{"url_path":"/sec/cety/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors.**","topic":"sec","document":{"doc_type":"10-K/A","doc_date":"2026-06-05","source_url":"https://www.sec.gov/Archives/edgar/data/1329606/0001493152-26-027379-index.html","accession_number":"0001493152-26-027379","cik":"0001329606","ticker":"CETY","issuer_name":"Clean Energy Technologies, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1329606/0001493152-26-027379-index.html","primary_entity_key":"0001329606","primary_entity_name":"Clean Energy Technologies, Inc."},"word_count":11317,"has_tables":true,"body_markdown":"**Item\n1A. Risk Factors.**\n\n \n\nWe\nare 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\nunder this item. We reserve the right not to provide risk factors in our future filings.\n\n* *\n\n*An\ninvestment in our common stock involves a high degree of risk. Before deciding to purchase, hold, or sell our common stock, you should\nconsider carefully the risks described below in addition to the cautionary statements and risks described elsewhere in this Annual Report\nand in our other filings with the SEC, including our registration statements and reports on Forms 10-K, 10-Q and 8-K. The risks and uncertainties\ndescribed below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem\nimmaterial may also impair our business operations. If any of these known or unknown risks or uncertainties actually occur, our business,\nfinancial condition, results of operations or cash flows could be seriously harmed. This could cause the trading price of our common\nstock to decline, resulting in a loss of all or part of your investment.*\n\n \n\n20\n\n \n\n \n\n**RISKS\nRELATD TO OUR BUSINESS**\n\n \n\n**OUR\nINDEPENDENT ACCOUNTANTS HAVE ISSUED A GOING CONCERN OPINION AND IF WE CANNOT OBTAIN ADDITIONAL FINANCING AND/OR REDUCE OUR OPERATING\nCOSTS SUFFICIENTLY, WE MAY HAVE TO CURTAIL OPERATIONS AND MAY ULTIMATELY CEASE TO EXIST.**\n\n \n\nThe\nfinancial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets\nand liquidation of liabilities in the normal course of business. The Company had a total stockholder’s equity of $1,897,145\nand a deficit working capital of $3,478,090 and an accumulated deficit of $28,480,730 as of December 31, 2024 (Restated), and used $3,560,951\nin net cash from operating activities for the year ended December 31, 2024.\n\n \n\nFor\nthe fiscal year ending December 31, 2024, our company reported a net loss of $4,550,296 compared to a net loss of $5,611,128 for the\nyear 2023. The reduction in net loss for 2024 is primarily attributed to several key factors, including our strategic expansion into\nhigher-margin waste-to-energy business unit, also a reduction in interest and financing fees compared to the previous year. Despite the\npersistently high interest rates, we are actively exploring more cost-effective financing options moving forward.\n\n \n\nAlthough\nour financial statements have been prepared under the assumption that we would continue our operations as a going concern, there is substantial\ndoubt about our ability to continue as a going concern, based on our financial statements and results of operations at that time. Specifically,\nas noted above, we have experienced losses from operations and negative cash flows from operating activities. Although our audited financial\nstatements for the years ended December 31, 2024 and 2023, were prepared under the assumption that we would continue our operations as\na going concern, the report of our independent registered public accounting firm that accompanies our financial statements for the years\nended December 31, 2024 and 2023, contains a going concern qualification in which such firm expressed substantial doubt about our ability\nto continue as a going concern, based on our financial statements and results at that time.\n\n \n\nWe\nexpect to continue to incur significant expenses and operating losses for the foreseeable future. These prior losses and expected future\nlosses have had, and will continue to have, an adverse effect on our financial condition. In addition, continued operations and our ability\nto continue as a going concern may be dependent on our ability to obtain additional financing in the near future and thereafter, and\nthere are no assurances that such financing will be available to us at all or will be available in sufficient amounts or on reasonable\nterms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable\nto generate additional funds in the future through sales of our products, financings or from other sources or transactions, we will exhaust\nour resources and will be unable to continue operations. If we cannot continue as a going concern, our shareholders would likely lose\nmost or all of their investment in us.\n\n \n\n**WE\nHAVE AN ACCUMULATED DEFICIT AND MAY INCUR ADDITIONAL LOSSES; THEREFORE, WE MAY NOT BE ABLE TO OBTAIN THE ADDITIONAL FINANCING NEEDED\nFOR WORKING CAPITAL, CAPITAL EXPENDITURES AND TO MEET OUR DEBT SERVICE OBLIGATIONS.**\n\n \n\nAs\nof December 31, 2024, we had current liabilities of $6,658,247 and total current assets of $3,180,157.\n\n \n\nOur\ndebt could limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, or\nother purposes in the future, as needed; to plan for, or react to, changes in technology and in our business and competition; and to\nreact in the event of an economic downturn.\n\n \n\nWe\nmay not be able to meet our debt service obligations. If we are unable to generate sufficient cash flow or obtain funds for required\npayments, or if we fail to comply with covenants in our revolving lines of credit, we will be in default.\n\n \n\n**WE\nMAY ONCE AGAIN IN THE FUTURE RELY ON CONTRACTUAL ARRANGEMENTS TO OBTAIN CONTROL OF A VIE, WHICH MAY NOT BE AS EFFECTIVE IN PROVIDING\nOPERATIONAL CONTROL AS DIRECT OWNERSHIP.**\n\n \n\nOn\nJanuary 1, 2023, we entered into the CAA with SSET and Xiangyueheng, two other shareholders of Shuya, wherein the three parties agreed\nto vote in unison at the shareholders’ meeting of Shuya to consolidate the controlling position of the three parties in Shuya.\nWe relied on such contractual arrangement to gain effective control of Shuya and consolidated Shuya into our consolidated financial statements\neffective on or after January 1, 2023. After the termination of such contractual arrangements on January 1, 2024, we no longer consolidate\nShuya into our consolidated financial statements. See “*Prospectus Summary – Corporate Information*” for details.\nHowever, in the event that we once again employ a similar VIE structure in the future, you should be aware that a controlling financial\ninterest through contractual arrangements is not considered as equal to equity interest and this structure involves unique risks to investors.\nIf we had more than 50% equity ownership of the VIE, we would be able to exercise our rights as a shareholder to effect changes in the\nboard of directors of the VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management\nand operational level. However, under the contractual arrangement, we relied on the performance by the other external parties of their\nobligations under the contract to exercise control over the VIE. The other parties may not perform their obligations under the contract.\nAll of such contractual arrangements are governed by and interpreted in accordance with PRC laws, and disputes arising from these contractual\narrangements will be resolved through arbitration or litigation in the PRC. However, the legal system in the PRC is not as developed\nas in other jurisdictions, such as the United States. There remain significant uncertainties regarding the outcome of arbitration or\nlitigation. These uncertainties could limit our ability to enforce the contractual arrangement. In the event we are unable to enforce\nthe terms of contractual arrangement or we experience significant delays or other obstacles in the process of enforcing such agreement,\nwe may not be able to exert control over the VIE and may lose control over the assets owned by the VIE. Our financial performance may\nbe materially and adversely affected as a result and we may not be eligible to consolidate the financial results of the VIE into our\nconsolidated financial results.\n\n \n\n**WE\nARE NOT CURRENTLY IN COMPLIANCE WITH NASDAQ’S MINIMUM BID PRICE LISTING REQUIREMENT OR NASDAQ’S ANNUAL SHAREHOLDER MEETING\nLISTING REQUIREMENT; IF WE ARE NOT ABLE TO REGAIN COMPLIANCE WITH THOSE REQUIREMENTS WITHIN THE TIME PERIODS PERMITTED BY NASDAQ, OUR\nCOMMON STOCK MAY BE DELISTED, WHICH WOULD LIKELY IMPAIR OUR ABILITY TO RAISE CAPITAL AND COULD CONSTITUTE AN EVENT OF DEFAULT UNDER OUR\nOUTSTANDING PROMISSORY NOTES.