NOTE 15 – VARIABLE INTEREST ENTITY

On April 2, 2023, the Company formed CETY Capital LLC (“CETY Capital”), a wholly owned subsidiary of the Company. In addition, the Company, through CETY Capital, established Vermont Renewable Gas LLC (“VRG”) with its partner, Synergy Bioproducts Corporation (“SBC”). The purpose of the joint venture is the development of a pyrolysis plant located in Lyndon, Vermont, designed to convert wood feedstock into electricity and biochar using a high-temperature ablative fast pyrolysis reactor for which the Company holds a license. Pursuant to the terms of the members’ agreement, CETY Capital owns a 49% interest in VRG and SBC owns a 51% interest.

The Company evaluated its interest in VRG under ASC 810, Consolidation, and determined that VRG is a variable interest entity (“VIE”) because VRG does not have sufficient equity at risk to finance its activities without additional financial support. The Company further evaluated whether it is the primary beneficiary of VRG. Under the VRG operating agreement, VRG is governed by a three-member Management Committee, of which two members are appointed by SBC and one member is appointed by CETY Capital. Based on the governance provisions of the operating agreement and the parties’ respective rights and obligations, the Company determined that it does not have the power to direct the activities of VRG that most significantly impact VRG’s economic performance and, therefore, is not the primary beneficiary of VRG. Accordingly, the Company does not consolidate VRG.

The Company’s 49% ownership interest in VRG is accounted for under the equity method of accounting in accordance with ASC 323, Investments — Equity Method and Joint Ventures. The Company has made no capital contributions to VRG, and the carrying amount of the Company’s ownership interest in VRG was $0 as of June 30, 2026.

As of June 30, 2026, the Company had a receivable from VRG of approximately $2.4 million, recognized in connection with the Company’s input-method accounting and included in Accounts Receivable – Related Party in the accompanying consolidated balance sheet. The Company had no liabilities recognized on its consolidated balance sheet related to its variable interest in VRG as of June 30, 2026.

The Company has not guaranteed any indebtedness or other obligations of VRG and, as of June 30, 2026, had no contractual commitments to provide additional financial support to VRG. The Company’s maximum exposure to loss associated with its involvement with VRG as of June 30, 2026 was approximately $2.4 million, representing the carrying amount of the Company’s receivable from VRG.