CitroTech Inc.
11/10/2026 | Press release | Distributed by Public on 11/10/2026 15:15
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the "Quarterly 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 Quarterly 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.
As used in this Quarterly Report, the terms "we", "us", "our" and "our company" mean CitroTech Inc.
Overview
We are a specialty chemical company focused on environmentally friendly fire inhibitor products serving the wildland fire, residential and commercial property protection, and wood products industries across the United States and Canada. Our fire inhibitor formulations are also used by the lumber and building materials industry for fire retardant treatment applications.
The Company's management team is highly experienced at building and running companies, as well as commercializing and executing on strategic partnerships for the sale of products and services.
Since Mighty Fire Breaker LLC ("MFB Ohio") acquired from Mighty Fire Breaker LLC ("MFB California") the MFB portfolio of intellectual property on April 13, 2022, our management team has continued to develop and refine our product formulations. The Company has received significant third-party recognition for these efforts, including twice receiving the EPA Safer Choice designation. Our product is the first and only fire inhibitor recognized by the EPA as safe for the environment. We also are the first fire inhibitor to receive UL GREENGUARD Gold certification, which reflects minimal impact on indoor air quality from toxic smoke over extended exposure. Our products have been adopted by fire departments throughout the State of California.
CitroTech has 42 granted patents (41 of which are granted in the US) and 90 pending applications (72 of which are pending in the US). We continue to evaluate our patent portfolio and technology platform to target additional markets that can benefit from environmentally safe alternatives to legacy fire retardant and fire retardant-treated wood products. Using this technology, CitroTech has developed products that help achieve Class-A fire rating for lumber and engineered wood products. We are in the initial phases of commercializing this product. In April 2026, CitroTech and Hexion Inc. formed a 50/50 global joint venture named HexiTech LLC, a Delaware limited liability company that will work to commercialize the CitroTech product into factory applied lumber and wood products. This venture is the Company's primary go-to-market channel for this portion of the business. Large scale ASTM burn tests have been performed as part of the joint venture to be able to bring fact-based data to some of the largest lumber and wood product companies for the potential adoption of CitroTech. The joint venture is working through potential revenues and anticipated adoption timelines for calendar year 2027.
The Company is also actively deploying proactive wildfire defense systems on residential and commercial properties under the CitroSafe Systems brand. CitroSafe Systems are self-contained sprinkler installations that utilize our patented CitroTech product. These systems deploy our fire inhibitor in advance of wildfires to help prevent the advance of fires and reduce structural risk. In addition to protecting property owners from the ravages of wildfires, this offering addresses a significant and growing insurance market disruption across the Western United States, where carriers have curtailed or declined to write wildfire coverage on new construction and are cancelling or not renewing existing policies in the Wildland-Urban Interface ("WUI"). WUI is the transitional zone between undeveloped land and built environments that is at elevated risk of catastrophic wildfire loss. The Company is now in discussions with multiple brokers to offer insurance coverage to customers who install a CitroSafe proactive wildfire system, with policies underwritten by established insurance carriers.
Our management team consists of four individuals: Wesley J. Bolsen, Chief Executive Officer; Andrew Hotsko, Chief Operating Officer; Nanuk Warman, Secretary and Chief Financial Officer; and Anthony Newton, General Counsel.
Known Trends and Uncertainties
Growth in Fire Safety
We believe that fire safety benefits from several growth drivers, including increasing fire severity, as measured by higher acres burned, longer fire seasons and a growing urban component moving into the WUI, resulting in increased demand for environmentally safe specialty chemical fire inhibitors, thereby increasing production. We believe these trends are prevalent in North America, as well as globally, and we expect these trends to continue driving growth in demand for fire retardants and fire retardant treated lumber products. As of September 30, 2026, our certified partner network consisted of more than 30 organizations that install systems and/or apply CitroTech product around homes and in the community.
