UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] THREE MONTHS ENDED MARCH 31, 2020 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the three months ended March 31, 2020

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

  For the transition period from _________ to _________

 

Commission File Number: 000-55656

 

CLEAN ENERGY TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   20-2675800

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

2990 Redhill Ave, Costa Mesa, California 92626

(Address of principal executive offices)

 

(949) 273-4990

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [  ] No

 

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

 

  Large accelerated filer [  ] Accelerated filer [  ]
  Non-accelerated filer [X] Smaller reporting company [X]
    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 pursuant to Section 13(a) of the Exchange Act [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

 

As of June 23, 2020, there were 762,895,515 shares of the Registrant’s $0.001 par value common stock issued and outstanding.

 

 

 

 

 

 

RELIANCE ON RELIEF ORDER.

 

On May 15, 2020 we filed a Current Report on Form 8-K in compliance with and in reliance upon the SEC Order issued pursuant to Section 36 of the Securities Exchange Act of 1934, as amended, granting Exemptions from Specified Provisions of the Exchange Act and Certain Rules thereunder (SEC Release No. 34-88465 on March 25, 2020) (Relief Order). By way of filing the Current Report (as amended),  we, among other things,  extended the time of filing of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (“Quarterly Report”), until no later than July 1, 2020 in reliance on the Relief Order. The Current Report disclosed the reasons that our Quarterly Report could not be filed timely.

 

As required by the Relief Order, we hereby disclose that we were unable to timely file our Quarterly Report and had to avail ourselves of the Relief Order because COVID-19 caused severe disruptions in our operations and the operations of our professional advisors. This has, in turn, delayed the Company’s ability to complete the Report. In particular, the stay at home orders in various states impacted our employees, and the staff or our professional advisors, in assembling the financial and operational information required to be presented in the Annual Report.

 

NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which include, but are not limited to, statements concerning our projected revenues, expenses, gross profit and income, mix of revenue, demand for our products, the benefits and potential applications for our products, the need for additional capital, our ability to obtain and successfully perform additional new contract awards and the related funding and profitability of such awards, the competitive nature of our business and markets and product qualification requirements of our customers. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by us. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “potential,” “believes,” “seeks,” “hopes,” “estimates,” “should,” “may,” “will,” “with a view to” and variations of these words or similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Such factors include, but are not limited to the following:

 

  our possible or assumed future results of operations;
     
  our business strategies;
     
  our ability to attract and retain customers;
     
  our ability to sell additional products and services to customers;
     
  our cash needs and financing plans;
     
  our competitive position;
     
  our industry environment;
     
  our potential growth opportunities;
     
  expected technological advances by us or by third parties and our ability to leverage them;
     
  Our inability to predict or anticipate the duration or long-term economic and business consequences of the ongoing COVID-19 pandemic;
     
  the effects of future regulation; and
     
  our ability to protect or monetize our intellectual property.

 

You should also read any other cautionary statements made in this Report as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future. Given these risks and uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements.

 

   

 

 

CLEAN ENERGY TECHNOLOGIES, INC.

(A Nevada Corporation)

 

TABLE OF CONTENTS

 

  Page

PART I. FINANCIAL INFORMATION

 
   
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS 3
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 27
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 32
     
ITEM 4. CONTROLS AND PROCEDURES 32
     

PART II. OTHER INFORMATION

 
   
ITEM 1. LEGAL PROCEEDINGS 33
     
ITEM 1A. RISK FACTORS 33
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 33
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 34
     
ITEM 4. MINE SAFETY DISCLOSURES 34
     
ITEM 5. OTHER INFORMATION 34
     
ITEM 6. EXHIBITS 35

 

Page 2 of 36 

 

 

Part I – Financial Information

 

Item 1. Financial Statements

 

Clean Energy Technologies, Inc.

 

Consolidated Financial Statements

 

(Expressed in US dollars)

 

March 31, 2020 (unaudited)

 

Financial Statement Index  
   
Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019 4
   
Consolidated Statements of Operations (unaudited) 5
   
Consolidated Statements of Stockholders Equity (unaudited) 6
   
Consolidated Statements of Cash Flows (unaudited) 7
   
Notes to the Consolidated Financial Statements (unaudited) 8
   

 

Page 3 of 36 

 

 

Clean Energy Technologies, Inc.

Consolidated Balance Sheet

 

    (Unaudited)     (audited)  
    March 31, 2020     December 31, 2019  
Assets                
Current Assets:                
Cash   $ 501,459     $ 7,406  
Accounts receivable - net     1,220,564       1,288,258  
Lease receivable asset     217,584       217,584  
Inventory     523,457       630,204  
Total Current Assets     2,463,064       2,143,452  
Property and Equipment - Net     67,993       74,467  
                 
Goodwill     747,976       747,976  
License     354,322       354,322  
Patents     136,352       139,322  
Right of use asset - long term     771,149       822,284  
Other Assets     25,400       25,400  
Total Non Current assets     2,103,192       2,163,771  
Total Assets   $ 4,566,256     $ 4,307,223  
                 
Liabilities and Stockholders’ (Deficit)                
Current Liabilities:                
Bank Overdraft   $ -     $ 1,480  
Accounts payable     1,703,830       1,587,989  
Accrued Expenses     582,371       503,849  
Customer Deposits     82,730       309,230  
Warranty Liability     100,000       100,000  
Deferred Revenue     33,000       47,750  
Derivative Liability     586,749       320,794  
Facility Lease Liability - current     205,592       201,297  
Line of Credit     1,692,126       1,617,086  
Notes payable - GE     2,400,214       2,386,234  
Convertible Notes Payable (net of discount of 156,548 and 80,647 respectively)     411,362       373,249  
Related Party Notes Payable (net of discount of 0 and 29,227 Respectively     1,597,582       1,480,183  
Total Current Liabilities     9,395,556       8,929,141  
Long-Term Debt:                
Facility Lease Liability - long term     577,751       630,560  
Net Long-Term Debt     577,751       630,560  
Total Liabilities     9,973,307       9,559,701  
                 
Commitments and contingencies   $ -     $ -  
                 
Stockholders’ (Deficit)                
Preferred D stock, stated value $100 per share; 20,000 shares authorized; 7,500 shares and 7,500 shares issued and 5,700 and 6,500 outstanding as of March 31, 2020 and December 31, 2019, respectively     570,000       650,000  
Common stock, $.001 par value; 2,000,000,000 shares authorized; 762,130,989 and 753,907,656 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively     762,132       753,909  
Additional paid-in capital     7,790,109       7,559,331  
Accumulated deficit     (14,529,292 )     (14,215,718 )
Total Stockholders’ (Deficit)     (5,407,051 )     (5,252,478 )
Total Liabilities and Stockholders’ Deficit   $ 4,566,256     $ 4,307,223  

 

The accompanying footnotes are an integral part of these consolidated financial statements

 

Page 4 of 36 

 

 

Clean Energy Technologies, Inc.

Consolidated Statement of Operations

for the three months ended March 31,

(Unaudited)

 

    2020     2019  
Sales   $ 858,816     $ 224,363  
Cost of Goods Sold     343,277       149,177  
Gross Profit     515,539       75,186  
                 
General and Administrative                
General and Administrative expense     95,720       60,642  
Salaries     209,547       203,303  
Travel     29,158       40,117  
Professional Fees     21,887       4,019  
Facility lease and Maintenance     110,455       82,034  
Depreciation and Amortization     9,443       11,763  
Total Expenses     476,210       401,878  
Net Profit / (Loss) From Operations     39,329       (326,692 )
                 
Change in derivative liability     (130,994 )     (159,733 )
Gain / (Loss) on debt settlement’     22,221       -  
Interest and Financing fees     (244,130 )     (240,352 )
Net Profit / (Loss) Before Income Taxes     (313,574 )     (726,777 )
Income Tax Expense     -       -  
Net Profit / (Loss)   $ (313,574 )   $ (726,777 )
                 
Per Share Information:                
Basic and diluted weighted average number                
of common shares outstanding     758,170,513       566,027,100  
                 
Net Profit / (Loss) per common share basic and diluted   $ (0.00 )   $ (0.00 )

 

The accompanying footnotes are an integral part of these consolidated financial statements

 

Page 5 of 36 

 

 

Clean Energy Technologies, Inc.

