# Greenwave Technology Solutions, Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Greenwave Technology Solutions, Inc.](/companies/gwav.md) (CIK 1589149)
- Form: 10-Q
- Filed: 2024-08-19
- Accepted by EDGAR: Aug 16, 2024, 18:01 ET
- Period: 2024-06-30
- Accession: 0001493152-24-032898
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1589149/000149315224032898/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1589149/000149315224032898/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $7.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $16.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $5.6m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $10.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $2.3m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | $5.5m | us-gaap:GrossProfit |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | −$9.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | −$11.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $2.5m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $4.7m | us-gaap:InterestExpenseNonoperating |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $7.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | −$739.2k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$8.43 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$28.97 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$8.38 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$28.97 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 5,195,391 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 2,667,275 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$14.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $2.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-06-30 | $24.3m | us-gaap:Cash |
| Current assets | at 2024-06-30 | $27.0m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $74.6m | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $12.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $18.5m | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $4.8m | us-gaap:LongTermDebt |
| Short-term borrowings | at 2024-06-30 | $2.7m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-06-30 | $56.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 26,759 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 third 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 aluminium), zurik (mainly stainless steel), and shredded insulated wire (mainly copper and aluminium).

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 144 people as of August 6, 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 aluminium, 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 June 30, 2024 and 2023

|  | For the three months ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $7,881,895 | $9,416,274 | $(1,534,379) | (16.29)% |
| Gross Profit | 2,283,855 | 3,298,854 | (1,014,999) | (30.77)% |
| Operating Expenses | 11,245,027 | 5,389,131 | 5,855,896 | 108.66% |
| Loss from Operations | (8,961,172) | (2,090,277) | (6,870,895) | 328.71% |
| Other Income (Expense) | 16,284,495 | (174,785) | 16,459,280 | (9,416.87)% |
| Net Loss Available to Common Stockholders | $(43,807,249) | $(2,265,062) | $(41,542,187) | 1,834.04% |

### Revenues

For the three months ended June 30, 2024, we generated $7,881,895 in revenues, as compared to $9,416,274 during the same period in 2023, a decrease of $1,534,379. This decrease was primarily due to declines in metal and hauling revenue.

Rental incomes increased $2,910 from $41,590 to $44,500, metal revenues fell $1,736,719 from $7,124,618 to $5,387,899, hauling revenues grew $210,200 from $2,239,184 to $2,449,384, and miscellaneous revenue fell $10,770 from $10,882 to $112, during the three months ended June 30, 2024 as compared to the same period in 2023.

Our cost of revenues decreased to $5,598,040 for the three months ended June 30, 2024 from $6,117,420 during the same period in 2023, a decrease of $519,380, primarily due to an increase in hauling costs.

Our gross profit was $2,283,855 during the three months ended June 30, 2024, a decrease of $1,014,999 from $3,298,854 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 June 30, 2024 and 2023, our operating expenses were $11,245,027 and $5,389,131 respectively, an increase of $5,855,896. There was an increase in payroll and related expenses of $208,544 as payroll and related expenses were $1,705,823 for the three months ended June 30, 2024 as compared to $1,497,279 for the same period in 2023 which was the result of expanding operations. Advertising expense decreased by $10,329 to $0 for the three months ended June 30, 2024 as compared to $ 10,329 for the same period in 2023 as the Company focused on operations. Depreciation of fixed assets, along with amortization of intangible assets, increased by $301,504 to $1,652,232 for the three months ended June 30, 2024 from $1,350,728 in 2023 as a result of the Company acquiring more fixed assets during fiscal year 2024. There were hauling and equipment maintenance costs of $1,774,273 during the three months ended June 30, 2024, as compared to $569,416 in 2023, an increase of $1,204,857, due to the Company expanding its fleet of trucks. Consulting, accounting, and legal expenses increased to $1,621,874 during the three months ended June 30, 2024 from $202,174 during the same period in 2023, an increase of $1,419,700 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 $189,258 from $1,033,518 during the three months ended June 30, 2023 to $844,260 during the same period in 2024. There was a stock based compensation of $2,716,008 during the three months ended June 30, 2024, as compared to $0 during the same period in 2023, an increase of $2,716,008 primarily related to the Company’s warrant exchange. There was stock compensation of $20,833 during the three months ended June 30, 2024, as compared to $0 during the same period in 2023, an increase of $20,833 primarily related to corporate branding.

