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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

 

For the period ended March 31, 2024

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

 

For the transition period from ___________to ____________

 

Commission File Number 001-41452

 

 

GREENWAVE TECHNOLOGY SOLUTIONS, INC.

(Exact name of business as specified in its charter)

 

Delaware   46-2612944

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

     
4016 Raintree Rd, Ste 300, Chesapeake, VA   23321
(Address of principal executive offices)   (Zip code)

 

(800) 966-1432

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.001 par value per share   GWAV   The Nasdaq Stock Market, LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of May 20, 2024, there were 639,663,407 shares of the registrant’s common stock issued and outstanding.

 

 

 

 
 

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION  
  ITEM 1. Financial Statements  
    Condensed Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023 1
    Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (unaudited) 2
    Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023 (unaudited) 3
    Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited) 5
    Notes to Condensed Consolidated Financial Statements (unaudited) 6
  ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28
  ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 33
  ITEM 4. Controls and Procedures 33
       
PART II. OTHER INFORMATION  
  ITEM 1. Legal Proceedings 35
  ITEM 1A. Risk Factors 35
  ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 35
  ITEM 3. Defaults Upon Senior Securities 35
  ITEM 4. Mine Safety Disclosures 35
  ITEM 5. Other Information 35
  ITEM 6. Exhibits 37
  SIGNATURES 38

 

i
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) that are based on our management’s beliefs and assumptions and on information currently available to management, and which statements involve substantial risk and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth and trends, and objectives for future operations are forward-looking statements. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions.

 

These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those set forth in “Item 1A. Risk Factors” in our Annual Report on Form 10-K, and our other filings with SEC. These risks and uncertainties include, among other things:

 

  Changing conditions in global markets including the impact of sanctions and tariffs, quotas and other trade actions and import restrictions which may adversely affect our operating results, financial condition and cash flows.
  Changes in the availability or price of inputs such as raw materials and end-of-life vehicles which could reduce our sales.
  Significant decreases in scrap metal prices which may adversely impact our operating results.
  Imbalances in supply and demand conditions in the global steel industry which may reduce demand for our products.
  Impairment of long-lived assets and equity investments which may adversely affect our operating results.
  Governmental agencies’ refusal to grant or renew our licenses and permits, thus restricting our ability to operate.

 

Compliance with existing and future climate change and greenhouse gas emission laws and regulations which may adversely impact our operating results.

 

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Any forward-looking statements speak only as of the date on which they are made, and we disclaim any obligation to publicly update or release any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as required by applicable law.

 

ii
 

 

GREENWAVE TECHNOLOGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   March 31,   December 31, 
   2024   2023 
   (Unaudited)     
         
ASSETS          
Current assets:          
Cash  $713,218   $1,546,159 
Inventories   400,219    200,428 
Accounts receivable   943,245    646,413 
Prepaid expenses   162,667    296,761 
Total current assets   2,219,349    2,689,761 
           
Property and equipment, net   22,596,251    23,495,440 
Operating lease right of use assets, net - related party   78,842    103,822 
Operating lease right of use assets, net   1,219,921    198,558 
Licenses, net   15,955,500    16,487,350 
Intellectual property, net   1,518,000    1,669,800 
Customer List, net   1,679,250    1,735,225 
Security deposit   31,892    31,893 
           
Total assets  $45,299,005   $46,411,849 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
           
Current liabilities:          
Bank overdraft  $298,264   $118,763 
Accounts payable and accrued expenses   5,122,300    6,100,449 
Accrued payroll and related expenses   4,009,213    4,089,836 
Factoring, net of unamortized debt discount of $1,347,230 and $-, respectively   2,231,731    - 
Non-convertible notes payable, current portion, net of unamortized debt discount of $754,863 and $500,250, respectively   2,751,628    2,623,561 
Convertible notes payable, current portion, net of unamortized debt discount of $3,237,544 and $3,934,506, respectively   6,756,732    8,065,494 
Due to related parties   1,166,940    2,070,402 
Operating lease obligations, current portion - related party   83,430    111,240 
Operating lease obligations, current portion   288,212    89,731 
Total current liabilities   22,708,450    23,269,476 
           
Operating lease obligations, less current portion   929,394    94,943 
Related party note payable   7,218,350    17,218,350 
Convertible notes payable, net of unamortized debt discount of $1,438,908 and $1,967,253, respectively   3,002,992    4,032,747 
Non-convertible notes payable, net of unamortized debt discount of $1,597,247 and $1,965,113, respectively   5,828,294    6,250,481 
Total liabilities   39,687,480    50,865,997 
           
Commitments and contingencies (See Note 11)   -    - 
           
Stockholders’ equity (deficit):          
Preferred stock - 10,000,000 shares authorized:          
Preferred stock - Series D, $0.001 par value, $10,000 stated value, 1,000 and 0 shares authorized; 1,000 and 0 shares to be issued, respectively   1    - 
Common stock, $0.001 par value, 1,200,000,000 and 500,000,000 shares authorized; 43,864,860 and 16,964,336 shares issued and outstanding, respectively   43,865    16,964 
Common stock to be issued, 241,373 and 0 shares, respectively   241    - 
Subscription receivable   (67,923)   - 
Additional paid in capital   434,962,276    391,395,045 
Accumulated deficit   (429,326,935)   (395,866,157)
Total stockholders’ equity (deficit)   5,611,525    (4,454,148)
           
Total liabilities and stockholders’ equity (deficit)  $45,299,005   $46,411,849 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

1
 

 

GREENWAVE TECHNOLOGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   2024   2023 
   For the Three Months Ended March 31, 
   2024   2023 
         
Revenues  $8,504,777   $9,043,422 
           
Cost of Revenues   5,240,516    4,316,811 
           
Gross Profit   3,264,261    4,726,611 
           
Operating Expenses:          
Advertising   2,374    5,522 
Payroll and related expense   1,738,028    1,951,259 
Rent, utilities and property maintenance ($192,720 and $672,557, respectively, to related-party)   443,872    1,023,709 
Hauling and equipment maintenance   601,562    1,250,717 
Depreciation and amortization expense   1,638,815    1,268,853 
Consulting, accounting and legal   612,271    273,073 
Stock based compensation for services   288,900    - 
Stock Compensation   

20,833

    - 
Other general and administrative expenses   729,330    888,654 
Total Operating Expenses   6,075,985    6,661,787 
           
Loss From Operations   (2,811,724)   (1,935,176)
           
Other Income (Expense):          
Interest expense and amortization of debt discount   (2,194,229)   (2,165,504)
Other gain (loss)   1,351    - 
Equity issued for warrant inducement   (3,029,927)    - 
Shares issued for Financing   

(52,183

)   - 
Gain on conversion of convertible notes   24,198    - 
Gain on settlement of non-convertible notes payable and advances   -    75,005 
Total Other Expense   (5,250,790)   (2,090,499)
           
Net Loss Before Income Taxes   (8,062,514)   (4,025,675)
           
Provision for Income Taxes (Benefit)   -    - 
           
Net Loss   (8,062,514)   (4,025,675)
           
