The Oct. 19 investors’ conference call for MassRoots, the Denver-based cannabis tech startup, was intended to celebrate a peaceful transition of power.

The call featured Isaac Dietrich, the company’s 25-year-old wunderkind founder, and Scott Kveton, a 44-year-old Portland-based entrepreneur—a tech whiz Red Herring magazine once proclaimed a “Titan in Waiting”—who was taking over for Dietrich as MassRoots CEO.

A board rebellion forced out founder Isaac Dietrich. He vowed to regain the throne. This morning, he did exactly that. But what kind of company is he left with?

The technology world is used to such peaceful handovers. At a certain point a startup’s brilliant but inexperienced founder relinquishes the reins to a mature 40-something tech veteran. This one went according to plan. On the call, Dietrich offered effusive praise for Kveton and his management team.

“I believe they are going to do a phenomenal job,” he said.

“I really appreciate that, Isaac,” Kveton responded. “I really appreciate you, Isaac, for all you have done over the last several years in founding this business. There is a heck of a business here…I am excited to take this even further.”

Behind the Curtain, a Different Story

Behind the public lovefest, though, sat an uglier truth.

In fact, Dietrich had been sacked by the MassRoots board of directors three days earlier. And Kveton’s “heck of a business” was in deep trouble. MassRoots was on financial life support and desperate for an infusion of cash.

Less than a month later, the ugliness burst into public view. On Nov. 14, MassRoots filed a lawsuit accusing Dietrich of “serious misconduct,” including “misappropriation and misuse of company funds” totaling $250,000, “illegal drug use at the work place,” and “improper sexual activities.”

Early this morning, Dec. 13, Isaac Dietrich proclaimed himself back in charge. Texts flew around Denver. Was that even possible?

By then, Kveton had exhausted his appreciation for the company’s founder. “Our last fiscal quarter was the worst quarter MassRoots ever recorded,” he said in a written statement, “and it was all Isaac Dietrich’s doing.” In an interview with Leafly last week, Kveton said he couldn’t discuss Dietrich further due to the ongoing litigation.

Dietrich, who had emerged as a charismatic darling of the cannabis investment economy, ripped the lawsuit as a fabrication. The allegations, Dietrich said, were “coming from Scott’s imagination.” Six days later, Dietrich launched a massive counterattack: a proxy fight to oust the board and regain control of the company he founded.

With millions of dollars in investment capital riding on the outcome, the fate of a company that once symbolized the digital cannabis economy hung in the balance. In the cannabis industry, many believed Dietrich’s wild ride at MassRoots had come to an end. Ousted CEOs rarely take on entire corporate boards and win.

But then, early this morning, Dec. 13, things changed. Isaac Dietrich proclaimed himself back in charge. Texts flew around Denver. Was that even possible?

It was. A Securities and Exchange Commission 8-K form, filed hastily, confirmed the rumors. On Dec. 12, the entire MassRoots board of directors—except Dietrich—resigned. They were replaced by Isaac Dietrich’s hand-picked director nominees.

Tucked into the document was the name of the new MassRoots CEO: Isaac Dietrich.

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'I'm back in. It's all happening in real time.' - Isaac Dietrich, MassRoots CEO, then fired, now CEO again.

The public feuding, mud-slinging and board purge appeared to signal the demise (or a nadir from which the company will rise—it depends on who you ask) of one of the cannabis industry’s most high-profile startups. At its height, MassRoots raised more than $20 million in investment capital and looked poised to become the first cannabis company to gain listing on the NASDAQ stock market.

The company raised $20 million from investors. Its stock is now priced in the pennies.

Last year MassRoots employed more than 30 full-time staff members at its Denver headquarters. Most recently, it was down to six, plus four contractors. In the third quarter of 2017 the company posted a net loss of $7.08 million, more than double its losses from the same period in 2016. MassRoots saw its over-the-counter stock (MRST) plunge from $7 in April 2015 to 11 cents by mid-November 2017. It staggered back to 31 cents by Dec. 13.

