8-K: Clean Energy Technologies Secures $310,500 Funding via Convertible Note and Share Issuance

Clean Energy Technologies, Inc. has entered into a securities purchase agreement with Pacific Pier Capital II, LLC, resulting in $310,500 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 4, 2025.
• Under the SPA, CETY sold a convertible promissory note with a principal amount of $345,000 and 45,000 shares of common stock to Pacific Pier.
• The aggregate purchase price for the note and shares was $310,500.
• After deducting Pacific Pier's legal expenses of $10,000, CETY received net funding of $300,500 on or about April 7, 2025.
• The proceeds from the transaction are earmarked for business development and payments to service providers, excluding debt repayment to insiders or investments in other entities outside existing operations.
• The SPA includes a restriction on issuing more than 1,250,000 shares to Pacific Pier until shareholder approval is obtained, referred to as the Exchange Cap.
• CETY is required to file a preliminary information statement on Schedule 14C with the SEC by the earlier of fifteen days after filing its 2024 Annual Report or April 30, 2025, followed by a definitive information statement.
• The convertible note matures in 12 months, accrues interest at 10% per annum, and can be converted into common stock six months after issuance.
• The conversion price is 90% of the lowest daily volume-weighted average price (VWAP) during the five trading days before the conversion date.
• Pacific Pier is limited to owning no more than 4.99% of CETY's outstanding common stock after any conversion.
• Pacific Pier can deduct $1,750 (or $500 if the conversion amount is $25,000 or less) from each conversion to cover their fees.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While the company secures funding, it comes with the cost of dilution and interest payments. The restrictions on the use of proceeds and the need for shareholder approval add complexity.

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 CETY with debt financing.
• The agreement restricts the use of funds, ensuring they are used for core business activities.
• The Exchange Cap provides some protection against immediate dilution for existing shareholders.

Negatives

• The convertible note will dilute existing shareholders if converted.
• The interest rate of 10% represents a cost of capital for CETY.
• The conversion price is subject to market fluctuations, potentially leading to greater dilution.
• The restrictions on the use of proceeds may limit CETY's flexibility in allocating capital.

Risks

• Failure to obtain shareholder approval for exceeding the Exchange Cap could limit the company's ability to utilize the full funding potential.
• Market volatility could negatively impact the conversion price, leading to greater dilution.
• The company's inability to meet its obligations under the note could trigger an event of default.
• The company's reliance on this funding source could indicate underlying financial challenges.

Future Outlook

The company intends to use the proceeds for business development and payment of amounts owed to service providers. The company is required to obtain shareholder approval to issue shares in excess of the Exchange Cap.

Industry Context

This type of financing is common for small-cap companies seeking capital, but it can be dilutive to existing shareholders. The terms of the agreement, such as the conversion price and interest rate, are typical for this type of transaction.

Comparison to Industry Standards

• Comparable companies in the clean energy sector often utilize convertible notes for financing, but the specific terms vary widely based on the company's financial health and market conditions.
• The 10% interest rate is within the typical range for convertible notes issued by small-cap companies, but it can be higher than rates offered to larger, more established companies.
• The conversion price discount of 10% is a common incentive for investors in convertible notes.
• The 4.99% beneficial ownership limitation is a standard provision to prevent the investor from becoming an insider without proper filings.

Stakeholder Impact

• Shareholders will experience potential dilution if the convertible note is converted.
• 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.
• The company must seek shareholder approval to issue shares exceeding the Exchange Cap.
• Pacific Pier Capital II, LLC will likely monitor the company's performance and potentially convert the note into common stock.

Key Dates

Keywords

convertible note, securities purchase agreement, financing, share issuance, Pacific Pier Capital, Clean Energy Technologies, CETY, funding