What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-10 compared with 2024-08-12 · 490 added, 95 removed, 32 unchanged (95% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

This Quarterly Report on

Form 10-Q (the “Quarterly 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 Quarterly 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 unaudited 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.

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.

As used in this Quarterly

Report, the terms “we”, “us”, “our” and “our company” mean CitroTech Inc.

We are a specialty chemical company focused on environmentally

friendly fire inhibitor products serving the wildland fire, residential and commercial property protection, and wood products industries

across the United States and Canada.

Our fire inhibitor formulations are also used by the lumber and building materials industry for fire

retardant treatment applications.

The Company’s management team is highly experienced

at building and running companies, as well as commercializing and executing on strategic partnerships for the sale of products and services.

Since Mighty Fire Breaker LLC (“MFB Ohio”)

acquired from Mighty Fire Breaker LLC (“MFB California”) the MFB portfolio of intellectual property on April 13, 2022, our

management team has continued to develop and refine our product formulations.

The Company has received significant third-party recognition

for these efforts, including twice receiving the EPA Safer Choice designation.

Our product is the first and only fire inhibitor recognized

by the EPA as safe for the environment.

We also are the first fire inhibitor to receive UL GREENGUARD Gold certification, which reflects

minimal impact on indoor air quality from toxic smoke over extended exposure.

Our products have been adopted by fire departments throughout

the State of California.

CitroTech has been issued 31 patents and has 56

patents pending.

We are expanding our patent portfolio and technology platform into additional markets that can benefit from environmentally

safe alternatives to legacy fire retardant and fire retardant-treated wood products.

Using this technology, CitroTech has developed products

that help achieve Class-A fire rating for lumber and engineered wood products.

We are in the initial phases of commercializing this product.

In April 2026, CitroTech and Hexion Inc.

formed a 50/50 global joint venture named HexiTech LLC, a Delaware limited liability company

that will work to commercialize the CitroTech product into factory applied lumber and wood products.

This venture will be the Company’s

primary go-to-market channel for this portion of the business.

The Company is also actively deploying proactive

wildfire defense systems on residential and commercial properties under the CitroSafe Systems brand.

CitroSafe Systems are self-contained

sprinkler installations that utilize our patented CitroTech product.

These systems deploy our fire inhibitor in advance of wildfires to

help prevent the advance of fires and reduce structural risk.

In addition to protecting property owners from the ravages of wildfires,

this offering addresses a significant and growing insurance market disruption across the Western United States, where carriers have curtailed

or declined to write wildfire coverage on new construction and are cancelling or not renewing existing policies in the Wildland-Urban

Interface (“WUI”).

WUI is the transitional zone between undeveloped land and built environments that is at elevated risk of

catastrophic wildfire loss.

The Company is working with a large insurance broker to offer insurance coverage to customers who install

a CitroSafe proactive wildfire system, with policies underwritten by established insurance carriers.

This program is currently in the

proof-of-concept phase.

Our management team consists of four individuals:

Bolsen, Chief Executive Officer;

Andrew Hotsko, Chief Operating Officer;

Nanuk Warman, Secretary and Chief Financial Officer;

and Anthony Newton, General Counsel.

Known Trends and Uncertainties

Growth in Fire Safety

We believe that fire safety benefits from several

growth drivers, including increasing fire severity, as measured by higher acres burned, longer fire seasons and a growing urban component

moving into the WUI, resulting in increased demand for specialty chemical fire inhibitors, thereby increasing production.

We believe these

trends are prevalent in North America, as well as globally, and we expect these trends to continue driving growth in demand for fire retardants

and fire retardant treated lumber products.

We have expanded our certified partner network to more than 20 organizations in the second

quarter of 2026 that will install systems and/or apply CitroTech product around homes and in the community.

We are working to grow our fire prevention and

protection business, which is primarily focused on expanding use of ground-applications for long-term fire retardants.

