Business Context and Reporting Period
This Form 8-K Current Report, dated September 30, 2021, is filed by MassRoots, Inc. (the "Company"), a Delaware corporation. The filing details the entry into a Material Definitive Agreement and the completion of an acquisition. The Company is identified as an emerging growth company.
Key Financial Metrics and Transaction Terms
The filing describes the acquisition of Empire Services, Inc. ("Empire"), a Virginia-based operator of 10 metal recycling facilities in Virginia and North Carolina. Empire employs approximately 65 people and processes ferrous and nonferrous scrap metals. The consideration paid for the acquisition includes:
- Equity: Issuance of 495,000,000 newly-issued restricted shares of the Company's common stock to the sole shareholder of Empire.
- Debt/Note: A promissory note in the principal amount of $3.7 million, maturing on September 30, 2023.
- Repayment Obligation: Repayment of a $1 million advance made to purchase Empire's Virginia Beach location, due within 3 business days of the Company's next capital raise.
The filing does not provide specific revenue, profit, cash flow, or margin figures for either the Company or Empire. Pro forma financial information is scheduled to be filed in an amendment within 71 days.
Material Changes and Corporate Actions
Effective September 30, 2021, the following material changes occurred:
- Acquisition: MassRoots, Inc. acquired Empire Services, Inc. via a merger with Empire Merger Corp.
- Executive Leadership Change: Isaac Dietrich resigned as Chief Executive Officer. Danny Meeks, the sole shareholder of Empire, was appointed as the new Chief Executive Officer.
- Capital Structure Amendment: The Company filed a Certificate of Amendment to its Second Amended and Restated Certificate of Incorporation to adjust authorized share capital and issuance rights.
- Unregistered Securities: The 495 million shares issued were sold in reliance on exemptions under Section 4(a)(2) of the Securities Act and/or Regulation D.
Outlook, Risks, and Contingencies
The Company issued a press release on October 1, 2021, announcing the merger. The filing notes that the financial statements of the acquired business and pro forma financial information are not yet included and will be filed by amendment. The transaction creates a direct financial obligation via the $3.7 million promissory note and a contingent obligation to repay the $1 million advance upon the next capital raise. The filing does not provide specific management commentary on future revenue guidance or operational outlook beyond the completion of the merger.
Investor Verification Checklist
- Verify the total number of outstanding shares post-issuance to assess the dilution impact of the 495 million new shares.
- Review the upcoming amendment (due within 71 days) for Empire's historical financial statements and pro forma combined results.
- Confirm the terms of the $3.7 million promissory note, including interest rates and covenants, in the full Merger Agreement (Exhibit 10.1).
- Monitor the Company's capital raise activities to determine the timing of the $1 million repayment obligation.
- Review the Employment Agreement (Exhibit 10.2) for details on the new CEO's compensation and tenure.