Our other general and administrative expenses increased to $909,724 for the three months ended June 30, 2024 from $725,687 for the same period in 2023, an increase of $184,037, as a result of the Company better managing its overhead.

The change in these expenditures resulted in our total operating expenses increasing to $11,245,027 during the three months ended June 30, 2024 compared to $5,389,131 during the three months ended June 30, 2023, an increase of $5,855,896.

### Loss from Operations

Our loss from operations increased by $6,870,895 to $8,961,172 during the three months ended June 30, 2023, from $2,090,277 during the three months ended June 30, 2023 for the reasons discussed above.

### Other Income (Expense)

During the three months ended June 30, 2024, we generated other income of $16,284,495, as compared to other losses of $(174,785) for the same period in 2023, an increase of $16,459,280. There was a gain on settlement of non-convertible notes and advances of $1,056,962 and $0 for the three months ended June 30, 2024 and 2023, respectively. Interest expenses and amortization of debt discount increased to $(2,497,911) during the three months ended June 30, 2024 from $(891,849) during the three months ended June 30, 2023. Loss on conversion of convertible notes increased to $14,237,678 during the three months ended June 30, 2024 from $0 during the three months ended June 30, 2023. There was a gain on tax credit of $0 during the three months ended June 30, 2024, as compared to $717,064 during the same period in 2023. There was a loss on extinguishment of debt of $16,351,827 during the three months ended June 30, 2024, as compared to $0 during the same period in 2023. There was change of derivative liabilities of $48,314,949 during the three months ended June 30, 2024, as compared to $0 during the same period in 2023.

### Deemed Dividend

During the three months ended June 30, 2024, there was a deemed dividend of $51,130,572 for the reduction of exercise price of warrants, as compared to $0 during the same period in 2023, a change of $51,130,572.

### Net Loss Available to Common Stockholders

Our net loss was $43,807,249 during the three months ended June 30, 2024 as compared to $2,265,062 during the same period in 2023, a change of $41,542,187, for the reasons discussed above.

### For the Six Months Ended June 30, 2024 and 2023

|  | For the six months ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $16,386,672 | $18,459,696 | $(2,073,024) | (11.23)% |
| Gross Profit | 5,548,116 | 8,025,465 | (2,477,349) | (30.87)% |
| Operating Expenses | 17,321,013 | 12,050,918 | 5,270,095 | 43.73% |
| Loss from Operations | (11,772,897) | (4,025,453) | (7,747,444) | 192.46% |
| Other Income (Expense) | 11,033,706 | (2,265,284) | 13,298,990 | (587.08)% |
| Net Loss Available to Common Stockholders | $(77,268,027) | $(6,290,737) | $(70,977,290) | 1,128.28% |

32

### Revenues

For the six months ended June 30, 2024, we generated $16,386,672 in revenues, as compared to $18,459,696 during the same period in 2023, a decrease of $2,073,024. This decrease was primarily due to a decline in metal revenue.

Rental incomes decreased $9,380 from $84,380 to $75,000, metal revenues fell $2,627,359 from $14,235,643 to $11,608,284, hauling revenues grew $591,113 from $4,112,163 to $4,703,276, and miscellaneous revenue fell $27,398 from $27,510 to $112, during the six months ended June 30, 2024 as compared to the same period in 2023.

Our cost of revenues increased to $404,325 for the six months ended June 30, 2024 from $10,434,231 during the same period in 2023, an increase of $10,838,556, primarily due to an increase in hauling costs.

