Clean Energy Technologies, Inc.: Form 10-Q for the period ended Jun 30, 2026

FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements using the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Description of the Company

We design, produce and market clean energy products and integrated solutions focused on energy efficiency and renewable energy. Our aim is to become a leading provider of renewable and energy efficiency products and solutions by helping commercial companies and municipalities reduce energy waste and emissions, lower energy costs and generate incremental revenue by providing electricity, renewable natural gas and biochar to the grid.

Our principal executive offices are located at 1340 Reynolds Avenue, Irvine, CA 92614. Our telephone number is (949) 273-4990. Our common stock is listed on the NASDAQ Markets under the symbol “CETY.”

Our internet website address is www.cetyinc.com (http://www.cetyinc.com) the information contained on our websites are not incorporated by reference into this document, and you should not consider any information contained on, or that can be accessed through, our website as part of this document.

Segment Information

Our four segments for accounting purposes are:

Clean Energy HRS & CETY Europe – Our Waste Heat Recovery Solutions, converting thermal energy to zero emission electricity.

CETY Renewables Waste to Energy Solutions – Providing Waste to Energy technologies and solutions.

Engineering and Manufacturing Business – providing customers with comprehensive design, manufacturing, and project management solutions.

CETY HK – The parent company of our Natural Gas trading operations in China. Prior to the first quarter of 2022 the Company had three reportable segments but added the CETY HK segment to reflect its recent new businesses in China.

We specialize in renewable energy & energy efficiency systems design, manufacturing and project implementation. We were incorporated in California in July 1995 under the name Probe Manufacturing Industries, Inc. We redomiciled to Nevada in April 2005 under the name Probe Manufacturing, Inc. We provided engineering and manufacturing electronics services to original equipment manufacturers (OEMs) of clean energy, industrial, automotive, semiconductor, medical, communication, military, and high technology products.

With the vision to combat climate change and creating a better, cleaner and environmentally sustainable future, we formed Clean Energy HRS, LLC a wholly owned subsidiary of Clean Energy Technologies, Inc. and acquired the assets of Heat Recovery Solutions from General Electric International on September 11, 2015. In November 2015, we changed our name to Clean Energy Technologies, Inc. We have 24 full-time employees.

Clean Energy Technologies, Inc. established a new company, CETY Europe, SRL (CETY Europe) as a wholly owned subsidiary. CETY Europe is a Sales and Service Center in Silea (Treviso), Italy established in 2017. The service center became operational in November 2018. Their offices are located at Alzaia Sul Sile, 26D, 31057 Silea (TV) and they have 1 full time employee.

Clean Energy Technologies, Inc. established a wholly owned subsidiary called CETY Capital, a financing arm of CETY to fund captive renewable energy projects producing low carbon energy. CETY Capital will add flexibility to the capacity CETY offers its customers and fund projects utilizing its products and clean energy solutions.

CETY Capital retains 49% ownership interest in Vermont Renewable Gas LLC established to develop a biomass plant in Vermont utilizing CETY’s High Temperature Ablative Pyrolysis system.

Clean Energy Technologies (H.K.) Limited., a wholly owned subsidiary of Clean Energy Technologies Inc. acquired 100% ownership of Leading Wave Limited a liquid natural gas trading company in China.

Business Overview

General

The Company’s business and operating results are directly affected by changes in overall customer demand, operational costs and performance and leverage of our fixed cost and selling, general and administrative (“SG&A”) infrastructure.

Product sales fluctuate in response to several factors including many that are beyond the Company’s control, such as general economic conditions, interest rates, government regulations, consumer spending, labor availability, and our customers’ production rates and inventory levels. Product sales consist of demand from customers in many different markets with different levels of cyclicality and seasonality.

Operating performance is dependent on the Company’s ability to manage changes in input costs for items such as raw materials, labor, and overhead operating costs. Performance is also affected by manufacturing efficiencies, including items such as on time delivery, quality, scrap, and productivity. Market factors of supply and demand can impact operating costs.

Who We Are

We develop renewable energy products and solutions and establish partnerships in renewable energy that make environmental and economic sense. Our 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. We target sustainable energy solutions that are profitable for us, profitable for our customers and represent the future of global energy production.