Unless the company mounted an incredible comeback, the name MassRoots would stand as a cautionary tale about fast-charging cannabis tech startups whose investment hype outpaced their products and revenue.

Two weeks ago, as he was fighting to regain control of MassRoots, Dietrich remained realistic, if not dour, about the company’s chances.

“Since I have been let go, the company has gone from raising an average of as much as a million dollars a month (in investments) to zero dollars,” Dietrich told me in a telephone interview on Nov. 30. (MassRoots officials disputed that claim.) “The company is no longer focused on the future. It is focused on cutting expenses rather than trying to figure out how to solve the problem. Really, there is little hope for the future.”

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In the Beginning: A Fragrant Vision

How did it reach this point?

Start with Isaac Dietrich’s dream. It was a well-crafted story he often shared with potential investors.

An exceptional student and debate team captain from Virginia Beach, Va., Dietrich veered right when others went left. “I didn’t go to college,” he said in a 2014 interview. “I felt it was a waste of money, because I always wanted to be an entrepreneur.” He worked as a Republican campaigner and co-founded a tech startup, RoboCent.com, that placed political robocalls.

Inspiration struck in April 2013, when Dietrich was smoking cannabis with Tyler Knight, a close friend and a student at Old Dominion University in Norfolk. The two realized that their friends who enjoyed cannabis needed a way to connect and post photos of buds and bongs. What the world needed, they decided, was a cannabis social network.

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Bong Rips and Bud Porn

The sound bite Dietrich would later offer to journalists—“Grandma doesn’t want to see me taking bong rips on Facebook”—captured the generational ambition of MassRoots. Indeed, the company Dietrich and Knight started with two friends, Stewart Fortier and his sister, Hyler, promised to stand out from internet buzz killers such as Google, Twitter, and Facebook, which refused to accept ads from cannabis businesses and discouraged users from uploading bud porn.

Fortier wrote the code. Dietrich wooed the investors. In two years, they built a cannabis powerhouse.

Knight dropped out of ODU, Dietrich pulled $17,000 out of his credit cards, and MassRoots was born. Early on, the founders proved they could do two things well: write code, with Fortier as the chief technology officer; and raise money, with Dietrich as the engaging CEO with a genius for wooing investors.

Within two months of its launch, MassRoots attracted 6,500 cannabis consumers, who registered and connected with fellow “buds”—MassRoots’ version of Facebook friends. App users posted pictures of glistening cannabis flowers, and, yes, their bong rips. A social community blossomed as more states legalized cannabis. By its first anniversary, MassRoots had surpassed its goal of 100,000 members. The rising startup banked $3.5 million from 70 individual investors and hedge funds.

MassRoots went public as an over-the-counter stock on April 9, 2015—amid the intoxicating buzz of its bid to join the NASDAQ exchange—and its price hit an all-time peak of $7 on April 20. On the holiest day on the cannabis calendar, MassRoots was flying high.

The Best of Times in Denver

Isaac Dietrich, Hyler Fortier, and Austin Hayslip discuss a business brochure during a staff meeting at MassRoots in Denver, CO on January 22, 2015. (Craig F. Walker/The Denver Post)

Isaac Dietrich offered himself as the youthful face of MassRoots and its promise. MassRoots partners and staffers were hard at work in building the firm, but he set the optics: To investors and the cannabis industry, MassRoots was Isaac, and Isaac was MassRoots.

That dynamic was on display at a Nov. 2015 meeting of the ArcView Group, the angel investor network that focuses on the cannabis industry. Dietrich, then 23 years old, commanded a Hilton Las Vegas Resort ballroom packed with high rollers seeking the next Facebook. He had planned his presentation down to the socks and shoes. Steve Jobs had his black turtleneck. Mark Zuckerberg has his t-shirt and hoodie. Dietrich chose a tweedy professorial look. Dressed in a brown patterned jacket with elbow patches, he cast MassRoots as an anthropological phenomenon—a unique community of cannabis consumers, then 650,000 strong, sharing and celebrating their experiences.

Amid all that community-building, Dietrich said, MassRoots was amassing a valuable trove of data. “We know what kinds of strains and what consumption patterns are most popular,” he told potential investors. “And in the next six months, we will begin to monetize that data.”

