ended September 30, 2022; our Facility Lease and maintenance expense was $260,262 compared to $254,708 for the same period in 2021.

 

Depreciation and Amortization Expense

 

The nine months ended September 30, 2022, our depreciation and amortization expense was $22,557 compared to $24,219 for the same period in 2021, which remained relatively unchanged.

 

Change in Derivative Liability

 

The nine months ended September 30, 2022; we had a gain on derivative liability of $12,980, compared to a gain of $1,734,624 for the same period in 2021. The gain in derivative liability was due to paying off several convertible notes in the six months ended June 30, 2021.

 

Gain on debt settlement

 

The nine months ended September 30, 2022, we recognized a gain on debt settlement in the amount of $2920 compared to $828,666 for the nine months ended September 30, 2021.

 

Interest and Finance Fees

 

The nine months ended September 30, 2022 interest and finance fees were $747,451 compared to $603,240 for the same period in 2021.

 

Net Income / Loss

 

The nine months ended September 30, 2022; our loss was $1,338,010 compared to net profit of $819,719 for the same period in 2021. The higher profits was primarily due to the gain on derivative liability in 2021.

 

Liquidity and Capital Resources

 

Clean Energy Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

for the nine months ended September 30, 2022

(unaudited)

 

    2022     2021  
Net Cash provided / (Used) In Operating Activities   $ (1,929,678 )   $ (1,964,231 )
Cash Flows Used In Investing Activities     (1,388,734 )      
Cash Flows Provided / (used) By Financing Activities     2,545,003       3,104,503  
Net (Decrease) Increase in Cash and Cash Equivalents   $ (1,016,545 )   $ 1,140,272  

 

On February 21, 2022 the Company completed public and private financing of an aggregate of $1,202,800.

 

Cash Flow from Operating Activities

 

Net cash used in operating activities was $1,929,678 during the nine months ended September 30, 2022, compared to net cash used in operating activities of $1,964,231 during the nine months ended September 30, 2021, a slight decrease on cash outflow of $34,553. The decrease in cash outflow was mainly due to decreased cash outflow on inventory by $101,982, decreased cash outflow on accounts payable by $718,191, and increased cash inflow on accrued expenses by $29,650, which was partly offset by increased cash outflow on accounts receivable by $602,342, decreased cash inflow on customer deposits by $135,810, and decreased cash inflow on long-term financing receivable by $67,630.

 

Cash Flow from Investing Activities

 

Net cash used in investing activities totaled $1,388,734 for the nine months ended September 30, 2022, which consists of short-term loan to Heze Hongyuan Natural Gas Co of $838,090 and capital contribution to our 49% owned subsidiary Shuya. Net cash used in investing activities was $0 for the nine months ended September 30, 2021.

 

Cash Flow from Financing Activities

 

Net cash provided by financing activities was $2,545,003 during the nine months ended September 30, 2022, which was $1,677,300 proceeds from notes payable, and proceeds from stock issuance of $1,493,945, but partly offset with payment on credit line of $219,656, and payment on notes payable of $406,586. Net cash provided by financing activities was $3,104,503 during the nine months ended September 30, 2021, which was $414,200 proceeds from notes payable, and proceeds from stock issuance of $3,584,511, but partly offset with payment on credit line of $894,208.

 

Critical Accounting Policies

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

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We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

Future Financing

 

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Recently Issued Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial position or results of operations upon adoption.

 

Results for the Year Ended December 31, 2021, compared to the Year Ended December 31, 2020

 

Going Concern

 

The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s deficit of $1,702,653 excluding none controlling interest and a working capital deficit of $4,274,383 and an accumulated deficit of $17,423,930 as of December 31, 2021 and used $2,552,547 in net cash from operating activities for the year ended December 31, 2021. Therefore, there is doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.

 

For the year ended December 31, 2021, we had a net profit of $278,492 compared to a net loss of $3,435,764 for the same period in 2020. The increase in the net profit in 2021 was mainly due to the change in derivative liability associated with the convertible debt and lower interest expense from 2021 to 2020.

 

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The following table shows key components of our results of operations during the years ended December 31, 2021 and 2020.

 

   For the Year Ended December 31, 2021   For the Year Ended December 31, 2020 
Sales  $1,300,439   $1,406,005 
Cost of Goods Sold   690,032    654,937 
Gross Profit   610,407    751,068 
           
General and Administrative          
General and Administrative expense   488,177    480,812 
Salaries   772,463    495,269 
Travel   145,170    86,292 
Professional Fees   155,241    111,318 
Facility lease and Maintenance   346,454    363,643 
Consulting   243,371    157,149 
Bad Debt Expense   -    259,289 
Depreciation and Amortization   32,292    32,912 
Total Expenses   2,183,167    1,986,684 
Net Profit / (Loss) From Operations   (1,572,760)   (1,235,616)
           
Change in derivative liability   1,752,119    (1,270,099)
Gain / (Loss) on debt settlement and write down   868,502    399,181 
Interest and Financing fees   (769,369)   (1,329,230)
Net Profit / (Loss) Before Income Taxes   278,492    (3,435,764)
Income Tax Expense   -    - 
Net Profit / (Loss)   278,492    (3,435,764)
           
Non-controlling interest   (19,059)   - 
           
Net Profit / (Loss) attributable to Clean Energy Technologies, Inc.   297,551    (3,435,764)
           
Per Share Information:          
Basic weighted average number of common shares outstanding and diluted   900,774,064    767,861,170 
           
Net Profit / (Loss) per common share basic and dilluted  $0.00   $(0.00)

 

Net Sales

 

For the year ended December 31, 2021, our total revenue was $1,300,439 compared to $1,406,005 for the same period in 2020. For the years ended December 31, 2021 and 2020, the Company had three reportable segments: Clean Energy HRS (HRS), CETY Europe and the legacy engineering & manufacturing services division.

 

Segment breakdown

 

For the year ended December 31, 2021, our revenue from Engineering and Manufacturing was $93,371 compared to $422,630 for the same period in 2020. The decrease was mainly due to CETY’s transition from the legacy business to the core business of Clean Energy Technologies and solutions.

 

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For the year ended December 31, 2021, our revenue from HRS was $1,014,707compared to $930,882 for the same period in 2020.

 

For the year ended December 31, 2021, our revenue from CETY Europe was $192,361compared to $52,492 for the same period in 2020. The increase was mainly due to additional product sales.

 

Gross Profit

 

For the year ended December 31, 2021, our gross profits decreased to $610,407 from $751,068 for the same period in 2020. Our gross profits could vary from period to period and is affected by several factors, including, production and supply change efficiencies, material costs, logistics and increase in personnel.

 

Segment breakdown

 

For the year ended December 31, 2021, our gross profit from Engineering and Manufacturing was ($90,328) compared to $118,412 for the same period in 2020. This decrease from the Electronic Assembly Segment was mainly due to increase of $71,104 to the inventory reserve.

 

For the year ended December 31, 2021, our gross profit from HRS was $547,812compared to $581,903 for the same period in 2020. The decrease from the HRS segment was mainly due to higher cost of materials due to the supply China issues caused by the pandemic in 2021.

 

For the year ended December 31, 2021, our gross profit from CETY Europe was $152,923 compared to $50,753 for the same period in 2020. The decrease was due to the decrease in revenue in 2020.

 

Selling, General and Administrative (SG&A) Expenses

 

For the year ended December 31, 2021, our SG&A expense was $488,177compared to $480,812 for the same period in 2020.

 

Salaries Expense

 

For the year ended December 31, 2021, our Salaries expense was $772,463 compared to $495,269 for the same period in 2020. This increase was due to the increase of key personnel.

 

Travel Expense

 

For the year ended December 31, 2021, our travel expense was $145,170 compared to $86,292 for the same period in 2020. The increase was mainly due to less travel because of COVID 19 travel restrictions in 2020 and increase in service and commissioning of recent installations in 2020 and 2021.

