8-K: Clean Energy Technologies Secures $107,000 in Funding via Convertible Note

Clean Energy Technologies, Inc. entered into a securities purchase agreement to sell a convertible promissory note for $131,610, receiving net funding of $100,000 after fees and expenses.

Summary

• Clean Energy Technologies, Inc. (CETY) has entered into a securities purchase agreement with 1800 Diagonal Lending LLC.
• The agreement involves the sale of a convertible promissory note with a principal amount of $131,610.
• CETY received $107,000 for the note, with $2,500 allocated for legal expenses and $4,500 retained as a due diligence fee, resulting in net funding of $100,000.
• The note matures on February 15, 2026, and accrues a one-time interest charge of 10% on the issuance date.
• The note is payable in 9 monthly installments of $16,085.67 starting June 15, 2025.
• The note is convertible into shares of CETY's common stock at $1.00 per share, subject to certain ownership limitations and shareholder approval requirements.
• The proceeds from the transaction will be used for general working capital purposes.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. The company has secured funding, which is a positive development. However, the terms of the convertible note, including the interest rate and potential dilution, introduce some risks.

Positives

• The company has secured additional funding of $100,000 for general working capital.
• The company has the right to accelerate payments or prepay in full at any time with no prepayment penalty.

Negatives

• The company incurs a one-time interest charge of 10% on the issuance date.
• The company is obligated to make nine monthly payments of $16,085.67.
• The note is convertible, potentially diluting existing shareholders' equity.
• The conversion price is subject to adjustment, which could lead to further dilution.
• The company is required to reimburse Buyer expenses of $7,000.00 for Buyers legal fees and due diligence fee.

Risks

• The company's stock price could be negatively impacted by the potential dilution from the conversion of the note.
• Failure to meet the monthly payment obligations could result in default and acceleration of the note.
• The conversion is limited to 4.99% ownership by the holder and may be further limited by Nasdaq rules requiring shareholder approval if conversion would result in more than 19.99% of the shares of Company common stock being issued.
• The holder of the Note is entitled to deduct $1,500 from the conversion amount in each note conversion to cover the holders fees associated with the conversion.
• The company's ability to maintain compliance with Nasdaq listing rules is crucial to avoid triggering an event of default.

Future Outlook

The company intends to use the proceeds from the note for general working capital purposes.

Industry Context

Many small companies use convertible notes as a means of raising capital, particularly when traditional financing options are limited. The terms of the note, including the interest rate and conversion price, reflect the perceived risk and potential upside of the investment.

Comparison to Industry Standards

• Convertible notes are a common financing tool for small-cap companies, especially in sectors like clean energy where access to traditional bank loans may be limited.
• The interest rate and conversion terms are fairly standard for this type of financing, reflecting the risk profile of the issuer and the potential return for the investor.
• Comparable companies might include other micro-cap or small-cap firms in the renewable energy sector that have utilized convertible debt to fund operations and growth.

Stakeholder Impact

• Shareholders may experience dilution if the note is converted into common stock.
• The funding provides the company with additional working capital, which could benefit employees and other stakeholders.
• Creditors may be impacted by the new debt obligation.

Next Steps

• Clean Energy Technologies will use the funds for general working capital.
• The company will make monthly payments on the note starting June 15, 2025.
• The company may need to seek shareholder approval for the conversion of the note if it exceeds certain thresholds.

Key Dates

Keywords

convertible note, funding, securities purchase agreement, working capital, promissory note, Clean Energy Technologies, 1800 Diagonal Lending, conversion, equity, debt