10-K/A: Clean Energy Technologies Files Amended 10-K, Details Financials and Strategic Shift

Clean Energy Technologies, Inc. files an amendment to its annual report, including an audit report and updated share information, while highlighting a strategic transition towards becoming an independent power producer.

Summary

• Clean Energy Technologies, Inc. has filed an amendment to its annual report on Form 10-K for the fiscal year ended December 31, 2023.
• The amendment includes the previously omitted audit report, updates the number of outstanding common shares to 42,665,248 as of April 16, 2024, and corrects minor errors.
• The company is transitioning to function as an independent power producer, focusing on waste heat recovery, waste-to-energy solutions, and clean energy engineering services.
• They are expanding their waste heat recovery product line to include ORC systems producing over 1 MW of power.
• The company is also establishing a waste-to-energy business using HTAP technology and developing small to mid-sized waste-to-energy power plants.
• CETY HK, their natural gas trading operation in China, saw significant revenue growth, reaching $14,138,789 in 2023, up from $1,890,439 in 2022.
• The company reported a net loss of $5,659,723 for 2023, compared to a net profit of $147,395 in 2022, due to strategic expansion, increased operating costs, and higher interest expenses.
• The company's equity increased from $1,878,196 to $5,869,198, primarily due to a public offering that generated $3.9 million and the conversion of convertible notes into Series E preferred shares.
• The company is planning to launch a biomass project in Vermont in 2024, which is expected to contribute to profitability and growth.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there is significant revenue growth and strategic expansion, the substantial net loss, going concern warning, and high debt levels raise concerns. The company's future prospects are uncertain, making the overall sentiment cautiously negative.

Positives

• The company's revenue increased significantly year-over-year.
• The company is expanding into new and growing markets such as waste-to-energy.
• The company's equity increased significantly due to a public offering and conversion of debt.
• The company is planning to launch a biomass project in Vermont in 2024, which is expected to contribute to profitability and growth.
• The company's listing on the Nasdaq has enhanced its ability to secure funding.

Negatives

• The company reported a net loss of $5,659,723 for 2023, a significant decrease from the net profit of $147,395 in 2022.
• The company's gross profit decreased year-over-year.
• Operating expenses, including salaries, travel, and consulting, increased significantly.
• Interest and finance fees increased substantially year-over-year.
• The company has an accumulated deficit of $22,984,163 as of December 31, 2023.

Risks

• The company's independent accountants have issued a going concern opinion, indicating substantial doubt about the company's ability to continue as a going concern.
• The company has an accumulated deficit and may incur additional losses, which may limit its ability to obtain additional financing.
• The company is in default in its obligations to a major creditor.
• The company's business may be adversely affected by public health epidemics, including COVID-19.
• The company operates in a highly competitive market and may lose out to larger and better-established competitors.
• The company's international operations are subject to various risks, including political and economic instability.
• The company's products may be displaced by newer technology.
• The company may be adversely affected by shortages of required components.
• The company's principal shareholders, directors, and executive officers beneficially own more than 50% of the outstanding common stock, giving them substantial influence.
• The company may be subject to environmental compliance risks and unexpected costs.
• The company's sales and contract fulfillment cycles can be long and unpredictable.
• The company's operating margins may decline due to increasing product costs.
• The company's sales and profitability in the US and China are dependent on the price of oil and natural gas.
• The company may not have sufficient funds to conduct its trading operations in the PRC.
• The company's waste-to-energy products from ENEX have not been tested in the United States and depend on data obtained from operations in the Ukraine and Russia.
• The implementation of the company's waste-to-energy joint ventures depends on finding funding for the projects.
• PRC regulations may delay or prevent the company from making loans or additional capital contributions to its Chinese subsidiaries.
• Fluctuations in exchange rates could affect the results of operations of the company's Hong Kong and China subsidiaries.
• The company may need to raise additional capital, and may not be able to do so on acceptable terms.
• Natural disasters and other catastrophic events could adversely affect the company's business operations and financial performance.
• The company has issued a substantial amount of convertible securities which, if converted, will substantially dilute all of its stockholders.
• The company may make acquisitions that are dilutive to existing stockholders.
• The company may be subject to government laws and regulations with which it may be unable to comply.
• Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses.
• The company's revenue growth rate depends primarily on its ability to execute its business plan.
• The company's operating results and share price may be volatile.