 

Facility Lease Expense

 

For the year ended December 31, 2021, our Facility Lease expense was $346,454 compared to $363,643 for the same period in 2020. This increase was due to the increase as a result of the original contractual agreement in our Costa Mesa facility Lease.

 

Consulting Expense

 

For the year ended December 31, 2021, our consulting expense was $243,371 compared to $157,149 for the same period in 2020. This increase was due to the increase in engineering services.

 

Bad Debt

 

For the year ended December 31, 2021, our bad debt expense was $0 compared to $259,289 for the same period in 2020. This change from 2020 was due to the long-term impairment of accounts receivable.

 

Depreciation and Amortization Expense

 

For the year ended December 31, 2021, our depreciation and amortization expense was $32,292 compared to $32,912 for the same period in 2020.

 

Professional fees Expense

 

For the year ended December 31, 2021, our Professional fees expense was $155,241compared to $111,318 for the same period in 2020. The increase was mainly due to the increase in legal fees associated with our 1A registration and accounting fees in 2020.

 

Net (Loss) from operations

 

For the year ended December 31, 2021, our net loss from operations was $1,572,760 compared to net loss from operations of $1,235,616 for the same period in 2020. The increase in the loss in 2021 was mainly due the additional employees and cost of materials due to the pandemic.

 

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Change in Derivative Liability

 

For the year ended December 31, 2021, we had a gain on derivative liability of $1,752,119 compared to a loss of $1,270,099 for the same period in 2020.

 

Gain on debt settlement and write off

 

For the year ended December 31, 2021, we recognized a gain on debt settlement of $868,502 compared to $399,181 for the year ended December 31, 2020 due to several liabilities statute of limitations had expired.

 

Interest and Finance Fees

 

As of December 31, 2021, we had $769,369 of interest expense and financing fees and $1,329,230 for the year ending December 31, 2020.

 

Liquidity & Capital Resources

 

As of December 31, 2021, we had cash and equivalents of $1,192,316, other current assets of $1,413,188, current liabilities of $6,865,123, working capital deficit of $4,259,619, a current ratio of 0.38:1. As of December 31, 2020, we had cash and equivalents of $414,885, other current assets of $1,041,142, current liabilities of $9,785,809, working capital deficit of $8,329,782, a current ratio of 0.15:1. The following is a summary of cash provided by or used in each of the indicated types of activities during the years ended December 31, 2021, and 2020, respectively.

 

   2021   2020 
Net cash used in operating activities  $(2,552,547)  $(1,430,395)
Net cash used in investing activities  $(1,500,000)  $- 
Net cash provided by financing activities  $4,829,978   $1,837,874 

 

Net cash used in operating activities

 

Net cash used in operating activities was $2,552,547 for the year ended December 31, 2021, compared to $1,430,395 in 2020. The increase of cash outflow of $1,122,152 from operating activities for the year ended December 31, 2021 was principally attributable to increased cash outflow on accrued expense by $434,905, increased cash outflow on accounts payable by $275,055, decreased cash inflow on accounts receivable by $370,324.

 

Net cash used in investing activities

 

Net cash used in investing activities was $1,500,000 for the year ended December 31, 2021, compared to $0 in 2020. For the year ended December 31, 2021, we have investment in CETY HK of $1,500,000 for acquiring 100% ownership interests in CETY HK.

 

Net cash provided by financing activities

 

Net cash provided by financing activities was $4,829,978 for the year ended December 31, 2021, compared to $1,837,874 in 2020. The net cash provided by financing activities in 2021 consisted of proceeds of $4,761,090 from stock issued, proceeds of $975,000 from loans payable and lines of credit, but partly offset by repayment of notes payable and lines of credit of 906,112. The net cash provided by financing activities in 2020 mainly consisted of proceeds of $1,171,020 from stock issued for cash, proceeds of $1,150,502 from notes payable and lines of credit, proceeds of $60,000 form notes payable from related party, but partly offset by repayment of notes payable and line of credit of $507,168, repayment of notes payable to related party of $35,000 and bank overdraft of $1,480.

 

Our current liabilities exceed current assets at December 31, 2021, and we incurred substantial losses and cash outflows from operating activities in the periods presented. We may have difficulty to meet upcoming cash requirements. As of December 31, 2021, our principal source of funds was from stock and notes issuance. In addition to our continuous effort to improve our sales and net profits, we have explored and continue to explore other options to provide additional financing to fund future operations as well as other possible courses of action. Such actions may include, but are not limited to, securing lines of credit, sales of debt or equity securities (which may result in dilution to existing shareholders), loans and cash advances from other third parties or banks, and other similar actions. There can be no assurance that we will be able to obtain additional funding (if needed), on acceptable terms or at all, through a sale of our common stock, loans from financial institutions, or other third parties, or any of the actions discussed above. If we cannot sustain profitable operations, and additional capital is unavailable, lack of liquidity could have a material adverse effect on our business viability, financial position, results of operations and cash flows.

 

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Critical Accounting Policies

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

DESCRIPTION OF BUSINESS

 

Who We Are

 

We develop renewable energy products and solutions and establish partnerships in renewable energy that make environmental and economic sense. Our mission is to be a leader in the Zero Emission Revolution by offering recyclable energy solutions, clean energy fuels and alternative electric power for small and mid-sized projects in North America, Europe, and Asia. We target sustainable energy solutions that are profitable for us, profitable for our customers and represent the future of global energy production.

 

Waste Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.

 

Waste to Energy Solutions – we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries to electricity, renewable natural gas (“RNG”), hydrogen and bio char which are sold or used by our customers.

 

Engineering, Consulting and Project Management Solutions – we have expanded our legacy electronics and manufacturing business and plan to manufacture component parts for our Waste Heat Recovery and Waste to Energy business and to provide consulting services to municipal and industrial customers and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean energy solutions in their projects.

 

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CETY HK – CETY HK consists of two business ventures in mainland China:(i) our NG trading operations sourcing and suppling NG to industries and municipalities. The NG is principally used for heavy truck refueling stations and urban or industrial users. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are prepaid for in advance at a discount to market. We sell the NG to our customers at prevailing daily spot prices for the duration of the contracts; and (ii) our planned joint venture with Shenzhen Gas, acquiring natural gas pipeline operator facilities, located in the southwestern part of China. Our planned joint venture with Shenzhen Gas plans to acquire, with financing from Shenzhen Gas, natural gas pipeline operator facilities with the goal of aggregating and selling the facilities to Shenzhen Gas in the future. According to our Framework Agreement with Shenzhen Gas, we will be required to contribute $8 million to the joint venture which the Company plans to raise in future fiancings. The terms of the joint venture are subject to the execution of definitive agreements.

 

Our Business Strategy

 

Our strategy is focused on further developing our existing Waste Heat Recovery business while expanding into the rapidly growing markets for Waste to Energy Solutions and clean energy engineering, consulting and project management services.

 

Our strategy focuses on three main elements:

 

  Expanding our Clean Energy HRS business’s waste heat recovery product line to include waste heat recovery ORC systems producing over 1 MW of power so we can qualify for midsized and large heat recovery projects in the United States, China, Southeast Asian and Pacific Rim countries.
     
  Establishing a Waste to Energy business by selling our ablative thermal processing products based on proprietary HTAP technology and developing small and mid-sized waste to energy power plants producing electricity and RNG for the grid and methane, hydrogen and biochar for resale.
     
 

 

Leveraging our engineering, procurement and manufacturing experience in Waste Heat Recovery and Waste to Energy to assist companies and EPCs incorporate clean energy solutions into energy and industrial construction projects.

 

Expanding our NG trading operations in China by acquiring more customers and developing the planned joint venture with Shenzhen Gas by acquiring natural gas pipeline operators’ facilities.