Consolidated Statement of Stockholders Equity

March 31, 2020

(unaudited)

 

   

Common Stock

.001 Par

    Preferred Stock    

Common Stock

to be issued

    Additional Paid in     Accumulated    

Stock holders’

Deficit

 
Description   Shares     Amount     Shares     Amount     Amount     Capital     Deficit     Totals  
December 31, 2018     555,582,656     $ 555,584       7,500     $ 750,000     $ 262,000     $ 5,236,457     $ (11,599,735 )   $ (4,795,694 )
                                                                 
Shares to be issued for compensation     20,000,000       20,000                       (262,000 )     242,000               -  
Net Loss                                                     (726,777 )     (726,777 )
March 31, 2019     575,582,656       575,584       7,500       750,000       -       5,478,457       (12,326,512 )     (5,522,471 )
                                                                 
Shares to be issued     -       -       -       -       932,680       1,066,520       -       1,999,200  
Shares returned from admin. hold     75,000       75       -       -       -       (75 )     -       -  
Shares issued for cash     500,000       500       -       -       -       9,500       -       10,000  
Prefered shares reclassed     -       -       (200 )     (20,000 )     -       20,000       -       -  
Shares issued for Preferred stock conversion     4,000,000       4,000       (800 )     (80,000 )     -       136,000       (60,000 )     -  
Net Loss                                                     (841,795 )     (841,795 )
June 30, 2019     580,157,656       580,159       6,500       650,000       932,680       6,710,402       (13,228,307 )     (4,355,066 )
                                                                 
Shares to be issued     168,000,000       168,000                       (932,680 )     764,680               -  
Shares issued for cash     500,000       500                               9,500               10,000  
Subscriptions Received             -                       5,000       -               5,000  
Net Loss                                                     (658,688 )     (658,688 )
September 30, 2019     748,657,656       748,659       6,500       650,000       5,000       7,484,582       (13,886,995 )     (4,998,754 )
                                                                 
Shares to be issued             -                       -       -               -  
Shares issued for cash     250,000       250                       (5,000 )     4,750               -  
Subscriptions Received     5,000,000       5,000                       -       70,000               75,000  
Net Loss                                                     (328,723 )     (328,723 )
December 31, 2019     753,907,656       753,909       6,500       650,000       -       7,559,332       (14,215,718 )     (5,252,477 )
                                                                 
Shares issued for debt conversion     1,700,000       1,700                       -       32,300               34,000  
Shares issued for cash     4,523,333       4,523                               120,477               125,000  
Preferred conversions     2,000,000       2,000       (800 )     (80,000 )             78,000               -  
Net Loss                                                     (313,574 )     (313,574 )
March 31, 2020     762,130,989     $ 762,132       5,700     $ 570,000     $ -     $ 7,790,109     $ (14,529,292 )   $ (5,407,051 )

 

The accompanying footnotes are an integral part of these consolidated financial statements

 

Page 6 of 36 

 

 

Clean Energy Technologies, Inc.

Consolidated Statements of Cash Flows

for the three months ended March 31,

(Unaudited)

 

    2020     2019  
Cash Flows from Operating Activities:                
Net Income / ( Loss )   $ (313,574 )   $ (726,777 )
Adjustments to reconcile net loss to net cash                
used in operating activities:                
Depreciation and amortization     9,443       11,763  
Gain on debt settlement     (22,221 )     -  
Financing fees and debt discount     68,010       -  
Change in derivative liability     130,994       253,576  
Changes in assets and liabilities:                
(Increase) decrease in right of use asset     51,135       -  
(Increase) decrease in lease liability     (48,514 )     -  
(Increase) decrease in accounts receivable     67,694       (54,359 )
(Increase) decrease in inventory     106,747       (32,010 )
(Increase) decrease in other assets             -  
(Decrease) increase in accounts payable     115,841       89,435  
Other (Decrease) increase in accrued expenses     91,300       118,195  
Other (Decrease) increase in accrued expenses related party     23,889          
Other (Decrease) increase in deferred revenue     (14,750 )     14,750  
Other (Decrease) increase in customer deposits     (226,500 )     (6,585 )
Net Cash Provided by (Used In) Operating Activities     39,493       (332,012 )
                 
Cash Flows from Investing Activities                
Purchase property plant and equipment     -       -  
Cash Flows Used In Investing Activities     -       -  
                 
Cash Flows from Financing Activities                
Bank Overdraft / (Repayment)     (1,480 )     373  
Proceeds from notes payable and lines of credit     271,040       326,215  
Proceeds from notes payable related party     60,000          
Stock issued for cash     125,000       -  
Cash Flows Provided By Financing Activities     454,560       326,588  
                 
Net (Decrease) Increase in Cash and Cash Equivalents     494,053       (5,424 )
Cash and Cash Equivalents at Beginning of Period     7,406       6,456  
Cash and Cash Equivalents at End of Period   $ 501,459     $ 1,032  
                 
Supplemental Cashflow Information:                
Interest Paid   $ 75,040     $ 106,368  
Taxes Paid   $ -     $ -  
                 
Supplemental Non-Cash Disclosure                
Discount on derivatives   $ 134,961     $ 138,000  
Shares issued for preferred conversions   $ 80,000     $ -  
Shares issued for debt conversion conversions   $ 34,000     $ -  

 

The accompanying footnotes are an integral part of these Consolidated financial statements

 

Page 7 of 36 

 

 

Clean Energy Technologies, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

 

These unaudited interim consolidated financial statements as of and for the three months ended March 31, 2020, reflect all adjustments which, in the opinion of management, are necessary to fairly state the Company’s financial position and the results of its operations for the periods presented, in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.

 

These unaudited interim consolidated financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s fiscal year end December 31, 2019, report. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three and three months ended March 31, 2020, are not necessarily indicative of results for the entire year ending December 31, 2020.

 

The summary of significant accounting policies of Clean Energy Technologies, Inc. is presented to assist in the understanding of the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity.

 

Going Concern

 

The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s deficit of $5,407,051 and a working capital deficit of $6,932,492 and a net loss of $313,574 for the three months ended March 31, 2020. The company also had an accumulated deficit of $14,529,292 as of March 31, 2020. Therefore, there is substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.

 

Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets, the collection of accounts receivable and valuation of inventory and reserves.

 

Cash and Cash Equivalents

 

We maintain the majority of our cash accounts at a commercial bank. The total cash balance is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per commercial bank. For purposes of the statement of cash flows we consider all cash and highly liquid investments with initial maturities of one year or less to be cash equivalents.

 

Page 8 of 36 

 

 

Accounts Receivable

 

We grant credit to our customers and do not require collateral. Our ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by us. Reserves for un-collectable amounts are provided, based on past experience and a specific analysis of the accounts. Although we expect to collect amounts due, actual collections may differ from the estimated amounts. As of March 31, 2020, and December 31, 2019, we had a reserve for potentially un-collectable accounts of $82,000 and $82,000 respectively. Historically, our bad debt write-offs related to these trade accounts have been insignificant. The three months ended March 31, 2020; our bad debt expense was $0 compared to $0 for the same period in 2019. accounts receivable March 31, 2020.

 

Lease asset

 

As of March 31, 2020, and 2019 we had a lease asset that was purchased from General electric with a value of $1,309,527, however due the purchase price allocation, we recognized a value of $217,584. The lease is due to be commissioned in the third quarter of 2020 and will generate approximately $20,000 per month for 120 months. See note 3 for additional information.

 

Inventory

 

Inventories are valued at the lower of weighted average cost or market value. Our industry experiences changes in technology, changes in market value and availability of raw materials, as well as changing customer demand. We make provisions for estimated excess and obsolete inventories based on regular audits and cycle counts of our on-hand inventory levels and forecasted customer demands and at times additional provisions are made. Any inventory write offs are charged to the reserve account. As of March 31, 2020, and December 31, 2019, we had a reserve for potentially obsolete inventory of $250,000.

 

Property and Equipment

 

Property and equipment are recorded at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets. The cost of ordinary maintenance and repairs is charged to operations. Depreciation and amortization are computed on the straight-line method over the following estimated useful lives of the related assets:

 

Furniture and fixtures   3 to 7 years
Equipment   7 to 10 years
Leasehold Improvements   7 years

 

Long –Lived Assets

 

Our management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long-lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment if any, is measured based on fair value and is charged to operations in the period in which long-lived assets impairment is determined by management. There can be no assurance however, that market conditions will not change or demand for our services will continue, which could result in impairment of long-lived assets in the future.

 

Revenue Recognition

 

The Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC 606”).

 

Performance Obligations Satisfied Over Time

 

FASB ASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10

 

Page 9 of 36 

 

 

An entity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one of the following criteria is met:

 

a. The customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB ASC 606-10-55-5 through 55-6).

 

b. The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced (as described in FASB ASC 606-10-55-7).

 

c. The entity’s performance does not create an asset with an alternative use to the entity (see FASB ASC 606-10-25-28), and the entity has an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).

 

Performance Obligations Satisfied at a Point in Time

 

FASB ASC 606-10-25-30

 

If a performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time. To determine the point in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should consider the guidance on control in FASB ASC 606-10-25-23 through 25-26. In addition, it should consider indicators of the transfer of control, which include, but are not limited to, the following:

 

a. The entity has a present right to payment for the asset

 

b. The customer has legal title to the asset

 

c. The entity has transferred physical possession of the asset

 

d. The customer has the significant risks and rewards of ownership of the asset

 

e. The customer has accepted the asset

 

The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. In Addition a) the company also does not have an alternative use for the asset if the customer were to cancel the contract, and b.) has a fully enforceable right to receive payment for work performed (i.e., customers are required to pay as various milestones and/or timeframes are met)

 

The following five steps are applied to achieve that core principle for our HRS and Cety Europe Divisions:

 

  Identify the contract with the customer
  Identify the performance obligations in the contract
  Determine the transaction price
  Allocate the transaction price to the performance obligations in the contract
  Recognize revenue when the company satisfies a performance obligation

 

The following steps are applied to our legacy engineering and manufacturing division:

 

  We generate a quotation
  We receive Purchase orders from our customers.
  We build the product to their specification
  We invoice at the time of shipment
  The terms are typically Net 30 days

 

Also, from time to time our contracts state that the customer is not obligated to pay a final payment until the units are commissioned, i.e. a final payment of 10%. As of March 31, 2020 and December 31, 2019 we had $33,000 and $47,750 of deferred revenue, which is expected to be recognized in the third quarter of year 2020. There is an additional ~$150,000 to be billed for labor/installation/commissioning services per the customer contracts outstanding as of 12/31/19.