Future Outlook

The company is poised for further growth with the anticipated launch of its biomass project in Vermont in 2024, which is expected to contribute to both profitability and growth. Additionally, the company's ability to secure funding has been greatly enhanced following its listing on the Nasdaq on March 23, 2023. With a focus on optimizing operations and expanding global sales, management is confident in the company's ability to sustain long-term profitability and maintain a strong capital position.

Management Comments

• With its current strategic approach and diversification of its products and solutions, the management has created a favorable environment for the company to transition towards profitability.
• Management is confident in the company's ability to sustain long-term profitability and maintain a strong capital position.

Industry Context

The company operates in the renewable energy sector, which is experiencing rapid growth due to increasing environmental concerns and government incentives. The company's focus on waste heat recovery and waste-to-energy solutions aligns with the growing demand for sustainable energy sources. The company's expansion into China's natural gas market also positions it to benefit from the country's increasing demand for cleaner energy.

Comparison to Industry Standards

• The company competes with major players in the ORC system market such as ORMAT, Exergy, TAS and Turboden, which control a significant portion of the installed capacity.
• In the waste-to-energy market, the company competes with large corporations like Hitachi Zosen Inova AG, Suez, and Veolia, as well as smaller companies focused on small to medium-sized installations.
• The company believes its waste-to-energy products are more efficient for small and medium-sized operations than its competitors, providing a competitive advantage.
• In China, the company's NG trading operations compete with large state-owned LNG producers and importers such as Sinopec and many smaller local energy trading companies.
• The company's Clean Cycle generator is estimated to have a 15% higher efficiency than competitors in the ORC market.
• The company's LNG trading operations target a gross profit margin of 20-30%, compared to competitors' margins of 1-5%.

Related Party Transactions

• From August 2022 through October 2022 Hongzhuo Shuya (Shuya) a 49% owned subsidiary (also is our consolidated VIE) of CETY HK limited engaged in the trading of pipeline gas and CNG processing and sales provided Sichuan Leishen Hongzhuo Energy Development Co., Ltd (Leishen) with approximately total of $ 700,000 loan with a 4-year term to facilitate building of a natural gas recycling station to provide Shuya with CNG sales.
• During the year ended December 31, 2023 Shuya made a $5,641,069 purchase from Leishen.
• As of December 31, 2023, we had no accounts receivable from Leishen. However, we had an advance to the supplier of Leishen amounting to $ 466,914 .
• Additionally, there were accounts payable to Leishen totaling $ 315,361 , which were recorded for inventory purposes but the advance to supplier account was not decreased.
• Furthermore, there was a due from related party balance of $ 752,066 and a due to related party balance of $ 103,939 .
• On June 2, 2023 CETY Renewables executed a turnkey agreement for the design, construction, and delivery of organics to energy plant with Vermont Renewable Gas, LLC. As a result, CETY has invoiced VRG $ in 2023 ($ 429,999 in total) and $410,486 recorded as related party revenue.
• From time to time, we purchase parts from Billet Electronics, which is owned by Kambiz Mahdi, our Chief Executive Officer. The amount of parts purchases in 2023 was $ 6,187 .

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of additional shares and convertible securities.
• Employees may benefit from the company's growth and expansion, but may also face uncertainty due to the company's financial challenges.
• Customers may benefit from the company's expanded product offerings and services.
• Suppliers may benefit from increased business with the company.
• Creditors face increased risk due to the company's default on obligations and financial challenges.

Next Steps

• The company plans to expand its waste heat recovery product line to include ORC systems producing over 1 MW of power.
• The company plans to establish a waste-to-energy business by selling its ablative thermal processing products based on proprietary HTAP technology.
• The company plans to develop small and mid-sized waste-to-energy power plants producing electricity and RNG for the grid and methane, hydrogen and biochar for resale.
• The company plans to leverage its engineering, procurement and manufacturing experience to assist companies and EPCs incorporate clean energy solutions into energy and industrial construction projects.
• The company plans to establish HTAP manufacturing facilities in Turkey for its Waste to Energy products and expand patent protection on the proprietary technology.
• The company plans to work with clean energy project development and finance companies to establish Waste to Energy power plants.
• The company plans to participate in other minority investments in medium to large clean energy projects being developed in ASEAN countries.
• The company plans to leverage the LNG trading and investment relationships to create opportunities for it to sell its Waste Recovery and Waste to Energy products in China and to provide engineering, consulting and project management services.
• The company is planning to launch a biomass project in Vermont in 2024.

Key Dates

Keywords

Clean Energy Technologies, Waste Heat Recovery, Waste to Energy, Renewable Energy, Natural Gas Trading, HTAP Technology, ORC Systems, China, Convertible Notes, Financial Results