S-1/A

Asfiled with the Securities and Exchange Commission on May 23, 2018

Registration No. 333-223038

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

______________________

AMENDMENT NO. 2

TO

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

______________________

MASSROOTS, INC.
(Exact name of registrant as specified in its charter) 

Delaware	7370	46-2612944
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

2420 17^th Street, Office 3118, Denver, Colorado 80202
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

(833) 467-6687

______________________

Isaac Dietrich, Chief Executive Officer

MassRoots, Inc.
2420 17^th Street, Office 3118

Denver, Colorado 80202

 (833) 467-6687
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

______________________

Copies to:

Richard A. Friedman, Esq.

Andrea Cataneo, Esq.

Nazia J. Khan, Esq.

Sheppard, Mullin, Richter & Hampton LLP

30 Rockefeller Plaza

New York, New York 10112

Phone: (212) 653-8700

Fax: (212) 370-7889

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐

Accelerated filer      ☐

Non-accelerated filer (Do not check if a smaller reporting company) ☐

Smaller reporting company  ☒

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE 

Title of Each Class of Securities to be Registered (1)	Amount to be Registered		Proposed Maximum Offering Price Per Share (2)		Proposed Maximum Aggregate Offering Price (2)		Amount of Registration Fee
Common Stock, par value $0.001 per share		28,083,290	$	0.40	$	11,233,316	$	1,398.55
Common Stock, par value $0.001 per share (3)		24,635,750	$	0.40	$	9,854,300	$	1,226.86
Total		52,719,040	$	0.40	$	21,087,616	$	2,625.41	*

(1) The shares of our common stock being registered hereunder are being registered for sale by the selling security holders named in the prospectus. Under Rule 416 of the Securities Act of 1933, as amended, the shares being registered include such indeterminate number of shares of common stock as may be issuable with respect to the shares being registered in this registration statement as a result of any stock splits, stock dividends or other similar event.

(2) The proposed maximum offering price per share and the proposed maximum aggregate offering price have been estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended using the average of the high and low prices as reported on the OTCQB on February 13, 2018.

(3) Represents shares of common stock issuable upon exercise of outstanding warrants to purchase shares of common stock offered by the selling stockholders.

* Previously paid.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS - SUBJECT TO COMPLETION

Dated May 23, 2018

52,719,040 Shares of Common Stock

This prospectus relates to the resale by the selling stockholders of MassRoots, Inc., a Delaware corporation (the “Company”) identified in this prospectus of up to 52,719,040 shares of our common stock, par value par value $0.001 per share (“Common Stock”), including 28,083,290 outstanding shares of Common Stock and 24,635,750 shares of Common Stock issuable upon exercise of outstanding warrants (collectively, the “Resale Shares”). All of the Resale Shares were initially purchased from the Company in private placement transactions and are being offered for resale by the selling stockholders. For a description of the transactions pursuant to which this resale registration statement relates, please see “Recent Unregistered Financings.”

The Resale Shares may be sold by the selling stockholders to or through underwriters or dealers, directly to purchasers or through agents designated from time to time. For additional information regarding the methods of sale you should refer to the section entitled “Plan of Distribution” in this Prospectus.

The prices at which the selling stockholders may sell the Resale Shares will be determined by the prevailing market price for shares of the Company’s Common Stock or in negotiated transactions. We will not receive any proceeds from the sale of the Resale Shares by the selling stockholders; provided, however, we will receive the proceeds from any cash exercise of warrants.

We will bear all costs relating to the registration of the Resale Shares, other than any selling stockholders legal or accounting costs or commissions.

Our Common Stock is presently quoted on the OTCQB tier of the OTC Markets Group, Inc. (“OTCQB”) under the symbol “MSRT.” The closing price of our Common Stock on May 22, 2018, as reported by OTCQB, was $0.26 per share.

Investing in our Common Stock involves a high degree of risk. See the section entitled “Risk Factors” beginning on page 6 of this prospectus and elsewhere in this prospectus for a discussion of information that should be considered in connection with an investment in our Common Stock.

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision.

We qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act (“JOBS Act”). For more information, see the sub-section titled “Emerging Growth Company Status” in the Prospectus Summary section of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is_________, 2018.

TABLE OF CONTENTS

PART I - INFORMATION REQUIRED IN PROSPECTUS	Page
Prospectus Summary		1
Risk Factors		5
Cautionary Note Regarding Forward-Looking Statements		15
Use of Proceeds		15
Dividend Policy		16
Selling Stockholder		16
Plan of Distribution		22
Description of Securities		23
Shares Eligible for Future Sale		25
Description of Business		26
Market for Common Equity and Related Stockholder Matters		38
Management’s Discussion and Analysis of Financial Condition and Results of Operations		39
Quantitative and Qualitative Disclosures About Market Risk		45
Directors, Executive Officers, Promoters and Control Persons		45
Executive Compensation		48
Security Ownership Of Certain Beneficial Owners And Management		57
Certain Relationships And Related Party Transactions And Director Independence		58
Legal Matters		58
Experts		58
Where You Can Find More Information		58
Financial Statements		61
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Other Expenses of Issuance and Distribution		62
Indemnification of Directors and Officers		62
Recent Sales of Unregistered Securities		62
Exhibit Index		63
Undertakings		64
Signatures		66

You should rely only on the information contained in this prospectus or in any free writing prospectus  that we may specifically authorize to be delivered or made available to you. We have not authorized anyone to provide you with information that is different from that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus may only be used where it is legal to offer and sell our securities. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our securities. Our business, financial condition, results of operations and prospects may have changed since that date.  We are not making an offer to sell these securities and are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read together with, the more detailed information and financial statements and related notes thereto appearing elsewhere in this prospectus and incorporated by reference. Before you decide to invest in our securities, you should read the entire prospectus carefully, including the Risk Factors and the financial statements and related notes included in this prospectus and incorporated by reference.

Unless the context indicates or otherwise requires, the “Company,” “we,” “us,”, “our” “MassRoots” of the “Registrant” refer to MassRoots, Inc., a Delaware corporation, and its subsidiaries.

Unless otherwise indicated, all share and per share information relating to our Common Stock in this prospectus has been adjusted to reflect the Exchange which occurred during our Reorganization. See “The Reorganization And Exchange” for additional discussion of the Exchange and Reorganization.

Overview

MassRoots was formed in April 2013 as a technology platform for the cannabis industry. Powered by more than one million registered users, MassRoots enables consumers to rate cannabis products and strains based on their efficacy (i.e., effectiveness for treating ailments such as back-pain or epilepsy) and then presents this information in easy-to-use formats for consumers to make educated purchasing decisions at their local dispensary. Businesses are able to leverage MassRoots by strategically advertising to consumers based on their preferences and tendencies.

“Registered users” (“Users”) are defined as users who currently have an account with MassRoots. It does not include users who have deleted their account nor does it reflect active usage over any set period of time.

Over the past five years, MassRoots has established itself as a leading technology company in the emerging cannabis industry, building a User-base of one million registered Users, partnering with some of the most recognized brands in the industry and raising significant capital from institutional and private investors. Since inception, the Company has generated approximately $1.2 million in revenue.

Historically, we have focused on building a consumer-facing application and have not spent significant resources on developing our advertising portal for dispensaries. We are now focusing our efforts on developing our advertising portal so as to automate the processes and platform needed to deliver our underlying services. In December 2017, we began developing an advertising portal for dispensaries that will enable dispensaries to list their products on the MassRoots dispensary finder and view analytics of their local consumers. During the second quarter of 2018, we intend to launch an updated version of the portal and to charge dispensaries a minimum recurring monthly fee, per location, for access to the portal.

With MassRoots’ wide-spread audience and following in some of the leading medical cannabis markets in the country, we believe our business portal will be well-received by our client base. According to ArcView Market Research, there are projected to be over 2,700 state-regulated dispensaries in the United States by 2020.

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User Growth and Product Distribution Channels

The MassRoots app is distributed free-of-charge through the Apple App Store, the Google Play Marketplace and the Amazon App Store. The MassRoots network is also accessible through desktop and mobile web browsers by navigating to www.massroots.com. Our business and advertising portal can be accessed at www.massroots.com/dispensaries. Through this portal, companies can edit their profiles, distribute information to Users and view analytics such as impressions, views and clicks.

Competitors

We compete with other cannabis information platforms such as WeedMaps and Leafly, which provide information with respect to dispensary locations, strain information, and news relating to the cannabis industry. We believe our primary competitive advantage is the community we have created and the significant reviews and data we have collected on key cannabis markets.

Blockchain Technology

In December 2017, we formed MassRoots Blockchain Technologies, Inc., a wholly-owned subsidiary of MassRoots, to explore how blockchain technology may be utilized in the cannabis industry.

Company Information

We were incorporated in the state of Delaware on April 26, 2013 as a technology platform for the cannabis industry. Our address is 2420 17^th Street, Office 3118, Denver, Colorado 80202, our telephone number is (833) 467-6687 and our website is www.massroots.com. The information on our website or mobile apps is not a part of this prospectus.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies.

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Section 107(b) of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

We could remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion, as adjusted, or more, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed fiscal quarter, and (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.

Potential Corporate Action to be Approved at a Meeting of Stockholders

On May 11, 2018, the Company filed a definitive Proxy Statement on Schedule 14A with the SEC in connection with proposals to be voted upon at the annual meeting of stockholders of the Company to be held on June 8, 2018. Among such proposals is a proposal to approve the Second Amended and Restated Certificate of Incorporation of the Company. The Second Amended and Restated Certificate of Incorporation of the Company provides, among other things, an exclusive forum provision. The exclusive forum provision states that unless the Company consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, all Internal Corporate Claims shall be brought solely and exclusively in the Court of Chancery of the State of Delaware (or, if such court does not have jurisdiction, the Superior Court of the State of Delaware, or, if such other court does not have jurisdiction, the United States District Court for the District of Delaware). “Internal Corporate Claims” means claims, including claims in the right of the Company, brought by a stockholder (including a beneficial owner) (i) that are based upon a violation of a duty by a current or former director or officer or stockholder in such capacity or (ii) as to which the Delaware General Corporation Law confers jurisdiction upon the Court of Chancery of the State of Delaware.

In the event that stockholders of the Company vote in favor of the Second Amended and Restated Certificate of Incorporation, the exclusive forum provision contained therein may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes based upon Internal Corporate Claims, which may discourage lawsuits against us or our current or former directors or officers and/or stockholders in such capacity.

In addition to the foregoing proposal to approve the Second Amended and Restated Certificate of Incorporation of the Company, the Company is proposing the following proposals to be voted upon at the 2018 annual meeting of stockholders (i) election of four directors; (ii) approval of the Company’s 2018 Equity Incentive Plan and the reservation of 25,000,000 shares of common stock for issuance thereunder; (iii) ratification of RBSM LLP as the Company’s independent public accountant for the fiscal year ending December 31, 2018; (iv) an advisory vote on executive compensation; and (v) approval of a three-year frequency for holding an advisory vote on executive compensation.

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THE OFFERING

This prospectus relates to the resale from time to time by the selling stockholders identified herein of up to an aggregate of 52,719,040 shares of our Common Stock, consisting of:

(i) 490,000 shares of Common Stock and warrants to purchase up to 1,986,250 shares of Common Stock issued pursuant to the July 2017 Private Placement;

(ii) 1,130,295 shares of Common Stock issued upon conversion of the August Notes and warrants to purchase up to 4,400,000 shares of Common Stock issued pursuant to the August 2017 Private Placement;

(iii) 12,762,995 shares of Common Stock and warrants to purchase up to 4,549,500 shares of Common Stock issued pursuant to the December 2017 Private Placement; and

(iv) 13,700,000 shares of Common Stock and warrants to purchase up to 13,700,000 shares of Common Stock issued pursuant to the January 2018 Private Placement (collectively, the “Resale Shares”).

Common stock offered by selling stockholders:	52,719,040 shares which includes 28,083,290 outstanding shares of Common Stock and 24,635,750 shares of Common Stock issuable upon exercise of outstanding warrants.
Offering price:	Market price or privately negotiated prices.
Common stock outstanding after the offering:	179,123,284 shares, including shares of Common Stock issuable upon exercise of warrants.
Use of proceeds:	We will not receive any proceeds from the sale of the Resale Shares by the selling stockholders; provided, however, we will receive the proceeds from any cash exercise of warrants.
Risk factors:	An investment in our securities involves a high degree of risk and could result in a loss of your entire investment. Prior to making an investment decision, you should carefully consider all of the information in this prospectus and, in particular, you should evaluate the risk factors set forth under the caption “Risk Factors” beginning on page 6.
Symbol on OTCQB	MSRT

The number of shares of Common Stock to be outstanding immediately after this offering is based on 154,487,534  shares of Common Stock outstanding as of May 18, 2018 and excludes:

● 15,371,765 shares of Common Stock issuable upon the exercise of options granted under our Plans (as defined below) to certain employees and directors, with a weighted average exercise price of $0.73 per share; and

● 11,290,589 shares of Common Stock issuable upon the exercise of warrants (excluding warrants covered by this prospectus) with a weighted average exercise price of $1.01 per share.

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RISK FACTORS

An investment in our securities involves a high degree of risk. This prospectus contains the risks applicable to an investment in our securities. Prior to making a decision about investing in our securities, you should carefully consider the specific factors discussed under the heading “Risk Factors” in this prospectus, together with all of the other information incorporated by reference in this prospectus. You should also consider the risks, uncertainties and assumptions discussed and any updates described in our Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q, all of which are incorporated herein by reference, and may be amended, supplemented or superseded from time to time by other reports we file with the SEC in the future and any prospectus supplement related to a particular offering. The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our operations. The occurrence of any of these known or unknown risks might cause you to lose all or part of your investment in the offered securities.

Risks Relating to Our Business and Industry

We have a limited history upon which an evaluation of our prospects and future performance can be made and have no history of profitable operations.

We were incorporated in April 2013 and have a limited operating history and our business is subject to all of the risks inherent in the establishment of a new business enterprise. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with development and expansion of a new business enterprise. We may sustain losses in the future as we implement our business plan. There can be no assurance that we will operate profitably.

Since we have a limited operating history, it is difficult for potential investors to evaluate our business.

Our limited operating history makes it difficult for potential investors to evaluate our business or prospective operations. As an early stage company, we are subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays inherent in a new business. Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive and evolving environment. Our business is dependent upon the implementation of our business plan. We may not be successful in implementing such plan and cannot guarantee that, if implemented, we will ultimately be able to attain profitability.

We will need to obtain additional financing to fund our operations.

We will need additional capital in the future to continue to execute our business plan. Therefore, we will be dependent upon additional capital in the form of either debt or equity to continue our operations. At the present time, we do not have arrangements to raise all of the needed additional capital, and we will need to identify potential investors and negotiate appropriate arrangements with them. We may not be able to arrange enough investment within the time the investment is required or that if it is arranged, that it will be on favorable terms. If we cannot obtain the needed capital, we may not be able to become profitable and may have to curtail or cease our operations.

Cannabis remains illegal under Federal law.

Despite the development of a regulated cannabis industry under the laws of certain states, these state laws regulating medical and adult cannabis use are in conflict with the Federal Controlled Substances Act, which classifies cannabis as a Schedule I controlled substance and makes cannabis use and possession illegal on a national level. The United States Supreme Court has ruled that the Federal government has the right to regulate and criminalize cannabis, even for medical purposes, and thus Federal law criminalizing the use of cannabis preempts state laws that regulate its use. Although the prior administration determined that it was not an efficient use of resources to direct Federal law enforcement agencies to prosecute those lawfully abiding by state laws allowing the use and distribution of medical and recreational cannabis, on January 4, 2018, the current administration issued the Sessions Memo announcing a return to the rule of law and the rescission of previous guidance documents. The Sessions Memo rescinds the Cole Memo which was adopted by the Obama administration as a policy of non-interference with marijuana-friendly state laws. The Sessions Memo shifts federal policy from a hands-off approach adopted by the Obama administration to permitting federal prosecutors across the country to decide how to prioritize resources to regulate marijuana possession, distribution and cultivation in states where marijuana use is regulated. There can be no assurance that federal prosecutors will not prosecute and dedicate resources to regulate marijuana possession, distribution and cultivation in states where marijuana use is regulated which may cause states to reconsider their regulation of marijuana which would have a detrimental effect on the marijuana industry. Any such change in state laws based upon the Sessions Memo and the Federal government’s enforcement of Federal laws could cause significant financial damage to us and our stockholders.

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As the possession and use of cannabis is illegal under the Federal Controlled Substances Act, we may be deemed to be aiding and abetting illegal activities through the services and data that we provide to government regulators, dispensaries, cultivators and consumers. As a result, we may be subject to enforcement actions by law enforcement authorities, which would materially and adversely affect our business.

Under Federal law, and more specifically the Federal Controlled Substances Act, the possession, use, cultivation, and transfer of cannabis is illegal. Our business provides services to customers that are engaged in the business of possession, use, cultivation, and/or transfer of cannabis. As a result, law enforcement authorities, in their attempt to regulate the illegal use of cannabis, may seek to bring an action or actions against us, including, but not limited, to a claim of aiding and abetting another’s criminal activities. The Federal aiding and abetting statute provides that anyone who “commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.” 18 U.S.C. §2(a). As a result of such an action, we may be forced to cease operations and our investors could lose their entire investment. Such an action would have a material negative effect on our business and operations.

Federal enforcement practices could change with respect to services provided to participants in the cannabis industry, which could adversely impact us. If the Federal government were to expend its resources on enforcement actions against service providers in the cannabis industry under guidance provided by the Sessions Memo, such actions could have a material adverse effect on our operations, our customers, or the sales of our products.

It is possible that due to the recent Sessions Memo our clients may discontinue the use of our services, our potential source of customers may be reduced and our revenues may decline. Further, additional government disruption in the cannabis industry could cause potential customers and users to be reluctant to use and advertise our products, which would be detrimental to the Company. We cannot predict the impact of the Sessions Memo at this time nor can we predict the nature of any future laws, regulations, interpretations or applications including the effect of such additional regulations or administrative policies and procedures, when and if promulgated, could have on our business.

Our business is dependent on state laws pertaining to the cannabis industry.

Thirty states allow their citizens to use medical cannabis. In addition, the District of Columbia and eight states (Alaska, California, Colorado, the District of Columbia, Maine, Massachusetts, Nevada, Oregon and Washington) have regulated the sale of cannabis for adult use. Continued development of the cannabis industry is dependent upon continued legislative authorization of cannabis at the state level. Any number of factors could slow or halt progress in this area including, but not limited to, the Sessions Memo. While there may be ample public support for legislative action, numerous factors impact the legislative process. For example, in November 2016, voters in Arizona rejected a ballot initiative that would have permitted the adult-use of cannabis. Further regulation attempts at the state level that create bad public policy could slow or stop further development of the cannabis industry. Any one of these or other factors could slow or halt use of cannabis, which would negatively impact our business.

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New platform features or changes to existing platform features could fail to attract new users, retain existing users or generate revenue.

Our business strategy is dependent on our ability to develop platforms and features to attract new businesses and users, while retaining existing ones. Staffing changes, changes in user behavior or development of competing platforms may cause Users to switch to alternative platforms or decrease their use of our platform. To date, our compliance platform is only in its beginning stages and has not gained widespread market adoption. There is no guarantee that companies and dispensaries will use these features and we may fail to generate revenue. Additionally, any of the following events may cause decreased use of our platform:

● Emergence of competing platforms and applications;

● Inability to convince potential companies to join our platform;

● Technical issues on certain platforms or in the cross-compatibility of multiple platforms;

● Potential securities breaches around our data;

● A rise in safety or privacy concerns; and

● An increase in the level of spam or undesired content on the network.

We are highly dependent on the services of key executives, the loss of whom could materially harm our business and our strategic direction. If we lose key management or significant personnel, cannot recruit qualified employees, directors, officers, or other personnel or experience increases in our compensation costs, our business may materially suffer.

We are highly dependent on our management team, specifically our Chief Executive Officer, Isaac Dietrich. While we have an employment agreement with Isaac Dietrich, such employment agreement permits Mr. Dietrich to terminate such agreement upon notice. If we lose key employees, our business may suffer. Furthermore, our future success will also depend in part on the continued service of our key management personnel and our ability to identify, hire, and retain additional personnel. We do not carry “key-man” life insurance on the lives of our executive officer, employees or advisors. We experience intense competition for qualified personnel and may be unable to attract and retain the personnel necessary for the development of our business. Because of this competition, our compensation costs may increase significantly.

We will need to obtain additional financing to fund our operations.

We will need additional capital in the future to continue to execute our business plan. Therefore, we will be dependent upon additional capital in the form of either debt or equity to continue our operations. At the present time, we do not have arrangements to raise all of the needed additional capital, and we will need to identify potential investors and negotiate appropriate arrangements with them. We may not be able to arrange enough investment within the time the investment is required or that if it is arranged, that it will be on favorable terms. If we cannot obtain the needed capital, we may not be able to become profitable and may have to curtail or cease our operations. Additional equity financing, if available, may be dilutive to the holders of our capital stock. Debt financing may involve significant cash payment obligations, covenants and financial ratios that may restrict our ability to operate and grow our business.

Our monetization strategy is dependent on many factors outside our control.

There is no guarantee that our efforts to monetize the MassRoots Retail platform will be successful. Furthermore, our competitors may introduce more advanced technologies that deliver a greater value proposition to cannabis related businesses in the future. For example, Google, MJ Freeway, LLC and BioTrackTHC, LLC may decide to introduce features similar to ours to their products, significantly increasing the competitive environment. In addition, dispensaries may not be able to accept credit or bank cards due to banking regulations, which could significantly increase the cost and time required for us to generate revenue. All these factors individually or collectively may preclude us from effectively monetizing our business which would have a material adverse effect on our financial condition and results of operation.

Changes in Amazon App Store, Apple App Store or Google Play Store policies could result in our mobile applications being de-listed. In addition, our third party service providers may decline to provide services due to their policies, or cease to provide services previously provided to us due to a change of policy.

On November 4, 2014, the MassRoots App was removed from Apple’s iOS App Store due to the Apple App Store review team changing their app enforcement guidelines to prohibit all social cannabis applications. After negotiation with Apple and the addition of certain restrictions, the MassRoots App returned to the Apple App Store in February 2015. Although Apple reversed its decision and included our app in the Apple App Store, we cannot provide any assurance that Apple’s policy will not change in the future or that our application will not once again be removed from the Apple App Store.

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The Apple App Store is one of the largest content distribution channels in the world and management believes that it is the only way to effectively distribute our iOS application to users who own iPhones and iPads. The Apple App Store review team effectively operates as our iOS App’s regulator; they decide what guidelines iOS apps must operate under and how to enforce such guidelines. The Apple guidelines related to cannabis related apps are not published, enforcement of such guidelines is difficult to predict, and the review and appeal processes are conducted without public oversight. Although we will continue advocating for a more open and transparent Apple App Store review process that will allow decisions that affect a significant portion of the United States smartphone owning population to be open to public scrutiny, there can be no assurance that we will be successful in these efforts.

MassRoots, along with other cannabis apps, regularly encounter issues with the Google Play Store review team in the normal course of business due to Google Play Store’s absence of clear guidelines regarding cannabis-related apps. In November 2016, the MassRoots App was removed from the Google Play Store due to a compliance review. However, on March 21, 2017, Google Play approved the MassRoots App for distribution to Android devices through the Google Play Store once again.

On December 1, 2016, MassRoots’ Android application received approval from the Amazon App Store for listing, and is currently available for download on the Amazon App Store.

In addition to challenges we face with respect to compliance with the Amazon App Store, Apple App Store and Google Play Store guidelines, service providers may refuse to provide services to us even if they previously provided such services due to our status as a cannabis related company. For example, in January 2016, after building a strong presence on Instagram and having previously used our Instagram account to grow our user count and highlight posts about our business, our account was suspended without warning by Instagram. While the account was reinstated on February 26, 2016, we cannot provide any assurance that our Instagram account will not be suspended in the future and if suspended that our account will be reinstated. Furthermore, we may face similar situations in the future with our other services providers that may cause disruptions to our business plan, all of which may have a material adverse effect on our business and financial condition.

Government actions or digital distribution platform restrictions could result in our products and services being unavailable in certain geographic regions which may harm our future growth.

Due to our connections to the cannabis industry, governments and government agencies could ban or cause our network or apps to become unavailable in certain regions and jurisdictions. This could greatly impair or prevent us from registering new users in affected areas and prevent current users from accessing our network. In addition, government action taken against our service providers or partners could cause our network to become unavailable for extended periods of time.

As discussed herein, as part of our agreement with Apple in connection with our application being returned to the Apple App Store, we agreed to limit registration of new members within our iOS application to the locations where cannabis is permitted under state law (medicinally or recreationally) at the state level. This restriction prohibits users in several states and countries from accessing our network. Expansions of such policies by Apple, Google or Amazon may slow our user registration rate which may have a material adverse effect on our business and future prospects.

Failure to generate user growth or engagement could greatly harm our business model.

Our business model involves attracting users to our mobile application and linking their MassRoots account with their profile in MassRoots Retail. There is no guarantee that growth strategies used in the past will continue to bring new users to our network or that users will agree to link their MassRoots and MassRoots Retail profiles. Changes in relationships with our partners, contractors and businesses we retain to grow our network may result in significant increases in the cost to acquire new users. In addition, new users may fail to engage with our network to the same extent current users are engaging with our network resulting in decreased use of our network. Decreases in the size of our user base and/or decreased engagement on our network may impair our ability to generate revenue.

