MassRoots Completes Capital Raise and is Nasdaq Eligible?

MassRoots (MSRT) is one of the largest and most active technology platforms for cannabis consumers, businesses and activists with over 775,000 users. After MSRT completed a $1.4+ million capital raise late last week, we believe the company now meets all Nasdaq listing requirement and we expect to see an S-1 filed in the very near future!

Investment Thesis

We are favorable on MSRT and see upside to current levels because of the following reasons: 1) The number of users and businesses using the platform continues to grow even though it faces several hurdles, 2) Continues to upgrade and improve its product and service, 3) MassRoots continues to raise capital and strengthen its balance sheet, 4) Started monetizing its platform and we expect to see top-line and bottom-line growth on a quarter-over-quarter basis, and 5) Valuation has improved.

Meets all of the Nasdaq’s Listing Qualifications

In late August, MSRT submitted a listing application to the Nasdaq Capital Markets with the goal of becoming one of the first cannabis technology companies to be listed on a national exchange. MSRT currently meets many of the key criteria for the Nasdaq—including the corporate governance requirements (this was met when the former Coca-Cola executive Terence Fitch joined MSRT’s Board of Directors in December 2015)—and expects to commence trading on the Nasdaq during 2016.

On Friday, MassRoots filed an 8-K which stated that the company completed a private offering with certain accredited investors on March 17th. Under the offering, MSRT entered into a securities purchase agreement with the investors who agreed to purchase notes and warrants. Chardan Capital Markets acted as the sole placement agent for the offering.

MSRT agreed to sell to the investors six month secured convertible original issue discount notes with principal amount in the aggregate of $1,461,333, together with five year warrants to purchase shares equal to the number of shares issuable upon the conversion of the notes in full. The warrants have an exercise price of $1.00 per share

We think this update is extremely significant because we believe that MassRoots now satisfies all Nasdaq’s listing requirements. According to the Nasdaq’s listing requirement, MSRT needed to have more than $3 million in shareholder equity and we believe that this raise helped them meet this requirement. Over the next few days we expect to see an S-1 filed with the Nasdaq.

User Base Continues to Grow Despite Hurdles

MassRoots was founded in 2013 and is considered to be the “Facebook of marijuana.” MSRT has over 725,000 users and only operates in the states where medical marijuana is legal (23 states). Its apps let people discuss their cannabis-related experiences, learn about dispensaries, and keep up with state-by-state campaigns to liberalize drug laws.

At the start of 2015, MSRT had over 200,000 users and its app was on the list of App Store’s banned applications. After thousands of users and the cannabis industry complained to Apple, Inc. (AAPL), MSRT’s application returned to the App Store in mid-February.

During 2016, at least eight states are expected to have some form of cannabis legalization on the ballot including California, Arizona, Massachusetts, Nevada, Florida, Ohio, Maine, and Michigan. These states have close to 40% of the United States population and this would significantly increase MSRT’s total addressable market.

Since cannabis-related companies cannot advertise on websites such as Google (GOOG) or Facebook (FB), MSRT provides a great outlet for marijuana-related businesses to advertise, given the targeting opportunities and the lack of prohibitions often found on general-interest sites.

MassRoots Business Portal Continues to Improve and Grow

The regulatory nature of the cannabis industry has benefited MassRoots’ Business Portal and it currently has more than 5,500 businesses on the platform. Dispensaries, glass shops and cannabis brands use the company’s business portal to advertise their products to MSRT’s user base. MassRoots plans to starting charging businesses a monthly fee to access real-time market data on their given region or specialty.

MSRT has many plans for its business platform and will release several new features during 2016. MSRT’s timeline for the introduction of new services on its business platform is as follows:

• First Quarter: MSRT plans to release localized advertising features. This will allow dispensaries to target ads toward users that are within a specific distance.
• Second Quarter: MSRT plans to release personalized advertising features which will let businesses target users based on previous posts.
• Third Quarter: MSRT plans to integrate a point-of-sales system into its platform. This will let businesses target users based on their purchasing history at a particular dispensary.

These new features will improve the service offered by MSRT and should expand the number of businesses utilizing the company’s advertising solutions.

Continues to Improve User Experience by Enhancing its Platform

After MassRoots user base broke through 450,000 users, activity on their application became overwhelming and this started to negatively impact user experience. In mid-September 2015, MSRT began migrating its infrastructure to Amazon Web Services and this improvement led to a significant increase in the number of page views and sessions.

In late November, MassRoots released its new Web interface which will open public content on MSRT’s network to search engines such as Google for the first time. In a short period of time, some of MSRT’s blogs became one of the top results on Google for several cannabis-related searches. Once the company’s network is fully indexed on Google, MSRT will see search engine traffic increase significantly on a monthly basis.

Over the next few months, MSRT plans to release new features which will help keep users on the app. Some of the new features include direct messaging (expected in March 2016), dispensary discovery and live inventory (expected in April 2016), and a strain and tagging guide (expected in May 2016).