Our principal businesses

Waste Heat Recovery Solutions – we recycle wasted heat produced in manufacturing, waste to energy and power generation facilities using our patented Clean CycleTM generator to create electricity which can be recycled or sold to the grid.

Waste to Energy Solutions - we convert waste products created in manufacturing, agriculture, wastewater treatment plants and other industries to electricity, renewable natural gas (“RNG”), hydrogen and biochar which are sold or used by our customers.

Engineering, Consulting and Project Management Solutions – we bring a wealth of experience in developing clean energy projects for municipal and industrial customers and Engineering, Procurement and Construction (EPC) companies so they can identify, design and incorporate clean energy solutions in their projects.

CETY HK

Clean Energy Technologies (H.K.) Limited (“CETY HK”) consists of two business ventures in mainland China:(i) our natural gas (“NG”) trading operations sourcing and suppling NG to industries and municipalities. Natural Gas is principally used for heavy truck refueling stations and urban or industrial users. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are prepaid for in advance at a discount to the market. We sell the NG to our customers at fixed prices or prevailing daily spot prices for the duration of the contracts.

Business and Segment Information

We design, produce and market clean energy products and integrated solutions focused on energy efficiency and renewable energy. Our aim is to become a leading provider of renewable and energy efficiency products and solutions by helping commercial companies and municipalities reduce energy waste and emissions, lower energy costs and generate incremental revenue by providing electricity, renewable natural gas and biochar to the grid.

Summary of Operating Results the six months ended June 30, 2026 Compared to the same period in June 30, 2025 (Restated)

Going Concern

The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s equity of $5,990,022 and a working capital deficit of $37,355 as of June 30, 2026, The company also had an accumulated deficit of $37,035,080 as of June 30, 2026 and used $1,664,648 in net cash from operating activities for the six months ended June 30, 2026. Therefore, there is substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.

For the six months ended June 30, 2026, total revenue was $1,155,641, compared to $678,215 for the same period in 2025. The increase was primarily attributable to higher revenue generated by our natural gas business in China.

For the six months ended June 30, 2026, our gross profit was $3,689, compared to $635,535 for the same period in 2025. The decrease in gross profit and gross margin was primarily attributable to a shift in our revenue mix, with a greater proportion of revenue generated by our lower-margin natural gas business, as well as the absence of higher-margin clean energy system sales during the period.

For the six months ended June 30, 2026, our operating expenses were $1,479,117, compared to $1,766,687 for the same period in 2025. The decrease in operating expenses was primarily attributable to lower salary and related personnel costs as fewer resources were required for our Vermont Renewable Gas (“VRG”) projects, which are progressing into the final phase of the permitting process.

For the six months ended June 30, 2026, we recorded a net loss of $ 1,735,079, compared to $1,699,754 for the same period in 2025. The net loss remained relatively steady year-over-year, reflecting reduced salary expenses, while professional fees increased from $333,318 to $449,420.

For the quarter ended June 30, 2026, stockholders’ equity decreased to $5,990,022 compared to $6,246,597 as of December 31, 2025, primarily due to higher interest and financing fees.

CETY has successfully repositioned itself as a diversified clean energy solutions provider by establishing four distinct business segments designed to support scalable, stable, and diversified revenue growth. These segments include:

• Clean Energy HRS (Heat Recovery Systems)
• Waste-to-Energy (via Pyrolysis Technology)
• Engineering, Procurement, and Consulting (EPC)
• CETY HK (Natural Gas Trading and Acquisitions)

Revenue for the first and second quarter was primarily driven by the CETY HK natural gas trading business. Looking ahead, the company anticipates stronger revenue contributions from its Waste-to-Energy, Heat Recovery, and EPC segments with higher margins.

CETY’s pilot Waste-to-Energy facility in Vermont, which integrates all of the company’s proprietary technologies and operational expertise into a unified, turnkey solution, is currently pending final approval from the Vermont Public Utility Commission.

Meanwhile, demand for Heat Recovery solutions is accelerating across both the U.S. and Europe. In parallel, CETY is actively scaling its Engineering and project management operations to deliver comprehensive self-generation energy solutions on a global scale.

