Clean Energy Technologies, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed April 16, 2024. This is an annual report, not a quarterly filing. The company develops waste-heat recovery and waste-to-energy solutions, provides engineering and manufacturing services, and operates a natural-gas trading business in China. Its common stock trades on Nasdaq under CETY.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $15.11 million | $2.66 million |
| Gross profit / margin | $1.09 million / 7.2% | $1.17 million / 44.1% |
| Operating loss | $2.66 million | $0.99 million |
| Net income (loss), consolidated | $(5.53) million | $147,395 |
| Net income (loss) attributable to CETY | $(5.66) million | $147,395 |
| Cash from operating activities | $(4.78) million | $(2.24) million |
| Cash from investing activities | $(0.32) million | $(1.44) million |
| Cash from financing activities | $5.10 million | $2.80 million |
| Cash at year-end | $174,851 | $149,272 |
- China natural-gas trading contributed $14.14 million of FY2023 revenue, versus $1.89 million in FY2022. Waste-to-energy contributed $430,000, with no revenue reported for that segment in FY2022; HRS revenue was $498,000 versus $488,000; engineering and manufacturing revenue declined to $47,000 from $203,000.
- Current assets were $6.75 million and current liabilities $4.80 million at year-end. The balance sheet therefore implies positive working capital of approximately $1.95 million, while the filing repeatedly describes a $1.95 million working-capital deficit. The filing does not provide a clear reconciliation.
- Total liabilities were $5.06 million; current convertible notes were $1.93 million and the line of credit was $626,000. The line of credit bears stated monthly rates of 2.5% or 2.25% per 30 days, and receivables, inventory, and equipment are pledged as collateral.
- Year-end stockholders’ equity was $5.87 million, including $757,000 of non-controlling interest; accumulated deficit was $22.98 million.
Changes versus FY2022
- Revenue increased substantially, primarily with expansion of natural-gas trading and consolidation of Shuya, a Chinese gas business, beginning January 1, 2023. FY2022 reported revenue is therefore not directly comparable; the filing’s unaudited pro forma FY2022 revenue including Shuya is $4.03 million.
- Despite higher revenue, gross profit fell by $84,000 and gross margin declined sharply, which management attributes mainly to the lower margins of the expanded CETY HK trading business.
- Operating costs increased: salaries rose to $1.67 million from $783,000, and SG&A to $685,000 from $400,000. Management cites hiring, expansion, Nasdaq-related costs, marketing, travel, and new business activities.
- Interest and financing fees rose to $2.14 million from $1.13 million. The company reported a $1.12 million loss on debt settlement/write-down in 2023, versus a $2.56 million gain in 2022, and a $327,000 derivative-liability loss/gain-line benefit versus a $331,000 loss in 2022.
- The company raised approximately $3.9 million gross in its March 2023 public offering and issued Series E preferred shares in exchange for debt. The exchange of approximately $1.96 million of debt and accrued interest for Series E shares was recorded at a stated fair value of $3.21 million, producing a disclosed $1.26 million loss.
Outlook, risks, and notable items
- Going concern: The independent auditor’s report states that accumulated and working-capital deficits and negative operating cash flows raise substantial doubt about the company’s ability to continue as a going concern. Management says it expects to restructure debt, obtain financing, optimize operations, and grow sales; these plans are not assured. There is no formal quantified financial guidance.
- Projects: Management anticipated launching the Vermont biomass project in 2024. The company’s stated project targets are up to 18,000 MWh of annual renewable electricity and 1,500 tons of biochar. The filing does not establish that these targets have been achieved.
- Financing and dilution: The filing says the company expects to continue relying on equity and debt financing. Series E preferred stock carries a 15% annual dividend and is convertible at a price based on 80% of the lowest VWAP over five trading days, subject to stated ownership limits. Additional stock, warrants, or debt conversions may dilute common shareholders.
- Debt and default: A risk disclosure states that the company is in default on obligations to a major creditor, but the filing text does not clearly identify the relevant obligation, amount, or current status. Several short-term notes carry default rates as high as 22%.
- Subsequent event: Effective January 1, 2024, the parties terminated the concerted-action agreement that supported Shuya’s consolidation. CETY says it will no longer consolidate Shuya from that date, which may materially affect future reported revenue and assets.
- Other risks: The filing highlights dependence on financing, volatile natural-gas spot prices, customer and supplier concentration, competition, international and China-related regulatory and currency risks, project funding and performance risks, and potential technology and environmental compliance costs.
- Controls and audit: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end, citing limited qualified accounting staff, inadequate segregation of duties, and estimation demands related to Shuya. The auditor expressed an unqualified opinion on the financial statements but did not audit internal-control effectiveness.
- Related parties: FY2023 included $410,486 of related-party revenue from the Vermont Renewable Gas project. The filing also describes material purchases, advances, payables, loans, and leases involving a Shuya shareholder and supplier.
Important facts for investors to verify
- Reconcile the stated working-capital deficit with balance-sheet current assets and liabilities, and reconcile the conflicting operating cash-flow presentation in MD&A with the cash-flow statement.
- Confirm the correct net-loss figures: the statements show consolidated net loss of $5.53 million and loss attributable to CETY of $5.66 million, while other narrative passages give differing amounts.
- Determine the nature, amount, and status of the disclosed major-creditor default, and review debt maturities, collateral, interest costs, and available liquidity.
- Assess the effects of Shuya’s 2024 deconsolidation on revenue, margins, assets, cash flows, and comparability with FY2023.
- Verify the Vermont project’s financing, construction and commissioning progress, contractual economics, related-party terms, and whether management’s output targets remain achievable.
- Review Series E conversion and dividend terms, warrants, subsequent financing, and current share count for potential dilution; also assess remediation of ineffective financial controls.