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 company. The Company recently closed its acquisition of Empire Services, Inc. (“Empire”), acquiring the entirety of its issued and outstanding equity. Our primary focus is expanding the number of metal recycling facilities Empire operates and utilizing technology to improve its operational efficiency. 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. For the Three Months Ended September 30, 2021 and 2020 For the three months ended Sept 30, 2021 Sept 30, 2020 $ Change % Change Revenue $ 54 $ 2,316 $ (2,262 ) (97.67 %) Operating Expenses 395,312 208,238 187,074 89.84 % Loss from Operations (395,258 ) (205,922 ) (189,336 ) 91.95 % Other Income (Expense) 6,274,716 64,885,144 (58,610,428 ) (90.62 %) Net Income (Loss) Available to Common Stockholders $ 5,879,458 $ 64,679,222 $ (58,799,764 ) (90.91 %) 27 Revenues For the three months ended September 30, 2021 and 2020, we generated revenues of $54 and $2,316, respectively, a decrease of $2,262 primarily due to the relaunch of product placements on the Company’s YouTube and social media channels. Operating Expenses For the three months ended September 30, 2021 and 2020, our operating expenses were $395,258 and $208,238, respectively, an increase of $187,074. There was a decrease in advertising expenses from $43,020 for the three months ended September 30, 2020 to ($4,578) for the same period in 2021, a decrease of $47,598 as the Company advertised less. There was an increase in payroll and related expenses of 2,814, as payroll and related expenses increased to $66,693 for the three months ended September 30, 2021 from $63,879 for same period in 2020. Other general and administrative expenses increased by $232,008 from $101,189 for the three months ended September 30, 2020, to $333,197 for the three months ended September 30, 2021. This increase was attributable to higher travel and legal costs for the three months ended September 30, 2021 as compared to the same period in 2020. Loss from Operations During the three months ended September 30, 2021, we incurred losses of $395,258 from operations, as compared to losses of $205,922 during the same period in 2020, a difference of $189,336, for the reasons stated above. Other Income (Expense) For the three months ended September 30, 2021 and 2020, the Company recorded interest expense of $699,254 and $ 1,602,204, respectively, primarily related to Company’s convertible notes. The Company recorded $0 and a $0 loss on the conversion of convertible notes payable for the three months ended September 30, 2021 and 2020, respectively. For the three months ended September 30, 2021 and 2020, the Company recorded a $0 change and a $85,287 loss, respectively, on the change in fair value of derivative liabilities. For the three months ended September 30, 2021 and 2020, the Company recorded gains of $2,641,481 and $66,572,635, respectively, of the change in the fair value of the derivative liability for the authorized shares shortfall. The Company recorded a $4,332,489 gain on settlement of convertible notes payable and accrued interest, warrants and accounts payable during the three months ended September 30, 2021, as compared to $0 during the same period in 2020. There was a $0 gain on the forgiveness of debt for the three months ended September 30, 2021, as compared to $0 during the same period in 2020. Net Income (Loss) Available to Common Stockholders For the three months ended September 30, 2021, we had income available to common stockholders of $5,879,458 as compared to a net loss of $64,679,222 for the same period in 2020, a difference of $58,799,764 for the reasons discussed above. For the Nine Months Ended September 30, 2021 and 2020 For the nine months ended Sept 30, 2021 Sept 30, 2020 $ Change % Change Revenue $ 1,660 $ 2,316 $ (656 ) (28.32 %) Operating Expenses 1,196,292 696,357 502,251 72.37 % Loss from Operations (1,196,292 ) (694,041 ) (502,251 ) 72.37 % Other Income (Expense) 18,463,640 (46,708,918 ) 65,172,558 (139.53 %) Net Income (Loss) Available to Common Stockholders $ (17,531,575 ) $ (142,405,892 ) $ 124,874,317 (87.69 %) 28 Revenues For the nine months ended September 30, 2021 and 2020, we generated revenues of $1,660 and $2,316, respectively, a decrease of $656 primarily due to the relaunch of product placements on the Company’s YouTube and social media channels. Operating Expenses For the nine months ended September 30, 2021 and 2020, our operating expenses were $1,196,292 and $696,357, respectively, an increase of $502,251. There was a decrease in advertising expenses from $43,020 for the nine months ended September 30, 2020 to $18,125 for the same period in 2021, a decrease of $24,895. There was a decrease in payroll and related expenses of $14,167 due to reduction in the number of employees, as payroll and related expenses decreased to $225,603 for the nine months ended September 30, 2021 from $ 239,770 for same period in 2020. Other general and administrative expenses increased by $540,510 from $413,417 for the nine months ended September 30, 2020, to $953,927 for the nine months ended September 30, 2021. This increase was attributable to higher travel and legal costs for the nine months ended September 30, 2021 as compared to the same period in 2020. Loss from Operations During the nine months ended September 30, 2021, we incurred losses of $1,196,292 from operations, as compared to losses of $694,041 during the same period in 2020, a difference of $502,251, for the reasons stated above. Other Income (Expense) For the nine months ended September 30, 2021 and 2020, the Company recorded interest expense of $1,667,413 and $3,607,210, 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 nine months ended September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021 and 2020, the Company recorded a $300,885 and a $303,593 gain, respectively, on the change in fair value of derivative liabilities. For the nine months ended September 30, 2021 and 2020, the Company recorded losses of $159,633,797 and $43,406,183, respectively, of changes in the fair value of the derivative liability for the authorized shares shortfall. The Company recorded a $179,272,324 gain on settlement of convertible notes payable and accrued interest, warrants and accounts payable during the nine months ended September 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 nine months ended September 30, 2021, as compared to $0 during the same period in 2020. Net Income (Loss) Available to Common Stockholders For the nine months ended September 30, 2021, we had net losses available to common stockholders of $17,531,575 as compared to a net loss of $142,405,892 for the same period in 2020, a difference of $124,874,317 for the reasons discussed above. Liquidity and Capital Resources Net cash used in operations for the nine months ended September 30, 2021 and 2020 was $548,640 and $717,062, respectively. This $168,422 decrease was primarily caused by an increase in accounts payable and accrued expenses, accrued payroll and related expenses, and deferred revenue. Net cash used in operations for the nine months ended September 30, 2020 was primarily based on the loss for the nine months ended September 30, 2020, partially offset by decreases in accounts payable and accrued payroll. Net cash provided by financing activities for the nine months ended September 30, 2021 and 2020 was $548,237 and $716,592 respectively. During the nine months ended September 30, 2021, these funds were derived mainly from proceeds related to the issuance of preferred shares and non-convertible notes. During the nine months ended September 30, 2020, net cash provided by financing activities was derived from the issuance of convertible notes, offset by repayment of non-convertible notes. 29 Capital Resources As of September 30, 2021, the Company had cash of $1,082 and working capital deficit (current liabilities in excess of current assets) of $17,514,830. During the nine months ended September 30, 2021, the net loss available to common stockholders was $17,531,575 and net cash used in operating activities was $548,640. 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 September 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. 30