-8- 

Failure to attract clients could greatly harm our ability to generate revenue.

Our ability to generate revenue is dependent on the continued growth of our platform. If we are unable to continue to grow our network or bring new clients to our network, our ability to generate revenue would be greatly compromised. There is no guarantee businesses will want to join our platform or that we will be able to generate revenue from our existing user base.

Historically, we have generated most of our revenue from advertising. The loss of clients or reduction in spending by advertisers may have a material adverse effect on our business.

Historically, we have generated most of our revenue from third parties advertising on our website. Some of our third party advertisers include cannabis companies, including regulated cannabis dispensaries, and mainstream brands such as Uber. As is common in the industry, our advertisers usually do not have long-term advertising commitments with us. It is possible that such advertisers may not continue to do business with us for several reasons including that they no longer believe that their advertisements on our website will generate a competitive return relative to other alternatives or in the alternative they may reduce the prices they are willing to pay to advertise their products and services on our website.

Our revenue could be adversely affected by a number of other factors including, but not limited to:

● decreases in User engagement, including time spent on our website and mobile app;

● our inability to improve our analytics and measurement solutions that demonstrate the value of our ads and other commercial content;

● loss of market share to our competitors;

● adverse legal developments relating to our business, including legislative and regulatory developments and developments in litigation, if any;

● adverse media reports or other negative publicity involving us or other companies in our industry; and

● the impact of macroeconomic conditions and conditions in the industry in general.

The occurrence of any of these or other factors could result in decreased traffic to our website which may result in less views of third party ads. If we are unable to generate traffic to our website and as a result third party advertisers no longer continue to do business with us, our business, financial conditions and results of operation may be materially affected.

User engagement and growth depends on software and device updates beyond our control.

Our mobile application and websites are currently available on multiple operating systems, including iOS and Android, across multiple different manufacturers, including Motorola, LG, Apple and Samsung and on thousands of devices. Changes to the device infrastructure or software updates on such devices could render our platforms and services useless or inoperable and require users to utilize our website rather than our mobile application which may result in decreased user engagement. Any decrease in user engagement may devalue our value proposition to third party advertisers who may no longer continue to do business with us which may have a material adverse effect on business, financial conditions and results of operation.

We may be unable to manage growth.

Successful implementation of our business strategy requires us to manage our growth. Growth could place an increasing strain on our management and financial resources. To manage growth effectively, we need to continuously:

● Evaluate definitive business strategies, goals and objectives;

● Maintain a system of management controls; and

● Attract and retain qualified personnel, as well as, develop, train and manage management-level and other employees.

-9- 

If we fail to manage our growth effectively, our business, financial condition or operating results could be materially harmed.

We may not be able to compete successfully with other established companies offering the same or similar services and, as a result, we may not achieve our projected revenue and user targets.

We compete with both start-up and established technology companies. Our competitors may have substantially greater financial, marketing and other resources than we do and may have been in business longer than we have or have greater name recognition and be better established in the technological or cannabis markets than we are. If we are unable to compete successfully with other businesses in our existing market, we may not achieve our projected revenue and/or user targets which may have a material adverse effect on our financial condition.

Expansion by our well-established competitors into the cannabis industry could prevent us from realizing anticipated growth in users and revenues.

Competitors in the social network space, such as Twitter and Facebook, have continued to expand their businesses in recent years into other social network markets. If they decided to expand their social networks into the cannabis community, this could harm the growth of our business and user base and cause our revenues to be lower than we expect. In addition, competitors in the point-of-sale and compliance software space, such as IQ Metrics, may continue to expand their businesses into the cannabis space which could harm the growth of our business and user base and cause our revenues to be lower than we expect.

Government regulation of the Internet and e-commerce is evolving, and unfavorable changes could substantially harm our business and results of operations.

We are subject to general business regulations and laws as well as Federal and state regulations and laws specifically governing the Internet and e-commerce. Existing and future laws and regulations may impede the growth of the Internet, e-commerce or other online services, and increase the cost of providing online services. These regulations and laws may cover sweepstakes, taxation, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, broadband residential Internet access and the characteristics and quality of services. It is not clear how existing laws governing issues such as property ownership, sales, use and other taxes, personal privacy apply to the Internet and e-commerce. Unfavorable resolution of these issues may harm our business and results of operations.

The failure to enforce and maintain our intellectual property rights could enable others to use trademarks used by our business which could adversely affect the value of the Company.

The success of our business depends on our continued ability to use our existing tradename in order to increase our brand awareness. As of the date hereof, MASSROOTS is a federally registered trademark owned by us, ODAVA is a state registered trademark owned by us and RETAIL is a state registered trademark of Odava, Inc. In addition, we have applied for the trademark “TOKE”. The unauthorized use or other misappropriation of any of the foregoing trademarks could diminish the value of our business which would have a material adverse effect on our financial condition and results of operation.

Due to our involvement in the cannabis industry, we may have a difficult time obtaining insurance coverage for our business which may expose us to additional risk and financial liabilities.

Insurance that may otherwise be readily available, such as workers compensation, general liability, and directors and officers insurance, is more expensive and difficult for us to obtain because we are a service provider to companies in the cannabis industry. Although we currently maintain director’s and officer’s liability insurance there can be no assurance that we will be able to maintain such policy in the future or at costs that are affordable to us due to the nature of our business operations. If we are unable to maintain insurance related to our Company and business operations we will be exposed to additional risk and financial liabilities which may have a material adverse effect on our business and financial condition.

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Participants in the cannabis industry may have difficulty accessing the service of banks, which may make it difficult for us to operate.

Despite recent rules issued by the United States Department of the Treasury mitigating the risk to banks which do business with cannabis companies operating in compliance with applicable state laws, as well as recent guidance from the United States Department of Justice, banks remain wary of accepting funds from businesses in the cannabis industry. Since the use of cannabis remains illegal under Federal law, there remains a compelling argument that banks may be in violation of Federal law when accepting for deposit funds derived from the sale or distribution of cannabis. Consequently, businesses involved in the cannabis industry continue to have trouble establishing banking relationships. Although we currently have a bank account, our inability to open additional bank accounts or maintain our current account may make it difficult, if not impossible, for us, or some of our advertisers, to do business.

Our independent registered accounting firm has expressed concerns about our ability to continue as a going concern.

The report of our independent registered accounting firm expresses concern about our ability to continue as a going concern based on the absence of significant revenues, our significant losses from operations and our need for additional financing to fund all of our operations. It is not possible at this time for us to predict with assurance the potential success of our business. The revenue and income potential of our proposed business and operations are unknown. If we cannot continue as a viable entity, we may be unable to continue our operations and you may lose some or all of your investment in our securities.

In the past we have experienced material weaknesses in our internal control over financial reporting, which if continued, could impair our financial condition.

As reported in our Annual Report on Form 10-K, our management concluded that our internal control over financial reporting was not effective as of December 31, 2017 and 2016 due to material weaknesses regarding our controls and procedures. The Company did not have sufficient segregation of duties to support its internal control over financial reporting. Due to our small size and limited resources, segregation of all conflicting duties has not always been possible and may not be economically feasible in the near term; however, we do expect to hire additional accounting personnel in the near future. We have and do endeavor to take appropriate and reasonable steps to make improvements to remediate these deficiencies. If we have continued material weaknesses in our internal financial reporting, our financial condition could be impaired or we may have to restate our financials, which could cause us to expend additional funds that would have a material impact on our ability to generate profits and on the success of our business.

Risks Relating to Use of New Technology

Government regulation of the Internet, blockchain technology and cryptocurrency is evolving, and unfavorable changes could substantially harm us and our subsidiary.

We are subject to federal and state regulations and laws governing the Internet, blockchain technology and e-commerce. Existing and future laws and regulations may impede the growth of the Internet, blockchain technology and e-commerce and/or other online services, and may increase the cost of providing online services. Changes in regulations and laws may effect sweepstakes, taxation, tariffs, user privacy, data protection, pricing, content, intellectual property rights, distribution, electronic contracts and other communications, consumer protection, broadband residential Internet access and the characteristics and quality of services. In addition, many governments and regulatory agencies have not established specific regulations pertaining to blockchain technology and other instruments that use such technology and no assurance can be given that such governments or regulatory authorities will not implement adverse changes to laws and regulations. Any such changes to federal and state regulations and laws may harm our and our subsidiary’s business and results of operations.

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There are no assurances that we will be successful in developing blockchain-based solutions, that such solutions will be economically viable or that such solutions will be able to generate any revenue.

While we are devoting development resources to exploring the feasibility of developing block-chain based solutions, there can be no assurances that we will be successful in implementing such solutions, that they will be economically viable, or such solutions will generate any revenue.

The development and acceptance of digital instruments is subject to a variety of factors which are difficult to evaluate.

We may explore the use of digital instruments for use in connection with our platform or programs; however, there can be no assurance that we will adopt or use any such instruments, or be successful in doing so. The development and use of such instruments is subject to a variety of factors that are difficult to evaluate including, but not limited to:

· the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the development of a new product or service based upon relatively new and developing technology;

· the acceptance and use of the new technology by consumers;

· regulation by governmental and quasi-governmental agencies;

· the maintenance and development of the protocols for the new technology;

· generic economic conditions and the regulatory environment relating to the new technology; and

· the availability and popularity of other forms or methods of buying and selling goods and services.

The slowing or stopping of the development, general acceptance, adoption and usage of digital instruments or compliance with regulations by governmental and quasi-governmental agencies may deter or delay the acceptance of such instruments.

The potential application of U.S. laws with respect to traditional investment securities to digital instruments is unclear.

The use of digital instruments is novel and the application of U.S. federal and state securities laws is unclear in many respects. Specifically, regulation with respect to such instruments is currently undeveloped, likely to evolve, may vary significantly among international, federal, state and local jurisdictions and is subject to significant uncertainty. Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the permissibility of the use of digital instruments, the technology behind them or the means of transaction in or transferring them. In the event that securities laws restrict the ability for digital instruments to be transferred in a manner similar to traditional investment securities, this would have a material adverse effect on the value of such instruments, which could result in a material impact on the use of such instruments as a possible means to provide rewards on the MassRoots platform.

Our failure to comply with any laws, rules and regulations, some of which may not exist yet or that are subject to interpretations that may be subject to change, could result in a variety of adverse consequences, including civil penalties and fines. The effect of any future regulatory change is impossible to predict, but such change could be substantial and materially adverse to the adoption and value our new technology, when and if developed, accepted and adopted.

Risks Relating to our Common Stock

Due to our connection to the cannabis industry, there can be no assurance that our common stock will ever be approved for listing on a national securities exchange.

Currently, shares of our common stock are quoted on the OTCQB and are not traded or listed on any securities exchange. Even if we desire to have our shares listed on a national securities exchange, the fact that our network is associated with the use of cannabis, the legal status of which is uncertain at the state and Federal level, may make any efforts to become listed on a securities exchange more problematic. While we remain determined to work towards getting our securities listed on a national exchange, there can be no assurance that this will occur. As a result we may never develop an active trading market for our securities which may limit our investors’ ability to liquidate their investments

-12- 

The market price of our common stock may be volatile and adversely affected by several factors.

The market price of our common stock could fluctuate significantly in response to various factors and events, including, but not limited to: our ability to execute our business plan;  operating results below expectations;  announcements regarding regulatory developments with respect to the cannabis industry; our issuance of additional securities, including debt or equity or a combination thereof, necessary to fund our operating expenses; announcements of technological innovations or new products by us or our competitors; and    period-to-period fluctuations in our financial results.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

Our common stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.

Rule 15g-9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our common stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

We are an “emerging growth company” within the meaning of the Securities Act, and if we decide to take advantage of certain exemptions from various reporting requirements applicable to emerging growth companies, our common stock could be less attractive to investors.

For as long as we remain an “emerging growth company”, as defined in the JOBS Act, we will have the option to take advantage of certain exemptions from various reporting and other requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”) and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these and other exemptions until we are no longer an “emerging growth company”. In addition, the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year during which we have total annual gross revenues of $1.0 billion or more, (2) the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering, (3) the date on which we have, during the previous three-year period, issued more than $1.07 billion in non-convertible debt, and (4) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act (i.e., the first day of the fiscal year after we have (a) more than $700,000,000 in outstanding common equity held by our non-affiliates, measured each year on the last day of our second fiscal quarter, and (b) been public for at least 12 months).

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Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock or warrants less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.

We do not anticipate paying dividends on our common stock, and investors may lose the entire amount of their investment.

Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares of common stock. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.

You could lose all of your investment.

An investment in our securities is speculative and involves a high degree of risk. Potential investors should be aware that the value of an investment in the Company may go down as well as up. In addition, there can be no certainty that the market value of an investment in the Company will fully reflect its underlying value. You could lose your entire investment.

Our management controls a large block of our common stock that will allow them to control us. 

As of the date of this prospectus, members of our management team beneficially own approximately 13.35% of our outstanding common stock. As a result, management may have the ability to control substantially all matters submitted to our stockholders for approval including:

● Election and removal of our directors;

● amendment of our Certificate of Incorporation or Bylaws; and

● adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us. 

In addition, management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investors will own a minority percentage of our common stock and will have minority voting rights. 

Because we can issue additional shares of Common Stock, purchasers of our Common Stock may incur immediate dilution and experience further dilution.

We are authorized to issue up to 200,000,000 shares of Common Stock, of which 154,487,534 shares of Common Stock are issued and outstanding as of May 18, 2018. Our Board of Directors has the authority to cause us to issue additional shares of Common Stock without consent of any of stockholders. Consequently, our stockholders may experience further dilution in their ownership of our stock in the future, which could have an adverse effect on the trading market for our Common Stock.

If our proposal to adopt the Second Amended and Restated Certificate of Incorporation is adopted by a majority of our outstanding voting capital stock at our 2018 annual meeting of stockholders, the Second Amended and Restated Certificate of Incorporation will contain an exclusive forum provision with respect to all Internal Corporate Claims, which may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable and discourage lawsuits against us or our current or former directors or officers and/or stockholders in such capacity.

Our proposed Second Amended and Restated Certificate of Incorporation provides that all Internal Corporate Claims must be brought solely and exclusively in the Court of Chancery of the State of Delaware (or, if such court does not have jurisdiction, the Superior Court of the State of Delaware, or, if such other court does not have jurisdiction, the United States District Court for the District of Delaware). If our proposed Second Amended and Restated Certificate of Incorporation is adopted by a majority of our outstanding voting capital stock at our 2018 annual meeting of stockholders, then all of our stockholders will be subject to the exclusive forum provision of the Second Amended and Restated Certificate of Incorporation. The exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes based upon Internal Corporate Claims, which may discourage lawsuits against us or our current or former directors or officers and/or stockholders in such capacity. In addition, if a court were to find this exclusive-forum provision to be inapplicable or unenforceable in an action, we may incur costs associated with resolving the dispute in other jurisdictions, which could have a material adverse effect on our business and operations.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the documents that we incorporate by reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Any statements in this prospectus about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our Common Stock and future management and organizational structure are all forward-looking statements. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement.

Any forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout this prospectus. You should read this prospectus and the documents that we reference herein and therein and have filed as exhibits to the registration statement, of which this prospectus is part, completely and with the understanding that our actual future results may be materially different from what we expect.  You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only.  Because the risk factors referred to on page 6 of this prospectus and incorporated herein by reference, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements.  Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise.  In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the information presented in this prospectus and any accompanying prospectus supplement, and particularly our forward-looking statements, by these cautionary statements.

USE OF PROCEEDS

The selling stockholders will receive all of the proceeds from the sale of the Resale Shares offered by them pursuant to this prospectus. We will not receive any proceeds from the sale of the Resale Shares by the selling stockholders covered by this prospectus. If the warrants issued pursuant to the July 2017 Private Placement, August 2017 Private Placement, December 2017 Private Placement or January 2018 Private Placement are exercised for cash, such proceeds will be used by the Company for working capital.

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DIVIDEND POLICY

We have not paid any cash dividends on our Common Stock and have no present intention of paying any dividends on the shares of our Common Stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our Board of Directors.

SELLING STOCKHOLDERS

This prospectus relates to the resale from time to time by the selling security holders identified herein of up to an aggregate of 52,719,040 Resale Shares consisting of:

(i) 490,000 shares of Common Stock and warrants to purchase up to 1,986,250 shares of Common Stock issued pursuant to the July 2017 Private Placement;

(ii) 1,130,295 shares of Common Stock issued upon conversion of the August Notes and warrants to purchase up to 4,400,000 shares of Common Stock issued pursuant to the August 2017 Private Placement;

(iii) 12,762,995 shares of Common Stock and warrants to purchase up to 4,549,500 shares of Common Stock issued pursuant to the December 2017 Private Placement; and

(iv) 13,700,000 shares of Common Stock and warrants to purchase up to 13,700,000 shares of Common Stock issued pursuant to the January 2018 Private Placement.

The transactions by which the selling stockholders acquired their securities from us were exempt under the registration provisions of the Securities Act.

The Resale Shares referred to above are being registered to permit public sales of the Resale Shares, and the selling stockholders may offer the shares for resale from time to time pursuant to this prospectus. The selling stockholders may also sell, transfer or otherwise dispose of all or a portion of their shares in transactions exempt from the registration requirements of the Securities Act or pursuant to another effective registration statement covering those shares.

The table below sets forth certain information regarding the selling stockholders and the Resale Shares offered in this prospectus. The selling stockholders have had no material relationship with us within the past three years other than as described in the footnotes to the table below or as a result of their acquisition of our shares or other securities.

Beneficial ownership is determined in accordance with the rules of the SEC. The selling stockholder’s percentage of ownership of our outstanding shares in the table below is based upon 153,944,886 shares of Common Stock outstanding as of April 17, 2018.

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	Ownership Before Offering			After Offering (2)
Selling Stockholder	Number of  Shares of  Common stock  Beneficially  Owned (1)		Number of  Shares Offered	Number of  Shares of  Common stock  Beneficially  Owned (1)	Percentage of  Common stock  Beneficially  Owned
DBIC Ltd. (3)		1,440,000 (4)	1,440,000 (4)	0	0%
DSBI Bahamas Ltd. (5)		1,440,000 (6)	1,440,000 (6)	0	0%
Jayesh Shah		190,000 (7)	170,000 (8)	20,000	*
Jonathan Honig		1,502,475	1,502,475	0	0%
Midori No Nami LLC (9)		6,400,000 (10)	4,200,000 (11)	2,200,000	1.43%
Pinz Capital International LP (12)		850,000 (13)	500,000 (14)	350,000	*
Richard Taney		312,500 (15)	212,500 (16)	100,000	*
Acquisition Group Limited (17)		1,500,000 (18)	1,500,000 (18)	0	0%
Grander Holdings, Inc. 401K (19)		2,500,000 (20)	2,500,000 (20)	0	0%
Robert Halpern		1,500,000 (21)	1,500,000 (21)	0	0%
The Special Equities Group LLC (22)		674,500 (23)	674,500 (23)	0	0%
US Commonwealth Life AI Policy 2013-17 (24)		2,250,000 (25)	2,250,000 (25)	0	0%
David Hall		250,000 (26)	250,000 (26)	0	0%
ATG Capital LLC (27)		375,619 (28)	375,619 (28)	0	0%
Azure Capital Corp (29)		968,396 (30)	500,000 (31)	468,396	*
2330573 Ontario Inc. (32)		3,500,000 (33)	3,500,000 (33)	0	0%
Cambridge Capital Ltd. (34)		7,000,000 (35)	7,000,000 (35)	0	0%
Melechdavid, Inc. (36)		2,500,000 (37)	2,500,000 (37)	0	0%
Mohit Bhansali		2,500,000 (38)	250,000 (39)	2,250,000	1.45%
NG Bahamas Ltd. (40)		6,400,000 (41)	6,400,000 (41)	0	0%
Dark Horse Financial Corp (42)		280,000 (43)	280,000 (43)	0	0%
Caitlin Plunkett		80,000 (44)	80,000 (44)	0	0%
2443904 Ontario Inc. (45)		360,000 (46)	360,000 (46)	0	0%
Iroquois Master Fund Ltd. (47)		653,835 (48)	312,500 (49)	341,335	*
Zachary John Harvey		605,000 (50)	500,000 (51)	105,000	*
DiamondRock, LLC (52)		1,868,236 (53)	1,858,236 (54)	10,000	*
Gerald Lindenmuth & Tim Kirby Trustees U/A DTD 01-01-1991 Lidenmuth & Associates Inc Trust (55)		2,298,393 (56)	1,197,059 (57)	1,101,334	*
HS Contrarian Investments, LLC (58)		6,354,053	6,009,901	344,152	*
L1 Capital Global Opportunities Master Fund (59)		2,485,000 (60)	2,475,000 (61)	10,000	*
Travis Trawick		704,579 (62)	150,000 (63)	554,579	*
Tyler Knight		1,200,000 (64)	750,000 (65)	450,000	*
Arthur Eli Kaplan		106,250 (66)	81,250 (67)	25,000	*

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(1)	Under applicable SEC rules, a person is deemed to beneficially own securities which the person has the right to acquire within 60 days through the exercise of any option or warrant or through the conversion of a convertible security. Also under applicable SEC rules, a person is deemed to be the “beneficial owner” of a security with regard to which the person directly or indirectly, has or shares (a) voting power, which includes the power to vote or direct the voting of the security, or (b) investment power, which includes the power to dispose, or direct the disposition, of the security, in each case, irrespective of the person’s economic interest in the security. Each listed selling stockholder has the sole investment and voting power with respect to all shares of Common Stock shown as beneficially owned by such selling stockholder, except as otherwise indicated in the footnotes to the table.
(2)	Represents the amount of shares that will be held by the selling stockholder after completion of this offering based on the assumptions that (a) all Resale Shares registered for sale by the registration statement of which this prospectus is part will be sold and (b) no other shares of our Common Stock are acquired or sold by the selling stockholder prior to completion of this offering. However, the selling stockholder may sell all, some or none of the Resale Shares offered pursuant to this prospectus and may sell other shares of our Common Stock that they may own pursuant to another registration statement under the Securities Act or sell some or all of their shares pursuant to an exemption from the registration provisions of the Securities Act, including under Rule 144. To our knowledge there are currently no agreements, arrangements or understanding with respect to the sale of any of the shares that may be held by the selling stockholder after completion of this offering or otherwise.
(3)	Catherine DeFrancesco as Director of DBIC Ltd. has voting and dispositive power over the securities held by such entity.
(4)	Includes (i) 720,000 shares of Common Stock and (ii) warrants to purchase up to 720,000 shares of Common Stock.
(5)	Catherine DeFrancesco as Director of DSBI Bahamas Ltd. has voting and dispositive power over the securities held by such entity.
(6)	Includes (i) 720,000 shares of Common Stock and (ii) warrants to purchase up to 720,000 shares of Common Stock.
(7)	Includes (i) 40,000 shares of Common Stock held by Jayesh Shah, 20,000 shares of Common Stock held by Jayesh M Shah IRA and (iii) warrants to purchase up to 130,000 shares of Common Stock. Jayesh Shah is the Trustee of Jayesh M Shah IRA and has voting and dispositive power over the securities held by such entity.
(8)	Includes (i) 40,000 shares of Common Stock and (ii) warrants to purchase up to 130,000 shares of Common Stock.
(9)	Steven Markowitz as Managing Member of Midori No Nami LLC has voting and dispositive power over the securities held by such entity.
(10)	Includes (i) 3,550,000 shares of Common Stock,  (ii) warrants to purchase up to 2,550,000 shares of Common Stock and (iii) options to purchase up to 300,000 shares of Common Stock.
(11)	Includes (i) 1,650,000 shares of Common Stock and (ii) warrants to purchase up to 2,550,000 shares of Common Stock.
(12)	Matthew Pinz as Managing Member of Pinz Capital International LP has voting and dispositive power over the securities held by such entity.
(13)	Includes (i) 250,000 shares of Common Stock and (ii) warrants to purchase up to 600,000 shares of Common Stock.
(14)	Includes (i) 250,000 shares of Common Stock and (ii) warrants to purchase up to 250,000 shares of Common Stock.

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(15)	Includes (i) 50,000 shares of Common Stock and (ii) warrants to purchase up to 262,500 shares of Common Stock.
(16)	Includes (i) 50,000 shares of Common Stock and (ii) warrants to purchase up to 162,500 shares of Common Stock.
(17)	Adam Arviv as President of Acquisition Group Limited has voting and dispositive power over the securities held by such entity.

(18)	Includes (i) 750,000 shares of Common Stock and (ii) warrants to purchase up to 750,000 shares of Common Stock.
(19)	Michael Brauser as Trustee of Grander Holdings, Inc. 401K has voting and dispositive power over the securities held by such entity.
(20)	Includes (i) 1,250,000 shares of Common Stock and (ii) warrants to purchase up to 1,250,000 shares of Common Stock.
(21)	Includes (i) 750,000 shares of Common Stock and (ii) warrants to purchase up to 750,000 shares of Common Stock.
(22)	Jonathan Schechter as the Managing Member of The Special Equities Group LLC and Joseph Reda a Member of The Special Equities Group LLC each have voting and dispositive power over the securities held by such entity.
(23)	Includes (i) 500,000 shares of Common Stock  and (ii) warrants to purchase up to 174,500 shares of Common Stock.
(24)	Mohit Bhansali as the Investment Manager of US Commonwealth Life AI Policy 2013-17 has voting and dispositive power over the securities held by such entity.
(25)	Includes (i) 1,125,000 shares of Common Stock and (ii) warrants to purchase up to 1,125,000 shares of Common Stock.
(26)	Includes (i) 125,000 shares of Common Stock and (ii) warrants to purchase up to 125,000 shares of Common Stock.
(27)	John O’Rourke as Managing Member of ATG Capital LLC has voting and dispositive power over the securities held by such entity.
(28)	Includes 375,619 shares of Common Stock.
(29)	Douglas Leighton as Chief Executive Officer of Azure Capital Corp has voting and dispositive power over the securities held by such entity.
(30)	Includes (i) 468,396 shares of Common Stock and (ii) warrants to purchase up to 500,000 shares of Common Stock.
(31)	Includes (i) 250,000 shares of Common Stock and (ii) warrants to purchase up to 250,000 shares of Common Stock.
(32)	Jason Theofilos, Angelo Pollastrone and Duncan Ka-Shing Yuen as the President and Director, Director and Director, respectively, of 2330573 Ontario Inc. have voting and dispositive power over the securities held by such entity.

