CitroTech Inc 10-Q/A for FY2024 Q1
CitroTech Inc. (CITR)
About this 10-Q/A
CitroTech Inc filed this 10-Q/A on August 12, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $433.02K
- up 678.9% from $55.6K a year earlier
- Net loss
- $3.52M
- compared with a net loss of $415.42K a year earlier
- Diluted EPS
- -$0.03
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Amendment No. 1)
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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| For the quarterly period ended: |
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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| For the transition period from ___________ to ___________ |
Commission File Number:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
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(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.
EXPLANATORY NOTE
General Enterprise Ventures, Inc. (the “Company”) is filing this Amendment on Form 10-Q/A (the “Amended 10-Q”) to amend the Company’s Quarterly Report on Form 10-Q for the three month period ended March 31, 2024 (the “Original 10-A”), originally filed with the Securities and Exchange Commission (the “SEC”) on May 15, 2024, to amend the items set forth below in response to the following:
On May 3, 2024 (the “Order Date”), BF Borgers CPA PC and Benjamin F. Borgers, CPA (collectively, “Borgers”) was suspended from appearing or practicing before the Securities Exchange Commission (“SEC”).By letter to the Company dated May 9, 2024, the SEC informed the Company that it could not include audit reports or consents from Borgers in filings with the SEC on or after the Order Date. Furthermore, the SEC informed the Company that to the extent Borgers audited any portion of the financial statements required to be included in filings with the SEC on or after the Order Date, that the Company obtain a re-audit from a firm authorized to appear and practice before the SEC. Accordingly, the Company tasked its recently appointed audit firm, WWC, P.C., to undertake the re-audit of the Company’s financial statements for the year ended December 31, 2022 and to re-review the interim report for the three months ended March 31, 2023.
Except as described above and the items set forth below, no other amendments are being made to the Original 10-Q. This Amended 10-Q does not reflect events occurring after the filing of the Original 10-Q or modify or update the disclosure contained therein in any way other than as required to reflect the amendments discussed above.
The Company has attached to this Amended 10-Q updated certifications executed as of the date of this Amended 10-Q by the Principal Executive Officer and Principal Financial Officer as required by Sections 302 and 906 of the Sarbanes Oxley Act of 2002. These updated certifications are attached as Exhibits 31.1/31 .2 and 32.1/32.2 to this Amended 10-Q.
Items restated in this Form 10-Q/A
The following items have been restated, as appropriate, to update as noted above:
| · | Part I – Financial Information |
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| · | Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| · | Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
General Enterprise Ventures, Inc.
Consolidated Balance Sheets
(Unaudited)
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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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Total Current Assets |
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Equipment, net |
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Intangible assets |
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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 note payable |
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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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Operating lease liability |
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Total Liabilities |
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Commitment and contingencies |
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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.
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| 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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Revenue |
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Operating Expenses |
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Cost of revenue (includes payments to related parties of $47,346 and $12,530, respectively and exclusive of amortization and depreciation shown separately below) |
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Amortization and depreciation |
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General and administration |
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Marketing |
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Professional fees- related party |
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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 by issuing common stock |
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Total other income (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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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
(Unaudited)
For the three months ended March 31, 2024
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| Additional |
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Balance - December 31, 2023 |
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Series C Preferred Stock issued for cash |
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Series C Preferred Stock issued for services |
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Common stock issued for stock to be issued - management |
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Common stock issued for conversion and settlement of debt |
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Cancellation of comment stock -related party |
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Common stock issued for services |
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Net loss |
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Balance - March 31, 2024 |
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For the three months ended March 31, 2023
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Balance - December 31, 2022 |
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Common stock issued for services |
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Net loss |
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Balance - March 31, 2023 |
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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 Statement of Cash Flows
(Unaudited)
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Cash Flows from Operating Activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Common stock-based compensation |
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Series C Preferred stock-based compensation |
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Non-cash lease expenses |
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Depreciation and amortization |
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Loss on settlement of debt |
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Changes in operating assets and liabilities: |
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Inventory |
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Prepaid expense |
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Related party advances funding operating expense |
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Accounts payable and accrued liabilities |
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Operating lease liabilities |
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Net Cash used in Operating Activities |
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Cash Flows from Financing Activities: |
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Proceeds from loan - related party |
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Proceed from issuance Series C Preferred Stock |
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Net Cash provided by Financing Activities |
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Change in cash |
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Cash, end of period |
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Supplemental Disclosure Information: |
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Cash paid for interest |
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Cash paid for taxes |
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Non-Cash Financing Disclosure: |
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Common stock issued for conversion and settlement of debt |
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Common stock issued for stock to be issued - management |
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Series C Preferred stock issued for subscription received |
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Cancellation comment stock -related party |
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See the accompanying Notes, which are an integral part of these unaudited consolidated financial statements.
