Greenwave Tech Solutions Inc (GWAV)

[Level2Me]

Upon further review, there are so many red flags with this company. Frankly, I wasn't even anticipating spending this much time writing it up, but there are just too many issues. Where does one start? Ok, here we go:

Problem 1.
Registered users
As of August of last year, the company was at 950k registered users
(Source: Most recent 10Q, Nov 2016)


Yesterday they PRed 1M users. Question number one: How many users did they add in Which means they added 50k users (Registrations is not the same as daily users, mind you).



They are not growing fast enough. 50k new registrations in 7 months = 7.5k registrations / month, or less than 1%



Problem 2.
Significant operating losses:

950k users all in all provided them with roughly $200k in revenue last quarter. Let's be more generous, lets round it up significantly. 950k user gets them to $100k/revenue a month. Their loss from operations is about $600k/ month. It means since last report they probably lost $2M. We will know exact amount soon enough



Problem 3.
Forward revenue.
If you put 1 and 2 (above) together, you will see that their estimated revenue could NOT increase significantly. Their user base grew at the rate of 5% in 6 months. Their revenue, most likely, grew at the same pace. Remember how I rounded up above? Such a small increase in registrations means I can estimate flat revenue QoQ. So same $300k of revenue and same $500k/mo in net losses from operations. Ok, let's say there was zero stock compensation, zero other SG&A (which will not be a zero, by the way). Still, their advertising and payroll is double the revenue and this is not likely to change in the future. Losing money hand over fist. Yes, they did raise almost $3M. So what? In the last 9 months their loss from operations was exactly $6M. You do the math.

1M registrations got them to $100k/mo in revenues... or about 10 cents per registration.

Problem 4.
Payroll
According to most recent 10q, they had 24 full-time employees. Yet, payroll (excluding stock compensation) is ridiculous $500k/quarter. (And if you include stock compensation, it adds up to $1.1M in compensation in 3 (THREE!!!)months for 24 people. Which means, each employee averages $20k/quarter. (excl comp) or $50/k quarter (including stock comp). I can see management getting paid this much (yeah, for growing registrations 50k in six months, let's celebrate!), but c'mon, this is totally messed up. American weed dream, in other words


Problem 5.
Stock promotion
Annual report is imminent. Company is heavily promoting their stock in order to stimulate run-up into earnings. (Here is a sample, but I found at least 4 stock promoters that picked up this stock last Friday). Each of those gets compensated $15k, for the total of at least $60k. Hey, that's almost their monthly revenue! No biggie.
Such promotion hasn't done much to the stock, though. Share price increased from $0.87 open on a Monday to $0.89 close on a Tuesday.
And, as I mentioned, annual report is imminent. I will speculate that if company was expecting stock price to rise due organically to very positive report, they wouldn't pay tons of money in an attempt to spike the price. Which, in my own opinion, could mean only one thing, the report will show more losses.



Problem 6.
Google Play store
Look at this business update from about a month ago:

Then look at the google play store as of today (3/21).



Nope. It's not there. If anything, the number of initial registrations may have gone up, but the number of users actually dropped significantly due to Android users (over 50% of the market in the US in controlled by Android, and is not being able to use this app)

Problem 7.
Dilution.
At the end of 2014, weighted average number of common shares was 14 Millions
At the end of 2015, it was 44M
At the end of Sep 2016, company had 54M O/S
Last known data shows about 67M O/S
The company issues approximately 20M shares annually. Keeping today's market cap constant (which I doubt will be the case), a year from now each share will be worth about 25% less given current rate of dilution.

Let's recap.
Although valued at nearly $75 million, the company brings less than $100k in monthly revenues. At the same time their operating losses exceed $500k/month. Their registrations are hardly growing. Their current number of active users is not public.
1M registrations got them to $100k/mo in revenues... or about 10 cents per registration.
They are not even present in google play store, which covers over 50% of the market in the US, and even more market outside of the US
They are paying hefty bucks for stock promotion, alas it's barely moving the needle
Their annual report will be here shortly. Last year it was published on March 30 so I probably give it another week. I don't anticipate any significant improvement to operating profits, though.
And it still continues to trade at $75 million valuation. For how much longer? The bear case here is quite convincing
The only source of capital is new stock/new warrants/p-notes etc. This will dilute stock further. (in case you are wondering, they have 200M A/S, so long way to go in diluting the heck out of this stock)

Considering all of the above, I would say this is definitely significant market underperform. Not even a 'hold', I would recommend getting out, taking whatever profits, and not looking back. Alternatively, shorting this stock might also prove to be a viable option.

I will be interested in hearing bull case here, however, please be specific, saying things like 'to the moon' and 'the market will grow' are not specific enough. Looking for tangible evidence before I can pull the trigger.