UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________

 

FORM 10-K

______________________

 

(Mark One)

   [X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the fiscal year ended: December 31, 2017


 

 

  [  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the transition period from _______________________ to ___________________________________________

 

Commission File Number: 333-125678


 



CLEAN ENERGY TECHNOLOGIES, INC.

  (Exact name of registrant as specified in its charter)

 

Nevada

20-2675800

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


 

 

2990 Redhill Ave, Costa Mesa, California 92626

(Address of principal executive offices)


(949) 273-4990

(Registrant ’ s telephone number)

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock; Par Value $0.001

 

Securities registered pursuant to Section 12(b) of the Act:

 

None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

[  ] Yes  [X] No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

[  ] Yes  [X] No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                                                                                          



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  [X] Yes [  ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such (files).           .                                                    

[X] Yes [  ] No





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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X]

No  [   ]




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “ large accelerated filer, ” “ accelerated filer ” and “ smaller reporting company ” in Rule 12b-2 of the Exchange Act. (Check one):


 

Large accelerated filer

[  ]

Accelerated filer

[  ]

Non-accelerated filer

[  ] (Do not check if a smaller reporting company)

Smaller reporting company


[X]





Emerging growth company


[  ]

 


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  [  ]  Yes   [X] No

 

The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2017 was $1,634,547 based upon ___________ shares held by non-affiliates and the closing price of $0.022 per share. 


 The number of shares of common stock outstanding on March 31, 2018 was 554,773,461 shares.



DOCUMENTS INCORPORATED BY REFERENCE

None.



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CLEAN ENERGY TECHNOLOGIES, INC.

 (F/K/A PROBE MANUFACTURING, INC.)

Form 10-K

 

TABLE OF CONTENTS

 

Part I

 

 

Page

Item 1.

Business

5

Item 1A.

Risk Factors

11

Item 1B.

Unresolved Staff Comments

15

Item 2.

Properties

15

Item 3.

Legal Proceedings

16

Item 4.

Mine Safety Disclosures

16

 

 

Part II


Item 5.

Market for Registrant ’ s Common Equity, related Shareholder Matters and Issuer Purchases of Equity Securities

16

Item 6.

Selected Financial Data

20

Item 7.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operation

21

Item 7A.

Quantitative and Qualitative Disclosure about Market Risk

28

Item 8.

Financial Statements and Supplementary Data

29

Item 9.

Changes and Disagreements with Accountants on Accounting and Financial Disclosure

50

Item 9A

Controls and Procedures

50

Item 9B

Other Information

50

 

 

Part III


Item 10

Directors, Executive Officers and Corporate Governance

51

Item 11

Executive Compensation

61

Item 12

Security Ownership of Certain Beneficial Owners, management and Related Stockholder Matters

66

 

Item 13

Certain Relationships and Related Transactions and Director Independence

66

Item 14

Principal Accounting Fees and Services

68

Item 15

Exhibits

69

 

Signatures

69



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FORWARD-LOOKING STATEMENTS


This report, particularly the description of our business set forth in Item 1 and the discussion and analysis of our financial condition and operating results in Item 7, contains a number of “ forward-looking statements ” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. Any statements contained in this report that are not statements of historical fact should be considered to be forward-looking statements. You can identify these forward-looking statements by use of the words “ believes, ” “ expects, ” anticipates, ” plans, ” “ may, ” “ will, ” “ would, ” “ intends, ” “ estimates ” and other similar expressions. These forward-looking statements are based on current expectations, estimates, forecasts and projections about our company and the industries and markets in which we operate and on management ’ s beliefs and assumptions, and they should be read in conjunction with the information presented elsewhere in this report, including the discussion and analysis in Item 2 and the consolidated financial statements and notes provided pursuant to Item 7. Although we believe our forward-looking statements are based on reasonable beliefs and assumptions, we cannot guarantee our future performance and a number of important risks and uncertainties could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Those risks and uncertainties include the factors summarized in Item 1A as well as risks that emerge from time to time and are impossible for us to predict. Forward-looking statements, like all of the statements in this report, speak only as of the date of filing of this report with the SEC, unless another date is indicated. We disclaim any obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include the following:


-

The availability and adequacy of our cash flow to meet our requirements;

-

Economic, competitive, demographic, business and other conditions in our local and regional markets;

-

Changes or developments in laws, regulations or taxes in our industry;

-

Actions taken or omitted to be taken by third parties including our suppliers and competitors, as well as legislative, regulatory, judicial and other governmental authorities;

-

Competition in our industry;

-

The loss of or failure to obtain any license or permit necessary or desirable in the operation of our business;

-

Changes in our business strategy, capital improvements or development plans;

-

The availability of additional capital to support capital improvements and development; and



Use of Terms


Except as otherwise indicated by the context, references in this report to “ Company ” , “ CETY, ” “ we, ” “ us, ” and “ our ” are references to Clean Energy Technologies, Inc., All references to currency are in United States Dollars.





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PART I

Item 1.  Business.

 

General

 

We are headquartered in Costa Mesa, California , designs, builds and markets clean energy products focused on energy efficiency for a better, cleaner, and environmentally sustainable future. The Company ’ s principal product is the Clean Cycle TM generator, offered through its wholly owned subsidiary Clean Energy HRS LLC dba Heat Recovery Solutions, Inc., ( “ HRS ” or “ Heat Recovery Systems ” ). The Clean Cycle TM generator captures waste heat from a variety of sources and turns it into electricity that users can use or sell back to the grid.  By using our Clean Cycle TM generator commercial and industrial heat generators boost their overall energy efficiency by approximately 12%, and the savings created provide our customers with a return on their investment within 3-4 years, depending on the installation and local energy prices. Our product saves fuel, reduces pollution and requires very little maintenance. Our goal is to position CETY to become a worldwide leader in the energy efficiency market.


  Organic Rankine Cycle System Using Clean Cycle Generator



[CETYFORM10K10K3.JPG]


The Rankine Cycle is a thermodynamic cycle that converts heat into energy. The organic Rankine cycle is similar. Heat from an industrial waste source is passed through a heat exchanger where it superheats cold fluid that is vaporized. The vapor is passed through an expansion device (turbine or other expander) which creates electricity, and then through a condenser where the vapor is re-condensed to liquid and cooled. The cycle repeats itself generating energy.


We produce a turnkey Organic Rankine Cycle system we call the Clean Cycle TM generator.  Our Clean Cycle TM generators create additional power from waste heat with no additional emission and come in two models, skids for use inside a plant or containers for outdoor applications. Our customers may use their own heat exchangers or condensers or we provide these products as part of our integrated system through third party suppliers.

We compete based on efficiency, maintenance and our customer ’ s return on investment. We have an exclusive license from Calnetix to use their magnetic turbine for heat waste recovery applications. We believe that the magnetic turbine technology is more efficient than our competitors turbines which allows our systems to generate more electricity at lower heat ranges.  Because our generator is magnetic, it requires far less maintenance



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than our competitors who use oil, gearbox and rubber seals in their turbines.  We have the advantage of selling a system that was originally manufactured and sold by General Electric International so our Clean Cycle TM generator has a substantial market base and we believe has a reputation as one of the defacto standards in the market.


Our greatest advantage is that the Clean Cycle TM generator is a product that can be delivered on a turnkey basis, not a major project that needs to be designed, manufactured and installed. We believe that this is one of the most distinguishing features of our Clean Cycle ™ generator, as it significantly reduces the time our customers spend on installation, improves the speed with which we can deliver our product and reduces startup costs.   


Corporate History


We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc.  We redomiciled   to Nevada in April 2005 under the name Probe Manufacturing, Inc. We manufactured electronics and provided services to original equipment manufacturers (OEMs) of industrial, automotive, semiconductor, medical, communication, military, and high technology products  On September 11, 2015 Clean Energy HRS, our wholly owned subsidiary acquired the assets of Heat Recovery Solutions from General Electric International  In November 2015, we changed our name to Clean Energy Technologies, Inc. 


Our Products


Our CE HRS subsidiary provides clean energy and environmentally sustainable technology solutions to companies through the offering of heat recovery solutions products. The Company ’ s principal product offering currently is the Clean Cycle TM  generator. The Clean Cycle generator converts heat from a variety of sources into clean, affordable electricity.


Our Clean Cycle TM  generator  generates electricity from any heat source, typically through a heat exchanger and a closed loop hot water or steam loop directed to the Clean Cycle TM  generator. The process by which the Clean Cycle TM    generator generates electricity is  called the Organic Rankine Cycle.


Our Clean Cycle TM  generator:   


·

 requires no fuel,

·

produces no emissions, and

·

is closed loop, meaning it has feedback control within the system.

·

Meticulously engineered and improved by General Electric International and

·

is available in a complete package for indoor, outdoor and remote sites.


The major components are delivered as a complete turnkey package and include, the Integrated Power Module ( “ IPM ” ), our patented the magnetic bearing turbine, the electronics controls with the ancillary mechanical parts, packaged inside a container when used outdoors. The condenser comes as a separate piece which is purchased by either us or our customer through third party manufactures and attaches to the top of the container. Once the condenser is attached to the container all that is left to do is attach the container to the heat source, and it is ready to produce energy.

Due to the low amount of moving parts the IPM is a minimal maintenance solution, that requires no oils, no lubricants, no external rotating seals, and does not require manned operation. The whole package (except condenser) is mounted inside a 20ft shipping container. The Condenser comes as a separate piece and attaches to the top of the container. Once the condenser is attached to the container all that is left to do is attach the container to the heat source, and it is ready to produce energy.






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The Clean Cycle Containerized Generator


[CETYFORM10K10K5.GIF]

Clean CycleTM generator and the Organic Rankine Cycle


The Organic Rankine Cycle  is a thermodynamic process where heat is transferred to a fluid at a constant pressure. The fluid inside the generator is vaporized and then expanded in a vapor turbine that drives a turbine generator, producing electricity. The spent vapor is condensed to liquid and recycled back through the cycle.


Its applications include power generation from solar, geothermal and waste heat sources. According to an article in Distributed Energy, a leading industry magazine, Organic Rankine Cycle systems are most useful for waste heat recovery. Waste heat recovery can be applied to a variety of low­ to medium temperature heat streams.


We have used our Clean Cycle Containerized Generator in Marshall Island for Marshall Electric Company to offset engine fuel use and produce additional electricity. The two cycle generators will generate an estimated 184kW of net electrical power from the heat of exiting engines. The clean cycle units, which require no added fuel and produce no additional emissions, are expected to displace 3.5 million liters of fuel and 10,000 metric tons of CO 2 . Our products are be particularly useful in nations where the cost of energy is high, and the savings rapidly offset the cost of their fuel and reduce emissions.


We currently hold 15 patents in 6 countries and 28 pending applications in 8 countries, which was acquired from General Electric International. Majority of our materials and components are procured domestically from mechanical and electrical suppliers. We have in-house electro-mechanical assembly and testing capabilities. Our products are compliant with American Society of Mechanical Engineers and are UL and CE approved.


We are currently in default on the payment of the purchase price pursuant to our asset purchase agreement with General Electric International due to a combination of our inability to raise sufficient capital as expected and our belief that we are entitled to a reduction in purchase price we paid. We are in the process of negotiations with General Electric International. .


Our Services

 

Engineering .   Our global engineering team supports the installation and maintenance of our Clean CycleTM generators, supports our technology customers and innovative start-ups with a broad range of electrical, mechanical



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and software engineering services. CETY has assembled a team of experts from around the globe to assist customers at any point in the design cycle.  These services include design processes from electrical, software, mechanical and Industrial design. Utilization of CETY ’ s design services will enable rapid market entry for our customers and potential equity partners. Our design and engineering services provides flexibility to our customers by becoming an extension of their engineering departments and allowing them to focus on their business strategy.

Supply Chain Management .   CETY ’ s supply chain solution provides maximum flexibility and responsiveness through a collaborative and strategic approach with our customers. CETY can assume supply chain responsibility from component sourcing through delivery of finished product. CETY ’ s focus on the supply chain allows us to build internal and external systems and better our relationships with our customers, which allows us to capitalize on our expertise to align with our partners and customer ’ s objectives and integrate with their respective processes.

Business Model

Management ’ s plan is to continue its efforts  to take the following steps to achieve profitability and growth: (i) increase sales through existing global distribution channels,utilization of direct sales, integrators, and engineering firms (ii) sell electricity by kWh to Island nations in the pacific rim where the cost of energy is higher and it can offset the cost of their fuel and reduce  emissions (iii) Leveraging core competencies to acquire technologies and entertain equity opportunities and (iv) license patented technology and  proprietary processes and develop cogeneration and OEM opportunities. 

Our business objective is to design, build, and market Clean Technology products and Clean CycleTM generators that we can manufacture for direct sale to customers or license our technology to manufacturers and other producers of specialized applications. Our revenue has and will come from:

·

Sales thru global distribution channels;

·

Direct sales revenue from Clean CycleTM generators we manufacture in-house or through contractors;

·

Up-front license fees and on-going royalties based on sales by our licensees;

·

Sales thru cogeneration or OEM opportunities.

We also plan to design and install power generation systems for certain waste heat recovery applications using our Clean Cycle TM generators as an electricity generator to produce electricity which we plan to sell to our customers. Waste heat recovery is the process of using heat generated from another source, such as an industrial furnace, to produce electricity.  We plan to use our Clean Cycle TM generators in this process.  

Sales and Marketing

 

Our marketing approach is to position CETY as a worldwide leader in the energy efficiency market by targeting   industries that have waste heat which could potentially turn into electricity. We plan to leverage our core expertise to identify, acquire and develop leading clean energy and clean technology solutions and products. We will continue to utilize our relationships and expertise to expand in clean and renewable energy sector through new in-house development, acquisitions, cogeneration, and licensing agreements.

 

We utilize both a direct sales force and global distribution group with expertise in heat recovery solutions and clean energy markets.


CETY maintains an online presence through our web portal and social media. Our application engineers assist in converting the opportunities into projects. We provide technical support to our Clean Cycle TM generator clients through providing maintenance and product support.


Program Managers are responsible for managing the global supply chain, reducing material acquisition time and cost. They ’ re also responsible for the profitability of the programs and ultimately the customer satisfaction index, including on-time delivery, quality, communication and technology.




9


The sales of our products are related to the global prices for oil, gas, coal and solar energy. As prices increase our products produce a better return on investment for our customers.

  

Our Market

 

The world currently faces fundamental problems with its energy supply, which are due primarily to the reliance on fossil fuels. The economic prosperity of the wealthiest nations in the twentieth century was built on a ready supply of inexpensive fossil fuel and developing nations have continued in the twenty-first century to consume fossil fuel reserves at an ever increasing rate. This has led to worldwide reserve depletions, indicating that both oil and gas are likely to be effectively exhausted before the end of this century. Only coal reserves are expected to last into the next century. Yet even if fossil fuel supplies were unconstrained, their continued use poses its own problems. All fossil fuel combustion produces carbon dioxide, which appears to result in the warming of the earth's atmosphere with profound environmental implications across the globe.

 

These problems have resulted in the realization that the world must both increase the efficiency of its utilization of fossil fuels and decrease its reliance upon them. Environmental issues related to fossil fuel combustion were began to be noticed during the 1980 ’ s with the advent of acid rain, a product of the sulfur and nitrogen emissions from fossil fuel combustion. Power plants were forced by legislation and economic measures to control these emissions. However it is the recognition of global warming that presents the most serious challenge because carbon dioxide exists at much higher levels in the flue gases of power plants and major types of industrial manufacturing facilities than sulfur dioxide and nitrogen oxides.

 

Although renewable energy capacity offers a hedge against major price rises because most renewable technologies exploit a source of energy that is freely available, many renewable technologies today still rely on government subsidies to make them competitive. Governments may also impose penalties upon companies, such as carbon trading schemes, which discourage the use of fossil fuels or increase its costs by imposing stringent emissions limits.

 

Given the international concerns regarding global warming and pollution and the need to more efficiently utilize fossil fuels, we believe that there exists substantial worldwide demand and a growing market for our Clean Cycle TM generators that can enable companies to generate greater amounts of energy from the same supply of fossil fuels and that also reduce the amount of harmful emissions that would otherwise be released from the combustion of those fossil fuels. Our technologies, including our Clean Cycle TM generators, could benefit companies by both reducing energy costs and mitigating possible emissions penalties.


The market for waste heat recovery is well defined and, according to a recent report published by the U.S. Department of Energy “ Waste Heat recovery: Technology and Opportunities in US Industry ” and International Energy Agency report, “ World Energy Outlook 2012 ” ,   “ 20 to 50% of industrial energy input is lost as waste heat. ” and “ ~3/5 of the primary energy used in power plants becomes waste heat ” . The opportunity in the waste heat recovery market is substantial.  The report continues, “ A valuable alternative approach to improving overall energy efficiency is to capture and reuse the lost or ‘ waste heat ’ that is intrinsic to all manufacturing processes. During these manufacturing processes, as much as 20% to 50% of the energy consumed is ultimately lost via waste heat contained in streams of hot exhaust gases and liquids, as well as through heat conduction, convection, and radiation from hot equipment surfaces and from heated product streams.  In some cases, such as industrial furnaces, waste heat recovery can improve energy efficiency by 10% to as much as 50%. ”


The advantage of recapturing and utilizing waste heat is that it typically replaces purchased electric power, much of which does and will continue to require burning fossil fuels, or directly replaces fuels which must be purchased and combusted. Thus it actually can directly reduce emissions and eliminate transmission losses. Projections of market potential are truly enormous, with unrecovered waste heat in industrial processes estimated at half a quintillion (a billion billion) BTUs. The Company believes that if it can capture even a small percentage of this market it would have a strong opportunity to reduce exhaust emissions, assist in lowering energy costs of the manufacturers, while growing the Company and its client base.


Going Concern




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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 stockholder ’ s 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.


Our operating results are affected by a number of factors, including the following:

 

·

changes in the macro-economic environment and related changes in electricity & fuel cost;

·

the effects on our business when our customers are not successful in marketing their products and solutions;

·

the effects of government and municipality regulations impeding growth;

 

Competition


The competitors with our Clean Cycle TM II Generators are Organic Rankine Cycle generator manufacturers such as Turboden, Ormat and some start-ups with fewer installations and some engine competitors aligning with ORC such as Wartsila, Caterpillar, and Cummins. Our product was designed by General Electric International and maintains its history and association with a major brand, however Clean Cycle TM II is currently branded under CETY an entrepreneurial company with a proven product and technology. Our product is distinguished from its competitors by its magnetic bearing turbine technology offering lower maintenance and higher efficiency of 12% for under 500kW applications with low to medium temperature requirements. We have more than 1,000,000 fleet operating hours and 8 years of history in the field.


