{"url_path":"/sec/cety/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.**","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":7249,"has_tables":true,"body_markdown":"**Item\n7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.**\n\n \n\nYou\nshould read this section together with our consolidated financial statements and related notes thereto included elsewhere in this report.\n\n \n\n**Forward-Looking\nStatements**\n\n \n\nThis\nAnnual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,\nand Section 21E of the Securities Exchange Act of 1934, as amended, adopted pursuant to the Private Securities Litigation Reform Act\nof 1995. Statements that are not purely historical may be forward-looking. For example, statements in this Annual Report regarding our\nplans, strategy and focus areas are forward-looking statements. You can identify some forward-looking statements by the use of words\nsuch as “believe,” “anticipate,” “expect,” “intend,” “goal,” “plan,”\nand similar expressions. Forward-looking statements involve inherent risks and uncertainties regarding events, conditions and financial\ntrends that may affect our future plans of operation, business strategy, results of operations and financial position.\n\n \n\nA\nnumber of important factors could cause actual results to differ materially from those included within or contemplated by such forward-looking\nstatements, including, but not limited to risks relating to pandemics, the ongoing war in Ukraine and the conflict in Israel and their\nimpact on the global economy, trade tariffs and threats of trade tariffs and their impact on localized economies, our history of losses,\nour dependence on key members of our management and development team, and our ability to generate and/or obtain adequate capital to fund\nfuture operations.\n\n \n\nFor\na discussion of these and other factors that could cause actual results to differ from those contemplated in the forward-looking statements,\nplease see the discussion under “Risk Factors” in our other publicly available filings with the Securities and Exchange Commission.\nForward-looking statements reflect our analysis only as of the date of this Annual Report on Form 10-K.\n\n \n\nBecause\nactual events or results may differ materially from those discussed in or implied by forward-looking statements made by us or on our\nbehalf, you should not place undue reliance on any forward-looking statement. We do not undertake responsibility to update or revise\nany of these factors or to announce publicly any revision to forward-looking statements, whether as a result of new information, future\nevents or otherwise.\n\n \n\nThe\nfollowing discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto included\nin Item 8 of this Annual Report on Form 10-K.\n\n** **\n\n**Company\nInformation**\n\n \n\nWe\nwere incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005\nunder the name Probe Manufacturing, Inc. We manufactured electronics and provided services to original equipment manufacturers (OEMs)\nof industrial, automotive, semiconductor, medical, communication, military, and high technology products. On September 11, 2015 Clean\nEnergy HRS, or “CE HRS”, our wholly owned subsidiary acquired the assets of Heat Recovery Solutions from General Electric\nInternational. In November 2015, we changed our name to Clean Energy Technologies, Inc.\n\n \n\nOur\nprincipal executive offices are located at 1340 Reynolds Avenue Unit 120, Irvine, California 92614. Our common stock is listed on the NASDAQ Markets under the symbol “CETY.”\n\n \n\nOur\ninternet website address is www.cetyinc.com. The information contained on our websites are not incorporated by reference into\nthis document, and you should not consider any information contained on, or that can be accessed through, our website as part of this\ndocument.\n\n \n\nThe\nCompany has four reportable segments: Clean Energy HRS (HRS), CETY Renewables waste to energy solutions, engineering, procurement, construction\nand program management services, and CETY HK natural gas trading business.\n\n \n\nWe\noffer turnkey energy solutions leveraging our technologies and solutions to provide green energy solutions, clean energy fuels and alternative\nelectricity. We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada\nin April 2005 under the name Probe Manufacturing, Inc. We provided engineering and manufacturing electronics services to original equipment\nmanufacturers (OEMs) of clean energy, industrial, automotive, semiconductor, medical, communication, military, and high technology products.\n\n \n\nWith\nthe vision to combat climate change and creating a better, cleaner and environmentally sustainable future, we formed Clean Energy HRS,\nLLC a wholly owned subsidiary of Clean Energy Technologies, Inc. and acquired the assets of Heat Recovery Solutions from General Electric\nInternational on September 11, 2015. In November 2015, we changed our name to Clean Energy Technologies, Inc. Our principal executive\noffices are located at 1340 Reynolds Avenue Unit 120, Irvine, CA 92614. We have 22 full-time employees. All employees and overhead are\nshared between Clean Energy Technologies, Inc, Clean Energy HRS, LLC, waste to energy business unit, engineering solutions, and our natural\ngas trading business.\n\n \n\nClean\nEnergy Technologies, Inc. established a new company, CETY Europe, SRL (CETY Europe) as a wholly owned subsidiary. CETY Europe is a Sales\nand Service Center in Silea (Treviso), Italy established in 2017. The service center became operational in November 2018. Their offices\nare located at Alzaia Sul Sile, 26D, 31057 Silea (TV) and the have 1 full time employee.\n\n \n\nClean\nEnergy Technologies, Inc. established a wholly owned subsidiary called CETY Capital, a financing arm of CETY to fund captive renewable\nenergy projects producing low carbon energy. CETY Capital will add flexibility to the capacity CETY offers its customers and fund projects\nutilizing its products and clean energy solutions.