 

Page 10 of 36 

 

 

Fair Value of Financial Instruments

 

The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures” for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:

 

  Level 1: Quoted prices in active markets for identical assets or liabilities.
  Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
  Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company’s derivative liabilities have been valued as Level 3 instruments. We value the derivative liability using a lattice model, with a volatility range of 90% to 112% and using a risk free interest rate of .15%

 

The Company’s financial instruments consist of cash, prepaid expenses, inventory, accounts payable, convertible notes payable, advances from related parties, and derivative liabilities. The estimated fair value of cash, prepaid expenses, investments, accounts payable, convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these instruments.

 

The carrying amounts of the Company’s financial instruments as of March 31, 2020 and December 31, 2019, reflect:

 

    Level 1     Level 2     Level 3     Total  
                                 
Fair value of convertible notes derivative liability – December 31, 2019   $     $     $ 320,794     $ 320,794  

 

    Level 1     Level 2     Level 3     Total  
                                 
Fair value of convertible notes derivative liability – March 31, 2020   $     $     $ 586,749     $ 586,749  

 

The carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments.

 

Other Comprehensive Income

 

We have no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.

 

Net Profit (Loss) per Common Share

 

Basic profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding. At March 31, 2020, we had outstanding common shares of 762,130,989 used in the calculation of basic earnings per share. Basic Weighted average common shares and equivalents at March 31, 2020 and 2019 were 758,170,513 and 566,027,100, respectively. As of March 31, 2020, we had convertible notes and related party convertible notes, convertible into approximately 498,211,169 of additional common shares, outstanding preferred shares convertible into 8,125,000, calculated @ $.08 of additional common shares and 174,250,000 common stock warrants convertible into an additional. Fully diluted weighted average common shares and equivalents were withheld from the calculation as they were considered anti-dilutive.

 

Page 11 of 36 

 

 

Research and Development

 

We had no amounts of research and development R&D expense during the three months ended March 31, 2020 and 2019.

 

Segment Disclosure

 

FASB Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company has three reportable segments: Clean Energy HRS (HRS), Cety Europe and the legacy Engineering and Manufacturing services division. The segments are determined based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics. Prior to December 31, 2015 we only had one reporting segment.

 

An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include amortization of intangibles, stock-based compensation, other charges (income), net and interest and other, net.

 

Selected Financial Data:

 

    For the three months ended March 31,  
    2020     2019  
Net Sales                
Engineering and Manufacturing     107,567       151,633  
Clean Energy HRS     748,750       25,448  
Cety Europe     2,499       47,282  
Total Sales     858,816       224,363  
                 
Segment income and reconciliation before tax                
Engineering and Manufacturing     26,606       25,141  
Clean Energy HRS     486,434       17,835  
Cety Europe     2,499       32,210  
Total Segment income     515,539       75,186  
                 
Reconciling items                
General and administrative expense     (95,720 )     (60,642 )
Salaries     (209,547 )     (203,303 )
Travel     (29,158 )     (40,117 )
Professional fees     (21,887 )     (4,019 )
Facility lease     (110,455 )     (82,034 )
Depreciation     (9,443 )     (11,763 )
Change in derivative liability     (130,994 )     (159,733 )
Gain debt settlement     22,221       -  
Interest Expense     (244,130 )     (240,352 )
Net Loss before income tax     (313,574 )     (726,777 )

 

    March 31, 2020     December 31, 2019  
Total Assets                
Electronics Assembly     1,851,175       1,877,916  
Clean Energy HRS     2,696,079       2,405,628  
Cety Europe     19,002       23,679  
Total Assets     4,566,256       4,307,223  

 

Page 12 of 36 

 

 

Share-Based Compensation

 

The Company has adopted the use of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (SFAS No. 123R) (now contained in FASB Codification Topic 718, Compensation-Stock Compensation), which supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance and eliminates the alternative to use Opinion 25’s intrinsic value method of accounting that was provided in Statement 123 as originally issued. This Statement requires an entity to measure the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and stock warrants, based on the fair value of the award, measured at the grant date (with limited exceptions). Under this standard, the fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black-Scholes option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets the requirements of SFAS No. 123R; however, the fair values generated may not reflect their actual fair values, as it does not consider certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility. For the “risk-free interest rate,” we use the Constant Maturity Treasury rate on 90-day government securities. The term is equal to the time until the option expires. The dividend yield is not applicable, as the Company has not paid any dividends, nor do we anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading common stock, on the grant date calculated using a 20-trading-day average. At the time of grant, the share-based compensation expense is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates and the expense is reduced accordingly. It is also adjusted to account for the restricted and thinly traded nature of the shares. The expense is reviewed and adjusted in subsequent periods if actual attrition differs from those estimates.

 

We re-evaluate the assumptions used to value our share-based awards on a quarterly basis and, if changes warrant different assumptions, the share-based compensation expense could vary significantly from the amount expensed in the past. We may be required to adjust any remaining share-based compensation expense, based on any additions, cancellations or adjustments to the share-based awards. The expense is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The three months ended March 31, 2020 and 2019 we had $0 and $0 respectively, in share-based expense, due to the issuance of common stock. As of March 31, 2020, we had no further non-vested expense to be recognized.

 

Income Taxes

 

Federal Income taxes are not currently due since we have had losses since inception.

 

Page 13 of 36 

 

 

On December 22, 2018 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective January 1, 2018. The Company will compute its income tax expense the three months ended March 31, 2020 using a Federal Tax Rate of 21%.

 

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.

 

Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.

 

As of March 31, 2020, we had a net operating loss carry-forward of approximately $(5,679,574) and a deferred tax asset of $1,192,711 using the statutory rate of 21%. The deferred tax asset may be recognized in future periods, not to exceed 20 years. However, due to the uncertainty of future events we have booked valuation allowance of $(1,192,711). FASB ASC 740 prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At March 31, 2020 the Company had not taken any tax positions that would require disclosure under FASB ASC 740.

 

    March 31, 2020     December 31, 2019  
Deferred Tax Asset   $ 1,192,711     $ 1,126,860  
Valuation Allowance     (1,192,711 )     (1,126,860 )
Deferred Tax Asset (Net)   $ -     $ -  

 

On February 13, 2018 , Clean Energy Technologies, Inc., a Nevada corporation (the “Registrant” or “Corporation”) entered into a Common Stock Purchase Agreement (“Stock Purchase Agreement”) by and between MGW Investment I Limited (“MGWI”) and the Corporation. The Corporation received $907,388 in exchange for the issuance of 302,462,667 restricted shares of the Corporation’s common stock, par value $.001 per share (the “Common Stock”).

 

On February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement (the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL Note”) in the principal amount of $939,500 with an interest rate of 10% per annum interest rate and a maturity date of February 13, 2020. The CVL Note is convertible into shares of Common Stock at $0.003 per share, as adjusted as provided therein. This note was assigned to MGW Investments.

 

This resulted in a change in control, which limited the net operating to that date forward. We are subject to taxation in the U.S. and the states of California. Further, the Company currently has no open tax years’ subject to audit prior to December 31, 2015. The Company is current on its federal and state tax returns.

 

Reclassification

 

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported income, total assets, total liabilities or stockholders’ equity as previously reported. We reclassified accrued interest and other accrued expenses to the respective note’s payable accounts. See Note 8 for the GE liability, convertible notes payable and note 12 regarding the related party disclosure

 

Page 14 of 36 

 

 

Recently Issued Accounting Standards

 

The Company is reviewing the effects of following recent updates. The Company has no expectation that any of these items will have a material effect upon the financial statements.

 

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit Losses [codified as Accounting Standards Codification Topic (ASC) 326]. ASC 326 adds to US generally accepted accounting principles (US GAAP) the current expected credit loss (CECL) model, a measurement model based on expected losses rather than incurred losses. Under this new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses. This will become effective in January 2023 and the impact on the company is under evaluation.

 

NOTE 2 – ACCOUNTS AND NOTES RECEIVABLE

 

    March 31, 2020     December 31, 2019  
Accounts Receivable   $ 1,302,564     $ 1,370,258  
Less Reserve for uncollectable accounts     (82,000 )     (82,000 )
Accounts Receivable (Net)   $ 1,220,564     $ 1,288,258  

 

Our Accounts Receivable is pledged to Nations Interbanc, our line of credit.

