Item 7. Management’s Discussion and Analysis
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.” 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.
23
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 two American Pulverizer 60x85 automotive shredders, one at our Kelford, North Carolina facility and a second at our Carrollton,
Virginia yard. 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).
We
are headquartered in Chesapeake, Virginia and employ 180 people as of April 7, 2025.
Results
of Operations For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023
For the Fiscal Year ended
31-Dec-24
31-Dec-23
$ Change
%Change
Revenues
$ 33,315,859
$ 35,667,982
$ (2,352,123 )
(6.59 )%
Gross Profit
12,989,478
14,483,403
(1,493,925 )
(10.31 )%
Operating Expenses
47,251,411
33,998,165
13,253,246
38.98 %
Loss from Operations
(34,261,933 )
(19,514,762 )
(14,747,171 )
75.57 %
Other Income (Expense)
10,344,580
(7,421,228 )
17,765,808
(239.39 )%
Net Income (Loss) Available to Common Stockholders
$ (100,446,189 )
$ (33,597,142 )
$ (66,849,047 )
198.97 %
Revenues
For
the year ended December 31, 2024, we generated $33,315,859 in revenues, as compared to $35,667,982 for the year ended December 31, 2023,
a decrease of $2,352,123. This decrease was primarily due to the Company accumulating inventory during the fourth quarter of 2024 in
anticipation of metal tariffs in early 2025 likely driving the prices of domestic scrap metal higher. Inventories increased to $2,889,682
as of December 31, 2024, from $200,248 at December 31, 2023, an increase of $2,689,254. The Company believes it would have generated
in excess of $4 million in revenue had it sold these inventories during fiscal year 2024. From January 6 to March 17, 2025, the price
for the Company’s unshredded ferrous metal increased 32% — enabling the Company to generate significantly more revenue and
gross profit from the inventory accumulated in the final months of 2024 and the first two months of 2025.
During
the year ended December 31, 2024, our metal revenues declined to $23,296,239 from $ 25,350,883 during
the same period in 2023, a decline of $2,054,644, primarily due to our fourth quarter 2024 inventory accumulation strategy described
above. Our hauling revenues fell to $9,881,820 from $10,156,938 for the years ended December 31, 2024 and 2023, respectively, a decline
of $275,118, due to significant storms in Hampton Roads, VA in 2024. There was other revenue, compromised rental income from our Portsmouth
Blvd properties, of $137,800 during the year ended December 31, 2024, as compared to $132,640 for the same period in 2023, a minor increase
of $5,160 due to annual rent increases.
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Cost
of revenues
Our
cost of revenues decreased to $20,326,381 for the year ended December 31, 2024 from $21,184,579 during the same period in 2023, a decline
of $858,198, primarily due to our fourth quarter 2024 inventory accumulation strategy described
above.
Metal
costs declined to $14,508,923 during the year ended December 31, 2024 from $ 16,154,529 during
the same period in 2023, a decrease of $1, 645,606 due to the Company streamlining its operations, along with its fourth
quarter 2024 inventory accumulation strategy described above.
Hauling
costs increased to $5,817,458 for the year ended December 31, 2024 from $4,996,871 during the same period in 2023, an increase of $820,587,
due to higher fuel and driver costs. The cost of other revenue was $0 for the year ended December 31, 2024, compared to $33,179 during
the same period in 2023, a decrease of $33,179.
Gross
pro fit
Our
gross profit was $12,989,478 during the year ended December 31, 2024 as compared to $14,483,403 during the same period in 2023, a decrease
of $1,493,925, as the Company accumulated metal inventory, our highest gross margin revenue stream. For this same reason, our gross margins
decreased to 39% during the year ended December 31, 2024 from 41% during the same period in 2023.
Gross
profit on metal declined to $8,787,316 during the year ended December 31, 2024, or 38%, from $9,196,354 during the same period in 2023,
or 36%, a decline of $409,038, primarily due to the inventory accumulation strategy described above, partially offset by operational
efficiencies.
Gross
profit on hauling declined to $4,064,362, a margin of 41%, during the year ended December 31, 2024, from $5,160,067, a margin of 51%,
during the same period in 2023, a decrease of $1,095,705, due to higher fuel and driver costs.
Operating
Expenses
For
the years ended December 31, 2024 and 2023, our operating expenses were $47,251,411 and $33,998,165, respectively, an increase of $13,253,246.
There was an increase in payroll and related expenses of $1,546,901 as payroll and related expenses were $8,181,701 for 2024 as compared
to $6,634,800 for the same period in 2023, which was the result of the Company expanding its operational staff. Advertising expense decreased
by $361,047 to $53,147 for 2024 as compared to $414,194 for 2023 as the Company focused its resources on its scrap metal operations.
Depreciation and amortization of intangible assets increased by $1,523,013 to $7,337,893 for 2024 from $5,814,880 in 2023 as a result
of the Company acquiring additional fixed assets. Impairment of tangible assets increased by $439,086 to $439,086 for 2024 from $0 in
2023. There were hauling and equipment maintenance costs of $5,296,630 in 2024, as compared to $2,898,202 in 2023, an increase of $2,398,428,
due to an increase in repair and fuel costs. Consulting, accounting, and legal expenses increased to $3,179,812 during the year ended
December 31, 2024 from $1,713,613 during the same period in 2023, an increase of $1,466,199 due to the Company conducting capital raises.
