CitroTech Inc 10-Q for FY2024 Q3
CitroTech Inc. (CITR)
About this 10-Q
CitroTech Inc filed this 10-Q on November 18, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $107.04K
- down 38.7% from $174.71K a year earlier
- Net loss
- $655.24K
- compared with a net loss of $9.08M a year earlier
- Diluted EPS
- -$0.02
- compared with -$0.09 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| |
| For the quarterly period ended: |
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| |
| For the transition period from ___________ to ___________ |
Commission File Number:
(Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
___________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
General Enterprise Ventures, Inc.
Consolidated Balance Sheets
(Unaudited)
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| September 30, |
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| December 31, |
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Assets |
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Current assets |
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Cash |
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Accounts receivable |
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Inventory |
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Prepaid expenses |
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Deferred offering costs |
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Total Current Assets |
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Non-current assets |
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Equipment, net |
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Intangible assets, net |
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Operating lease right-of-use asset |
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Total Assets |
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Liabilities and Stockholders' Equity |
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Current liabilities |
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Accounts payable and accrued liabilities |
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Promissory note |
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Convertible notes, net of discount |
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Due to related parties |
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Operating lease liability - current portion |
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Total Current Liabilities |
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Non-current liability |
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Operating lease liability |
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Total Liabilities |
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Stockholders' Equity |
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Series A Preferred Stock, par value $ |
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Series C Convertible Preferred Stock, par value $ |
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Common Stock par value $ |
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Additional paid-in capital |
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Common Stock to be issued - |
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Subscription received - |
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Accumulated deficit |
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Total Stockholders' Equity |
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Total Liabilities and Stockholders' Equity |
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See the accompanying Notes, which are an integral part of these unaudited consolidated financial statements.
| 3 |
| Table of Contents |
General Enterprise Ventures, Inc.
Consolidated Statement of Operations and Comprehensive Loss
(Unaudited)
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| Three Months Ended |
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| Nine Months Ended |
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| September 30, |
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Revenue |
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Operating expenses |
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Cost of revenue, exclusive of amortization and depreciation shown separately below) |
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Cost of revenue - related parties |
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Amortization and depreciation |
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General and administration |
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Advertising and marketing |
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Management compensation |
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Professional fees - related parties |
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Professional fees |
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Total operating expenses |
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Loss from operations |
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Other income (expense) |
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Interest expense |
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Loss on settlement of debt |
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Total other expense |
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Loss from operations before taxes |
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Provision for income taxes |
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Net loss |
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| $ | ( | ) |
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Comprehensive loss |
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Net loss per common share - basic and diluted |
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Basic and diluted weighted average number of common shares outstanding |
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See the accompanying Notes, which are an integral part of these unaudited consolidated financial statements.
| 4 |
| Table of Contents |
General Enterprise Ventures, Inc.
Consolidated Statements of Change in Stockholders’ Deficit
For the Three and Nine Months ended September 30, 2024
(Unaudited)
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| Convertible Series A |
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| Convertible Series C |
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| Preferred Stock |
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| Common Stock |
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| Additional |
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| Total |
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| Preferred stock |
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| Common Stock |
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| to be |
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| Paid-In |
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| Accumulated |
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| Stockholders' |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| issued |
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| issued |
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| Capital |
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| Deficit |
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| Equity |
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Balance - December 31, 2023 |
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Series C Preferred Stock issued for preferred stock to be issued |
|
| - |
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| - |
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Series C Preferred Stock issued for cash |
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| - |
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Series C Preferred Stock issued for services |
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| - |
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Common stock issued for stock to be issued - management |
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| - |
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Common stock issued for conversion and settlement of debt |
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| - |
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| - |
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Cancellation of comment stock -related party |
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| - |
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Common stock issued for services |
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| - |
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| - |
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Net loss |
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| - |
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| - |
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| - |
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Balance - March 31, 2024 |
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Series C Preferred Stock issued for preferred stock to be issued |
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| - |
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Common stock issued for services |
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| - |
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Common stock to be issued for services |
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| - |
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| - |
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Net loss |
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| - |
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| - |
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Balance - June 30, 2024 |
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Warrants issued in conjunction with convertible debts |
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| - |
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| - |
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Common Stock issued for common stock to be issued |
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Cancellation of stock to be issued for services |
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| - |
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| - |
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Net loss |
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| - |
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| - |
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| - |
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Balance - September 30, 2024 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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See the accompanying Notes, which are an integral part of these unaudited consolidated financial statements.
| 5 |
| Table of Contents |
General Enterprise Ventures, Inc.
Consolidated Statements of Change in Stockholders’ Deficit
For the Three and Nine Months ended September 30, 2023
(Unaudited)
|
| Convertible Series A |
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| Convertible Series C |
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| Preferred Stock |
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| Common Stock |
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| Additional |
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| Total Stockholders' |
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| Preferred stock |
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| Preferred stock |
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| Common Stock |
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| to be |
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| to be |
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| Paid-In |
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| Accumulated |
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| Equity |
| ||||||||||||||||||||
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| issued |
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| issued |
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| Capital |
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| Deficit |
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| (Deficit) |
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Balance - December 31, 2022 |
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| $ |
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| $ |
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| $ |
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| $ | - |
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| $ | - |
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| $ |
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| $ | ( | ) |
| $ |
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Common stock issued for services |
|
| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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Net loss |
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| - |
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| - |
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| - |
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| - |
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|
| - |
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|
| - |
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| - |
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|
| - |
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|
| - |
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|
| ( | ) |
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| ( | ) |
Balance - March 31, 2023 |
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| $ |
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| $ |
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| $ |
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| - |
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| - |
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| $ |
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| $ | ( | ) |
| $ |
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|
|
|
|
|
|
|
|
|
|
Subscription received - shares to be issued |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Common stock issued for services |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Conversion of Convertible Series C Preferred stock in Common stock |
|
| - |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| |||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||||
Balance - June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock to be issued - management |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Issuance Series C Preferred stock related to subscription |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Issuance Series C Preferred stock in cash |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Issuance Series C Preferred stock for services -related party |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Contribution inventory - related party |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||||
Balance - September 30, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| ||||||||||
See the accompanying Notes, which are an integral part of these unaudited consolidated financial statements.
