A Letter From MassRoots Chairman About Merger With Odava

NEW YORK: MassRoots, one of the leading technology platforms for the cannabis industry, has released the following update from its Chairman and CEO Isaac Dietrich concerning its planned merger with Odava.


Dear MassRoots Shareholders,

Last week, MassRoots entered into an agreement and plan of merger with Odava, Inc., a leading compliance and point-of-sale system for cannabis-related businesses. The closing of the merger is subject to various closing conditions as we have detailed in our Current Report on Form 8-K filing, dated July 5, 2017. Upon effectiveness of the merger, MassRoots can offer clients a complete set of solutions to operate their business: advertising to cannabis consumers, reporting to state regulatory systems, and streamlined management of their supply chain. This acquisition, along with other recent developments, further solidifies MassRoots as one of the leading technology companies in the regulated cannabis industry, which ArcView Market Research projects to grow from $6 billion to $22 billion over the next five years.

Our main focus is expanding market share in states where Odava is able to report to state regulators via Franwell, Inc.’s METRC system, currently OregonAlaska, and Colorado. Just a few days ago, it was announced that California will be utilizing METRC, enabling us to enter the largest regulated cannabis market in the U.S. with minimal integration modifications. With more than 1,000 dispensaries expected to be subject to California state regulations for the first time, this presents a unique growth opportunity for MassRoots to on-board these dispensaries to the Odava system as well as our other offerings.

Our main engineering priority is integrating MassRoots’ community of over a million cannabis consumers with Odava, enabling consumers to view pricing and inventory data in real-time, identifying the best strains and products through community-driven reviews, and empowering dispensaries to implement customer loyalty and deal programs to boost retention. We believe the seamless integration of our systems will give us a unique value proposition to dispensaries by consolidating the most important functionality and data collection in one central platform.

Four years ago, I invested my life savings to start MassRoots and since then, purchased stock on two occasions at $0.50per share, to take advantage of three core opportunities in the cannabis marketplace:

  • Patients and consumers need an app to find the best products and, as state and App Store regulations permit, order cannabis directly from their smart phones;
  • Cannabis-related businesses are in need of result-driven advertising and customer loyalty systems to boost sales. An online community of over a million of the world’s most passionate cannabis consumers is their target audience; and
  • Dispensaries need reliable software to streamline their operations and manage their compliance reporting to state regulators in an efficient manner.

We believe MassRoots is uniquely positioned to solve these problems. First, we estimate our market-share of cannabis consumers on our mobile applications is among the top three in the country and the MassRoots brand is one of the most recognized in the industry. Second, we have a top-tier engineering team, made up of some of the world’s top technologists that enables us to build better products and move faster than anyone else in the space. Third, MassRoots has one of the largest data sets in the cannabis space, giving us knowledge on the sector very few people have – and giving us the necessary insight to build products that drive immediate value for dispensaries. Lastly, with over 25,000 shareholders, $17 million raised to date through equity financings and warrant exercises, and no long-term debt on our balance sheet, we believe we have access to the capital necessary to rapidly grow our platform.

In late 2016, we began leveraging MassRoots’ stock as a strategic currency, allowing us to acquire Whaxy and, now, Odava, which extends our platform’s reach into retail dispensaries. We are currently evaluating several other synergistic and technology-focused opportunities that we expect would expand MassRoots’ revenue channels and cross-selling opportunities.

As is the case with many companies operating in a dynamic environment, MassRoots’ execution has not been perfect – we spent too much money advertising to consumers, over-expanded the size of our staff and overhead, and did not effectively listen to our clients to better solve their needs. The Odava integration plan has given our leadership team an opportunity to re-evaluate our strategy and the following changes have gone into effect:

  • We have significantly reduced our advertising budget and staff devoted to marketing and community-outreach. MassRoots already has one of the largest user bases in the industry and going forward, we expect our brand growth to be primarily-driven by dispensaries on-boarding their customers as part of a consumer loyalty program.
  • In an effort to expedite the development of MassRoots’ new business portal for dispensaries, we retained one of the most reputable development firms in Silicon Valley to supplement our in-house development team. With the work on this portal nearly complete, we decided not to renew this contract, under which we have paid approximately $100,000 per month since the beginning of 2017. It is important to note that we have not capitalized any of the over $5 million MassRoots has spent on development-related salaries and expenses over the past several years; we believe that by immediately expensing these costs rather than spreading them out over time, it will enable us to reach profitability more rapidly.
  • While our current Chief Operating Officer, Daniel Hunt, has been instrumental in helping MassRoots grow to this point, we have both recognized it is time to bring in a more seasoned operator to lead our team on a day-to-day basis. Over the past several weeks, our leadership team and I have interviewed several candidates with the experience necessary to bring MassRoots to the next level. We expect to announce a new Chief Operating Officer in the near-future.

Collectively, the changes we have implemented are expected to reduce MassRoots’ expenses by more than $1.5 millionannually while still enabling us to deliver on our core business objectives. Despite the challenges we have encountered over the past few years, MassRoots has succeeded in establishing one of the most recognizable brands in cannabis with one of the largest market shares of cannabis consumers and extensive sets of data – uniquely positioning our company to dominate the cannabis technology space.