**\n\n \n\nOn\nNovember 5, 2024, the Company received a written notice from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”)\nindicating that the Company was not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2)\nfor continued listing on The Nasdaq Capital Market (the “Minimum Bid Price Requirement”). The Nasdaq listing rules require\nlisted securities to maintain a minimum bid price of $1.00 per share, and, based upon the closing bid price of the Company’s common\nstock for the prior 30 consecutive business days, the Company no longer met this requirement. The Nasdaq rules provided the Company a\ncompliance period of 180 calendar days from the date of the notice (or until May 5, 2025) in which to regain compliance with the Minimum\nBid Price Requirement.\n\n \n\nOn\nJanuary 8, 2025, the Company received a written notice from Nasdaq indicating that the Company was not in compliance with Nasdaq’s\nannual shareholder meeting requirement as set forth in Listing Rules 5620(a) and 5810(c)(2)(G) (the “Annual Shareholder Meeting\nRequirement”). The Nasdaq listing rules require the Company to have an annual meeting of shareholders within twelve months of the\nend of the Company’s fiscal year end, and the Company has not had an annual meeting within twelve months of the Company’s\n2023 fiscal year end as required. The Nasdaq rules provided the Company 45 calendar days to submit a plan to regain compliance with the\nAnnual Shareholder Meeting Requirement. The Company submitted such plan as required, and on February 27, 2025, Nasdaq provided the Company\nan extension of until June 3, 2025, to regain compliance with the Annual Shareholder Meeting Requirement.\n\n \n\nThere\nis no guarantee that the Company will be able to regain compliance with either the Minimum Bid Price Requirement or the Annual Shareholder\nMeeting Requirement. If the Company’s common stock ultimately were to be delisted for any reason, including because the Company\ncannot regain compliance with the Minimum Bid Price Requirement or the Annual Shareholder Meeting Requirement, it could negatively impact\nthe Company by (i) reducing the liquidity and market price of the Company’s common stock; (ii) reducing the number of investors\nwilling to hold or acquire the Company’s common stock, which could negatively impact the Company’s ability to raise equity\nfinancing; (iii) limiting the Company’s ability to use a registration statement to offer and sell freely tradable securities, thereby\npreventing the Company from accessing the public capital markets; and (iv) impairing the Company’s ability to provide equity incentives\nto its employees. Additionally, delisting of the Company’s common stock from the Nasdaq Capital Market could constitute an event\nof default under its outstanding convertible promissory notes, resulting in those notes becoming immediately due and payable, and resulting\nin default penalties being applied to those notes.\n\n \n\n21\n\n \n\n \n\n**OUR\nBUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY PUBLIC HEALTH EPIDEMICS.**\n\n \n\nOur\nbusiness, results of operations and financial condition may be adversely affected if a public health epidemic such as COVID-19 interferes\nwith the ability of us, our employees, workers, contractors, suppliers, customers and other business partners to perform our and their\nrespective responsibilities and obligations relative to the conduct of our business. We maintain offices in various countries throughout\nthe world with employees and workers upon whom we rely to, among other things, identify sources of supply, conduct factory inspections,\nplace orders for merchandise, perform factory monitoring with respect to production, quality control and other requirements, and arrange\nshipping. A public health epidemic, like the coronavirus, poses the risk that we or our employees, workers, contractors, suppliers, customers\nand other business partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns\nthat may be requested or mandated by governmental authorities. We face similar risks if a public health epidemic affects other geographic\nareas where our employees, workers, contractors, suppliers, customers and other business partners are located.\n\n \n\n**IF\nDEMAND FOR THE PRODUCTS AND SERVICES THAT THE COMPANY OFFERS SLOWS, OUR BUSINESS WOULD BE MATERIALLY AFFECTED.**\n\n \n\nDemand\nfor products which it intends to sell depends on many factors, including:\n\n \n\n \n●\nthe\neconomy, and in periods of rapidly declining economic conditions, customers may defer purchases or may choose alternate products;\n\n \n \n \n\n \n●\nthe\ncost of oil, gas and solar energy;\n\n \n \n \n\n \n●\nthe\ncompetitive environment in the heat to power sectors may force us to reduce prices below our desired pricing level or increase promotional\nspending;\n\n \n \n \n\n \n●\nour\nability to maintain efficient, timely and cost-effective production and delivery of the products and services; and,\n\n \n \n \n\n \n●\nAll\nof these factors could result in immediate and longer term declines in the demand for the products and services that we offer, which\ncould adversely affect our sales, cash flows and overall financial condition.\n\n \n\n**WE\nOPERATE IN A HIGHLY COMPETITIVE MARKET. IF WE DO NOT COMPETE EFFECTIVELY, OUR PROSPECTS, OPERATING RESULTS, AND FINANCIAL CONDITION COULD\nBE ADVERSELY AFFECTED.**\n\n \n\nThe\nmarkets for our products and services are highly competitive, with companies offering a variety of competitive products and services.\nWe expect competition in our markets to intensify in the future as new and existing competitors introduce new or enhanced products and\nservices that are potentially more competitive than our products and services. We believe many of our competitors and potential competitors\nhave significant competitive advantages, including longer operating histories, ability to leverage their sales efforts and marketing\nexpenditures across a broader portfolio of products and services, larger and broader customer bases, more established relationships with\na larger number of suppliers, contract manufacturers, and channel partners, greater brand recognition, and greater financial, research\nand development, marketing, distribution, and other resources than we do and the ability to offer financing for projects. Our competitors\nand potential competitors may also be able to develop products or services that are equal or superior to ours, achieve greater market\nacceptance of their products and services, and increase sales by utilizing different distribution channels than we do. Some of our competitors\nmay aggressively discount their products and services in order to gain market share, which could result in pricing pressures, reduced\nprofit margins, lost market share, or a failure to grow market share for us. If we are not able to compete effectively against our current\nor potential competitors, our prospects, operating results, and financial condition could be adversely affected.\n\n \n\n**WE\nMAY LOSE OUT TO LARGER AND BETTER-ESTABLISHED COMPETITORS.**\n\n \n\nThe\nalternative power industry is intensely competitive. Most of our competitors have significantly greater financial, technical, marketing\nand distribution resources as well as greater experience in the industry than we have. Our products may not be competitive with other\ntechnologies, both existing at the current time and in the future. If this happens, our sales and revenues will decline, or fail to develop\nat all. In addition, our current and potential competitors may establish cooperative relationships with larger companies to gain access\nto greater development or marketing resources. Competition may result in price reductions, reduced gross margins and loss of market share.\n\n \n\n22\n\n \n\n \n\n**OUR\nINTERNATIONAL OPERATIONS SUBJECT US TO RISKS, WHICH COULD ADVERSELY AFFECT OUR OPERATING RESULTS.**\n\n \n\nOur\ninternational operations are exposed to the following risks, several of which are out of our control:\n\n \n\npolitical\nand economic instability, international terrorism and anti-American sentiment, particularly in emerging markets;\n\n \n\n \n●\npreference\nfor locally branded products, and laws and business practices favoring local competition;\n\n \n●\nunusual\nor burdensome foreign laws or regulations, and unexpected changes to those laws or regulations;\n\n \n●\n|import\nand export license requirements, tariffs, taxes and other barriers;\n\n \n●\ncosts\nof customizing products for foreign countries;\n\n \n●\nincreased\ndifficulty in managing inventory;\n\n \n●\nless\neffective protection of intellectual property; and\n\n \n●\ndifficulties\nand costs of staffing and managing foreign operations.\n\n \n\nAny\nor all of these factors could adversely affect our ability to execute any geographic expansion strategies or have a material adverse\neffect on our business and results of operations.\n\n \n\n**OUR\nPRODUCTS MAY BE DISPLACED BY NEWER TECHNOLOGY.