This growth includes

use of ground assets in response to active fires (protection), as well as proactive treatments around critical infrastructure and known

high-risk areas (prevention).

Fire prevention products can be used to help prevent fire ignitions and protect property from potential

fire danger by providing proactive retardant treatment in high-risk areas such as along roadsides, under power lines, along railroad rights-of-way,

and around residential neighborhoods and commercial infrastructure.

Treating these areas ahead of the fire season can help to prevent

ignitions from equipment failures or sparks until a significant rainfall occurs.

This prevention effort was proven by San Diego announcing

an expansion of their CitroTech treatment program during 2026 based on success seen in 2025.

Although there is no certainty in wildfire

defense, when our CitroSafe system is installed, we fill it with our CitroTech product.

Thereafter, we will conduct an annual inspection

of the system to help ensure it is ready to help defend against a wildfire.

While there is no specific useful life for our product, if

the system has not been deployed since the third anniversary of the initial installation, or three years following an annual inspection,

in an abundance of caution we will recommend the customer replace the CitroTech product.

In addition, we suggest spraying CitroTech in

areas surrounding the property that pose the greatest risk to help reduce the risk posed by dry vegetation, decks, garden bark, and fences.

We have invested and intend to continue investing

in the expansion of our fire retardant and lumber treatment business through product development and business development to grow our

customer base.

Weather Conditions and Climate Trends

Our business is highly dependent on the needs

of commercial entities, residential homeowners and fire departments to prevent fires and protect assets, as well as the use and expansion

of Class A Fire Retardant Treated lumber and wood products.

As such, our financial condition and results of operations are significantly

impacted by weather, which impact the number and severity of fires in any given year.

Typically, sales of our product are higher during

the summer months in the United States due to weather patterns that are generally correlated to a higher prevalence of wildfires due to

We believe orders will generally peak during the late summer months, but with expanded fire seasons in the United States, ignitions

may continue through late fall or even into the winter months.

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.

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

We are developing and commercializing our

product lines.

We have been focused historically on obtaining patents and various accreditations.

To date, we do not have a

large customer base, having relied heavily on a few customers, for the commercialization and testing of our CitroTech product and

delivery system.

We currently do not have an established retail product line nor recurring significant customer base.

The following summary of our results of operations

should be read in conjunction with our unaudited financial statements for six months ended June 30, 2026 and 2025, which are included

Our results of operations for the three months

ended June 30, 2026 and 2025 are summarized below:

Three Months Ended

3 unchanged sentences

$ (11,904,018 )

The Company’s revenue is associated with revenue from Mighty Fire Breaker, LLC, an Ohio limited liability company (“MFB Ohio’) which acquired intellectual property to fire suppression in April 2022.

During the three months ended March 31,2024, the revenue increased $377,423 over the three months ended March 31, 2023, due to MFBs EPA approval and the filing of additional patents.

With the EPA approval, MFB started the marketing phase of the company’s evolution.

MFB started selling directly to fire departments and launched its proactive wild-fire defense systems and is gaining momentum with commercial customers, along with attempting to influence the insurance industry to the benefit of consumers.

The net loss for the three months ended March 31, 2024 increased by $3.1 million as compared to the three months ended March 31,2023 primarily due to the increase in operating expenses, largely from stock-based compensation awards and loss on settlement of debt.

$ (8,001,464 )

Our revenue is generated through our subsidiary

Mighty Fire Breaker LLC ("MFB Ohio"), which acquired our fire suppression intellectual property portfolio in April 2022.

revenue is highly seasonal and event-driven, with demand concentrated in the Western United States during the traditional May to October

fire season, and is materially influenced by wildfire activity in any given period.

During the three months ended June 30, 2026, revenue

decreased $407,000, or 59%, compared to the three months ended June 30, 2025.

The rare situation of a devastating fire in both the Pacific

Palisades and Eaton Canyon, in the first quarter of 2025 added to system revenue in the first quarter of 2025 that was not seen in 2026.

