With years of legal publishing research and industry experience behind us our guesstimate for the sale of a service like this to the likes of a Lexis or Westlaw might, if you are lucky, pull in a couple of million as that’s the investment they’d have to make to get a few editors in and integrate into existing tech and sales and marketing networks.
It illustrates Mass Roots lack of knowledge of the legal publishing industry that they applied a value of $US12 million (even if it was a share deal) to a good but not yet finalized product that may soon be in competition to the behemoths of legal publishing.
That said we congratulate Canna Regs for persuading Mass Roots that the valuation was reasonable at that price.
New Cannabis Ventures though are somewhat more forward. Here, as they say, are some takeaways from a piece they just published on the subject.
While the stock promoters are busy telling everyone what a great deal this is for MassRoots, perhaps driving the price higher, it looks to be a last-ditch effort by a failed technology company that is rapidly losing its ability to fund itself. MassRoots overpaid for CannaRegs in our view, and investors should be cautious, especially until additional capital has been raised.
Despite having some cash in its coffers at the beginning of the year and promises of positive cash flow from operations that never materialized, the company reported terrible financials in Q2:
- Cash of just $31,247
- Current assets of just $31,247
- Current liabilities of $697,838
- YTD Operating loss of $19.50mm ($5.13mm net of stock based compensation)
- YTD Cash Flow from Operations of -$5.2mm
On Friday, August 19th, days before the CannaRegs deal was announced, the company sold toxic convertible notes and issued warrants at just $0.50, raising $950K. This follows a July financing that was materially worse than the 2016 financing, with the company selling shares at $0.50 with warrants at $0.65 to raise $1.217mm.
MassRoots has never had a handle on its finances, and there is nothing to suggest that it does at this point either. The bottom line is that the company is significantly undercapitalized, and its plan appears to be for the stock to rally so that warrants get exercised. Instead, it is likely that it will have to raise capital yet again, and this follows a really nasty stop-gap toxic convertible debenture deal done just before the CannaRegs deal was announced.
During the conference call on 8/23, Ostrowitz indicated that she expects the MassRoots sales team to help her expand, but this seems like a bit of a stretch, as MassRoots has never generated significant sales.
Mass Roots stock holders can depress themselves further by reading the full article at