What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-20 compared with 2023-11-14 · 305 added, 166 removed, 152 unchanged (76% of the section changed)

17 unchanged sentences

of the Company

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, or “CE 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.

principal executive offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626.

design, produce and market clean energy products and integrated solutions focused on energy efficiency and renewable energy.

is to become a leading provider of renewable and energy efficiency products and solutions by helping commercial companies and municipalities

reduce energy waste and emissions, lower energy costs and generate incremental revenue by providing electricity, renewable natural gas

and biochar to the grid.

principal executive offices are located at 1340 Reynolds Avenue, Irvine, CA 92614.

Our telephone number is (949) 273-4990.

stock is listed on the NASDAQ Markets under the symbol “CETY.”

internet website address is www.cetyinc.com the information contained on our website are not incorporated by reference into this

internet website address is www.cetyinc.com the information contained on our websites are 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.

Company has four reportable segments:

Clean Energy HRS, the engineering & manufacturing services, CETY Renewables waste to energy

solutions, and CETY HK natural gas trading business.

four segments for accounting purposes are:

Energy HRS & CETY Europe – Our Waste Heat Recovery Solutions, converting thermal energy to zero emission electricity.

Renewables Waste to Energy Solutions – Providing Waste to Energy technologies and solutions.

and Manufacturing Business – providing customers with comprehensive design, manufacturing, and project management solutions.

HK – The parent company of our NG trading operations in China.

Prior to the first quarter of 2022 the Company had three reportable

segments but added the CETY HK segment to reflect its recent new businesses in China.

specialize in renewable energy & energy efficiency systems design, manufacturing and project implementation.

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In November 2015, we changed our name to Clean Energy Technologies, Inc.

Our principal executive

offices are located at 2990 Redhill Avenue, Costa Mesa, CA 92626.

We have 24 full-time employees.

All employees and overheads are shared

between Clean Energy Technologies, Inc.

Energy Technologies, Inc.

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principal businesses

Heat Recovery Solutions – we recycle waste heat produced in manufacturing, waste to energy and power generation facilities

Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities

using our patented Clean Cycle TM generator to create electricity which can be recycled or sold to the grid.

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of the contracts.

and (ii) our planned joint venture with a large state-owned gas enterprise in China called Shenzhen Gas (Hong Kong)

International Co.

(“Shenzhen Gas”), acquiring natural gas pipeline operator facilities, primarily located in the southwestern

part of China.

Our planned joint venture with Shenzhen Gas plans to acquire, with financing from Shenzhen Gas, natural gas pipeline operator

facilities with the goal of aggregating and selling the facilities to Shenzhen Gas in the future.

According to our Framework Agreement

with Shenzhen Gas, we will be required to contribute $8 million to the joint venture which plans to raise in future rounds of financing.

The terms of the joint venture are subject to the execution of definitive agreements.

and Segment Information

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and biochar to the grid.

four segments for accounting purposes are:

Energy HRS & CETY Europe – Our Waste Heat Recovery Solutions, converting thermal energy to zero emission electricity.

Renewables Waste to Energy Solutions – Providing Waste to Energy technologies and solutions.

& Manufacturing Services – providing customers with comprehensive design, manufacturing, and project management solutions.

HK – The parent company of our NG trading operations in China, as well as our planned joint venture to acquire NG distribution

systems depots and transmission systems.

Prior to the first quarter of 2022 the Company had three reportable segments but added the CETY

HK segment to reflect its recent new businesses in China.

of Operating Results the nine months ended September 30, 2023 compared to the same period in 2022.

of Operating Results the three months Ended March 31, 2024 Compared to the same period in 2023

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 equity of $5,389,051 and

a working capital of $1,755,468 as of September 30, 2023 the company also had an accumulated deficit of $19,829,422 as of September 30,

2023 and used $3,842,232 in net cash from operating activities for the nine months ended September 30, 2023.

CETY has a clear strategy

in place and has the capability to successfully restructure its existing debt and secure additional financing.

With its current strategic

approach and diversification of its products and solutions, the management has created a favorable environment for the company to transition

towards profitability.

the nine months ended September 30, 2023, our total revenue amounted to $11,701,118, a substantial increase from the $2,567,596 recorded

during the same period in 2022, reflecting a remarkable revenue growth of 356%.

This also represents a remarkable 339% growth over our

total revenue in 2022.