\n\n \n\nCETY\nCapital retains 49% ownership interest in Vermont Renewable Gas LLC established to develop a biomass plant in Vermont utilizing CETY’s\nHigh Temperature Ablative Pyrolysis system.\n\n \n\nClean\nEnergy Technologies (H.K.) Limited., a wholly owned subsidiary of Clean Energy Technologies Inc. acquired 100% ownership of Leading Wave\nLimited a natural gas trading company in China.\n\n \n\nThe\nCompany has four reportable segments: Clean Energy HRS (HRS) and CETY Europe, CETY Renewables, CETY HK and CETY engineering solution\nservices division. During the reporting period, the Company made the strategic decision to discontinue its involvement in the Shuya operations,\nwhich was previously aligned under the CETY HK segment. This decision reflects a broader effort to sharpen the Company’s focus\non its core competencies and highest-value opportunities in waste-to-energy, heat recovery, and eco-friendly energy solutions.\n\n \n\n**Business\nOverview**\n\n \n\n**General**\n\n \n\nThe\nCompany’s business and operating results are directly affected by changes in overall customer demand, operational costs and performance\nand leverage of our fixed cost and selling, general and administrative (“SG&A”) infrastructure.\n\n \n\nProduct\nsales fluctuate in response to several factors including many that are beyond the Company’s control, such as general economic conditions,\ninterest rates, government regulations, consumer spending, labor availability, and our customers’ production rates and inventory\nlevels. Product sales consist of demand from customers in many different markets with different levels of cyclicality and seasonality.\n\n \n\n38\n\n \n\n \n\nOperating\nperformance is dependent on the Company’s ability to manage changes in input costs for items such as raw materials, labor, and\noverhead operating costs. Performance is also affected by manufacturing efficiencies, including items such as on time delivery, quality,\nscrap, and productivity. Market factors of supply and demand can impact operating costs\n\n \n\n**Who\nWe Are**\n\n \n\nWe\nprovide turnkey energy solutions leveraging our technologies, including power generation, heat recovery, and waste to energy to deliver\ngreen energy solutions, clean energy fuels, and alternative electricity to small and midsize projects in North America, Europe, and ASEAN\nmarkets that make environmental and economic sense. Our mission is to be a segment leader in the Zero Emission Revolution by offering\neco-friendly energy solutions for a sustainable future. We target sustainable energy solutions that are profitable for us, profitable\nfor our customers and represent the future of global energy production.\n\n \n\n**Our\nprincipal businesses**\n\n \n\n**Waste\nHeat Recovery Solutions** – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities\nusing our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.\n\n \n\n**Waste\nto Energy Solutions** - we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries\nto electricity, renewable natural gas (“RNG”), hydrogen and bio char which are sold or used by our customers.\n\n \n\n**Engineering,\nConsulting and Project Management Solutions** – we bring a wealth of experience in developing clean energy projects for municipal\nand industrial customers and Engineering, Project Development companies so they can identify, design, and incorporate clean energy solutions\nin their projects.\n\n \n\n**CETY\nHK**\n\n \n\nClean\nEnergy Technologies (H.K.) Limited (“CETY HK”) consists of a ventures in mainland China: (i) our natural gas\n(“NG”) trading operations sourcing and suppling NG to industries and municipalities. The NG is principally used for\nheavy truck refueling stations and urban or industrial users. We purchase large quantities of NG from large wholesale NG depots at\nfixed prices which are prepaid for in advance at a discount to market. We sell the NG to our customers at prevailing daily spot\nprices for the duration of the contracts.\n\n \n\n**Business\nand Segment Information**\n\n \n\nWe\ndesign, produce and market clean energy products and integrated solutions focused on energy efficiency and renewable energy. Our aim\nis to become a leading provider of renewable and energy efficiency products and solutions by helping commercial companies and municipalities\nreduce energy waste and emissions, lower energy costs and generate incremental revenue by providing electricity, renewable natural gas,\nhydrogen and biochar to the grid.\n\n \n\nSegment\nInformation\n\n \n\nOur\nfour segments for accounting purposes are:\n\n \n\n**Clean\nEnergy HRS & CETY Europe** – Our Waste Heat Recovery Solutions, converting thermal energy to zero emission electricity.\n\n \n\n**CETY\nRenewables Waste to Energy Solutions** – Providing Waste to Energy technologies and solutions.\n\n \n\n**Engineering\nand Manufacturing Business** – Providing customers with comprehensive design, manufacturing, and project management solutions.\n\n \n\n**CETY\nHK** – The parent company of our NG trading operations in China. Prior to the first quarter of 2022, the Company had three reportable\nsegments but added the CETY HK segment to reflect its recent new businesses in China.\n\n \n\n39\n\n \n\n \n\n**Summary\nof Operating Results for the year ended December 31, 2024 (Restated), Compared to the year ended December 31, 2023 (Restated)**\n\n \n\n**Going\nConcern**\n\n \n\nThe\nfinancial statements have been prepared on a 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 and\na working capital deficit of $3,478,090 and an accumulated deficit of $28,480,730 as of December 31, 2024 and used $3,560,951 in net\ncash from operating activities for the year ended December 31, 2024. CETY has a clear strategy in place and has the capability to successfully\nrestructure its existing debt and secure additional financing. With its current strategic approach and diversification of its products\nand solutions, the management has created a favorable environment for the company to transition towards profitability.