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(33)	Includes (i) 1,750,000 shares of Common Stock and (ii) warrants to purchase up to 1,750,000 shares of Common Stock.
(34)	Craig Bridgman as President of Cambridge Capital Ltd. has voting and dispositive power over the securities held by such entity.
(35)	Includes (i) 3,500,000 shares of Common Stock and (ii) warrants to purchase up to 3,500,000 shares of Common Stock.
(36)	Mark Groussman as the President of Melechdavid, Inc. has voting and dispositive power over the securities held by such entity.
(37)	Includes (i) 1,250,000 shares of Common Stock and (ii) warrants to purchase up to 1,250,000 shares of Common Stock.
(38)	Includes (i) 125,000 shares of Common Stock, (ii) warrants to purchase up to 125,000 shares of Common Stock, (iii) 1,125,000 shares of Common Stock held by US Commonwealth Life AI Policy 2013-17 (“US Commonwealth”) and (ii) warrants to purchase up to 1,125,000 shares of Common Stock held by US Commonwealth. Mohit Bhansali as the Investment Manager of US Commonwealth has voting and dispositive power over the securities held by such entity.
(39)	Includes (i) 125,000 shares of Common Stock and (ii) warrants to purchase up to 125,000 shares of Common Stock.

(40) Catherine DeFrancesco as the Director of NG Bahamas Ltd. has voting and dispositive power over the securities held by such entity.

(41) Includes (i) 3,200,000 shares of Common Stock and (ii) warrants to purchase up to 3,200,000 shares of Common Stock.

(42)	Andrew Rudensky as the President of Dark Horse Financial Corp has voting and dispositive power over the securities held by such entity.
(43)	Includes (i) 140,000 shares of Common Stock and (ii) warrants to purchase up to 140,000 shares of Common Stock.
(44)	Includes (i) 40,000 shares of Common Stock and (ii) warrants to purchase up to 40,000 shares of Common Stock.
(45)	Anthony Vella as the Director of 2443904 Ontario Inc. has voting and dispositive power over the securities held by such entity.
(46)	Includes (i) 180,000 shares of Common Stock and (ii) warrants to purchase up to 180,000 shares of Common Stock.
(47)	Richard Abbe as Director of Iroquois Master Fund Ltd. has voting and dispositive power over the securities held by such entity.
(48)	Includes warrants to purchase up to 653,835 shares of Common Stock.
(49)	Includes warrants to purchase up to 312,500 shares of Common Stock.
(50)	Includes (i) 355,000 shares of Common Stock and (ii) warrants to purchase up to 250,000 shares of Common Stock.
(51)	Includes (i) 250,000 shares of Common Stock and (ii) warrants to purchase up to 250,000 shares of Common Stock.

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(52)	Neil Rock as Manager of DiamondRock, LLC has voting and dispositive power over the securities held by such entity.
(53)	Includes (i) 493,236 shares of Common Stock and (ii) warrants to purchase up to 1,375,000 shares of Common Stock.
(54)	Includes (i) 483,236 shares of Common Stock and (ii) warrants to purchase up to 1,375,000 shares of Common Stock.
(55)	Gerald Lindenmuth as Trustee of Gerald Lindenmth & Tim Kirby Trustees U/A DTD 01-01-1991 Lidenmuth & Associates Inc Trust has voting and dispositive power over the securities held by such entity.
(56)	Includes (i) 1,247,059 shares of Common Stock (iii) warrants to purchase up to 1,051,334 shares of Common Stock
(57)	Includes (i) 647,059 shares of Common Stock and (ii) warrants to purchase up to 550,000 shares of Common Stock.
(58)	John Stetson as Managing Member of HS Contrarian Investments, LLC has voting and dispositive power over the securities held by such entity.
(59)	David Feldman as Director of L1 Capital Global Opportunities Master Fund as voting and dispositive power over the securities held by such entity.
(60)	Includes warrants to purchase up to 2,485,000 shares of Common Stock.
(61)	Includes warrants to purchase up to 2,475,000 shares of Common Stock.
(62)	Includes (i) 511,579 shares of Common Stock and (ii) warrants to purchase up to 193,000 shares of Common Stock.
(63)	Includes (i) 75,000 shares of Common Stock and (ii) warrants to purchase up to 75,000 shares of Common Stock.
(64)	Includes (i) 825,000 shares of Common Stock and (ii) warrants to purchase up to 375,000 shares of Common Stock.
(65)	Includes (i) 375,000 shares of Common Stock and (ii) warrants to purchase up to 375,000 shares of Common Stock.
(66)	Includes (i) 25,000 shares of Common Stock and (ii) warrants to purchase up to 81,250 shares of Common Stock.
(67)	Includes warrants to purchase up to 81,250 shares of Common Stock.

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PLAN OF DISTRIBUTION

General

We are registering the Resale Shares covered by this prospectus to permit the selling stockholders to conduct public secondary trading of such shares from time to time after the date of this prospectus. We will not receive any of the proceeds of the sale of the Resale Shares offered by this prospectus. The aggregate proceeds to the selling stockholders from the sale of the Resale Shares will be the purchase price of the Resale Shares less any discounts and commissions. Each selling stockholder reserves the right to accept and, together with their respective agents, to reject, any proposed purchases of Resale Shares to be made directly or through agents.

Following the date of this prospectus, the selling stockholders and any of their pledgees, assignees and successors-in-interest may sell all or a portion of their Resale Shares from time to time in one or more transactions in the over-the-counter market at prevailing market prices or at privately negotiated market prices. The selling stockholders may use any one or more of the following methods when selling the Resale Shares offered by this prospectus:

● ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

● block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

● purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

● an exchange distribution in accordance with the rules of the applicable exchange;

● privately negotiated transactions;  

● settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;

● broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

● a combination of any such methods of sale;

● through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

● under Rule 144, Rule 144A or Regulation S under the Securities Act, if available, rather than under this prospectus; or

● any other method permitted pursuant to applicable law.

Our Common Stock is quoted on the OTCQB under the symbol “MSRT.” Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with NASD Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with NASD IM-2440.

In connection with the sale of our Common Stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of our Common Stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of our Common Stock short and deliver these securities to close out their short positions, or loan or pledge our common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

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The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts. If a selling stockholder is deemed to be an underwriter, the selling stockholder may be subject to certain statutory liabilities including, but not limited to Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. Selling stockholders who are deemed underwriters within the meaning of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act. The SEC staff is of a view that selling stockholders who are registered broker-dealers or affiliates of registered broker-dealers may be underwriters under the Securities Act. In compliance with FINRA guidelines, the maximum commission or discount to be received by an FINRA member or independent broker-dealer may not exceed 8% for the sale of any securities registered hereunder. We will not pay any compensation or give any discounts or commissions to any underwriter in connection with the securities being offered by this prospectus. The selling stockholders have advised us that they have not entered into any written or oral agreements, understandings or arrangements with any underwriter or broker-dealer regarding the sale of the Resale Shares. There is no underwriter or coordinating broker acting in connection with the proposed sale of the Resale Shares by the selling stockholders.

We are required to pay certain fees and expenses incurred by us incident to the registration of the shares. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. Each selling stockholder has in turn agreed to indemnify us for certain specified liabilities.

In order to comply with the securities laws of some states, if applicable, the shares of Common Stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the shares of Common Stock may not be sold unless they have been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the Resale Shares may not simultaneously engage in market making activities with respect to the Common Stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the Common Stock by the selling stockholders or any other person. The anti-manipulation rules under the Exchange Act may apply to sales of Common Stock in the market and to the activities of the selling stockholders and their affiliates. Regulation M may restrict the ability of any person engaged in the distribution of the Common Stock to engage in market-making activities with respect to the particular shares of common stock being distributed for a period of up to five business days before the distribution. These restrictions may affect the marketability of the Common Stock and the ability of any person or entity to engage in market-making activities with respect to the common stock. We will make copies of this prospectus available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale.

DESCRIPTION OF SECURITIES

We are offering up to 52,719,040 shares of our Common Stock including 28,083,290 outstanding shares of Common Stock and 24,635,750 shares of Common Stock issuable upon exercise of outstanding warrants

Common Stock

The following description of our Common Stock is intended as a summary only and is qualified in its entirety by reference to our Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”) and Bylaws, as amended (“Bylaws”), which are filed as exhibits to the registration statement of which this prospectus forms a part.

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Our authorized Common Stock consists of 200,000,000 shares, par value $0.001 per share, of which 154,487,534 shares were issued and outstanding as of May 18, 2018.

Each share of our Common Stock is entitled to one vote on all matters submitted to a vote of the stockholders. Our stockholders are not permitted to cumulative voting. Holders of our Common Stock are entitled to receive ratably such dividends, if any, as may be declared by our Board out of legally available funds. However, the current policy of our Board is to retain earnings, if any, for the operation and expansion of our Company. Upon liquidation, dissolution or winding-up, the holders of our Common Stock are entitled to share ratably in all of our assets which are legally available for distribution, after payment of or provision for all liabilities, subject to rights, if any, of the holders of any of our other securities. The holders of our Common Stock have no preemptive, subscription, redemption or conversion rights.

Preferred Stock

As of the date of this prospectus, no shares of preferred stock are outstanding. Pursuant to our Certificate of Incorporation, our Board has the authority, without further action by the stockholders, to issue from time to time up to 21 shares of preferred stock, all of which are designated as Series A Preferred Stock.

Series A Preferred Stock

The Series A Preferred Stock are convertible into shares of Common Stock based on a conversion calculation equal to the Series A Original Issue Price (as defined herein) divided by the Series A Conversion Price (as defined herein). The “Series A Original Issue Price” means $8,499.79 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock. The “Series A Conversion Price” means $ 8,499.79, subject to adjustment. The shares of Series A Preferred Stock accrue dividends at a rate of 7% per annum (the “Series A Dividends”). In the event of any liquidation, dissolution or winding up of the Company or Deemed Liquidation Event (as defined in the Certificate of Incorporation”) the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series A Original Issue Price, plus any Series A Dividends accrued but unpaid thereon and (ii)  such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event. Each cast such number of votes equal to the number of shares of Common Stock into which the shares of Series A Preferred Stock are convertible. Holders of Series A preferred Stock shall vote together with the holders of Common Stock as a single class; provided, however, the holders of Series A Preferred Stock, exclusively and as a separate class, shall be entitled to elect 2 directors of the Company.

Warrants  

On February 27, 2015, we issued service providers warrants to purchase up 100,000 shares of Common Stock at $0.50 per share. As of May 18, 2018, warrants to purchase up to 100,000 shares were outstanding.

On April 8, 2015, the Company issued warrants to purchase up to 50,000 shares of its common stock at $0.60 per share to certain service providers. As of May 18, 2018, warrants to purchase 50,000 shares were outstanding.

On July 30, 2015, we entered into consulting agreements with each of Shmuel Tennenhaus and Daniel Mohler to provide advisory services to us. As part of the agreements, Mr. Tennenhaus and Mr. Mohler received warrants to purchase up to 125,000 and 50,000 shares of Common Stock, respectively, at $0.90 per share. As of May 18, 2018, warrants to purchase up to 175,000 shares were outstanding.

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On November 9, 2015, we issued three-year warrants to purchase up to 407,475 shares of Common Stock at a price of $3.00 per share in a registered direct offering. As of May 18, 2018, warrants to purchase up to 407,475 shares were outstanding.

In December 2015, we issued three-year warrants to purchase up to 146,200 shares of Common Stock with an exercise price of $1.06 per share to holders of outstanding warrants issued in the September 2014 Offering. These warrants were issued in consideration for the holders thereof agreeing to waive certain adjustment provisions of the warrants received in the September 2014 Offering. As of May 18, 2018, warrants to purchase up to 146,200 shares were outstanding.

In January 2016, we issued warrants to purchase up to 100,000 shares of Common Stock at $0.83 per share to certain service providers. As of May 18, 2018, warrants to purchase up to 100,000 shares were outstanding.

In February 2016, we issued a three-year warrant to purchase up to 35,000 shares of Common Stock at $1.00 per share to a service provider. As of May 18, 2018, none of these warrants were outstanding.

In March 2016, we issued five-year warrants to purchase up to 2,346,670 shares of Common Stock at an exercise price of $1.00 per share. As of May 18, 2018, warrants to purchase up to 340,002 shares were outstanding.

From August 12 to October 21, 2016, we issued three-year warrants to purchase up to 4,945,002 shares of Common Stock at a price of $0.90 per share in a registered direct offering. As of May 18, 2018, warrants to purchase up to 4,825,002 shares were outstanding.

In July 2017, we issued five-year warrants to purchase up to 2,394,000 shares of Common Stock at $0.65 per share. Our December 2017 Private Placement triggered the Price Protection provisions of the warrants issued in the July 2017 Private Placement, and as a result of such adjustment, as of May 18, 2018, warrants to purchase up to 2,265,000 shares were outstanding at $0.20 per share.

In August 2017, we issued five-year warrants to purchase up to 2,090,000 shares of Common Stock at an exercise price of $0.50 per share. Our December 2017 Private Placement triggered the Price Protection provisions of the warrants issued in the August 2017 Private Placement, and as a result of such adjustment, as of May 18, 2018, warrants to purchase up to 3,480,130 shares were outstanding at $0.20 per share.

In December 2017, we issued five-year warrants to purchase up to 4,850,000 shares of Common Stock at an exercise price of $0.20 per share. As of May 18, 2018, warrants to purchase up to 4,850,000 shares were outstanding.

In December 2017, we issued five-year warrants to purchase up to 10,250,000 shares of Common Stock at an exercise price of $0.40 per share. As of May 18, 2018, warrants to purchase up to 5,000,000 shares were outstanding.

In January 2018, we issued five-year warrants to purchase up to 250,000 shares of Common Stock at an exercise price of $0.20 per share. As of May 18, 2018, warrants to purchase up to 250,000 shares were outstanding.

In January 2018, we issued five-year warrants to purchase up to 13,700,000 shares of Common Stock at an exercise price of $0.40 per share. As of May 18, 2018, warrants to purchase up to 13,700,000 shares were outstanding.

SHARES ELIGIBLE FOR FUTURE SALE

We cannot predict the effect, if any, that market sales of shares of our Common Stock or the availability of shares of our Common Stock for sale will have on the market price of our Common Stock prevailing from time to time. Future sales of our Common Stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. The availability for sale of a substantial number of shares of our Common Stock acquired through the exercise of outstanding warrants could materially adversely affect the market price of our Common Stock. In addition, sales of our Common Stock in the public market after the restrictions lapse as described below, or the perception that those sales may occur, could cause the prevailing market price to decrease or to be lower than it might be in the absence of those sales or perceptions.

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Rule 144

In general, under Rule 144, any person who is not our affiliate and has held their shares for at least six months, including the holding period of any prior owner other than one of our affiliates, may sell shares without restriction, subject to the availability of current public information about us. In addition, under Rule 144, any person who is not an affiliate of ours and has held their shares for at least one year, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell an unlimited number of shares without regard to whether current public information about us is available. A person who is our affiliate or who was our affiliate at any time during the preceding three months, and who has beneficially owned restricted securities for at least six months, including the holding period of any prior owner other than one of our affiliates, is entitled to sell a number of shares within any three-month period that does not exceed the greater of: (i) 1% of the number of shares of our common stock then outstanding and (ii) if and when the Common Stock is listed on a national securities exchange, the average weekly trading volume of the Common Stock during the four calendar weeks preceding the date on which notice of such sale was filed under Rule 144.

Sales under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirements, and to the availability of current public information about us.

DESCRIPTION OF BUSINESS

Overview

MassRoots was formed in April 2013 as a technology platform for the cannabis industry. Powered by more than one million registered users, MassRoots enables consumers to rate cannabis products and strains based on their efficacy (i.e., effectiveness for treating ailments such as back-pain or epilepsy) and then presents this information in easy-to-use formats for consumers to make educated purchasing decisions at their local dispensary. Businesses are able to leverage MassRoots by strategically advertising to consumers based on their preferences and tendencies.

“Registered users” (“Users”) are defined as users who currently have an account with MassRoots. It does not include users who have deleted their account nor does it reflect active usage over any set period of time.

Background

We were incorporated in the state of Delaware on April 26, 2013 as a technology platform for the cannabis industry. Our principal executive office is located at 2420 17^th Street, Office 3118, Denver, Colorado 80202, and our telephone number is (833) 467-6687.

On January 25, 2017, we consummated a reverse triangular merger (the “Whaxy Merger”) pursuant to which we acquired all of the outstanding common stock of DDDigtal Inc (“DDDigtal”), a Colorado corporation. Upon closing of the Whaxy Merger, each share of DDDigtal’s common stock was exchanged for such number of shares of our common stock (or a fraction thereof) based on an exchange ratio equal to approximately 5.273-for-1, such that 1 share of our common stock was issued for every 5.273 shares of DDDigtal’s common stock. At the closing of the Whaxy Merger, all shares of common stock of our newly-formed merger subsidiary formed for the sole purpose of effectuating the Whaxy Merger, were converted into and exchanged for one share of common stock of DDDigtal, and all shares of DDDigtal’s common stock that were outstanding immediately prior to the closing of the Whaxy Merger were automatically cancelled and retired. Upon the closing of the Whaxy Merger, DDDigtal continued as our surviving wholly-owned subsidiary, and the merger subsidiary ceased to exist.

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On July 13, 2017, we consummated a reverse triangular merger (the “Odava Merger”) pursuant to which we acquired all of the outstanding common stock of Odava Inc (“Odava”), a Delaware corporation. Upon closing of the Odava Merger, each share of Odava’s common stock was exchanged for such number of shares of our common stock (or a fraction thereof), based on an exchange ratio equal to approximately 4.069-for-1, such that 1 share of our common stock was issued for every 4.069 shares of Odava’s common stock. At the closing of the Odava Merger, all shares of common stock of our newly-formed merger subsidiary formed for the sole purpose of effectuating the Odava Merger, were converted into and exchanged for one share of common stock of Odava, and all shares of Odava’s common stock that were outstanding immediately prior to the closing of the Odava Merger automatically cancelled and retired. Upon the closing of the Odava Merger, Odava continued as our surviving wholly-owned subsidiary, and the merger subsidiary ceased to exist.

Our Products and Services

Our technology platform consists of MassRoots, our consumer-facing social network (accessible through an Android application, iOS application, and web portal) and our business and advertising portal for companies which can be accessed at www.massroots.com/dispensaries.

The MassRoots Network

The MassRoots network is accessible as a free mobile application through the Apple App Store, the Amazon App Store, the Google Play Marketplace, and as a web application at www.massroots.com. These applications and services work in a manner similar to other social review platforms such as Vivino, Untappd and Yelp. Using our network after agreeing to our Terms and Conditions,

● Users can create a profile by selecting a username and setting their password;

● Users have the ability to follow other Users on our network which permits them to follow other Users’ posts which are displayed on their newsfeed;

● Users have the ability to review strains and products based on factors including, but not limited to, quality. These reviews are displayed on product pages within the app and on the User’s profile;

● Users have the ability to like, comment and report statuses from other Users. By “liking” a status, a User is indicating their approval of the post’s content. By commenting on a status, Users are free to voice their opinions or comments with respect to the post. By reporting a status, Users can flag content that violates our Terms and Conditions, including spam, harassing content, and posts or comments that appear to solicit the transaction of cannabis or other products;

● Users have the ability to tag other Users and use hashtags to categorize posts. By using the “@” symbol followed by a username, Users can tag other Users in posts they want them to see or if such Users are included in the picture or post. By using the “#” followed by a categorical word, Users can categorize posts based on their content;

● Users have the ability to post pictures with text captions or just text statuses;

● Users have the ability to search for Users based on their username and the ability to search by hashtag to display all results within a particular category. Users can sort hashtag searches by their popularity or when they were posted; and

● Users have the ability to set their profile to public or private. By setting their profile to public, any User on MassRoots’ apps will be able to see the public profile’s posts and follow the account. When a profile is private, another User must request to follow such account and the account owner must grant permission before they can view any of the account’s posts.

User Growth and Product Distribution Channels

The MassRoots app is distributed free-of-charge through the Apple App Store, the Google Play Marketplace and the Amazon App Store. The MassRoots network is also accessible through desktop and mobile web browsers by navigating to www.massroots.com. Our business and adverting portal can be accessed at www.massroots.com/dispensaries. Through this portal companies can edit their profiles, distribute information to Users and view analytics such as impressions, views and clicks.

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Blockchain Technologies

MassRoots Blockchain Technologies, Inc. (“MassRoots Blockchain”) was formed in December 2017 as a wholly-owned subsidiary of the Company to continue the Company’s efforts in exploring how new technologies may be utilized in the cannabis industry. Initially, we are focusing on blockchain technology for several reasons, including, but not limited to:

· that it may enable better tracking of impressions, views, and interactions with posts, advertisements and dispensary listings;

· that it has the potential to streamline the collection and organization of data while eliminating traditional security risks;

· that it may provide a greater degree of reliability and accuracy with respect to data;

· that it may allow us to implement an intelligent newsfeed to deliver high-quality and more relevant content to our Users;

· that it may enable the development of contracts that are automatically executed when certain parameters are met;

· that it has the potential to reduce friction in the cannabis market-place and save businesses valuable and resources; and

· that it may provide greater transparency to government regulators.

In December 2017, we commenced the re-development of the MassRoots Business Portal, a platform where dispensaries and other industry participants, such as producers and other ancillary businesses, may advertise their goods and services. To date, we have used approximately $250,000 for the initial development of the MassRoots Business Portal, including features that allow for tracking of advertising impressions, enhanced targeting and serving of advertisements, as well as a program that would be designed to reward Users of the MassRoots platform for providing high quality reviews on cannabis strains and products. The development and implementation of these any other features, including the possible use of digital instruments, is currently contemplated to be made within the MassRoots App and platform, and is intended to generate the growth of Users of the MassRoots platform and stimulate the MassRoots platform’s overall activity.

All initial development has been outsourced to third party development firms and consultants. Specifically, we have outsourced the following services: software development services, including, but not limited to, web and mobile development services, blockchain development and integration services, and infrastructure development, automation, support and management services. During the second quarter of 2018, we intend to launch an updated version of the MassRoots Business Portal that includes certain features that use blockchain technology to track advertisement impressions. While we intend to launch an updated version of the MassRoots Business Portal there can be no assurance as to when, or if, we will complete development of a fully functional portal that utilizes features based upon such technology. As stated in “Risk Factors,” the development of features based upon the use of blockchain technology is subject to numerous risks and uncertainties, and there can be no assurance as to when, or if, any such features will be successfully developed, or that if developed, that they will be accepted or adopted. Further, the likelihood of our development and implementation of features based upon new technology must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the inception and development of a product or service based upon any such relatively new and developing technology.

While MassRoots Blockchain and the Company intend to devote resources to exploring the feasibility of developing these or other solutions, there can be no assurances that we will be successful in implementing such solutions, that any such solutions will be economically viable, or that any of them will result in the generation of User interest, participation or revenue.

We currently anticipate that MassRoots Blockchain and/or the Company will need to raise additional funds to continue to explore and develop potential uses and applications of blockchain technologies and uses for our business and other businesses in the cannabis industry; however, no assurance can be given that additional financing will be available on terms favorable to us, or at all.

App/Play Store Issues, User Support and Similar Matters

On November 4, 2014, the MassRoots App was removed from Apple’s iOS App Store because the App Store changed its guidelines to prohibit the promotion of social cannabis applications. Although existing iOS Users were still able to access and use the MassRoots App, new users were prohibited from downloading our app. After correspondences with Apple, other cannabis companies and cannabis advocates, in February 2015 Apple advised us that it revised its enforcement guidelines to permit cannabis applications in the Apple App Store which restricted access to users located in the states where use of cannabis was permitted. On February 12, 2015, our application was reinstated to the Apple App Store and can now only be accessed by users in the states which permit the use of cannabis. Although our app has been reinstated to the Apple App Store, we cannot provide any assurance that Apple’s policy will not change in the future or that our application will not once again be removed from the Apple App Store.

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The Apple App Store is one of the largest content distribution channels in the world and is the only way to effectively distribute software to the large percentage of the United States population who own iPhones and iPads. The Apple App Store review team effectively operates as our iOS App’s regulator; they decide what guidelines iOS apps must operate under and how to enforce such guidelines. The Apple guidelines related to cannabis-related apps are not published, enforcement of such guidelines is difficult to predict, and the review and appeal processes are conducted without public oversight. Although we will continue advocating for a more open and transparent Apple App Store review process that will allow decisions that affect a significant portion of the United States smartphone owning population to be open to public scrutiny, there can be no assurance that we will be successful in these efforts.