This impressive increase can be attributed to the success of the Vermont Renewable Gas Biomass project in Lyndon

and the substantial anticipated growth in Natural Gas (NG) trading from CETY HK.

the nine months ending on September 30, 2023, our gross profit amounted to $1,427,629, as compared to $1,151,903 for the corresponding

period in 2022.

The substantial fluctuations in natural gas (NG) prices during both the winter and summer seasons had a notable impact

on our profit margins.

Nevertheless, the sale of CETY’s waste-to-energy and waste-heat to power systems significantly bolstered

our profit margins.

the nine months ending on September 30, 2023, our operating expenses totaled $2,709,963, compared to $1,724,727 for the corresponding

period in 2022.

This increase can be attributed to CETY’s expansion in 2023, along with additional costs related to marketing and

business development, professional fees for legal and accounting services, increased expenses for investor relations, higher salaries

for the new executives and directors, and additional consulting engineering expenses.

the nine months ended September 30, 2023, we incurred a net loss of $2,460,489, as compared to $1,322,861 for the corresponding period

This increase in net loss can be attributed to the rise in operating expenses stemming from our recent expansion, as well as

interest and financing fees amounting to $1,707,690, which includes financing fees and debt discount calculations associated with the

the period ending September 30, 2023, the stockholder’s equity amounted to $5,389,051, representing a significant increase from

the $1,878,196 reported on December 31, 2022.

This substantial growth is attributable to the offering associated with the Nasdaq up-listing,

along with debt conversions and write-offs.

The Company had a total stockholder’s equity of $4,414,986

and a working capital of $324,893 as of March 31, 2024, The company also had an accumulated deficit of $24,473,587 as of March 31,

2024 and used $871,636 in net cash from operating activities for the three months ended March 31, 2024.

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.

the quarter ended March 31, 2024, our total revenue was $1,513,026 compared to $551,869 for the same period in 2023.

Our first quarter

2024 total revenue was higher than the same period in 2023 due to deconsolidation of our Shuya entity.

the quarter ended March 31, 2024, our gross profit was $253,005 compared to $19,487 for the same period in 2023.

The higher gross profit

margins were a result of increased revenue from CETY’s non-NG business in China.

the three months ended March 31, 2024, our operating expense was $1,073,926 compared to $698,107 for the same period in 2023.

in expenses contributed to salaries expenses and professional fees for legal & accounting.

the quarter ended March 31, 2024, we had a net loss of $1,419,400 compared to $1,110,390 for the same period in 2023 due to increased

in salaries expense contributed to CETY Renewables new engineers and operational and technology directors, fees and marketing campaign

expenses attributed to CETY’s expansion plans and loss from deconsolidation of Shuya.

the quarter ended March 31, 2024, stockholder’s equity was $4,414,986, compared to $5,869,198 as of December 31, 2023.

This decrease

of $1,454,212 in stockholder’s equity can be attributed to net loss for the quarter.

has successfully repositioned itself and created 4 different business segments to create a larger, more stable, and more diversified

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Procurement and Consulting (EPC), and CETY HK (NG trading and acquisitions).

The revenue in the CETY HK fuel segment is expected to continue

to scale up which will help establish CETY as a player in the Asian market and allows cross-selling of CETY products and solutions.

expects larger revenue contribution from Waste-to-Energy, and EPC in the latter of this year which are higher gross margin segments.

First quarter revenue was mainly contributed by NG trading.

The revenue in this segment is expected to continue to stay stable which will help establish CETY as a player in the China market and

allows cross-selling of CETY products and solutions and transfer of advanced clean energy with lower cost technologies.

larger revenue contribution from Waste-to-Energy, Heat Recovery, and EPC in the latter of this year which are higher gross margin segments.

Our pilot Waste-to-Energy plant in Vermont which integrates all of CETY’s technologies and expertise into a single solution, is

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believes this 4-segment strategy has created many operational synergies and cross-selling opportunities across different markets.

breakneck revenue growth that was demonstrated this quarter is a direct result of this strategy as we have exceeded the revenues for

the entire year of 2022.

CETY believes that it will continue to deliver growth in all segments this year due to our belief that there

is an optimistic industry macro backdrop.

The main macro factor benefiting us is the global commitment to push renewable energy to the

forefront from governments across the world.

growth in the year ended 2024 vs.

2023 was a result of this strategy.

CETY believes that it will continue to deliver growth on all segments

this year due to our belief that there is an optimistic industry macro backdrop.

