Citrotech Inc. / General Enterprise Ventures, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. The filing identifies the registrant as General Enterprise Ventures, Inc. (GEVI), while the request names Citrotech Inc.; the filing describes CitroTech products through its Mighty Fire Breaker (MFB) business.
Business context
GEVI describes itself as a technology company and is focused on MFB, acquired in April 2022. MFB’s wildfire-prevention products and related intellectual property are the source of reported product revenue. The company says it divested crypto-mining operations in 2022. The acquired intellectual property is carried at $4.20 million, most of total assets.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $28,355 | $41,468 | $83,950 | $41,468 |
| Gross profit | $23,462 | $41,468 | $65,203 | $41,468 |
| Gross margin | 82.8% | 100% | 77.6% | 100% |
| Operating expenses | $378,936 | $2,360,541 | $774,113 | $2,403,307 |
| Net loss | $(356,058) | $(2,321,103) | $(709,669) | $(2,350,853) |
| Operating cash flow | Not presented by quarter | Not presented by quarter | $(423,890) | $(274,274) |
Q2 revenue fell about 32% year over year; six-month revenue approximately doubled. Losses narrowed substantially, primarily because the 2022 comparison included $2.1 million of management compensation recorded for restricted shares. Excluding that unusual prior-year charge, operating expenses increased year over year. Q2 interest expense was $584; six-month interest expense was $759. No income tax provision was recorded.
At June 30, 2023, cash was $86,144, current assets $210,219, current liabilities $1,454,116, and working-capital deficiency $1,243,897. Total assets were $4,419,565 and total liabilities $1,454,116. Current liabilities included $1,355,989 due to related parties and a $54,000 convertible note. Cash increased by $30,710 in the first half, supported by $454,600 of financing, including related-party loans and stock subscriptions. Operating activities used $423,890.
Material changes, outlook, and risks
- Related-party obligations rose from $899,153 at year-end 2022 to $1,355,989 at June 30, 2023. These are described as unsecured, non-interest-bearing demand loans.
- The $54,000 convertible note is in default, bears 2% interest, and is convertible at the lender’s option at $0.18 per common share. Accrued interest was $1,015 at quarter-end.
- Management states that substantial doubt exists about the company’s ability to continue as a going concern. Continued operations depend on raising capital and generating revenue and profits; the filing provides no quantified guidance or forecast.
- Management found disclosure controls ineffective, citing no functioning audit committee, insufficient independent board oversight, inadequate segregation of duties, and management concentration in one individual. The filing says material weaknesses may persist and could contribute to financial-statement errors.
- The MFB acquisition carries a 10% royalty on pretax gross sales of products in the MFB family. A July 2023 lease amendment extends the lease for two years, with monthly rent of $5,200 in the first year and $5,400 in the second.
- After quarter-end, the company paid $120,000 under a 12-month, 5% promissory note to a borrower. This is a cash deployment subsequent to the balance-sheet date.
- No material legal proceedings or off-balance-sheet arrangements were reported. The filing does not provide a substantive forward outlook.
Important facts for investors to verify
- Confirm the registrant’s identity and relationship to the Citrotech name, and clarify the MFB product’s commercial traction given low reported revenue.
- Assess funding needs, related-party loan terms and availability, and the company’s ability to meet demand obligations and the defaulted convertible note.
- Review the basis and recoverability of the $4.20 million intangible-asset balance and the royalty burden on MFB sales.
- Verify the status of control-remediation plans and the effect of the disclosed material weaknesses on financial reporting reliability.
- Reconcile filing descriptions of MFB intellectual property and approvals: the notes refer to 19 patents, while MD&A cites 18 granted and 17 pending; descriptions of government testing and approvals also vary.