8-K: Clean Vision Secures $425,000 in High-Cost Convertible Debt and Revenue Interest Financing

Clean Vision Corporation has entered into multiple financing agreements, including two convertible notes totaling $437,500 in principal and a $200,000 revenue interest purchase agreement, under terms highly dilutive to existing shareholders.

Summary

• Clean Vision Corporation (CLNV) entered into a Securities Purchase Agreement with GS Capital Partners, LLC on May 13, 2025, for a convertible amortization note with a principal amount of $137,500, purchased for $125,000 (an original issue discount of $12,500).
• The GS Capital note carries a guaranteed interest rate of 12% per calendar year, with a lump-sum interest payment of $16,500 due immediately and added to the principal, maturing on February 13, 2026.
• Principal payments for the GS Capital note are structured in four installments of $31,250, commencing 180 days after the issue date, with the final payment due on the maturity date.
• The GS Capital note's conversion price is initially $0.02 per share, but it can drop to $0.01 per share if the common stock trades below $0.02 for more than five consecutive days, and further reset to the lowest traded price if it falls below $0.01 for more than five consecutive days, readjusting every 21 days.
• Clean Vision also issued 2,500,000 shares of common stock to GS Capital as an inducement for entering into the agreement.
• On May 27, 2025, Clean Vision entered into a Securities Purchase Agreement with Coventry Enterprises, LLC for a promissory note with a principal amount of $300,000, purchased for $270,000 (an original issue discount of $30,000).
• The Coventry note includes guaranteed interest of $30,000 and is repayable in 10 equal monthly installments of $33,000, starting August 27, 2025, and maturing by May 27, 2026.
• Clean Vision issued 15,000,000 shares of common stock to Coventry as an inducement, with 12,000,000 shares returnable if the company fully complies with repayment obligations.
• The Coventry note is convertible into common stock only upon an Event of Default, at a conversion price equal to 102% of the lowest per-share trading price during the 20-trading day period before conversion.
• On May 29, 2025, Clean Vision entered into a Revenue Interest Purchase Agreement with Kingdom Building, Inc. (KBI) for $200,000, granting KBI a continuing interest in the company's revenue.
• Under the KBI agreement, Clean Vision will pay KBI $3,334 per calendar month from its monthly total revenue, starting July 1, 2025, until the repurchase price is repaid.
• KBI has the option to convert outstanding amounts into shares of Clean Vision's Series D Preferred Stock, which are convertible into common stock at $0.10 per share (1 Series D Preferred = 10 Common Shares).
• Clean Vision filed a Certificate of Designation for Series D Convertible Preferred Stock on July 22, 2025, authorizing 500,000 shares.
• All securities were offered and sold in reliance on the exemption from registration requirements provided by Section 4(a)(2) of the Securities Act of 1933.
• The company acknowledges the potentially dilutive effect of these transactions on its common stock.

Sentiment

Score: 3

Explanation: The company secured capital, which is essential for operations, but the terms of the financing, especially the convertible notes, are extremely dilutive and punitive. This indicates a distressed financial position and is likely to lead to significant future shareholder value erosion due to the high cost of capital, substantial share issuance, and aggressive conversion mechanisms.

Positives

• Secured $425,000 in new capital ($125,000 from GS Capital, $270,000 from Coventry, and $200,000 from KBI) to support ongoing operations.
• The financing provides immediate liquidity, which is crucial for companies facing capital constraints.

Negatives

• The GS Capital note includes a significant original issue discount of $12,500 on a $137,500 principal, effectively increasing the cost of capital.
• The Coventry note includes a significant original issue discount of $30,000 on a $300,000 principal, also increasing the cost of capital.
• High guaranteed interest rates of 12% for the GS Capital note and a $30,000 lump-sum interest for Coventry, plus default interest rates of 24% and 22% respectively, indicate very expensive financing.
• The issuance of 2,500,000 common shares to GS Capital and 15,000,000 common shares to Coventry (with 12,000,000 potentially returnable) as inducement shares is highly dilutive to existing shareholders.
• The floating conversion price mechanism for the GS Capital note, which can drop to the lowest traded price, creates a 'death spiral' scenario, incentivizing the holder to convert and sell, leading to severe dilution.
• An extensive list of 'Events of Default' for the notes, including failure to maintain DTC eligibility, delisting, and failure to provide Rule 144 opinion letters, provides numerous triggers for punitive measures.
• Upon an Event of Default, the company is required to pay 150% of the outstanding principal and accrued interest, a highly punitive penalty.
• The 'Most Favored Nations' clause for GS Capital means any more favorable terms offered to future investors will automatically apply to GS Capital, limiting future financing flexibility.

Risks

• Significant dilution risk for existing shareholders due to the conversion features of the notes and Series D Preferred Stock, especially with floating conversion prices.
• High default interest rates (up to 24% per annum) could rapidly increase the company's debt burden if payments are missed.
• Severe financial penalties upon an Event of Default, including a 150% payment of the outstanding amount, could lead to financial distress or bankruptcy.
• Risk of delisting from OTC Markets or other exchanges, which is an Event of Default and could trigger immediate repayment obligations.
• Risk of failure to maintain DTC eligibility, resulting in a $15,000 increase in the note's principal amount.
• Risk of inability to obtain Rule 144 legal opinions for the resale of conversion shares, which is an Event of Default.
• The company's common stock price falling could trigger lower conversion prices, leading to increased share issuance and further dilution.
• Failure to reserve sufficient shares for conversion is an Event of Default.
• Entering into certain transactions (e.g., 3(a)(9) or 3(a)(10) transactions) could incur liquidated damages of at least $15,000.
• Failure to maintain material intellectual property rights or assets is an Event of Default.
• Restatement of financial statements filed with the SEC that materially adversely affects the holder's rights is an Event of Default.
• Cross-default provisions mean a breach in any other agreement with the holder could trigger a default under these notes.
• Loss of bid price for common stock or changes in OTC Markets designation (e.g., Caveat Emptor) are Events of Default.

Future Outlook

The financing agreements provide capital for Clean Vision Corporation's operations, with repayment schedules extending into 2026. The conversion features of the notes and preferred stock indicate potential future dilution for existing shareholders as investors may convert debt into equity, especially if the common stock price declines, triggering lower conversion prices.

Management Comments

• "The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arms length purchasers with respect to this Agreement and the transactions contemplated hereby."
• "The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company."

Industry Context

This type of financing, characterized by high interest rates, significant original issue discounts, substantial commitment shares, and highly dilutive conversion terms (especially floating conversion prices), is typically sought by micro-cap or financially distressed companies that have limited access to traditional, less expensive capital markets. The punitive terms reflect the high perceived risk by investors and the company's limited alternatives, often leading to significant shareholder dilution and potential 'death spiral' scenarios common in the high-risk, high-reward distressed debt and equity financing sector.

Comparison to Industry Standards

• The 12-24% interest rates and substantial Original Issue Discounts (OID) are significantly higher than typical corporate debt for established companies, indicating a high-risk profile and a high cost of capital for Clean Vision Corporation.
• The issuance of large blocks of 'commitment shares' (2.5 million for GS Capital, 15 million for Coventry) as an inducement is a common feature in highly dilutive financing for micro-cap companies, but it represents a substantial cost to existing shareholders.
• The 'Most Favored Nations' clause for GS Capital is a strong protective measure for the investor, ensuring they receive the best terms offered to any other party, which is common in investor-friendly agreements for high-risk ventures.
• The floating conversion price mechanism for the GS Capital note (dropping from $0.02 to $0.01 and then to the lowest traded price) is an aggressive, highly dilutive feature often associated with 'death spiral' financing, which can incentivize noteholders to short the stock and drive down the price, increasing their conversion shares. This is far more punitive than standard convertible notes.
• The 150% default penalty is an extremely severe term, significantly higher than standard default penalties in more conventional financing arrangements, highlighting the high risk and investor leverage.
• The beneficial ownership limitation of 4.99% is a standard provision to prevent triggering Schedule 13D filing requirements for the investors.
• The revenue interest agreement with KBI, while less common than traditional debt, provides a direct claim on future revenue, which can be attractive to investors seeking a more direct return stream, especially in companies with uncertain profitability or limited assets for collateral.

Corporate Governance

Stakeholder Impact

• Shareholders: Face significant potential for severe dilution due to the convertible notes' floating conversion prices and the issuance of substantial commitment shares. Their ownership percentage and per-share value are at high risk of erosion.
• Creditors (Note Holders): Benefit from highly favorable terms, including high interest rates, original issue discounts, and strong protective covenants such as 'Most Favored Nations' clauses, severe default penalties, and aggressive floating conversion prices, providing significant upside potential and downside protection.
• Company Operations: The capital raised provides necessary funding for ongoing operations, potentially preventing immediate liquidity issues and allowing the company to continue its business activities.

Next Steps

• Company to commence principal and interest payments on the GS Note starting 180 days after May 13, 2025.
• Company to commence monthly payments on the Coventry Note starting August 27, 2025.
• Company to commence monthly payments to KBI from revenue starting July 1, 2025.
• Company is obligated to maintain its listing on the OTC Markets or an equivalent exchange.
• Company must comply with SEC reporting requirements.
• Company is required to reserve sufficient shares of common stock for the full conversion of the notes and preferred stock.

Key Dates

Recommendation

The financing terms are exceptionally punitive and highly dilutive for existing shareholders. The combination of high original issue discounts, high interest rates, substantial commitment shares, and especially the floating conversion price mechanism for the GS Capital note, creates a 'death spiral' scenario. This structure heavily incentivizes the noteholders to convert their debt into equity and sell, which will exert continuous downward pressure on the stock price and lead to severe dilution of existing shareholder value. The extensive list of default events and the extreme 150% default penalty further exacerbate the financial risk for the company. This type of financing typically signals severe financial distress and is fundamentally detrimental to long-term shareholder value, making the stock a strong sell.

Keywords

Clean Vision Corporation, CLNV, Convertible Note, Securities Purchase Agreement, Revenue Interest, Series D Preferred Stock, Debt Financing, Capital Raise, Dilution, SEC Filing, 8-K, Corporate Finance, Investment, OTC Markets, Original Issue Discount