CitroTech Inc 10-Q for FY2022 Q3
CitroTech Inc. (CITR)
About this 10-Q
CitroTech Inc filed this 10-Q on November 10, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $19.03K
- compared with $0 a year earlier
- Net loss
- $297.07K
- compared with a net loss of $20.57K a year earlier
- Diluted EPS
- $0.00
- compared with -$0.05 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 | |
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| 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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| 3 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| 2 |
| 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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| 2021 |
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Assets |
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Current Assets |
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Cash |
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Inventory |
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Total Current Assets |
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Intangible assets |
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Operating lease right-of-use asset |
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Prepaid expenses |
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Equipment, net |
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Digital currency |
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Total Assets |
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Liabilities and Stockholders' Equity (Deficit) |
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Current liabilities |
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Accounts payable and accrued liabilities |
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Convertible note |
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Due to related party |
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Operating lease liability - current portion |
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Total Current Liabilities |
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Total Liabilities |
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Stockholders' Equity (Deficit) |
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Convertible 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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Accumulated deficit |
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Total Stockholders' Equity (Deficit) |
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Total Liabilities and Stockholders' Equity (Deficit) |
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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 Statements of Operations
(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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| 2022 |
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| 2021 |
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| 2021 |
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Revenues |
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Revenue |
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Cost of revenue |
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Gross Profit |
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Operating Expenses |
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General and administration |
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Depreciation |
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Management compensation |
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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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Total other income (expense) |
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Loss from continuing operations before taxes |
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Provision for income taxes |
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Loss from continuing operations |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Discontinued operations: |
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Income (loss) from discontinued operations |
| $ |
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| $ |
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Loss on disposition of digital currency and digital currency assets |
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Income (loss) from discontinued operations, net of tax |
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Net Loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Loss from continuing operations per Common Share – Basic |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Gain (loss) from discontinuing operations per Common Share– Basic |
| $ |
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| $ |
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Net loss per common share - Basic |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Loss from continuing operations per Common Share – Diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Gain (loss) from discontinuing operations per Common Share– Diluted |
| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) | ||
Net loss per common share - Diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Basic Weighted Average Number of Common Shares Outstanding |
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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 nine months ended September 30, 2022
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| Convertible Series A |
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| Convertible Series C |
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| Additional |
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| Total |
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| Preferred stock |
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| Preferred stock |
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| Common Stock |
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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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| Capital |
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| Deficit |
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| Equity |
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Balance - December 31, 2021 |
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| $ |
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| - |
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| $ |
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| $ |
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| $ |
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Debt forgiveness - former related party |
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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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Balance - March 31, 2022 |
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| - |
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Shares issued for acquisition of Mighty Fire Breakers |
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| - |
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Conversion of Convertible Series C Preferred stock of Common stock |
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Stock based compensation |
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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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Balance - June 30, 2022 |
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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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Balance - September 30, 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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For the nine months ended September 30, 2021
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| Convertible Series A |
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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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| 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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| Capital |
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| Deficit |
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| Deficit |
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Balance - December 31, 2020 |
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| $ |
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Net loss |
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Balance - March 31, 2021 |
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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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Balance - June 30, 2021 |
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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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| (9,055 | ) |
Balance - September 30, 2021 |
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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 Cash Flows
(Unaudited)
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| Nine Months Ended |
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| September 30, |
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| 2022 |
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| 2021 |
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Cash Flows from Operating Activities: |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Loss on disposition of digital currency and digital currency assets |
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Impairment loss on digital assets |
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Non-cash lease expense |
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Depreciation and amortization |
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Changes in operating assets and liabilities: |
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Inventory |
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Digital currency |
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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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Fixed cash payments related to operating leases |
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Net Cash Used in Operating Activities |
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Cash Flows from Investing Activities: |
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Purchase of equipment |
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Cash proceeds from acquisition of Strategic Asset Holdings, LLC. |
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Net Cash (Used in) Provided by Investing Activities |
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Cash Flows from Financing Activities: |
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Proceed from convertible note |
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Proceeds from loan - related party |
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Repayment of loan- related party |
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Proceeds from loan |
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Net Cash Provided by Financing Activities |
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Change in cash |
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Cash, beginning of period |
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Cash, end of period |
| $ |
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| $ |
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Supplemental Disclosure Information: |
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Cash paid for interest |
| $ |
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| $ |
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Cash paid for taxes |
| $ |
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| $ |
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Non-Cash Investing and Financing Activities Disclosure: |
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Issuance of Preferred C Stock for acquisition of Mighty Fire Breakers |
| $ |
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| $ |
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Common stock issued upon conversion of Preferred C stock |
| $ |
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| $ |
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Debt forgiveness - related party |
| $ |
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| $ |
| ||
Issuance of note payable for acquisition of Strategic Asset Holdings, LLC. |
| $ |
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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 Consolidated Financial Statements
September 30, 2022
(Unaudited)
Note 1 – Nature of Operations and Going Concern
General Enterprise Ventures, Inc., (the “Company” or “GEVI”), was originally incorporated under the laws of the State of Nevada on March 14, 1990.