Employees

 

We presently have approximately 10 employees, including production, program management, materials management, engineering, sales, quality, and administrative and management personnel. We have never experienced work stoppages and we are not a party to any collective bargaining agreement. 

 

Government Regulation

 

Our operations are subject to certain foreign, federal, state and local regulatory requirements relating to environmental, waste management, and health and safety matters. We believe we operate in substantial compliance with all applicable requirements. However, material costs and liabilities may arise from these requirements or from new, modified or more stringent requirements. Material cost may rise due to additional manufacturing cost of raw or made parts with the application of new regulations. Our liabilities may also increase due to additional regulations imposed by foreign, federal, state and local regulatory requirements relating to environmental, waste management, and health and safety matters. In addition, our past, current and future operations and those of businesses we acquire, may give rise to claims of exposure by employees or the public or to other claims or liabilities relating to environmental, waste management or health and safety concerns.

 

Our markets can be positively or negatively impacted by the effects of governmental and regulatory matters. We are affected not only by energy policy, laws, regulations and incentives of governments in the markets into which we sell, but also by rules, regulations and costs imposed by utilities. Utility companies or governmental entities could place barriers on the installation of our product or the interconnection of the product with the electric grid. Further, utility companies may charge additional fees to customers who install on-site power generation, thereby reducing the electricity they take from the utility, or for having the capacity to use power from the grid for back-up or standby purposes. These types of restrictions, fees or charges could hamper the ability to install or effectively use our products or increase the cost to our potential customers for using our systems in the future. This could make our systems less desirable, thereby adversely affecting our revenue and profitability potential. In addition, utility rate reductions can make our products less competitive which would have a material adverse effect on our future



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operations. These costs, incentives and rules are not always the same as those faced by technologies with which we compete. However, rules, regulations, laws and incentives could also provide an advantage to our Heat Recovery Solutions as compared with competing technologies if we are able to achieve required compliance at a lower cost when our Clean Cycle TM generators are commercialized. Additionally, reduced emissions and higher fuel efficiency could help our future customers combat the effects of global warming. Accordingly, we may benefit from increased government regulations that impose tighter emission and fuel efficiency standards.


 Research and Development

 

We had no expenses in Research and Development costs during the years ended December 31, 2016 and 2017. 


WHERE YOU CAN GET ADDITIONAL INFORMATION


We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy our reports or other filings made with the SEC at the SEC ’ s Public Reference Room, located at 100 F Street, N.E., Washington, DC 20549. You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can also access these reports and other filings electronically on the SEC ’ s web site, www.sec.gov .


Item 1a.  Risk Factors.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. We reserve the right not to provide risk factors in our future filings. Our primary risk factors and other considerations include:


RISKS ABOUT OUR BUSINESS

 

OUR INDEPENDENT ACCOUNTANTS HAVE ISSUED A GOING CONCERN OPINION AND IF WE CANNOT OBTAIN ADDITIONAL FINANCING AND/OR REDUCE OUR OPERATING COSTS SUFFICIENTLY, WE MAY HAVE TO CURTAIL OPERATIONS AND MAY ULTIMATELY CEASE TO EXIST.


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 stockholder ’ s 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.



WE HAVE AN ACCUMULATED DEFICIT AND MAY INCUR ADDITIONAL LOSSES; THEREFORE, WE MAY NOT BE ABLE TO OBTAIN THE ADDITIONAL FINANCING NEEDED FOR WORKING CAPITAL, CAPITAL EXPENDITURES AND TO MEET OUR DEBT SERVICE OBLIGATIONS.

 

As of December 31, 2017, we had current liabilities of $6,888,698. Our debt could limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, or other purposes in the future, as needed; to plan for, or react to, changes in technology and in our business and competition; and to react in the event of an economic downturn.

 

We may not be able to meet our debt service obligations. If we are unable to generate sufficient cash flow or obtain funds for required payments, or if we fail to comply with covenants in our revolving lines of credit, we will be in



12


default. We are currently in default on the payment of the purchase price pursuant to our asset purchase agreement with General Electric International due to a combination of our inability to raise sufficient capital as expected and our belief that we are entitled to a reduction in purchase price we paid. We are in the process of negotiations with General Electric International. We are currently in default with our notes payable to Cybernaut Zfounder Ventures.

We are in discussions with both General Electric International and Cybernaut Zfounder Ventures.

 

IF DEMAND FOR THE PRODUCTS AND SERVICES THAT THE COMPANY OFFERS SLOWS, OUR BUSINESS WOULD BE MATERIALLY AFFECTED.


Demand for products which it intends to sell depends on many factors, including:


 

•

 

the economy, and in periods of rapidly declining economic conditions, customers may defer purchases or may choose alternate products;


the cost of oil, gas and solar energy;

 




 

•

 

the competitive environment in the heat to power sectors may force us to reduce prices below our desired pricing level or increase promotional spending;






•


our ability to maintain efficient, timely and cost-effective production and delivery of the products and services; and,



•


All of these factors could result in immediate and longer term declines in the demand for the products and services that we offer, which could adversely affect our sales, cash flows and overall financial condition.



WE FACE INTENSE COMPETITION, WHICH MAY REDUCE OUR SALES, OPERATING PROFITS, OR BOTH .

 

The Energy Efficiency market is large, competitive and diverse, and is serviced by many companies, whereby we compete with numerous domestic and foreign firms. 

 

WE MAY LOSE OUT TO LARGER AND BETTER-ESTABLISHED COMPETITORS.

 

The alternative power industry is intensely competitive. Most of our competitors have significantly greater financial, technical, marketing and distribution resources as well as greater experience in the industry than we have. Our products may not be competitive with other technologies, both existing at the current time and in the future. If this happens, our sales and revenues will decline, or fail to develop at all. In addition, our current and potential competitors may establish cooperative relationships with larger companies to gain access to greater development or marketing resources. Competition may result in price reductions, reduced gross margins and loss of market share.


OUR PRODUCTS MAY BE DISPLACED BY NEWER TECHNOLOGY.


The alternative power industry is undergoing rapid and significant technological change. Third parties may succeed in developing or marketing technologies and products that are more effective than those developed or marketed by us, or that would make our technology obsolete or non-competitive. Accordingly, our success will depend, in part, on our ability to respond quickly to technological changes. We may not have the resources to do this.

 

WE MUST HIRE QUALIFIED ENGINEERING, DEVELOPMENT AND PROFESSIONAL SERVICES PERSONNEL.

 

We cannot be certain that we can attract or retain a sufficient number of highly qualified mechanical engineers, industrial technology and manufacturing process developers and professional services personnel. To deploy our products quickly and efficiently, and effectively maintain and enhance them, we will require an increasing number of technology developers. We expect customers that license our technology will typically engage our professional engineering staff to assist with support, training, consulting and implementation. We believe that growth in sales



13


depends on our ability to provide our customers with these services and to attract and educate third-party consultants to provide similar services. As a result, we plan to hire professional services personnel to meet these needs. New technical and professional services personnel will require training and education and it will take time for them to reach full productivity. To meet our needs for engineers and professional services personnel, we also may use costlier third-party contractors and consultants to supplement our own staff. Competition for qualified personnel is intense, particularly because our technology is specialized and only a limited number of individuals have acquired the needed skills. Additionally, we will rely on third-party implementation providers for these services. Our business may be harmed if we are unable to establish and maintain relationships with third-party implementation providers.


WE MAY BE ADVERSELY AFFECTED BY SHORTAGES OF REQUIRED COMPONENTS.   IN ADDITION, WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS TO PROCURE OUR PARTS FOR PRODUCTION WHICH IF AVAILABILITY OF PRODUCTS BECOMES COMPROMISED IT COULD ADD TO OUR COST OF GOODS SOLD AND AFFECT OUR REVENUE GROWTH.

 

At various times, there have been shortages of some of the components that we use, as a result of strong demand for those components or problems experienced by suppliers. These unanticipated component shortages have resulted in curtailed production or delays in production, which prevented us from making scheduled shipments to customers in the past and may do so in the future. Our inability to make scheduled shipments could cause us to experience a reduction in our sales and an increase in our costs and could adversely affect our relationship with existing customers as well as prospective customers. Component shortages may also increase our cost of goods sold because we may be required to pay higher prices for components in short supply and redesign or reconfigure products to accommodate substitute components.

 

OUR PRINCIPAL SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS, IN THE AGGREGATE, BENEFICIALLY OWN MORE THAN 50% OF OUR OUTSTANDING COMMON STOCK AND THESE SHAREHOLDERS, IF ACTING TOGETHER, WILL BE ABLE TO EXERT SUBSTANTIAL INFLUENCE OVER ALL MATTERS REQUIRING APPROVAL OF OUR SHAREHOLDERS .

 

Our principal shareholders, directors and executive officers in the aggregate, beneficially own more than 50% our outstanding common stock on a fully diluted basis. These shareholders, if acting together, will be able to exert substantial influence over all matters requiring approval of our shareholders, including amendments to our Articles of Incorporation, fundamental corporate transactions such as mergers, acquisitions, the sale of the company, and other matters involving the direction of our business and affairs and specifically the ability to determine the members of our board of directors. (See “ Principal Shareholders ” ).   

 

THE MAJORITY OF OUR SALES COME FROM A SMALL NUMBER OF CUSTOMERS WITH WHOM WE DO NOT HAVE LONG TERM CONTRACTS; IF WE LOSE ANY OF THESE CUSTOMERS, OUR SALES COULD DECLINE SIGNIFICANTLY.

 

Sales to our five largest customers have represented a significant percentage of our net sales in recent periods. Our five largest customers accounted for approximately 74% of net sales during the twelve months ended December 31, 2017.

     

Our principal customers have varied from year to year, and our principal customers may not continue to purchase services from us at current levels, if at all. Significant reductions in sales to any of these customers, or the loss of major customers, would seriously harm our business. If we are not able to timely replace expired, canceled or reduced contracts with new business, our revenues could be harmed.


We do not have any long term agreements with our customers, and our principal customers may not continue to purchase services from us. The duration of a purchase order is usually from 30 to 360 days.

 

IF WE LOSE KEY SENIOR MANAGEMENT PERSONNEL OUR BUSINESS COULD BE NEGATIVELY AFFECTED. FURTHER, WE WILL NEED TO RECRUIT AND RETAIN ADDITIONAL SKILLED MANAGEMENT PERSONNEL AND IF WE ARE NOT ABLE TO DO SO, OUR BUSINESS AND OUR ABILITY TO CONTINUE TO GROW COULD BE HARMED.



14


 

Our success depends to a large extent upon the continued services of our executive officers. We could be seriously harmed by the loss of any of our executive officers. In order to manage our growth, we will need to recruit and retain additional skilled management personnel and if we are not able to do so, our business and our ability to continue to grow could be harmed. Although a number of companies in our industry have implemented workforce reductions, there remains substantial competition for highly skilled employees.

 

WE ARE SUBJECT TO ENVIRONMENTAL COMPLIANCE RISKS AND UNEXPECTED COSTS THAT WE MAY INCUR WITH RESPECT TO ENVIRONMENTAL MATTERS MAY RESULT IN ADDITIONAL LOSS CONTINGENCIES, THE QUANTIFICATION OF WHICH CANNOT BE DETERMINED AT THIS TIME.

We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, storage, discharge and disposal of hazardous substances in the ordinary course of our manufacturing process.  If more stringent compliance or cleanup standards under environmental laws or regulations are imposed, or the results of future testing and analyses at our current or former operating facilities indicate that we are responsible for the release of hazardous substances, we may be subject to additional remediation liability. Further, additional environmental matters may arise in the future at sites where no problem is currently known or at sites that we may acquire in the future. Currently unexpected costs that we may incur with respect to environmental matters may result in additional loss contingencies, the quantification of which cannot be determined at this time.



RISKS ABOUT OUR STOCK

 

SHARES OF OUR COMMON STOCK ARE SUBJECT TO THE PENNY STOCK RESTRICTIONS WHICH CREATES A LACK OF LIQUIDITY AND MAKE TRADING DIFFICULT OR IMPOSSIBLE .

 

Our shares of common stock are traded in the over-the-counter markets which are commonly referred to as the OTC Markets. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the price of our securities.

 

The United States Securities and Exchange Commission, or the SEC, has adopted rules that regulate broker-dealer practices in connection with transactions in "penny stocks." Penny stocks (generally) are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on NASDAQ, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. Prior to a transaction in a penny stock, a broker-dealer is required to:

 

·          Deliver a standardized risk disclosure document prepared by the SEC;

·          Provide the customer with current bid and offer quotations for the penny stock;

·          Explain the compensation of the broker-dealer and its salesperson in the transaction;

·          Provide monthly account statements showing the market value of each penny stock held in the customer's account;

·          Make a special written determination that the penny stock is a suitable investment for the purchaser; and

·          Provide a written agreement to the transaction.

 

These requirements may have the effect of reducing the level of trading activity in the secondary market for our stock. Because our shares are subject to the penny stock rules, you may find it more difficult to sell your shares.

 

OUR SECURITIES ARE THINLY TRADED WHICH DOES NOT PROVIDE LIQUIDITY FOR OUR INVESTORS.

 

Our securities are quoted on the Over-the-Counter Markets as a Pink Sheet SEC Reporting Company. The OTC Markets is an inter-dealer, over-the-counter market that provides significantly less liquidity than the NASDAQ Stock Market or national or regional exchanges. Securities traded on the OTC Markets are usually thinly traded,



15


highly volatile, have fewer market makers and are not followed by analysts. The Securities and Exchange Commission's order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the OTC Markets. Quotes for stocks included on the OTC Markets are not listed in newspapers. Therefore, prices for securities traded solely on the OTC Markets may be difficult to obtain and holders of our securities may be unable to resell their securities at or near their original acquisition price, or at any price.

 

Investors must contact a broker-dealer to trade over-the-counter bulletin board securities. As a result, you may not be able to buy or sell our securities at the times that you may wish. Furthermore, when investors place market orders to buy or sell a specific number of shares at the current market price it is possible for the price of a stock to go up or down significantly during the lapse of time between placing a market order and its execution.


THE MARKET PRICE AND TRADING VOLUME OF SHARES OF OUR COMMON STOCK MAY BE VOLATILE.

 

The market price of our common stock could fluctuate significantly for many reasons, including for reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or negative announcements by customers, or competitors regarding their own performance, as well as general economic and industry conditions.  In addition, when the market price of a company ’ s shares drops significantly, stockholders could institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.

 

IF WE FAIL TO MAINTAIN EFFECTIVE INTERNAL CONTROLS OVER FINANCIAL REPORTING, THE PRICE OF OUR COMMON STOCK MAY BE ADVERSELY AFFECTED.

 

As a public reporting company, we are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds. Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting, and may require attestation of this assessment by our independent registered public accountants. The standards that must be met for management to assess the internal control over financial reporting as effective are complex, and require significant documentation, testing and possible remediation to meet the detailed standards. We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting. In addition, the attestation process by our independent registered public accountants is new and we may encounter problems or delays in completing the implementation of any requested improvements and receiving an attestation of our assessment by our independent registered public accountants.


COMPLIANCE WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE WILL RESULT IN ADDITIONAL EXPENSES.

 

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have significantly increased the costs and risks associated with accessing the public markets and public reporting. Our management team will need to invest significant management time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

 

WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE; THEREFORE, YOU MAY NEVER SEE A RETURN ON YOUR INVESTMENT.

 

We do not anticipate the payment of cash dividends on our common stock in the foreseeable future. We anticipate that any profits from our operations will be devoted to our future operations. Any decision to pay dividends will depend upon our profitability at the time, cash available and other factors.




16


Item 1B.  Unresolved Staff Comments.

 

None.

 

Item 2.  Properties.


As of May 1, 2016, our corporate headquarters are located at 2990 Redhill Unit A, Costa Mesa, CA. On March 10, 2016, the Company signed a lease agreement for a 18,200-square foot CTU Industrial Building. Lease term is seven years and two months beginning July 1, 2016. Future minimum lease payments for the years ending December 31, are:



 

Year

 

Lease Payment

2018

 

$228,000

2019

 

$234,840

2020

 

$241,884

2021

 

$249,132

2022

 

$256,608

2023

 

$44,052



Our Rent expense for the years ended December 31, 2017 and 2016 was $268,551 and $230,024 respectively.


Item 3. Legal Proceedings.

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

Item 4.  Mine Safety Disclosures


Not Applicable.

 

PART II

 

Item 5.  Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Bid and ask quotations for our common shares are routinely submitted by registered broker dealers who are members of the National Association of Securities Dealers on the NASD Over-the-Counter Electronic Bulletin Board. These quotations reflect inner-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The high and low bid information for our shares for each quarter for the last two years, so far as information is reported, through the quarter ended December 31, 2017, as reported by the OTC Markets, are as follows:

 

2016 FISCAL YEAR

 

High

 

Low

First Quarter

 

$0.10

 

$0.04

Second Quarter

 

$0.0895

 

$0.02

Third Quarter

 

$0.04

 

$0.008

Fourth Quarter

 

$0.034

 

$0.005

   



17


 

2017 FISCAL YEAR

 

High

 

Low

First Quarter

 

$0.0111

 

$0.001

Second Quarter


  $0.027


$0.0032

Third Quarter

 

$0.0318

 

$0.01

Fourth Quarter

 

$0.0238

 

$0.0101



Record Holders


As of December 31, 2017, there were 210,881,122 shares of the registrant ’ s $0.001 par value common stock issued and outstanding and were owned by approximately 260 holders of record, based on information provided by our transfer agent.


Dividend Policy


We have never declared a cash dividend on our common stock and our Board of Directors does not anticipate that we will pay cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will depend upon our financial condition, operating results, capital requirements, restrictions contained in our agreements and other factors which our Board of Directors deems relevant.


Securities Authorized for Issuance Under Equity Compensation Plans

 

The following table summarizes securities authorized for issuance under equity compensation plans:

 

 

Equity Compensation Plan Information

Plan Category

Number of shares of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)

 

(a)

(b)

(c)

2016 Stock Compensation Program

2,550,000

$0.03

-

Total

2,550,000

$0.03

4,192,943


Subsequently on February 9, 2018 the non-employee board members resigned, as disclosed in our 8K filed on February 15, 2018. As a result, all remaining 2,550,000 stock options were cancelled.