**\n\n \n\nThe\nalternative power industry is undergoing rapid and significant technological change. Third parties may succeed in developing or marketing\ntechnologies and products that are more effective than those developed or marketed by us, or that would make our technology obsolete\nor non-competitive. Accordingly, our success will depend, in part, on our ability to respond quickly to technological changes. We may\nnot have the resources to do this.\n\n \n\n**WE\nMUST HIRE QUALIFIED ENGINEERING, DEVELOPMENT AND PROFESSIONAL SERVICES PERSONNEL.**\n\n \n\nWe\ncannot be certain that we can attract or retain a sufficient number of highly qualified mechanical engineers, industrial technology and\nmanufacturing process developers and professional services personnel. To deploy our products quickly and efficiently, and effectively\nmaintain and enhance them, we will require an increasing number of technology developers. We expect customers that license our technology\nwill typically engage our professional engineering staff to assist with support, training, consulting and implementation. We believe\nthat growth in sales depends on our ability to provide our customers with these services and to attract and educate third-party consultants\nto provide similar services. As a result, we plan to hire professional services personnel to meet these needs. New technical and professional\nservices personnel will require training and education and it will take time for them to reach full productivity. To meet our needs for\nengineers and professional services personnel, we also may use costlier third-party contractors and consultants to supplement our own\nstaff. Competition for qualified personnel is intense, particularly because our technology is specialized and only a limited number of\nindividuals have acquired the needed skills. Additionally, we will rely on third-party implementation providers for these services. Our\nbusiness may be harmed if we are unable to establish and maintain relationships with third-party implementation providers.\n\n \n\n**WE\nMAY BE ADVERSELY AFFECTED BY SHORTAGES OF REQUIRED COMPONENTS. IN ADDITION, WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS TO PROCURE OUR\nPARTS FOR PRODUCTION WHICH IF AVAILABILITY OF PRODUCTS BECOMES COMPROMISED IT COULD ADD TO OUR COST OF GOODS SOLD AND AFFECT OUR REVENUE\nGROWTH.**\n\n \n\nAt\nvarious times, there have been shortages of some of the components that we use, as a result of strong demand for those components or\nproblems experienced by suppliers. These unanticipated component shortages have resulted in curtailed production or delays in production,\nwhich prevented us from making scheduled shipments to customers in the past and may do so in the future. Our inability to make scheduled\nshipments could cause us to experience a reduction in our sales and an increase in our costs and could adversely affect our relationship\nwith existing customers as well as prospective customers. Component shortages may also increase our cost of goods sold because we may\nbe required to pay higher prices for components in short supply and redesign or reconfigure products to accommodate substitute components.\n\n \n\n23\n\n \n\n \n\n**OUR\nPRINCIPAL SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS, IN THE AGGREGATE, BENEFICIALLY OWN MORE THAN 50% OF OUR OUTSTANDING COMMON\nSTOCK AND THESE SHAREHOLDERS, IF ACTING TOGETHER, WILL BE ABLE TO EXERT SUBSTANTIAL INFLUENCE OVER ALL MATTERS REQUIRING APPROVAL OF\nOUR SHAREHOLDERS.**\n\n \n\nOur\nprincipal shareholders, directors and executive officers in the aggregate, beneficially own more than 50% our outstanding\ncommon stock on a fully diluted basis as of the date of the filing of this annual report. These shareholders, if acting together, will be able to exert substantial influence over all\nmatters requiring approval of our shareholders, including amendments to our Articles of Incorporation, fundamental corporate\ntransactions such as mergers, acquisitions, the sale of the company, and other matters involving the direction of our business and\naffairs and specifically the ability to determine the members of our board of directors. (See “Security Ownership of Certain\nBeneficial Owners and Managements”).\n\n \n\n**IF\nWE LOSE KEY SENIOR MANAGEMENT PERSONNEL OUR BUSINESS COULD BE NEGATIVELY AFFECTED. FURTHER, WE WILL NEED TO RECRUIT AND RETAIN ADDITIONAL\nSKILLED MANAGEMENT PERSONNEL AND IF WE ARE NOT ABLE TO DO SO, OUR BUSINESS AND OUR ABILITY TO CONTINUE TO GROW COULD BE HARMED.**\n\n \n\nOur\nsuccess depends to a large extent upon the continued services of our executive officers. We could be seriously harmed by the loss of\nany of our executive officers. In order to manage our growth, we will need to recruit and retain additional skilled management personnel\nand 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\nour industry have implemented workforce reductions, there remains substantial competition for highly skilled employees.\n\n \n\n**WE\nARE SUBJECT TO ENVIRONMENTAL COMPLIANCE RISKS AND UNEXPECTED COSTS THAT WE MAY INCUR WITH RESPECT TO ENVIRONMENTAL MATTERS MAY RESULT\nIN ADDITIONAL LOSS CONTINGENCIES, THE QUANTIFICATION OF WHICH CANNOT BE DETERMINED AT THIS TIME.**\n\n \n\nWe\nare subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, storage,\ndischarge and disposal of hazardous substances in the ordinary course of our manufacturing process. If more stringent compliance or cleanup\nstandards under environmental laws or regulations are imposed, or the results of future testing and analyses at our current or former\noperating facilities indicate that we are responsible for the release of hazardous substances, we may be subject to additional remediation\nliability. Further, additional environmental matters may arise in the future at sites where no problem is currently known or at sites\nthat we may acquire in the future. Currently unexpected costs that we may incur with respect to environmental matters may result in additional\nloss contingencies, the quantification of which cannot be determined at this time.\n\n \n\n**OUR\nSALES AND CONTRACT FULFILLMENT CYCLES CAN BE LONG, UNPREDICTABLE AND VARY SEASONALLY, WHICH CAN CAUSE SIGNIFICANT VARIATION IN REVENUES\nAND PROFITABILITY IN A PARTICULAR QUARTER.**\n\n \n\nThe\ntiming of our sales and related customer contract fulfillment is difficult to predict. Many of our customers are large enterprises, whose\npurchasing decisions, budget cycles and constraints and evaluation processes are unpredictable and out of our control. Further, the timing\nof our sales is difficult to predict. The length of our sales cycle, from initial evaluation to payment for our products and services,\ncan range from several months to well over a year and can vary substantially from customer to customer. Our sales efforts involve significant\ninvestment in resources in field sales, marketing and educating our customers about the use, technical capabilities and benefits of our\nproducts and services. Customers often undertake a prolonged evaluation process. As a result, it is difficult to predict exactly when,\nor even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. Large individual sales\nhave, in some cases, occurred in quarters subsequent to those we anticipated, or have not occurred at all. In addition, the fulfillment\nof our customer contracts is partially dependent on other factors related to our customers’ businesses that are not in our control.\nas with the sales cycle, this can also cause revenues and earnings to fluctuate from quarter to quarter. If our sales and/or contract\nfulfillment cycles lengthen or our substantial upfront investments do not result in sufficient revenue to justify our investments, our\noperating results could be adversely affected.\n\n \n\nWe\nhave experienced seasonal and end-of-quarter concentration of our transactions and variations in the number and size of transactions\nthat close in a particular quarter, which impacts our ability to grow revenue over the long term and plan and manage cash flows and other\naspects of our business and cost structure. Our transactions vary by quarter, with the fourth quarter typically being our largest. If\nexpectations for our business turn out to be inaccurate, our revenue growth may be adversely affected over time and we may not be able\nto adjust our cost structure on a timely basis and our cash flows may suffer.\n\n \n\n24\n\n \n\n \n\n**OUR\nOPERATING MARGINS MAY DECLINE AS A RESULT OF INCREASING PRODUCT COSTS.