Corporate changes
Effective April 1, 2022, the Company implemented a plan to divest its Crypto Mining operations and focus resources on the operations of Mighty Fire Breaker LLC (“MFB”). We expanded our services by building upon its foundation of emerging technology development, by creating a Crypto-Currency mining operation (farm). Previously,
Change of Control
On April 28th, 2022, Jan Ralston transferred ownership of
Series C Preferred Stock
On April 13, 2022, The Company designated
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.
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| Table of Contents |
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 financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K, for the year ended December 31, 2021, as filed with the SEC on April 12, 2022.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 had $
Inventory
Inventories consist of raw materials which are stated at lower of cost or net realizable value, with cost being determined on the weighted average method. As of September 30, 2022, and December 31, 2021, the Company held inventories of $
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed on the straight-line method. Currently our assets consist solely of furniture and equipment which we amortize over a useful life of
Maintenance and repairs are charged to expense as incurred. Improvements of a major nature are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any gains or losses are reflected in income.
Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value.
Digital Assets
We currently account for all digital assets held as a result of these transactions as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. We have ownership of and control over our digital assets and we may use third-party custodial services to secure it. The digital assets are initially recorded at cost and are subsequently remeasured on the consolidated balance sheet at cost, net of any impairment losses incurred since acquisition.
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| Table of Contents |
We determine the fair value of our digital assets on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that we have determined is the principal market for such assets (Level 1 inputs). We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that our digital assets are impaired. In determining if an impairment has occurred, we consider the lowest market price of one unit of digital asset quoted on the active exchange since acquiring the digital asset. If the then current carrying value of a digital asset exceeds the fair value so determined, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the price determined.
Impairment losses are recognized within other income (expense) on the statements of operations in the period in which the impairment is identified. The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale(s), at which point they are presented net of any impairment losses for the same digital assets held within other income (expense). In determining the gain to be recognized upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale.
During the nine months ended September 30, 2022, the Company recorded an impairment loss of $
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; |
|
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|
| ● | 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 |
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|
| ● | 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 payable and accrued liabilities, and loans payable, are carried at historical cost. At September 30, 2022 and December 31, 2021, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
Related Parties
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions (see Note 12).
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.
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For the three months ended September 30, 2022 and three and nine months ended September 30, 2021, 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, 2022 |
|
| September 30, 2021 |
| ||
Convertible notes |
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Revenue
We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 includes provisions within a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity 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.