There was no reason to doubt the claim. Months earlier, the company rallied MassRoots users to pressure Apple to drop its prohibition on cannabis-related products on the App Store. They prevailed, and Apple allowed iPhone users in legal cannabis states to download the MassRoots app.

Morgan Paxhia, co-founder and managing director of Poseidon Asset Management, a cannabis-oriented financial management company, invested early in MassRoots. By Nov. 2015, when Dietrich wooed the ArcView forum, Poseidon had already participated in three rounds of funding.

“They were in a really great position to do something pretty special and different,” Paxhia recalled.

Dietrich asked for $8 million from ArcView’s investors that day. He fell short, walking away with just over $1 million in pledges. But plenty of others wanted in.

“Investors got caught up in thinking that something novel was filling a void in this industry,” said Matt Karnes, a former Wall Street analyst at Bear Stearns who founded GreenWave Advisors, a New York research firm that focuses on the cannabis investment market. “People thought the natural takeout would be Facebook in a social network for cannabis users.”

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The March to Monetization

Six months passed. By mid-2016, Dietrich and his MassRoots team still hadn’t cracked the nut: how to monetize their community or their data. Yet still the company grew. Every morning 33 employees walked through the door. MassRoots moved into new offices in in Denver’s fashionably revitalized Lower Downtown (LoDo) district. A headline in Inc. magazine summed up the situation: “MassRoots Becomes the Biggest Hit in the Marijuana Business.”

There seemed no reason to slow down. The company sponsored the city’s fragrant 4/20 smokefest and concert in 2016, which ended disastrously when a freak snowstorm canceled the show. Last July, the company spent thousands of dollars to host “High Mass,” a lavish party for cannabis entrepreneurs and enthusiasts at a private estate in the Hollywood Hills.

Meanwhile, the losses kept piling up.

“There were claims made about revenue or reaching cash-flow positives that were never met and were never close to being met,” Paxhia said. “If you’re going to make a statement like that, you’ve got to be certainly confident it is going to happen.”

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Now Is the Time

If MassRoots was going to make it happen, the second half of 2016 was the company’s moment. MassRoots had reached an apex of positive public exposure.

Unable to monetize the data, Dietrich pivoted. He would make MassRoots a kind of canna-data conglomerate.

Dietrich and his team had amassed an impressive base of social network “buds,” and owned one of the best-known brands in cannabis. There was just one problem: Revenue remained a slim fraction of the company’s burn rate.

Unable to find a way to monetize the company’s proprietary data and social network, Dietrich pivoted. He decided to reinvent MassRoots as more than just a social network.

In Sept. 2016, the company partnered with the cannabis business intelligence firm Headset to develop business data products.

The company investigated the possibility of entering the digital currency space. MassRoots raised $545,000 for a “Simple Agreement for Future Tokens”—a venture, Dietrich said, that would allow the company to “develop a cryptocurrency to be used in the cannabis industry.”

Perhaps the most promising venture was the company’s Dec. 2016 purchase of DDDigtal Inc., a company known as Whaxy, for 2.9 million shares of MassRoots stock and $100,000. Whaxy offered an inventory management system for licensed cannabis businesses. In theory, the integration of Whaxy’s system would give members of the MassRoots social network the opportunity to pre-order products for pickup at dispensaries, and then post feedback on their purchases. “Together, we’re building a cannabis technology powerhouse,” said Whaxy CEO Zack Marburger.

More Deals, Faster

Isaac Dietrich, CEO of MassRoots, displays his app at his office in Denver, CO on January 22, 2015. (Craig F. Walker/The Denver Post)

Deals were inked even as MassRoots encountered significant cash flow issues. In March 2016, the company took out a $1.5 million promissory note to keep the lights on. When the note came due in September, MassRoots executives were forced to admit they could not repay it on time. Dietrich reassured investors in an upbeat note. In the second quarter of 2016, he wrote, “We generated more revenue in a single quarter than in all previous quarters combined.” And costs were being contained. The company laid off 14 of its 33 full-time employees and cut $146,000 in monthly expenses.

