Citrotech / General Enterprise Ventures, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. The filing registrant is General Enterprise Ventures, Inc. (GEVI); the supplied company label, Citrotech Inc., does not match the registrant name in the filing.
Business context
GEVI acquired Mighty Fire Breaker, LLC (MFB) and its CitroTech fire-prevention intellectual property in April 2022, and says it is shifting resources toward that business. MFB’s products are intended to reduce the combustibility of vegetation and wood. The company reported EPA Safer Choice status and UL GreenGuard Gold approval during the quarter; it said products were also being tested by three U.S. government agencies and that it was pursuing further approvals. GEVI completed its exit from crypto mining in 2022.
Financial highlights
| Metric | Q3 2022 | Nine months 2022 | Comparable 2021 |
|---|---|---|---|
| Revenue | $19,033 | $60,501 | $0 |
| Cost of revenue | $1,798 | $1,798 | $0 |
| Gross profit | $17,235 | $58,703 | $0 |
| Operating expenses | $314,224 | $2,717,531 | $13,250 |
| Net loss | $297,065 | $2,647,918 | $20,566 / $84,293 |
| Operating cash flow | Not separately presented | $(506,731) | $(18,889) |
The comparable net losses are for the three- and nine-month periods, respectively. Revenue and gross profit reflect continuing operations; the company separately reported $13,016 of income from discontinued crypto-mining operations in the first nine months of 2022, offset by a $2,030 disposition loss, for $10,986 net discontinued-operations income. Q3 gross margin was approximately 91%; nine-month gross margin was approximately 97%, on very small revenue.
- Cash and liquidity: Cash was $57,152 at September 30, versus $5,469 at year-end 2021. Current assets were $171,565 and current liabilities $822,375, yielding a $650,810 working-capital deficit.
- Debt and obligations: Liabilities included $688,402 due to related parties, a $35,000 current convertible note, and a $53,762 current operating lease liability. The note bears 2% interest, matures six months after funding, and may be converted at the lender’s option at $0.18 per common share. Related-party loans are described as unsecured, non-interest-bearing and payable on demand.
- Balance sheet: Total assets were $4.43 million, including $4.20 million of acquired MFB intangible assets and $114,413 of inventory. Stockholders’ equity was $3.61 million, versus a $52,859 deficit at year-end 2021.
- Cash flows: Financing provided $563,764 in the first nine months, principally from related-party advances and the convertible note; investing used $5,350. Cash increased by $51,683.
Material changes and unusual items
- Nine-month operating expenses included $2.1 million of noncash management compensation related to a 70-million-share restricted stock award. The shares carry voting rights but are restricted from release unless annual gross-revenue thresholds of at least $100 million are met for each of 2023–2026.
- MFB was acquired for 1 million Series C preferred shares valued at $4.2 million, plus a contractual royalty of 10% of pretax gross sales of MFB-family products. The filing records $4.195 million of acquired intangible assets.
- Common shares outstanding rose from 22,945,388 at year-end 2021 to 93,945,388 at September 30, 2022; the filing reports 93,945,388 outstanding as of November 9, 2022. The Series C preferred shares are convertible at 20 common shares per preferred share; 50,000 had converted into 1 million common shares by June 2022.
- Crypto mining was discontinued effective April 1, 2022. The filing reports $46,976 of mining revenue through that date in discontinued operations, and says mining equipment and digital currency were divested.
Outlook, risks and controls
The filing provides no quantified revenue, earnings, or cash-flow guidance. Management says future viability depends on raising capital and generating revenue and profits. The filing states that the company has not generated significant income and that its limited operating capital and lack of substantive revenue raise substantial doubt about its ability to continue as a going concern.
Management reported disclosure controls were ineffective as of September 30, 2022, citing no functioning audit committee, insufficient independent board oversight, inadequate segregation of duties, and management concentration in one individual. The company expects material dependence on third-party accounting consultants and warns that errors or restatements may occur. Management reported no material legal proceedings and no material off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm the issuer identity and whether the filing is intended to represent Citrotech Inc. or GEVI.
- Assess whether MFB can convert testing, approvals and limited initial sales into sustainable revenue, and account for the 10% gross-sales royalty.
- Review the going-concern disclosure, near-term cash needs, related-party funding dependence, and terms or conversion potential of the note.
- Examine the valuation and accounting for MFB’s acquired intellectual property and the conditions attached to the 70-million-share award.
- Track share-count changes, preferred-stock conversion rights, and remediation of the disclosed control weaknesses.