Greenwave Technology Solutions, Inc. — Filing Summary
Filing identity discrepancy: The supplied filing is a Form 10-Q for MassRoots, Inc., not Greenwave Technology Solutions, Inc. Verify the issuer before relying on this summary.
Business context and reporting period
The filing covers the quarter ended March 31, 2020, with unaudited consolidated results compared with the three months ended March 31, 2019. MassRoots describes its business as a cannabis-industry technology and media platform. It said it planned to focus on monetizing its existing audience through product placements, display advertising, and daily deals. The report was filed September 4, 2020, after a COVID-19-related filing delay.
Key financial metrics
| Metric | Q1 2020 | Q1 2019 or prior date |
|---|---|---|
| Revenue | $0 | $4,383 |
| Operating expenses | $211,328 | $968,498 |
| Operating loss | $211,328 | $964,115 |
| Net loss | $31,952,896 | $1,496,499 |
| Net loss available to common stockholders | $126,955,829 | $1,496,499 |
| Net loss per share, basic and diluted | $0.09 | $0.01 |
| Net cash used in operations | $109,352 | $286,583 |
| Cash at quarter-end | $850 | $1,120 at December 31, 2019 |
| Working capital deficit | $68,501,692 | Not stated for Q1 2019 |
| Current liabilities | $68,502,542 | $36,872,021 at December 31, 2019 |
There was no meaningful revenue base from which to calculate a positive operating margin. Q1 2020 other expense included $941,649 of interest expense and a $31,129,095 charge for the derivative liability associated with an authorized-share shortfall. A $327,062 derivative fair-value gain partly offset those expenses. The $95,002,933 deemed dividend from warrant price protection increased the loss attributable to common stockholders but was not included in net loss.
At March 31, 2020, the balance sheet reported $50,898,006 of derivative liabilities and $7,132,244 of convertible notes payable, net of debt discount. The company also reported $6,200,147 of accounts payable and accrued expenses, $3,773,064 of accrued payroll and related liabilities, $337,500 of advances, and $149,000 of non-convertible notes payable. Total stockholders’ deficit was $68,501,692.
Material changes versus the prior comparable period
- Revenue declined from $4,383 to zero; management attributed this mainly to interruptions to the website and content production.
- Operating expenses fell by $757,170, mainly from lower general and administrative costs, payroll, advertising, and stock-based compensation.
- Net loss available to common stockholders rose sharply, primarily due to the derivative-liability charge and warrant-price-protection deemed dividend, rather than higher operating expenses.
- Interest expense increased from $238,787 to $941,649.
- Operating cash use decreased by $177,231 year over year, but quarter-end cash remained only $850.
- Common shares outstanding increased from 384,266,948 at year-end 2019 to 474,976,405 at March 31, 2020, largely through debt conversions and issuance of shares previously recorded as issuable.
Outlook, risks, contingencies, and unusual items
- Going concern: Management said cash was insufficient to fund operations for the next fiscal year and that substantial doubt existed about the company’s ability to continue as a going concern. It depended on raising additional capital and generating revenue; financing might not be available on acceptable terms, or at all.
- COVID-19: The company reported delays in obtaining customers and related revenue and said the pandemic could further impair operations, liquidity, and its ability to raise capital. It could not estimate the impact for fiscal 2020.
- Convertible debt and dilution: The company said it lacked enough authorized and unissued common shares to satisfy all potential conversions. It treated related conversion features and warrants as derivative liabilities; the shortfall also caused all convertible notes to be in default, with default interest accruing where applicable. The filing reports 17.16 billion warrants outstanding and 21.73 billion shares potentially issuable upon conversion of notes. Many instruments include reset or price-protection provisions.
- Payroll taxes: The company said it was delinquent in payroll-tax filings and reported $3,773,064 of payroll-tax liabilities, including penalties. It expected to settle them by December 31, 2020, but stated the actual amount could change with interest or penalties.
- Litigation: Power Up Lending Group sued the company and an officer/director, alleging note defaults, misrepresentations, and other claims. Its requested relief includes amounts tied to the notes, alleged lost profits, legal costs, and other remedies. The outcome was uncertain.
- Controls and filing timeliness: Management concluded disclosure controls were ineffective, citing inadequate review, lack of segregation of duties, and a closing process that did not identify all adjustments and disclosures promptly. The company said the material weakness could continue until it hires and trains accounting personnel.
- Subsequent financing: After quarter-end, the company disclosed additional debt issuances, including a $50,000 PPP loan received in May 2020 and further notes through September 2020. These later events do not change the March 31 balance sheet.
- No specific financial guidance: The filing provides no quantified revenue, earnings, or cash-flow forecast.
Most important facts for investors to verify
- Confirm the filing’s issuer: the supplied document identifies MassRoots, Inc., despite the request naming Greenwave Technology Solutions, Inc.
- Reconcile the capital structure and share counts: the company had 500 million authorized common shares, 474.98 million issued and outstanding at quarter-end, and 907.50 million shares recorded as “common stock to be issued”; the filing also reports a weighted-average share count of 1.368 billion and enormous potential warrant and note-conversion shares.
- Review the terms, default status, conversion prices, and potential dilution of outstanding notes and warrants, and whether the authorized-share shortfall has been resolved.
- Assess immediate liquidity, overdue liabilities, payroll-tax exposure, and the company’s ability to obtain financing or generate cash.
- Track the Power Up litigation and any other claims, as well as remediation of the disclosed material weakness in financial reporting controls.