The main macro factor benefiting us is the global commitment

to push renewable energy to the forefront from governments across the world.

This is evidenced by the Paris Agreement and COP26.

The Inflation Reduction Act passed by

Congress in August 2022 had specific provisions that can take advantage of CETY’s products and solutions.

Another catalyst that

will potentially help our Company, is a continuously improving global supply chain as U.S.

and European markets have begun to return

normal levels post COVID and China has reopened its borders.

The European energy crisis has given rise to the opportunity for CETY to

sell more of its products and solutions as customers are in search of self-generation capabilities in renewable energy.

And lastly, as

China ends its draconian COVID lockdown policies, CETY was able to resume its growing business in that region.

reached a momentous milestone in its corporate history on March 23, 2023 when the company was able to meet all the Nasdaq listing standards

and began trading on Nasdaq.

Nasdaq trading status increases CETY’s reputation greatly and benefits CETY’s sales plans globally.

This also improves the company’s ability to access capital with better terms.

Inflation Reduction Act passed by Congress in August 2022 had specific provisions that can take advantage of CETY’s products and

Another catalyst that will potentially help our Company, is a continuously improving global supply chain.

The European energy

crisis has given rise to the opportunity for CETY to sell more of its products and solutions as customers are in search of self-generation

capabilities in renewable energy.

expects to and will continue to execute its corporate strategy to build sustained and profitable growth by providing end to end fully

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note 13 to the notes to the financial statements for a discussion on related party transaction

of the nine-month ended September 30, 2023 compared to the nine-month ended September 30, 2022

the nine months ended September 30, 2023 our total revenue was $11,701,118 compared to $2,567,596 for the same period in 2022.

has four reportable segments:

Clean Energy HRS (HRS), CETY Renewables waste to energy solutions, the engineering and manufacturing services,

and CETY HK Natural gas trading business.

nine months ended September 30, 2023 our revenue from Engineering and Manufacturing was $59,877 compared to $132,316 for the same period

Our engineering team was in transition to establish the innovation center in Europe and has executed a master services agreement

of the three Ended March 31, 2024, Compared to the three ended March 31, 2023

the quarter ended March 31, 2024, our total revenue was $1,513,026 compared to $551,869 for the same period in 2023.

The higher revenue

was contributed to the deconsolidation of Shya’s business.

three months ended March 31, 2024, our revenue from Engineering and Manufacturing was $9,342 compared to zero for the same period in

Our engineering team is in transition to establish the innovation center in Europe and has executed a master services agreement

with RPG to support its fortune 500 customers with its sustainability goals.

Additionally, our engineering team has started work on the

Vermont projects in the second quarter of 2023.

We expect continued growth from this segment with the revenue being recognized within

the waste to energy business segment.

nine months ended September 30, 2023 our revenue from HRS was $399,136 compared to $509,330 for the same period in 2022.

from this segment in 2023 was from service fees vs.

Equipment sale in 2022.

We are in the process of securing long lead materials to

complete several units over the next few months and be able to recognize unit sales by the end of the year.

nine months ended September 30, 2023 our revenue from our wholly owned subsidiary CETY HK was $10,462,385 compared to $1,925,950 for

the same period in 2022.

The increase was as a result of the ability to secure larger amounts of gas and growth from the newly formed

joint venture.

nine months ended September 30, 2023 our revenue from our wholly owned subsidiary CETY Renewables Waste to Energy was $779,720, this

was as a result of commencement of the design, sourcing and permitting of the Vermont Renewable Gas project.

nine months ended September 30, 2023;

our gross profits were $1,427,629 compared to $1,151,903 for the same period in 2022.

gross profit percentage was due to lower margins from the NG business offset by higher revenue from the HRS and Engineering services.

nine months ended September 30, 2023 our gross profit from Engineering and Manufacturing was $16,528 compared to $85,352 for the same

Additionally, our engineering team will be commencing work

on the Vermont project starting in the second quarter of 2023.

the three months ended March 31, 2024, our revenue from HRS was $72,488 compared to $10,942 for the same period in 2023.

We have a large

pipeline of opportunities in this segment and are working diligently to complete the engineering and design, enabling us to execute contractual

agreements and close these opportunities.

The sales cycle for these types of opportunities is long due to cost factors and the integration

of the technology.

We are also working with financial institutions to assist in financing the projects as we increasingly move towards

Independent Power Producer models.

the three months ending March 31, 2024, our revenue from our natural gas (NG) business amounted to $1,219,629, down from $540,927 for

the corresponding period in 2023.

