What changed in Clean Energy Technologies, Inc.'s 10-K — 2023 vs 2024

Item 1. Business 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 turnkey energy solutions leveraging advanced technologies by delivering eco-friendly green 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 Cycle TM 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 bio char which are sold or used by our customers.

Engineering, Consulting and Project Management Solutions – We provide power generation, waste to energy, and heat recovery Engineering, Procurement and Construction (EPC) services to to municipal and industrial customers and to 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, operated through our PRC Subsidiaries and Shuya. The NG 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 market.

We sell the NG to our customers at prevailing daily spot prices for the duration of the contracts; and (ii) our planned joint venture with a large state-owned gas enterprise in China called Shenzhen Gas (Hong Kong) International Co. Ltd. (“Shenzhen Gas”), acquiring natural gas pipeline operator facilities, primarily located in the southwestern part of China.

Our planned joint venture with Shenzhen Gas plans to acquire, with financing from Shenzhen Gas, natural gas pipeline operator facilities with the goal of aggregating and selling the facilities to Shenzhen Gas in the future.

According to our Framework Agreement with Shenzhen Gas, we will be required to contribute $8 million to the joint venture which plans to raise in future rounds of financing. The terms of the joint venture are subject to the execution of definitive agreements.

CETY HK has not commenced business with Shenzhen Gas due to macro-economic factors such as falling NG prices and reduced industrial demand.

CETY HK will wait until macro economic factors have improved before commencement of the Shenzhen Gas joint venture . 6 Our Business Strategy Our strategy is focused on further developing our existing Waste Heat Recovery business while expanding into the rapidly growing markets for Waste to Energy Solutions and power generation and integrated clean energy engineering, and project management services.

Our strategy focuses on three main elements: ● Expanding our Waste Heat Recovery product line to include waste heat recovery ORC systems producing over 1 MW of power so we can qualify for midsized and large heat recovery projects in the United States, Europe, and Asia. ● Establishing a Waste to Energy business by selling our ablative thermal processing products based on proprietary HTAP technology and building small and mid-sized waste to energy power plants producing electricity and RNG for the grid and methane, hydrogen and biochar. ● Leveraging our engineering, procurement and manufacturing experience to assist our customers with turnkey energy solutions leveraging advanced technologies.

We intend to implement this strategy through: ○ We have added a new ORC system manufactured by Exergy for Heat Recovery applications that will enable us to implement projects in the markets producing between 1 MW and 10 MW of electricity. ○ To support the growing energy demands of data centers, we have added power generation capabilities to provide immediate and reliable power. ○ Taking advantage of Inflation Reduction act of 2022 federal investment tax credits and state incentives that now include waste heat recover as a recognized clean energy source making our Clean Cycle Generator and ORC systems more profitable to install.

On August 2022, Congress passed the Inflation Reduction act offering 30% Investment Tax Credit and technology neutral tax credits offering clean electricity production credit and investment credit.

CETY’s products directly benefit from these tax credits. ○ Benefiting from lack of energy capacity from the grid and higher energy costs which provide higher returns on our Power Generation, Waste Heat Recovery, and Waste to Energy products and projects. ○ Improving our balance sheet and capital position to permit us to invest in more products and projects. ○ We are establishing a reliable network of global and domestic supply chain partners to drive scalability and cost efficiency in our solutions. ○ Leveraging our existing marketing channels to sell HTAP Waste to Energy products to industrial companies and government agencies. ○ We are collaborating with clean energy project development and finance companies to offer solutions that generate RNG, hydrogen, methane, and biochar from biomass, municipal waste, timber waste, and other organic materials. 7 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.

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 NG 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.

Our Clean Energy Solutions Business Waste Heat Recovery Solutions We provide our customers with power plants that capture wasted heat energy and produce electricity using a unique Organic Rankine Cycle (ORC) system containing our Clean Cycle TM generator.

Our magnetic bearing Integrated Power Modules is at the heart of our Clean Cycle TM generator which can fit into a standard cargo container we call our Containerized System Module, producing 140KW per Clean Cycle generator and can be linked together for projects generating up to 1MW of power.