We are working to grow our fire prevention and protection business, which is primarily focused on expanding use of ground-applications for long-term fire retardants. This growth includes use of ground assets and potentially drones in response to active fires (protection), as well as proactive treatments around critical infrastructure and known high-risk areas (prevention). Fire prevention products can be used to help prevent fire ignitions and protect property from potential fire danger by providing proactive retardant treatment in high-risk areas such as along roadsides, under power lines, along railroad rights-of-way, and around residential neighborhoods and commercial infrastructure. Treating these areas ahead of the fire season can help to prevent ignitions from equipment failures or sparks until a significant rainfall occurs. During 2026, San Diego announced an expansion of its CitroTech treatment program. In addition, certain utilities and railroads began applying CitroTech in pilot applications during Q3 of 2026. Some of these customers have indicated that they are waiting on QPL listing prior to large-scale adoption of the product onto high risk fire threat areas. Although there is no certainty in wildfire defense, when our CitroSafe system is installed, we fill it with our CitroTech product. Thereafter, we will conduct an annual inspection of the system to help ensure it is ready to help defend against a wildfire. While there is no specific useful life for our product, if the system has not been deployed since the third anniversary of the initial installation, or three years following an annual inspection, in an abundance of caution we will recommend the customer replace the CitroTech product. In addition, we suggest spraying CitroTech in areas surrounding the property that pose the greatest risk to help reduce the risk posed by dry vegetation, decks, garden bark, and fences.
We have invested and intend to continue investing in the expansion of our fire retardant and lumber treatment business through product development and business development to grow our customer base.
Weather Conditions and Climate Trends
Our business is highly dependent on the needs of commercial entities, residential homeowners and fire departments to prevent fires and protect assets, as well as the use and expansion of Class A Fire Retardant Treated lumber and wood products. As such, our financial condition and results of operations are significantly impacted by weather, which impacts the number and severity of fires in any given year. Typically, sales of our product are higher during the summer months in the United States due to weather patterns that are generally correlated to a higher prevalence of wildfires due to drought. We believe orders will generally peak during the late summer months, but with expanded fire seasons in the United States, ignitions may continue through late fall or even into the winter months.
In addition, we believe that there are opportunities to apply CitroTech in the future related to prescribed burns to prevent escape from the intended area or re-ignition of a fire after the prescribed burn is concluded. Any such opportunity would depend in part on the CitroTech product being listed on the federal Qualified Products List ("QPL"), which we are pursuing.
Results of Operations
We are developing and commercializing our product lines. We have been focused historically on obtaining patents and various accreditations. To date, we do not have a large customer base, having relied heavily on a few customers, for the commercialization and testing of our CitroTech product and delivery system. We currently do not have an established retail product line nor recurring significant customer base.
The following summary of our results of operations should be read in conjunction with our unaudited financial statements for nine months ended September 30, 2026 and 2025, which are included herein.
Our results of operations for the three months ended September 30, 2026 and 2025 are summarized below:
| Three Months Ended | ||||||||||||||||
| September 30, | ||||||||||||||||
| 2026 | 2025 | Change | % | |||||||||||||
| Revenue | $ | 664,328 | $ | 288,212 | 376,116 | 130% | ||||||||||
| Operating expenses | 2,950,886 | 4,525,910 | (1,575,024 | ) | (35% | ) | ||||||||||
| Other income (expense) | 6,673 | (3,691,510 | ) | 3,698,183 | (100% | ) | ||||||||||
| Net loss | $ | 2,279,885 | $ | 7,929,208 | (5,649,323 | ) | (71% | ) | ||||||||
Revenue
Our revenue is generated through our subsidiary Mighty Fire Breaker LLC ("MFB Ohio"), which acquired our fire suppression intellectual property portfolio in April 2022. Our revenue is highly seasonal and event-driven, with demand concentrated in the Western United States during the traditional May to October fire season, and is materially influenced by wildfire activity in any given period. During the three months ended September 30, 2026, revenue increased $376,000, or 130%, compared to the three months ended September 30, 2025, primarily due to increased sales of products to corporate customers and used in residential installations. In addition, revenue that was booked in the first half of 2025 related to CitroSafe systems is being shifted to our Certified Partners for the installation of systems, with higher margin CitroTech chemical sales that are being put into the system. This accounts for some of the change in revenues from the prior year quarter. No revenues were reported from the HexiTech joint venture during Q3, although some CitroTech product was field applied in the lumber and wood industry during the quarter.