This increase can be attributed to the deconsolidation of Shuya’s revenue and our strategic decision

to prioritize non-Chinese markets over expansion into the ASEAN region.

the three months ending March 31, 2024, our gross profits totaled $253,004, marking an favorable increase compared to $160,569 recorded

for the corresponding period in 2023.

This uptick in gross profit can be attributed to elevated margins stemming from the increase from

our non-Chinese NG business, alongside the successful launch of our waste-to-energy plant in Vermont.

the three months ending March 31, 2024, our gross profit from Engineering and Manufacturing amounted to $7,806, compared for the same

period in 2023.

This was as a result of higher revenue in this segment.

nine months ended September 30, 2023 our gross profit from HRS was $148,706 compared to $467,534 for the same period in 2022.

revenue from the same period in 2022 was a result of more unit sales and higher margin product sale.

nine months ended September 30, 2023 our gross profit from CETY HK was $524,152 compared to $631,082 for the same period in 2022.

lower margin was due to lower gas prices in winter and spring and higher volume.

the nine months ending September 30, 2023, our gross profit from our waste-to-energy solutions amounted to $738,243, in contrast to no

revenue for the same period in 2022.

The improved margins were primarily driven by increased sales and the launch of the Vermont Renewable

This segment is a recent addition to CETY’s portfolio, currently serving as a support for our ongoing internal

Nevertheless, it is anticipated to expand notably as CETY shifts its focus towards providing comprehensive end-to-end integrated

the three months ended March 31, 2024, our gross profit from HRS was $51,598, in compared to $5,128 for the corresponding period in 2023.

This increase in margins primarily stemmed from increased service activities, which did not include equipment sales.

the three months ended March 31, 2024, our gross profit from our wholly owned subsidiary, JHJ, was $9,852, a decrease from $12,959

recorded for the corresponding period in 2023.

This decline was primarily attributed to the deconsolidation of the Shuya business unit.

It’s worth noting that our NG business typically operates on slim margins.

Looking ahead, we intend to leverage our presence in

China to foster synergistic partnerships and facilitate technology transfers, particularly in the growing EV charging sector.

Additionally,

we aim to explore cross-selling opportunities for our waste heat recovery and waste-to-energy products within the Chinese market.

General and Administrative (SG&A) Expenses.

September 30, 2023, after nine months, our SG&A expense amounted to $476,078, marking a significant increase from the $284,025 recorded

for the corresponding period in 2022.

This uptick can be attributed to heightened expenditures in several areas, including Media and

Investor Relations activities, marketing, sales efforts, subscription services, and IT-related expenses.

the nine months concluding on September 30, 2023, our salaries expense totaled $1,040,431, reflecting a substantial rise from the $587,928

incurred during the equivalent period in 2022.

This increase in 2023 was primarily attributable to the addition of new executive hires.

nine months ended September 30, 2023;

the three-month period ending March 31, 2024, our SG&A expenses totaled $218,658, an increase from $88,891 for the same period in

This increase can be attributed to increased spending in IT, insurance expenditures particularly the D&O policy, and increased

spending on repairs and maintenance, largely driven by the recent relocation of our HRS operations.

the three months ended March 31, 2024, our Salaries expense totaled $511,111, marking a significant increase from $158,557 recorded during

the same period in 2023.

This surge in expenses for the quarter ending March 31, 2024, can be attributed to the inclusion of key personnel

such as our CFO, director of operations, director of technology, and the recruitment of four additional engineers.

Our strategy involves

fortifying our team from the ground up to establish a robust foundation for scalable growth, reinforced by cutting-edge technology and

streamlined systems.

We hold strong conviction in the capabilities of our assembled team, envisioning their collective efforts leading

us to a position of leadership within the clean energy sector.

three months ended March 31, 2024;

our travel expense was $29,652 compared to $71,662 for the same period in 2023.

was due to travel expenses related to Europe for the MSA development and increased site visits due to an increase in the sales opportunities

and commissioning, and customer visits in China related to the LNG trading business.

The decrease was due

to lower travel expenses related to China NG business development.

fees legal and accounting

the nine-month period ending on September 30, 2023, our professional fees expense amounted to $259,476, as opposed to $359,636 for the

corresponding period in 2022.