MassRoots, along with other cannabis apps, regularly encounter issues with the Google Play Store review team in the normal course of business due to Google Play Store’s absence of clear guidelines regarding cannabis-related apps. On November 8, 2016, the MassRoots App was removed from the Google Play Store due to a compliance review. However, on March 21, 2017, Google approved the MassRoots App for distribution to Android devices through the Google Play Store, making it available for download on the Google Play Store once again.

On December 1, 2016, MassRoots’ Android application received approval from the Amazon App Store for listing, and is currently available for download on the Amazon App Store.

Under their respective developer license agreements, Apple, Inc., Google, Inc. and Amazon.com, Inc. have the right to update the Apple App Store, Google Play Store and Amazon App Store policies, respectively, to prohibit cannabis-related applications at any time. This could result in many prospective users being unable to access and join our network and existing Users being unable to access our app.

Our activities outside of the application stores have also faced backlash and resistance due to our status as a cannabis-related company. For example, our Instagram account is followed by more than 450,000 users and we utilize this following to help expand our user-base. However, in a situation similar to the removal of our application from the Apple App Store, our Instagram account was suspended in January 2016 without notice or explanation. Our account was reinstated on February 26, 2016. While management believes that our platform is at the point where any potential suspensions effecting our Company will not affect our User growth, we expect to continue to face similar situations in the future that may cause disruptions to the execution of our business plan.

Market Conditions

MassRoots is poised to take advantage of two rapidly growing industries: cannabis and mobile technology.

Cannabis Market Growth and Current Trends

Since the MassRoots app first launched in July 2013, on January 4, 2018, Attorney General Jefferson B. Sessions, III issued a memo which rescinded the Cole Memo (as described below) which was adopted by the Obama administration as a policy of non-interference with marijuana friendly state laws.

The Cole Memo

On August 29, 2013, Deputy Attorney General James Cole issued a memo (the “Cole Memo”) in response to certain states passing measures to regulate the medical and adult-use of cannabis. In the Cole Memo, the Department of Justice made clear that marijuana remains an illegal drug under the Controlled Substances Act and that federal prosecutors will continue to aggressively enforce the statute. The Department of Justice identified eight enforcement areas that federal prosecutors should prioritize. Outside of such enforcement priorities, the federal government has traditionally relied on state and local authorities to address marijuana activity. The Cole Memo established several basic guidelines by which state regulated cannabis businesses could operate to minimize the risk of intervention and enforcement by the Department of Justice. The guidelines focused on ensuring that cannabis did not cross state lines, keeping dispensaries away from schools and public facilities and strict-enforcement of state laws by regulatory agencies, among other priorities.

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The Sessions Memo

On January 4, 2018, Attorney General Jefferson B. Sessions, III issued a memo (the “Sessions Memo”) on federal marijuana enforcement policy announcing a return to the rule of law and the rescission of previous nationwide guidance by the Department of Justice (including, but not limited to, the Cole Memo). In the memorandum, Attorney General Jefferson Sessions directs all U.S. attorneys to enforce the laws enacted by Congress and to follow the well-established principles when pursuing prosecutions related to marijuana activities. These principles include weighing all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.

Guidance to Banks Relating to the Marijuana Industry

On February 14, 2014, the Department of Justice and the Department of Treasury issued guidance to banks about how to serve the marijuana industry without running afoul of federal regulations. Prior to such guidance, dispensaries were forced to operate on a cash basis, presenting significant security and accounting issues. Although banks have remained reluctant to work with marijuana businesses because of federal prohibition laws, this guidance was a major step in legitimizing and accepting the cannabis industry on a national level. In addition, the adoption of the Rohrabacher Farr Amendment (as discussed below) indicates some level of support in Congress for medicinal cannabis, even if its actual effect is still undetermined.

For additional information concerning the Cole Memo, the Sessions Member, the Rohrabacher-Farr Amendment and regulatory conditions, see the section entitled “Business – Government Regulation.”

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Current States with Laws Permitting the Medical or Adult Use of Cannabis

According to CNN Money, recreational marijuana is regulated in nine states and the District of Columbia and medical marijuana is regulated in 30 states. The states which have enacted such laws are listed below the following map:

State	Year Passed
1. Alaska*	1998
2. Arizona	2010
3. Arkansas	2016
4. California*	1996
5. Colorado*	2000
6. Connecticut	2012
7. District of Columbia*	2010
8. Delaware	2011
9. Florida	2016
10. Hawaii	2000
11. Illinois	2013
12. Louisiana	2015
13. Maine*	1999
14. Maryland	2014
15. Massachusetts*	2012
16. Michigan	2008
17. Minnesota	2014
18. Montana	2004
19. Nevada*	2000
20. New Hampshire	2013
21. New Jersey	2010
22. New Mexico	2007
23. New York	2014
24. North Dakota	2016
25. Pennsylvania	2016
26. Ohio	2016
27. Oregon*	1998
28. Rhode Island	2006
29. Vermont	2004
30. Washington*	1998
31. West Virginia	2017

* State has enacted laws permitting the adult use of cannabis, in addition to medical use.

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Public Support for Regulation of Cannabis Increasing

A Quinnipiac poll conducted in February 2017 found that 93% of the American people supported regulating the medicinal use of cannabis, 59% supported regulating the adult-use of cannabis and 71% of Americans were opposed to federal government interference with state marijuana programs. These statistics continue the trend over the past decade toward public support for cannabis.

Market Conditions that Could Limit Our Business

Cannabis is a Schedule I controlled substance under Federal law and, as such, there are several factors that could limit our business operations including, but not limited to:

● The Federal government and many private employers prohibit drug use of any kind, including cannabis, even where it is permissible under state law. Random drug screenings and potential enforcement of such employment provisions may significantly reduce the size of the potential cannabis market;

● Enforcement of Federal law prohibiting cannabis occurs randomly and often without notice. This could scare many potential investors away from cannabis-related investments and makes it difficult to make accurate market predictions;

● On January 4, 2018, the Department of Justice issued the Sessions Memo announcing a return to the rule of law and the rescission of previous guidance documents. The Sessions Memo rescinded the Cole Memo. Although there is no guarantee that additional states will pass measures to regulate cannabis use under state law, the Sessions Memo may further deter states from passing such measures. Furthermore, irrespective of the Sessions Memo, in many states, public support of regulation initiatives may not maintain enough support to pass. This is especially true when a supermajority is needed to pass measures, like in Florida where a state constitutional amendment permitting medical cannabis has been proposed, but requires 60% approval to pass. Changes due to the Sessions Memo and in voters’ attitudes and turnout have the potential to slow or stop the cannabis regulation movement and potentially reverse recent cannabis regulation victories;

● There has been some resistance and negativity as a result of recent cannabis regulation at the state level, especially as it relates to drugged driving. The lack of clearly defined and enforced laws at the state level has the potential to sway public opinion against marijuana regulation; and

● In the event that the Federal government does not enforce the Federal law prohibiting cannabis, state laws regarding the regulation of cannabis are being challenged through lawsuits. Lawsuits have been brought by private groups and local law enforcement officials. If these lawsuits are successful, state laws permitting cannabis sales may be overturned which will significantly reduce the size of the potential cannabis market and have a material adverse effect on our business.

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Please see “Government Regulation” below for additional information.

Government Regulation

Marijuana is a categorized as a Schedule I controlled substance by the Drug Enforcement Agency and the United States Department of Justice and is illegal to grow, possess and consume under Federal law. However, 30 states have passed state laws that permit doctors to recommend cannabis for medical-use and eight of those states and the District of Columbia have enacted laws that regulate the adult-use of cannabis for any reason. Because doctors are prohibited from prescribing a Schedule I controlled substance, the passage of a state medical marijuana does not necessarily guarantee the implementation of a regulated, commercial system through which patients can purchase cannabis products. This has created an unpredictable business-environment for dispensaries and collectives that operate under certain state laws but in violation of Federal law.

Cole Memo

On August 29, 2013, United States Deputy Attorney General James Cole issued the Cole Memo to United States attorneys guiding them to prioritize enforcement of Federal law away from the cannabis industry operating as permitted under certain state laws, so long as:

● cannabis is not being distributed to minors and dispensaries are not located around schools and public buildings;

● the proceeds from sales are not going to gangs, cartels or criminal enterprises;

● cannabis grown in states where it is legal is not being diverted to other states;

● cannabis-related businesses are not being used as a cover for sales of other illegal drugs or illegal activity;

● there is not any violence or use of firearms in the cultivation and sale of marijuana;

● there is strict enforcement of drugged-driving laws and adequate prevention of adverse health consequences; and

● cannabis is not grown, used, or possessed on Federal properties.

The Cole Memo was a guide for United States attorneys and did not alter in any way the Department of Justice’s authority to enforce Federal law, including Federal laws relating to cannabis, regardless of state law. As described below, as a result of the issuance of the Sessions Memo by the Department of Justice on January 4, 2018, the Cole memo was rescinded. Prior to the issuance of the Sessions Memo, we had implemented standard operating procedures and policies to ensure that we were operating in compliance with the Cole Memo. We cannot provide assurance that our actions were, are or will be in compliance with the Cole Memo, the Sessions Memo or any other laws or regulations that currently exist or may be amended or adopted in the future.

Pursuant to our currently existing Terms and Conditions:

● Users must agree that they are located in a state where medical-use or adult-use of cannabis is regulated;

● Users must be of age to consume cannabis in their particular state (18 or 21 years old, depending on the state);

● Users may only post content that is in compliance with their state’s laws;

● Users may not solicit or distribute cannabis through MassRoots unless they are a licensed dispensary;

● Posting of any of the following materials to MassRoots is prohibited and will result in account termination:

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● Posting other drugs or substances, including prescription pain pills;

● Posting of any violence or threat of violence;

● Posting of any drugged-driving content; and

● Posting of any copyright-protected content.

We have implemented an aggressive content and account review program to ensure compliance with our Terms and Conditions. Users have the ability to report any status or account that is in violation of our Terms and Conditions and we encourage Users to do so as any illegal content jeopardizes the network for all our Users. When a status or account is reported, the post is automatically removed from the network until further review. A MassRoots employee then reviews the content within 24 hours and either approves it as in compliance within our Terms and Conditions or permanently deletes it and bans the User’s account.

In addition, as part of the agreement to allow our app to return to the Apple App Store, we implemented geographic restrictions to restrict new Users to our mobile apps to the District of Columbia and the 30 states in which the use of marijuana is permitted.

Our business plan includes allowing cannabis dispensaries to advertise on our network, which we believe could be deemed to be aiding and abetting illegal activities, a violation of Federal law. We continue to evaluate the effects of the Sessions Memo; however, we cannot provide assurance that we were, are or will be in compliance with the Cole Memo, the Sessions Memo or any other laws or regulations.

Rohrabacher-Farr Amendment

On December 16, 2014, H.R. 83 - Consolidated and Further Continuing Appropriations Act, 2015 was enacted and included a provision known as the “Rohrabacher-Farr Amendment” which states:

None of the funds made available in this Act to the Department of Justice may be used, with respect to the States of Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Washington, and Wisconsin, to prevent such States from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.

The Rohrabacher-Farr Amendment would appear to protect the right of the states to determine their own laws on medical cannabis use; however, the actual effects of the amendment are still unclear. The Rohrabacher-Farr Amendment did not remove the federal ban on medical cannabis and cannabis remains regulated as a Schedule I controlled substance. Further, the United States Department of Justice has interpreted the Rohrabacher-Farr Amendment as only preventing federal action that prevents states from creating and implementing cannabis laws - not against the individuals or businesses that actually carry out cannabis laws – and has continued to sporadically initiate enforcement actions against individuals or businesses participating in the cannabis industry despite such participation being regulated under state law. Whether this interpretation is appropriate is still being litigated, and, while an initial district court decision has not supported the Department of Justice’s interpretation, such decision is currently under appellate review. In addition, no matter what the interpretation is adopted by the courts, there is no question that the Rohrabacher-Farr Amendment does not protect any party not in full compliance with state medicinal cannabis laws.

The Rohrabacher-Farr Amendment represents one of the first times in recent history that Congress has taken action indicating support of medical cannabis. The Rohrabacher-Farr Amendment was renewed by Congress in 2015, 2016, 2017 and 2018 and is in effect until September 30, 2018.

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Sessions Memo

On January 4, 2018, Attorney General Jefferson B. Sessions, III issued a memo on federal marijuana enforcement policy announcing a return to the rule of law and the rescission of previous nationwide guidance by the Department of Justice (including, but not limited to, the Cole Memo). In the memorandum, Attorney General Jefferson Sessions directs all U.S. attorneys to enforce the laws enacted by Congress and to follow well established principles when pursuing prosecutions related to marijuana activities. These principles include weighing all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community. The effect of this memo is to shift federal policy from a hands-off approach adopted by the Obama administration to permitting federal prosecutors across the country to determine how to prioritize resources to regulate marijuana possession, distribution and cultivation in states where marijuana use is legal.

While we do not directly harvest or distribute cannabis today, we still may be deemed to be violating federal law, or aiding and abetting the violation of Federal law and may be irreparably harmed by a change in enforcement by the federal or state governments.

Additional Government Regulations

We are subject to general business regulations and laws as well as Federal and state regulations and laws specifically governing the Internet and e-commerce. These regulations and laws cover among others, sweepstakes, taxation, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, broadband residential Internet access and the characteristics and quality of services. Any noncompliance with the foregoing laws and regulations may harm our business and results of operations.

Competitors

We compete with other cannabis information platforms such as WeedMaps and Leafly, which provide information with respect to dispensary locations, strain information, and news relating to the cannabis industry. We believe our primary competitive advantage is the community we have created and the significant reviews and data we have collected on key cannabis markets.

Intellectual Property

MASSROOTS is a federally registered trademark of MassRoots, and ODAVA is a state registered trademark of MassRoots. MassRoots has applied for the trademark “TOKE”.

Employees and Consultants

MassRoots has7 full-time employees, two part-time employees, and one full-time independent contractor as of May 18, 2018.

Legal Proceedings

  
We are not currently a party to any legal proceedings, and we are not aware of any pending or potential legal actions.

Properties

On February 1, 2018, we entered into a Membership Agreement with WeWork pursuant to which we will lease offices located at 2420 17^th Street, Office 3118, Denver, Colorado 80202 effective as of February 2, 2018. The term of the agreement is for one month which shall automatically be renewed for successive one month terms unless terminated by either party. Pursuant to the terms of the Membership Agreement we will pay a fee of $1,360 per month for the leased premises.

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We do not own any properties or land.

We believe that our facilities are adequate for our current needs and that, if required, we will be able to expand our current space or locate suitable new office space and obtain a suitable replacement for our executive and administrative headquarters.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Since April 9, 2015, our Common Stock has been quoted on the OTCQB under the symbol “MSRT”. Trading in our Common Stock has historically lacked consistent volume, and the market price has been volatile.

The following table presents, for the periods indicated, the high and low sales prices of Common Stock, and is based upon information provided by the OTCQB Marketplace. These quotations below reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.

	2017
	High		Low
First Quarter	$	1.18	$	0.77
Second Quarter	$	0.95	$	0.41
Third Quarter	$	0.63	$	0.30
Fourth Quarter	$	0.67	$	0.11

	2016
	High		Low
First Quarter	$	1.54	$	0.65
Second Quarter	$	1.67	$	0.66
Third Quarter	$	0.85	$	0.38
Fourth Quarter	$	1.08	$	0.40

The last reported sale price of Common Stock as of May 22, 2018 on the OTCQB was $0.26 per share.

As of May 18, 2018, there were 168 stockholders of record. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of Common Stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. The transfer agent of our Common Stock is Pacific Stock Transfer Company, located at 173 Keith Street, Suite 3, Warrenton, Virginia 20186.

As of May 18, 2018, there were 154,487,534 shares of our Common Stock issued and outstanding.

As of May 18, 2018, excluding consideration of vesting provisions, 15,371,765 shares of Common Stock were issuable upon the exercise of options granted under Plans to certain employees and directors with a weighted average exercise price of $0.73 per share, as set forth below:

Number of Shares  Underlying Options	Per Share Exercise Price		Expiration Date
1,056,786	$	0.10	June 2024
250,000	$	0.36	March 2028
1,000,000	$	0.40	February 2028
689,631	$	0.50	January to March 2025
1,820,112	$	0.51-0.75	April 2025 to October 2026
9,926,072	$	0.76 – 1.00	April 2025 to January 2027
629,164	$	1.01-1.10	March 2026 to January 2027

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In addition, 35,926,339 shares of Common Stock were issuable upon the exercise of warrants outstanding as of May 18, 2018, with a weighted average exercise price of $0.44, as set forth below:

Number of Shares  Underlying Warrants	Per Share Exercise Price		Expiration Date
11,082,660	$	0.20	December 2022 to January 2023
18,700,000	$	0.40	January 2023
440,002	$	0.50	February 2020 to August 2021
50,000	$	0.60	April 2020
100,000	$	0.83	January 2021
5,000,002	$	0.90	July 2020 to October 2020
146,200	$	1.06	December 2018
407,475	$	3.00	November 2018

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

You should read the following discussion of our financial condition and results of operations in conjunction with financial statements and notes thereto, as well as the “Risk Factors” and “Description of Business” sections included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors”.

Overview

MassRoots was formed in April 2013 as a technology platform for the cannabis industry. Powered by more than one million registered Users, MassRoots enables consumers to rate cannabis products and strains based on their efficacy (i.e., effectiveness for treating ailments such as back-pain or epilepsy) and then presents this information in easy-to-use formats for consumers to make educated purchasing decisions at their local dispensary. Businesses are able to leverage MassRoots by strategically advertising to consumers based on their preferences and tendencies.

Over the past five years, MassRoots has established itself as a leading technology company in the emerging cannabis industry, building a User-base of one million registered Users, partnering with some of the most recognized brands in the industry and raising significant capital from institutional and private investors. Since inception, the Company has generated approximately $1.2 million in revenue.

Historically, we have focused on building a consumer-facing application and have not spent significant resources on developing our advertising portal for dispensaries. We are now focusing our efforts on developing our advertising portal so as to automate the processes and platform needed to deliver our underlying services. In December 2017, we began developing an advertising portal for dispensaries that will enable dispensaries to list their products on the MassRoots dispensary finder and view analytics of their local consumers. During the second quarter of 2018, we intend to launch an updated version of the portal and to charge dispensaries a minimum recurring monthly fee, per location, for access to the portal.

With MassRoots’ wide-spread audience and following in some of the leading medical cannabis markets in the country, we believe our business portal will be well-received by our client base. According to ArcView Market Research, there are projected to be over 2,700 state-regulated dispensaries in the United States by 2020.

In 2018, MassRoots has fully repaid its convertible debt and reduced its liabilities by more than $10 million while investing significant capital into the continued development of its platform. MassRoots’ has also reduced its operating expenses by more than $2 million during the first quarter of 2018 as compared to 2017 as we continue to focus on automation with technology rather than expansion of payroll.

User Growth and Product Distribution Channels

The MassRoots app is distributed free-of-charge through the Apple App Store, the Google Play Marketplace and the Amazon App Store. The MassRoots network is also accessible through desktop and mobile web browsers by navigating to www.massroots.com. Our business and adverting portal can be accessed at www.massroots.com/dispensaries. Through this portal, companies can edit their profiles, distribute information to Users and view analytics such as impressions, views and clicks.

Competitors

We compete with other cannabis information platforms such as WeedMaps and Leafly, which provide information with respect to dispensary locations, strain information, and news relating to the cannabis industry. We believe our primary competitive advantage is the community we have created and the significant reviews and data we have collected on key cannabis markets.

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Blockchain Technology

In December 2017, we formed MassRoots Blockchain Technologies, Inc., a wholly-owned subsidiary of MassRoots, to explore how blockchain technology may be utilized in the cannabis industry.

From September 2017 until March 31, 2018, we raised an aggregate of $942,500 from the sale of Simple Agreement for Future Tokens. For a further description of this financing, see “Recent Sales of Unregistered Securities.” To date, we have used approximately $250,000 for the initial development of the MassRoots Business Portal, including features that allow for tracking of advertising impressions, enhanced targeting and serving of advertisements, as well as a program that would be designed to reward Users of the MassRoots platform for providing high quality reviews on cannabis strains and products.

Results Of Operations For the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

	For the Fiscal Year ended
	31-Dec-17			31-Dec-16			$ Change			% Change
Gross revenue	$	319,242		$	701,581		$	(382,339	)		(54.5	)%
Operating expenses		37,123,202			14,303,960			22,819,242			159.5	%
Loss from Operations		(36,803,960	)		(13,602,379	)		(23,201,581	)		170.6	%
Other Income /(Expense)		(7,585,609	)		(4,427,745	)		(3,157,864	)		71.3	%
Net Loss	($	44,389,569	)	($	18,030,124	)	($	26,359,445	)		146.20	%
Net loss per share - basic and diluted	$	(0.46	)	$	(0.34	)	$	N/A			N/A

Since inception on April 26, 2013, and during the year ended December 31, 2017, our business operations have been primarily focused developing our mobile applications, web platform and increasing our User-base.

Revenues

Since beginning to monetize our platform in August 2015, we have generated minimal revenues from our operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including the financial risks associated with the limited capital resources currently available to us, and risks associated the implementation of our business strategies.

For the year ended December 31, 2017, we generated $319,242 in total revenues, as compared to $701,581 for the year ended December 31, 2016, a decrease of $382,339. This decline is primarily related to prior management’s decision to make MassRoots’ dispensary finder, its main source of revenue, free for dispensaries to use with the goal of getting them to upgrade to premium features, which did not materialize.

Operating Expenses

Our cost of revenues decreased $179,797 during 2017, from $180,427 during fiscal year 2016 to $630 during fiscal year 2017. This decrease was mainly a result of lower sales and merchandise activity in 2017.

We incurred $960,239 in advertising expenses during fiscal year 2017, a decrease of $25,103 from $985,342 in fiscal year 2016. This decrease was mainly a result of less advertising activities in 2017.

We incurred a $3,796,991 impairment expense was associated with our acquisitions of Odava and Whaxy.

Payroll and related expenses increased $991,528 to $3,104,407 during fiscal year 2017 from $2,112,879 during fiscal year 2016. This increase was mainly a result of added personnel in 2017.

The Company is delinquent in filing its payroll taxes related to stock compensation awards. At December 31, 2017 and 2016, the Company has payroll tax liabilities, including interest and penalties, of approximately $1,599,489 and $0, respectively, due to federal and state taxing authorities. The actual liability may be higher or lower due to interest or penalties assessed by federal and state taxing authorities. The Company expects to settle these liabilities by June 30, 2018.

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Over the course of fiscal year 2017, we issued $22,107,949 in Common Stock, options and warrants issued for services, as compared to $7,380,431 during fiscal year 2016, an increase of $14,727,518. This increase was mainly a result of a combination of additional consultants added for our business development and higher valuation of our stock price during the first half of 2017.

During the fiscal years ended 2017 and 2016, the Company incurred amortization of software costs of $389,059 and $0 respectively, related to our acquisition of Odava.

MassRoots’ other general and administrative expenses increased to $5,164,438 during fiscal year 2017 from $3,644,881 in fiscal year 2016, an increase of $1,519,557. This increase was mainly attributed to the following:

● Legal expenses increased during the year ended December 31, 2017 to $417,347 from $295,325 during the year ended December 31, 2016. This increase was primarily a result of additional costs associated with our acquisition of Odava and management changes that occurred during the fourth quarter of 2017.

● Independent contractor expenses increased from $72,183 during fiscal year 2016 to $567,114 during fiscal year 2017 due to increased use of development-related independent contractors.

● During fiscal year 2017, MassRoots incurred $2,121,287 in consulting and accounting related expenses as compared to $2,112,690 in fiscal year 2016. This increase was primarily caused by increased investor relations and other professionals in establishing a market for our Common Stock.

● Travel and related expenses increased to $718,693 in fiscal year 2017 from $188,723 during the same period in 2016. Over the course of the year, the MassRoots’ team attended over 50 conferences and hundreds of meetings with cannabis related businesses that have built the relationships necessary for our Company to grow.

The combination of these increasing expenditures resulted in MassRoots’ total operating expenses growing to $37,123,202 in fiscal year 2017 compared to $14,303,960 in fiscal year 2016, an increase of $22,819,242.

Loss from Operations

MassRoots’ loss from operations increased $23,201,581 to $36,803,960 during fiscal year 2017, from $13,602,379 during fiscal year 2016.

Other Income (Expense)

During the fiscal years ended 2017 and 2016, the Company realized losses related to the fair value mark to market adjustments of its derivative liabilities of $7,000,835 and $581,912, respectively.

In addition, for fiscal year ended December 31, 2017 and 2016, the Company recognized a gain on sale of securities of $75,000 and $0, respectively.

During the fiscal years ended 2017 and 2016, interest expense decreased to $659,774 during fiscal year 2017 from $3,845,833 during fiscal year 2016, a decrease of $3,186,059. This decrease is mainly from a reduction in the interest charges relating to our convertible debt and the amortization of debt discounts.

Net Loss

Our net loss increased $26,359,445 to $44,389,569 during fiscal year 2017, from $18,030,124 during fiscal year 2016.

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Liquidity And Capital Resources

Net cash used in operations for the year ended December 31, 2017 and 2016 was $7,997,465 and $6,182,816, respectively. This increase was primarily caused by a widening net loss in the Company’s operations, an increase in the value of options issued to employees, and the costs associated with management changes in the fourth quarter of 2017.