 

We intend to implement this strategy through:

 

  Adding a new ORC system manufactured by Enertime for Waste Heat Recovery that will enable us to implement projects in the U.S. markets producing between 1 MW and 10 MW of electricity.
     
  Taking advantage of federal investment tax credits and state incentives that now include waste heat recover as a recognized clean energy source making our Clean Cycle Generator and ORC systems more profitable to install. On December 21, 2020, Congress passed the Consolidated Appropriations Act, 2021 enacted waste energy recovery Sec. 48 Investment Tax Credit, which extended Investment Tax Credit of 26% including Waste Heat to Power providing a dollar-for-dollar offset against current liability.
     
  Benefiting from higher energy costs which provide higher returns on our Waste Heat Recovery and Waste to Energy products and projects.
     
  Improving our balance sheet and capital position to permit us to invest in more products and projects.
     
  Establishing HTAP manufacturing facilities in Turkey for our Waste to Energy products and expanding patent protection on the proprietary technology.
     
  Leveraging our existing marketing channels to sell HTAP Waste to Energy products to industrial companies and government agencies.

 

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  Working with clean energy project development and finance companies to establish Waste to Energy power plants producing electricity, RNG, hydrogen, methane and biochar from biomass, municipal waste, timber waste and other biomass and while retaining an equity interest in these facilities to provide re-occurring revenue.
     
  Sourcing NG and selling it to privately owned pipeline companies in China through our newly formed NG Trading company to participate in the rapidly growing clean energy market.
     
  Acquiring natural gas pipeline operators into our planned joint venture with Shenzhen Gas who will hold 51% of the joint venture and agreed to finance these acquisitions in a framework agreement.
     
  Participate in other minority investments in medium to large clean energy projects being developed in China that may be sourced by our majority stockholder in Hong Kong.
     
  Leveraging the NG trading and investment relationships to create opportunities for us to sell our Waste Recovery and Waste to Energy products in China and to provide engineering, consulting and project management services.
     
  Expanding our NG trading operations in China by acquiring more customers and developing the planned joint venture with Shenzhen Gas by acquiring natural gas pipeline operators’ facilities.

 

In 2021, we raised $4.78 million in a Regulation A equity offering. The proceeds from this offering were used to expand and enhance our existing business, improve our balance sheet and to expand into new energy-based businesses in China.

 

Our principal businesses

 

Our Clean Energy HRS Business

 

Waste Heat Recovery Solutions

 

We provide our customers with power plants that capture wasted heat energy and produce electricity using a unique Organic Rankine Cycle (ORC) system containing our Clean CycleTM generator. Our magnetic bearing Integrated Power Modules is at the heart of our Clean CycleTM generator which can fit into a standard cargo container we call our Containerized System Module, producing 140KW per Clean Cycle generator and can be linked together for projects generating up to 1MW of power.

 

Our recent agreement with Enertime now permits us to sell midsized and large ORC systems (between 1 MW and 10 MW) in the United States, allowing us to offer a full range of ORC systems to our customers. We believe this new capacity will enable us to expand our product offerings into larger scale waste recovery products in the United States. Enertime is one of the leaders in producing ORC systems in Europe.

 

ORC waste heat recycling systems use pressurized working fluids that have a lower boiling point than water which make them ideal to repurpose waste heat into electricity. While most manufacturing processes do not produce enough heat to turn water into steam, there is enough heat to generate pressurized refrigerant in our ORC systems which is used to turn a turbine at high speeds to generate electricity.

 

Each Clean Cycle Generator can generate up to 1 GWh of electricity per year for every 1 MW of thermal energy from waste heat which we estimate would reduce up to 5000 metric tons of CO2 production per year in an industrial heat recovery system or the annual equivalent of the CO2 emissions of approximately 2000 cars per year.

 

We believe the most important component in any ORC system is the turbine generator because it converts the steam heat into electricity and accounts for approximately 60% of the cost of the system. The more efficiently the turbine generator works, the better the ORC power plant operates. The remaining components consisting of the low boiling point fluid, condensers, which cool the fluids, the feed pumps, which pressurize the fluids to reduce boiling points and the heat exchangers, which extract the heat from the heat sources. These are more commoditized products and tend to perform at similar levels of efficiencies at similar price points.

 

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We believe our Clean CycleTM generator is the most efficient turbine generator in its class and size available in the market for ORC systems generating up to 1 MW. We estimate that the Clean CycleTM generator has higher efficiency of approximately 15% than our competitors and its magnetic design eliminates the use of oils and lubricants, which we believe significantly reduces down time, repairs and operating costs. Our Integrated Power Module is compact and fit into a standard cargo container that can be delivered on a turnkey basis resulting in what we believe are lower installation and implementation costs than on-site assembly.

 

We believe these features and benefits give us an important competitive advantage when building heat recovery power plants for our customers and provide us with the opportunity to compete with and obtain market share from the dominant industrial waste heat to power systems.

 

Approximately 121 Clean CycleTM generators have been deployed to date with units being used in biomass and waste to energy projects, diesel electric generators, turbine electric generators and industrial electric production applications. In 2021, we sold CCII units at 3 sites generating approximately $1.2 million in revenue. We expect to raise additional funds to expand our capacity to install 6-8 units per year which should approximately double our sales on a year-to-year basis.

 

We have a current backlog of two units representing approximately $800,000 in sales revenues.

 

The patented technology used in Clean CycleTM generator was purchased from General Electric International, together with over 100 installation sites, making us one of the leading provider of small-scale industrial waste heat to power systems. We have an exclusive license from Calnetix to use their magnetic turbine for heat waste recovery applications.

 

Our Integrated Power Module Our Clean Cycle TM Generator

 

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A complete ORC System with Integrated Power Module housed in a Containerized System Module (CSM)

 

Our Waste to Energy Business

 

Waste to Energy Solutions

 

We are adding a new business line in our clean energy solutions business consisting of Waste to Energy processing equipment, engineering services and Waste to Energy processing power plant joint ventures where we expect to retain an ownership interest in the project.

 

Waste-to-Energy technologies that process non-renewable waste can reduce environmental and health damages while generating sustainable energy. Waste-to-Energy technologies consist of waste treatment process that creates energy in the form of electricity, heat or fuels from a waste source. These technologies can be applied to several types of waste: from the biomass (e.g. woodchips) to semi-solid (e.g. thickened sludge from effluent treatment plants) to liquid (e.g. domestic sewage) and gaseous (e.g. refinery gases) waste.

 

Waste to Energy Solutions can be used:

 

  In any town, city or province with established waste management and collection.
  Where there is a consistent supply of solid waste.
  Places where treatment costs increase with shortages of space to store waste.
  In areas with high energy prices to allow for cost of recovery from waste.

 

Waste to Energy Solutions have many benefits:

 

  Electricity from Waste to Energy plants can be generated from small amounts up to 30 MW providing for a wide range of opportunities to sell it back to the grid.
  The synthetic renewable fuel gas produced from waste can be used for various production recyclable energy such as hot water, thermo-oil or steam, renewable natural gas or hydrogen.
  Landfill waste is reduced and so is leachate and methane released from decomposing landfills.
  Waste is a reliable source of energy and production is typically predictable and low cost whereas fossil fuel prices can fluctuate dramatically.

 

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But Traditional Incineration Methods Have Significant Downsides:

 

  Air pollution can increase because scrubbing technologies are very expensive to install.
  Many industrial, agricultural, and mixed municipal solid wastes have high moisture content at source and direct incineration of such waste requires burning fossil fuel.
  to maintain thermal conversion process.
  Carbon is released into the air which would otherwise be stored in landfill.
  Ash and flue gas cleaning residues from incineration can also cause toxic leachate problems if not properly disposed of which is costly and causes downstream environmental issues.
  Generating electricity from incineration releases more CO2, SO2, NOx and mercury than natural gas.