Going forward, the MassRoots team is going to be focused on two core metrics: the number of dispensaries utilizing our platform and the monthly recurring revenue we have contracted with dispensaries. While we utilize a number of other data points to analyze and adjust our strategies, fundamentally, these two metrics best reflect the health of our business. We look forward to regularly updating investors on these metrics and our progress.

With CaliforniaNevada, and several other new markets coming online in the near-future, we are in an incredible position  to leverage our brand’s equity and capabilities to seize this opportunity. We are grateful for your continued trust in our company and look forward to updating you on our progress.

Regards,
Isaac Dietrich
Chairman and Chief Executive Officer
MassRoots, Inc.

MassRoots’ latest corporate overview deck is accessible here.

Energy Gluttony of Cannabis Industry Reaches Breaking Point

NEW YORK: A study by the Lawrence Berkeley National Laboratory revealed that legal indoor marijuana-growing operations are highly energy intensive, and are responsible for an alarming percentage of the nation’s total energy use. In California, the top-producing state, indoor cultivation uses about 3% of all electricity use. A single cannabis cigarette represents 1.5 kg (3 pounds) of CO2 emissions, an amount equal to driving a fuel efficient hybrid car 22 miles, or keeping a 100-watt light bulb on 24-hours a day.

This energy use can account for as much as 50% of a grower’s total overhead, and is detrimental to the environment – taking the “green” out of the growing marijuana industry.

In order to reduce this energy drain, the team at Scale Energy Solutions devised a new type of “Micro-Grid” that integrates clean technology solutions into indoor cannabis grow facilities, to significantly lower energy use and reduce environmental impact.

“The cannabis industry is now using six times more energy than the pharmaceutical industry, and this paradigm is not sustainable,” says Timothy Hade, Co-Founder of Scale Energy Solutions. “Our new approach to energy reduction not only slashes costs for growers, but also improves the industry’s total environmental footprint, which in the long run will increase its chance of acceptance at a national level.”

Some companies are touting energy-saving LED lighting as a means to lower energy costs, but this addresses only a small part of the overall problem, Hade said. Additionally, many growers say that LEDs do not perform as well as the high-pressure sodium or metal halide lamps, especially when the plants began producing flowers – the valued part of the yield, according to the New York Times.

Scale Energy Solutions is one of the only company’s the provides a comprehensive solution, by essentially re-engineering a grower’s energy grid.

“We provide a way for cultivators to reduce operating costs and improve profit margins in an increasingly commoditized market,” Hade said. “By applying new technologies to cannabis growing, we create a truly greener industry.”

MassRoots Enters Into Definitive Agreement To Acquire Whaxy

COLORADO: MassRoots, one of the leading technology platforms for the cannabis industry, this week announced it has entered into a definitive agreement to acquire DDDigtal Inc. d.b.a. “Whaxy” & Cannabuild for $100,000 cash and 2,926,830 million shares of MassRoots’ common stock.

Since launching in May 2016Whaxy‘s menu management and online ordering platform for licensed cannabis businesses has processed over $5 million in volume across 40,000 unique transactions. The acquisition is subject to customary closing conditions.

screenshot-2016-12-17-10-31-57“This acquisition, when completed, will expand MassRoots’ offerings to include a full suite of dispensary software solutions – online ordering, marketing, and real-time inventory management— for cannabis businesses,” stated Isaac Dietrich, MassRoots CEO. “Zach Marburger is a brilliant strategist whom we’ve known for years and Whaxy’s CTO Micah Davidson engineered one of the best technology platforms on the market with a lean budget. We could not be more excited to welcome them to the MassRoots team. Over the next few months, our main focus will be increasing the number of dispensaries utilizing the MassRoots/Whaxy platform.”

“We could not be more excited to be joining forces with MassRoots, enabling Whaxy’s system to scale its transaction volume, provide new capabilities to our customers, and add more enterprise value far more rapidly than we would have on our own,” stated Zach Marburger, Whaxy founder and CEO. “MassRoots comes to the table with hundreds of thousands of end-cannabis consumer relationships, hundreds of dispensary clients, a world-class development team, and one of the largest shareholder bases in the industry. The synergies between our two companies are strong and together, we’re building a cannabis technology powerhouse.”

Whaxy’s platform seamlessly integrates with nearly every major point-of-sale system used dispensaries and will seamlessly connect to the MassRoots network, allowing for live pricing, online ordering, and product feedback. Over the last six months, Whaxy has been used by some of the leading businesses in the industry, including Harborside, GreenHouse, Cresco Labs, and more.

Why Tech Innovators Are High On The Prospects For Legalized Marijuana

COLORADO:  While the tech industry soldiers on mightily in search of disruptive, game-changing, TED-worthy apps, SaaS platforms, and amplified monetization plays, a few brave souls have taken the proverbial off-ramp in search of the next big thing. Experts estimate that the highly fragmented $2.3 billion US legal cannabis industry will increase to $10.2 billion by 2018.

Tom Bollich, the artificial intelligence-savvy robotics engineer who co-founded Zynga, is betting on that boom. As director and CEO of Surna Inc., he’s gone from virtual goods in Farmville to a pure play on explosive growth in the cannabis industry. Bollich’s Surna produces water-chilled climate control systems, designed for legal marijuana growers but applicable to other hydroponic agriculture needs.

Why would a whiz kid who grew Zynga to a $10 billion market valuation make the pivot from a gaming industry to the promise of the cannabis industry? I contacted him in a written interview, and the explanation is more naturally progressive than you might think.