What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-14 compared with 2025-05-20 · 119 added, 55 removed, 160 unchanged (52% of the section changed)

30 unchanged sentences

Corporate Changes

On April 13, 2022, the Company, Mighty Fire Breaker, LLC, an Ohio limited liability company (“MFB Ohio”), Mighty Fire Breaker, LLC, a California limited liability company (“MFB California”) and Mr.

Steven Conboy, the sole member of MFB California, entered into a Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company (i) acquired all membership interests of MFB California, (ii) acquired all intellectual property owned by MFB California and Mr.

Conboy, (iii) issued 166,667 shares of Series C Convertible Preferred Stock, par value of $0.0001 per share of the Company (“Series C Convertible Preferred Stock”), valued at $4,200,000 at closing to Mr.

Conboy and (iv) agreed to provide a 10% royalty to Mr.

Conboy on gross sales before taxes of the MFB Ohio product.

Effective June 25, 2024, the Company formed and organized a wholly owned subsidiary, GEVI Insurance Holdings Inc., an Ohio corporation (“GEVI Insurance”), to enter the wildfire insurance markets utilizing the Company’s flame retardant and flame suppression product.

Effective February 21, 2025, the Company formed MFB Insurance Company, Inc., a Hawaii corporation and organized it as a wholly owned subsidiary of GEVI Insurance to act as a captive insurance company to enter the wildfire insurance market.

Effective February 21, 2025, the Company formed MFB Insurance Company, Inc., a Hawaii corporation (“MFBI”) and organized it as a wholly owned subsidiary of GEVI Insurance to act as a captive insurance company to enter the wildfire insurance market.

MFBI was formed to act as a captive insurance company to reinsure real property protected with the Company’s CitroTech product.

MFBI is not currently able to reinsure real property.

Results of Operations

The following summary of our results of operations should be read in conjunction with our unaudited interim financial statements for the three months ended March 31, 2025 and 2024, which are included herein.

The following summary of our results of operations should be read in conjunction with our unaudited interim financial statements for the three and six months ended June 30, 2025 and 2024, which are included herein.

The Company is in the early stage of developing and commercializing their product lines.

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Therefore, period over period comparisons of our results of operations are not indicative of future results.

The following summary of our results of operations should be read in conjunction with our audited financial statements for the three months ended March 31, 2025 and 2024, which are included herein.

Our results of operations for the three months ended March 31, 2025 and 2024 are summarized below:

The following summary of our results of operations should be read in conjunction with our audited financial statements for the three and six months ended June 30, 2025 and 2024, which are included herein.

Our results of operations for the three months ended June 30, 2025 and 2024 are summarized below:

Three Months Ended

Operating expenses

Other expenses

$ (10,903,404 )

Other expense

$ (11,904,019 )

1 unchanged sentence

The Company’s revenue is associated with revenue from MFB Ohio which acquired intellectual property to fire suppression in April 2022.

During the three months ended March 31, 2025, the revenue increased $536,000 from the three months ended March 31, 2024, largely due to the adoption of our technology by the marketplace, including the sale of homebased wildfire defense systems, commercial and fire department chemical sales, and directly spraying residential properties due to the wildfire concerns.

During the three months ended June 30, 2025, the revenue increased $489,000 from the three months ended June 30, 2024, largely due to the adoption of our technology by the marketplace, including the sale of homebased wildfire defense systems, commercial and fire department chemical sales, and directly spraying residential properties due to the wildfire concerns.

Our revenues consisted of the following:

3 unchanged sentences

Product installation services commenced in the second quarter of 2024.

Our revenues from significant customers for the three months ended March 31, 2025 and 2024, are as follows:

Percentage of products sale

Percentage of installation service

For three months Ended

Total (as a group)

Our revenues from significant customers for the three months ended June 30, 2025 and 2024, are as follows:

Three months ended

Number of customers (more than 10% revenue)

Total revenue of top 5 customers

We do not have major sales from recurring customers for the three months ended June 30, 2025 and 2024.

Operating Expenses

15 unchanged sentences

Total cost of revenue

During the three months ended March 31, 2025, the cost of revenue increased over the three months ended March 31, 2024, primarily due to an increase in cost of inventory and royalty and sales commissions.

During the three months ended June 30, 2025, the cost of revenue increased over the three months ended June 30, 2024, primarily due to an increase in cost of inventory and rent expense.

Cost of inventory consists of product costs, related supplies and direct testing of our CitroTech product and various components required to for installation of Mighty Fire Breaker proactive wildfire defense systems.