| 6 |
| Table of Contents |
General Enterprise Ventures, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
|
| Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Cash Flows from Operating Activities: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
| ||
Series C Preferred stock-based compensation |
|
|
|
|
|
| ||
Non-cash lease expenses |
|
|
|
|
|
| ||
Depreciation and amortization |
|
|
|
|
|
| ||
Amortization of debt discount |
|
|
|
|
|
| ||
Loss on settlement of debt |
|
|
|
|
|
| ||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| ( | ) |
|
| ( | ) |
Inventory |
|
| ( | ) |
|
| ( | ) |
Contribution inventory - related party |
|
|
|
|
|
| ||
Prepaid expense |
|
| ( | ) |
|
| ( | ) |
Related party advances funding operating expense |
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
|
|
|
|
| ( | ) | |
Operating lease liabilities |
|
| ( | ) |
|
| ( | ) |
Net Cash used in Operating Activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Purchase of equipment |
|
|
|
|
| ( | ) | |
Net Cash used in Investing Activities |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds from convertible notes |
|
|
|
|
|
| ||
Deferred offering cost |
|
| ( | ) |
|
|
| |
Proceeds from loan - related party |
|
|
|
|
|
| ||
Repayment of loan- related party |
|
| ( | ) |
|
|
| |
Proceed from issuance Series C Preferred Stock |
|
|
|
|
|
| ||
Proceeds from promissory note |
|
|
|
|
|
| ||
Net Cash provided by Financing Activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Change in cash |
|
| ( | ) |
|
|
| |
Cash, beginning of period |
|
|
|
|
|
| ||
Cash, end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental Disclosure Information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for taxes |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Non-Cash Financing Disclosure: |
|
|
|
|
|
|
|
|
Common stock issued for services |
| $ |
|
| $ |
| ||
Series C Preferred stock issued for services |
| $ |
|
| $ |
| ||
Common stock issued upon conversion of Series C Preferred stock |
| $ |
|
| $ |
| ||
Common stock issued for conversion and settlement of debt |
| $ |
|
| $ |
| ||
Common stock issued for stock to be issued - management |
| $ |
|
| $ |
| ||
Series C Preferred stock issued for subscription received |
| $ |
|
| $ |
| ||
Cancellation comment stock - related party |
| $ |
|
| $ |
| ||
Warrants issued in conjunction with convertible debts |
| $ |
|
| $ |
| ||
Reclassification of due to related party to convertible note |
| $ |
|
| $ |
| ||
Contribution inventory - related party |
| $ |
|
| $ |
| ||
Issuance Series C Preferred stock for services - related party |
| $ |
|
| $ |
| ||
Right -of-use assets obtain in exchange for new operating lease liabilities |
| $ |
|
| $ |
| ||
See the accompanying Notes, which are an integral part of these unaudited consolidated financial statements.
| 7 |
| Table of Contents |
General Enterprise Ventures, Inc.
Notes to Unaudited Consolidated Financial Statements
September 30, 2024
Note 1 – Organization, Business and Going Concern
General Enterprise Ventures, Inc., was originally incorporated under the laws of the State of Nevada on March 14, 1990. When used in these notes, the terms “GEVI,” “Company,” “we,” “us” and “our” mean General Enterprise Ventures, Inc. and all entities included in our consolidated financial statements.
In January 2021, Board of Directors of the Company approved redomiciling the Company in Delaware. On March 31, 2021, the Company formed General Entertainment Ventures, Inc. in Delaware as a wholly owned subsidiary of the Company (“GEVI”). The purpose of the formation of GEVI was to merge the Company into GEVI pursuant to Section 251(g) of the General Corporation Law of the State of Delaware. On April 10, 2021, after approval by the board of directors and shareholders of the Company, the Company was merged into GEVI pursuant to an Agreement and Plan of Merger dated as of the same date. GEVI is the accounting and legal acquiror of the Company.
On June 3, 2021, after approval by the board of directors and shareholders of the Company, the Company was redomiciled to the State of Wyoming. On October 11, 2021, after approval by the board of directors and shareholders of the Company, the Company was renamed General Enterprise Ventures, Inc., in the State of Wyoming.
Corporate Changes
On January 3, 2022, the Company formed Mighty Fire Breaker, LLC, an Ohio limited liability company (“MFB Ohio”), to acquire all the intellectual property of Mighty Fire Breaker, LLC, a California limited liability company (“MFB California”) in connection with the flame retardant and flame suppression segments of the environmental industry, including patents and patents pending. On April 13, 2022, the transaction between the Company, MFB Ohio and MFB California closed. The transaction consideration to the equity holders of MFB California was
In addition, on November 14, 2022, the Company formed Mighty Fire Breaker UK Limited (“MFB UK” and together with MFB Ohio, collectively, “MFB”). MFB has 30 patents and 26 patents pending pertaining to its CitroTech MFB 31 Technology™ (“CitroTech” or the “MFB Technology”) for the prevention and spread of wildfires. When CitroTech is applied it converts flammable fuels like dry native vegetation and wood into non-combustible materials. During the third quarter of 2022 the Company received EPA Safer Choice status and UL Green-Guard Gold approval on its CitroTech fire inhibitor. The Company continues to pursue accreditations such as the Missoula Testing approval for selling products to the government. Currently, MFB Ohio is involved in installing commercial and large residential Proactive Wildfire Prevention Systems.
On April 30, 2024, MFB UK was dissolved under the Companies House in the United Kingdom. The board of directors of the Company determined that it was in the best interest of the Company to focus its business development on its existing markets. Accordingly, the Company has no current plan to revive the existence of MFB UK.
Effective June 25, 2024, the Company formed and organized a wholly owned subsidiary, GEVI Insurance Holdings Inc., an Ohio corporation, while the Company contemplates the opportunity to enter the wildfire insurance markets relating to the Company’s flame retardant and flame suppression products.
Business
We are an environmentally sustainable flame retardant and flame suppression company for the residential home industry throughout the United States and international markets. Management is experienced in business integration and branding potential. The Company is bringing to the marketplace unique, disruptive products with significant environmental impact potential.
The Company holds various intellectual property in the form of patents and trademarks in the fields of fire suppression, mapping and tracking of fire-retardant dispersion and fire inhibition chemistry and technology. The Company has obtained multiple certification and accreditations in this industry, such as being the only two-time, EPA Safer Choice approved long-term fire retardant, UL Greengard Gold, California Bioassay water approval, LENS, and in the process of USDA approval.
| 8 |
| Table of Contents |
Going Concern
Our consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception and has a net loss of $
Management recognizes that the Company must obtain additional resources to successfully implement its business plans. During the nine months ended September 30, 2024, the Company completed financing from the issuance of Series C preferred stock, convertible notes and relate party loans, generating net proceeds of $
Management plans to continue to raise funds and complete an Initial Public Offering (IPO) to support our operations in 2024 and beyond. However, no assurances can be given that we will be successful. If management is not able to timely and successfully raise additional capital and/or complete an IPO, the implementation of the Company’s business plan, financial condition and results of operations will be materially affected. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the unaudited interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the unaudited interim financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K/A, for the year ended December 31, 2023, as filed with the SEC on July 30, 2024.
Principles of Consolidation
The consolidated financial statements include the accounts of General Enterprise Ventures, Inc., and its wholly owned subsidiaries, Mighty Fire Breaker, LLC, an Ohio Limited Liability company and GEVI Insurance Holdings Inc., an Ohio corporation. Intercompany transactions and balances have been eliminated.
