Greenwave Technology Solutions, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Greenwave operates metal recycling facilities and provides hauling services. Comparisons are with Q1 2023 unless stated otherwise.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $8.50 million | $9.04 million; down 6.0% |
| Gross profit / margin | $3.26 million / 38.4% | $4.73 million / 52.3% |
| Operating expenses | $6.08 million | $6.66 million; down 8.8% |
| Operating loss | $2.81 million | $1.94 million |
| Net loss before deemed dividends | $8.06 million | $4.03 million |
| Net loss available to common stockholders | $33.46 million | $4.03 million |
| Cash from operating activities | $(3.46) million | $(0.20) million |
| Cash at period end | $0.71 million | $0.28 million at March 31, 2023 |
Gross margin contracted as cost of revenue rose 21.4% despite lower sales. Management attributed lower revenue mainly to metal sales and lower gross profit to reduced margins in metal and hauling. Hauling revenue increased by $0.38 million, while metal revenue fell by $0.89 million. Higher hauling costs contributed to the increase in cost of revenue. Operating expenses declined, including lower rent and payroll, partly offset by higher depreciation and amortization and professional fees.
At March 31, 2024, current assets were $2.22 million and current liabilities were $22.71 million, a working-capital deficit of $20.49 million. Total liabilities were $39.69 million. Balance-sheet debt included $2.23 million of factoring, $9.76 million of convertible notes, $8.58 million of non-convertible notes, and a $7.22 million related-party note; amounts are carrying values and exclude lease liabilities and bank overdraft. Stockholders’ equity was $5.61 million, compared with a $4.45 million deficit at year-end 2023.
Financing activities provided $2.63 million, including $2.57 million from warrant exercises and $2.84 million in factoring proceeds, partly offset by debt repayments. No cash was spent on investing activities in Q1 2024. Cash declined by $0.83 million from year-end.
Material changes, outlook and risks
- Going concern: Management states that low cash, a $20.49 million working-capital deficit, and a $429.33 million accumulated deficit raise substantial doubt about the company’s ability to continue as a going concern for one year from issuance. The statements contain no adjustments for a failure to continue as a going concern.
- Financing, dilution and unusual charges: A warrant inducement reduced warrant exercise prices and the senior notes’ conversion price to $0.196. The company recorded $3.03 million of warrant-inducement expense and $25.40 million of deemed dividends related to repricing warrants and debt. The dividends materially increased the loss available to common stockholders. The filing reports basic and diluted loss per share of $0.39, while reporting $33.46 million of loss available to common stockholders; investors should verify the per-share presentation.
- Subsequent financing and share issuance: After quarter-end, Greenwave reported an April offering of 45.1 million shares and accompanying warrants for $5.26 million gross proceeds; an exchange of the remaining $7.22 million related-party note for 61.9 million shares; and an exchange of Series D preferred stock for 200 million common shares. It also disclosed conversion of $12.21 million of debt into about 288.7 million shares during May. A May offering agreed to sell 420.6 million shares and warrants for $21.87 million gross proceeds. As of May 20, 2024, 639.7 million common shares were issued and outstanding, versus 43.9 million at March 31.
- Debt and factoring: Several factoring advances required substantial weekly payments and were personally guaranteed by the CEO. Two advances were settled for $400,000 each in April and May. The March covenant waiver deferred certain senior-note amortization payments and temporarily restricted conversion under specified share-price conditions; the conversion restriction was waived in May. A May amendment reduced the senior notes’ conversion price to $0.05, subject to adjustment terms.
- Operations: Management expected the second automotive shredder at its Carrollton, Virginia site to come online in Q2 2024 and identified a facility with rail or port access as a strategic priority. No quantified revenue, earnings, or cash-flow guidance is provided.
- Concentration and execution risks: Two customers generated approximately 67% and 6% of Q1 revenue. Operations are exposed to scrap-metal prices, supply and steel demand, and the availability of permits. Greenwave also reported a Nasdaq low-price notice and requested a hearing; continued listing is not assured.
- Controls and contingencies: Management concluded disclosure controls and internal control over financial reporting were ineffective, citing lack of segregation of duties and insufficient review of accounting and reporting. Remediation depends partly on additional financing or revenue. Payroll-tax liabilities, including penalties, were $4.01 million; the filing says the actual amount could differ. The company reported no environmental remediation accrual at quarter-end and stated that prior required remediation and penalties had been completed or paid.
- Related parties: The company leases sites from entities controlled by its CEO, owed those entities $1.17 million at quarter-end, and disclosed other CEO-affiliated transactions, including hauling and scrap purchases.
Most important facts for investors to verify
- Near-term liquidity, cash needs, factoring payment schedules, and the company’s ability to meet debt obligations given the going-concern warning.
- The final terms, closing, net proceeds, and dilution from the May financing and the large debt and preferred-stock conversions; reconcile these with the reported May 20 share count.
- The senior notes’ amended conversion price, remaining principal and amortization requirements, and any further conversion or anti-dilution effects.
- Customer concentration, metal and hauling margins, and whether the Carrollton shredder and planned expansion generate improved operating cash flow.
- Progress addressing material control weaknesses, the final payroll-tax exposure, and the outcome of the Nasdaq listing hearing.