UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




Form 10-K




ý
Annual report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2008r
Transition report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________________ to ________________Commission file number 0-30448





Clean Energy and Power, Inc.


(Exact name of small business issuer as specified in its charter)




Nevada

(State of Incorporation)
20-0420885

(I.R.S. Employer Identification No.)





111 Airport Rd., Unit 2

Warwick, RI  02889

Tel: (401) 648-0805(Address and telephone number of Registrant's principal

executive offices and principal place of business)





Securities registered pursuant to Section 12(b) of the Act:
NoneSecurities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001

(Title of Class)




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


Yes r      No ý




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


Yes r      No ý




Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.




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


Yes r     No ý




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


Yes r      No ý










Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.


r




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




Large accelerated filer r

Non-accelerated filer r

(Do not check if a smaller reporting company)
Accelerated filer r

Smaller reporting company ý




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes q   No ý




The number of shares of Common Stock held by non-affiliates, as of December 31, 2008 was 69,148,824 shares, all of one class of common stock, $0.001 par value, having an aggregate market value of $10,372,324 based on the closing price of the Registrant's common stock of $0.15 on December 31, 2008 as quoted on the Electronic Over-the-Counter Bulletin Board ("OTCBB").




As of April 12, 2011 there were 204,798,984 shares of the Company's Common Stock outstanding.




Indicate the number of shares outstanding of each of the registrant's classes of Common Stock, as of the latest practicable date.




Class: Common Stock - $0.001 par value

Outstanding  at April 12, 2011: 204,798,984





DOCUMENTS INCORPORATED BY REFERENCE




None.





2





PART I




ITEM 1.  DESCRIPTION OF BUSINESS




How our company is organized




The Company was incorporated as Tesmark, Inc. in September 1979. In November 1998, the Company changed its state of incorporation from Idaho to Nevada and in January 2001 changed its name to 5G Wireless Communications, Inc. In March 2001, the Company acquired 5G Partners, a Canadian partnership, and changed its business to provide wireless technology systems through high speed Internet access and data transport systems. In April 2002, the Company acquired Wireless Think Tank, Inc., a developer of high-speed long distance wireless technologies. In July 2003, the Company shifted its strategy from that of a service provider to an equipment manufacturer, or OEM. 5G Partners liquidated shortly after acquisition and Wireless Think Tank, Inc. is inactive.  On June 25, 2009, the Company changed its name to Clean Energy and Power, Inc.




On January 21, 2003, the Company’s articles of incorporation were amended to do the following: (a) increase the authorized shares of common stock of the Company to 800,000,000; (b) in the future, an increase in the authorized capital stock of the company can be approved by the board of directors without stockholder consent; and (c) in the future, a decrease in the issued and outstanding common stock of the company (a reverse split) can be approved by the board of directors without stockholder consent. Effective on September 16, 2004, the Company amended its articles of incorporation to increase the number of authorized shares of common stock from 800,000,000 to 5,000,000,000.




On October 19, 2004, the Company elected, by the filing of a Form N-54A with the Securities and Exchange Commission (“SEC”), to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (“1940 Act”). On December 31, 2004, the Company transferred certain assets and certain liabilities of the Company into 5G Wireless Solutions, Inc. in exchange for 100% of the outstanding shares of 5G Wireless Solutions, Inc.’s common stock.




On June 3, 2005, the Company’s board of directors unanimously determined that it would be in the best interests of the Company and its stockholders to seek stockholder approval on certain matters. Pursuant to a definitive Schedule 14A proxy statement filed with the SEC on September 19, 2005, the Company sought approval from the stockholders, at the annual stockholder’s meeting on October 20, 2005, for the following (among other things): (a) to terminate the Company’s status as a BDC under the 1940 Act and to file a Form N-54C with the SEC to terminate this status, and (b) to file a new registration statement with the SEC. This registration statement was filed on August 8, 2006, but was not declared effective by the SEC prior to the Company’s request to withdraw the registration statement on July 19, 2007.




On October 20, 2005, the Company’s shareholders approved (among other things) (a) the termination of the Company’s status as a BDC under the 1940 Act and the filing of a Form N-54C with the SEC, and (b) the filing of a new registration statement. Based on this approval, on October 21, 2005, the Company filed a Form N-54C with the SEC terminating its status as a BDC.




On November 3, 2005, the Company’s Board of Directors approved a 1 for 350 reverse stock split of the Company’s common stock. Common shares outstanding prior to and after the reverse stock split totaled 1,169,494,405 and 3,341,419 shares, respectively.




On January 19, 2006, 5G Wireless Solutions, Inc. was merged with and into the Company.




On October 4, 2006, the Company acquired certain assets of Global Connect, Inc. (“GCI”). The assets acquired from GCI were in the business of providing wireless Internet access to hospitality property patrons.




On July 11, 2008, the Company’s Board of Directors approved a 1 for 2,000 reverse stock split of the Company’s common stock.  Common shares outstanding prior to and after the reverse stock split totaled 320,401,433 and 53,137,297 shares, respectively. The July 11, 2008 reverse stock split has been retroactively reflected in the accompanying financial statements for all periods presented. Unless otherwise indicated, all references to outstanding common shares, including common shares to be issued upon the exercise of warrants and convertible notes payable, refer to post-split shares.




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Where you can find us




We are located at 111 Airport Road - Unit 2, Warwick, RI 02889. Our telephone number is (401) 648-0803, our facsimile number is (401) 648-0699, our e-mail address is info@cleanenergyandpower.com, and our homepage on the world-wide web is at http://www.cleanenergyandpower.com.




About Our Company




As indicated in its recent filings for yearend 2007 and the first three quarters of 2008, the Company has changed its business. Clean Energy and Power, Inc. formerly known as 5G Wireless Communications, Inc. (“Company”) was a designer, developer and manufacturer of commercial grade wireless telecommunications equipment operating on the 802.11a/b/g frequency. The Company deployed its equipment as a wireless Internet service provider (“WISP”), primarily to hospitality properties. The Company also sold its equipment through resellers or directly to end-users.




In July 2008 after the departure of both Mr. Dix and Mr. Boudewyn, the manufacture of equipment for the wireless Internet market was curtailed and abandoned.  The contracts with locations offering Wi-Fi services on a pay for use basis or as an amenity began to expire.  Presently, the Company realizes most of its current revenue from a small group of resorts where the Company continues to offer and support Wi-Fi services, however, while to this day it continues to provide Wi-Fi services, the Company in late 2008 into the first part of 2009 formulated a strategy to redirect it efforts into alternative energy projects.




In June 2009 the Company, formerly 5G Wireless, Inc., was renamed Clean Energy and Power, Inc.  The Company’s focus is on the development of alternative energy projects and environmentally beneficial technologies.  These two areas cover projects such as:




Alternative Energy Projects:


·
Solar electric generation


·
Wind powered electric generation


·
Development of bio-fuel alternatives





Environmentally Beneficial Technologies:


·
Development of non-edible bio-fuel feed stocks that minimize the impact of bio-fuel consumption on the food chain


·
Development of cost effective methods to extract bio-fuels from the non-edible feed stocks to assure profitability


·
Development of or investment in waste water treatment and water purification and recovery technologies that will lead to greater conservation and cleanliness of water resources and reduction of cost to accomplish these goals.




In 2010, the Company built and deployed its first pilot solar project in the Czech Republic.  While a small project overall, its goal was to make sure that the Company would be able to work in Eastern Europe for deployment of larger projects that it was investigating.  Several of these projects are under review and the Company expects that during 2011, it will either acquire or build one or more of these projects, each of which is profitable on a standalone basis.




In November 2010, the Company announced the decision to launch a new division dedicated to the bio-fuel efforts.  Subsequently, the Company announced the signing of a Letter of Intent to acquire the assets Pacific Oil Products.  Closing of this acquisition is expected to be completed during the first quarter of 2011, however in the interim, Mr. Shen our Company’s President, is working with the management of Pacific Oil Products to develop a number of opportunities that should lead to revenue generation in the near future.




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Major Customers




In 2008 a number of major customers left the Company as their contracts expired.  Major customers in 2007 such as Denison University (19% of sales) and DigitalSkys, (11% of sales) were replaced in 2008 by three resort groups with multiple properties which represented 39% of sales in 2008.  The balance of revenue came from another 20 or so location where the Company offered Wi-Fi subscriptions with no real concentration of sales.




Hospitality customers pay for wireless Internet service using the Company’s products. The Company operates “pay for wireless” Internet service for hospitality customers. The Company is obligated to provide support to the hospitality property users. The Company considers such contracts to be entered into in the ordinary course of business.




Research and Development




For the years ended December 31, 2008 and 2007, all internal research and development costs were charged to expense as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. Research and development costs (exclusive of salary related) were $1,596 for the year ended December 31, 2008 compared to $1,528 for the year ended December 31, 2007.




Competition.




As is seen from the loss of a number of large customers in the latter half of the year, the Company operates in the highly competitive communications equipment market. The Company competes primarily on the basis of its fixed wireless equipment portfolio, experience and technical skills, competitive pricing model, service quality, reliability and deployment speed. The hospitality WISP business is competitive until a contract is signed, and when a contract ends, there are numerous competitors who seek to acquire the sites through aggressive pricing. Contracts provide exclusive rights for WISP operation on a specific property for a specific period.




The Company’s principal competitors are other equipment manufacturers that utilize fixed wireless technology, including Cisco Systems Inc. and Tropos Networks, Inc. Cisco currently possesses approximately 60% of the wireless equipment market for colleges and universities, while Tropos Networks, Inc. has a lead in the municipal market with more than 150 customers and 90 value added resellers throughout the world. Cisco Systems, Inc. and Tropos Networks, Inc. both utilize a dense access point deployment or mesh network architecture. There are approximately 8 other major competitors; some of these include: Belair and Strix offering mesh network solutions across a broad range of vertical markets, Terrabeam and Aruba providing base station equipment approaches similar to those of the Company, Airespace (now Cisco), Meru and Colubris all offering integrated dense access point deployment architecture coupled with a variety of service to comprise an enterprise solution. There is a relatively high cost of entry into this space given the need for proof of reliability and the long lead-time associated with establishing brand awareness through marketing communications. To date, the Company has not encountered any barriers to competition imposed by the practices of any of its competitors such as, for example, exclusivity agreements with the Company’s potential customer base.




Many of the Company’s competitors have longer operating histories, long-standing relationships with customers and suppliers, greater name recognition and greater financial, technical and marketing resources than the Company does and, as a result, may have substantial competitive advantages over the Company. Additionally, market perceptions as to reliability and security for the relatively early-stage fixed wireless networks as compared to copper or fiber networks provide the Company with additional marketing challenges. The Company may not be able to exploit new or emerging technologies or adapt to changes in customer requirements more quickly than these competitors, or devote the necessary resources to the marketing and sale of its products.




5





Competitors in the hospitality WISP business include companies such as Wayport (now part of AT&T) and Lodgenet. The Company believes that it competed favorably in the open market against these and other competitors in the market. Many of the Company’s competitors in this area have significantly more marketing capacity than the Company.




Regulation.




Internet-based communication equipment makers generally are not subject to federal fees or taxes imposed to support programs such as universal telephone service. Changes in the rules or regulations of the U.S. Federal Communications Commission or in applicable federal communications laws relating to the imposition of these fees or taxes could result in significant new operating expenses for the Company, and could negatively impact the Company’s business. Any new law or regulation, U.S. or foreign, pertaining to Internet-based communications products, or changes to the application or interpretation of existing laws, could decrease the demand for the Company’s products, increase its cost of doing business or otherwise harm its business. There are an increasing number of laws and regulations pertaining to the Internet. These laws or regulations may relate to taxation and the quality of products. Furthermore, the applicability to the Internet of existing laws governing intellectual property ownership and infringement, taxation, encryption, obscenity, libel, employment, personal privacy, export or import matters and other issues is uncertain and developing and the Company is not certain how the possible application of these laws may affect the Company. Some of these laws may not contemplate or address the unique issues of the Internet and related technologies. Changes in laws intended to address these issues could create uncertainty in the Internet market, which could reduce demand for the Company’s products, increase its operating expenses or increase its litigation costs.




Employees




We presently have two employees our Chief Executive Officer/Chief Financial Officer, and our President.  Both are also directors of the Company.  At the end of 2008, the Company had one employee – the Chief Executive Officer appointed prior to the resignation of Mr. Dix and Mr. Boudewyn.  We believe that our relationship with employees is satisfactory. We have not suffered any labor problems during the last two years.




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ITEM 1A. RISK FACTORS




Investment in our securities involves a high degree of risk. We are subject to various risks that may materially harm our business, financial condition and results of operations. You should carefully consider the risks and uncertainties described below and the other information in this filing before deciding to purchase our common stock. If any of these risks or uncertainties actually occurs, our business, financial condition or operating results could be materially harmed. In that case, the trading price of our common stock could decline and you could lose all or part of your investment.







History of Losses May Continue, Requiring Additional Sources of Capital, Which May Result in Curtailing of Operations and Dilution to Existing Stockholders.




The Company incurred a net loss of $939,983 for the year ended December 31, 2008 and a net loss of $2,853,488 for the year ended December 31, 2007. The net loss in 2008 is significantly less than the prior year due to a reduction of $2,795,890 in selling, general, and administrative expenses due to the reduction in personnel and curtailment of manufacturing operations, the operating loss for the year ended December 31, 2008 and December 31, 2007 was $469,090 and $3,385,733 respectively.  The Company cannot assure that it can achieve or sustain profitability on a quarterly or annual basis in the future. If revenues grow more slowly than anticipated, or if operating expenses exceed expectations or cannot be adjusted accordingly, the Company will continue to incur losses. The Company’s possible success is dependent upon the successful development, deployment and marketing of its products, of which there is no assurance. Any future success that the Company might enjoy will depend upon many factors, including factors out of the Company’s control or which cannot be predicted at this time. These factors may include changes in or increased levels of competition, including the entry of additional competitors and increased success by existing competitors, changes in general economic conditions, increases in operating costs, including costs of supplies, personnel and equipment, reduced margins caused by competitive pressures and other factors. These conditions may have a materially adverse effect upon the Company or may force it to reduce or curtail operations. In addition, the Company will require additional funds to sustain and expand its sales and marketing activities, particularly if a well-financed competitor emerges. The Company anticipates that it will require additional funds to continue operations for the next twelve months. There can be no assurance that financing will be available in amounts or on terms acceptable to the Company, if at all. The inability to obtain sufficient funds from operations or external sources would require the Company to curtail or cease operations. Any additional equity financing may involve substantial dilution to the existing stockholders.




We Have Been The Subject Of A Going Concern Opinion As Of December 31, 2008 And December 31, 2007 From Our Independent Auditors Which Means That We May Not Be Able To Continue Operations Unless We Obtain Additional Funding.