In prior periods our revenues included cryptocurrency mining revenues. The Company earned its cryptocurrency mining revenues by providing transaction verification services within the digital currency networks of cryptocurrencies, for Bitcoin, Litecoin, and Dogecoin. The Company satisfied its performance obligations at the point in time that the Company was awarded a unit of digital asset through its participation in the applicable network and network participants benefit from the Company’s verification service. In consideration for these services, the Company received Bitcoin, Litecoin, and Dogecoin, net of applicable network fees, which was recorded as revenue using the closing U.S. dollar price of the digital asset on the date of receipt. Expenses associated with running the cryptocurrency mining operations, which consisted of utilities, equipment depreciation and monitoring services were recorded as cost of revenues. On April 1, 2022, the Company implemented a plan to discontinue its crypto mining operations and divest all related assets. As of September 30, 2022, all of the crypto mining assets had been discarded and as the Company no longer engages in crypto mining all revenue during the nine months ended September 30, 2022, has been reclassified to income from discontinued operations (see Note 4).
There is currently no specific definitive guidance in GAAP or alternative accounting frameworks for the accounting for the production and mining of digital assets and management has exercised significant judgment in determining appropriate accounting treatment for the recognition of revenue for mining of digital assets. Management has examined various factors surrounding the substance of the Company’s operations and the guidance in ASC 606, including identifying the transaction price, when performance obligations are satisfied, and collectability is reasonably assured being the completion and addition of a block to a blockchain and the award of a unit of digital currency to the Company. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies which could result in a change in the Company’s financial statements.
Note 3 – Acquisition
On April 13, 2022 General Enterprise Ventures, Inc. acquired MFB and all associated IP, in exchange for
| 10 |
| Table of Contents |
The following table summarizes the consideration paid for MFB and the amounts of the assets acquired, and liabilities assumed at the acquisition date of April 13, 2022:
Consideration: |
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Convertible Preferred C stock |
| $ |
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Assets acquired and liabilities assumed: |
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Intangible assets |
| $ |
| |
Operating lease right-of-use assets |
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| |
Operating lease liabilities |
|
| ( | ) |
Note 4 – Discontinued Operations
(a) Crypto mining
On April 1, 2022, the Company implemented a plan to divest its crypto mining operations to focus its resources on the MFB acquisition (see Note 3). The Company recognized a loss of $
The following is a summary of the assets and liabilities of the Company’s crypto mining operations as of April 1, 2022 and December 31, 2021:
|
| April 1, |
|
| December 31, |
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|
| 2022 |
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| 2021 |
| ||
Digital currency |
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Digital currency equipment, net |
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Total assets from discontinued operations |
| $ |
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| $ |
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Due to related party |
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Total liabilities from discontinued operations |
| $ |
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| $ |
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The following is a summary of discontinued operations for the period ended April 1,2022 and the nine months ended September 30, 2021:
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| 2022 |
|
| 2021 |
| ||
Revenue |
| $ |
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| $ |
| ||
Cost of revenue |
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Gross Profit |
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Operating expenses: |
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Impairment loss |
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Total operating expenses |
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Income from discontinued operations |
| $ |
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| $ |
| ||
(b) Strategic Assets Holdings, LLC. (“SAH”)
On October 19, 2021, the Board of Directors approved the divesture of SAH. The separation was amicable, and no severance was determined to be owed to Mr. Jason Tucker or SAH. As result of divesture, the Company recognized $
| 11 |
| Table of Contents |
The following is a summary of the assets and liabilities of SAH as of October 19, 2021 and December 31, 2020:
|
| October 19, |
|
| December 31, |
| ||
|
| 2021 |
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| 2020 |
| ||
Cash |
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Total assets from discontinued operations |
| $ |
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| $ |
| ||
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Loan payable |
|
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Total liabilities from discontinued operations |
| $ |
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| $ |
| ||
The following is a summary of discontinued operations for the nine months ended September 30,2022 and 2021:
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| 2022 |
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| 2021 |
| ||
Revenues |
| $ |
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| $ |
| ||
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General and administration |
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Management compensation |
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Impairment loss |
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Total operating expenses |
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Loss from discontinued operations |
| $ |
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| $ | ( | ) | |
Note 5 – Inventory