Recent Sales of Unregistered Securities


For the years ended December 31, 2017 we issued the following securities without registration under the Securities Act of 1933, as amended. These securities were issued on the reliance of an exemption provided by Section 4(2) of the Securities Act.


On January 4, 2017 we issued 2,300,000 shares @ .002291 for a partial conversion of a note dated June 6, 2016 in the amount of $5,041.




18


On January 4, 2017 we issued 7,000,000 shares @ .0022 for a partial conversion of a note dated July 6, 2016 in the amount of $15,400.


On February 8, 2017 we issued 2,400,000 shares @ .00188 for a partial conversion of a note dated June 6, 2016 in the amount of $4,512.


On February 27, 2017 we issued 8,600,000 shares @ .001 for a partial conversion of a note dated June 6, 2016 in the amount of $8,600.


On March 3, 2017 we issued 9,000,000 shares @ .001 for a partial conversion of a note dated June 6, 2016 in the amount of $9,000.


On March 8, 2017 we issued 600,000 shares @ .007 for compensation in the amount of $4,200.


On March 10, 2017 we issued 9,500,000 shares @ .001 for a partial conversion of a note dated June 6, 2016 in the amount of $9,500.


On April 4, 2017 we issued 7,700,000 shares @ .001 for a partial conversion of a note dated June 6, 2016 in the amount of $7,700.


On May 11, 2017 we issued 7,369,080 shares of common stock for the final conversion of a note dated June 6, 2016 in the amount of $9,211.


On September 11, 2017 we issued 1,233,959 for a partial conversion of $20,000 in accrued interest.





19


Item 6.  Selected Financial Data.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. We reserve the right not to provide the Selected Financial Data in our future filings.



Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

You should read this section together with our consolidated financial statements and related notes thereto included elsewhere in this report.

 


  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 stockholder ’ s 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.


Summary of Results for the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

 

For the year ended December 31, 2017, we had a net loss of $2,214,854 compared to a net loss of $1,699,726 for the same period in 2016. The increase in the net loss in 2017 was mainly due to the Interest expense of 444,612 and financing fees of $708,714 associated with the convertible debt and lines of credit.  For the year ended December 31, 2017, our revenue was $957,633 compared to $2,047,333 for the same period in 2016. For the year ended December 31, 2017, our cost of goods sold was 57% compared to 63% for the same period in 2016, mainly due to the decrease material cost and higher efficiency as a percent of sales.  For the twelve months ended December 31, 2017, our gross margin was 43% compared to 37% for the same period in 2016.  For the twelve months ended December 31, 2017, our operating expense was $1,616,735 compared to $2,041,117 for the same period in 2016.  For the year ended December 31, 2017, we had a net loss from operations of $1,203,854 compared to $1,276,795 for the same period in 2016. Our total stockholder ’ s equity decreased by $1,844,928 resulting in shareholder deficit of $4,113,182 as of December 31, 2017.  As of December 31, 2017, we had a working capital deficit of $5,547,652 compared to working capital deficit of $3,307,374 as of December 31,2016.


  Cash and Cash Equivalents

 

We maintain the majority of its 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.

 

Estimates

 

The preparation of financial statements in conformity with GAAP 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.

 



20


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, we had a reserve for potentially un-collectable accounts of $7,000.  Five (5) customers accounted for approximately 97% 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, we had a reserve for potentially obsolete inventory of $250,000. 


Property and Equipment

 

Property and equipment are stated 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.  We follow the practice of capitalizing property and equipment purchased over $5,000.  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                                                  2 years (life of the lease)

 

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.

 

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.



21


 

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 142,572,730, 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 have suspended all research and development to focus on the expansion of our existing product line.

 

We had no expenses in Research and Development costs during the years ended December 31, 2016 and 2017. 


Segment Information     


Please see Note 2 in the footnotes to the financial statement for a discussion on our segment information.

 

Share Based Compensation  

 

For a discussion on share-based compensation and recently issued accounting pronouncements relating to share based compensation, see Note 2, Basis of Presentation and Summary of Significant Accounting Policies, to our accompanying audited financial statements. 

 

Income Taxes


For a discussion income taxes and recently issued accounting pronouncements relating to share based compensation, see Note 2, Basis of Presentation and Summary of Significant Accounting Policies, to our accompanying financial statements. 

 

Results for the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

 


Net Sales 

 

For the year ended December 31, 2017, our revenue was $957,633 compared to $2,047,333 for the same period in 2016.  Our revenue decreased mainly due to the transitional period while raising capital to fund the new business and establishing a new sales strategy for newly acquired HRS assets.


Gross Profit 

 

For the year ended December 31, 201 7 , our gross profits increased to 43 % from 37 % for the same period in 201 6 . Our gross profits could vary from period to period and is affected by a number of factors, including product mix, production efficiencies, component availability and costs, pricing, competition, customer requirements and unanticipated restructuring or inventory charges and potential scrap of materials


Selling, General and Administrative (SG&A) Expenses 

 

For the year ended December 31, 201 7 , our SG&A expense was $ 422,746 compared to $527,943 for the same period in 201 6 .


Salaries Expense




22


For the year ended December 31, 201 7 , our Salaries expense was $ 783,656 compared to $ 933,125 for the same period in 201 6


Facility Lease Expense


For the year ended December 31, 201 7 , our Facility Lease expense was $268,551 compared to 230,024 for the same period in 201 6


Professional fees Expense


For the year ended December 31, 201 7 , our Professional fees expense was $ 139,322 compared to $ 157,976 for the same period in 201 6 . The decrease was mainly due to a decrease in our legal fees related to our patents .


Moving expense


For the year ended December 31, 201 7 , our moving expense was $0 compared to $78,702 for the same period in 201 6


Share Based Expense  


For the year ended December 31, 201 7 , our share based expense was $2,460 compared to $113,347 for the same period in 201 6


Net (Loss) from operations

 

For the year ended December 31, 2017, our net loss from operations was $1,203,854 compared to net loss from operations of $1,276,795 for the same period in 2016. This decrease, was primarily due to the overall reduction in the operating expenses.

Gain (Loss) on derivative liability

On June 6, 2016, we entered into a one-year convertible note payable for $87,500, which accrues interest at the rate of 12% per annum.  It is not convertible until six months after its issuance and has a conversion rate of fifty-five percent (55%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the twenty (20) Trading Days immediately preceding the date of conversion. As a result we recognized a net gain on derivative liability in the amount of $2,576.

On March 11, 2016, we entered into a three-year convertible note payable in the initial face amount of $75,000, which accrues interest at the rate of 1.46% per annum.  It was not convertible until six months after its issuance and has a conversion rate of sixty five percent (65%) of the lowest closing bid price (as reported by Bloomberg LP) of common stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion.  On September 15, 2016 we issued shares at a price of $.006 per share for a partial conversion of this note in the amount of $15,000.  Subsequently, on November 1, 2016 the Company exercised its right to redeem the note, assigned its redemption right to a third-party investor, agreed to amend the conversion price of a replacement note to $.005 per share, and that investor now holds the replacement note in the principal amount of $84,000.  As a result we recognized a loss on beneficial conversion feature of $52,621.

On May 5, 2017 we entered into a six-month convertible note payable for $78,000, which accrues interest at the rate of 12% per annum.  It is not convertible until six months after its issuance and has a conversion rate of sixty-one percent (61%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion.

On May 24, 2017 we entered into a six-month convertible note payable for $32,000, which accrues interest at the rate of 12% per annum.  It is not convertible until six months after its issuance and has a conversion rate of fifty-eight percent (58%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion.

On June 13, 2017 we entered into a six-month convertible note payable for $110,000, which accrues interest at the rate of 12% per annum.  It is not convertible until six months after its issuance and has a conversion rate of fifty-five



23


percent (55%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the twenty-five (25) Trading Days immediately preceding the date of conversion.


Financing Fees

For the year ended December 31, 201 7 our financing fees expense was $ 708,712 compared to $ 122,397 for the same period in 201 6 , due to the issuance of convertible notes and the related conversions .


Gain on Warranty Liability

For the year ended December 31, 2016 we recognized a gain on our warranty liability in the amount of $141,611

There was no change in our warranty liability for the year ended December 31, 2017.


Interest Expense

For the year ended December 31, 201 7 interest expense was $ 444,612 compared to $ 318,133 for the same period in 201 6 .


Net Income / Loss

For the year ended December 31, 2017, our net loss was $2,214,854 compared to net loss of $1,699,726 for the same period in 2016. This increase was primarily due to the increase in the financing fees.



Liquidity and Capital Resources


Clean Energy Technologies, Inc.

Selected financial data from the statement of cashflows

for the years ended December 31,






2017 

2016 

Net Cash provided / (Used) In Operating Activities

$

(1,495,470)

$

(513,186)

Cash Flows Used In Investing Activities

(75,436)

Cash Flows Provided / (used)  By Financing Activities

1,498,446 

590,868 

Net (Decrease) Increase in Cash and Cash Equivalents

$

2,976 

$

2,246 




Capital Requirements for long-term Obligations

 

None.


Critical Accounting Policies


Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.


We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other



24


assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.


Future Financing


We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.


Off-balance Sheet Arrangement

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.


Contractual Obligations


We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.


Recently Issued Accounting Pronouncements


The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.


Item 7a. Quantitative and Qualitative Disclosures about Market Risk.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.




25


 

Item 8.  Financial Statements and Supplemental Data.

 

 

CLEAN ENERGY TECHNOLOGIES, INC.

 (f/k/a PROBE MANUFACTURING, INC.)

CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2017

FINANCIAL STATEMENT TABLE OF CONTENTS

 

 

Page

Report of independent registered public accounting firm

30

Consolidated Balance Sheets as of December 31, 2017 and 2016

31

Consolidated Statements of Operations for the years ended December 31, 2017 and 2016

32

Consolidated Statements of Stockholders Equity for the years ended December 31, 2017 and 2016

33

Consolidated Statements of Cash flows for the years ended December 31, 2017 and 2016

34

Footnotes to the Consolidated Financial Statements

36






26


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of Clean Energy Technologies, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Clean Energy Technologies, Inc. ( “ the Company ” ) as of December 31, 2017 and 2016, and the related consolidated statements of operations, stockholders ’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.


Basis for Opinion

These financial statements are the responsibility of the Company ’ s management. Our responsibility is to express an opinion on the Company ’ s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company ’ s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


Consideration of the Company ’ s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has an accumulated deficit, net losses, and negative cash flows from operations. These factors raise substantial doubt about the Company ’ s ability to continue as a going concern. Management ’ s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

[CETYFORM10K10K7.GIF]


Fruci & Associates II, PLLC


We have served as the Company ’ s auditor since 2015.


Spokane, Washington

April 16, 2018



Clean Energy Technologies, Inc.

Consolidated Balance Sheets

as of December 31,





2017 

2016 

Assets



Current Assets:



 Cash

$

9,418 

$

6,442 

Accounts receivable - net

477,081 

367,623 

Inventory

854,547 

913,954 

Total Current Assets

1,341,046 

1,288,019 

Property and Equipment - Net

144,867 

187,682 




Goodwill

747,976 

747,976 

License

354,322 

354,322 

Patents

163,076 

174,911 

Other Assets

24,229 

24,229 

Total Assets

$

2,775,516 

$

2,777,139 




Liabilities and Stockholders' (Deficit)



Current Liabilities:



Bank Overdraft

$

10,863 

$

15,407 

Accounts payable - trade

996,474 

881,607 

Accrued Expenses

1,706,372 

1,666,816 

Accrued Expenses Related party

133,260 

107,167 

Warranty Liability

100,000 

100,000 

Derivative Liability

244,496 

102,913 

Notes Payable - Current (net of discount)

3,692,233 

1,716,483 

Notes Payable - Current - Related Party

5,000 

5,000 

Total Current Liabilities

6,888,698 

4,595,393 

Long-Term Debt:



Notes Payable

450,000 

Net Long-Term Debt

450,000 

Total Liabilities

6,888,698 

5,045,393 




Commitments and contingencies




Stockholders' (Deficit)



Preferred D stock, stated value $100 per share; 20,000 shares authorized; 5000 shares and 0 shares issued and outstanding respectively

750,000 

750,000 

Common stock, $.001 par value; 400,000,000 shares authorized; 210,881,122 and 155,178,083 shares issued and outstanding respectively

210,883 

155,180 

Shares to be issued

58,000 


Additional paid-in capital

3,657,653 

3,401,430 

Accumulated deficit

(8,789,718)

(6,574,864)

Total Stockholders'  (Deficit)

(4,113,182)

(2,268,254)

Total Liabilities and Stockholders' Deficit

$

2,775,516 

$

2,777,139 

The accompanying footnotes are an integral part of these financial statements

Clean Energy Technologies, Inc.

Consolidated Statements of Operations

for the years ended December 31,





2017 

2016 

Sales

$

957,633 

$

2,047,333 

Cost of Goods Sold

544,752 

1,283,011 

Gross Profit

412,881 

764,322 




General and Administrative



 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 

Total Expenses

1,616,735 

2,041,117 

Net Profit / (Loss) From Operations

(1,203,854)

(1,276,795)




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 Profit / (Loss) Before Income Taxes

(2,214,854)

(1,699,726)

Income Tax Expense

Net Profit / (Loss)

$

(2,214,854)

$

(1,699,726)




Per Share Information:



Net Profit / (Loss) per common share basic and diluted

$

(0.01)

$

(0.01)




Basic and diluted weighted average number



of common shares outstanding

200,560,377 

142,572,730 


The accompanying footnotes are an integral part of these financial statements



Clean Energy Technologies, Inc.

Consolidated Statements of Stockholders Equity

December 31, 2017



Common Stock
.001 Par

Preferred Stock        

Treasury Stock

Common Stock
to be issued




Description

 Shares

Amount

 Shares

Amount

Shares

Amount

Amount

Additional Paid in Capital

Accumulated Deficit

Stock
holders' Deficit Totals

12/31/2015

139,446,765

$

139,449

$

7,500

$

750,000

$

11,500 

$

(633)

$

-

$

2,736,477 

$

(4,875,137)

$

(1,249,844)






















Shares Issued for Financing fees

400,000

400






27,600 


28,000 

Shares Issued for Note conversion

387,866

388






30,641 


31,029 

Shares Issued for Note conversion

2,380,952

2,381






12,619 


15,000 

Shares issued for Services

300,000

300






8,700 


9,000 

Share based Expense for options issued








76,347 


76,347 

Shares issued for conversion of accrued expenses

562,500

563






44,438 


45,000 

Shares Issued for Note conversion

1,200,000

1,200






3,120 


4,320 

Shares issued for cash

10,500,000

10,500






409,500 


420,000 

Beneficial Conversion Feature








52,621 


52,621 

Shares no longer valid





(11,500)

633 


(633)


Net Loss









(1,699,726)

(1,699,726)

December 31, 2016

155,178,083

$

155,180

7,500

$

750,000

$

$

-

$

3,401,430 

$

(6,574,864)

$

(2,268,254)












Shares Issued for Note conversion

38,800,000

38,800






158,341 


197,141 

Shares issued for Services

600,000

600






1,860 


2,460 

Shares Issued for Note conversion

15,069,080

15,069






68,382 


83,451 

Shares Issued for Note conversion

1,233,959

1,234






27,640 


28,874 

Note Conversion shares to be issued







58,000



58,000 

Net Loss









(2,214,854)

(2,214,854)

December 31, 2017

210,881,122

$

210,883

7,500

$

750,000

$

$

58,000

$  

3,657,653 

$ (8,789,718)

$ (4,113,182)


The accompanying footnotes are an integral part of these financial statements



Clean Energy Technologies, Inc.

Consolidated Statements of Cash Flows

for the years ended December 31,






2017 

2016 

Cash Flows from Operating Activities:



Net Income / ( Loss )

$

(2,214,854)

$

(1,699,726)

Adjustments to reconcile net loss to net cash



used in operating activities:



Depreciation and amortization

54,650 

41,444 

Share based compensation

2,460 

113,347 

Shares issued for finance fee

551,997 

Loss on Disposal of fixed assets

73,967 

Gain on warranty liability

(141,612)

Beneficial conversion feature

52,621 

Change in Derivative Liability and debt discount

(45,486)

29,997 

Changes in assets and liabilities:



(Increase) decrease in accounts receivable

(109,458)

107,076 

(Increase) decrease in inventory

59,407 

293,455 

(Increase) decrease in other assets

33,479 

(Decrease) increase in accounts payable

114,868 

272,197 

Other (Decrease) increase in accrued expenses

90,946 

310,569 

Net Cash Used In Operating Activities

(1,495,470)

(513,186)




Cash Flows from Investing Activities



Purchase property plant and equipment

(75,436)

Cash Flows Used In Investing Activities

(75,436)




Cash Flows from Financing Activities



Bank Overdraft / (Repayment)

(4,544)

15,407 

Proceeds from convertible notes

1,021,500 

391,250 

Proceeds from related party note

5,000 

(Decrease) increase in advances line of credit

481,490 

(97,258)

Penalty on convertible note

24,000 

Payment on notes payable

(167,531)

Proceeds from sale of common stock

420,000 

Cash Flows Provided  By Financing Activities

1,498,446 

590,868 




Net (Decrease) Increase in Cash and Cash Equivalents

2,976 

2,246 

Cash and Cash Equivalents at Beginning of Period

6,442 

4,196 

Cash and Cash Equivalents at End of Period

$

9,418 

$

6,442 







Supplemental Cashflow Information:



Interest Paid

$

238,966 

$

273,715 

Taxes Paid

$

$




Supplemental Non-Cash Disclosure:



Shares issued for Note conversion

$

367,466 

$

50,349 


The accompanying footnotes are an integral part of these financial statements




33


Clean Energy Technologies, Inc.

(f/k/a Probe Manufacturing, Inc.)

 Notes to Consolidated Financial Statements

 

Notes 1- GENERAL


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 Electric ’ s rights to the technology in those applications, together with General Electric ’ s 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 Company ’ s Current Report on Form 8K 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.  



