Debra Borchardt
While numerous small businesses across the country struggle during an unforeseen lockdown, MassRoots (OTC:MSRT) the poorly run cannabis tech company managed to snag $50,000 in the Payroll Protection Program. This despite one of the company’s main shareholders being sued for stock fraud by the SEC.
“I’m pleased to report MassRoots has raised significant capital to fund our operations and, later this month, launch our rewards program – MassRoots Rewards – aimed at driving cannabis demand from our community to client dispensaries,” stated Isaac Dietrich, MassRoots’ Chief Executive Officer. “We’ve slashed our monthly expenses to less than $75,000 per month, negotiated far better rates and terms with our vendors, and built a rewards model we believe can gain widespread adoption while generating positive cash-flows. We’ve learned many important lessons in the five years since MassRoots became a public company – and we’re now positioned to combine that knowledge with an unparalleled work-ethic to deliver results for all our shareholders.”
The PPP loan matures in May 2022 and bears an interest rate of 1.0% per annum. Payments of principal and interest of any unforgiven balance commence in December 2020.
$300,000 Bridge Financing
This loan supplements the $300,000 in bridge financing recently closed by MassRoots. Although there is no press release detailing the terms of this loan, the SEC filing noted that on April 17, 2020, the company issued and sold convertible notes in the aggregate principal amount of $330,000 (including an aggregate of $30,000 original issuance discount) to accredited investors. The April Notes mature on October 17, 2020.
The April Notes accrue interest at a rate of 12% per annum and are convertible into shares of the Company’s common stock at $0.01 per share, subject to adjustment; provided, however, upon the occurrence of an Event of Default, the conversion price shall be 60% of the average of the three lowest closing bid prices of the Company’s common stock during the twenty days prior to the date of conversion; provided, further, however, upon the occurrence of an Event of Default, the conversion price shall not be less than $0.001 per share.
MassRoots stock sells at less than one penny.
Once called the “Facebook” of cannabis, MassRoots burned through millions of dollars raised with little to show for it. When the advertising dollars for the social media platform never came through, MassRoots then pivoted to becoming a seed-to-sale tech platform. However, the competition was already well-entrenched and this endeavor never seemed to get off the ground. The company is now pursuing a review, mapping, and news website style entity not unlike Weedmaps or Leafly.
Stock Fraud
The SEC posted a filing that it is going after the lead investor group in Massroots for stock price manipulation and organizing coordinated buying and selling movements. Dietrich is not a part of the lawsuit. Instead, the defendant is mainly Douglas Leighton.
Leighton is specifically called out for promoting the stock, causing a rise in the share prices so that he could sell at a profit. A scheme often referred to as “pump and dump.” Leighton and his trading group, which was comprised of the above-listed individuals and companies owned roughly 90% of MassRoots shares prior to the company going public. He assisted in bringing the company public in 2015.
The SEC lawsuit alleges, “Leighton directed the trading group members how to slow the sales of their privately-purchased MassRoots stock, imposing a limit on how many shares he wanted them to sell at a time. He criticized trading group members who did not follow his “rule” about selling their MassRoots stock.” The intent of this manipulation was to keep MassRoots stock prices high so that Leighton and the trading group members could sell at a large profit.
Leighton is currently listed as an advisor to BudTrader.com, which is also planning to go public through a reverse takeover.