In its report dated April 12, 2011, the Company’s independent registered public accounting firm stated that the financial statements for the years ended December 31, 2008 and 2007 were prepared assuming that the Company would continue as a going concern. The Company’s ability to continue as a going concern is an issue raised as a result of cash flow constraints, an accumulated deficit of $32,779,274 at December 31, 2008 and recurring losses from operations. The Company continues to experience net losses. The Company’s ability to continue as a going concern is subject to the ability to generate a profit and/or obtain necessary funding from outside sources, including obtaining additional funding from the sale of the Company’s securities, increasing sales or obtaining loans from various financial institutions where possible. The continued net losses and stockholders’ deficit increases the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.




Our independent auditors have added an explanatory paragraph to their audit report issued in connection with our financial statements for the years ended December 31, 2008 and 2007.  We have incurred losses of $939,983 and $2,853,488 for the years ended December 31, 2008 and 2007.  We had a working capital deficiency of $8,362,234 at December 31, 2008 and that these conditions raise substantial doubt about the Company's ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.




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We Are Subject To A Working Capital Deficit, Which Means That Our Current Assets On December 31, 2008 Were Not Sufficient To Satisfy Our Current Liabilities.




As of December 31, 2008, we have incurred substantial operating losses. We have generated negative free cash flow and expect to continue to experience negative free cash flow for the foreseeable future. To date we have deferred payments, sold stock and convertible debentures, and reduced overhead to minimize cash requirements.  We have current liabilities of $8,382,196 and current assets of $19,962 at December 31, 2008, and a working capital deficiency of $8,362,234.  If we cannot meet our current liabilities we may have to curtail or cease business operations.




The Company May Not Be Able to Accommodate Rapid Growth Which Could Decrease Revenues and Result in a Loss of Customers.




The Company is focused on WISP hospitality service and selling its products to universities and international markets. To manage anticipated growth, the Company must continue to implement and improve its operational, financial and management information systems. The Company must also hire, train and retain additional qualified personnel, continue to expand and upgrade core technologies, and effectively manage its relationships with end users, suppliers and other third parties. The Company’s expansion could place a significant strain on its current services and support operations, sales and administrative personnel, capital and other resources. The Company could also experience difficulties meeting demand for its products. The Company cannot guarantee that its systems, procedures or controls will be adequate to support operations, or that management will be capable of fully exploiting the market. The Company’s failure to effectively manage growth could adversely affect its business and financial results.




If we do not obtain additional financing, our business will fail because we cannot fund our business objectives.




We need to raise money to meet our general and administrative expenses, and we need to raise money to achieve our business objectives. As of December 31, 2008, we had cash in the amount of $1,375, and current liabilities of $8,382,196.  We currently do not have any arrangements for financing and we may not be able to obtain financing when required. Obtaining additional financing would be subject to a number of factors, including the fact that we have no business and the present financial market conditions may make obtaining additional financing difficult. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us.




We Could Fail To Attract Or Retain Key Personnel




The Company’s success is largely dependent on the personal efforts and abilities of its senior management, none of which currently has an employment agreement with the Company. The loss of certain members of the Company’s senior management, including its chief executive officer, could have a material adverse effect on its business and prospects.




As the Company shifts its business focus, it intends to recruit employees who are skilled in its new industry. The failure to recruit these key personnel could have a material adverse effect on the Company’s business. As a result, the Company may experience increased compensation costs that may not be offset through either improved productivity or higher revenue. There can be no assurances that the Company will be successful in retaining existing personnel or in attracting and recruiting experienced qualified personnel.




No Expectation of Dividends on Common Stock.




We have never paid cash dividends on our Common Stock and we do not expect to pay cash dividends on our Common Stock at any time in the foreseeable future.  The future payment of dividends directly depends upon the future earnings, capital requirements, financial requirements and other factors that our Board of Directors will consider.  Since we do not anticipate paying cash dividends on our Common Stock, the return on investment on our Common Stock will depend solely on an increase, if any, in the market value of the Common Stock.




8





Our Common Stock May Lack Liquidity And Be Affected By Limited Trading Volume.




Our Common Stock is traded on the NASDAQ Over the Counter Bulletin Board. There can be no assurance that an active trading market for our common stock will be maintained. An absence of an active trading market could adversely affect our shareholders' ability to sell our common stock in short time periods, or possibly at all.  Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance.  In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially.  We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our stock will be stable or appreciate over time.




The Volatility Of Stock Prices May Adversely Affect The Market Price Of Our Common Stock.




The market for our Common Stock is highly volatile.  The trading price of our Common Stock could be subject to wide fluctuations in response to, among other things:




(i)
changes in market price of the various services we offer;


(ii)
quarterly variations in operating and financial results;


(iii)
changes in our revenue and revenue growth rates; and


(iv)
marketing and advertising.




Statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to the market in which we do business or related to it could result in an immediate effect in the market price of our Common Stock. In addition, the stock market has from time to time experienced extreme price and volume fluctuations which have particularly affected the market price for the securities of many companies and which often have been unrelated to the operating performance of these companies. These broad market fluctuations may adversely affect the market price of our Common Stock.




Dependence on Suppliers May Affect the Ability of the Company to Conduct Business.




The Company depends upon a number of suppliers for components of its products. Although the Company attempts to have multiple suppliers of critical components, there is an inherent risk that certain components of the Company’s products will be unavailable for prompt delivery or, in some cases, discontinued. The Company only has limited control over any third-party manufacturer as to quality controls, timeliness of production, deliveries and various other factors. Should the availability of certain components be compromised, it could force the Company to develop alternative designs using other components, which could add to the cost of goods sold and compromise delivery commitments. If the Company is unable to obtain components in a timely manner, at an acceptable cost, or at all, it may need to select new suppliers, redesign or reconstruct processes used to build its devices. In such an instance, the Company would not be able to manufacture any devices for a period of time, which could materially adversely affect its business, results from operations, and financial condition.




The Company Faces Strong Competition in Its Market, Which Could Make It Difficult for the Company to Generate Revenues.




The market for wireless products is highly competitive. The Company’s future success will depend on its ability to adapt to rapidly changing technologies, evolving industry standards, product offerings and evolving demands of the marketplace. The Company competes for customers primarily with facilities-based carriers, as well as with other non-facilities-based network operators. Some of the Company’s competitors have substantially greater resources, larger customer bases, longer operating histories and greater name recognition than the Company has:




9




·
some of the Company’s competitors provide functionalities that the Company does not. Potential customers who desire these functions may choose to obtain their equipment from the competitor that provides these additional functions; and




·
potential customers may be motivated to purchase their wireless Internet equipment from a competitor in order to maintain or enhance their respective business relationships with that competitor.




In addition, the Company’s competitors may also be better positioned to address technological and market developments or may react more favorably to technological changes. The Company competes on the basis of a number of factors, including:




·
range


·
non-line of sight capabilities


·
data rate


·
security scheme


·
simultaneous users


·
implementation cost




Competitors may develop or offer products that provide significant (technological, creative, performance, price) or other advantages over the products offered by the Company. If the Company fails to gain market share or loses existing market share, its financial condition, operating results and business could be adversely affected and the value of the investment in the Company could be reduced significantly. The Company may not have the financial resources, technical expertise, marketing, and distribution or support capabilities to compete successfully.




Uncertain Demand for Equipment and WISP Service May Cause Revenues to Fall Short of Expectations and Expenses to Be Higher Than Forecast If the Company Needs to Incur More Marketing Costs.




The Company is unable to forecast revenues with certainty because the Company may not continue to provide products in the future to meet the continually changing demands of customers. The Company is focused primarily on the WISP business. Should the Company be unable to perform under its contracts, the contracts could be terminated by the properties. Vendors who provide Internet service to the Company may have operational failures or even go out of business. The Company may not have adequate alternatives to quickly repair or replace vendors who do not meet the Company’s performance requirements. The Company is in the process of refining its sales and marketing plan for colleges, universities and other commercial applications in order to achieve the desired level of revenue, which could result in increased sales and marketing costs. In the event demand for the Company’s wireless equipment does not prove to be as great as anticipated, revenues may be lower than expected and/or sales and marketing expenses higher than anticipated, either of which may increase the amount of time and capital that the Company needs to achieve a profitable level of operations.




The Company Could Fail to Develop New Products to Compete In an Industry of Rapidly Changing Technology, Resulting In Decreased Revenues.




The Company operates in an industry with rapidly changing technology, and its success will depend on the ability to deploy new products that keep pace with technological advances. The market for broadband communications equipment is characterized by rapidly changing technology and evolving industry standards in both the Wi-Fi and Internet access industries. The Company’s technology or systems may become obsolete upon the introduction of alternative technologies. If the Company does not develop and introduce new products in a timely manner, it may lose opportunities to competing service providers, which would adversely affect business and results of operations.




There is a risk to the Company that there may be delays in initial implementation of new products. Further risks inherent in new product introductions include the uncertainty of price-performance relative to products of competitors, competitors’ responses to its new product introductions, and the desire by customers to evaluate new products for longer periods of time. Also, the Company does not have any control over the pace of technology development. There is a significant risk that rights to a technology could be acquired or be developed that is currently or is subsequently made obsolete by other technological developments. There can be no assurance that any new technology will be successfully acquired, developed, or transferred.




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The Company’s Ability to Grow Is Directly Tied to Its Ability to Attract and Retain Customers, Which Could Result In Reduced Revenues.




The Company has no way of predicting whether its marketing efforts will be successful in attracting new locations and acquiring substantial market share. Past efforts have been directed toward a limited target market of colleges, universities, hospitality properties and municipalities. If the Company’s marketing efforts fail, it may fail to attract new customers and fail to retain existing ones, which would adversely affect business and financial results.




We Are Subject To Municipal and Other Local Regulation




Municipalities may require us to obtain various permits and licenses in order to install or operate equipment in various locations where we seek to deploy Wi-Fi networks. A municipality’s decision to require Clean Energy and Power to obtain permits or licenses could delay or impede the development of our revenue model, as well as force us to incur additional costs.




Government Regulation May Affect the Company’s Ability to Conduct Business.




Internet-based communication equipment makers generally are not subject to federal fees or taxes imposed to support programs such as universal telephone service. Changes in the rules or regulations of the Federal Communications Commission or in applicable federal communications laws relating to the imposition of these fees or taxes could result in significant new operating expenses, and could negatively impact the Company’s business. Any new law or regulation, U.S. or foreign, pertaining to Internet-based communications products, or changes to the application or interpretation of existing laws, could decrease the demand for the Company’s products, increase the cost of doing business or otherwise harm the business. There are an increasing number of laws and regulations pertaining to the Internet. These laws or regulations may relate to taxation and the quality of products. Furthermore, the applicability to the Internet of existing laws governing intellectual property ownership and infringement, taxation, encryption, obscenity, libel, employment, personal privacy, export or import matters and other issues is uncertain and developing and the Company is not certain how the possible application of these laws may affect it. Some of these laws may not contemplate or address the unique issues of the Internet and related technologies. Changes in laws intended to address these issues could create uncertainty in the Internet market, which could reduce demand for the Company’s products, increase operating expenses or increase litigation costs.




The Company’s technology is deployed in license-free frequency bands and is not subject to any wireless or transmission licensing in most jurisdictions, including the United States. Continued license-free operation is dependent upon the continuation of existing government policy. While the Company is not aware of any policy changes planned or expected, there can be no assurances that government policy will not change. The manner in which legislation may be enacted and enforced cannot be precisely determined and may subject either the Company or its customers to potential liability, which in turn could have an adverse effect on the Company’s business, results of operations and financial condition.




Interference on License Free Bands May Affect the Company’s Equipment and Sales.




License-free operation of the Company’s products in the 2.4 GHz and 5 GHz bands are subordinate to certain licensed and unlicensed uses of the bands and the Company’s products must not cause harmful interference to other equipment operating in the bands and must accept interference from any of them. If the Company is unable to eliminate any such harmful interference, or should its products be unable to accept interference caused by others, the Company and its customers could be required to cease operations in the bands in the locations affected by the harmful interference.




11





Protection of Proprietary Rights May Affect the Company’s Ability to Compete.




The Company’s intellectual property combines hardware design and modifications to the radio frequency software that enables it to extend range and throughputs. The Company plans to maintain this intellectual by limiting individuals within the organization from having access to these codes and will not allow any third party to have access to the base codes or hardware configurations.




The Company’s success and ability to compete will be dependent in part on the protection of its trade name (Wi-Fi Hot Zone), and other proprietary rights. The Company intends to rely on trade secret and copyright laws to protect the intellectual property that it has developed, but there can be no assurance that such laws will provide sufficient protection, that others will not develop products that are similar or superior to the Company’s, or that third parties will not copy or otherwise obtain and use proprietary information without authorization.




The Company may rely on certain intellectual property licensed from third parties, and may be required to license additional products or services in the future, for use in the general operations of the business plan. There can be no assurance that these third party licenses will be available or will continue to be available to the Company on acceptable terms or at all. The inability to enter into and maintain any of these licenses could have a material adverse effect on the Company’s business, financial condition or operating results.




There is a risk that some of the Company’s products may infringe the proprietary rights of third parties. In addition, whether or not the Company’s products infringe on proprietary rights of third parties, infringement or invalidity claims may be asserted or prosecuted against the Company and it could incur significant expense in defending them. If any claims or actions are asserted against the Company, it may be required to modify its products or seek licenses for these intellectual property rights. The Company may not be able to modify its products or obtain licenses on commercially reasonable terms, in a timely manner or at all. The Company’s failure to do so could have a negative effect on its business and revenues.




Any Required Expenditures as a Result of Indemnification Will Result in an Increase in the Company’s Expenditures.




The Company’s bylaws include provisions to the effect that the Company may indemnify any director, officer, or employee. In addition, provisions of Nevada law provide for such indemnification, as well as for a limitation of liability of the Company’s directors and officers for monetary damages arising from a breach of their fiduciary duties. Any limitation on the liability of any director or officer, or indemnification of any director, officer, or employee, could result in substantial expenditures being made by the Company in covering any liability of such persons or in indemnifying them.




Risks Relating to Financing Arrangements.




Conversion Price Feature of Notes, Preferred Stock, and Debentures May Encourage Short Sales in the Company’s Common Stock.




The total of $3,300,000 in convertible notes originally issued to Longview Fund, LP, Longview Equity Fund, LP, and Longview International Equity Fund, LP are convertible into shares of the Company’s common stock. The conversion formula per share is at the lesser of:




·
75% of the average of the five lowest closing bid prices of the common stock as reported by the Over the Counter Bulletin Board for the 90 trading days preceding the conversion date; or


·
$17.50 or $3.50 (depending on the particular note).




12





The $69,000 convertible notes issued to Longview Fund, LP are convertible into shares of common stock. The conversion formula per share is at the lesser of:




·
$0.50 per share; or


·
50% of the lowest five-day weighted average volume price of the common stock using the volume weighted average price as reported by Bloomberg L.P. for the Company’s principal market for the 20 trading days preceding a conversion date.