Management believes this 4-segment strategy has created many operational synergies and cross-selling opportunities across different markets. The main macro factor benefiting us is the global commitment to push renewable energy to the forefront from governments across the world. Another catalyst that will potentially help our Company, is a continuously improving our global supply chain and lowering our cost.

CETY expects to and will continue to execute its corporate strategy to build sustained and profitable growth by providing end to end fully integrated solutions and technologies, expand our global sales and marketing, production, research & development, as well as search for synergistic acquisition opportunities.

See note 2 to the notes to the financial statements for a discussion on critical accounting policies

RELATED PARTY TRANSACTIONS

See note 13 to the notes to the financial statements for a discussion on related party transaction

Results of the Six Ended June 30, 2026, Compared to the six ended June 30, 2025 (Restated)

Net Sales

For the six months ended June 30, 2026, our total revenue was $1,155,641 compared to $678,215 for the same period in 2025. The higher revenue was contributed to primarily due to our China natural gas business.

Segment breakdown

For the six months ended June 30, 2026, our revenue from the Heat Recovery Solutions (HRS) segment was $16,977, compared to $339,488 for the same period in 2025. The decrease was primarily driven by no product sales from our HRS business unit. We continue to work diligently on current requirements and engineering and design, which will enable us to execute contractual agreements and close additional opportunities.

The sales cycle for these projects tends to be longer due to cost considerations and the integration complexity of our technology. We are also engaging with financial institutions to support project financing, as customers increasingly adopt Independent Power Producer (IPP) models. Additionally, general economic uncertainty and evolving federal clean-energy legislation, and investment tax credits have influenced the timing of certain project commitments.

For the six months ended June 30, 2026, revenue from the Waste to Energy segment was $0, compared to $331,597 for the same period in 2025. The segment generated no revenue during the period as the related projects remain pending final review by the Vermont Public Utility Commission and issuance of the Certificate of Public Good. Revenue-generating construction activities are expected to commence following receipt of the required regulatory approvals.

For the six months ended June 30, 2026, CETY reported nil revenue from its Manufacturing and Engineering segments, compared to nil for the same period in 2025. This segment is still in its early stages and much of the related activity is currently being integrated into the HRS and CETY Renewables segments. However, with a developing pipeline of opportunities, CETY expects to see gradual revenue growth from this segment.

For the six months ended June 30, 2026, revenue from our Natural Gas (NG) business was $1,138,664 an increase from $7,130 for the same period in 2025. The increase primarily reflects higher revenue from our China natural gas business, despite the impact of macroeconomic conditions and our strategic decision to reduce our focus on lower-margin business activities.

Gross Profit

For the six months ended June 30, 2026, gross profit was $3,689, compared to $635,535 for the same period in 2025. The decrease was primarily attributable to the absence of sales of our higher-margin clean energy systems during the period, combined with a greater proportion of revenue generated by our natural gas business in China, which operates at lower gross margins.

Segment breakdown

For the six months ended June 30, 2026, our gross profit from Engineering and Manufacturing amounted to $nil, compared to $ nil for the same period in 2025. This segment is a recent addition to CETY’s portfolio, currently serving as a support for our ongoing internal projects. Nevertheless, it is anticipated to expand as CETY shifts its focus towards providing comprehensive end-to-end power generation and integrated solutions.

For the six months ended June 30, 2026, we had a negative gross profit from our Heat Recovery Solutions (“HRS”) segment of $19, 620 compared to $303,699 for the same period in 2025. The decrease in gross profit was primarily attributable to the absence of product sales during the period, combined with higher freight costs.

For the six months ended June 30, 2026, our gross profit from the CETY Waste to Energy segment was $nil, compared to $331,597 for the same period in 2025. The Company is working through the Certificate of Public Good (CPG) process and approach the final stages of permitting.

For the six months ended June 30, 2026, our gross profit from our Natural Gas segment, was $23,308, up from $239 for the same period in 2025. This increase was primarily due to increase business activity in China.

Selling, General and Administrative (SG&A) Expenses

For the six months ended June 30, 2026, our selling, general and administrative (SG&A) expenses totaled $1,479,117 compared to $1,766,687 for the same period in 2025. The decrease was primarily due to lower costs associated with a consulting agreement related to IR activities and Nasdaq subscription.