In addition, revenue that was booked in the first half of 2025 related to CitroSafe systems is being shifted to our Certified Partners

for the installation of systems, with higher margin CitroTech chemical sales that are being put into the system mostly starting after

the end of the second quarter.

This strategic shift will drive the installation of more systems with more CitroTech product and recurring

income in the future from a redeveloped control system.

This accounts for some of the change in revenues from the prior year quarter.

Although the 50/50 joint venture with Hexion was formed in Q2 2026, no revenues were generated from the joint venture in the early days

of getting it established.

Our revenues consisted of the following:

Three Months Ended

Products sale

Product installation service

Our revenues from significant customers for the three

months ended June 30, 2026 and 2025, are as follows:

Three months ended

Number of customers (more than 10% of revenue)

Total revenue of top 5 customers

Our revenue is currently project- and event-driven

rather than subscription- or contract-based, and we do not currently have a meaningful base of recurring customers.

The decrease in our

top-five customer concentration to 71.9% in the three months ended June 30, 2026, from 78.4% in the comparable 2025 period, reflects both

the absence of the Pacific Palisades and Eaton Canyon fire deployments that drove revenue in the prior period and the early-stage nature

of our commercial customer base.

We expect customer concentration to remain elevated until our channel partner program and recurring utility

and structural-protection customer relationships further mature.

Operating Expenses

2 unchanged sentences

Amortization and depreciation

General and administration

Professional fees- related party

General and administrative

Advertising and marketing

Payroll and management compensation

Professional fees

Research and development expense

Total operating expenses

The increase in operating expenses was primarily

attributed to increases in professional fees, research and development costs, and advertising and marketing, partially offset by decreases

in management compensation and cost of revenue.

Cost of revenue

2 unchanged sentences

Freight and shipping

Consulting and advisory

Royalty and sales commission

Total cost of revenue

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 $98,614, cost of revenue of $86,298 and general and administrative expenses of $65,666.

During the three months ended March 31, 2024, the cost of revenue increase 86,298 over the three months ended March 31, 2023, primarily due to increase in cost of inventory and royalty and sales commissions.

Cost of inventory consists of the sales of product, related supplies and direct testing our CitroTech™ product and various components required to for installation of Mighty Firese Breaker proactive fire systems.

Cost of inventory increased during the three months ended March 31, 2024 primarily due to an increase in product sales and supplies and royalty and commission, from increased sales.

Royality and sales commissions increased in the three months ended March 31,2024 from more revenue.

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

During the three months ended June 30, 2026, the cost

of revenue decreased over the three months ended June 30, 2025, primarily due to a decrease in cost of inventory.

Cost of inventory consists of product costs, direct

labor, related supplies, and direct testing of our CitroTech product and the various components required for installation of CitroSafe™

Cost of inventory decreased during the three months ended June 30, 2026, compared to the comparable 2025 period, primarily due

to lower product sales volume.

Freight and shipping relate to costs for shipping

products to customers.

Rent expenses are warehouse and facility rent expenses.

Amortization and depreciation

Amortization and depreciation expenses are from

the amortization of patents and technology and the depreciation of vehicles, furniture and equipment.

General and administrative

General and administrative expenses are office, rent,

travel, insurance, website, IT, public listing fees, and other office related expenses.

For the three months ended June 30, 2026,

we incurred decreased expenditures on our website and IT development and general office offset by an increase in insurance and public

listing fees.

Advertising and marketing

The increase in advertising and marketing during the

three months ended June 30, 2026, over the three months ended June 30, 2025, is primarily due to supporting revenue growth in addition

to investor relations activities after being uplisted to the NYSE American.

This includes rebranding efforts around the official company

name change to CitroTech Inc.

from General Enterprise Ventures Inc as well as the product labels moving from Mighty Fire Breaker to CitroTech

and the conversion of relevant website and marketing materials.