\n\n \n\nFor\nthe fiscal year closing on December 31, 2024, our company reported a net loss amounting to $4,550,296, to the net loss of $5,734,071 before non-controlling interest and tax\nwe achieved during the equivalent period in 2023. CETY’s net loss was impacted by a shift in our revenue mix, with lower business from China, which historically\nhad lower margins, and an increasing focus on higher-margin opportunities from our waste-to-energy business. Additionally, while interest\nand financing fees were lower compared to previous periods, they remained high due to delays in our registration becoming effective. These\nfactors contributed to the overall financial performance for the period.\n\n \n\nFollowing\nthe close of the 2024 fiscal year, CETY’s equity saw a significant decrease, dropping from $4,208,460 to $1,897,145, as reflected\nin our quarterly financials. This decline was primarily driven by ongoing investments in our waste-to-energy business, the impact of\nlower-margin revenue from China, and continued financing costs. Despite this, our strategic focus on higher-margin opportunities positions\nus for stronger long-term growth and improved financial performance.\n\n \n\nThe financial statements have been prepared assuming\nthe Company will continue as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal\ncourse of business. As of December 31, 2024, the Company had stockholders’ equity of $1,897,145, a working capital deficit of $3,478,090,\nand an accumulated deficit of $28,480,730. The Company also reported net cash used in operating activities of $3,560,951 for the year\nended December 31, 2024. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within\none year after the date the financial statements are issued.\n\n \n\nDuring 2024 and continuing into 2025,\nthe Company’s financial condition and operating results were adversely impacted by several factors, including continued financing\nand interest-related costs, delays associated with financing and registration effectiveness, lower-margin revenue contributions from\ncertain operations, ongoing investments in strategic waste-to-energy initiatives, and accounting adjustments and restatement-related\nimpacts associated with prior period activities and financial reporting reviews.\n\n \n\nManagement has implemented and continues to pursue\nmultiple initiatives intended to improve liquidity and operating performance. These initiatives include restructuring certain existing\nobligations, pursuing additional equity and strategic financing opportunities, reducing operating costs where appropriate, focusing on\nhigher-margin waste-to-energy and heat recovery opportunities, advancing strategic commercial projects, and pursuing operational efficiencies\nacross the organization. Management is also actively evaluating strategic partnerships, project-level financing opportunities, and other\ncapital formation initiatives intended to support the Company’s long-term business objectives.\n\n \n\nFor the fiscal year ended December 31, 2024, the Company\nreported a net loss of $4,550,296 compared to a net loss of $5,734,071 for the prior year period. While management believes the actions\npresently being taken provide a path toward improving liquidity and operating performance, such plans are subject to various risks and\nuncertainties, and there can be no assurance that such efforts will be successful or sufficient to alleviate substantial doubt regarding\nthe Company’s ability to continue as a going concern.\n\n \n\nAccordingly, the accompanying financial statements\ndo not include any adjustments that might result from the outcome of this uncertainty.\n\n \n\n**RELATED\nPARTY TRANSACTIONS**\n\n \n\n**See\nnote 12 to the notes to the financial statements for a discussion on related party transaction**\n\n \n\n**Results\nfor the year ended December 31, 2024 (Restated), compared to the year ended December 31, 2023 (Restated).**\n\n \n\n**Net\nSales**\n\n \n\nFor\nthe year ending December 31, 2024, our total revenue was $2,424,659 compared to $6,693,844 for the same period in 2023. The Company has\nfour reportable segments: CETY Renewables division, Clean Energy HRS (HRS) and CETY Europe, the engineering and program management services\ndivision, and CETY HK.\n\n \n\n**Segment\nBreakdown**\n\n \n\nFor\nthe fiscal year ending December 31, 2024, our revenue from Engineering and Manufacturing amounted to $9,341, a decrease from $47,091\nfor the corresponding period in 2023. This decline is due to the gradual shutdown of our legacy manufacturing operations and the strategic\nreallocation of resources towards becoming a turnkey provider of technology energy solutions, thus enhancing support for our other advanced\ntechnology segments. Going forward, our power generation site design and integration for data centers and industrial operations will\nbe assigned to this segment.\n\n \n\nFor\nthe year ended December 31, 2024, our revenue from HRS was $158,141 compared to $497,584 for the same period in 2023. The decrease in\nrevenue for Heat Recovery Solutions (HRS) and ORC systems in 2024 compared to 2023 was primarily due to project delays and longer sales\ncycles associated with supply chain disruptions and extended customer decision-making processes. Additionally, some key contracts that\nwere expected to close in 2024 were pushed into 2025 due to permitting and financing challenges faced by customers. The lower revenue\nalso reflects a strategic shift toward larger-scale projects, which have longer development timelines but are expected to generate higher\nfuture revenues.\n\n \n\nFor\nthe fiscal year ending December 31, 2024, our revenue from CETY Renewables, our newly launched waste-to-energy business, amounted to\n$1,064,757 compared to $429,999 for the same period in 2023. The increase in revenue from CETY Renewables in 2024 compared to 2023 was\nprimarily driven by the continued development and progress of the VRG project, which advanced through critical permitting and early-stage\nconstruction design phases. The rise in revenue also aligns with our strategic efforts to scale operations and establish a stronger market\npresence in the renewable energy sector.