The Series B preferred stock sold in February 2006 and May 2006 is convertible into shares of common stock at a conversion price per share equal to the lesser of:




·
if converted without benefit of a registration statement, 75% of the lowest close bid of the common stock as reported by the market or exchange on which the common stock is listed or quoted for trading or quotation on the date in question for the 20 trading days preceding the conversion date for each full share of convertible preferred stock held;


·
if converted with the benefit of a registration statement, 85% of the lowest close bid of the common stock as reported by the trading market for the 20 trading days preceding the conversion date for each full share of convertible preferred stock held; or


·
the face amount per share, which is $1.00.




The convertible debentures issued to Montgomery Equity Partners, LP are convertible into shares of common stock by Montgomery, at its sole option, into a price per share of either:




·
$0.3155; or


·
80% of the lowest closing bid price of common stock, for the 5 trading days immediately preceding the conversion date.




The downward pressure on the price of the common stock as the selling stockholders under both these financings convert and sell amounts of common stock could encourage short sales by investors. This could place further downward pressure on the price of the common stock. The selling stockholders could sell common stock into the market in anticipation of covering the short sale by converting their securities, which could cause the further downward pressure on the stock price. In addition, not only the sale of shares issued upon conversion or exercise of notes and related warrants, and Series B preferred stock, but also the mere perception that these sales could occur, may adversely affect the market price of the common stock.




Rules of the Securities and Exchange Commission concerning low priced securities may limit the ability of shareholders to sell their shares




Clean Energy’s common stock is subject to Rule 15g-9 of the Securities and Exchange Commission which regulates broker/dealer practices in connection with transactions in "penny stocks". Penny stocks generally are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in that security are provided by the exchange or system. The penny stock rules require a broker/dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the Commission that provides information about penny stocks and the nature and level or risks in the penny stock market. The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson in the transaction, and if the broker/dealer is the sole market-maker, the broker/dealer must disclose this fact and the broker/dealers presumed control over the market. This information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to the customer. The bid and offer quotations, and the broker/dealer and its salesperson compensation information, must be given to the customer in writing before or with the customer's confirmation. The broker/dealer must make a special suitability determination for purchasers of the securities and receive the purchaser's written agreement to the transaction prior to sale. Monthly statements must be sent by the broker/dealer to the customer disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. These disclosure requirements may reduce the level of trading activity in the market for Clean Energy's common stock and may limit the ability of investors in this offering to sell Clean Energy's common stock in the secondary market.




13


The limited public market for Clean Energy’s common stock may limit the ability of shareholders to sell their shares.




There has been only a limited public market for Clean Energy's common stock. An active trading market for Clean Energy’s stock may not develop and purchasers of the shares may not be able to resell their securities at prices equal to or greater than the price paid for these shares. The market price of Clean Energy’s common stock may decline as the result of announcements by Clean Energy or its competitors, variations in Clean Energy’s results of operations, and market conditions in the real estate and Internet industries in general.




Rules of the Securities and Exchange Commission concerning late report filings




Clean Energy and Power’s common stock is quoted on the Pink Sheets, and was previously reported on the OTC Bulletin Board. FINRA Rule 6530 provides that OTC Bulletin Board issuers who are late in filing their annual or quarterly reports three times within a 24-month period will be ineligible for quotation on the OTC Bulletin Board. The Company’s delinquent filings have also led the SEC to suspend trading in the Company’s common stock.  The Company hopes that this suspension will not become permanent.




ITEM 1B UNRESOLVED STAFF COMMENTS




In previous filings for 2007 and 2008, current management was unaware that the SEC had issued comments on August 31, 2006 in connection with a withdrawn Form SB-2 filing dated August 8, 2006.  The comments on the filing included 14 comments related to the December 31, 2005 Form 10K filing, and the March 31, 2006 Form 10Q filing.  Management is analyzing the comments and expects to respond appropriately to these comments as required by the Commission.  Several of the comments have been addressed as they relate to ongoing requirements of quarterly and yearend filings which have been corrected in accordance with the comments.




ITEM 2. PROPERTIES




The principal executive offices for the Company currently consist of approximately 1,000 square feet of office space which are located at 111 Airport Road, Unit 2, Warwick, RI  02889. The Company is a tenant at will, and pays $500 per month for rent.




At the beginning of 2008, the Company leased offices at 4136 Del Rey Avenue in Marina del Ray, California.  The Company leased this property on October 30, 2003 for a 5-year term at a monthly rent of $10,414 as of December 31, 2007.  Total rent payments for this property during 2008 were approximately $21,376.  The Company as part of its contraction sublet the location and left its offices.




ITEM 3. LEGAL PROCEEDINGS




Other than as set forth below, the Company is not a party to any material pending legal proceedings and, to the best of its knowledge, no such action by or against the Company has been threatened.




(a)  On June 15, 2005 the Company was served with a complaint from a third party in a matter entitled Leslie J. Bishop and Deborah J. Bishop v. Brian K. Corty and Candy M. Corty, Wireless Think Tank, Inc., and 5G Wireless Communications, Inc., New York Supreme Court (Chenango County). This action seeks actual damages in excess of $80,000 and punitive damages of $300,000 against a former employee for breach of a residential lease and damage to a residential property in 2001. The claim against the Company alleges that the former employee was a principal in Wireless Think Tank, Inc. (a wholly owned subsidiary of the Company) and conducted business from such residence.




14





The Company had tentatively agreed to settle this litigation; however, as of December 31, 2006 the action was still open. In April 2007, the Company was notified by its counsel that the case was settled for $7,500.




(b)  On May 8, 2006 the Company was served with a complaint in a matter entitled Brian Vallone and Anne Vallone v. 5G Wireless Communications, Inc., California Superior Court (Orange County). This action, which does not allege a damage amount, includes causes of action for breach of contract, negligent misrepresentation, and fraud, and is concerning equipment that was sold to a wireless internet provider in California for approximately $9,000 who claims that they were unable to generate fees for use and for advertising revenues.




Management believes the Company has meritorious claims and defenses to the plaintiffs’ claims and ultimately will prevail on the merits. However, this matter remains in the early stages of litigation and there can be no assurance as to the outcome of the lawsuit. Litigation is subject to inherent uncertainties, and unfavorable rulings could occur. Were unfavorable rulings to occur, there exists the possibility of a material adverse impact of money damages on the Company’s financial condition, results of operations, or liquidity of the period in which the ruling occurs, or future periods.




(c) In November 2006 the Company was served with a Notice of Motion for Summary Judgment in Lieu of Complaint filed by Longview Fund, L.P., Longview Equity Fund, L.P., and Longview International Equity Fund, L.P. (“Longview Funds”). In this Motion, filed in New York State Supreme Court on November 2, 2006, the Longview Funds allege that the Company has failed to make payments of interest due on a series of notes issued by the Company, and failed to make payments of interest due on these notes.  The Longview Funds asked the court to enter judgment in their favor for $2,644,987 allegedly due under the notes, plus accrued interest.




Summary judgment was denied by the court, and the Longview Funds were ordered to file a regular complaint, which they did in January 2007. The Company has filed an answer and counterclaims in response to the complaint, asserting numerous defenses and independent claims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and breach of fiduciary duty against the Longview Funds, and Stanley A. Hirschman and Phil E. Pearce (two former directors of the Company). The Longview Funds have filed an answer in response to the Company’s counterclaims; the two former directors have filed a motion to dismiss for lack of personal jurisdiction at a hearing on April 20, 2007).




On July 9, 2007, the Company, the two former directors, and Longview Funds entered into Settlement Agreements under which Cornell Capital Partners, L.P. acquired Longview’s interest in and to the convertible debentures and warrants held by Longview.  Simultaneously, the Company and Cornell entered into an extension agreement under which one year was added to the due date of each of the convertible debenture.  In conjunction with the Settlement Agreements, the parties filed dismissals of the complaints referenced above.




In December 2010, the Company received notice from the SEC that they would be opening an investigation into the Company’s failure to file the reports required pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934.  These filings include the following:




Filing
Year
Filed / UnfiledForm 10K
2007
FiledForm 10Q’s – 3 periods
2008
FiledForm 10K
2008
Filed herewithForm 10Q’s – 3 periods
2009
UnfiledForm 10K
2009
UnfiledForm 10Q’s – 3 periods
2010
Unfiled




15




The filing of this report is the fifth filing of delinquent reports and the Company expects to complete all past due filings within several weeks, and believes that completion of all delinquent filings will lead to the closing of the investigation by the SEC.  It is entirely possible that the SEC upon completion of their investigation could halt trading in the shares of the Company’s Common Stock, and management is making every effort through completion of the filings to prevent this outcome.  On January 27, 2011, the SEC issued a temporary cease trade order on the Company’s common shares.  While the temporary cease trade order has expired, the Company must be current in its fillings before a Broker-Dealer can file the required 15c-211 to resume trading in the Company’s stock.  The Company is attempting to resolve this matter in a timely fashion, but cannot be certain its efforts will be successful.




In January 2011, the Company, its CEO, and a former CEO, were served with a lawsuit by a holder of Preferred B Shares of the Company.  The suit alleges a number of unfounded accusations, and is the result of the Company’s refusal to convert the Preferred B Shares into Common Stock after a representative of the Preferred B shareholder threatened to “tank the price of the stock” upon conversion which had occurred on two previous occasions after conversion.




The Company believes that the suit is without merit and will seek its dismissal.  In addition, the Company believes that neither the current or former CEO acted “ex-officio” in their actions and, as is required under Nevada law and the Company’s by-laws, will represent them in seeking dismissal of the case.




The Company cannot be certain of the outcome, but believes the suit to be without merit and frivolous.




ITEM 4. RESERVED




16




PART II




ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES




The Company’s shares of common stock are traded on the Over the Counter Bulletin Board under the symbol “KEPI” (previously “FGWI”). From February 12, 2001 through November 22, 2005, the stock traded under the symbol “FGWC;” prior to February 12, 2001 the symbol was “TSMK”. The range of closing bid prices shown below is as reported by the Over the Counter Bulletin Board. The quotations shown reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions, and are shown to reflect the 1 for 350 reverse split of the common stock that occurred on November 23, 2005.




As of December 31, 2010, there were approximately 200 owners of record of the Company's common stock. The Company's common stock is currently traded on the OTC Pink Sheets under the symbol "KEPI".   Once all delinquent filings are filed, the Company should be eligible for relisting on the OTC Bulletin Board. Set forth below are the range of high and low bid quotations for the periods indicated as reported by the OTC Bulletin Board or OTC Pink Sheets. The market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions. The following table reports high and low closing prices, on a quarterly basis, for the Company's common stock:




Quarter Ending

High


LowMar. 31, 2007

$
0.1500


$
0.1000June 30, 2007

$
0.1334


$
0.0200Sept. 30, 2007

$
0.0250


$
0.0050Dec. 31, 2007

$
0.0075


$
0.0013Mar. 31, 2008

$
0.0029


$
0.0004June 30, 2008

$
0.0007


$
0.0001Sept. 30, 2008(1)

$
1.0000


$
0.2000Dec. 31, 2008

$
0.5100


$
0.1200


(1) Adjusted to reflect 1:2,000 Reverse Stock Split effective July 11, 2008




Dividend Policy




We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.





The Company has accrued a 10% dividend on the unconverted Preferred B Series shares.  The dividend on the Preferred B shares will ultimately be paid by conversion into common stock at the then market price.




17





Recent Sales of Unregistered Securities




The following sets forth certain information regarding sales of, and other transactions with respect to, our securities, which sales and other transactions were not registered pursuant to the Securities Act of 1933, during the last year. Unless otherwise indicated, no underwriters were involved in such transactions.





In January 2008, we issued an aggregate of 32,063,022 shares of common stock on the conversion of $31,100 in convertible debentures and accrued interest at an average price of $0.00097 per share.





In January 2008, we issued 5,400,000 shares of common stock upon the exchange of Preferred B shares with a value of $5,265 at an average price of $0.00098 per share.





In February 2008, we issued an aggregate of 5,000,000 shares of common stock on the conversion of $5,000 in convertible debentures and accrued interest at an average price of $0.001 per share.





In February 2008, we issued an aggregate of 6,728,975 shares of common stock for $3,364 in consulting services at an average price of $0.0005 per share.





In March 2008, we issued an aggregate of 8,665,000 shares of common stock for $4,333 in consulting services at an average price of $0.0005 per share.





In March 2008, we issued an aggregate of 22,000,000 shares of common stock on the conversion of $22,000 in convertible debentures and accrued interest at an average price of $0.001 per share.





In April 2008, we issued an aggregate of 21,525,000 shares of common stock for $10,758 in consulting services at an average price of $0.0005 per share.





In April 2008, we issued an aggregate of 7,100,000 shares of common stock on the conversion of $7,100 in convertible debentures and accrued interest at an average price of $0.001 per share.





In May 2008, we issued an aggregate of 12,700,000 shares of common stock for $2,540 in consulting services at an average price of $0.0002 per share.





In June 2008, we issued an aggregate of 13,359,224 shares of common stock for $1,344 in consulting services at an average price of $0.0001 per share.





On July 11, 2008, the Company affected a reverse stock split of 1 for 2,000





In July 2008, we issued an aggregate of 142 shares of common stock for $80 in consulting services at an average price of $0.563 per share.





In July 2008, we issued 8,000,000 shares of common stock upon the exchange of Preferred A shares with a value of $8,000 at an average price of $0.001 per share.





In November 2008, we issued 8,000,000 shares of common stock upon the exchange of Preferred A shares with a value of $8,000 at an average price of $0.001 per share.




ITEM 6. SELECTED FINANCIAL DATA




Not applicable.




ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




The financial data presented below should be read in conjunction with the more detailed financial statements and related notes, which are included elsewhere in this report. Information discussed herein, as well as elsewhere in this Annual Report on Form 10-K, includes forward-looking statements or opinions regarding future events or the future financial performance of the Company, and are subject to a number of risks and other factors which could cause the actual results to differ materially from those contained in forward-looking statements. Among such factors are general business and economic conditions, and risk factors as listed in this Form 10-K or listed from time to time in documents filed by the Company with the Securities and Exchange Commission.




18





Financial Condition




As of December 31, 2008, Clean Energy and Power had total current assets of $19,962 and total liabilities of $8,382,196 for a net working capital deficit of $8,362,234. We need to raise additional money to meet our general and administrative expenses, and we need to raise money to achieve our business objective to acquire additional properties for the installation of Wi-Fi services, or to acquire a target company or business. The additional funding will come from equity financing from the sale Clean Energy’s common stock or the issuance of convertible debt. If Clean Energy is successful in completing an equity or convertible debenture financing, existing shareholders will experience dilution of their interest in Clean Energy. Clean Energy does not have any financing arranged and Clean Energy cannot provide investors with any assurance that Clean Energy will be able to raise sufficient funding or that such funding will be available when necessary. In the absence of such financing, Clean Energy's business will fail.