Cost of inventory increased during the three months ended March 31, 2025, primarily due to an increase in product sales and supplies from increased sales.

Cost of inventory increased during the three months ended June 30, 2025, primarily due to an increase in product sales and supplies from increased sales.

Freight and shipping relate to costs for shipping products to customers.

Consulting and advisory services are to a related party company for services related to product installations.

Royalty and sales commissions was $0, in the three months ended June 30, 2025.

The Company recognized an allocated portion of consulting and direct labor costs associated with our revenue as royalty and sales cost of revenue during 2024.

In March 2025, the Company entered into a new management contract and is no longer paying for consulting, advisory and royalty fees.

Rent expenses are warehouse rent expenses.

The increase in rent expense is primarily because the Company leased a larger commercial space for office, retail and warehousing from April 2025 and the cancelation of one of our warehouse leases in May 2025.

Amortization and depreciation

Amortization and depreciation expenses are an amortization of patents and a depreciation of vehicle, and furniture and equipment.

General and administrative

General and administrative expenses are office, rent, travel, insurance, website, IT and other office related expenses.

For the three months ended June 30, 2025, the Company incurred increased expenditures on our website and IT development and travel as well as general office and insurance expenses from expansion of operations.

Advertising and marketing

The decrease in advertising and marketing during the three months ended June 30, 2025, over the three months ended June 30, 2024, is primarily due to stock-based service compensation of $160,000 in 2024.

Excluding stock based compensation, advertising marketing expense increased due to support revenue growth.

Professional fees

The professional fees during the three months ended June 30, 2025, primarily included various professional fee for accounting and audit related to SEC filing, legal on patents and other consulting services in 2025.

The professional fees during the three months ended June 30, 2024, primarily included stock-based service compensation of $200,000 to consultants for corporate advisory and accounting and audit related to SEC filing, legal on patents and other consulting services in 2024.

The decrease in professional fees during the three months ended June 30, 2025, over the three months ended June 30, 2024, is primarily due to reduced stock-based service compensation.

Payroll and management compensation

During the three months ended June 30, 2025, management compensation primality included stock-based management compensation of $1,867,000 to our management and cash payments of $325,000 to our management, and payroll to our employees of $142,000.

During the three months ended June 30, 2024, there was no payroll and management compensation.

Other Expenses

For the three months ended June 30, 2025 and 2024, the other expenses consisted of $765,000 and $0 interest related to convertible notes payable issued in 2025 and 2024, respectively, change in fair value of derivative liability related to convertible notes payable issued in 2025 and 2024 of $3.0 million and $0, respectively, financing expense of $2.5 million and $0, respectively, and loss on settlement of debt from conversion of debt of $2.6 million and $0, respectively.

Financing expense is from 69,007 shares of Series C Convertible Preferred stock issued to a Series A Preferred Shareholder in 2025.

The net loss for the three months ended June 30, 2025, increased by approximately $11.0 million as compared to the three months ended June 30, 2024 primarily due to the increase in operating expenses and other expense offset by the increase in revenue.

Our results of operations for the six months ended June 30, 2025 and 2024 are summarized below:

Six months ended

Operating expenses

Other expenses

$ (22,807,423 )

$ (4,427,114 )

$ (18,380,309 )

The Company’s revenue is associated with revenue from MFB Ohio which acquired intellectual property to fire suppression in April 2022.

During the six months ended June 30, 2025, the revenue increased $1.0 million from the six months ended June 30, 2024, largely due to the adoption of our technology by the marketplace, including the sale of homebased wildfire defense systems, commercial and fire department chemical sales, and directly spraying residential properties due to the wildfire concerns.

Our revenues consisted of the following:

Six months ended

Products sale

Product installation service

Product installation services commenced in the second quarter of 2024.

Our revenues from significant customers for the six months ended June 30, 2025 and 2024, are as follows:

Six months ended

Number of customers (more than 10% revenue)

Total revenue from our top 5 customers

We do not have major sales from recurring customers for the six months ended June 30, 2025 and 2024.

Operating Expenses

Six months ended

Cost of revenue

Amortization and depreciation

General and administration

Advertising and marketing

Payroll and management compensation

Professional fees

Total operating expenses

The increase in operating expenses was primarily attributed to increases in cost of revenue and payroll and management compensation.

Cost of revenue

Six months ended

Cost of inventory

Freight and shipping

Consulting and advisory-related party

Royalty and sales commission-related party

Total cost of revenue

During the six months ended June 30, 2025, the cost of revenue increased over the six months ended June 30, 2024, primarily due to an increase in cost of inventory, rent and royalty and sales commissions.

