CitroTech Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS This report contains forward-looking statements. The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. We caution that the factors described herein, and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Our audited financial statements are stated in United States Dollars (USD) and are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report. In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock. As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean General Enterprise Ventures, Inc. General Overview General Enterprise Ventures, Inc. (the “Company”) was originally incorporated under the laws of the State of Nevada on March 14, 1990. On January 15, 2021, the Company filed a Certificate of Conversion from a Non-Delaware Corporation to a Delaware Corporation, and the associated Certificate of Incorporation, to become a corporation in Delaware. Delaware recognized this domestication of the Company. On March 31, 2021, the Company formed General Entertainment Ventures, Inc. (“GEVI”) in Delaware as a wholly owned subsidiary of the Company. The purpose of the formation of GEVI was to merge the Company into GEVI pursuant to Section 251(g) of the General Corporation Law of the State of Delaware. On April 10, 2021, after approval by the board of directors and shareholders of the Company, the Company was merged into GEVI pursuant to an Agreement and Plan of Merger dated as of the same date. GEVI is the accounting and legal acquiror of the Company. 17 Table of Contents On June 3, 2021, after approval by the board of directors and shareholders of the Company, the Company was redomiciled to the State of Wyoming. On October 11, 2021, after approval by the board of directors and shareholders of the Company, the Company was renamed General Enterprise Ventures, Inc., in the State of Wyoming. On April 13, 2022, the Company acquired Mighty Fire Breaker LLC ("MFB”), in exchange for 1,000,000 shares of Series C Convertible Preferred Stock. MFB was formed to hold intellectual property pertaining to the fire suppression segment of the environmental industry, which included patents and patents pending, On April 13, 2022, The Company designated 5,000,000 shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”). The Series C Preferred Stock is convertible into twenty (20) shares of Common Stock for each share of Series C Preferred Stock at the option of the stockholder. The Series C Preferred Stock does not have voting rights and is not eligible to receive dividends. On April 28, 2022, Jan Ralston transferred ownership of 10,000,000 shares of Series A Convertible Preferred Stock to CEO, Joshua Ralston, making Mr. Ralston the Shareholder with majority voting control. Current Operations Fully Integrated Services We are a fully integrated technology company structured to provide mergers and acquisitions of new and available technology. Through our services, we incubate first-to-market products and help existing companies accelerate their product development within all regulatory requirements. Corporate changes On April 13, 2022, the Company acquired Mighty Fire Breaker LLC ("MFB”), in exchange for 1,000,000 shares of Series C Convertible Preferred Stock. MFB was formed to hold intellectual property pertaining to the fire suppression segment of the environmental industry, which included patents and patents pending,. MFB has 18 granted patents as well as 17 U.S. and worldwide patents pending centered around it’s CitroTech MFB 31 Technology for the prevention and spread of wildfires, mapping and tracking and other associated technologies. Its core products can be used as vegetation and lumber treatments for fire prevention and is in development of uses for it’s green technologies. It has been widely tested and approved by three major US government agencies. When CitroTech is sprayed and applied it takes flammable fuels like dry native vegetation and wood and makes them non-combustible. During the third quarter of 2022, MFB received EPA Safer Choice status and UL Green-Guard Gold approval on its CitroTech fire inhibitor as well as California Aquatic approval as non-toxic and non-hazardous. MFB continues to pursue additional accreditations, such as USDA Missoula Testing approval, for selling products to governmental entities. Currently, MFB is involved in installing large home and facility Proactive Wildfire Prevention Systems as well as providing it’s products to various entities for proactive wildfire defense spraying. MFB continues to pursue and do business with retail chains selling both DIY home systems and its CitroTech non-toxic non-hazardous chemistry. On October 2 nd 2023 Mighty Fire Breaker LLC won the EPA Safer Choice Partner of the Year Award. The Company continues to work towards a revenue model and advancements in IP. Effective April 1, 2022, the Company implemented a plan to divest its Crypto Mining operations and focus resources on the operations of MFB. We expanded our services by building upon its foundation of emerging technology development, by creating a Crypto-Currency mining operation (farm). Previously, the Company had 20 Bitmain Antminer SJ19 PRO 104t/h and 99 Mini-Doge 185 m/h miners deployed, which are mining, Bitcoin, Doge, and Litecoin through the F2Pool and utilized its 8,000 Sq Ft Commercial space to house these ASIC Miners. Effective November 20, 2022, the Company formed a UK branch of its US subsidiary MFB, named Mighty Fire Breaker UK Limited. The subsidiary headquartered in the United Kingdom, will be used to direct the sales of the Mighty Fire Breaker line of products and technologies in Europe, the Middle East and Africa. 