In an interview with Leafly earlier this month, Dietrich acknowledged that MassRoots had its share of failings and missed financial opportunities. Although the site offered paid listings for dispensaries and other cannabis companies in its web portal, MassRoots notably passed up on charging them for the privilege of posting in its separate Facebook-style feed of consumers.

“If we had just charged per month for businesses to have access to our community, I think that would have helped our growth,” he said.

Investors Cool on the Company

At Poseidon Asset Management, Morgan Paxhia sensed that MassRoots’ challenges mirrored the wild rides of many tech startups.

“There are periods when all these stocks go up and get to a price where it is unstainable,” Paxhia said. The Poseidon partners decided it was time to pull back. “We started taking chips off the table,” selling off much—though not all—of its MassRoots stock to reduce its exposure, and doing so in time “to make a good return on our investment.”

Dietrich, who was and still remains MassRoots’ largest single shareholder, remained bullish. He insisted that revenue growth was inevitable. The company’s network boasted “a million of the world’s most compassionate cannabis consumers” in “a safe, stigma-free environment for people to talk about all things cannabis.”

He believed MassRoots had the potential to gather as many as 10 million online users, as more states legalized cannabis for medical or adult use. Legalization in California, he said, would be a major driver of traffic.

Odava Enters the Picture

Scott Kveton, Odava co-founder, came aboard MassRoots in June 2017. (Intel Free Press/Flickr Creative Commons)

The acquisitions didn’t stop.

In late May, MassRoots spent $100,000 to acquire an equity share in High Times, the venerable magazine and Cannabis Cup owner. “This is a great strategic relationship for us, and we expect significant shareholder return,” Dietrich told The Cannabist when the deal was announced.

About six weeks later the company purchased Odava, a Portland, Oregon-based manufacturer of cannabis-focused supply chain software, for $1.75 million. Odava’s operations were folded entirely into MassRoots, as was also the case with Whaxy. The deal included bringing Odava’s co-founder and CEO, Scott Kveton, onto the MassRoots executive team.

Kveton was once the Portland technology community’s most renowned entrepreneur. As co-founder of the mobile startup Urban Airship, he was lauded by Portland Monthly, Forbes, and other glossies. That run ended poorly when, in 2014, Kveton’s ex-girlfriend accused him of sexual assault in a civil lawsuit, forcing him to leave the company. The lawsuit was resolved the following year. Neither party in the case disclosed terms of the resolution. “I spent three years fighting those claims. All of them were dismissed,” Kveton told Leafly last week. “I fought this. I won.”

In late 2015, Kveton co-founded Odava with Urban Airship co-founder Steven Osborn. MassRoots snapped up the company less than a year later. Kveton came aboard at MassRoots—as the company’s vice president—full of optimism. He described Isaac Dietrich as a “visionary.” But the company’s financial troubles soon sparked conflict in the Denver office.

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Conflict From the Start

According to Dietrich, Kveton took to belittling “the kid” in charge, an account others dispute. Tensions simmered as the company split into warring factions.

The specific truths are hard to discern. But the fiscal reality was that MassRoots had never turned a profit. The social reality was that Isaac Dietrich, for all his success, was still a very young CEO. Instead of Kveton becoming a valued mentor to Dietrich and the pair finding harmony, Kveton confronted him over alleged behavioral issues amid worsening financial tensions of the company.

When Dietrich plunged into his next enthusiastic quest—a $12 million stock deal to buy CannaRegs, Inc., a Denver firm that provides city-by-city listings of marijuana regulations—Kveton pushed back.

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CannaRegs: Too Big a Fish to Swallow

Amanda Ostrowitz, an attorney and former Federal Reserve Regulator, first met Isaac Dietrich at a Sept. 2014 hack-a-thon held at a Denver bar called the Watering Bowl. It was a weekend competition. Sixteen cannabis technology startups pitched their ideas. Dietrich was one of the judges. Ostrowitz, with an idea for a startup called CannaRegs, won the event. He forged a friendship and intellectual partnership with Dietrich.