**\n\n \n\nOur\nbusiness is subject to significant pressure on pricing and costs caused by many factors, including competition, the cost of components\nused in our products, labor costs, constrained sourcing capacity, inflationary pressure, pressure from customers to reduce the prices\nwe charge for our products and services, and changes in consumer demand. Costs for the raw materials used in the manufacture of our products\nare affected by, among other things, energy prices, consumer demand, fluctuations in commodity prices and currency, and other factors\nthat are generally unpredictable and beyond our control. Increases in the cost of raw materials used to manufacture our products or in\nthe cost of labor and other costs of doing business in the United States and internationally could have an adverse effect on, among other\nthings, the cost of our products, gross margins, operating results, financial condition, and cash flows.\n\n \n\n**OUR\nSALES AND PROFITABLITY OF OPERATIONS IN THE UNITED STATES AND IN THE PRC ARE DEPENDANT ON THE PRICE OF OIL AND NATURAL GAS.**\n\n \n\nOur\nWaste Heat Recovery products and Waste Recovery products are dependent on the prices of traditional energy sources. Our products reuse\nwasted heat and create electricity or reusable fuel. As the price of energy increases, the economic justification for our products increases.\nAt the same time, as the price for traditional fuel decreases, there is less incentive for customers to purchase our products and it\nmay impair our ability to sell our products.\n\n \n\n**IF\nTHE SPOT PRICE OF NG IN CHINA DROPS BELIOW THE PURCHASE PRICE OUR TRADERS NETOTIATE WITH OUR SUPPLIERS, WE MAY NOT BE ABLE TO SELL OUR\nLNG OR MAY HAVE TO SELL IT AT A LOSS.**\n\n \n\nOur\ntraders at JHJ purchase NG at a fixed price in large volumes. If the spot prices for NG drop below our purchase price, we may not be\nable to sell our NG to our customers or may have to sell the NG at a substantial loss. We do not purchase a sufficient volume of LNG\nto be able to hedge against price declines of this commodity. If we believe that NG prices are too high and we are unable to purchase\nbecause we believe that prices will drop, we will not have sufficient supply of NG to conduct trading operations until the market pricing\nreturns to a level at which we can conduct operations.\n\n \n\n**WE\nMAY NOT HAVE SUFFICENT FUNDS TO CONDUCT OUR TRADING OPERATIONS IN THE PRC.**\n\n \n\nWe\nare funding our trading operations through cash flow generated by JHJ and from funds provided by our parent. If we or JHJ does not have\nsufficient funds, we may not be able to conduct trading operations.\n\n \n\n**OUR\nWASTE TO ENERGY PRODUCTS FROM ENEX HAVE NOT BEEN TESTED IN THE UNITED STATES AND DEPEND ON DATA OBTAINED FROM OPERATIONS IN THE UKRAINE\nAND RUSSIA.**\n\n \n\nENEX’s\nHTAP 5 and 10 have not been installed in the United States. In order to commence sales, our purchasers will need to accept data from\nRussia or the Ukraine that they may not deem reliable. We cannot give any assurances that we will be able to finance the bonds or find\nan EPC willing to guaranty performance.\n\n \n\n**THE\nIMPLEMENTAION OF OUR WASTE TO ENERGY JOINT VENTURES DEPENDS ON US FINDING FUNDING FO THE PROJECTS.**\n\n \n\nIn\norder to implement the ENEX system in our waste to energy joint ventures, we will need to finance directly or obtain third party financing\nfor these projects. We cannot give any assurances that we will be able to directly finance these projects or be able to find a third\nparty to provide financing to them. If we are not able to finance the projects we will not be able to implement our business plan in\nthis sector.\n\n \n\n**FLUCTUATIONS\nIN EXCHANGE RATES COULD HAVE A AN EFFECT ON THE RESULTS OF OPERATIONS OF OUR HONG KONG AND CHINA SUBSIDIARIES.**\n\n \n\nThe\nvalue of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political\nand economic conditions in China and by China’s foreign exchange policies. Since June 2010, the Renminbi has fluctuated against\nthe U.S. dollar, at times significantly and unpredictably. In the fourth quarter of 2016, the Renminbi has depreciated significantly\nin the backdrop of a surging U.S. dollar and persistent capital outflows of China. This depreciation halted in 2017, and the RMB appreciated\napproximately 7% against the U.S. dollar during this one-year period. With the development of the foreign exchange market and progress\ntowards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes\nto the exchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against\nthe U.S. dollar in the future which may impact the profitability of our operations in China.\n\n \n\n25\n\n \n\n \n\n**WE\nMAY NEED TO RAISE ADDITIONAL CAPITAL REQUIRED TO GROW OUR BUSINESS, AND WE MAY NOT BE ABLE TO RAISE CAPITAL ON TERMS ACCEPTABLE TO US\nOR AT ALL.**\n\n \n\nGrowing\nand operating our business will require significant cash outlays and capital expenditures and commitments. We have utilized cash on hand\nand cash generated from operations as sources of liquidity. If cash on hand and cash generated from operations are not sufficient to\nmeet our cash requirements, we will need to seek additional capital, potentially through equity or debt financing, to fund our growth.\nOur ability to access the credit and capital markets in the future as a source of liquidity, and the borrowing costs associated with\nsuch financing, are dependent upon market conditions.\n\n \n\nIn\naddition, any equity securities we issue, including any preferred stock, may be on terms that are dilutive or potentially dilutive to\nour stockholders, and the prices at which new investors would be willing to purchase our securities may be lower than the offering price\nper share of our Common Stock. The holders of any equity securities we issue, including any preferred stock, may also have rights, preferences\nor privileges which are senior to those of existing holders of Common Stock. If new sources of financing are required, but are insufficient\nor unavailable, we will be required to modify our growth and operating plans based on available funding, if any, which would harm our\nability to grow our business.\n\n \n\n**NATURAL\nDISASTERS AND OTHER CATASTROPHIC EVENTS BEYOND OUR CONTROL COULD ADVERSELY AFFECT OUR BUSINESS OPERATIONS AND FINANCIAL PERFORMANCE.**\n\n \n\nThe\noccurrence of one or more natural disasters, such as fires, hurricanes, tornados, tsunamis, floods and earthquakes; geo-political events,\nsuch as civil unrest in a country in which our suppliers are located or terrorist or military activities disrupting transportation, communication\nor utility systems; or other highly disruptive events, such as nuclear accidents, pandemics, unusual weather conditions or cyber-attacks,\ncould adversely affect our operations and financial performance. Such events could result, among other things, in operational disruptions,\nphysical damage to or destruction or disruption of one or more of our properties or properties used by third parties in connection with\nthe supply of products or services to us, the lack of an adequate workforce in parts or all of our operations and communications and\ntransportation disruptions. These factors could also cause consumer confidence and spending to decrease or result in increased volatility\nin the United States and global financial markets and economy. Such occurrences could have a material adverse effect on us and could\nalso have indirect consequences such as increases in the costs of insurance if they result in significant loss of property or other insurable\ndamage.\n\n \n\n**WE\nHAVE ISSUED A SUBSTANTIAL AMOUNT OF CONVERTIBLE SECURITIES WHICH IF CONVERTED WILL SUBSTANTIALLY DILUTE ALL OF OUR STOCKHOLDERS.**\n\n \n\nWe\nhave issued a substantial number of convertible securities which, if converted, would result in substantial dilution to our stockholders.\nWe also have outstanding other convertible securities, including shares of preferred stock, warrants and other equity instruments convertible\ninto shares of common stock. As of December 31, 2024, these convertible securities include the following and retroactively adjusted to reflect the 1-for-15 reverse stock split effective October 6, 2025.\n\n \n\nConvertible Notes - and Approximate common share equivalents \n 206,305 \n\nSeries E preferred shares \n 50,400 \n\nWarrants and Common Stock equivalent’s \n 16,901 \n\nTotal Convertible Common Stock equivalents \n 273,606 \n\n \n\n26\n\n \n\n \n\n**OUR\nISSUANCE OF ADDITIONAL CAPITAL STOCK IN CONNECTION WITH FINANCINGS, ACQUISITIONS, INVESTMENTS, OUR EQUITY INCENTIVE PLANS, OR OTHERWISE\nWILL DILUTE ALL OTHER STOCKHOLDERS.**\n\n \n\nWe\nexpect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity\nawards to employees, directors, and consultants under our equity incentive plans. We may also raise capital through equity financings\nin the future. As part of our business strategy, we may acquire or make investments in complementary companies, products, or technologies,\nand issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders\nto experience significant dilution of their ownership interests and the per share value of our common stock to decline.