MassRoots shake-up: In wake of abrupt CEO switch, deal to acquire CannaRegs gets nixed

CannaRegs changes plans because of "too many unknowns right now"; MassRoots interim CEO Scott Kveton says founder and former CEO Isaac Dietrich to stay on board of directors

Updated Oct. 19, 2017 at 5:02 p.m. This article has been updated with information on MassRoots’ conference call with shareholders.


MassRoots Inc. went through a massive transition this week.

In a span of two days, the Denver-based marijuana tech and social media firm no longer had its founder at the helm and no longer had an acquisition valued at $12 million on the docket.

In two regulatory filings made public early Wednesday, MassRoots disclosed founder Isaac Dietrich had resigned from his position as chief executive and a deal to buy Denver-based compliance software firm CannaRegs was nixed. By Wednesday afternoon, MassRoots officials announced the “planned transition” of Dietrich at the end of a press release about a new dispensary-finder service, with officials saying the executive change was far from sudden or unplanned.

Dietrich will remain with MassRoots as a member of the board of directors, a role that suits his strengths as a “visionary,” interim CEO Scott Kveton told The Cannabist in an exclusive interview Wednesday.

On Thursday, Kveton hosted a conference call for company shareholders. Dietrich, who spoke briefly on the call, said he would support the leadership in any way he could.

Kveton, who led the call, touted MassRoots’ current and future position, saying the company had a strong brand, diverse set of product offerings and the liquidity to pursue additional acquisitions. He said his “No. 1 focus is how do we get to cash-flow positive as quickly as possible,” and added MassRoots was reining in its monthly cash burn rate.

Early media reports — including Green Market Report, which first reported the CEO switch — described a company in crisis, a firm that was bleeding cash and one that quickly and unexpectedly shed the old guard. Dietrich tweeted on Oct. 16, “By far one of the toughest days of my life.”

Kveton joined MassRoots three months ago when his company Odava, a software firm focused on cannabis retail infrastructure, was acquired by Dietrich’s firm for $1.75 million. The new CEO shook off reports that MassRoots was in turmoil, adding that he remains quite bullish on the firm’s future prospects.

“I feel really good, and there is a lot of value we’re unlocking here in the business,” Kveton said in an interview. “And to me, that is super exciting.”

Dietrich could not be reached Wednesday for comment.

Isaac Dietrich, CEO of MassRoots, makes a call at his office in Denver on Jan. 22, 2015. (Denver Post file)

As for CannaRegs, Kveton described the failed deal as “unfortunate.”

“Ultimately, it just came down to the board wanting to maximize the deal for MassRoots’ shareholders, and we just couldn’t get there,” Kveton said, declining to disclose any proposed terms or specific details of the discussions.

During Thursday’s shareholder call, Kveton repeated comments he made to The Cannabist about the scrapped CannaRegs deal. He also touched on the company’s stock sink in recent days, claiming that officials would look into who dumped shares on Monday and “what their agenda was.”

Shares of MassRoots (OTCQB: MSRT) closed at 26 cents on Thursday. The stock fell more than 40 percent since Monday.

CannaRegs pulled the plug on the planned acquisition on Tuesday, said company founder Amanda Ostrowitz. By that point, Marijuana Business Daily and other media outlets were fleshing out the details of Dietrich’s apparent ouster by the board of directors.

“There’s just too many unknowns right now,” Ostrowitz told The Cannabist.

The deal with MassRoots presented “infinite upside” for CannaRegs, which was looking for some added muscle in expanding its web-based rules and regulations platform to cannabis companies and municipalities throughout California and beyond, she said. MassRoots had a strong brand, good visibility and a robust marketing engine, she said.

But the company’s operations were also tumultuous and volatile enough to raise some red flags, she said, adding that the departure of Dietrich was the last straw.

“People were clearly on different pages throughout the company, with different goals and different objectives,” she said. “We didn’t realize the disjointedness of it until we were all the way in it.”

CannaRegs was able to make a clean break and back out of the deal without any financial penalties, she said.

Ostrowitz’s firm is not actively seeking another suitor, she said. The company returns to what it was doing before — pursuing steady adoption of its regulations platform and eventually expanding the guts of that technology to other emerging, highly regulated industries, she said.

“CannaRegs is prospering on its own,” she said. “I simply had to look at what was in the best interest of my company,” she said.

Watch an interview with CannaRegs founder Amanda Ostrowitz on The Cannabist Show: