Greenwave Technology Solutions, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are with FY2021. This is an annual report, not a standalone fourth-quarter report. Greenwave’s business is metal recycling, following its 2021 acquisition of Empire Services and discontinuation of its former social-media operations. Share and per-share amounts were retroactively adjusted for a 1-for-300 reverse split.
Business context and operating developments
Greenwave buys, processes, and sells ferrous and nonferrous scrap metal through facilities in Virginia and North Carolina. Revenue depends on metal prices, supply and demand, processing and transport costs, and customer markets. The company opened a Fairmont, North Carolina facility in November 2022. It said a second shredder in Carrollton, Virginia and a Cleveland, Ohio facility were expected to open in 2023; these were forward-looking plans in the filing.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $33.98 million | $8.10 million |
| Gross profit | $12.44 million | $2.86 million |
| Gross margin | Approximately 36.6% | Approximately 35.3% |
| Operating loss | $10.88 million | $2.93 million |
| Net loss | $35.04 million | $1.63 million |
| Net income (loss) available to common stockholders | $(63.86) million | $2.78 million |
| Cash used in operating activities | $2.61 million | $2.49 million |
| Cash used in investing activities | $5.94 million | $0.08 million |
| Cash provided by financing activities | $6.41 million | $5.52 million |
Revenue rose 319.6%, principally because FY2022 includes a full year of Empire operations, versus only about three months in FY2021, alongside favorable recycled-metal markets, additional facilities, and technology and operating changes. The increase should not be read as purely organic growth. Gross margin improved modestly, while operating expenses rose to $23.32 million, including $4.06 million of depreciation and amortization and a $2.50 million goodwill impairment.
The common-stockholder loss substantially exceeded the $35.04 million net loss, largely because of $28.82 million in deemed preferred-stock and warrant dividends. Other significant, noncash or financing-related items included $34.08 million of interest expense, a $14.26 million gain from derivative-liability remeasurement, and $7.41 million of warrant expense tied to a liquidated-damages waiver. FY2021 results were also affected by large, unusual debt-settlement and derivative items.
At year-end, cash was $821,804, current assets were $1.24 million, and current liabilities were $19.01 million, producing a $17.77 million working-capital deficit. Total liabilities were $26.13 million and stockholders’ equity was $15.34 million. Balance-sheet debt included $4.89 million of factoring and $8.82 million of nonconvertible notes, net of debt discounts; convertible notes were zero at year-end. Operating lease liabilities totaled approximately $3.09 million. The filing reports no external credit-institution liquidity arrangements and says additional financing may be needed.
Material changes, financing, and capital structure
- When Greenwave listed on Nasdaq in July 2022, senior secured convertible notes with $37.71 million principal and $1.47 million accrued interest converted into 6,896,903 common shares at $6.02 per share.
- Factoring advances and nonconvertible notes provided $6.52 million and $2.73 million, respectively, during 2022. Factoring is described as an important working-capital source; availability changes could materially affect the company.
- Common shares outstanding increased to 10,962,319 at December 31, 2022 from 3,331,916 at December 31, 2021. The filing also reports 9,757,710 outstanding warrants and 322 Series Z preferred shares at year-end, among other potentially dilutive securities.
- CEO Danny Meeks waived his right to four quarterly bonuses of $250,000 each for 2023, according to the subsequent-events disclosure.
Outlook, risks, and unusual matters
Management did not provide quantified financial guidance. It stated that it believes the business could generate positive operating cash flow, but warned that a sharp recycled-metal downturn or delays to growth plans could require additional capital. The independent auditor’s report identifies substantial doubt about the company’s ability to continue as a going concern for one year from issuance, citing accumulated losses and expected future losses.
- Customer concentration: Three customers represented approximately 53%, 16%, and 13% of FY2022 revenue, respectively. One customer represented 77% of year-end receivables.
- Internal controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2022, citing inadequate segregation of duties and insufficient review in the financial close. Remediation depends partly on financing or significant revenue.
- Payroll taxes: The company disclosed delinquent payroll-tax filings and $3.95 million of payroll-tax liabilities, including penalties, at year-end; the final amount may change with assessments.
- Related parties: The company leases 12 scrap-yard facilities from an entity controlled by the CEO, paid that entity $2.48 million in rent during 2022, and owed it $317,781 in accrued rent at year-end. The filing also describes equipment purchases from CEO-affiliated entities.
- Other risks: Cyclical metal prices and supply, export markets and trade restrictions, environmental and permitting obligations, lease renewals, equipment disruption, and dependence on key personnel may affect results. Environmental remediation liabilities were reported as fully satisfied in 2022. The Sheppard Mullin payment plan was also reported as completed.
Most important facts for investors to verify
- Whether subsequent filings show improved liquidity, positive operating cash flow, and a credible plan to address the going-concern warning and working-capital deficit.
- Whether the company has remediated the disclosed material weakness and strengthened accounting review and segregation of duties.
- Current customer concentration, factoring balances and terms, debt maturities, and access to new financing.
- Actual operating status and results of the planned shredder and facility expansions, and whether growth is translating into sustainable margins and cash generation.
- Potential dilution from warrants, preferred stock, and further share issuance; confirm current share counts and applicable conversion or exercise terms.
- Current status of payroll-tax liabilities, environmental and legal contingencies, and related-party leases and transactions.
Note: The MD&A gives operating loss as $10,882,922, while the audited statement of operations gives $10,882,992; the audited financial-statement figure is used above.