Based on the nature of Clean Energy's business, management anticipates incurring operating losses in the foreseeable future. Clean Energy's future financial results are uncertain due to a number of factors, some of which are outside its control. These factors include, but are not limited to:





·
Clean Energy's ability to raise additional funding;


·
Clean Energy's ability to identify and successfully negotiate the acquisition of potential contracts with various properties or assets; and


·
If such opportunities or businesses acquired will be profitable.





Clean Energy's independent auditors have added an explanatory paragraph to their audit opinion issued in connection with our financial statements indicating substantial doubt about Clean Energy's ability to continue as a going concern. This means that there is substantial doubt whether Clean Energy can continue as an ongoing business for the next 12 months unless we obtain additional capital to pay our bills.




Overview




Beginning in late 2007, the Company focused its business development efforts on generating revenue as a Wireless Internet Service Provider (“WISP”) to hospitality properties. To a lesser degree, the Company earns revenue from installation services and extended warranties. The Company has focused on developing new solutions that better serve its customers as a value added solution provider.





The move into timeshare and hospitality changes the business model under which the company had been operating since it now provides the equipment to the timeshare or hospitality property and absorbs all costs in order to own the network and revenue streams. Although the Company continues to focus on developing and improving current solutions, both hardware and software, to create more efficient wireless networks with greater remote control and network functionality its main focus is on securing new properties in which to deploy, manage and own the equipment and revenue.





Through years of research and development, field-testing and customer support, the Company has optimized the hardware design and deployment to maximize coverage to mobile wireless devices. The Company’s offering provides strong security at both the hardware and software levels, optimizes voice, and offers data, and video links at multi-megabit speeds, and can work seamlessly in wireless networks.





In the second half of 2008 a number of customer contracts came up for renewal.  Competitors acquired a number of these locations and as a result, the Company experienced a significant decline in revenue in the second half of 2008.





19





The Company has historically experienced operating losses and negative cash flow. The Company expects that these operating losses and negative cash flows may continue through additional periods.




In June 2009 the Company, formerly 5G Wireless, Inc., was renamed Clean Energy and Power, Inc.  The Company’s focus is on the development of alternative energy projects and environmentally beneficial technologies.  These two areas cover projects such as:




Alternative Energy Projects:


·
Solar electric generation


·
Wind powered electric generation


·
Development of bio-fuel alternatives





Environmentally Beneficial Technologies:


·
Development of non-edible bio-fuel feed stocks that minimize the impact of bio-fuel consumption on the food chain


·
Development of cost effective methods to extract bio-fuels from the non-edible feed stocks to assure profitability


·
Development of or investment in waste water treatment and water purification and recovery technologies that will lead to greater conservation and cleanliness of water resources and reduction of cost to accomplish these goals.




In 2010, the Company built and deployed its first pilot solar project in the Czech Republic.  While a small project overall, its goal was to make sure that the Company would be able to work in Eastern Europe for deployment of larger projects that it was investigating.  Several of these projects are under review and the Company expects that during 2011, it will either acquire or build one or more of these projects, each of which is profitable on a standalone basis.




In November 2010, the Company announced the decision to launch a new division dedicated to the bio-fuel efforts.  Subsequently, the Company announced the signing of a Letter of Intent to acquire the assets Pacific Oil Products.  Closing of this acquisition is expected to be completed during the first quarter of 2011, however in the interim, Mr. Shen our Company’s President, is working with the management of Pacific Oil Products to develop a number of opportunities that should lead to revenue generation in the near future.




Liquidity




In 2008, Clean Energy’s internal sources of liquidity came from the sale of wireless equipment, paid installation of the equipment, and ongoing revenue from the operation and maintenance of Wi-Fi networks.





Clean Energy's external sources of liquidity will come from private placements of equity and debt financings.





There are no assurances that Clean Energy will be able to achieve further sales of its common stock, sale of convertible debentures, or any other form of additional financing. If Clean Energy is unable to achieve the financing necessary to continue its plan of operations, then the Company will not be able to continue its operations and its business will fail.




Capital Resources




As of December 31, 2008, Clean Energy had total current assets of $19,962, total liabilities of $8,382,196 and a working capital deficit of $8,362,234, as compared with a working capital deficit of $7,849,553 as of December 31, 2007. The current assets are comprised of cash of $1,375, and accounts receivable of $18,587. The liabilities consisted mainly of accounts payable and accrued expenses of $1,929,772, convertible debentures of $4,443,849 net of the note discount of $0, and derivative liability of $1,602,717.





Clean Energy’s current cash is not sufficient to finance its operations at current and planned levels for the next 12 months. Management intends to manage Clean Energy's revenue, expenses and payments to preserve cash until Clean Energy is profitable, and will also seek additional financing.  Management is also exploring the possible issuance of the Company’s stock in settlement of amounts due.




20





Revenue




Our principal sources of revenue are derived from the manufacture and sales of Wi-Fi equipment, and the sales, installation, support and operation of Wi-Fi “Hot Spots” (public wireless local area networks).  We generated $301,410 in revenue for the year ended December 31, 2008 versus $927,073 in revenue for the year ended December 31, 2007. The revenue generated was from the sale of Wi-Fi services, equipment and installation fees, network management services and maintenance services.





Revenue was generated from the following services:





2008


2007Transaction Service Fees

$
276,310


$
518,928Equipment Sales and Installation


-



390,645Managed Services


25,100



17,500Total

$
301,410


$
927,073





Cost of Services




Cost of Services consists primarily of:





2007


2007Wi-Fi Services

$
139,256


$
331,125Equipment and Installation


-



196,124Total

$
139,256


$
527,248Gross Margin

$
162,153


$
399,825




The Gross Margin for the year ended December 31, 2008 dropped significantly from the year ended December 31, 2007 as the Company lost revenue as a result of customer’s contracts coming to the end of their term and not being renewed or replaced.




Selling, General and Administrative Expenses




General and administrative expenses consist primarily of:




·
Employee compensation and related expenses (including payroll taxes and benefits for executive, administrative and operations personnel)


·
professional fees associated with deployment of our Wi-Fi networks


·
legal and accounting expense connected with various registration efforts with the SEC


·
investor relations and shareholder awareness programs


·
professional fees associated with the development and creation of marketing materials as well as attendance at trade shows


·
travel and entertainment


·
facility and office-related costs such as rent, insurance, maintenance and telephone





These costs decreased ­­­­­­approximately 89% from $3,137,830 for the year ended December 31, 2007 to $341,940 for the year ended December 31, 2008.  This decrease is primarily due to reductions associated with a significant reduction of business in the second half of 2008 coupled with the shutdown in late 2007 of the equipment manufacturing and its associated overhead.  See table below.





21





Comparison of Selling, General and Administrative Costs




For the Years EndedDecember 31, 2008


December 31, 2007Payroll & Related Expenses

$
14,277


$
856,412Sales & Marketing


185



24,902Consulting


126,505



772,602Legal


9,204



942,924Accounting


30,795



129,471Finance Fees


50,381



19,407Insurance


-



59,274Rent


21,376



128,224Telephone


26,612



68,810Travel & Entertainment


46,632



97,490Other


15,973



38,314Total

$
341,940


$
3,137,830




Depreciation and Amortization Expense




Depreciation and amortization expense of $289,303 was recorded for the year ended December 31, 2008 as compared to $655,848 for the year ended December 31, 2007, a decrease of $366,545.  The majority of the decrease is due to having written off intangible assets in 2007.




Impairment of Assets Write Down




In December 2008, the Company evaluated various assets determining that there was no impairment of the economic value of any assets during the fiscal year.




Interest Expense




Interest expense consists of interest accrued on loans and convertible notes payable, the beneficial conversion feature on convertible notes, and the recording of the fair value of warrants issued throughout the year. Interest expense decreased from $633,241 for the year ended December 31, 2007 to $424,094 for the year ended December 31, 2008 representing a decrease of $209,147. The decrease in recorded interest expense was primarily attributable to two items: (1) conversion of convertible debentures into common shares reducing the principle balance; and (2) the reduction of interest expense when the underlying convertible debentures were assigned from Longview to Taib Bank and Montgomery Securities and the interest rate on the assigned debentures was adjusted from a higher penalty rate to a normal rate of between 5% and 8%.  The accrued liquidated damages associated with the defaults in the amount of $609,191 were not acquired and were written off in 2007.




Net Loss




For the year ended December 31, 2008, we had a net loss of $939,983 as compared to a loss of $2,853,488 for the year ended December 31, 2007. The decrease in net loss of $1,913,505 was mainly due to the decrease of $2,795,890 in SG&A, a decrease of $209,147 in interest expense, a favorable adjustment in the derivative instrument liability adjustment of $280,938 offset by a decrease of $237,672 in gross margin due to a reduction in revenue.




22





Income Taxes




No provision for federal and state income taxes has been recorded as we incurred net operating losses since September 1979. Subject to statutory limitations, the net operating losses will be available to offset any future taxable income. Given our operating history, losses incurred to date and the difficulty in accurately forecasting future results, management does not believe that the realization of the potential future benefits of these carry forwards meets the criteria for recognition of a deferred tax asset required by generally accepted accounting principles. Accordingly, a full 100% valuation allowance has been provided.




Liquidity and Capital Resources




Cash and cash equivalents were $1,375 at December 31, 2008. Net cash used in operating activities of $54,749 was derived from the net loss from operations offset by depreciation of equipment, furniture and fixtures, amortization of deferred finance costs, and an increase in accrued expenses.




In January 2008, we issued an aggregate of 32,063,022 shares of common stock on the conversion of $31,100 in convertible debentures and accrued interest at an average price of $0.00097 per share.





In January 2008, we issued 5,400,000 shares of common stock upon the exchange of Preferred B shares with a value of $5,265 at an average price of $0.00098 per share.





In February 2008, we issued an aggregate of 5,000,000 shares of common stock on the conversion of $5,000 in convertible debentures and accrued interest at an average price of $0.001 per share.





In February 2008, we issued an aggregate of 6,728,975 shares of common stock for $3,364 in consulting services at an average price of $0.0005 per share.





In March 2008, we issued an aggregate of 8,665,000 shares of common stock for $4,333 in consulting services at an average price of $0.0005 per share.





In March 2008, we issued an aggregate of 22,000,000 shares of common stock on the conversion of $22,000 in convertible debentures and accrued interest at an average price of $0.001 per share.





In April 2008, we issued an aggregate of 21,525,000 shares of common stock for $10,758 in consulting services at an average price of $0.0005 per share.





In April 2008, we issued an aggregate of 7,100,000 shares of common stock on the conversion of $7,100 in convertible debentures and accrued interest at an average price of $0.001 per share.





In May 2008, we issued an aggregate of 12,700,000 shares of common stock for $2,540 in consulting services at an average price of $0.0002 per share.





In June 2008, we issued an aggregate of 13,359,224 shares of common stock for $1,344 in consulting services at an average price of $0.0001 per share.





On July 11, 2008, the Company affected a reverse stock split of 1 for 2,000





In July 2008, we issued an aggregate of 142 shares of common stock for $80 in consulting services at an average price of $0.563 per share.





In July 2008, we issued 8,000,000 shares of common stock upon the exchange of Preferred A shares with a value of $8,000 at an average price of $0.001 per share.





In November 2008, we issued 8,000,000 shares of common stock upon the exchange of Preferred A shares with a value of $8,000 at an average price of $0.001 per share.




23





Off-Balance Sheet Arrangements




Clean Energy and Power, Inc. has no off-balance sheet arrangements.




Material Agreements




The Company has contractual obligations to repay it debentures and notes payable and to make payments under its operating lease agreement.




Payments due by period:




Contractual Obligation

Total


2008


2009 and thereafterConvertible Debt1

$
4,443,849


$
4,443,849


$
-Notes payable


107,658



107,658



-Total Contractual Obligations

$
4,551,507


$
4,551,507


$
-





1 – Convertible debentures matured in 2007 and were extended one year by written agreement.  Subsequently they are all in default having matured and not been paid off or fully converted.  To date, the investors in these debentures have been willing to liquidate their debt through periodic conversions.




Federal and State Tax Liabilities




The Company had been previously notified by the Internal Revenue Service (IRS) and the California Employment Development Department that the Company owed a total of $222,335 in back payroll taxes (including penalties and interest to date).  The Company was also notified that the Internal Revenue Service had recorded a federal tax lien against the Company in the office of the Los Angeles County Recorder in the amount of $58,638 (which is a part of the total amount).





As of the statement date of December 31, 2008, the Company had made payment to the California Employment Development Department.  The Company had also made partial payment and entered into a settlement agreement with the IRS.  As of December 31, 2008, the remaining balance due to the IRS was approximately $180,000 including penalties and interest.





Subsequently, at the date of filing, the balance due to the IRS is approximately $60,000.




Critical Accounting Policies And Estimates




Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. At each balance sheet date, management evaluates its estimates, including but not limited to, those related to inventories, accrued liabilities, and the valuation allowance offsetting deferred income taxes.  We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.  The estimates and critical accounting policies that are most important in fully understanding and evaluating our financial condition and results of operations include those listed below, as well as our valuation of equity securities used in transactions and for compensation, and our revenue recognition methods.




24





Cash and Cash Equivalents – For purposes of the statement of cash flows, cash includes demand deposits, saving accounts and money market accounts. The Company considers all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents.




Impairment of long-lived assets – The Company evaluates the recoverability and carrying value of its long-lived assets at each balance sheet date, based on guidance issued in ASC 360, “Accounting for the Impairment or Disposal of Long-Lived Assets.”  Among other factors considered in such evaluation is the historical and projected operating performance of business operations, the operating environment and business strategy, competitive information and market trends.




As of December 31, 2008 the Company does not have any impaired assets.




Use of Estimates - The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date the financial statements and the reported amounts of revenue and expenditures during the reporting period. Actual results could differ from those estimates.




Accounts receivable and concentration of credit risk – Concentration of credit risk with respect to trade receivables is limited to customers dispersed across the United States of America.  While trade receivables are concentrated in the market for Wi-Fi equipment, the Company has begun to diversity its sales and has developed additional markets including its efforts to increase the direct installation of Wi-Fi networks and development of a recurring revenue stream from such locations; accordingly the Company has reduced its exposure to business and economic risk.  Although the Company does not currently foresee a concentrated credit risk associated with these trade receivables, repayment is dependent upon the financial stability of the various customers.




Allowance for doubtful accounts – The Allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts and the aging of the accounts receivable.  The Company regularly reviews the adequacy of the Company’s allowance for doubtful accounts through identification of specific receivables where it is expected that payments will not be received.  The Company also establishes an unallocated reserve that is applied to all amounts that are not specifically identified.  In determining specific receivables where collections may not have been received, the Company reviews past due receivables and gives consideration to prior collection history and changes in the customer’s overall business condition.  The allowance for doubtful accounts reflects the Company’s best estimate as of the reporting dates.




At December 31, 2008, the Company created an allowance for bad debts in the amount of $ 0.  Since our reporting was delayed long past the collection of the open receivables, the bad debts were adjusted to the actual results in financial statements filed with this 10K.