34


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 stockholder ’ s 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) pursuing increased sales through existing global distribution channels and utilization of direct sales, integrators, and engineering firms; (ii) pursuing lease and energy-based contracts with customers, including targeted island or isolated locations where the economics, energy production, and emissions reduction profiles are attractive; (iii) pursuing stable and higher-margin electronics manufacturing services contracts where the terms are favorable to the Company; (iv) arranging financing partnerships and relationships to facilitate increased lease and energy-based commercialization of our HRS products; (v) leveraging core competencies to acquire or integrate other technologies and entertain equity opportunities; and (vi) pursuing licenses of our patented technology and proprietary processes and developing 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



36


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 Group ’ s 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 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 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



37


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 , establishes standards for reporting financial and descriptive information about an enterprise ’ s reportable segments.   The Company has two reportable segments: Clean Energy HRS (HRS) and the legacy electronic manufacturing services division. The segments are determined based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery



38


channels and similar economic characteristics. Refer to note 1 for a description of the various product categories manufactured under each of these segments. Prior to March 31, 2016 we only had one reporting segment.

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 ), which supersedes APB Opinion No. 25, “ Accounting for Stock Issued to Employees, ” and its related implementation guidance and eliminates the alternative to use Opinion 25 ’ s intrinsic value method of accounting that was provided in



39


Statement 123 as originally issued. This Statement requires an entity to measure the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and stock warrants, based on the fair value of the award, measured at the grant date (with limited exceptions). Under this standard, the fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black-Scholes option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets the requirements of SFAS No. 123R; however, the fair values generated may not reflect their actual fair values, as it does not consider certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility; however, due to the thinly traded nature of our stock, we have chosen to use an average of the annual volatility of like companies in our industry. For the “ risk-free interest rate, ” we use the Constant Maturity Treasury rate on 90-day government securities. The term is equal to the time until the option expires. The dividend yield is not applicable, as the Company has not paid any dividends, nor do we anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading common stock, on the grant date calculated using a 20-trading-day average. At the time of grant, the share-based compensation expense is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates and the expense is reduced accordingly.  It is also adjusted to account for the restricted and thinly traded nature of the shares.  The expense is reviewed and adjusted in subsequent periods if actual attrition differs from those estimates.

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 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, 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



40


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 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 — Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities

·

Update 2017-05 — Other Income — Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets 

·

Update 2017-04 — Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment 

·

Update 2017-03 — Accounting Changes and Error Corrections (Topic 250) and Investments — Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings  (SEC Update) 

·

Update 2017-01 — Business Combinations (Topic 805): Clarifying the Definition of a Business 

·

Update 2016-20 — Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers 

·

Update 2016-18 — Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) 

·

Update 2016-17 — Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control

·

Update 2016-16 — Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory 

·

Update 2016-15 — Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) 

·



41


Update 2016-13 — Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

·

Update 2016-12 — Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients

·

Update 2016-10 — Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing

·

Update 2016-09 — Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting

·

Update 2016-08 — Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)

·

Update 2016-07 — Investments — Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting

·

Update 2016-03 — Intangibles — Goodwill 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 2015-16 — Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments

·

Update 2015-15 — Interest — Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements — Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update)

·

Update 2015-11 — Inventory (Topic 330): Simplifying the Measurement of Inventory

·

Update 2015-08 — Business Combinations (Topic 805): Pushdown Accounting — Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115 (SEC Update)

·

Update No. 2015-03 — Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs

·

Update No. 2015-02 — Consolidation (Topic 810): Amendments to the Consolidation Analysis.


NOTE 3 – ACCOUNTS AND NOTES RECEIVABLE 

  


December 31, 2017

December 31, 2016

Accounts Receivable

 $                       487,081

 $                         374,623

Less Reserve for uncollectable accounts

                             (7,000)

                             (7,000)

Accounts Receivable (Net)

  $                       477,081

 $                        367,623

 

NOTE 4 – ASSET ACQUISITION

On September 11, 2015, we issued a promissory note in the initial principal amount of $1,400,000 and assumed a pension liability of $100,000, for a total liability of $1,500,000, in connection with the Company ’ s acquisition from General Electric International, Inc., a Delaware corporation ( “ GEII ” ) of certain GEII ’ s heat recovery solutions, or HRS, assets, including intellectual property, patents, trademarks, machinery, equipment, tooling and fixtures.


Acquired Assets


Inventory

 $            848,029

Leased asset

                217,584

Property and Equipment

                130,887

Intellectual Property

                545,112

Assumed warranty Liability

              (241,612)

Net Assets Acquired

 $         1,500,000


NOTE 5 – INVENTORY

 

Inventories by major classification were comprised of the following at:

  


December 31, 2017

December 31, 2016

Raw Material

$

1,089,813 

$

1,136,850 

Work in Process

14,734 

27,104 

Total

1,104,547 

1,163,954 

Less reserve for excess or obsolete inventory

(250,000)

(250,000)

Total Inventory

$

854,547 

$

913,954 


Our Inventory is pledged to Nations Interbanc, our line of credit



NOTE 6 – PROPERTY AND EQUIPMENT

 

Property and equipment were comprised of the following at:




December 31, 2017

December 31, 2016

Capital Equipment

 $              1,772,632

 $              1,772,632

Leasehold improvements

                      75,436

              75,436   

Accumulated Depreciation

                (1,703,201)

               (1,660,386)

Net Fixed Assets

 $                 144,867

 $                 187,682

 

Our Depreciation Expense for the years ended December 31, 2017 and 2016 was $42,815 and 29,542 respectively.



 NOTE 7 – ACCRUED EXPENSES



December 31, 2017

December 31, 2016




Accrued Wages

 $                    287,002

 $                    419,501

Accrued Interest

                       224,918

                       148,456

Accrued Interest Related party

                       133,259

                       107,167

Customer Deposit

                         98,594

                           3,000

Accrued Payable to GE - TSA

                       972,233

                       972,233

Accrued Rents and Moving Expenses

                       123,626

                       123,626


 $                 1,839,631

 $                 1,773,983


 

NOTE 8 – NOTES PAYABLE  

The Company issued a short-term note payable to an individual, secured by the assets of the Company, dated September 6, 2013 in the amount of $50,000 and fixed fee amount of $3,500. As of December 31, 2016 the outstanding balance was $38,500 .



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On November 11, 2013, we entered in to an accounts receivable financing agreement with American Interbanc (now Nations Interbanc).  Amounts outstanding under the agreement bear interest at the rate of 2.5% per month.  It is secured by the assets of the Company.  In addition, it is personally guaranteed by Kambiz Mahdi, our Chief Executive Officer. As of December 31, 2017, the outstanding balance was $1,145,801 compared to $688,969 at December 31, 2016.

On November 3, 2009, the Company issued an unsecured note payable to Linwood Goddard at a 12.00% interest rate, with a 36-month amortization and monthly payments of $334.14.  At March 31, 2016, the outstanding balance was $4,332. On May 13, 2016 the remaining principal balance of this note and accrued interest were converted into common stock at $.08.


On December 24, 2009, the Company issued an unsecured note payable to Linwood Goddard at a 12.00% interest rate, with a 36-month amortization and monthly payments of $334.14.  At March 31, 2016, the outstanding balance was $4,332. On May 13, 2016 the remaining Principal balance of this note and accrued interest were converted into common stock at $.08



On September 11, 2015, our CE HRS subsidiary issued a promissory note in the initial principal amount $1,400,000 and assumed a pension liability of $100,000, for a total liability of $1,500,000, in connection with our acquisition of the heat recovery solutions, or HRS, assets of General Electric International, Inc., a Delaware corporation ( “ GEII ” ), including intellectual property, patents, trademarks, machinery, equipment, tooling and fixtures.  The note bears interest at the rate of 2.66% per annum.  The note is payable on the following schedule: (a) $200,000 in principal on December 31, 2015 and (b) thereafter, the remaining principal amount of $1,200,000, together with interest thereon, payable in equal quarterly installments of principal and interest of $157,609.02, commencing on December 31, 2016 and continuing until December 31, 2018, at which time the remaining unpaid principal amount of this note and all accrued and unpaid interest thereon shall be due and payable in full


We are currently in default on the payment of the purchase price pursuant to our asset purchase agreement with General Electric due to a combination of our inability to raise sufficient capital as expected and our belief that we are entitled to a reduction in purchase price we paid. We are in the process of negotiations with General Electric..


Convertible notes

On March 15, 2016, we entered into a three-year convertible note payable in the initial face amount of $75,000, which accrues interest at the rate of 1.46% per annum.  It was not convertible until six months after its issuance and has a conversion rate of sixty five percent (65%) of the lowest closing bid price (as reported by Bloomberg LP) of common stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion.  On September 15, 2016 we issued shares at a price of $.006 per share for a partial conversion of this note in the amount of $15,000.  On November 1, 2016 the Company exercised its right to redeem the note, assigned its redemption right to a third-party investor, agreed to amend the conversion price of a replacement note to $.005 per share, and that investor now holds the replacement note in the principal amount of $84,000.

On June 6, 2016, we entered into a one-year convertible note payable for $87,500, which accrues interest at the rate of 12% per annum.  It is not convertible until six months after its issuance and has a conversion rate of fifty-five percent (55%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the twenty (20) Trading Days immediately preceding the date of conversion. On December 16, 2016 we issued 1,200,000 shares of common stock at $.0031 for a partial conversion of this note in the amount of $3,696.  Subsequently on January 4, we issued 2,300,000 shares of common stock at $.002192 for a partial conversion of this note in the amount of $5,042.

On June 15, 2016, Meddy Sahebi, Chairman of our Board of Directors, advanced the Company $5,000.  There were no specified terms for repayment of this loan other than that it was to be repaid within a reasonable time.  As of December 31, 2016 the outstanding balance was $5,000.

On July 6, 2016, we entered into a six-month convertible note payable for $77,500, which accrues interest at the rate of 10% per annum.  It is not convertible until six months after its issuance and has a conversion rate of fifty-five percent (55%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the twenty (20) Trading Days immediately preceding the date of conversion.



44


On August 12, 2016, we entered into a six-month convertible note payable for $57,000, which accrues interest at the rate of 12% per annum.  It is not convertible until six months after its issuance and has a conversion rate of fifty-five percent (55%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the twenty (20) Trading Days immediately preceding the date of conversion.


On November 2, 2016, we effected the repayment of the convertible note dated March 15, 2016 for an aggregate amount of $84,000.  Concurrently, we entered into an Escrow Funding Agreement with Red Dot Investment, Inc., a California corporation ( “ Reddot ” ), pursuant to which Reddot deposited funds into escrow to fund the repayment and we assigned to Reddot our right to acquire the convertible note and Reddot acquired the convertible note.  Concurrently, we and Reddot amended the convertible note (a) to have a fixed conversion price of $.005 per share, subject to potential further adjustment in the event of certain Common Stock issuances, (b) to have a fixed interest rate of ten percent (10%) per annum with respect to both the redemption amount and including a financing fee and any costs, expenses, or other fees relating to the convertible note or its enforcement and collection, and any other expense for or on our account (in each case with a minimum 10% yield in the event of payoff or conversion within the first year), such amounts to constitute additional principal under the convertible note, as amended, and (c) as otherwise provided in the Escrow Funding Agreement.  The March 2016 convertible note, as so amended, is referred to as the “ Master Note. ”


On January 9, 2017, we effected the partial repayment of the convertible note dated July 6, 2016.  The holder had elected to convert $15,400 ($11,544.45 in principal and $3.855.55 in accrued interest) into a total of 7,000,000 shares of Common Stock.  The conversion left $66,205.55 remaining due and payable under the July 2016 convertible note and we paid the note holder a total of $89,401.98 in repayment.  On January 12, 2017, we effected the partial repayment of the convertible note dated June 6, 2016.  The holder had elected to retain $26,117.77 (consisting of $24,228.72 in principal and $1,899.05 in interest), leaving $60,941.49 remaining due and payable under the June 2016 convertible note, which was satisfied and canceled in consideration of the payment to the note holder of $97,506.38.  On January 9, 2017, we effected the repayment in full of the convertible note dated August 12, 2016 through payment to the note holder of a total of $89,401.98.  


Concurrently with the foregoing note repayments, we entered into a Credit Agreement and Promissory Note (the “ Credit Agreement ” ) with Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation ( “ MW I ” ), pursuant to which MW I deposited funds into escrow to fund the repayment of the convertible notes and we assigned to MW I our right to acquire the convertible notes and otherwise agreed that MW I would be subrogated to the rights of each note holder to the extent a note was repaid with funds advanced by MW I.  Concurrently, MW I acquired the Master Note and we agreed that all amounts advanced by MG I to or for our benefit would be governed by the terms of the Master Note, including the payment of a financing fees, interest, minimum interest, and convertibility. Reddot is MW I ’ s agent for purposes of administration of the Credit Agreement and the Master Note and advances thereunder.


The foregoing summary descriptions of the Escrow Funding Agreement (including amendments to the Master Note), the Settlement Agreement, and the Credit Agreement are not complete and are qualified in their entirety by reference to the full texts thereof, copies of which were included as Exhibits 10.02 to our Current Report on Form 8-K dated October 31, 2016 and to Exhibits 10.01 and 10.02 to our Current Report on Form 8-K dated January 4, 2016.  The foregoing summary description of the original Master Note is not complete and is qualified in its entirety by reference to the full text thereof, a copy of which was included as Exhibit 10.03 to our Current Report on Form 8-K dated October 31, 2016.     


On May 5, 2017 we entered into a six-month convertible note payable for $78,000, which accrues interest at the rate of 12% per annum.  It is not convertible until six months after its issuance and has a conversion rate of sixty one percent (61%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. On November 6 this note was assumed and paid in full at a premium for a total of $116,600 by Cybernaut Zfounder Ventures. An amended term were added to the original note with the interest rate of 14%. This note matured on February 21 st of 2018 and is currently in default.


On May 24, 2017 we entered into a six-month convertible note payable for $32,000, which accrues interest at the rate of 12% per annum.  It is not convertible until six months after its issuance and has a conversion rate of fifty-five



45


eight percent (58%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. On November 6 this note was assumed and paid in full at a premium for a total of $95,685 by Cybernaut Zfounder Ventures. An amended term were added to the original note with the interest rate of 14%. This note matured on February 26 th , 2018 and is currently in default.


On June 13, 2017 we entered into a nine-month convertible note payable for $110,000, which accrues interest at the rate of 12% per annum.  It is not convertible until six months after its issuance and has a conversion rate of fifty-five percent (55%) of the lowest closing bid price (as reported by Bloomberg LP) of our common stock for the twenty-five (25) Trading Days immediately preceding the date of conversion. Subsequently this note was partially converted into common stock and the balance was paid in full on February 14, 2018


On July 13, 2017 we entered into a convertible note payable for $58,000, with a maturity date of April 30, 2018, which accrues interest at the rate of 12% per annum.  It is not convertible until six months after its issuance and has a conversion rate of fifty-eight percent (58%) of the average of the two lowest trading prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. This note was subsequently converted into common stock


On August 17, 2017 we entered into a convertible note payable for $68,000, with a maturity date of May 30, 2018, which accrues interest at the rate of 12% per annum.  It is not convertible until six months after its issuance and has a conversion rate of fifty-eight percent (58%) of the average of the two lowest trading prices (as reported by Bloomberg LP) of our common stock for the fifteen (15) Trading Days immediately preceding the date of conversion. This note was subsequently paid in full on February 15, 2018


On July 25, 2017 we entered into a convertible note payable for $103,000, with a maturity date of April 25, 2018, which accrues interest at the rate of 12% per annum.  It is not convertible until six months after its issuance and has a conversion rate of sixty percent (60%) of the average of the two lowest trading prices (as reported by Bloomberg LP) of our common stock for the twenty (20) Trading Days immediately preceding the date of conversion. This note was subsequently paid in full on February 15, 2018



Note 9 – Derivative Liabilities

As a result of the convertible notes we recognized the embedded derivative liability on the date that the note was convertible. We also revalued the remaining derivative liability on the outstanding note balance on the date of the balance sheet. The remaining derivative liabilities were:



 

December 31, 2017

December  31, 2016

Derivative Liabilities on Convertible Loans:

 

 

Outstanding Balance

$        244,496

$        102,913



NOTE 10 – COMMITMENTS AND CONTINGENCIES


The company has received an invoice from Oberon Securities for $291,767 which is in dispute.  The company believes it has defenses to the claim for compensation and plans to assert appropriate counterclaims and actions as permitted by law.  No liability has been recorded for this claim as the Company believes there is a greater than not probability that our Company will prevail in defending against the claim.




46


Operating Rental Leases

On August 27, 2015, we entered into a sublease agreement with Rosenson Properties, LLC, a California limited liability company, as landlord, and General Electric International, Inc., a Delaware corporation, as tenant and assignor, for the premises located at 150 Baker Street East, Costa Mesa, California.  GEII had entered into a lease dated as of December 17, 2010, as amended by a First Amendment to Lease dated March 11, 2014, wherein Rosenson Properties leased the premises to GEII.  The premises consist of approximately 35,704 square feet of space and the lease provides for monthly triple-net lease payments of $22,973.  The lease term ended on December 31, 2016.

On March 10, 2016, we signed a lease agreement for a 18,200 square-foot CTU Industrial Building at 2990 Redhill Unit A, Costa Mesa, CA.  On May 1, 2016 we moved out of the Baker Street facility and moved our operations and headquarters to the new facility.  The lease term at the new facility is seven years and two months beginning October 1, 2016.  Future minimum lease payments for the years ended December 31, as follows:

 

Year

 

Lease Payment

2018

 

$228,000

2019

 

$234,840

2020

 

$241,884

2021

 

$249,132

2022

 

$256,608

2023

 

$44,052


Our Rent expense including common area maintenance for the years ended December 31, 2017 and 2016 was $268.551 and $230,024 respectively.


Severance Benefits

Effective at December 31, 2017, Mr. Bennett, was entitled to receive in the event of his termination without cause a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Bennett would have been entitled to receive through the remainder of his employment period or two (2) years, whichever is greater, at an annual salary of $140,000.

NOTE 11 – CAPITAL STOCK TRANSACTIONS

On April 21, 2005, our Board of Directors and shareholders approved the re-domicile of the Company in the State of Nevada, in connection with which we increased the number of our authorized common shares to 200,000,000 and designated a par value of $.001 per share.

On May 25, 2006, our Board of Directors and shareholders approved an amendment to our Articles of Incorporation to authorize a new series of preferred stock, designated as Series C, and consisting of 15,000 authorized shares. 

On June 30, 2016, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 400,000,000 and in the number of our authorized preferred shares to 10,000,000.  The amendment effecting the increase in our authorized capital was filed and effective on July 5, 2016.

On August 28, 2017, our Board of Directors and shareholders approved an increase in the number of our authorized common shares to 800,000,000. The amendment effecting the increase in our authorized capital was filed and effective on August 23, 2017


Common Stock Transactions

Beginning with the year 2016, we issued the following securities without registration under the Securities Act of 1933, as amended. These securities were issued on the reliance of an exemption provided by Section 4(a)(2) or 4(a)(5) of the Securities Act.