Our gross profit was $5,548,116 during the six months ended June 30, 2024, a decrease of $2,477,349 from $8,025,465 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 six months ended June 30, 2024 and 2023, our operating expenses were $17,321,013 and $12,050,918 respectively, an increase of $5,270,095. There was a decline in payroll and related expenses of $4,687 as payroll and related expenses were $3,443,851 for the six months ended June 30, 2024 as compared to $3,448,538 for the same period in 2023 which was the result of a reducing in overtime. Advertising expense decreased by $13,477 to $2,374 for the six months ended June 30, 2024 as compared to $15,851 for the same period in 2023 as the Company focused on operations. Depreciation of fixed assets, along with amortization of intangible assets, increased by $671,466 to $3,291,047 for the six months ended June 30, 2024 from $ 2,619,581 in 2023 as a result of the Company acquiring more fixed assets during fiscal year 2024. There were hauling and equipment maintenance costs of $2,375,835 during the six months ended June 30, 2024, as compared to $1,820,133 in 2023, an increase of $555,702, due to the Company expanding its fleet of trucks. Consulting, accounting, and legal expenses increased to $2,234,145 during the six months ended June 30, 2024 from $475,247 during the same period in 2023, an increase of $1,758,898 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 $769,095 from $2,057,227 during the six months ended June 30, 2023 to $1,288,132 during the same period in 2024. There was stock based compensation of $3,004,909 during the six months ended June 30, 2024, as compared to $0 during the same period in 2023, an increase of $3,004,909 primarily related to the Company’s registered direct offerings. There was stock compensation of $41,666 during the six months ended June 30, 2024, as compared to $0 during the same period in 2023, an increase of $41,666 primarily related to corporate branding.

Our other general and administrative expenses increased to $1,639,054 for the six months ended June 30, 2024 from $1,614,341 for the same period in 2023, an increase of $24,713, as a result of the Company expanding its operations

The change in these expenditures resulted in our total operating expenses increasing to $17,321,013 during the three months ended June 30, 2024 compared to $12,050,918 during the six months ended June 30, 2023, an increase of $5,270,095.

### Loss from Operations

Our loss from operations increased by $7,747,444 to $11,772,897 during the six months ended June 30, 2023, from $4,025,453 during the six months ended June 30, 2023 for the reasons discussed above.

### Other Expense

During the six months ended June 30, 2024, we generated other income of $11,033,706, as compared to other losses of $(2,265,284) for the same period in 2023, a change of $13,298,990. There was a gain on settlement of non-convertible notes and advances of $1,056,962 and $75,005 for the six months ended June 30, 2024 and 2023, respectively. Interest expenses and amortization of debt discount increased to $(4,692,140) during the six months ended June 30, 2024 from $(3,057,353) during the six months ended June 30, 2023. Expense for warrants issued for financing increased to $(3,082,109) during the six months ended June 30, 2024 from $0 during the six months ended June 30, 2023. Loss on conversion of convertible notes increased to $(14,213,480) during the six months ended June 30, 2024 from $0 during the six months ended June 30, 2023. Other income increased to $1,351 during the six months ended June 30, 2024 from $0 during the six months ended June 30, 2023. There was a gain on tax credit of $0 during the six months ended June 30, 2024, as compared to $717,064 during the same period in 2023. There was a loss on extinguishment of debt of $16,351,827 during the six months ended June 30, 2024, as compared to $0 during the same period in 2023. There was change of derivative liabilities of $48,314,949 during the six months ended June 30, 2024, as compared to $0 during the same period in 2023.

### Deemed Dividend

During the six months ended June 30, 2024, there was a deemed dividend of $52,574,896 for the reduction of exercise price of warrants, as compared to $0 during the same period in 2023, a change of $52,574,896.

During the six months ended June 30, 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 $77,268,027 during the six months ended June 30, 2024 as compared to $6,290,737 during the same period in 2023, a change of $70,977,290, for the reasons discussed above.