\n\n \n\n**WE\nMAY MAKE ACQUISITIONS THAT ARE DILUTIVE TO EXISTING STOCKHOLDERS. IN ADDITION, OUR LIMITED EXPERIENCE IN ACQUIRING OTHER BUSINESSES,\nPRODUCT LINES AND TECHNOLOGIES MAY MAKE IT DIFFICULT FOR US TO OVERCOME PROBLEMS ENCOUNTERED IN CONNECTION WITH ANY ACQUISITIONS WE MAY\nUNDERTAKE.**\n\n \n\nWe\nintend to evaluate and explore strategic opportunities as they arise, including business combinations, strategic partnerships, and the\npurchase, licensing or sale of assets. In connection with any such future transaction, we could issue dilutive equity securities, incur\nsubstantial debt, reduce our cash reserves or assume contingent liabilities.\n\n \n\nOur\nexperience in acquiring other businesses, product lines and technologies is limited. Our inability to overcome problems encountered in\nconnection with any acquisitions could divert the attention of management, utilize scarce corporate resources and otherwise harm our\nbusiness. Any potential future acquisitions also involve numerous risks, including:\n\n \n\n \n●\nproblems\nassimilating the purchased operations, technologies or products;\n\n \n●\ncosts\nassociated with the acquisition;\n\n \n●\nadverse\neffects on existing business relationships with suppliers and customers;\n\n \n●\nrisks\nassociated with entering markets in which we have no or limited prior experience;\n\n \n●\npotential\nloss of key employees of purchased organizations; and\n\n \n●\npotential\nlitigation arising from the acquired company’s operations before the acquisition.\n\n \n\nFurthermore,\nacquisitions may require material charges and could result in adverse tax consequences, substantial depreciation, deferred compensation\ncharges, in-process research and development charges, the amortization of amounts related to deferred compensation and identifiable purchased\nintangible assets or impairment of goodwill, any of which could negatively affect our results of operations.\n\n \n\n**WE\nMAY BE SUBJECT TO GOVERNMENT LAWS AND REGULATIONS PARTICULAR TO OUR OPERATIONS WITH WHICH WE MAY BE UNABLE TO COMPLY.**\n\n \n\nWe\nmay not be able to comply with all current and future government regulations which are applicable to our business. Our business operations\nare subject to all government regulations normally incident to conducting business (e.g., occupational safety and health acts, workmen’s\ncompensation statutes, unemployment insurance legislation, income tax, and social security laws and regulations, environmental laws and\nregulations, consumer safety laws and regulations, etc.) as well as to governmental laws and regulations applicable to small public companies\nand their capital formation efforts. Although we will make every effort to comply with applicable laws and regulations, we can provide\nno assurance of our ability to do so, nor can we predict the effect of those regulations on our proposed business activities. Our failure\nto comply with material regulatory requirements would likely have an adverse effect on our ability to conduct our business and could\nresult in our cessation of active business operations.\n\n \n\n**COMPLIANCE\nWITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE WILL RESULT IN ADDITIONAL EXPENSES.**\n\n \n\nChanging\nlaws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and\nrelated SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with\naccessing the public markets and public reporting. Our management team will need to invest significant management time and financial\nresources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative\nexpenses and a diversion of management time and attention from revenue generating activities to compliance activities.\n\n \n\n**OUR\nREVENUE GROWTH RATE DEPENDS PRIMARILY ON OUR ABILITY TO EXECUTE OUR BUSINESS PLAN.**\n\n \n\nWe\nmay not be able to identify and maintain the necessary relationships within our industry. Our ability to execute our business plan also\ndepends on other factors, including the ability to:\n\n \n\n1.\nNegotiate and maintain contracts and agreements with acceptable terms;\n\n2.\nHire and train qualified personnel;\n\n3.\nMaintain marketing and development costs at affordable rates; and,\n\n4.\nMaintain an affordable labor force.\n\n \n\n27\n\n \n\n \n\n**WE\nMAY BE SUBJECT TO SECURITIES LITIGATION, WHICH IS EXPENSIVE AND COULD DIVERT MANAGEMENT ATTENTION.**\n\n \n\nThe\nmarket price of the shares of our common stock may be volatile, and in the past companies that have experienced volatility in the market\nprice of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in\nthe future. Securities litigation against us could result in substantial costs and divert our management’s attention from other\nbusiness concerns, which could seriously harm our business.\n\n \n\nOur common stock is listed on\nthe Nasdaq Capital Market, which requires us to maintain a **minimum bid price of $1.00 per share**. If our stock trades below this\nthreshold for **30 consecutive trading days**, we may receive a **non-compliance notice** from Nasdaq. Failure to regain compliance\nwithin the specified grace period could result in **delisting**, which may negatively impact our liquidity and ability to raise capital.\n\n \n\nAdditionally, Nasdaq listing requirements\nmandate that we **hold an annual shareholder meeting** to maintain compliance with corporate governance rules. Failure to do so may\nalso result in **delisting proceedings**. We are actively working to address these issues and remain in good standing with Nasdaq.\n\n \n\nCETY faces the risk of **Nasdaq\ndelisting** due to a **price deficiency**, meaning its stock price has fallen below the minimum bid requirement. To maintain compliance,\nthe company must regain the required price threshold within the allotted grace period. Additionally, successfully holding an **annual\nshareholder meeting** is crucial to meeting Nasdaq’s corporate governance requirements and maintaining its listing status.\n\n \n\nCETY\nfaces the risk of **Nasdaq delisting** due to the Company’s failure to hold an annual meeting within 12 months of the end of\nthe Company’s fiscal year ended December 31, 2023. As a result, as of January 8, 2025, the Company has 45 calendar days, or until\nFebruary 24, 2025, to submit a plan to Nasdaq to regain compliance.\n\n \n\nThe\nCompany intends to hold its annual meeting as soon as practicable. In that regard, the Company plans to complete and file its Form 10-K\nfor the fiscal year ended December 31, 2024, on or about by the end of March 2025. Subsequently, the Company plans to file a preliminary\nproxy on about April 17, 2025 and hold its annual meeting before June 3, 2025. As such, Staff has determined to grant the Company an\nextension until June 3, 2025, to regain compliance with the Rule.\n\n \n\n**RISKS\nRELATED TO DOING BUSINESS IN CHINA**\n\n \n\nDue\nto our operations in China, we face various legal and operational risks and uncertainties related to being based in and having significant\noperations in China, and therefore are subject to risks associated with doing business in China generally. Risks and uncertainties related\nto doing business in China could result in a material adverse change in our operations in China and/or the value of the securities we\nare registering for sale, and may significantly limit or completely hinder our ability to offer or continue to offer securities to investors\nand cause the value of such securities to significantly decline or be worthless. Such risks and uncertainties include the following:\n\n \n\n**THERE\nARE UNCERTAINTIES REGARDING THE INTERPRETATION AND ENFORCEMENT OF PRC LAWS, RULES AND REGULATIONS.**\n\n \n\nThe\nPRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for\nreference but have limited precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws, rules\nand regulations governing economic matters in general. The overall effect of legislation over the past four decades has significantly\nenhanced the protections afforded to various forms of foreign investment in China. However, China has not developed a fully integrated\nlegal system, and recently enacted laws, rules and regulations may not sufficiently cover all aspects of economic activities in China\nor may be subject to various degrees of interpretation and discretion by PRC regulatory agencies. In particular, because these laws,\nrules and regulations are relatively new, and because of the limited number of published decisions and the nonbinding nature of such\ndecisions, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and are not always uniform and\npredictable. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual\nrights or tort claims. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are\nnot published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation\nof these policies and rules until some time after the occurrence of the violation.