Deemed dividend for the reduction of exercise price of warrants   (1,444,324)   - 
Deemed dividend for the reduction of the conversion price of a debt note   (23,953,940)   - 
           
Net Loss Available to Common Stockholders  $(33,460,778)  $(4,025,675)
           
Net Loss Per Common Share:          
Basic  $(0.39)  $(0.36)
Diluted  $(0.39)  $(0.36)
           
Weighted Average Common Shares Outstanding:          
Basic   20,858,437    11,209,142 
Diluted   20,858,437    11,209,142 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

2
 

 

GREENWAVE TECHNOLOGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2024

(Unaudited)

 

   Shares   Amount   Shares   Amount   Shares   Amount   Receivable   In Capital   Deficit   Total 
   Preferred Stock                             
   Series D to be Issued   Common Stock   Common Stock
to be Issued
   Subscription   Additional Paid   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Receivable   In Capital   Deficit   Total 
                                         
Balance at December 31, 2023   -   $-    16,964,336   $16,964    -   $-   $-   $391,395,045   $(395,866,157)  $(4,454,148)
Exchange of non-convertible note into shares of Series D Preferred   1,000   $1    -    -    -    -    -   $9,999,999    -   $10,000,000 
Common stock issued for the conversion of convertible debt notes   -    -    10,864,690   $10,865    -   $-   $-   $2,031,677    -   $2,042,542 
Common stock issued for the exercise of warrants for cash   -    -    16,035,834   $16,036    241,373   $241   $(67,923)  $2,818,464    -   $2,766,818 
Stock based compensation   -    -    -    -    -    -    -   $288,900    -   $288,900 
Equity issued for warrant inducement   -    -    -    -    -    -    -   $3,029,927    -   $3,029,927 
Deemed dividend for the reduction of the conversion price of a debt note   -    -    -    -    -    -    -   $23,953,940   $(23,953,940)   - 
Deemed dividend for the reduction of the exercise price of warrants   -    -    -    -    -    -    -   $1,444,324   $(1,444,324)   - 
Net loss   -    -    -    -    -    -    -    -   $(8,062,514)  $(8,062,514)
Balance at March 31, 2024   1,000   $1    43,864,860   $43,865    241,373   $241   $(67,923)  $434,962,276   $(429,326,935)  $5,611,525 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3
 

 

GREENWAVE TECHNOLOGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2023

(Unaudited)

 

   Shares   Amount   Shares   Amount   In Capital   Deficit   Total 
                         
   Preferred Stock
Series Z
   Common Stock   Additional Paid   Accumulated     
   Shares   Amount   Shares   Amount   In Capital   Deficit   Total 
                             
Balance at December 31, 2022   322   $   -    10,962,319   $10,962   $377,595,618   $(362,269,015)  $15,337,565 
Issuance of common stock upon conversion of Series Z Preferred   (72)   -    288,494   $289   $(288)   -   $1 
Net loss   -    -    -    -    -   $(4,025,675)  $(4,025,675)
Balance at March 31, 2023   250   $-    11,250,813   $11,251   $377,595,330   $(366,294,690)  $11,311,891 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4
 

 

GREENWAVE TECHNOLOGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS

(Unaudited)

 

   2024   2023 
   For the Three Months Ended March 31, 
   2024   2023 
         
Cash flows from operating activities:          
Net loss  $(8,062,514)  $(4,025,675)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization of intangible assets   1,638,815    1,268,853 
Amortization of right of use assets, net - related-party   24,980    602,404 
Amortization of right of use assets, net   48,935    43,226 
Interest and amortization of debt discount   2,194,229    1,861,971 
Gain on conversion of debt   (24,198)   - 
Gain (loss) on settlement of non-convertible notes payable and advances   -    (75,005)
Stock based compensation for services   288,900    - 
Stock based compensation   

20,833

      
Equity issued for warrant inducement   3,029,927    - 
Shares issued for Financing   52,183    - 
Changes in operating assets and liabilities:          
Changes in due to related party   (903,462)   529,693 
Inventories   (199,791)   (303,826)
Accounts receivable   (296,832)   (144,269)
Prepaid expenses   113,261    (42,262)
Security deposit   -    (25,000)
Accounts payable and accrued expenses   (1,649,694)   812,188 
Accrued payroll and related expenses   

328,781

    (36,649)
Principal payments made on operating lease liability - related-party   (39,791)   (574,454)
Principal payments made on operating lease liability   

(25,385

)   (95,160)
Net cash used in operating activities   (3,460,823)   (203,965)
           
Cash flows from investing activities:          
Purchases of property and equipment   -    (712,335)
Net cash used in investing activities   -    (712,335)
           
Cash flows from financing activities:          
Proceeds from warrant exercises   2,574,679    - 
Repayment of convertible notes   (1,497,083)   - 
Proceeds from issuance of non-convertible notes payable   -    1,000,000 
Bank overdrafts   179,501    - 
Repayment of a non-convertible notes payable   (456,776)   (519,543)
Proceeds from factoring   2,843,950    1,876,109 
Repayments of factoring   (1,016,389)   (1,985,985)
Net cash provided by financing activities   2,627,882    370,581 
           
Net increase (decrease) in cash   (832,941)   (545,719)
           
Cash, beginning of year   1,546,159    821,804 
Cash, end of year  $713,218   $276,085 
           
Supplemental disclosures of cash flow information:          
Cash paid during period for interest  $309,170   $20,646 
Cash paid during period for taxes  $-   $- 
           
Supplemental disclosure of non-cash investing and financing activities:          
Deemed dividend for conversion price reduction of note  $

23,953,940

   $- 
Factoring proceeds utilized for payoff of factoring liabilities  $-   $5,004,393 
Equipment purchased by issuance of non-convertible notes payable  $-   $2,840,958 
Deemed dividend for exercise price reduction of warrants  $1,444,324   $- 
Exchange of notes to Series D Preferred  $10,000,000   $- 
Increase in right of use assets and operating lease liabilities  $1,070,298   $199,466 
Common shares issued upon conversion of Series Z Preferred  $-   $289 
Common shares issued upon conversion of convertible notes and accrued interest  $2,066,740   $- 
Advance utilized for equipment purchases  $-   $1,193,380 
Legal fees paid out of warrant exercise  $139,955   $- 
Advance for asset  $-   $162,000 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5
 

 

GREENWAVE TECHNOLOGY SOLUTIONS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2024 (Unaudited)

 

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

Overview

 

Greenwave Technology Solutions, Inc. (“Greenwave”, the “Company”, “we”, “us” or “ours”) was incorporated in the State of Delaware on April 26, 2013 as a technology platform developer under the name MassRoots, Inc. The Company sold its social media assets in October 2021 and has discontinued all operations related to this business. On September 30, 2021, we closed our acquisition of Empire Services, Inc. (“Empire”), which operates 13 metal recycling facilities in Virginia and North Carolina. The acquisition was effective October 1, 2021 upon the effectiveness of the Certificate of Merger in Virginia.

 

In December 2022, we began offering hauling services to corporate clients. We haul sand, dirt, asphalt, metal, and other materials in a fleet of approximately 50 trucks which we own, manage, and maintain.

