DEF 14C: Clean Energy Technologies Secures $2.5 Million Through Convertible Notes and Warrants; Majority Stockholders Approve Issuance

Clean Energy Technologies, Inc. informs stockholders of the majority stockholders' approval of securities purchase agreements, resulting in the issuance of convertible notes, shares, and warrants to Mast Hill Fund, L.P. and Pacific Pier Capital II, LLC, raising approximately $2.5 million.

Summary

• Clean Energy Technologies, Inc. is circulating an information statement to its stockholders regarding actions taken by written consent of the majority stockholders, holding approximately 55.4% of the outstanding shares.
• The majority stockholders approved the entry into securities purchase agreements with Mast Hill Fund, L.P. and Pacific Pier Capital II, LLC.
• These agreements resulted in the issuance of convertible notes, shares, and warrants.
• Specifically, the company entered into agreements with Mast Hill on January 16, 2025, and February 28, 2025, for a total of $2,257,833.33 in convertible notes and warrants to purchase 1,128,917 shares.
• The company also entered into agreements with Pacific Pier on April 4, 2025, and April 23, 2025, for a total of $601,000 in convertible notes and 90,000 shares of common stock.
• The aggregate purchase price from these transactions totals $2,573,050.
• The company is required to seek shareholder approval under NASDAQ listing rules for the issuance of shares exceeding certain thresholds.
• The actions approved by the majority stockholders will become effective 20 calendar days after the information statement is mailed to stockholders.
• The majority stockholders include MGW Investment I Limited (controlled by CFO Calvin Pang) and the Kambiz and Bahareh Mahdi Living Trust (controlled by CEO Kambiz Mahdi).

Sentiment

Score: 5

Explanation: The document is neutral in tone, primarily conveying information about the financing transactions. While securing funding is generally positive, the potential dilution and debt obligations temper the overall sentiment.

Positives

• The company secured approximately $2.5 million in funding through the issuance of convertible notes, shares, and warrants.
• The majority stockholders' approval ensures compliance with NASDAQ listing rules.
• The funding is intended for working capital, business development, and payment of service providers.
• The company is using the funds to pay off existing debt, including $852,406.35 to Mast Hill for the payment in full of the September 10th Mast Hill Note.

Negatives

• The transactions involve the issuance of convertible notes and warrants, which could lead to dilution of existing shareholders' equity.
• The notes are secured by a junior security interest, subordinate to the company's senior secured lender, Nations Interbanc.
• The conversion price of the notes is subject to adjustment, potentially leading to a significant number of shares being issued at a discount to market value.
• The company is required to hold special meetings to obtain shareholder approval for issuing shares in excess of certain exchange caps.

Risks

• The conversion of the notes and exercise of the warrants could significantly dilute existing shareholders' equity.
• The company's ability to meet its obligations under the notes is subject to its financial performance and ability to generate cash flow.
• Failure to obtain shareholder approval for issuing shares in excess of the exchange cap could impact the company's ability to raise further capital.
• The junior secured nature of the notes places the investors behind Nations Interbanc in the event of liquidation.

Future Outlook

The company intends to use the proceeds from these transactions for working capital, business development, and payment of amounts owed to service providers. The company is also required to seek shareholder approval for the issuance of shares exceeding certain thresholds to maintain its NASDAQ listing.

Management Comments

• Our Board of Directors is not soliciting your consent or your proxy in connection with this action, and neither consents nor proxies are being requested from stockholders.

Industry Context

Many small-cap companies rely on convertible notes and warrants to raise capital, especially when traditional financing options are limited. These instruments can be attractive to investors seeking higher returns but also carry risks due to potential dilution and the complexities of conversion terms.

Comparison to Industry Standards

• The 10% interest rate on the convertible notes is relatively standard for small-cap companies raising capital through this method.
• The conversion price being tied to a percentage of the volume-weighted average price is a common feature designed to protect investors from significant price declines.
• The 4.99% beneficial ownership limitation is a standard clause to prevent investors from triggering change of control provisions without proper approvals.
• Similar companies, such as those in the renewable energy sector, often use similar financing structures to fund growth and development.

Stakeholder Impact

• Existing shareholders face potential dilution due to the issuance of new shares upon conversion of notes and exercise of warrants.
• The company's employees and service providers may benefit from the use of proceeds to pay outstanding amounts.
• The company's creditors are impacted by the junior secured nature of the notes, placing them behind the senior secured lender.

Next Steps

• The actions taken by written consent of the Majority Stockholders will become effective 20 calendar days after the first mailing or other delivery of this Information Statement to holders of our Common Stock as of the Record Date.
• The company needs to satisfy the shareholder approval requirements of Nasdaq Listing Rule 5635.
• The company needs to file a preliminary information statement on Schedule 14C in connection with the issuance of shares in excess of exchange cap with the U.S. Securities and Exchange Commission (the SEC) on or before the earlier of fifteen (15) calendar days after the date that the Company files its Annual Report on Form 10-K for the period ending December 31, 2024, or April 30, 2025, and (b) file a definitive information statement as soon as permissible.

Key Dates

Keywords

convertible notes, warrants, securities purchase agreement, stockholder approval, NASDAQ listing rules, common stock, financing, dilution, Mast Hill, Pacific Pier, capital raise