| Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies | Business Overview We design, build, and market clean energy products focused on energy efficiency and environmentally sustainable technologies and we perform electronics manufacturing services for Heat recovery Solutions and third parties. Our principal products are based upon the Clean Cycle heat recovery system, offered by our wholly owned subsidiary Clean Energy HRS LLC DBA Heat Recovery Solutions. Our Clean Cycle captures waste heat from a variety of sources and turns it into electricity that users can use, store, or export, such as to an external or utility power grid. The proven, cutting-edge Clean Cycle technology allows commercial and industrial heat generators or sources to boost their overall energy efficiency with no additional fuel, no pollutants, and virtually no maintenance. The engineering and manufacturing resources from our electronics manufacturing services business support our heat recovery solutions business. We intend also to leverage these capabilities to identify and exploit other clean energy technologies and opportunities. The Clean Cycle heat recovery solution is an Organic Rankine Cycle, or ORC, system. An ORC system is a closed-loop heat recovery steam generator system, sometimes referred to as an HRS or an HRSG, that utilizes heat from a heat source, such as an existing power generation system, to heat a fluid to produce steam. The steam then passes through a turbine generator, and turbine generator converts the kinetic energy in the steam to produce electrical energy, which can be used, stored, or exported. The ORC cycle then recycles and further cools the fluid medium to again use heat from the external heat source to continue the power-generation cycle. The technology at the heart of the Clean Cycle is a magnetic levitation bearing generator, which requires no oil or other lubricants and has no gear box. The turbine generator and related power management electronics are what convert the kinetic energy in the steam cycle into electrical energy. There are over 100 Clean Cycle HRS units installed globally with more than one million fleet operating hours in diesel, gas, and biomass applications. The magnetic levitation bearing generator technology was originally developed by Calnetix, Inc. General Electric International, Inc. acquired the rights to the technology in certain applications from Calnetix in 2010. In September 2015, our CE HRS subsidiary acquired General Electrics rights to the technology in those applications, together with General Electrics related HRS technology and improvements, pursuant to an Asset Purchase Agreement with General Electric International, Inc. and General Electric Company that was filed as Exhibit 10.1 to the Companys Current Report on Form 8 K dated September 11, 2015 and a concurrent Transaction Completion and Financing Agreement with ETI Partners IV, LLC. CE HRS made an initial purchase price payment of $300,000 at closing and issued a three-year $1.2 million promissory note to GEII with respect to payment of the balance of the cash portion of the purchase price. CE HRS also assumed certain liabilities of GEII related to the acquired assets. In connection with the Asset Purchase Agreement, the Company also entered into various ancillary agreements customary for asset acquisition transactions of this type. Pursuant to the companion Transaction Completion and Financing Agreement facilitating our acquisition of the GE HRS assets, we issued 100,910,321 restricted shares of our common stock to ETI Partners IV, LLC (representing approximately 70% of the post-acquisition outstanding common stock). Concurrently, we entered into a Loan, Guarantee, and Collateral Agreement and a Registration Rights Agreement with ETI Partners IV, LLC to provide a framework for further financing in the Company. Pursuant to our license agreement with Calnetix (which General Electric assigned to us in connection with the Asset Purchase Agreement), we market and sell our Clean Cycle products world-wide to ORC-based application where heat is sourced from reciprocating combustion engines, of any type (other than those employed on transiting marine vessels), gas or steam turbine systems used for power generation, and biomass boiler systems. Our rights in these applications are exclusive. We also market our Clean Cycle products world-wide on a non-exclusive basis in the following applications, whether or not ORC-based: reciprocating combustion engines, of any type (except those employed on transiting marine vessels or in the automotive application for cars, trucks, and other motor vehicles); gas or steam turbine systems with an ISO rated power output above one megawatt (1 MW); and applications that use biomass as a source of heat. We have also periodically negotiated to obtain additional non-exclusive marketing rights to the technology from Calnetix as commercial opportunities have arisen that are not in conflict with other licensees of Calnetix. Our growth strategy is to scale up our business by focusing on the significant installed base of power generation and biomass boiler systems ideally suited to ORC-based heat recovery systems, exploiting market segments and regions where there are significantly high electricity prices, and identifying and exploiting incentive markets as they are available. We sell equipment and complete heat recovery systems globally directly to end customers and also through distributors. We also commercialize our heat recovery systems through lease and energy-based programs where appropriate. We are also developing technology co-ventures with owners of compatible power generation technology to develop integrated energy production systems to exploit additional potential customers. The GE HRS asset acquisition and related financing transactions resulted in a change of control of the Company according to FASB No. 2014-17 Business Combinations (Topic 805). As a result, the transactions qualify as a business combination. In accordance with Topic 805, the Company elected to apply pushdown accounting, using the valuation date of December 31, 2015. As a result we recognized $747,976 in goodwill. ETI Recognized Assets Acquired 2,949,592 Liabilities Acquired 3,589,558 Cash paid 300,000 Non-controlling interest 191,990 Goodwill recognized 747,976 CETY - Push down accounting election Cash Received 300,000 Goodwill recognized 747,976 Equity 1,047,976 Following completion of the acquisition and integration of the GE HRS into our business, on November 13, 2015 we changed our name to Clean Energy Technologies, Inc. to better reflect the focus of our new business and business strategies. 