The Company’s inventory consists of raw materials. During the nine months ended September 30, 2022 and 2021, the Company recorded cost of goods sold of $
Note 6 – Equipment, net
At September 30, 2022 and December 31, 2021, equipment consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Cost: |
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Furniture and equipment |
| $ |
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| $ |
| ||
Digital currency equipment |
|
| - |
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| |
Less: accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Property and equipment, net |
| $ |
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| $ |
| ||
During the year ended December 31, 2021, the Company acquired digital asset machines with a cost of $
During the nine months ended September 30, 2022, the Company recorded depreciation of $
| 12 |
| Table of Contents |
Note 7 – Digital Currencies Intangible Assets
The Company mined Crypto currencies with a total aggregate value of $
|
| September 30, |
|
| December 31, |
| ||
Digital currencies held |
| 2022 |
|
| 2021 |
| ||
Opening balance |
| $ |
|
| $ |
| ||
Additional earned |
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Remittance as operating cost |
|
| ( | ) |
|
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| |
Repayment of related party loan |
|
| ( | ) |
|
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| |
Impairment |
|
| (6,125 | ) |
|
| ( | ) |
Disposition |
|
| ( | ) |
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| |
|
| $ |
|
| $ |
| ||
Note 8 – Intangible Assets
The Company has capitalized the costs associated with acquiring the intellectual property of MFB (see Note 3) at a value of $
The amount capitalized consisted of a portion of the fair value of
Note 9 – Lease
The following summarizes right-of-use asset and lease information about the Company’s operating lease as of September 30, 2022:
|
| Nine Months Ended |
| |
|
| September 30, |
| |
|
| 2022 |
| |
Lease cost |
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Operating lease cost |
| $ |
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Other information |
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Cash paid for operating cash flows from operating leases |
| $ |
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Right -of-use assets obtained upon acquisition |
| $ |
| |
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Weighted-average remaining lease term - operating leases (year) |
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| |
Weighted-average discount rate — operating leases |
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| % | |
| 13 |
| Table of Contents |
Future minimum lease payments under the operating lease liability has the following non-cancellable lease payments as of September 30, 2022:
2022 (excluding the nine months ended September 30, 2022) |
| $ |
| |
2023 |
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| |
Thereafter |
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| |
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| |
Less: Imputed interest |
|
| ( | ) |
Operating lease liabilities |
| $ |
| |
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Operating lease liabilities - current |
| $ |
| |
Operating lease liabilities- non-current |
| $ |
|
Note 10 – Convertible Note
On September 30, 2022, the Company entered a convertible note agreement for amount of $
|
| Principal |
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| Interest |
|
| September 30. |
| |||
Payment date |
| Amount |
|
| Maturity date |
| Rate |
|
| 2022 |
| |||
8/11/2022 |
| $ |
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| % |
| $ |
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9/2/2022 |
| $ |
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| % |
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Total Convertible notes |
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| $ |
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Current portion |
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Long -term portion |
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| $ |
| |
During the nine months ended September 30, 2022, the Company recognized $
Note 11 – Stockholders’ Equity
Preferred Shares
The Company’s preferred shares consist of the following:
| · | |
| · |
On November 25, 2020, the Company’s board of directors approved issuance of
On April 13, 2022, the Company’s board of directors approved the issuance of 1,000,000 Convertible Series C Preferred Stock, with a value of $
| 14 |
| Table of Contents |
Common Shares
The Company has authorized
On June 7, 2022, the holder of the Convertible Series C Preferred Stock converted
Common shares issued and outstanding as of September 30, 2022 and December 31, 2021 was
Stock-Based Compensation
On June 13, 2022, the Company issued
|
| Nine Months Ended |
| |||||
|
| September 30, 2022 |
| |||||
|
| Restricted Stock Award |
|
| Weighted-Average Grant Price |
| ||
Balance, December 31, 2021 |
|
| - |
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| $ |
| |
Granted |
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Vested |
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| - |
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Forfeited |
|
| - |
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| - |
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Balance, September 30, 2022 |
|
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| $ |
| ||
Note 12 – Related Party Transactions
During the nine months ended September 30, 2022, our former officer forgave $
During the nine months ended September 30, 2022 a related party advanced to the Company an amount of $
During the nine months ended September 30, 2022, as part of the Company’s divestiture of its digital asset operations, a related party forgave loans payable of $
During the nine months ended September 30, 2022, the Company paid $
As of September 30, 2022, and December 31, 2021, the Company was obliged to related parties, for unsecured, non-interest-bearing demand loans with a balance of $
Note 13 – Contingencies
As part of the consideration for the Company’s acquisition of MFB (see Note 4), the vendor will be entitled to a ten (10%) percent royalty on the gross sales before taxes of products sold under the MFB family of products, to be paid on or before the fifteenth (15th) day of the following month.
