Business Context and Reporting Period
This Form 8-K is filed by MassRoots, Inc. (not Greenwave Technology Solutions, Inc.) on October 7, 2016, reporting events occurring on October 5, 2016. The filing addresses significant corporate actions including executive compensation adjustments, the resolution of a debt default, and the issuance of unregistered equity securities.
Key Financial Metrics and Transactions
- Debt Repayment: The Company repaid all outstanding principal and amounts due on its six-month convertible secured promissory notes (issued March 14, 2016). Total repayment consisted of $1,479,298 in cash and the issuance of 2,377,861 shares of common stock.
- Equity Issuance: The 2,377,861 shares were issued pursuant to the conversion right of the Notes at a price equal to 65% of the average of the three lowest trading days in the 15 days prior to September 14, 2016.
- Compensation Adjustments:
- CEO Isaac Dietrich: Salary reduced from $130,000 to $95,000 annually.
- COO Dan Hunt: Salary reduced from $130,000 to $90,000 annually.
- CTO Lance Galey: Salary reduced from $150,000 to $60,000 annually. Additionally, Mr. Galey waived $51,785 in deferred salary.
- Equity Incentives: Mr. Galey was granted 600,000 unvested restricted shares and options to purchase 600,000 shares at $0.51 per share. Vesting is scheduled monthly through April 2017, contingent on shareholder approval of the 2016 Equity Incentive Plan (expected by November 15, 2016).
Note: The filing does not provide specific revenue, profit, cash flow, or margin figures for the period.
Material Changes and Events
- Resolution of Default: The Company previously defaulted on its Notes on September 15, 2016, due to failure to pay principal. As of October 7, 2016, the Company announced the debt has been repaid in full, and the Notes are retired.
- Expense Reduction: Significant salary reductions for top executives were implemented as part of the Board's expense reduction initiatives.
- Capital Structure Change: The conversion of debt to equity increased the number of outstanding shares by approximately 2.38 million.
Outlook, Risks, and Contingencies
- Shareholder Approval Contingency: The issuance of shares and exercise of options granted to the CTO under the 2016 Plan are contingent upon shareholder approval, expected approximately 40 days after October 5, 2016.
- Acceleration Clauses: The CTO's equity awards include provisions for immediate vesting in the event of termination prior to full vesting or a change of control/merger.
- Liquidity Context: The ability to repay the debt through a combination of cash and equity suggests the Company utilized available liquidity and dilution to resolve the default.
Investor Verification Checklist
- Verify the exact number of shares outstanding post-conversion and the impact on dilution.
- Confirm the status of the shareholder vote for the 2016 Equity Incentive Plan to ensure the CTO's awards can be issued.
- Review the press release (Exhibit 99.1) for any additional terms regarding the debt settlement.
- Assess the Company's remaining cash position following the $1.48 million cash payment.
- Monitor future filings for any further defaults or liquidity constraints given the recent financial stress.