Ousted MassRoots Founder Gets His Company Back
This story, which originally appeared in Issue 30, has been updated.
On Dec. 12, MassRoots founder Isaac Dietrich reclaimed his job as CEO of the cannabis technology company, closing out a tumultuous year. Just three weeks earlier, on Nov. 21, the company sued him in a Denver federal court for misappropriating funds. He was fired by his board of directors on Oct. 16
MassRoots (OTCQB: MSRT) reinstated Dietrich with an annual salary of $145,000, according to SEC filings. The company also added board members Cecil Kyte, Charles Blum and Nathan Sheldon Scott Kveton, who worked as interim CEO, resigned along with board members Tripp Keber, Ean Seeb and Terry Fitch.
Dietrich plans to pursue cryptocurrency efforts through a potential initial coin offering. Lawsuits that were filed by him and his company after his initial departure, he says, would go no further.
Meanwhile, MassRoots is behind on its rent payments in the Market Center office building at 1624 Market St. and is facing eviction.
The company’s stock price has stayed close to the 30 cents since Dietrich’s return. The stock had been gaining strength from its lows for the year below 20 cents a share, but is still down sharply down from the $1 price earlier in 2017.
It’s been one of the highest-profile stock meltdowns in the short history of the marijuana Green Rush. While the company boasts one million followers on its social networks, it has yet to monetize that audience.
During his brief tenure, Kveton tried to steer MassRoots in a new direction as legal documents flew back and forth between Dietrich and the company. Kveton had said Dietrich violated his separation agreement by making disparaging remarks about company officials in a published interview. A lawsuit accused Dietrich of making more than $250,000 in unauthorized payments to himself and to third parties on his behalf.
Dietrich responded by launching a proxy battle against MassRoots in a bid to get himself reinstated as CEO. With 15.8% of the outstanding shares, Dietrich had remains the company’s largest shareholder.
Asked about the allegations against him, Dietrich told Freedom Leaf in a Nov. 20 email that rival board members are “scared because I have the votes to replace them” and added that the company’s lawsuit as a whole was “baseless.”
Volatility should be expected for cannabis startups like MassRoots, a postage stamp-sized microcap which is valued at less than $20 million as a. But the tiny company loomed large in the world of cannabis penny stocks that have come into focus in recent years.
Earlier this year, Mass Roots, which boasts of having “one of the leading technology platforms for the regulated cannabis industry,” was riding high with at least $4 million in venture capital backing, plenty of traction from penny stock traders and attention as a Facebook-like app to track like-minded cannabis consumers.
In a 2016 interview with Freedom Leaf, Dietrich said he was motivated to “create an environment for sharing cannabis” and pointed to dispensary location services as a potential way to create revenue for the start-up. With appearances at ArcView events, backing from venture capital investors and solid press coverage, MassRoots seemed to have the wind at its back.
But the company’s financial performance fell sharply in the third quarter of 2017, down to $11,516 in revenues from $209,003 in the same period in 2016. Meanwhile, expenses rose to $7.5 million from $2 million.
Dietrich blames the weak third-quarter results on a “rocky integration of Odava and the Odava team.” MassRoots acquired Odava, which makes point-of-sale software for licensed dispensaries, this year for $1.7 million. Kveton was Odava’s former CEO.
Dietrich has had a wild ride for a guy who’s just 26 years old. Some investors might be upset, but meltdown sagas like this one are not uncommon in the world of penny stocks. There will be more to come with this tiny company that makes a lot of noise.
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