Greenwave Technology Solutions, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. The following discussion and other sections of this Annual Report contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors.” You should also carefully read “Special Note Regarding Forward-Looking Statements”. Overview We were formed on April 26, 2013 as a technology platform developer under the name MassRoots, Inc. In October 2021, we changed our corporate name from “MassRoots, Inc.” to “Greenwave Technology Solutions, Inc.” We sold all of our social media assets on October 28, 2021 for cash consideration equal to $10,000 and have discontinued all operations related to our social media business. On September 30, 2021, we closed our acquisition of Empire Services, Inc. (“Empire”), which operates 13 metal recycling facilities in Virginia, North Carolina, and Ohio. The acquisition was effective October 1, 2021 upon the effectiveness of the Certificate of Merger in Virginia. 21 Upon the acquisition of Empire, we transitioned into the scrap metal industry which involves collecting, classifying and processing appliances, construction material, end-of-life vehicles, boats, and industrial machinery. We process these items by crushing, shearing, shredding, separating, and sorting, into smaller pieces and categorize these recycled ferrous, nonferrous, and mixed metal pieces based on density and metal prior to sale. In cases of scrap cars, we remove the catalytic converters, aluminum wheels, and batteries for separate processing and sale prior to shredding the vehicle. We have designed our systems to maximize the value of metals produced from this process. We operate an automotive shredder at our Kelford, North Carolina location and a second automotive shredder at our Carrollton, Virginia location is expected to come online in the second quarter of 2024. Our shredders are designed to produce a denser product and, in concert with advanced separation equipment, more refined recycled ferrous metals, which are more valuable as they require less processing to produce recycled steel products. In totality, this process reduces large metal objects like auto bodies into baseball-sized pieces of shredded recycled metal. The shredded pieces are then placed on a conveyor belt under magnetized drums to separate the ferrous metal from the mixed nonferrous metal and residue, producing consistent and high-quality ferrous scrap metal. The nonferrous metals and other materials then go through a number of additional mechanical systems which separate the nonferrous metal from any residue. The remaining nonferrous metal is further processed to sort the metal by type, grade, and quality prior to being sold as products, such as zorba (mainly aluminum), zurik (mainly stainless steel), and shredded insulated wire (mainly copper and aluminum). One of our main corporate priorities is to open a facility with rail or deep-water port access to enable us to efficiently transport our products to domestic steel mills and overseas foundries. Because this would greatly expand the number of potential buyers of our processed scrap products, we believe opening a facility with port or rail access could result in an increase in both the revenue and profitability of our existing operations. However, there is no guarantee that we will be able to open such facility in the future. Empire is headquartered in Chesapeake, Virginia and employs 172 people as of June 12, 2026. Results of Operations For the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024 For the Fiscal Year ended 31-Dec-25 31-Dec-24 $ Change %Change Revenues $ 46,660,320 $ 33,315,859 $ 13,344,461 40.1 % Gross Profit 11,873,425 12,989,478 (1,116,053 ) (8.6 )% Operating Expenses 31,694,143 47,251,411 (15,557,268 ) (32.9 )% Loss from Operations (19,820,718 ) (34,261,933 ) 14,441,215 (42.1 )% Other Income (Expense) (1,775,910 ) 10,344,580 (12,120 ,490 ) (117.2 )% Net Loss Available to Common Stockholders $ (24,596,592 ) $ (100,446,189 ) $ 75,849,597 (75.51 )% Revenues For the year ended December 31, 2025, we generated $46,660,320 in revenues, as compared to $33,315,859 for the year ended December 31, 2024, an increase of $13,344,461. This increase was primarily driven by the Company’s sale of inventory accumulated during the fourth quarter of 2024 in anticipation of metal tariffs in early 2025, which contributed to higher pricing for domestic scrap metal. As previously disclosed, inventories decreased to $2,240,943 as of December 31, 2025, from $2,889,682 at December 31, 2024 as the Company sold the accumulated inventory. Metal revenues increased to $32,888,499 during the year ended December 31, 2025, from $23,296,239 during the year ended December 31, 2024, an increase of 9,592,260. This increase was primarily driven by the Company’s sale of inventory accumulated during late 2024, as well as by rising scrap prices. Hauling revenues increased to $13,695,565 during the year ended December 31, 2025, from $9,881,820 during the year ended December 31, 2024, an increase of 3,813,745. This increase was primarily driven by increased sales volume and efforts by the Company to reduce empty hauling legs. 22 Cost of revenues Our cost of revenues increased to $34,786,895 for the year ended December 31, 2025, from $20,326,381 for the year ended December 31, 2024, an increase of $14,460,514, primarily due to higher sales volumes in 2025, including the sale of inventory accumulated in late 2024, as well as increased activity levels associated with higher revenues. Metal costs increased to $27,473,253 during the year ended December 31, 2025 from $14,508,923 during the same period in 2024, an increase of $12,964,330, primarily due to higher sales volumes and the sale of inventory accumulated in late 2024. Hauling costs increased to $7,313,641 for the year ended December 31, 2025 from $5,817,458 during the same period in 2024, an increase of $1,496,183, due to the corresponding increase in hauling revenue. The cost of other revenue remained at $0 for the year ended December 31, 2025, compared to $0 during the same period in 2024. Gross profit Our gross profit increased to $11,873,425 during the year ended December 31, 2025, as compared to $12,989,478 during the same period in 2024, a decrease of $1,116,053, primarily due to higher cost of sales relative to higher revenues in 2025 due to rapid scaling, including the sale of inventory accumulated in late 2024 at improved pricing. The Company expects cost of sales to normalize over time as it shifts focus from rapid revenue growth to cost saving measures. Our gross margin decreased to approximately 25.4% during the year ended December 31, 2025, from approximately 39.0% during the same period in 2024, reflecting higher cost of revenues relative to revenue and a change in sales mix. Gross profit on metal decreased to approximately $5,415,245 during the year ended December 31, 2025, from $8,787,316 during the same period in 2024, a decrease of approximately $3,372,071, primarily due to higher metal costs associated with increased sales volumes and the sale of inventory accumulated in late 2024, which resulted in lower margins despite higher revenues. Gross profit on hauling increased to approximately $5,643,347, or approximately 48%, during the year ended December 31, 2025, from $4,064,362, or 41%, during the same period in 2024, an increase of approximately $1,578,985, primarily due to increased hauling revenues and improved cost efficiencies compared to the prior year. Operating Expenses For the years ended December 31, 2025 and 2024, our operating expenses were $31,694,143 and $47,251,411, respectively, representing a decrease of $15,557,268 in 2025 compared to the prior period. Payroll and related expenses increased by $3,091,612 to $11,273,313 for 2025 as compared to $8,181,701 for the same period in 2024, reflecting continued investment in personnel, while advertising expense increased by $120,298 to $173,445 for 2025 compared to $53,147 for 2024. Depreciation and amortization expense increased by $1,326,885 to $8,664,778 from $7,337,893, and hauling and equipment maintenance costs decreased by $53,594 to $5,243,036. There were also decreases in consulting, accounting, and legal expenses, which declined by $1,361,686 to $1,818,126 for 2025, and in rent, utilities and property maintenance, which decreased by $1,660,454 to $1,020,000 for 2025, in each case as compared to 2024, as the Company owned properties that it previously leased. Additionally, no impairment charges were recorded in 2025 compared to $439,086 in 2024, and significant non-recurring expenses in 2024, including a $12,338,550 loss on related-party assets and $3,004,909 of warrants issued for services, did not recur in 2025. Stock-based compensation decreased to $100,000 in 2025 from $823,500 in 2024, and a gain on disposal of assets of approximately $202,466 was recorded in 2025. Other general and administrative expenses decreased modestly by $311,818 to $3,603,911. Overall, the decrease in operating expenses was primarily driven by the absence of significant non-recurring charges incurred in 2024, partially offset by increases in payroll, depreciation, and operating activity-related costs. 23 There were $0 and $12,338,550 in losses on assets acquired from related parties during the years ended December 31, 2025 and 2024, respectively, a decrease of $12,338,550, as no such transactions occurred in 2025. The loss recognized in 2024 was associated with the Company’s purchase of land and permits underlying seven of its scrap yards from a related party. The SEC requires companies to record assets acquired from related parties at the related party’s historical cost basis, regardless of the assets’ current fair market value, and as the Company’s Chairman began acquiring these properties approximately 20 years ago, the assets had appreciated significantly since their original purchase, resulting in a non-cash loss upon acquisition in 2024. As a result of these transactions, the Company expects to realize approximately $1.7 million in annual cash savings from reduced rent expense and now owns key infrastructure supporting its operations and future expansion. Loss from Operations Our loss from operations decreased by $14,441,215 to $19,820,718 during the year ended December 31, 2025, from $34,261,933 during the year ended December 31, 2024. Other Income (Expense) During the year ended December 31, 2025, there was other expense of $(1,775,910), as compared to other income of $10,344,580 for the year ended December 31, 2024, a decrease of $12,120,490. Interest expense decreased to $(2,839,749) during fiscal year 2025 as compared to $(5,364,703) during fiscal year 2024. There was a gain on settlement of non-convertible notes payable and advances of $0 during the year ended December 31, 2025, as compared to $1,056,962 during the same period in 2024, along with other income of $26,970 and related-party income of $56,100 in 2025. These items were partially offset by a gain on extinguishment of debt of $980,769 during the year ended December 31, 2025, as compared to a loss of $(16,351,827) during the same period in 2024. There were no gains or losses related to derivative liabilities, conversions of convertible notes, or warrant-related financing activities during 2025, compared to significant activity in 2024, including a $48,314,949 gain from the change in fair value of derivative liabilities, a $(14,213,480) loss on conversion of convertible notes, and $(3,029,927) of warrant-related expenses. Overall, the change in other income (expense) was primarily driven by the absence of significant non-recurring gains recognized in 2024. Net Loss available to common stockholders Our net loss available to common stockholders decreased by $75,849,597 to ($24,596,592) during the year ended December 31, 2025, from $100,446,189 during the year ended December 31, 2024. Liquidity and Capital Resources Net cash used in operating activities for the years ended December 31, 2025 and 2024 was $5,975,441 and $17,254,723, respectively. Cash flows used in operations in 2025 were impacted by depreciation and amortization of $8,664,778, interest and amortization of debt discount of $2,839,749, stock-based compensation of $100,000, partially offset by a gain on settlement of non-convertible notes payable and advances of $980,267 and a gain on asset of $202,466. Changes in operating assets and liabilities in 2025 included a decrease in due to related parties of $200,403, a decrease in inventories of $648,739, a decrease in accounts receivable of $137,466, a decrease in prepaid expenses to $396,889, and an increase in accounts payable and accrued expenses to $4,264,931 compared to the prior period. Cash flows used in operations in 2024 were impacted by depreciation and amortization of $7,337,893, interest and amortization of debt discount of $5,364,703, a loss on conversion of debt of $14,213,480, a loss on assets acquired from related parties of $12,338,550, stock-based compensation of $823,500, warrants issued for services of $3,004,909, a loss on extinguishment of debt of $16,351,827, and a gain on the change in fair value of derivative liabilities of $48,314,949. Changes in operating assets and liabilities in 2024 included a decrease due to related parties of $1,685,205, an increase in inventories of $2,689,254, an increase in accounts receivable of $745,477, an increase in prepaid expenses of $687,194, and a decrease in accounts payable and accrued expenses of $969,383 compared to the prior period. 24 Net cash used in investing activities was $(934,299) for the year ended December 31, 2025, as compared to net cash used in investing activities of $(15,921,990) for the year ended December 31, 2024. During 2025, there were purchases of property and equipment of $2,068,086, partially offset by proceeds from the disposal of assets of $1,133,787, while no purchases from related parties were made in 2025. During 2024, cash used in investing activities consisted of purchases of property and equipment of $12,339,809 and purchases from related parties of $3,582,181. Net cash provided by financing activities was $5,269,039 for the year ended December 31, 2025, as compared to $34,207,018 for the year ended December 31, 2024. During 2025, financing activities included proceeds from the issuance of common stock with warrants of $10,478,605 and proceeds from bank overdrafts of $68,555, offset by repayments of $2,300,000 on related party notes and $2,841,012 on non-convertible notes. During 2024, financing activities included proceeds from the issuance of common stock with warrants of $40,369,115, proceeds from warrant exercises of $2,834,741, proceeds from bank overdrafts of $112,933, and proceeds from factoring of $2,843,950, offset by repayments of $2,910,193 on non-convertible notes, $3,538,388 on factoring arrangements, $4,008,057 on related-party notes, and $1,497,083 on convertible notes. Capital Resources As of December 31, 2025, we had cash on hand of $935,763, as compared to $2,576,464 as of December 31, 2024. We currently have no external sources of liquidity, such as arrangements with credit institutions, that have had or are reasonably likely to have a current or future effect on our financial condition or provide immediate access to capital. Required Capital over the Next Fiscal Year We may require additional capital in the future to continue executing our business plan and supporting our growth initiatives. During the year ended December 31, 2025, we raised capital through the issuance of common stock with warrants; however, we do not currently have committed arrangements with credit institutions or other financing sources that would provide immediate access to additional capital. As a result, we may seek to raise additional funds through equity or debt financings. There can be no assurance that such financing will be available when needed or on terms favorable to us. If we are unable to obtain sufficient capital, we may be required to delay, reduce, or eliminate certain aspects of our operations or growth strategy. Any additional equity financing may be dilutive to existing stockholders, while debt financing, if available, could involve restrictive covenants, increased interest costs, and obligations that may impact our financial flexibility and ability to operate our business. Going Concern and Management’s Liquidity Plans As of December 31, 2025, the Company had cash of $935,763 and a working capital deficit (current liabilities in excess of current assets) of $(18,339,586). During the year ended December 31, 2025, net cash used in operating activities was $(5,975,441). The accumulated deficit as of December 31, 2025 was $(520,910,428). These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the consolidated financial statements. 25 If the Company raises additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources from other activities. The Company’s ability to raise additional capital will be impacted by market conditions and the price of the Company’s common stock. Accordingly, the accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business for one year from the date the consolidated financial statements are issued. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of December 31, 2025. Recent Accounting Pronouncements Income Taxes In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires enhanced disclosures surrounding income taxes, particularly related to rate reconciliation and income taxes paid information. In particular, on an annual basis, companies will be required to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Companies will also be required to disclose, on an annual basis, the amount of income taxes paid, disaggregated by federal, state, and foreign taxes, and also disaggregated by individual jurisdictions above a quantitative threshold. The standard is effective for the Company for annual periods beginning January 1, 2025 on a prospective basis, with retrospective application permitted for all prior periods presented. The Company adopted ASU 2023-09 for the annual period ending December 31, 2025. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements but resulted in enhanced income tax disclosures. Recently Issued Accounting Pronouncements Not Yet Adopted Disclosure Improvements In October 2023, the FASB issued Accounting Standards Update No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 incorporates into the FASB Accounting Standards Codification 14 of the 27 disclosure and presentation requirements that were referred to the FASB by the SEC in connection with the SEC’s Disclosure Update and Simplification Initiative (SEC Release No. 33-10532). The amendments modify or add various disclosure and presentation requirements across a number of Codification topics. The effective date for each amendment will be the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. If by June 30, 2027 the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the related amendment will be removed from the Codification and will not become effective for any entity. The Company is currently evaluating the impact of this guidance but does not expect it to have a material impact on its consolidated financial statements or disclosures. Disaggregation of Income Statement Expenses In November 2024, the FASB issued Accounting Standards Update No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”). ASU 2024-03 requires specified information about certain costs and expenses be disclosed in the notes to the financial statements, including the expense caption on the face of the income statement in which they are disclosed, in addition to a qualitative description of remaining amounts not separately disaggregated. Entities will also be required to disclose their definition of “selling expenses” and the total amount in each annual period. The standard is effective for the Company for annual periods beginning January 1, 2027 and for interim periods beginning January 1, 2028, with updates applied either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its disclosures. 26 Credit Losses – Accounts Receivable and Contract Assets In July 2025, the FASB issued Accounting Standards Update No. 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides all entities with a practical expedient, and entities other than public business entities with an additional accounting policy election, when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. Under the practical expedient, an entity may assume that current economic conditions as of the balance sheet date remain unchanged over the forecast period, and is therefore not required to develop reasonable and supportable forecasts of future economic conditions for those assets. The standard is effective for the Company for annual reporting periods beginning January 1, 2026, and interim periods within those annual periods, applied on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. Critical Accounting Policies Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates its estimates and judgments, including estimates used in the calculation of stock-based compensation, fair values relating to derivative liabilities, payroll tax liabilities with interest and penalties, deemed dividends, assumptions used in right-of-use and lease liability calculations, valuations and impairments of intangible assets acquired in business combination, estimated useful life of long-lived assets and finite life tangible assets, determination of environmental remediation liabilities, and the valuation allowance related to deferred tax assets. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. Intangible: Intangible assets with finite useful lives consist of tradenames, licenses and customer relationships and are amortized on a straight-line basis over their estimated useful lives, which range from three to ten years. The estimated useful lives associated with finite-lived intangible assets are consistent with the estimated lives of the associated products and may be modified when circumstances warrant. Such assets are reviewed for impairment when events or circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset and its eventual disposition are less than its carrying amount. The amount of any impairment is measured as the difference between the carrying amount and the fair value of the impaired asset. During the fiscal years ended December 31, 2025 and 2024, the Company recorded $2,958,500 and $2,958,500 in amortization of intangible assets, respectively. Income Taxes: The Company accounts for its income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Income tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for consolidated financial reporting purposes and such amounts recognized for tax purposes and are measured by applying enacted tax rates in effect in years in which the differences are expected to reverse. The Company also follows the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. 27 Greenwave has also experienced impacts of inflation to its operations, mainly the significant increases in the prices of recycled metal, which in turn, has resulted in increases to the Company’s revenue and profit margin. The Company has also experienced increases to its wages and salaries, hauling, and towing expenses caused by inflation, but is taking steps to minimize impacts to the Company’s financial position. Greenwave does not experience material changes to its business due to seasonality. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required by this Item. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements required to be included in this Annual Report appear as indexed in the appendix to this Annual Report beginning on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.