Professional fees

The increase in professional fees during the three months ended March 31, 2024 of $2.3 million over March 31, 2023, is primarily due to stock-based compensation of $1.7 million.

The professional fees during the three months ended

June 30, 2026, primarily included stock-based compensation of $283,000 to advisors to our subsidiary MFB, and various professional

fees for accounting and audit related to SEC filings, legal on patents and other consulting services in 2026.

The professional fees during

the three months ended June 30, 2025, did not include stock-based compensation.

Professional fees were for accounting and audit related

to SEC filings, legal on patents and other consulting services in 2025.

Payroll and management compensation

During the three months ended June 30, 2026, management

compensation decreased to $2.1 million from $2.3 million in the prior period.

This decrease was primarily attributable to the buildout

of a full executive management team during 2025, including the appointment of a Chief Operating Officer, Chief Financial Officer, Chief

Technology Officer, and General Counsel.

Compensation during 2026 and 2025, primarily included stock-based management compensation of

$1.3 million and $1.9 million, respectively.

Payroll compensation to employees during 2026, was approximately $0.8 million as compared

to $0.4 million during 2025.

Research and development costs

We continue to invest heavily in the testing and certifications of CitroTech treated products as well as in advance of submitting formulas

for approval to apply product onto federal lands.

We are spending on outside testing to ensure that our products can pass the rigorous

US Forest Service QPL testing as well as funding an additional product to be submitted to the US Forest Service for testing.

to continue growing R&D spend over historical spend as we add additional product lines and invest in the future of the company.

includes funded research programs with Texas A&M on new products that were not underway in 2025.

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 $882,000 and $0, respectively.

For the three months ended June 30, 2026

and 2025, the other expenses consisted of interest expense primarily related to convertible notes payable issued in 2025 of $31,000

and convertible notes payable issued in 2025 and 2024 of $764,000, respectively, change in fair value of derivative liability

related to convertible notes payable issued in 2025 and 2024 of $0 and $3.0 million, respectively, financing expense of $361,000 and

$2.5 million, respectively, and loss on settlement of debt of $0 and $2.6 million, respectively.

Settlement of debt in 2025 was

the conversion of convertible notes issued in 2024.

Financing expense is from 69,007 shares of Series C Convertible Preferred stock

issued to BoltRock Holdings, LLC (“BRH”) in 2025.

The net loss for the three months ended June 30, 2026

was approximately $3.9 million, a decrease of approximately $8.0 million as compared to the three months ended June 30, 2025, primarily

due to a significant reduction in other expenses, partially offset by lower revenue and higher operating expenses.

Our results of operations for the six months

ended June 30, 2026 and 2025 are summarized below:

Six months ended

$ (1,031,439 )

Operating expenses

Other expenses

(14,159,505 )

$ (10,113,118 )

$ (22,807,422 )

$ (12,694,304 )

Our revenue is generated through our subsidiary

Mighty Fire Breaker LLC ("MFB Ohio"), which acquired our fire suppression intellectual property portfolio in April 2022.

revenue is highly seasonal and event-driven, with demand concentrated in the Western United States during the traditional May to October

fire season, and is materially influenced by wildfire activity in any given period.

During the six months ended June 30, 2026, revenue

decreased $1.0 million, or 62%, compared to the six months ended June 30, 2025.

The rare situation of a devastating fire in both the Pacific

Palisades and Eaton Canyon in the first six months of 2025 added to system revenue in the first half of 2025 that was not seen in the

first half of 2026.

Our revenues consisted of the following:

Six months ended

Products sale

Product installation service

Our revenues from significant customers for the six

months ended June 30, 2026 and 2025, are as follows:

Six months ended

Number of customers (more than 10% of revenue)

Total revenue of top 5 customers

Our revenue is project- and event-driven rather than

subscription- or contract-based, and we do not currently have a meaningful base of recurring customers.

