Business Context and Reporting Period
This Form 8-K is a current report filed by MassRoots, Inc. (not Greenwave Technology Solutions, Inc.) on September 4, 2020, covering events occurring between July 13, 2020, and September 1, 2020. The company is an emerging growth company incorporated in Delaware with principal executive offices in Denver, Colorado.
Key Financial Metrics and Debt
The filing details the issuance of unregistered convertible notes (the "2020 Notes") to raise capital. No revenue, profit, or cash flow metrics are provided in this specific filing.
- Total Principal Amount Issued: $225,500 aggregate principal ($176,000 issued July 13–August 31, 2020; $49,500 issued September 1, 2020).
- Original Issuance Discount: $20,500 total ($16,000 on the initial tranche; $4,500 on the September Note).
- Interest Rate: 12% per annum.
- Maturity Dates: Ranging from January 13, 2021, to March 1, 2021.
- Conversion Price: $0.01 per share (subject to adjustment).
Material Changes and Terms
The primary material change is the entry into definitive agreements for debt financing with aggressive conversion terms and default penalties.
- Default Penalty: Upon an Event of Default, the outstanding balance increases to 130% of the balance immediately prior to the event.
- Default Conversion Price: In the event of default, the conversion price adjusts to 60% of the average of the three lowest closing bid prices during the 20 days prior to conversion, with a floor of $0.001 per share.
- Beneficial Ownership Limit: Conversion is prohibited if the holder would beneficially own more than 9.99% of outstanding common stock post-conversion.
- Prepayment: The Company may prepay notes within 180 days of issuance subject to penalties.
Guidance, Risks, and Unusual Items
The filing includes an investor presentation (Exhibit 99.1) containing forward-looking statements, for which the company disclaims any obligation to update. The notes were issued under Section 4(a)(2) of the Securities Act of 1933 as an exemption from registration.
Risks: The high interest rate (12%), significant original issuance discount, and the 130% default penalty create substantial financial leverage and potential dilution risks for existing shareholders, particularly if the company defaults or if the stock price declines significantly.
Investor Verification Checklist
- Verify the exact number of shares outstanding to calculate the dilution impact of the $0.01 conversion price.
- Review the full text of the Note agreements (Exhibits 10.1 and 10.2) for specific definitions of "Event of Default."
- Confirm the company's current cash position to assess the ability to service the 12% interest and principal repayment by early 2021.
- Examine the Investor Presentation (Exhibit 99.1) for operational context, noting the disclaimer regarding forward-looking statements.