Restatement
For the three and nine months ended September 30, 2023, the company restated the Consolidated Financial Statements for the calculation of amortization on intangible assets.
| 9 |
| Table of Contents |
The impact on the Consolidated Statement of Operations and Comprehensive Loss of the restatement is as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, 2023 |
|
| September 30, 2023 |
| ||||||||||||||||||
|
| As Filed |
|
| Adjustment |
|
| As Restated |
|
| As Filed |
|
| Adjustment |
|
| As Restated |
| ||||||
Amortization and depreciation |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||
Total operating expense |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||
Loss from operations |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
The impact on the Consolidated Statement of Cash Flows of the restatement is as follows:
|
| Nine Months |
| |||||||||
|
| September 30, 2023 |
| |||||||||
|
| As Filed |
|
| Adjustment |
|
| As Restated |
| |||
|
|
|
|
|
|
|
|
|
| |||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
| |||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
| |||
Net Cash used in Operating Activities |
| $ | ( | ) |
| $ |
|
| $ | ( | ) | |
The impact on the Consolidated Statement of Stockholders’ Equity of the restatement is as follows:
|
| September 30, 2023 |
| |||||||||
|
| As Filed |
|
| Adjustment |
|
| As Restated |
| |||
Stockholders' equity: |
|
|
|
|
|
|
|
|
| |||
Accumulated deficit |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Total stockholders' equity |
| $ |
|
| $ | ( | ) |
| $ |
| ||
Reclassification
For the three and nine months ended September 30, 2023, certain amounts have been reclassified to improve the clarity and comparability of the Consolidated Financial Statements. An adjustment has been made to the Consolidated Statements of Operations and Comprehensive Loss and for the three and nine months ended September 30, 2023, to reclassify partial operating expenses to cost of revenue, and to separately disclose professional service provided by related party from line-item professional service to professional fees- related party.
| 10 |
| Table of Contents |
The impact on the Consolidated Statement of Operations and Comprehensive Loss, with no change to the restated loss from operations or net loss, respectively, as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, 2023 |
|
| September 30, 2023 |
| ||||||||||||||||||
|
| As Filed and Restated (*) |
|
| Adjustment |
|
| As Reclassified |
|
| As Filed and Restated (*) |
|
| Adjustment |
|
| As Reclassified |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||
Cost of revenue |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue (exclusive of amortization and depreciation shown separately below) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amortization and depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
General and administration |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Management compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Stock-based professional fees - related party |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Professional fees- related party |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Professional fees |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
|
| $ | ( | ) | ||
(*) Originally as filed for September 30, 2023, and restated for the change for amortization of intangible assets.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.
Cash and Cash Equivalents
For purposes of balance sheet presentation and reporting of cash flows, the Company considers all unrestricted demand deposits, money market funds and highly liquid debt instruments with an original maturity of less than 90 days to be cash and cash equivalents. The Company did not have any cash equivalents at September 30, 2024 and December 31, 2023. The Company had cash of $
Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $
| 11 |
| Table of Contents |
Accounts Receivable
Trade accounts receivable is recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make the required payments for services. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped in categories by the number of days the balance is past due, and the estimated loss is calculated as a percentage of the total category based upon past history. Account balances are charged against the allowance when it is probable that the receivable will not be recovered. As of September 30, 2024, and December 31, 2023, the Company had no allowance for doubtful accounts.
Inventory
Inventories consist of raw materials which are stated at lower cost or net realizable value, with cost being determined on the weighted average method. As of September 30, 2024, and December 31, 2023, the Company held inventories of $
Deferred Offering Costs
Pursuant to ASC 340-10-S99-1, costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering as a reduction of additional paid-in capital. Deferred offering costs consist of underwriting, legal, accounting, and other expenses incurred through the balance sheet date that are directly related to the proposed public offering. Should the proposed public offering prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be expensed.
As of September 30, 2024 and December 31, 2023, deferred offering costs consisted of the following:
|
| September 30 |
|
| December 31 |
| ||
|
| 2024 |
|
| 2023 |
| ||
Legal fees |
| $ |
|
| $ |
| ||
Accounting fees |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
Fair Value of Financial Instruments
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:
| ● | Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; |
|
|
|
| ● | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and |
|
|
|
| ● | Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
The Company’s financial instruments, including cash, accounts receivable, prepaid expenses, accounts payable and accrued liabilities, due to related parties and loans payable, are carried at historical cost. At September 30, 2024 and December 31, 2023, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
| 12 |
| Table of Contents |
Revenue
The Company recognizes revenue from its contracts with customers in accordance with ASC 606 – Revenue from Contracts with Customers. The Company recognizes revenues when satisfying the performance obligation of the associated contract that reflects the consideration expected to be received based on the terms of the contract.
Revenue related to contracts with customers is evaluated utilizing the following steps:
| (i) | Identify the contract, or contracts, with a customer; |
| (ii) | Identify the performance obligations in the contract; |
| (iii) | Determine the transaction price; |
| (iv) | Allocate the transaction price to the performance obligations in the contract; |
| (v) | Recognize revenue when the Company satisfies a performance obligation. |
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.
Cost of Revenue
For the three and nine months ended September 30, 2024 and 2023, cost of revenue consists of:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Cost of inventory |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Freight and shipping |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Consulting and advisory - related party |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Royalty and sales commission - related party |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total cost of revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Basic and Diluted Net Loss Per Common Share
Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued.
For the nine months ended September 30, 2024 and 2023, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive.
|
| September 30, |
|
| September 30, |
| ||
|
| 2024 |
|
| 2023 |
| ||
|
| Shares |
|
| Shares |
| ||
Convertible notes |
|
|
|
|
|
| ||
Convertible Series C Preferred Stock |
|
|
|
|
|
| ||
Common stock warrants |
|
|
|
|
| - |
| |
Convertible Series A Preferred Stock(1) |
|
| - |
|
|
|
| |
|
|
|
|
|
|
| ||
(1) Series A Preferred Stock was amended in March 2024 to remove the conversion feature (Note 9).
| 13 |
| Table of Contents |
For the three and nine months ended September 30, 2024 and 2023, the reconciliation to net loss per common share basic and the anti-dilutive impact on net loss per share, are as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Interest on convertible debts |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss - diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Effect of dilutive shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common stock warrants |
|
|
|
|
| - |
|
|
|
|
|
| - |
| ||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures ("ASU 2023-09"), which is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for the Company prospectively to all annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact this update will have on our consolidated financial statements and disclosures.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which require public companies disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. The guidance is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is applied retrospectively to all periods presented in the financial statements, unless it is impracticable. We are currently evaluating the impact this update will have on our consolidated financial statements and disclosures.
| 14 |
| Table of Contents |
We have evaluated all other recently issued, but not yet effective, accounting pronouncements and do not believe that these accounting pronouncements will have any material impact on our consolidated financial statements or disclosures upon adoption.
Note 3 – Equipment
At September 30, 2024 and December 31, 2023, equipment consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Cost: |
|
|
|
|
|
| ||
Equipment |
| $ |
|
| $ |
| ||
Less: accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Equipment, net |
| $ |
|
| $ |
| ||
For the three and nine months ended September 30, 2024 and 2023, depreciation consists of:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Depreciation |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Note 4 – Intangible Assets
In 2022, the Company acquired the intellectual property of MFB California, 19 patents centered around its MFB Technology for the prevention and spread of wildfires.
As of September 30, 2024 and December 31, 2023, finite lived intangible assets consisted of the following:
|
| September 30 |
|
| December 31 |
| ||
|
| 2024 |
|
| 2023 |
| ||
Patents |
| $ |
|
| $ |
| ||
Accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Intangible assets, net |
| $ |
|
| $ |
| ||
Estimated future amortization expense for finite lived intangibles are as follows:
2024 (excluding the nine months ended September 30, 2024) |
| $ |
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
Thereafter |
|
|
| |
|
| $ |
|
As of September 30, 2024, the weighted-average useful life is
| 15 |
| Table of Contents |
For the three and nine months ended September 30, 2024 and 2023, amortization expense is as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Amortization |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Note 5 – Lease
We had one operating lease for our corporate office and warehouse and three short term leases for executive office and storage facilities.
