CitroTech Inc. Liquidation Value

CitroTech Inc. (CITR) is a pre-profitability fire suppression technology company with a 10-K for the year ended December 31, 2025. Under a liquidation lens, the recovery posture to equity is deeply negative despite a positive book equity figure, once the standard asset haircuts are applied against face-value liabilities.

Asset-side recovery estimate: Cash of $6.3M receives a 100% haircut (full recovery). Gross accounts receivable of $554K with a $346K allowance yields a net carrying value of $209K; at 90% recovery this is approximately $188K. Inventory of $621K at a 60% recovery rate yields approximately $372K. PP&E net book value is not separately available in TAG_CONTEXT but is implied from the $14.2M total assets less current assets of $7.4M and intangibles of $5.3M and other noncurrent items; PP&E net appears to be approximately $1.1M based on residuals, which at a 50-70% haircut yields roughly $0.6-0.8M. Intangibles (patents/IP) of $5.3M net book value receive a 0% recovery — zero. Prepaid and other current assets receive zero or nominal value. Total estimated liquidation asset recovery is approximately $7.4M-$7.6M.

Liability side at face value: Total liabilities per TAG_CONTEXT are $2.92M. However, this figure captures book liabilities net of debt discounts and excludes contingent claims. The face value of outstanding convertible notes (third-party) is $375K and related-party convertible note is $2.0M, totaling $2.375M at face — materially higher than the book net of discount. Additionally, operating lease obligations total approximately $885K undiscounted (from note disclosures) and are not extinguished on windup. Accounts payable and accrued liabilities stand at $316K. The royalty obligation (10% of gross invoiced sales on MFB product, ongoing) does not have a termination payment quantified in the filing.

Gross NOL carryforward of approximately $40M exists but has zero liquidation value given the full valuation allowance and the requirement for taxable income to monetize.

Significant non-balance-sheet exposure: The $2.0M related-party convertible note (related party F) is secured by a pledge of CITR's membership interests in MFB Ohio, which owns the IP portfolio. In a default/liquidation scenario, the IP assets — the primary non-cash asset — could be seized by the secured noteholder, leaving general creditors and equity holders with essentially no recovery from intangibles. This structural subordination is material. The note was extended post-period to April 28, 2026, but the security pledge persists (release was partial, covering 'certain' intangible assets per the subsequent events note).

Comparison to prior period (9-month 10-Q through September 30, 2025): Total current assets improved from $1.6M (December 31, 2024) to $7.3M at September 30, 2025 and remain at $7.4M at December 31, 2025, driven entirely by cash from the September and October 2025 PIPE offerings ($5.4M and $2.7M). The derivative liability of $1.1M at December 31, 2024 has been fully settled or reclassified to APIC by December 31, 2025. Convertible note face values have declined year-over-year as most 2024 notes converted to equity in 2025, though the new $2.0M related-party note introduced a secured lien on the core IP asset. Filing discusses the royalty obligation (10% of gross invoiced sales) in Note 15 but does not separately XBRL-tag the present value of this commitment; it appears only in narrative.