This reduction in legal and accounting fees can be attributed to a decreased workload associated with the

registration and uplisting process to NASDAQ.

the quarterly period ended March 31, 2024, our Professional Fees expense totaled $126,105, marking an increase from $88,210 in the

corresponding period of 2023.

This rise in accounting fees can be attributed directly to engaging a new audit firm, which incurred

higher costs.

Lease and Maintenance Expense

the nine-month period ending on September 30, 2023, our Facility Lease and maintenance expense amounted to $347,529, showing an increase

compared to the $260,262 spent during the same period in 2022.

This rise can be attributed to the inclusion of Shuya’s new facility

in Chengdu, China.

the three months ended March 31, 2024, our Facility Lease and maintenance expenses totaled $71,275, marking a significant decrease from

the $122,779 incurred during the same period in 2023.

This reduction in cost can be attributed to the strategic relocation and separation

of our corporate offices from our HRS operations, resulting in a cost-saving measure.

and Amortization Expense

the nine months ending on September 30, 2023, our depreciation and amortization expense amounted to $13,805, compared to $22,557 for

the corresponding period in 2022, showing a relatively unchanged figure.

three months ended March 31, 2024, our depreciation and amortization expense was 2,969 compared to $5,949 for the same period in 2023.

in Derivative Liability

nine months ended September 30, 2023;

we had a gain on derivative liability of $326,539 compared to a gain of $(12,980) for the same

period in 2022.

The gain in derivative liability was from a favorable derivative calculations and payoffs from several convertible notes

in the nine months ended September 30, 2023.

three months ended March 31, 2024;

we had no derivative liability compared to a gain of $326,539 for the same period in 2023.

in derivative liability was from a favorable derivative calculation from several convertible notes in the three months ended March 31,

and Finance Fees

nine months ended September 30, 2023 interest and finance fees were $1,707,690 compared to $747,451 for the same period in 2022.

increase was due to several new notes to assist with the uplist to Nasdaq.

the nine months ending on September 30, 2023, our loss amounted to $2,460,489, which is an increase compared to a loss of $1,322,861

for the same period in 2022.

This increase can be primarily attributed to $1,707,690 in financing fees.

We incurred these additional

financing fees due to our commitment to paying more for financing in order to safeguard our investors, thereby preventing dilution at

a lower valuation.

the three months ending on March 31, 2024, interest and finance fees amounted to $295,193, as opposed to $837,391 for the

corresponding period in 2023.

The decrease in interest and fees for the March 31, 2024 period can be attributed to less number of

notes and bridge financing aimed at facilitating the uplisting to Nasdaq.

Despite the decrease in interest and fees for the March

31, 2024 period, we believe that the cost of capital for CETY remains elevated.

The delay in securing affordable financing for our

Vermont project resulted in our reliance on high-cost financing options.

We are working diligently to finalize our financing

in the second quarter of 2024.

the three months ending March 31, 2024, our loss amounted to $1,419,400, representing an increase from the loss of $1,110,390 incurred

during the corresponding period in 2023.

This increase is attributed to expenditures in salaries, IT, relocation, and legal and professional

and Capital Resources

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Consolidated Statements of Cash Flows

the nine months ended September 30, 2023

the three months ended March 31,

Net cash (used in) operating activities

$ (3,842,232 )

$ (1,929,678 )

Cash Flows provided by/ (used in) investing activities

Cash Flows Provided by financing activities

Net Increase (decrease) in Cash and Cash Equivalents

$ (1,016,545 )

Net cash provided by investing activities

Net cash provided by financing activities

Foreign Currency Transaction

Net increase in cash and cash equivalents

Requirements for Long-Term Obligations

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Actual results could differ from those estimates made by management.

Company recognizes revenue under ASU No.

2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC

Obligations Satisfied Over Time

ASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10

entity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one

of the following criteria is met:

The customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB

ASC 606-10-55-5 through 55-6).

The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is

created or enhanced (as described in FASB ASC 606-10-55-7).

The entity’s performance does not create an asset with an alternative use to the entity (see FASB ASC 606-10-25-28), and the entity

has an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).

following five steps are applied to achieve that core principle for our business:

the contract with the customer

the performance obligations in the contract

the transaction price

the transaction price to the performance obligations in the contract

revenue when the company satisfies a performance obligation

Obligations Satisfied at a Point in Time

ASC 606-10-25-30

a performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time.

To determine the point

in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should

consider the guidance on control in FASB ASC 606-10-25-23 through 25-26.