Our recent agreement with Enertime now permits us to install midsized and large ORC systems (between 1 MW and 10 MW) in the United States, allowing us to offer a full range of ORC systems to our customers.

We believe this new capacity will enable us to expand our product offerings into larger scale waste recovery products in the United States. Enertime is a leader in producing ORC systems in Europe. ORC waste heat recycling systems use pressurized working fluids that have a lower boiling point than water which make them ideal to repurpose waste heat into electricity.

While most manufacturing processes do not produce enough heat to turn water into steam, there is enough heat to generate pressurized refrigerant in our ORC systems which is used to turn a turbine at high speeds to generate electricity.

We can link up to 10 Clean Cycle Generators together which can generate up to 10 GWh of electricity per year from waste heat which we estimate would reduce up to 5000 metric tons of CO2 production per year in an industrial heat recovery system or the annual equivalent of the CO2 emissions of approximately 2000 cars per year. 8 We believe the most important component in any ORC system is the turbine generator because it converts the steam heat into electricity and accounts for approximately 60% of the cost of the system.

The more efficiently the turbine generator works, the better the ORC power plant operates. The remaining components consisting of the low boiling point fluid, condensers, which cool the fluids, the feed pumps, which pressurize the fluids to reduce boiling points and the heat exchangers, which extract the heat from the heat sources.

These are more commoditized products and tend to perform at similar levels of efficiencies at similar price points. We believe our Clean Cycle TM generator is the most efficient turbine generator in it’s class and size available in the market for ORC systems generating up to 1 MW.

We estimate that the Clean Cycle TM generator has higher efficiency of approximately 15% than our competitors and its magnetic design eliminates the use of oils and lubricants, significantly reducing down time, repairs and operating costs.

Our Integrated Power Module is compact and fit into a standard cargo container that can be delivered on a turnkey basis resulting in lower installation and implementation costs than on-site assembly.

We believe these features and benefits give us an important competitive advantage when building heat recovery power plants for our customers and provide us with the opportunity to compete with and obtain market share from the dominant industrial waste heat to power systems.

Over 121 Clean Cycle TM generators have been deployed to date with 88 units used in biomass and waste to energy projects, 4 with diesel electric generators, 3 with turbine electric generators and 26 in industrial electric production applications.

We expect to raise additional funds to expand our capacity to install 6-8 units per year which should approximately double our sales on a year-to-year basis.

The patented technology used in Clean Cycle TM generator was purchased from General Electric International, together with over 100 installation sites, making us one of the leading provider of small-scale industrial waste heat to power systems. We have an exclusive license from Calnetix to use their magnetic turbine for heat waste recovery applications.

Our Integrated Power Module Our Clean Cycle TM Generator 9 A complete ORC System with Integrated Power Module housed in a Containerized System Module (CSM) Waste to Energy Solutions We are adding a new business line in our clean energy solutions segment consisting of Waste to Energy processing equipment, engineering services and Waste to Energy processing power plant joint ventures where we expect to retain an ownership interest in the project.

Waste-to-Energy technologies that process non-renewable waste can reduce environmental and health damages while generating sustainable energy. Waste-to-Energy technologies consist of waste treatment process that creates energy in the form of electricity, heat or fuels from a waste source.

These technologies can be applied to several types of waste: from the biomass (e.g. woodchips) to semi-solid (e.g. thickened sludge from effluent treatment plants) to liquid (e.g. domestic sewage) and gaseous (e.g. refinery gases) waste.

Waste to Energy Solutions can be used: ● In any town, city or province with established waste management and collection. ● Where there is a consistent supply of solid waste. ● Places where treatment costs increase with shortages of space to store waste. ● In areas with high energy prices to allow for cost of recovery from waste .