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 stockholders deficit of $4,113,182 and a working capital deficit of $5,547,652 and a net loss of $2,214,854 for the year ended December 31, 2017. The company also had an accumulated deficit of $8,789,718 as of December 31, 2017 and used $1,495,470 in net cash from operating activities for the year ended December 31, 2017. Therefore, there is substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations. Plan of Operation Management is taking the following steps to sustain profitability and growth: (i) increase sa s through existing global distribution channels and utilization of direct sales (ii) leveraging core competencies to acquire technologies and entertain equity opportunities and ( ) license patented technology and proprietary process and develop cogeneration and OEM opportunities. Our future success is likely dependent on our ability to sustain profitable growth and attain additional capital to support growth. There can be no assurance that we will be successful in obtaining any such financing, or that it will be able to generate sufficient positive cash flow from operations. The successful outcome of these or any future activities cannot be determined at this time and there is no assurance that if achieved, we will have sufficient funds to execute its business plans. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern. Our Products and Services Our main product, the Clean Cycle HRS system, converts heat from variety of heat sources into clean, affordable electricity. Our heat recovery solution system generates electricity from heat with zero additional fuel required, zero additional emissions produced, and low maintenance. The Clean Cycle HRS system is also re-deployable with continuous 24x7 operation. Sales and Marketing Our marketing approach is to position the Company, our products and our services under our new Clean Energy Technologies, Inc. and CETY identity and brand. We intend to market our Heat Recovery Solutions products specifically using the market-recognized Clean Cycle brand name. We also intend to utilize our relationships to identify new market segments and regions in which we can expand the commercialization of our products. We intend to offer our products for sale and also to commercialize them under leases, energy-based contracts and other financing structures to accelerate customer adoption and increase market penetration. We also intend to explore licensing opportunities for our patented and other proprietary technologies. We utilize both direct sales force and global distributors with expertise in clean energy. Corporate Information Our principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626. Our telephone number is (949) 273-4990. Our common stock is listed on the OTC Market Groups Pink Open Market under the symbol CETY. Our internet website address is www.cetyinc.com. The information contained on our website is not incorporated by reference into this document, and you should not consider any information contained on, or that can be accessed through, our website as part of this document. NOTE 2 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The summary of significant accounting policies of Clean Energy Technologies, Inc. (formerly Probe Manufacturing, Inc.) is presented to assist in the understanding of the Company's financial statements. The financial statements and notes are representations of the Companys management, who is responsible for their integrity and objectivity. 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. Accounts Receivable We grant credit to our customers located within the United States of America; 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 December 31, 2017, and December 31, 2016, we had a reserve for potentially un-collectable accounts of $7,000. Five (5) customers accounted for approximately 96% of accounts receivable at December 31, 2017. Our trade accounts primarily represent unsecured receivables. Historically, our bad debt write-offs related to these trade accounts have been insignificant. Inventory Inventories are valued at the lower of weighted average cost or market value. Our industry experiences changes in technology, changes in market value and availability of raw materials, as well as changing customer demand. We make provisions for estimated excess and obsolete inventories based on regular audits and cycle counts of our on-hand inventory levels and forecasted customer demands and at times additional provisions are made. Any inventory write offs are charged to the reserve account. As of December 31, 2017 and December 31, 2016, 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 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 Revenue from product and services are recognized at the time goods are shipped or services are provided to the customer, with an appropriate provision for returns and allowances. Terms are generally FOB origination with the right of inspection and acceptance. We have not experienced a material amount of rejected or damaged product. The Company provides services for its customers that range from contract design to original product design to repair services. The Company recognizes service revenue when the services have been performed, and the related costs are expensed as incurred. Fair Value of Financial Instruments 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 