Business context and reporting period
The supplied filing is MassRoots, Inc.’s unaudited Form 10-Q for the three months ended March 31, 2016—not a filing identified as Greenwave Technology Solutions, Inc. Investors should verify the issuer and filing before relying on this summary. MassRoots operated a social and marketing platform for cannabis consumers and businesses, with revenue primarily from advertising and merchandise.
Key financial metrics
| Metric | Q1 2016 | Q1 2015 or prior date |
|---|---|---|
| Revenue | $93,385 | $941 |
| Cost of revenue; gross profit and margin | $8,552; $84,833; approximately 90.8% | $700 |
| General and administrative expenses | $2,378,567 | $565,751 |
| Operating loss | $(2,285,182) | $(564,810) |
| Net loss; loss per share | $(2,636,223); $(0.06) | $(550,509); $(0.01) |
| Cash from operations / investing / financing | $(1,385,002) / $(15,704) / $1,428,000 | $(409,141) / $(9,896) / $332,000 |
| Cash and current assets | $413,610 and $575,312 | $386,316 and $438,754 at Dec. 31, 2015 |
| Current liabilities; total liabilities | $1,023,040; $1,232,140 | $194,352; $403,452 at Dec. 31, 2015 |
| Stockholders’ equity (deficit) | $(363,141) | $316,827 at Dec. 31, 2015 |
Revenue increased substantially from a very small base, but operating costs rose faster. Q1 expenses included $670,767 of option-based compensation, $263,583 of stock issued for services, and $68,369 of warrants issued for services. Other expense included a $222,857 derivative-liability valuation loss and $119,549 amortization of debt discounts. The company reported $1.42 million gross proceeds from a March convertible-note financing and $1.272 million net proceeds, excluding legal fees.
Material changes and financing
- Cash increased by $27,294 during the quarter, while operating cash use grew from $409,141 to $1,385,002 year over year. Cash at quarter-end was materially below current liabilities.
- March financing included six-month secured convertible notes with $1,514,667 principal, warrants, discounted conversion-price provisions, and repayment premiums. The filing reports a $1,430,119 debt discount and $732,260 of derivative liabilities at quarter-end. The financing terms create potential dilution and repayment pressure.
- Principal convertible debt was $1,758,667; the reported net carrying value was $328,548, including long-term debentures and a current portion. Existing 2014 debentures were extended to March 2020? No—the filing states March 24, 2018.
- Common shares outstanding were 47,806,744 at March 31 and 48,695,151 as of May 11, 2016. Potentially dilutive securities excluded from loss-per-share calculations totaled approximately 20.5 million shares at quarter-end.
Outlook, risks, and unusual items
- Management stated cash and receivables were expected to fund operations through June 2016 and estimated a need to raise another $2.5 million over the next fiscal year. It anticipated relying largely on warrant exercises, but warned that failure to obtain financing or sufficient revenue could force it to cease operations or seek bankruptcy protection. The auditor expressed substantial doubt about the company’s ability to continue as a going concern.
- Management said monthly cash-flow breakeven might be achievable by year-end 2016 if user and web traffic continued growing. This was an expectation, not formal earnings guidance. Planned initiatives included AWS infrastructure migration, a revamped business portal, dispensary finder, and localized advertising.
- The company disclosed about 900,000 users by mid-May 2016 and reported approximately 50 advertising contracts with around 30 clients valued at about $340,000 in the first-quarter footnote. The Denver 420 Rally, intended to support audience growth and generate revenue, was postponed by a snowstorm from April 16 to May 21, 2016.
- The company stated it had no current or pending legal proceedings and no off-balance-sheet arrangements. Management found internal control over financial reporting ineffective due to a material weakness in segregation of duties arising from limited staffing.
- Key risks include ongoing losses, reliance on external capital, potentially dilutive and price-sensitive convertible financing, uncertain monetization of users, competition for local advertising, and execution of product and event plans. The filing’s statements about cannabis-market growth and expected product launches are management views, not assured outcomes.
Investor verification checklist
- Confirm the issuer: the request names Greenwave Technology Solutions, while this filing names MassRoots, Inc.
- Reconcile reported advertising-contract and deferred-revenue figures: the notes cite approximately $340,000 in contracts, while MD&A cites $324,530 of contracts and separately reports deferred ticket sales and other deferred amounts.
- Check debt carrying-value and current-portion figures: the balance sheet reports $119,548 for the current convertible note, while the debt summary gives $119,448.
- Review the March note and warrant agreements, conversion and prepayment provisions, debt discounts, derivative valuation assumptions, maturity obligations, and potential share dilution.
- Assess subsequent financing, cash runway, warrant exercises, and whether the company achieved its stated operating milestones and cash-flow expectations.
- Confirm the reported net loss against the MD&A, which contains a differing figure in one passage; the financial statements show $2,636,223.