“I thought Isaac was a smart, ambitious young guy,” Ostrowitz told Leafly. “I always got along with him,” she added. “He has been very frank with his strengths and weaknesses. A lot of his weaknesses were my strengths and my weaknesses were his strengths. We made a good team.”

Dietrich’s strength, according to Ostrowitz, was his skill with people: “He’s a brilliant, brilliant fundraiser and he knows how to motivate people.” Ostrowitz saw in MassRoots a public company with a large shareholder base, good liquidity and volume, “and a whole lot of tech talent.”

The pair began negotiating Mass Roots’ purchase of CannaRegs and what they hoped would become a strong partnership. Ostrowitz believed she could help address the major weakness of Dietrich’s company: fiscal management.

“I would have brought in a lot of the fundamentals: scrappiness and financial prudence,” Ostrowitz said. Asked to expand on her observations, she explained, “There is no need for me to elaborate—their 10-Q reports say it all: They spent a lot of money. Nobody is denying that.” (10-Q reports are quarterly financial disclosure documents that publicly traded companies are required to file with the Securities and Exchange Commission.)

The Final Straw: ‘Toxic Environment’

The MassRoots app continues to function, despite the turmoil behind the scenes. (Julia Sumpter/Leafly)

MassRoots’ purchase of CannaRegs was announced in August 2017, but almost immediately the deal started falling apart.

At MassRoots’ Denver offices, Scott Kveton didn’t care for the wager Dietrich was laying down on CannaRegs.

'None of the staff could focus on their jobs. It was really just a toxic environment.
Isaac Dietrich, MassRoots CEO

Dietrich argued that CannaRegs was a cash-positive company that could significantly expand MassRoots’ business reach. Kveton balked at the $12 million price, which was seven times what MassRoots had paid for his own company just a few months prior.

Kveton told Ostrowitz and Dietrich the purchase price didn’t make sense based on the company’s revenues and the valuation of MassRoots’ previous investment of $300,000. Kveton’s concerns were echoed by the MassRoots board, which also opposed the deal. A review of the company’s financial books also raised questions about Dietrich’s spending.

As the company became factionalized over “competing visions,” Dietrich charges that Kveton began running off many employees loyal to the MassRoots founder.

“None of the staff could focus on their jobs,” Dietrich said. “It was really just a toxic environment.”

Morale Plunge

The usual upbeat vibe at company headquarters turned south. Dustin Carter, 30, a Denver restaurant manager and small-scale investor in MassRoots, signed on as a member of its sales force in August 2015, when the future seemed limitless. “I saw the potential of the company,” Carter told me. “We were the hot commodity. Everyone was taking about MassRoots. We were going to change social media for cannabis. We were definitely the cool kids on the block.”

By October 2017, when Carter moved to a sales executive position with CannaRegs, he sensed that MassRoots was being mocked for its failure to become cash-positive. Though he never missed a paycheck with MassRoots, he felt “we were becoming more of a joke” in the tech sector.

Before leaving MassRoots, Carter booked a booth for the company at the Marijuana Business Conference in Las Vegas, the industry’s largest annual trade show. He still believed in MassRoots and particularly in Dietrich. He said he was shocked to hear after he left that Kveton had canceled the Las Vegas booth, not wanting to pay the expense.

The Blow-Up

Isaac Dietrich, 25, poses for a portrait Wednesday, Dec. 13, 2017 on Lawrence Street in Denver. Dietrich, the founder of Massroots, a Denver-based cannabis technology platform, was forced out and accused of “serious misconduct.” (Daniel Brenner for Leafly)

Things finally boiled over on Oct. 16, when Kveton confronted Dietrich.

According to Dietrich, Kveton pressured him to sign a separation agreement by threatening criminal charges over alleged illegal drug use by Dietrich in the workplace. Kveton also alleged that Dietrich had authorized unapproved expenditures of $250,000 paid to himself and others. When Kveton advised him to get an attorney, Dietrich denied the allegations but didn’t retain counsel. Yet, he realized Kveton had maneuvered him nearly to checkmate. He had little choice but to leave. “Scott,” he later recalled, “was unfortunately able to get the board on his side.”