Net cash used in investing activities for the year ended December 31, 2017 and 2016 was $314,833 and $83,750, respectively. These investing activities in 2017 were proceeds from sale of securities of $250,000 and $11,273 received in connection with the acquisitions of DDDigtal and Odava, net with the purchase of equipment, primarily computers, of $40,570, investment in CannaRegs, Inc. of $300,000, investment in DDDigital, LLC of $78,000 and equity investment in High Times Holdings Corporation of $100,002. For the year ended December 31, 2017, $57,534 was used to purchase office equipment.

Net cash provided by financing activities for the year ended December 31, 2017 and 2016 was $9,139,395 and $6,254,740, respectively. During the year ended December 31, 2017, these funds came mainly from warrant exercises amounting to $4,759,762, proceeds from sale of common stock of $2,676,644, proceeds from issuance of convertible debt of $942,500 and proceeds from related party advances of $770,000. Comparatively for the year ended December 31, 2016, the Company received proceeds from its March 2016 convertible debt offering and warrants of $1,420,000, for sale of common stock of $5,000,275 and option and warrant exercises of $1,158,494.

Capital Resources

As of December 31, 2017, we had cash on hand of $1,201,587 and as of December 31, 2017, there are warrants outstanding to purchase up to aggregate of 35,187,847 shares which, if all were exercised, would supply $14,564,834 in cash to the Company.

We currently have no external sources of liquidity such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital.

We are dependent on the sale of our securities to fund our operations, and will remain so until we generate sufficient revenues to pay for our operating costs. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans and/or financial guarantees.

Fundraising

During the year ended December 31, 2017, we received approximately $4,759,762 proceeds from the exercise of our previously issued warrants.

On July 21, 2017, we received aggregate gross proceeds to the Company of $1,198,000 in connection with the sale of 2,394,000 shares of common stock and warrants to purchase up to 2,394,000 shares of common stock.

On August 24, 2017, we received net proceeds to the Company of $942,500 in connection with the issuance of convertible notes and warrants to purchase $2,090,000 shares of common stock.

On September 27, 2017, we received aggregate gross proceeds to the Company of $420,000 in connection with the sale to two investors of a right to receive digital instruments at a 50% discount, if the Company conducts a public sale of such digital instruments on or before November 30, 2017, which has since been extended to April 30, 2018. The $420,000 is included in amounts due in small loans at December 31, 2017.

From December 15 to December 29, 2017, the Company entered into separate subscription agreements with certain accredited investors pursuant to which it sold an aggregate of $1,478,644 of shares of common stock at $0.20 per share together with five-year warrants to purchase shares of common stock in an amount equal to 100% of the number of shares issued.

Results Of Operations For the Three Months Ended March 31, 2018 Compared to the Three Months Ended March 31, 2017

	For the three months ended
		31-Mar-18			31-Mar-17			$ Change			% Change
Gross revenue		$	1,492		$	134,741		$	(133,249	)		(98.9	)%
Operating expenses			5,134,544			7,635,816			(2,501,272	)		(32.8	)%
Loss from Operations			(5,133,052	)		(7,501,075	)		2,363,023			31.6	%
Other Income /(Expense)			(350,196	)		53,898			(404,094	)		(749.7	)%
Net Loss		$	(5,483,248	)	$	(7,447,177	)	$	1,963,929			26.4	%
Net loss per share - basic and diluted		$	(0.04	)	$	(0.09	)	$	-			-

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Revenues

For the three months ended March 31, 2018 and 2017, we generated revenues of $1,492 and $134,741, respectively, a decrease of $133,249. During the first quarter of 2018, MassRoots was redeveloping its online advertising portal for businesses which is expected to launch in the second quarter of 2018.

Operating Expenses

For the three months ended March 31, 2018 and 2017, our operating expenses were $5,134,544 and $7,635,816, respectively, a decrease of $2,501,272. For the three months ended March 31, 2018, these decreases were mainly attributed to a decrease in stock-based compensation to our employees and key consultants which, for 2018, was $3,117,250 as compared to $5,231,003 for the same period last year (a non-cash decrease of $2,113,753). There was a decrease in payroll and related expenses of $426,130 as payroll and related expenses were $425,730 in 2018 as compared to $851,860 for the same period in 2017, and advertising expense decreased to $64,577 for 2018 from $193,431 expensed in 2017, a decrease of $128,854. For the three months ended March 31, 2018 and 2017, the Company recorded amortization of software costs of $97,265 and $0, respectively. This is primarily a result of MassRoots reducing its employee work-force and advertising activity.

Other Income (Expense)

For the three months ended March 31, 2018 and 2017, the Company recorded interest expense of $350,196 and $0, respectively, related-to the Company’s convertible debt issued in August 2017. As of March 31, 2018 the remaining notes payable had been paid in full. For the three months ended March 31, 2018, the Company had no gain or loss and a gain related to the fair value mark to market adjustments of its derivative liabilities, while recognizing a gain on its derivative liabilities of $53,898 during the same period as of March 31, 2017.

Net Loss

For the three months ended March 31, 2018 and 2017, we had net losses of $5,483,248 and $7,447,177, respectively, a decrease of $1,963,929, for the reasons discussed above.

Liquidity And Capital Resources

Net cash used in operations for the three months ended March 31, 2018 and 2017 was $3,535,373 and $2,473,430, respectively. This increase was primarily caused by the utilization of $1,113,554 in cash to reduce accounts payable and other liabilities as compared to $221,846 during the same period in 2017. In addition, the Company made prepayments in cash of $534,961 during the three months ended March 31, 2018 as compared to $0 during the same period in 2017.

Net cash used in investing activities for the three months ended March 31, 2018 and 2017 was $0 and $122,052, respectively. These investing activities were related to the purchase of equipment for the three months ended March 31, 2017 of $30,722 and the purchase of an equity investment of $100,002 in HighTimes Holdings Corp., and we received $8,672 in connection with the acquisition of DDDigtal, LLC.

Net cash provided by financing activities for the three months ended March 31, 2018 and 2017 was $3,008,562 and $4,449,700, respectively. During the three months ended March 31, 2018, these funds came mainly from sales of common stock while during the same period in 2017, these funds came mainly from warrant and option exercises.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements. The Company’s primary source of operating funds since inception has been cash proceeds from private placements of common stock, proceeds from the exercise of warrants and options and issuance of notes payable. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. The Company will require additional financing to fund future operations. 

Capital Resources

As of March 31, 2018, we had cash on hand of $674,776. We currently have no external sources of liquidity such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital.

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Required Capital Over the Next Fiscal Year

We do not believe MassRoots has sufficient capital to become cash-flow positive from operations. We expect to need to raise additional funds to continue to fund operations.

We prepared the accompanying consolidated financial statements assuming that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have not yet established an ongoing source of revenues sufficient to cover our operating costs and allow us to continue as a going concern. Our ability to continue as a going concern depends on the ability to obtain adequate capital to fund operating losses until we generate adequate cash flows from operations to fund its operating costs and obligations. If we are unable to obtain adequate capital, we could be forced to cease operations.

We depend upon our ability, and will continue to attempt, to secure equity and/or debt financing. We cannot be certain that additional funding will be available on acceptable terms, or at all. Our management has determined that there is substantial doubt about our ability to continue as a going concern within one year after the consolidated financial statements are issued.

The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

Financial Accounting Standards Board (“FASB”) Accounting Standards Updates (“ASU”) 2017-04 (Topic 350), “Intangibles - Goodwill and Others” – Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company is currently evaluating the effect that ASU 2017-04 will have on our consolidated financial statements and related disclosures.

FASB ASU 2017-01 (Topic 805), “Business Combinations: Clarifying the Definition of a Business” – Issued in January 2017, ASU 2017-01 revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance became effective for the Company on January 1, 2018. The Company believes the standard did not have a material impact on its consolidated financial statements and related disclosures.

FASB ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” – Issued in August 2016, the amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, “Statement of Cash Flows”. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company believes the standard did not have a material impact on our condensed, consolidated financial statements and related disclosures.

FASB ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers” – Issued in May 2014, ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers using a five-step model that requires entities to exercise judgment when considering the terms of the contracts. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”. This amendment defers the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Gross versus Net)”, which amends the principal versus agent guidance and clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer. In addition, the FASB issued ASU Nos. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” and 2016-12, “Narrow-Scope Improvements and Practical Expedients”, both of which provide additional clarification of certain provisions in Topic 606. These ASC updates are effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. Early adoption is permitted only as of annual reporting periods after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method.

The Company applied the guidance using the modified retrospective transition method. The Company believes the adoption of ASU 2014-09 did not have a material impact on the Company’s financial position or results of operations but resulted in additional disclosures regarding the Company’s revenue recognition policies. Additionally, the Company has expanded its revenue recognition inquiries and update its questionnaires primarily to identify matters that would signal variable consideration implications under the new guidance. The Company also does not believe the adoption of ASU 2014-09 required material or significant changes to its internal controls over financial reporting.

FASB ASU No. 2014-15, “Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern, which is included in Accounting Standards Codification (ASC) 205, Presentation of Financial Statements” - Issued August 2014, this update provides an explicit requirement for management to assess an entity's ability to continue as an ongoing concern, and to provide related footnote disclosures in certain circumstances.

The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. The Company has adopted this standard, included the necessary disclosures in the footnotes to its financial statements, and does not believe such adoption has had a material impact on its financial statements.

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FASB ASU 2016-02, Leases (Topic 842) - ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.

FASB ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” - The amendment is part of the FASB’s simplification initiative and is intended to simplify the accounting around share-based payment award transactions. The amendments include changing the recording of excess tax benefits from being recognized as a part of surplus capital to being charged directly to the income statement, changing the classification of excess tax benefits within the statement of cash flows, and allowing companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this standard has not had a material impact on the Company’s financial position and results of operations.

FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) – Adopted in November 2016, this ASU requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include cash and restricted cash equivalents. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s financial position and results of operations.

FASB Issued ASU No. 2014-09, (“ASU 606”), Revenue from Contracts with Customers – In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. The FASB also issued subsequent amendments to ASU 2014-09 to provide clarification on the guidance. ASU 2014-09 will be effective for annual periods beginning after December 15, 2017, which for us will be in the period beginning January 1, 2018. We have performed our detailed evaluation, using a five-step model specified in the guidance, to assess the impacts of the new standard.

· Under the new standard, revenue will be recognized when the Company satisfies its performance obligation by transferring promised products or services to its customer. The standard allows for application of the guidance to a portfolio of contracts or performance obligations with similar characteristics.

· The Company’s revenue recognition will be achieved upon delivery of advertising and listing services as there are no other promised services as part of the Company’s contracts with customers.

· To determine the amount of consideration which the Company expects to be entitled in exchange for transferring promised services, the Company has considered if variable consideration exists. The Company has reviewed its standard terms and conditions and its customary business practices to determine the transaction price. The Company has reviewed its pricing policies and strategies including marketing, loyalty and incentive programs for determining whether the Company has any variable or non-cash consideration. No material items were noted.

· The Company’s sales transactions do not require any additional performance obligation after delivery. Therefore, the Company does not have multiple performance obligations for which the Company will have to allocate the transaction price.

· The Company expects to recognize revenue upon delivery to the customer as its performance obligation will be satisfied at that point in time.

The Company expects to apply the guidance using the modified retrospective transition method. Based on the Company’s analysis performed to date, the Company does not expect the adoption of ASU 2014-09 will have a material impact on its financial position or results of operations but will result in additional disclosures regarding its revenue recognition policies. Additionally, the Company has expanded its revenue recognition inquiries and updated its questionnaires primarily to identify matters that would signal variable consideration implications and performance obligations under the new guidance. The Company also does not expect the adoption will require material or significant changes to its internal controls over financial reporting.

FASB issued ASU 2017-11, Earnings Per Share (“ASC 260”), Distinguishing Liabilities from Equity (“ASC 480”), and Derivatives and Hedging (“ASC 815”) - Adopted in July 2017, ASU No. 2017-11 is intended to simplify the accounting for financial instruments with characteristics of liabilities and equity. Among the issues addressed are: (i) determining whether an instrument (or embedded feature) is indexed to an entity’s own stock; (ii) distinguishing liabilities from equity for mandatorily redeemable financial instruments of certain nonpublic entities; and (iii) identifying mandatorily redeemable non-controlling interests. The Company adopted ASU No. 2017-11 as of January 1, 2018. The adoption of ASU No. 2017-11 has eliminated the derivative liabilities from the Company’s financial statements.

There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows. The Company implemented these standards using the modified retrospective transition method.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by Item 304 of Regulation S-K.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS

Directors and Executive Officers

The names and ages of our Directors and Executive Officers are set forth below. All Directors are elected annually by the stockholders to serve until the next annual meeting of the stockholders and until their successors are duly elected and qualified. The officers are elected by our Board.

Name	Age	Executive Position
Isaac Dietrich	26	Chief Executive Officer, Chairman and Director
Jesus Quintero	56	Chief Financial Officer
Charles Blum	79	Director
Cecil Kyte	46	Director
Graham Farrar	40	Director

Isaac Dietrich, Chief Executive Officer, Chairman of the Board and Director - Isaac Dietrich is the founder, largest shareholder, and has been a director of the Company since our inception. He also serves as Chief Executive Officer and Chairman of the Board effective as of December 13, 2017. In addition, he previously held the following positions with the Company: Chief Executive Officer (April 2013 – October 2017); Chairman of the Board of the Company (April 2013 – October 2017); and Chief Financial Officer (April 2013 – May 2014 and August 2017 – October 2017). In his various positions, Mr. Dietrich has been responsible for executing MassRoots’ strategic business development. Mr. Dietrich was the co-founder and majority shareholder of RoboCent.com from June 2012 where he helped scale the business until his buyout in December 2016. He has served as Chairman of 2Meet, Inc. since May 2017. He also founded Tidewater Campaign Solutions, LLC, a Virginia Beach-based political strategy firm that was retained by 30 political local and congressional campaigns and political action committees from January 2010 to December 2012. From February 2010 to December 2010, Mr. Dietrich served as Field Director for former Congressman E. Scott Rigell’s campaign. Mr. Dietrich is qualified to serve as a member of the Board because of his business management experience and his years of service with us in various executive capacities together with his knowledge of our Company and relevant experience in the cannabis industry.

Jesus Quintero, Chief Financial Officer - From January 2017 through December 2017 Jesus Quintero served as a financial consultant to several domestic and international companies including, but not limited to, Premier Radiology Services, ATR Wireless Inc. and GAM Distribution Corporation. From May 2014 until December 2016, Mr. Quintero served as Chief Financial Officer of the Company, and from January 2013 until October 2014, he served as Chief Financial Officer of Brazil Interactive Media. Mr. Quintero has held senior finance positions with Avnet Inc., Latin Node, Inc., Globetel Communications Corp and Telefonica of Spain and has extensive experience in public company reporting and SEC compliance matters. His prior experience also includes tenure with PricewaterhouseCoopers and Deloitte & Touch. Mr. Quintero received a B.S. in Accounting from St. John’s University and is a Certified Public Accountant in the State of New York.

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Charles R. Blum, Director – Charles Blum has served as a director of MassRoots since December 2017. Mr. Blum served as President and Chief Executive Officer of QS Energy (formerly STWA, Inc.) from July 2007 to January 2009, and until June 2017 he served as a member of the Board of QS Energy. Mr. Blum spent 22 years as the President/CEO of the Specialty Equipment Market Association (“SEMA”). SEMA, a trade group representing 6,500 business members who are actively engaged in the manufacture and distribution of automotive parts and accessories. SEMA produces the world’s largest automotive aftermarket Trade Show which is held annually in Las Vegas, Nevada. Mr. Blum led the association as its members grew from a handful of small entrepreneurial companies into an industry membership that sells over 31 billion dollars of product at the retail level annually. Mr. Blum is qualified to serve as a member of the Board because he has a proven record of accomplishment as a senior executive.

Cecil Kyte, Director – Cecile Kyte has served as a director of MassRoots since December 2017. Mr. Kyte has served in various capacities at Rightscorp’s, including serving as Chief Executive Officer since June 2015, Chief Financial Officer since October 2016 and Chairman of the company’s board of directors since December 2015. Rightscorp’s mission is to support copyright holders’ abilities to litigate and monetize efforts aimed at piracy and peer to peer infringement on the internet. From 2007 to 2013, Mr. Kyte served as CEO and Chairman of Save The World Air, Inc., a California based publicly traded energy technology company. Under his stewardship, that company grew from roughly $10 million in market capitalization in 2007 to an excess of $350 million by 2013 and accessed roughly $40 million in equity based capital. From 2008 until 2013, Mr. Kyte served as Chief Executive Officer and Chairman of the Board of QS Energy (formerly STWA, Inc.). Additionally, having been a pilot for 30 years Mr. Kyte has served as an airline captain and flight instructor who is recognized and included in the prestigious FAA Airmen Certification database. This database recognizes pilots who have met or exceeded the high educational, licensing and medical standards established by the Federal Aviation Administration. Mr. Kyte received a Bachelor of Science Degree in Business Administration with emphasis in Accounting from California State University, Long Beach. Mr. Kyte is qualified to serve as a member of the Board because of his previous and current experience running a public company, as well as his educational requirements to hold such a position.

Graham Farrar, Director – Graham Farrar has served as Director of MassRoots since February 2018. He is the owner and founder of Elite Garden Wholesale, a business which provides supplies for the growth of hydroponic crops, since January 2016. In addition, since April 2016, Mr. Farrar has also served as the President of G&H Supply Company which is a licensed commercial cannabis grower. From March 2014 until October 2015, Mr. Farrar served as Chief Product Officer of iStoryTime Inc, and from April 2008 until March 2014 he served as the founder and owner of zukka, a company which published the iStoryTime library of narrated and interactive children’s books for iPhones, iPads, Kindles and Nooks. In addition, Mr. Farrar has served in various other capacities including, but not limited to: Senior Account Executive for Network Hardware Resale; Manager, World Wide Customer Support and Senior Manager Quality Assurance for Sonos Inc.; and Senior Manager Partner Sales Engineers and Manager, World Wide Technical Sales for Openwave Systems (previously Software.com). Furthermore, Mr. Farrar has served as Chair of Education Outreach Committee and a member of the board of Santa Barbara Bowl Foundation since January 2011 and August 2004, respectively. In addition, from January 2001 until May 2010, Mr. Farrar served as a member of the board of Heal the Ocean and from January 2000 until March 2007 he served as a member of the board of Seacology. Mr. Farrar is qualified to serve as a member of the Company’s Board because of his experience in the cannabis industry as well as his experience serving a member of the board of various organizations.

Family Relationships

There are no family relationships among our directors and executive officers.

Other Directorships

Other than as disclosed above, none of the Directors of the Company are also directors of issuers with a class of securities registered under Section 12 of the Exchange Act (or which otherwise are required to file periodic reports under the Exchange Act).

Legal Proceedings

We are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy, insolvency, criminal proceedings (other than traffic and other minor offenses) or being subject to any of the items set forth under Item 401(f) of Regulation S-K.

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CORPORATE GOVERNANCE

Governance of Our Company

We seek to maintain high standards of business conduct and corporate governance, which we believe are fundamental to the overall success of our business, serving our stockholders well and maintaining our integrity in the marketplace. Our corporate governance guidelines and Code of Conduct and Ethics, together with our Certificate of Incorporation, Bylaws and the charters for each of our Board committees, form the basis for our corporate governance framework. We also are subject to certain provisions of the Sarbanes-Oxley Act and the rules and regulations of the SEC. The full text of the Code of Conduct and Ethics is available on our website at www.massroots.com/investors/governance and is also filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the SEC on April 1, 2015.

As described below, our Board has established three standing committees to assist it in fulfilling its responsibilities to the Company and its stockholders: The Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee.

Our Board of Directors

Our Board currently consists of four members. The number of directors on our Board can be evaluated and amended by action of our Board.

Our Board has decided that it would judge the independence of its directors by the heightened standards established by the Nasdaq Stock Market, despite the Company not being subject to these standards at this time. Accordingly, the Board has determined that our three non-employee directors, Cecil Kyte, Graham Farrar and Charles R. Blum each meet the independence standards established by the Nasdaq Stock Market and the applicable independence rules and regulations of the SEC, including the rules relating to the independence of the members of our Audit Committee and Compensation Committee. Our Board considers a director to be independent when the director is not an officer or employee of the Company or its subsidiaries, does not have any relationship which would, or could reasonably appear to, materially interfere with the independent judgment of such director, and the director otherwise meets the independence requirements under the listing standards of the Nasdaq Stock Market and the rules and regulations of the SEC.

Our Board believes its members collectively have the experience, qualifications, attributes and skills to effectively oversee the management of our Company, including a high degree of personal and professional integrity, an ability to exercise sound business judgment on a broad range of issues, sufficient experience and background to resolve the issues facing our Company, a willingness to devote the necessary time to their Board and committee duties, a commitment to representing the best interests of the Company and our stockholders and a dedication to enhancing stockholder value.

Risk Oversight. Our Board oversees the management of risks inherent in the operation of our business and the implementation of our business strategies. Our Board performs this oversight role by using several different levels of review. In connection with its reviews of the operations and corporate functions of our Company, our Board addresses the primary risks associated with those operations and corporate functions. In addition, our Board reviews the risks associated with our Company’s business strategies periodically throughout the year as part of its consideration of undertaking any such business strategies. Each of our Board committees also coordinates oversight of the management of our risk that falls within the committee’s areas of responsibility. In performing this function, each committee has full access to management, as well as the ability to engage advisors. The Board is also provided with updates by the Chief Executive Officer and other executive officers of the Company on a regular basis.

Stockholder Communications. Although we do not have a formal policy regarding communications with the Board, stockholders may communicate with the Board by writing to us at 2420 17^th Street, Office 3118, Denver, Colorado 80202, Attention: Legal. Stockholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate. Please note that the foregoing communication procedure does not apply to (i) stockholder proposals pursuant to Exchange Act Rule 14a-8 and communications made in connection with such proposals or (ii) service of process or any other notice in a legal proceeding.

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Board Committees

On December 9, 2015, our Board designated the following three committees of the Board: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee.

Audit Committee. Effective as of December 28, 2017, the Board appointed each of Cecil Kyte, Graham Farrar and Charles R. Blum as a member of the Audit Committee. Cecil Kyte is the Chairman of the Audit Committee. The Audit Committee is responsible for, among other things, overseeing the financial reporting and audit process and evaluating our internal controls over financial reporting. The Board has determined that Cecil Kyte is an “audit committee financial expert” serving on its Audit Committee. The Board has determined that each member of the Audit Committee is “independent,” as that term is defined by applicable SEC rules. In addition, the Board has determined that each member of the Audit Committee is “independent,” as that term is defined by the rules of the Nasdaq Stock Market. A copy of the Audit Committee Charter is available on our website at www.massroots.com/investors/governance.

Compensation Committee. Effective as of December 28, 2017, the Board appointed each of Cecil Kyte, Graham Farrar and Charles R. Blum as a member of the Compensation Committee. Cecil Kyte is the Chairman of the Compensation Committee. The Compensation Committee is responsible for, among other things, establishing and overseeing the Company’s executive and equity compensation programs, establishing performance goals and objectives, and evaluating performance against such goals and objectives. The Board has determined that each member of the Compensation Committee is “independent,” as that term is defined by applicable SEC rules. In addition, the Board has determined that each member of the Compensation Committee is “independent,” as that term is defined by the rules of the Nasdaq Stock Market. A copy of the Compensation Committee Charter is available on our website at www.massroots.com/investors/governance.

Nominating and Corporate Governance Committee. Effective as of December 28, 2017, the Board appointed each of Cecil Kyte, Graham Farrar and Charles R. Blum as a member of the Nominating and Corporate Governance Committee. Cecil Kyte is the Chairman of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee is responsible for, among other things, identifying and recommending candidates to fill vacancies occurring between annual stockholder meetings and reviewing the Company’s policies and programs relating to matters of corporate citizenship, including public issues of significance to the Company and its stockholders. The Board has determined that each member of the Nominating and Corporate Governance Committee is “independent,” as that term is defined by applicable SEC rules. In addition, the Board has determined that each member of the Nominating and Corporate Governance Committee is “independent,” as that term is defined by the rules of the Nasdaq Stock Market. A copy of the Nominating and Corporate Governance Committee Charter is available on our website at www.massroots.com/investors/governance.

EXECUTIVE COMPENSATION

Named Executive Officers

Our “named executive officers” for the 2017 fiscal year consisted of the following individuals:

● Isaac Dietrich, Chief Executive Officer

● Scott Kveton, former Chief Executive Officer

● Lance Galey, former Chief Technology Officer

No other executive officers earned over $100,000 during the previous fiscal year.

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Summary Compensation Table

The table below summarizes all compensation awarded to, earned by, or paid to our Chief Executive Officer and our two most highly compensated executive officers (the “named executive officers”) at the end of our last fiscal year for all services rendered in all capacities to us during the years during which they served as executive officers. Where a named executive officer is also a director, all compensation related to such individuals position as an officer.

