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 The Company’s U.S. subsidiary, Mighty Fire Breaker LLC (“MFB”) is engaged in developing solutions to support the resolution of the insurance crisis in the western United States by use of its EPA approved CitroTech products. MFB has developed and patented additional intellectual property in this regard, such as a system for commercial properties and homes that puts a fire inhibiting buffer zone around a property, blocking blown-in embers from igniting. The technology continues to work dry, which unlike other products allows for early deployment and evacuation of people. MFB also has developed a job site trailer allowing for the fire protection of property during the construction phase and fire hardening of the inner construction and installation of our patented system during that phase. The intent is for the home owner to be able to bind insurance to start a construction project. The Company has achieved USDA approval. It has sold products to various fire departments and continues to demonstrate a market for its products. 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 March 31, 2024, which are included herein. 18 Table of Contents Our operating results for the three months ended March 31, 2024, and 2023 and the changes between those periods for the respective items are summarized as follows: Results of Operations for the three months ended March 31, 2024, and the three months ended March 31, 2023 Three Months Ended March 31, 2024 2023 Change Revenue $ 433,018 $ 55,595 $ 377,423 Operating expenses $ 2,979,692 $ 395,177 $ 2,584,515 Other expense $ 883,164 $ 175 $ 882,989 Net loss $ (3,519,710) $ (353,611) $ (3,166,099) Revenue The Company’s revenue is associated with revenue from MFB which acquired intellectual property to fire suppression in April 2022. The cost of revenue was $89,872 and 13,854 for three months ended March 31, 2024 and 2023, respectively. Operating Expenses Three months ended March 31, 2024 2023 Change Stock-based management compensation $ 1,422,750 $ - $ 1,422,750 Stock -based compensation 975,250 - 975,250 Professional fees -related party 88,800 85,000 3,800 Professional fees 185,330 210,129 (24,799 ) Marketing expenses 110,205 11,602 98,603 Depreciation 63,835 264 63,571 General and administrative expenses 133,522 88,182 45,340 $ 2,979,692 $ 395,177 $ 2,584,515 The increase in operating expenses was primarily attributed to stock -base management compensation of $1,422,750, stock-based services companion of $975,250, marketing expenses of $98,603, depreciation of $63,571 and general and administrative expenses of $45,340. Other Expenses For the three months ended March 31, 2024, and 2023, the other expenses consisted of $885 and $175 interest related to convertible note payable and loss on settlement of debt of $882,279 and $0, respectively. Net Loss As a result of the foregoing, we incurred a net loss of $3,519,710, for the three months ended March 31, 2024, compared to a net loss of $353,611 for the corresponding three months ended March 31, 2023. 19 Table of Contents Liquidity and Capital Resources March 31, December 31, 2024 2023 Change Cash $ 371,095 $ 549,755 $ (178,660 ) Current Assets $ 1,252,314 $ 1,218,056 $ 34,258 Current Liabilities $ 1,461,385 $ 1,617,785 $ (156,400 ) Working Capital (Deficiency) $ (209,071 ) $ (399,729 ) $ 190,658 The increase in working capital in 2024 was primarily the result of an increase in accounts receivable of $253,532, prepaid expenses of $792 and a decrease in cash of $178,660 and inventory of 41,406 offset by an increase in accounts payable and accrued liabilities of $15,685, operating lease liability -current portion of $1,915, a decrease in promissory note of $120,000 and convertible note of $54,000. As of March 31, 2024, and December 31, 2023, the current assets consisted primarily of cash of $371,095 and $549,755, inventory of $188,791 and $230,197, accounts receivable of $680,965 and $427,433, and prepaid expenses of $11,463 and 10,671, respectively. As of March 31, 2024, and December 31, 2023, the current liabilities consisted of accounts payable and accrued liabilities of $70,257 and $54,572, due to related party of $1,309,077 and $1,309,077, convertible note of $0 and $54,000, promissory note of $0 and $120,000 and current portion of operating lease liability of $82,051 and $80,136, respectively. Cash Flows Three months ended March 31, 2024 2023 Cash used in operating activities $ (343,660) $ (176,905) Cash provided by investing activities $ - $ - Cash provided by financing activities $ 165,000 $ 185,000 Net Change in Cash $ (178,660 ) $ 8,095 Cash Flows from Operating Activities We have not generated positive cash flows from operating activities. For the three months ended March 31, 2023, net cash flows used in operating activities was $343,660, consisting of a net loss of $3,519,710, reduced by stock-based compensation of $2,398,000, non-cash lease expenses of $19,602, depreciation of $63,835, loss on settlement of debt of $882,279 and increased by changes in operating assets and liabilities of $187,666. For the three months ended March 31, 2023, net cash flows used in operating activities was $176,905, consisting of a net loss of $353,611, reduced by stock-based compensation of $86,850, depreciation of $264, non-cash lease expenses of $15,000 and reduced by changes in operating assets and liabilities of $75,592. Cash Flows from Investing Activities The Company did not use any funds for investing activities during the three months ended March 31, 2024, and 2023. Cash Flows from Financing Activities For the three months ended March 31, 2024, net cash provided by financing activities consisted of $165,000 proceed from issuance Series C Preferred Stock. For the three months ended March 31, 2023, net cash provided by financing activities consisted of $185,000 received from a related party. 20 Table of Contents 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. Our most critical accounting policies and estimates relate to the following: ● Revenue Recognition ● Incremental borrowing rate for Right of Use Assets ● Share based compensation Revenue Recognition Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied. Our revenues currently consist of products used for lumber products for fire prevention. Revenue is recognized at a point in time, that is which the risks and rewards of ownership of the products transfer from the Company to the customer. All of our performance obligations under the terms of contracts with our customers have an original duration of one year or less. Incremental borrowing rate for Right of Use Assets As the Company’s operating leases typically do not provide an implicit rate, the Company estimates its incremental borrowing rate. The assessment of the Company’s incremental borrowing rate involves judgment regarding the cost of borrowing funds on a collateralized basis over a similar term and in a similar economic environment. 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. 21 Table of Contents 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.