\n\n \n\nAny\nadministrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management\nattention. Since PRC administrative and court authorities have different degrees of discretion in interpreting and implementing statutory\nand contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal\nprotection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have\nentered into and could materially and adversely affect our business, financial condition and results of operations.\n\n \n\n**THE\nPRC GOVERNMENT EXERTS SUBSTANTIAL INFLUENCE OVER THE MANNER IN WHICH WE CONDUCT OUR BUSINESS OPERATIONS. IT MAY INFLUENCE OR INTERVENE\nIN OUR OPERATIONS AT ANY TIME AS PART OF ITS EFFORTS TO ENFORCE PRC LAW, WHICH COULD RESULT IN A MATERIAL ADVERSE CHANGE IN OUR OPERATIONS\nAND THE VALUE OF THE SECURITIES WE ARE OFFERING.**\n\n \n\nA\nportion of our business is conducted in the PRC, and is governed by PRC laws, rules and regulations. The PRC government exerts substantial\ninfluence over the manner in which we conduct our business, and it may intervene in or influence our operations at any time. The PRC\ngovernment has recently published new policies that substantially affected certain industries. We cannot rule out the possibility that\nit will in the future release regulations or policies that directly or indirectly affect our industry or require us to seek additional\npermission to continue our operations, which could result in a material adverse change in our operation in China and/or the value of\nour securities. Therefore, investors of our company and our business face potential uncertainty from actions taken by the PRC government\naffecting our business.\n\n \n\nThe\nChinese government has exerted more oversight and control over offerings that are conducted overseas and foreign investment in China-based\nissuers. Such actions could significantly limit or completely hinder our ability to offer or continue to offer securities to investors\nand cause the value of such securities to significantly decline or be worthless. For more details, see *“— The approval\nor record filing of the CSRC, CAC, or other PRC government authorities may be required in connection with our future capital raising\nactivities under the PRC laws*.”\n\n \n\n28\n\n \n\n \n\n**A\nRECENT JOINT STATEMENT BY THE SEC AND THE PCAOB, RULE CHANGES BY NASDAQ, AND THE HOLDING FOREIGN COMPANIES ACCOUNTABLE ACT ALL CALL FOR\nADDITIONAL AND MORE STRINGENT CRITERIA TO BE APPLIED TO COMPANIES WITH OPERATIONS IN EMERGING MARKETS UPON ASSESSING THE QUALIFICATION\nOF THEIR AUDITORS, ESPECIALLY THE NON-U.S. AUDITORS WHO ARE NOT INSPECTED BY THE PCAOB. THESE DEVELOPMENTS COULD ADD UNCERTAINTIES TO\nOUR CONTINUED LISTING OR FUTURE OFFERINGS OF OUR SECURITIES IN THE U.S.**\n\n \n\nOn\nApril 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint\nstatement highlighting the risks associated with investing in companies based in or having substantial operations in emerging markets\nincluding China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit\nwork papers in China and higher risks of fraud in emerging markets.\n\n \n\nOn\nMay 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating\nin “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of directors for\nRestrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications\nof the company’s auditors.\n\n \n\nOn\nMay 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act requiring a foreign company to certify it is not owned\nor controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not\nsubject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s\nsecurities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the Holding\nForeign Companies Accountable Act. On December 18, 2020, the Holding Foreign Companies Accountable Act was signed into law.\n\n \n\nOn\nMarch 24, 2021, the SEC announced the adoption of interim final amendments to implement the submission and disclosure requirements of\nthe Holding Foreign Companies Accountable Act. In the announcement, the SEC clarified that before any issuer will have to comply with\nthe interim final amendments, the SEC must implement a process for identifying covered issuers. The announcement also stated that the\nSEC staff was actively assessing how best to implement the other requirements of the Holding Foreign Companies Accountable Act, including\nthe identification process and the trading prohibition requirements.\n\n \n\nOn\nJune 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if passed by the U.S. House\nof Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions\nunder the Holding Foreign Companies Accountable Act from three years to two. On December 29, 2022, a legislation entitled “Consolidated\nAppropriations Act, 2023” (the “Consolidated Appropriations Act”), was signed into law by President Biden. The Consolidated\nAppropriations Act contained, among other things, an identical provision to HFCAA, which reduces the number of consecutive non-inspection\nyears required for triggering the prohibitions under the HFCAA from three years to two.\n\n \n\nOn\nSeptember 22, 2021, the PCAOB adopted a final rule implementing the Holding Foreign Companies Accountable Act, which provides a framework\nfor the PCAOB to use when determining, as contemplated under the Holding Foreign Companies Accountable Act, whether the board of directors\nof a company is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because\nof a position taken by one or more authorities in that jurisdiction.\n\n \n\nOn\nDecember 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the Holding\nForeign Companies Accountable Act. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit\nreport issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or\ninvestigate completely because of a position taken by an authority in foreign jurisdictions. The final amendments were effective on January\n10, 2022. The SEC began to identify and list Commission-Identified Issuers on its website shortly after registrants began filing their\nannual reports for 2021.\n\n \n\n29\n\n \n\n \n\nOn\nDecember 16, 2021, the PCAOB announced the PCAOB Holding Foreign Companies Accountable Act determinations (the “PCAOB determinations”)\nrelating to the PCAOB’s inability to inspect or investigate completely registered public accounting firms headquartered in China\nof the PRC or Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities\nin the PRC or Hong Kong.\n\n \n\nOn\nAugust 26, 2022, the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the People’s Republic of\nChina governing inspections and investigations of audit firms based in China and Hong Kong.\n\n \n\nOn\nDecember 15, 2022, the PCAOB announced in the 2022 Determination its determination that the PCAOB was able to secure complete access\nto inspect and investigate accounting firms headquartered in mainland China and Hong Kong, and the PCAOB Board voted to vacate previous\ndeterminations to the contrary.\n\n \n\nShould\nthe PCAOB again encounter impediments to inspections and investigations in mainland China or Hong Kong as a result of positions taken\nby any authority in either jurisdiction, including by the CSRC or the MOF, the PCAOB will make determinations under the HFCAA as and\nwhen appropriate. The inability of the PCAOB to conduct inspections of auditors in PRC makes it more difficult to evaluate the effectiveness\nof these accounting firm’s audit procedures or quality control procedures as compared to auditors outside of PRC that are subject\nto the PCAOB inspections, which could cause investors and potential investors in our Common stock to lose confidence in our audit procedures\nand reported financial information and the quality of our financial statements.\n\n \n\nOur\nauditor, TAAD LLP, is headquartered in the United States, and, as a PCAOB-registered public accounting firm, it is required to undergo\nregular inspections by the PCAOB to assess its compliance with the laws of the U.S. and professional standards. TAAD LLP has been subject\nto PCAOB inspections and is not among the PCAOB-registered public accounting firms headquartered in the PRC or Hong Kong that are subject\nto the PCAOB’s determination of having been unable to inspect or investigate completely. Notwithstanding the foregoing, if it is\nlater determined that the PCAOB is unable to inspect or investigate our auditor completely, if there is any regulatory change or step\ntaken by PRC regulators that does not permit our auditor to provide audit documentations located in China or Hong Kong to the PCAOB for\ninspection or investigation, or the PCAOB expands the scope of the Determination so that we are subject to the HFCAA, as the same may\nbe amended, our common stock may be delisted from or prohibited from trading on a national securities exchange, including the Nasdaq,\nthe exchange on which our common stock is currently listed.