| 6 |
| Table of Contents |
General Enterprise Ventures, Inc.
Notes to (Unaudited) Consolidated Financial Statements
March 31, 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. 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 October 17, 2021, the Board of Directors approved the corporate name change from General Entertainment Ventures, Inc. to General Enterprise Ventures, Inc.
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 56 patents 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.
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 EPA Safer Choice approved, long-term fire retardant, UL GreenGaurd Gold, California Bioassay water approval, LENS, and in the process of USDA approval.
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 three months ended March 31, 2024, the Company completed financings from the issuance of Series C preferred stock, 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.
| 7 |
| Table of Contents |
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 subsidiary, Mighty Fire Breaker, LLC, an Ohio Limited Liability company. Intercompany transactions and balances have been eliminated.
Restatement
For the three months ended March 31, 2023, the company restated the consolidated financial statements for the calculation of amortization on intangible assets.
The impact on the Consolidated Statement of Operations and Comprehensive Loss of the restatement is as follows:
|
| Three Months Ended |
| |||||||||
|
| March 31, 2023 |
| |||||||||
|
| As Filed |
|
| Adjustment |
|
| As Restated |
| |||
Amortization and depreciation |
| $ |
|
| $ |
|
| $ |
| |||
Total operating expense |
| $ |
|
| $ |
|
| $ |
| |||
Loss from operations |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Net loss and comprehensive loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
The impact on the Consolidated Statement of Cash Flows of the restatement is as follows:
|
| Three months ended |
| |||||||||
|
| March 31, 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 |
| $ |
|
| $ |
|
| $ |
| |||
The impact on the Consolidated Statement of Stockholders’ Equity of the restatement is as follows:
|
| March 31,2023 |
| |||||||||
|
| As Filed |
|
| Adjustment |
|
| As Restated |
| |||
Stockholders' Equity: |
|
|
|
|
|
|
|
|
| |||
Accumulated deficit |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Total Stockholders' Equity: |
| $ |
|
| $ | ( | ) |
| $ |
| ||
Reclassification
For the three months ended March 31,2024 and 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 ended March 31,2024 and 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.
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 |
|
| Three Months Ended |
| ||||||||||||||||||
|
| March 31, 2024 |
|
| March 31, 2023 |
| ||||||||||||||||||
|
| As Filed |
|
| Adjustment |
|
| As Reclassified |
|
| As Filed and Restated(*) |
|
| Adjustment |
|
| As Reclassified |
| ||||||
Cost of revenue |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| ||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue (exclusive of amortization and depreciation shown separately below) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amortization and depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
General and administration |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Professional fees- related party |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Professional fees |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Total operating expenses |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||
(*) Originally as filed for March 31, 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 March 31, 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 $
Accounts Receivable
Trade accounts receivable are 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 March 31, 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 March 31, 2024 and December 31, 2023, the Company held inventories of $
| 8 |
| Table of Contents |
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 March 31, 2024 and December 31, 2023, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
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 months ended March 31, 2024, and 2023, cost of revenue consists of:
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 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 three months ended March 31, 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.
|
| March 31, |
|
| March 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
|
| Shares |
|
| Shares |
| ||
Convertible notes |
|
| - |
|
|
|
| |
Convertible Series C Preferred Stock |
|
|
|
|
|
| ||
Convertible Series A Preferred Stock(1) |
|
| - |
|
|
|
| |
|
|
| 47,562,284 |
|
|
| 10,019,196,467 |
|
(1) Series A Preferred Stock was amended in March 2024 to remove the conversion feature (Note 9).
