Business Context and Reporting Period
This Form 8-K is filed by MassRoots, Inc. (not Greenwave Technology Solutions, Inc.) on September 21, 2016, reporting events occurring as of September 14, 2016. The filing addresses a default on secured promissory notes and subsequent equity issuances.
Key Financial Metrics and Obligations
- Defaulted Notes: $966,384.27 principal outstanding on six-month convertible secured promissory notes issued March 14, 2016.
- Mandatory Default Amount: $1,256,170 (calculated as 130% of outstanding principal).
- Convertible Debentures: $209,100 outstanding principal (issued March 24, 2014), potentially subject to acceleration.
- Equity Issuance: 319,008 shares of common stock authorized for issuance to note holders due to default.
- Warrant Adjustment: Exercise price reset from $1.00 to $0.50 per share; share count increased from 1,514,669 to 3,029,338.
- Liquidity: The filing text does not provide specific cash balance or liquidity metrics, only that the company was unable to make required payments.
Material Changes and Events
On September 14, 2016, the company failed to repay the principal amount of $966,384.27 on its secured notes, triggering an Event of Default. Consequently, the debt obligation increased to the Mandatory Default Amount of $1,256,170. Holders have demanded payment plus 2% monthly interest (24% per annum) on the outstanding balance. Additionally, a partial conversion of $25,000 of debt into equity was executed by one holder (DiamondRock, LLC).
Outlook, Risks, and Contingencies
- Secured Asset Rights: The default triggers rights under the Security Agreement, allowing the agent (DiamondRock G3, LLC) to take possession of collateral, sell assets, or operate the business.
- Cross-Default Risk: The default on the Notes may trigger a default on the $209,100 Convertible Debentures, potentially leading to immediate acceleration, revenue garnishment, or a 2.5% monthly increase in the face amount.
- Dilution: Significant dilution is occurring via the issuance of 319,008 shares and the doubling of warrant shares due to the anti-dilution price reset.
Investor Verification Checklist
- Verify the company's current cash position and ability to fund the $1,256,170 mandatory default payment.
- Confirm if the Convertible Debentures have formally been accelerated or if revenue garnishment has commenced.
- Review the impact of the 319,008 new shares and 3,029,338 warrant shares on existing shareholder ownership percentages.
- Assess the status of the company's assets held as collateral and whether the agent has initiated control or liquidation proceedings.