On March 11, 2016 we issued 400,000 shares of our common stock @ $.07 for financing fees.



47


On May 5, 2016 we issued 387,866 to a previous employee @ $.08 for $8,644 in notes payable, $11,332 in accrued interest and $11,030 for past due payroll.

On August 15, 2016 we issued 562,500 shares @ $.08 to a consultant for past due amounts owed of $45,000.

On July 1, 2016 we entered into a consulting agreement with Uptick capital for 300,000 a term of 45 days. For these services, we agreed to issue a total of 300,000 shares of our common stock.

Pursuant to our 2016 Stock Compensation Program, effective July 1, 2016, we made the following stock option grants to members of our Board of Directors:  (a) we issued to each of our non-employee members of our Board of Directors first joining the Board in October 2015 and who had not received any compensation for serving as directors of the Company (five persons) options to purchase 150,000 shares of our common stock with an exercise price of $.03 per share, the last sale price of our common stock on June 29, 2016 and (b) we issued to each of our non-employee members of our Board of Directors currently serving on the Board (six persons) options to purchase 300,000 shares of our common stock with an exercise price of $.03 per share.

On September 15, 2016 we issued 2,380,952 shares @ $.006 for a partial conversion of the convertible note dated March 11, 2016 in the amount of $15,000.


On October 31, 2016, Clean Energy Technologies, Inc., a Nevada corporation (the “ Company ” ) closed a private placement pursuant to Section 4(a) (2) of the Securities Act to one investor, Cyberfuture One LP, ( “ Subscriber ” ) of an aggregate of 10,500,000 restricted common shares ( “ Shares ” ) at a price of US$0.04 per Share, for total gross proceeds of US $420,000. The offering provides that Subscriber obtains piggyback registration rights on the Shares, so long as the Subscriber holds at least 8% of the outstanding Common Stock. Also, the subscription agreement provides that if the Company and the Subscriber enter a joint venture that the Subscriber will be entitled to nominate a person to be elected to and to serve on the Board of Directors of the Company.  The restricted common shares were offered by the Company pursuant to an exemption from registration under Regulation S of the Securities Act of 1933, as amended. The private placement was fully subscribed to by one non-U.S. person.

On December 16, 2016, we issued 1,200,000 shares @ .0031 for a partial conversion of a note dated June 6, 2016 in the amount of $3,696.

On January 4, 2017 we issued 2,300,000 shares @ .002291 for a partial conversion of a note dated June 6, 2016 in the amount of $5,041.

On January 4, 2017 we issued 7,000,000 shares @ .0022 for a partial conversion of a note dated July 6, 2016 in the amount of $15,400.

On February 8, 2017 we issued 2,400,000 shares @ .00188 for a partial conversion of a note dated June 6, 2016 in the amount of $4,512.

On February 27, 2017 we issued 8,600,000 shares @ .001 for a partial conversion of a note dated June 6, 2016 in the amount of $8,600.

On March 3, 2017 we issued 9,000,000 shares @ .001 for a partial conversion of a note dated June 6, 2016 in the amount of $9,000.

On March 8, 2017 we issued 600,000 shares @ .007 for compensation in the amount of $4,200.

On March 10, 2017 we issued 9,500,000 shares @ .001 for a partial conversion of a note dated June 6, 2016 in the amount of $9,500.

On April 4, 2017 we issued 7,700,000 shares @ .001 for a partial conversion of a note dated June 6, 2016 in the amount of $7,700.

May 11, 2017 we issued 7,369,080 shares of common stock for the final conversion of a note dated June 6, 2016 in the amount of $9,211.

On September 11, 2017 we issued 1,233,959 for a partial conversion of $20,000 in accrued interest.



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Common Stock  

Our Articles of Incorporation authorize us to issue 800,000,000 shares of common stock, par value $0.001 per share. As of December 31, 2017 there were 210,881,122 shares of common stock outstanding.  All outstanding shares of common stock are, and the common stock to be issued will be, fully paid and non-assessable.  Each share of our common stock has identical rights and privileges in every respect. The holders of our common stock are entitled to vote upon all matters submitted to a vote of our shareholders and are entitled to one vote for each share of common stock held. There are no cumulative voting rights.

The holders of our common stock are entitled to share equally in dividends and other distributions that our Board of Directors may declare from time to time out of funds legally available for that purpose, if any, after the satisfaction of any prior rights and preferences of any outstanding preferred stock. If we liquidate, dissolve or wind up, the holders of common stock shares will be entitled to share ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities and our obligations to holders of our outstanding preferred stock.

Preferred Stock

Our Articles of Incorporation authorize us to issue 10,000,000 shares of preferred stock, par value $0.001 per share.  Our Board of Directors has the authority to issue additional shares of preferred stock in one or more series, and fix for each series, the designation of and number of shares to be included in each such series. Our Board of Directors is also authorized to set the powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or restrictions of the shares of each such series.

Unless our Board of Directors provides otherwise, the shares of all series of preferred stock will rank on parity with respect to the payment of dividends and to the distribution of assets upon liquidation. Any issuance by us of shares of our preferred stock may have the effect of delaying, deferring or preventing a change of our control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect the rights and powers, including voting rights, of the holders of common stock.

We previously authorized 440 shares of Series A Convertible Preferred Stock, 20,000 shares of Series B Convertible Preferred Stock, and 15,000 shares Series C Convertible Preferred Stock.  As of August 20, 2006, all series A, B, and C preferred had been converted into common stock.

Effective August 7, 2013, our Board of Directors designated a series of our preferred stock as Series D Preferred Stock, authorizing 15,000 shares.  Our Series D Preferred Stock offering terms authorized us to raise up to $1,000,000 with an over-allotment of $500,000 in multiple closings over the course of six months.  We received an aggregate of $750,000 in financing in subscription for Series D Preferred Stock, or 7,500 shares.  

The following are primary terms of the Series D Preferred Stock.  The Series D Preferred holders were initially entitled to be paid a special monthly divided at the rate of 17.5% per annum.  Initially, the Series D Preferred Stock was also entitled to be paid special dividends in the event cash dividends were not paid when scheduled.  If the Company does not pay the dividend within five (5) business days from the end of the calendar month for which the payment of such dividend to owed, the Company will pay the investor a special dividend of an additional 3.5%. Any unpaid or accrued special dividends will be paid upon a liquidation or redemption.  For any other dividends or distributions, the Series D Preferred Stock participates with common stock on an as-converted basis.  The Series D Preferred holders may elect to convert the Series D Preferred Stock, in their sole discretion, at any time after a one year (1) year holding period, by sending the Company a notice to convert.  The conversion rate is equal to the greater of $0.08 or a 20% discount to the average of the three (3) lowest closing market prices of the common stock during the ten (10) trading day period prior to conversion.  The Series D Preferred Stock is redeemable from funds legally available for distribution at the option of the individual holders of the Series D Preferred Stock commencing any time after the one (1) year period from the offering closing at a price equal to the initial purchase price plus all accrued but unpaid dividends, provided, that if the Company gave notice to the investors that it was not in a financial position to redeem the Series D Preferred, the Company and the Series D Preferred holders are obligated to negotiate in good faith for an extension of the redemption period.  The Company timely notified the investors that it was not in a financial position to redeem the Series D Preferred and the Company and the investors have engaged in ongoing negotiations to determine an appropriate extension period.  The Company may elect to redeem the Series D Preferred Stock any time at a price equal to initial purchase price plus all accrued but unpaid dividends, subject to the investors ’ right to convert, by providing written notice about its intent to redeem.  Each investor has the right to convert the Series D Preferred Stock at least ten (10) days prior to such redemption by the Company.



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In connection with the subscriptions for the Series D Preferred, we issued series F warrants to purchase an aggregate of 375,000 shares of our common stock at $.10 per share and series G warrants to purchase an aggregate of 375,000 shares of our common stock at $.20 per share.  

On August 21, 2014, a holder holding 5,000 shares of Preferred Series D Preferred agreed to lower the dividend rate to 13% on its Series D Preferred.  In September 2015, all holders of Series D Preferred signed and delivered estoppel agreements, whereby the holders agreed, among other things, that the Series D Preferred was not in default and to reduce (effective as of December 31, 2015) the dividend rate on the Series D Preferred Stock to six percent per annum and to terminate the 3.5% penalty in respect of unpaid dividends accruing on or after such date.

Warrants

Series E – Common stock warrants

On April 8, 2011, we issued 300,000 series E Warrants.  Each warrant gives the holder the right to purchase one share of common stock (300,000 total shares) at $0.50 per share. The Series E Warrants expired on April 8, 2016.

Series F – Common stock warrants

On June 25, 2013, we issued 250,000 series F warrants.  Each warrant gives the holder the right to purchase one share of common stock at $.10.

On September 19, 2013, we issued 125,000 series F warrants.  Each warrant gives the holder the right to purchase one share of common stock at $.10.

Series G – Common stock warrants

On June 25, 2013, we issued 250,000 series G warrants.  Each warrant gives the holder the right to purchase one share of common stock at $.20.

On September 19, 2013, we issued 125,000 series G warrants.  Each warrant gives the holder the right to purchase one share of common stock at $.20.


A summary of warrant activity for the periods is as follows:





 Warrants - Common Share Equivalents

Weighted Average Exercise price


 Warrants exercisable - Common Share Equivalents

Weighted Average Exercise price

Outstanding December 31, 2015

1,050,000 

0.25


1,050,000 

0.25


Granted

-


-


Expired

(300,000)

0.50


(300,000)

0.50


Exercised

-


-

Outstanding December 31, 2016

750,000 

0.15


750,000 

0.15


Granted

-


-


Expired

-


0.50


Exercised

-


-

Outstanding December 31, 2017

750,000 

0.15


750,000 

0.15












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Warrants Outstanding


 Warrants Exercisable

Range of Warrant Exercise Price

 Warrants - Common Share Equivalents

Weighted Average Exercise price

Weighted Average Remaining Contractual life in years

 

 Warrants - Common Share Equivalents

Weighted Average Exercise price

$

0.10

250,000

$

0.10

.50


250,000

$

0.10

$

0.20

250,000

$

0.20

.50


250,000

$

0.20

$

0.10

125,000

$

0.10

.75


125,000

$

0.10

$

0.20

125,000

$

0.20

.75


125,000

$

0.20

Total

750,000

$

0.15



750,000

$

0.15


Stock Options

On February 8, 2007 pursuant to our 2006 Qualified Incentive Option Plan, we granted to Company employees incentive stock options to purchase 406,638 shares of our common stock.  These options were granted at $1.73 cents, the fair market value of the Company ’ s common stock at the time of the grant. These options expired on February 8, 2017.  

On February 8, 2008, we granted stock options to our key employees to purchase up to 750,000 shares of our common stock. These options were granted at $1.73 cents, the fair market value of the Company ’ s common stock at the time of the grant. These options expired on February 8, 2017.   

On February 28, 2008, we granted stock options to a key employee to purchase up to 30,000 shares of our common stock. These options were granted at $.033 cents, the fair market value of the Company ’ s common stock at the time of the grant. These options expired on February 8, 2017.  

Pursuant to our 2016 Stock Compensation Program, effective July 1, 2016, we made the following stock option grants to members of our Board of Directors:  (a) we issued to each of our non-employee members of our Board of Directors first joining the Board in October 2015 and who had not received any compensation for serving as directors of the Company (five persons) options to purchase 150,000 shares of our common stock with an exercise price of $.03 per share, the last sale price of our common stock on June 29, 2016 and (b) we issued to each of our non-employee members of our Board of Directors currently serving on the Board (six persons) options to purchase 300,000 shares of our common stock with an exercise price of $.03 per share. Subsequently on February 9, 2018 the non-employee board members resigned, as disclosed in our 8K filed on February 15, 2018. As a result, all remaining stock options were cancelled.


NOTE 12 – RELATED PARTY TRANSACTIONS

Kambiz Mahdi, our Chief Executive Officer, owns Billet Electronics, which is distributor of electronic components.  From time to time, we purchase parts from Billet Electronics.    In addition, Billet was a supplier of parts and had dealings with current and former customers of the Company prior to joining the company.  Our Board of Directors has approved the transactions between Billet Electronics and the Company.



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On June 15, 2016 Meddy Sahebi Chairman of our Board of Directors advanced the Company $5,000.  There were no specified terms for repayment of this loan other than that it was to be repaid within a reasonable time.  As of December 31, 2016, the outstanding balance was $5,000. Mr. Sahebi resigned from the board of directors on February 8, 2018.

Pursuant to our 2016 Stock Compensation Program, effective July 1, 2016, we made the following stock option grants to members of our Board of Directors:  (a) we issued to each of our non-employee members of our Board of Directors first joining the Board in October 2015 and who had not received any compensation for serving as directors of the Company (five persons) options to purchase 150,000 shares of our common stock with an exercise price of $.03 per share, the last sale price of our common stock on June 29, 2016 and (b) we issued to each of our non-employee members of our Board of Directors currently serving on the Board (six persons) options to purchase 300,000 shares of our common stock with an exercise price of $.03 per share.


Note 13 - Warranty Liability

For the year ended December 31, 2016 we recognized a gain on our warranty liability in the amount of $141,611

There was no change in our warranty liability for the year December 31, 2017


NOTE 14 – SUBSEQUENT EVENTS


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 ” ), as disclosed on form 8K on February 15, 2018.


From January 1 through February 13, 2018 we issued 26,054,672 for partial conversions of our convertible notes



  Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.


None.


Item 9a.  Controls and Procedures.

 

(a)                 Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports pursuant to the Securities Exchange Act, of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

As required by Rules 13a-15(b) of the Exchange Act, an evaluation as of December 31, 2017 was conducted under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2017. 

 

(b)                  Report of Management on Internal Control over Financial Reporting

 

We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our management including our of our chief executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013



52


framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO.

 

Based on our evaluation under the 2013 Internal Control-Integrated Framework, our chief executive officer and chief financial officer concluded that our internal control over financial reporting was not effective as of December 31, 2017.

 

(c)                  Changes in Internal Control over Financial Reporting

 

There have been no other changes in our internal control over financial reporting that occurred during the period covered by this Annual Report on Form 10-K for the year ended 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9b.  Other Information.

 

Quarterly Events


None.


Subsequent Events



On February 13, 2018, Clean Energy Technologies, Inc., 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 ” ).


 


The Corporation has not entered into any compensatory agreement with any of the newly appointed directors at this time but may do so in the future.



PART III

 

 

Item 10.     Directors, Executive Officers and Corporate Governance


O ur officers and directors are the individuals listed below as of December 31, 2017 and directors pending the effective date of a Form 14F-1 to be filed with the Securities and Exchange Commission:


Name

Age

Position

Kambiz Mahdi

53

President, CEO, Director

John Bennett

57

CFO, Director

Wang Jun

51

Pending Director

Lin Shuangan

30

Pending Director

Lyu Yongsheng

65

Pending Director

Calvin Pang

33

Pending Director

Robert Young

64

Director

Kevin Scott

53

Director

Meddy Sahebi

62

Director

William Maloney

58

Director

Juha Rouvinen

50

Director

Erin Falconer

41

Director




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On February 8, 2018 all of the directors except Mr. Mahdi tendered their resignations in connection with a condition precedent to the financing of the company.


There are no family relationships among any of the directors or the executive officer.


Biographical Information.


Kambiz Mahdi age 53, Kambiz Mahdi is co-founder, and served as President and Chief Executive Officer of Probe Manufacturing from 1996 until December of 2005 and again from July 2009 until present. Prior to CETY, Mr. Mahdi was technical director at Future Electronics for six years supporting Motorola, Analog Devices and Micro Chip technologies and product lines. While at Future Electronics, Mr. Mahdi developed superior technical management leadership and skills servicing some of the top 100 fortune technology customers and their applications. Mr. Mahdi also started Billet Electronics a global supply chain provider of products, services and solutions in the technology sector in 2007. He has established the company as a leading independent distributor of electronic components and provider of value-added services to its market. Mr. Mahdi has a BS degree in Electrical Engineering from California State University of Northridge. Mr. Mahdi has not served on any other boards of public companies in the past five years.


Our Board of Directors selected Mr. Mahdi to serve as a director because he is our Chief Executive Officer and has served in various executive roles with our company for 14 years, with a focus on electrical design & manufacturing, sales and operations. Mr. Mahdi has profound insight into the development, marketing, finance, and operations aspects of our company. He has expansive knowledge of engineering and manufacturing industry and relationships with chief executives and other senior management at technology companies. Our Board of Directors believes that Mr. Mahdi brings a unique and valuable perspective to our Board of Directors.


John Bennett , age 57, John Bennett has been with Probe Manufacturing since February 2005, as the Chief Financial Officer. He has been in the Electronic Manufacturing Industry for 22 years. He has held positions as the Controller, Vice President of Finance and Chief Financial Officer, with experience in Contract Manufacturing of Printed Circuit Board Assembly, Cable and Harness Assembly, Box Builds and Battery & Charger assembly. He holds a Bachelor of Science in Accounting from Mesa University and a Master of Science in Finance from the University of Colorado. Mr. Bennett has not served on any other boards of public companies in the past five years.


Our Board of Directors selected Mr. Bennett to serve as a director because he is our Chief Financial Officer and has been with our company for more than 10 years, where his primary focus has been on the financial systems and operations and SEC reporting of the company. He has significant knowledge of, and relationships within, the electronic manufacturing industry, due in part to the 25 years he has spent working in the industry. Our Board of Directors believes that his executive experience in the electronic manufacturing coupled with his deep knowledge of our company ’ s strategies and operations will bring strong financial and operational expertise to our Board of Directors.


Robert Young age 64, prior to joining our board of directors in June of 2012, Mr. Young was Director of Mobile Services for Boeing Satellite Systems, Inc. ( “ BSS ” ), the world ’ s largest manufacturer of commercial satellites, where he was responsible for developing communication and navigation services for governmental and commercial clients. Prior to joining BSS, Mr. Young was the CFO and Chief of Business Operations for a joint venture between Hughes Electronics, General Motors and Delco Electronics. Previously, Mr. Young was assigned to the Hughes Electronics Corporate Office where he was responsible for mergers and acquisitions, identifying and developing foreign offset programs and served as the Hughes Chief Economist.  Mr. Young currently sits on the board of Kinecta Federal Credit Union, which is the 19 th  largest credit union in the United States (having previously served as Kinecta ’ s Chairman of the board of directors from 2007-2009).  Mr. Young received his B.S. degree from the San Diego State University and an M.BA. from Loyola Marymount University.


