The embattled former CEO of MassRoots Inc. launched a counter-offensive against the firm that is now suing him.
Isaac Dietrich, who founded the Denver firm and remains the marijuana social network and business technology company’s largest shareholder, on Monday initiated a process with the U.S. Securities and Exchange Commission requesting a special meeting and shareholder vote to elect a new board.
“I strongly believe that the board must be reconstituted to ensure that the interests of the shareholders are appropriately represented in the boardroom, and that the board takes the necessary steps to help the company’s shareholders realize maximum value for their investment,” Dietrich wrote in the SEC filing made Monday.
Dietrich, in an interview with The Cannabist, said he believes the company he founded in 2013 has potential to become a market leader in the cannabis industry — especially in what could be a colossal market in California. However, he doesn’t believe MassRoots could succeed under the guidance of the current trio of directors and interim CEO.
“History has proven that when a founder is removed from a company, typically it loses its vision and its drive going forward,” Dietrich said. “I truly feel that if we make this change, we’re going to be in a position to dominate California.”
Initiating the proxy fight, Dietrich is seeking to replace three board members: Terence Fitch, a former beverage industry executive who logged two decades at Coca-Cola; Vincent “Tripp” Keber, the chief executive of cannabis infused products company Dixie Elixirs; and Ean Seeb, co-founder of consulting firm Denver Relief LLC.
Keber and Seeb have held their seats since 2014. Fitch has served as a MassRoots director since 2015.
Dietrich’s suggested replacement board includes himself as well as Charles R. Blum, a former CEO of Texas-based oil pipeline technology firm QS Energy and longtime head of the Specialty Equipment Market Association, a specialty automotive trade organization; Nathan Shelton, a former president of auto equipment manufacturer K&N Engineering and former board member of QS Energy and SEMA; and Cecil Kyte, an executive at copyright protection firm Rightscorp.
Those nominated have experience in growing small, public companies, Dietrich said, adding he was introduced to the three executives by one of MassRoots’ larger investors.
Dietrich owns nearly 17.74 million shares of MassRoots, or about 15.82 percent of the outstanding shares, according to Monday’s SEC filing.
The move is the latest chapter in MassRoots’ recent saga, a corporate drama unfolding at a company once touted as the “Facebook for pot.”
Last month, MassRoots officials announced that Dietrich resigned as part of a “planned transition” from executive to solely a member of the board, where his “visionary” skills could be better utilized. Taking the helm was Scott Kveton, founder of compliance software firm Odava, which MassRoots acquired months earlier.
Days after the executive shift, Kveton was joined by Dietrich on a conference call with investors. The new CEO lauded his predecessor and the company’s promise of being a leading provider of consumer- and business-focused technologies including a dispensary locator, social network, point-of-sale and ordering systems.
Behind the scenes, however, the situation wasn’t that amiable, according to Dietrich and other sources close to the company.
Dietrich’s allegations, as told to The Cannabist, include that he was “extorted based upon false and misleading information into giving up the company” that he founded. He also claims the directors ignored the will of the shareholders.
Last month, in the days before his ouster, Dietrich said a majority of shareholders voted via a written consent process to remove the majority of the board.
Dietrich believes the shareholders will have his back in this proxy fight.
The early media reports following Dietrich’s departure painted MassRoots as a company in turmoil, one that was bleeding cash and subject to stock promotion queries by the OTC Markets exchange.
Dietrich said his fellow board members bristled at the $12 million valuation of the 30-million-share stock deal for Denver-based CannaRegs. The infighting resulted in the scuttling of the acquisition and Dietrich’s departure, the MassRoots founder claimed.
The CannaRegs deal fell through at the time of Dietrich’s resignation. CannaRegs’ CEO Amanda Ostrowitz pulled the plug and sought to distance herself and her firm from MassRoots.
“I wouldn’t want to give anyone a reason to doubt CannaRegs for being involved in petty drama,” Ostrowitz said last week.
Last week, MassRoots reported that revenue and losses tanked during the most-recent quarter — a performance that directors and executives attributed as reasons for Dietrich’s removal.
“I think that if the CannaRegs acquisition had gone through, our revenue would have been significantly higher, and in fact would have grown year-over-year,” Dietrich said, adding that he believes that “part of the reason why the results were so weak, in my opinion, was the very rocky integration of Odava and the Odava team.”
During the third quarter, MassRoots shrank in size significantly — dropping from 20 employees to about a half-dozen people, Dietrich said.
“Scott and I were not on the same page, the board and I were not on the same page,” he said. “I think that no one would say that the (third-quarter) results were strong by any stretch. There’s a lot of room for improvement.”
Dietrich’s vision includes settling into the cryptocurrency venture initiated during his tenure and, most significantly, aggressively growing MassRoots’ market share in California, he said.
If successful, “We have a new board of directors, and we will immediately begin implementing our plan to dominate California next year,” Dietrich said. “This is ultimately what boards of directors are supposed to do — represent shareholders.”
Seeb and Keber were not immediately available for comment. A phone number could not be immediately located for Fitch.
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