 

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Our condensed consolidated financial statements include the accounts of Empire Services, Inc., Liverman Metal Recycling, Inc., Empire Staffing, LLC, Scrap App, Inc., and Greenwave Elite Sports Facility, Inc., our wholly owned subsidiaries. All intercompany transactions were eliminated during consolidation.

 

Basis of Presentation

 

The interim unaudited condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the SEC. In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly the Company’s results of operations for the three months ended March 31, 2024 and 2023, its cash flows for the three months ended March 31, 2024 and 2023, and its financial position as of March 31, 2024 have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

 

Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been condensed or omitted from these interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on April 16, 2024 (the “Annual Report”). The December 31, 2023 balance sheet is derived from those statements.

 

NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

 

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 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.

 

6
 

 

Accordingly, the accompanying unaudited condensed 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 condensed consolidated financial statements are issued. The carrying amounts of assets and liabilities presented in the unaudited condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values. The unaudited condensed consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The unaudited condensed consolidated financial statements include the accounts of Greenwave Technology Solutions, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include estimates used in the calculation of stock-based compensation, payroll tax liabilities with interest and penalties, deemed dividends, allowance for doubtful accounts, 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, and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

 

Fair Value of Financial Instruments

 

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 825-10, “Financial Instruments” (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The estimated fair value of certain financial instruments, including cash, accounts payable and accrued liabilities are carried at historical cost basis, which approximates their fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the condensed consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk.

 

The Company follows ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value.

 

Cash

 

For purposes of the condensed consolidated statements of cash flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. As of March 31, 2024 and December 31, 2023, the Company had no cash equivalents. The Company maintains its cash in banks insured by the Federal Deposit Insurance Corporation in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. As of March 31, 2024 and December 31, 2023, the uninsured balances amounted to $505,707 and $1,267,659, respectively.

 

7
 

 

Accounts Receivable

 

Accounts receivable represent amounts primarily due from customers on product and other sales. These accounts receivable, which are reduced by an allowance for credit losses, are recorded at the invoiced amount and do not bear interest. The Company delivers shipments of scrap metal to customers and typically receives payment within 45 days of delivery.

 

The Company evaluates the collectability of its accounts receivable based on a combination of factors, including the aging of customer receivable balances, the financial condition of the Company’s customers, historical collection rates, and economic trends. Management uses this evaluation to estimate the amount of customer receivables that may not be collected in the future and records a provision for expected credit losses. Accounts are written off when all efforts to collect have been exhausted. As of March 31, 2024 and December 31, 2023, the accounts receivable balances amounted to $943,245 and $646,413, respectively.

 

Property and Equipment, net

 

We state property and equipment at cost or, if acquired through a business combination, fair value at the date of acquisition. We calculate depreciation and amortization using the straight-line method over the estimated useful lives of the assets, except for our leasehold improvements, which are depreciated over the shorter of their estimated useful lives or their related lease term. Upon the sale or retirement of assets, the cost and related accumulated depreciation are removed from our accounts and the resulting gain or loss is credited or charged to income. We expense costs for repairs and maintenance when incurred. Our property and equipment is pledged as collateral for certain factoring advances and promissory notes, see Note 8 – Factoring Advances and Non-Convertible Notes.

 

Cost of Revenue

 

The Company’s cost of revenue consists primarily of the costs of purchasing metal from its suppliers, direct costs of providing hauling costs to customers, and cost of other revenue, including sand.

 

Related Party Transactions

 

Parties are considered related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. See Note 17 – Related Party Transactions.

 

Leases

 

The Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the condensed consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term. Variable lease expenses, if any, are recorded when incurred.

 

In calculating the right of use asset and lease liability, the Company elected to combine lease and non-lease components. The Company excluded short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. See Note 12 – Leases.

 

8
 

 

Commitments and Contingencies

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, we are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. See Note 13 – Commitments and Contingencies.

 

Revenue Recognition

 

The Company recognizes revenue when services are realized or realizable and earned, less estimated future doubtful accounts.

 

The Company’s revenues are accounted for under ASC Topic 606, “Revenue From Contracts With Customers” (“ASC 606”) and generally do not require significant estimates or judgments based on the nature of the Company’s revenue streams. The sales prices are generally fixed at the point of sale and all consideration from contracts is included in the transaction price. The Company’s contracts do not include multiple performance obligations or material variable consideration.

 

In accordance with ASC 606, the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company recognizes revenue in accordance with that core principle by applying the following:

 

(i) Identify the contract(s) with a customer;

 

(ii) Identify the performance obligation in the contract;
   
(iii) Determine the transaction price;
   
(iv) Allocate the transaction price to the performance obligations in the contract; and
   
(v) Recognize revenue when (or as) the Company satisfies a performance obligation.

 

The Company primarily generates revenue by purchasing scrap metal from businesses and retail suppliers, processing it, and selling the ferrous and non-ferrous metals to clients.

 

The Company realizes revenue upon the fulfillment of its performance obligations to customers.

 

Inventories

 

Although we ship the ferrous and non-ferrous metals we purchase from suppliers multiple times per day, we do maintain inventories. We calculate the value of the inventories we do carry, which consist of processed and unprocessed scrap metal (ferrous and nonferrous), used and salvaged vehicles, and supplies, based on the net realizable value or the cost of the inventories, whichever is less. We calculate the value of the inventory based on the first-in-first-out (FIFO) methodology. We calculate the value of finished products based on their net realizable value as their cost basis is not readily available. The value of our inventories was $400,219 and $ 200,428, respectively, as of March 31, 2024 and December 31, 2023. See Note 5 – Inventories.

 

Advertising

 

The Company charges the costs of advertising to expense as incurred. Advertising costs were $2,374 and $5,522 for the three months ended March 31, 2024 and 2023, respectively.

 

9
 

 

Stock-Based Compensation

 

Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the requisite service period. For stock-based awards to employees, non-employees and directors, the Company calculates the fair value of the award on the date of grant using the Black-Scholes option pricing model. Determining the fair value of stock-based awards at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based awards represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment.

 

Income Taxes

 

The Company follows ASC Subtopic 740-10, “Income Taxes” (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period.

 

If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

 

Convertible Instruments

 

U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under ASC 480, “Distinguishing Liabilities From Equity.”

 

Deemed Dividend

 

The Company records, when necessary, deemed dividends for: (i) warrant price protection, based on the difference between the fair value of the warrants immediately before and after the repricing (inclusive of any full ratchet provisions); (ii) the exchange of preferred shares for convertible notes, based on the amount of the face value of the convertible notes in excess of the carrying value of the preferred shares; (iii) the settlement of warrant provisions, based on the fair value of the common shares issued; and (iv) amortization of discount on preferred stock resulting from recognition of a beneficial conversion feature.

 

Issuance of Debt Instruments With Detachable Stock Purchase Warrants

 

Proceeds from the issuance of a debt instrument with stock purchase warrants (detachable call options) are allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portion of the proceeds allocated to the warrants are recorded as additional paid-in capital. The remainder of the proceeds are allocated to the debt instrument portion of the transaction. Such issuances generally result in a discount (or, occasionally, a reduced premium) relative to the debt instrument, which is amortized to interest expense using the effective interest rate method.