Our revenues consisted of the following:
| Three Months Ended | ||||||||
| September 30, | ||||||||
| 2026 | 2025 | |||||||
| Products sale | $ | 515,628 | $ | 91,598 | ||||
| Product installation service | 148,700 | 196,614 | ||||||
| $ | 664,328 | $ | 288,212 | |||||
Our revenues from significant customers for the three months ended September 30, 2026 and 2025, are as follows:
| Three months ended | ||||||||
| September 30, | ||||||||
| 2026 | 2025 | |||||||
| Number of customers (more than 10% revenue) | 3 | 6 | ||||||
| Total revenue of top 5 customers | 58.6% | 79.6% | ||||||
Our revenue is currently project- and event-driven rather than subscription- or contract-based, and we do not currently have a meaningful base of recurring customers. The decrease in our top-five customer concentration to 58.6% in the three months ended September 30, 2026, from 79.6% in the comparable 2025 period, reflects the shift of system installation revenues to the Certified Partner network while still attracting the higher margin CitroTech chemical sales. We expect customer concentration to remain elevated until our channel partner program and recurring utility and structural-protection customer relationships further mature.
Operating Expenses
| Three Months Ended | ||||||||||||||||
| September 30, | ||||||||||||||||
| 2026 | 2025 | Change | % | |||||||||||||
| Cost of revenue | $ | 474,535 | $ | 575,603 | (101,068 | ) | (18% | ) | ||||||||
| Amortization and depreciation | 120,820 | 90,054 | 30,766 | 34% | ||||||||||||
| General and administrative | 278,894 | 269,703 | 9,191 | 3% | ||||||||||||
| Advertising and marketing | 294,396 | 232,569 | 61,827 | 27% | ||||||||||||
| Payroll and management compensation | 999,271 | 2,437,089 | (1,437,818 | ) | (59% | ) | ||||||||||
| Professional fees | 637,051 | 841,192 | (204,141 | ) | (24% | ) | ||||||||||
| Research and development expense | 145,919 | 79,700 | 66,219 | 83% | ||||||||||||
| Total operating expenses | $ | 2,950,886 | $ | 4,525,910 | (1,575,024 | ) | (35% | ) | ||||||||
The decrease in operating expenses was primarily attributed to decreases in management compensation, professional fees, and cost of revenue, partially offset by increases in research and development and marketing costs.
Cost of revenue
| Three Months Ended | ||||||||||||||||
| September 30, | ||||||||||||||||
| 2026 | 2025 | Change | % | |||||||||||||
| Cost of inventory | $ | 415,091 | $ | 494,144 | (79,053 | ) | (16% | ) | ||||||||
| Freight and shipping | 6,376 | 15,665 | (9,289 | ) | (59% | ) | ||||||||||
| Rent expense | 53,068 | 65,794 | (12,726 | ) | (19% | ) | ||||||||||
| Total cost of revenue | $ | 474,535 | $ | 575,603 | (101,068 | ) | (18% | ) | ||||||||
During the three months ended September 30, 2026, the cost of revenue decreased over the three months ended September 30, 2025, primarily due to a decrease in cost of inventory.
Cost of inventory consists of product costs, direct labor, related supplies, and direct testing of our CitroTech product and the various components required for installation of CitroSafe™ systems. Cost of inventory decreased during the three months ended September 30, 2026, compared to the comparable 2025 period, primarily due to a decrease in outsource labor cost.
Freight and shipping relate to costs for shipping products to customers.
Rent expenses are warehouse and facility rent expenses.
Amortization and depreciation
Amortization and depreciation expenses are from the amortization of patents and technology and the depreciation of vehicles, furniture and equipment.
General and administrative
General and administrative expenses are office, rent, travel, insurance, website, IT, public listing fees, and other office related expenses.
Advertising and marketing
The increase in advertising and marketing during the three months ended September 30, 2026, over the three months ended September 30, 2025, is primarily due to supporting revenue growth in addition to investor relations activities after being uplisted to the NYSE American. This includes rebranding efforts around the official company name change to CitroTech Inc. from General Enterprise Ventures Inc as well as the product labels moving from Mighty Fire Breaker to CitroTech and the conversion of relevant website and marketing materials. In addition, during Q3 2026, the Company rang the closing bell of the New York Stock Exchange and engaged in additional Company marketing activities for the benefit of shareholders.
Professional fees
The professional fees during the three months ended September 30, 2026, includes stock-based compensation of $82,000 to consultants, and various professional fees for accounting and audit related to SEC filings, legal on patents and other consulting services in 2026. The professional fees during the three months ended September 30, 2025, includes stock-based compensation of $314,000 to consultants and various fees for accounting and audit related to SEC filings, legal on patents and other consulting services in 2025.
