Filing identity and reporting period
Important identity mismatch: The filing supplied is MassRoots, Inc.’s Form 10-K for the fiscal year ended December 31, 2020, not a filing identified as Greenwave Technology Solutions, Inc. This summary therefore covers MassRoots. It reports annual results; it does not provide a standalone 2020 fourth-quarter results summary.
MassRoots describes itself as a cannabis-industry technology and advertising platform. It reported a March 2021 website relaunch and plans to monetize its YouTube audience through sponsorships and product placements; these are post-period developments and plans, not demonstrated 2020 results.
Financial results and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $6,964 | $23,703 |
| Operating expenses | $1,167,175 | $3,469,139 |
| Loss from operations | $1,160,211 | $3,445,436 |
| Other expense, net | $13,550,249 | $30,823,476 |
| Net loss | $14,710,460 | $34,268,912 |
| Net loss available to common stockholders | $111,623,487 | $110,263,157 |
| Basic and diluted loss per common share | $0.08 | $0.19 |
| Net cash used in operating activities | $1,037,843 | $1,797,227 |
Revenue fell 70.6%. The company attributed the decline mainly to platform service interruptions and reductions in sales and corporate staffing. Gross margin is not presented as a headline measure; revenue was minimal relative to operating expenses.
The reported 2020 net loss was substantially affected by unusual, non-cash financing and derivative accounting. Other expense included a $162.1 million gain on settlement of convertible notes, accrued interest, warrants and accounts payable, offset in part by a $170.3 million charge related to an authorized-share shortfall and $5.1 million of interest expense. Net loss available to common stockholders also included $95.8 million of deemed dividends from warrant price protection and $1.1 million from preferred-stock discount amortization. These items make the reported net loss and per-share figures difficult to interpret as measures of operating performance.
At December 31, 2020, cash was $1,485, total current assets were $98,617, current liabilities were $37,722,469, and total liabilities were $37,832,469. The working capital deficit was $37,623,852 and stockholders’ deficit was $37,733,852. Current liabilities included $25,475,514 of derivative liabilities, $4,948,890 of accounts payable and accrued expenses, $3,864,055 of accrued payroll and related expenses, and $3,186,303 of convertible notes payable, net of discount. The balance sheet also showed $60,000 of non-convertible notes and a $50,000 PPP note outside current liabilities.
Operating cash use was funded largely through securities issuance. Financing activities provided $1,038,208 in 2020, including $637,000 from convertible notes, $132,911 from non-convertible notes and the $50,000 PPP loan; Series X preferred stock generated $321,000. There were no investing cash flows in 2020. The company said it had no committed external liquidity source and expected to need additional financing.
Material changes and unusual items
- Operating expenses declined 66.4%, principally due to lower payroll and related costs, fewer consultants, no 2020 stock-based compensation, and no 2020 software impairment expense. Advertising expense increased to $58,961 from $29,764.
- Operating loss narrowed to $1.16 million from $3.45 million, but revenue also fell sharply and remained only $6,964.
- Convertible debt and related instruments produced significant derivative liabilities. The company said it lacked sufficient authorized common shares to cover all potential conversions; it treated convertible notes as in default on this basis.
- Common shares issued and outstanding increased to 493,726,405 at year-end from 384,266,948. The filing reported 11.82 billion potentially dilutive shares excluded from diluted loss per share, including shares underlying notes, warrants and preferred stock. Common shares authorized were capped at 500 million.
- After year-end, holders exchanged warrants and debt for Series Y preferred stock. The filing describes exchanges involving 659.605674 Series Y shares and substantial warrants and debt, but its narrative and table do not clearly reconcile the amounts of principal and accrued interest exchanged; verify against the exhibits and subsequent filings.
Outlook, risks and contingencies
Management stated that available capital was insufficient to fund operations for the next fiscal year and that additional financing was needed. Management’s plans were to seek funding and increase revenue by converting the platform’s audience into paying customers; the filing gives no quantified revenue or earnings guidance. The auditor and management cited substantial doubt about the company’s ability to continue as a going concern within one year after issuance of the financial statements.
- Going concern and financing: Continued operations depend on obtaining additional capital; financing may not be available on acceptable terms or at all. Failure to raise funds could force the company to curtail or cease operations.
- Debt, dilution and share authorization: The company has substantial liabilities, conversion-related defaults and a limited number of authorized common shares. Financing and conversion terms may cause significant dilution and large derivative-accounting fluctuations.
- Legal matters: A $350,551.10 default judgment was entered jointly and severally against the company and its CEO in February 2021. Other disclosed claims include a $487,390.73 legal-fee arbitration demand, a note claim seeking $124,750 plus costs and interest, and a separate claim seeking more than $130,336.15 plus costs and interest.
- Payroll taxes and controls: The company disclosed delinquent payroll-tax filings and liabilities of $3,864,055, including penalties, and expected settlement by June 30, 2021. Management found disclosure controls and internal control over financial reporting ineffective, citing insufficient segregation of duties and review procedures; remediation depends in part on funding.
- Business and regulatory exposure: Cannabis remains illegal under U.S. federal law despite state programs. Enforcement uncertainty, platform-store policies, competition, limited customer monetization and COVID-19-related disruption could adversely affect revenue and access to capital.
- 2021 relaunch and audience: The website relaunch and proposed YouTube monetization are prospective initiatives; the filing does not establish that they generated material revenue.
Most important facts for investors to verify
- Confirm the issuer: the supplied 10-K is for MassRoots, Inc., not Greenwave Technology Solutions, Inc.
- Reconcile the Series Y exchange disclosures, including the stated debt and accrued-interest amounts, warrants exchanged, shares issued and remaining obligations.
- Review current cash, debt maturities, default status, derivative liabilities and authorized-share capacity in subsequent filings.
- Check the status and ultimate resolution of the disclosed litigation, payroll-tax liabilities and PPP-loan forgiveness application.
- Assess whether financing was secured, whether internal-control weaknesses were remediated, and whether the website relaunch or audience monetization produced measurable revenue.