Waste to Energy Solutions have many benefits: ● Electricity from Waste to Energy plants can be generated from small amounts up to 30 MW providing for a wide range of opportunities to sell it back to the grid. ● The synthetic renewable fuel gas produced from waste can be used for various production recyclable energy such as hot water, thermo-oil or steam, renewable natural gas or hydrogen. ● Landfill waste is reduced and so is leachate and methane released from decomposing landfills. ● Waste is a reliable source of energy and production is typically predictable and low cost whereas fossil fuel prices can fluctuate dramatically. 10 But Traditional Incineration Methods Have Significant Downsides: ● Air pollution can increase because scrubbing technologies are very expensive to install. ● Many industrial, agricultural, and mixed municipal solid wastes have high moisture content at source and direct incineration of such waste requires burning fossil fuel. ● to maintain thermal conversion process. ● Carbon is released into the air which would otherwise be stored in landfill. ● Ash and flue gas cleaning residues from incineration can also cause poisonous leachate problems if not properly disposed of which is costly and causes downstream environmental issues. ● Generating electricity from incineration releases more CO2, SO2, NOx and mercury than natural gas.

(Source: https://www.energyforgrowth.org/memo/waste-to-energy-one-solution-for-two-problems/ ) The most common form of waste to energy systems are based on incinerators which simply burn waste using air. The Thermal Treatment on Grate is the most widespread technology being used by large waste landfills to generate electricity and heat.

These systems produce substantial amounts of ash, heavy metals and carbon dioxide which need to be treated and disposed of to minimize its impact on the environment. They also require substantial amounts of pre-treatments prior to burning.

The Thermal on Grate incineration process, while wide-spread, is too expensive and complex for smaller and mid-sized waste to energy projects creating, what we believe, a significant market opportunity in small and mid-sized waste processing applications to create not only electricity but valuable renewable natural gas, bio diesel oil, hydrogen, methane, and biochar.

Our solution is a patented High Temperature Ablative Pyrolysis (HTAP) Biomass Reactor as viable commercial solution to the costs and environmental problems posed by traditional incarnation methods.

We have the exclusive license and right to sell the HTAP10 and HTAP5 and related products manufactured by Enex which has a proven installed commercial base of customers using its waste to energy solutions.

We believe this is an ideal solution to process waste for small to mid-sized waste to energy generation applications needed for processing industrial and municipality solid waste, agriculture waste, and forestry waste. Pyrolysis systems decompose waste without the use of oxygen under varying pressurized conditions and at temperatures ranging from 300 degrees Celsius and 1,300 degrees Celsius.

The major advantage of pyrolysis is that it is a cost-effective technology and helps curb environmental pollution. Pyrolysis systems are gradually replacing traditional incineration and gaining momentum in the waste to energy processing market addresses many of the pre-treatment issues and, when using high temperature and high-pressure, substantially reduce or eliminates pollutant.

(Source: “Life Cycle Assessment of Waste-to-Bioenergy Processes: a Review” Pooja Ghosh,... Arunaditya Sahay, in Bioreactors, 2020) Pyrolysis systems can produce hydrogen, renewable natural gas, bio-diesel oil, charcoal, and biochar which are used to power hydrogen, diesel, and natural gas engines or electrical turbines which can be sold and often are eligible for substantial tax and pricing benefits.

When compared with the conventional incineration plant that runs in the capacity of kilotons per day, the scale of the pyrolysis plant is more flexible, and the output of pyrolysis can be integrated with other downstream technologies for product upgrading. (Source: Influential Aspects in Waste Management Practices Karthik Rajendran PhD,. Jerry D.

Murphy PhD, in Sustainable Resource Recovery and Zero Waste Approaches, 2019) In addition, BioChar stores and reduces atmospheric CO2 and can be used as a soil conditioner, an organic component of animal feeds, construction materials, wastewater treatment and in textiles.

(Source: https://www.bioenergyconsult.com/applications-of-biochar/) The ablative pyrolysis system is a waste to energy process that largely eliminates pre-treatment and the harmful pollutants and storage waste produced when using standard incineration and other pyrolysis technologies.