Payroll and management compensation
During the three months ended September 30, 2026, payroll and management compensation decreased to $1.0 million from $2.4 million in the prior-year period. This decrease was primarily attributable to lower stock-based compensation. The higher prior-period expense reflected performance stock units (PSUs) granted in 2025 in connection with the buildout of a full executive management team, including the appointment of a Chief Operating Officer, Chief Financial Officer, Chief Technology Officer, and General Counsel. Management compensation for the three months ended September 30, 2026 and 2025 primarily included stock-based management compensation of $0.4 million and $1.8 million, respectively, and payroll to management of $0.4 million in each period. Payroll compensation to employees was approximately $0.3 million as compared to $0.2 million in the prior-year period.
Research and development costs
We continue to invest heavily in the testing and certifications of CitroTech treated products as well as submitting formulas for approval to apply product onto federal lands. We are spending on outside testing to ensure that our products can pass the rigorous US Forest Service QPL testing as well as funding additional products to be submitted to the US Forest Service for testing. We expect to continue growing R&D spend over historical spend as we add additional product lines and invest in the future of the company. This includes a funded research program with Texas A&M on new products that were not underway in 2025.
Other Income (Expenses)
For the three months ended September 30, 2026 and 2025, the other income (expenses) consisted of interest income of $9,000 and $4,000, respectively, interest expense of $2,000 and $1.3 million, respectively, with the 2026 amount related to a finance loan and the 2025 amount primarily related to convertible notes payable issued in 2025 and 2024, change in fair value of derivative liability related to convertible notes payable issued in 2025 and 2024 of $0 and gain of $1.8 million, respectively, and loss on settlement of debt of $0 and $4.1 million, respectively. Settlement of debt in 2025 was the conversion of convertible notes issued in 2025.
Net loss
The net loss for the three months ended September 30, 2026 was approximately $2.3 million, a decrease of approximately $5.6 million as compared to the three months ended September 30, 2025, primarily due to a significant reduction in other expenses and operating expenses as well as an increase in revenue.
Our results of operations for the nine months ended September 30, 2026 and 2025 are summarized below:
| Nine months ended | ||||||||||||||||
| September 30, | ||||||||||||||||
| 2026 | 2025 | Change | % | |||||||||||||
| Revenue | $ | 1,289,909 | $ | 1,945,232 | (655,323 | ) | (34% | ) | ||||||||
| Operating expenses | 11,517,762 | 12,659,025 | (1,141,263 | ) | (9% | ) | ||||||||||
| Other expenses | 2,165,150 | 20,022,838 | (17,857,688 | ) | (89% | ) | ||||||||||
| Net loss | $ | 12,393,003 | $ | 30,736,631 | (18,343,628 | ) | (60% | ) | ||||||||
Revenue
Our revenue is generated through our subsidiary Mighty Fire Breaker LLC ("MFB Ohio"), which acquired our fire suppression intellectual property portfolio in April 2022. Our revenue is highly seasonal and event-driven, with demand concentrated in the Western United States during the traditional May to October fire season, and is materially influenced by wildfire activity in any given period. During the nine months ended September 30, 2026, revenue decreased $0.7 million, or 34%, compared to the nine months ended September 30, 2025. This change was primarily seen in shifts that the Company made in the first quarter of the year, while growing revenue during the third quarter over the prior year.
Our revenues consisted of the following:
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2026 | 2025 | |||||||
| Products sale | $ | 924,697 | $ | 1,142,865 | ||||
| Product installation service | 365,212 | 802,367 | ||||||
| $ | 1,289,909 | $ | 1,945,232 | |||||
Our revenues from significant customers for the nine months ended September 30, 2026 and 2025, are as follows:
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2026 | 2025 | |||||||
| Number of customers (more than 10% revenue) | - | 1 | ||||||
| Total revenue of top 5 customers | 38.8% | 37.9% | ||||||
Our revenue is project- and event-driven rather than subscription- or contract-based, and we do not currently have a meaningful base of recurring customers. The increase in our top-five customer concentration to 38.8% in the nine months ended September 30, 2026, from 37.9% in the comparable 2025 period, reflects the early-stage nature of our commercial customer base. We expect customer concentration to remain elevated until our channel partner program and recurring utility and structural-protection customer relationships further mature.
Operating Expenses
| Nine months ended | ||||||||||||||||
| September 30, | ||||||||||||||||
| 2026 | 2025 | Change | % | |||||||||||||
| Cost of revenue | $ | 1,201,385 | $ | 1,564,255 | (362,870 | ) | (23% | ) | ||||||||
| Amortization and depreciation | 370,354 | 241,700 | 128,654 | 53% | ||||||||||||
| General and administrative | 907,140 | 743,101 | 164,039 | 22% | ||||||||||||
| Advertising and marketing | 642,788 | 489,673 | 153,115 | 31% | ||||||||||||
| Payroll and management compensation | 5,938,321 | 5,445,210 | 493,111 | 9% | ||||||||||||
| Professional fees | 2,033,263 | 4,046,078 | (2,012,815 | ) | (50% | ) | ||||||||||
| Research and development expense | 424,511 | 129,008 | 295,503 | 229% | ||||||||||||
| Total operating expenses | $ | 11,517,762 | $ | 12,659,025 | (1,141,263 | ) | (9% | ) | ||||||||
The decrease in operating expenses was primarily attributed to decreases in cost of revenue and professional fees offset by an increase in payroll and research and development expense.
Cost of revenue
| Nine months ended | ||||||||||||||||
| September 30, | ||||||||||||||||
| 2026 | 2025 | Change | % | |||||||||||||
| Cost of inventory | $ | 1,017,584 | $ | 1,315,378 | (297,794 | ) | (23% | ) | ||||||||
| Freight and shipping | 14,466 | 21,724 | (7,258 | ) | (33% | ) | ||||||||||
| Consulting and advisory-related party | - | 4,000 | (4,000 | ) | (100% | ) | ||||||||||
| Royalty and sales commission-related party | - | 56,290 | (56,290 | ) | (100% | ) | ||||||||||
| Rent expense | 169,335 | 166,863 | 2,472 | 1% | ||||||||||||
| Total cost of revenue | $ | 1,201,385 | $ | 1,564,255 | (362,870 | ) | (23% | ) | ||||||||
During the nine months ended September 30, 2026, the cost of revenue decreased over the nine months ended September 30, 2025, primarily due to a decrease in cost of inventory and royalty and sales commission payments.
Cost of inventory consists of product costs, direct labor, related supplies, and direct testing of our CitroTech product and the various components required for installation of CitroSafe™ systems. Cost of inventory decreased during the nine months ended September 30, 2026, compared to the comparable 2025 period, primarily due to lower product sales volume and a decrease in outsource labor cost.
Freight and shipping relate to costs for shipping products to customers.
Consulting and advisory services are to a related party company for services related to product installations.
We did not have royalty and sales commissions to a related party in the nine months ended September 30, 2026. During the first quarter of 2025, we recognized $56,000 as an allocated portion of consulting and direct labor costs associated with our revenue as royalty and sales cost of revenue. In March 2025, we entered into a new contract under which the consulting and advisory royalty arrangement was terminated.
Rent expenses are warehouse and facility rent expenses. The increase in rent expense is primarily attributable to our relocation to a larger commercial facility for operations, warehousing, and customer-facing activities beginning in April 2025, along with the cancellation of a prior warehouse lease in May 2025.
Amortization and depreciation
Amortization and depreciation expenses are from the amortization of patents and technology and the depreciation of vehicles, furniture and equipment.
General and administrative
General and administrative expenses are office, rent, travel, insurance, website, IT, public listing fees, and other office related expenses. For the nine months ended September 30, 2026, we incurred increased expenditures on public listing fee, our website and IT development and travel as well as general office and insurance expenses from expansion of operations.
Advertising and marketing
The increase in advertising and marketing during the nine months ended September 30, 2026, over the nine months ended September 30, 2025, is primarily due to supporting revenue growth in addition to investor relations activities after being uplisted to the NYSE American. This includes rebranding efforts around the official company name change to CitroTech Inc. from General Enterprise Ventures Inc as well as the product labels moving from Mighty Fire Breaker to CitroTech and the conversion of relevant website and marketing materials. We attended and helped to fund events in the wildfire industry to expose leaders in the fire industry to the CitroTech product, which we believe will lead to sales in the future.
Professional fees
The professional fees during the nine months ended September 30, 2026, primarily included stock-based compensation of $526,000 to advisors and consultants, and various professional fees for accounting and audit related to SEC filings, legal on patents and other consulting services in 2026. In addition, we had expenses related to the formation of the HexiTech Joint Venture between CitroTech and Hexion that were a one-time expense. The professional fees during the nine months ended September 30, 2025, primarily included stock-based compensation of $2.7 million, of which $2.1 million was to a related party consultant (TC Special Investments, LLC ("TCSI")) and various professional fees for accounting and audit related to SEC filings, legal on patents and other consulting services in 2025.