 

(Source: https://www.energyforgrowth.org/memo/waste-to-energy-one-solution-for-two-problems/)

 

The most common form of waste to energy systems are based on incinerators which simply burn waste using air. The Thermal Treatment on Grate is the most widespread technology being used by large waste landfills to generate electricity and heat. These systems produce substantial amounts of ash, heavy metals and carbon dioxide which need to be treated and disposed of to minimize its impact on the environment. They also require substantial amounts of pre-treatments prior to burning.

 

We believe the Thermal on Grate incineration process, while wide-spread, is too expensive and complex for smaller and mid-sized waste to energy projects creating, what we believe, is a significant market opportunity in small and mid-sized waste processing applications to create not only electricity but valuable renewable natural gas, bio diesel oil, hydrogen, methane, and biochar.

 

Our solution is a patented High Temperature Ablative Pyrolysis (HTAP) Biomass Reactor which we believe is a viable commercial solution to the costs and environmental problems posed by traditional incarnation methods. We have the exclusive license and right to sell the HTAP10 and HTAP5 and related products manufactured by Enex which has a proven installed commercial base of customers using its waste to energy solutions. We believe this is an ideal solution to process waste for small to mid-sized waste to energy generation applications needed for processing industrial and municipality solid waste, agriculture waste, and forestry waste.

 

Pyrolysis systems decompose waste without the use of oxygen under varying pressurized conditions and at temperatures ranging from 300 degrees Celsius and 1,300 degrees Celsius. The major advantage of pyrolysis is that it is a cost-effective technology and helps curb environmental pollution. Pyrolysis systems are gradually replacing traditional incineration and gaining momentum in the waste to energy processing market addresses many of the pre-treatment issues and, when using high temperature and high-pressure, substantially reduce or eliminates pollutant. (Source: “Life Cycle Assessment of Waste-to-Bioenergy Processes: A Review” Pooja Ghosh, ... Arunaditya Sahay, in Bioreactors, 2020)

 

Pyrolysis systems can produce hydrogen, renewable natural gas, bio-diesel oil, charcoal, and biochar which are used to power hydrogen, diesel, and natural gas engines or electrical turbines which can be sold and often are eligible for substantial tax and pricing benefits. When compared with the conventional incineration plant that runs in the capacity of kilotons per day, the scale of the pyrolysis plant is more flexible, and the output of pyrolysis can be integrated with other downstream technologies for product upgrading. (Source: Influential Aspects in Waste Management Practices Karthik Rajendran PhD, Jerry D. Murphy PhD, in Sustainable Resource Recovery and Zero Waste Approaches, 2019) In addition, BioChar stores and reduces atmospheric CO2 and can be used as a soil conditioner, an organic component of animal feeds, construction materials, wastewater treatment and in textiles. (Source: https://www.bioenergyconsult.com/applications-of-biochar/)

 

The ablative pyrolysis system is a waste to energy process that uses high pressure to generate fast pyrolysis and is designed so that the heat transferred from a hot reactor wall softens the feedstock under pressure and permits larger feedstock particles to be processed. These systems create high relative motion between the reactor wall and the feedstock. The process avoids the need of inert gas and hence the processing equipment is small and the reaction system is more intense. (Source: http://biofuelsacademy.org/index.html%3Fp=608.html )

 

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CETY has licensed proprietary patented ablative pyrolysis system for commercial use that has been installed in 7 sites for use in waste to energy creating applications processing including peat, coal, flax waste, sawdust and wood scrap, straw, buckwheat husks, and cardboard, tapes, films and paper machine sludge. The technology has been implemented over 1,500 onsite power generation projects in Russia working with major energy production companies such as Gazprom, Rosneft, Lukoil and Rostelecom as well as completing several projects for customers in the European Union, Middle East and United States. Due to the conflict in the Ukraine, ENEX is redomiciling and relocating key personnel to Turkey where it will complete an existing project and is expected to wind down its operations. CETY will develop additional ablative technology and expects to manufacture units in the United States. Sales and European distribution will be run out of a CETY office that has been established in Turkey.

 

CETY has global rights (except Russia and CIS countries) to design, build, manufacture, sell and operate renewable energy and waste recovery facilities HTAP10 and HTAP5 systems and other products and technologies we expect to develop in the future.

 

HTAP technology utilizes a high temperature that uses a cleaner gas for the heating process and a more efficient biogas turbine. The units can be customized to produce hydrogen and bio char in varying quantities which can be sold or used to produce electricity. We believe that the key benefits of the HTAP Biomass Reactor are:

 

  Flexibility in waste sourcing and mixing.
  Customized outputs of hydrogen, synthetic fuels, natural gas, methane, biochar, carbon black, or construction materials.
  Better waste sourcing and mixing flexibility,
  Near-zero emissions,
  Modular design,
  Zero liquid discharge,
  Zero solid waste residue waste.
  Modular, containerize design reducing implementation costs
  Proven commercial implementation.

 

We are targeting industrial and municipality solid waste, landfill waste, agriculture waste (straw, stems, plant biomass, manure, crop wastage), and forestry waste from tree cuttings and shredded products.

 

We are in the process of identifying projects domestically and internationally for the HTAP Biomass Reactor. We believe the first project where we expect to implement the HTAP10 technology will be with our planned project to co-develop a biomass renewable energy processing facility

 

 

ENEX HTAP 10 Waste to Energy Processing Plant.

 

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We established a wholly owned subsidiary called CETY Capital that we expect will help us finance our customers renewable energy projects producing low carbon energy. CETY Capital, when implemented, should add flexibility to the capacity CETY offers its customers and fund projects utilizing its products and clean energy solutions. The in-house financing arm is expected to support our sales and build new renewable energy facilities. To date we have conducted no material operations in this subsidiary.

 

Our CETY HK Business

 

Our Clean Energy Initiatives in China

 

Natural gas is China’s fastest-growing primary fuel with demand quadrupling in the past decade. Developing the natural gas sector is a critical aspect China’s effort to reduce reliance on coal. According to the International Energy Agency, China is the world’s sixth-largest natural gas producer, the third-largest consumer, and the second-largest importer. In 2050, the U.S. Energy Information Administration (EIA) expects China to consume nearly three times as much natural gas as it did in 2018, which was 280.30 b/cm. China’s natural gas consumption accounted for 8.3% of its total energy mix in 2019. China anticipates boosting the share of natural gas as part of total energy consumption to 14% by 2030. Before COVID 19, China was expected to account for a third of global demand growth through 2022, thanks in part to the country’s “Blue Skies” policy and the strong drive to improve air quality. China’s relatively strong economic recovery from the COVID 19 crisis will probably increase that share. Natural gas is imported either through pipelines or as liquefied natural gas (NG) on ships. According to Reuters, in 2019, the largest sources for Chinese NG imports were Australia, Qatar, Malaysia, and Indonesia. ( Source: U.S. Department of Commerce, International TradeAdministration.https://www.trade.gov/country-commercial-guides/china energy#:~:text=China%20anticipates%20boosting%20the%20share,drive%20to%20improve%20air%20quality.)

 

Liquid Natural Gas in the Chinese energy market produces half as much carbon dioxide, less than a third as much nitrogen oxides, and 1 percent as much sulfur oxides at the power plant compared to the average air emissions from coal-fired generation. In addition to reduced air emissions, natural gas has other environmental benefits that make it a smart fuel choice. Natural gas-fired power plants use about 60 percent less water than coal plants and 75 percent less water than nuclear power plants for the same electricity output. (Source: Conoco Phillips)

 

In 2021, we acquired through our subsidiary, CETY Hong Kong, a natural gas trading operation called Jiangsu Huanya Jieneng (“JHJ”) which sources NG from large NG producers and distributors and sells it to non-state-owned industries and downstream customers in mainland China. In addition, CETY Hong Kong established a framework agreement for a future joint venture with the overseas investment arm of a large state-owned gas enterprise in China called Shenzhen Gas (Hong Kong) International Co. Ltd. (“Shenzhen Gas”). CETY Hong Kong will hold a 49% interest in the joint venture. The joint venture plans to acquire municipal natural gas operators in China with funds provided by Shenzhen Gas.