 

Note 3 – Lease Asset

 

    March 31, 2020     December 31, 2019  
Lease asset   $ 217,584     $ 217,584  

 

The Company is currently modifying the assets subject to lease to meet the provisions of the agreement, and as of March 31, 2020 any collection on the lease payments was not yet considered probable, resulting in no derecognition of the underlying asset and no net lease investments recognized on the sales-type lease pursuant to ASC 842-30-25-3.

 

NOTE 4 – INVENTORY

 

Inventories by major classification were comprised of the following at:

 

    March 31, 2020     December 31, 2019  
Raw Material   $ 745,012     $ 848,464  
Work in Process     28,445       31,740  
Total     773,457       880,204  
Less reserve for excess or obsolete inventory     (250,000 )     (250,000 )
Inventory   $ 523,457     $ 630,204  

 

Our Inventory is pledged to Nations Interbanc, our line of credit.

 

NOTE 5 – PROPERTY AND EQUIPMENT

 

Property and equipment were comprised of the following at:

 

    March 31, 2020     December 31, 2019  
Capital Equipment   $ 1,350,794     $ 1,350,794  
Leasehold improvements     75,436       75,436  
Accumulated Depreciation     (1,358,237 )     (1,351,763 )
Net Fixed Assets   $ 67,993     $ 74,467  

 

Page 15 of 36 

 

 

Our Depreciation Expense the three months ended March 31, 2020 and 2019 was $6,474 and $8,794 respectively.

 

Our Property Plant and Equipment is pledged to Nations Interbanc, our line of credit.

 

NOTE 6 – INTANGIBLE ASSETS

 

Intangible assets were comprised of the following at:

 

    March 31, 2020     December 31, 2019  
Goodwill   $ 747,976     $ 747,976  
License     354,322       354,322  
Patents     190,789       190,789  
Accumulated Amortization     (54,437 )     (51,467 )
Net Intangible Assets   $ 1,238,650     $ 1,241,620  

 

Our Amortization Expense the three months ended March 31, 2020 and 2019 was $2,969 and $2,969 respectively.

 

NOTE 7 – ACCRUED EXPENSES

 

    March 31, 2020     December 31, 2019  
Accrued Payroll   $ 261,801     $ 192,227  
Accrued Interest     320,570       311,620  
Total accrued expenses   $ 582,371     $ 503,847  

 

NOTE 8 – NOTES PAYABLE

 

The Company issued a short-term note payable to an individual, secured by the assets of the Company, dated September 6, 2013 in the amount of $50,000 and fixed fee amount of $3,500. As of March 31, 2020, the outstanding balance was $36,500. Subsequently, on January 30, 2020 we issued 1,700,000 shares of our common stock at a purchase price of $.02 per share, as settlement in full of a note payable of in the amount of $36,500 with accrued interest of 19,721. As a result, we recognized a gain in the amount of $22,221 in the 1st quarter of 2020.

 

On November 11, 2013, we entered into an accounts receivable financing agreement with American Interbanc (now Nations Interbanc). Amounts outstanding under the agreement bear interest at the rate of 2.5% per month. It is secured by the assets of the Company. In addition, it is personally guaranteed by Kambiz Mahdi, our Chief Executive Officer. As of March 31, 2020, the outstanding balance was $1,692,126 compared to $1,617,086 at December 31, 2019.

 

On September 11, 2015, our CE HRS subsidiary issued a promissory note in the initial principal amount $1,400,000 and assumed a pension liability of $100,000, for a total liability of $1,500,000, in connection with our acquisition of the heat recovery solutions, or HRS, assets of General Electric International, Inc., a Delaware corporation (“GEII”), including intellectual property, patents, trademarks, machinery, equipment, tooling and fixtures. The note bears interest at the rate of 2.66% per annum. The note is payable on the following schedule: (a) $200,000 in principal on December 31, 2015 and (b) thereafter, the remaining principal amount of $1,200,000, together with interest thereon, payable in equal quarterly installments of principal and interest of $157,609, commencing on December 31, 2016 and continuing until December 31, 2019, at which time the remaining unpaid principal amount of this note and all accrued and unpaid interest thereon shall be due and payable in full.

 

Page 16 of 36 

 

 

Total Liability to GE

 

    March 31, 2020     December 31, 2019  
Note payable GE   $ 1,200,000     $ 1,200,000  
Accrued transition services     972,233       972,233  
Accrued Interest     227,981       214,001  
Total   $ 2,400,214     $ 2,386,234  

 

We are currently in default on the payment of the purchase price pursuant to our asset purchase agreement with General Electric due to a combination of our inability to raise sufficient capital as expected and our belief that we are entitled to a reduction in purchase price we paid. We are in the process of negotiations with General Electric.

 

Convertible notes

 

On May 5, 2017 we entered into a nine-month convertible note payable for $78,000, which accrues interest at the rate of 12% per annum. It is not convertible until nine months after its issuance and has a conversion rate of ninety one percent (61%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. On November 6, 2017 this note was assumed and paid in full at a premium for a total of $116,600 by Cybernaut Zfounder Ventures. An amended term were added to the original note with the interest rate of 14%. This note matured on February 21st of 2018 and is currently in default.

 

On May 24, 2017 we entered into a nine-month convertible note payable for $32,000, which accrues interest at the rate of 12% per annum. It is not convertible until nine months after its issuance and has a conversion rate of fifty-five eight percent (58%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. On November 6, 2017 this note was assumed and paid in full at a premium for a total of $95,685, by Cybernaut Zfounder Ventures. An amended term was added to the original note with the interest rate of 14%. This note matured on February 26th, 2018 and is currently in default.

 

On December 13, 2018 we entered into a convertible note payable for $83,000, with a maturity date of December 13, 2019, which accrues interest at the rate of 12% per annum. It is convertible six months after its issuance and has a conversion rate of fifty-eight percent (65%) of the average of the two lowest trading prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. On May 28, 2019 this note was paid in full.

 

On February 13, 2019 we entered into a convertible note payable for $138,000, with a maturity date of February 13, 2020, which accrues interest at the rate of 12% per annum. It is not convertible six months after its issuance and has a conversion rate of fifty-eight percent (65%) of the average of the two lowest trading prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. On August 12, 2019 this note was paid in full. The fair value of the convertible feature was $513,829, we recorded a debt discount of $138,000 and an additional loss of $375,828. As of March 31, 2020 the un-amortized debt discount was $0. The total amortized debt discount expense was $138,000.

 

Page 17 of 36 

 

 

On April 9, 2019 we entered into a convertible note payable for $53,000, with a maturity date of April 9, 2020, which accrues interest at the rate of 12% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%) of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. This note was paid in full on October 10, 2019. The fair value of the convertible feature was $55,604, we recorded a debt discount of $53,000 and an additional loss of $2,604. As of March 31, 2020 the un-amortized debt discount was $0. The total amortized debt discount expense was $53,000.

 

On October 30, 2019 we entered into a convertible note payable for $103,000, with a maturity date of October 30, 2020, which accrues interest at the rate of 12% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%) of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. Subsequently that note was paid in full on May 1, 2020. The fair value of the convertible feature was $97,471, we recorded a debt discount of $97,471 and an additional loss of $0. As of March 31, 2020, the un-amortized debt discount was $46,821. The total amortized debt discount expense was $33,826 for the three months ended March 31, 2020 and $16,824 for the year ended December 31, 2019

 

On January 8, 2020 we entered into a convertible note payable for $103,000, with a maturity date of January 8, 2021, which accrues interest at the rate of 12% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%) of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. The fair value of the convertible feature was $87,560, we recorded a debt discount of $87,560. As of March 31, 2020, the un-amortized debt discount was $67,649. The total amortized debt discount expense was $19,910 for the three months ended March 31, 2020.

 

On February 19, 2020 we entered into a convertible note payable for $53,000, with a maturity date of February 19, 2021, which accrues interest at the rate of 12% per annum. It is convertible nine months after its issuance and has a conversion rate of sixty-five percent (65%) of the average of the two lowest closing prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. We also entered into a stock purchase agreement for the potential conversion into common stock. The fair value of the convertible feature was $47,401, we recorded a debt discount of $47,401. As of March 31, 2020, the un-amortized debt discount was $42,076. The total amortized debt discount expense was $5,325 for the three months ended March 31, 2020.

 

Total due to Convertible Notes

 

    March 31, 2020     December 31, 2019  
Total convertible notes   $ 491,285     $ 371,785  
Accrued Interest   $ 76,626     $ 82,111  
Debt Discount   $ (156,549 )   $ (80,647 )
Total   $ 411,362     $ 373,249  

 

Page 18 of 36 

 

 

Note 9 – Derivative Liabilities

 

As a result of the convertible notes we recognized the embedded derivative liability on the date of note issuance. We also revalued the remaining derivative liability on the outstanding note balance on the date of the balance sheet. We value the derivative liability using a binomial lattice model with an expected volatility range of 85% to 92% and a risk-free interest rate range of 1.60% to 1.64%. The remaining derivative liabilities were:

 

Derivative Liabilities on Convertible Loans:      
Derivative Liability December 31, 2019   $ 320,794  
Additions     134,961  
Fair market value adjustments     130,994  
Derivative Liability March 31, 2020     586,749  

 

NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

The company has received an invoice from Oberon Securities for $291,767 which is in dispute. The company believes it has defenses to the claim for compensation and plans to assert appropriate counterclaims and actions as permitted by law. No liability has been recorded for this claim as the Company believes there is a greater than not probability that our Company will prevail in defending against the claim.