Name & Principal Position	Year	Salary $		Bonus $		Stock Awards (1) $		Option Awards (1) $		Non-Equity Incentive Plan Compensation $		All Other Compensation $		Total $
Isaac Dietrich Chief Executive Officer, Director	2017 2016		96,971 107,917	$	190,659 —	—		— —			— —		— —		287,630 107,917
Daniel Hunt former Chief Operating Officer (4)	2017 2016		94,222 104,377		— —	174,000 178,000	(2) (2)	683,113 777,195	(3)      (3)(14)		— —		— —		951,335 1,059,572
Lance Galey former Chief Technology Officer (5)	2017 2016		117,742 10,000		— —	102,000 204,000	(15) (15)	868,346 84,055	(3)(13) (3)(13)		— —		— —		1,088,088 298,055
Scott Kveton former Chief Executive Officer (6)	2017 2016		33,692 —		— —	899,000 —	(9)	— —			— —		20,000 —		972,692 —
Steven Osborn former Chief Technology Officer (7)	2017 2016		57,442 —		— —	173,698 —	(10)	— —			— —		— —		231,140 —
George Robert Pullar former Chief Financial Officer (5)	2017 2016		96,769 —		— —	209,240 —	(11)	415,899 —	(12)		— —		100,000 —		821,908 —

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(1)	These amounts are the aggregate fair value of the equity compensation incurred by the Company for payments to executives during the fiscal year. The aggregate fair value is computed in accordance with FASB ASC Topic 718. The fair market value was calculated using the Black-Scholes options pricing model. Assumptions underlying the valuation of each specific award are included in Note 9 of our Financial Statements included in this Annual Report on Form 10-K.
(2)	On December 14, 2015, the Company’s Compensation Committee approved the grant of 200,000 unvested restricted shares to Mr. Hunt. However, pursuant to the Company’s 2015 Equity Incentive Plan (the “2015 Plan”), the grant would not occur until stockholder’s approved such plan, which occurred in January 2016 (as described further in the section below entitled “Our Equity Incentive Plans”). As such, this grant was included as compensation for Mr. Hunt in fiscal year 2016 and 2017. Upon Mr. Hunt’s resignation as Chief Operating Officer in July 2017, all stock awards were fully vested.
(3)	On December 19, 2016, the Company granted each to Mr. Hunt and Mr. Galey 1,000,000 options to purchase the Company’s Common Stock at $0.86 per share for ten years, vesting over the course of one year. In the second quarter of 2017, the Company’s Compensation Committee accelerated the vesting of these options such that the options vested immediately in full.
(4)	Resigned as Chief Operating Officer on July 9, 2017.
(5)	Resigned as Chief Technology Officer on July 22, 2017.
(6)	Appointed as Chief Executive Officer on October 16, 2017 and resigned on December 13, 2017.
(7)	Appointed as Chief Technology Officer on October 16, 2017 and resigned on January 8, 2018.
(8)	Appointed as Chief Financial Officer on December 21, 2016 and resigned on August 28, 2017.
(9)	On July 18, 2017 and July 19, 2017, the Company’s Compensation Committee approved the grant of 50,000 and 1,500,000 unvested restricted shares to Mr. Kveton, respectively. Upon Mr. Kveton resignation as Chief Executive Officer in December 2017, stock awards were fully vested.
(10)	On July 18, 2017 and July 19, 2017, the Company’s Compensation Committee approved the grant of 50,000 vested and 1,000,000 unvested restricted shares to Mr. Osborn, respectively. Upon Mr. Osborn resignation as Chief Technology Officer in January 2018, stock awards were fully vested.
(11)	On August 23, 2017, the Company’s Compensation Committee approved the grant of 250,000 and vested restricted shares to Mr. Pullar. On January 3, 2017, the Company’s Compensation Committee approved the grant of 100,000 unvested restricted shares to Mr. Pullar, which vested immediately upon his resignation in August 2017.
(12)	On December 21, 2017, the Company’s Compensation Committee approved the grant of 425,000 options to purchase shares of Common Stock including (i) 250,000 options to purchase shares of Common Stock vesting in one (1) year and (ii) up to 175,000 options to purchase shares of Common Stock, upon meeting specified EBITDA thresholds. Upon Mr. Pullar resigning from his position in August 2017, all options were vested.
(13)	On November 3, 2016, the Company’s Compensation Committee approved the grant of 600,000 options to purchase shares of Common Stock vesting over one year to Mr. Galey. In the second quarter of 2017, the Company’s Compensation Committee accelerated the vesting of these options such that the options vested immediately in full.

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(14)	On December 10, 2015, the Company’s Compensation Committee approved the grant of 800,000 options to purchase shares of Common Stock vesting on the completion of certain milestones to Mr. Hunt. In the second quarter of 2017, the Company’s Compensation Committee accelerated the vesting of these options such that the options vested immediately in full.
(15)	On October 3, 2016, the Company’s Compensation Committee approved a grant of 600,000 shares of the Company’s Common Stock to Mr. Galey, vesting as follows: (a) 300,000 shares on October 3, 2016 and (b) 50,000 shares on the first day of each month from November 2016 through April 2017.

Outstanding Equity Awards at December 31, 2017

The following table sets forth the equity awards our named executive officers had outstanding at December 31, 2017.

Option Awards
Name	Number of securities underlying unexercised options Exercisable			Number of securities underlying unexercised options Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned  Options		Option exercise price		Option  expiration date
Isaac Dietrich		—			—		—	$	—		—
Daniel Hunt		100,000			—		—	$	0.50		1/1/2025
		800,000	(1)		—			$	1.00		12/14/2025
		1,000,000			—		—	$	0.86		12/19/2026
Lance Galey		600,000			—		—	$	0.53		10/3/2026
		1,000,000			—		—	$	0.86		12/19/2026
George Robert Pullar		425,000	(2)		—		—	$	0.86		1/1/2027
Steven Osborn					—		—	$	—		—
Scott Kveton					—		—	$	—		—

(1)

The  options to purchase up to 800,000 shares of Common Stock were awarded pursuant to the 2015 Plan, which vest as follows: upon the Company reaching 2,500,000 registered Users, 200,000 options shall vest; upon the Company reaching $1,000,000 in cumulative revenue, 200,000 options shall vest; and, upon the Company reaching $2,500,000 in cumulative revenue, 200,000 options shall vest. In the second quarter of 2017, the Company’s Compensation Committee accelerated the vesting of these options to immediate.

(2)

The options to purchase up to 425,000 shares of Common Stock include (i) 250,000 options to purchase shares of common stock vesting in one year and (ii) up to 175,000 options to purchase shares of Common Stock, upon meeting specified earnings before interest, taxes, depreciation and amortization, or EBITDA, thresholds. Upon Mr. Pullar resigning from his position in August 2017, all options were vested.

Narrative Disclosure to Summary Compensation and Option Tables

Isaac Dietrich

Isaac Dietrich provides services to us as our Chief Executive Officer pursuant to an at-will agreement that provides that Mr. Dietrich would be paid an amount determined by the Company in accordance with the Company’s normal payroll procedures. From April 1, 2014 to March 31, 2015, Mr. Dietrich was paid a salary of $5,000 per month. From April 1, 2015 until March 31, 2016, Mr. Dietrich was paid a salary of $6,500 per month. From April 1, 2016 until September 30, 2016, Mr. Dietrich was paid a salary of $10,833 per month. From October 1, 2016 and thereafter, Mr. Dietrich was paid a salary of $7,917 per month. Mr. Dietrich received $190,659 in bonuses in 2017. Starting December 13, 2017, Mr. Dietrich has been paid a salary of $12,083 per month. Mr. Dietrich did not receive any compensation related to his position as a director.

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In December 2015, Mr. Dietrich started receiving health, vision and dental insurance. No retirement plan, life insurance or employee benefits program has been awarded to Mr. Dietrich and he serves at the direction of the Board.

Daniel Hunt

Daniel Hunt provided services to us as our Chief Operating Officer pursuant to an “at-will” agreement that became effective July 19, 2015. Pursuant to this agreement, Mr. Hunt received a salary of $78,000 per year and the agreement may be terminated by either party with or without cause with one month’s written notice. From January 1, 2015 until July 17, 2015, Mr. Hunt served as an at-will employee with a salary of $3,500 per month. From July 17, 2015 to March 31, 2016, Mr. Hunt was paid a salary of $6,500 per month. From April 1, 2016 until September 30, 2016, Mr. Hunt was paid a salary of $10,833 per month. From October 1, 2016 and thereafter, Mr. Hunt was paid a salary of $7,500 per month.

In addition, on January 1, 2015, the Company approved the issuance of 50,000 shares of Common Stock and options to purchase up to 100,000 shares of Common Stock at $0.50 per share pursuant to the Company’s 2014 Equity Incentive Plan to Mr. Hunt, which would vest over the period of one year on a monthly basis. The fair market value was calculated using the Black-Scholes options pricing model, assuming approximately 2.17% risk-free interest, 0% dividend yield, 150% volatility, and expected term of 5.25 years.

On December 14, 2015, the Board approved a grant of options to purchase up to 800,000 shares of Common Stock at $1.00 per share to Mr. Hunt pursuant to the 2015 Plan, which vest as follows: upon the Company reaching 1,000,000 registered Users, 200,000 options shall vest; upon the Company reaching 2,500,000 registered Users, 200,000 options shall vest; upon the Company reaching $1,000,000 in cumulative revenue, 200,000 options shall vest; and, upon the Company reaching $2,500,000 in cumulative revenue, 200,000 options shall vest. The fair market value was calculated using the Black-Scholes options pricing model. Under this model, the fair market value of the 200,000 options that vest upon the Company reaching 1,000,000 register Users was calculated assuming approximately 2.23% risk-free interest, 0% dividend yield, 280% volatility, and expected term of 5.25 years. Upon Mr. Hunt resigning in July 2017, all options were vested. As of December 31, 2017, 800,000 options had vested.

On December 19, 2016, the Board approved a grant of options to purchase up to 1,000,000 shares of Common Stock at $0.86 per share to Mr. Hunt pursuant to the Company’s 2017 Equity Incentive Plan, which vest as follows: (i) 83,333 options on the first day of each of January, February, April, May, July, August, October and November of 2017; and (ii) 83,334 options on the first day of each of March, June, September and December of 2017. Because no options vested in fiscal year 2016, this grant will be included as compensation for Mr. Hunt in fiscal year 2017. Upon Mr. Hunt resigning in July 2017, all options were accelerated and fully vested. As of December 31, 2017, 1,000,000 options had vested.

Lance Galey

Lance Galey provided services to us as our Chief Technology Officer pursuant to an “at-will” agreement that became effective June 20, 2016.

On October 3, 2016, pursuant to the Company’s 2016 Equity Incentive Plan, the Board issued Mr. Galey a stock grant of 600,000 restricted shares of the Company’s Common Stock (the “Galey Stock Award”) and ten-year options to purchase up to 600,000 shares of the Company’s Common Stock with an exercise price of $0.51 (the “Galey Option Award”). The Galey Stock Award will vest as follows: (i) 300,000 shares will vest on October 3, 2016 and (i) 50,000 shares will vest on the first day of each month from November 2016 through April 2017. If the Company terminates the employment of Mr. Galey prior to the full vesting of the Galey Stock Award and Galey Option Award, or in the event of a change of control, merger, or similar event affecting the Company, all remaining unvested options and shares will vest immediately. Upon Mr. Galey resigning in July 2017, all options were vested. As of December 31, 2017, options to purchase up to 600,000 shares of Common Stock had vested.

On December 19, 2016, the Board approved a grant of unvested options to purchase up to 1,000,000 shares of Common Stock at $0.86 per share pursuant to the Company’s 2017 Equity Incentive Plan to Mr. Galey, which vest as follows: (i) 83,333 options on the first day of each of January, February, April, May, July, August, October and November of 2017; and (ii) 83,334 options on the first day of each of March, June, September and December of 2017. Because no options vested in fiscal year 2016, this grant will be included as compensation for Mr. Galey in fiscal year 2017. Upon Mr. Galey resigning in July 2017, all options were accelerated and fully vested. As of December 31, 2017, 1,000,000 options had vested.

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Compensation Adjustments

On March 29, 2016, our Board, upon the recommendation of the Company’s Compensation Committee, approved increases in the salary of Mr. Dietrich and Mr. Hunt, such that each would receive $10,833 per month for their services in their respective positions.

On October 5, 2016, our Board, upon the recommendation of the Company’s Compensation Committee, approved adjustments to several officers’ compensation packages. Specifically, in connection with the Board’s expense reduction initiatives, the Board approved (i) a decrease of the annual salary of the Company’s President and Chief Executive Officer, Isaac Dietrich, to $95,000 per year from $130,000 per year; (ii) a decrease of the annual salary of the Company’s Chief Operating Officer, Daniel Hunt, to $90,000 per year from $130,000 per year; and (iii) a decrease of the annual salary of the Company’s Chief Technology Officer, Lance Galey, to $60,000 per year from $150,000 per year.

In addition to the salary decrease, Mr. Galey agreed to waive $51,785 in salary which he had earned but deferred payment of in connection with the Board’s approval of the Galey Stock Award and the Galey Option Award.

Except Lance Galey, George Robert Pullar, Scott Kveton, and Daniel Hunt each of who’s awards were accelerated, at no time during the periods listed in the above tables, with respect to any named executive officers, was there:

● any outstanding option or other equity-based award re-priced or otherwise materially modified (such as by extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined);

● any waiver or modification of any specified performance target, goal or condition to payout with respect to any amount included in non-stock incentive plan compensation or payouts;

● any non-equity incentive plan award made to a named executive officer;

● any nonqualified deferred compensation plans including nonqualified defined contribution plans; or

● any payment for any item to be included under All Other Compensation (column (i)) in the Summary Compensation Table.

Director Compensation

Our interested, employee director does not receive any additional compensation for his service as director.

The following table shows for the fiscal year ended December 31, 2017, certain information with respect to the compensation of all non-employee directors of the Company:

Name	Fees Earned or Paid in Cash		Stock Awards (1)			Option and Warrant Awards (1)			Total
Ean Seeb(2)(3)	$	100,000	$	—	(5)	$	1,142,179	(3)(7)	$	1,242,179
Vincent Keber(2)(3)	$	100,000	$	—	(5)	$	1,142,179	(3)(7)	$	1,242,179
Terence Fitch(2)	$	100,000	$	—	(5)	$	1,236,487	(3)(7)	$	1,336,487
Nathan Shelton(4)(6)	$	—	$	—		$	—		$	—
Cecil Kyte(4)	$	15,000	$	—		$	—		$	15,000
Charles Blum(4)	$	—	$	—		$	—		$	—

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(1)	These amounts are the aggregate fair value of the equity compensation granted to our directors during the fiscal year. The fair value is computed in accordance with FASB ASC Topic 718. The fair market value was calculated using the Black-Scholes options pricing model. Assumptions underlying the valuation of each specific award are included in Note 9 of our Financial Statements included in this Annual Report on Form 10-K.
(2)	Messrs. Seeb, Keber and Fitch joined our Board on June 4, 2014, March 31, 2014 and December 9, 2015, respectively and resigned as members of the Board on December 12, 2017.
(3)	On December 19, 2016, the Company granted Messrs. Seeb Fitch and Keber ten-year options to acquire up to 1,000,000 shares of the Company’s Common Stock each at an exercise price of $0.86 per share and vesting monthly over one year. Upon resignation from the Board, these options vested immediately.
(4)	Messrs. Shelton, Kyte, and Blum joined our Board on December 12, 2017.
(5)	As discussed below, on July 26, 2017, the Board approved a grant of Common Stock of 500,000 shares to each of Messrs. Keber and Seeb and 750,000 shares to Mr. Fitch. These shares were rescinded upon their resignation on December 12, 2017.
(6)	Mr. Shelton resigned from our Board effective February 21, 2018.
(7)	As discussed below, on December 13, 2017, the Board approved an award of warrants to purchase up to 1,500,000 shares of Common Stock to Messrs. Keber and Seeb and warrants to purchase up to 1,850,000 shares of Common Stock to Mr. Fitch.

On December 19, 2016, the Board approved a grant of options to purchase up to 1,000,000 shares of Common Stock at $0.86 per share pursuant to the Company’s 2017 Equity Incentive Plan to each of Messrs. Seeb, Keber and Fitch which vest as follows for each such recipient: (i) 83,333 options on the first day of each of January, February, April, May, July, August, October and November of 2017; and (ii) 83,334 options on the first day of each of March, June, September and December of 2017. Because no options vested in fiscal year 2016, this grant will be included as compensation for Messrs. Seeb, Keber and Fitch in fiscal year 2017. These options immediately vested upon Messrs. Seeb, Keber and Fitch’s resignations on December 12, 2017.

On July 26, 2017, the Board approved a grant of Common Stock of 500,000 shares to each of Messrs. Keber and Seeb and 750,000 shares to Mr. Fitch. These shares were rescinded upon their resignation on December 12, 2017.

On December 13, 2017, the Board approved a grant of vested warrants to purchase up to 1,500,000 shares of Common Stock at $0.20 per share to each of Messrs. Seeb and Keber and warrants to purchase 1,850,000 shares of Common Stock at $0.20 per share to Mr. Fitch.

Indemnification of Officers and Directors

Our Amended and Restated Certificate of Incorporation provides that we shall indemnify our officers and directors to the fullest extent permitted by applicable law against all liability and loss suffered and expenses (including attorneys” fees) incurred in connection with actions or proceedings brought against them by reason of their serving or having served as officers, directors or in other capacities. We shall be required to indemnify a director or officer in connection with an action or proceeding commenced by such director or officer only if the commencement of such action or proceeding by the director or officer was authorized in advance by the Board of Directors.

We currently maintain director’s and officer’s liability insurance having a total aggregate limit of liability of $1,000,000, and an umbrella policy for up to $1,000,000 in excess coverage.

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Our Equity Incentive Plans

Our stockholders approved our 2014 Equity Incentive Plan (“2014 Plan”) in June 2014, our 2015 2015 Plan in December 2015, our 2016 Equity Incentive Plan (“2016 Plan”) in October 2016 and our 2017 Equity Incentive Plan (“2017 Plan”, and collectively, the “Plans”) in December 2016. The Plans are identical, except for number of shares reserved for issuance under each.

The Plans provide for the grant of incentive stock options to our employees and our parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, stock bonus awards, restricted stock awards, performance stock awards and other forms of stock compensation to our employees, including officers, consultants and directors. Our Plans also provide that the grant of performance stock awards may be paid out in cash as determined by the Committee (as defined herein).

Plan Details

The following table and information below sets forth information as of December 31, 2017 on our Plans:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders:
2014 Equity Incentive Plan		1,685,792	$	0.31		0
2015 Equity Incentive Plan		3,059,157	$	0.94		0
2016 Equity Incentive Plan		1,971,771	$	0.51		0
2017 Equity Incentive Plan		7,660,850	$	0.87		0
Equity compensation plans not approved by security holders		—		—		—
Total		14,377,570	$	0.76		0

Summary of the Plans

Authorized Shares

A total of 4,000,000 shares of our Common Stock are reserved for issuance pursuant to the 2014 Plan. A total of 4,500,000 shares of our Common Stock are reserved for issuance pursuant to the 2015 Plan. A total of 6,000,000 shares of our Common Stock are reserved for issuance pursuant to the 2016 Plan. A total of 25,000,000 shares of our Common Stock are reserved for issuance pursuant to the 2017 Plan. Shares issued under our Plans may be authorized but unissued or reacquired shares of our Common Stock. Shares subject to stock awards granted under our Plans that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under our Plans. Additionally, shares issued pursuant to stock awards under our Plans that we repurchase or that are forfeited, as well as shares reacquired by us as consideration for the exercise or purchase price of a stock award, will become available for future grant under our Plans.

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Administration

Our Board, or a duly authorized committee thereof (collectively, the “Committee”), has the authority to administer our Plans. Our Board may also delegate to one or more of our officers the authority to designate employees other than Directors and officers to receive specified stock, which, in respect to those awards, said officer or officers shall then have all that the Committee would have.

Subject to the terms of our Plans, the Committee has the authority to determine the terms of awards, including recipients, the exercise price or strike price of stock awards, if any, the number of shares subject to each stock award, the fair market value of a share of our Common Stock, the vesting schedule applicable to the awards, together with any vesting acceleration, the form of consideration, if any, payable upon exercise or settlement of the stock award and the terms and conditions of the award agreements for use under the Plans. The Committee has the power to modify outstanding awards under the Plans, subject to the terms of the Plans and applicable law. Subject to the terms of our Plans, the Committee has the authority to reprice any outstanding option or stock appreciation right, cancel and re-grant any outstanding option or stock appreciation right in exchange for new stock awards, cash or other consideration, or take any other action that is treated as a repricing under generally accepted accounting principles, with the consent of any adversely affected participant.

Stock Options

Stock options may be granted under the Plans. The exercise price of options granted under our Plans must at least be equal to the fair market value of our Common Stock on the date of grant. The term of an incentive stock option may not exceed 10 years, except that with respect to any participant who owns more than 10% of the voting power of all classes of our outstanding stock, the term must not exceed 5 years and the exercise price must equal at least 110% of the fair market value on the grant date. The Committee will determine the methods of payment of the exercise price of an option, which may include cash, shares or other property acceptable to the Committee, as well as other types of consideration permitted by applicable law. No single participant may receive more than 25% of the total options awarded in any single year. Subject to the provisions of our Plans, the Committee determines the other terms of options.

Performance Shares

Performance shares may be granted under our Plans. Performance shares are awards that will result in a payment to a participant only if performance goals established by the administrator are achieved or the awards otherwise vest. The Committee will establish organizational or individual performance goals or other vesting criteria in its discretion, which, depending on the extent to which they are met, will determine the number and/or the value of performance shares to be paid out to participants. After the grant of a performance share, the Committee, in its sole discretion, may reduce or waive any performance criteria or other vesting provisions for such performance shares. The Committee, in its sole discretion, may pay earned performance units or performance shares in the form of cash, in shares or in some combination thereof, per the terms of the agreement approved by the Committee and delivered to the participant. This agreement will state all terms and condition of the agreements.

Restricted Stock

The terms and conditions of any restricted stock awards granted to a participant will be set forth in an award agreement and, subject to the provisions in the Plans, will be determined by the Committee. Under a restricted stock award, we issue shares of our Common Stock to the recipient of the award, subject to vesting conditions and transfer restrictions that lapse over time or upon achievement of performance conditions. The Committee will determine the vesting schedule and performance objectives, if any, applicable to each restricted stock award. Unless the Committee determines otherwise, the recipient may vote and receive dividends on shares of restricted stock issued under our Plans.

Other Share-Based Awards and Cash Awards

The Committee may make other forms of equity-based awards under our Plans, including, for example, deferred shares, stock bonus awards and dividend equivalent awards. In addition, our Plans authorizes us to make annual and other cash incentive awards based on achieving performance goals that are pre-established by our compensation committee.

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Change in Control

If the Company is merged or consolidated with another entity or sells or otherwise disposes of substantially all of its assets to another company while awards or options remain outstanding under the Plans, unless provisions are made in connection with such transaction for the continuance of the Plans and/or the assumption or substitution of such awards or options with new options or stock awards covering the stock of the successor company, or parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, then all outstanding options and stock awards which have not been continued, assumed or for which a substituted award has not been granted shall, whether or not vested or then exercisable, unless otherwise specified in the relevant agreements, terminate immediately as of the effective date of any such merger, consolidation or sale.

Change in Capitalization

If the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Common Stock outstanding, without receiving consideration therefore in money, services or property, then awards amounts, type, limitations, and other relevant consideration shall be appropriately and proportionately adjusted. The Committee shall make such adjustments, and its determinations shall be final, binding and conclusive.

Plan Amendment or Termination

Our Board has the authority to amend, suspend, or terminate our Plans, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent. The Plans will terminate ten years after the earlier of (i) the date the each Plan is adopted by the Board, or (ii) the date a Plan is approved by the stockholders, except that awards that are granted under the applicable Plan prior to its termination will continue to be administered under the terms of the that Plan until the awards terminate, expire or are exercised.

SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our Common Stock by (i) each person who, to our knowledge, owns more than 5% of our Common Stock, (ii) each of our current directors and the named executive officer identified under the heading “Executive Compensation” and (iii) all of our current directors and executive officers as a group. We have determined beneficial ownership in accordance with applicable rules of the SEC, and the information reflected in the table below is not necessarily indicative of beneficial ownership for any other purpose. Under applicable SEC rules, beneficial ownership includes any shares of Common Stock as to which a person has sole or shared voting power or investment power and any shares of Common Stock which the person has the right to acquire within 60 days after May 18, 2018 through the exercise of any option, warrant or right or through the conversion of any convertible security. Unless otherwise indicated in the footnotes to the table below and subject to community property laws where applicable, we believe, based on the information furnished to us that each of the persons named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.

The information set forth in the table below is based on 154,487,534 shares of our Common Stock issued and outstanding on May 18, 2018. In computing the number of shares of Common Stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of Common Stock subject to options, warrants, rights or other convertible securities held by that person that are currently exercisable or will be exercisable within 60 days after May 18, 2018. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the principal address of each of the stockholders below is in care of MassRoots, Inc., 2420 17^th Street, Office 3118, Denver, Colorado 80202.

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	Number of Shares Beneficially Owned			Percentage Beneficially Owned
Directors and Named Executive Officers
Isaac Dietrich		17,738,831	(1)		11.48	%
Charles R. Blum		500,000	(2)		*
Cecil Kyte		1,500,000	(3)		*
Graham Farrar		500,000	(4)		*
Jesus Quintero		320,075			*
All directors and named executive officers as a group (5 persons)		20,558,906			13.30	%

(1) Includes 17,738,831 shares of common stock. Excludes warrants to purchase up to 85,000 shares of common stock. The forgoing warrants contains an ownership limitation such that the holder may not convert any of such securities to the extent that such conversion would result in the holder’s beneficial ownership being in excess of 4.99% of the Company’s issued and outstanding common stock together with all shares owned by the holder and its affiliates.

(2) Includes (i) 250,000 shares of common stock and (ii) an option to purchase up to 250,000 shares of common stock.

(3) Includes (i) 750,000 shares of common stock and (ii) an option to purchase up to 750,000 shares of common stock.