In March 2022, the Company entered into an operating lease for the office, with the term of 18 months. In July 2023, the Company amended the contract and extended the lease term to July 2025.
For the three and nine months ended September 30, 2024 and 2023, right-of-use asset and lease information about the Company’s operating lease consist of:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
The components of lease expense were as follows: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating lease cost |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Short-term lease cost |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total lease cost |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Supplemental cash flow information related to leases was as follows:
|
| Nine Months Ended |
| |||||
|
| September30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Cash paid for operating cash flows from operating leases |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term - operating leases (year) |
|
|
|
|
|
| ||
Weighted-average discount rate — operating leases |
|
| % |
|
| % | ||
Supplemental balance sheet information related to leases consists of:
|
| September 30, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Operating lease right-of-use asset |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Operating lease liabilities: |
|
|
|
|
|
|
|
|
Current portion |
| $ |
|
| $ |
| ||
Non-current portion |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
The following table outlines maturities of our lease liabilities as of September 30, 2024:
Year ending December 31, |
|
|
| |
2024 (excluding the nine months ended September 30, 2024) |
| $ |
| |
2025 |
|
|
| |
Thereafter |
|
|
| |
|
|
|
| |
Less: Imputed interest |
|
| ( | ) |
Operating lease liabilities |
| $ |
| |
| 16 |
| Table of Contents |
Note 6 – Convertible Notes
The components of convertible notes as of September 30, 2024 and December 31, 2023, were as follows:
|
| Principal |
|
|
|
| Interest |
|
| September 30, |
|
| December 31, |
| ||||
Payment date |
| Amount |
|
| Maturity date |
| Rate |
|
| 2024 |
|
| 2023 |
| ||||
August 11, 2022 |
| $ |
|
|
|
| % |
| $ |
|
| $ |
| |||||
September 2, 2022 |
| $ |
|
|
|
| % |
|
|
|
|
|
| |||||
April 1,2023 |
| $ |
|
|
|
| % |
|
|
|
|
|
| |||||
July 15, 2024 |
| $ |
|
|
|
| % |
|
|
|
|
|
| |||||
August 15, 2024 |
| $ |
|
|
|
| % |
|
|
|
|
|
| |||||
Total Convertible notes |
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
| ||
Less: Unamortized debt discount |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Less: Current portion |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| (54,000 | ) |
Long-term portion |
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
| ||
On September 30, 2022, the Company entered into a convertible note agreement for the amount of $54,000, with term of six (6) months from the date of receipt of the funds, at interest rate of
On July 15, 2024 and August 15, 2024, the Company entered into seventeen (17) subscription agreements for convertible notes ($
During the nine months ended September 30, 2024, the Company recognized the debt discount of $
During the nine months ended September 30, 2024 and 2023, the Company recognized interest expenses of $
Note 7 – Promissory Note
On June 7, 2023, the Company entered into a promissory note agreement for the amount of $
During the nine months ended September 30, 2024, the Company settled the promissory note with principal amount of $
| 17 |
| Table of Contents |
Note 8 – Related Party Transactions
The related parties that had material transactions for the three and nine months ended September 30, 2024 and 2023, consist of the following:
Related Party | Nature of Relationship to the Company | |
A | An Ohio Corporation – a significant shareholder | |
B | Owner of related party A | |
C | Chief Executive Officer (CEO) of the Company | |
D | A California Corporation owned by related party E | |
E | Significant shareholder | |
F | MFB Ohio board advisor | |
G | MFB Ohio board advisor | |
H | MFB Ohio board advisor | |
I | MFB Ohio board advisor | |
J | MFB Ohio board advisor | |
K | MFB Ohio board advisor |
As of September 30, 2024 and December 31, 2023, amounts owing to related parties consists as follows:
|
| September 30, |
|
| December 31, |
| ||
Related Party |
| 2024 |
|
| 2023 |
| ||
A |
| $ |
|
| $ |
| ||
B |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
During the nine months ended September 30, 2024 and 2023, related party A advanced to the Company an amount of $
For the three months ended September 30, 2024 and 2023, expenses to related parties and their nature consists of:
|
| Three Months Ended |
|
|
|
|
| ||||||
|
| September 30, |
|
|
|
|
| ||||||
Related Party |
| 2024 |
|
| 2023 |
|
| Nature of transaction |
| Financial Statement Line Item | |||
D |
| $ |
|
| $ |
|
|
| Professional fees - related party | ||||
D |
| $ |
|
| $ |
|
|
| Cost of revenue | ||||
E |
| $ |
|
| $ |
|
|
| Professional fees - related party | ||||
E |
| $ |
|
| $ |
|
|
| Cost of revenue | ||||
| 18 |
| Table of Contents |
For the nine months ended September 30, 2024 and 2023, expenses to related parties and their nature consists of:
|
| Nine Months Ended |
|
|
|
|
| ||||||
|
| September 30, |
|
|
|
|
| ||||||
Related Party |
| 2024 |
|
| 2023 |
|
| Nature of transaction |
| Financial Statement Line Item | |||
C |
| $ |
|
| $ |
|
|
| General and administration | ||||
D |
| $ |
|
| $ |
|
|
| Professional fees - related party | ||||
D |
| $ |
|
| $ |
|
|
| Cost of revenue | ||||
E |
| $ |
|
| $ |
|
|
| Professional fees - related party | ||||
E |
| $ |
|
| $ |
|
|
| Cost of revenue | ||||
F |
| $ |
|
| $ |
|
|
| Professional fees - related party | ||||
G |
| $ |
|
| $ |
|
|
| Professional fees - related party | ||||
H |
| $ |
|
| $ |
|
|
| Professional fees - related party | ||||
I |
| $ |
|
| $ |
|
|
| Professional fees - related party | ||||
J |
| $ |
|
| $ |
|
|
| Professional fees - related party | ||||
K |
| $ |
|
| $ |
|
|
| Professional fees - related party | ||||
Note 9 – Stockholders’ Equity
Preferred Shares
Shares Outstanding
The Company is authorized to issue up to
Series A Preferred Stock
The Company originally designated
Dividends. Holders of shares of Series A Preferred Stock are not entitled to receive dividends.
Voting Rights. Each share of Series A Preferred Stock is entitled to
Other Rights. Shares of Series A Preferred Stock are not entitled to a liquidation preference. The holders of the Series A Preferred Stock may not be redeemed without the consent of the holders of the Series A Preferred Stock. The holder of the Series A Preferred Stock are not entitled to pre-emptive rights or subscription rights.
The Company will not, by amendment of its Charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of its Charter and in the taking of all such action as may be necessary or appropriate to protect the rights of the holders of the Series A Preferred Stock against impairment.
| 19 |
| Table of Contents |
So long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent as provided by the Wyoming Business Corporations Act) of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock: (a) alter or change the rights, preferences or privileges of the Series A Preferred Stock; (b) alter or change the rights, preferences or privileges of any capital stock of the Company so as to affect adversely the Series A Preferred Stock; (c) increase the authorized number of shares of Series A Preferred Stock; or (d) authorize or issue any shares of senior securities.
