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, 2008
r	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:	None
Securities 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.

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.

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 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.

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.

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.

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.

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.

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.

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:

·	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.

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.

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).

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.

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.

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 / Unfiled
Form 10K	2007	Filed
Form 10Q’s – 3 periods	2008	Filed
Form 10K	2008	Filed herewith
Form 10Q’s – 3 periods	2009	Unfiled
Form 10K	2009	Unfiled
Form 10Q’s – 3 periods	2010	Unfiled

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

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		Low
Mar. 31, 2007	$	0.1500	$	0.1000
June 30, 2007	$	0.1334	$	0.0200
Sept. 30, 2007	$	0.0250	$	0.0050
Dec. 31, 2007	$	0.0075	$	0.0013
Mar. 31, 2008	$	0.0029	$	0.0004
June 30, 2008	$	0.0007	$	0.0001
Sept. 30, 2008(1)	$	1.0000	$	0.2000
Dec. 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.

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.

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.

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.

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.

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.

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		2007
Transaction Service Fees	$	276,310	$	518,928
Equipment Sales and Installation		-		390,645
Managed Services		25,100		17,500

Total	$	301,410	$	927,073

Cost of Services

Cost of Services consists primarily of:

	2007		2007
Wi-Fi Services	$	139,256	$	331,125
Equipment and Installation		-		196,124

Total	$	139,256	$	527,248
Gross 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.

Comparison of Selling, General and Administrative Costs

	For the Years Ended
	December 31, 2008		December 31, 2007
Payroll & Related Expenses	$	14,277	$	856,412
Sales & Marketing		185		24,902
Consulting		126,505		772,602
Legal		9,204		942,924
Accounting		30,795		129,471
Finance Fees		50,381		19,407
Insurance		-		59,274
Rent		21,376		128,224
Telephone		26,612		68,810
Travel & Entertainment		46,632		97,490
Other		15,973		38,314
Total	$	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.

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.

CLEAN ENERGY & POWER, INC. 10-K