Business context and reporting period
Entity identification: The request names Greenwave Technology Solutions, Inc., but the supplied Form 10-Q identifies the registrant as MassRoots, Inc. This summary reflects the filing provided and may not relate to the requested company.
The filing covers the quarter and six months ended June 30, 2018. MassRoots described itself as a cannabis-industry technology platform with more than one million registered users. It launched a paid dispensary advertising portal in late June 2018.
Financial performance and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue, 2018 | $2,237 | $3,729 |
| Revenue, 2017 | $142,873 | $277,614 |
| Operating loss, 2018 | $2,890,018 | $8,023,071 |
| Net loss, 2018 | $2,938,014 | $8,421,262 |
| Net loss, 2017 | $11,630,654 | $19,077,831 |
| Operating cash used, 2018 | — | $4,441,379 |
| Operating cash used, 2017 | — | $5,204,069 |
- Revenue fell 98.4% year over year in the quarter and 98.7% for the six-month period. Management attributed the decline to its new sales strategy and the late-June portal launch.
- Net loss narrowed year over year, primarily as stock-based compensation expense declined substantially. Six-month stock-based compensation was $3.19 million versus $14.37 million in 2017; payroll costs also declined modestly.
- Cash was $15,948 at June 30, 2018, down from $1.20 million at December 31, 2017. Total current assets were $132,356 and current liabilities were $4.09 million. Total liabilities were $4.09 million; stockholders’ deficit was $2.81 million.
- Financing activities provided $3.26 million in the first half, including $3.30 million from common-stock sales and $323,000 from warrant exercises. The company had no external credit facility or off-balance-sheet arrangements.
- Common shares outstanding were 155.8 million at June 30 and 163.0 million as of August 16. At June 30, the company also disclosed 34.6 million warrants and 15.4 million options outstanding.
Material changes, outlook, and risks
- The company stated that it had repaid or converted its August 2017 convertible notes and considered those notes retired by June 30. The balance sheet showed no convertible notes payable at that date.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern for one year from issuance. It said available cash was insufficient to fund operations for the next fiscal year and that additional financing was required. Plans included seeking investor funding and generating sales through the portal; management could not assure success.
- After quarter-end, on July 5, the company issued $1.65 million principal amount of secured convertible notes, due January 5, 2019, with warrants for up to 6.6 million shares. The notes include conversion-price adjustments and restrictions on future financings; default can accelerate repayment.
- On July 26, the company issued options covering 12.0 million shares and 7.1 million shares to employees under its 2018 plan. These issuances reduced the exercise price of 13.7 million January warrants from $0.40 to $0.20 per share.
- Disclosure controls were deemed ineffective due to deficiencies including lack of segregation of duties and inadequate review of accounting and financial reporting. Management identified a material weakness and said hiring qualified accounting personnel was needed.
- The filing notes a clerical error in the prior annual report’s option cancellation and outstanding-option disclosures, which management said it did not believe materially affected 2017 financial statements. The filing reports no material pending legal proceedings.
Investor verification priorities
- Confirm the correct issuer: the supplied filing is for MassRoots, Inc., not Greenwave Technology Solutions, Inc.
- Reconcile the filing’s stated $2,814,788 working-capital deficit with its balance-sheet figures: current liabilities of $4,086,770 less current assets of $132,356 imply a deficit of $3,954,414. The stated $2,814,788 equals the reported stockholders’ deficit.
- Verify the terms, proceeds, repayment status, and dilution effects of the July 2018 secured notes and subsequent share- and option-related issuances.
- Assess cash runway, financing availability, portal sales traction, and progress toward addressing the going-concern uncertainty.
- Review remediation of the disclosed material weakness and controls over financial reporting, including the corrected option disclosures.