Clean Energy Technologies, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. The company develops waste-heat recovery and waste-to-energy systems, provides engineering and manufacturing services, and operates an LNG trading business in China. Its four reportable segments are HRS, CETY Europe, legacy engineering and manufacturing, and CETY HK.
Financial performance and position
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $2,663,212 | $1,300,439 |
| Gross profit | $1,174,196 | $610,407 |
| Gross margin | 44.1% | 46.9% |
| Operating loss | $(989,751) | $(1,572,760) |
| Net income attributable to CETY, as reported | $147,395 | $297,551 |
| Operating cash flow | $(2,244,133) | $(2,552,548) |
| Cash at year-end | $149,272 | $1,192,316 |
| Total assets | $8,114,329 | $6,432,274 |
| Total liabilities | $6,236,132 | $8,153,986 |
- Revenue more than doubled, primarily because CETY HK contributed $1,890,439; it had no reported 2021 revenue. HRS revenue fell to $488,453 from $1,014,707, attributed to supply-chain delays; CETY Europe revenue declined to $81,242 from $192,361.
- Gross profit rose mainly with the addition of LNG trading, but gross margin declined. Operating expenses were $2,163,947, leaving an operating loss despite higher sales.
- Reported net income depended materially on a $2,556,916 gain from writing off the GE note and related accrued amounts. The company also recorded a $331,495 derivative-liability loss and $1,125,395 in interest and finance fees.
- Financing provided $2,798,885 in 2022, but cash still decreased by $1,043,043. The company reported a $2,245,996 working-capital deficit and an accumulated deficit of $17,276,536 at year-end.
- Year-end current liabilities included $3,092,055 of convertible notes, $998,820 on a line of credit, and $177,704 of related-party notes payable. The line of credit is secured by receivables, inventory, and other assets and carries high stated monthly fees/rates.
Material changes, outlook, and risks
- Business expansion: CETY HK added LNG trading revenue and made investments related to Chinese gas businesses. The planned Shenzhen Gas joint venture remained subject to definitive agreements; the filing describes a potential $8 million CETY contribution and a much larger proposed financing framework. Treat these plans as contingent, not completed acquisitions.
- Growth initiatives: Management is pursuing larger waste-heat projects using Enertime ORC systems and developing HTAP waste-to-energy projects. The filing identifies an Ashfield biomass project and states a backlog of two Clean Cycle units, approximately $800,000 in sales. CETY Capital had no material operations.
- No quantified company-wide financial guidance is provided. Management cites tax incentives, energy prices, streamlined operations, and expanded sales as potential supports for growth, but these are forward-looking expectations.
- Going concern: The auditor and management report substantial doubt about the company’s ability to continue as a going concern, citing operating cash outflows, working-capital deficit, and dependence on additional capital or positive operating cash flow. The auditor’s opinion on the financial statements was unqualified, with a going-concern emphasis.
- Subsequent financing and listing: After year-end, the company reported a March 2023 public offering of 975,000 shares at $4.00 per share for $3.9 million gross proceeds, and Nasdaq listing on March 23, 2023. It also disclosed a 1-for-40 reverse split effective in January 2023, conversion of a $666,250 note, and settlement of defaulted debt. These events do not change 2022 results and included further financing and dilution.
- Controls and risks: Management concluded disclosure controls and internal control over financial reporting were not effective at December 31, 2022. Key risks include continued financing needs, dilution, convertible debt, customer and supplier concentration, volatile LNG purchase-versus-spot prices, international/China regulatory and currency risks, and the unproven U.S. performance of HTAP systems. Management also disclosed a prior creditor default that it said was settled after year-end.
- The filing reports no material pending legal proceedings and no material research and development expense in either 2022 or 2021.
Important facts for investors to verify
- Reconcile the filing’s net-income figures: the operations statement shows 2021 net profit of $278,492 before non-controlling interest and $297,551 attributable to CETY, while the MD&A compares $147,395 in 2022 with $297,551 in 2021. Confirm the intended comparison and accounting presentation.
- Assess whether post-year-end offering proceeds and debt settlements provide sufficient liquidity, and review remaining debt maturities, interest costs, defaults, and conversion or warrant dilution.
- Verify collection of receivables and recovery of investments and advances; four customers represented approximately 98% of year-end accounts receivable.
- Confirm the status, financing, definitive terms, and capital requirements of the Shenzhen Gas venture, Shuya/Heze investments, and planned waste-to-energy projects.
- Track execution of the $800,000 Clean Cycle backlog and whether HTAP technology can be independently validated, financed, and deployed commercially in the United States.