Fully Paid. The issued and outstanding shares of Series A Preferred Stock are fully paid and non-assessable. This means the full purchase price for the outstanding shares of Series A Preferred Stock has been paid and the holders of such shares will not be assessed any additional amounts for such shares.
As of September 30, 2024 and December 31, 2023, there were
Series C Convertible Preferred Stock
The Company has designated
Dividends. Holders of shares of Series C Convertible Preferred Stock are not entitled to receive dividends.
Voting Rights. The holders of the Series C Convertible Preferred Stock are not entitled to vote.
Conversion Rights. Each share of Series C Convertible Preferred Stock outstanding as such time shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into 20 shares of the Common Stock of the Company (the “Conversion Ratio”). Such Conversion Ratio, and the rate at which shares of Series C Convertible Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment.
If at any time or from time to time there shall be (i) a merger or consolidation of the Company with or into another corporation, (ii) the sale of all or substantially all of the Company’s capital stock or assets to any other person, (iii) any other form of business combination or reorganization in which the Company shall not be the continuing or surviving entity of such business combination or reorganization, or (iv) any transaction or series of transactions by the Company in which more than 50 percent (50%) of the Company’s voting power is transferred (each a “Reorganization”) then as a part of such Reorganization, the provision shall be made so that the holders of the Series C Convertible Preferred Stock shall thereafter be entitled to receive the same kind and amount of stock or other securities or property (including cash) of the Company, or the successor corporation resulting from such Reorganization.
Other Rights. The holders of the Series C Convertible Preferred Stock are not entitled to a liquidation preference. The holders of the Series C Convertible Preferred Stock may not be redeemed without the consent of the holders of the Series C Convertible Preferred Stock. The holder of the Series C Convertible Preferred Stock are not entitled to pre-emptive rights or subscription rights.
The Company will not, by amendment of its Charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of its Charter and in the taking of all such action as may be necessary or appropriate to protect the rights of the holders of the Series C Convertible Preferred Stock against impairment.
| 20 |
| Table of Contents |
So long as any shares of Series C Convertible Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent as provided by the Wyoming Business Corporations Act) of the holders of at least a majority of the then outstanding shares of Series C Convertible Preferred Stock: (a) alter or change the rights, preferences or privileges of the Series C Convertible Preferred Stock; (b) alter or change the rights, preferences or privileges of any capital stock of the Company so as to affect adversely the Series C Convertible Preferred Stock; (c) increase the authorized number of shares of Series C Convertible Preferred Stock; or (d) authorize or issue any shares of senior securities.
Fully Paid. The issued and outstanding shares of Series C Convertible Preferred Stock are fully paid and non-assessable. This means the full purchase price for the outstanding shares of Series C Convertible Preferred Stock has been paid and the holders of such shares will not be assessed any additional amounts for such shares.
During the nine months ended September 30, 2024, the Company issued
| ● | 183,332 shares issued for stock payable of $ |
| ● | |
| ● |
Subscription received
During the year ended December 31, 2023, the Company received $
During the nine months ended September 30, 2024, the Company issued
As of September 30, 2024, and December 31, 2023, there were
Common Stock
The Company has authorized
During the nine months ended September 30, 2024, the Company issued
| ● | |
| ● | |
| ● | |
| ● |
As of September 30, 2024 and December 31, 2023, there were
| 21 |
| Table of Contents |
Stock-Based Compensation
On June 13, 2022, the Company issued
|
| Restricted Stock Award |
|
| Weighted-Average Grant Price |
| ||
Balance, December 31, 2023 |
|
|
|
| $ |
| ||
Granted |
|
| - |
|
|
|
| |
Vested |
|
| - |
|
|
|
| |
Cancelled |
|
| ( | ) |
|
|
| |
Balance, September 30, 2024 |
|
|
|
| $ |
| ||
As of December 31, 2023,
Common Stock to be Issued
On November 1, 2022, the Company’s Board of Directors approved the issuance of
On April 22, 2024, the Company entered into an advisory and consulting agreement for a period of twelve (12) months with share compensation of
As of September 30, 2024 and December 31, 2023,
Warrants
During the nine months ended September 30, 2024, the Company issued a total of
The Company utilizes the Black-Scholes model to value its warrants and recognized debt discount of $
|
| September 30 |
| |
|
| 2024 |
| |
Expected term |
|
| ||
Expected average volatility |
|
| ||
Expected dividend yield |
|
|
| |
Risk-free interest rate |
|
| ||
| 22 |
| Table of Contents |
A summary of activity of the warrants during the nine months ended September 30, 2024, as follows:
|
| Warrants Outstanding |
|
|
|
| ||||||
|
|
|
|
| Weighted Average |
|
| Weighted Average Remaining |
| |||
|
| Shares |
|
| Exercise Price |
|
| Contractual life (in years) |
| |||
|
|
|
|
|
|
|
|
|
| |||
Outstanding, December 31, 2023 |
|
| - |
|
| $ |
|
|
| - |
| |
Granted |
|
|
|
|
|
|
|
|
| |||
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
Forfeited/canceled |
|
| - |
|
|
| - |
|
|
| - |
|
Outstanding, September 30, 2024 |
|
|
|
| $ |
|
|
|
| |||
The intrinsic value of the warrants as of September 30, 2024 is $262,734.
Note 10– Commitments and Contingencies
As part of the intellectual asset purchase agreement with MFB California, the Company is subject to royalties of
Note 11 – Concentration
As of September 30, 2024 and December 31, 2023, and for nine months ended September 30, 2024 and 2023, customer and supplier concentrations (more than 10%) were as follows:
Revenue and accounts receivable
|
| Percentage of Revenue |
|
| Percentage of |
| ||||||||||
|
| For Nine Months Ended |
|
| Accounts Receivable |
| ||||||||||
|
| September 30, |
|
| September 30 |
|
| December 31 |
| |||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Customer A |
|
| % |
|
| - |
|
|
| - |
|
|
| - |
| |
Customer B |
|
| % |
|
| - |
|
|
| % |
|
| - |
| ||
Customer C |
|
| % |
|
| - |
|
|
| - |
|
|
| - |
| |
Customer D |
|
| % |
|
| - |
|
|
| % |
|
| % | |||
Customer E |
|
| - |
|
|
| - |
|
|
| - |
|
|
| % | |
Customer F |
|
| - |
|
|
| % |
|
| - |
|
|
| - |
| |
Customer G |
|
| - |
|
|
| % |
|
| - |
|
|
| - |
| |
Customer H |
|
| - |
|
|
| % |
|
| - |
|
|
| - |
| |
Total (as a group) |
|
| % |
|
| % |
|
| % |
|
| % | ||||
Purchase and supplier accounts payable
|
| Percentage of Purchase |
|
| Percentage of |
| ||||||||||
|
| For Nine Months Ended |
|
| Accounts Payable for purchase |
| ||||||||||
|
| September 30, |
|
| September 30, |
|
| December 31, |
| |||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Supplier A |
|
| % |
|
| - |
|
|
| - |
|
|
| - |
| |
Supplier B |
|
| % |
|
| % |
|
| % |
|
| - |
| |||
Total (as a group) |
|
| % |
|
| % |
|
| % |
|
| - |
| |||
To reduce risk, the Company closely monitors the amounts due from its customers and assesses the financial strength of its customers through a variety of methods that include, but are not limited to, engaging directly with customer operations and leadership personnel, visiting customer locations to observe operating activities, and assessing customer longevity and reputation in the marketplace. As a result, the Company believes that its accounts receivable credit risk exposure is limited.