December 31, 2017, we had outstanding common shares of 210,881,122 used in the calculation of basic earnings per share. Basic Weighted average common shares and equivalents at December 31, 2017 and 2016 were 200,560,377 and 59,583,060, respectively. As of December 31, 2017, we had outstanding warrants to purchase 750,000 additional common shares and options to purchase 2,618,818 additional common shares. In addition, we had convertible notes, convertible into 43,376,000 of additional common shares. Fully diluted weighted average common shares and equivalents were withheld from the calculation as they were considered anti-dilutive. Research and Development We had no amounts of research and development R&D expense during the year ended December 31, 2017 and 2016. Segment Disclosure FASB Codification Topic 280, Segment Reporting 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 years ended December 31, 2017 2016 Net Sales Electronics Assembly $ 581,191 $ 1,222,856 Clean Energy HRS 376,442 824,477 Total Sales 957,633 2,047,333 Segment income and reconciliation before tax Electronics Assembly 70,949 145,858 Clean Energy HRS 341,932 618,464 Total Segment income 412,881 764,322 Reconciling items General and Administrative expense (422,746) (527,943) Salaries (783,656) (933,125) Moving Expense - (78,702) Facility lease (268,551) (230,024) Professional fees (139,322) (157,976) Share Based Expense (2,460) (113,347) Loss on Disposal of fixed assets - (73,967) Change in derivative liability 142,326 2,576 Beneficial conversion Feature (52,621) Gain on Warranty liability - 141,611 Financing Fees (708,714) (122,397) Interest Expense (444,612) (318,133) Net Loss before income tax $ (2,214,854) $ (1,699,726) December 31, 2017 December 31, 2016 Total Assets Electronics Assembly $ 1,161,901 $ 1,219,848 Clean Energy HRS 1,613,615 1,557,291 $ 2,775,516 $ 2,777,139 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 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 awardthe requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. For the year ended December 31, 2017 and 2016 we had $2460 and $113,347 respectively, in share-based expense, due to the issuance of common stock. As of December 31, 2017, we had no further non-vested expense to be recognized. Income Taxes The Company accounts for income taxes under SFAS No. 109 (now contained in FASB Codification Topic 740-10-25, Accounting for Uncertainty in Income Taxes), which requires the asset and liability approach to accounting for income taxes. Under this method, deferred tax assets and liabilities are measured based on differences between financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when differences are expected to reverse. As of December 31, 2017, we had a net operating loss carry-forward of approximately $(4,026,145) and a deferred tax asset of $845,490 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 $(845,490). FASB ASC 740 prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, 2017 the Company had not taken any tax positions that would require disclosure under FASB ASC 740. December 31, 2017 December 31, 2016 Deferred Tax Asset $ 845,490 $ 696,639 Valuation Allowance (845,490) (696,639) Deferred Tax Asset (Net) $ - $ - Subsequently, o n 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 will receive $907,388 in exchange for the issuance of 302,462,667 restricted shares of the Corporations 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 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 and Utah. Further, the Company currently has no open tax years subject to audit prior to December 31, 2013. The Company is current on its federal and state tax returns. Reclassification Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported income, total assets, or stockholders equity as previously reported. Business Combination and Goodwill On March 20, 2013, we completed the acquisition of Trident whereby we acquired 100% of the issued and outstanding common stock shares of Trident in exchange for 1,600,000 shares of our restricted shares of common stock. As a result of the acquisition, Trident has become a wholly-owned subsidiary of the Company. As a result, we recognized $420,673 in goodwill. On January 2, 2016 we closed the Trident facility in Utah and as for the year ended December 31, 2015 we booked an impairment of the goodwill in the amount of $420,673. Recently Issued Accounting Standards The Company is reviewing the effects of following recent updates. The Company has no expectation that any of these items will have a material effect upon the financial statements. Update 2017-08 Update 2017-05 Update 2017-04 Update 2017-03 Update 2017-01 Update 2016-20Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers Update 2016-18 Update 2016-17 Update 2016-16 Update 2016-15 Update 2016-13 Update 2016-12Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients Update 2016-10Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing Update 2016-09CompensationStock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting Update 2016-08Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Update 2016-07 InvestmentsEquity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting Update 2016-03IntangiblesGoodwill and Other (Topic 350), Business Combinations (Topic 805), Consolidation (Topic 810), Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance (a consensus of the Private Company Council) Update 2015-16Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments Update 2015-15InterestImputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit ArrangementsAmendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update) Update 2015-11Inventory (Topic 330): Simplifying the Measurement of Inventory Update 2015-08Business Combinations (Topic 805): Pushdown AccountingAmendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115 (SEC Update) Update No. 2015-03InterestImputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs Update No. 2015-02Consolidation (Topic 810): Amendments to the Consolidation Analysis. |