\n\n \n\nFor\nthe fiscal year ending December 31, 2024, our revenue from the NG business reached $1,192,420, a significant drop from $5,719,170 in\nthe corresponding period of 2023. The decline in revenue from our NG business in 2024 compared to 2023 was primarily due to lower demand\nin China, driven by economic factors and shifts in energy consumption patterns. Additionally, increased competition and more competitive\npricing in the market pressured margins, leading to a significant drop in revenue. These factors contributed to a slower sales cycle\nand reduced order volume compared to the previous year.\n\n \n\n**Gross\nProfit**\n\n \n\nFor\nthe year ending December 31, 2024, our gross profit increased to $846,555 compared to $460,835 for the same period in 2023. This\ngrowth was achieved despite a significant decline in revenue, primarily due to the slowdown in CETY HK’s natural gas business.\nThe increase in gross profit reflects improved operational efficiencies and a stronger revenue mix from higher-margin segments,\nincluding CETY Renewables. However, the overall gross margin percentage declined, largely due to the lower-margin nature of the\nChina natural gas business and increased competition in that market. Moving forward, we remain focused on expanding our\nhigher-margin renewable energy and waste-to-energy solutions to drive sustainable profitability.\n\n \n\n40\n\n \n\n \n\n**Segment\nBreakdown**\n\n \n\nFor\nthe year ended December 31, 2024, our gross profit from HRS was $19,206 compared to $157,178 for the same period in 2023; This decrease was primarily\ndue to delays in booking and shipping products, as customers were evaluating their sites and waiting for clarity on economic factors\ndriven by the U.S. government’s pending tax incentive programs and the release of new guidelines at the end of 2024, compounded\nby the election year uncertainties.\n\n \n\nFor\nthe year ended December 31, 2024, our gross profit from CETY Renewables increased to $829,784, compared to $355,234 for the same period\nin 2023. This growth reflects the expansion of our higher-margin waste-to-energy business, which in 2024 consisted of engineering, project\ndevelopment, and services with minimal material costs. The strong profitability of this segment underscores our strategic focus on delivering\nturnkey renewable energy solutions that generate long-term value while maintaining a lean cost structure.\n\n \n\nFor\nthe year ended December 31, 2024, our gross profit from CETY HK improved to $(6,195), compared to $(35,378) for the same period in 2023.\nWhile overall market conditions for the natural gas business in China remained challenging, we were able to mitigate some losses through\noperational efficiencies and pricing adjustments.\n\n \n\nFor the year ended December 31, 2024, our gross profit from PMI amounted to $7,806, compared to $(16,199) for the\nsame period in 2023. This segment is a recent addition to CETY’s portfolio, currently serving as a support for our ongoing internal\nprojects. Nevertheless, it is anticipated to expand notably as CETY shifts its focus towards providing comprehensive end-to-end power\ngeneration and integrated solutions.\n\n \n\n**Selling,\nGeneral and Administrative (SG&A) Expenses**\n\n \n\nFor\nthe year ending December 31, 2024, our Selling, General, and Administrative (SG&A) expenses increased to $1,015,102, compared to $679,004\nin 2023. This increase was primarily driven by expanded investments in Media and Investor Relations, marketing efforts, and sales initiatives\naimed at supporting business growth. Increased spending on subscription services and IT infrastructure. Furthermore, the rise in SG&A\nincludes expenses related to inducement shares issued in connection with inducement shares for various notes, contributing to the overall\nincrease in administrative costs.\n\n \n\n**Salary\nExpense**\n\n \n\nFor\nthe fiscal year ending December 31, 2024, our total salaries increased to $1,906,701, compared to $1,570,909 in 2023. This increase was\nprimarily driven by the expansion of our CETY Renewables team to support the growth of our waste-to-energy business, as well as salary\nincreases in our China operations. These strategic investments in personnel were necessary to strengthen our capabilities, drive project\nexecution, and support long-term business expansion.\n\n** **\n\n**Travel\nExpense**\n\n \n\nFor\nthe year ending December 31, 2024, our travel expenses totaled $185,876, compared to $247,124 for the same period in 2023. This reduction\nin expenditure is primarily due to a decrease in travel costs from both the US and Europe.\n\n \n\n**Facility\nLease Expense**\n\n \n\nFor\nthe fiscal year ending December 31, 2024, our Facility Lease expense amounted to $285,823, a slight decrease from $310,004 in 2023. This\nreduction reflects our ongoing efforts to lower lease costs through renegotiations and our focus on more efficient operations. We have\ncontinuously worked to optimize our space utilization and streamline processes, contributing to this modest reduction in lease expenses.\n\n \n\n**Consulting\nExpense**\n\n \n\nFor\nthe fiscal year ending December 31, 2024, our total expenses for Investor Relations (IR), marketing, and contractors related to the VRG\nproject were $195,640, compared to $196,301 for the same period in 2023. This represents a very slight decrease in expenses, reflecting\nour continued focus on cost management while maintaining efforts to support the VRG project.\n\n \n\n**Bad\nDebt**\n\n \n\nFor\nthe year ended December 31, 2024, our bad debt expense was $217,584 compared to $0 for the same period in 2023.\n\n \n\n**Depreciation\nand Amortization Expense**\n\n \n\nFor\nthe year ended December 31, 2024, our depreciation and amortization expense was $8,907 compared to $26,692 for the same period in 2024.