# Greenwave Technology Solutions, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [Greenwave Technology Solutions, Inc.](/companies/gwav.md) (CIK 1589149)
- Form: 10-Q
- Filed: 2024-05-20
- Accepted by EDGAR: May 20, 2024, 16:40 ET
- Period: 2024-03-31
- Accession: 0001493152-24-020718
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1589149/000149315224020718/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1589149/000149315224020718/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $8.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $5.2m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $3.3m | us-gaap:GrossProfit |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$2.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $2.2m | us-gaap:InterestExpense |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$8.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.39 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.39 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 20,858,437 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | −$3.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-03-31 | $713.2k | us-gaap:Cash |
| Current assets | at 2024-03-31 | $2.2m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $45.3m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $22.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $39.7m | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $13.0m | us-gaap:LongTermDebt |
| Short-term borrowings | at 2024-03-31 | $2.8m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-03-31 | $5.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 24,634 characters.

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

We were formed in 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.

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.

Empire is headquartered in Chesapeake, Virginia and employs 131 people as of May 13, 2024.

### Products and Services

Our main product is selling ferrous metal, which is used in the recycling and production of finished steel. It is categorized into heavy melting steel, plate and structural, and shredded scrap, with various grades of each of those categorizations based on the content, size and consistency of the metal. All of these attributes affect the metal’s value.

We also process nonferrous metals such as aluminum, copper, stainless steel, nickel, brass, titanium, lead, alloys and mixed metal products. Additionally, we sell the catalytic converters recovered from end-of-life vehicles to processors which extract the nonferrous precious metals such as platinum, palladium and rhodium.

We provide metal recycling services to a wide range of suppliers, including large corporations, industrial manufacturers, retail customers, and government organizations.

### Pricing and Customers

Prices for our ferrous and nonferrous products are based on prevailing market rates and are subject to market cycles, worldwide steel demand, government regulations and policy, and supply of products that can be processed into recycled steel. Our main buyers adjust the prices they pay for scrap metal products based on market rates usually on a monthly or bi-weekly basis. We are usually paid for the scrap metal we deliver to customers within 14 days of delivery.

Based on any price changes from our customers or our other buyers, we in turn adjust the price for unprocessed scrap we pay suppliers in order to manage the impact on our operating income and cash flows.

The spread we are able to realize between the sales prices and the cost of purchasing scrap metal is determined by a number of factors, including transportation and processing costs. Historically, we have experienced sustained periods of stable or rising metal selling prices, which allow us to manage or increase our operating income. When selling prices decline, we adjust the prices we pay customers to minimize the impact to our operating income.

### Sources of Unprocessed Metal

Our main sources of unprocessed metal we purchase are end-of-life vehicles, old equipment, appliances and other consumer goods, and scrap metal from construction or manufacturing operations. We acquire this unprocessed metal from a wide base of suppliers including large corporations, industrial manufacturers, retail customers, and government organizations who unload their metal at our facilities or we pick it up and transport it from the supplier’s location. Currently, our operations and main suppliers are located in the Hampton Roads and northeastern North Carolina markets. In the second quarter of 2023, we are expanding our operations by opening a metal recycling facility in Cleveland, Ohio.

Our supply of scrap metal is influenced by the overall health of economic activity in the United States, changes in prices for recycled metal, and, to a lesser extent, seasonal factors such as severe weather conditions, which may prohibit or inhibit scrap metal collection.

### Competition

We compete with several large, well-financed recyclers of scrap metal, steel mills which own their own scrap metal processing operations, and with smaller metal recycling companies. Demand for metal products is sensitive to global economic conditions, the relative value of the U.S. dollar, and availability of material alternatives, including recycled metal substitutes. Prices for recycled metal are also influenced by tariffs, quotas, and other import restrictions, and by licensing and government requirements.

We aim to create a competitive advantage through our ability to process significant volumes of metal products and utilize the technology solutions, our use of processing and separation equipment, the number and location of our facilities, and the operating synergies we have been able to develop based on our experience.