Our Board of Directors selected Mr. Young to serve as a director due to his knowledge of the electronics manufacturing industry and his previous relationships with companies such as BSS, Hughes Electronics, General Motors and Delco Electronics. Mr. Young ’ s extensive knowledge of our company ’ s business sector combined with his executive experience at numerous other companies focused on the manufacturing industry is a significant asset



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to our company. Our Board of Directors believes that Mr. Young ’ s experience will assist us in developing our long- term strategy in the electronics manufacturing services industry.


Meddy Sahebi  age 62  –  Meddy Sahebi, has over 35 years of experience in business development, where he has focused specifically on finding opportunities in emerging markets, and product development. Mr. Sahebi, was a founder of Mann Healthcare Partners, in 2011, and has been a director since that time.  From 2008 to 2011, Mr. Sahebi was a business development consultant to Crescent Financial Partners, a Los Angeles  –  based private equity and merchant banking firm. While at Crescent, Mr. Sahebi focused on business development for fast growing, early-stage and middle market companies across multiple industries ranging from high-tech to real estate to energy companies. Prior to 2008, Mr. Sahebi founded a consulting company that worked with master developers to develop eco-friendly, socially responsible, sustainable communities comprising of entertainment, commercial and residential real estate projects in the United States and Canada. The Board of Directors appointed Mr. Sahebi as Chairman of the Board of the Company due to his strong experience in management of small to mid-size companies and his work in the emerging markets.


William Maloney  age 58  –  William Maloney has been the President of Bioenergy Associates, LLC, since 2008, where he is currently managing consultants and providing advisory services to biofuels and bioenergy producers, traders and project developers. Mr. Maloney has been involved in the renewable energy sector for over 30 years. Previously to working at Bioenergy Associates, Mr. Maloney served as President and CEO of Pacific West Energy, LLC, a renewable energy company involved in developing renewable energy projects in Hawaii, and affiliated with Province Line Capital LLC, a company that traded in soft commodities and biofuels, as well as, providing consulting and advisory services. From 1996  –  2008 Mr. Maloney served as Director of Business development for ED & F Man Alcohols. In this position Mr. Maloney was responsible for fuel ethanol sales in the USA as well as project evaluation and development in the US and Central America. In addition to ED & F Man, Mr. Maloney has or continues to provide consulting services to such firms the Louis Dreyfus, Vitol SA, Morgan Stanley, Pacific Ventures, Pacific International Energy Solutions, Windstrip and Aloha Petroleum.  Prior to joining ED & F Man Mr. Maloney was the principal owner and director of Caribbean Pacific Alcohol Company (1992-1998), owner and operator of a twelve million gallon per annum ethanol plant in Kingston, Jamaica. The Board of Directors believes that Mr. Maloney ’ s experience in the renewable energy sectors and his financial knowledge would be a valuable asset to the Company, and as such, has elected Mr. Maloney as a Director to the Company.


Juha Rouvinen  age 59  –  Juha Rouvinen, has been the Chairman and CEO of Windstrip LLC, since 2005. At Windstrip, Mr. Rouvinen manages teams that have invented and are commercializing an integrated hybrid power system that provides continuous power to remote locations that otherwise would not have access to electricity. Mr. Rouvinen has more than 20 years of experience in founding, managing, financing and investing in start-up companies. Mr. Rouvinen specializes in advising clean technology investors, incubators and green technology funds in Finland, the Middle East and North America. Previously to Windstrip, Mr. Rouvinen founded and managed a hospitality and health services company in Finland. In light of Mr. Rouvinen ’ s past experience in green technology, start-up companies and his business knowledge, he was appointed as a Director of the Company.

Erin Falconer  age 42  –  Erin Falconer, is the co-owner and Editor-in-Chief of PickTheBrain.com, which is currently one of the most successful self-development websites on the internet, with Forbes Magazine distinguishing her blog as  “ One of the Top 100 Most Influential Sites for Women ” , in 2013.  In 2012, Erin along with her partner, raised one million dollars to fund her tech start-up LEAF.tv (an ecommerce video brand for the Millennial generation). She was president until 2015, when LEAF was sold to publicly traded, Demand Media. She is now the General Manager of the brand. Simultaneously, since 2008, Erin has been the Editor in Chief and co-owner of PickTheBrain - one of the most successful and respected self-improvement blogs online, today.


Prior to this, Erin was the Vice-President of Marketing for ThisNext - a popular social shopping platform from 2010-2012 and the Content Manager for PeopleJam until it was purchased by Chicken Soup for the Soul, from 2008-2010). Ms. Falconer is a seasoned tech expert with over 8 years of online experience. She has been heralded as one of the most innovative thought leaders in her space by many media outlets, including LA Confidential. Ms. Falconer is also the co-founder of the lifestyle online website Leaf.tv  –  a how-to video portal for the millennial generation, which she recently sold. We appointed Ms. Falconer as a Director of the Company due to her extensive online experience creating successful websites, her ability to find innovative solutions to market demands, and her talent of growing small companies into successful brands.




55


Mr. Wang Jun , age: 51. Mr. Wang, is the current Chairman and Chief Executive Officer of Taiyu (Shenyang) Energy Technology Co., Ltd. and has held those positions since 2002. From 2008 -2012 Mr. Wang served as Chief Executive Officer and director of SmartHeat, Inc. Prior to that, he served as an executive at Beijing HTN Pipeline Equipment Co., Ltd. from 2000 to 2002 and Honeywell from 1996 to 1999. Mr. Wang graduated from Tsinghua University and obtained a master ’ s degree in engineering. Our Board of Directors selected Mr. Wang to serve as a director because of his extensive experience in clean energy technology and his prior experience as a CEO and board member of a public company. Mr. Wang will join the Board of Directors after the Form 14F-1 filed with the Securities and Exchange Commission becomes effective.

 

Mr. Lin Shuangan . age: 30. Mr. Lin is the Deputy Chief Executive of Shanghai New Hope Data Technology Co., Ltd. where he has worked since 2015. Prior to that Mr. Lin, worked for New Hope Group Co., Ltd from 2012 to 2015 as a project manager for the chemical industry subsidiary. Mr. Lin graduated from De Montford University and obtained a bachelor ’ s degree in business. Our Board of Directors selected Mr. Lin to serve as a director because of his extensive experience in product manufacturing. Mr. Lin will join the Board of Directors after the Form 14F-1 filed with the Securities and Exchange Commission becomes effective.

 

Mr. Lyu Yongsheng . age: 65. Mr. Lyu has acted as an independent project consultant for Taiyu (Shenyang) Energy Technology Co., Ltd. since 2009. From 2003 to 2009, he served as the Executive Director of the Mianyang City Civil Aviation Administration Greening Company. From 1996 to 2003, he was the General Manager of Mianyang Township Enterprise Supply and Marketing Corporation. Mr. Lyu graduated from Jilin University with a bachelor ’ s degree in engineering. Our Board of Directors selected Mr. Lyu to serve as a director because of his extensive experience in clean energy technology and his experience in managing complex engineering processes. Mr. Lyu will join the Board after the Form 14F-1 filed with the Securities and Exchange Commission becomes effective

 

Mr. Calvin Pang . age: 33. Since 2015 Mr. Pang has been the Managing Director of Megawell Capital Limited. From 2007 to 2015, he was a banker at UBS AG managing portfolios of Hong Kong and China based investors. Mr. Pang graduated from the Olin School of Business in Washington University in St. Louis with a bachelor ’ s degree in business and finance. Our Board of Directors selected Mr. Wang to serve as a director because of his extensive experience in corporate finance. Mr. Pang will join the Board after the Form 14F-1 filed with the Securities and Exchange Commission becomes effective.


Corporate Governance

 

Director Attendance at Meetings of the Board of Directors


Our Board of Directors held nine meetings during the fiscal year ended December 31, 2017. Each of our incumbent directors attended at least 75.0% of the aggregate total number of meetings of our Board of Directors held during the period for which he served as a director.


Director Attendance at Annual Meetings of the Shareholders

 

Although we have no policy with regard to attendance by the members of our Board of Directors at our annual meetings, we invite and encourage the members of our Board of Directors to attend our annual meetings to foster communication between Shareholders and our Board of Directors. We did not hold an annual meeting in 2017.


Stockholder Communication with the Board of Directors

 

Any stockholder who desires to contact members of our Board of Directors, or a specified committee of our Board of Directors, may do so by writing to: Clean Energy Technologies, Inc., Board of Directors, 2990. Redhill Ave, Costa Mesa, California 92626, Attention: Secretary. Communications received will be distributed by our Secretary to such member or members of our Board of Directors as deemed appropriate by our Secretary, depending on the facts and circumstances outlined in the communication received.

 

Director Independence

 



56


We had a seven-member Board of Directors in 2017. After the resignation of 6 members of our Board of Directors on February 8 and 14, 2018, Kam Mahdi was our sole director. Upon the effective date of the Form 14F-1, we will have 5 members of our Board of Directors.

 

 

Board Leadership Structure; Independent Lead Director


The Company currently does not have an Independent Directors.  Upon the effective date of the Form 14F-1, we will have 3 members of our Board of Directors that are classified as independent.


Committees of our Board of Directors

 

We have no standing committees of our Board of Directors at the current time, which is due to the size of our operations. From time to time, our Board of Directors may establish committees it deems appropriate to address specific areas in more depth than may be possible at a full Board of Directors meeting. As our Company grows, we plan to establish an audit committee, compensation committee and nominating and corporate governance committee.  The functions that these committees will perform are currently being performed by our five-member Board.

 

Director Nomination Procedures and Diversity

 

As outlined above, in selecting a qualified nominee, our Board of Directors considers such factors as it deems appropriate, which may include: the current composition of our Board of Directors; the range of talents of a nominee that would best complement those already represented on our Board of Directors; the extent to which a nominee would diversify our Board of Directors; a nominee ’ s standards of integrity, commitment and independence of thought and judgment; a nominee ’ s ability to represent the long-term interests of our shareholders as a whole; a nominee ’ s relevant expertise and experience upon which to be able to offer advice and guidance to management; a nominee who is accomplished in his or her respective field, with superior credentials and recognition; and the need for specialized expertise. While we do not have a formal diversity policy, we believe that the backgrounds and qualifications of our directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow our Board of Directors to fulfill its responsibilities. Applying these criteria, our Board of Directors considers candidates for membership on our Board of Directors suggested by its members, as well as by our Shareholders. Members of o ur Board of Directors annually review our Board of Directors ’ composition by evaluating whether our Board of Directors has the right mix of skills, experience and backgrounds.


Our Board of Directors may also consider an assessment of its diversity, in its broadest sense, reflecting, but not limited to, age, geography, gender and ethnicity.

 

Our Board of Directors identifies nominees by first evaluating the current members of our Board of Directors willing to continue in service. Current members of our Board of Directors with skills and experience relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of our Board of Directors does not wish to continue in service or if our Board of Directors decides not to nominate a member for re-election, our Board of Directors will review the desired skills and experience of a new nominee in light of the criteria set forth above.

 

Our Board of Directors also considers nominees for our Board of Directors recommended by Shareholders. Notice of proposed stockholder nominations for our Board of Directors must be delivered in accordance with the requirements set forth in our bylaws and SEC Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Nominations must include the full name of the proposed nominee, a brief description of the proposed nominee ’ s business experience for at least the previous five years and a representation that the nominating stockholder is a beneficial or record owner of our common stock. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected. Nominations should be delivered to: Clean Energy Technologies, Inc., Board of Directors, 2990. Redhill Ave, Costa Mesa, California 92626, Attention: Chief Executive Officer.

 



57


Our Board of Directors will recommend the slate of directors to be nominated for election at the annual meeting of shareholders. We have not and do not currently employ or pay a fee to any third party to identify or evaluate, or assist in identifying or evaluating, potential director nominees.

 

Board of Directors Role in Risk Oversight

 

Our Board of Directors oversees our shareholders ’ interest in the long-term success of our business strategy and our overall financial strength.

 

Our Board of Directors is actively involved in overseeing risks associated with our business strategies and decisions. It does so, in part, through its approval of all acquisitions and business-related investments and all assumptions of debt, as well as its oversight of our executive officers pursuant to annual reviews. Our Board of Directors is also responsible for overseeing risks related to corporate governance and the selection of nominees to our Board of Directors.

 

In addition, the Board reviews the potential risks related to our financial reporting. The Board meets with our Chief Financial Officer and with representatives of our independent registered public accounting firm on a quarterly basis to discuss and assess the risks related to our internal controls. Additionally, material violations of our Code of Ethics and related corporate policies are reported to our Board of Directors.

 

Code of Business Conduct and Ethics

 

We have adopted our Code of Ethics, which contains general guidelines for conducting our business and is designed to help our directors, employees and independent consultants resolve ethical issues in an increasingly complex business environment. Our Code of Ethics applies to our Principal Executive Officer, Principal Financial Officer, and persons performing similar functions and all members of our Board of Directors. Our Code of Ethics covers topics including, but not limited to, conflicts of interest, confidentiality of information, and compliance with laws and regulations. Shareholders may request a copy of our Code of Ethics, which will be provided without charge, by writing to: Clean Energy Technologies, Inc., Board of Directors, 2990. Redhill Ave, Costa Mesa, California 92626; Attention: Chief Executive Officer.


Compensation of Directors


The key objective of our non-employee directors' compensation program is to attract and retain highly qualified directors with the necessary skills, experience and character to oversee our management. We currently use equity-based compensation to compensate our directors due to our restricted cash flow position; however, we may in the future provide cash compensation to our directors. The use of equity-based compensation is designed to recognize the time commitment, expertise and potential liability relating to active Board service, while aligning the interests of our Board of Directors with the long-term interests of our shareholders.


In addition to the compensation provided to our non-employee director, which is detailed below, each non-employee director is reimbursed for any reasonable out-of-pocket expenses incurred in connection with attending in-person meetings of the Board of Directors and Board committees, as well for any fees incurred in attending continuing education courses for directors.

 

Fiscal Years 201 7 and 201 6 Annual Cash Compensation


We currently do not provide cash compensation to our directors and as such did not provide any cash compensation during the years ended December 31, 2017 and 2016.


Fiscal Years 201 7 and 201 6 Equity Compensation


Yearly Restricted Share Awards


Under the terms of the discretionary restricted share unit grant provisions of our 2006 Incentive Stock Plan and our 2011 Omnibus Incentive Plan , which we refer to as the 2006 Plan and 2011 Plan, respectively, each non-employee



58


director is eligible to receive grants of restricted common stock share awards at the discretion of our Board of Directors. These yearly restricted share unit awards vest in full on the grant date. For the year ended 2016, we issued the 450,000 shares of common stock options to our five new independent directors and 300,000 to our one legacy director.  For the year ended December 31, 2017 there were no stock options granted


Discretionary Grants


Under the terms of the discretionary option grant provisions of the 2006 Plan and the 2011 Plan, non-employee directors are eligible to receive stock options or other stock awards granted at the discretion of the Board of Directors. No director received stock awards pursuant to the discretionary grant program during fiscal year 2017 or 2016.


Director Summary Compensation in Fiscal Years 201 7 and 201 6


The following table sets forth the fiscal years 2016, and 2017 compensation for our non-employee directors.

 

Name

Fees Earned or Paid in Cash ($) (1)

Stock Awards ($) (2)

Total ($)





Robert Young 2016

 $                                 -   

 $                                 -  

 $                                 -

Robert Young 2017

 $                                 -   

 $                                 -   

 $                                 -   





Kevin Scott 2016

 $                                 -   

 $                                 -

 $                                 -





Meddy Sahebi 2016

 $                                 -   

 $                                 -   

 $                                 -   

Meddy Sahebi 2017

 $                                 -   

 $                                 -   

 $                                 -   





William Maloney 2016

 $                                 -   

 $                                 -   

 $                                 -   

William Maloney 2017

 $                                 -   

 $                                 -   

 $                                 -   





Juha Rouvinen 2016

 $                                 -   

 $                                 -   

 $                                 -   

Juha Rouvinen 2017

 $                                 -   

 $                                 -   

 $                                 -   





Daniel Elliott 2016

 $                                 -   

 $                                 -   

 $                                 -   

Daniel Elliott 2017

 $                                 -   

 $                                 -   

 $                                 -   





Erin Falconer 2016

 $                                 -   

 $                                 -   

 $                                 -   

Erin Falconer 2017

 $                                 -   

 $                                 -   

 $                                 -   



 (1)        This column represents the amount of cash compensation earned in fiscal years 2017, and 2016 for Board and committee service.

(2)        This column represents the grant date fair value of restricted share awards granted in fiscal years, 2017, and 2016 in accordance with FASB ASC Topic 718. The grant date fair value of restricted share unit awards is the closing price of our common stock shares on the date of grant.



Change of Control and Termination Provisions


We currently have stock options issued and outstanding to our non-employee directors purchase 2,550,000 shares of our common stock at $ .03 per shar e . In the event of a dissolution or liquidation of the company or if we are acquired by merger or asset sale or in the event of other change of control events , no acceleration of the termination of any of the restrictions applicable to Restricted Shares, Restricted Stock Unit Awards, Options or Stock Appreciation Rights



59


as defined in the 2011 Plan shall occur in the event of a change in control, unless otherwise provided by our Board of Directors or committee thereof, in such grant.


 

Family Relationship


We currently do not have any officers or directors of our Company who are related to each other.


Involvement in Certain Legal Proceedings


During the past ten years no director, executive officer, promoter or control person of the Company has been involved in the following:

(1)

A petition under the Federal bankruptcy laws or any state insolvency law which was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

(2)

Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

(3)

Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

i.

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

ii.

Engaging in any type of business practice; or

iii.

Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

(4)

Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;

(5)

Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

(6)

Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

(7)

Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

i.

Any Federal or State securities or commodities law or regulation; or

ii.

Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

iii.

Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

(8)

Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the



60


Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.


Compliance with Section 16(a) of the Exchange Act


Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of change in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us under Rule 16a-3(e) during the year ended December 31, 2017, Forms 5 and any amendments thereto furnished to us with respect to the year ended December 31, 2017, and the representations made by the reporting persons to us, we believe that during the year ended December 31, 2017, our executive officers and directors and all persons who own more than ten percent of a registered class of our equity securities complied with all Section 16(a) filing requirements with the exception of ETI Partners IV LLC or their members who may be considered to beneficially own our common stock who have not filed a Forms 3 or 4 in 2012 or thereafter or a Form 5 as required in 2017.