\n\n \n\n41\n\n \n\n \n\n**Professional\nfees legal and accounting**\n\n \n\nFor\nthe fiscal year ending December 31, 2024, our Professional Fees expense amounted to $578,937, up from $356,785 in the same period of\n2023. This increase was primarily due to higher costs associated with engaging a new auditor, as well as the increased expenses tied\nto our status as a Nasdaq-listed company and expenses associated with our SEC filings.\n\n \n\n**Net\n(Loss) from operations**\n\n \n\nFor\nthe fiscal year ending December 31, 2024, our net loss from operations totaled $3,330,431, an increase compared to the net loss of $2,925,984\nfor the same period in 2023. This rise in loss is primarily due to the expansion of our team, our uplisting to Nasdaq, and the growth\nof our global business operations, as well as a decline in revenue from our NG business. Although revenue dropped substantially, our\nnet loss remained relatively close to the losses incurred in 2023, reflecting our efforts to manage costs despite the challenges.\n\n \n\n**Change\nin Derivative Liability**\n\n \n\nFor the year ended December 31, 2024, we had $0 compared\nto loss on derivative liability of $326,539 for the same period in 2023. The decrease in loss on derivative liability was due to maturity\ndate and expiration of the notes.\n\n \n\n**Change in FV of warrant liability**\n\n \n\nFor the year ended December 31, 2024 and 2023, we\nhad $26,596 and nil gain on warrant liability related to Equity Line of Credit Agreement entered December 5, 2024.\n\n \n\n**Gain\non debt settlement and write off**\n\n \n\nFor the year ended December 31, 2024, we recorded\ngain of $8,135, compared to a loss of $1,124,654 for the same period in 2023. The loss in 2024 was\nprimarily attributable to the deconsolidation of Shuya, while the 2023 loss was due to the fair market valuation of preferred shares.\n\n \n\n**Interest Income**\n\n \n\nFor the year ended December 31, 2024, interest income from Florya associated with long-term financing receivable\ntotaled $53,153 compared to $48,595 for the same period in 2024.\n\n \n\n**Interest\nand Finance Fees**\n\n \n\nFor\nthe year ended December 31, 2024, interest and finance fees totaled $1,199,042, compared to $2,137,649 for the same period in 2023. The\ndecrease was primarily due to a reduction in convertible notes, bridge financing fees, and interest. However, we still incurred significant\nfinancing fees and higher interest costs due to delays in our registration statement becoming effective, delays in funding, and the need\nto rely on more expensive debt during the year.\n\n \n\n**Liquidity\nand Capital Resources**\n\n \n\nCash\nFlow Summary\n\nFor\nthe years ended December 31,\n\n \n\n  \n2024  \n2023 \n\nNet Cash used in operating activities \n$(3,560,951) \n$(4,783,077)\n\nCash flows used in investing activities \n 161,240  \n (318,602)\n\nCash flows provided by financing activities \n 3,373,903  \n 5,096,483 \n\nNet decrease in cash and cash equivalents \n$(27,525) \n$25,580 \n\n \n\n42\n\n \n\n \n\n**Capital\nRequirements for long-term obligations**\n\n \n\nThe following table presents the Company’s material contractual obligations\nas of December 31, 2024:\n\n \n\nContractual Obligations \nTotal  \nLess than 1 year  \n1–3 years \n\nOperating lease obligations \n$168,608  \n$130,483  \n$38,125 \n\n  \n$168,608  \n$130,483  \n$38,125 \n\n \n\n**None.**\n\n \n\n**Critical\nAccounting Policies**\n\n \n\nOur\nfinancial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles\napplied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles\nrequires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent\nassets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting\nperiods.\n\n \n\nWe\nregularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these\npolicies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience,\non information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and\ncircumstances. Actual results could differ from those estimates made by management.\n\n \n\n**Revenue\nRecognition**\n\n \n\nThe\nCompany recognizes revenue under ASU No. 2014-09, *“Revenue from Contracts with Customers (Topic 606),”* (“ASC\n606”).\n\n \n\n*Performance\nObligations Satisfied Over Time*\n\n \n\n*FASB\nASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10*\n\n \n\nAn\nentity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one\nof the following criteria is met:\n\n \n\na.\nThe customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB\nASC 606-10-55-5 through 55-6).\n\nb.\nThe entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is\ncreated or enhanced (as described in FASB ASC 606-10-55-7).\n\nc.\nThe 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\nhas an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).\n\n \n\nThe\nfollowing five steps are applied to achieve that core principle for our business:\n\n \n\n \n●\nIdentify\nthe contract with the customer\n\n \n \n \n\n \n●\nIdentify\nthe performance obligations in the contract\n\n \n \n \n\n \n●\nDetermine\nthe transaction price\n\n \n \n \n\n \n●\nAllocate\nthe transaction price to the performance obligations in the contract\n\n \n \n \n\n \n●\nRecognize\nrevenue when the company satisfies a performance obligation\n\n \n\n*Performance\nObligations Satisfied at a Point in Time*\n\n \n\n*FASB\nASC 606-10-25-30*\n\n \n\nIf\na performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time. To determine the point\nin time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should\nconsider the guidance on control in FASB ASC 606-10-25-23 through 25-26. In addition, it should consider indicators of the transfer of\ncontrol, which include, but are not limited to, the following:\n\n \n\na.\nThe entity has a present right to payment for the asset\n\nb.\nThe customer has legal title to the asset\n\nc.\nThe entity has transferred physical possession of the asset\n\nd.