 

CETY also plans to sell its waste heat recovery and waste to energy products in China as well as provide consulting services relating to the same to projects in China.

 

The JHJ team has more than 10 years of experience in the natural gas and clean energy industry and has maintained relationships and partners with many natural gas enterprises in China.

 

CETY HK

 

NG Trading Operations

 

JHJ’s principal service is to source and supply NG to industries and municipalities located in the southwestern part of China. The NG is principally used for heavy truck refueling stations and urban or industrial users in areas that do not have a connection to local NG pipeline systems. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are prepaid for in advance at a discount to market. We sell the NG to our customers at prevailing daily spot prices for the duration of the contracts.

 

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Either our sources or customers arrange for delivery of the NG. Our profitability depends on our ability to purchase NG at volume discounts at the beginning of a season and sell it at a delivered price that is higher than the price we pay.

 

JHJ traders are experienced NG traders, familiar with the spot and future markets and have relationships with the major users of NG in the areas that we serve. Our customers may be local or may be as far as 700km from each depot.

 

We compete with other NG trading based on availability and price. We target our discount with our sources to partially hedge against falling spot prices and give us what we believe is a gross profit targeted at substantially higher rate than our competitors. So long as there are no major fluctuations in the spot market, we believe we can offer more competitive prices due to the discounts we receive from the large volumes purchased and the prepayments for the NG.

 

We are able to purchase NG at what we believe is a significant discount from our suppliers because our prepayments offer suppliers more certainty with respect to the sales of their inventory, address their cash flow issues, and allow them to better plan for production. We believe our downstream customers get better prices from us because of our bulk buying power, ease of inventory management and cash flow.

 

We believe that both our suppliers and customers can reduce costs by using JHJ as a centralized procurement center and establishing professional logistics distribution based on stable supply and downstream demand.

 

In addition, at the time of our acquisition of JHJ, JHJ had substantially completed negotiations to enter into an agreement to obtain a 15% equity stake in Heze Hongyuan Natural Gas (HHNG), a local pipeline operator in the Shandong Province, by purchasing a stake through Chengdu Rongjun Enterprise Consulting Co., Ltd. (CRE) The investment is secured via a share-pledge by the majority shareholder of HHNG, and in case of a default, JHJ can take over the majority position. JHJ has full transparency to the use of proceeds as well as supervision of the operations of HHNG. In January 2022, JHJ entered into a convertible promissory note with CRE, at 12% annual interest, in the amount of Yuan 5,000,000 (approximately USD 787,686), which was funded by, purchases of our stock by PRC investors through an offshore company under our Regulation A offering at a price of USD .08 per share. The Note is convertible into 15% of HHNG equity interests subject to dilution by additional equity investment into HHNG by third parties. We do not expect the project to require additional investment from us, JHJ or HHNG. The project is currently planning and constructing additional pipelines in the Heze area and is expected to generate cash flow by the first quarter of 2023.

 

Joint Venture with Shenzhen Gas

 

We are in the process of establishing a joint venture with Shenzhen Gas with plans to acquire natural gas utility companies in China. Shenzhen Gas is expected to provide a line of credit to the joint venture to fully cover the acquisition costs or otherwise facilitate capital infusions. We believe our participation in the joint venture will also provide our parent company, CETY and its subsidiaries, with the opportunity to sell its products and consulting services to the companies acquired by the joint venture.

 

We believe that Shenzhen Gas entered into the Joint Venture with us because of the expertise of JHJ in the NG market in southwest China and their ability to source and complete profitable deals for the joint ventures.

 

Our subsidiary, Leading Wave Limited, signed a non-binding “Strategic Cooperation Framework Agreement” with Shenzhen Gas, on August 30, 2021. According to the agreement, we expect the joint venture will invest up to RMB 3 to 5 billion which will be financed through a credit line extended by Shenzhen Gas to the joint venture at an interest rate of approximately 5% per annum. JHJ’s team will be providing the know-how on the joint venture’s acquisition strategy as well as streamlining the operations of the portfolio companies to increase the overall profitability of the investments.

 

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Engineering, Consulting and Project Management Services

 

In all of our business segments we intend to provide engineering, consulting and project management services.

 

Engineering. Our global engineering team supports the design, build, installation, and maintenance of our Clean CycleTM generators, supports our technology customers and innovative start-ups with a broad range of electrical, mechanical and software engineering services. CETY has assembled a team of experts from around the globe to assist customers at any point in the design cycle. These services include design processes from electrical, software, mechanical and Industrial design. Utilization of CETY’s design services will provide our customers with a complete end to end solution.

 

Supply Chain Management. CETY’s supply chain solution provides maximum flexibility and responsiveness through a collaborative and strategic approach with our customers. CETY can assume supply chain responsibility from component sourcing through delivery of finished product. CETY’s focus on the supply chain allows us to build internal and external systems and better our relationships with our customers, which allows us to capitalize on our expertise to align with our partners and customer’s objectives and integrate with their respective processes.

 

Sales and Marketing

 

We utilize both a direct sales force and global distribution group with expertise in heat recovery solutions and clean energy markets.

 

CETY maintains an online presence through our web portal and social media. We also have established cross-sale agreements with synergistic technology providers promoting our solutions to our respective customers. We utilize email campaigns to keep the marketplace abreast of the recent developments with our solutions. We work with the municipalities to identify incentive programs that could utilize our solutions.

 

Our application engineers assist in converting the opportunities into projects. We provide technical support to our Clean Cycle TM generator clients and recently introduced waste to energy plants through providing maintenance and product support.

 

Our market focus is segmented by the engine heat recovery, waste to energy plants, engineering & procurement, and renewable energy trade, Wastewater treatment plants and boiler applications with excess heat.

 

Our experienced team of NG traders identify producers and customers for the NG trading business as well as originate acquisition opportunities for our Shenzhen Gas joint venture.

 

Suppliers

 

Our heat recovery solutions systems are manufactured primarily from components available from multiple suppliers and to a lesser extend from custom fabricated components available from various sources. We purchase our components from suppliers based on price and availability. Our significant suppliers in the Waste Heat Recovery business include Powerhouse, Concise Instrument, and Grainger.

 

Our waste to energy components are sourced globally. We are in the process of establishing an inhouse center of competence and technology development based out of Turkey to source these components in Europe and US with the ability to deploy the product globally. Although future impacts cannot be predicted the company does not foresee any negative impact from the Russa and Ukraine conflict.

 

The natural gas in China is obtained from various local production plants in Southeast China based on price and quality. Deliveries of the NG are made through third party trucking companies. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are discounted and prepaid for in advance at a discount to market.

 

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Competition

 

We believe ORMAT, Exergy, TAS and Turboden are the leaders in ORC system power plants.

 

The Waste to Energy Market is dominated by Hitachi Zosen Inova AG, Suez, Veolia, Ramboll Group A/S, Covanta Holding Corporation, China Everbright International Ltd., Abu Dhabi National Energy Company PJSC, Babcock & Wilcox Enterprises Inc., Whaleboater Technologies Inc., Xcel Energy Inc. (Source: https://www.mynewsdesk.com/brandessence/pressreleases

/at-cagr-of-7-dot-6-percent-waste-to-energy-market-is-expected-to-reach-usd-52-dot-92-billion-by-2027-3125591)

 

We also compete with numerous companies that are smaller than the major companies who are focused on the smaller to medium sized installations in Waste Heat Recovery and Waste to Energy. We believe our waste to energy products are more efficient for use in small and medium sized operations than our competitors and provide us with a competitive advantage on that basis.