 

 

 

Item 11.  

Executive Compensation.

 

 

The following table sets forth the fiscal year 2017 and 2016 compensation for:


·

Kambiz Mahdi, our Chief Executive Officer; and

·

John Bennett, our Chief Financial Officer

 

The executive officers included in the Summary Compensation Table are referred to in this Form 10K as our named executive officers. A detailed description of the plans and programs under which our named executive officers received the following compensation can be found in the section entitled " Compensation Discussion and Analysis . ”


Summary Compensation Table



Salary

Bonus

Stock Awards 

Option Awards

Non-equity Incentive Plan Compensation

Change in Pension Value and Nonqualified Deferred Compensation Earnings

All Other Compensation ($)

Total

Name and Principal Position

Year

($)

($)(3)

($)(4)

($)

($)

($)


($)

Kambiz Mahdi (1)

2017

 $275,000 

$

$

$

$

$

$

-

$275,000 

Chief Executive Officer

2016

$275,000 

$

$

$

$

$

$

-

$275,000 











John Bennett (2)

2017

$140,000 

$

$

$

$

$

$

-

$140,000 

Chief Financial Officer

2016

$140,000

$

$

$

$

$

$

-

$140,000 


1)    

On October 1, 2015, we entered into a new employment agreement with Mr. Mahdi for 2 years with an annual salary of $275,000 In 2017 Mr. Mahdi was paid down total of $38,461 from the past due balance of unpaid salary from 2016 with remaining outstanding balance of  $69,884 due to lack of capital.

 

2)       In 201 6 Mr. Bennett was only paid $ 74,821 due to lack of capital and is still due $ 58,145 from 2016.

 

3)        There were no bonuses paid or accrued for any executives for fiscal years 201 7 and 2016.

 



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4)        Mr. Bennett was issued an option to purchase 30,000 shares of our common stock on February 8, 2007 at $1.73 under our 2006 Plan and an option to purchase 30,000 shares of our common stock at $.33 per share on February 28, 2008.  Both option grants expired on February 08, 2017. 

 


Outstanding Equity Awards at 2017 Fiscal Year-End

       

 There are no outstanding options or stock awards held by our named executive officers as of December 31, 2017.


 (1) Mr. Bennett was issued an option to purchase 30,000 shares of our common stock on February 8, 2007 at $1.73 under our 2006 Plan and an option to purchase 300,000 shares of our common stock on February 28, 2008.  Both option grants expired on February 08, 2017. 


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 ), which supersedes APB Opinion No. 25, “ Accounting for Stock Issued to Employees ” , and its related implementation guidance and eliminates the alternative to use Opinion 25 ’ s intrinsic value method of accounting that was provided in Statement 123 as originally issued. This Statement requires an entity to measure the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and stock warrants, based on the fair value of the award, measured at the grant date, (with limited exceptions). Under this standard, the fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black- Scholes option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets the requirements of SFAS No. 123R; however, the fair values generated may not reflect their actual fair values, as it does not consider certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility; however, due to the thinly traded nature of our stock, we have chosen to use an average of the annual volatility of like companies in our industry. For the “ risk-free interest rate ” , we use the Constant Maturity Treasury rate on 90 day government securities. The term is equal to the time until the option expires. The dividend yield is not applicable, as the company has not paid any dividends, nor do we anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading common stock, on the grant date calculated using a 20 trading day average. At the time of grant, the share based-compensation expense is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates and the expense is reduced accordingly.  It is also adjusted to account for the restricted and thinly traded nature of the shares.  The expense is reviewed and adjusted in subsequent periods if actual attrition differs from those estimates.

 

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 years ended December 31, 2017 and 2016, we had $0 in non-vested expense to be recognized.  

 

Executive Employment Agreements

 

On September 1, 2011, the Board approved long-term executive employment agreements with our Chief Executive Officer, Kambiz Mahdi and Chief Financial Officer John Bennett, for a period of five years from execution, unless terminated earlier pursuant to the terms of their respective agreements. 

 

On October 1, 2015 we entered into a new employment agreement with Mr. Mahdi for 2 years with an annual salary of $275,000. In addition, Mr. Mahdi will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Mahdi would have been entitled to receive through the remainder or the Employment Period or (1) year, whichever is greater. Mr. Mahdi employment contract expired on October 1, 2017 . Mr Mahdi has been cont i nuing to work under the same term and we are negotiating a new contract with Mr. Mahdi.




62


Mr. Bennett will receive an annual compensation of $140,000 per year, subject to annual increases based on the greater of the consumer price index or 5.0% to take into account annual cost of living increases and also subject to such increases as may from time to time be determined by the Board of the Directors of the Company. Additionally, Mr. Bennett will receive $40,000, payable in 800,000 shares of the company ’ s common stock at $.05 per share, as a retention bonus. The shares will be issued at the rate of 100,000 shares per quarter, on the 15th day of each quarter, commencing on September 15, 2011 and continuing for the following seven quarters. Mr. Bennett will also receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Bennett would have been entitled to receive through the remainder or the Employment Period or two (2) years, whichever is greater. On September 1, 2016 Mr. Bennett ’ s employment agreement automatically renewed for an additional five years.


Potential Payments upon Termination or Change of Control


Severance Benefits


Mr. Mahdi will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Mahdi would have been entitled to receive through the remainder or the Employment Period or One (1) year, whichever is greater.


Mr. Bennett will receive a severance benefit consisting of a single lump sum cash payment equal the salary that Mr. Bennett would have been entitled to receive through the remainder or the Employment Period or two (2) years, whichever is greater.

 


Item 12.  

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table shows, as of March 31, 2018 the number of shares of our common stock beneficially owned by (1) any person who is known by us to be the beneficial owner of more than 5.0% of the outstanding shares of our common stock; (2) our directors and former directors; (3) our named executive officers; and (4) all of our directors and executive officers as a group. The percentage of common stock beneficially owned is based on 554,773,461 shares of our common stock outstanding as of March 31, 2018. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes securities over which a person has voting or investment power and securities that a person has the right to acquire within 60 days. Unless otherwise provided, the address of each beneficial owner listed is c/o Clean Energy Technologies, Inc., Board of Directors, 2990. Redhill Ave, Costa Mesa, California 92626.



Name of Beneficial Owners (1)

  Number of Shares of Common Stock Beneficially Owned   

 Percentage  

MGW Investments I Limited (11

                615,629,334

70.93%

ETI Capital Partners (6)

                  57,380,323

6.61%

Kambiz Mahdi (2) – Director and CEO

                  22,866,000

2.63%

John Bennett (3) – Former Director and CFO

                    1,359,200

0.16%

Robert Young (4) – Former Director

                       400,000

0.05%

Meddy Sahebi – Former Director (6)

                                -   

0.00%

William Maloney – Former Director

                                -   

0.00%

Juha Rouvinen – Former Director

                                -   

0.00%

Erin Falconer – Former Director

                                -   

0.00%

All directors and officers as a group

                  24,225,200

2.79%

Total Issuable and Outstanding March 31, 2018

                867,940,128



 

1)

The shares of common stock are held directly by the Kambiz and Bahareh Mahdi Living Trust and indirectly by Kambiz Mahdi and Bahareh Mahdi as Trustees.


2)

ETI Partners IV LLC ( “ P-IV ” ) is a private investment company organized as a Delaware limited liability company, with its principal offices c/o Energy Technology Innovations, Inc., 901 Washington Boulevard, Suite 208, Marina Del Rey, CA 90292.  Energy Technology Innovations, Inc. is the Manager of P-IV.  Mr. Meddy Sahebi is the President of Energy Technology Innovations, Inc.  P-IV is the beneficial owner of 57,380,323 shares of common stock.  Mr. Sahebi, is the President of Energy Technology Innovations, Inc., which is the Manager of P-IV.   

3)

Calvin Pang has voting and investment power over all of our common stock held by MGWI Investment I Limited ( “ MGWI ” ). MGWI




Item 13.  

Certain Relationships and Related Transactions, and Director Independence.

 


  Director Independence



64


 

We have a five-member Board of Directors. Due to the size of our company and the difficulty in finding directors that have experience in our industry, four of our directors can be deemed an “ independent directors. ”

 

While our stock is not listed on the New York Stock Exchange, our independent directors would qualify as independent under the rules of the New York Stock Exchange.

 

Review of Related Person Transactions

 

Our Code of Business Conduct and Ethics provides guidance for addressing actual or potential conflicts of interests, including those that may arise from transactions and relationships between us and our executive officers or directors, such as:

 

·

Business transaction between the company and any executive are prohibited, unless otherwise approved by the Board; 

·

Activities that may interfere with an executive ’ s performance in carrying out company responsibilities; 

·

Activities that call for the use of the company ’ s influence, resources or facilities; and  

·

Activities that may discredit the name or reputation of the company.          


We have various procedures in place to identify potential related person transactions, and the Board of Directors and a separate compliance committee work together in reviewing and considering whether any identified transactions or relationships are covered by the Code of Business Conduct and Ethics.

 


Transactions with Related Persons




Kambiz Mahdi, our Chief Executive Officer, owns Billet Electronics, which is an independent distributor of electronic components. From time to time we purchase parts from Billet Electronics. In addition Billet was a supplier of parts and had dealings with current and former customers of our company. Our board of directors has approved such transactions of our chief executive officer.


 On August 7, 2013, we held our initial closing of our Series D Preferred Stock private financing offering with two related parties, whereby we received $750,000 in financing. Our Series D Preferred Stock offering terms allow us to raise up to $1,000,000 US with an over-allotment of $500,000 in multiple closings over the course of 6 months.


On June 25th, 2013 we received $500,000 from a related party and issued 5,000 shares of Preferred Series D Preferred stock.


On September 8, 2015 the investors signed an estoppel agreement, whereby the investors agreed to reduce, (effective as of June 30, 2015), the dividend rate on the Series D Preferred Stock to six percent per annum and to terminate the penalty provided for in the IAs in respect of unpaid dividends accruing on or after such date.


  Item 14.    Principal Accounting Fees and Services.   

 

The aggregate fees billed to us by our principal accountant for services rendered during the fiscal years ended December 31, 2016 and December 31, 2017 are set forth in the table below:

 

Services:


2016

2017

Audit Fees (1)


$

62,846

$

50,528

Audit Related Fees (2)


1,400

-

Tax Fees (3)


1,500

3,885

Total


$

52,513

$

54,413

 







65


 

 

 

(1)

Audit fees billed in 2017 and 2016 consisted of fees related to the audit of our annual financial statements, reviews of our quarterly financial statements, and statutory and regulatory audits, consents and other services related to filings with the SEC.

 

(2)

Audit-related fees related to financial accounting and reporting consultations, assurance and related services.

 

(3)

Tax services consist of tax compliance and tax planning and advice.

 

The Board of Directors pre-approves all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for us by our independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(b) of the Exchange Act and the rules and regulations of the SEC. All services rendered by our principal auditor for the years ended December 31, 2016 and 2017 were pre-approved in accordance with the policies and procedures described above.

 

Auditor Independence

 

The Board of Directors has considered whether the provision of the above noted services is compatible with maintaining our independent registered public accounting firm ’ s independence and has concluded that the provision of such services has not adversely affected the independent registered public accounting firm ’ s independence.

 

Board of Directors Audit Report to Shareholders

 

Since we do not have a standing Audit Committee our full Board of Directors oversees our financial reporting process. Our management has the primary responsibility for our financial statements as well as our financial reporting process, principles and internal controls. The independent registered public accounting firm is responsible for performing an audit of our financial statements and expressing an opinion as to the conformity of such financial statements with accounting principles generally accepted in the United States of America.

 

In this context, the Board of Directors has reviewed and discussed our audited financial statements as of December 31, 2016 and December 31, 2017 with management and the independent registered public accounting firm. The Board of Directors has discussed with the independent registered public accounting firm the matters required to be discussed by the Statement on Auditing Standards No. 61, Professional Standards , as amended. In addition, the Board of Directors has received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees , as currently in effect, and it has discussed their independence with us.


Item 15.  Exhibits, Financial Statement Schedules.

 

(a)(1) Financial Statements:

 

The consolidated financial statements and the related notes are included in Item 8 herein.

 

 

(a)(2)  Financial Statement Schedule:

 

 

All schedules have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.

 

 

(a)(3) Exhibits:

 

 

The exhibits listed on the Exhibit Index (following the signatures section of this report) are included, or incorporated by reference, in this annual report.

 

 

(b)  Exhibits:

 

 

See Item 15(a)(3) above.

 

 

(c)  Financial Statement Schedule:

 



66


 

All schedules have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Costa Mesa, State of California on the 17th day of April, 2018.

 

Clean Energy Technologies, Inc.

 ______________________________

 REGISTRANT

 

 

/s/ Kambiz Mahdi                                                                                                              

___________________                                                                                                   

By: Kambiz Mahdi

Chief Executive Officer

 

Date: April 16, 2018

 

/s/ John Bennett                                                                                                                 

___________________                                                                                                   

By: John Bennett

Chief Financial Officer

 

Date: April 16, 2018

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

 

Signature                                                                Title                                        

 

/s/ Kambiz Mahdi                            Chief Executive Officer and Director             

_______________________          (principal executive officer)

By: Kambiz Mahdi

 

Date: April 16, 2018



EXHIBIT INDEX

 

 

Pursuant to Item 601(a)(2) of Regulation S-K, this Exhibit Index immediately precedes the exhibits.

 

 

The following exhibits are included, or incorporated by reference; in this Annual Report on Form 10-K for the fiscal year ended December 31, 201 7 (and are numbered in accordance with Item 601 of Regulation S-K).

 

EXHIBIT

NUMBER                                          DESCRIPTION

 

3.1 Articles of Incorporation (included as exhibit 3.1 to the Form SB-2/A filed on June 10, 2005).

 

3.2 Bylaws (included as exhibit 3.2 to the Form SB-2/A filed on June 10, 2005).



67


3.3 Amended ByLaws (included as exhibit 3.03 to our Current Report on Form 8-K dated 2.15.18)

3.4 Certificate of Amendment of Articles of Incorporation, dated November 13, 2015, filed with the Nevada Secretary of State (included as exhibit 3.1 to our Current Report on Form 8-K dated January 12, 2016)

3.5  Amended and Restated Articles dated, July 6, 2016, filed with the Nevada Secretary of State (included as exhibit 3.1 to our Current Report on Form 8-K dated July 6, 2016)

3.6  Amended By-Laws, dated July 6, 2016 (included as exhibit 3.2 to our Current Report on Form 8-K dated July 6, 2016)

3.7  Certificate of Amendment of Articles of Incorporation filed with the Nevada Secretary of State on August 23, 2017. (included as exhibit 10.1 to the Form S-8 filed on August 28, 2017)

4.1  Certificate of Designation for Series A Convertible Preferred Stock, dated May 20, 2004 (included as exhibit 4.2 to the Form SB-2/A filed on June 10, 2005 ).

4.3 Certificate of Designation for Series B Convertible Preferred Stock dated December 31, 2004 (included as exhibit 4.2 to the Form SB-2/A filed on June 10, 2005 ).

4.4  Sample Series A Warrant Purchase Agreement (included as exhibit 4.3 to the Form SB-2/A filed on September 26, 2005 ).

4.5  Sample Series B Warrant Purchase Agreement (included as exhibit 4.4 to the Form SB-2/A filed on September 26, 2005 ).

4.6 Sample Amended Series A Warrant Purchase Agreement (included as exhibit 4.5 to the Form SB-2/A filed on November 25, 2005

4.7 Sample Amended Series B Warrant Purchase Agreement (included as exhibit 4.6 to the Form SB-2/A filed on November 25, 2005 ).

4.9  Amended Series A Warrant Agreement. (included as exhibit 4.1 to the Form 8.K filed on November 10, 2008  and amended on November 18, 2008).

4.10  Amended Series B Warrant Agreement. (included as exhibit 4.2 to the Form 8-K filed on November 10, 2008  and amended on November 18, 2008).

4.11  Probe Manufacturing, Inc. 2011 Omnibus Incentive Plan.  (included as exhibit 4.2 to the Form S-8 filed on April 18, 2011)

4.12   Voting Agreement, dated February 13, 2018 by and among, the Corporation, ETI IV, Kambiz Mahadi, John Bennett and the The Kambiz & Bahareh Mahdi Living Trust. (included as exhibit 4.24to the Form 8-K filed on  February 14, 2018).

10.1  Lease  Agreement between Probe Manufacturing, Inc. (F.K.A. Probe Manufacturing Industries, Inc. and Reza Zarif and Kambiz Mahdi, dated May 2, 1997 (included as exhibit 10.1 to the Form SB-2/A filed on June 10, 2005).  

10.2 Consulting  Agreement  between  Probe Manufacturing Industries and Anthony Reed dated December 31, 2004 (included as exhibit 10.2 to the Form SB-2/A filed on June 10, 2005 ).



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10.3  Legal retainer agreement between Probe Manufacturing, Inc. and Jeffrey Conrad dated (included as exhibit 10.3 to the Form SB-2/A filed on June 10, 2005 ).

10.4 Line of Credit agreement between Probe Manufacturing, Inc. and eFund Capital Partners, LLC dated January 1, 2005 (included as exhibit 10.4 to the Form SB-2/A filed on June 10, 2005 ).

10.5 Line of Credit agreement between Probe Manufacturing, Inc. and Ashford Capital, LLC dated January 1, 2005 (included as exhibit 10.5 to the Form SB-2/A filed on June 10, 2005 ).

10.6 Line of Credit agreement between Probe Manufacturing, Inc. and Benner Exemption Trust dated March 8, 2005 (included as exhibit 10.6 to the Form SB-2/A filed on June 10, 2005 ).

10.7 Line of Credit agreement between Probe Manufacturing, Inc. and Edward Lassiter dated March 22, 2005 (included as exhibit 10.7 to the Form SB-2/A filed on June 10, 2005 ).

10.8 Line of Credit agreement between Probe Manufacturing, Inc. and Rufina V. Paniego dated January 1, 2004  (included as exhibit 10.8 to the Form SB-2/A filed on June 10, 2005 ).

10.9 Promissory Note between Probe Manufacturing, Inc and Ashford Transitional Fund, L.P. dated September 20, 2004 (included as exhibit 10.9 to the Form SB-2/A filed on June 10, 2005 ).

10.10 Engagement Letter between Probe Manufacturing, Inc. and eFund Capital Partners, LLC dated May 20, 2004 (included as exhibit 10.10 to the Form SB-2/A filed on June 10, 2005 ).