Cost of inventory increased during the six months ended June 30, 2025, primarily due to an increase in product sales and supplies from increased sales.

Freight and shipping relate to costs for shipping products to customers.

Royalty and sales commissions increased in the three months ended March 31, 2025 from more revenue.

The Company recognizes an allocated portion of consulting and direct labor costs associated with our revenue as royalty and sales cost of revenue.

In March 2025, the Company entered int new contract and there is no longer royalty.

Consulting and advisory services are to a related party company for services related to product installations.

Royalty and sales commissions increased in the six months ended June 30, 2025, from more revenue.

The Company recognized an allocated portion of consulting and direct labor costs associated with our revenue as royalty and sales cost of revenue in 2024 and during the first quarter of 2025.

In March 2025, the Company entered into a new contract and there is no longer consulting and advisory and royalty.

Rent expenses are warehouse rent expenses.

The increase in rent expense is because the Company leased commercial space for office, retail and warehousing from March 2024 under a one-year contract.

Amortization and depreciation

2 unchanged sentences

General and administrative expenses are office, rent, travel, insurance, website, IT and other office related expenses.

For the three months ended March 31, 2025, the Company incurred increased expenditures on our website and IT development and travel as well as general office and insurance expenses from expansion of operations.

For the six months ended June 30, 2025, the Company incurred increased expenditures on our website and IT development and travel as well as general office and insurance expenses from expansion of operations.

Advertising and marketing

The increase in advertising and marketing during the three months ended March 31, 2025, over the three months ended March 31, 2024, is primarily due to an increase in expenses to support revenue growth.

The decrease in advertising and marketing during the six months ended June 30, 2025, over the six months ended June 30, 2024, is primarily due to stock-based service compensation of $160,000 in 2024.

Excluding stock based compensation, advertising marketing expense increased due to support revenue growth.

Professional fees

The professional fees during the three months ended March 31, 2025, primarily included stock-based compensation of $2.1 million to a related party consultant (TC Special Investments, LLC (“TCSI”)) and various professional fee for accounting and audit related to SEC filing, legal on patents and other consulting services in 2025.

The professional fees during the three months ended March 31, 2024, primarily included stock-based management compensation of $1.4 million to advisors to our subsidiary MFB and stock-based compensation of $1.0 million to various consultants for IT service for software development, legal on patents and other consulting services in 2024.

The professional fees during the six months ended June 30, 2025, primarily included stock-based compensation of $2.1 million to a related party consultant (TC Special Investments, LLC (“TCSI”)) and various professional fees for accounting and audit related to SEC filings, legal on patents and other consulting services in 2025.

The professional fees during the six months ended June 30, 2024, primarily included stock-based management compensation of $1.4 million to advisors to our subsidiary MFB and stock-based compensation of $1.2 million to various consultants for IT service for software development, legal on patents and other consulting services in 2024.

TCSI’s consulting services to the Company include sales and business development, customer relationship management, strategy optimization, investor relations, underwriter interface, coordinating outside counsel and other business aspects at the request of the Board of Directors.

1 unchanged sentence

Payroll and management compensation

During the three months ended March 31, 2025, management compensation primality included stock-based management compensation of $410,000 to a management of subsidiary and cash payments of $142,000 to our former CEO, and payroll to our employees of $76,203.

During the three months ended March 31, 2024, management compensation primality included cash payment of $25,000 to our former CEO.

During the six months ended June 30, 2025, management compensation primality included stock-based management compensation of $2.3 million to our management and cash payments of $467,000 to our management, and payroll to our employees of $218,000.

During the six months ended June 30, 2024, management compensation primality included cash payment of $25,000 to our former CEO.

Other Expenses

For the three months ended March 31, 2025 and 2024, the other expenses consisted of $473,000 and $1,000 interest related to convertible notes payable issued in 2024, respectively, change in fair value of derivative liability related to convertible notes payable issued in 2024 of $805,000 and $0, respectively, financing expense of $6.2 million and $0, respectively, and loss on settlement of notes payable and convertible note issued in 2022 of $0 and $882,000, respectively.

Financing expense is 4 million warrants granted to a financial advisor in 2025.

The net loss for the three months ended March 31, 2025, increased by approximately $7.4 million as compared to the three months ended March 31, 2024 primarily due to the increase in operating expenses and other expense offset by the increase in revenue.