There was a decrease in rent expenses as a result of the Company buying properties it previously rented, declining $422,030 from $3,102,484
during the year ended December 31, 2023 to $2,680,454 during the same period in 2024. There were warrants issued for services of $3,004,909
during the year ended December 31, 2024 as compared to $171,239 during the same period in 2023, an increase of $2,833,770 primarily related
to the Company’s registered direct offerings. There was stock based compensation of $823,500 during the year ended December 31,
2024, as compared to $0 during the same period in 2023, an increase of $823,500, as a result of equity awards to the Company’s
directors and an officer under its shareholder-approved equity inventive plans. Other general and administrative expenses increased to
$3,915,729 for the year ended December 31, 2024 from $3,200,445 for the year ended December 31, 2023, an increase of $715,284, as a result
of the Company’s operations expanding.
25
There
were $12,338,550 and $9,850,850 in losses on assets acquired from a related-party, an increase of $2,487,700, during the years ended
December 31, 2024 and 2023, respectively, due to the Company’s purchase of land and permits underlying 7 of the Company’s
scrap yards in 2024 and the purchase of two American Pulverizer 60x85 shredders and a downstream processing system in 2023. There were
$0 and $197,458 in losses on assets acquired from a non related-party, a decrease of $197,458, during the years ended December 31, 2024
and 2023, respectively. The Division of Corporate Finance requires companies to report the value of assets acquired from related-parties
at the original cost basis of the related-party– regardless of the assets’ current fair market value. As our Chairman began
acquiring the properties underlying our scrap yards approximately 20 years ago, these properties – along with the permits, automotive
shredders, and downstream processing system – had appreciated significantly since their original purchase. As a result of these
transactions, Greenwave is expected to realize savings of $1.7 million in cash annually in rent and owns the infrastructure to rapidly
expand its operations.
Loss
from Operations
Our
loss from operations increased $14,747,171 to $34,261,933 during the year ended December 31, 2024, from $19,514,762 during the year ended
December 31, 2023.
Other
Income (Expense)
During
the year ended December 31, 2024, there was other income of $10,344,580, as compared to $(7,421,228) in other expenses for the year ended
December 31, 2023, an increase of $17,765,808. There were losses of $(14,213,480) on the conversion of convertible notes during the year
ended December 31, 2024, as compared to $0 during the same period in 2023. There was a gain on settlement of notes payable and accrued
interest, along with advances of $1,056,962 and $632,540 for the years ended December 31, 2024 and 2023, respectively. Interest expense
decreased to $(5,364,703) during fiscal year 2024 as compared to $(8,897,267) during fiscal year 2023. There was neither a gain nor loss
in the fair value of derivative liabilities during the year ended December 31, 2023, as compared to a gain in change of fair value of
derivative liabilities of $48,314,949 during the same period in 2024. There was other losses of $15,212 during the year ended December
31, 2024, as compared to other gains of $17,572 during the same period in 2023, respectively. There was gain on lease termination of
$108,863 during the year ended December 31, 2023 as compared to $0 during the same period in 2024. There was a gain on tax credit of
$717,064 during the year ended December 31, 2023 as compared to $0 during the same period in 2024. There were losses on the extinguishment
of debt of $(16,351,827) during the year ended December 31, 2024, as compared to $0 during the same period in 2023. There were warrant
expenses for financing of $(3,029,927) during the year ended December 31, 2024, as compared to $0 during the same period in 2023. Lastly,
there was an expense of $(52,182) for shares issued for financing during the year ended December 31, 2024, as compared to $0 during the
same period in 2023.
Net
Loss available to common stockholders
Our
net loss available to stockholders increased by $66,849,047 to $100,446,189 during the year ended December 31, 2024, from $33,597,142
during the year ended December 31, 2023.
Liquidity
and Capital Resources
Net
cash used in operating activities for the years ended December 31, 2024 and 2023 was $17,254,723 and $1,833,310, respectively. Cash flows
used in operations in 2024 was impacted by depreciation of $7,337,893, loss on asset – related party of $12,338,550, amortization
of right of use assets net of $324,608, interest and amortization of debt discount of $5,364,703, a gain on the settlement of notes payable
and factoring advances of $1,056,962, a decrease in due to a related party of $1,685,205, an increase in accounts receivable of $745,477,
stock compensation of $823,500, stock compensation for services of $3,004,909, loss on extinguishment of $16,351,827, change in fair
value of derivative liabilities of $48,314,949, an increase in inventories of $2,689,254, an increase in prepaid expenses of $687,194,
loss of conversion of debt of $14,213,480, impairment of equipment of $439,086, an increase in accounts payable of $969,383, an decrease
in payroll wages payable of $156,582, an increase in lease liability of $177,417, and a decrease in lease liability (related-party) of
$83,430. Cash flows used in operations in 2023 were impacted by depreciation of $2,856,380, amortization of intangible assets of $2,958,500,
loss on asset – related party of $9,850,850, loss on assets of $197,458 amortization of right of use assets net of $392,050, amortization
of right of use assets-related party net of $1,250,218, interest and amortization of debt discount of $8,897,267, a gain on the settlement
of notes payable and factoring advances of $632,540, an increase in due to a related party of $1,824,318, an increase in accounts receivable
of $431,155, stock compensation of $171,239, a decrease in inventories of $10,782, a decrease in prepaid expenses of $200,590, an decrease
in security deposit of $25,000, gain on deferred revenue of $25,000, gain on lease termination of $108,863 an increase in accounts payable
of $856,151 an decrease in payroll wages payable of $614,271, and a decrease in lease liability of $1,619,790.