Fair Value of Financial Instruments - The Company considers its financial instruments, which are carried at cost, to approximate fair value due to their near-term maturities.




Deferred Financing Costs - The Company amortizes deferred financing costs over the life of the notes which range from one to three years.




Impact of New Accounting Standards Recent Accounting Pronouncements




In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends ASC 820 to require a number of additional disclosures regarding (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company does not expect that the adoption of ASU 2010-06 will have a material impact on the Company’s financial statements.




25





On March 5, 2010, the FASB issued authoritative guidance to clarify the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Specifically, only one form of embedded credit derivative qualifies for the exemption – one that is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. This guidance also has transition provisions, which permit entities to make a special one-time election to apply the fair value option to any investment in a beneficial interest in securitized financial assets, regardless of whether such investments contain embedded derivative features. This guidance is effective on the first day of the first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of any fiscal quarter beginning after March 5, 2010. This amendment is not expected to have a material impact on the Company’s financial statements




Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.




A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to our financial statements.




Property and Equipment - Property and equipment are recorded at cost.   Depreciation is provided by the straight - line method over the estimated useful lives of the related assets, which is estimated to be from three to seven years.




Intangibles – Intangibles represent the net value of the customer lists and contracts acquired in the acquisition of both Global Connect, Inc. doing business as Ivado.  The Company has adopted the provisions of ASC 350, “Goodwill and Other Intangible Assets” (“ASC 350”) for the determination of fair value of the intangibles carrying value.




Revenue Recognition - Revenue generated for Internet access via Wi-Fi or Internet terminals is recognized at the time the service is used.  Costs associated with providing the services are expensed as incurred.




Revenue generated from the manufacture, sale and installation of Wi-Fi equipment is recognized at time of shipment FOB to the customer.  Costs associated with the equipment sold are expensed at the time of shipment. Configuration and setup labor is expensed as incurred.




Derivative Liabilities - Pursuant to Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock", the Company accounts for its embedded conversion features and freestanding warrants pursuant to SFAS ASC 315, "Accounting for Derivative Instruments and Hedging Activities", which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives. The recognition of derivative liabilities related to the issuance of shares of common stock is applied first to the proceeds of such issuance, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as interest expense in the accompanying consolidated financial statements. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as interest expense in the accompanying consolidated financial statements. Any subsequent increase or decrease in the fair value of the derivative liabilities is recognized as an adjustment to interest expense.




26





Cautionary Statement Regarding Forward-Looking Statements




This annual report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "our company believes," "management believes" and similar language. These forward-looking statements are based on our current expectations and are subject to certain risks, uncertainties and assumptions, including those set forth in the following discussion, including under the heading "Risk Factors". Our actual results may differ materially from results anticipated in these forward-looking statements. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. In addition, our historical financial performance is not necessarily indicative of the results that may be expected in the future and we believe that such comparisons cannot be relied upon as indicators of future performance. Other important factors that could cause actual results to differ materially include the following: business conditions, the price of precious metals, ability to attract and retain personnel; the price of the Company's stock; and the risk factors set forth from time to time in the Company's SEC reports, including but not limited to its annual report on Form 10-K; its quarterly reports on Form 10-Q; and any current reports on Form 8-K. In addition, the Company disclaims any obligation to update or correct any forward-looking statements in all the Company's annual reports and SEC filings to reflect events or circumstances after the date hereof.




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Not applicable.




27





ITEM 8. FINANCIAL STATEMENTS





CLEAN ENERGY AND POWER, INC.




FINANCIAL STATEMENTS





INDEX


Page NumberREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F - 2FINANCIAL STATEMENTS:Balance Sheets
F - 3Statements of Operations
F - 4Statements of Stockholders' Deficit
F - 5Statements of Cash Flows
F - 6Notes to Financial Statements
F - 7 to 17





F - 1




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the Board of Directors and Stockholders
 Clean Energy and Power, Inc.
 Warwick, Rhode Island
 
 We have audited the accompanying balance sheets of Clean Energy and Power, Inc. (the “Company”) as of December 31, 2008 and 2007 and the related statements of operations, stockholders' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
 We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Clean Energy and Power, Inc. as of December 31, 2008 and 2007 and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
 
 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has incurred significant losses as more fully described in Note 1.  These issues raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
 /s/ Sherb & Co., LLPNew York, New YorkApril 21, 2011


F - 2


Clean Energy and Power, Inc.
 CONSOLIDATED BALANCE SHEETS
 
 ASSETS

December 31, 2008


December 31, 2007CURRENT ASSETS:Cash

$
1,375


$
12,124Accounts receivable (net of allowance of $0)


18,587



25,669TOTAL CURRENT ASSETS


19,962



37,793EQUIPMENT, net


15,180



304,483DEFERRED FINANCE COSTS


11,962



62,343$
47,104


$
404,620LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIES:Accounts payable and accrued expenses

$
1,929,772


$
1,459,222Payroll tax liability


178,700



180,000Convertible debentures due in one year (net of note discount of $0 and $327,738)


4,443,849



4,181,311Notes payable


107,658



107,658Notes payable - officers / related parties


119,500



75,500Derivative liability


1,602,717



1,883,655TOTAL CURRENT LIABILITIES


8,382,196



7,887,346STOCKHOLDERS' DEFICIT:Preferred stock - Series A, $.0001 par value; authorized shares -3,000,000 shares; 2,980,000 shares and 3,000,000 shares issued and outstanding


2,980



3,000Preferred stock - Series B, $.0001 par value; authorized shares -5,000,000 shares; 521,767 shares and 527,032 shares issued and outstanding


522



527Accrued dividend - Series B Preferred


139,718



86,627Common stock, $.0001 par value; authorized shares -5,000,000,000 shares; 69,148,824 shares and 53,069,911 shares issued and outstanding (1)


69,149



53,070Additional paid-in capital (1)


24,231,812



24,213,340Accumulated deficit


(32,779,274
)


(31,839,290
)TOTAL STOCKHOLDERS' DEFICIT


(8,335,093
)


(7,482,726
)$
47,104


$
404,620
 
 (1)  Adjusted for 1:2,000 reverse stock split on July 11, 2008


See notes to audited consolidated financial statements
 
 F - 3
 
 Clean Energy and Power, Inc.


CONSOLIDATED STATEMENTS OF OPERATIONS




For the years endedDecember 31,2008


2007REVENUES:Wi-Fi service fees

$
276,309


$
518,928Equipment sales and installation


-



390,645Managed and professional services


25,100



17,500TOTAL REVENUE


301,409



927,073COST OF SERVICES:Wi-Fi services


139,256



331,125Equipment and installation


-



196,123TOTAL COST OF SERVICES


139,256



527,248GROSS MARGIN


162,153



399,825OPERATING EXPENSES:Selling, general and administrative


341,940



3,137,830Depreciation


289,303



655,848Gain on sale of assets


-



(8,120
)TOTAL OPERATING EXPENSES


631,243



3,785,558OPERATING LOSS


(469,090
)


(3,385,733
)INTEREST EXPENSE


(424,094
)


(633,241
)FORGIVENESS OF ACCRUED INTEREST & LIQUIDATED DAMAGES


-



609,191MARK TO MARKET - DERIVATIVE INSTRUMENT LIABILITY


280,938



1,440,989AMORTIZATION OF NOTE DISCOUNT


(327,738
)


(969,694
)OTHER INCOME


-



85,000NET LOSS

$
(939,984
)

$
(2,853,488
)Undeclared dividends and deemed dividends on preferred stock


(53,092
)


(44,467
)Net loss applicable to common stockholders

$
(993,076
)

$
(2,897,955
)BASIC AND DILUTED - NET LOSS PER SHARE

$
(0.02
)

$
(0.07
)WEIGHTED AVERAGE COMMON SHARES OUTSTANDINGBasic and Diluted


58,408,024



38,997,062




F - 4




Clean Energy and Power, Inc.


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT




Preferred Stock











AccumulatedSeries A


Series B


Common Stock


Additional


Dividend on





Total($.001 par value)


($.001 par value)


($.001 par value)


Paid-In


Preferred


Accumulated


Stockholders'Shares


Amount


Shares


Amount


Shares


Amount


Capital


Stock


Deficit


DeficitBalance forward, January 1, 2007

3,000,000


$
3,000



540,000


$
540



16,165


$
16


$
22,142,388


$
42,160


$
(28,941,335
)

$
(6,753,230
)Issuance of stock for:Compensation





-







-



5,985



6



192,054







-



192,060Conversion of debentures





-







-



11,732



12



117,144







-



117,156Cash





-







-



31,772



32



1,714,593











1,714,625Reg S shares sold for cash





-







-



53,003,483



53,003



(53,003
)










-Cancellation of escrow shares





-







-



(784
)


(1
)


(15,273
)










(15,274
)Issuance of shares to escrow





-







-



31



-



-











-Dividend on Series B Preferred





-







-



-



-



-



44,467



(44,467
)


-Beneficial conversion





-







-



-



-



115,425











115,425Conversion of Preferred B stock to common





-



(12,968
)


(13
)


1,528



2



11











-Net loss





-







-



-



-



-







(2,853,488
)


(2,853,488
)Balance, December 31, 2007

3,000,000



3,000



527,032



527



53,069,912



53,070



24,213,340



86,627



(31,839,290
)


(7,482,726
)Issuance of stock for:Conversion of debentures





-







-



33,082



33



65,167







-



65,200.00Compensation





-







-



39,439



39



22,378







-



22,417.00Other





-







-







-











-



-Dividend on Series B Pfd

























(53,091
)


53,091



-



-Conversion of preferred A stock to common

(20,000
)


(20
)






-



16,000,000



16,000



(15,980
)






-



-Conversion of preferred B stock to common









(5,265
)


(5
)


2,700



3



3







-



-Adjustment for stock reverse 1:2000

















3,692



4



(4
)






-



-Net loss





-







-



-



-



-







(939,984
)


(939,984
)Balance, December 31, 2008

2,980,000


$
2,980



521,767


$
522



69,148,824


$
69,149


$
24,231,812


$
139,718



(32,779,274
)

$
(8,335,093
)


F - 5
  Clean Energy and Power, Inc.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the years Ended December 31,2008


2007CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(939,984
)

$
(2,853,488
)Adjustments to reconcile net loss to

net cash used in operating activities:Depreciation


289,303



655,848Amortization of deferred financing cost


50,381



56,899Stock issued for compensation


22,418



192,060Write off of note discounts


327,738



969,694Forgivness of accrued interest and liquidated damages


-



609,191Change in fair value of derivitive


(280,938
)


(1,440,989
)Changes in assets and liabilities:Accounts receivable


7,082



70,703Inventory


-



97,015Prepaid expenses


-



8,088Payroll taxes


(1,350
)


180,000Accounts payable and accrued expenses


470,601



(247,674
)Net cash used in operating activities


(54,749
)


(1,702,653
)CASH FLOWS FROM INVESTING ACTIVITIESAcquisition / disposition of equipment


-



(371,756
)NET CASH USED IN INVESTING ACTIVITIES


-



(371,756
)CASH FLOWS FROM FINANCING ACTIVITIES:Payments of notes payable


-



(3,266
)Proceeds of private placement


-



1,714,625Proceeds from related party


44,000



33,023Proceeds from convertible debentures


-



340,000NET CASH PROVIDED BY FINANCING ACTIVITIES


44,000



2,084,382NET (DECREASE) INCREASE IN CASH


(10,749
)


9,973CASH - BEGINNING OF YEAR


12,124



2,151CASH - END OF YEAR

$
1,375


$
12,124SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for taxes

$
1,300


$
-Cash paid for interest

$
-


$
-NON-CASH INVESTING AND FINANCING ACTIVITIES:Conversion of debentures and interest into stock

$
65,200


$
117,516Relcass of accounts payable converted to convertible debentures

$
-


$
452,550Accrued dividends on Preferred Stock

$
53,092


$
86,627


F - 6





Clean Energy and Power, Inc.


Notes to the Financial Statements


December 31, 2008 and 2007




1.
Nature of Operations and Going Concern




Clean Energy and Power, Inc. (the “Company”) was incorporated as Tesmark, Inc. in September 1979 in the State of Idaho.  In November 1998, the Company changed its state of incorporation from Idaho to Nevada and in January 2001 changed its name to 5G Wireless Communications, Inc. In March 2001, the Company acquired 5G Partners, a Canadian partnership, and changed its business to provide wireless technology systems through high speed Internet access and data transport systems. In April 2002, the Company acquired Wireless Think Tank, Inc., a developer of high-speed long distance wireless technologies. In July 2003, the Company shifted its strategy from that of a service provider to an original equipment manufacturer, or OEM. 5G Partners liquidated shortly after acquisition and Wireless Think Tank, Inc. is inactive.  On June 25, 2009, the Company changed its name to Clean Energy and Power, Inc.




On January 21, 2003, the Company’s articles of incorporation were amended to do the following: (a) increase the authorized shares of common stock of the Company to 800,000,000; (b) in the future, an increase in the authorized capital stock of the company can be approved by the board of directors without stockholder consent; and (c) in the future, a decrease in the issued and outstanding common stock of the company (a reverse split) can be approved by the board of directors without stockholder consent. Effective on September 16, 2004, the Company amended its articles of incorporation to increase the number of authorized shares of common stock from 800,000,000 to 5,000,000,000.




On October 19, 2004, the Company elected, by the filing of a Form N-54A with the Securities and Exchange Commission (“SEC”), to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (“1940 Act”). On December 31, 2004, the Company transferred certain assets and certain liabilities of the Company into 5G Wireless Solutions, Inc. in exchange for 100% of the outstanding shares of 5G Wireless Solutions, Inc.’s common stock.




On June 3, 2005, the Company’s board of directors unanimously determined that it would be in the best interests of the Company and its stockholders to seek stockholder approval on certain matters. Pursuant to a definitive Schedule 14A proxy statement filed with the SEC on September 19, 2005, the Company sought approval from the stockholders, at the annual stockholder’s meeting on October 20, 2005, for the following (among other things): (a) to terminate the Company’s status as a BDC under the 1940 Act and to file a Form N-54C with the SEC to terminate this status, and (b) to file a new registration statement with the SEC. This registration statement was filed on August 8, 2006, but was not declared effective by the SEC prior to the Company’s request to withdraw the registration statement on July 19, 2007.




On October 20, 2005, the Company’s stockholders approved (among other things) (a) the termination of the Company’s status as a BDC under the 1940 Act and the filing of a Form N-54C with the SEC, and (b) the filing of a new registration statement. Based on this approval, on October 21, 2005, the Company filed a Form N-54C with the SEC terminating its status as a BDC. Accordingly, the accompanying balance sheet as of December 31, 2006 has been presented on a single entity basis.




On November 3, 2005, the Company’s Board of Directors approved a 1 for 350 reverse stock split of the Company’s common stock. Common shares outstanding prior to and after the reverse stock split totaled 1,169,494,405 and 3,341,419 shares, respectively. The November 23, 2005 reverse stock split has been retroactively reflected in the accompanying financial statements for all periods presented. Unless otherwise indicated, all references to outstanding common shares, including common shares to be issued upon the exercise of warrants and convertible notes payable, refer to post-split shares.




