Filing summary
Entity and period: The supplied filing is General Enterprise Ventures, Inc. (OTC: GEVI), not a company named Citrotech Inc. It is the Form 10-K for the fiscal year ended December 31, 2023, filed April 15, 2024; it is not a quarterly filing. The company’s operating business is Mighty Fire Breaker (MFB), which sells CitroTech fire-inhibiting products and systems.
Business context and outlook
GEVI focuses on environmentally oriented fire retardants and wildfire prevention. It reports EPA Safer Choice status and UL GreenGuard Gold approval for CitroTech products, and is pursuing USDA approval. Products are sold to fire departments, retailers, and other customers. The company says it is developing proactive property-defense systems and expanding its market, including through a UK subsidiary. No quantified revenue or earnings guidance is provided.
Financial performance and liquidity
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Revenue | $520,645 | $62,732 |
| Gross profit | $387,137 | $60,839 |
| Gross margin | 74.4% | 97.0% |
| Operating expenses | $10,485,075 | $2,979,398 |
| Net loss | $10,102,266 | $2,907,828 |
| Cash used in operations | $1,211,764 | $708,450 |
| Cash at year-end | $549,755 | $55,434 |
Revenue grew substantially from a small base, but operating expenses and net loss rose sharply. FY 2023 operating expenses included $8.64 million of related-party professional fees, recorded for preferred shares issued for consulting services, and $180,000 of management compensation. Stock-based compensation adjustments totaled $8.97 million in the cash-flow reconciliation, largely noncash.
At December 31, 2023, current assets were $1.218 million and current liabilities were $1.618 million, producing a $399,729 working-capital deficit. Current liabilities included $1.309 million due to related parties, a $120,000 promissory note, and $54,000 of convertible notes. Total liabilities were $1.668 million. The company funded operations with $1.710 million of financing cash inflows, including related-party advances, preferred-stock proceeds, subscriptions, and a promissory note.
Intangible assets, principally acquired patents, were $3.948 million, approximately three-quarters of total assets. The MFB acquisition also entitles its vendor to a 10% royalty on gross sales before taxes of MFB-family products.
Material changes and unusual items
- Revenue increased from $62,732 to $520,645 as MFB sales expanded; the company discontinued crypto-mining operations in 2022.
- The company issued 1.2 million Series C preferred shares to a related party for consulting services, valued at $8.64 million. Series C shares are convertible into 20 common shares each, creating potential dilution.
- In March 2024, the company amended Series A preferred terms to remove their conversion feature; the shares retain 1,000 votes each. Joshua Ralston held all 10 million Series A shares, giving him substantial voting control.
- Subsequent events disclosed after year-end include $165,000 of Series C subscriptions, issuances of common shares for services and debt conversion, and cancellation of 65 million shares by the CEO. These events warrant review for their effects on capitalization and control.
Risks, contingencies, and governance
- Going concern: The auditor and management report substantial doubt about the company’s ability to continue as a going concern, citing losses, working-capital deficit, limited operating capital, and dependence on raising funds and increasing revenue.
- Customer and supplier concentration: Two customers represented 76.84% of 2023 revenue and 93.60% of year-end receivables. One supplier represented 77.01% of purchases.
- Controls: Management concluded disclosure controls were ineffective and identified material weaknesses involving segregation of duties, review and documentation of financial reporting, and IT general controls.
- Product and regulatory risks: USDA approval remains in process for use on government land; product liability, regulatory compliance, raw-material costs, and reliance on key personnel and suppliers are disclosed risks. No pending or threatened material legal proceedings were reported.
- Audit and reporting: The auditor identified intangible-asset impairment and preferred-stock valuation as critical audit matters. The filing states that the company was not required to obtain, and the auditor did not perform, an audit of internal control effectiveness.
- Market and governance: The common stock is thinly traded on OTC Pink. The board has no committees, and the CEO serves as both CEO and CFO.
Important facts for investors to verify
- Reconcile the filing’s inconsistent figures: the audited statements report FY 2023 net loss of $10.102 million and operating expenses of $10.485 million, while the MD&A contains differing amounts; its narrative also gives 2022 revenue as $67,732 versus $62,732 in the audited statements and MD&A table.
- Confirm the nature, authorization, valuation, and beneficiaries of the $8.64 million related-party consulting award, and assess the potential dilution from outstanding and issuable preferred shares.
- Review the post-year-end share cancellations, issuances, debt conversions, and preferred subscriptions, including updated share counts and voting control.
- Assess financing needs and liquidity against the going-concern warning, related-party balances, operating cash burn, and near-term obligations.
- Validate customer receivables and collection, sales growth, gross margins, and the commercial status of USDA approval and other certifications.