In addition, it should consider indicators of the transfer of

control, which include, but are not limited to, the following:

The entity has a present right to payment for the asset

The customer has legal title to the asset

The entity has transferred physical possession of the asset

The customer has the significant risks and rewards of ownership of the asset

The customer has accepted the asset

core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services

to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration

it is entitled to in exchange for the goods and services transferred to the customer.

In addition a) the company also does not have an

alternative use for the asset if the customer were to cancel the contract, and b) has a fully enforceable right to receive payment for

work performed (i.e., customers are required to pay as various milestones and/or timeframes are met)

following five steps are applied to achieve that core principle for our HRS and Cety Europe Divisions:

the contract with the customer

the performance obligations in the contract

the transaction price

the transaction price to the performance obligations in the contract

revenue when the company satisfies a performance obligation

following steps are applied to our legacy engineering and manufacturing division:

generate a quotation

receive Purchase orders from our customers.

build the product to their specification

invoice at the time of shipment

terms are typically Net 30 days

following step is applied to our CETY HK business unit:

HK is primarily responsible for fulfilling the contract / promise to provide the specified good or service.

principal obtains control over any one of the following (ASC 606-10-55-37A):

good or another asset from the other party which the entity then transfers to the customer.

Note that momentary control before transfer

to the customer may not qualify.

right to a service to be performed by the other party, which gives the entity the ability to direct that party to provide the service

to the customer on the entity’s behalf.

good or service from the other party that it then combines with other goods or services in providing the specified good or service

to the customer.

the entity obtains control over one of the above before the good or service is transferred to a customer, the entity could be considered

the project development and engineering phase of our CETY Renewable projects such as VRG, we employ the input method of revenue recognition

to estimate revenue based on projected costs.

This approach involves forecasting future costs and revenues to determine the amount of

revenue we recognize in the current period.

It’s important to understand, however, that these recognized revenue figures are not

final and are subject to adjustments.

Changes may occur as we gain more clarity on actual costs compared to our initial projections,

affecting the revenue recognized accordingly.

projected costs of the VRG project is based on estimates and profitability will be impacted depending on actual costs.

Using the input

method for revenue recognition, the amount of recorded revenue is also affected depending on the estimated total costs.

price allocation for Shuya was also based on estimates and comparable data selected by the Company.

The inputs for the valuation of the

Series E preferred shares were also based on estimates and comparable data selected by the Company.

Additionally,

the above five steps are applied to achieve core principle for our CETY Renewables Division:

the CETY Renewables division is presently engaged in the Engineering, Procurement, and Construction (EPC) of biomass power facilities,

CETY Renewables has developed a process of executing EPC Agreements with customers for this work.

In contracting these engagements, CETY

Renewables recognizes revenue according to accounting standards in accordance with ASC 606.

recognizing this revenue, CETY Renewables first identifies the relevant contract with its customer according to 606-10-25-1.

entities, together known as the Parties, approved the contract in writing, through signatures and commitment to the performance of

permitting, design, procurement, construction, and commissioning.

work product includes permits, engineering designs, equipment, and full balance of plant specific to permitting, design, procurement,

construction, and commissioning.

and customer agree to a total EPC Contract price.

contract has commercial substance.

The risk associated with this EPC Agreement is that payment of the EPC contract price.

the EPC Agreement, CETY expects to collect substantially all of the consideration for its goods and services.

CETY identifies the performance obligations of the Parties in performance of the EPC Agreement in accordance with 606-10-25-14.

inception, CETY assesses the goods and services necessary to deliver the facility in accordance with the its agreement with its clients.

The agreement specifically laid out all deliverables necessary to achieve the permitting, design, procurement, construction, and commissioning.

also looks at 606-10-25-14(A).

A bundle of goods or services is also present, in that CETY is delivering all work products associated

with permitting, design, procurement, construction and commissioning of a commercially operable biomass power plant.

A biomass power

plant is a distinct bundle of goods or services, so the individual goods or services on their own do not lend themselves to a fully integrated

or functional system.

in accordance with 606-10-32-1, CETY reviews measurement of the performance obligations.

There are no exclusion of any amount of the

Contract Price due to constraints associated with 606-10-31-11 through 606-10-32-13.

review of 606-10-32-2A, CETY did not exclude measurement from the measurement of the transaction price any taxes assessed by a government

authority as no such taxes will be due.

reviewing 606-10-32-3, CETY evaluated the nature, timing, and amount of consideration promised, and whether it impacts the estimate of

the transaction price.

in identifying a single method of measuring progress for each performance obligation satisfied over time, in accordance with 606-10-25-32,

CETY applies the methodology of 606-10-25-36.