Note 14 – Subsequent Events
Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation no material events have occurred that require disclosure.
| 15 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation
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 unaudited 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. (the “Company”) was originally incorporated under the laws of the State of Nevada on March 14, 1990.
Effective April 1, 2022, the Company implemented a plan that is now complete to divest its Crypto Mining operations out of the company. The Company intends to focus resources on the operations of the Mighty Fire Breaker LLC (“MFB”) acquisition.
On April 13, 2022, General Enterprise Ventures, Inc. acquired Mighty Fire Breaker LLC and all associated IP, in exchange for 1,000,000 Preferred C Shares.
On April 13, 2022, The Company designated 5,000,000 shares of Series C convertible Preferred Stock (“Series C Preferred Stock”). The Series C Preferred Stock is convertible into twenty (20) shares of Common Stock for each share of Series C Preferred Stock at the option of the stockholder. The Series C Preferred Stock does not have voting rights and is not eligible to receive dividends
On April 28, 2022, Jan Ralston transferred ownership of 10,000,000 Preferred A shares to CEO, Joshua Ralston, making Mr. Ralston the new Majority Shareholder.
| 16 |
| Table of Contents |
Current Operations
Fully Integrated Services
We are a fully integrated technology company structured to provide mergers and acquisitions of new and available technology. Through our services, we incubate first-to-market products and help existing companies accelerate their product development within all regulatory requirements.
Environmental Impact
At this time, there are no significant environmental impacts occurring from the services, products, or activities of General Enterprise Ventures.
Human Services
The Company currently employees, 2 people full-time and hosts several consultants, attorneys, and independent contractors that all perform tasks on behalf of the company.
Results of Operations
The following summary of our results of operations should be read in conjunction with our unaudited financial statements for the period ended September 30, 2022, which are included herein.
Our operating results for the nine months ended September 30, 2022, and 2021 and the changes between those periods for the respective items are summarized as follows:
For the three months ended September 30, 2022, compared to three months ended September 30, 2021
|
| Three Months Ended |
|
|
|
| ||||||
|
| September 30, |
|
|
|
| ||||||
|
| 2022 |
|
| 2021 |
|
| Change |
| |||
Revenue |
| $ | 19,033 |
|
| $ | - |
|
| $ | 19,033 |
|
Cost of revenue |
|
| 1,798 |
|
|
| - |
|
|
|
|
|
Operating expenses |
|
| 314,224 |
|
|
| 13,250 |
|
|
| 300,974 |
|
Other expenses |
|
| 76 |
|
|
| 945 |
|
|
| (869 | ) |
Loss from continuing operations |
| $ | (297,065 | ) |
| $ | (14,195 | ) |
| $ | 320,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations |
|
| - |
|
|
| (6,371 | ) |
|
| 6,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (297,065 | ) |
| $ | (20,566 | ) |
| $ | (276,499 | ) |
Revenue
Our Company generated $19,033 and $0 revenue for the three months ended September 30, 2022 and 2021, respectively. The Company’s revenue is associated with revenue from MFB which was acquired in April 2022.
| 17 |
| Table of Contents |
Operating Expenses
For the three months ended September 30, 2022, operating expenses consisted of professional fees of $111,783, general and administrative expenses of $202,309 and depreciation of $132. For the three months ended September 30, 2021, operating expenses consisted of management compensation of $13250.