 

Operating Rental Leases

 

As of May 1, 2017, our corporate headquarters are located at 2990 Redhill Unit A, Costa Mesa, CA. On March 10, 2017, the Company signed a lease agreement for a 18,200-square foot CTU Industrial Building. Lease term is seven years and two months beginning July 1, 2017. In October of 2018 we signed a sublease agreement with our facility in Italy with an indefinite term that may be terminated by either party with a 60 day notice for 1,000 Euro per month. Due to the short termination clause, we are treating this as a month to month lease.

 

Future minimum lease payments as of March 31, 2020 are:

 

Year   Lease Payment  
2020   $ 181,413  
2021   $ 249,132  
2022   $ 256,608  
2023   $ 44,052  
Imputed Interest   $ 52,138  
Net Lease Liability   $ 783,343  

 

Our Building expense for the three months s ended March 31, 2020 and 2019 was $110,455 and $82,034 respectively.

 

ASB ASU 2016-02 “Leases (Topic 842)” – In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model, but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We have adopted the above ASU as of January 1, 2019. The right of use asset and lease liability have been recorded at the present value of the future minimum lease payments, utilizing a 5% average borrowing rate and the company is utilizing the transition relief and “running off” on current leases.

 

Page 19 of 36 

 

 

Severance Benefits

 

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

 

Mr. Bennett will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Bennett would have been entitled to receive through the remainder or the Employment Period or One (1) year, whichever is greater. Subsequently on March 9, 2020, John Bennett notified Clean Energy Technologies, Inc. (the “Company”) of his resignation from his position as the Company’s Chief Financial Officer, effective March 9, 2020. Mr. Bennett will remain as a consultant to the Company and assist with maintaining the financial books and records of the Company. As a result, Mr. Bennett is no longer entitled to any severance benefits.

 

NOTE 11 – CAPITAL STOCK TRANSACTIONS

 

On April 21, 2005, our Board of Directors and shareholders approved the re-domicile of the Company in the State of Nevada, in connection with which we increased the number of our authorized common shares to 200,000,000 and designated a par value of $.001 per share.

 

On May 25, 2006, our Board of Directors and shareholders approved an amendment to our Articles of Incorporation to authorize a new series of preferred stock, designated as Series C, and consisting of 15,000 authorized shares.

 

On June 30, 2017, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 400,000,000 and in the number of our authorized preferred shares to 10,000,000. The amendment effecting the increase in our authorized capital was filed and effective on July 5, 2017.

 

On August 28, 2018, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 800,000,000. The amendment effecting the increase in our authorized capital was filed and effective on August 23, 2018.

 

On June 10, 2019, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 2,000,000,000. The amendment effecting the increase in our authorized capital was effective on September 27, 2019.

 

Common Stock Transactions

 

In the first quarter of 2019, we signed agreements to issue 4,000,000 shares of common stock valued at $.015 for a total value of $60,000 for the conversion of 800 preferred series D shares, which were subsequently issued.

 

We also recorded a $60,000 inducement fee (relating to the Preferred series D estoppel agreement and discounted conversion terms) to account for the difference in the fair value which was offset to retained earnings.

 

On June 10, 2019 we issued 500,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $10,000 in a private sale. We also issued 500,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.

 

On July 19, 2019 we issued 500,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $10,000 in a private sale. We also issued 500,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.

 

Page 20 of 36 

 

 

On September 19, 2019 we entered into a stock purchase agreement for 250,000 units at a purchase price of $.02 a unit for an aggregate price of $5,000 to an accredited investor a private sale. Each unit consist of one share of common stock and one warrant to purchase one share of common stock exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement. The shares were included in the shares to be issued as of September 30, 2019 and were subsequently issued on October 15, 2019.

 

On December 5, 2019 we issued 5,000,000 units at a purchase price of $.015 per unit for an aggregate price of $75,000 to an accredited investor in a private sale. Each unit consist of one share of common stock and one warrant to purchase one share of common stock exercisable at $.04 per share.

 

On January 21, 2020 our Registration Statement on Form 1-A was qualified with the Securities and Exchange Commission, under which we may offer up to 300,000,000 shares of our common stock at a purchase price of $.03 per share. As of the date hereof, 4,523,333 shares of common stock have been issued thereunder.

 

On January 30, 2020 we issued 1,700,000 shares of our common stock at a purchase price of $.02 per share, as settlement in full of a note payable of in the amount of $36,500 with accrued interest of 19,721. As a result we recognized a gain in the amount of $22,221 in the 1st quarter of 2020.

 

On February 3, 2020 we issued 3,690,000 shares of our common stock under our Reg A offering at $.03 per share. These shares are unrestricted and free trading.

 

On February 4, 2020 we issued 2,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 800 shares of our Series D Preferred Stock.

 

On March 17, 2020 we issued 833,333 shares of our common stock under our Reg A offering at $.03 per share. These shares are unrestricted and free trading.

 

On June 8, 2020, Clean Energy Technology, Inc., a Nevada corporation (the “Company”), entered into an Equity Financing Agreement (“Equity Financing Agreement”) and Registration Rights Agreement (“Registration Rights Agreement”) with GHS Investments LLC, a Nevada limited liability company (“GHS”). Under the terms of the Equity Financing Agreement, GHS agreed to provide the Company with up to $2,000,000 upon effectiveness of a registration statement on Form S-1 (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the “Commission”) As a result we issued 764,526 Shares of common stock as an inducement fee.

 

Common Stock

 

Our Articles of Incorporation authorize us to issue 2,000,000,000 shares of common stock, par value $0.001 per share. As of March 31, 2020, there were 762,130,989 shares of common stock outstanding. All outstanding shares of common stock are, and the common stock to be issued will be, fully paid and non-assessable. Each share of our common stock has identical rights and privileges in every respect. The holders of our common stock are entitled to vote upon all matters submitted to a vote of our shareholders and are entitled to one vote for each share of common stock held. There are no cumulative voting rights.

 

The holders of our common stock are entitled to share equally in dividends and other distributions that our Board of Directors may declare from time to time out of funds legally available for that purpose, if any, after the satisfaction of any prior rights and preferences of any outstanding preferred stock. If we liquidate, dissolve or wind up, the holders of common stock shares will be entitled to share ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities and our obligations to holders of our outstanding preferred stock.

 

Preferred Stock

 

Our Articles of Incorporation authorize us to issue 20,000,000 shares of preferred stock, par value $0.001 per share. Our Board of Directors has the authority to issue additional shares of preferred stock in one or more series, and fix for each series, the designation of and number of shares to be included in each such series. Our Board of Directors is also authorized to set the powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or restrictions of the shares of each such series.

 

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Unless our Board of Directors provides otherwise, the shares of all series of preferred stock will rank on parity with respect to the payment of dividends and to the distribution of assets upon liquidation. Any issuance by us of shares of our preferred stock may have the effect of delaying, deferring or preventing a change of our control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect the rights and powers, including voting rights, of the holders of common stock.

 

We previously authorized 440 shares of Series A Convertible Preferred Stock, 20,000 shares of Series B Convertible Preferred Stock, and 15,000 shares Series C Convertible Preferred Stock. As of August 20, 2006, all series A, B, and C preferred had been converted into common stock.

 

Effective August 7, 2013, our Board of Directors designated a series of our preferred stock as Series D Preferred Stock, authorizing 15,000 shares. Our Series D Preferred Stock offering terms authorized us to raise up to $1,000,000 with an over-allotment of $500,000 in multiple closings over the course of six months. We received an aggregate of $750,000 in financing in subscription for Series D Preferred Stock, or 7,500 shares.

 

The following are primary terms of the Series D Preferred Stock. The Series D Preferred holders were initially entitled to be paid a special monthly divided at the rate of 17.5% per annum. Initially, the Series D Preferred Stock was also entitled to be paid special dividends in the event cash dividends were not paid when scheduled. If the Company does not pay the dividend within five (5) business days from the end of the calendar month for which the payment of such dividend to owed, the Company will pay the investor a special dividend of an additional 3.5%. Any unpaid or accrued special dividends will be paid upon a liquidation or redemption. For any other dividends or distributions, the Series D Preferred Stock participates with common stock on an as-converted basis. The Series D Preferred holders may elect to convert the Series D Preferred Stock, in their sole discretion, at any time after a one-year (1) year holding period, by sending the Company a notice to convert. The conversion rate is equal to the greater of $0.08 or a 20% discount to the average of the three (3) lowest closing market prices of the common stock during the ten (10) trading day period prior to conversion. The Series D Preferred Stock is redeemable from funds legally available for distribution at the option of the individual holders of the Series D Preferred Stock commencing any time after the one (1) year period from the offering closing at a price equal to the initial purchase price plus all accrued but unpaid dividends, provided, that if the Company gave notice to the investors that it was not in a financial position to redeem the Series D Preferred, the Company and the Series D Preferred holders are obligated to negotiate in good faith for an extension of the redemption period. The Company timely notified the investors that it was not in a financial position to redeem the Series D Preferred and the Company and the investors have engaged in ongoing negotiations to determine an appropriate extension period. The Company may elect to redeem the Series D Preferred Stock any time at a price equal to initial purchase price plus all accrued but unpaid dividends, subject to the investors’ right to convert, by providing written notice about its intent to redeem. Each investor has the right to convert the Series D Preferred Stock at least ten (10) days prior to such redemption by the Company.