| 9 |
| Table of Contents |
For the three months ended March 31, 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 |
| |||||
|
| March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Numerator: |
|
|
|
|
|
| ||
Net Loss |
| $ | ( | ) |
| $ | ( | ) |
Net Loss - diluted |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
| ||
Effect of dilutive shares |
|
|
|
|
|
|
|
|
Convertible notes |
|
| - |
|
|
|
| |
Preferred stock |
|
|
|
|
|
| ||
Diluted |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
Basic |
| $ | ( | ) |
| $ | ( | ) |
Diluted |
| $ | ( | ) |
| $ | ( | ) |
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires, among other things, additional disclosures primarily related to the income tax rate reconciliation and income taxes paid. The expanded annual disclosures are effective for our year ending December 31, 2025. The Company is currently evaluating the impact that ASU 2023-09 will have on our consolidated financial statements and whether we will apply the standard prospectively or retrospectively.
The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.
Note 3 – Equipment
At March 31, 2024 and December 31, 2023, equipment consisted of the following:
|
| March 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Cost: |
|
|
|
|
|
| ||
Furniture and equipment |
| $ |
|
| $ |
| ||
Less: accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Property and equipment, net |
| $ |
|
| $ |
| ||
During the three months ended March 31, 2024, and 2023, the Company recorded depreciation of $
| 10 |
| Table of Contents |
Note 4 – Intangible Assets
The Company has capitalized the costs associated with acquiring the intellectual property of MFB at a value of $
The amount capitalized consisted of a portion of the fair value of
As of March 31, 2024 and December 31, 2023, finite lived intangible assets consisted of the following:
|
| March 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Patents |
| $ |
|
| $ |
| ||
Accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Intangible assets, net |
| $ |
|
| $ |
| ||
Estimated future amortization expense for finite lived intangibles are as follows:
Year Ending December 31, |
|
|
| |
2024 (excluding the three months ended March 31, 2024) |
| $ |
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
Thereafter |
|
|
| |
|
| $ |
| |
As of March 31, 2024, the weighted-average useful life is
During the three months ended March 31, 2024 and 2023, the amortization expense was $
Note 5 – Lease
In March 2022, the Company has 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.
The following summarizes right-of-use asset and lease information about the Company’s operating lease for the three months ended March 31, 2024 and 2023:
|
| Three months ended |
| |||||
|
| March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
The components of lease expense were as follows: |
|
|
|
|
|
| ||
Operating lease expense |
| $ |
|
| $ |
| ||
Short-term lease expense |
|
|
|
|
|
| ||
Total lease expense |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental cash flow information related to leases was as follows: |
|
|
|
|
|
|
|
|
Cash paid for operating cash flows from operating leases |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term - operating leases (year) |
|
|
|
|
|
| ||
Weighted-average discount rate — operating leases |
|
| % |
|
| % | ||
| 11 |
| Table of Contents |
Supplemental balance sheet information related to leases was as follows:
|
| March 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Operating lease right-of-use asset |
| $ |
|
| $ |
| ||
|
| March 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Operating lease liabilities: |
|
|
|
|
|
| ||
Current portion |
| $ |
|
| $ |
| ||
Non-current portion |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
The following table outlines maturities of our lease liabilities as of March 31, 2024:
Year ending December 31, |
|
|
| |
2024 (excluding the three months ended March 31, 2024) |
| $ |
| |
2025 |
|
|
| |
Thereafter |
|
|
| |
|
|
|
| |
Less: Imputed interest |
|
| ( | ) |
Operating lease liabilities |
| $ |
| |
Note 6 – Convertible Note
On September 30, 2022, the Company entered into a convertible note agreement for the amount of $
|
| Principal |
|
|
|
| Interest |
|
| March 31, |
|
| December 31, |
| ||||
Payment date |
| Amount |
|
| Maturity date |
| Rate |
|
| 2024 |
|
| 2023 |
| ||||
August 11, 2022 |
| $ |
|
|
|
| % |
| $ | - |
|
| $ |
| ||||
September 2, 2022 |
| $ |
|
|
|
| % |
|
| - |
|
|
|
| ||||
April 1, 2023 |
| $ |
|
|
|
| % |
|
| - |
|
|
|
| ||||
Total Convertible notes |
|
|
|
|
|
|
|
|
|
|
| $ | - |
|
| $ |
| |
Current portion |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| ( | ) |
Long -term portion |
|
|
|
|
|
|
|
|
|
|
| $ | - |
|
| $ |
| |
| 12 |
| Table of Contents |