On January 19, 2006, 5G Wireless Solutions, Inc. was merged with and into the Company.




F - 7





Clean Energy and Power, Inc.
 Notes to the Financial Statements
 December 31, 2008 and 2007




Nature of Operations and Going Concern (continued)




On October 4, 2006, the Company acquired certain assets of Global Connect, Inc. (“GCI”). The assets acquired from GCI were in the business of providing wireless Internet access to hospitality property patrons.




On July 11, 2008, the Company’s Board of Directors approved a 1 for 2,000 reverse stock split of the Company’s common stock.  Common shares outstanding prior to and after the reverse stock split totaled 320,401,433 and 53,137,297 shares, respectively. The July 11, 2008 reverse stock split has been retroactively reflected in the accompanying financial statements for all periods presented. Unless otherwise indicated, all references to outstanding common shares, including common shares to be issued upon the exercise of warrants and convertible notes payable, refer to post-split shares.




In June 2009 the Company, in conjunction with its name change to Clean Energy and Power, Inc. re-focused its business on the development of alternative energy projects and environmentally beneficial technologies.




The accompanying financial statements have been prepared on the basis of accounting principles applicable to a going concern; accordingly, they do not give effect to adjustment that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and retire its liabilities in other than the normal course of business and at amounts different from those in the accompanying financial statements. As shown in the accompanying financial statements, the Company incurred a net loss of $939,983 for the year ended December 31, 2008, and has an accumulated deficit of $32,779,274. Management plans to raise cash from public or private debt or equity financing, on an as needed basis to generate revenues from Wi-Fi Operations, and in the longer term through a shift to alternative energy projects. The Company's ability to continue as a going concern is dependent upon achieving profitable operations and/or upon obtaining additional financing. The outcome of these matters cannot be predicted at this time.




2.
Significant Accounting Policies


a)
Accounting Principles and Basis of Presentation







These financial statements have been prepared in accordance with U.S. generally accepted accounting principles for financial information.




F - 8





Clean Energy and Power, Inc.
 Notes to the Financial Statements
 December 31, 2008 and 2007


Significant Accounting Policies(continued)


b)
Revenue Recognition




Revenue generated for Internet access via Wi-Fi or Internet terminals is recognized at the time the service is used.  Costs associated with providing the services are expensed as incurred.




Revenue generated from the manufacture, sale and installation of Wi-Fi equipment is recognized at time of shipment FOB to the customer.  Costs associated with the equipment sold are expensed at the time of shipment. Configuration and setup labor is expensed as incurred.


c)
Foreign Currency Translation







The Company's functional and reporting currency is the U.S. Dollar. All transactions initiated in foreign currencies are translated into U.S. dollars in accordance with guidelines issued by the FASB as follows:




i)      monetary assets and liabilities at the rate of exchange in effect at the balance sheet date;




ii)     non-monetary assets at historical rates; and




iii)    revenue and expense items at the average rate of exchange prevailing during the period.




Gains and losses from foreign currency transactions are included in the statement of operations.


d)
Basic and Diluted Loss Per Share







Basic loss per share is computed by dividing the net loss by the weighted average number of shares outstanding during the period. Diluted loss per share is the same as basic loss per share, as no common stock equivalents at December 31, 2008 and 2007 would be dilutive.




As of December 31, 2008 and 2007, the Company has respectively excluded 42,616,666 and 42,616,666 warrants from the calculation.


e)
Fair Value of Financial Instruments







As defined in FASB ASC Topic No. 820-10 (formerly SFAS 157), fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC Topic No. 820 – 10 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the following categories:




Level 1:
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.Level 2:
Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that the Company values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace.  F - 9
  Clean Energy and Power, Inc.
 Notes to the Financial Statements
 December 31, 2008 and 2007
 
 Fair Value of Financial Instruments (continued)
  Level 3:
Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity). The Company’s valuation models are primarily industry standard models.  Level 3 instruments include derivative warrant instruments.  The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 1 or Level 2.




As required by FASB ASC Topic No. 820 – 10 (formerly SFAS 157), financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The estimated fair value of the derivative liability was calculated using the Black-Scholes option pricing model.




The following table sets forth, by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2008 and December 31, 2007:




Fair Value Measurements at December 31,Description

(Level 1)


(Level 2)


(Level 3)


Total Carrying Value2008


2007


2008


2007Derivative liability

$
-


$
-


$
1,602,717


$
1,883,655


$
1,602,717


$
1,883,655Total

$
-


$
-


$
1,602,717


$
1,883,655


$
1,602,717


$
1,883,655




f)
Income Taxes







Income taxes are accounted for using the liability method of accounting. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax loss and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides an allowance against deferred tax assets for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not.




Effective December 1, 2007, the Company adopted guidelines issued by the FASB, which requires that the Company recognize in the financial statements, the impact of a tax position if that position is more likely than not of being sustained on examination by taxation authorities, based on the technical merits of the position. The adoption of this guideline had no impact on the Company's financial statements.




F - 10





Clean Energy and Power, Inc.


Notes to the Financial Statements


December 31, 2008 and 2007


g)
Cash and Cash Equivalents







For purposes of the statement of cash flows, cash includes demand deposits, saving accounts and money market accounts. The Company considers all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents.


h)
Use of Estimates







The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those reported.




i)
Impairment of Long-Lived Assets




The Company reviews the carrying value of long-lived assets or asset groups to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset, or a significant decline in the observable market value of an asset, among others. If such facts indicate a potential impairment, the Company would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, the Company will estimate the fair value of the asset group using appropriate valuation methodologies which would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset groups carrying amount and its estimated fair value.


j)
Recently Adopted Accounting Pronouncements





In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends ASC 820 to require a number of additional disclosures regarding (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company does not expect that the adoption of ASU 2010-06 will have a material impact on the Company’s financial statements.




On March 5, 2010, the FASB issued authoritative guidance to clarify the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Specifically, only one form of embedded credit derivative qualifies for the exemption – one that is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. This guidance also has transition provisions, which permit entities to make a special one-time election to apply the fair





F - 11




Clean Energy and Power, Inc.


Notes to the Financial Statements


December 31, 2008 and 2007




Recently Adopted Accounting Pronouncements(continued)




value option to any investment in a beneficial interest in securitized financial assets, regardless of whether such investments contain embedded derivative features.  This guidance is effective on the first day of the first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of any fiscal quarter beginning after March 5, 2010. This amendment is not expected to have a material impact on the Company’s financial statements.




Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.




A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to our financial statements.


k)
Reclassifications


3.
Capital Stock
  a)
Authorized


Authorized capital stock consists of:




5,000,000,000 common shares with a par value of $0.001 per share; and


3,000,000 preferred “A” shares with a par value of $0.001 per share; and


5,000,000 preferred “B” shares with a par value of $0.001 per share




b)
Convertible Debentures




The Company has issued convertible debentures to a number of parties.  The debentures are convertible at variable rates.  The discounts range from 20% to 35% of the market price at the time of conversion.  As a result, the Company assessed the terms of the various convertible debentures in accordance with ASC Topic No. 815 – 40,  Derivatives and Hedging - Contracts in Entity’s Own Stock  (formerly Emerging Issues Task Force Issue No. 07-5,  Determining Whether an Instrument or Embedded Feature is Indexed to an Entity’s Own Stock ) and determined that the underlying embedded feature conversion option is indexed to the Company’s common stock and are therefore a derivative which should be valued at fair value at the date of issuance and at each subsequent reporting period.




As each debenture has a separate issuance date, the table below summarizes the valuations at the valuation dates of December 31, 2008 and 2007 respectively.  The revaluation of the derivatives as of December 31, 2008 resulted in a derivative liability of $1,602,717.  The change in fair value during the period of December 31, 2007 to December 31, 2008 resulted in a recorded gain on fair value of derivative liability of $280,938 in the accompanying consolidated statement of operations.  For the twelve months ended December 31, 2008, the Company also amortized the discount on the note for $327,738.




F - 12




Clean Energy and Power, Inc.


Notes to the Financial Statements


December 31, 2008 and 2007




Convertible Debentures(continued)




The fair value of the derivative liability was determined using the valuation model with the following assumptions:




December 31, 2008


December 31,2007Common stock issuable upon conversion


37,492,805



3,363,354,724Estimated market value of common stock on measurement date

$
5,623,921


$
260,204Exercise price

$
0.1165


$
0.0010Risk free interest rate (1)


3.84
%


3.94
%Term in years (3)

Demand


0.50 yearsExpected volatility


137
%


155
%Expected dividends (2)


0
%


0
%
  (1)
The risk-free interest rate was estimated by management using the U.S. Treasury zero-coupon yield over the contractual term of the note.(2)
Management estimated the dividend yield at 0% based upon its expectation that there will not be earnings available to pay dividends in the near term.(3)
All debentures have matured and are in default therefore due on demand.




c)
Share Issuances




In January 2008, we issued an aggregate of 32,063,022 shares of common stock on the conversion of $31,100 in convertible debentures and accrued interest at an average price of $0.00097 per share.




In January 2008, we issued 5,400,000 shares of common stock upon the exchange of Preferred B shares with a value of $5,265 at an average price of $0.00098 per share.




In February 2008, we issued an aggregate of 5,000,000 shares of common stock on the conversion of $5,000 in convertible debentures and accrued interest at an average price of $0.001 per share.




In February 2008, we issued an aggregate of 6,728,975 shares of common stock for $3,364 in consulting services at an average price of $0.0005 per share.




In March 2008, we issued an aggregate of 8,665,000 shares of common stock for $4,333 in consulting services at an average price of $0.0005 per share.




In March 2008, we issued an aggregate of 22,000,000 shares of common stock on the conversion of $22,000 in convertible debentures and accrued interest at an average price of $0.001 per share.




In April 2008, we issued an aggregate of 21,525,000 shares of common stock for $10,758 in consulting services at an average price of $0.0005 per share.




In April 2008, we issued an aggregate of 7,100,000 shares of common stock on the conversion of $7,100 in convertible debentures and accrued interest at an average price of $0.001 per share.




In May 2008, we issued an aggregate of 12,700,000 shares of common stock for $2,540 in consulting services at an average price of $0.0002 per share.




In June 2008, we issued an aggregate of 13,359,224 shares of common stock for $1,344 in consulting services at an average price of $0.0001 per share.




On July 11, 2008, the Company affected a reverse stock split of 1 for 2,000, which is reflected retro-actively in these financial statements.




In July 2008, we issued an aggregate of 142 shares of common stock for $80 in consulting services at an average price of $0.563 per share.




F - 13




Clean Energy and Power, Inc.


Notes to the Financial Statements


December 31, 2008 and 2007




Share Issuances(continued)




In July 2008, we issued 8,000,000 shares of common stock upon the exchange of Preferred A shares with a value of $8,000 at an average price of $0.001 per share.




In November 2008, we issued 8,000,000 shares of common stock upon the exchange of Preferred A shares with a value of $8,000 at an average price of $0.001 per share.


5.
Income Taxes
  A reconciliation of income taxes at statutory rates with the reported income taxes is as follows:
 
 Period ended December 31,

2008


2007Income tax benefit at Federal statutory rate of 35%

$
329,000


$
1,000,000Income tax benefit, net of Federal effect


47,000



142,000Permanent differences (primarily stock-based compensation)


(22,000
)


(631,000
)Change in valuation allowance


(354,000
)


(511,000
)$
-


$
-
  The significant components of the Company's deferred income tax assets are as follows:
 
 As at December 31,

2008


2007Operating losses carried forward

$
12,720,000


$
11,465,000Valuation allowance


(12,720,000
)


(11,465000
)$
-


$
-
  At December 31, 2008 the Company has available net operating losses of approximately $12,720,000 which may be carried forward to apply against future taxable income. These losses will expire in 2030. Deferred tax assets related to these losses have not been recorded due to uncertainty regarding their utilization.


6.
Legal




(a)  On June 15, 2005 the Company was served with a complaint from a third party in a matter entitled Leslie J. Bishop and Deborah J. Bishop v. Brian K. Corty and Candy M. Corty, Wireless Think Tank, Inc., and 5G Wireless Communications, Inc., New York Supreme Court (Chenango County). This action seeks actual damages in excess of $80,000 and punitive damages of $300,000 against a former employee for breach of a residential lease and damage to a residential property in 2001. The claim against the Company alleges that the former employee was a principal in Wireless Think Tank, Inc. (a wholly owned subsidiary of the Company) and conducted business from such residence.




The Company had tentatively agreed to settle this litigation; however, as of December 31, 2006 the action was still open. In April 2007, the Company was notified by its counsel that the case was settled for $7,500.




(b)  On May 8, 2006 the Company was served with a complaint in a matter entitled Brian Vallone and Anne Vallone v. 5G Wireless Communications, Inc., California Superior Court (Orange County). This action, which does not allege a damage amount, includes causes of action for breach of contract, negligent misrepresentation, and fraud, and is concerning equipment that was sold to a wireless internet provider in California for approximately $9,000 who claims that they were unable to generate fees for use and for advertising revenues.




F - 14




Clean Energy and Power, Inc.


Notes to the Financial Statements


December 31, 2008 and 2007




Legal (continued)




Management believes the Company has meritorious claims and defenses to the plaintiffs’ claims and ultimately will prevail on the merits. However, this matter remains in the early stages of litigation and there can be no assurance as to the outcome of the lawsuit. Litigation is subject to inherent uncertainties, and unfavorable rulings could occur. Were unfavorable rulings to occur, there exists the possibility of a material adverse impact of money damages on the Company’s financial condition, results of operations, or liquidity of the period in which the ruling occurs, or future periods.




(c) In November 2006 the Company was served with a Notice of Motion for Summary Judgment in Lieu of Complaint filed by Longview Fund, L.P., Longview Equity Fund, L.P., and Longview International Equity Fund, L.P. (“Longview Funds”). In this Motion, filed in New York State Supreme Court on November 2, 2006, the Longview Funds allege that the Company has failed to make payments of interest due on a series of notes issued by the Company, and failed to make payments of interest due on these notes.  The Longview Funds asked the court to enter judgment in their favor for $2,644,987 allegedly due under the notes, plus accrued interest.




Summary judgment was denied by the court, and the Longview Funds were ordered to file a regular complaint, which they did in January 2007. The Company has filed an answer and counterclaims in response to the complaint, asserting numerous defenses and independent claims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and breach of fiduciary duty against the Longview Funds, and Stanley A. Hirschman and Phil E. Pearce (two former directors of the Company). The Longview Funds have filed an answer in response to the Company’s counterclaims; the two former directors have filed a motion to dismiss for lack of personal jurisdiction at a hearing on April 20, 2007.