### Liquidity and Capital Resources

Net cash used in operating activities for the six months ended June 30, 2024 was $14,084,802 as compared to cash generated by operating activities of $1,053,796 for the six months ended June 30, 2023. For the six months ended June 30, 2024, net cash used in operating activities was driven by a net loss of $739,191, depreciation and amortization of $3,291,047, amortization of right of use assets (related-party) of $49,960, amortization of right of use assets of $104,935, loss on conversion of debt of $14,213,480, stock based compensation of $41,666, equity issued for warrant inducement of $3,029,927, loss on extinguishment of debt of $16,351,827, warrants issued for financing of $3,004,909, payment of due to related parties of $5,652,583, increase of prepaid expenses of $499,079, an increase of accounts payable and accrued expenses of $1,143,496, change in fair value of derivative liabilities of $48,314,949, a decrease in operating lease liabilities of $129,118, a gain on the settlement of non-convertible notes payable and advances of $1,056,962, interest and amortization of debt discount of $4,692,140, an increase in accounts receivable of $301,210, and an increase in inventories of $922,974, accrued payroll and related expenses of $105,131. For the six months ended June 30, 2023, the cash flows generated by operating activities were driven by a net loss of $6,290,737, amortization of right of use assets (related-party) of $1,140,331, amortization of right of use assets of $184,757, depreciation and amortization of $2,619,581, due to related parties of $1,608,189, increase of prepaid expenses of $596,646, an increase of accounts payable and accrued expenses of $503,252, a decrease in operating lease liabilities of $40,425, a decrease in operating lease liabilities (related-party) of $1,269,496, a gain on the settlement of non-convertible notes and accrued interest of $75,005, interest and amortization of debt discount of $3,057,053, a increase in accounts receivable of $11,301, decrease in inventories of $70,037, increase in security deposit of $25,000 and accrued payroll and related expenses of $179,206.

Net cash used in investing activities was $2,560,135 and $826,422 for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, there was cash used in the purchase of equipment of $2,560,135. For the six months ended June 30, 2023, there was cash used in the purchase of equipment of $826,422.

Net cash provided by financing activities was $39,401,892 during the six months ended June 30, 2024, as compared to cash used in financing activities of $854,564 during the six months ended June 30, 2023. During the six months ended June 30, 2024, the Company received $2,843,950 from the issuance of factoring advances, $40,369,116 from the sale of common stock with warrants, $2,834,632 from warrant exercises, and $235,584 from bank overdrafts, while utilizing $1,845,919 in the repayment of non-convertible notes, $3,538,388 for the repayment of factoring advances, and $1,497,083 for the repayment of convertible notes. During the six months ended June 30, 2023, the Company received $3,746,109 from the issuance of factoring advances and $1,000,000 from the issuance of non-convertible notes, while utilizing $1,301,846 in the repayment of non-convertible notes, utilizing $4,298,827 for the repayment of factoring advances And bank overdrafts of $180,337.

#### Capital Resources

As of June 30, 2024, we had cash on hand of $24,303,114. 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 June 30, 2024, the Company had cash of $24,303,114 and working capital (current assets in excess of current liabilities) of $14,126,157. The accumulated deficit as of June 30, 2024 was $(473,134,184). 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 unaudited 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.

On July 19, 2024, the Company held a special meeting of stockholders at which stockholders approved (i) the adoption of an amendment to the Company’s Amended and Restated By-laws to decrease the number of shares of Common Stock needed to establish a quorum for meetings of stockholders; (ii) amendment to the Company’s 2024 Equity Incentive Plan to increase the number of shares of the Company’s Common Stock available and reserved for issuance thereunder to 3,000,000, subject to certain conditions; and (iii) the issuance of warrants to purchase up to an aggregate of 3,104,382 shares of Common Stock, and the issuance of the shares of Common Stock issuable upon the exercise of such warrants, in accordance with Nasdaq Listing Rule 5635(d).

### 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.

## Controls and procedures

As filed, 7,078 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 June 30, 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 June 30, 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 June 30, 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 June 30, 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 Aug 19, 2024.
Source: SEC EDGAR, the filing index for accession 0001493152-24-032898. Last ingested by Listed: Nov 5, 2026, 11:26 ET. No prices; not investment advice.