It uses high pressure to generate fast pyrolysis and is designed so that the heat transferred from a hot reactor wall softens the feedstock under pressure and permits larger feedstock particles to be processed without pre-treatment. These systems create high relative motion between the reactor wall and the feedstock.

The process avoids the need of inert gas and hence the processing equipment is small and the reaction system is more intense.

(Source: http://biofuelsacademy.org/index.html%3Fp=608.html) 11 CETY has licensed proprietary patented ablative pyrolysis system for commercial use that has been installed in 7 sites for use in waste to energy creating applications processing including peat, coal, flax waste, sawdust and wood scrap, straw, buckwheat husks, and cardboard, tapes, films and paper machine sludge.

The technology has been implemented over 1,500 onsite power generation projects in Russia working with major energy production companies such as Gazprom, Rosneft, Lukoil and Rostelecom as well as completing several projects for customers in the European Union, Middle East and United States.

Due to the conflict in the Ukraine, ENEX is redomiciling and relocating key personnel to Turkey where it will complete an existing project and is expected to wind down its operations. CETY will develop additional ablative technology and expects to manufacture units in the United States.

Sales and European distribution will be run out of a CETY office that has been established in Turkey. CETY has global rights (except Russia and CIS countries) to design, build, manufacture, sell and operate renewable energy and waste recovery facilities HTAP10 and HTAP5 systems and other products and technologies we expect to develop in the future.

The patented HTAP technology utilizes a higher temperature that uses a cleaner gas for the heating process and a more efficient biogas turbine. The units can be customized to produce hydrogen, natural gas, diesel oil and bio char in varying quantities which can be sold or used to produce electricity.

We believe that the key benefits of the HTAP Biomass Reactor are: ● Flexibility in waste sourcing and mixing. ● Customized outputs of hydrogen, synthetic fuels, natural gas, methane, biochar, carbon black, or construction materials. ● Better waste sourcing and mixing flexibility, ● Near-zero emissions, ● Modular design, ● Zero liquid discharge, ● Zero solid waste residue waste. ● Modular, containerize design reducing implementation costs ● Proven commercial implementation.

We are targeting industrial and municipality solid waste, landfill waste, agriculture waste (straw, stems, plant biomass, manure, crop wastage), and forestry waste from tree cuttings and shredded products. We are in the process of identifying projects domestically and internationally for the HTAP Biomass Reactor.

We believe the first project where we expect to implement the HTAP10 technology with Vermont Renewable Gas to develop a biomass renewable energy processing facility. The project is planned for a location in Lyndon, Vermont to convert forest and agriculture biomass waste products to renewably generated electricity and BioChar fertilizer.

We expect to annually deliver up to 18,000 MWh of renewable electricity and 1,500 tons of BioChar. The Vermont Renewable Gas project is one of the many renewable energy processing facilities we plan to commission. 12 ENEX HTAP 10 Waste to Energy Processing Plant.

We established a wholly owned subsidiary called CETY Capital that we expect will help us finance our customers renewable energy projects producing low carbon energy. CETY Capital, when implemented, should add flexibility to the capacity CETY offers its customers and fund projects utilizing its products and clean energy solutions.

The in-house financing arm is expected to support our sales and build new renewable energy facilities. To date we have conducted no material operations in this subsidiary. Our Clean Energy Initiatives in China Natural gas is China’s fastest-growing primary fuel with demand quadrupling in the past decade.

Developing the natural gas sector is a critical aspect China’s effort to reduce reliance on coal. According to the International Energy Agency, China is the world’s sixth-largest natural gas producer, the third-largest consumer, and the second-largest importer. In 2050, the U.S.

Energy Information Administration (EIA) expects China to consume nearly three times as much natural gas as it did in 2018, which was 280.30 b/cm. China’s natural gas consumption accounted for 8.3% of its total energy mix in 2019. China anticipates boosting the share of natural gas as part of total energy consumption to 14% by 2030.

Before COVID 19, China was expected to account for a third of global demand growth through 2022, thanks in part to the country’s “Blue Skies” policy and the strong drive to improve air quality. China’s relatively strong economic recovery from the COVID 19 crisis will probably increase that share.