Other expenses
For the three months ended September 30,2022 and 2021, the other expenses consisted of interest expense $76 and $945, respectively.
Discontinued operations
During the three months ended September 30, 2022, loss on discontinued operations was $0. During the three months ended September 30, 2021, loss on discontinued operations of $6,371 was the result of the net loss incurred from the operations of Strategic Asset Holdings, which was divested in October 2021.
Net Loss
As a result of the foregoing, we incurred a net loss of $297,065, for the three months ended September 30, 2022, compared to a net loss of $20,566 for the three months ended September 30, 2021.
For the nine months ended September 30, 2022, compared to nine months ended September 30, 2021
|
| Nine Months Ended |
|
|
|
| ||||||
|
| September 30, |
|
|
|
| ||||||
|
| 2022 |
|
| 2021 |
|
| Change |
| |||
Revenue |
| $ | 60,501 |
|
| $ | - |
|
| $ | 60,501 |
|
Cost of revenue |
|
| 1,798 |
|
|
| - |
|
|
| 1,798 |
|
Operating expenses |
|
| 2,717,531 |
|
|
| 13,250 |
|
|
| 2,704,281 |
|
Other expenses |
|
| 76 |
|
|
| 1,469 |
|
|
| (1,393 | ) |
Loss from continuing operations |
| $ | (2,658,904 | ) |
| $ | (14,719 | ) |
| $ | 2,766,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Income) loss from discontinued operations |
|
| (13,016 | ) |
|
| 69,574 |
|
|
| (82,590 | ) |
Loss on disposition of Strategic Holdings, LLC |
|
| 2,030 |
|
|
| - |
|
|
| 2,030 |
|
Income (loss) from discontinued operations |
| $ | 10,986 |
|
| $ | (69,574 | ) |
| $ | 80,560 |
|
Net loss |
| $ | (2,647,918 | ) |
| $ | (84,293 | ) |
| $ | (2,563,625 | ) |
Revenue
Our Company generated $60,501 and $0 revenue for the nine months ended September 30, 2022 and 2021, respectively. The Company’s revenue is associated with revenue from MFB which was acquired in April 2022.
Operating Expenses
For the nine months ended September 30, 2022, operating expenses consisted of management compensation of $2,100,000 associated with the issuance of 70,000,000 restricted stock units as compensation, professional fees of $334,249, general and administrative expenses of $283,015 and depreciation of $267. For the nine months ended September 30,2021, operating expenses consisted of management compensation of $13.250.
Other expenses
For the nine months ended September 30, 2022 and 2021, the other expenses consisted of interest expense $76 and $1,469, respectively.
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| Table of Contents |
Discontinued operations
During the nine months ended September 30, 2022, income from discontinued operations of $10,986 was the result of net income generated from the Company’s crypto mining activities of $13,016 reduced by a loss on disposition of the Company’s digital currency assets of $2,030, which includes the disposition of equipment and digital currency, against a note payable issued as consideration for the equipment when it was previously acquired. During the nine months ended September 30, 2021, loss on discontinued operations of $69,574 was the result of the net loss incurred from the operations of Strategic Asset Holdings, which was divested in October 2021.
Net Loss
As a result of the foregoing, we incurred a net loss of $2,647,918, for the nine months ended September 30, 2022, compared to a net loss of $84,293 for the nine months ended September 30, 2021.
Liquidity and Capital Resources
|
| September 30, |
|
| December 31, |
|
|
|
| |||
|
| 2022 |
|
| 2021 |
|
| Change |
| |||
Cash |
| $ | 57,152 |
|
| $ | 5,469 |
|
| $ | 51,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
| $ | 171,565 |
|
| $ | 5,469 |
|
| $ | 166,096 |
|
Current Liabilities |
| $ | 822,375 |
|
| $ | 383,090 |
|
| $ | 439,285 |
|
Working Capital (Deficiency) |
| $ | (650,810 | ) |
| $ | (377,621 | ) |
| $ | (273,189 | ) |
As of September 30, 2022, and December 31, 2021, we had $57,152 and $5,469 in cash, respectively.