\n\n \n\nThe\nrecent developments would add uncertainties to our offering and we cannot assure you whether Nasdaq or regulatory authorities would apply\nadditional and more stringent criteria to us. Furthermore, the Consolidated Appropriations Act reduces the period for foreign companies\nto comply with PCAOB audits to two consecutive years instead of three, thus reducing the time period for triggering the prohibition on\ntrading, and this ultimately could result in our common stock being delisted by an exchange.\n\n \n\n**THE\nAPPROVAL OR RECORD FILING OF THE CSRC, CAC, OR OTHER PRC GOVERNMENT AUTHORITIES MAY BE REQUIRED IN CONNECTION WITH OUR FUTURE CAPITAL\nRAISING ACTIVITIES UNDER THE PRC LAWS.** \n\n \n\nRecent\nstatements by the Chinese government have indicated an intent to exert more oversight and control over offerings that are conducted overseas\nand/or foreign investments in PRC based issuers. The PRC has recently promulgated new rules that require companies collecting or holding\nlarge amounts of data to undergo a cybersecurity review prior to listing in foreign countries, a move that will significantly tighten\noversight over PRC-based internet giants. The Measures for Cybersecurity Review (2021 version) was promulgated on December 28, 2021 and\nbecame effective on February 15, 2022. These measures specify that any “online platform operators” controlling the personal\ninformation of more than one million users which seek to list on a foreign stock exchange are subject to prior cybersecurity review.\n\n \n\n30\n\n \n\n \n\nOn\nNovember 14, 2021, the Cyberspace Administration of China (the “CAC”) published the Draft Regulations on the Network Data\nSecurity Administration (Draft for Comments) (the “Security Administration Draft”), which provides that data processing operators\nengaging in data processing activities that affect or may affect national security must be subject to cybersecurity review by the relevant\nCyberspace Administration of the PRC. According to the Security Administration Draft, data processing operators shall apply for a cybersecurity\nreview by the relevant Cyberspace Administration of the PRC under certain circumstances, such as (i) mergers, restructurings, and divisions\nof Internet platform operators that hold large amount of data relating to national security, economic development, or public interest\nwhich affects or may affect the national security, (ii) overseas listings of data processors that process personal data for more than\none million individuals, (iii) Hong Kong listings of data processors that affect or may affect national security, and (iv) other data\nprocessing activities that affect or may affect the national security. The deadline for public comments on the Security Administration\nDraft was December 13, 2021.\n\n \n\nThe\nPRC Data Security Law, which was promulgated by the Standing Committee of the National People’s Congress (the “SCNPC”)\non June 10, 2021 and took effect on September 1, 2021, requires data collection to be conducted in a legitimate and proper manner, and\nstipulates that, for the purpose of data protection, data processing activities must be conducted based on data classification and hierarchical\nprotection system for data security.\n\n \n\nOn\nAugust 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the People’s Republic of China, or the Personal\nInformation Protection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and\ntook effect on November 1, 2021.\n\n \n\nOur\nbusiness in China does not involve the collection of user data, implicate cybersecurity, or involve any other type of restricted industry.\nBased on our understanding of currently applicable PRC laws and regulations, our registered public offering in the U.S. is not subject\nto the review or prior approval of the CAC. As of the date of this Annual Report, we have not received any notice from any authorities\nidentifying the operating entities as CIIOs or requiring us to go through cybersecurity review or network data security review by the\nCAC. Uncertainties still exist, however, due to the possibility that laws, regulations, or policies in the PRC could change rapidly in\nthe future. Any future action by the PRC government expanding the categories of industries and companies whose foreign securities offerings\nare subject to review by the CAC could significantly limit our ability to offer or continue to offer securities to investors and could\ncause the value of such securities to significantly decline or be worthless.\n\n \n\nOn\nFebruary 17, 2023, the CSRC released Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies\nwith five interpretive guidelines (the “Trial Measures”), which came into effect on March 31, 2023. Pursuant to the Trial\nMeasures, a PRC domestic company that seeks to offer and list securities in overseas markets, either in direct or indirect overseas offering,\nshall fulfill the filing procedure with the CSRC and report relevant information to the CSRC. Direct overseas offering and listing by\ndomestic companies refers to such overseas offering and listing by a joint-stock company incorporated domestically. Any overseas offering\nand listing made by an issuer that meets both the following conditions will be deemed an indirect offering and listing in an overseas\nmarket and, therefore, be subject to filing requirement: (i) 50% or more of the issuer’s operating revenue, total profit, total\nassets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted\nfor by domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in the Mainland China, or\nits main places of business are located in the Mainland China, or the senior managers in charge of its business operation and management\nare mostly Chinese citizens or domiciled in the Mainland China. The determination as to whether or not an overseas offering and listing\nby domestic companies is indirect shall be made on substance over form basis. If we ever are required by the CSRC to submit and complete\nthe filing procedures for our future offerings of our securities, we cannot assure you that we will be able to complete such filings\nin a timely manner, or even at all, which could significantly limit or completely hinder our ability to offer or continue to offer securities\nto investors and cause the value of such securities to significantly decline or become worthless. Any failure by us to comply with such\nfiling requirements under the Trial Measures may result in rectification, warnings, and a fine between RMB 1 million and RMB 10 million\non our PRC Subsidiaries or Shuya, which could adversely and materially affect our business operations and financial outlook and could\ncause the value of our common stock to significantly decline or, in extreme cases, become worthless.\n\n \n\n31\n\n \n\n \n\nOn\nFebruary 24, 2023, the CSRC, together with other PRC government authorities, released the Provisions on Strengthening the Confidentiality\nand Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Enterprises (the “Confidentiality\nand Archives Administration Provisions”), which come into effect on March 31, 2023. The Confidentiality and Archives Administration\nProvisions require, among others, that PRC domestic enterprises seeking to offer and list securities in overseas markets, either directly\nor indirectly, shall establish the confidentiality and archives system, and shall complete approval and filing procedures with competent\nauthorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials\ninvolving state secrets and work secrets of PRC government agencies to relevant securities companies, securities service institutions,\noverseas regulatory agencies and other entities and individuals. It further stipulates that providing or publicly disclosing documents\nand materials which may adversely affect national security or public interests, and accounting files or copies of important preservation\nvalue to the state and society shall be subject to corresponding procedures in accordance with relevant laws and regulations. As of the\ndate of this Annual Report, we are not subject to the approval to the competent authorities since we do not possess any documents or\nmaterials involving state secrets and work secrets of PRC government agencies.\n\n \n\nWe\nhave been closely monitoring regulatory developments in the PRC regarding any necessary approvals from the CSRC or other PRC governmental\nauthorities required for overseas listings. However, there remains significant uncertainty as to the enactment, interpretation and implementation\nof regulatory requirements related to overseas securities offerings and other capital markets activities, which could materially and\nadversely impact our business and financial outlook and may impact our ability to accept foreign investments, or continue to list on\na U.S. or other foreign exchange.