The increase in our top-five customer

concentration to 52.5% in the six months ended June 30, 2026, from 40.7% in the comparable 2025 period, reflects both the absence of the

Pacific Palisades and Eaton Canyon deployments that drove revenue in the prior period and the early-stage nature of our commercial customer

We expect customer concentration to remain elevated until our channel partner program and recurring utility and structural-protection

customer relationships further mature.

Operating Expenses

Six months ended

Cost of revenue

Amortization and depreciation

General and administrative

Advertising and marketing

Payroll and management compensation

Professional fees

Research and development expense

Total operating expenses

The increase in operating expenses was primarily attributed

to increases in management compensation offset by a decrease in cost of revenue and professional fees.

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, 2026, the cost

of revenue decreased over the six months ended June 30, 2025, primarily due to a decrease in cost of inventory.

Cost of inventory consists of product costs, direct

labor, related supplies, and direct testing of our CitroTech product and the various components required for installation of CitroSafe™

Cost of inventory decreased during the six months ended June 30, 2026, compared to the comparable 2025 period, primarily due

to lower product sales volume.

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.

We did not have royalty and sales commissions to a

related party in the six months ended June 30, 2026.

During the first quarter of 2025, we recognized $56,000 as an allocated portion of

consulting and direct labor costs associated with our revenue as royalty and sales cost of revenue.

In March 2025, we entered into a new

contract under which the consulting and advisory royalty arrangement was terminated.

Rent expenses are warehouse and facility rent expenses.

The increase in rent expense is primarily attributable to our relocation to a larger commercial facility for operations, warehousing,

and customer-facing activities beginning in April 2025, along with the cancellation of a prior warehouse lease in May 2025.

Amortization and depreciation

Amortization and depreciation expenses are from the

amortization of patents and technology and the depreciation of vehicle, and furniture and equipment.

General and administrative

General and administrative expenses are office, rent,

travel, insurance, website, IT, public listing fees, and other office related expenses.

For the six months ended June 30, 2026, we

incurred increased expenditures on public listing fee, 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

six months ended June 30, 2026, over the six months ended June 30, 2025, is primarily due to supporting revenue growth in addition to

investor relations activities after being uplisted to the NYSE American.

This includes rebranding efforts around the official company

name change to CitroTech Inc.

from General Enterprise Ventures Inc as well as the product labels moving from Mighty Fire Breaker to CitroTech

and the conversion of relevant website and marketing materials.

We attended and helped to fund events in the wildfire industry to expose

leaders in the fire industry to the CitroTech product, which we believe will lead to sales in the future.

Professional fees

The professional fees during the six months ended

June 30, 2026, primarily included stock-based compensation of $443,000 to advisors, and various professional fees for accounting and audit

related to SEC filings, legal on patents and other consulting services in 2026.

In addition, we had expenses related to the formation

of the HexiTech Joint Venture between CitroTech and Hexion that were a one-time expense.

The professional fees during the six months ended

June 30, 2025, primarily included stock-based management compensation of $2.3 million, of which $2.1 million was 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.

TCSI’s consulting services to us 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.

In addition to TCSI, stock-based compensation was

remitted to certain individuals with fire retardant and industry experience, who provided guidance and insight to our management and Board

of Directors with respect to the fire retardant and fire inhibitor industry, business development connections, and oversight during the

testing and recognition processes.

Payroll and management compensation

During the six months ended June 30, 2026, management

compensation increased to $5.2 million from $3.0 million in the prior period.

This increase was primarily attributable to the buildout

of a full executive management team during 2025, including the appointment of a Chief Operating Officer, Chief Financial Officer, Chief

Technology Officer, and General Counsel.

Compensation during 2026, primarily included stock-based management compensation of $3.4 million,

and payroll to management of $0.8 million and employees of approximately $1.1 million.

The significant increase in stock-based compensation

reflects the transition from a single-executive structure in the first quarter of 2025.

Compensation during 2025, primarily included stock-based

management compensation of $2.3 million and payroll to management of $0.5 million and employees of $0.2 million.