\nThe customer has the significant risks and rewards of ownership of the asset\n\ne.\nThe customer has accepted the asset\n\n \n\nThe\ncore principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services\nto customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or\nservices. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration\nit is entitled to in exchange for the goods and services transferred to the customer. In addition a) the company also does not have an\nalternative use for the asset if the customer were to cancel the contract, and b) has a fully enforceable right to receive payment for\nwork performed (i.e., customers are required to pay as various milestones and/or timeframes are met)\n\n \n\n43\n\n \n\n \n\nThe\nfollowing five steps are applied to achieve that core principle for our HRS and CETY Europe Divisions:\n\n \n\n \n●\nIdentify\nthe contract with the customer\n\n \n●\nIdentify\nthe performance obligations in the contract\n\n \n●\nDetermine\nthe transaction price\n\n \n●\nAllocate\nthe transaction price to the performance obligations in the contract\n\n \n●\nRecognize\nrevenue when the company satisfies a performance obligation\n\n \n\nThe\nfollowing steps are applied to our legacy engineering and manufacturing division:\n\n \n\n \n●\nWe\ngenerate a quotation\n\n \n●\nWe\nreceive Purchase orders from our customers.\n\n \n●\nWe\nbuild the product to their specification\n\n \n●\nWe\ninvoice at the time of shipment\n\n \n●\nThe\nterms are typically Net 30 days\n\n \n\nThe\nfollowing step is applied to our CETY HK business unit:\n\n \n\n \n●\nCETY\nHK is primarily responsible for fulfilling the contract / promise to provide the specified good or service.\n\n \n\n*A\nprincipal obtains control over any one of the following (ASC 606-10-55-37A):*\n\n \n\n \na.\nA\ngood or another asset from the other party which the entity then transfers to the customer. Note that momentary control before transfer\nto the customer may not qualify.\n\n \nb.\nA\nright to a service to be performed by the other party, which gives the entity the ability to direct that party to provide the service\nto the customer on the entity’s behalf.\n\n \nc.\nA\ngood or service from the other party that it then combines with other goods or services in providing the specified good or service\nto the customer.\n\n \n\nIf\nthe entity obtains control over one of the above before the good or service is transferred to a customer, the entity could be considered\na principal.\n\n \n\nDuring\nthe project development and engineering phase of our CETY Renewable projects such as VRG, we employ the input method of revenue recognition\nto estimate revenue based on projected costs. This approach involves forecasting future costs and revenues to determine the amount of\nrevenue we recognize in the current period. It’s important to understand, however, that these recognized revenue figures are not\nfinal and are subject to adjustments. Changes may occur as we gain more clarity on actual costs compared to our initial projections,\naffecting the revenue recognized accordingly.\n\n \n\nThe\nprojected costs of the VRG project is based on estimates and profitability will be impacted depending on actual costs. Using the input\nmethod for revenue recognition, the amount of recorded revenue is also affected depending on the estimated total costs. The purchase\nprice allocation for Shuya was also based on estimates and comparable data selected by the Company. The inputs for the valuation of the\nSeries E preferred shares were also based on estimates and comparable data selected by the Company.\n\n \n\nAdditionally,\nthe above five steps are applied to achieve core principle for our CETY Renewables Division:\n\n \n\nBecause\nthe CETY Renewables division is presently engaged in the Engineering, Procurement, and Construction (EPC) of biomass power facilities,\nCETY Renewables has developed a process of executing EPC Agreements with customers for this work. In contracting these engagements, CETY\nRenewables recognizes revenue according to accounting standards in accordance with ASC 606.\n\n \n\nIn\nrecognizing this revenue, CETY Renewables first identifies the relevant contract with its customer according to 606-10-25-1.\n\n \n\n \n●\nThe\nentities, together known as the Parties, approved the contract in writing, through signatures and commitment to the performance of\npermitting, design, procurement, construction, and commissioning.\n\n \n\n \n●\nCETY’s\nwork product includes permits, engineering designs, equipment, and full balance of plant specific to permitting, design, procurement,\nconstruction, and commissioning.\n\n \n\n \n●\nCETY\nand customer agree to a total EPC Contract price.\n\n \n\n \n●\nThe\ncontract has commercial substance. The risk associated with this EPC Agreement is that payment of the EPC contract price.\n\n \n\n \n●\nPer\nthe EPC Agreement, CETY expects to collect substantially all of the consideration for its goods and services.\n\n \n\nSecondly,\nCETY identifies the performance obligations of the Parties in performance of the EPC Agreement in accordance with 606-10-25-14. At contract\ninception, CETY assesses the goods and services necessary to deliver the facility in accordance with the agreement with its clients.\nThe agreement specifically laid out all deliverables necessary to achieve the permitting, design, procurement, construction, and commissioning.\n\n \n\nCETY\nalso 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\nwith permitting, design, procurement, construction and commissioning of a commercially operable biomass power plant. A biomass power\nplant 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\nor functional system.\n\n \n\nCETY\nin accordance with 606-10-32-1, CETY reviews measurement of the performance obligations. There are no exclusion of any amount of the\nContract Price due to constraints associated with 606-10-31-11 through 606-10-32-13.\n\n \n\n44\n\n \n\n \n\nIn\nreview of 606-10-32-2A, CETY did not exclude measurement from the measurement of the transaction price any taxes assessed by a government\nauthority as no such taxes will be due.\n\n \n\nIn\nreviewing 606-10-32-3, CETY evaluated the nature, timing, and amount of consideration promised, and whether it impacts the estimate of\nthe transaction price.\n\n \n\nFinally,\nin identifying a single method of measuring progress for each performance obligation satisfied over time, in accordance with 606-10-25-32,\nCETY applies the methodology of 606-10-25-36. CETY adopted and implemented the input method for revenue recognition in accordance with\nASC 606-10-25-33. The company adopts the input method for implementation. CETY recognizes revenue for performance obligations on the\nbasis of the entity’s efforts or inputs to the satisfaction of a performance obligation per 606-10-55-20.\n\n \n\nFor\nCETY, the contracts with clients for the construction of biomass power plants are the basis for revenue recognition. In each separate\nEPC Agreement, the performance obligations include permitting, design, procurement, construction, and commissioning of the plant. All\nof these work products satisfy Section 606-10-25-27(b) as these work products create or enhance an asset under customer’s control.\nUpon delivery of the work product, the customer takes control of the work products and has full right and ability to direct the use of\nand obtain substantially all of the remaining benefits of the assets. We recognize revenue over time, using timeline and milestone methods\nto measure progress towards complete satisfaction of the performance obligation.\n\n \n\nDuring\nthe complexity and duration of the biomass power plant construction projects, CETY will recognize revenue over time, consistent with\nthe criteria for over-time recognition under ASC 606. This approach reflects the continuous transfer of documents, permits, and the equipment\nover to the customer, which is characteristic of long-term construction contracts.\n\n \n\nWe\nhave a list of appropriate measures of progress: This is based on milestones achieved, among other measures.\n\n \n\nGiven\nthe long-term nature of the projects, CETY regularly reviews and, if necessary, updates its estimates of progress towards completion,\ntransaction price, and the allocation of the transaction price to performance obligations.\n\n \n\nAlso,\nfrom time-to-time, our contracts state that the customer is not obligated to pay a final payment until the units are commissioned, i.e.\na final payment of 10%. As of December 31, 2024 and 2023 we had $33,000 and $33,000 of deferred revenue, which is expected to be recognized\nin the second quarter of year 2025.\n\n \n\nAlso,\nfrom time-to-time, we require upfront deposits from our customers based on the contract. As of December 31, 2024 (Restated) and\n2023, we had outstanding customer deposits of $172,061 and $307,236, respectively.\n\n \n\n**Change\nfrom fair value or equity method to consolidation**\n\n** **\n\nIn\nJuly 2022, JHJ and other three shareholders agreed to form and make total capital contribution of RMB 20 million ($2.81 million) with\nlatest contribution due date in February 2066 into Sichuan Hongzuo Shuya Energy Limited (“Shuya”), JHK owns 20% of Shuya.\nIn August 2022, JHJ purchased 100% ownership of Sichuan Shunengwei Energy Technology Limited (“SSET”) for $0, who owns 29%\nof Shuya; Shunengwei is a holding company and did not have any operations nor made any capital contribution into Shuya as of the ownership\npurchase date by JHJ; right after the ownership purchase of SSET, JHJ ultimately owns 49% of Shuya.\n\n \n\nShuya\nwas set up as the operating entity for pipeline natural gas (PNG) and compressed natural gas (CNG) trading business, while the other\ntwo shareholders of Shuaya have large supply relationships.\n\n \n\nFor\nthe year ended December 31, 2022, the Company has determined that Shuya was not a VIE and has evaluated its consolidation analysis under\nthe voting interest model. Because the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly,\nit has accounted for its investment in Shuya under the equity method of accounting. Under this method, the investor (“JHJ”)\nrecognizes its share of the profits and losses of the investee (“Shuya”) in the periods when these profits and losses are\nalso reflected in the accounts of the investee. Any profit or loss recognized by the investing entity appears in its income statement.\nAlso, any recognized profit increases the investment recorded by the investing entity, while a recognized loss decreases the investment.\n\n \n\nJHJ\nmade a investment of RMB 3.91 million ($0.55 million) into Shuya during the 12 months ended December 31, 2022 recorded in accordance\nwith ASC 323. Shuya had a net loss of approximately $10,750 during the year ending December 31, 2022, of which approximately $5,000 was\nallocated to the company, reducing the investment by that amount.\n\n \n\nHowever,\neffective January 1, 2023, JHJ, SSET and Chengdu Xiangyueheng Enterprise Management Co., Ltd (“Xiangyueheng), who is the 10% shareholder\nof Shuya, entered a Three-Parties Consistent Action Agreement, wherein these three shareholders (or three parties) will guarantee that\nthe voting rights will be expressed in the same way at the shareholders’ meeting of Shuya to consolidate the controlling position\nof the three parties in Shuya. The three parties agree that within the validity period of this agreement, before the party intends to\npropose the motions to the shareholders or the board of directors on the major matters related to the voting rights of the shareholders\nor the board of directors, the three parties internally will discuss, negotiate and coordinate the motion topics for consistency; in\nthe event of disagreement, the opinions of JHJ shall prevail.