### For the Three Months Ended March 31, 2024 and 2023

|  | For the three months ended March 31, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $8,504,777 | $9,043,422 | $(538,645) | (5.96)% |
| Gross Profit | 3,264,261 | 4,726,611 | (1,462,350) | (30.94)% |
| Operating Expenses | 6,075,985 | 6,661,787 | (585,802) | (8.79)% |
| Loss from Operations | (2,811,724) | (1,935,176) | (876,548) | 45.30% |
| Other Expense | (5,250,790) | (2,090,499) | (3,160,291) | 151.17% |
| Net Loss Available to Common Stockholders | $(33,460,778) | $(4,025,675) | $(29,435,103) | 731.38% |

### Revenues

For the three months ended March 31, 2024, we generated $8,504,777 in revenues, as compared to $9,043,422 during the same period in 2023, a decrease of $538,645. This decrease was primarily due a decline in metal revenue.

Rental incomes decreased $12,290 from $42,790 to $30,500, metal revenues fell $890,641 from $7,111,026 to $6,220,385, hauling revenues grew $380,913 from $1,872,979 to $2,253,892, and miscellaneous revenue fell $16,627 from $16,627 to $0, during the three months ended March 31, 2024 as compared to the same period in 2023.

Our cost of revenues increased to $5,240,516 for the three months ended March 31, 2024 from $4,316,811 during the same period in 2023, an increase of $923,705, primarily due to an increase in hauling costs.

Our gross profit was $3,264,261 during the three months ended March 31, 2024, a decrease of $1,462,350 from $4,726,611 during the same period in 2023 primarily due to a decline in margins on the Company’s hauling and metal revenue.

### Operating Expenses

For the three months ended March 31, 2024 and 2023, our operating expenses were $6,075,985 and $6,661,787 respectively, a decline of $585,802. There was a decline in payroll and related expenses of $213,231 as payroll and related expenses were $1,738,028 for the three months ended March 31, 2024 as compared to $1,951,259 for the same period in 2023 which was the result of a reducing in overtime. Advertising expense decreased by $3,148 to $2,374 for the three months ended March 31, 2024 as compared to $5,522 for the same period in 2023 as the Company focused on operations. Depreciation of fixed assets, along with amortization of intangible assets, increased by $369,962 to $1,638,815 for the three months ended March 31, 2024 from $1,268,853 in 2023 as a result of the Company acquiring more fixed assets during fiscal year 2023. There were hauling and equipment maintenance costs of $601,562 during the three months ended March 31, 2024, as compared to $1,250,717 in 2023, a decrease of $649,155, due to the Company bringing its hauling in-house. Consulting, accounting, and legal expenses increased to $612,271 during the three months ended March 31, 2024 from $273,073 during the same period in 2023, an increase of $339,198 as a result of the Company having significant corporate activity in 2024. There was a decrease in rent expenses as a result of the Company acquiring the equipment on certain properties, decreasing $579,837 from $1,023,709 during the three months ended March 31, 2023 to $443,872 during the same period in 2024. There was an equity issued for services expense of $288,900 during the three months ended March 31, 2024, as compared to $0 during the same period in 2023, an increase of $309,733 primarily related to the Company’s warrant exchange.

Our other general and administrative expenses decreased to $729,330 for the three months ended March 31, 2024 from $888,654 for the same period in 2023, a decrease of $159,324, as a result of the Company better managing its overhead.

The change in these expenditures resulted in our total operating expenses decreasing to $6,075,985 during the three months ended March 31, 2024 compared to $6,661,787 during the three months ended March 31, 2023, a decrease of $585,802.

### Loss from Operations

Our loss from operations increased by $876,548 to $2,811,724 during the three months ended March 31, 2023, from $1,935,176 during the three months ended March 31, 2023 for the reasons discussed above.