For the six months ended June 30, 2025 and 2024, the other expenses consisted of interest expense related to convertible notes payable issued in 2025 and 2024 of $1.2 million and interest expense related to convertible notes issued in 2022 and 2023 and promissory notes issued in 2024 of $1,000, respectively, change in fair value of derivative liability related to convertible notes payable issued in 2025 and 2024 of $3.8 million and $0, respectively, financing expense of $8.7 million and $0, respectively, and loss on settlement of debt of $2.6 million and $882,000, respectively.

Settlement of debt in 2025 is conversion of convertible notes issued in 2024 and settlement of debt in 2024 is settlement of notes payable and convertible note issued in 2022.

Financing expense is 4 million warrants granted to a financial advisor and 69,007 shares of Series C Convertible Preferred stock issued to a Series A Preferred Shareholder in 2025.

The 4 million warrants were subsequently cancelled by the financial advisor subsequent to June 30, 2025.

The net loss for the six months ended June 30, 2025, increased by approximately $18.4 million as compared to the six months ended June 30, 2024 primarily due to the increase in operating expenses and other expense offset by the increase in revenue.

Liquidity and Capital Resources

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Since our inception, we have incurred significant operating losses and negative cash flows from our operations.

Our net loss was $10.9 million and $3.5 million for the three months ended March 31, 2025 and 2024, respectively.

During the three months ended March 31, 2025, we completed a debt offering and an equity offering which generated net proceeds of approximately $3.7 million and $0.3 million respectively.

Our net loss was $22.8 million and $4.4 million for the six months ended June 30, 2025 and 2024, respectively.

During the six months ended June 30, 2025, we completed a debt offering and an equity offering which generated net proceeds of approximately $3.7 million and $0.3 million respectively.

Working capital

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Working capital (deficiency)

As of March 31, 2025 and December 31, 2024, the current assets consisted of cash of $3.7 million and $775,000, respectively, inventory of $312,000 and $325,000, respectively accounts receivable of $746,000 and $317,000, respectively, prepaid expenses and other current assets of $61,000 and $74,000, respectively, and deferred offering costs of $149,000 and $126,000, respectively.

As of March 31, 2025 and December 31, 2024, the current liabilities consisted of accounts payable and accrued liabilities of $530,000 and $187,000, respectively, convertible notes net of discount of $542,000 and $196,000, respectively, convertible note – related parties of $783,000 and $577,000, respectively, accrued interest – related parties of $31,000 and $0, respectively financing loan of $0 and $97,000, respectively, derivative liability of $2.9 million and $1.1 million, respectively, and current portion of operating lease liability of $29,000 and $50,000, respectively.

The increase in working capital in 2025 was primarily due to an increase in cash and accounts receivable offset by an increase in the convertible notes and derivative liability related to convertible notes.

$ (2,022,295 )

$ (1,477,890 )

As of June 30, 2025 and December 31, 2024, the current assets consisted of cash of $2.3 million and $775,000, respectively, inventory of $410,000 and $325,000, respectively accounts receivable of $654,000 and $317,000, respectively, prepaid expenses and other current assets of $206,000 and $74,000, respectively, and deferred offering costs of $185,000 and $126,000, respectively.

As of June 30, 2025 and December 31, 2024, the current liabilities consisted of accounts payable and accrued liabilities of $533,000 and $187,000, respectively, deferred revenue of $95,000 and $0, respectively, convertible notes net of discount of $278,000 and $196,000, respectively, convertible note – related parties of $932,000 and $577,000, respectively, due to related party of $96,000 and $0, respectively financing loan of $0 and $97,000, respectively, derivative liability of $3.7 million and $1.1 million, respectively, and current portion of operating lease liability of $139,000 and $50,000, respectively.

The increase in working capital deficiency in 2025 was primarily due to an increase in the convertible notes and derivative liability related to convertible notes offset by an increase in cash and accounts receivable.

The Company had net loss and negative cash flows from our operations.

In 2025, the Company generated funds from more debt financing than equity financing, however, the carrying value of convertible notes included of unamortized debt discount of $4.6 million.

Considering this unamortized discount, the Company still had capital deficiency of $4.6 million as of March 31, 2025.

For the three months ended March 31, 2025 and 2024

Three months ended

In 2025, the Company generated funds from more debt financing than equity financing.

For the six months ended June 30, 2025 and 2024

Six months ended

Cash used in operating activities

$ (1,925,536 )

$ (1,157,011 )

Cash used in investing activities

3 unchanged sentences

We have not generated positive cash flows from operating activities.