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Net
cash used in investing activities was $15,921,990 and $1,678,176 for the years ended December 31, 2024 and 2023, respectively. For the
year ended December 31, 2024, there was cash used in the purchase of equipment of $12,339,809 and purchase of equipment from a related-party
of $3,582,181.For the year ended December 31, 2023, there was cash used in the purchase of equipment of $1,760,945 and cash received
for the advance of asset of $82,769.
Net
cash provided by financing activities for the year ended December 31, 2024and 2023 was $34,207,018 and $4,235,841, respectively. During
the year ended December 31, 2024, there were proceeds from warrant exercises of $2,834, 741, proceeds from the sale of common stock and
warrants of $40,369,115, proceeds from bank overdrafts of $112,933, and proceeds from factoring advances of $2,843,950, offset by repayments
of $2,909,257 towards non-convertible notes, repayments of $3,538,388 towards factoring advances, repayments of $4,008,993 towards a
related-party note payable, and repayments of $1,497,083 towards convertible notes payable. During the year ended December 31, 2023,
there were proceeds from non-convertible notes of $1,000,000, proceeds from convertible notes of $13,118,750, proceeds from the sale
of common stock of $2,841,181, proceeds from warrant exercises of $15,511 proceeds from bridge financing of $825,000, proceeds from bank
overdrafts of $118,763, and proceeds of $3,746,109 from factoring advances, offset by repayments of $4,858,587 towards non-convertible
notes and repayments of $12,570,886 towards factoring advances.
Capital
Resources
As
of December 31, 2024, we had cash on hand of $2,576,464. We currently have no external sources of liquidity such as arrangements with
credit institutions that will have or are reasonably likely to have a current or future effect on our financial condition or immediate
access to capital.
Fundraising
During
the year ended December 31, 2024, there were proceeds from warrant exercises of $2,834, 741, proceeds from the sale of common stock and
warrants of $40,369,115, proceeds from bank overdrafts of $112,933, and proceeds from factoring advances of $2,843,950.
Required
Capital over the Next Fiscal Year
We
may need additional capital in the future to continue to execute our business plan. Therefore, we may be dependent upon additional capital
in the form of either debt or equity to continue our operations. At the present time, we do not have arrangements to raise additional
capital, and we may need to identify potential investors and negotiate appropriate arrangements with them. We may not be able to arrange
enough investment within the time the investment is required or that if it is arranged, that it will be on favorable terms. If we cannot
obtain the needed capital, we may not be able to become profitable and may have to curtail or cease our operations. Additional equity
financing, if available, may be dilutive to the holders of our capital stock. Debt financing may involve significant cash payment obligations,
covenants and financial ratios that may restrict our ability to operate and grow our business.
Going
Concern and Management’s Liquidity Plans
As
of December 31, 2024, the Company had cash of $2,576,464 and a working capital deficit (current liabilities in excess of current assets)
of $(13,453,459). During the year ended December 31, 2024, the net cash used in operating activities was $(17,254,723). The accumulated
deficit as of December 31, 2024 was $(496,312,346). 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.
During
the year ended December 31, 2024, there were proceeds from warrant exercises of $2,834,741, proceeds from the sale of common stock and
warrants of $40,369,115, proceeds from bank overdrafts of $112,933, and proceeds from factoring advances of $2,843,950.
27
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
do not have any off-balance sheet arrangements.
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
will adopt ASU 2023-09 for the annual period ending December 31, 2025 and is currently evaluating the impact of this guidance on its
disclosures.
Segment
Reporting
In
November 2023, the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable
Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires enhanced disclosures surrounding reportable segments, particularly
(i) significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included
in the reported measure(s) of a segment’s profit and loss and (ii) other segment items that reconcile segment revenue and significant
expenses to the reported measure(s) of a segment’s profit and loss, both on an annual and interim basis. Companies are also required
to provide all annual disclosures currently required under Topic 280 in interim periods, in addition to disclosing the title and position
of the CODM and how the CODM uses the reported measure(s) of segment profit and loss in assessing segment performance and allocating
resources. The Company adopted ASU 2023-07 for the annual period ended December 31, 2024. See Note 20 – Segment Reporting.
28
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.
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 goodwill and 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, 2024 and 2023, 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.
29
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.