CETY — Q2 2026 Financial Report Analysis

Revenue up 57% from low-margin China gas trading, but cash was down to $19,735 at quarter-end and the clean-energy businesses sold almost nothing

Clean Energy Technologies (CETY), based in Irvine, California, describes itself as a clean-energy company: it sells heat-recovery generators that turn waste heat into electricity, is developing a waste-to-energy plant in Vermont, and offers engineering services. In practice, almost all of its revenue now comes from a fourth line of business — trading natural gas in China — which earns very thin margins.

In the second quarter of 2026 (April–June), revenue rose 57% to $371,936, but gross profit fell to $17,619 from $223,657 because last year's sales were high-margin project work and this year's were gas trades. The net loss was $1.07 million, about the same as a year ago. The company ended June with $19,735 in cash, and the filing says there is substantial doubt it can continue as a going concern.

At a glance

• Gross margin collapsed to 4.7% from 94.7%. For the half-year, 98.5% of revenue ($1.14M of $1.16M) came from China gas trading; heat recovery sold $16,977 and waste-to-energy sold nothing.
• $19,735 of cash against $7.83M of current liabilities. The company says its working-capital shortfall is only $37,355, but that relies on counting a $2.35M receivable from its own Vermont joint venture and a $2.05M note receivable as near-term assets.
• The share count has tripled in a year. Weighted shares were 12.17M this quarter versus 3.72M a year earlier (after a 1-for-15 reverse split in October 2025), so the loss per share fell to $0.09 from $0.27 even though the dollar loss was slightly larger.

The quarter in numbers

Gross margin is the share of revenue left after the direct cost of what was sold. Operating margin is what's left after running the business, before interest and tax — here, the company spent about $2 on overheads for every $1 of revenue.

Where the revenue came from (first half of 2026)

The 10-Q breaks segments out only for the six months:

Management attributes the drop in heat-recovery sales to long sales cycles, customers moving to project-financed models, and uncertainty over federal clean-energy tax credits. The waste-to-energy segment had no revenue because the Vermont plant is still "pending final review by the Vermont Public Utility Commission"; last year's revenue there was billed to that same project (Vermont Renewable Gas, 49% owned by CETY). Half-year gas trading produced only $23,308 of gross profit on $1.14M of sales.

Revenue also fell from the first quarter: Q1 2026 was $783,705 (six-month total minus Q2), so Q2 was down about 53% quarter on quarter.

What the headline numbers hide

• Going-concern warning, and almost no cash. The filing states "there is substantial doubt about the ability of the Company to continue as a going concern" — i.e. that it can keep operating without new money. In the first half, operations used $1.66M of cash and the note purchase described below another $0.70M; $2.05M of new borrowing (less $0.46M of repayments) didn't fully cover that, and cash fell from $602,461 at the start of the year to $19,735 at the end of June.
• Funding is coming from small, expensive convertible notes. After quarter-end, CETY sold four more convertible notes (July 1 to August 7) with $624,750 of face value for about $529,000 of net cash. The Pacific Pier note becomes convertible after six months at 85% of the lowest recent daily average price, and the Coventry and 1800 Diagonal notes convert on the same kind of discount if CETY defaults — a structure where the lender gets more shares the lower the stock goes, which tends to put pressure on the price and dilute existing shareholders. Interest and financing fees already rose 28% this quarter.
• The half-year result is propped up by paper gains. Other income for the six months was $638,073, including a $406,197 fair-value gain on a convertible note CETY bought in January and $138,082 of interest accrued but not received on it (at 20% a year). That note is valued with "significant unobservable inputs" (Level 3 — no market price exists). Without those two items, the half-year loss would have been about $2.28M instead of $1.74M.
• That note was bought partly with shares, from a party that then joined the board. CETY paid about $700,000 in cash plus 1,932,000 new shares for part of a convertible bond issued by China Ruifeng Renewable Energy Holdings. A principal of the seller, Filled Converge, joined CETY's board on June 16, 2026, making it a related party.
• Two large assets are not cash and haven't moved. Other assets include a HK$25M (about $3.2M) "refundable deposit" paid in July–August 2025 to Linkage International — one of the investors in CETY's May 2025 $4.4M share placement — toward a possible acquisition of an Italian business, on top of a $640,903 non-refundable consulting fee to the same firm. Management concluded no write-down was needed; the fallback if the deposit isn't refunded is that 715,447 CETY shares are returned for cancellation. Separately, the $2.35M receivable from the Vermont joint venture has been unchanged since December. Together these two items ($5.55M) are almost equal to total shareholders' equity of $5.99M.
• Inconsistencies within the filing. The note on the 2025 sale of Chinese gas affiliate Shuya says it was part of a plan "to exit natural gas trading operations in China," yet China gas trading is now nearly all of revenue. And one note says CETY gave a corporate guarantee on a $12M construction loan to the Vermont project, while another says it "has not guaranteed any indebtedness" of that project. The filing doesn't reconcile either point.
• A record of late and restated filings. CETY filed late-filing notices for its 2025 annual report and for both 2026 quarterly reports. On June 5, 2026 it filed the 2025 10-K together with restated versions of its 2024 annual report and all three 2025 quarterly reports, which is why this quarter's comparison figures are labelled "restated." Management concluded its disclosure controls were "not effective" as of June 30, 2026.
• Cost cuts are real but small. Operating expenses fell 18%, mainly lower salaries ($276,742 vs $439,469) as fewer staff were needed on the Vermont project; professional fees rose on higher audit costs.

Takeaway: The 57% revenue growth is the wrong number to focus on. CETY's revenue now comes almost entirely from thin-margin gas trading, its clean-energy products sold almost nothing, it had $19,735 of cash at the end of June, and it is relying on small discounted convertible loans to keep going — with going-concern language, ineffective controls and a history of restatements on top.

Outlook

Management says it "anticipates stronger revenue contributions from its Waste-to-Energy, Heat Recovery, and EPC segments with higher margins" and that heat-recovery demand "is accelerating across both the U.S. and Europe," but it gives no figures or dates. The clearest catalyst is the Vermont Public Utility Commission's decision on the Vermont Renewable Gas plant: approval would let construction billing (and possibly collection of the $2.35M receivable) start; a further delay would leave the company dependent on new financing.

Our read: the third-quarter 10-Q (due mid-November) should be checked for three things — whether cash was rebuilt or the going-concern language got stronger, how many new shares were issued as the convertible notes come due, and whether the $3.2M Hong Kong deposit is refunded or written down.