Research and development costs

We continue to invest heavily in the testing and certifications of CitroTech treated products as well as in advance of submitting formulas

for approval to apply product onto federal lands.

We expect to continue growing R&D spend over historical spend as we add additional

product lines and invest in the future of the company.

This includes funded research programs with Texas A&M on new products that

were not underway in 2025.

Other Expenses

For the six months ended June 30, 2026

and 2025, the other expenses consisted of interest expense primarily related to convertible notes payable issued in 2025 of $973,000

and convertible notes payable issued in 2025 and 2024 of $1.2 million, respectively, change in fair value of derivative liability

related to convertible notes payable issued in 2025 and 2024 of $0 and $3.8 million, respectively, financing expense of $0.4 million

and $8.7 million, respectively, and loss on settlement of debt of $847,000 and $2.6 million, respectively.

Settlement of debt in

2026 is the conversion of convertible notes issued in 2025.

Settlement of debt in 2025 is conversion of convertible notes issued in

Financing expense is from 4 million warrants granted to a financial advisor and 69,007 shares of Series C Convertible

Preferred stock issued to BRH in 2025.

The net loss for the six months ended June 30, 2026

was approximately $10.1 million, a decrease of approximately $12.7 million as compared to the six months ended June 30, 2025, primarily

due to a significant reduction in other expenses, partially offset by lower revenue and higher operating expenses.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have incurred significant

operating losses and negative cash flows from our operations.

Our net loss was $10.1 million and $22.8 million for the six months

ended June 30, 2026 and 2025, respectively.

During fiscal year 2025, we completed a debt offering in February and an equity offering in

September and October which generated net proceeds of approximately $3.7 million and $8.1 million, respectively.

Working capital

Current assets

$ (3,732,759 )

Current liabilities

Working Capital (Deficiency)

The increase in working capital in 2024 was primarily the result of an increase in accounts receivable of $254,000, prepaid expenses of $800 and a decrease in cash of $179,000 and inventory of 41,000 offset by an increase in accounts payable and accrued liabilities of $16,000 operating lease liability -current portion of $2,000, 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, inventory of $189,000 and $230,000, accounts receivable of $681,000 and $427,000, and prepaid expenses of $11,000 and $11,000, respectively.

As of March 31, 2024, and December 31, 2023, the current liabilities consisted of accounts payable and accrued liabilities of $70,000 and $55,000, due to related party of $1.3 million and $1.3 million, convertible note of $0 and $54,000, promissory note of $0 and $120,000 and current portion of operating lease liability of $82,000 and $80,000, respectively.

Three months ended

Working capital

$ (1,983,221 )

As of June 30, 2026 and December 31, 2025, the

current assets consisted of cash of $2.5 million and $6.3 million, respectively, inventory of $579,000 and $621,000, respectively, accounts

receivable of $165,000 and $209,000, respectively, and prepaid expenses and other current assets of $419,000 and $317,000, respectively.

As of June 30, 2026 and December 31, 2025, the

current liabilities consisted of accounts payable and accrued liabilities of $222,000 and $316,000, respectively, deferred revenue of

$21,000 and $3,000, respectively, due to related parties of $5,000 and $168,000, respectively, convertible notes net of discount of $0

and $219,000, respectively, convertible note – related party of $0 and $1.3 million, respectively, current portion of financing

loan of $15,000 and $30,000 respectively, and current portion of operating lease liability of $157,000 and $148,000, respectively.

The decrease in working capital in 2026 was primarily

due to a decrease in cash of $3.7 million for operating activities, offset by a decrease in convertible debt due to conversions into common

For the six months ended June 30, 2026 and 2025

Six months ended

Cash used in operating activities

Cash provided by investing activities

$ (3,842,728 )

$ (1,925,535 )

Cash provided by (used in) investing activities

Cash provided by financing activities

Net Change in cash

Cash Flows from Operating Activities

We have not generated positive cash flows from operating activities.

