Greenwave Technology Solutions, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis in conjunction with our condensed consolidated financial statements and related notes contained in Part I, Item 1 of this Quarterly Report. Please also refer to the note about forward-looking information for information on such statements contained in this Quarterly Report immediately preceding Part I, Item 1. Overview MassRoots, Inc. was formed in April 2013 as a technology platform for the cannabis industry. The Company has recently shifted its focus to developing cloud-based solutions to deliver informative content and improve operating efficiencies. The Company’s long-term strategy has been transformed accordingly, and MassRoots believes this shift could be accretive to shareholder value. Additionally, we plan to monetize our existing social media accounts such as YouTube Channel, which has 273,000 subscribers, through product placements and sponsorships. Management believes that our YouTube Channel has a large and diverse following while our Instagram account is followed by 378,000 users. Our Strategy Our primary business objective is to develop revenue generating channels. Currently, we are considering various strategies to achieve such objective including acquisitions, dispositions, mergers, or other business combinations with one or more targets. The management of the Company believes that such approach may be especially relevant in the current state of the marketplace and continues to explore strategic opportunities that would further the business of the Company. A recently executed letter of intent with Empire Services, Inc. (“Empire”) to acquire the entirety of issued and outstanding equity of Empire is the primary focus of the management of the Company at the moment. Further, the Company is currently taking affirmative steps to effect the non-binding provisions of the letter of intent with Empire in the absence of definitive agreement, which is considered the best course of action by the management of the Company. COVID-19 Pandemic In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, leading to an economic downturn. It has also disrupted the normal operations of many businesses, including ours. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak of COVID-19 and its effects on our business including our financial condition, liquidity, or results of operations at this time. Management is actively monitoring the global situation and its impact on the Company’s financial condition, liquidity, operations, customers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects that the COVID-19 outbreak will have on its results of operations, financial condition, or liquidity for fiscal year 2021. As of the date of this Quarterly Report on Form 10-Q, the Company has experienced delays in securing new customers and related revenues and the longer this pandemic continues there may be additional impacts. Furthermore, the COVID-19 outbreak has and may continue to impact the Company’s ability to raise capital. Although the Company cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may have a material adverse effect on the Company’s results of future operations, financial position, liquidity, and capital resources, and those of the third parties on which the Company relies in fiscal year 2021. 26 For the Three Months Ended June 30, 2021 and 2020 For the three months ended June 30, 2021 June 30, 2020 $ Change % Change Revenue $ 79 $ - $ 79 - Operating Expenses 499,365 276,791 222,574 80.4 % Loss from Operations (499,286 ) (276,791 ) (222,495 ) 80.4 % Other Income (Expense) 37,942,273 (79,852,494 ) 117,794,767 (147.5 )% Net Income (Loss) Available to Common Stockholders $ 23,782,905 $ (80,129,285 ) $ 103,912,190 (129.6 )% Revenues For the three months ended June 30, 2021 and 2020, we generated revenues of $79 and $0, respectively, an increase of $79 primarily due to the relaunch of product placements on the Company’s YouTube and social media channels. Operating Expenses For the three months ended June 30, 2021 and 2020, our operating expenses were $499,365 and $276,791, respectively, an increase of $222,574. This increase was attributable to an increase in advertising expenses from $0 for the three months ended June 30, 2020 to $4,150 for the same period in 2021, an increase of $4,150. There was a decrease in payroll and related expenses of $13,778 due to reduction in the number of employees, as payroll and related expenses decreased to $79,377 for the three months ended June 30, 2021 from $93,155 for same period in 2020. Other general and administrative expenses increased by $232,202 from $183,636 for the three months ended June 30, 2020, to $415,838 for the three months ended June 30, 2021. This increase was attributable to higher travel and legal costs for the three months ended June 30, 2021 as compared to the same period in 2020. Loss from Operations During the three months ended June 30, 2021, we incurred losses of $499,286 from operations, as compared to losses of $276,791 during the same period in 2020, a difference of $222,495, for the reasons stated above. Other Income (Expense) For the three months ended June 30, 2021 and 2020, the Company recorded interest expense of $398,011 and $1,063,357, respectively, primarily related to Company’s convertible notes. The Company recorded $0 and a $1,232 loss on the conversion of convertible notes payable for the three months ended June 30, 2021 and 2020, respectively. For the three months ended June 30, 2021 and 2020, the Company recorded a $52,508 loss and a $61,818 gain, respectively, on the change in fair value of derivative liabilities. For the three months ended June 30, 2021 and 2020, the Company recorded $132,821,830 and $78,849,723 in losses, respectively, of the change in the fair value of the derivative liability for the authorized shares shortfall. The Company recorded a $170,085,696 gain on settlement of convertible notes payable and accrued interest, warrants and accounts payable during the three months ended June 30, 2021, as compared to $0 during the same period in 2020. There was a $192,521 gain on the forgiveness of debt for the three months ended June 30, 2021, as compared to $0 during the same period in 2020. 