18 Table of Contents Results of Operations The following summary of our results of operations should be read in conjunction with our unaudited interim financial statements for the period ended September 30, 2023, which are included herein. Our operating results for the three and nine months ended September 30, 2023 and 2022 and the changes between those periods for the respective items are summarized as follows: Results of Operations for the three months ended September 30, 2023 and the three months ended September 30, 2022 Three Months Ended September 30, 2023 2022 Change Revenue $ 174,710 $ 19,033 $ 155,677 Operating expenses 9,156,070 314,224 8,841,846 Other expense 1,760 76 1,684 Net loss $ (9,023,003 ) $ (297,065 ) $ 8,997,523 Net loss $ (9,023,003 ) $ (297,065 ) $ (8,725,938 ) Revenue Our Company generated $174,710 and $19,033 revenue for the three months ended September 30, 2023 and 2022, respectively. The Company’s revenue is associated with revenue from MFB which acquired intellectual property to fire suppression in April 2022. Operating Expenses Operating expenses consisted of $189,508 cash paid for professional fees and $146,562 for general and administrative expenses and non-cash stock-based compensation of $8,820,000 in the three months ended September 30, 2023. Whereas, for the three months ended September 30, 2022, we paid cash for professional fees of $111,783 and general and administrative expenses of $202,441 and had no stock-based compensation expenses. The increase in operating expenses during the three-month period ended 2023, is due to the valuations of preferred and common stock issued to a consultant and directors of the Company, respectively, and using quoted closing common stock prices from the OTCMarkets. The Company issued 1,200,000 shares of Preferred C stock, for professional fees to a related party consultant, which is valued as if they are fully converted to 24 million shares of common stock on issuance, and based on closing stock prices resulted in an accounting valuation of $8,640,000. The Company issued 250,000 shares of common stock to each of the two directors of the Company and using quoted stock values resulted in a non-cash compensation expense of $180,000. Other Expenses For the three months ended September 30, 2023 and 2022, the other expenses consisted of $1,760 and $76 interest related to convertible note payable, respectively. Net Loss As a result of the foregoing, we incurred a net loss of $9,023,003, for the three months ended September 30, 2023, compared to a net loss of $297,065 for the corresponding three months ended September 30, 2022. 19 Results of Operations for the nine months ended September 30, 2023 and the nine months ended September 30, 2022 Nine Months Ended September 30, 2023 2022 Change Revenue $ 258,660 $ 60,501 $ 198,159 Operating expenses 9,930,183 2,717,531 7,212,652 Other expenses 2,519 76 2,443 Net loss from continuing operations $ (9,732,672 ) $ (2,658,904 ) $ 7,467,643 Income from discontinued operations - 13,016 (13,016 ) Loss on disposition of digital currency and digital currency assets - (2,030 ) 2,030 Net income from discontinued operations, net of tax $ - $ 10,986 $ (10,986 ) Net loss $ (9,732,672 ) $ (2,647,918 ) $ (7,084,754 ) Revenue Our Company generated $258,660 and $60,501 revenue for the nine months ended September 30,2023 and 2022, respectively. The Company’s revenue is associated with the commencement of revenue from MFB, which acquired intellectual property to fire suppression in April 2022. Operating Expenses Operating expenses consisted of $749,155 cash paid for professional fees and $361,028 for general and administrative expenses and non-cash stock-based compensation of $8,966,850 in the nine months ended September 30, 2023. Whereas, for the nine months ended September 30, 2022, we paid cash for professional fees of $334,249 and general and administrative expenses of $283,282 and calculated $2,100,00 in stock-based compensation expenses. The increase in operating expenses during the period ended 2023, is due to the valuations of preferred and common stock issued to a consultant and directors of the Company, respectively, and using quoted closing prices from the OTCMarkets. The Company issued 1,200,000 shares of Preferred C stock, for professional fees to a related party consultant, which is valued as if it is fully converted to 24 million shares of Common stock on issuance, and based on closing prices, resulted in an accounting valuation of $8,640,000. The Company issued 250,000 common shares to each of the two directors of the Company using quoted values resulted in a non-cash stock-based compensation expense of $180,000. The 2022 stock-based compensation expenses were associated with the issuance of 70,000,000 restricted common stock units as compensation. Other Expenses For the nine months ended September 30, 2023 and 2022, the other expenses consisted of $1,760 and $76 interest related to convertible note payable, respectively. Discontinuing