 

In China, our NG trading operations compete with large state-owned NG producers and importers such as Sinopec and many smaller local energy trading companies in the PRC. We compete based on price and consistency of services. Our planned joint venture with Shenzhen Gas competes with other large state-owned gas producers and smaller operators that may seek to grow by acquiring additional natural gas operators. We believe our local relationships maintained by our local trading team and affiliation with Shenzhen Gas, a major supplier in China, enable us to identify and acquire companies more efficiently than our competitors.

 

Patents

 

We currently hold 22 patents in 5 countries and 2 pending applications in 2 countries, which were acquired from General Electric International relating to our magnetic turbine technology.

 

Filing Country Code   Application Number   Patent Number   Title   Application Date   Issue Date   Expiration Date
US   11/735854   8839622   FLUID FLOW IN A FLUID EXPANSION SYSTEM   4/16/2007   9/23/2014   4/16/2027
WO   PCT/US2008/060324       Fluid Flow in a Fluid Expansion   4/15/2008        
EP   08745846.9   2147194   Fluid Flow in a Fluid Expansion   04/15/2008   8/5/2015   4/15/2028
IN   2024/MUMNP/2009       Fluid Flow in a Fluid Expansion System   10/29/2009       4/15/2028
DE   08745846.9   2147194   Fluid Flow in a Fluid Expansion   04/15/2008   8/5/2015   4/15/2028
IT   502015000049832   2147194   Fluid Flow in a Fluid Expansion   04/15/2008   8/5/2015   4/15/2028
US   11/735849   7841306   RECOVERING HEAT ENERGY   4/16/2007   11/30/2010   4/16/2027
US   12/859890   8146360   RECOVERING HEAT ENERGY   8/20/2010   4/3/2012   4/16/2027
US   11/735839   7638892B2   GENERATING ENERGY FROM FLUID EXPANSION   4/16/2007   12/29/2009   4/16/2027
US   12/783455   8400005   GENERATING ENERGY FROM FLUID EXPANSION   5/19/2010   3/19/2013   5/19/2030
US   12/790616   8739538       5/28/2010   6/3/2014   5/28/2030
WO   PCT/US2008/060227       GENERATING ENERGY FROM FLUID EXPANSION   4/14/2008        
EP   08745761.0   2140110   GENERATING ENERGY FROM FLUID EXPANSION   04/14/2008   3/5/2014   4/14/2028

 

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IN   6164/DELNP/2009   327112    GENERATING ENERGY FROM FLUID EXPANSION   9/25/2009       12/11/2019
IT   08745761.0   2140110   GENERATING ENERGY FROM FLUID EXPANSION   4/14/2008   3/5/2014   4/14/2028
PL   08745761.0   2140110   GENERATING ENERGY FROM FLUID EXPANSION   4/14/2008   3/5/2014   4/14/2028
DE   08745761.0   2140110   GENERATING ENERGY FROM FLUID EXPANSION   4/14/2008   3/5/2014   4/14/2028
US   13/343466   8984884   WASTE HEAT RECOVERY SYSTEMS   1/4/2012   3/24/2015   1/4/2032
               

12/21/2012

       
GB   1222997.7   2498258   WASTE HEAT RECOVERY SYSTEMS   12/20/2012       9/16/20014
US   13/343483   9,018,778   WASTE HEAT RECOVERY SYSTEM GENERATOR VARNISHING   1/4/2012       4/28/2015
US   13/343490   9024460   WASTE HEAT RECOVERY SYSTEM GENERATOR ENCAPSULATION   1/4/2012   5/5/2015   1/4/2032
JP  2015-116192     SYSTEM AND METHOD FOR THERMAL MANAGEMENT  6/9/2015     6/9/2035

 

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Intellectual Property

 

As part of our asset acquisition from General Electric International we acquired an exclusive, irrevocable, sublicensable, limited transferable, royalty free, fully paid, worldwide perpetual license to develop, improve and commercialize Calnetix’s magnetic turbine in any Organic Rankine Cycle based application where heat is sourced from a reciprocating combustion engine of any type, except marine vessels, any gas or steam turbine systems for electrical power generation applications or any type of biomass boiler system.

 

In August 2020, we entered into a global manufacturing and sales agreement with ENEX to cooperate with each other with respect to designing, building, and operating renewable energy and waste recovery facilities. ENEX was granted the right to package and resell ORC heat recovery generators, manufactured by CETY, to customers in Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan (the “CIS Countries”) and CETY was granted the right to package and resell the high temperature ablative fast pyrolysis reactor, called the ENEX HTAP and manufactured by ENEX, to the customers in the United States and Asia. Payment terms are handled by each purchase order and contract. Due to the conflict in the Ukraine, we terminated all agreements with ENEX and plan to absorb key members of their team and acquire key technology after the company and its personnel become citizens of Turkey.

 

Facilities

 

We operate from a 20,000 sq-ft state of the art facility in Costa Mesa, California USA. We have in-house electro-mechanical assembly and testing capabilities. Our products are compliant with American Society of Mechanical Engineers and are UL and CE approved. We also have a 5,000 sq-ft sales and service center located in Treviso, Italy. Our 5,000 sq-ft Engineering consultancy and Natural Gas Trading company is located in Chengdu, China.

 

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Employees

 

We presently have approximately 11 full time employees, including operational, engineering, accounting and marketing personnel. We utilize extensive number of consultants as well and have never experienced work stoppages and we are not a party to any collective bargaining agreement.

 

Government Regulation

 

Our operations are subject to certain foreign, federal, state and local regulatory requirements relating to environmental, waste management, and health and safety matters. We believe we operate in substantial compliance with all applicable requirements. However, material costs and liabilities may arise from these requirements or from new, modified or more stringent requirements. Material cost may rise due to additional manufacturing cost of raw or made parts with the application of new regulations. Our liabilities may also increase due to additional regulations imposed by foreign, federal, state and local regulatory requirements relating to environmental, waste management, and health and safety matters. In addition, our past, current and future operations and those of businesses we acquire, may give rise to claims of exposure by employees or the public or to other claims or liabilities relating to environmental, waste management or health and safety concerns.

 

Our markets can be positively or negatively impacted by the effects of governmental and regulatory matters. We are affected not only by energy policy, laws, regulations and incentives of governments in the markets into which we sell, but also by rules, regulations and costs imposed by utilities. Utility companies or governmental entities could place barriers on the installation of our product or the interconnection of the product with the electric grid. Further, utility companies may charge additional fees to customers who install on-site power generation, thereby reducing the electricity they take from the utility, or for having the capacity to use power from the grid for back-up or standby purposes. These types of restrictions, fees or charges could hamper the ability to install or effectively use our products or increase the cost to our potential customers for using our systems in the future. This could make our systems less desirable, thereby adversely affecting our revenue and profitability potential. In addition, utility rate reductions can make our products less competitive which would have a material adverse effect on our future operations. These costs, incentives and rules are not always the same as those faced by technologies with which we compete. However, rules, regulations, laws and incentives could also provide an advantage to our Heat Recovery Solutions as compared with competing technologies if we are able to achieve required compliance at a lower cost when our Clean Cycle TM generators are commercialized. Additionally, reduced emissions and higher fuel efficiency could help our future customers combat the effects of global warming. Accordingly, we may benefit from increased government regulations that impose tighter emission and fuel efficiency standards.

 

Research and Development

 

We had no expenses in Research and Development costs during the years ended December 31, 2021 and 2020.

 

Seasonality of Business

 

There is no significant seasonality in our business.

