30 September 2016

Here’s what the Cannabist are reporting … we’ve provided below some of the details of both filings if you aren’t inclined to link through.

The second filing is particularly informative and it appears they are hoping for a positive result across states on legalization ballots in order to keep the business afloat.

” 2016 Elections …We believe that if California voters pass Proposition 64 (60-31-9) and Florida voters ratify Amendment 2 (70-23-7), it will have significant implications for MassRoots’ revenue and user growth. If any combination of Arizona (50-40-10), Nevada (53-39-8), Massachusetts (50-45-5), Maine (53-43-4), North Dakota (Unknown) or Arkansas (58-35-7) also pass cannabis initiatives, it will cause the growth rate to accelerate even faster.”

Cannabist write… MassRoots Inc., the cannabis-centric technology and social media company, has cut more than 40 percent of its workforce and recently defaulted on debt payments, the Denver-based firm disclosed.

MassRoots officials said they received notices of default after not being able to make required payments on an outstanding principal of $966,000 owed to creditors, according to a filing made Sept. 21 with the U.S. Securities and Exchange Commission and first reported Tuesday by BusinessDen..

In a separate filing made Monday, the company disclosed that it shed vendor agreements, cut 14 of 33 full-time jobs, and implemented new technology to save $146,000 a month

Full report at
http://www.thecannabist.co/2016/09/27/massroots-debt-payment-default-layoffs-marijuana/64053/

With regard to the filing made Sept 21 this appears to be the paragraph that gets to the nub of the issue

Relating to the Company’s registered offering that commenced on August 2, 2016, an anti-dilution price reset provision contained in warrants that permit the purchase of Common Stock that were issued to the Holders on March 14, 2016 (the “Warrants”) was triggered. This provision caused the exercise price of the Warrants to be adjusted from $1.00 per share to $0.50 per share and the aggregate number of shares of Common Stock subject to the Warrants to be increased from 1,514,669 to of 3,029,338.

Here are what we believe to be the 2 main bullet points as to the company’s health and future plans as outlined in the second filing

A) Where they’ve had to cut costs

Expense Reductions
From July to September 2016, the Company eliminated $146,000 in monthly expenses by terminating relationships with certain vendors, reducing headcount from 33 to 19 full-time employees, and utilizing new technological tools to achieve better results with fewer resources. As many of these contracts and agreements had 30 or 60-day termination clauses, we expect these expense reductions not to be fully reflected until the fourth quarter of 2016. Even as MassRoots continues to scale its userbase, we do not expect a significant increase in the size of our team as we plan to automate as many processes as possible in a self-service platform for our clients.

B) The investment that they believe will pull them out of the hole. The question here is will the investment achieve what they hope? The question is how much did they invest and at what point will they be generating profit rather than revenue from the investment. We note that this is left deliberately vague and does rely on ballot votes going towards legalization in a number of states.

We’d also ask – is time on their side?  

It does, as the market is fully aware , take quite an extended period of time for the results of a ballot to become enacted legislation and then a managed regulatory market.

Especially so in a market complicated beyond belief like California

In May 2015, MassRoots invested in Flowhub’s preferred seed round to provide capital for the initial development of the next generation of cannabis point-of-sale and compliance technology. Since launching in June 2016, Flowhub has facilitated more than 250,000 transactions across dozens of dispensaries in Colorado and Oregon, facilitating end-to-end regulatory compliance while streamlining their business operations. We believe Flowhub is at a critical inflection point, poised to scale from dozens of dispensary locations using its platform now to hundreds of locations by the end of the year. Within the next few months, we expect a significant percentage of all transactions occurring in the regulated cannabis industry will happen within the MassRoots/Flowhub ecosystem.