Salaries Expense

For the six months ended June 30, 2026, our salary expenses totaled $571,175 compared to $873,268 for the same period in 2025. The decrease was primarily due to reduced activity within our CETY Renewables business, while salary levels across other segments remained relatively stable.

Travel Expense

For the six months ended June 30, 2026, our travel expenses were $78,157, compared to $79,737 for the same period in 2025. This slight decrease reflects stable activity levels within our service and marketing operations.

Professional fees legal and accounting

For the six months ended June 30, 2026, our professional fees totaled $449,420 compared to $333,319 for the same period in 2025. The increase was primarily due to costs associated with a audit fees.

Facility Lease and Maintenance Expense

For the six months ended June 30, 2026, our facility lease and maintenance expenses totaled $130,181 compared to $133,399 for the same period in 2025. This slight decrease reflects normal fluctuations, with no significant changes in underlying operations.

Depreciation and Amortization Expense

For the six months ended June 30, 2026, our depreciation and amortization expense was $5,938, compared to $5,938 for the same period in 2025. There were no significant changes, as the majority of our equipment has already been fully depreciated.

Change in Derivative Liability

For the six months ended June 30, 2026 and 2025, we recorded gains from changes in fair value recognized in earnings of $283,640 and $112,672, respectively. The increase in derivative liability was primarily due to the issuance of new convertible instruments and mark-to-market adjustments resulting from changes in our stock price and volatility. These fair value remeasurements are required each reporting period in accordance with ASC 815.

Change in FV of warrant liability

For the six months ended June 30, 2026 and 2025, we had $5,828 and $13,893 gain on warrant liability related to Equity Line of Credit Agreement entered December 5, 2024.

Interest Income

For the six months ended June 30, 2026, interest income from Florya associated with contract assets totaled $31,120 compared to $28,418 for the same period in 2025 (Restated).

Interest income included in other income consists primarily of interest earned on the Company’s convertible note receivable. During the six months ended June 30, 2026, the Company recognized $138,082 of interest income related to the accrual of interest under the terms of the convertible note agreement.

Other Income

Other income includes a gain of $406,197 resulting from the remeasurement of the Company’s investment in the Filled Converge convertible note to its estimated fair value of $1,910,489.

Interest and Finance Fees

For the six months ended June 30, 2026, interest and finance fees totaled $1,177,937, compared to $865,734 for the same period in 2025. The increase was primarily due to two larger interim financings obtained to bridge the Company through the finalization of funding for the Vermont Renewable Gas Project and monetizing HRS projects.

Net Loss

For the six months ended June 30, 2026, our net loss was $1,735,079, compared to a net loss of $1,699,803 for the same period in 2025 (Restated). The increase in net loss was primarily attributable to the absence of higher-margin sales from our Heat Recovery Solutions (“HRS”) segment, a shift in revenue mix toward our lower-margin China natural gas business, changes in Fv convertible, and lower gross margins during the period, and interest and financing fee variations. Although operating expenses declined due to reduced personnel costs associated with our Vermont Renewable Gas (“VRG”) projects as they progressed through the final permitting phase, these savings were not sufficient to offset the decline in gross profit.

Liquidity and Capital Resources

Clean Energy Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

for the six months ended June 30,

(unaudited)

Net cash used in operating activities was $(1,664,648) for the six months ended June 30, 2026, compared to $(1,540,526) for the same period in 2025. The increase in cash used in operating activities was primarily attributable to the Company’s operating loss and interest receivable, and other assets. These uses of cash were partially offset by non-cash items, including amortization of debt discount and the fair value gain recognized on the Company’s note receivable, as well as increases in accounts payable, accrued interest, customer deposits, and accrued expenses.

Net cash used in investing activities was $(702,769) for the six months ended June 30, 2026, compared to $nil for the same period in 2025. The increase in cash used in investing activities was primarily attributable to the Company’s $700,000 investment in a note receivable and a $2,768 investment in a long-term investment during the current period.

Net cash provided by financing activities was $1,783,373 for the six months ended June 30, 2026, compared to $5,903,311 for the same period in 2025. The decrease was primarily attributable to lower net proceeds from notes payable and lines of credit during the period.

Capital Requirements for Long-Term Obligations

None.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the six months ended June 30, 2026, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of June 30, 2026.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the six months ended June 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.