Clean Energy Technologies, Inc. issued a $500,000 convertible promissory note to Falcon Venture Limited on October 18, 2026, a transaction that raises questions about the dilution potential for existing shareholders of the Nasdaq-listed company. The firm filed a Form 8-K with the U.S. Securities and Exchange Commission to report the entry into a material definitive agreement, detailing the terms under which Falcon purchased the instrument.
Under the securities purchase agreement, Clean Energy Technologies sold the note for a purchase price of $500,000, a sum the company stated it had already received prior to the formal issuance date. The agreement requires the company to use the proceeds for business development and the payment of company obligations. The note matures on October 18, 2027, and accrues interest at a rate of 8% per annum.
The note is convertible into shares of Clean Energy Technologies common stock at the election of the holder, provided six months have passed since issuance. The conversion price is set at 85% of the lowest traded price during the ten trading days prior to the conversion date. This discount mechanism allows Falcon to acquire equity at a rate below the prevailing market price, a structure often scrutinized for its impact on shareholder value.
Two specific conditions limit Falcon's ability to convert the debt into equity. First, Falcon cannot convert the note to the extent that its beneficial ownership would exceed 9.99% of the company's issued and outstanding common stock. Second, conversion is restricted if it would result in the aggregate issuance of more than 2,432,004 shares of common stock without first obtaining shareholder approval required by Nasdaq Rule 5635(d). Additionally, the holder is entitled to deduct $1,750 from the conversion amount in each note conversion to cover fees associated with the process.
The sale of the note was conducted in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933. The company noted that no general solicitation was used and the issuance did not involve a public offering. Disputes related to the securities purchase agreement or the note must be arbitrated in Orange County, California.
Kambiz Mahdi, Chief Executive Officer of Clean Energy Technologies, signed the report on October 20, 2026. The full text of the securities purchase agreement and the promissory note are filed as Exhibits 10.1 and 10.2 to the current report.