(4) Includes (i) 250,000 shares of common stock and (ii) an option to purchase up to 250,000 shares of common stock.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In the last two fiscal years, there has not been any transaction, and currently there is no proposed transaction, in which we were or are going to be a participant and the amount involved exceeds the lesser of $120,000 or 1% of the average of the Company’s total assets at year end, in which any related person had or will have a direct or indirect material interest.

LEGAL MATTERS

Unless otherwise indicated, Sheppard, Mullin, Richter & Hampton LLP, New York, New York, will pass upon the validity of the shares of our Common Stock to be sold in this offering.

EXPERTS

The financial statements of MassRoots, Inc. for the year ended December 31, 2017 and December 31, 2016 have been included herein in reliance upon the reports of RBSM LLP and Liggett & Webb P.A respectively, independent registered public accounting firms, upon the authority of said firms as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the Resale Shares being offered by this prospectus. This prospectus does not contain all of the information in the registration statement of which this prospectus is a part and the exhibits to such registration statement. For further information with respect to us the Resale Shares by this prospectus, we refer you to the registration statement of which this prospectus is a part and the exhibits to such registration statement. Statements contained in this prospectus as to the contents of any contract or any other document are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document incorporated by reference or filed as an exhibit to the registration statement of which this prospectus is a part. Each of these statements is qualified in all respects by this reference.

-58- 

You may read and copy the registration statement of which this prospectus is a part, as well as our reports, proxy statements and other information, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the Public Reference Room. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including MassRoots, Inc.. The SEC’s Internet site can be found at http://www.sec.gov. You may also request a copy of these filings, at no cost, by writing us at 2420 17^th Street, Office 3118, Denver, Colorado 80202 or telephoning us at (833) 467-6687.

We are subject to the information and reporting requirements of the Exchange Act, and, in accordance with this law, file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copying at the SEC’s public reference facilities and the website of the SEC referred to above. We also maintain a website at www.massroots.com. You may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.

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52,719,040 Shares of Common Stock

PROSPECTUS

, 2018

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MASSROOTS, INC.

FINANCIAL STATEMENTS

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets as of December 31, 2017 and 2016	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2017 and 2016	F-4
Consolidated Statement of Stockholders’ (Deficit) Equity for the Years Ended December 31, 2017 and 2016	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017 and 2016	F-8
Notes to Financial Statements	F-10
Condensed Consolidated Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017 (audited)	F-37
Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2018 and 2017 (unaudited)	F-38
Condensed Consolidated Statement of Stockholders’ Deficit for the Three Months Ended March 31, 2018 (unaudited)	F-39
Condensed Consolidated Statements of Cash Flows for the Three months Ended March 31, 2018 and 2017 (unaudited)	F-40
Notes to Condensed Consolidated Financial Statements (unaudited)	F-41

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

MassRoots, Inc.

Denver, Colorado

We have audited the accompanying balance sheet of MassRoots, Inc. (the “Company”) as of December 31, 2016, and the related statements of operations, stockholders’ (deficit) equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2016, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a working capital deficit and has negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Liggett & Webb, P.A.

New York, New York

March 31, 2017

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of MassRoots, Inc. and subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of MassRoots, Inc. and subsidiaries (The “Company”) as of December 31, 2017, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flow for the year ended December 31, 2017 and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the consolidated results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

The Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/S/ RBSM LLP

We have served as the Company’s auditor since 2017.

Henderson, Nevada

April 17, 2018

F-2

MASSROOTS, INC.

CONSOLIDATED BALANCE SHEETS

	DECEMBER 31,
	2017			2016
ASSETS
CURRENT ASSETS
Cash	$	1,201,587		$	374,490
Accounts receivables		-			3,306
Prepaid expense		16,556			-
TOTAL CURRENT ASSETS		1,218,143			377,796
Property and equipment - net		55,146			77,322
OTHER ASSETS
Investments		403,249			235,000
Software Cost, net of amortization of $389,059 and $0		863,941			-
Deposits and other assets		33,502			33,502
Total Other Assets		1,300,692			268,502
TOTAL ASSETS		2,573,981			723,620
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
CURRENT LIABILITIES
Accounts payable		1,257,783			382,550
Accrued payroll and related		1.601,232			-
Advances		800,394			-
Deferred revenue		-			27,010
Convertible notes payable, net of debt discount of $248,009		796,991			-
Derivative liability		9,493,307			1,301,138
TOTAL CURRENT LIABILITIES		13,949,707			1,710,698
LONG-TERM LIABILITY
Convertible notes payable, long term		-			108,100
TOTAL LIABILITIES		13,949,707			1,818,798
STOCKHOLDERS’ (DEFICIT) EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 112,165,839 and 71,908,370 shares issued and outstanding		112,166			71,908
Common stock to be issued, 12,572,500 and 1,740,000 shares, respectively		12,573			1,740
Additional paid in capital		63,315,749			28,693,819
Subscriptions receivable		(564,000	)		-
Accumulated deficit		(74,252,214	)		(29,862,645	)
TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY		(11,375,726	)		(1,095,178	)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	2,573,981		$	723,620

The accompanying notes are an integral part of these consolidated financial statements.    

F-3

MASSROOTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year ended December 31,
	2017			2016
REVENUES	$	319,242		$	701,581
OPERATING EXPENSES
Cost of revenues		630			180,427
Advertising		960,239			985,342
Impairment expense		3,796,991			-
Payroll and related expense		3,104,407			2,112,879
Payroll taxes related to stockbased compensation		1,599,489			-
Stock based compensation		22,107,949			7,380,431
Amortization of Software costs		389,059			-
Other general and administrative expenses		5,164,438			3,644,881
Total General and Administrative expenses		37,123,202			14,303,960
(LOSS) FROM OPERATIONS		(36,803,960	)		(13,602,379	)
OTHER INCOME (EXPENSE)
Loss on change in fair value of derivative liabilities		(7,000,835	)		(581,912	)
Gain on Sale of Securities		75,000			-
Interest Expense		(659,774	)		(3,845,833	)
Total Other Income (Expense)		(7,585,609	)		(4,427,745	)
Net Loss before Income Taxes		(44,389,569	)		(18,030,124	)
Provision for Income taxes (benefit)		-			-
NET (LOSS)	$	(44,389,569	)	$	(18,030,124	)
Net loss per common share-basic and diluted	$	(0.46	)	$	(0.34	)
Weighted average common shares outstanding-basic and diluted		97,213,230			53,151,429

The accompanying notes are an integral part of these consolidated financial statements.   

F-4

MASSROOTS , INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ (DEFICIT) EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

	Common Stock				Common Stock to be Issued						Additional Paid			Subscriptions		Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount			In Capital			Receivable		Deficit			Deficit
Balance as of December 31, 2015		46,939,965	$	46,940		624,000		$	624		$	12,101,784			—		(11,832,521	)		316,827
Common stock issued related to 2015 stock grants		624,000		624		(624,000	)		(624	)		—			—		—			—
Common stock issued for services		4,225,675		4,226		1,740,000			1,740			4,193,940			—		—			4,199,906
Common stock issued upon exercise of warrants for cash		5,242,393		5,242		—			—			1,128,252			—		—			1,133,494
Common stock issued upon exercise of options for cash		210,000		210		—			—			24,790			—		—			25,000
Common shares issued upon cashless exercise of warrants		639,051		639		—			—			(639	)		—		—			—
Common shares issued upon cashless exercise of options		264,158		264		—			—			(264	)		—		—			—
Sale of common stock		10,350,376		10,350		—			—			4,989,925			—		—			5,000,275
Common stock issued in settlement of convertible notes		3,108,229		3,108		—			—			1,356,783			—		—			1,359,891
Common stock issued for penalties related to convertible notes		304,523		305		—			—			163,316			—		—			163,621
Fair value of warrants issued for services rendered		—		—		—			—			68,369			—		—			68,369

F-5

Reclassify fair value of derivative liability to equity upon note payment and warrant exercise(s)	—		—	—		—		1,555,407		—		—			1,555,407
Fair value of stock option issued for services	—		—	—		—		3,112,156		—		—			3,112,156
Net loss	—		—	—		—		—		—		(18,030,124	)		(18,030,124	)
Balance as of December 31, 2016	71,908,370	$	71,908	1,740,000	$	1,740	$	28,693,819	$	—	$	(29,862,645	)	$	(1,095,178	)

Common stock issued related to 2016 stock grants	1,740,000	1,740	(1,740,000	)	(1,740	)	—		—		—	—
Common stock issued for services	21,000,898	21,001	4,100,000		4,100		15,449,229		—		—	15,474,330
Common stock issued upon exercise of warrants for cash	7,033,041	7,033	12,500		13		4,752,716		—		—	4,759,762
Common shares issued upon cashless exercise of warrants	355,689	356	—		—		(356	)	—		—	—
Common shares issued upon cashless exercise of options	436,011	436					(436	)	—		—	—
Sale of common stock	2,434,000	2,434	10,210,000		10,210		2,224,130		(564,000	)	—	1,672,774
Common stock issued in settlement of convertible notes	1,081,000	1,081	—		—		107,019		—		—	108,100
Common stock issued to acquire Odava Inc.	3,250,000	3,250	—		—		1,963,000		—		—	1,966,250

F-6

Common stock issued to acquire DDDigital Inc.	2,926,830		2,927	—			—			2,880,293		—			—			2,883,220
Common stock received from former Board members in exchange for warrants				(1,750,000	)		(1,750	)		813,738		—			—			811,988
Reclassify fair value of  derivative liability to equity upon warrant exercise(s)	—		—	—			—			610,966		—			—			610,966
Fair value of repriced and vesting options	—		—	—			—			5,821,631		—			—			5,821,631
Net loss	—		—	—			—			—		—			(44,389,569	)		(44,389,569	)
Balance as of December 31, 2017	112,165,839	$	112,166	12,572,500		$	12,573		$	63,315,749	$	(564,000	)	$	(74,252,214	)	$	(11,375,726	)

The accompanying notes are an integral part of these consolidated financial statements.                            

F-7

MASSROOTS, INC.

CONSOLIDATED STATEMENTS OF CASHFLOWS

	Year Ended December 31,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)	($	44,389,569	)	($	18,030,124	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		416,253			19,451
Impairment expense		3,796,991			—
Stock based compensation		22,107,949			7,380,431
Amortization of debt discounts		652,921			1,549,669
Gain on sale of securities		(75,000	)		—
Loss on sale of property and equipment		55,849			—
Payroll tax expense related to stock based compensation		1,599,489
Loss on change in Fair Value of derivative liability		7,000,835			581,912
Non cash interest		—			1,265,376
Penalties related to note maturity		—			763,872
Changes in operating assets and liabilities
Accounts receivables		6,889			36,194
Prepaid and other		(19,803	)		12,938
Deferred revenue		(27,010	)		27,010
Accounts payable and other liabilities		876,741			210,455
Net Cash used in operating activities		(7,997,465	)		(6,182,816	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired from acquisition of DDDigtal LLC		8,672			—
Cash acquired from acquisition of Odava, LLC		2,601			—
Proceeds from sale of securities		250,000			—
Cash paid related to acquisition of Odava LLC		(40,570	)		—
Purchase of equity investment		(100,002	)		(23,750	)
Purchase of convertible promissory note		(300,000	)		—
Investment in DDDigital LLC		(78,000	)		(60,000	)
Purchase of equipment		(57,534	)		—
Net Cash used in investing activities		(314,833	)		(83,750	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible note		942,500			1,420,000
Proceeds from common stock sales		2,676,644			5,000,275
Proceeds from exercise of warrants		4,759,762			1,133,494
Proceeds from exercise of options		—			25,000
Proceeds from advances		770,000			—
Repayment of loans		(9,511	)		—
Repayment of convertible notes		—			(1,324,029	)
Net cash provided by financing activities		9,139,395			6,254,740
NET INCREASE (DECREASE) IN CASH		827,097			(11,826	)
Cash, beginning of period		374,490			386,316
Cash, end of period	$	1,201,587		$	374,490
Supplemental disclosures of cash flow information:
Cash paid during period for interest	$	—		$	—
Cash paid during period for taxes	$	—		$	—

F-8

Non cash investing and financing activities:
Common stock issued in settlement of debt	$	108,100	$	1,359,891
Common stock issued in payment of penalties related to notes payable	$	—	$	163,621
Common stock issued to acquire DDDigtal LLC	$	2,883,220	$	—
Net assets acquired from acquisition of DDDigtal LLC	$	15,448	$	—
Common stock issued to acquire Odava, LLC	$	1,966,250	$	—
Net assets acquired from acquisition of Odava, LLC	$	2,601	$	—
Reclassification of liability warrants from equity in connection with the sale of common stock	$	1,003,870	$	—
Reclassification of derivative liability to equity upon note prepayment(s)	$	—	$	1,555,407
Reclassification of derivative liability to equity upon warrant exercise(s)	$	610,966	$	—
Beneficial conversion feature relating to convertible note payable	$	—	$	945,596

See the accompanying notes to the consolidated financial statements.    

F-9

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

MassRoots, Inc. (“MassRoots” or the “Company”) has created a technology platform for the cannabis industry focused on enabling users to share their cannabis content, follow their favorite dispensaries, and stay connected with the legalization movement. The Company was incorporated in the State of Delaware on April 26, 2013.

The accompanying audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Our consolidated financial statements include the accounts of DDDigtal, Inc., Odava, Inc., and MassRoots Blockchain Technologies, Inc. All intercompany transactions were eliminated during consolidation.

Acquisitions

DDDigtal Inc.

On December 15, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Whaxy Inc., a wholly-owned subsidiary of the Company (“Merger Subsidiary”), DDDigtal Inc., a Colorado corporation (“DDDigtal”), Zachary Marburger, an individual acting solely in his capacity as stockholder representative of DDDigtal, and all of the stockholders of DDDigtal. Pursuant to the Merger Agreement, the parties agreed to merge Merger Subsidiary with and into DDDigtal, whereby DDDigtal survived as a wholly-owned subsidiary of MassRoots (the “Merger”). The primary reason for this combination was the acquisition of DDDigtal’s menu management software, which has been integrated with MassRoots’ business portal to expand the services provided to our clients.

On January 25, 2017 (the “Effective Date”), the Merger became effective upon the filing of certificates of merger with the respective Secretary of State of the States of Delaware and Colorado, in such forms as required by, and executed in accordance with, the relevant provisions of the Delaware General Corporation Law and the Colorado Business Corporation Act.

Pursuant to the terms of the Merger Agreement, each share of DDDigtal’s common stock was exchanged such number of shares of the Company’s common stock (or a fraction thereof), based on an exchange ratio equal to approximately 5.273-for-1, such that 1 share of the Company’s common stock was issued for every 5.273 shares of DDDigtal’s common stock.

On the Effective Date, the Company issued an aggregate of 2,926,830 shares of the Company’s common stock on a pro rata basis to all stockholders of DDDigtal (the “Share Consideration”) in exchange for all of the outstanding shares of common stock of DDDigtal’s. In addition, on the Effective Date, each share of the common stock of Merger Subsidiary was exchanged for one share of common stock of DDDigtal, and all shares of DDDigtal common stock outstanding immediately prior to the Effective Date were automatically cancelled and retired. As of the Effective Date, DDDigtal continued as a surviving wholly-owned subsidiary of the Company, and the Merger Subsidiary ceased to exist.

Pursuant to the terms of the Merger Agreement, in December 2016, the Company paid each of Zachary Marburger and Micah Davidson $40,000 and $20,000, respectively, as repayment for outstanding debts owed by DDDigtal to such individuals.

As a condition to the closing of the Merger, the Company hired Zachary Marburger as its Vice President of Strategy, and engaged Micah Davidson as a Senior Software Engineer. As a condition of Mr. Marburger’s employment and pursuant to the terms of the Merger Agreement, the Company paid Mr. Marburger an additional $40,000 following the one-year anniversary of his employment with the Company.

F-10

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

A summary of consideration is as follows:

Cash (paid in December 2016)	$	60,000
2,926,830 shares of the Company’s common stock		2,883,220
Liabilities assumed		40,140
Total purchase price	$	2,983,360

The following summarizes the current estimates of fair value of assets acquired and liabilities assumed:

Cash	$	8,672
Accounts receivable		3,583
Property and equipment		3,333
Goodwill		2,967,772
Assets acquired	$	2,983,360

During management’s annual review of these assets, it was determined that the fair-market value of DDDigtal’s menu management software was $1,253,000 based upon projected cash-flows and valuations of comparable software services. This value will be amortized over an expected three-year useful life. The remaining $1,714,772 in goodwill was impaired and written-off in December 2017.

Pro forma Results

The following tables set forth the unaudited pro forma results of the Company as if the acquisition of DDDigtal had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of the first day of the periods presented.

	Twelve months ended December 31, 2017			Twelve months ended December 31, 2016
Total revenues	$	319,242		$	740,264
Net loss		(44,389,569	)		(18,193,082	)
Basic and diluted net loss per common share	$	(0.46	)	$	(0.34	)

F-11

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Odava, Inc.

On July 5, 2017, the Company entered into an Agreement and Plan of Merger (the “July 2017 Merger Agreement”) with MassRoots Compliance Technology, Inc., a wholly-owned subsidiary of the Company (“MCT”), Odava, Inc., a Delaware corporation (“Odava”), and Scott Kveton, an individual acting solely in his capacity as a stockholder representative of Odava. Pursuant to the July 2017 Merger Agreement, the parties agreed to merge MCT with and into Odava, whereby Odava survived as a wholly-owned subsidiary of MassRoots (the “Odava Merger”). The primary reason for this combination was the acquisition of Whaxy’s point-of-sale software for dispensaries, which MassRoots planned to offer as an additional service to its clients.

On July 13, 2017 (the “Odava Merger Effective Date”), the Odava Merger became effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware, in the form as required by and executed in accordance with the relevant provisions of the Delaware General Corporation Law.

Pursuant to the terms of the July 2017 Merger Agreement, each share of Odava’s common stock was exchanged for such number of shares of MassRoots’ common stock (or a fraction thereof), based on an exchange ratio equal to approximately 4.069-for-1, such that one share of MassRoots’ common stock was issued for approximately every 4.069 shares of Odava’s common stock.

On the Odava Merger Effective Date, the Company issued an aggregate of 3,250,000 shares of common stock pro rata to all stockholders of Odava (the “Share Consideration”) in exchange for all of their shares of Odava’s common stock. In addition, on the Odava Merger Effective Date, shares of the common stock of MCT were converted into and exchanged for one share of common stock of Odava, and all shares of Odava common stock outstanding immediately prior to the Odava Merger Effective Date were automatically cancelled and retired. As of the Odava Merger Effective Date Odava continued as a surviving wholly-owned subsidiary of MassRoots, and MCT ceased to exist. In addition, the Company issued an aggregate of 2,600,000 shares of its common stock to the founders of Odava in connection with the Odava Merger. Furthermore, pursuant to the terms of the Odava Merger Agreement, the Company paid each of Scott Kveton and Steven Osborn $30,000 and $5,000, respectively, as repayment for outstanding debts owed by Odava to such individuals.

As a condition to the closing of the Odava Merger, the Company hired Scott Kveton as its new Director of Business Development, and Steven Osborn as its Principal Architect.

A summary of consideration is as follows:

Cash and costs incurred	$	40,570
3,250,000 shares of the Company’s common stock		1,966,250
Total purchase price	$	2,006,820

The following summarizes the current estimates of fair value of assets acquired and liabilities assumed:

Cash	$	2,601
Goodwill		2,004,219
Assets acquired	$	2,006,820

The above estimated fair value of the intangible assets is based on a preliminary purchase price allocation prepared by management. As this software has never been monetized and market conditions have changed significantly since the acquisition, the value of this of this asset is significantly impaired and we have written off the $2,006,820 in goodwill associated with Odava.

F-12

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Pro forma results

The following tables set forth the unaudited pro forma results of the Company as if the acquisition of Odava had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of the first day of the periods presented.

	Twelve months ended December 31, 2017			Twelve months ended December 31, 2016
Total revenues	$	319,242		$	701,581
Net loss		(44,405,275	)		(18,030,668	)
Basic and diluted net loss per common share	$	(0.46	)	$	(0.34	)

The Company accounts for acquisitions in accordance with the provisions of Accounting Standards Codification (“ASC”) 805 Business Combinations (“ASC 805”). The Company assigns to all identifiable assets acquired a portion of the cost of the acquired company equal to the estimated fair value of such assets at the date of acquisition. The Company records the excess of the cost of the acquired company over the sum of the amounts assigned to identifiable assets acquired as goodwill.

The Company recorded goodwill in the aggregate amount of $0 as a result of the acquisitions of DDDigtal and Odava during the year ended December 31, 2017.

The Company accounts for and reports acquired goodwill under ASC subtopic 350-10, Intangibles-Goodwill and Other (“ASC 350”). In accordance with ASC 350-10, at least annually, the Company tests its intangible assets for impairment or more often if events and circumstances warrant. Any write-downs will be included in results from operations. As this software has never been monetized and market conditions have changed significantly, the value of the Odava acquisition was deemed fully impaired and fully written-off as of December 31, 2017.

F-13

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

NOTE 2 –GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

As of December 31, 2017, the Company had cash of $1,201,587 and working capital deficit (current liabilities in excess of current assets) of $12,731,564. During the twelve months ended December 31, 2017, the Company used net cash in operating activities of $7,997,465. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements.

During the twelve months of 2017, the Company received $4,753,196, $950,000, $3,248,000 and $442,500 from the exercise of common stock warrants, proceeds from issuance of convertible notes, sale of common stock and proceeds from simple agreements for future tokens, respectively. The Company does not have cash sufficient to fund operations.

The Company’s primary source of operating funds since inception has been cash proceeds from private placements of common stock, proceeds from the exercise of warrants and options and issuance of notes payable. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. The Company will require additional financing to fund future operations.

Management’s plans with regard to these matters encompass the following actions: 1) obtain funding from new and potentially current investors to alleviate the Company’s working capital deficiency, and 2) implement a plan to generate sales. The Company’s continued existence is dependent upon its ability to translate its user base into sales. However, the outcome of management’s plans cannot be ascertained with any degree of certainty.

Accordingly, the accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of MassRoots, Inc. and its wholly-owned operating subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include stock-based compensation, fair values relating to derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

Fair Value of Financial Instruments

ASC subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk.

F-14

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The Company follows ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value.

Cash and Cash Equivalents

For purposes of the Statement of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. As of December 31, 2017, MassRoots was indebted to four debtor in secured convertible notes. The concentration of credit amongst these debtors make it likely they would wield significant influence over MassRoots and the disposition of assets in the event of a default.

Property and Equipment

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. Repair and maintenance costs are expensed as occurred. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

Accounts Receivable and Allowance for Doubtful Accounts

The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. As of December 31, 2017 and December 31, 2016, based upon the review of the outstanding accounts receivable, the Company has determined that an allowance for doubtful accounts is not required.

Revenue Recognition

The Company recognizes revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met:

(i) persuasive evidence of an arrangement exists;

(ii) the services have been rendered and all required milestones achieved;

(iii) the sales price is fixed and determinable; and

(iv) collectability is reasonably assured.

The Company primarily generates revenue by charging businesses to advertise on the network. The Company has the ability to target advertisements directly to a clients’ target audience, based on their location, on their mobile devices. In cases where clients sign advertising contracts for an extended period of time, the Company only realizes revenue for services provided during that quarter and defers all other revenue to future periods.

Acquisitions and Subsidiaries

Subsidiaries are all entities over which MassRoots has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether MassRoots controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to MassRoots.  

F-15

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The purchase method of accounting is used to account for the acquisition of subsidiaries by MassRoots. The cost of an acquisition is measured as the fair value of the assets transferred in consideration, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the MassRoots’ share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.

Inter-company transactions, balances and unrealized gains on transactions between MassRoots’ companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred. The company charged to operations $960,239 and $985,342, as advertising for the year ended December 31, 2017 and 2016, respectively.

Stock Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period.

Income Taxes

The Company follows ASC subtopic 740-10, Income Taxes- (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period.

If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

Convertible Instruments

U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under ASC 480.

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

F-16

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Derivative Financial Instruments

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company’s own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

The Company’s free-standing derivatives consisted of warrants to purchase common stock that were issued in connection with the issuance of debt and sale of common stock, and of embedded conversion options with convertible debentures. The Company evaluated these derivatives to assess their proper classification in the balance sheet as of December 31, 2017 using the applicable classification criteria enumerated under ASC 815 Derivatives and Hedging. The Company determined that certain embedded conversion and/or exercise features do not contain fixed settlement provisions. The convertible debentures contain a conversion feature such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands.

As such, the Company was required to record the derivatives which do not have fixed settlement provisions as liabilities and mark to market all such derivatives to fair value at the end of each reporting period.

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Intangible assets are stated at cost and reviewed annually to examine any impairments, usually assuming an estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Chief Executive Officer, or decision-making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company’s core business.

F-17

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Net Earnings (Loss) Per Common Share

The Company computes earnings (loss) per share under ASC subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.

The computation of basic and diluted income (loss) per share as of December 31, 2017 and 2016 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:

	December 31, 2017		December 31, 2016
Common stock issuable upon conversion of convertible debentures		6,147,059		1,081,000
Options to purchase common stock		14,377,570		14,824,158
Warrants to purchase common stock		35,187,847		15,488,056
Totals		55,712,476		31,393,214

Reclassification

Certain reclassifications have been made to the prior years’ data to conform to the current year presentation. These reclassifications had no effect on reported income (losses).