### Other Expense

During the three months ended March 31, 2024, we incurred other expenses of $(5,250,790), as compared to $(2,090,499) for the same period in 2023, a decrease of $3,160,291. There was a gain on settlement of non-convertible notes and advances of $0 and $75,005 for the three months ended March 31, 2024 and 2023, respectively. Interest expenses and amortization of debt discount decreased to $(2,194,229) during the three months ended March 31, 2024 from $(2,165,504) during the three months ended March 31, 2023. Expense for warrants issued for financing increased to $(3,082,110) during the three months ended March 31, 2024 from $0 during the three months ended March 31, 2023. Gain on conversion of convertible notes increased to $24,198 during the three months ended March 31, 2024 from $0 during the three months ended March 31, 2023. Other income increased to $1,351 during the three months ended March 31, 2024 from $0 during the three months ended March 31, 2023.

### Deemed Dividend

During the three months ended March 31, 2024, there was a deemed dividend of $1,444,324 for the reduction of exercise price of warrants, as compared to $0 during the same period in 2023, a change of $1,444,324.

During the three months ended March 31, 2024, there was a deemed dividend of $23,953,940 for the reduction of the conversion price of a debt note, as compared to $0 during the same period in 2023, a change of $23,953,940.

### Net Loss Available to Common Stockholders

Our net loss was $33,460,778 during the three months ended March 31, 2024 as compared to $4,025,675 during the same period in 2023, a change of $29,435,103, for the reasons discussed above.

### Liquidity and Capital Resources

Net cash used in operating activities for the three months ended March 31, 2024 was $3,460,823 as compared to $203,965 for the three months ended March 31, 2023. For the three months ended March 31, 2024, the cash flows used in operating activities were driven by a net loss of $8,062,514, amortization of right of use assets (related-party) of $24,980, amortization of right of use assets of $48,935, depreciation and amortization of $1,638,815, decrease of due to related parties of $903,462, decrease of prepaid expenses of $113,261, a decrease of accounts payable and accrued expenses of $1,649,694, a decrease in operating lease liabilities of $25,385, a decrease in operating lease liabilities (related-party) of $39,791, stock based compensation of $309,773, equity issued for warrant inducement of $3,029,927, interest and amortization of debt discount of $2,194,229, gain on the conversion of notes of $24,198, an increase in accounts receivable of $296,832, shares issued for financing of $52,183, and increases in inventories of $199,791. For the three months ended March 31, 2023, the cash flows used in operating activities were driven by a net loss of $4,025,675, amortization of right of use assets (related-party) of $602,404, amortization of right of use assets of $43,226, depreciation and amortization of $1,268,853, accrual of due to related parties of $529,693 increase of prepaid expenses of $42,262, an increase of accounts payable and accrued expenses of $812,188, a decrease in operating lease liabilities of $95,160, a decrease in operating lease liabilities (related-party) of $574,454, a gain on the settlement of non-convertible notes and accrued interest of $75,005 interest and amortization of debt discount of $1,861,971, an increase in accounts receivable of $144,269, increases in inventories of $303,826, increase in security deposit of $25,000, and a decrease in accrued payroll of $36,649.

Net cash used in investing activities was $0 and $712,335 for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2023, there was cash used in the purchase of equipment of $712,335.

Net cash provided by financing activities was $2,627,882 during the three months ended March 31, 2024, as compared to $370,581 during the three months ended March 31, 2023. During the three months ended March 31, 2024, there were proceeds from warrant exercises, bank overdrafts, factoring advances of $2,574,679, $179,501 and $2,843,950, respectively, while there were repayments of factoring advances, convertible notes, and non-convertible notes of $1,016,389, $1,497,083, and $456,776, respectively. During the three months ended March 31, 2023, the Company received $1,876,109 from the issuance of factoring advances and $1,000,000 from the issuance of non-convertible notes, while utilizing $519,543 in the repayment of non-convertible notes and utilizing $1,985,985 for the repayment of factoring advances.

#### Capital Resources

As of March 31, 2024, we had cash on hand of $713,218. 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.

#### Required Capital over the Next Fiscal Year

As of March 31, 2024, the Company had cash of $713,218 and a working capital deficit (current liabilities in excess of current assets) of $(20,489,101). The accumulated deficit as of March 31, 2024 was $(429,326,935). These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the unaudited condensed consolidated financial statements.

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. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

### 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.

### Recent Developments

The Company has entered into several material agreements during the most recent fiscal quarter. References in this section to any of our contracts or other documents are not necessarily complete, and each such reference is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the relevant Current Report on Form 8-K.