 

10
 

 

Environmental Remediation Liability

 

The operations of the Company, like those of other companies in its industry, are subject to various domestic and foreign environmental laws and regulations. These laws and regulations not only govern current operations and products, but also impose potential liability on the Company for past operations. Management expects environmental laws and regulations to impose increasingly stringent requirements upon the Company and the industry in the future. Management believes that the Company conducts its operations in compliance with applicable environmental laws and regulations and has implemented various programs designed to protect the environment and promote continued compliance.

 

The Company continuously assesses its potential liability for remediation-related activities and adjusts its environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated and as additional accounting guidelines are issued. As of March 31, 2024 and December 31, 2023, the Company had accruals reported on the balance sheet as current liabilities of $0 and $0, respectively, as the Company had paid all civil penalties and completed all remediation activities required under the Virginia DEQ Consent Order dated June 30, 2021. See Note 13 —Commitments and Contingencies.

 

Actual costs incurred may vary from the accrued estimates due to the inherent uncertainties involved including, among others, the nature and magnitude of the wastes involved, the various technologies that can be used for remediation and the determination of acceptable remediation with respect to a particular site. Additionally, costs for environmental-related activities may not be reasonably estimable and therefore would not be included in our current liabilities.

 

Management believes these contingent environmental-related liabilities have been resolved.

 

Long-Lived Assets

 

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Intangible assets are stated at cost and reviewed annually to examine any impairments, usually assuming an estimated useful life of five to ten years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. The estimated useful lives of the Intellectual Property, Customer List, and Licenses assumed in the Empire acquisition is 5 years, 10 years, and 10 years, respectively. See Note 7 – Amortization of Intangible Assets.

 

Factoring Agreements

 

We have entered into factoring agreements with various financial institutions to receive cash for our future revenues. These transactions are treated as a debt instrument and are accounted for as a liability because the Company makes weekly payments towards the balance and fees. We utilize factoring arrangements as an integral part of our financing for working capital. Any change in the availability of these factoring arrangements could have a material adverse effect on our financial condition. As of March 31, 2024 and December 31, 2023, the Company owed $2,231,731 and $0, net debt discounts of $1,347,230 and $0, respectively for factoring advances. See Note 8 – Factoring Advances and Non-Convertible Notes Payable.

 

11
 

 

Segment Reporting

 

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Chief Financial Officer, or decision-making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company’s core business.

 

Net Earnings (Loss) Per Common Share

 

The Company computes earnings (loss) per common share under ASC Subtopic 260-10, Earnings Per Share. Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods, as applicable.

 

The computation of basic and diluted income (loss) per share, for the three months ended March 31, 2023 and 2023 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

 

Potentially dilutive securities are as follows:

 

   March 31,
2024
   March 31,
2023
 
Common shares issuable upon conversion of convertible notes   92,067,453    - 
Options to purchase common shares   92,166    92,166 
Warrants to purchase common shares   32,723,490    9,756,876 
Common shares issuable upon conversion of preferred stock   49,019,608    1,013,500 
Total potentially dilutive shares   173,902,717    10,862,542 

 

12
 

 

Recent Accounting Pronouncements

 

There are 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.

 

NOTE 4 – CONCENTRATIONS OF RISK

 

Accounts Receivable

 

The Company has a concentration of credit risk with its accounts receivable balance. At March 31, 2024, seven certain large customers individually accounted for $167,479, $139,090, $132,983, $109,774, $84,363, $69,186, $61,544, or 18%, 15%, 14%, 12%, 9%, 7%, and 7%, respectively. At December 31, 2023, six certain large customers individually accounted for $154,090, $95,510, $95,219, $62,057, $59,932, and $54,007, or 23.84%, 14.78%, 14.74%, 9.60%, 9.27%, and 8.35%, respectively.

 

Customer Concentrations

 

The Company has a concentration of customers. For the three months ended March 31, 2024, two customers individually accounted for $5,688,064 and $478,248, or approximately 67% and 6% of our revenues, respectively. For the three months ended March 31, 2023, two customers individually accounted for $5,200,126 and $536,624, or

approximately 58% and 6% of our revenues, respectively.

 

The Company’s sales are concentrated in the Virginia and northeastern North Carolina markets.

 

NOTE 5 – INVENTORIES

 

Inventories as of March 31, 2024 and December 31, 2023 consisted of the following:

 

SCHEDULE OF INVENTORIES

   March 31,
2024
  

December 31,

2023

 
Processed and unprocessed scrap metal  $400,219   $200,428 
Finished products   -    - 
Inventories  $400,219   $200,428 

 

13
 

 

NOTE 6 – PROPERTY AND EQUIPMENT

 

Property and equipment as of March 31, 2024 and December 31, 2023 is summarized as follows:

 

   March 31,
2024
   December 31,
2023
 
Machinery and Equipment  $18,028,893   $18,028,893 
Furniture and Fixtures   6,128    6,128 
Land   980,129    980,129 
Buildings   724,170    724,170 
Vehicles   7,149,919    7,149,919 
Leaseholder Improvements   1,862,593    1,862,593 
Subtotal   28,751,832    28,751,832 
           
Less accumulated depreciation   (6,155,581)   (5,256,392)
Property and equipment, net  $22,596,251   $23,495,440 

 

Depreciation expense for the three months ended March 31, 2024 and 2023 was $899,190 and $529,228, respectively

 

NOTE 7 – AMORTIZATION OF INTANGIBLE ASSETS

 

All of the Company’s current identified intangible assets were assumed upon consummation of the Empire acquisition on October 1, 2021. Identified intangible assets consisted of the following at the dates indicated below:

 

   March 31, 2024    
  

Gross

carrying

amount

  

Accumulated

amortization

  

Carrying

value

  

Estimated

remaining

useful life

Intellectual Property  $3,036,000   $(1,518,000)  $1,518,000   2.75 years
Customer List   2,239,000    (559,750)   1,679,250   7.75 years
Licenses   21,274,000    (5,318,500)   15,955,500   7.75 years
Total intangible assets, net  $26,549,000   $(7,396,250)  $19,152,750    

 

   December 31, 2023   Remaining
  

Gross carrying

amount

  

Accumulated

amortization

  

Carrying

value

  

estimated

useful life

Intellectual Property  $3,036,000   $(1,366,200)  $1,669,800   3 years
Customer List   2,239,000    (503,775)   1,735,225   8 years
Licenses   21,274,000    (4,786,650)   16,487,350   8 years
Total intangible assets, net  $26,549,000   $(6,656,625)  $19,892,375    

 

Amortization expense for intangible assets was $739,625 and $739,625 for the three months ended March 31, 2024 and 2023, respectively.