As of September 30, 2022, and December 31, 2021, we had current assets of $171,565 and $5,469, current liabilities of $822,375 and $383,090, and our working capital deficiency were $650,810 and $377,621, respectively. The increase in working capital deficiency of $273,189, was primarily the result of increases in cash on hand and inventory of $166,096 offset by increases in accounts payable and accrued liabilities of $34,470, due to related party of $316,053, convertible note of $35,000 and current portion of operating lease liability of $53,762.
As of September 30, 2022, and December 31, 2021, the current assets consisted of cash of $57,152 and $5,469 and inventory of $114,413 and $0, respectively.
As of September 30, 2022, and December 31, 2021, the current liabilities consisted of accounts payable and accrued liabilities of $45,211 and $10,741, due to related parties of $688,402 and $372,349, convertible note of $35,000 and $0, and current portion of operating lease liability of $53,762 and $0, respectively.
Cash Flows
|
| Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash used in operating activities |
| $ | (506,731 | ) |
| $ | (18,889 | ) |
Cash provided by (used in) investing activities |
| $ | (5,350 | ) |
| $ | 14,075 |
|
Cash provided by financing activities |
| $ | 563,764 |
|
| $ | 5,500 |
|
Net change in cash |
| $ | 51,683 |
|
| $ | 686 |
|
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| Table of Contents |
Cash Flows from Operating Activities
For the nine months ended September 30, 2022, net cash flows used in operating activities were $506,731, consisting of a net loss of $2,647,918, reduced by non-cash management compensation of $2,100,000 associated with the issuance of 70,000,000 restricted stock units as compensation, loss on disposition of digital currency and digital currency assets of $2,030, impairment loss on digital assets of $6,125, non-cash lease expense of $29,647, depreciation of $15,326 and increased by an increase in inventory of $114,413, prepaid expenses of $5,190 , fixed cash payments on operating leases of $25,000 and decreased by an increase in due to related part of $97,819, accounts payable and accrued liabilities of $34,469 and change in digital currency of $374.
For the nine months ended September 30, 2021, net cash flows used in operating activities of $18,889, consisting of a net loss of $84,293, reduced by impairment loss on digital assets of $52,976, an increase in due to related party of $10,959 and accounts payable and accrued liabilities of $1,469.
Cash Flows from Investing Activities
Cash flows used in investing activities of $5,350 during the nine months ended September 30, 2022, was the result of the purchase of equipment. Cash flows provided by investing activities of $14,075 during the nine months ended September 30, 2021, was the result of cash acquired from the acquisition of SAH.
Cash Flows from Financing Activities
For the nine months ended September 30, 2022, net cash provided by financing activities was $563,764, consisting of $584,484 received from related parties, $35,000 from convertible note and repayments of $55,720 to related parties. For the nine months ended September 30,2021, net cash provided from financing activities was $5,500, was the result of a loan received of $5,500.
Going Concern
The accompanying 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.
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 revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.
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| 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 September 30, 2022. 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 have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the period ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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| 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
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit Number |
Description | |
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer | ||
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer | ||
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. |
104* |
| Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. |
________
* Filed herewith.
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| 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: November 10, 2022 |
| /s/ Joshua Ralston | |
| Joshua Ralston | ||
| Chief Executive Officer and Chief Financial Officer |
| 23 |
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, 2022; |
|
|
|
| 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; |
|
|
|
| 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: |
|
| (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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|
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|
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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; |
|
|
|
|
|
| (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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|
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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): |
|
| (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 10, 2022 | By: | /s/ Joshua Ralston | |
|
| Joshua Ralston | ||
|
| 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 of Genera Enterprise Ventures, Inc. (the “Company”), for the quarter ended September 30, 2022, 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:
|
| (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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|
|
|
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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 10, 2022 | By: | /s/ Joshua Ralston | |
|
| Joshua Ralston | ||
|
| Chief Executive Officer and Chief Financial Officer |