During the three months ended March 31, 2024, the Company settled liabilities of $
During the three months ended March 31, 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 three months ended March 31, 2024, the Company settled the promissory note with principal amount of $
Note 8 – Related Party Transactions
The related parties had material transactions for the three months ended March 31, 2024 and 2023, consist of the following:
Related Party | Nature of Relationship to the Company | |
A | Significant shareholdings owned by a corporation (greater than 10%) | |
B | Owner of related party A | |
C | Chief Executive Officer (CEO) of the Company | |
D | Company owned by related party E | |
E | Significant shareholder (greater than 10%) | |
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 March 31, 2024 and December 31, 2023, amounts owing to related parties consists as follows:
|
| March 31, |
|
| December 31, |
| ||
Related Party |
| 2024 |
|
| 2023 |
| ||
A |
| $ |
|
| $ |
| ||
B |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
During the three months ended March 31, 2024 and 2023, related party A advanced to the Company an amount of $
As of March 31, 2024 and December 31, 2023, the Company was obliged to related parties A and B, for unsecured, non-interest-bearing demand loans with a balance of $
For the three months ended March 31, 2024 and 2023, expenses to related parties and their nature, consists as follows:
|
| Three months ended |
|
|
| ||||||||
|
| March 31, |
|
|
| Financial Statement | |||||||
Related Party |
| 2024 |
|
| 2023 |
|
| Nature of Transaction |
| Line Items | |||
C |
| $ |
|
| $ |
|
|
| General and administration | ||||
D |
| $ |
|
| $ |
|
| Cash paid for consulting fees |
| 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 10,000,000 shares of its Preferred Stock as Series A Convertible Preferred Stock. Issued and outstanding Series A Convertible Preferred stock as of March 31, 2024 and December 31, 2023, was
| 13 |
| Table of Contents |
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.
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.
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.
| 14 |
| Table of Contents |
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.
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 three months ended March 31, 2024, the Company issued
| · | |
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|
|
| · | |
|
|
|
| · |
Subscription received
During the year ended December 31, 2023, the Company received $500,000 for stock subscriptions. As of March 31, 2024 and December 31, 2023,
As of March 31, 2024, and December 31, 2023, there were
Common Stock
The Company has authorized
During the three months ended March 31, 2024, the Company issued
| · | |
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|
| · | 1,506,762 shares for conversion and settlement of debt of $ |
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|
| · | |
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|
| · |
As of March 31, 2024 and December 31, 2023, there were
| 15 |
| 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, March 31, 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
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 March 31, 2024 and December 31, 2023 and for three months ended March 31, 2024 and 2023, customer and supplier concentrations (more than 10%) were as follows:
Revenue and accounts receivable
|
| Percentage of Revenue |
|
| Percentage of |
| ||||||||||
|
| For Three Months ended |
|
| Accounts receivable |
| ||||||||||
|
| March 31, |
|
| March 31, |
|
| December 31 |
| |||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Customer A |
|
| % |
|
| - |
|
|
| % |
|
| - |
| ||
Customer B |
|
| % |
|
| - |
|
|
| % |
|
| - |
| ||
Customer C |
|
| % |
|
| - |
|
|
| % |
|
| % | |||
Customer D |
|
| - |
|
|
| - |
|
|
| % |
|
| % | ||
Total (as a group) |
|
| % |
|
| - |
|
|
| % |
|
| % | |||
| 16 |
| Table of Contents |
Purchase and accounts payable
|
| Percentage of Purchase |
|
| Percentage of |
| ||||||||||
|
| For Three Months ended |
|
| Accounts Payable |
| ||||||||||
|
| March 31, |
|
| March 31, |
|
| December 31 |
| |||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Supplier A |
|
| % |
|
| - |
|
|
| - |
|
|
| - |
| |
Supplier B |
|
| % |
|
| - |
|
|
| - |
|
|
| - |
| |
Supplier C |
|
| % |
|
| - |
|
|
| - |
|
|
| - |
| |
Supplier D |
|
| % |
|
| - |
|
|
| - |
|
|
| - |
| |
Supplier E |
|
| - |
|
|
| % |
|
| - |
|
|
| - |
| |
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 May 15, 2024, which is the date the financial statements were available to be issued. Based upon this review, unless noted below, the Company did not identify any material subsequent events that would have required adjustment or disclosure in the financial statements.