 

Total estimated amortization expense for our intangible assets for the years 2024 through 2028 is as follows:

 

Year ended December 31,    
2024 (remaining)  $2,218,875 
2025   2,958,500 
2026   2,806,700 
2027   2,351,300 
2028   2,351,300 
Thereafter   6,466,075 

 

14
 

 

NOTE 8 – FACTORING ADVANCES AND NON-CONVERTIBLE NOTES PAYABLE

 

Factoring Advances

 

On February 1, 2024, the Company entered into a revenue factoring advance in the principal amount of $1,340,000 for a purchase price of $970,000. There was an origination fee of $30,000. There were cash proceeds of $970,000 during the three months ended March 31, 2024. The Company’s Chief Executive Officer was personally liable for this factoring advance. The Company was required to make weekly payments in the amount $25,800 through January 2025. The advance matured on January 23, 2025. There was amortization of debt discount of $60,656 during the three months ended March 31, 2024. The Company made cash repayments of $206,400 during the three months ended March 31, 2024. As of March 31, 2024, the revenue factoring advance had a balance of $824,256, net an unamortized debt discount of $309,344. In April 2024, the Company settled the advance for $400,000. The advance is retired.

 

On February 7, 2024, the Company entered into a revenue factoring advance in the principal amount of $822,000 for a purchase price of $572,950. There was an origination fee of $27,050. There were cash proceeds of $572,950 during the three months ended March 31, 2024. The Company’s Chief Executive Officer was personally liable for this factoring advance. The Company was required to make weekly payments in the amount $30,444 through August 2024. The advance matured on August 31, 2024. There was amortization of debt discount of $64,075 during the three months ended March 31, 2024. The Company made cash repayments of $243,556 during the three months ended March 31, 2024. As of March 31, 2024, the revenue factoring advance had a balance of $393,469, net an unamortized debt discount of $184,975. In May 2024, the Company settled the advance for $400,000. The advance is retired.

 

On February 29, 2024, the Company entered into a revenue factoring advance in the principal amount of $559,600 for a purchase price of $376,000. There was an origination fee of $24,000. There were cash proceeds of $376,000 during the three months ended March 31, 2024. The Company’s Chief Executive Officer was personally liable for this factoring advance. The Company was required to make weekly payments in the amount $25,436 through July 2024. The advance matured on July 15, 2024. There was amortization of debt discount of $41,545 during the three months ended March 31, 2024. The Company made cash repayments of $97,745 during the three months ended March 31, 2024. As of March 31, 2024, the revenue factoring advance had a balance of $319,800, net an unamortized debt discount of $142,055.

 

On March 7, 2024, the Company entered into a revenue factoring advance in the principal amount of $1,499,000 for a purchase price of $700,000. There was an origination fee of $300,000. There were cash proceeds of $700,000 during the three months ended March 31, 2024. The Company’s Chief Executive Officer was personally liable for this factoring advance. The Company was required to make weekly payments in the amount $125,000 through June 2024. The advance matured on June 6, 2024. There was amortization of debt discount of $208,435 during the three months ended March 31, 2024. The Company made cash repayments of $375,000 during the three months ended March 31, 2024. As of March 31, 2024, the revenue factoring advance had a balance of $533,435, net an unamortized debt discount of $590,565.

 

On March 7, 2024, the Company entered into a revenue factoring advance in the principal amount of $374,750 for a purchase price of $225,000. There was an origination fee of $25,000. There were cash proceeds of $225,000 during the three months ended March 31, 2024. The Company’s Chief Executive Officer was personally liable for this factoring advance. The Company was required to make weekly payments in the amount $23,422 through July 2024. The advance matured on July 7, 2024. There was amortization of debt discount of $29,459 during the three months ended March 31, 2024. The Company made cash repayments of $93,688 during the three months ended March 31, 2024. As of March 31, 2024, the revenue factoring advance had a balance of $160,771, net an unamortized debt discount of $120,291.

 

The remaining advances are for Simple Agreements for Future Tokens, entered into with accredited investors issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(a)(2) thereof and/or Regulation D thereunder in 2018. As of March 31, 2024 and December 31, 2023, the Company owed $85,000 for Simple Agreements for Future Tokens.

 

15
 

 

Non-Convertible Notes Payable

 

On April 11, 2022, the Company entered into a vehicle financing agreement with GM Financial for the purchase of a vehicle for use by the Company’s Chief Executive Officer in the principal amount of $74,186. GM Financial financed $65,000 of the purchase price of the vehicle and the Company was required to make a $10,000 down payment. There was a $2,400 rebate applied to the purchase price. The Company is required to make 60 monthly payments of $1,236. During the three months ended March 31, 2024 and 2023, the Company made $5,679 and $3,267 in payments towards the financing agreement, respectively. There was amortization of debt discount of $447 and $442 during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the financing agreement had a balance of $29,280 and $34,312, net an unamortized debt discount of $5,651 and $6,298, respectively.

 

On April 21, 2022, the Company entered into a secured promissory note in the principal amount of $964,470 for the financing and installation of a piece of equipment in the amount $750,000. The Company is required to make monthly payments in the amount $6,665 through October 2022 and monthly payments of $19,260 until October 2026. The note bears an interest rate of 10.6%, is secured by certain assets of the Company, and matures on October 21, 2026. During the three months ended March 31, 2024 and 2023, the Company made $31,192 and $56,115 in payments towards the note, respectively. There was amortization of debt discount of $9,508 and $11,741 during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the note had a balance of $434,245 and $455,929 net an unamortized debt discount of $97,589 and $107,097, respectively.

 

On September 1, 2022, the Company entered into a Deed of Trust note for the purchase of land and buildings. The note has a principal amount of $600,000, bears an interest rate of 6.5%, and matures on September 1, 2032. The Company is required to make monthly payments of $4,476 until September 1, 2032, when the remaining principal and accrued interest becomes due. The Company made principal payments of $4,564 and $4,214 during the three months ended March 31, 2024 and 2023, respectively. The Company made interest payments of $8,865 and $9,214 during the years ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the note had a principal balance of $574,663 and $579,227 and accrued interest of $3,070 and $2,991 respectively.

 

On September 1, 2022, the Company entered into a Deed of Trust note for the purchase of land and buildings. The note has a principal amount of $600,000, bears an interest rate of 6.5%, and matures on September 1, 2032. The Company is required to make monthly payments of $4,476 until September 1, 2032, when the remaining principal and accrued interest becomes due. The Company made principal payments of $4,564 and $4,214 during the three months ended March 31, 2024 and 2023, respectively. The Company made interest payments of $8,865 and $9,214 during the years ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the note had a principal balance of $574,663 and $579,227 and accrued interest of $2,904 and $2,991, respectively.

 

On September 14, 2022, the Company entered into a secured promissory note in the principal amount of $2,980,692 for a purchase price of $2,505,000. The note is secured by certain assets of the Company. The Company is required to make monthly payments in the amount $82,797 through September 2025. The note bears an interest rate of 10.6%, is secured by certain assets of the Company, and matures on September 14, 2025. There was amortization of debt discount of $25,048 and $39,509 during the three months ended March 31, 2024 and 2023, respectively. There were payments of $135,197 and $248,391 towards the note during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the note had a balance of $1,158,644 and $1,268,792 net an unamortized debt discount of $146,436 and $171,484, respectively.