MSRT plans to introduce new features and improvements on its Web platform every two weeks. The company’s Web interface presents an opportunity for MassRoots to start breaking into older age groups and expand well beyond the stoner demographic.

One of the reasons why MSRT has been able to quickly scale its business is because the company recruited a talented in-house development team during 2015. MSRT has nine full time programmers working out of its corporate headquarters in downtown Denver and CEO Isaac Dietrich believes that the quality of MSRT’s development team will play a huge role in the new features and improved systems introduced in 2016.

Expect Continued Revenue Growth During 2016 and Beyond

In mid-August, MassRoots started generating revenue through advertising and reported $60,000 in revenue by September 30. Since then, MSRT has been increasing revenue by approximately 20% on a month-over-month basis.  The company’s burn rate has also decreased on a monthly basis. This is a trend that we expect to continue throughout 2016 and beyond.

On February 22nd, MSRT announced that from February 15th to February 19th, it entered into two social media advertising contracts that it expects will generate $77,000 in annual revenue.

Valuation has Improved

With marijuana legalization continuing to open new markets and MSRT continuing to improve its service through new features and new developers, we think shares possess significant price appreciation potential.

Company Relationship Disclosure

T420 is responsible for the T420 opinions provided in this disclosure except all sources or information provided by other parties were not verified or authenticated and T420 does not undertake to confirm or substantiate or be responsible for such information provided by other parties.

Any Content posted regarding a Profiled Issuer is not a solicitation or recommendation to buy, sell or hold securities. We cannot and do not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. All information should be independently verified. We are not responsible for errors or omissions in our publications, and any opinions expressed are subject to change, without notice. We do not, nor are we under any obligation to undertake due diligence or investigation or authenticate and verify whatsoever regarding Profiled Issuers or any Content posted in relation thereto and we do not receive any verification from the Profiled Issuer regarding the Content we disseminate. Similarly, while we endeavor to facilitate the provision of quality information, we are not responsible for any loss or damages caused or alleged to have been caused by its use nor verify or authenticate or update such information.

Pursuant to an agreement between StoneBridge Partners LLC and MassRoots Inc. (MSRT) we have been hired for a period of 360 days beginning October 4, 2016 and ending April 4, 2017 to publicly disseminate information about (MSRT) including on the Website and other media including Facebook and Twitter. We are being paid “ZERO” per month (MSRT) for or were paid “50,000” shares of unrestricted or restricted common shares. We own ZERO shares of (MSRT), which we purchased in the open market. We plan to sell the “ZERO” shares of (MSRT) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (MSRT) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information. This contract was extended on from April 4, 2017 to October 4, 2017. We are being paid “ZERO” dollars per month or were paid “50,000” shares of restricted common shares.

This article contains forward-looking statements within the meaning of applicable securities laws. All statements that are not historical facts, including without limitation, statements regarding future estimates, plans, programs, forecasts, projections, objectives, assumptions, expectations or beliefs regarding future performance are “forward-looking statements”. Forward-looking statements can be identified by the use of words such as “expects”, “does not expect”, “is expected”, “believes”, “intends”, “anticipates”, “does not anticipate”, “believes” or variations of these words, expressions or statements, that certain actions, events or results “may”, “could”, “would”, “might” or “will be” taken, will occur or will be realized. Such forward-looking statements involve risks, uncertainties and other known and unknown factors that could cause actual results, events or developments to differ materially from the results, events or developments expected and expressed or implied in such forward-looking statements. These risks and uncertainties include, but are not limited to, dependence on obtaining and maintaining regulatory approvals, including the acquisition and renewal of federal, provincial, state, municipal, local or other licenses, and any inability to obtain all necessary government authorizations, licenses and permits to operate and expand the Company’s facilities; regulatory or policy changes such as changes in applicable laws and regulations, including federal, state and provincial legalization, due to fluctuations in public opinion, industry perception of integrative mental health, including the use of psychedelic-assisted therapy, delays or inefficiencies or any other reason; any other factor or development likely to hamper the growth of the market; the Company’s limited operating and profitability track record; dependence on management; the Company’s need for additional financing and the effects of financial market conditions and other factors on the availability of capital; competition, including that of more established and better funded competitors; the impact of the Russia-Ukraine conflict on the global economy; the continued impact of the COVID-19 pandemic; and the need to build and maintain alliances and partnerships, including with research and development companies, customers and suppliers. These factors should be carefully considered, and readers are cautioned not to place undue reliance on forward-looking statements. Despite the Company’s efforts to identify the main risk factors that could cause actual measures, events or results to differ materially from those described in forward-looking statements, other risk factors may cause measures, events or developments to materially differ from those anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in forward-looking statements. The Company does not undertake to revise forward-looking statements, even if new information becomes available as a result of future events, new facts or any other reason, except as required by applicable laws.

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Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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