| 17 |
| 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
The Company’s U.S. subsidiary, Mighty Fire Breaker LLC (“MFB”) is engaged in developing solutions to support the resolution of the insurance crisis in the western United States by use of its EPA approved CitroTech products. MFB has developed and patented additional intellectual property in this regard, such as a system for commercial properties and homes that puts a fire inhibiting buffer zone around a property, blocking blown-in embers from igniting. The technology continues to work dry, which unlike other products allows for early deployment and evacuation of people. MFB also has developed a job site trailer allowing for the fire protection of property during the construction phase and fire hardening of the inner construction and installation of our patented system during that phase. The intent is for the home owner to be able to bind insurance to start a construction project. The Company has achieved USDA approval. It has sold products to various fire departments and continues to demonstrate a market for its products.
Results of Operations
The following summary of our results of operations should be read in conjunction with our unaudited interim financial statements for the period ended March 31, 2024, which are included herein.
| 18 |
| Table of Contents |
Our operating results for the three months ended March 31, 2024, and 2023 and the changes between those periods for the respective items are summarized as follows:
Results of Operations for the three months ended March 31, 2024, and the three months ended March 31, 2023
|
| Three Months Ended |
|
|
|
| ||||||
|
| March 31, |
|
|
|
| ||||||
|
| 2024 |
|
| 2023 |
|
| Change |
| |||
Revenue |
| $ | 433,018 |
|
| $ | 55,595 |
|
| $ | 377,423 |
|
Operating expenses |
| $ | 3,069,564 |
|
| $ | 470,843 |
|
| $ | 2,598,721 |
|
Other expense |
| $ | 883,164 |
|
| $ | 175 |
|
| $ | 882,989 |
|
Net loss |
| $ | (3,519,710 | ) |
| $ | (415,423 | ) |
| $ | (3,104,287 | ) |
Revenue
The Company’s revenue is associated with revenue from Mighty Fire Breaker, LLC, an Ohio limited liability company (“MFB Ohio’) which acquired intellectual property to fire suppression in April 2022. During the three months ended March 31,2024, the revenue increased $377,423 over the three months ended March 31, 2023, due to MFBs EPA approval and the filing of additional patents. With the EPA approval, MFB started the marketing phase of the company’s evolution. MFB started selling directly to fire departments and launched its proactive wild-fire defense systems and is gaining momentum with commercial customers, along with attempting to influence the insurance industry to the benefit of consumers.
The net loss for the three months ended March 31, 2024 increased by $3.1 million as compared to the three months ended March 31,2023 primarily due to the increase in operating expenses, largely from stock-based compensation awards and loss on settlement of debt.
Operating Expenses
|
| Three Months Ended |
|
|
|
|
|
|
| |||||||
|
| March 31, |
|
|
|
|
|
|
| |||||||
|
| 2024 |
|
| 2023 |
|
| Change |
|
| % |
| ||||
Cost of revenue |
| $ | 126,072 |
|
| $ | 39,774 |
|
| $ | 86,298 |
|
|
| 217 | % |
Amortization and depreciation |
|
| 63,835 |
|
|
| 62,076 |
|
|
| 1,759 |
|
|
| 3 | % |
General and administration |
|
| 140,468 |
|
|
| 74,802 |
|
|
| 65,666 |
|
|
| 88 | % |
Marketing |
|
| 110,206 |
|
|
| 11,592 |
|
|
| 98,614 |
|
|
| 851 | % |
Professional fees- related party |
|
| 1,468,404 |
|
|
| 72,470 |
|
|
| 1,395,934 |
|
| 1926 | % | |
Professional fees |
|
| 1,160,579 |
|
|
| 210,129 |
|
|
| 950,450 |
|
|
| 452 | % |
Total operating expenses |
| $ | 3,069,564 |
|
| $ | 470,843 |
|
| $ | 2,598,721 |
|
|
| 552 | % |
Cost of revenue
|
| Three Months Ended |
|
|
|
|
|
|
| |||||||
|
| March 31, |
|
|
|
|
|
|
| |||||||
|
| 2024 |
|
| 2023 |
|
| Change |
|
| % |
| ||||
Cost of inventory |
| $ | 76,196 |
|
| $ | 26,154 |
|
| $ | 50,042 |
|
|
| 191 | % |
Freight and shipping |
|
| 2,530 |
|
|
| 1,090 |
|
|
| 1,440 |
|
|
| 132 | % |
Consulting and advisory |
|
| 4,200 |
|
|
| 9,000 |
|
|
| (4,800 | ) |
|
| -53 | % |
Royalty and sales commission |
|
| 43,146 |
|
|
| 3,530 |
|
|
| 39,616 |
|
| 1122 | % | |
Total cost of revenue |
| $ | 126,072 |
|
| $ | 39,774 |
|
| $ | 86,298 |
|
|
| 217 | % |
The increase in operating expenses was primarily attributed to stock -base management compensation of $1,422,750, stock-based services companion of $975,250, marketing expenses of $98,614, cost of revenue of $86,298 and general and administrative expenses of $65,666.