 

Inventory

 

Inventory consists of raw materials, work-in-process and finished goods. Because a large percentage of the Company’s orders require products to be shipped in the same quarter in which the order was received, and because orders in the inventory may be canceled and delivery schedules may be changed, the Company’s inventory at any particular date is not necessarily indicative of actual sales for any succeeding period.

 

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MANAGEMENT

 

Directors, Executive Officers and Corporate Governance

 

The following table sets forth information regarding our current directors and executive officers:

 

Name   Age   Position
Kambiz Mahdi   56   President, CEO, Director
Calvin Pang   37   CFO, Director
Ted Hsu   60   Independent Director Candidate
Lauren Morrison   68   Independent Director Candidate
Mathew Graham Smith   48   Independent Director Candidate

 

* We intend to appoint Ted Hsu, Lauren Morrison, and Mathew Graham Smith as our independent directors, effective immediately prior to the listing.

 

Biographical Information

 

Mr. Kambiz Mahdi served as President and Chief Executive Officer of the Company from 1996 until December of 2005 and again from July 2009 until present. Mr. Mahdi also started Billet Electronics a global supply chain provider of products, services and solutions in the technology sector in 2007. Mr. Mahdi has a BS degree in Electrical Engineering from California State University of Northridge. Mr. Mahdi has not served on any other boards of public companies in the past five years.

 

Our Board of Directors selected Mr. Mahdi to serve as a director because he is our Chief Executive Officer and has served in various executive roles with our company for 14 years, with a focus on electrical design & manufacturing, sales and operations and his insight into the development, marketing, finance, and operations aspects of our company. He has expansive knowledge of engineering and manufacturing industry and relationships with chief executives and other senior management at technology companies. Our Board of Directors believes that Mr. Mahdi brings a unique and valuable perspective to our Board of Directors.

 

Mr. Calvin Pang has served as our Chief Financial Officer since March 9, 2020. Since 2015 Mr. Pang has been the Managing Director of Megawell Capital Limited. From 2007 to 2015, he was a banker at UBS AG managing portfolios of Hong Kong and China based investors. Mr. Pang graduated from the Olin School of Business at Washington University in St. Louis with a bachelor’s degree in business and finance. We believe that Mr. Pang is well qualified to serve as a member of our Board of Directors due to his extensive experience in U.S. and Asian corporate finance and may assist us in developing relationships with financial institutions.

 

Mr. Ted Hsu has almost 3 decades of experience as a commercial banker. He joined Preferred Bank in 1992 and currently serves as the bank’s Executive Vice President. Preferred Bank is one of the largest independent commercial banks in California. He has extensive experience in servicing clients in various sectors including real estate, construction, commercial and industrial. Recently, Mr. Hsu began to cover companies in the renewable energy sector as it is the growing trend. We believe Mr. Hsu is well qualified to serve as a member of our Board of Directors due to his experience in commercial lending.

 

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Ms. Lauren Morrison is an international business development consultant whose career has had a major focus in the clean energy, smart building, and sustainability sectors. She has worked with companies of all sizes and areas of specialization, from concept to early-stage and maturity, on global growth strategies, branding, and product development. Lauren is interested in the integration and optimization of technologies that measurably increase energy efficiency, and the application of monitoring and data analysis that iteratively improves building processes, practices, and net functionality. As part of a leading-edge model smart city development in Asia, Lauren saw first-hand the critical imperative for global collaboration to address climate challenges as they rapidly eclipse geographic boundaries. She is passionate about expanding the conversation on this topic to include the widest possible audience of stakeholders. Our Board of Directors believes that Ms. Morrison brings a unique and valuable international perspective and clean energy experience to our Board of Directors

 

Mr. Matthew Graham Smith has over a decade of experience working in a range of overseas and domestic roles with the Australian Department of Foreign Affairs and Trade (DFAT) and has held positions as Product Manager, Major Surface Ships, Department of Defence, Senior Administrative Officer, Consulate-General, Chengdu, Senior Administrative Officer, Consulate-General, Chengdu, Post Opener, Consulate-General Surabaya, Indonesia. Mr. Smith is a Certified Practicing Accountant in Australia and will serve as the Chairman of our Audit Committee upon the listing of our common stock on Nasdaq. Mr Smith has received a Bachelor of Laws and a Bachelor of Commerce in Finance from Australian National University and was an exchange student at the Olin Business School, Washington University.

 

Each director holds office until the earlier of his or her death, resignation, removal from office by the stockholders, or his or her respective successor is duly elected and qualified. There are no arrangements or understandings between any of our nominees or directors and any other person pursuant to which any of our nominees or directors have been selected for their respective positions. No nominee or director is related to any executive officer or any other nominee or director.

 

Committees

 

We intend to establish three committees under the board of directors immediately prior to the listing of our common stock on Nasdaq: an audit committee, a compensation committee and a nominating and corporate governance committee. We will adopt a charter for each of the three committees. Each committee’s members and functions are described below.

 

Audit Committee. We expect that our audit committee will consist of Matthew-Graham Smith , Lauren Morrison and Ted Hsu. Matthew-Graham Smith is the chairperson of the audit committee. We have determined that Matthew-Graham Smith, Lauren Morrison and Ted Hsu each satisfy the “independence” requirements of Nasdaq Listing Rule 5605(a)(2) and meets the independence standards under Rule 10A-3 under the Exchange Act. We have determined that Matthew-Graham Smith qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things: (a) representing and assisting the Board in its oversight responsibilities regarding the Company’s accounting and financial reporting processes, the audits of the Company’s financial statements, including the integrity of the financial statements, and the independent auditors’ qualifications and independence; (b) overseeing the preparation of the report required by SEC rules for inclusion in the Company’s annual proxy statement; (c) retaining and terminating the Company’s independent auditors; (d) approving in advance all audit and permissible non-audit services to be performed by the independent auditors; and (e) approving related person transactions.

 

Compensation Committee. We expect that our compensation committee will consist of Matthew-Graham Smith, Lauren Morrison and Ted Hsu. Ted Hsu is the chairperson of our compensation committee. We have determined that Matthew-Graham Smith, Lauren Morrison and Ted Hsu each are “independent,” as such term is defined for directors and compensation committee members in the listing standards of the NASDAQ Stock Market LLC. Additionally, each qualify as “non-employee directors” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code. The Committee has been established to: (a) assist the Board in seeing that a proper system of long-term and short-term compensation is in place to provide performance oriented incentives to attract and retain management, and that compensation plans are appropriate and competitive and properly reflect the objectives and performance of management and the Company; (b) assist the Board in discharging its responsibilities relating to compensation of the Company’s executive officers; (c) evaluate the Company’s Chief Executive Officer and set his or her remuneration package; and (d) make recommendations to the Board with respect to incentive compensation plans and equity-based plans.

 

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Nominating and Corporate Governance Committee. We expect that our nominating and corporate governance committee will consist of Matthew-Graham Smith, Lauren Morrison and Ted Hsu. Lauren Morrison is the chairperson of our nominating and corporate governance committee. We have determined that each of Matthew-Graham Smith, Lauren Morrison and Ted Hsu qualify as “independent” as that term is defined by Nasdaq Listing Rule 5605(a)(2). The Committee is responsible for: (a) assisting the Board in determining the desired experience, mix of skills and other qualities to provide for appropriate Board composition, taking into account the current Board members and the specific needs of the Company and the Board; (b) identifying qualified individuals meeting those criteria to serve on the Board; (c) proposing to the Board the Company’s slate of director nominees for election by the shareholders at the Annual Meeting of Shareholders and nominees to fill vacancies and newly created directorships; (d) reviewing candidates recommended by shareholders for election to the Board and shareholder proposals submitted for inclusion in the Company’s proxy materials; (e) advising the Board regarding the size and composition of the Board and its committees; (f) proposing to the Board directors to serve as chairpersons and members on committees of the Board; (g) coordinating matters among committees of the Board; (h) proposing to the Board the slate of corporate officers of the Company and reviewing the succession plans for the executive officers; (i) recommending to the Board and monitoring matters with respect to governance of the Company; and (j) overseeing the Company’s compliance program.