 

On November 28, 2022, the Company entered into a secured promissory note in the principal amount of $1,539,630 for a purchase price of $1,078,502. The note is secured by certain assets of the Company. The Company is required to make monthly payments in the amount of $10,410 through March 2023 and then monthly payments in the amount of $20,950 through March 2029. The note bears an interest rate of 10.6%, is secured by certain assets of the Company, and matures on March 5, 2029. There was amortization of debt discount of $16,939 and $18,048 during the three months ended March 31, 2024 and 2023, respectively. There were payments of $33,978 and $19,515 during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the note had a balance of $780,388 and $797,427 net an unamortized debt discount of $335,065 and $352,005, respectively.

 

16
 

 

On November 28, 2022, the Company entered into a secured promissory note in the principal amount of $1,560,090 for a purchase price of $1,092,910. The note is secured by certain assets of the Company. The Company is required to make monthly payments in the amount of $10,630 through March 2023 and then monthly payments in the amount of $21,225 through March 2029. The note bears an interest rate of 10.6%, is secured by certain assets of the Company, and matures on March 5, 2029. There was amortization of debt discount of $17,187 and $18,285 during the three months ended March 31, 2024 and 2023. respectively. There were payments of $34,424 and $21,260 during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the note had a balance of $788,712 and $805,949 net an unamortized debt discount of $339,976 and $357,164, respectively.

 

On November 28, 2022, the Company entered into a secured promissory note in the principal amount of $1,597,860 for a purchase price of $1,119,334. The note is secured by certain assets of the Company. The Company is required to make monthly payments in the amount of $10,860 through March 2023 and then monthly payments in the amount of $21,740 through March 2029. The note bears an interest rate of 10.6%, is secured by certain assets of the Company, and matures on March 5, 2029. There was amortization of debt discount of $17,520 and $18,729 during the three months ended March 31, 2024 and 2023, respectively. There were payments of $35,460 and $21,270 during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 202, the note had a balance of $810,554 and $827,495 net an unamortized debt discount of $346,549 and $364,069 , respectively.

 

On December 15, 2022, the Company entered into a secured promissory note in the principal amount of $1,557,435 for a purchase price of $1,093,380. The note is secured by certain assets of the Company. The Company is required to make monthly payments in the amount of $10,585 through March 2023 and then monthly payments in the amount of $21,190 through March 2029. The note bears an interest rate of 10.6%, is secured by certain assets of the Company, and matures on March 15, 2029. There was amortization of debt discount of $16,916 and $18,302 during the three months ended March 31, 2024 and 2023, respectively. There were payments of $34,341 and $21,170 during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the note had a balance of $790,475 and $807,900, net an unamortized debt discount of $336,452 and $353,367, respectively.

 

On January 10, 2023, the Company entered into a secured promissory note in the principal amount of $1,245,018 for a purchase price of $1,021,500. The note is secured by certain assets of the Company. There were cash proceeds of $1,000,000. The Company is required to make monthly payments in the amount of $10,365 through March 2023 and then monthly payments in the amount of $34,008 through March 2026. The note bears an interest rate of 10.6%, is secured by certain assets of the Company, and matures on March 10, 2026. There was amortization of $16,261 and $15,288 during the three months ended March 31, 2024 and 2023, respectively. There were payments of $55,146 and $10,365 during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the note had a balance of $609,359 and $648,244, net an unamortized debt discount of $126,693 and $142,954, respectively.

 

On January 12, 2023, the Company entered into a secured promissory note in the principal amount of $1,185,810 for a purchase price of $832,605. The note is secured by certain assets of the Company. There were non-cash proceeds of $832,605 used to purchase equipment. The Company is required to make monthly payments in the amount of $8,030 through April 2023 and then monthly payments in the amount of $16,135 through April 2028. The note bears an interest rate of 10.6%, is secured by certain assets of the Company, and matures on April 12, 2028. There was amortization of debt discount of $16,172 and $14,187 during three months ended March 31, 2024 and 2023, respectively. There were payments of $13,078 and $8,030 during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the note had a balance of $623,970 and $620,876, net an unamortized debt discount of $261,779 and $277,951, respectively.

 

On February 23, 2023, the Company entered into a secured promissory note in the principal amount of $822,040 for a purchase price of $628,353. The note is secured by certain assets of the Company. There were non-cash proceeds of $628,253 used to purchase equipment. The Company is required to make monthly payments in the amount of $6,370 through June 2023 and then monthly payments in the amount of $16,595 through June 2027. The note bears an interest rate of 10.6%, is secured by certain assets of the Company, and matures on June 23, 2027. There was amortization of debt discount of $772 and $4,043 during three months ended March 31, 2024 and 2023, respectively. There were payments of $38,804 and $16,595 during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the note had a balance of $476,209 and $514,241, net an unamortized debt discount of $10,007 and $10,779, respectively.

 

17
 

 

On February 24, 2023, the Company entered into a secured promissory note in the principal amount of $1,186,580 for a purchase price of $832,605. The note is secured by certain assets of the Company. There were non-cash proceeds of $832,605 used to purchase equipment. The Company is required to make monthly payments in the amount of $9,185 through June 2023 and then monthly payments in the amount of $23,955 through June 2027. The note bears an interest rate of 10.6%, is secured by certain assets of the Company, and matures on June 24, 2027. There was amortization of debt discount of $21,548 and $6,189 during the three months ended March 31, 2024 and 2023, respectively. There were payments of $26,884 and $0 during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the note had a balance of $655,425 and $660,761, net an unamortized debt discount of $279,412 and $300,960, respectively.

 

On April 12, 2023, the Company entered into a secured promissory note in the principal amount of $317,415 for a purchase price of $219,676. The note is secured by certain assets of the Company. There were non-cash proceeds of $219,676 used to purchase equipment. The Company is required to make monthly payments in the amount of $2,245 through August 2023 and then monthly payments in the amount of $4,315 through July 2027. The note bears an interest rate of 10.6%, is secured by certain assets of the Company, and matures on July 12, 2029. There were payments of $3,466 during the three months ended March 31, 2024. There was amortization of debt discount of $3,137 during the three months ended March 31, 2024. As of March 31, 2024 and December 31, 2023, the note had a balance of $183,334 and $183,663, net an unamortized debt discount of $66,501 and $69,638, respectively.

 

On July 31, 2023, the Company entered into a secured promissory note with an entity controlled by the Company’s Chief Executive Officer in the principal amount of $17,218,350. The note was for the purchase of certain equipment from an entity controlled by the Company’s Chief Executive Officer and is secured by such equipment. There were non-cash proceeds of $17,218,350 used to purchase equipment. The note is junior to the senior secured debt entered into by the Company on the same date. The note matures on July 31, 2043 and accrues interest at 7% per annum. The note requires interest-only payments until the senior secured debt is fully satisfied. The Company made payments of $0 and $291,440 towards the principal and interest, respectively, during the three months ended March 31, 2024. On March 29, 2024, the holder of the note exchanged $10,000,000 in principal for 1,000 shares of Series D Preferred Stock (see Note 14 – Stockholders’ Equity). As of March 31, 2024 and December 31, 2023, the note had a balance of $7,218,350 and $17,218,350, respectively.