For the three months ended March 31, 2025, net cash flows used in operating activities consisted of a net loss of $10.9 million, reduced by stock-based compensation of $2.8 million, financing expense of $6.2 million, non-cash lease expenses of $21,000, amortization and depreciation of $75,000, amortization of debt discount of $377,000, and changes in derivative liability of $805,000, which were increased by net changes in operating assets and liabilities of $24,000.

For the three months ended March 31, 2024, net cash flows used in operating activities consisted of a net loss of $3.5 million, reduced by stock-based compensation of $1.7 million, non-cash lease expenses of $20,000, amortization and depreciation of $64,000, loss on settlement of debt of $882,000 and increased by net changes in operating assets and liabilities of $188,000.

For the six months ended June 30, 2025, net cash flows used in operating activities consisted of a net loss of $22.8 million, reduced by stock-based compensation of $4.7 million, financing expense of $8.7 million, non-cash lease expenses of $86,000, amortization and depreciation of $151,000, amortization of debt discount of $1 million, loss on settlement of debt of $2.6 million and changes in derivative liability of $3.8 million, and increased by net changes in operating assets and liabilities of $101,000.

For the six months ended June 30, 2024, net cash flows used in operating activities consisted of a net loss of $4.4 million, reduced by stock-based compensation of $2.8 million, non-cash lease expenses of $39,000, amortization and depreciation of $127,000, loss on settlement of debt of $882,000 and increased by net changes in operating assets and liabilities of $148,000.

Investing Activities

For the three months ended March 31, 2025, the cash flows used in investing activities were $27,000, which was related to the purchase of equipment.

The Company did not use any funds for investing activities during the three months ended March 31, 2024.

For the six months ended June 30, 2025, the cash flows used in investing activities were $168,000, which was related to the purchase of property and equipment.

The Company did not use any funds for investing activities during the six months ended June 30, 2024.

Financing Activities

For the three months ended March 31, 2025, net cash provided by financing activities consisted of $260,000 proceeds from the issuance of Series C Convertible Preferred Stock, $3.7 million from the issuance of convertible promissory notes and associated warrants, $23,000 deferred offering cost payment, and repayment of a financing loan of $216,000.

For the six months ended June 30, 2025, net cash provided by financing activities consisted of $260,000 proceeds from the issuance of Series C Convertible Preferred Stock, $3.7 million from the issuance of convertible promissory notes and associated warrants, $59,000 deferred offering cost payment, repayment of a financing loan of $216,000 and repayments to related party of $25,000.

The basic terms of the convertible promissory notes issued in 2025 are:

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The associated warrants are exercisable for a period of 5 years from the issuance date, for an aggregate of up to 5,093,750 shares at an exercise price of $0.50.

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 six months ended June 30, 2024, net cash provided by financing activities consisted of $165,000 proceed from issuance Series C Preferred Stock, $695,000 advances received from eleven (11) lenders in cash for issuance of convertible promissory notes and warrants, $35,000 deferred offering cost payment and $60,000 repayment of loan -related party.

Contractual Obligations

Convertible notes

In third and fourth quarter 2024 and first quarter 2025, the Company entered into thirty-one (31) subscription agreements for convertible notes ($3,371,000) and warrants (4,213,750 shares of common stock).

In first quarter 2025, the Company entered into eleven (11) subscription agreements for convertible notes ($2,075,000) and warrants (2,593,750 shares of common stock).

The material terms of this convertible note indebtedness are, (i) a 12-month maturity;

10 unchanged sentences

The obligations of the Company under the convertible note are secured by a pledge of the Company’s membership interests in MFB Ohio.

In the event of a default, related party G could proceed against the equity of MFB Ohio pledged to collateralize the convertible note.

In the event of a default, the noteholder could proceed against the equity of MFB Ohio pledged to collateralize the convertible note.

MFB Ohio owns the Company’s intellectual property portfolio.

1 unchanged sentence

The Company has one lease classified as an operating lease for an office and warehouse purpose.

The following table outlines maturities of our lease liabilities as of March 31, 2025:

Year ending December 31,

2025 (remaining four months)

The following table outlines maturities of our lease liabilities as of June 30, 2025:

2025 - remaining six months

Imputed interest

15 unchanged sentences

Critical Accounting Estimates

Our unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”), which require management to make estimates, judgments and assumptions that affect the amounts reported in our unaudited consolidated financial statements and accompanying notes.

Our unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), which require management to make estimates, judgments and assumptions that affect the amounts reported in our unaudited consolidated financial statements and accompanying notes.

We believe our most critical accounting estimates relate to the following:

25 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis