Greenwave Technology Solutions(GWAV) - 2021 Q4 - Annual Report

Part I Business The company transformed its business in 2021, acquiring Empire Services to pivot from social media to operating 11 scrap metal recycling facilities - In October 2021, the company changed its name to Greenwave Technology Solutions, Inc. and divested social media assets, pivoting its business focus[20][22] - The company acquired Empire Services, Inc. on September 30, 2021, transitioning into the scrap metal industry with 11 facilities in Virginia and North Carolina[22][31] - A primary business strategy is to open a new facility with rail or deep-water port access to enhance transportation efficiency and expand the customer base[26] - The company implemented new technology in 2021, including a cloud-based ERP system and a junk car buying platform, to streamline operations and improve customer acquisition[41][42][43] - In November 2021, the company raised $27.6 million in aggregate proceeds through a placement of secured convertible promissory notes with a principal amount of $37.7 million[52] Risk Factors The company faces significant risks including market cyclicality, customer concentration, going concern doubts, internal control weaknesses, and stock volatility - The business is highly sensitive to the cyclical nature of the scrap metal industry and general economic conditions, which can adversely affect operating results[60][68] - The company has substantial customer concentration, with a single customer accounting for 83% of its revenue in fiscal 2021[93] - The independent registered accounting firm has expressed substantial doubt about the company's ability to continue as a going concern due to historical losses and the need for additional financing[99] - Material weaknesses in internal control over financial reporting were identified, primarily due to a lack of sufficient segregation of duties, which could impair financial condition if not remediated[100] - As of March 30, 2022, company management beneficially owned approximately 50.67% of the outstanding common stock, giving them significant control over stockholder matters[125] - The company's common stock is quoted on the OTC Pink market and could be subject to penny stock rules, which may reduce trading activity and make it difficult for stockholders to sell shares[116][119] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[139] Properties The company leases all 11 scrap yard facilities from an entity owned by its CEO, with primary leases expiring January 1, 2024 - The company leases all 11 of its scrap yards from DWM Properties, LLC, an entity owned by its Chairman and Chief Executive Officer, Danny Meeks[140][141][142] - The primary property leases expire on January 1, 2024, with options for the company to extend[140][141][145] - The company does not own any properties or land and believes its current leased facilities are adequate for its needs[155] Legal Proceedings The company settled a legal dispute with former counsel over unpaid fees and resolved a significant arbitration demand from Iroquois Master Fund - A dispute with former counsel over unpaid legal fees of $487,391 resulted in a judgment against the company, settled in September 2021 with monthly payments until February 2023[156][157] - A significant arbitration demand from Iroquois Master Fund, seeking damages of at least $12 million, was settled on September 30, 2021, involving a $1 million payment and Series Z Preferred Stock issuance[389][392] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[160] Part II Market for Registrant's Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock is quoted on the OTC Pink Tier under "GWAV," with no dividends paid or anticipated, and 131 stockholders of record as of April 7, 2022 - The company's common stock is quoted on the OTC Pink Tier of the OTC Markets under the symbol "GWAV" as of March 25, 2022[162] Quarterly Stock Prices | Period | High Price ($) | Low Price ($) | | :--- | :--- | :--- | | 2022 | | | | First Quarter | 14.10 | 3.35 | | 2021 | | | | First Quarter | 17.10 | 1.83 | | Second Quarter | 26.37 | 5.25 | | Third Quarter | 17.49 | 8.40 | | Fourth Quarter | 19.20 | 11.40 | | 2020 | | | | First Quarter | 2.55 | 0.45 | | Second Quarter | 2.07 | 0.30 | | Third Quarter | 1.56 | 0.45 | | Fourth Quarter | 2.52 | 0.48 | - The company has never declared or paid dividends and does not anticipate doing so in the foreseeable future, retaining earnings for business growth[167] Reserved This item is intentionally left blank - This item is reserved[170] Management's Discussion and Analysis of Financial Condition and Results of Operations Following the Empire acquisition, 2021 revenues surged to $8.1 million, resulting in a $2.8 million net income primarily from a non-cash gain, despite increased operating losses and ongoing liquidity concerns Comparison of Fiscal Years 2021 and 2020 | Metric | 2021 ($) | 2020 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | 8,098,036 | 6,964 | 8,091,072 | 116,184% | | Gross Profit | 2,859,554 | 5,681 | 2,853,873 | 50,235% | | Loss from Operations | (2,927,564) | (1,160,211) | (1,767,353) | 152.33% | | Net Income (Loss) Applicable to Common Stockholders | 2,776,027 | (111,623,487) | 114,399,514 | (102.49)% | - The dramatic increase in revenue and gross profit in 2021 is directly attributable to the acquisition of Empire and the shift to scrap metal operations[186][187] - Operating expenses increased by $4.6 million to $5.8 million in 2021, primarily due to higher payroll, rent, and hauling costs associated with expanded operations[188][189] - The company had cash of $2,958,293 as of December 31, 2021, with net cash used in operating activities of $2,487,213 and net cash provided by financing activities of $5,521,687[194][196][197] - The company has $37.7 million in principal of senior secured convertible debt maturing on May 30, 2022, which it expects will be converted into common stock[200] Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Greenwave is exempt from providing disclosures under this item - The company is a "smaller reporting company" and is not required to provide the information for this item[221] Financial Statements and Supplementary Data The company's consolidated financial statements and supplementary data are included in the report, beginning on page F-1 - The consolidated financial statements required by this item are included in the appendix to the Annual Report, starting on page F-1[222] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting principles or financial disclosure - None[223] Controls and Procedures Management concluded disclosure controls were ineffective as of December 31, 2021, due to material weaknesses in internal control over financial reporting, with remediation dependent on future financing - Management concluded that disclosure controls and procedures were not effective as of December 31, 2021[225] - A material weakness in internal control over financial reporting was identified, stemming from inadequate segregation of duties and insufficient review of accounting matters[225][229] - Remediation plans include appointing additional qualified personnel, but these efforts are dependent on securing additional financing or generating significant revenue[230] Other Information There is no other information to report in this section - None[237] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This disclosure is not applicable to the company - None[238] Part III Directors, Executive Officers and Corporate Governance Required information is incorporated by reference from the company's Definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - Required information is incorporated by reference from the company's Definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[240] Executive Compensation Executive compensation information is incorporated by reference from the company's 2022 Definitive Proxy Statement - Required information is incorporated by reference from the company's Definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[242] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership details are incorporated by reference from the company's 2022 Definitive Proxy Statement - Required information is incorporated by reference from the company's Definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[243] Certain Relationships and Related Transactions, and Director Independence Related party transactions and director independence information is incorporated by reference from the company's 2022 Definitive Proxy Statement - Required information is incorporated by reference from the company's Definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[244] Principal Accountant Fees and Services Principal accountant fees and services information is incorporated by reference from the company's 2022 Definitive Proxy Statement - Required information is incorporated by reference from the company's Definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[245] Part IV Exhibits and Financial Statement Schedules This section lists documents filed as part of the Annual Report, including financial statements starting on page F-1 and a comprehensive list of exhibits - The report includes an index of financial statements starting on page F-1[247][248] - A detailed list of exhibits filed with the report is provided, including merger agreements, debt instruments, and equity incentive plans[251] - No financial statement schedules have been submitted because they are not required or applicable[250] Financial Statements Report of Independent Registered Public Accounting Firm The auditor's report expresses substantial doubt about the company's going concern ability and identifies intangible asset valuation from the Empire acquisition as a Critical Audit Matter - The auditor's report includes a "Going Concern" paragraph, highlighting substantial doubt about the company's ability to continue due to accumulated deficit and expected future losses[261] - A Critical Audit Matter was identified concerning the accounting for the Empire business combination, specifically the valuation of intangible assets, which involved complex and subjective judgments[267][268] Consolidated Financial Statements The 2021 consolidated financial statements reflect a significant transformation, showing $38.2 million in assets, a $23.3 million stockholders' deficit, $8.1 million in revenues, and a $2.8 million net income Consolidated Balance Sheet Highlights (as of December 31, 2021) | Account | Amount ($) | | :--- | :--- | | Total Current Assets | 3,339,295 | | Total Assets | 38,177,570 | | Total Current Liabilities | 59,470,149 | | Total Liabilities | 61,525,632 | | Total Stockholders' Deficit | (23,348,062) | Consolidated Statement of Operations Highlights (for the year ended December 31, 2021) | Account | Amount ($) | | :--- | :--- | | Revenues | 8,098,036 | | Gross Profit | 2,859,554 | | Loss From Operations | (2,927,564) | | Net Income Available to Common Stockholders | 2,776,027 | Notes to Consolidated Financial Statements Notes detail a going concern warning due to a $56.1 million working capital deficit, the $23.1 million Empire acquisition, $37.7 million in convertible debt, related-party leases, and 83% revenue concentration from one customer - Note 2 (Going Concern): As of December 31, 2021, the company had a working capital deficit of $56.1 million and an accumulated deficit of $298.4 million, raising substantial doubt about its ability to continue as a going concern[285] - Note 4 (Acquisition of Empire): The acquisition was valued at $23.1 million, with purchase price allocated to Licenses ($21.3 million), Intellectual Property ($3.0 million), Customer Base ($2.2 million), and Goodwill ($2.5 million)[342][348] - Note 10 (Convertible Notes Payable): The company has senior secured convertible notes with a principal balance of $37.7 million as of December 31, 2021, which mature in 2022[406][411] - Note 16 (Concentrations of Revenue): For fiscal year 2021, one customer accounted for approximately 83% of the company's revenue[488] - Note 18 (Related Party Transactions): The company leases 11 scrap yard facilities from an entity controlled by its CEO, paying $477,140 in rent to this entity in 2021[501] - Note 20 (Subsequent Events): The company effectuated a 1-for-300 reverse stock split on February 28, 2022[509]