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 $1.702,000, 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 three months ended March 31, 2023, net cash flows used in operating activities consisted of a net loss of $415,000, reduced by stock-based compensation of $87,000, amortization and depreciation of $62,000, non-cash lease expenses of $15,000 and reduced by net changes in operating assets and liabilities of $74,000.

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.

$ (3,749,289 )

$ (5,301,244 )

Operating Activities

We have not generated positive cash flows from operating

For the six months ended June 30, 2026, net cash flows

used in operating activities consisted of a net loss of $10.1 million, reduced by stock-based compensation of $4.2 million, non-cash lease

expenses of $78,000, amortization and depreciation of $250,000, amortization of debt discount of $892,000, loss on settlement of debt

of $847,000, loss on disposal of equipment of $32,000, and increased by bad debt recovery of $20,000, and net changes in operating assets

and liabilities of $33,000.

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 $13.3 million, non-cash

lease expenses of $86,000, amortization and depreciation of $151,000, amortization of debt discount of $1.0 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

Investing Activities

For the six months ended June 30, 2026 and 2025, the

net cash flows provided by (used in) investing activities consisted of the purchase of equipment of $11,000 and $168,000 and sales of

equipment of $12,500 and $0, respectively.

Financing Activities

For the six months ended June 30, 2026, net cash provided

by financing activities consisted of $96,000 capital contribution from a related party and proceeds from the exercise of warrants of $25,000,

and repayment of a financing loan of $30,000.

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, and repayment of loans

Contractual Obligations

Financing loans

We had a financing loan for the purchase of a vehicle

in September 2025.

The loan repayment is $2,021 per month for 60 months, beginning October 2025, with an interest rate of 11.33%.

Lease Agreements

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, 2023:

We have one lease classified as an operating lease

for office and warehouse purposes.

The following table outlines maturities of our lease liabilities as of June 30, 2026:

Year ending December 31,

2024 (excluding the three months ended March 31, 2024)

2026 (remaining six months)

Imputed interest

Operating lease liabilities

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.

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.

Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company”, we are not required to provide the information required by this Item.

We have incurred losses since inception and incurred

a net loss of $10.1 million during the six months ended June 30, 2026.

However, in September 2025, we completed an equity offering

which generated net proceeds of $5.4 million.

Additionally, in October 2025, we completed an equity offering which generated net

proceeds of $2.7 million.

Our existing cash resources, if necessary, could

provide sufficient funds to carry out our planned operations through fiscal year 2026.

To more rapidly grow our revenue and continue

operations beyond such time frame, we will be required to raise additional funds by completing additional equity or debt offerings or

increasing revenue.

We may also raise capital through public or private offerings of equity or debt securities or by entering into a credit

There can be no assurance that we will be successful in acquiring additional funding, that our projections of its future working

capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.

Contingencies

Certain conditions may exist as of the date the financial

statements are issued, which may result in a loss to us, but which will only be resolved when one or more future events occur or fail

In consultation with its legal counsel as appropriate, our management assesses such contingent liabilities, and such assessment

inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against us

or unasserted claims that may result in such proceedings, we, in consultation with legal counsel, evaluate the perceived merits of any

legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can

be estimated, then the estimated liability would be accrued in our financial statements.

If the assessment indicates a potentially material

loss contingency is not probable, but is reasonably possible, or is likely, but cannot be estimated, then the nature of the contingent

liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed.

Loss contingencies

considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Critical Accounting Estimates

Our 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 consolidated financial statements and accompanying notes.

For a discussion of our critical accounting estimates,

refer to Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the

year ended December 31, 2025, filed with the SEC on March 30, 2026 (the “Annual Report”).

There have been no material changes

to our critical accounting estimates as described in that Annual Report.

Quantitative and

Qualitative Disclosures About Market Risk.

We are a smaller reporting

company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required

to provide the information specified under this item.

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/A

Item 2. Management’s Discussion and Analysis