Clean Energy Technologies, Inc. Commitments Disclosure

NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

Operating Rental Leases

 

ASB ASU 2016-02 “Leases (Topic 842)” – In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We have adopted the above ASU as of January 1, 2019. The right of use asset and lease liability have been recorded at the present value of the future minimum lease payments, utilizing an average borrowing rate and the company is utilizing the transition relief and “running off” on current leases.

 

 

As of May 1, 2017, our corporate headquarters were located at 2990 Redhill Unit A, Costa Mesa, CA. On March 10, 2017, the Company signed a lease agreement for an 18,200-square foot CTU Industrial Building. Lease term is seven years and two months beginning July 1, 2017. This lease ended as of November 30, 2023. In October of 2018 we signed a sublease agreement with our facility in Italy with an indefinite term that may be terminated by either party with a 60-day notice for 1,000 Euro per month. Due to the short termination clause, we are treating this as a month-to-month lease. This lease ended as of December 31, 2023.

 

We have relocated our corporate office to 1340 Reynolds Avenue Unit 120, Irvine, CA 92614. On December 1, 2023, the Company signed a lease agreement for a 3000-square foot of office space with Metro Creekside California, LLC. Lease term is thirty-eight months beginning December 1, 2023 and expiring on January 31, 2027. On October 16 of 2023, we signed a sublease agreement to relocate the HRS operations from Costa Mesa to Irvine, California for one year and 7 months commencing December 1, 2023 and ending June 30, 2025. We also signed a temporary storage lease and Due to the short termination clause, we are treating this as a month-to-month lease.

 

On January 30, 2024, JHJ entered into a lease for the office in Chengdu City (“Chengdu lease”), China from January 30, 2024 to February 28, 2026 and has a monthly rent of RMB 28,200 including the VAT. The lease required a security deposit of RMB 77,120 (or $10,727). The Company received a one-month rent abatement, which was considered in calculating the present value of the lease payments to determine the ROU asset which is being amortized over the term of the lease.

 

The components of lease costs, lease term and discount rate with respect of these two leases with an initial term of more than 12 months are as the following:

 

Balance sheet information related to the Company’s operating leases:

SCHEDULE OF OPERATING LEASE COST 

		As of December 31, 2024				As of December 31, 2023
Right-of-used assets			166,727			$	245,975
Lease liabilities – current			130,483			$	117,606
Lease liabilities – non-current			38,125				128,480
Total lease liabilities			168,608			$	246,086

 

The weighted-average remaining lease term and the weighted-average discount rate of the above two leases are as follows:

 

		Year Ended December 31, 2024
Weighted average remaining lease term (years)			1.32
Weighted average discount rate			4.5-10.0	%

 

The following is a schedule, by year of lease payment for above two leases as of December 31, 2024:

SCHEDULE OF LEASE PAYMENT 

For the 12 months ending		Lease Payment
December 31, 2025			134,553
2026			40,642
2027			3,511
Total undiscounted cash flows			178,706
Imputed Interest			(10,098	)
Present value of lease liabilities		$	168,608

 

Our lease expense ASC 842 lease for the years ended December 31, 2024 and 2023 was $175,700 and $11,392 respectively. Our short-term lease for the years ended December 31, 2024 and 2023 was $74,567 and $298,612.

 

Severance Benefits

 

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