 

In connection with the subscriptions for the Series D Preferred, we issued series F warrants to purchase an aggregate of 375,000 shares of our common stock at $.10 per share and series G warrants to purchase an aggregate of 375,000 shares of our common stock at $.20 per share.

 

On August 21, 2014, a holder holding 5,000 shares of Preferred Series D Preferred agreed to lower the dividend rate to 13% on its Series D Preferred. In September 2015, all holders of Series D Preferred signed and delivered estoppel agreements, whereby the holders agreed, among other things, that the Series D Preferred was not in default and to reduce (effective as of December 31, 2015) the dividend rate on the Series D Preferred Stock to six percent per annum and to terminate the 3.5% penalty in respect of unpaid dividends accruing on or after such date.

 

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In the first quarter of 2019, we signed agreements to issue 4,000,000 shares of common stock valued at $.015 for a total value of $60,000 for the conversion of 800 preferred series D shares, which were subsequently issued.

 

We also recorded a $60,000 inducement fee (in exchange for the “standoff” and estoppel agreement and discounted conversion terms) to account for the difference in the fair value which we offset to retained earnings.

 

On February 4, 2020 we issued 2,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 800 shares of our Series D Preferred Stock.

 

Warrants

 

A summary of warrant activity for the periods is as follows:

 

On May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell 168,000,000 units (each a “Unit” and together the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $1,999,200, or $.0119 per Unit, with each unit consisting of one share of common stock, par value $.001 per share (the “Common Stock”) and a warrant (the “Warrant”) to purchase one share of common stock. The Common Stock will be issued to MGWI at such time as the Company increases the number of shares of its authorized Common Stock. The Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.

 

On June 10, 2019 we issued 500,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $10,000 in a private sale. We also issued 500,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.

 

On July 18, 2019 we issued 500,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $10,000 in a private sale. We also issued 500,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.

 

On September 19, 2019 we entered into a stock purchase agreement for 250,000 units to an accredited investor a private sale. Each unit consist of one share of common stock and one warrant to purchase one share of common stock exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement. The shares were included in the shares to be issued as of September 30, 2019 and were subsequently issued on October 15, 2019.

 

On December 5, 2019 we issued 5,000,000 units to an accredited investor a private sale. Each unit consist of one share of common stock and one warrant to purchase one share of common stock exercisable at $.04 per share.

 

    Warrants - Common Share Equivalents     Weighted Average Exercise price     Warrants exercisable - Common Share Equivalents     Weighted Average Exercise price  
Outstanding December 31, 2019     174,250,000     $ 0.04       174,250,000     $ 0.04  
Issued     -       -       -       -  
Exercised     -       -       -          
Expired     -       -       -       -  
Outstanding March 31, 2020     174,250,000     $ 0.04       174,250,000     $ 0.04  

 

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Stock Options

 

We currently have no outstanding stock options

 

NOTE 12 – RELATED PARTY TRANSACTIONS

 

Kambiz Mahdi, our Chief Executive Officer, owns Billet Electronics, which is distributor of electronic components. From time to time, we purchase parts from Billet Electronics. In addition, Billet was a supplier of parts and had dealings with current and former customers of the Company prior to joining the company. Our Board of Directors has approved the transactions between Billet Electronics and the Company.

 

On September 6, 2016, we entered into a one-year convertible note payable for $87,500, which accrues interest at the rate of 12% per annum. It is not convertible until nine months after its issuance and has a conversion rate of fifty-five percent (55%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the twenty (20) Trading Days immediately preceding the date of conversion. On December 16, 2016 we issued 1,200,000 shares of common stock at $.0031 for a partial conversion of this note in the amount of $3,696. January 4, 2018, we issued 2,300,000 shares of common stock at $.002192 for a partial conversion of this note in the amount of $5,042.

 

On November 2, 2016, we effected the repayment of the convertible note dated March 15, 2016 for an aggregate amount of $84,000. Concurrently, we entered into an Escrow Funding Agreement with Red Dot Investment, Inc., a California corporation (“Reddot”), pursuant to which Reddot deposited funds into escrow to fund the repayment and we assigned to Reddot our right to acquire the convertible note and Reddot acquired the convertible note. Concurrently, we and Reddot amended the convertible note (a) to have a fixed conversion price of $.005 per share, subject to potential further adjustment in the event of certain Common Stock issuances, (b) to have a fixed interest rate of ten percent (10%) per annum with respect to both the redemption amount and including a financing fee and any costs, expenses, or other fees relating to the convertible note or its enforcement and collection, and any other expense for or on our account (in each case with a minimum 10% yield in the event of payoff or conversion within the first year), such amounts to constitute additional principal under the convertible note, as amended, and (c) as otherwise provided in the Escrow Funding Agreement. The March 2016 convertible note, as so amended, is referred to as the “Master Note.”

 

Concurrently with the foregoing note repayments, we entered into a Credit Agreement and Promissory Note (the “Credit Agreement”) with Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation (“MW I”), pursuant to which MW I deposited funds into escrow to fund the repayment of the convertible notes and we assigned to MW I our right to acquire the convertible notes and otherwise agreed that MW I would be subrogated to the rights of each note holder to the extent a note was repaid with funds advanced by MW I. Concurrently, MW I acquired the Master Note and we agreed that all amounts advanced by MG I to or for our benefit would be governed by the terms of the Master Note, including the payment of a financing fees, interest, minimum interest, and convertibility. Reddot is MW I’s agent for purposes of administration of the Credit Agreement and the Master Note and advances thereunder.

 

On February 13, 2018 the Corporation and Confections Ventures Limited. (“CVL”) entered into a Convertible Note Purchase Agreement (the “Convertible Note Purchase Agreement,” together with the Stock Purchase Agreement and the transactions contemplated thereunder, the “Financing”) pursuant to which the Corporation issued to CVL a convertible promissory Note (the “CVL Note”) in the principal amount of $939,500 with an interest rate of 10% per annum interest rate and a maturity date of February 13, 2020. The CVL Note is convertible into shares of Common Stock at $0.003 per share, as adjusted as provided therein. As a result we recognized a beneficial conversion feature of $532,383, which is amortized over the life of the note. This note was assigned to Mgw Investments and they agreed not to convert the $939,500 note in to shares in excess of the 800,000,000 Authorized limit until we have increased the Authorized shares to the Board approved limit of 2 billion shares.

 

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On February 8, 2018 the Corporation entered a Convertible Promissory Note in the principal amount of $153,123, due October 8, 2018, with an interest rate of 12% per annum payable to MGWI (the “MGWI Note”). The MGWI Note is convertible into shares of the Corporation’s common stock at the lower of: (i) a 40% discount to the lowest trading price during the previous twenty (20) trading days to the date of a Conversion Notice; or (ii) 0.003. As a result of the closing of the transactions contemplated by the Stock Purchase Agreement and Convertible Note Purchase Agreement, the MGWI Note must be redeemed by the Corporation in an amount that will permit CVL and MGWI and their affiliates to hold 65% of the issued and outstanding Common Stock of the Corporation on a fully diluted basis. The proceeds from the MGWI Note were used to redeem the convertible note of the Corporation to JSJ Investments, Inc. in the principal amount of $103,000 with an interest rate of 12% per annum, due April 25, 2018. At December 31, 2019 the holder of this note beneficially owned 70% of the company and this note is not convertible if the holder holds more than 9.99%, as a result, we did not recognize a derivative liability or a beneficial conversion feature.

 

On June 21, 2018 the corporation entered into a promissory note with MGW Investment I Limited, for the principal amount of $250,000, with an interest rate of Eight Percent (8%) per annum and a maturity date of June 21, 2019. On May 28, 2019 this note was paid in full.

 

On September 21, 2018 the corporation entered into a promissory note with MGW Investment I Limited, for the principal amount of $100,000, with an interest rate of Eight Percent (8%) per annum and a maturity date of September 21, 2019. On May 28, 2019 this note was paid in full.

 

On February 15, 2018 we issued 9,200,000 at a purchase price of .0053 per share as additional compensation in the amount of $48,760.

 

On October 18, 2018 we entered into an at will employment agreement with Kambiz Mahdi our CEO. This agreement may be terminated at any time. As part of the agreement Mr. Mahdi was to be issued 20,000,000 shares of our common stock, as additional compensation. As a result; the three months ended December 31, 2019 we accrued for and subsequently on February 13, 2019, issued 20,000,000 shares at a purchase price of $.0131 per share to Mr. Mahdi in the amount of $262,000.