Note 12 – Subsequent Events
Management evaluated all additional events through the date the consolidated financial statements were available to be issued. Based upon this review, the Company did not identify any material subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
The Company filed with the Securities and Exchange Commission (“SEC”) a prospectus on Form S-1 with the objective, when effective, of raising up to $
During the month of October 2024, the Company raised $
| 23 |
| Table of Contents |
Item 2. Management’s 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. 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
General Enterprise Ventures, Inc., (“GEVI,” “we,” “us,” or the “Company”) was originally incorporated in Nevada on March 14, 1990. Our principal executive offices are located at 1740H Del Range Blvd, Suite 166, Cheyenne, Wyoming 82009.
We are an environmentally sustainable flame retardant and flame suppression company for the residential home industry throughout the United States. On January 3, 2022, the Company formed Mighty Fire Breaker, LLC, an Ohio limited liability company (“MFB Ohio”), to acquire all the intellectual property of Mighty Fire Breaker, LLC, a California limited liability company (“MFB California”) in connection with the flame retardant and flame suppression segments of the environmental industry, including patents and patents pending. On April 13, 2022, the transaction between the Company, MFB Ohio and MFB California closed. The transaction consideration to the equity holders of MFB California was 1,000,000 shares of the Series C Convertible Preferred Stock of the Company with a value at closing of $4,200,000, and a 10% royalty on gross sales before taxes of the MFB Ohio family of products.
| 24 |
| Table of Contents |
Steve Conboy, who founded MFB California, has been in the lumber business for over 30 years. Approximately 10 years ago, he realized that residential and commercial fires, as well as wildfires, would not cease for the foreseeable future. Mr. Conboy understood that, even if lumber was treated, it was toxic by nature and this toxicity is harmful to humans and the environment. He realized that there was a market, and most importantly a need, for a product that was capable of fire suppression and being a fire retardant while also being the safest for the environment and for human beings.
Mr. Conboy set out to develop a formula for a product that would meet these requirements. During the course of research and development, Mr. Conboy formed MFB California and contributed numerous patents toward development of a green product line that was envisioned many years ago. That product is its CitroTech MFB 31 Technology™. Since MFB Ohio acquired the MFB California portfolio of intellectual property, Company management has continued to develop many formulations to achieve the vision. In addition, the Company has been recognized and certified for their achievement. These recognitions and achievements, including twice receiving the EPA Safer Choice award and being the first and only EPA certified fire retardant, UL Certification, GreenGaurd Gold for no VOCs, other accreditations, and adoption by departments throughout the State of California.
Our management is comprised of one individual, Joshua Ralston, who is our President, Chief Executive officer, Chief Financial Officer and Chairman of the Board of Directors..
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 and nine months ended September 30, 2024 and 2023, which are included herein.
Our results of operations for the three months ended September 30, 2024 and 2023 are summarized below:
|
| Three Months Ended |
|
|
|
|
|
|
| |||||||
|
| September 30, |
|
|
|
|
|
|
| |||||||
|
| 2024 |
|
| 2023 |
|
| Change |
|
| % |
| ||||
Revenue |
| $ | 107,042 |
|
| $ | 174,710 |
|
| $ | (67,668 | ) |
| (39 | %) | |
Operating expenses |
|
| 668,405 |
|
|
| 9,257,765 |
|
|
| (8,589,360 | ) |
| (93 | %) | |
Other expense |
|
| 93,875 |
|
|
| 1,760 |
|
|
| 92,115 |
|
|
| 5,234 | % |
Net loss |
| $ | (655,238 | ) |
| $ | (9,084,815 | ) |
| $ | 8,429,577 |
|
| (93 | %) | |
Revenue
The Company’s revenue is associated with revenue from MFB Ohio which acquired intellectual property to fire suppression in April 2022. Although overall, the Company’s revenue has increased year to date, during the three months ended September 30, 2024, revenue decreased $68,000 over the three months ended September 30, 2023, due to decreased wildfire activity associated with cooler temperatures during the summer months of July 2024 and August 2024.
| 25 |
| Table of Contents |
Operating Expenses
|
| Three Months Ended |
|
|
|
|
|
|
| |||||||
|
| September 30, |
|
|
|
|
|
|
| |||||||
|
| 2024 |
|
| 2023 |
|
| Change |
|
| % |
| ||||
Cost of revenue |
| $ | 126,064 |
|
| $ | 103,290 |
|
| $ | 22,774 |
|
|
| 22 | % |
Amortization and depreciation |
|
| 63,647 |
|
|
| 62,152 |
|
|
| 1,495 |
|
|
| 2 | % |
General and administration |
|
| 194,381 |
|
|
| 87,530 |
|
|
| 106,851 |
|
|
| 122 | % |
Advertising and marketing |
|
| 172,667 |
|
|
| 18,656 |
|
|
| 154,011 |
|
|
| 826 | % |
Management compensation |
|
| - |
|
|
| 180,000 |
|
|
| (180,000 | ) |
| (100 | %) | |
Professional fees |
|
| 111,646 |
|
|
| 8,806,137 |
|
|
| (8,694,491 | ) |
| (99 | %) | |
Total operating expenses |
| $ | 668,405 |
|
| $ | 9,257,765 |
|
| $ | (8,589,360 | ) |
| (93 | %) | |
The decrease in operating expenses was primarily due to decreases in professional fee of $8.7 million and management compensation offset by increases in general and administration expense and management compensation.
Cost of revenue
|
| Three Months Ended |
|
|
|
|
|
|
| |||||||
|
| September 30, |
|
|
|
|
|
|
| |||||||
|
| 2024 |
|
| 2023 |
|
| Change |
|
| % |
| ||||
Cost of inventory |
| $ | 98,637 |
|
| $ | 79,919 |
|
| $ | 18,718 |
|
|
| 23 | % |
Freight and shipping |
|
| 1,171 |
|
|
| - |
|
|
| 1,171 |
|
|
| - |
|
Consulting and advisory - related party |
|
| 5,800 |
|
|
| 5,900 |
|
|
| (100 | ) |
| (2 | %) | |
Royalty and sales commission - related party |
|
| 20,456 |
|
|
| 17,471 |
|
|
| 2,985 |
|
|
| 17 | % |
Total cost of revenue |
| $ | 126,064 |
|
| $ | 103,290 |
|
| $ | 22,774 |
|
|
| 22 | % |
During the three months ended September 30, 2024, the cost of revenue slightly increased over the three months ended September 30, 2023, primarily due to an increase in cost of inventory.
Cost of inventory consists of the sales of product, related supplies and direct testing our CitroTechproduct and various components required to for installation of Mighty Fire Breaker proactive wildfire defense systems. Cost of inventory increased during the three months ended September 30, 2024, primarily due to an increase in product sales and supplies and royalty and commission, from increased sales.
Consulting and advisory services are to a related party company for services related to product installations.
Freight and shipping relate to product shipped to customers.
Royality and sales commissions decreased during the three months ended September 30, 2024 due to a decrease in revenue. The Company recognizes an allocated portion of consulting and direct labor costs associated with our revenue.
