Greenwave Technology Solutions, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; filed November 14, 2022. Unaudited consolidated statements. Greenwave now operates a metal-recycling business through Empire Services, acquired effective October 1, 2021; it sold its social-media assets in October 2021. Accordingly, 2021 operating comparisons largely predate the acquisition and are not directly comparable.
Financial performance
| Metric | Three months 2022 | Nine months 2022 | Comparable 2021 |
|---|---|---|---|
| Revenue | $7.35 million | $27.97 million | $54; $1,660 |
| Gross profit / margin | $2.48 million / 33.8% | $10.81 million / 38.7% | $54; $1,363 |
| Operating loss | $3.29 million | $4.46 million | $0.40 million; $1.20 million |
| Net loss | $8.58 million | $27.89 million | $0.52 million loss; $10.86 million income |
| Net loss available to common stockholders | $37.39 million | $56.70 million | $0.52 million; $23.93 million |
| Cash used in operations | Not separately presented | $2.07 million | $0.39 million |
Q3 revenue increased $7.35 million from the near-zero prior-year quarter, primarily reflecting Empire, favorable recycled-metal market conditions, and implementation of Greenwave technology. Nine-month operating expenses were $15.27 million, including $2.97 million of depreciation, impairment and amortization. Interest expense was $33.27 million for the nine months, substantially affected by debt-discount amortization. Q3 common-stockholder loss also included $28.82 million of deemed dividends; the nine-month figure included the same dividends, principally from warrant and preferred-stock price protections.
Balance sheet, debt and liquidity
- At September 30, cash was $1.57 million, current assets $3.00 million, and current liabilities $13.63 million; working capital deficit was $10.63 million. Total assets were $40.23 million and stockholders’ equity $22.49 million.
- Non-convertible notes payable were approximately $6.66 million net of discounts, including significant secured borrowing and advances. Convertible notes were reduced to zero following conversion. Operating lease liabilities totaled $3.42 million.
- Cash declined from $2.96 million at December 31, 2021. Nine-month investing outflows were $3.68 million, mainly equipment purchases; financing inflows were $4.36 million, primarily new non-convertible notes, partly offset by repayments.
- Accrued payroll and related liabilities, mainly delinquent payroll taxes, were $3.91 million; the filing says the ultimate amount may vary with tax-authority interest and penalties.
Material developments, outlook and risks
- On July 22, 2022, the Nasdaq listing triggered conversion of $37.71 million principal of senior secured convertible debt, plus $1.47 million accrued interest, into about 6.90 million common shares. The company reported a $2.63 million conversion gain. Common shares outstanding reached 10.71 million at September 30.
- Warrant repricing and issuance connected with the uplisting and liquidated-damages waiver produced a $7.41 million warrant expense and substantial deemed dividends. About 9.79 million warrants were outstanding at September 30, creating potential dilution.
- Management expects a second automotive shredder and additional sorting equipment to increase processing capacity and says the projects are expected to improve margins. It also identifies rail or port access as a strategic priority. No numerical financial guidance is provided.
- Management believes operating cash flow and existing cash can support planned operations for a year and anticipates potentially positive operating cash flow. However, the filing states that the working-capital deficit and accumulated deficit raise substantial doubt about the company’s ability to continue as a going concern. Additional capital may be needed if metal markets weaken or growth plans are delayed; financing availability and terms are uncertain.
- Revenue depends on volatile scrap-metal prices and is concentrated: three customers represented approximately 84% of nine-month sales. Sales and suppliers are concentrated in Virginia and northeastern North Carolina. The filing also identifies COVID-19 uncertainty and possible dilution or restrictive terms from future financing.
- Related-party exposure is significant: the company leases 12 scrap yards from an entity controlled by its CEO and paid that entity $1.85 million in rent during the first nine months. Environmental remediation obligations under the cited Virginia consent order were reported paid and completed; the Sheppard Mullin judgment is being paid under a monthly settlement schedule.
Key investor verification points
- Reconcile the cash-flow statement’s September 30 ending cash of $1,568,771 with the balance sheet’s $1,568,104.
- Review the going-concern assessment, cash needs, debt maturities, and weekly or monthly payment obligations against actual subsequent cash generation and financing.
- Assess customer concentration, scrap-price exposure, and whether planned capacity expansions deliver the expected utilization and margin benefits.
- Evaluate potential dilution from outstanding warrants, convertible preferred stock, and the expanded common-share count; confirm warrant terms and exercise activity.
- Review delinquent payroll-tax liabilities, related-party lease terms and payments, and any updates to legal or environmental contingencies.
- Confirm the reported financial figures and presentation against the full filing: the cash-flow cash balance differs from the balance sheet, and prior-year comparisons are affected by the Empire acquisition and restatements.