 

Term of Office

 

Our directors hold office until the next annual meeting of shareholders of the Company and until their successors have been elected and qualified. Our officers are elected by the board of directors and serve at the discretion of the board of directors.

 

Family Relationships

 

There are no other family relationships between any of our directors or executive officers. There are no arrangements or understandings between our directors and directors and any other person pursuant to which they were appointed as an officer and director of the Company.

 

Code of Ethics

 

We have adopted a written code of ethics and business conduct that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code of ethics and business conduct has been filed as Exhibit 14.1 to our Current Report on Form 8-K on September 29, 2011 and a copy of which will be provided to any person, without charge, upon written request sent to Clean Energy Technologies, Inc., 2990 Redhill Avenue, Costa Mesa, CA 92626 Attention: Corporate Secretary. Any amendments to or waivers of the code of ethics and business conduct will be promptly reported in a Current Report on Form 8-K, as required by applicable laws.

 

Involvement in Certain Legal Proceedings

 

During the past ten years no current director, executive officer, promoter or control person of the Company has been involved in the following:

 

(1) A petition under the Federal bankruptcy laws or any state insolvency law which was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

 

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(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

(3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

 

i. Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

 

ii. Engaging in any type of business practice; or

 

iii. Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

 

(4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;

 

(5) Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

 

(6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

 

(7) Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

 

i. Any Federal or State securities or commodities law or regulation; or

 

ii. Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

 

iii. Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

(8) Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Shareholder Communications to the Board

 

Shareholders who are interested in communicating directly with members of the Board, or the Board as a group, may do so by writing directly to the individual Board member c/o Secretary, Clean Energy Technologies, Inc., 2990 Redhill Avenue, Costa Mesa, CA 92626. The Company’s Secretary will forward communications directly to the appropriate Board member. If the correspondence is not addressed to the particular member, the communication will be forwarded to a Board member to bring to the attention of the Board. The Company’s Secretary will review all communications before forwarding them to the appropriate Board member.

 

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Compensation of Directors

 

The key objective of our non-employee directors’ compensation program is to attract and retain highly qualified directors with the necessary skills, experience and character to oversee our management. We currently use equity-based compensation to compensate our directors due to our restricted cash flow position; however, we may in the future provide cash compensation to our directors. The use of equity-based compensation is designed to recognize the time commitment, expertise and potential liability relating to active Board service, while aligning the interests of our Board of Directors with the long-term interests of our shareholders.

 

In addition to the compensation provided to our non-employee director, which is detailed below, each non-employee director is reimbursed for any reasonable out-of-pocket expenses incurred in connection with attending in-person meetings of the Board of Directors and Board committees, as well for any fees incurred in attending continuing education courses for directors.

 

Fiscal Years 2020 and 2021 Annual Cash Compensation

 

We currently do not provide cash compensation to our directors and as such did not provide any cash compensation during the years ended December 31, 2020 and 2021.

 

Fiscal Years 2020 and 2021 Equity Compensation

 

Yearly Restricted Share Awards

 

Under the terms of the discretionary restricted share unit grant provisions of our 2006 Incentive Stock Plan and our 2011 Omnibus Incentive Plan, which we refer to as the 2006 Plan and the 2011 Plan, respectively, each non-employee director is eligible to receive grants of restricted common stock share awards at the discretion of our Board of Directors. These yearly restricted share unit awards vest in full on the grant date. The 2006 Plan and the 2011 Plan have expired and there are no outstanding grants.

 

For the year ended December 31, 2021, there were no stock options granted.

 

Discretionary Grants

 

Under the terms of the discretionary option grant provisions of the 2006 Plan and the 2011 Plan, non-employee directors are eligible to receive stock options or other stock awards granted at the discretion of the Board of Directors. The 2006 Plan and the 2011 Plan have expired and there are no outstanding grants. No director received stock awards pursuant to the discretionary grant program during fiscal year 2020 or 2021.

 

Change of Control and Termination Provisions

 

None.

 

Family Relationship

 

We currently do not have any officers or directors of our Company who are related to each other.

 

Outstanding Equity Awards at Fiscal Year-End

 

None.

 

Long-Term Incentive Plan

 

None.

 

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EXECUTIVE COMPENSATION

 

The following table sets forth the fiscal year 2020 and 2021 compensation for our Chief Executive officer and the other executive officers with compensation exceeding $100,000 during 2021 and 2020.:

 

Summary Compensation Table

 

Name and Principal     Salary   Bonus   Stock Awards   Option Awards   Non-equity Incentive Plan Compensation   Change in Pension Value and Nonqualified Deferred Compensation Earnings   All Other Compensation   Total
Position  Year  ($)   ($)(3)   ($)(4)   ($)   ($)   ($)   ($)   ($)
Kambiz Mahdi (1)  2020  $275,000   $-    $        $-   $-   $-   $-   $275,000
Chief Executive Officer  2021  $275,000   $85,000        $-   $-   $-   $-   $-   $360,000

 

  1) On July 1, 2018 we entered into an at will employment agreement with Mr. Mahdi, with an annual salary of $275,000. This agreement may be terminated at any time. In addition as part of the agreement Mr. Mahdi was to be issued 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.
     
    There was a bonus of $85,000 paid to Mr. Mahdi for fiscal year 2021, Mr. Mahdi is entitled to 50% of his salary in cash bonus, this bonus was approved by the board of directors.

 

Executive Employment Agreements

 

On July 1, 2018 we entered into an at-will employment agreement with Mr. Mahdi, with an annual salary of $275,000. This agreement may be terminated at any time. In addition as part of the agreement Mr. Mahdi was issued 20,000,000 shares of our common stock, as additional compensation.

 

Potential Payments upon Termination or Change of Control

 

Severance Benefits

 

Mr. Mahdi will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Mahdi would have been entitled to receive through the remainder or the Employment Period or One (1) year, whichever is greater.

 

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PRINCIPAL STOCKHOLDERS

 

The following table shows, as of November 22, 2022, the number of shares of our common stock beneficially owned by (1) any person who is known by us to be the beneficial owner of more than 5.0% of the outstanding shares of our common stock; (2) our directors and former directors; (3) our named executive officers; and (4) all of our directors and executive officers as a group. The percentage of common stock beneficially owned is based on 1,482,977,289 shares of our common stock outstanding. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes securities over which a person has voting or investment power and securities that a person has the right to acquire within 60 days. Unless otherwise provided, the address of each beneficial owner listed is c/o Clean Energy Technologies, Inc., Board of Directors, 2990. Redhill Ave, Costa Mesa, California 92626. We need to footnote how the voting rights are allocated and add them to the number of shares.

 

Name of Beneficial Owners  Number of Shares
of Common Stock Beneficially Owned
   Percentage 
         
5% Holders          
MGW Investments I Limited (1)   961,764,010    64.8%
Officers and Directors          
Calvin Pang(1)   961,764,010    64.8
Kambiz Mahdi (2)   92,701,618    6.3%
All directors and officers as a group   1,054,465,628    71.5%

 

*Less than 1%.

 

1) Calvin Pang has voting and investment power over all of our common stock held by MGW Investments I Limited (“MGWI”). MGWI holds 961,764,010 shares of common stock directly.

 

2) The shares of common stock are held directly by the Kambiz and Bahareh Mahdi Living Trust and indirectly by Kambiz Mahdi and Bahareh Mahdi as Trustees.

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

Material Transactions with Related Parties

 

The following is a summary of reportable transactions, for the period from the beginning of 2020 through the date of this prospectus, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”).

 

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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 fi