During the three months ended March 31, 2024, the cost of revenue increase 86,298 over the three months ended March 31, 2023, primarily due to increase in cost of inventory and royalty and sales commissions.
Cost of inventory consists of the sales of product, related supplies and direct testing our CitroTech™ product and various components required to for installation of Mighty Firese Breaker proactive fire systems. Cost of inventory increased during the three months ended March 31, 2024 primarily due to an increase in product sales and supplies and royalty and commission, from increased sales.
Royality and sales commissions increased in the three months ended March 31,2024 from more revenue. The Company recognizes an allocated portion of consulting and direct labor costs associated with our revenue.
Professional fees
The increase in professional fees during the three months ended March 31, 2024 of $2.3 million over March 31, 2023, is primarily due to stock-based compensation of $1.7 million.
Other Expenses
For the three months ended March 31, 2024, and 2023, the other expenses consisted of $885 and $175 interest related to convertible note payable and loss on settlement of debt of $882,000 and $0, respectively.
| 19 |
| Table of Contents |
Liquidity and Capital Resources
|
| March 31, |
|
| December 31, |
|
|
|
| |||
|
| 2024 |
|
| 2023 |
|
| Change |
| |||
Cash |
| $ | 371,095 |
|
| $ | 549,755 |
|
| $ | (178,660 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
| $ | 1,252,314 |
|
| $ | 1,218,056 |
|
| $ | 34,258 |
|
Current Liabilities |
| $ | 1,461,385 |
|
| $ | 1,617,785 |
|
| $ | (156,400 | ) |
Working Capital (Deficiency) |
| $ | (209,071 | ) |
| $ | (399,729 | ) |
| $ | 190,658 |
|
The increase in working capital in 2024 was primarily the result of an increase in accounts receivable of $254,000, prepaid expenses of $800 and a decrease in cash of $179,000 and inventory of 41,000 offset by an increase in accounts payable and accrued liabilities of $16,000 operating lease liability -current portion of $2,000, a decrease in promissory note of $120,000 and convertible note of $54,000.
As of March 31, 2024, and December 31, 2023, the current assets consisted primarily of cash, inventory of $189,000 and $230,000, accounts receivable of $681,000 and $427,000, and prepaid expenses of $11,000 and $11,000, respectively.
As of March 31, 2024, and December 31, 2023, the current liabilities consisted of accounts payable and accrued liabilities of $70,000 and $55,000, due to related party of $1.3 million and $1.3 million, convertible note of $0 and $54,000, promissory note of $0 and $120,000 and current portion of operating lease liability of $82,000 and $80,000, respectively.
Cash Flows
|
| Three months ended |
| |||||
|
| March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Cash used in operating activities |
| $ | (343,660) |
|
| $ | (176,905) |
|
Cash provided by investing activities |
| $ | - |
|
| $ | - |
|
Cash provided by financing activities |
| $ | 165,000 |
|
| $ | 185,000 |
|
Net Change in Cash |
| $ | (178,660 | ) |
| $ | 8,095 |
|
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities.