\n\n****\n\n** **\n\n45\n\n \n\n****\n\n** **\n\nAs\na result of Consistent Action Agreement, the Company re-analyzed and determined that Shuya is the variable interest entity (“VIE”)\nof JHJ because 1) the equity investors at risk, as a group, lack the characteristics of a controlling financial interest, and 2) Shuya\nis structured with disproportionate voting rights, and substantially all of the activities are conducted on behalf of an investor with\ndisproportionately few voting rights. Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate\nthat VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most\nsignificantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits,\nthat could potentially be significant to the VIE. The Company concluded JHJ is deemed the primary beneficiary of the VIE. Accordingly,\nthe Company consolidates Shuya effective on January 1, 2023.\n\n \n\nThe\nchange of control interest was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification,\nreferred to as ASC, 805, Business Combinations. The management determined that the Company was the acquiror for financial accounting\npurposes. In identifying the Company as the accounting acquiror, the companies considered the structure of the transaction and other\nactions contemplated by the Three-Parties Consistent Action Agreement, relative outstanding share ownership and market values, the composition\nof the combined company’s board of directors, the relative size of Shuya, and the designation of certain senior management positions\nof the combined company.\n\n \n\nIn\naccordance with ASC 805, the Company recorded the acquisition based on the fair value of the consideration transferred and then allocated\nthe purchase price to the identifiable assets acquired and liabilities assumed based on their respective fair values as of the Acquisition\nDate. The excess of the value of consideration transferred over the aggregate fair value of those net assets was recorded as goodwill.\nAny identified definite lived intangible assets will be amortized over their estimated useful lives and any identified intangible assets\nwith indefinite useful lives and goodwill will not be amortized but will be tested for impairment at least annually. All intangible assets\nand goodwill will be tested for impairment when certain indicators are present. Determining the fair value of assets acquired and liabilities\nassumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of\nfuture revenues and cash flows, discount rates, and selection of comparable companies. The valuation of purchase considerations was based\non preliminary estimates that management believes are reasonable under the circumstances.\n\n \n\nAs\nthe Consistent Action Agreement did not quantify any considerations to gain the control, the deemed consideration paid is the fair value\nof 51% non-controlling interest as of January 1, 2023. The following table summarizes the fair value of the consideration paid and the\nfair value of assets acquired, and liabilities assumed on January 1, 2023, the acquisition date.\n\n \n\nFair value of non-controlling interests \n$650,951 \n\nFair value of previously held equity investment \n 556,096 \n\nSubtotal \n$1,207,047 \n\nRecognized value of 100% of identifiable net assets \n (1,207,047)\n\nGoodwill Recognized \n$- \n\nRecognized amounts of identifiable assets acquired and liabilities assumed (preliminary): \n   \n\nInventories \n$516,131 \n\nCash and cash equivalents \n 50,346 \n\nTrade and other receivables \n 952,384 \n\nAdvanced deposit \n 672,597 \n\nNet fixed assets \n 6,704 \n\nTrade and other payables \n (1,021,897)\n\nAdvanced payments \n (5,317)\n\nSalaries and wages payables \n (4,692)\n\nOther receivable \n 40,791 \n\nTotal identifiable net assets \n$1,207,047 \n\n****\n\n**** \n\n46\n\n \n\n****\n\n** **\n\nUnder\nASC-805-10-50-2, initial consolidation of an investee previously reported using fair value or the equity method should be accounted for\nprospectively as of the date the entity obtained a controlling financial interest. Therefore, the Company should provide pro forma information\nas if the consolidation had occurred as of the beginning of each of the current and prior comparative reporting period per\n\n \n\nOn\nJanuary 1, 2024, and effective on the same date, JHJ, SSET and Xiangyueheng entered into the Agreement on the Termination of the Concerted\nAction Agreement (the “Termination Agreement”), pursuant to which the parties released each other from any and all obligations\nunder the CAA. Due to the Termination Agreement, the Company now holds less than 50% of the voting rights in Shuya. The Company analyzed\nwhether Shuya should be consolidated under ASC 810 and determined Shuya is no longer required to be consolidated on January 1, 2024 after\nthe execution of the Termination Agreement. Accordingly, the Company will not consolidate Shuya into its consolidated financial statements\non or after January 1, 2024.\n\n**** \n\n**Series\nE Valuation**\n\n \n\nAdditionally,\nthe inputs for the valuation of the Series E preferred shares were also based on estimates and comparable data selected by the Company\nand fair value measurements, furthermore, the purchase price allocation was based on estimates of fair market values.\n\n \n\n**Future\nFinancing**\n\n \n\nWe\nwill continue to rely on equity sales of our common shares to continue to fund our business operations. Issuances of additional shares\nwill result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities\nor arrange for debt or other financing to fund planned acquisitions and exploration activities.\n\n \n\n**Off-balance\nSheet Arrangement**\n\n \n\nWe\nhave no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial\ncondition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources\nthat are material to stockholders.\n\n \n\n**Recently\nIssued Accounting Pronouncements**\n\n \n\nFrom\ntime to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard\nsetting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently\nissued standards that are not yet effective will not have a material impact on our consolidated financial position or results of operations\nupon adoption."}