8-K: Clean Energy Technologies Secures $230,400 Funding via Convertible Note and Share Issuance

Clean Energy Technologies, Inc. entered into a securities purchase agreement with Pacific Pier Capital II, LLC, securing $230,400 in net funding through a convertible promissory note and share issuance.

Summary

• Clean Energy Technologies, Inc. (CETY) entered into a securities purchase agreement (SPA) with Pacific Pier Capital II, LLC on April 23, 2025.
• Under the SPA, CETY sold a convertible promissory note with a principal amount of $256,000 and 45,000 shares of common stock to Pacific Pier for an aggregate purchase price of $230,400.
• After deducting Pacific Pier's legal expenses of $7,000, CETY received net funding of $223,400.
• The proceeds from the transaction are earmarked for business development and payment of amounts owed to service providers, excluding repayment of debt to officers, directors, employees, or their affiliates, corporate finance debt, loans/investments in other entities (except existing operations), or advances to company insiders.
• The SPA includes a provision requiring CETY to obtain shareholder approval for issuing more than 1,250,000 shares of common stock (the Exchange Cap) to Pacific Pier.
• CETY is obligated to file a preliminary information statement on Schedule 14C with the SEC by April 30, 2025, and a definitive information statement as soon as permissible.
• The convertible note matures in 12 months, accrues interest at 10% per annum, and is convertible into common stock six months after the issue date at 90% of the lowest daily volume-weighted average price during the 5 trading days prior to conversion.
• Conversion is limited to ensure Pacific Pier's beneficial ownership does not exceed 4.99% of CETY's outstanding common stock.
• Pacific Pier is entitled to deduct $1,750 (or $500 if the conversion amount is $25,000 or less) from each conversion to cover its associated fees.

Sentiment

Score: 6

Explanation: The sentiment is neutral. The document describes a financing transaction, which is neither inherently positive nor negative. The terms of the agreement appear to be standard for this type of transaction.

Positives

• The funding provides Clean Energy Technologies with capital for business development and paying service providers.
• The convertible note structure allows for potential equity upside for the investor while providing debt financing to the company.
• The agreement restricts the use of proceeds, preventing them from being used for purposes that would primarily benefit insiders.

Negatives

• The convertible note could lead to dilution of existing shareholders if Pacific Pier converts the note into common stock.
• The interest rate of 10% on the convertible note represents a cost of capital for Clean Energy Technologies.
• The restrictions on the use of proceeds, while potentially positive, could limit the company's flexibility in allocating capital.

Risks

• The need for shareholder approval to issue more than 1,250,000 shares could delay or complicate the full conversion of the note.
• The conversion price is subject to market fluctuations, which could impact the number of shares issued upon conversion.
• Failure to comply with the terms of the agreement could trigger events of default, potentially accelerating the repayment of the note.
• The company's ability to meet its obligations under the note depends on its financial performance and ability to generate sufficient cash flow.

Future Outlook

The company intends to use the proceeds from the transaction for business development and the payment of amounts owed to service providers. The company is required to obtain shareholder approval for the issuance of shares exceeding the Exchange Cap.

Industry Context

This type of financing is common for small-cap companies seeking to raise capital. Convertible notes can be attractive to investors as they offer the potential for both fixed income and equity upside. The terms of the agreement, such as the interest rate, conversion price, and restrictions on the use of proceeds, are typical for these types of transactions.

Comparison to Industry Standards

• Comparable companies in the clean energy sector, such as FuelCell Energy and Ballard Power Systems, have also utilized convertible notes to raise capital.
• The interest rate of 10% is within the typical range for convertible notes issued by small-cap companies, but can vary based on the company's creditworthiness and market conditions.
• The conversion price based on a percentage of VWAP is a common mechanism to provide investors with a market-based conversion price.
• The beneficial ownership limitation of 4.99% is a standard provision to prevent the investor from becoming an insider and triggering additional regulatory requirements.

Stakeholder Impact

• Shareholders may experience dilution if the convertible note is converted into common stock.
• Service providers may benefit from the company's ability to pay outstanding amounts.
• Employees may benefit from the company's ability to invest in business development.

Next Steps

• Clean Energy Technologies needs to file a preliminary information statement on Schedule 14C with the SEC by April 30, 2025.
• Clean Energy Technologies needs to file a definitive information statement on Schedule 14C with the SEC as soon as permissible.
• Clean Energy Technologies needs to obtain shareholder approval for issuing more than 1,250,000 shares to Pacific Pier.
• Pacific Pier will monitor the company's performance and may choose to convert the note into common stock at a later date.

Key Dates

Keywords

convertible note, securities purchase agreement, financing, common stock, Pacific Pier Capital, Clean Energy Technologies, shareholder approval, business development, funding