10.11 Series A Convertible Preferred Stock Purchase Agreement with eFund Capital Partners, LLC dated May 20, 2004 (included as exhibit 10.11 to the Form SB-2/A filed on June 10, 2005 ).

10.12 Series A Convertible Preferred Stock Purchase Agreement with Reza Zarif dated May 20, 2004 (included as exhibit 10.12 to the Form SB-2/A filed on June 10, 2005 ).

10.13 Series A Convertible Preferred Stock Purchase Agreement with Kambiz Mahdi dated May 20, 2004. (included as exhibit 10.13 to the Form SB-2/A filed on June 10, 2005 ).

10.14 Series B Convertible Preferred Stock Purchase Agreement with eFund Capital Partners, LLC dated December 31, 2004 (included as exhibit 10.14 to the Form SB-2/A filed on June 10, 2005 ).

10. 15 Series B Convertible Preferred Stock Purchase Agreement with Reza Zarif dated December 31, 2004 (included as exhibit 10.15 to the Form SB-2/A filed on June 10, 2005 ).

10.16 Series B Convertible Preferred Stock Purchase Agreement with Kambiz Mahdi dated December 31, 2004 (included as exhibit 10.16 to the Form SB-2/A filed on June 10, 2005 ).

10.17 Agreement to Cancel and Return shares of common stock between Probe and eFund Capital Partners, LLC, Ashford Capital, LLC, Reza Zarif, Kambiz Mahdi, dated December 31, 2004 (included as exhibit 10.17 to the Form SB-2/A filed on June 10, 2005 ).

10.18 Promissory note with eFund Capital Partners, LLC dated October 12, 2004 (included as exhibit 10.18 to the Form SB-2/A filed on June 10, 2005 ).

10.19 Promissory note with Rufina V. Paniego dated July 1, 2004 (included as exhibit 10.19 to the Form SB-2/A filed on June 10, 2005 ).



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10.20 Sample purchase order agreement with Celerity, Inc (included as exhibit 10.20 to the Form SB-2/A filed on September 26, 2005 ).

10.21 Sample purchase order agreement with Newport Corporation (included as exhibit 10.21 to the Form SB-2/A filed on September 26, 2005 ).

10.22 Sample purchase order agreement with Asymteck Corporation (included as exhibit 10.22 to the Form SB-2/A filed on September 26, 2005 ).

10.23 Sample purchase order agreement with Jetline Engineering Corporation (included as exhibit 10.23 to the Form SB-2/A filed on September 26, 2005 ).

10.24 Sample purchase order agreement with our supplier Future Active, Inc (included as exhibit 10.24 to the Form SB-2/A filed on September 26, 2005 ).

10.25 Sample purchase order agreement with our supplier Arrow Electronics, Inc. (included as exhibit 10.25 to the Form SB-2/A filed on September 26, 2005 ).

10.26 Lease Agreement between Probe Manufacturing, Inc. and Mitchell Fitch, LLC, dated November 15, 2005 (included as exhibit 10.26 to the Form 10-K filed on April 17, 2006 )

10.27 Sublease Agreement with Quantum Fuel System Technologies, Inc. (included as exhibit 10.25 to the Form 8-K filed on September 21, 2006)

10.28 Form Of Stock Subscription Agreement By And Between Quantum Fuel Systems Technologies Worldwide, Inc. And Probe Manufacturing, Inc. . (included as exhibit 99.1 to our definitive 14D filed on October 5, 2006 )

10.29 Employment Agreement with Reza Zarif, Chief Executive Officer of Probe Manufacturing, Inc. (included as exhibit 10.1 to Form 8-K filed on June 14, 2006 ).

10.30 Series C Convertible Preferred Exchange Agreement with eFund Capital Partners, LLC (included as exhibit 10.2 to Form 8-K filed on June 14, 2006 ).

10.31 Series C Convertible Preferred Exchange Agreement with Reza Zarif (included as exhibit 10.3 to Form 8-K filed on June 14, 2006 ).

10.32 Series C Convertible Preferred Exchange Agreement with Kambiz Mahdi (included as exhibit 10.4 to Form 8-K filed on June 14, 2006 ).

10.33 Amended Series C Convertible Preferred Exchange Agreement with eFund Capital Partners, LLC (included as exhibit 10.1 to Form 8-K filed on August 14, 2006 ).

10.34 Amended Series C Convertible Preferred Exchange Agreement with Reza Zarif (included as exhibit 10.2 to Form 8-K filed on August 14, 2006 ).

10.35 Amended Series C Convertible Preferred Exchange Agreement with Kambiz Mahdi (included as exhibit 10.3 to Form 8-K filed on August 14, 2006 ).

10.36 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Kambiz Mahdi dated August 10, 2006 (included as exhibit 10.1 to the Form 8-K filed on August 23, 2006 ).



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10.37 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Reza Zarif dated August 10, 2006 (included as exhibit 10.2 to the Form 8-K filed on August 23, 2006 ).

10.38 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Frank Kavanaugh dated August 10, 2006 (included as exhibit 10.3 to the Form 8-K filed on August 23, 2006 ).

10.39 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Kambiz Mahdi dated August 10, 2006 (included as exhibit 10.4 to the Form 8-K filed on August 23, 2006 ).

10.40 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Reza Zarif dated August 10, 2006 (included as exhibit 10.5 to the Form 8-K filed on August 23, 2006 ).

10.41 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Rufina Paniego dated August 10, 2006 (included as exhibit 10.6 to the Form 8-K filed on August 23, 2006 ).

10.42 Amended Line of Credit agreement between Probe Manufacturing, Inc. and eFund Capital Partners, LLC dated August 10, 2006 (included as exhibit 10.7 to the Form 8-K filed on August 23, 2006 ).

10.43 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Benner Exemption Trust dated August 10, 2006 (included as exhibit 10.8 to the Form 8-K filed on August 23, 2006 ).

10.44 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Ed Lassiter dated August 10, 2006 (included as exhibit 10.9 to the Form 8-K filed on August 23, 2006 ).

10.45 Amended Line of Credit agreement between Probe Manufacturing, Inc. and William Duncan dated August 10, 2006 (included as exhibit 10.10 to the Form 8-K filed on August 23, 2006 ).

10.46 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Hoa Mai dated August 10, 2006 (included as exhibit 10.11 to the Form 8-K filed on August 23, 2006 ).

10.47 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Ashford Transition Fund dated August 10, 2006 (included as exhibit 10.12 to the Form 8-K filed on August 23, 2006 ).

10.48 Employee Profit Sharing Plan (included as exhibit 10.13 to the Form 8-K filed on August 23, 2006 ).

10.49 Probe Manufacturing 2006 Employee Incentive Stock Option Plan (included as exhibit 10.14 to the Form 8-K filed on August 23, 2006 ).

10.50  Amended and Restated Series A Warrant Agreement. (included as exhibit 10.1 to the Form 8-K filed on November 14, 2006) (included as exhibit 10.1 to the Form 8-K filed on November 14, 2006).

10.51 Amended and Restated Series B Warrant Agreement.

10.52 Contract Services Agreement for purchase order No. 43103 between Probe Manufacturing, Inc. and Mettler Electronics Corp. dated May 8, 2007. (included as exhibit 10.1 to the Form 8-K filed on May 22, 2007)

10.53 Contract Services Agreement for purchase order No. 43104 between Probe Manufacturing, Inc. and Mettler Electronics Corp. dated May 8, 2007. (included as exhibit 10.1 to the Form 8-K filed on May 22, 2007)

10.55 Contract Services Agreement for purchase order No. 43104 between Probe Manufacturing, Inc. and Mettler Electronics Corp. dated May 8, 2007. (included as exhibit 10.1 to the Form 8-K filed on May 22, 2007)

10. 56 Probe Manufacturing, Inc. 2008 Directors Stock Compensation Plan. (included as attachment to PRE14A Form 8-K filed on November 18, 2007)



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10.57 Employment Letter of John Bennett date February 28, 2008. (included as exhibit 10.1 to the Form 8-K filed on February 29, 2008 and March 3, 2008)

10.58 Amended Sublease Agreement dated May 19, 2008. (included as exhibit 10.1 to the Form 8-K filed on May 19, 2008)

10.59 Letter of Intent between Probe Manufacturing and Solar Masters. (included as exhibit 10.1 to the Form 8-K filed on July 28, 2008)

10.60 Amended Letter of intent to acquire the assets of Solar Master Company. included as exhibit 10.1 to the Form 10-Q filed on August 12, 2008).

10.61 Agreement for the sale and purchase of business assets of Solar Masters, LLC date August 13, 2008.  (included as exhibit 10.1 to the Form 8-K filed on August 21, 2008)

10.62 Executive Consulting Agreement with Barrett Evans.  (included as exhibit 10.1 to the Form 8-K filed on September 12, 2008)

10.63 Engagement Letter of W. T. Uniack & Co. CPA ’ s P.C. (included as exhibit 10.1 to the Form 8-K filed on November 10, 2008 and amended on November 18, 2008)

10.64 Letter to Reza Zarif regarding Resignation Letter. (included as exhibit 10.2 to the Form 8-K filed on November 10, 2008 and amended on November 18, 2008)

10.65 Resignation letter from Board of Directors. (included as exhibit 10.3 to the Form 8-K filed on November 10, 2008 and amended on November 18, 2008)

10.66 Response from Reza Zarif Regarding 8-K dated 9/25/2008. (included as exhibit 10.4 to the Form 8-K filed on November 10, 2008 and amended on November 18, 2008)

10.67 Settlement Agreement and General release with Reza Zarif, dated June 2009. (included as exhibit 10.4 to the Form 8-K filed on August 12, 2009)

10.68 Sale of Solar Masters to Solar Masters Acquisition Company dated July 2009 (included as exhibit 10.4 to the Form 8-K filed on August 12, 2009)

10.69 Sale of Common Stock to KB Development Group, LLC  (included as exhibit 10.4 to the Form 8-K filed on August 12, 2009)

10.70  Resignation Letters of Barrett Evans and Jeffrey Conrad (included as exhibit 10.4 to the Form 8-K filed on August 12, 2009)

10.71  Summary of lease terms regarding Lease Agreement between Probe Manufacturing, Inc. and Benhard Family Trust dated October 14, 2009. (included as exhibit 10.1 to the Form 8-K filed on November 20, 2009)

10.72 Accounts Receivable Purchasing Agreement by and between Probe Manufacturing, Inc. and DSCH Capital Partners, LLC d/b/a Far West Capital, dated February 17, 2011 and effective as of February 18, 2011. Conrad (included as exhibit 10.1 to the Form 8-K filed on February 24, 2011)

10.73 Inventory Finance Rider to Accounts Receivable Purchasing Agreement by and between Probe Manufacturing, Inc. and DSCH Capital Partners, LLC d/b/a Far West Capital, dated February 17, 2011 and effective as of February 18, 2011.  (included as exhibit 10.2 to the Form 8-K filed on February 24, 2011)



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10.74 Agreement and Plan of Acquisition between Probe Manufacturing, Inc., Trident Manufacturing, Inc. and the Shareholders of Trident Manufacturing, Inc., dated March 13, 2013. (included as exhibit 10.1 to the Form 8-K filed on March 15, 2013)

10.75  Form of Series D Preferred Stock Purchase Agreement. (included as exhibit 10.1 to the Form 8-K filed on August 8, 2013)

10.76  Form of Series F Warrant Agreement.  (included as exhibit 10.2 to the Form 8-K filed on August 8, 2013)

10.77  Form of Series G Warrant Agreement  (included as exhibit 10.3 to the Form 8-K filed on August 8, 2013)

10.78 OEM Agreement between the Company and S-Ray INCORPORATED, dated November 21st, 2014. (included as exhibit 10.3 to the Form 8-K filed on November 24, 2014)

10.79 Form of Stock Purchase Agreement (included as exhibit 10.3 to the Form 8-K filed on December 17, 2014)

10.80  Registration Rights Agreement, by and between the Company and ETI Partners IV LLC, dated as of September 15, 2015. (included as exhibit 4.1 to the Form 8-K filed on September 15, 2015)

10.81  Asset Purchase Agreement, by and between the Company and General Electric International, Inc., dated as of September 11, 2015.  (included as exhibit 10.2 to the Form 8-K filed on September 15, 2015)

10.82 Transaction Completion and Financing Agreement, by and between the Company and ETI Partners IV LLC, dated as of September 15, 2015. (included as exhibit 10.3 to the Form 8-K filed on September 15, 2015)

10.83 Loan, Guarantee, and Collateral Agreement, by and between the Company and ETI Partners IV LLC, dated as of September 15, 2015. (included as exhibit 10.4 to the Form 8-K filed on September 15, 2015)

10.84 Securities Purchase agreement between the company and Peak One Opportunity Fund, LP (included as exhibit 10.4 to the Form 10-Q filed on August 22, 2016)

10.85 Subscription Agreement by and between the Company and Cyberfuture One LP, dated October 31, 2016. (included as exhibit 10.1 to the Form 10-Q filed on November 18, 2016)

10.86 Securities Purchase agreement between the company and Peak One Opportunity Fund, LP (included as exhibit 10.4 to the Form 10-Q filed on November 17, 2016)

10.87 Subscription Agreement by and between the Company and Cyberfuture One LP, dated October 31, 2016. (included as exhibit 10.1 to the Form 8-K/A filed on April 20, 2017)

10.88 Escrow Funding Agreement dated November 1, 2016 between Red Dot Investment, Inc., a California corporation and the Registrant. (included as exhibit 10.2 to the Form 8-K/A filed on April 20, 2017)

10.89 Partial Debt Settlement Agreement by and between EMA Financial, LLC, a Delaware limited liability company and the Registrant, dated January 9, 2017. (included as exhibit 10.1 to the Form 8-K filed on April 20, 2017)

10.90 Payoff Agreement by and between the Registrant and JSJ Investments, Inc., dated February 14, 2017. (included as exhibit 10.2 to the Form 8-K filed on April 20, 2017)



73


10.91 Credit Agreement and Promissory Note by and between Megawell USA Technology Investment Fund I LLC, a Wyoming limited liability company in formation and the Registrant, dated December 31, 2016. (included as exhibit 10.3 to the Form 8-K filed on April 20, 2017)

10.92 Common Stock Purchase Agreement by and between MGW Investment I Limited and the Registrant, dated February 13, 2018. (included as exhibit 10.20 to the Form 8-K filed on February, 20 2018)

10.93 Convertible Note Stock Purchase Agreement by and between the Registrant and Confections Ventures, Inc., dated February 13, 2018. (included as exhibit 10.21 to the Form 8-K filed on February, 20 2018)

10.94  $939,500 Convertible Promissory Note by and between Confections Ventures, Inc. and the Registrant, dated February 13, 2018. (included as exhibit 10.22 to the Form 8-K filed on February, 20 2018)

10.95 ETI IV LLC Settlement Agreement by and between the Registrant and ETI IV LLC, dated February 13, 2018. (included as exhibit 10.23 to the Form 8-K filed on February, 20 2018)

10.96 Reddot Settlement Agreement by and between the Registrant and Reddot Investment Inc., dated February 13, 2018. (included as exhibit 10.24 to the Form 8-K filed on February, 20 2018)

10.97 $153,123 Convertible Promissory Note of the Corporation to MGW Investment I Limited, dated February 8, 2018. (included as exhibit 10.25 to the Form 8-K filed on February, 20 2018)

14.1 Code of Ethics (included as exhibit 14.1 to the Form 10-KSB on April 5, 2007.

14.2  Amended and Restated Code of Business Conduct and Ethics, adopted September 23, 2011. .  (included as exhibit 14.1 to the Form 8-K filed on September 29, 2011)

 

21.1* List of Subsidiaries


31.1* Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

31.2* Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley 

Act of 2002.

 

32.1** Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.1** Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS**       XBRL Instance Document

 

101.SCH**      XBRL Taxonomy Extension Schema Document

 

101.CAL**      XBRL Taxonomy Extension Calculation Linkbase Document

 

101.LAB**      XBRL Taxonomy Extension Label Linkbase Document

 

101.PRE**      XBRL Taxonomy Extension Presentation Linkbase Document

 

101.DEF**      XBRL Taxonomy Extension Definition Linkbase Document

_________________

 

* Filed herewith

** Furnished herewith











74


Exhibit 31.1


CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


I, Kambiz Mahdi, certify that:


1. I have reviewed this Annual Report on Form 10-K of Probe Manufacturing, Inc.;


2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4. The registrant ’ s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c) Evaluated the effectiveness of the registrant ’ s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d) Disclosed in this report any change in the registrant ’ s internal control over financial reporting that occurred during the registrant ’ s most recent fiscal quarter (the registrant ’ s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant ’ s internal control over financial reporting; and


5. The registrant ’ s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant ’ s auditors and the audit committee of the registrant ’ s board of directors (or persons performing the equivalent functions):


a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant ’ s ability to record, process, summarize and report financial information; and


b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant ’ s internal control over financial reporting.








Date: April 16, 2018

By: /s/ KAMBIZ MAHDI



Kambiz Mahdi,

Chief Executive Officer







Exhibit 31.2


CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


I, John Bennett, certify that:


1. I have reviewed this Annual Report on Form 10-K of Probe Manufacturing, Inc.;


2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4. The registrant ’ s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c) Evaluated the effectiveness of the registrant ’ s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d) Disclosed in this report any change in the registrant ’ s internal control over financial reporting that occurred during the registrant ’ s most recent fiscal quarter (the registrant ’ s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant ’ s internal control over financial reporting; and


5. The registrant ’ s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant ’ s auditors and the audit committee of the registrant ’ s board of directors (or persons performing the equivalent functions):


a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant ’ s ability to record, process, summarize and report financial information; and


b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant ’ s internal control over financial reporting.








Date: April 16, 2018

By: /s/ JOHN BENNETT



John Bennett,

Chief Financial Officer







EXHIBIT 32.1


CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Probe Manufacturing, Inc. (the “ Company ” ) hereby certifies, to his knowledge, that:


(i) the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “ Report ” ) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and


(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.








April 16, 2018

By: /s/ Kambiz Mahdi


Date

Kambiz Mahdi

Chief Executive Officer


 




EXHIBIT 32.2


CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Probe Manufacturing, Inc. (the “ Company ” ) hereby certifies, to his knowledge, that:


(i) the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “ Report ” ) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and


(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.








April 16, 2018

By: /s/ John Bennett


Date

John Bennett

Chief Financial Officer