General and administrative
General and administrative expenses are office, rent, travel, insurance, website, IT and other office related expenses. For the three months ended September 30, 2024, the Company incurred increased expenditures on their website and IT development and travel as well as general office and insurance expenses from expansion of operations.
| 26 |
| Table of Contents |
Advertising and marketing
The increase in advertising and marketing during the three months ended September 30, 2024, over September 30, 2023, is primarily due to increased marketing expenses to support revenue growth.
Professional fees
The increase in professional fees during the three months ended September 30, 2024, over September 30, 2023, is primarily due to stock-base management compensation of $8.6 million. The Company issued 1,200,000 shares of Preferred C stock, for professional fees to a related party consultant, which is valued as if they are fully converted to 24 million shares of common stock on issuance, and based on closing stock prices resulted in an accounting valuation of $8,640,000.
Other Expenses
For the three months ended September 30, 2024 and 2023, the other expenses consisted of $93,875 and $1,760 interest related to convertible notes payable, respectively.
Net loss
The net loss for the three months ended September 30, 2024, decreased by $8.6 million as compared to the three months ended September 30, 2023 primarily due to the decrease in operating expenses, primarily stock based professional fees.
Our results of operations for the nine months ended September 30, 2024 and 2023 are summarized below:
|
| Nine Months Ended |
|
|
|
|
|
|
| |||||||
|
| September 30, |
|
|
|
|
|
|
| |||||||
|
| 2024 |
|
| 2023 |
|
| Change |
|
| % |
| ||||
Revenue |
| $ | 738,729 |
|
| $ | 258,660 |
|
| $ | 480,069 |
|
|
| 186 | % |
Operating expenses |
|
| 4,844,042 |
|
|
| 10,174,248 |
|
|
| (5,330,206 | ) |
| (52 | %) | |
Other (income) expenses |
|
| 977,039 |
|
|
| 2,519 |
|
|
| 974,520 |
|
|
| 38,687 | % |
Net loss |
| $ | (5,082,352 | ) |
| $ | (9,918,107 | ) |
| $ | 4,835,755 |
|
| (49 | %) | |
Revenue
The Company’s revenue is associated with revenue from MFB Ohio which acquired intellectual property to fire suppression in April 2022. During the nine months ended September 30, 2024, the revenue increased $480,000 over the nine months ended September 30, 2023, due to MFB Ohio’s EPA approval and the filing of additional patents. With the EPA approval, MFB Ohio started the marketing phase of the company’s evolution. MFB Ohio 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.
| 27 |
| Table of Contents |
Operating Expenses
|
| Nine Months Ended |
|
|
|
|
|
|
| |||||||
|
| September 30, |
|
|
|
|
|
|
| |||||||
|
| 2024 |
|
| 2023 |
|
| Change |
|
| % |
| ||||
Cost of revenue |
| $ | 342,075 |
|
| $ | 171,641 |
|
| $ | 170,434 |
|
|
| 99 | % |
Amortization and depreciation |
|
| 190,247 |
|
|
| 186,306 |
|
|
| 3,941 |
|
|
| 2 | % |
General and administration |
|
| 534,308 |
|
|
| 239,208 |
|
|
| 295,100 |
|
|
| 123 | % |
Advertising and marketing |
|
| 530,043 |
|
|
| 58,474 |
|
|
| 471,569 |
|
|
| 806 | % |
Management compensation |
|
| - |
|
|
| 180,000 |
|
|
| (180,000 | ) |
| (100 | %) | |
Professional fees |
|
| 3,247,369 |
|
|
| 9,338,619 |
|
|
| (6,091,250 | ) |
| (65 | %) | |
Total operating expenses |
| $ | 4,844,042 |
|
| $ | 10,174,248 |
|
| $ | (5,330,206 | ) |
| (52 | %) | |
The decrease in operating expenses was primarily attributed to decreases in profession fees of $6.1 million, management compensation of $180,000 offset by increases in cost of revenue of $170,000, advertising and marketing of $472,000 and general and administrative expenses of $295,000.
Cost of revenue
|
| Nine Months Ended |
|
|
|
|
|
|
| |||||||
|
| September 30, |
|
|
|
|
|
|
| |||||||
|
| 2024 |
|
| 2023 |
|
| Change |
|
| % |
| ||||
Cost of inventory |
| $ | 233,362 |
|
| $ | 110,680 |
|
| $ | 122,682 |
|
|
| 111 | % |
Freight and shipping |
|
| 9,321 |
|
|
| 10,425 |
|
|
| (1,104 | ) |
| (11 | %) | |
Consulting and advisory-related party |
|
| 16,200 |
|
|
| 26,700 |
|
|
| (10,500 | ) |
| (39 | %) | |
Royalty and sales commission-related party |
|
| 83,192 |
|
|
| 23,836 |
|
|
| 59,356 |
|
|
| 249 | % |
Total cost of revenue |
| $ | 342,075 |
|
| $ | 171,641 |
|
| $ | 170,434 |
|
|
| 99 | % |
During the nine months ended September 30, 2024, the cost of revenue increased over the nine months ended September 30, 2023, primarily due to an 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 Firebreaker proactive wildfire defense systems. Cost of inventory increased during the nine months ended September 30, 2024, primarily due to an increase in product sales and supplies and royalty and commission, from increased sales.
Consulting and advisory services are to a related party company for services related to product installations.
Freight and shipping relate to product shipped to customers.
Royality and sales commissions increased in the nine months ended September 30, 2024 from more revenue. The Company recognizes an allocated portion of consulting and direct labor costs associated with our revenue.
General and administrative
General and administrative expenses are office, rent, travel, insurance, website, IT and other office related expenses. For the nine months ended September 30, 2024, the Company incurred increased expenditures on their website and IT development and travel as well as general office and insurance expenses from expansion of operations.
| 28 |
| Table of Contents |
Advertising and marketing
The increase in advertising and marketing during the nine months ended September 30, 2024, over September 30, 2023, is primarily due to stock-based compensation for services of $160,000 and increased expenses to support revenue growth.
Professional fees
The decrease in professional fees during the nine months ended September 30, 2024, over September 30, 2023, is primarily due to stock-base management compensation of $1.4 million and stock-based services compensation of $1.2 million in 2024 over stock-base management compensation of $8.6 million in 2023.
Other Expenses
For the nine months ended September 30, 2024 and 2023, the other expenses consisted of $94,760 and $2,519 interest related to convertible notes payable and loss on settlement of debt of $882,279 and $0, respectively.
Net loss
The net loss for the nine months ended September 30, 2024, decreased by $4.8 million as compared to the nine months ended September 30, 2023 primarily due to the decrease in operating expenses, primarily from stock-based professional fees.
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 $0.9 million and $10.1 million for the nine months ended September 30, 2024 and the year ended December 31, 2023, respectively. During July and August 2024, we completed a debt offering which generated net proceeds of $1.1 million, of which $0.75 million was advanced on or before June 30, 2024.
