Greenwave Technology Solutions, Inc. — 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. Greenwave, formerly MassRoots, shifted from its legacy social-media business to metal recycling after acquiring Empire Services, effective October 1, 2021. Empire operates 11 recycling facilities in Virginia and North Carolina. The company sold its social-media assets for $10,000 and discontinued that business in October 2021. Share and per-share amounts were retrospectively adjusted for the 1-for-300 reverse split effective February 28, 2022.
Key financial results
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $8.10 million | $6,964 |
| Gross profit / gross margin | $2.86 million / 35.3% | $5,681 |
| Operating expenses | $5.79 million | $1.17 million |
| Operating loss | $(2.93) million | $(1.16) million |
| Net loss | $(1.63) million | $(14.71) million |
| Net income (loss) available to common stockholders | $2.78 million | $(111.62) million |
| Net cash used in operating activities | $(2.49) million | $(1.04) million |
| Cash at year-end | $2.96 million | $1,485 |
The 2021 common-stockholder income differs from the company’s net loss because of substantial preferred-stock deemed dividends and redemption accounting. Neither that measure nor the large year-over-year improvement in net loss indicates profitable core operations: Greenwave reported an operating loss and negative operating cash flow. The revenue comparison is also not like-for-like: Empire was consolidated only from October 1, 2021; unaudited pro forma revenue assuming Empire had been acquired at the start of 2021 was $27.76 million.
Revenue growth primarily reflected the Empire acquisition, stronger recycled-metal prices, operating technology initiatives, and the Virginia Beach yard. Cost of revenue was $5.24 million. Management attributed higher expenses to the expanded business, including payroll, rent, hauling and maintenance, depreciation and amortization, and general and administrative costs. The filing reports no clear operating margin trend for Empire on a standalone, comparable basis.
Debt, liquidity, and balance sheet
- At December 31, 2021, current assets were $3.34 million and current liabilities were $59.47 million, producing a working-capital deficit of $56.13 million. Total liabilities were $61.53 million; stockholders’ deficit was $23.35 million.
- Cash was $2.96 million. Operating cash burn was $2.49 million; financing activities provided $5.52 million. The company said it had no external credit-facility arrangements providing immediate access to capital.
- November 2021 financing generated $27.59 million cash proceeds through senior secured convertible notes with $37.71 million principal, 6% interest, and warrants. The notes were due May 30, 2022, with a possible extension to November 30, 2022, and were convertible at $15 per share. The notes are secured by substantially all company assets. The CEO rolled $4.76 million of existing debt into the offering; the company also disclosed $2.2 million in commissions and a warrant commission.
- The balance sheet reported convertible notes net of discounts of $6.46 million and derivative liabilities of $44.02 million. The principal amount of the senior notes substantially exceeds their reported net carrying amount; conversion, repayment, and dilution outcomes depend on note terms and available authorized shares.
- Management and the auditor cited substantial doubt about the company’s ability to continue as a going concern, based on accumulated losses, expected future losses, liquidity needs, and potential need for additional financing. The auditor nevertheless gave an unqualified opinion on the financial statements.
Material changes, outlook, and risks
- Strategic transition: The Empire acquisition consideration was reported at $23.11 million, including 1.65 million common shares valued at $18.41 million and notes totaling $4.70 million. The company aims to expand recycling operations and pursue a facility with rail or deep-water port access. Management also plans to repurpose its technology platform for marketing and customer-management tools for scrap yards; no quantified forecast or formal financial guidance is provided.
- Outlook: Management said it believes the business could generate positive operating cash flow, but warned that failure to convert outstanding debt, a downturn in recycled-metal markets, or delays to growth plans could require additional capital. Management expected the senior notes to convert in 2022; otherwise, it might need to raise funds to meet obligations.
- Concentration and market exposure: One customer accounted for $6.68 million, or 83%, of 2021 revenue. Sales and supply are concentrated in Virginia and northeastern North Carolina. Scrap-metal prices, steel demand, export markets, tariffs, supply availability, transportation, and economic cycles can affect results.
- Unusual noncash items: Other income included $182.16 million of gains on settlements of convertible notes, accrued interest, warrants, and accounts payable, offset in part by a $171.34 million loss from derivative liabilities associated with an authorized-share shortfall. These large fair-value and settlement items materially affect reported results and are not equivalent to recurring operating earnings.
- Controls and compliance: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end, citing inadequate segregation of duties and review processes. Remediation depends partly on obtaining financing or generating sufficient revenue. Payroll-tax liabilities, including penalties, were $4.00 million, and the company reported delinquent payroll-tax filings.
- Contingencies and related parties: Under a Virginia environmental consent order, the company reported $22,207 remaining for remediation and civil penalties at year-end. It settled an Iroquois warrant dispute for $1 million cash and Series Z preferred shares. It also agreed to pay former securities counsel under a settlement schedule through February 2023. Multiple facilities are leased from an entity controlled by the CEO; the company reported $477,140 of related-party rent expense for 2021. The Empire acquisition also involved notes and an advance payable to its sole shareholder, who is Greenwave’s CEO.
- Other risks: COVID-19 impacts remained uncertain. The company also highlighted environmental and permitting exposure, leases, equipment reliability, customer and supplier concentration, dilution, OTC trading and share-price volatility, and dependence on key executives. Its common stock was quoted on OTC Pink, not a national exchange.
Most important facts for investors to verify
- Whether the $37.71 million senior secured notes were converted, extended, or repaid, and the resulting cash needs, collateral exposure, and potential share dilution.
- Whether operating cash flow improved after year-end and whether the company raised additional capital to address its $56.13 million working-capital deficit and going-concern uncertainty.
- Empire’s full-year revenue, margins, and cash generation compared with the limited post-acquisition results included in Greenwave’s 2021 statements.
- The sustainability and terms of the relationship with the customer generating 83% of revenue, and whether customer concentration has declined.
- Progress in remediating material weaknesses, addressing payroll-tax liabilities, and meeting environmental consent-order requirements.
- The nature and recurring cash impact of related-party leases and obligations, and how the large settlement gains, derivative liabilities, and preferred-stock deemed dividends affect the interpretation of reported earnings.