| Basis of Accounting | NOTE 2 – 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, 2019, 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, 2018, 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 month period ended March 31, 2019, are not necessarily indicative of results for the entire year ending December 31, 2019. 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. 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 March 31, 2019, and December 31, 2018, we had a reserve for potentially un-collectable accounts of $57,000. Five (5) customers accounted for approximately 94% of accounts receivable at March 31, 2019. 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 March 31, 2019 and December 31, 2018, 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 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),” · · · · · We also collect deposits with our order. Our customer deposit are recognized as revenue when we have met the contractual obligations. The following is table summarizes the customer deposit activity for the quarter: Customer Deposits as of December 31, 2018 365,815 Customer Deposits Invoiced and applied (6,585) New customer Deposits - Customer Deposits as of March 31, 2019 359,230 We Invoice the customer and the time of the contract and only recognize the revenue when the company satisfies a performance obligation. The following is table summarizes the deferred revenue activity for the quarter: Deferred revenue December 31, 2018 33,000 Deferred revenue recognized in the Quarter - Additional deferred revenue added in the Quarter 14,750 Deferred revenue March 31, 2019 47,750 The following steps are applied to our contract manufacturing revenue: · · · · · 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: The carrying amounts of the Company’s financial instruments as of December 31 2018 and March 31, 2019, reflect: Level 1 Level 2 Level 3 Total Fair value of convertible notes derivative liability – December 31, 2018 $ – $ – $ 245,988 $ 245,988 Level 1 Level 2 Level 3 Total Fair value of convertible notes derivative liability – March 31, 2019 $ – $ – $ 543,721 $ 543,721 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, 2019, we had outstanding common shares of 575,657,656 used in the calculation of basic earnings per share. Basic Weighted average common shares and equivalents at March 31, 2019 and 2018 were 566,027,100 and 388,286,554, respectively. In addition, we had convertible notes, convertible into 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 expense during the three months ended March 31, 2019 and 2018. Segment Disclosure FASB Codification Topic 280, Segment Reporting The Company has three reportable segments: Clean Energy Technologies; Heat recovery solutions and our service center CETY Europe, which provides support services to our currently installed units in Europe. The segments are determined based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics. Refer to note 1 for a description of the various product categories manufactured under each of these segments. An operating segment's performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include amortization of intangibles, stock-based compensation, other charges (income), net and interest and other, net. Selected Financial Data three months ended March 31, 2019 2018 Net Sales Clean Energy 151,633 149,515 Heat Recovery 25,448 22,876 Cety Europe 47,282 - Total Sales 224,363 172,391 Segment income and reconciliation before tax Clean Energy 25,141 7,232 Heat Recovery 17,835 21,455 Cety Europe 32,210 - Total Segment income 75,186 28,687 Reconciling items General and Administrative (116,541) (159,335) Share Based Expense - (91,140) Salaries (203,303) (194,062) Rent (82,034) (70,979) Financing Fees - (378,155) Loss on disposal of fixed assets - (6,618) Change in derivative liability (159,733) (273,178) Interest expense (240,352) (168,468) Net Loss before income tax (726,777) (1,313,248) March 31, 2019 March 31, 2018 Total Assets Electronics Assembly 1,080,909 1,308,322 Clean Energy HRS 1,776,240 1,702,632 Cety Europe 30,150 - 2,887,299 3,010,954 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 award—the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. For the three months ended March 31, 2019 and 2018 we had $0 and $91,140 respectively, in share-based expense, due to the issuance of common stock. As of March 31, 2019, we had no further non-vested expense to be recognized. Income Taxes Federal Income taxes are not currently due since we have had losses since inception. On December 22, 2018 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective January 1, 2018. The Company will compute its income tax expense for the three months ended March 31, 2019 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. 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, 2019, we had a net operating loss carry-forward of approximately $(3,183,654) and a deferred tax asset of approximately $668,567 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 $(668,567). 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, 2019, the Company had not taken any tax positions that would require disclosure under FASB ASC 740. March 31, 2019 December 31, 2018 Deferred Tax Asset $ 668,567 $ 515,944 Valuation Allowance (668,577) (515,944 ) 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 will receive $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 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 state of California. Further, the Company currently has no open tax years’ subject to audit prior to December 31, 2015. The Company is current on its federal and state tax returns. Reclassification Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported income, total assets, or stockholders’ equity as previously reported. Recently Issued Accounting Standards The Company is reviewing the effects of following recent updates. The Company has no expectation that any of these items will have a material effect upon the financial statements. FASB ASU 2016-02 “Leases (Topic 842)” – Update 2019-04 —Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments Update 2019-01 Update 2018-17 Update 2018-13 —Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement Update 2018-08 Update 2018-05 Update 2018-04 Update 2018-03 Update 2018-01 FASB ASU 2016-02 “Leases (Topic 842)” – |