Natural gas is imported either through pipelines or as liquefied natural gas (LNG) on ships. https://www.axios.com/2018/06/26/china-largest-natural-gas-importer?utm_source=chatgpt.com Liquid Natural Gas in the Chinese energy market produces half as much carbon dioxide, less than a third as much nitrogen oxides, and 1 percent as much sulfur oxides at the power plant compared to the average air emissions from coal-fired generation.

In addition to reduced air emissions, natural gas has other environmental benefits that make it a smart fuel choice. Natural gas-fired power plants use about 60 percent less water than coal plants and 75 percent less water than nuclear power plants for the same electricity output.

(Source: Conoco Phillips) In 2021, we acquired through our subsidiary, CETY Hong Kong, a liquefied natural gas trading operation called Jiangsu Huanya Jieneng (“JHJ”) which sources LNG from large LNG producers and distributors and sells it to non-state-owned industries and downstream customers in mainland China.

CETY also plans to sell its waste heat recovery and waste to energy products in China as well as provide consulting services relating to the same to projects in China.

The JHJ team has more than 10 years of experience in the natural gas and clean energy industry and has maintained relationships and partners with many natural gas enterprises in China. 13 CETY HK NG Trading Operations JHJ’s principal service is to source and supply NG to industries and municipalities located in the southern part of Sichuan Province and portions of Yunnan Province.

The NG is principally used for heavy truck refueling stations and urban or industrial users in areas that do not have a connection to local NG pipeline systems. We purchase large quantities of NG from large wholesale NG depots at fixed prices which are prepaid for in advance at a discount to market.

We sell the NG to our customers at prevailing daily spot prices for the duration of the contracts. Either our sources or customers arrange for delivery of the NG.

Our profitability depends on our ability to purchase NG at volume discounts at the beginning of a season and sell it at a delivered price that is higher than the price we pay.

JHJ traders are experienced NG traders, familiar with the spot and future markets and have relationships with the major users of NG in the areas that we serve. Our customers may be local or may be as far as 700km from each depot. We compete with other NG trading based on availability and price.

Before deciding to purchase, hold, or sell our common stock, you should consider carefully the risks described below in addition to the cautionary statements and risks described elsewhere in this Annual Report and in our other filings with the SEC, including our registration statements and reports on Forms 10-K, 10-Q and 8-K.

The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of these known or unknown risks or uncertainties actually occur, our business, financial condition, results of operations or cash flows could be seriously harmed.

The reduction in net loss for 2024 is primarily attributed to several key factors, including our strategic expansion into higher-margin waste-to-energy business unit, also a reduction in interest and financing fees compared to the previous year. Despite the persistently high interest rates, we are actively exploring more cost-effective financing options moving forward.

Although our financial statements have been prepared under the assumption that we would continue our operations as a going concern, there is substantial doubt about our ability to continue as a going concern, based on our financial statements and results of operations at that time.

Specifically, as noted above, we have experienced losses from operations and negative cash flows from operating activities.

Although our audited financial statements for the years ended December 31, 2024 and 2023, were prepared under the assumption that we would continue our operations as a going concern, the report of our independent registered public accounting firm that accompanies our financial statements for the years ended December 31, 2024 and 2023, contains a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern, based on our financial statements and results at that time.

We expect to continue to incur significant expenses and operating losses for the foreseeable future. These prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition.

In addition, continued operations and our ability to continue as a going concern may be dependent on our ability to obtain additional financing in the near future and thereafter, and there are no assurances that such financing will be available to us at all or will be available in sufficient amounts or on reasonable terms.

Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through sales of our products, financings or from other sources or transactions, we will exhaust our resources and will be unable to continue operations.

As of December 31, 2024, we had current liabilities of $6,438,099 and total current assets of $3,198,091.

WE MAY ONCE AGAIN IN THE FUTURE RELY ON CONTRACTUAL ARRANGEMENTS TO OBTAIN CONTROL OF A VIE, WHICH MAY NOT BE AS EFFECTIVE IN PROVIDING OPERATIONAL CONTROL AS DIRECT OWNERSHIP.