27 Net Income (Loss) Available to Common Stockholders For the three months ended June 30, 2021, we had income available to common stockholders of $23,782,905 as compared to a net loss of $80,129,285 for the same period in 2020, a difference of $103,912,190 for the reasons discussed above. For the Six Months Ended June 30, 2021 and 2020 For the six months ended June 30, 2021 June 30, 2020 $ Change % Change Revenue $ 1,606 $ - $ 1,606 - Operating Expenses 802,640 488,119 314,521 64.4 % Loss from Operations (801,034 ) (488,119 ) (312,915 ) 64.1 % Other Income (Expense) 12,188,924 (111,594,062 ) 123,782,986 (110.9 )% Net Income (Loss) Available to Common Stockholders $ (23,411,033 ) $ (207,085,114 ) $ 183,674,081 88.7 % Revenues For the six months ended June 30, 2021 and 2020, we generated revenues of $1,606 and $0, respectively, an increase of $1,606 primarily due to the relaunch of product placements on the Company’s YouTube and social media channels. Operating Expenses For the six months ended June 30, 2021 and 2020, our operating expenses were $802,640 and $488,119, respectively, an increase of $314,521. This increase was attributable to an increase in advertising expenses from $0 for the six months ended June 30, 2020 to $22,703 for the same period in 2021, an increase of $22,703. There was a decrease in payroll and related expenses of $16,981 due to reduction in the number of employees, as payroll and related expenses decreased to $158,910 for the six months ended June 30, 2021 from $175,891 for same period in 2020. Other general and administrative expenses increased by $308,502 from $312,228 for the six months ended June 30, 2020, to $620,730 for the six months ended June 30, 2021. This increase was attributable to higher travel and legal costs for the six months ended June 30, 2021 as compared to the same period in 2020. Loss from Operations During the six months ended June 30, 2021, we incurred losses of $801,034 from operations, as compared to losses of $488,119 during the same period in 2020, a difference of $312,915, for the reasons stated above. Other Income (Expense) For the six months ended June 30, 2021 and 2020, the Company recorded interest expense of $968,159 and $2,005,006, respectively, primarily related to Company’s convertible notes. The Company recorded a $880 loss and $882 gain on the conversion of convertible notes payable for the six months ended June 30, 2021 and 2020, respectively. For the six months ended June 30, 2021 and 2020, the Company recorded a $300,885 and a $388,880 gain, respectively, on the change in fair value of derivative liabilities. For the six months ended June 30, 2021 and 2020, the Company recorded $162,275,278 and $109,978,818 loss, respectively, of changes in the fair value of the derivative liability for the authorized shares shortfall. The Company recorded a $174,939,835 gain on settlement of convertible notes payable and accrued interest, warrants and accounts payable during the six months ended June 30, 2021, as compared to $0 during the same period in 2020. There was a $192,521 gain on the forgiveness of debt for the six months ended June 30, 2021, as compared to $0 during the same period in 2020. Net Income (Loss) Available to Common Stockholders For the six months ended June 30, 2021, we had net losses available to common stockholders of $23,411,033 as compared to a net loss of $207,085,114 for the same period in 2020, a difference of $183,674,081 for the reasons discussed above. 28 Liquidity and Capital Resources Net cash used in operations for the six months ended June 30, 2021 and 2020 was $385,658 and $492,544, respectively. This $106,886 decrease was primarily caused by an increase in accounts payable and accrued expenses, accrued payroll and related expenses, and prepaid expenses. Net cash used in operations for the six months ended June 30, 2020 was primarily based on the loss for the six months ended June 30, 2020, partially offset by the increases in accounts payable and accrued payroll. Net cash provided by financing activities for the six months ended June 30, 2021 and 2020 was $385,434 and $492,074, respectively. During the six months ended June 30, 2021, these funds were derived mainly from proceeds related to the issuance of preferred shares and non-convertible notes. During the six months ended June 30, 2020, net cash provided by financing activities was derived from the issuance of convertible notes, offset by repayment of non-convertible notes. Capital Resources As of June 30, 2021, the Company had cash of $1,261 and working capital deficit (current liabilities in excess of current assets) of $24,482,427. During the six months ended June 30, 2021, the net loss available to common stockholders was $23,411,033 and net cash used in operating activities was $385,434. These conditions raise substantial doubt about our ability to continue as a going concern for one year from the issuance of the condensed consolidated financial statements. Our primary source of operating funds since inception has been cash proceeds from the public and private placements of our securities, including debt securities, and proceeds from the exercise of warrants and options. We have experienced net losses and negative cash flows from operations since inception and expect these conditions to continue for the foreseeable future. For the foreseeable future, our ability to continue our operations is dependent upon our ability to obtain additional capital through public or private equity offerings, debt financings or other sources; however, financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy and we may be forced to curtail or cease operations. Management’s plans regarding these matters encompass the following actions: 1) obtain funding from new and current investors to alleviate our working capital deficiency; and 2) implement a plan to generate revenues. Our continued existence is dependent upon our ability to translate our audience into revenues. However, the outcome of our plans cannot be determined with any degree of certainty. Accordingly, the accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business for one year from the date the condensed consolidated financial statements are issued. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty such as the final settlement amounts of our notes payable and accrued interest. Off-Balance Sheet Arrangements As of June 30, 2021, we did not have any off-balance sheet arrangements. Contractual Obligations Our contractual obligations are included in our notes to the condensed consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q. To the extent that funds generated from our operations, together with our existing capital resources, are insufficient to meet future requirements, we will be required to obtain additional funds through equity or debt financings. No assurance can be given that any additional financing will be made available to us or will be available on acceptable terms should such a need arise. Critical Accounting Policies and Estimates For a discussion of our accounting policies and related items, please see the notes to the condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS As a “smaller reporting company” we are not required to provide the information required by this Item. 29