 

The following table details the current and long-term principal due under non-convertible notes as of March 31, 2024.

 

  

Principal

(Current)

  

Principal

(Long Term)

 
GM Financial (Issued April 11, 2022)  $18,546   $16,385 
Non-Convertible Note (Issued March 8, 2019)   -    5,000 
Deed of Trust Note (Issued September 1, 2022)   53,712    520,951 
Deed of Trust Note (Issued September 1, 2022)   53,712    520,951 
Equipment Finance Note (Issued April 21, 2022)   231,120    300,714 
Equipment Finance Note (Issued September 14, 2022)   993,564    311,516 
Equipment Finance Note (Issued November 28, 2022)   251,400    864,054 
Equipment Finance Note (Issued November 28, 2022)   254,700    873,989 
Equipment Finance Note (Issued November 28, 2022)   260,880    896,224 
Equipment Finance Note (Issued December 15, 2022)   254,280    872,646 
Equipment Finance Note (Issued January 10, 2023)   408,096    327,956 
Equipment Finance Note (Issued January 12, 2023)   193,620    692,129 
Equipment Finance Note (Issued February 24, 2023)   287,460    647,377 
Equipment Finance Note (Issued February 23, 2023)   193,620    292,595 
Equipment Finance Note (Issued April 12, 2023)   51,780    198,055 
Related-party Equipment Note (Issued July 31, 2023)   -    7,218,350 
SAFTs   -    85,000 
Debt Discount   (754,863)   (1,597,247)
Total Principal of Non-Convertible Notes  $2,751,627   $13,046,645 

 

18
 

 

Total principal payments due on non-convertible notes for 2024 through 2028 and thereafter is as follows:

 

Year ended December 31,    
2024 (remaining)  $2,629,867 
2025   3,528,100 
2026   1,530,119 
2027   809,342 
2028   785,128 
Thereafter   8,867,826 

 

NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

As of March 31, 2024 and December 31, 2023, the Company owed accounts payable and accrued expenses of $5,122,300 and $6,100,449, respectively. These are primarily comprised of payments to vendors, accrued interest on debt, and accrued legal bills.

 

   March 31,
2024
   December 31,
2023
 
Accounts Payable  $1,908,575   $1,884,973 
Credit Cards   26,639    1,756 
Accrued Interest   2,165,705    2,074,016 
Accrued Expenses   1,021,381    2,139,704 
Total Accounts Payable and Accrued Expenses  $5,122,300   $6,100,449 

 

NOTE 10 – ACCRUED PAYROLL AND RELATED EXPENSES

 

The Company is delinquent in filing its payroll taxes, primarily related to stock compensation awards in 2016 and 2017, but also including payroll for 2018, 2019, 2020, and 2021. As of March 31, 2024 and December 31, 2023, the Company owed payroll tax liabilities, including penalties, of $4,009,213 and $4,089,836 , respectively, to federal and state taxing authorities. The actual liability may be higher or lower due to interest or penalties assessed by federal and state taxing authorities.

 

NOTE 11 – CONVERTIBLE NOTES PAYABLE

 

On July 3, 2023, the Company closed a bridge financing in the principal amount of $1,031,250 for a purchase price of $825,000 with certain accredited investors. The bridge notes matured on July 31, 2023 and were personally guaranteed by the Company’s Chief Executive Officer. The bridge notes were exchanged into the senior secured offering which closed on July 31, 2023 and are retired.

 

On July 31, 2023, the Company entered into a Purchase Agreement with certain institutional investors as purchasers whereby, the Company sold, and the investors purchased, approximately $15,000,000, which consisted of approximately $13,188,750 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 and warrants and $500,000 in notes issued as commission. The transaction closed on August 1, 2023. The Senior Notes were issued with an original issue discount of 16.67%, do not bear interest, unless in the event of an event of default, in which case the notes bear interest at the rate of 18% per annum until such default has been cured, and mature after 24 months, on July 31, 2025. The aggregate principal amount of the notes is $18,000,000. The Company will pay to the Investors an aggregate of $1,000,000 per month beginning on the last business day of the sixth (6th) full calendar month following the issuance thereof. The Senior Notes are convertible into shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), at a conversion price per share of $1.50, subject to adjustment under certain circumstances described in the Senior Notes. There is a 125% conversion premium for any principal converted to shares of common stock. In occurrence of an event of default, until such event of default has been cured, the Holder may, at the Holder’s option, convert all, or any part of, the Conversion Amount (into shares of Common Stock at a conversion rate equal to the quotient of (x) the Redemption Premium of the Conversion Amount, divided by (y) the greater of (A) 90% of the lowest VWAP of the Common Stock for the three (3) Trading Days immediately preceding the delivery or deemed delivery of the applicable Conversion Notice, and (B) the lesser of (1) 80% of the VWAP of the Common Stock as of the Trading Day immediately preceding the delivery or deemed delivery of the applicable Conversion Notice, and (2) 80% of the price computed as the quotient of (x) the sum of the VWAPs of the Common Stock for each of the three (3) Trading Days with the lowest VWAP of the Common Stock during the fifteen (15) consecutive Trading Day period ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable Conversion Notice, divided by (y) three (3) and (II) the floor price of $0.196. To secure its obligations thereunder and under the Purchase Agreement, the Company has granted a security interest over substantially all of its assets to the collateral agent for the benefit of the Investors, pursuant to a security agreement and a related trademark security agreement. The Company has the option to redeem the Senior Notes at a 10% redemption premium. There is a 125% change in control redemption premium. The maturity date of the Senior Notes also may be extended by the holders under circumstances specified therein. The Company estimated the fair value of the warrants using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 93%, (3) risk-free interest rate of 5.06% and (4) expected life of 5.01 years.

 

19
 

 

During the three months ended March 31, 2024, there was amortization of debt discount of $1,225,307. During the three months ended March 31, 2024, the Company made cash payments of $1,497,083 on the principal of the convertible notes. During the three months ended March 31, 2024, holders converted $2,066,740 of principal into 10,864,690 shares of common stock with a fair value of $2,031,677 (see Note 14 – Stockholder’s Equity). The Company realized a $24,198 gain on conversion of notes during the three months ended March 31, 2024.

 

On March 18, 2024, the Company obtained the waiver of the following covenants from holders of the notes: (i) until September 30, 2024, the Available Cash Test covenant contained in Section 14(t)(i) of the Notes; (ii) the right to receive the Amortization Amount for the next four (4) consecutive Amortization Dates immediately following the date of the waiver, with the aggregate of such Amortization Amounts now instead being due on the Maturity Date; and (iii) notwithstanding anything to the contrary set forth in the Notes, through and including the sixtieth (60) calendar day following the date of the waiver, (A) if the average closing price on the Eligible Market of the Common Stock on the three (3) most recent Trading Days is less than $0.25, the Holder cannot convert the Note into Common Stock and (B) if the average closing price on the Eligible Market of the Common Stock on the three (3) most recent Trading Days is $0.25 or greater, there shall be no limitations as to the amount of the Note that may be converted into Common Stock.