On July 9, 2007, the Company, the two former directors, and Longview Funds entered into Settlement Agreements under which Cornell Capital Partners, L.P. acquired Longview’s interest in and to the convertible debentures and warrants held by Longview.  Simultaneously, the Company and Cornell entered into an extension agreement under which one year was added to the due date of each of the convertible debenture.  In conjunction with the Settlement Agreements, the parties filed dismissals of the complaints referenced above.




In December 2010, the Company received notice from the SEC that they would be opening an investigation into the Company’s failure to file the reports required pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934.  These filings included the following:




Filing
Year
Filed / UnfiledForm 10K
2007
FiledForm 10Q’s – 3 periods
2008
FiledForm 10K
2008
Filed herewithForm 10Q’s – 3 periods
2009
UnfiledForm 10K
2009
UnfiledForm 10Q’s – 3 periods
2010
Unfiled




The Company expects to complete the remaining past due filings within several weeks, and believes that completion of all delinquent filings will lead to the closing of the investigation by the SEC.  It is entirely possible that the SEC upon completion of their investigation could halt trading in the shares of the Company’s Common Stock, and management is making every effort through completion of the filings to prevent this outcome.  On January 27, 2011, the SEC issued a temporary cease trade order on the Company’s common shares.  While the temporary cease trade order has expired, the




F - 15




Clean Energy and Power, Inc.


Notes to the Financial Statements


December 31, 2008 and 2007




Legal (continued)




Company must be current in its fillings before a Broker-Dealer can file the required 15c-211 to resume trading in the Company’s stock.  The Company is attempting to resolve this matter in a timely fashion, but cannot be certain its efforts will be successful.




In January 2011, the Company, its CEO, and a former CEO, were served with a lawsuit by a holder of Preferred B Shares of the Company.  The suit alleges a number of unfounded accusations, and is the result of the Company’s refusal to convert the Preferred B Shares into Common Stock after a representative of the holder threatened to “tank the price of the stock” upon conversion.




The Company believes that the suit is without merit and will seek its dismissal for lack of venue.  In addition, the Company believes that neither the current or former CEO acted “ex-officio” in their actions and, as is required under Nevada law and the Company’s by-laws, will represent them in seeking dismissal of the case.




The Company cannot be certain of the outcome, but believes the suit to be without merit and frivolous.




7.
Commitments and Contingencies




The Company has contractual obligations to repay it debentures and notes payable and to make payments under its operating lease agreement.




Payments due by period:




Contractual Obligation

Total


2009


2010 and thereafterConvertible Debt1

$
4,443,849


$
4,443,849


$
-Notes payable


107,658



107,658



-Total Contractual Obligations

$
4,551,507


$
4,551,507


$
-





1 – Convertible debentures matured in 2007 and were extended one year by written agreement.  Subsequently they are all in default having matured and not been paid off or converted.




The Company has not reserved for any contingency in connection with the unresolved comments made by the SEC in their comment letter of August 31, 2006 as the comments appear to cover disclosure and reporting information requiring explanation or clarification in the filings.




8.
Related Party Transactions




From time to time, our former CEO, and other officers lent money to the Company.  At December 31, 2008 the balance owed was $119,500.  Of this balance, only $40,000 bears interest at 10% per annum.  The remaining balance bears no interest and all loans are due on demand.




9.
Warrants




From time to time, the Company has issued warrants in connection with the issuance of certain financial instruments.




During the year ended December 31, 2008, the Company issued no warrants.


During the year ended December 31, 2007, the Company issued 40,000,000 warrants at an exercise price of $0.001 per share.




At December 31, 2008, the Company had a total of 281,632,833 warrants outstanding with a weighted average exercise price of $0.13 per share.




F - 16





Clean Energy and Power, Inc.


Notes to the Financial Statements


December 31, 2008 and 2007




Warrants(continued)
  The following warrants were open at December 31, 2008 and have expired without being exercised:
 
 Date of issuance

Expiration Date

Number of Warrants


Exercise Price


Total Face Value9/20/2004

9/19/2009


13,000,000


$
0.150


$
1,950,000.009/20/2004

9/19/2009


93,333,333


$
0.150


$
13,999,999.959/20/2004

9/19/2009


43,333,333


$
0.150


$
6,499,999.953/22/2005

3/21/2010


61,224,499


$
0.150


$
9,183,674.857/30/2005

7/19/2010


28,125,000


$
0.150


$
4,218,750.004/15/2006

4/14/2011


216,668


$
0.150


$
32,500.206/13/2006

6/12/2011


800,000


$
0.150


$
120,000.006/13/2006

6/12/2011


800,000


$
0.350


$
280,000.006/13/2006

6/12/2011


800,000


$
0.350


$
280,000.009/18/2007

9/18/2012


40,000,000


$
0.001


$
40,000.00Total


281,632,833






$
36,604,925
  At the time of this filing, all warrants have expired unexercised with the exception of the following:
 
 Date of issuance

Expiration Date

Number of Warrants


Exercise Price


Total Face Value6/13/2006

6/12/2011


800,000


$
0.150


$
120,000.006/13/2006

6/12/2011


1,600,000


$
0.350


$
560.000.009/18/2007

9/18/2012


40,000,000


$
0.001


$
40,000.00Total


42,400,000






$
720,000.00
  10.
Subsequent Events
 In accordance with ASC 855, “Subsequent Events” the Company evaluated subsequent events after the balance sheet date of December 31, 2008 which is the date of the financial statements issued herewith.  Only significant Company events are listed here.
  ·
On June 25, 2009, the Company changed its name to Clean Energy and Power, Inc.
 ·
On August 31, 2009, the Company amended its Articles to increase the number of preferred shares to 50,000,000 shares with a par value of $0.001 per share
 ·
On October 16, 2009, the Company appointed Erwin Vahlsing, Jr. to the board of directors and as Chief Executive Officer
 ·
On October 16, 2009, Bo Linton resigned as an officer and director of the Company
 ·
On February 5, 2010, the board of directors appointed Dennis Shen as President
 ·
On April 23, 2010, the Company effected a reverse stock split of 1 for 1,000
 ·
On January 27, 2011, the SEC issued a temporary cease trade order on the Company’s common shares.  While the temporary cease trade order has expired, the Company must be current in its fillings before a Broker-Dealer can file the required 15c-211 to resume trading in the Company’s stock.  The Company is attempting to resolve this matter in a timely fashion, but cannot be certain its efforts will be successful.  To date, the Company has filed five of the delinquent filings (including this Form 10K).  There are seven additional filings to be completed.


F - 17




ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE




(a)  Effective on July 17, 2009, the independent accountant who was previously engaged as the principal accountant to audit the Company’s financial statements, Squar, Milner, Peterson, Miranda & Williamson, LLP, was dismissed.  This dismissal was approved by the Company’s Board of Directors.  This firm audited the Company’s financial statements for the fiscal years ended December 31, 2004, 2005, and 2006.  This accountant’s report on these financial statements was modified as to uncertainty that the Company will continue as a going concern; other than this, this accountant’s report on the financial statements for those years neither contained an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to audit scope or accounting principles.




During the Company’s two most recent fiscal years and the subsequent interim period preceding such dismissal, there were no disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.  In addition, there were no “reportable events” as described in Item 304(a)(1)(iv)(B)1 through 3 of Regulation S-K that occurred within the Company’s most recent fiscal year and the subsequent interim period preceding the former accountant's dismissal.




(b)  Effective on July 17, 2009, the firm of Sherb & Co., LLP was engaged to serve as the new independent registered public accounting firm to audit the Company’s financial statements.  The decision to retain this firm was approved by the Company’s Board of Directors.  During the Company’s two most recent fiscal years, and the subsequent interim period prior to engaging this firm, neither the Company (nor someone on its behalf) consulted the newly engaged firm regarding any matters involving (i) the application of accounting principles to a specified transaction, (ii) the type of opinion that might be rendered on the Company’s financial statements, (iii) accounting, auditing or financial reporting issues, or (iv) reportable events.




(c)  On November 30, 2006, the Company was informed by Squar, Milner, Miranda & Williamson, LLP (formerly known as Squar, Milner, Reehl & Williamson, LLP) (“Squar Milner”), the Company’s independent registered public accounting firm, that it had consummated a merger with Peterson & Co., LLP of San Diego, California (which is also registered with the Public Company Accounting Oversight Board). As this is viewed as a separate legal entity, the Company terminated its accounting arrangement with the former firm. The name of the post-merger firm is Squar, Milner, Peterson, Miranda & Williamson, LLP. The decision to change principal accountants was approved by the Company’s Audit Committee and subsequently approved by the Board of Directors.




Squar Milner audited the Company’s financial statements for the fiscal years ended December 31, 2005 and 2004. This firm’s report on these financial statements was modified as to uncertainty that the Company will continue as a going concern; other than this, the accountant’s report on the financial statements for those periods neither contained an adverse opinion or a disclaimer of opinion, nor was qualified or modified as to uncertainty, audit scope, or accounting principles.




During the fiscal years ended December 31, 2004 and 2003, and the subsequent interim period preceding such change, there were no disagreements with Squar Milner on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. In addition, there were no “reportable events” as described in Item 304(a)(1)(iv)(B)1 through 3 of Regulation S-B that occurred during the fiscal years ended December 31, 2004 and 2003, and the subsequent interim period preceding such change.




(d) On November 30, 2006, the Company engaged Squar, Milner, Peterson, Miranda & Williamson, LLP, as successor to Squar Milner, as its independent registered public accounting firm to audit the Company’s financial statements. During the fiscal years ended December 31, 2005 and 2004, and the subsequent interim period prior to engaging this firm, neither the Company (nor someone on its behalf) consulted the newly engaged accountant regarding any matter.




45




ITEM 9A. CONTROLS AND PROCEDURES




Disclosure Controls and Procedures





Under the supervision and with the participation of the Company's management, including the Company's principal executive officer and principal financial officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) and Rule 15d-15(e) as of the end of the fiscal year covered by this annual report (the “Evaluation Date”).   The disclosure controls and procedures are intended to insure that the information relating to us, required to be disclosed in our Securities and Exchange Commission (SEC) reports (i) is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer chief financial officer, or persons performing similar functions as appropriate to allow timely decisions regarding required disclosure.
 
 Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
 
 Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2008 based on the framework established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).”
 
 Based on management’s assessment, management concluded that, as of December 31, 2008, the Company’s internal control over financial reporting was not effective due to two material weaknesses.
 
 More specifically, the material weaknesses are:
 
 1.
Lack of sufficient personnel with appropriate knowledge, experience and training in US GAAP resulting in a lack of sufficient analysis and documentation of the application of US GAAP to transactions, most especially the timely preparation of the required reporting in accordance with SEC rules.
 
 2.
Due to the Company’s small size and limited financial resources, there was only one officer during the period of this report involved in financial reporting.  As a result, there has been no segregation of duties within the accounting function.  This lack of segregation of duties represents a material weakness.
 
 In efforts to address these material weaknesses, the Company added the current CFO in late 2009.  His efforts are focused on addressing the delinquent filings and brining all reporting of the Company current.  Subsequently, the Company added its current President who also assists in the oversight of all financial expenditures.  The Company is also planning to add personnel to the internal accounting operation as resources permit.
 
 This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.
 
 ITEM 9B. OTHER INFORMATION




None.




46




PART III




ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE




Executive Officers and Directors




The following table sets forth the directors and executive officers of our Company, their ages and positions with our Company. Pursuant to our bylaws, our directors are elected at our annual meeting of stockholders and each director holds office until his successor is elected and qualified. Officers are elected by our Board of Directors and hold office until an officer's successor has been duly appointed and qualified unless an officer sooner dies, resigns or is removed by the Board.




There are no arrangements or understandings’ regarding the length of time a director of our company is to serve in such a capacity.




Due to changes in the executive officers since the date this filing was due, below are both the current and former officers of record at the time this 10K was due.




The following table sets forth information about our executive officers and directors as of April 12, 2011:




Name and Address

Age

PositionErwin Vahlsing, Jr.

54

Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and DirectorDennis Shen

43

President, and Director




Erwin Vahlsing, Jr. has served as our Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and Director since October 2009.  Mr. Vahlsing is a financial executive with domestic and international experience managing finance departments in the manufacturing, service, and construction industries. Mr. Vahlsing has acted as Chief Financial Officer to ICOA, Inc. since 2001. He acted as a Consultant to E&M Advertising for SEC compliance and due diligence. Mr. Vahlsing received an MBA from the University of Rhode Island in 1986 and a Bachelors degree in Accounting from the University of Connecticut.




Dennis Shen has served as our President and a Director since February 2010.  Mr. Shen is the former Chief Operating officer of Biocentric Energy Holdings, Inc. (OTCPK:BEHL), and lead developer of the Algae Bioreactor.  He has significant experience with a number of alternative and clean energy technologies, and a solid understanding of the financing, cash flow, and budgeting for development of such opportunities.




From July 27, 2008 to October 16, 2009 the following individuals held the positions of Chief Executive Officer and Director:




April 4, 2008 to December 15, 2008
James R. Clarke





Mr. Clarke, age 63, has had varied experience in sales and marketing, strategic planning, start-ups, and turnaround management for high technology products and services.  He has directed several start-up companies from initial funding through setting up manufacturing and international distribution.  From 1993 to 2005, Mr. Clarke served as a partner of Delphi Group, Inc., a corporate development business that advised clients with regard to the interaction of the public financing community with the securities industry.  He retired in 2005.  From March 2008 to the present, he has served as a director of BPIL International, a shell company, and corporate secretary of DM Products, a company that develops, finances, produces, markets and distributes unique and innovative consumer products through infomercials, media marketing and other distribution channels.





Mr. Clarke has a Bachelor of Science degree from Oklahoma City University and a Master of Science degree (marketing) from Oklahoma State University.





47




December 15, 2008 to October 16, 2009
Bo Linton





Mr. Linton, age 38, founded International Capital Group, Inc. in 1998, a successful mergers and acquisitions firm.  Under his leadership as president and CEO, this company advised on numerous mergers and acquisitions with private and publicly traded companies.  In 2001 Mr. Linton left his previous position to found Berserker Entertainment, Inc.  Mr. Linton served as Chairman of the Board for this production, distribution, and HD post-production facility until the end of 2004.  From March 2005 to October 2005, he served as the president of Seamless Skyyfi, Inc., a wholly owned subsidiary of the public company Seamless Wi-Fi, Inc.  In November 2005, Mr. Linton left his last position and founded the company Carbon Jungle LLC and served as President and CEO of this environmental company.  After leaving this position, he served as president and a Director of MagneGas Corporation, a reporting company in the waste to fuel industry, from March 2007 to July 2008.





Mr. Linton received his Bachelor's degree from Louisiana State University in the spring of 1994. Some of his studies included: business law, economics, finance, environmental science, theater, real estate, and speech.




The following table sets forth information about our executive officers and directors as of December 31, 2008 the period covered by this filing and at the time this filing was due.