Working capital
|
| September 30, |
|
| December 31, |
|
|
|
|
|
|
| ||||
|
| 2024 |
|
| 2023 |
|
| Change |
|
| % |
| ||||
Cash |
| $ | 309,129 |
|
| $ | 549,755 |
|
| $ | (240,626 | ) |
| (44 | %) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Current Assets |
| $ | 1,110,368 |
|
| $ | 1,218,056 |
|
| $ | (107,688 | ) |
| (9 | %) | |
Current Liabilities |
| $ | 2,113,132 |
|
| $ | 1,617,785 |
|
| $ | 495,347 |
|
|
| 31 | % |
Working Capital (Deficiency) |
| $ | (1,002,764 | ) |
| $ | (399,729 | ) |
| $ | (603,035 | ) |
|
| 151 | % |
As of September 30, 2024 and December 31, 2023, the current assets consisted of cash of $309,000 and $550,000, inventory of $271,000 and $230,000, accounts receivable of $430,000 and $427,000, prepaid expenses of $43,000 and $11,000, and deferred offering costs of $57,000 and $0, respectively.
| 29 |
| Table of Contents |
As of September 30, 2024 and December 31, 2023, the current liabilities consisted of accounts payable and accrued liabilities of $154,000 and $55,000, due to related parties of $1.3 million and $1.3 million, convertible notes of $633,000 and $54,000, and current portion of operating lease liability of $71,000 and $80,000, respectively.
2024 versus 2023
The increase in working capital deficiency in 2024 was primarily the result of advances for convertible notes. The Company had net loss and negative cash flows from our operations. In 2024, the Company generated funds from more debt financing than equity financing, therefore, current liabilities increased more than current assets.
Cash Flows
|
| Nine Months Ended |
|
|
|
| ||||||
|
| September 30, |
|
|
|
| ||||||
|
| 2024 |
|
| 2023 |
|
| Change |
| |||
Cash used in operating activities |
| $ | (1,319,815 | ) |
| $ | (819,936 | ) |
| $ | (499,879 | ) |
Cash used in investing activities |
| $ | - |
|
| $ | (2,231 | ) |
| $ | 2,231 |
|
Cash provided by financing activities |
| $ | 1,079,189 |
|
| $ | 1,332,600 |
|
| $ | (253,411 | ) |
Net Change In Cash |
| $ | (240,626 | ) |
| $ | 510,433 |
|
| $ | (751,059 | ) |
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities.
For the nine months ended September 30, 2024, net cash flows used in operating activities consisted of a net loss of $5.1 million, reduced by stock-based compensation of $2.6 million , non-cash lease expenses of $60,000, amortization and depreciation of $190,000, loss on settlement of debt of $882,000 and increased by net changes in operating assets and liabilities of $1.
For the nine months ended September 30, 2023, net cash flows used in operating activities consisted of a net loss of $9.9 million, reduced by stock-based compensation of $9.0 million, amortization and depreciation of $186,000, non-cash lease expenses of $52,000 and reduced by net changes in operating assets and liabilities of $107,000.
Cash Flows from Investing Activities
The Company did not use any funds for investing activities during the nine months ended September 30, 2024.
For the nine months ended September 30, 2023, the cash flows used in investing activities were $2,231, which was related to the purchase of equipment.
Cash Flows from Financing Activities
For the nine months ended September 30, 2024, net cash provided by financing activities consisted of $165,000 proceed from issuance Series C Preferred Stock, $1.0 million from convertible promissory notes and warrants, $57,000 deferred offering cost payment and $60,000 repayment of loan - related party.
| 30 |
| Table of Contents |
For the nine months ended September 30, 2023, net cash provided by financing activities consisted of $305,000 received from a related party, $907,600 from preferred stock subscriptions and $120,000 from promissory note.
Contractual Obligations
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 September 30, 2024:
Year ending December 31, |
|
|
| |
2024 (excluding the nine months ended September 30, 2024) |
| $ | 21,798 |
|
2025 |
|
| 50,862 |
|
Thereafter |
|
| - |
|
|
|
| 72,660 |
|
Less: Imputed interest |
|
| (1,737 | ) |
Operating lease liabilities |
| $ | 70,923 |
|
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.
Future Capital Requirements
Our current available cash and cash equivalents are insufficient to satisfy our liquidity requirements. Our capital requirements for the fiscal year ending December 31, 2024, will depend on numerous factors, including management’s evaluation of the timing of projects to pursue. Subject to our ability to generate revenues and cash flow from operations and our ability to raise additional capital (including through possible joint ventures or partnerships), we expect to incur substantial expenditures to carry out our business plan, as well as costs associated with our capital raising efforts and being a public company.
Our plans to finance our operations include seeking equity and debt financing, alliances or other partnership agreements, or other business transactions that would generate sufficient resources to ensure the continuation of our operations.
The sale of additional equity or debt securities may result in further dilution to our stockholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our Common Stock and could contain covenants that would restrict our operations. Any such required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned activities and limit our operations, which could have a material adverse effect on our business, financial condition, and operations results.
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Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. 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, evaluates 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 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 performance obligation generally of product used for lumber product for fire prevention. Revenue is recognized at a point in time, that is which the risks and rewards of ownership of the product 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.
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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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2024. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms as a result of the following material weaknesses: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; and (4) management is dominated by one individual without adequate compensating controls.
A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements would not be prevented or detected on a timely basis.
We expect to be materially dependent upon a third party to provide us with accounting consulting services for the foreseeable future. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements which could lead to a restatement of those financial statements.
Changes in Internal Controls
There has been no change in the Company’s internal control over financial reporting during the three months ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting. Management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional improvements as necessary.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition, and results of operations. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors
As a “smaller reporting company,” we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the nine months ended September 30, 2024, the Company issued 273,332 shares of Series C Preferred Stock as follow;
| ● | 183,332 shares issued for stock payable of $500,000. |
| ● | 50,000 shares for $165,000 cash subscription. |
| ● | 40,000 issued for services, valued at $696,000 at market price on issuance date. |
During the nine months ended September 30, 2024, the Company issued 4,256,762 shares of Common Stock and cancelled 65,000,000 shares as follow:
| ● | 2,250,000 shares issued for services, valued at $1,862,000 at market price on issuance date. |
| ● | 1,506,762 shares for conversion and settlement of debt of $1,085,148 at market price on issuance date. |
| ● | 500,000 shares issued for common stock to be issued from fiscal year ended 2023 – to a director of the Company. |
| ● | 65,000,000 shares were cancelled by the Company's President. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit Number | Description | |
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101* |
| Inline XBRL Document Set for the condensed financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q/A. |
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104* |
| Inline XBRL for the cover page of this Quarterly Report on Form 10-Q/A, included in the Exhibit 101 Inline XBRL Document Set. |
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* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| General Enterprise Ventures, Inc. | ||
| (Registrant) | ||
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Dated: November 18, 2024 |
| /s/ Joshua Ralston | |
| Joshua Ralston | ||
| Chief Executive Officer and Chief Financial Officer |
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EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT AND RULE 13A-14(A)
OR 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Joshua Ralston, certify that:
| 1. | I have reviewed this report on Form 10-Q of General Enterprise Ventures, Inc. for the quarter ended September 30, 2024; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 18, 2024 | By: | /s/ Joshua Ralston | |
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| Joshua Ralston | ||
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| Chief Executive Officer and Chief Financial Officer |
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EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of General Enterprise Ventures, Inc. (the “Company”), for the quarter ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joshua Ralston, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: November 18, 2024 | By: | /s/ Joshua Ralston | |
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| Joshua Ralston | ||
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| Chief Executive Officer and Chief Financial Officer |
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