For the three months ended March 31, 2024, net cash flows used in operating activities consisted of a net loss of $3.5 million, reduced by stock-based compensation of $1.702,000, non-cash lease expenses of $20,000, amortization and depreciation of $64,000, loss on settlement of debt of $882,000 and increased by net changes in operating assets and liabilities of $188,000.
For the three months ended March 31, 2023, net cash flows used in operating activities consisted of a net loss of $415,000, reduced by stock-based compensation of $87,000, amortization and depreciation of $62,000, non-cash lease expenses of $15,000 and reduced by net changes in operating assets and liabilities of $74,000.
Cash Flows from Investing Activities
The Company did not use any funds for investing activities during the three months ended March 31, 2024, and 2023.
Cash Flows from Financing Activities
For the three months ended March 31, 2024, net cash provided by financing activities consisted of $165,000 proceed from issuance Series C Preferred Stock.
For the three months ended March 31, 2023, net cash provided by financing activities consisted of $185,000 received from a related party.
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 March 31, 2023:
Year ending December 31, |
|
|
| |
2024 (excluding the three months ended March 31, 2024) |
| $ | 64,594 |
|
2025 |
|
| 50,862 |
|
Thereafter |
|
| - |
|
|
|
| 115,456 |
|
Less: Imputed interest |
|
| (4,575 | ) |
Operating lease liabilities |
| $ | 110,881 |
|
| 20 |
| Table of Contents |
Going Concern
The accompanying consolidated financial statements have been prepared (i) in accordance with accounting principles generally accepted in the United States, and (ii) assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated significant income to date. The Company is subject to the risks and uncertainties associated with a business with no substantive revenue, as well as limitations on its operating capital resources. These matters, among others, raise substantial doubt about the ability of the Company to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. In light of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to raise capital and generate revenue and profits in the future.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.
Our most critical accounting policies and estimates relate to the following:
● | Revenue Recognition | |
● | Incremental borrowing rate for Right of Use Assets | |
● | Share based compensation |
Revenue Recognition
Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied. Our revenues currently consist of products used for lumber products for fire prevention. Revenue is recognized at a point in time, that is which the risks and rewards of ownership of the products transfer from the Company to the customer. All of our performance obligations under the terms of contracts with our customers have an original duration of one year or less.
Incremental borrowing rate for Right of Use Assets
As the Company’s operating leases typically do not provide an implicit rate, the Company estimates its incremental borrowing rate. The assessment of the Company’s incremental borrowing rate involves judgment regarding the cost of borrowing funds on a collateralized basis over a similar term and in a similar economic environment.
Share-Based Compensation
The Company accounts for employee and non-employee stock awards under ASC 718, Compensation – Stock Compensation, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to nonemployees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. Equity grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service.
| 21 |
| Table of Contents |
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 March 31, 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 March 31, 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.
| 22 |
| Table of Contents |
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 three months ended March 31, 2024, the Company issued 198,333 shares of Series C Preferred Stock as follow;
| · | 108,333 shares issued for stock payable of $320,000. |
|
|
|
| · | 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 three months ended March 31, 2024, the Company issued 3,756,762 shares of Common Stock and cancelled 65,000,000 shares as follow;
| · | 2,000,000 shares issued for services, valued at $1,702,000 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. |
|
|
|
| · | 250,000 shares for stock to be issued - management, valued $90,000 at market price on approval date. |
|
|
|
| · | 65,000,000 shares were cancelled by the Company's President, valued $6,500 at par value. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
| 23 |
| Table of Contents |
Item 6. Exhibits
Exhibit Number | Description | |
|
|
|
|
|
|
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. |
|
|
|
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. |
________
* Filed herewith.
| 24 |
| Table of Contents |
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) | ||
|
|
| |
Dated: August 9, 2024 |
| /s/ Joshua Ralston | |
| Joshua Ralston | ||
| Chief Executive Officer and Chief Financial Officer |
25 |
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/A of General Enterprise Ventures, Inc. for the quarter ended March 31, 2024; |
|
|
|
| 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; |
|
|
|
| 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: August 9, 2024 | By: | /s/ Joshua Ralston | |
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| Joshua Ralston | ||
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| Chief Executive Officer and Chief Financial Officer |
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/A of General Enterprise Ventures, Inc. (the “Company”), for the quarter ended March 31, 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: August 9, 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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