 

On January 10, 2019 the corporation entered into a promissory note with MGW Investment I Limited, for the principal amount of $25,000, with an interest rate of Eight Percent (8%) per annum and a maturity date of January 10, 2020. On May 28, 2019 this note was paid in full.

 

On May 1, 2019 we entered into an employment agreement with Mr. Bennett, with an annual salary of $175,000.

 

Subsequently on March 9, 2020, John Bennett notified Clean Energy Technologies, Inc. (the “Company”) of his resignation from his position as the Company’s Chief Financial Officer, effective March 9, 2020. Mr. Bennett will remain as a consultant to the Company and assist with maintaining the financial books and records of the Company.

 

On May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell 168,000,000 units (each a “Unit” and together the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $1,999,200, or $.0119 per Unit, with each unit consisting of one share of common stock, par value $.001 per share (the “Common Stock”) and a warrant (the “Warrant”) to purchase one share of common stock. The Common Stock will be issued to MGWI at such time as the Company increases the number of shares of its authorized Common Stock. The Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.

 

In the fourth quarter of 2019 MGW Investment I Limited, advanced $167,950, with no terms or interest rate. In the first quarter of 2020 they advanced an additional $60,000, The outstanding balance on these advances on March 31, 2020 is $227,950.

 

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Total Related Party Debt

 

    March 31, 2020     December 31, 2019  
Total related party notes   $ 1,320,572     $ 1,260,572  
Accrued Interest   $ 277,010     $ 248,838  
Debt Discount   $ -     $ (29,227 )
Total   $ 1,597,582     $ 1,480,183  

 

NOTE 13 - WARRANTY LIABILITY

 

The three months ended March 31, 2020 and 2019 there was no change in our warranty liability. Due to the lack of historical warranty cost, any potential change to the warranty accrual is not material.

 

NOTE 14 – SUBSEQUENT EVENTS

 

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.

 

On June 8, 2020, Clean Energy Technology, Inc., a Nevada corporation (the “Company”), entered into an Equity Financing Agreement (“Equity Financing Agreement”) and Registration Rights Agreement (“Registration Rights Agreement”) with GHS Investments LLC, a Nevada limited liability company (“GHS”). Under the terms of the Equity Financing Agreement, GHS agreed to provide the Company with up to $2,000,000 upon effectiveness of a registration statement on Form S-1 (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the “Commission”)

 

In accordance with ASC 855, the Company has analyzed its operations subsequent to March 31, 2020 through the date these financial statements were issued, and has determined that it does not have any other material subsequent events to disclose in these financial statements.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

 

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 of Clean Energy Technologies, Inc. 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. Our principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. We have 12 full time employees. All employees and overhead are shared between Clean Energy Technologies, Inc. (which still provides the contract electronic manufacturing services) and Clean Energy HRS, LLC.

 

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

 

The Company has three reportable segments: Clean Energy HRS (HRS), Cety Europe and the legacy engineering and manufacturing services division.

 

Business Overview

 

General

 

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

 

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.

 

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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.

 

Clean Energy HRS (HRS)

 

We design, build and deliver power from wasted heat generated by industrial heating systems, reciprocating engines and waste to energy plants to produce environmentally friendly energy at competitive prices using our Clean CycleTM heat generators acquired from General Electric International. Our initial principal product is the Clean CycleTM heat generator, offered through our wholly owned subsidiary Heat Recovery Solutions, (HRS). The Clean CycleTM generator captures waste heat from a variety of sources and turns it into zero emission electricity. By using our Clean CycleTM generator commercial and industrial heat generators boost their overall energy efficiency and the savings created provide our customers with a fast return on their investment. The Clean CycleTM saves fuel, reduces pollution and requires very little maintenance. Please see a more detailed discussion of the products and services in the Clean Energy HRS Products and services overview business overview below.

 

Cety Europe

 

CETY Europe Sales and Service Center is the Sales, warranty and service company for CETY’s Clean Cycle™ Heat Recovery Solutions (HRS) and includes a 24/7 Call Center, support Field Service Personnel, including remote access to the Waste Heat Generators and inventory spare parts to support the currently commissioned 65 Clean CycleTM installations in Europe. The service center also provides support services for new European sales. CETY has identified substantial unmet market needs in many European countries including the United Kingdom, Germany, Italy, Ukraine, Croatia, Slovakia, Slovenia, Austria, Belarus and the Czech Republic. Cety Europe will sell and distribute the Clean CycleTM Waste Heat Generators and replacement parts from the Clean Energy HRS line of products. The CETY Europe Sales and Service Center will be well suited to handle any warranty and/or service issues, as well as sell and distribute the Clean energy HRS line of products. Cety Europe has 1 employee.

 

Engineering and Manufacturing

 

The Engineering and Manufacturing business was our core legacy business until we acquired the Heat Recovery Solutions technology and business assets from GE. We consolidated the Probe Manufacturing, now named Clean Energy Technologies, Inc with the Clean Energy HRS, LLC. to support a few legacy electronics manufacturing customers and support the electronics manufacturing portion of our newly acquired technology from General Electric by Clean Energy HRS, LLC. Although this is not our core focus nor do we intend to grow this segment, we still derive a revenue stream to help offset a portion of the overhead and it provides in house manufacturing of the Clean Cycle electronics products. This segment also provides manufacturing services to customers in the medical and aerospace industries. The services provided are contract in nature and are built the customers specification. They supply the design and component specifications. We purchase the components and manufacture the assemblies.

 

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Summary of Operating Results the three months Ended March 31, 2020 Compared to the Year Ended December 31, 2019

 

Going Concern

 

The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s deficit of $5,407,051 and a working capital deficit of $6,932,492 and a net loss of $313,574 for the three months ended March 31, 2020. The company also had an accumulated deficit of $14,529,292 as of March 31, 2020. Therefore, there is substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.

 

The three months ended March 31, 2020; we had a net loss of $313,574 compared to a net loss of $726,777 for the same period in 2019. The decrease in the net loss in 2019 was mainly due to the increase in revenue. The three months ended March 31, 2020; our revenue was $858,816 compared to $224,363 for the same period in 2019. For the three months ended March 31, 2020, our gross margin was 65% compared to 34% for the same period in 2019 mainly due to the decrease in material cost for the two-unit sale from the HRS segment. For the three months ended March 31, 2020, our operating expense was $476,210 compared to $401,878 for the same period in 2019. The three months ended March 31, 2020; we had a net gain from operations of $39,329 compared to a net loss from operations of $(326,692) for the same period in 2019.

 

See note 1 to the notes to the financial statements for a discussion on critical accounting policies

 

RELATED PARTY TRANSACTIONS

 

See note 12 to the notes to the financial statements for a discussion on related party transaction

 

Results the three months Ended March 31, 2020 Compared to the three months ended March 31, 2019

 

Net Sales

 

The three months ended March 31, 2020; our total revenue was $858,816, compared to $224,363 for the same period in 2019. The Company has three reportable segments: Clean Energy HRS (HRS), Cety Europe and the legacy engineering and manufacturing services division (Electronic Assembly).

 

Segment breakdown

 

The three months ended March 31, 2020, our revenue from Engineering and Manufacturing was $107,567 compared to $151,633 for the same period in 2019. The decrease was due to a drop in orders from one customer in 2020.

 

The three months ended March 31, 2020, our revenue from HRS was $748,750 compared to $25,448 for the same period in 2018. The increase in revenue from the HRS segment was mainly due to 2 units shipped in 2020 vs. the 0 units shipped in 2019.

 

The three months ended March 31, 2020, our revenue from Cety Europe was $2,499 compared to $47,282 for the same period in 2019. The decrease in revenue was mainly due to the impact of the Covid 19 virus in Italy.

 

Gross Profit

 

The three months ended March 31, 2020; our gross profits increased to $515,539 (65%) from $75,186 (34%) for the same period in 2019. Our gross profits could vary from period to period and is affected by a number of factors, including, production and supply change efficiencies, material costs, and logistics.

 

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Segment breakdown

 

The three months ended March 31, 2020, our gross profit from Engineering and Manufacturing was $26,606 compared to $25,141 for the same period in 2019. This increase from the Electronic Assembly Segment was mainly due increase in prices with the existing customers.

 

The three months ended March 31, 2020, our gross profit from HRS was $486,434 compared to $17,835 for the same period in 2019. The increase from the HRS segment was mainly due to 2 units shipped in 2020 vs. the 0 units shipped in 2019 and the lower than normal cost of material due to the inventory that was acquired from GE and the associated purchase price allocation.

 

The three months ended March 31, 2020, our gross profit from Cety Europe was $2,499 compared to $32,210 for the same period in 2019. The decrease in revenue was mainly due to the impact of the Covid 19 virus in Italy.

 

Selling, General and Administrative (SG&A) Expenses

 

The three months ended March 31, 2020; our SG&A expense was $95,720 compared to $60,642 for the same period in 2019. This increase was mainly due to increases in insurance expenses, advertising and promotion, License and permits and additional expenses associated with the commissioning of the Marshal Island installation acquired from GE.

 

Salaries Expense

 

The three months ended March 31, 2020; our Salaries expense was $209,547 compared to $203,303 for the same period in 2019.