The following day Dietrich signed a separation agreement. The terms of that exit deal were not disclosed, but later court filings indicated it contained non-disparagement and standstill clauses, which prevented Dietrich from criticizing MassRoots or create and/or work for a competing company. The deposed founder went public with his exit on Twitter that evening, saying he had just endured “one of the toughest days of my life.”

As news emerged of his ouster, Ostrowitz withdrew CannaRegs from the MassRoots purchase deal. “Once they fired Isaac, we put in our notice of withdrawal,” she said. “It was in the best interests of CannaRegs. There was way too much uncertainty there [at MassRoots] and I had to protect my team.”

By late October, the formerly bustling MassRoots office had become a ghost ship. A handful of company staffers jumped to the healthier CannaRegs. One of them, sales executive Carter, told Marijuana Business Daily that the move was sad but amicable. “[Kveton] said to me, ‘You’ve been a kick-ass employee…but there’s nothing to sell at MassRoots currently.’” Carter added: “There wasn’t much for everyone to do.”

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Tallying the Losses

In the first six months of 2017, MassRoots lost $19.1 million, a fivefold spike from the same period in 2016. MassRoots had just $31,247 in cash as of June 30, down from $374,490 at the end of last year. The brands Odava and Whaxy have vanished, absorbed into MassRoots and then imploded inside the parent company. Dietrich estimates that the company’s net losses since its inception now total $50 million, with $30 million having been paid in now-devalued stock options and shareholder compensation for investors and to pay for the company’s many acquisitions. (That estimate is Dietrich’s alone; Leafly could not confirm the accuracy of his statement.)

Despite those staggering losses, and with the board aligned against him, Dietrich refused to quietly walk away.

In early November, the banished company founder spoke with John Schroyer of Marijuana Business Daily. And he came out spitting fire.

“I don’t know exactly what the next steps are, but I do know that the board’s days are limited,” Dietrich told Schroyer.

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Threatening a Proxy Battle

Isaac Dietrich, 25, poses for a portrait Wednesday, Dec. 13, 2017 at the University of Colorado Denver School of Business. (Daniel Brenner for Leafly)

That MJ Biz article, published on Thursday, Nov. 9, raised alarms across Denver’s cannabis industry. Isaac Dietrich was mounting a proxy battle? It seemed brazen. But anyone who’d seen Dietrich in action knew one thing about him: The guy could deliver a compelling pitch, which meant he could potentially sway the votes of MassRoots’ 35,000 investors, despite the mountain of financial losses looming behind him.

The following Tuesday, Nov. 14, MassRoots’ board and executive team counterattacked. The company filed a civil lawsuit against Dietrich alleging that the former CEO violated his termination agreement by fomenting a shareholder uprising and talking smack about MassRoots in the Nov. 9 MJ Biz article. The lawsuit alleged illegal drug use and sexual misconduct on Dietrich’s part, but offered no evidence to substantiate the claims.

In a written statement issued that day, Scott Kveton laid the wood to his predecessor. Kveton characterized the company’s massive losses as “all Isaac Dietrich’s doing.” MassRoots board member Tripp Keber, founder of the cannabis edibles company Dixie Elixirs, put things more diplomatically. “The Q3 results do not reflect what we believe to be MassRoots’ potential and reaffirms the board’s decision…to make a leadership change,” he said in an accompanying statement.

In a conference call to shareholders in November, Kveton said MassRoots had cut its losses—or burn rate—to $175,000 monthly, “down significantly from earlier this year.”

Kveton, also a major company shareholder, said MassRoots maintained a heady social media presence, including 1.4 million followers on Twitter, 520,000 on Facebook, and more than 120,000 on YouTube. He said the company was poised to grow with an improved website, a dispensary finder service, and an online partnership with a cannabis delivery company in California.

“Myself and the rest of the team have been executing a plan towards profitability,” he said. Meanwhile, he added, MassRoots was seeking an infusion of $2.5 million to stay afloat. The company said it was actively raising money, despite Dietrich’s claims to the contrary.

