According to a Sept. 21 Securities and Exchange Commission filing, the Denver-based social media network MassRoots disclosed that it was unable to make $966,000 in mandatory payments to creditors who purchased six-month convertible secured promissory notes in March, and is now in default on those notes.
The default was partly triggered when one of the creditors, DiamondRock, sought to convert $25,000 of promissory notes. Two other holders, unnamed in the filing, provided the company with formal notices of default; which, according to the terms of the notes, require the company to pay 130 percent of the outstanding principle of the note with 2 percent interest every month the balance remains unpaid.
According to the filing, the company owes $1,256,170 on those defaulted notes. Under the terms of the default, the company issued 319,008 common stock shares to its creditors. The company had issued 51 million shares of common stock as of Aug. 17, which is traded on the over-the-counter market OTCQB as MSRT.
According to a Sept. 26 letter to shareholders, CEO Isaac Dietrich announced the company eliminated $146,000 in monthly expenses by “terminating relationships with certain vendors” and shrinking its workforce from 33 full-time employees to 19. The letter also outlines their partnerships with cannabis business intelligence firm Headset, and point-of-sale technology company Flowhub, which Dietrich said will expand the company’s offerings and capabilities of the Massroots platform.
“I know these past few months have been frustrating in the public market for our stock and as the company’s largest shareholder, I have used this opportunity to add to my position,” Dietrich said in the letter. “Fundamentally we believe that Massroots is in a stronger position than ever while the 2016 elections have the potential to significantly accelerate the growth of the cannabis market.”
On Sept. 23 the company announced a 2016 Equity Incentive Plan, which reserves issuance up to 6,000,000 shares of common stock for issuance in connection with the recruitment and retention of employees, directors, and consultants.