TCSI's consulting services to us include sales and business development, customer relationship management, strategy optimization, investor relations, underwriter interface, coordinating outside counsel and other business aspects at the request of the Board of Directors. In addition to TCSI, stock-based compensation was remitted to certain individuals with fire retardant and industry experience, who provided guidance and insight to our management and Board of Directors with respect to the fire retardant and fire inhibitor industry, business development connections, and oversight during the testing and recognition processes.
Payroll and management compensation
During the nine months ended September 30, 2026, payroll and management compensation increased to $5.9 million from $5.4 million in the prior period. This increase was primarily attributable to higher payroll, reflecting a full period of compensation for the executive management team built out during 2025 and higher employee payroll. Management Compensation during 2026, primarily included stock-based management compensation of $3.8 million, and payroll to management of $1.1 million and employees of approximately $0.9 million. Compensation during 2025, primarily included stock-based management compensation of $4.1 million and payroll to management of $0.8 million and employees of $0.5 million.
Research and development costs
We continue to invest heavily in the testing and certifications of CitroTech treated products as well as in advance of submitting formulas for approval to apply product onto federal lands. We expect to continue growing R&D spend over historical spend as we add additional product lines and invest in the future of the company. This includes funded research programs with Texas A&M on new products that were not underway in 2025.
Other Expenses
For the nine months ended September 30, 2026 and 2025, the other expenses consisted of interest expense primarily related to convertible notes payable issued in 2025 of $975,000 and convertible notes payable issued in 2025 and 2024 of $2.6 million, respectively, change in fair value of derivative liability related to convertible notes payable issued in 2025 and 2024 of $0 and $2.0 million, respectively, financing expense of $0.4 million and $8.7 million, respectively, and loss on settlement of debt of $847,000 and $6.8 million, respectively. Settlement of debt in 2026 is the conversion of convertible notes issued in 2025. Settlement of debt in 2025 is conversion of convertible notes issued in 2024 and 2025. Financing expense is from 666,668 warrants granted to a financial advisor and 69,007 shares of Series C Convertible Preferred stock issued to BRH in 2025.
Net loss
The net loss for the nine months ended September 30, 2026 was approximately $12.4 million, a decrease of approximately $18.3 million as compared to the nine months ended September 30, 2025, primarily due to a significant reduction in other expenses and operating expenses, partially offset by lower revenue.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have incurred significant operating losses and negative cash flows from our operations. Our net loss was $12.4 million and $30.7 million for the nine months ended September 30, 2026 and 2025, respectively. In October 2026, we completed an equity offering which generated net proceeds of approximately $5.2 million. During fiscal year 2025, we completed a debt offering in February and an equity offering in September and October which generated net proceeds of approximately $3.7 million and $8.1 million, respectively.
Working capital
| September 30, | December 31, | |||||||||||
| 2026 | 2025 | Change | ||||||||||
| Current assets | $ | 2,342,767 | $ | 7,415,426 | $ | (5,072,659 | ) | |||||
| Current liabilities | $ | 782,922 | $ | 2,169,626 | $ | (1,386,704 | ) | |||||
| Working capital | $ | 1,559,845 | $ | 5,245,800 | $ | (3,685,955 | ) | |||||
As of September 30, 2026 and December 31, 2025, the current assets consisted of cash of $1.1 million and $6.3 million, respectively, inventory of $542,000 and $621,000, respectively, accounts receivable of $264,000 and $209,000, respectively, and prepaid expenses of $314,000 and $317,000, respectively, and deferred offering costs of $134,000 and $0, respectively.
As of September 30, 2026 and December 31, 2025, the current liabilities consisted of accounts payable and accrued liabilities of $590,000 and $316,000, respectively, deferred revenue of $12,000 and $3,000, respectively, due to related parties of $3,000 and $168,000, respectively, convertible notes net of discount of $0 and $219,000, respectively, convertible note - related party of $0 and $1.3 million, respectively, current portion of financing loan of $17,000 and $30,000 respectively, and current portion of operating lease liability of $162,000 and $148,000, respectively.
The decrease in working capital in 2026 was primarily due to a decrease in cash of $5.2 million for operating activities, offset by a decrease in convertible debt due to conversions into common stock.