Name and Address

Age

PositionBo Linton

38

Chief Executive Officer, President, and DirectorJames R. Clarke – Resigned

63

Chief Executive Officer, President, and DirectorJerry Dix – Resigned

California

63

Chief Executive Officer, President, and DirectorDon Bodeuwyn  - Resigned

California

44

Executive Vice President, Secretary, Treasurer, and Director




On December 15, 2008, Mr. James R. Clarke resigned as CEO, President, and Director of the Company.




On July 27, 2008, Mr. Jerry Dix, resigned as a CEO, President, and Director of the Company.




On July 27, 2008, Mr. Don Boudewyn resigned as Executive Vice President, Secretary, Treasurer and Director of the Company.




Jerry Dix has served as our President, Chief Executive Officer and Director since January 2002.  Mr. Dix has been in the wireless industry since 1994 and was a pioneer in the pre-paid cellular industry with Globalwise Communications and Prepaid Technologies. In 1995, Dix and his partner launched PrePay Technologies, a wholly owned subsidiary of Globalwise Communications. PrePay Technologies was developed with proprietary technology that enabled PrePay Technology to deliver a prepaid wireless platform as a re-seller for AirTouch in San Diego, California. In 1996, Mr. Dix helped found Satellite Control Technologies, a publicly traded company with patented one and two-way paging technologies, where he worked until being named president and chief executive officer of the Company in January 2002. Mr. Dix helped develop and launch the AlphaTrak locating and control system that utilizes this patented technology combined with GPS technology to locate assets in North America.




Don Boudewynhas served as our Executive Vice President, Secretary, Treasurer, and Director since January 2002. He has held various positions with the Company, including president and vice president of international sales since founding the Company in 2000. From October 1998 to October 2000, Mr. Boudewyn served as a major account executive and business development manager for Celterra Vancouver Ltd., where he was responsible for sales, marketing and business development strategies for a national fiber optic network. Prior to his experience in the communications arena, Mr. Boudewyn worked in real estate from July 1986 to October 1998. He graduated from the British Columbia Institute of Technology with a Bachelor of Arts degree in sales and marketing management. He is also a graduate of the UCLA Director Training & Certification Program.




48





Committees of the Board of Directors




Audit Committee.




The Company does not currently have an audit committee.  The Board acts in that capacity.  In 2007, the Company’s audit committee consisted of Messrs. Boudewyn and McCormac, neither of which is an independent director. The audit committee has adopted a written charter. Mr. McCormac has been designated the Audit Committee’s “financial expert” in compliance with Item 407(d)(5) of Regulation S-B.  Subsequent to Mr. McCormac’s resignation, the audit committee ceased to operate.




The primary responsibility of the Audit Committee is to oversee the Company’s financial reporting process on behalf of the Company’s board of directors and report the result of their activities to the board. Such responsibilities include, but are limited to, the selection, and if necessary the replacement, of the Company’s independent auditors, review and discuss with such independent auditors (i) the overall scope and plans for the audit, (ii) the adequacy and effectiveness of the accounting and financial controls, including the Company’s system to monitor and manage business risks, and legal and ethical programs, and (iii) the results of the annual audit, including the financial statements to be included in the Company’s annual report on Form 10-KSB.




The Company’s policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the audit committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The audit committee may also pre-approve particular services on a case-by-case basis.




Code of Ethics




We have adopted a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Controller and persons performing similar functions within the Company. A copy of the code of ethics is filed with the SEC as Exhibit 14 to the Company's Form 10K for the year ending December 31, 2006.  If we make any substantive amendments to the Code of Ethics or grant any waiver, including any implicit waiver, from a provision of the Code of Ethics to our directors, officers and employees, we will disclose the nature of such amendment or waiver in a report on Form 8-K.




Family Relationships




There are no family relationships between any two or more of our directors or executive officers. There is no arrangement or understanding between any of our directors or executive officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect the current board of directors. There are also no arrangements, agreements or understandings to our knowledge between non-management shareholders that may directly or indirectly participate in or influence the management of our affairs.




Section 16(a) Beneficial Ownership Reporting Compliance




Section 16(a) of the Securities Exchange Act of 1934 requires directors, executive officers and 10% or greater shareholders of the Company ("Reporting Persons") to file with the Securities and Exchange Commission initial reports of ownership (Form 3) and reports of changes in ownership of equity securities of the Company (Form 4 and Form 5) and to provide copies of all such forms as filed to the Company. During fiscal 2008, the Company is unaware of any required reports that were not timely filed.




49




Significant Personnel




We have no significant personnel other than our officers and directors. We presently rely on consultants and other third party contractors to perform administrative services for the Company. We have no formal contracts with any of these consultants and contractors.




Nominating Committee




We do not have a standing nominating committee; our Board of Directors is responsible for identifying new candidates for nomination to the Board. We have not adopted a policy that permits shareholders to recommend candidates for election as directors or a process for shareholders to send communications to the Board of Directors.




ITEM 11. EXECUTIVE COMPENSATION




The following table sets forth all compensation awarded to, earned by, or paid for services rendered to us in all capacities by the officers for the last three completed fiscal years.




Summary Compensation Table




Annual Compensation


Long-Term CompensationName &

Principal Position

Fiscal Year

Dec 31,

Salary


Bonus


Other Annual Compensation


Restricted Stock Awards


Options / SARs


LTIP Payouts


All Other Compensation(1)Bo Linton

2008

$
0


$
0


$
0



0



0



0



0Chief Executive Officer

2007

$
0


$
0


$
0



0



0



0



0President,  Director

2006

$
0


$
0


$
0



0



0



0



0James R. Clarke

2008

$
0


$
0


$
0



0



0



0



0Chief Executive Officer

2007

$
0


$
0


$
0



0



0



0



0President,  Director

2006

$
0


$
0


$
0



0



0



0



0Jerry Dix,

2008

$
0


$
0


$
0



0



0



0



0Chief Executive Officer,

2007

$
0


$
0


$
0



0



0



0



0President,  Director

2006

$
140,400
(2)

$
0


$
0


$
48,843
(3)


0



0



0Don Boudewyn

2008

$
0


$
0


$
0



0



0



0



0Executive VP,

2007

$
107,000


$
0


$
0



0



0



0



0Secretary, Treasurer,  Director

2006

$
107,000
(4)

$
0


$
0


$
30,200
(5)


0



0



0





See notes below:




(1)
The aggregate amount of personal benefits not included in the Summary Compensation Table does not exceed the lesser of either $50,000 or 10% of the total annual salary and bonus paid to the named executive officers.




(2)
Of this total amount, $10,200 was accrued but not paid in 2006.




(3)
The total stock award was 61,954 restricted shares of common stock valued at $48,843 ($0.80 per share).




(4)
Of this total amount, $12,000 was accrued but not paid in 2006.




(5)
The total stock award was 37,750 restricted shares of common stock valued at $30,200 ($0.80 per share).




50





We do not presently have a stock option plan but intend to develop an incentive based stock option plan for our officers and directors in the future and may reserve up to ten percent of our outstanding shares of common stock for that purpose.




Compensation Committee




We no longer have a compensation committee. The functions of the compensation committee are currently carried out by our Board of Directors.




Employment Agreements




All prior employment agreements between the Company and Mr. Dix and Mr. Boudewyn expired on February 1, 2005.




Other Compensation




There are no plans that provide for the payment of retirement benefits, or benefits that will be paid primarily following retirement, including but not limited to tax-qualified defined benefit plans, supplemental executive retirement plans, tax-qualified defined contribution plans and nonqualified defined contribution plans. In addition, there are no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payment(s) to a named executive officer at, following, or in connection with the resignation, retirement or other termination of a named executive officer, or a change in control of the Company or a change in the named executive officer’s responsibilities following a change in control, with respect to each named executive officer.




Presently, there are no plans or agreements for compensation of our officers and directors even if certain milestones are achieved in the business plan. However, we expect to adopt a plan of reasonable compensation to our officers and employees during the coming year.




Outstanding Equity Awards at Fiscal Year-End Table.




There were no outstanding equity awards at December 31, 2008 for the directors and executive officers of the Company.




Compensation of Directors.




With the exception of director compensation, no remuneration is proposed to be paid in the future directly or indirectly by the Company to any director in that capacity. The Company currently has no independent directors. In the future, independent directors of the Company will receive $300 per telecom meeting, $500 per day plus reasonable expenses for in person meetings, $200 for board update telecom meetings, and $300 for audit committee meetings.




51




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS




Securities authorized for issuance under equity compensation plans




The Company has no securities authorized for issuance under equity compensation plans.




Security Ownership of Certain Beneficial Owners and Management




The following table sets forth certain information as of March 18, 2011 with respect to the beneficial ownership of our Company's common stock with respect to each named director and executive officer of our Company, each person known to our Company to be the beneficial owner of more than 5% of said securities, and all directors and executive officers of our Company as a group:




Common Stock Beneficially Owned (1)Name and Address

Title of Class

Amount


Percent of Class(2)Montgomery

Common


16,634,401



7.5%Certain Wealth / Taib Bank

Common


24,181,105



10.6%Richardson & Patel

Common


3,549,410



1.7%Erwin Vahlsing, Jr.

Common


1,000,000



0.5%Dennis Shen

Common


2,600,000



1.3%Jerry Dix

Preferred A


1,400,000,000



87.2%Don Boudewyn

Preferred A


960,000,000



82.4%Top Dog Holdings

Preferred B


2,415,708



1.2%




(1)
Applicable percentage of ownership is based on 204,798,984 shares of common stock outstanding as of April 12, 2011 for each stockholder. Beneficial ownership is determined in accordance within the rules of the Commission and generally includes voting of investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently exercisable or exercisable within 60 days of April 12, 2011, are deemed to be beneficially owned by the person holding such options for the purpose of computing the percentage of ownership of such persons, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.




(2)
Holders are restricted to conversion of no greater than 9.9% of the issued and outstanding stock, however, multiple conversion can be performed after sale of previously converted shares.




The persons named above have full voting upon conversion of debentures, or in accordance with the certificate of designation for the respective preferred share, and investment power with respect to the shares indicated. Under the rules of the Securities and Exchange Commission, a person (or group of persons) is deemed to be a "beneficial owner" of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our common stock.




52




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE




Since the beginning of CEP’s last fiscal year, no director, executive officer, security holder, or any immediate family of such director, executive officer, or security holder owing more than 5% of our shares of common stock has had any direct or indirect material interest in any transaction or currently proposed transaction, which Clean Energy and Power, Inc. was or is to be a participant, that exceeded the lesser of (1) $120,000, or (2) 1% of the average of Clean Energy and Power, Inc.'s total assets at year end for the last two completed fiscal years.




From time to time, former officers or shareholders lent money to the Company.  At December 31, 2008 the balance owed was $119,500.  Of the balance $40,000 carries interest at 10% per annum; the balance does not bear interest.  All notes are due on demand.




The Company's transactions with its officers, directors and affiliates have been and such future transactions will be, on terms no less favorable to the Company than could have been realized by the Company in arm's length transactions with non-affiliated persons and will be approved by a majority of the independent disinterested directors.




Directors Independence




Our current directors Mr. Vahlsing and Mr. Shen are not independent, pursuant to the definition of an "independent director" set forth in Rule 5605(a)(2) of the NASDAQ Manual. In summary, an "independent director" means a person other than an executive officer or employee of the issuer or any other individual having a relationship which, in the opinion of the issuer's board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.




The Company intends to add members to the Board of Directors who are independent during the fiscal year 2011.




We do not have a compensation committee, nominating committee or audit committee; the functions of these committees are performed by our directors and Chief Financial Officer.




The Company is currently traded on the (Pink Sheets) OTC Bulletin Board, which does not require that a majority of the Board be independent.




53





ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES





Audit Fees.
 
 The aggregate fees billed to us by our principal accountant for services rendered during the fiscal years ended December 31, 2008 and 2007 are set forth in the table below:
 
 Fee Category

Fiscal year ended

December 31,

2008


Fiscal year ended

December 31,

2007Audit fees (1)

$
12,667


$
12,667Audit-related fees (2)


0



0Tax fees (3)


0



0All other fees (4)


0



0Total fees

$
12,667


$
12,667
  (1)
Audit fees consist of fees incurred for professional services rendered for the audit of consolidated financial statements, for reviews of our interim consolidated financial statements included in our quarterly reports on Form 10-Q and for services that are normally provided in connection with statutory or regulatory filings or engagements.



We have engaged Sherb & Co., LLP to audit our financial statements for the years ended December 31, 2007, 2008 and 2009.  The total fee for the three years ended December 31, 2009 will be $38,000.  Therefore, we have allocated $12,667 to each year.



The fees for our quarterly reviews have yet to be determined and we have yet to be billed for the quarterly reviews performed by Sherb & Co., LLP for the three quarters ended in fiscal year end 2008.
 
 (2)
Audit-related fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our financial statements, but are not reported under “Audit fees.”
 
 (3)
Tax fees consist of fees billed for professional services relating to tax compliance, tax planning, and tax advice.
 
 (4)
All other fees consist of fees billed for all other services.
  Audit Committee’s Pre-Approval Practice.
  We do not have an audit committee.  Our board of directors performs the function of an audit committee.  Section 10A(i) of the Securities Exchange Act of 1934, as amended, prohibits our auditors from performing audit services for us as well as any services not considered to be audit services unless such services are pre-approved by our audit committee or, in cases where no such committee exists, by our board of directors (in lieu of an audit committee) or unless the services meet certain de minimis standards.


54





PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES




Financial Statements and Schedules




The financial statements are set forth under Item 8 of this Annual Report on Form 10-K. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.




Exhibit Listing




Incorporated by referenceExhibit No.
Description of Exhibit
Filed herewith
Form
Exhibit
Filing date

(mm/dd/yy)3.1
Articles of Incorporation

S-1
3.1
02/22/083.2
Certificate of Change dated July 20, 2009

8-K
3.1
08/03/093.3
Bylaws

S-1
3.2
02/22/084.1
Specimen Stock Certificate

S-1
4.1
02/22/0810.1


S-1
10.1
02/22/0810.2


S-1
10.2
02/22/0810.3


S-1
10.3
02/22/0810.4


8-K
10.1
09/03/0910.5


8-K
10.1
09/23/0910.6
Consulting and Fee Agreement dated July 1, 2009 between
X14
Code of Ethics

S-1
14
02/22/0831.1
Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X32.1
Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X




55





SIGNATURES




Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned; thereunto duly authorized.




CLEAN ENERGY AND POWER, INC.Date: April 25, 2011
By:
/s/ Dennis ShenDennis Shen, PresidentDate: April 25, 2011
By:
/s/ Erwin Vahlsing, Jr.Erwin Vahlsing, Jr.,

Chief Executive Officer, Chief Financial Officer, Secretary, and  Treasurer




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




Date
Signature
TitleDate: April 25, 2011
/s/ Dennis Shen
Director, and PresidentDennis ShenDate: April 25, 2011
/s/ Erwin Vahlsing, Jr.
Director, Chief Executive Officer, Chief Financial Officer,

Secretary, and  TreasurerErwin Vahlsing, Jr.