CETY adopted and implemented the input method for revenue recognition in accordance with

ASC 606-10-25-33.

The company adopts the input method for implementation.

CETY recognizes revenue for performance obligations on the

basis of the entity’s efforts or inputs to the satisfaction of a performance obligation per 606-10-55-20.

CETY, the contracts with clients for the construction of biomass power plants are the basis for revenue recognition.

In each separate

EPC Agreement, the performance obligations include permitting, design, procurement, construction, and commissioning of the plant.

of these work products satisfy Section 606-10-25-27(b) as these work products create or enhance an asset under customer’s control.

Upon delivery of the work product, the customer takes control of the work products and has full right and ability to direct the use of

and obtain substantially all of the remaining benefits of the assets.

We recognize revenue over time, using timeline and milestone methods

to measure progress towards complete satisfaction of the performance obligation.

the complexity and duration of the biomass power plant construction projects, CETY will recognize revenue over time, consistent with

the criteria for over-time recognition under ASC 606.

This approach reflects the continuous transfer of documents, permits, and the equipment

over to the customer, which is characteristic of long-term construction contracts.

have a list of appropriate measures of progress:

This is based on milestones achieved, among other measures.

the long-term nature of the projects, CETY regularly reviews and, if necessary, updates its estimates of progress towards completion,

transaction price, and the allocation of the transaction price to performance obligations.

from time to time our contracts state that the customer is not obligated to pay a final payment until the units are commissioned, i.e.

a final payment of 10%.

As of December 31, 2023 and 2022 we had $33,000 and 33,000 of deferred revenue, which is expected to be recognized

in the second quarter of year 2024.

from time to time we require upfront deposits from our customers based on the contract.

As of December 31, 2023 and 2022, we had outstanding

customer deposits of $210,310 and $80,475 respectively.

from fair value or equity method to consolidation

Xiangyueheng Enterprise Management Co., Ltd (the “Xiangyueheng”), which owns a 10% equity interest in Shuya, entered a three-party

Concerted Action Agreement (the “CAA”), wherein the parties agreed to vote in unison at the shareholders’ meeting of

Shuya to consolidate the controlling position of the three parties in Shuya.

The three parties agreed that during the term of the CAA,

before any of the three parties intends to propose motions to the shareholders’ meetings or the board of directors, or exercise

their voting rights on any matter that shall be presented to and resolved through the shareholders’ meeting in accordance with

the laws, regulations, Articles of Association of Shuya or any relevant shareholders’ agreements, the three parties will discuss,

negotiate, and coordinate the motion topics for consistency;

in the event of disagreement, the opinions of JHJ shall prevail.

a result of the CAA, the Company re-analyzed and determined that Shuya is the variable interest entity (the “VIE”) of JHJ

because 1) the equity investors at risk, as a group, lack the characteristics of a controlling financial interest, and 2) Shuya is structured

with disproportionate voting rights, and substantially all the activities are conducted on behalf of an investor with disproportionately

few voting rights.

Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if

the reporting entity has both of the following characteristics:

(a) the power to direct the activities of the VIE that most significantly

affect the VIE’s economic performance;

and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially

be significant to the VIE.

The Company concluded JHJ is deemed the primary beneficiary of the VIE.

Accordingly, the Company consolidates

Shuya into its consolidated financial statements effective on January 1, 2023.

On January 1, 2024, and effective on the same date,

JHJ, SSET and Xiangyueheng entered into the Agreement on the Termination of the Concerted Action Agreement (the “Termination Agreement”),

pursuant to which the parties released each other from any and all obligations under the CAA.

Due to the Termination Agreement, the Company

now holds less than 50% of the voting rights in Shuya.

The Company analyzed whether Shuya should be consolidated under ASC 810 and determined

Shuya is no longer required to be consolidated on January 1, 2024 after the execution of the Termination Agreement.

Accordingly, the Company

will not consolidate Shuya into its consolidated financial statements on or after January 1, 2024.

Additionally,

the inputs for the valuation of the Series E preferred shares were also based on estimates and comparable data selected by the Company

and fair value measurements, furthermore, the purchase price allocation was based on estimates of fair market values.

will continue to rely on equity sales of our common shares to continue to fund our business operations.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis