CETY(CETY) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Clean Energy Technologies, Inc.'s unaudited consolidated financial statements and management's discussion and analysis for the period ended June 30, 2025 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS This section presents Clean Energy Technologies, Inc.'s unaudited consolidated financial statements for the period ended June 30, 2025, detailing financial position, operations, equity, and cash flows, with explanatory notes Consolidated Balance Sheets The consolidated balance sheets show a significant increase in total assets and equity as of June 30, 2025, compared to December 31, 2024, primarily driven by a substantial rise in cash and accounts receivable | Metric | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--------------------------- | :-------------------------- | :-------------------------- | | Cash | $4,408,887 | $62,101 | | Accounts receivable - net | $645,268 | $131,067 | | Accounts receivable - Related Party | $2,278,728 | $1,947,131 | | Total Current Assets | $9,225,057 | $3,198,091 | | Total Assets | $14,785,544 | $9,505,480 | | Total Current Liabilities | $6,957,240 | $6,438,099 | | Total Liabilities | $7,029,856 | $6,566,978 | | Total Equity | $7,755,688 | $2,938,502 | Consolidated Statements of Operations The consolidated statements of operations indicate a decrease in total income for the six months ended June 30, 2025, compared to the same period in 2024, but a significant improvement in gross profit and a reduced net loss | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total Income | $1,028,215 | $1,709,151 | | Cost of Goods Sold | $76,005 | $1,280,116 | | Gross Profit | $952,210 | $429,035 | | Total Expense | $1,783,145 | $2,221,990 | | Net Profit / (Loss) Before Income Taxes | $(1,419,972) | $(2,251,278) | | Net Profit / (Loss) | $(1,420,021) | $(2,251,278) | | Basic and diluted weighted average number of common shares outstanding | 51,249,303 | 41,618,349 | | Net loss per common share basic and diluted | $(0.03) | $(0.06) | - Gross Profit increased significantly from $429,035 in H1 2024 to $952,210 in H1 2025, despite a decrease in total income, indicating improved margins[14] - Net Loss decreased from $(2,251,278) in H1 2024 to $(1,420,021) in H1 2025, showing an improvement in profitability[14] Consolidated Statements of Stockholders' Equity The consolidated statements of stockholders' equity show a substantial increase in total equity from $2,938,502 as of December 31, 2024, to $7,755,688 as of June 30, 2025, primarily driven by significant additions to additional paid-in capital and common stock issuances | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Common stock, par value $0.001 | $63,174 | $45,332 | | Additional Paid-In Capital | $36,732,024 | $30,593,041 | | Accumulated Deficit | $(28,820,537) | $(27,443,231) | | Total Equity | $7,755,688 | $2,938,502 | - Total Equity increased by $4,817,186 (163.9%) from December 31, 2024, to June 30, 2025[12] - Additional Paid-In Capital increased by $6,138,983, reflecting new capital infusions[12] Consolidated Statements of Cash Flows The consolidated statements of cash flows show a significant net increase in cash and cash equivalents for the six months ended June 30, 2025, primarily driven by substantial cash flows from financing activities, which offset continued cash usage in operating activities | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(1,420,021) | $(2,251,278) | | Net cash used in operating activities | $(1,556,984) | $(1,612,034) | | Net cash provided by investing activities | $0 | $83,160 | | Net cash provided by financing activities | $5,903,311 | $1,828,380 | | Net (decrease) increase in cash and cash equivalents | $4,346,786 | $298,318 | | Cash and cash equivalents at end of period | $4,408,887 | $387,943 | - Cash from financing activities increased significantly by over 220% year-over-year, from $1,828,380 in H1 2024 to $5,903,311 in H1 2025[19] - Net cash used in operating activities slightly decreased, indicating a marginal improvement in operational cash burn[19] Notes to the Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies, financial instrument valuations, and significant transactions, including the reclassification of Shuya, various debt and equity issuances, and related party transactions NOTE 1 – GENERAL Clean Energy Technologies, Inc. (CETY) is a clean energy technology company providing eco-friendly energy solutions across North America, Europe, and Asia, operating through four reportable segments, and faces substantial doubt about its ability to continue as a going concern - CETY operates in four reportable segments: Clean Energy HRS (Heat Recovery Solutions) & CETY Europe, CETY Renewables waste to energy, engineering, consulting & management services, and CETY HK NG trading[26] - The company had an accumulated deficit of $28,820,537 and negative cash flows from operating activities of $1,556,984 as of June 30, 2025, raising substantial doubt about its going concern ability[27] - CETY's principal businesses include Heat Recovery Solutions (Clean Cycle Generator), Waste to Energy Solutions (pyrolysis technology), Engineering, Consulting and Project Management Solutions, and CETY HK's natural gas trading operations in China[29][30][31][32] NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines the company's accounting policies, including estimates, cash, receivables, inventory, property, revenue recognition, derivative liabilities, fair value, foreign currency, and the reclassification of Shuya, along with segment reporting and share-based compensation - The company maintains a reserve for potentially uncollectable accounts receivable of $95,322 as of June 30, 2025, unchanged from December 31, 2024[38] - Inventory reserve decreased from $934,344 as of December 31, 2024, to $576,704 as of June 30, 2025, indicating a reduction in estimated excess and obsolete inventory[40] - The company recognized a derivative liability of $251,718 as of June 30, 2025, compared to zero as of December 31, 2024, due to certain conversion features in debt financing transactions[67] - Shuya, previously consolidated as a Variable Interest Entity (VIE) effective January 1, 2023, was deconsolidated on January 1, 2024, due to the termination of the Concerted Action Agreement, reverting to an equity method investment[78][82] Net Sales by Segment | Segment | Net Sales (6 months ended June 30, 2025) | Net Sales (6 months ended June 30, 2024) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Manufacturing and Engineering | $0 | $9,341 | | Heat Recovery Solutions | $689,488 | $120,874 | | NG Trading | $7,130 | $1,219,629 | | Waste to Energy | $331,597 | $359,307 | | Total Sales | $1,028,215 | $1,709,151 | NOTE 3 – ACCOUNTS AND NOTES RECEIVABLE Accounts and notes receivable, including related party receivables, significantly increased as of June 30, 2025, compared to December 31, 2024, with a constant reserve for uncollectable accounts Accounts and Notes Receivable Summary | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Accounts Receivable | $740,590 | $226,389 | | Accounts Receivable Related Party | $2,278,728 | $1,947,131 | | Less reserve for uncollectable accounts | $(95,322) | $(95,322) | | Total Accounts Receivable | $2,923,996 | $2,078,198 | | Long-term financing receivables - net | $1,423,055 | $1,423,054 | - Total Accounts Receivable (net) increased by $845,798 (40.7%) from December 31, 2024, to June 30, 2025[105] - All accounts receivable and long-term financing receivables are pledged to Nations Interbanc, the company's line of credit[105][108] NOTE 4 – INVENTORIES, NET Net inventories slightly decreased as of June 30, 2025, compared to December 31, 2024, primarily due to a significant reduction in the inventory reserve Inventories, Net Summary | Metric | June 30, 2025 | December 31, 2024 | | :---------- | :------------ | :---------------- | | Inventory | $1,061,343 | $1,431,347 | | Less reserve | $(576,704) | $(934,344) | | Total | $484,639 | $497,003 | - The inventory reserve decreased by $357,640, indicating a more favorable assessment of inventory obsolescence or excess[109] - Inventory is pledged to Nations Interbanc, the company's line of credit[109] NOTE 5 – PROPERTY AND EQUIPMENT Net fixed assets saw a minor decrease as of June 30, 2025, compared to December 31, 2024, with depreciation expense remaining relatively stable Property and Equipment Summary | Metric | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Property and Equipment | $125,200 | $1,434,743 | | Accumulated Depreciation | $(122,993) | $(1,431,830) | | Net Fixed Assets | $2,207 | $2,913 | | Depreciation Expense (six months) | $752 | $5,938 | - Property, Plant, and Equipment are pledged to Nations Interbanc, the company's line of credit[111] NOTE 6 – INTANGIBLE ASSETS Net intangible assets slightly decreased due to amortization of patents, while goodwill and LWL Investment balances remained constant as indefinite-life assets Intangible Assets Summary | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Goodwill | $747,976 | $747,976 | | LWL Intangibles | $1,468,709 | $1,468,709 | | License | $354,322 | $354,322 | | Patents | $190,789 | $190,789 | | Accumulated Amortization | $(113,817) | $(107,879) | | Net Intangible Assets | $2,647,979 | $2,653,917 | | Amortization Expense (six months) | $5,938 | $5,938 | - Goodwill and LWL Investment are classified as indefinite-life assets and are not amortized, but subject to annual impairment testing[113][114] - Patents are amortized over their expected useful life, typically 20 years, resulting in a decrease in their net balance[116] NOTE 7 – CONVERTIBLE NOTE RECEIVABLE JHJ holds a convertible note receivable from Chengdu Rongjun Enterprise Consulting Co., Ltd, extended to January 10, 2027, with a 12% annual interest rate and an option to convert into a 15% equity interest in Heze Hongyuan Natural Gas Co., Ltd - JHJ lent RMB 5,000,000 ($0.7 million) to Rongjun at a 12% annual interest rate, with maturity extended to January 10, 2027[120] - JHJ has the right to convert the note into a 15% equity interest in Heze Hongyuan Natural Gas Co., Ltd[120] NOTE 8 – ACCRUED EXPENSES Total accrued expenses increased as of June 30, 2025, primarily due to a rise in accrued taxes and other expenses Accrued Expenses Summary | Metric | June 30, 2025 | December 31, 2024 | | :------------------ | :------------ | :---------------- | | Accrued Wages | $78,254 | $78,254 | | Sales tax payable | $15,271 | $15,014 | | Accrued Taxes and other | $469,253 | $371,964 | | Total accrued expenses | $562,778 | $465,232 | - Accrued Taxes and other increased by $97,289 (26.1%) from December 31, 2024, to June 30, 2025[121] NOTE 9 – LINE OF CREDIT AND NOTES PAYABLE The company's line of credit balance decreased, while total convertible notes payable increased significantly due to numerous issuances and conversions, leading to higher derivative liabilities and interest expenses Line of Credit and Notes Payable Summary | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Line of Credit | $599,038 | $662,804 | | Total convertible notes | $3,685,202 | $2,649,197 | | Accrued interest | $127,641 | $492,401 | | Debt discount | $(901,650) | $(93,725) | | Amortization of debt discount | $224,437 | $46,704 | | Total Convertible Notes Payable | $3,135,630 | $3,094,577 | | Derivative liability | $251,718 | $0 | - Total convertible notes increased by $1,036,005 (39.1%) from December 31, 2024, to June 30, 2025[167] - The company issued several new convertible promissory notes in 2025, including with Mast Hill ($1,637,833 and $620,000), Pacific Pier Capital II ($345,000 and $256,000), and 1800 Diagonal Lending LLC ($131,610), often with original issue discounts and commitment shares[154][155][156][159][161] - Derivative liabilities on outstanding convertible notes were revalued at $251,718 as of June 30, 2025, resulting from new issuances and fair value adjustments[167] NOTE 10 – COMMITMENTS AND CONTINGENCIES The company's commitments primarily involve operating leases for corporate offices and HRS operations, with lease liabilities decreasing, and a severance benefit commitment for its CEO Commitments and Contingencies Summary | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Right-of-used assets | $82,790 | $166,727 | | Lease liabilities – current | $56,806 | $130,483 | | Lease liabilities – non-current | $24,577 | $38,125 | | Total lease liabilities | $81,383 | $168,608 | | Lease expense (six months) | $119,733 | $133,264 | - The weighted-average remaining lease term is 1.33 years, with a weighted-average discount rate of 4.5%–10.0%[173] - The CEO, Mr. Mahdi, is entitled to a severance benefit equal to one year's salary or the remainder of his employment period, whichever is greater[174] NOTE 11 – CAPITAL STOCK TRANSACTIONS The company significantly increased authorized common shares and issued a substantial number of common shares through stock compensation, debt conversions, and subscriptions, leading to an increase in outstanding shares and warrants, and designated Series E Convertible Preferred Stock - Authorized common shares increased to 2,000,000,000, and a 1-for-40 reverse stock split was effective January 6, 2023[178][179] - As of June 30, 2025, there were 63,173,457 shares of common stock outstanding, with 2,228,266 outstanding warrants[212][239] - In May 2025, the company issued 10,731,704 shares of common stock for aggregate gross proceeds of $4,400,000 through a Subscription Agreement[203] - The 15% Series E Convertible Preferred Stock was designated in October 2023, with a stated value of $1.00 per share, 15% annual dividends, and conversion rights at 80% of the lowest VWAP over the last 5 trading days[219][220] NOTE 12 – RELATED PARTY TRANSACTIONS The company has significant related party transactions with Vermont Renewable Gas LLC (VRG), a joint venture where CETY Capital LLC holds a 49% interest, involving invoicing for plant construction and a defaulted $12 million loan guarantee - CETY Capital LLC owns a 49% interest in Vermont Renewable Gas LLC (VRG), a joint venture for developing a pyrolysis plant[240] - CETY Renewables invoiced VRG $331,597 in 2025, contributing to $2,278,728 in accounts receivable from VRG[241] - CETY provided a corporate guarantee for VRG's $12 million loan agreement, which is currently in default due to the lender's failure to disburse tranches[242][243] NOTE 13 - WARRANTY LIABILITY The company's warranty liability remained unchanged at $100,000 for the six months ended June 30, 2025 and 2024, based on estimates for critical turbine replacement costs Warranty Liability Summary | Metric | June 30, 2025 | June 30, 2024 | | :--------------- | :------------ | :------------ | | Warranty Liability | $100,000 | $100,000 | NOTE 14 – NON-CONTROLLING INTEREST The company's joint venture, Vermont Renewable Gas LLC (VRG), is accounted for as an equity method investment because Synergy Bioproducts Corporation (SBC) holds a controlling interest and is the primary beneficiary of the Variable Interest Entity (VIE) - VRG is classified as a Variable Interest Entity (VIE) due to insufficient equity to operate without financial support[248] - SBC is deemed the primary beneficiary of VRG, holding controlling interest and more board votes, leading CETY to account for its 49% interest using the equity method[248] NOTE 15 – THE STATUTORY RESERVES PRC laws impose restrictions on the company's PRC subsidiaries regarding dividend payments, requiring annual appropriations to statutory reserves and a special reserve for work safety funds, limiting net asset transfers - PRC subsidiaries must allocate at least 10% of annual after-tax profit to a surplus reserve until it reaches 50% of registered capital, restricting dividend payments[250][251][252] - A special reserve for work safety funds, calculated at 15% of total sales, is required for companies involved in dangerous goods production or storage[253] NOTE 16 – SUBSEQUENT EVENTS Subsequent to June 30, 2025, the company continued to issue common stock, primarily to Mast Hill and 1800 Diagonal, through conversions of convertible promissory notes, and entered a new securities purchase agreement with FirstFire Global Opportunities Fund, LLC - Between July 8 and August 6, 2025, the company issued over 5.5 million shares of common stock to Mast Hill and 1800 Diagonal through debt conversions[254][255][257][259][260] - On July 18, 2025, the company entered a securities purchase agreement with FirstFire for a $201,250 convertible promissory note and 125,000 common shares, with net funding of $169,500[256] - On July 30, 2025, the company entered a securities purchase agreement with 1800 Diagonal Lending LLC for a $151,800 convertible promissory note, receiving net funding of $125,000[258] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition and operating results for the six months ended June 30, 2025, highlighting strategic repositioning, going concern risk, and financial performance drivers including reduced net loss and improved gross margins Forward-Looking Statements This section contains forward-looking statements regarding future results, activities, performance, or achievements, which are subject to known and unknown risks and uncertainties, and actual results may differ materially - Forward-looking statements are identified by words like 'may,' 'will,' 'should,' 'expects,' 'plans,' 'anticipates,' 'believes,' 'estimates,' 'predicts,' 'intends,' 'potential,' 'proposed,' or 'continue'[262] - Actual results may differ materially and adversely from forward-looking statements due to various factors, and the company undertakes no obligation to update them[262] Description of the Company Clean Energy Technologies, Inc. (CETY) designs, produces, and markets clean energy products and integrated solutions, aiming to be a leader in renewable and energy efficiency through four segments: HRS, Waste to Energy, Engineering, and NG Trading - CETY's mission is to be a segment leader in the Zero Emission Revolution by offering recyclable energy solutions, clean energy fuels, and alternative electric power for small and mid-sized projects in North America, Europe, and Asia[275] - The company's principal businesses include Waste Heat Recovery Solutions (patented Clean Cycle generator), Waste to Energy Solutions (converting waste to electricity, RNG, hydrogen, biochar), Engineering, Consulting and Project Management Solutions, and CETY HK's natural gas trading operations[276][277][278] - CETY has four accounting segments: Clean Energy HRS & CETY Europe, CETY Renewables Waste to Energy Solutions, Engineering and Manufacturing Business, and CETY HK (natural gas trading)[265][266] Summary of Operating Results the Six months Ended June 30, 2025 Compared to the same period in 2024 For the six months ended June 30, 2025, CETY experienced decreased total revenue but significantly improved gross profit and reduced net loss, driven by higher margins from non-NG operations and lower operating expenses, with substantial growth in stockholders' equity Summary of Operating Results | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $1,028,215 | $1,709,151 | | Gross Profit | $952,210 | $429,035 | | Operating Expense | $830,935 | $1,792,955 | | Net Loss | $(1,420,021) | $(2,251,278) | | Stockholders' Equity (period end) | $7,755,688 | $2,938,502 (Dec 31, 2024) | - Gross profit margins improved due to greater contributions from CETY's non-NG business in China, which yields substantially higher margins[282] - The company is repositioning as a diversified clean energy solutions provider with four segments (HRS, Waste-to-Energy, EPC, CETY HK) to support scalable, stable, and diversified revenue growth[285] Results of the Six Months Ended June 30, 2025, Compared to the Six Months Ended June 30, 2024 Net sales decreased year-over-year due to a decline in the China natural gas business, but gross profit increased substantially from higher-margin HRS contributions, while operating expenses decreased, leading to a reduced net loss, though derivative liability and interest fees rose Operating Results Comparison | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net Sales | $1,028,215 | $1,709,151 | | HRS Revenue | $689,488 | $120,874 | | NG Trading Revenue | $7,130 | $1,219,629 | | Gross Profit | $952,210 | $429,035 | | HRS Gross Profit | $620,374 | $79,889 | | NG Trading Gross Profit | $239 | $9,853 | | SG&A Expenses | $1,783,145 | $2,221,990 | | Salaries Expense | $873,268 | $966,843 | | Professional Fees Legal & Accounting | $333,319 | $353,065 | | Change in Derivative Liability | $112,672 | $0 | | Interest and Finance Fees | $843,859 | $424,743 | | Net Loss | $(1,420,021) | $(2,251,278) | - HRS revenue increased significantly by 470.4% year-over-year, driven by equipment sales and engineering services[290][297] - NG trading revenue decreased by 99.4% due to macroeconomic factors and a strategic decision to reduce focus on lower-margin activities[294] - Interest and finance fees more than doubled, primarily due to two larger interim financings to bridge funding for the Vermont Renewable Project and S-3 registration completion[307] Liquidity and Capital Resources The company experienced a significant net increase in cash and cash equivalents for the six months ended June 30, 2025, primarily driven by substantial cash provided by financing activities, offsetting continued cash usage in operations Cash Flow Summary | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) operating activities | $(1,556,984) | $(1,612,034) | | Net cash provided by investing activities | $0 | $83,160 | | Net cash provided by financing activities | $5,903,311 | $1,828,380 | | Net increase in cash and cash equivalents | $4,346,786 | $298,318 | - Cash and cash equivalents at the end of the period increased to $4,408,887 in 2025 from $387,943 in 2024[19] Capital Requirements for Long-Term Obligations The company currently has no significant capital requirements for long-term obligations - No significant capital requirements for long-term obligations[311] Critical Accounting Policies The company's critical accounting policies involve significant estimates and assumptions, particularly in revenue recognition under ASC 606, accounting for Shuya's reclassification, and valuation of Series E preferred shares and purchase price allocations - Revenue recognition follows ASC 606, applying a five-step model to identify contracts, performance obligations, transaction price, allocation, and recognition[314][317] - For CETY Renewables' EPC projects, revenue is recognized over time using the input method, based on efforts or inputs to satisfy performance obligations[323][332] - The accounting for Shuya involved a change from equity method to consolidation as a VIE in 2023, and then back to equity method in 2024, requiring significant judgment in fair value estimates for assets acquired and liabilities assumed[343][345][348] Future Financing The company plans to continue relying on equity sales of common shares to fund operations, which will result in dilution for existing stockholders, with no assurance of securing additional financing for future activities - The company will continue to rely on equity sales of common shares for funding, leading to dilution for existing stockholders[350] - There is no assurance of securing additional equity sales or other financing for future activities[350] Off-Balance Sheet Arrangements The company has no significant off-balance sheet arrangements that are material to its financial condition or results of operations - The company has no significant off-balance sheet arrangements[352] Recently Issued Accounting Pronouncements The company believes that recently issued accounting standards not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption - Recently issued accounting standards not yet effective are not expected to have a material impact on financial statements upon adoption[353] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, Clean Energy Technologies, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide market risk disclosures[354] ITEM 4. CONTROLS AND PROCEDURES The company's disclosure controls and procedures were deemed ineffective as of June 30, 2025, with no material changes in internal control over financial reporting during the period Evaluation of Disclosure Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025 - Disclosure controls and procedures were not effective as of June 30, 2025[355] Changes in Internal Control over Financial Reporting There were no material changes in the company's internal control over financial reporting during the six months ended June 30, 2025 - No material changes in internal control over financial reporting during the six months ended June 30, 2025[356] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits ITEM 1. LEGAL PROCEEDINGS The company is not currently involved in any legal proceedings that management believes would have a material adverse effect on its financial position or results of operations - No current legal proceedings are expected to have a material adverse effect on the company's financial position or results of operations[358] ITEM 1A. RISK FACTORS The company refers to the risk factors detailed in its Annual Report on Form 10-K and registration statement on Form S-3, noting that these or other unknown factors could materially impact its business or financial results - Refer to the Annual Report on Form 10-K (filed April 14, 2025) and registration statement on Form S-3 (filed March 13, 2025) for detailed risk factors[359] - Additional unknown or immaterial risk factors may also impair the business or results of operations[359] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During the period, the company issued a significant number of common shares through unregistered sales, primarily as commitment shares for financing agreements and conversions of convertible promissory notes, under specific registration exemptions - Between April and June 2025, the company issued common stock as commitment shares for financing agreements with Pacific Pier Capital II and Lucas Ventures[360][361][363][366] - In May 2025, 10,731,704 common shares were sold to various investors for $4,400,000 in gross proceeds via a Subscription Agreement[362] - Numerous common shares were issued to Mast Hill and 1800 Diagonal through conversions of convertible promissory notes, utilizing the Section 3(a)(9) exemption[362][363][364][365][366][367][368][369] ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities during the reporting period - No defaults upon senior securities[370] ITEM 4. MINE SAFETY DISCLOSURES Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[370] ITEM 5. OTHER INFORMATION There is no other information to report in this section - No other information to report[371] ITEM 6. EXHIBITS This section lists all exhibits filed or furnished as part of the Quarterly Report on Form 10-Q, including corporate governance documents, various securities purchase agreements, convertible promissory notes, warrants, and certifications, along with interactive data files - Exhibits include corporate governance documents (Articles of Incorporation, Bylaws), numerous securities purchase agreements and convertible promissory notes with various lenders (e.g., Mast Hill, 1800 Diagonal Lending, Pacific Pier Capital II, FirstFire Global Opportunities Fund, LLC), and related warrants[374][375][376][377][378][380] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14 and Section 906 of the Sarbanes-Oxley Act are filed[379] - Interactive Data Files (Inline XBRL) are furnished, but are not deemed filed for liability purposes under certain sections of the Securities Act and Exchange Act[379]