Cash Flows
For the nine months ended September 30, 2026 and 2025
| Nine months ended | ||||||||||||
| September 30, | ||||||||||||
| 2026 | 2025 | Change | ||||||||||
| Cash used in operating activities | $ | (5,243,393 | ) | $ | (3,386,432 | ) | $ | (1,856,961 | ) | |||
| Cash used in investing activities | $ | (9,027 | ) | $ | (221,670 | ) | $ | 212,643 | ||||
| Cash provided by financing activities | $ | 72,530 | $ | 9,028,943 | $ | (8,956,413 | ) | |||||
| Net Change in cash | $ | (5,179,890 | ) | $ | 5,420,841 | $ | (10,600,731 | ) | ||||
Operating Activities
We have not generated positive cash flows from operating activities.
For the nine months ended September 30, 2026, net cash flows used in operating activities consisted of a net loss of $12.4 million, reduced by stock-based compensation of $4.7 million, non-cash lease expenses of $117,000, amortization and depreciation of $370,000, amortization of debt discount of $892,000, loss on settlement of debt of $847,000, loss on disposal of equipment of $32,000, and reduced by bad debt recovery of $20,000, and net changes in operating assets and liabilities of $211,000.
For the nine months ended September 30, 2025, net cash flows used in operating activities consisted of a net loss of $30.7 million, reduced by stock-based compensation of $15.4 million, non-cash lease expenses of $123,000, amortization and depreciation of $242,000, amortization of debt discount of $2.2 million, loss on settlement of debt of $6.8 million, write-off of deferred offering cost of $197,000 and changes in derivative liability of $2.0 million, and reduced by net changes in operating assets and liabilities of $328,000.
Investing Activities
For the nine months ended September 30, 2026 and 2025, the net cash flows used in investing activities consisted of the purchase of equipment of $22,000 and $222,000 and sales of equipment of $12,500 and $0, respectively.
Financing Activities
For the nine months ended September 30, 2026, net cash provided by financing activities consisted of $96,000 capital contribution from a related party and proceeds from the exercise of warrants of $25,000, $15,000 deferred offering cost payment and repayment of a financing loan of $33,000.
For the nine months ended September 30, 2025, net cash provided by financing activities consisted of $5.7 million from the issuance of Series C Convertible Preferred Stock, $3.7 million from the issuance of convertible promissory notes and associated warrants, $71,000 deferred offering cost payment, repayment of a financing loan of $216,000 and repayments to related party of $25,000.
Contractual Obligations
Financing loans
We had a financing loan for the purchase of a vehicle in September 2025. The loan repayment is $2,021 per month for 60 months, beginning October 2025, with an interest rate of 11.33%.
Lease Agreements
We have one lease classified as an operating lease for office and warehouse purposes. The following table outlines maturities of our lease liabilities as of September 30, 2026:
| Year ending December 31, | ||||
| 2026 (remaining three months) | $ | 49,327 | ||
| 2027 | 203,228 | |||
| 2028 | 211,357 | |||
| 2029 | 219,812 | |||
| 2030 | 55,486 | |||
| Thereafter | - | |||
| 739,210 | ||||
| Less: Imputed interest | (83,254 | ) | ||
| Operating lease liabilities | $ | 655,956 | ||
Liquidity
We have incurred losses since inception and incurred a net loss of $12.4 million during the nine months ended September 30, 2026. As of September 30, 2026, we had cash of $1.1 million. On October 22, 2026, subsequent to the end of the quarter, we closed an underwritten public offering of 2,240,000 shares of common stock at a public offering price of $2.50 per share, which generated net proceeds of approximately $5.2 million after deducting underwriting discounts and commissions and offering expenses payable by us.
We believe that our existing cash resources will be sufficient to fund our planned operations through the majority of 2027, with a high dependency on actual product sales. To more rapidly grow our revenue and continue operations beyond such time frame, we will be required to raise additional funds by completing additional equity or debt offerings or increasing revenue. We may also raise capital through public or private offerings of equity or debt securities or by entering into a credit facility. There can be no assurance that we will be successful in acquiring additional funding, that our projections of our future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to us, but which will only be resolved when one or more future events occur or fail to occur. In consultation with its legal counsel as appropriate, our management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, we, in consultation with legal counsel, evaluate the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is likely, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), which require management to make estimates, judgments and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.
For a discussion of our critical accounting estimates, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 30, 2026 (the "Annual Report"). There have been no material changes to our critical accounting estimates as described in that Annual Report.
CitroTech Inc. published this content on November 10, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 10, 2026 at 21:23 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]