 

Travel Expense

 

The three months ended March 31, 2020; our Salaries expense was $29,158 compared to $40,117 for the same period in 2019. The decrease in revenue was mainly due to the impact of the Covid 19 virus.

 

Facility Lease and Maintenance Expense

 

The three months ended March 31, 2020; our Facility Lease expense was $110,455 compared to $82,034 for the same period in 2019. This increase was due to the increase in our lease payments and building maintenance expense in our Costa Mesa facility.

 

Depreciation and Amortization Expense

 

The three months ended March 31, 2020, our depreciation and amortization expense was $9,443 compared to $11,763 for the same period in 2019, which remained relatively unchanged.

 

Professional fees Expense

 

The three months ended March 31, 2020; our Professional fees expense was $21,887 compared to $4,019 for the same period in 2019. The increase was mainly due to the in our legal and accounting fees related to the Filing of our form 1A and in our audit related fees.

 

Page 30 of 36 

 

 

Net Gain (Loss) from operations

 

The three months ended March 31, 2020, our net gain from operations was $39,329 compared to net loss from operations of $326,692 for the same period in 2019. This increase was primarily due to the higher revenues, higher gross profits discussed above and higher efficiency for the three months ended March 31, 2020.

 

Change in Derivative Liability

 

The three months ended March 31, 2020; we had a loss on derivative liability of $130,994 compared to $159,733 for the same period in 2019.

 

Gain on debt settlement

 

The three months ended March 31, 2020 we recognized a gain on debt settlement in the amount of $22,221 compared to $0 three months ended March 31, 2019.

 

Interest and Finance Fees

 

The three months ended March 31, 2020 interest and finance fees were $244,130 compared to $240,352 for the same period in 2019. The decrease was mainly due to the decrease in the amortization of the debt discount derived from the beneficial conversion features.

 

Net Income / Loss

 

The three months ended March 31, 2020; our net loss was $313,574 compared to net loss of $726,777 for the same period in 2019. This decrease was primarily due to the higher revenues and gross margins in 2020, higher efficiencies and lower interest expense.

 

Liquidity and Capital Resources

 

Clean Energy Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

The three months ended March 31, 2020

 

    2020     2019  
Net Cash provided / (Used) In Operating Activities     39,493       (332,012 )
Cash Flows Used In Investing Activities     -     -  
Cash Flows Provided / (used) By Financing Activities     454,560       326,588  
Net (Decrease) Increase in Cash and Cash Equivalents     494,053       (5,424 )

 

Capital Requirements for long-term Obligations

 

None.

 

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.

 

Page 31 of 36 

 

 

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.

 

Item 3. Quantitative and Qualitative Disclosure about Market Risk.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2020, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K as filed with the SEC on May 28, 2020 and amended on June 4, 2020, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.

 

Page 32 of 36 

 

 

Changes in Internal Control over Financial Reporting

 

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.

 

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company is presently not involved in any legal proceedings which in the opinion of management are likely to have a material adverse effect on the Company’s consolidated financial position or results of operations.

 

Item 1A. Risk Factors.

 

There have been no material changes in the Company’s risk factors from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

Item 2. Unregistered Sales of Equity Securities

 

On May 31, 2019, we entered into a subscription agreement pursuant to which the Company agreed to sell 168,000,000 units (each a “Unit” and together the “Units”) to MGW Investment I Limited MGWI for an aggregate purchase price of $1,999,200, or $.0119 per Unit, with each unit consisting of one share of common stock, par value $.001 per share (the “Common Stock”) and a warrant (the “Warrant”) to purchase one share of common stock. The Common Stock will be issued to MGWI at such time as the Company increases the number of shares of its authorized Common Stock. The Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.

 

On September 10, 2019 we issued 500,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $10,000 in a private sale. We also issued 500,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.

 

On July 18, 2019 we issued 500,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $10,000 in a private sale. We also issued 500,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.

 

October 15, 2019 we issued 250,000 shares of common stock at $.02 per share to an accredited investor for an aggregate price of $250,000 in a private sale. We also issued 250,000 warrants as part of the transaction. Each Warrant is exercisable at $.04 per share of Common Stock and expires one year from the date of the Agreement.

 

On December 5, 2019 we issued 5,000,000 units at a purchase price of $.015 per unit for an aggregate price of $75,000 to an accredited investor in a private sale. Each unit consist of one share of common stock and one warrant to purchase one share of common stock exercisable at $.04 per share.

 

On January 21, 2020 our Registration Statement on Form 1-A was qualified with the Securities and Exchange Commission, under which we may offer up to 300,000,000 shares of our common stock at a purchase price of $.03 per share. As of the date hereof, 4,523,333 shares of common stock have been issued thereunder.

 

Page 33 of 36 

 

 

On January 30, 2020 we issued 1,700,000 shares of our common stock at a purchase price of $.02 per share, as settlement in full of a note payable of in the amount of $36,500 with accrued interest of 19,721. As a result we recognized a gain in the amount of $22,221 in the 1st quarter of 2020.

 

On February 3, 2020 we issued 3,690,000 shares of our common stock under our Reg A offering at $.03 per share. These shares are unrestricted and free trading.

 

On February 4, 2020 we issued 2,000,000 shares of our common stock at a price of $.04 per share, in exchange for the conversion of 800 shares of our Series D Preferred Stock.

 

On March 17, 2020 we issued 833,333 shares of our common stock under our Reg A offering at $.03 per share. These shares are unrestricted and free trading.

 

On June 8, 2020, Clean Energy Technology, Inc., a Nevada corporation (the “Company”), entered into an Equity Financing Agreement (“Equity Financing Agreement”) and Registration Rights Agreement (“Registration Rights Agreement”) with GHS Investments LLC, a Nevada limited liability company (“GHS”). Under the terms of the Equity Financing Agreement, GHS agreed to provide the Company with up to $2,000,000 upon effectiveness of a registration statement on Form S-1 (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the “Commission”) As a result we issued 764,526 Shares of common stock as an inducement fee.

 

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

 

Item 3. Defaults upon Senior Securities

 

We are currently in default on the payment of $1,200,000, to the balance of the purchase price pursuant to our asset purchase agreement with General Electric International, due to a combination of our inability to raise sufficient capital as expected and our belief that we are entitled to a reduction in purchase price we paid.

 

We are also in default of $187,285 payments of principal and interest on our notes payable to Cybernaut Zfounder Ventures.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

None.

 

Page 34 of 36 

 

 

Item 6. Exhibits

 

The exhibit listed on the Exhibit Index (following the signatures section of this Three months ended March 31, 2020 Report on Form 10-Q are included, or incorporated by reference, in this Three months ended March 31, 2020ly Report on Form 10-Q.

 

EXHIBIT

NUMBER

 

DESCRIPTION

   
31.01   Certification of Principal Executive Officer Pursuant to Rule 13a-14   Filed herewith.
31.02   Certification of Principal Financial Officer Pursuant to Rule 13a-14   Filed herewith.
32.01   Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act   Filed herewith.
32.02   Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act   Filed herewith.
101.INS*   XBRL Instance Document   Furnished herewith.
101.SCH*   XBRL Taxonomy Extension Schema Document   Furnished herewith.
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase Document   Furnished herewith.
101.LAB*   XBRL Taxonomy Extension Labels Linkbase Document   Furnished herewith.
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase Document   Furnished herewith.
101.DEF*   XBRL Taxonomy Extension Definition Linkbase Document   Furnished herewith.

 

*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

Page 35 of 36 

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Costa Mesa, State of California on the 29th day of June 2020

 

Clean Energy Technologies, Inc.  
REGISTRANT  
     
  /s/ Kambiz Mahdi  
By:  Kambiz Mahdi  
  Chief Executive Officer  
     
  Date: June 29, 2020  
     
  /s/ Calvin Pang  
By: Calvin Pang  
  Chief Financial Officer  
     
  Date: June 29, 2020  

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

 
Signature   Title
       
  /s/ Kambiz Mahdi   Chief Executive Officer and Director
By:  Kambiz Mahdi   (principal executive officer)
       
  Date: June 29, 2020    

 

Page 36 of 36 

 

 

Exhibit 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Kambiz Mahdi, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Clean Energy Technologies, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: June 29, 2020 By: /s/ KAMBIZ MAHDI
   

Kambiz Mahdi,

Chief Executive Officer

 

 

 

Exhibit 31.2

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Calvin Pang, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Clean Energy Technologies, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: June 29, 2020 By: /s/ Calvin Pang
   

Calvin Pang,

Chief Financial Officer

 

 

 

EXHIBIT 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Clean Energy Technologies, Inc. (the “Company”) hereby certifies, to his knowledge, that:

 

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

June 29, 2020 By: /s/ Kambiz Mahdi
Date  

Kambiz Mahdi

Chief Executive Officer

 

 

 

EXHIBIT 32.2

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Clean Energy Technologies, Inc. (the “Company”) hereby certifies, to his knowledge, that:

 

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

June 29, 2020 By: /s/ Calvin Pang
Date  

Calvin Pang

Chief Financial Officer