The Proxy Fight Is On

Dietrich followed through on his threat. On Nov. 20, he formally initiated a process with the Securities and Exchange Commission to force a shareholders’ vote to remove and replace the three MassRoots board members who fired him: former Coca-Cola executive Terence Fitch, Ean Seeb of the consulting firm Denver Relief LLC, and Dixie Elixir’s Keber.

In a deliberate shift, Dietrich was hoping to replace them with Charles R. Blum, former CEO of the Texas oil pipeline company QS energy; Nathan Shelton, former president of auto equipment manufacturer K&N engineering; and copyright executive Cecil Kyte of the firm Rightscorp.

Dietrich remained MassRoots’ largest shareholder, with 17.74 million, or 15.82 percent of outstanding shares. He believed he had the votes to prevail. As evidence, he provided Leafly with signed documents from 21 other major shareholders backing the move.

CEO Scott Kveton, who once hailed Dietrich as a “visionary,” issued a blistering statement in anticipation of the proxy fight.

“The days of Isaac Dietrich treating this company like his personal piggybank are over,” he said. “It is not surprising to us that only a few days after we filed our lawsuit against him, he filed a preliminary proxy statement with the SEC with the intent to remove the board and retract the lawsuit against him.”

“I have faith the shareholders of this company will see through this ruse and recognize the folly of putting Dietrich back in charge.”

Investors: Once Bitten?

Morgan Paxhia of Poseidon Asset Management said the open combat at MassRoots did not bode well for additional investment.

“You don’t invest in lawsuits,” said Paxhia, who, with his sister, Emily Paxhia, co-founded the San Francisco hedge fund specializing in cannabis business investment. “There are now two lawsuits, one directly aimed at Isaac and one by Isaac (through the SEC action) aimed at the board. That just means there’s distraction from the core business, if there is a core business left.”

“There is just a lot of finger-pointing,” he added, “not ownership of what actually happened.”

Don’t Count Out a Comeback

Karnes, the New York cannabis industry analyst, said a comeback was unlikely.

“The ship is sinking and it’s a matter of figuring out what hole to fill first,” he said. “This is a great recipe for bankruptcy.”

Still, Paxhia held out hope for a surprise comeback. “In the cannabis industry, we live in dog years because things just happen so quickly,” he said. “But companies have cat lives. When you think a company should be dead many times over, they just come roaring back. The odds are not great, but you never know.”

In the eyes of Isaac Dietrich, there was only one chance for MassRoots survival, and that involved his return as CEO. Two weeks ago he appeared confident.

“My stress level is at an all-time low,” he said. “I am at peace with myself. They tried to drag my name through the mud, which didn’t work. And I will win this proxy vote, which will be vindication.”

Kveton, notably, told me on Dec. 11 that his stress level was low, too. Behind the scenes, a major MassRoots shareholder aligned with the new CEO called me, dishing background material on Dietrich and suggesting the possibility of new legal actions.

And then another corporate explosion rocked the company.

The Script Gets Flipped

On Dec. 12, the three board members supporting Scott Kveton resigned. Dietrich’s three-member board slate was in. The filing with the SEC, posted Dec. 13, said Dietrich was back as CEO “with an annual base salary of $145,000” and “annual bonuses and equity awards as shall be determined by the board from time to time.”

'I'm back in. It's happening in real time. Everyone realized I was going to win the proxy election.'
Isaac Dietrich, CEO once again

Shockingly, Scott Kveton was out. He sounded harried when he answered his phone on Wednesday morning. “I thought you were someone else,” he said. “I can’t talk right now.” He hung up.

Dietrich said his rival resigned after the board quit.

“I’m back in,” he told me. “It’s all happening in real time. Basically, everyone realized I was going to win the (proxy) election.”

Now that he’s back in control of MassRoots, the company’s lawsuit will be withdrawn, Dietrich said.

The kid” was in charge again. MassRoots, Isaac Dietrich’s MassRoots, was back. But the question still lingers: For how long?

Lead image by Daniel Brenner