Operating Expenses During the nine months ended September 30, 2022, loss on discontinued operations of $2,030 was the result of a loss on disposition of the Company’s digital currency assets, including equipment and digital currency, against a note payable issued as consideration for the equipment when it was previously acquired. During the nine months ended September 30, 2022, income from discontinued operations of $13,016 was the result of the net income from the operations of crypto mining and the disposition of crypto mining which the Company implemented a plan to divest its crypto mining operations to focus its resources on the MFB operations. Net Loss As a result of the foregoing, we incurred a net loss of $9,732,672, for the nine months ended September 30, 2023, compared to a net loss of $2,647,918 for the corresponding nine months ended September 30, 2022. 20 Liquidity and Capital Resources September 30, December 31, 2023 2022 Change Cash $ 565,867 $ 55,434 $ 510,433 Current Assets $ 947,683 $ 170,319 $ 777,364 Current Liabilities $ 1,722,087 $ 1,060,918 $ 661,169 Working Capital (Deficiency) $ (774,404 ) $ (890,599 ) $ 116,195 The increase in working capital in 2023 was primarily the result of an increase in cash of $510,433, accounts receivable of $182,308, inventory of $70,033 and prepaid expenses of $14,590 offset by an increase due to related party of $508,528, promissory note of $120,000, convertible note of $19,000. As of September 30, 2023, and December 31, 2022, the current assets consisted primarily of cash of $565,867 and $55,434, inventory of $184,678 and $114,645, accounts receivable of $182,308 and $0, and prepaid expenses of $14,830 and 240, respectively. As of September 30, 2023, and December 31, 2022, the current liabilities consisted of accounts payable and accrued liabilities of $62,156 and $87,398, due to related party of $1,407,681 and $899,153, convertible note of $54,000 and $35,000, promissory note of $120,000 and $0 and current portion of operating lease liability of $78,250 and $39,367, respectively. Cash Flows Nine Months Ended September 30, 2023 2022 Cash used in operating activities $ (819,936 ) $ (506,731 ) Cash used in Investing Activities $ (2,231 ) $ (5,350 ) Cash provided by financing activities $ 1,332,600 $ 563,764 Net Change in Cash $ 510,433 $ 51,683 Cash Flows from Operating Activities We have not generated positive cash flows from operating activities. For the nine months ended September 30, 2023, net cash flows used in operating activities was $819,936, consisting of a net loss of $9,732,672, reduced by stock-based compensation of $8,966,850, non-cash lease expenses of $52,058, depreciation $871 and increased by changes in operating assets and liabilities of $107,043. For the nine months ended September 30, 2022, net cash flows used in operating activities was $506,731, consisting of a net loss of $2,647,918, reduced by management compensation of $2,100,000 associated with the issuance of 70,000,000 shares of common stock as compensation, loss on disposition of digital currency and digital currency assets of $2,030, impairment loss on digital assets of $6,125, depreciation of $15,326, non-cash lease expenses of $29,647 and increased by changes in operating assets and liabilities of $11,941. Cash Flows from Investing Activities For the nine months ended September 30, 2023 and 202, the cash flows used in investing activities were $2,231 and $5,350, which was related to the purchase of equipment, respectively. Cash Flows from Financing Activities For the nine months ended September 30, 2023, net cash provided by financing activities consisted of $305,000 received from a related party, $907,600 from preferred stock subscriptions and $120,000 from promissory note. For the nine months ended September 30, 2022 net cash provided by financing activities consisted of $584,484 received from a related party, $35,000 from convertible note and $55,720 repaid to a related party. 21 Going Concern The accompanying consolidated financial statements have been prepared (i) in accordance with accounting principles generally accepted in the United States, and (ii) assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated significant income to date. The Company is subject to the risks and uncertainties associated with a business with no substantive revenue, as well as limitations on its operating capital resources. These matters, among others, raise substantial doubt about the ability of the Company to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. In light of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to raise capital and generate revenue and profits in the future. Critical Accounting Policies The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements. Share-Based Compensation The Company accounts for employee and non-employee stock awards under ASC 718, Compensation – Stock Compensation, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to nonemployees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. Equity grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Off-balance sheet arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. Item 3. Quantitative and Qualitative Disclosures About Market Risk As a “smaller reporting company”, we are not required to provide the information required by this Item.