 

On March 18, 2024, as a result of the Company’s warrant inducement, the conversion price of the Senior Notes was reduced from $1.02 to $0.196 per share. During the three months ended March 31, 2024, the Company credited additional paid in capital $23,953,940 for a deemed dividend for the triggering of certain price protection provisions in its senior secured debt. The Company estimated the fair value of the deemed dividend using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 93%, (3) risk-free interest rate of 5.06%, and (4) expected life of 1.37 years.

 

As of March 31, 2024 and December 31, 2023, the carrying value of the convertible notes was $9,759,725 and $12,098,241, net of unamortized debt discount of $4,676,452 and $5,901,759, respectively.

 

As of March 31, 2024, the current and non-current portions of the note are $6,756,732 and $3,002,992, net unamortized debt discounts of $3,237,544 and $1,438,908, respectively.

 

As of December 31, 2023, the current and non-current portions of the note are $8,065,494 and $4,032,747 net unamortized debt discounts of $3,394,506 and $1,967,253, respectively.

 

The maturity date of the convertible notes outstanding at March 31, 2024 is:

 

Maturity Date  Principal
Balance Due
 
2024  $5,000,000 
2025  $9,436,177 
Total Principal Outstanding  $14,436,177 

 

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NOTE 12 – LEASES

 

Property Leases (Operating Leases)

 

The Company leases its facilities and certain automobiles under operating leases which expire on various dates through 2025. The Company determines if an arrangement is a lease at inception and whether it is a finance or operating leases. Right of Use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, the Company uses the implicit rate in determining the present value of lease payments. The ROU asset also includes any fixed lease payments, including in-substance fixed lease payments and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lease term is determined at lease commencement and includes any non-cancellable period for which the Company has the right to use the underlying asset, together with any options to extend that the Company is reasonably certain to exercise.

 

Upon effectiveness of the acquisition of Empire on October 1, 2021, the Company assumed $30,699 in ROU assets and $31,061 in lease liabilities for an office lease. Under the terms of the lease, Empire is required to pay $1,150 per month and increasing by 3% on April 1st of every year beginning on April 1, 2022. The lease had an expiration date of March 31, 2024 and Empire was required to make a security deposit of $1,150. The Company does not have an option to extend the lease. The Company cannot sublease the office under the lease agreements. The Company did not renew the lease.

 

On October 11, 2021, Empire entered into leasing agreements with a company owned by the Chief Executive Officer of Empire for the leasing of the Company’s Virginia Beach metal recycling location. Under the terms of the leases, Empire is required to pay $9,677 for the prorated first month and $15,000 per month for the facilities beginning November 1, 2021 and increasing by 3% on January 1st of every year thereafter. The lease had an expiration date of January 1, 2024 and the Company has two options to extend the leases by 5 years per option. In the event the Company does not exercise the options, the leases will continue on a month-to-month basis. The Company cannot sublease any of the properties under the lease agreements. The Company terminated the lease on August 1, 2023.

 

On January 24, 2022, the Company entered into leasing agreements for 3,521 square feet of office space commencing upon the completion of tenant improvements which was expected to be on April 1, 2022 but shall be no later than May 1, 2022 (“Commencement Date”). Under the terms of the leases, the Company is required to pay $3,668 for the first twelve months of the lease and increasing by approximately 3% every 12 months thereafter until the expiration of the lease. The lease is for a period of five years from the Commencement Date and the Company was required to make a security deposit of $3,668. The Company does not have an option to extend the lease. The Company cannot sublease any of the office space under the lease agreement.

 

21
 

 

Effective February 1, 2022, the Company entered into an office space/land lease agreement with an entity owned by the Chief Executive Officer of Greenwave for the leasing of the Company’s Fairmont metal scrap yard located at 406 Sandy Street, Fairmont, NC 28340. Under the terms of the lease, the Company is required to pay $8,000 per month for the facility beginning February 1, 2022 and increasing by 3% on January 1, 2023. The lease had an expiration of January 1, 2024 and the Company has two options to extend the lease by 5 years per option. The Company also has the option to extend the term of the lease for an additional year for the next 5 years upon the same terms and conditions. In the event the Company does not exercise the options, the lease will continue on a month-to-month basis. The Company cannot sublease the property under the lease agreement. The Company terminated the lease on August 1, 2023.

 

Effective October 13, 2022, the Company entered into an office space/land lease agreement for the leasing of 900 Broad Street, Suite C, Portsmouth, VA 23707. Under the terms of the lease, the Company is required to pay $4,300 per month for the facility beginning November 1, 2022 and increasing by 3% on January 1, 2023. The lease expires on December 31, 2027 and the Company has two options to extend the lease by 5 years per option. The Company also has the option to extend the term of the lease for an additional year for the next 5 years upon the same terms and conditions. In the event the Company does not exercise the options, the lease will continue a month-to-month basis. The Company cannot sublease the property under the lease agreement.

 

Effective January 1, 2023, the Company entered into an office space/land lease agreement with an entity owned by the Chief Executive Officer of Greenwave for the leasing of the Company’s Chesapeake facility located at 101 Freeman Ave, Chesapeake, VA 23324. Under the terms of the lease, the Company is required to pay $9,000 per month for the facility beginning January 1, 2023 and increasing by 3% on January 1, 2024. The lease expires on January 1, 2025 and the Company has two options to extend the lease by 5 years per option. The Company also has the option to extend the term of the lease for an additional year for the next 5 years upon the same terms and conditions. In the event the Company does not exercise the options, the lease will continue on a month-to-month basis. The Company cannot sublease the property under the lease agreement.

 

On July 31, 2023, the Company terminated the leases for 12 scrap yards. There was a gain on termination of lease of $108,863 during the year ended December 31, 2023. Since August 1, 2023, the Company has been renting the land underlying 13 scrap yards from an entity controlled by the Company’s Chief Executive Officer, including the lease for the Chesapeake location described above, for an aggregate rent of $54,970 per month.

 

On March 15, 2024, the Company entered into leasing agreements for a scrap yard located at 3030 E 55th Street, Cleveland, OH 44127. Under the terms of the lease, the Company is required to pay $17,000 from March 1, 2024 to February 28, 2025; $23,000 from March 1, 2025 to February 28, 2026; $24,000 from March 1, 2026 to February 28, 2027; $25,000 from March 1, 2027 to February 28, 2028; $25,750 from March 1, 2028 and increasing by the greater of 3% and the CPI every 12 months thereafter until the expiration of the lease. The lease is for a period of five years, include two options to extend for five years each, and the Company was required to make a security deposit of $17,000. The Company has the option to purchase the property for $3,277,000 until February 28, 2024.

 

Automobile Leases (Operating Leases)

 

Upon effectiveness of the acquisition of Empire on October 1, 2021, the Company assumed $26,804 in ROU assets and $18,661 in lease liabilities for an automobile lease. Under the terms of the lease, Empire is required to pay $750 per month until the lease expires on February 18, 2025 and the Company does not have an option to renew or extend. The Company is responsible for any damage to the automobile under the terms of the lease.