On January 1, 2023, we entered into the CAA with SSET and Xiangyueheng, two other shareholders of Shuya, wherein the three parties agreed to vote in unison at the shareholders’ meeting of Shuya to consolidate the controlling position of the three parties in Shuya.

We relied on such contractual arrangement to gain effective control of Shuya and consolidated Shuya into our consolidated financial statements effective on or after January 1, 2023. After the termination of such contractual arrangements on January 1, 2024, we no longer consolidate Shuya into our consolidated financial statements. See “ Prospectus Summary – Corporate Information ” for details.

However, in the event that we once again employ a similar VIE structure in the future, you should be aware that a controlling financial interest through contractual arrangements is not considered as equal to equity interest and this structure involves unique risks to investors.

If we had more than 50% equity ownership of the VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level.

However, under the contractual arrangement, we relied on the performance by the other external parties of their obligations under the contract to exercise control over the VIE. The other parties may not perform their obligations under the contract.

All of such contractual arrangements are governed by and interpreted in accordance with PRC laws, and disputes arising from these contractual arrangements will be resolved through arbitration or litigation in the PRC. However, the legal system in the PRC is not as developed as in other jurisdictions, such as the United States.

There remain significant uncertainties regarding the outcome of arbitration or litigation. These uncertainties could limit our ability to enforce the contractual arrangement.

In the event we are unable to enforce the terms of contractual arrangement or we experience significant delays or other obstacles in the process of enforcing such agreement, we may not be able to exert control over the VIE and may lose control over the assets owned by the VIE.

Our financial performance may be materially and adversely affected as a result and we may not be eligible to consolidate the financial results of the VIE into our consolidated financial results.

WE ARE NOT CURRENTLY IN COMPLIANCE WITH NASDAQ’S MINIMUM BID PRICE LISTING REQUIREMENT OR NASDAQ’S ANNUAL SHAREHOLDER MEETING LISTING REQUIREMENT; IF WE ARE NOT ABLE TO REGAIN COMPLIANCE WITH THOSE REQUIREMENTS WITHIN THE TIME PERIODS PERMITTED BY NASDAQ, OUR COMMON STOCK MAY BE DELISTED, WHICH WOULD LIKELY IMPAIR OUR ABILITY TO RAISE CAPITAL AND COULD CONSTITUTE AN EVENT OF DEFAULT UNDER OUR OUTSTANDING PROMISSORY NOTES.

On November 5, 2024, the Company received a written notice from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) indicating that the Company was not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market (the “Minimum Bid Price Requirement”).

The Nasdaq listing rules require listed securities to maintain a minimum bid price of $1.00 per share, and, based upon the closing bid price of the Company’s common stock for the prior 30 consecutive business days, the Company no longer met this requirement.

The Nasdaq rules provided the Company a compliance period of 180 calendar days from the date of the notice (or until May 5, 2025) in which to regain compliance with the Minimum Bid Price Requirement.

On January 8, 2025, the Company received a written notice from Nasdaq indicating that the Company was not in compliance with Nasdaq’s annual shareholder meeting requirement as set forth in Listing Rules 5620(a) and 5810(c)(2)(G) (the “Annual Shareholder Meeting Requirement”).

The Nasdaq listing rules require the Company to have an annual meeting of shareholders within twelve months of the end of the Company’s fiscal year end, and the Company has not had an annual meeting within twelve months of the Company’s 2023 fiscal year end as required.

The Nasdaq rules provided the Company 45 calendar days to submit a plan to regain compliance with the Annual Shareholder Meeting Requirement. The Company submitted such plan as required, and on February 27, 2025, Nasdaq provided the Company an extension of until June 3, 2025, to regain compliance with the Annual Shareholder Meeting Requirement.

There is no guarantee that the Company will be able to regain compliance with either the Minimum Bid Price Requirement or the Annual Shareholder Meeting Requirement.