CETI.OQBCyber Enviro-tech, INC
10-Q: Cyber Enviro-Tech Reports Q3 2024 Results, Revenue Remains Minimal Amidst Strategic Shift
Sentiment:
Quarterly Report
Cyber Enviro-Tech, Inc. reports minimal revenue for the third quarter of 2024, alongside increased operating expenses and a strategic move to spin-off its oil field operations.
Capital raiseThe company raised $1.659 million in convertible notes payable during the first nine months of 2024.The company intends to finance operating costs over the next twelve months with increased revenue and private placement loans or institutional investors.The company has the right to sell 10 million shares of common stock at $0.40 per share under its S-1 registration statement.
Worse than expectedThe company's revenue was minimal, while operating expenses increased, resulting in a larger net loss compared to the same period last year.
Summary
- Cyber Enviro-Tech, Inc. (CETI) reported its financial results for the third quarter of 2024, showing a net loss of $2.7 million for the nine months ended September 30, 2024.
- The company's revenue for the nine-month period was $10,666, derived from temporary operations at a salt water disposal facility.
- Operating expenses increased to $2.18 million for the nine months, driven by higher general and administrative costs, while consulting fees decreased.
- CETI is in the process of spinning off its oil field operations, known as the Alvey oil field, into a new entity called Phoenix Well Development Inc.
- The company's cash and cash equivalents decreased from $239,417 at the end of 2023 to $119,028 as of September 30, 2024.
- CETI has raised $1.659 million in convertible notes payable during the first nine months of 2024.
- The company has a derivative liability of $181,313 related to convertible notes.
- CETI has a net operating loss carryforward of $9,610,105 which may be offset against future taxable income from the year 2024 to 2040.
Sentiment
Score: 3
Explanation: The document indicates a struggling company with minimal revenue, increasing losses, and significant reliance on debt financing. The going concern warning and internal control weaknesses further contribute to a negative sentiment.
Positives
- Consulting fees decreased by 25% for the nine months ended September 30, 2024, compared to the same period in 2023.
- The company has a significant net operating loss carryforward of $9,610,105 which may be offset against future taxable income.
Negatives
- The company's revenue remains minimal at $10,666 for the nine months ended September 30, 2024.
- CETI reported a net loss of $2.7 million for the nine months ended September 30, 2024.
- Operating expenses increased by 7% for the nine months ended September 30, 2024.
- Cash and cash equivalents decreased significantly to $119,028 as of September 30, 2024.
- The company has a derivative liability of $181,313 related to convertible notes.
- The company's internal controls were deemed ineffective.
Risks
- The company has limited operating history and is an emerging growth company.
- CETI's independent auditor has expressed substantial doubt about the company's ability to continue as a going concern.
- The company is dependent on raising additional capital to meet its business plans.
- There are material weaknesses in the company's internal controls.
- The company is exposed to risks associated with technological changes and market acceptance of its products.
- The company is exposed to risks associated with litigation and general economic conditions.
Future Outlook
The company intends to finance operating costs over the next twelve months with increased revenue and private placement loans or institutional investors. CETI is also planning to spin-off the Alvey oil field operations into a new entity called Phoenix Well Development Inc.
Management Comments
- Management intends to finance operating costs over the next twelve months with increased revenue and private placement loans or institutional investors.
- Management disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
Industry Context
CETI operates in the water science technology sector, focusing on remediation of contaminated industrial wastewater, particularly in the oil and gas industry. The company's technology aims to address water contamination issues globally. The company is also expanding into the commercial and non-commercial laundry business.
Comparison to Industry Standards
- The company's revenue of $10,666 for the nine months is significantly lower than established companies in the water purification and oil and gas sectors.
- The net loss of $2.7 million indicates that the company is not yet profitable and is in a development stage.
- The company's reliance on convertible debt financing is common for early-stage companies but also indicates a higher risk profile.
- The company's plan to spin-off the Alvey oil field is a strategic move to focus on its core water purification technology.
- The company's internal control weaknesses are not uncommon for smaller reporting companies but need to be addressed to ensure accurate financial reporting.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Internal Control Weaknesses | The company identified material weaknesses in its internal control over financial reporting, including inadequate segregation of duties and insufficient written policies and procedures. | 2024-09-30 | The company's disclosure controls and procedures were deemed ineffective, and management is evaluating remediation plans. |
Related Party Transactions
- The company has a convertible note payable for $22,000 with a related party.
- The company had accounts payable to various related parties for a total of $135,708 as of September 30, 2024.
- A related party issued a loan to the Company for a total amount of $153,989.
- The company paid various related parties for consulting services in the amounts of $110,100 for the nine months ended September 30, 2024.
Stakeholder Impact
- Shareholders face significant risk due to the company's financial losses and going concern warning.
- Employees may be impacted by the company's financial instability and potential restructuring.
- Customers may be affected by the company's ability to deliver products and services.
- Creditors face risk due to the company's high debt levels and potential inability to repay obligations.
Next Steps
- The company plans to expand its water and oil filtration operations in the Middle East and Texas.
- CETI intends to develop initial commercial tests with at least one significant meat packing client.
- The company is looking to acquire salt water disposal facilities to vertically expand its operations.
- CETI plans to spin off the Alvey oil field operation into a separate corporation called Phoenix Well Development, Inc via stock dividend to current shareholders of CETI.
Key Dates
| Date | Description |
|---|---|
| 2020-04-20 | Global Environmental Technologies, Inc. was formed. |
| 2020-09-03 | Synergy and Global entered into a securities purchase agreement. |
| 2020-09-23 | The Company entered into a share exchange agreement with Global Environmental Technologies, Inc. |
| 2020-10-06 | The Company formally changed its name from NexGen Holdings to Cyber Enviro-Tech, Inc. |
| 2021-04-30 | Reverse stock split of one share for every 20 shares. |
| 2022-03-07 | Date of a consulting agreement. |
| 2023-01-01 | S-1 Registration became effective. |
| 2023-03-01 | Date of a consulting agreement. |
| 2023-05-01 | The Company acquired certain intellectual property rights from KAM Biotechnology. |
| 2023-06-03 | The Company canceled and replaced stock options for a consultant. |
| 2023-07-01 | The Company and consultant amended a consulting agreement. |
| 2023-09-15 | The Company amended a consulting agreement again. |
| 2024-03-20 | Convertible note payable became convertible at the issuers option. |
| 2024-03-21 | CETI paid $60,000 towards a loan. |
| 2024-04-26 | Date of a convertible note issuance. |
| 2024-06-21 | Date of a convertible note issuance. |
| 2024-06-25 | Convertible note payable became convertible at the issuers option. |
| 2024-08-13 | CETI Axenic (CAX) was formed. |
| 2024-09-30 | End of the reporting period for the quarterly report. |
| 2024-10-01 | Start of the subsequent events period. |
| 2024-10-31 | CETI decided not to move forward with the purchase of a salt water disposal facility. |
| 2024-11-15 | Date of share count and end of subsequent events period. |
| 2024-11-19 | Date of the report. |
Keywords
water purification, oil and gas, wastewater treatment, convertible notes, financial results, discontinued operations, going concern, internal controls, derivative liability, stock issuance
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