#### Registered Direct Offering and Concurrent Private Placement

On April 22, 2024, the Company and certain institutional and accredited investors entered into a securities purchase agreement (the “April Securities Purchase Agreement”) to which the Company agreed to sell to such purchasers an aggregate of 45,058,612 shares of Common Stock, in a registered direct offering, and accompanying warrants to purchase up to 45,058,612 shares of common stock in a concurrent private placement, for gross proceeds of $5,258,340, before deducting the financial advisor’s fees and other estimated offering expenses. The purchase price for each share and the accompanying warrant to purchase one share of Common Stock is $0.1167.

The sale and offering of the Shares pursuant to the April Securities Purchase Agreement was effected as a takedown off the Company’s shelf registration statement on Form S-3 which became effective April 28, 2023. A brief description of the terms and use of proceeds along with the full text of the April Securities Purchase Agreement filed as Exhibit 10.1 can be found in the Company’s Current Report on Form 8-K filed with the SEC on April 22, 2024.

#### Note Exchange

On April 22, 2024, the Company entered into an exchange agreement with DWM Properties LLC, whereby the Company and DWM Properties LLC agreed to exchange the remaining $7,218,350 of that certain secured promissory note, dated July 31, 2023, issued by the Company to DWM Properties LLC for 61,853,899 shares of the Company’s common stock. In connection with the exchange agreement, DWM Properties LLC and the Company entered into a voting agreement stating that DWM Properties LLC will vote in favor of the approval for the issuance of the warrants and the warrant shares issuable upon exercise of the warrants. The full text of the exchange agreement and voting agreement filed as Exhibit 10.2 and Exhibit 10.3 respectively can be found in the Company’s Current Report on Form 8-K filed with the SEC on April 22, 2024.

#### Amendment to Senior Secured Convertible Promissory Note

As disclosed in the Company’s Current Report on Form 8-K filed on August 3, 2023, on July 31, 2023, Company entered into a Purchase Agreement (the “July Purchase Agreement”) with certain institutional investors as purchasers (the “Investors”). Pursuant to the July Purchase Agreement, the Company sold, and the Investors purchased, approximately $15,000,000, which consisted of approximately $13,968,750 in cash and $1,031,250 of existing debt of the Company which was exchanged for the notes and warrants issued in this offering in principal amount of senior secured convertible notes (the “Senior Notes”) and warrants. The transaction closed on August 1, 2023.

On May 3, 2024, the Company entered into an amendment to its senior secured convertible promissory note originally signed July 31, 2023. The amendment, among other things, changed the conversion price of the senior notes to $0.05, subject to certain circumstances described in the Senior Notes along with certain conversion price adjustment mechanism. The full text of the amendment filed as Exhibit 4.1 can be found on the Company’s Current Report on Form 8-K filed with the SEC on May 3, 2024.

#### Waiver Agreement

On March 20, 2024, the Company and the Investors entered into a Consent and Waiver (the “March Consent and Waiver”), pursuant to which the Investors agreed, among other things, not to convert the Senior Notes until May 20, 2024 if the average closing price of the Company’s common stock on the Nasdaq Capital Market on the three (3) most recent trading days was less than $0.25 (the “Conversion Prohibition”). On May 9, 2024, the Company and the Investors entered into a Waiver Agreement (the “Waiver Agreement”), pursuant to which the Company and the Investors decided to waive the Conversion Prohibition in the March Consent and Waiver. The full text of the Waiver Agreement filed as Exhibit 4.1 can be found on the Company’s Current Report on Form 8-K filed with the SEC on May 9, 2024.

#### Preferred Share Exchange

On May 10, 2024, the Company entered into an exchange agreement with DWM Properties LLC, whereby the Company and DWM Properties LLC agreed to exchange agreed 1,000 shares of the Company’s Series D Preferred Stock, par value $0.001 per share, issued by the Company to DWM Properties LLC for 200,000,000 shares of the Company’s common stock. The full text of the exchange agreement filed as Exhibit 10.1 can be found in the Company’s Current Report on Form 8-K filed with the SEC on May 16, 2024.