\n\n \n\n**CHINA’S\nANTI-MONOPOLY LAW, M&A RULES AND CERTAIN OTHER PRC LAWS AND REGULATIONS ALSO ESTABLISH COMPLEX PROCEDURES FOR ACQUISITIONS CONDUCTED\nBY FOREIGN INVESTORS THAT COULD MAKE IT MORE DIFFICULT FOR US TO GROW THROUGH ACQUISITIONS IN CHINA.**\n\n \n\nA\nnumber of regulations also established additional procedures and requirements that are expected to make merger and acquisition activities\nin China by foreign investors more time-consuming and complex. For example, the M&A rules require that the Ministry of Commerce,\nor the MOFCOM, be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic\nenterprise if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national\neconomic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark\nor PRC time-honored brand.\n\n \n\nThe\napproval from the MOFCOM shall be obtained in circumstances where overseas companies established or controlled by PRC enterprises or\nresidents acquire affiliated domestic companies. Mergers, acquisitions or contractual arrangements that allow one market player to take\ncontrol of or to exert decisive impact on another market player must also be notified in advance to the anti-monopoly authority under\nthe State Council when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, or\nthe Prior Notification Rules, issued by the State Council in August 2008 and amended in September 2018, is triggered. In addition, the\nRules of the Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisitions of Domestic Enterprises by\nForeign Investors, or the Security Review Rule issued by the MOFCOM that became effective in September 2011 specify that mergers and\nacquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through\nwhich foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are\nsubject to strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security review, including by structuring\nthe transaction through a proxy or contractual control arrangement.\n\n \n\n32\n\n \n\n \n\nFurthermore,\non December 19, 2020, the National Development and Reform Commission, or the NDRC, and MOFCOM promulgated the Measures for Security Review\nof Foreign Investment, or the Foreign Investment Security Review Measures, which took effect on January 18, 2021. Under the Foreign Investment\nSecurity Review Measures, investment in certain key areas which results in acquiring the actual control of the assets is required to\nobtain approval from designated governmental authorities in advance. We may grow our business in part by acquiring other companies operating\nin our industry. Complying with the requirements of the new regulations to complete such transactions could be time-consuming, and any\nrequired approval processes, including approval from the MOFCOM, the State Administration for Industry and Commerce and other governmental\nauthorities, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or\nmaintain our market share. It is unclear whether our business would be deemed to be in an industry that raises “national defense\nand security” or “national security” concerns. However, MOFCOM or other government agencies may publish explanations\nin the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in\nChina may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market share through future\nacquisitions would as such be materially and adversely affected.\n\n \n\n**OUR\nPRC SUBSIDIARIES AND SHUYA ARE SUBJECT TO RESTRICTIONS ON PAYING DIVIDENDS OR MAKING OTHER PAYMENTS TO US, WHICH MAY RESTRICT OUR ABILITY\nTO SATISFY OUR LIQUIDITY REQUIREMENTS IN THE FUTURE.**\n\n \n\nWe\nmay need dividends and other distributions on equity from our PRC Subsidiaries or Shuya to satisfy our liquidity requirements. Current\nPRC regulations permit our PRC Subsidiaries and Shuya to pay dividends to their respective shareholders only out of their accumulated\nprofits, if any, determined in accordance with PRC accounting standards and regulations. In addition, such companies are required to\nset aside at least 10% of their accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside\nreaches 50% of its registered capital. Our PRC Subsidiaries or Shuya may also, at the respective subsidiary’s discretion, allocate\na portion of its after-tax profits based on its articles of association and PRC accounting standards to certain reserve funds. These\nreserves are not distributable as cash dividends. Furthermore, if our PRC Subsidiaries or Shuya incur debt on their own behalf in the\nfuture, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on\nthe ability of our PRC Subsidiaries or Shuya to distribute dividends or to make payments to us may restrict our ability to satisfy our\nfuture liquidity requirements.\n\n \n\nIn\naddition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable\nto dividends payable by PRC companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements\nbetween the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.\nIf we are deemed by the PRC tax authorities as a PRC tax resident enterprise for tax purposes, any dividends we pay to our non-PRC resident\nshareholders may be regarded as China-sourced income and as a result, may be subject to PRC withholding tax at a rate of up to 10.0%.\nPursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation\nand Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be reduced to 5% if a Hong Kong\nresident enterprise owns no less than 25% of a PRC entity. However, the 5% withholding tax rate does not automatically apply and certain\nrequirements must be satisfied, including, without limitation, that (a) the Hong Kong entity must be the beneficial owner of the relevant\ndividends; and (b) the Hong Kong entity must directly hold no less than 25% share ownership in the PRC entity during the 12 consecutive\nmonths preceding its receipt of the dividends. In practice, a Hong Kong entity must obtain a tax resident certificate from the Hong Kong\ntax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate\non a case-by-case basis, we cannot be certain that we will be able to obtain the tax resident certificate from the relevant Hong Kong\ntax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to any dividends\nto be paid by our subsidiaries in mainland China to our Hong Kong subsidiary, Clean Energy Technologies (H.K.) Limited.\n\n \n\nWe\ncan give no assurance that we will declare dividends of any amounts, at any rate or at all in the future. The declaration of future dividends,\nif any, will be at the discretion of our board of directors and will depend upon our future operations and earnings, capital requirements,\ngeneral financial conditions, legal and contractual restrictions and other factors that our board of directors may deem relevant.\n\n \n\n**PRC\nREGULATION OF LOANS TO AND DIRECT INVESTMENT IN PRC ENTITIES BY OFFSHORE HOLDING COMPANIES AND GOVERNMENTAL CONTROL OF CURRENCY CONVERSION\nMAY DELAY OR PREVENT US FROM MAKING LOANS OR ADDITIONAL CAPITAL CONTRIBUTIONS TO OUR PRC SUBSIDIARIES OR SHUYA.**\n\n \n\nWe\nare a U.S. based company conducting a portion of our operations in China. We may make loans to our PRC subsidiaries or Shuya subject\nto the approval, registration, and filing with governmental authorities and limitation of amount, or we may make additional capital contributions\nto our subsidiaries in China and Hong Kong. Any loans to our wholly foreign-owned subsidiaries in mainland China, which are treated as\nforeign-invested enterprises under PRC law, are subject to foreign exchange loan registrations. In light of the various requirements\nimposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that\nwe will be able to complete the necessary government registrations or obtain the necessary government approvals or filings on a timely\nbasis, if at all, with respect to future loans by us to our PRC Subsidiaries and Shuya or with respect to future capital contributions\nby us to our PRC Subsidiaries and Shuya. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds\nfrom securities offering and to capitalize or otherwise fund our Chinese operations may be negatively affected.\n\n \n\n**FLUCTUATIONS\nIN EXCHANGE RATES COULD HAVE AN EFFECT ON THE RESULTS OF OPERATIONS OF OUR PRC SUBSIDIARIES AND SHUYA.**\n\n \n\nThe\nvalue of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political\nand economic conditions in China and by China’s foreign exchange policies. Since June 2010, the Renminbi has fluctuated against\nthe U.S. dollar, at times significantly and unpredictably. With the development of the foreign exchange market and progress towards interest\nrate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the exchange\nrate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar\nin the future which may impact the profitability of our operations in China.\n\n \n\n33"}