#### Notice of Delisting

On May 7, 2024, the Company received notice from the Listing Qualifications Department indicating that the bid price for the Company’s common stock had closed below $.10 per share for the 10-consecutive trading day period ended May 6, 2024 and, accordingly, the Company is subject to the previous contemplated under Nasdaq Listing Rule 5810(c)(3)(A)(iii) (the “Low Priced Stock Rule”) and subject to delisting from Nasdaq unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”). The Company plans to timely request a hearing before the Panel, which request will stay any further action by Nasdaq at least until the hearing is held and the expiration of any extension period that may be granted by the Panel. The Company’s common stock will continue to trade on Nasdaq under the symbol “GWAV” pending completion of the hearing process. There can be no assurance that the Panel will grant the Company’s request for continued listing or that the Company will be able meet the continued listing requirements during any compliance period that may be granted by the Panel.

### 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.

## Market risk

As filed, 276 characters.

The information contained above in Item 1.01 related to the Private Placement, the issuance of the Warrants, the Financial Advisor Warrants and the issuance of the Warrant Shares and the Financial Advisor Warrant Shares is hereby incorporated by reference into this Item 3.02.

## Controls and procedures

As filed, 7,082 characters.

### Evaluation of Disclosure Controls and Procedures

Pursuant to Rules 13a-15(b) and 15-d-15(b) under the Exchange Act, we carried out an evaluation, with the participation of our management, including our Chief Executive Officer (“CEO”) and Interim Chief Financial Officer (“CFO”) of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. The term “disclosure controls and procedures,” as defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based upon such evaluation, our CEO and CFO concluded that our disclosure controls and procedures as of March 31, 2024 were not effective (at a reasonable assurance level) due to identified control deficiencies regarding the lack of segregation of duties and the need for a stronger internal control environment.

To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our financial statements included in this Quarterly Report on Form 10-Q have been prepared in accordance with generally accepted accounting principles in the U.S. Accordingly, management believes that the financial statements included in this Quarterly Report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

Our principal executive officer and principal financial officer do not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

### Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our management, including our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of March 31, 2024. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (issued in 2013). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Based upon the assessments, management has concluded that as of March 31, 2024, there was a material weakness in our internal control over financial reporting due to the fact that we did not have an adequate process established to ensure appropriate levels of review of accounting and financial reporting matters, which resulted in our closing process not identifying all required adjustments and disclosures in a timely fashion.

We plan to take steps to enhance and improve the design of our internal control over financial reporting. To remediate our material weaknesses, we plan to appoint additional qualified personnel with the requisite knowledge to improve the levels of review of accounting and financial reporting matters; however, such remediation efforts are largely dependent upon our securing additional financing or generating significant revenue to cover the costs of implementing the changes required.

Until we remediate our material weakness in internal control over financial reporting such weaknesses could result in material misstatements in our financial statements not being prevented or detected.

### Inherent Limitations on Effectiveness of Controls and Procedures

The Company’s management, including the Company’s CEO and CFO, does not expect that the Company’s internal control over financial reporting will prevent or detect all errors and all fraud. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s CEO and CFO has identified control deficiencies regarding the lack of segregation of duties and the need for a stronger internal control environment. The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of such remediation.

Because of the above material weakness, management has concluded that we did not maintain effective internal control over financial reporting as of March 31, 2024, based on the criteria established in “Internal Control-Integrated Framework” issued by the COSO.

This Quarterly Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Quarterly Report.

### Changes in Internal Control over Financial Reporting

During the most recent fiscal quarter, the Company began hiring additional accounting personnel to enhance its segregation of duties and establishment of procedures in an effort to ensure appropriate levels of review of accounting and financial reporting matters.

## Risk factors

As filed, 246 characters.

As a “smaller reporting company,” we are not required to provide the information required by this Item 1A. Please see the Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on April 16, 2024.

Filed May 20, 2024.
Source: SEC EDGAR, the filing index for accession 0001493152-24-020718. Last ingested by Listed: Nov 5, 2026, 11:26 ET. No prices; not investment advice.