Recent Accounting Pronouncements

There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Financial Accounting Standards Board (“FASB”) Accounting Standards Updates (“ASU”) 2017-04 (Topic 350), “Intangibles - Goodwill and Others” – Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company is currently evaluating the effect that ASU 2017-04 will have on our consolidated financial statements and related disclosures.

FASB ASU 2017-01 (Topic 805), “Business Combinations: Clarifying the Definition of a Business” – Issued in January 2017, ASU 2017-01 revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance will be effective for the Company in the first fiscal quarter of 2018 on a prospective basis, and early adoption is permitted. The Company does not expect the standard to have a material impact on our consolidated financial statements and related disclosures.

FASB ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” – Issued in August 2016, the amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, “Statement of Cash Flows”. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. The Company has not yet completed the analysis of how adopting this guidance will affect its consolidated financial statements and related disclosures.

F-18

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

FASB ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers” – Issued in May 2014, ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers using a five-step model that requires entities to exercise judgment when considering the terms of the contracts. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”. This amendment defers the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Gross versus Net)”, which amends the principal versus agent guidance and clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer. In addition, the FASB issued ASU Nos. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” and 2016-12, “Narrow-Scope Improvements and Practical Expedients”, both of which provide additional clarification of certain provisions in Topic 606. These ASC updates are effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. Early adoption is permitted only as of annual reporting periods after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method.

The Company expects to apply the guidance using the modified retrospective transition method. The Company does not expect the adoption of ASU 2014-09 to have a material impact on the Company’s financial position or results of operations but will result in additional disclosures regarding the Company’s revenue recognition policies. The Company also does not expect the adoption of ASU 2014-09 will require material or significant changes to its internal controls over financial reporting. In connection with the application of that guidance and the adoption of ASU 2014-09, the Company expects that it will expand its revenue recognition inquiries and update its questionnaires primarily to identify matters that would signal variable consideration implications under the new guidance.

FASB ASU No. 2014-15, “Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern, which is included in Accounting Standards Codification (ASC) 205, Presentation of Financial Statements” - Issued August 2014,this update provides an explicit requirement for management to assess an entity’s ability to continue as an ongoing concern, and to provide related footnote disclosures in certain circumstances.

The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company has adopted this standard and included the necessary disclosures in the footnotes to our financial

FASB ASU 2016-02, Leases (Topic 842) - ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.

FASB ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” - The amendment is part of the FASB’s simplification initiative and is intended to simplify the accounting around share-based payment award transactions. The amendments include changing the recording of excess tax benefits from being recognized as a part of surplus capital to being charged directly to the income statement, changing the classification of excess tax benefits within the statement of cash flows, and allowing companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this standard has not had a material impact on the Company’s financial position and results of operations.

F-19

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) – Adopted in November 2016, this ASU requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include cash and restricted cash equivalents. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.

There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

NOTE 4 – INVESTMENTS

In 2016, the Company paid a $60,000 acquisition deposit to acquire DDDigital, LLC.  

As of December 31, 2017 and 2016, the carrying value of our investments in privately held companies totaled $403,249 and $175,000, respectively. These investments are accounted for as cost method investments, as we own less than 20% of the voting securities and do not have the ability to exercise significant influence over operating and financial policies of the entities.

To facilitate the integration with dispensary point of sale systems, in 2015, the Company invested $175,000 in exchange for preferred shares of Flowhub LLC (“Flowhub”), a seed-to-sale system, equal to 8.95% of the then outstanding equity of Flowhub. The preferred shares are considered non-marketable securities. On May 12, 2017, the Company sold its preferred shares in Flowhub for net proceeds of $250,000. The gain on sale of securities of $75,000 was recorded in current period operations.

During the twelve months ended December 31, 2017, the Company acquired 23,810 shares of Class A common stock of Hightimes Holding Corp. for $100,002, or $4.20 per share. The acquired Class A common stock are considered non-marketable securities.

On July 13, 2017, the Company purchased an unsecured convertible promissory note in the principal amount of $300,000 from Cannaregs, Ltd, a Colorado limited liability company (“Cannaregs”). The note bears interest at a rate of 5% per annum and matures on at December 19, 2019. In the event Cannaregs consummates an equity financing in excess of $2,000,000 prior to the maturity date of the note, the outstanding principal and any accrued and unpaid interest automatically converts to equity securities of the same class or series issued by Cannaregs at the lesser of: a) 90% of the price paid per equity security or b) a price reflecting a valuation cap of $4,500,000.

On July 17, 2017, MassRoots converted this the note 430,622 shares of CannaRegs’ common stock, approximately 4.31% of CannaRegs’ issued and outstanding shares of December 31, 2017.

F-20

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2017 and December 31, 2016 is summarized as follows:

	December 31, 2017			December 31, 2016
Computers	$	55,244		$	72,124
Office equipment		43,590			36,850
Subtotal		98,834			108,974
Less accumulated depreciation		(43,688	)		(31,652	)
Property and equipment, net	$	55,146		$	77,322

Depreciation expense for the fiscal years ended December 31, 2017 and 2016 was $27,194 and $19,451, respectively. The company incurred a loss on disposal of property and equipment of $55,848 and $0 for fiscal years December 31, 2017 and 2016, respectively.

NOTE 6 – SOFTWARE COSTS

On December 15, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Whaxy Inc., a wholly-owned subsidiary of the Company (“Merger Subsidiary”), DDDigtal Inc., a Colorado corporation (“DDDigtal”), Zachary Marburger, an individual acting solely in his capacity as Stockholder Representative, and all of the stockholders of DDDigtal. Pursuant to the Merger Agreement, the parties agreed to merge Merger Subsidiary with and into DDDigtal, whereby DDDigtal survived as a wholly-owned subsidiary of MassRoots (the “Merger”).

On January 25, 2017 (the “Effective Date”), the Merger was completed and became effective upon the filing of certificates of merger with the respective Secretary of State of the States of Delaware and Colorado, in such forms as required by, and executed in accordance with, the relevant provisions of the Delaware General Corporation Law and the Colorado Business Corporation Act.

Pursuant to the terms of the Merger Agreement, each share of DDDigtal’s common stock was to be exchanged for a number of shares of the Company’s common stock (or a fraction thereof), based on an exchange ratio, as ultimately calculated, equal to approximately 5.273-for-1, such that 1 share of the Company’s’ common stock was issued for every 5.273 shares of DDDigtal’s common stock.

F-21

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

On the Effective Date, the Company issued 2,926,830 shares of the Company’s common stock pro rata to all stockholders of DDDigtal (the “Share Consideration”) in exchange for all of their shares of DDDigtal’s common stock. At the same time, each share of the common stock of Merger Subsidiary was converted into and exchanged for one share of common stock of DDDigtal held by the Company, and all shares of DDDigtal common stock outstanding immediately prior to the Effective Date automatically cancelled and retired. DDDigtal continued as a surviving wholly-owned subsidiary of the Company, and Merger Subsidiary ceased to exist.

Also pursuant to the terms of the Merger Agreement, the Company paid cash consideration, in December 2016, of $40,000 to Zachary Marburger and $20,000 to Micah Davidson, as repayment of outstanding debts owed by DDDigtal to the individuals.

As a condition to the closing of the Merger, the Company hired Zachary Marburger as its Vice President of Strategy, and engaged Micah Davidson as a Senior Software Engineer. As a condition of Mr. Marburger’s employment and pursuant to the Merger Agreement, the Company will pay Mr. Marburger an additional $40,000 following the one-year anniversary of his constant employment with the Company.

Cash (paid in December 2016)	$	60,000
2,926,830 shares of the Company’s common stock		2,883,220
Liabilities assumed		40,140
Total purchase price	$	2,983,360

Cash	$	8,672
Accounts receivable		3,583
Property and equipment		3,333
Software		1,253,000	(1)
Goodwill		1,714,772
Assets acquired	$	2,983,360

(1) The estimated useful life for Software development is assumed at 3 years. The acquisition was completed in January 2017, however the allocation of proceeds to identifiable assets was recognized during fourth quarter. Initially the recording of acquisition was as disclosed in Note 1.

F-22

NOTE 7 – CONVERTIBLE NOTES PAYABLE

On March 24, 2014, the Company issued convertible debentures to certain accredited investors in the aggregate principal amount of $269,100. The debentures originally matured on March 24, 2016 and accrue no interest. The debentures are convertible into shares of the Company’s common stock at $0.10 per share. In March 2016, the debentures were amended to extend the maturity date to March 24, 2018. In 2016, the Company issued an aggregate of 1,010,000 shares of its common stock in settlement of $101,000 of outstanding debentures and during the twelve months ended December 31, 2017, the Company issued an aggregate of 1,081,000 shares of its common stock in settlement of $108,100 of outstanding debentures. As of December 31, 2017 and December 31, 2016, the aggregate carrying value of the debentures was $0 and $108,100, net of debt discounts of $0, respectively.

In February 2016, the Company issued to a service provider a 12 month convertible debenture at 15% interest with a principal amount of $35,000 along with 35,000 3-year warrants to purchase shares of common stock at $1.00 per share. The convertible debenture is payable at maturity, and convertible at the investor’s determination at a price equal to 90% of the price of a subsequent public underwritten offering if one occurs over $5 million, or, if no such subsequent offering occurs, at $0.75 per share. During the year ended December 31, 2016, the Company issued an aggregate of 343,767 shares in full settlement of the debenture obligation.

On March 14, 2016, the Company sold to investors six (6) month secured convertible original issue discount notes with a principal amount in the aggregate of $1,514,669, together with five-year warrants to purchase an amount of shares of the Company’s common stock equal to the number of shares of common stock issuable upon the conversion of the notes in full and having an exercise price of $1.00 per share with reset provisions. If the Company exercises its right to prepay the note, the Company must make payment to the investor of an amount in cash equal to the sum of the then outstanding principal amount of the note that it desires to prepay, multiplied by (a) 1.2, during the first ninety (90) days after the execution of the note, or (b) 1.35, at any point thereafter. The notes are convertible into shares of the Company’s common stock at a price per share equal to the lower of (i) $1.00, and (ii) a 25% discount to the price at which the Company next conducts an offering after the issuance date of the note; provided, however, for any part of the principal amount of the note that is not paid at its maturity date, September 14, 2016, the conversion price for such amount is equal to 65% of the average of the three trading days with the lowest daily weighted average prices of the Company’s common stock occurring during the fifteen days prior to the notes’ maturity date, September 14, 2016. The notes require that any net proceeds received in subsequent offerings made by the Company first be used to repay the notes’ outstanding principal amount. Because the note was not repaid by the maturity date, the investors became entitled to receive, in aggregate, but calculated pro rata to the principal amounts remaining outstanding at the time of maturity, up to five hundred thousand (500,000) shares of the Company’s common stock. Gross proceeds received by the Company for the notes and warrants in this offering were $1,420,000, while net proceeds were $1,271,600 (excluding any legal fees). On September 14, 2016, upon maturity of the notes, the Company was unable to make the required payment of the then outstanding aggregate principal amount of $966,384 and was in default under the notes. Penalties in aggregate of $584,735 were added to the carrying amount of the notes and were charged to current period interest.

F-23

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

During the year ended December 31, 2016, the Company paid an aggregate of $1,479,498 cash and issued 1,754,462 shares of its common stock upon conversion of $619,906 of the debenture obligation and accrued interest. In addition, the Company issued an aggregate of 304,523 shares of its common stock as penalty shares valued at $163,621 and was charged to current period interest. As of December 31, 2016, the debentures were paid in full.

On August 17, 2017, the Company issued secured convertible notes to certain accredited investors in the aggregate principal amount of $1,045,000. The notes mature on February 18, 2018 and accrue no interest. Net proceeds received were $942,500 after deduction of legal and other fees. If the Company exercises its right to prepay the notes, the Company shall make payment to the investors in an amount equal to the sum of the then outstanding principal amount of the notes that the Company desires to prepay, multiplied by (a) 1.1, during the first ninety (90) days after the execution of the note, or (b) 1.25, at any point thereafter. The notes are convertible into shares of the Company’s common stock at a price per share equal to the lower of (i) $0.75 and (ii) a 25% discount to the price at which the Company next conducts an offering after the issuance date of the notes; provided, however, if any part of the principal amount of the notes remains unpaid at its maturity date, the conversion price will be equal to 65% of the average of the three trading days with the lowest daily weighted average prices of the Company’s common stock occurring during the fifteen days prior to the notes’ maturity date.

In connection with the issuance of the notes, the Company and the investors also entered into a security agreement pursuant to which the notes are secured by all of the assets of the Company currently held or thereafter acquired.

In connection with the issuance of the notes, the Company issued five-year warrants to purchase an aggregate of 2,090,000 shares of Company’s common stock with an initial exercise price of $0.50. The warrants contain certain anti-dilutive (reset) provisions.

On August 17, 2017, upon issuance of the secured convertible notes and warrants, the Company determined that the features associated with the embedded conversion option and reset provisions embedded in the issued warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions.

During the twelve months ended December 31, 2017, the Company amortized $654,774 of debt discounts to current period interest.

NOTE 8 – DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS

The Company identified conversion features embedded within convertible debt and certain warrants outstanding during the twelve months ended December 31, 2017 and December 31, 2016. The Company has determined that the features associated with the embedded conversion option and exercise prices, in the form of ratchet provisions, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions.

On March 17, 2016, upon issuance of the secured convertible debentures, the Company determined that the features associated with the embedded conversion option and reset provisions embedded in the issued warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. At the date of inception, the Company estimated the fair value of the embedded derivatives of $1,769,121 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 112.29%, (3) weighted average risk-free interest rate of 0.47% to 1.04% (4) expected life of 0.05 to 5.00 years, and (5) estimated fair value of the Company’s common stock of $1.04 per share. The estimated fair value of the embedded derivative of $1,769,121 was charged to debt discount up to the net proceeds of $1,420,000 and amortized over the term of the debenture with the excess charged to current period interest.

F-24

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

On September 14, 2016, upon the maturity of certain secured convertible debentures (see Note 7), the embedded conversion terms changed. As such, the Company estimated the fair value of the change in the embedded derivative of $951,254 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 106.24%, (3) weighted average risk-free interest rate of 0.30%, (4) expected life of three months, and (5) estimated fair value of the Company’s common stock of $0.51 per share. The estimated fair value of the embedded derivative of $951,254 was charged to current period interest.

On December 31, 2016, the Company estimated the fair value of the embedded derivatives of $1,301,138 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 110.39%, (3) weighted average risk-free interest rate of 1.47%, (4) expected life of 4.21 years, and (5) estimated fair value of the Company’s common stock of $1.03 per share.

On January 4, 2017, warrant holders exercised outstanding warrants to purchase an aggregate of 682,668 shares of the Company’s common stock, and as such the Company transferred to estimated fair value of the embedded derivatives $610,967 from liability to equity. The Company estimated the fair value at the time of exercise using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 110.13%, (3) weighted average risk-free interest rate of 1.94%, (4) expected life of 4.20 years, and (5) estimated fair value of the Company’s common stock of $1.07 per share.

On July 21, 2017, upon issuance of the warrants in connection with the sale of common stock, the Company determined that the features associated with the reset provisions embedded in the issued warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. The Company estimated the fair value of the embedded derivatives of $1,003,870 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 103.46%, (3) weighted average risk-free interest rate of 1.81% (4) expected life of 5.00 years, and (5) estimated fair value of the Company’s common stock of $0.5687 per share. The estimated fair value of the embedded derivative of $1,003,870 was reclassified from equity at the date of issuance.

On August 17, 2017, upon issuance of the secured convertible notes and warrants, the Company determined that the features associated with the embedded conversion option and reset provisions embedded in the issued notes and warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions.

The Company estimated the fair value of the embedded derivatives of $798,429 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 102.73%, (3) weighted average risk-free interest rate of 1.11% to 1.78% (4) expected life of 0.49 to 5.00 years, and (5) estimated fair value of the Company’s common stock of $0.457 per share. The estimated fair value of the embedded derivative of $798,429 together with the issuance costs of $102,500 (aggregate of $900,929) was charged to debt discount and amortized over the term of the debenture with the excess charged to current period interest.

On December 31, 2017, the Company estimated the fair value of the embedded derivatives of $9,493,307 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 108.44%, (3) weighted average risk-free interest rate of 1.28% to 2.20%, (4) expected life of 0.13 to 4.65 years, and (5) estimated fair value of the Company’s common stock of $0.601 per share.

F-25

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The Company adopted the provisions of ASC 825-10, Financial Instruments (“ASC 825-10”). ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

· Level 1 – Quoted prices in active markets for identical assets or liabilities.

· Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

All items required to be recorded or measured on a recurring basis are based upon Level 3 inputs.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

The Company recognizes its derivative liabilities as Level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed are that of volatility and market price of the underlying common stock of the Company.

As of December 31, 2017 and December 31, 2016, the Company did not have any derivative instruments that were designated as hedges.

Items recorded or measured at fair value on a recurring basis in the accompanying financial statements consisted of the following items as of December 31, 2017 and December 31, 2016:

	December 31, 2017			Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative liability	$	9,493,307	$	-		$                -		$	9,493,307

	December 31, 2016			Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative liability	$	1,301,138	$	-		$                -		$	1,301,138

F-26

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the two years ended December 31, 2017:

Balance, January 1, 2016		—
Transfers in to Level 3:		2,720,375
Transfers out due to conversions and payoffs		(2,001,149	)
Mark to market to December 31, 2016		581,912
Balance, December 31, 2016	$	1,301,138
Loss on change in warrant and derivative liabilities for the year ended December 31, 2016	$	(581,912	)

Balance, January 1, 2017	$	1,301,138
Transfers in due to issuance of liability warrants in connection with sale of common stock		1,003,870
Transfers in due to issuance of convertible notes and warrants with embedded conversion and
reset options		798,431
Transfers out due to warrant exercise		(610,967)
Mark to market to December 31, 2017		7,000,835
Balance, December 31, 2017	$	9,493,307
Loss on change in warrant liabilities for the twelve months ended December 31, 2017	$	(7,000,835	)

Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the Company’s expected volatility. Increases in expected volatility would generally result in higher fair value measurement. A 10% change in pricing inputs and changes in volatilities and correlation factors would not result in a material change in our Level 3 fair value.

F-27

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

NOTE 9 – CAPITAL STOCK

Preferred Stock

The Company is authorized to issue 21 shares of Series A Preferred Stock, par value $1.00 per share. Each share of Series A Preferred Stock is convertible into one share of common stock and may vote with holders of common stock on an as converted basis. As of December 31, 2017 and December 31, 2016, there were no shares of Series A Preferred Stock issued and outstanding.

Common Stock

The Company is authorized to issue 200,000,000 shares of common stock, par value $0.001 per share. As of December 31, 2017, there were 112,165,839 shares of common stock issued and outstanding and 12,572,500 shares of common stock to be issued under the Company’s 2017 Employee Stock Option Plan. As of December 31, 2016, there were 71,908,370 shares of common stock issued and outstanding and 1,740,000 shares of common stock to be issued under the Company’s 2015 Employee Stock Option Plan.

The following common stock transactions were recorded during the years ended December 31, 2017 and 2016:

During the year ended December 31, 2016, the Company issued an aggregate of 624,000 shares of its common stock which was previously classified as shares to be issued as of December 31, 2015.

During the year ended December 31, 2016, the Company issued an aggregate of 4,225,675 shares of its common stock for services rendered and recorded another 1,740,000 shares to be issued for services rendered at an average stock price of $0.70 per share.

During the year ended December 31, 2016, the Company issued an aggregate of 639,051 shares of its common stock for the cashless exercise of stock warrants.

During the year ended December 31, 2016, the Company issued an aggregate of 5,242,393 shares of its common stock for the cash exercise of stock warrants.

During the year ended December 31, 2016, the Company issued an aggregate of 264,158 shares of its common stock for the cashless exercises of stock options.

During the year ended December 31, 2016, the Company issued an aggregate of 210,000 shares of its common stock for the cash exercise of stock options.

During the year ended December 31, 2016, the Company issued an aggregate of 10,350,376 shares of its common stock for net sales proceeds of $5,000,275.

During the year ended December 31, 2016, the Company issued an aggregate of 3,108,229 shares of its common stock in settlement of $1,359,891 secured convertible debentures (see Note 7).

During the year ended December 31, 2016, the Company issued an aggregate of 304,523 shares of its common stock in payment of penalties relating to secured convertible debentures of $163,621 (see Note 7).

F-28

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

During the year ended December 31, 2017, the Company issued an aggregate of 22,740,898 shares of its common stock for services valued at $15,474,330.

During the year ended December 31, 2017, the Company sold an aggregate of 2,434,000 shares of its common stock and warrants to purchase shares of common stock for net proceeds of $2,676,444.

During the year ended December 31, 2017, the Company issued an aggregate of 436,011 shares for its common stock upon the cashless exercise of common stock options.

During the year ended December 31, 2017, the Company issued an aggregate of 355,689 shares of its common stock for the cashless exercise of common stock warrants.

During the year ended December 31, 2017, the Company issued an aggregate of 1,081,000 shares of its common stock in settlement of $108,100 of convertible debt.

During the year ended December 31, 2017, the Company issued an aggregate of 7,033,041 shares of its common stock upon the exercise of common stock warrants for net proceeds of $4,759,762.

During the year ended December 31, 2017, the Company issued an aggregate of 2,926,830 shares of its common stock to acquire DDDigtal (Note 1).

During the year ended December 31, 2017, the Company issued an aggregate of 3,250,000 shares of its common stock to acquire Odava (Note 1).

During the year ended December 31, 2017, three former board members agreed to surrender an aggregate of 1,750,000 shares of the Company’s common stock in exchange for five-year warrants to purchase up to 4,850,000 shares of the Company’s common stock at an exercise price of $0.20 per share. As a result of the exchange in equity, the Company recorded stock-based compensation of $811,988.

F-29

NOTE 10 WARRANTS

In January 2016, the Company issued warrants to purchase 100,000 shares of common stock at $0.83 per share to certain service providers. The estimated fair value of $68,369 was charged to current period operations. The fair market value was calculated using the Black Scholes Option Pricing Model, assuming approximately 1.46% risk-free interest, 0% dividend yield, 119.14% volatility, and expected life of five years.

In February 2016, the Company issued warrants to purchase 35,000 shares of common stock at $1.00 per share to a service provider. The estimated fair value of $24,301was charged to current period operations. The fair market value was calculated using the Black Scholes Option Pricing Model, assuming approximately 0.71% risk-free interest, 0% dividend yield, 117.43% volatility, and expected life of 3 years.

On March 24, 2016, in connection with the issuance of convertible notes, the Company granted to the same investors five-year warrants to purchase an aggregate of 1,514,669 shares of the Company’s common stock at $1.00 per share. The warrants may be exercised any time after the issuance through and including the fifth (5th) anniversary of its original issuance. The warrants have a fair market value of $910,596. The fair market value was calculated using the Binomial Option Pricing Model, assuming approximately 0.47% risk-free interest, 0% dividend yield, 112.3% volatility, and expected life of five years. In August 2016, upon the sale of the Company’s common stock, the Company issued an additional 1,514,669 warrants to purchase the Company’s common stock at $0.50 per share, exercisable through March 14, 2021. The exercise price of the previously issued 1,514,669 warrants issued in connection with the debt was reset from $1.00 per share to $0.50. As of December 31, 2017, the price protection provision in the warrants had expired and there were 836,670 outstanding.

In August and September 2016, the Company issued an aggregate of 3,385,002 warrants to purchase the Company’s common stock at $0.90 per share, exercisable for three years in connection with the sale of common stock.

In August 2016, upon the sale of the Company’s common stock, the Company issued an additional 1,514,669 warrants to purchase the Company’s common stock at $0.50 per share, exercisable through March 14, 2021. The exercise price of the previously issued 1,514,669 warrants issued in connection with the debt was reset from $1.00 per share to $0.50.

In October 2016, upon the sale of the Company’s common stock, the Company issued an additional 6,659,000 warrants to purchase the Company’s common stock at $0.90 per share, exercisable through October 26, 2019.

In July 2017, upon the sale of the Company’s common stock, the Company issue an additional 2,394,000 to purchase the Company’s common stock at $0.65 per share, exercisable through July 24, 2022. These warrants contain certain anti-dilutive (reset) provisions (See Note 8).

In August and September 2017, in connection with the issuance of convertible notes, the Company granted to the same investors five-year warrants to purchase an aggregate of 2,090,000 shares of the Company’s common stock at $0.50 per share. The warrants may be exercised any time after the issuance through and including the fifth (5th) anniversary of its original issuance. The warrants have a fair market value of $715,432. The fair market value was calculated using the Binomial Option Pricing Model, assuming approximately 0.47% risk-free interest, 0% dividend yield, 102.73% volatility, and expected life of five years. These warrants contain certain anti-dilutive (reset) provisions (See Note 8).

In December 2017, the Company issued warrants to purchase 4,850,000 shares of common stock at $0.20 per share to former Directors of the Company. The estimated fair value of $1,450,737 was charged to current period operations. The fair market value was calculated using the Black Scholes Option Pricing Model, assuming approximately 2.18% risk-free interest, 0% dividend yield, 223,02% volatility, and expected life of 5 years.

In December 2017, upon the sale of the Company’s common stock, the Company issue an additional 10,250,000 to purchase the Company’s common stock at $0.40 per share, exercisable through December 31, 2022.

In December 2017, upon the sale of the Company’s common stock, the Company issued an additional 8,521,000 warrants to purchase the Company’s common stock at $0.20 per share, exercisable through December 31, 2022. The exercise price of the previously issued 4,484,000 warrants issued in connection with the July 2017 common stock sale and August and September convertible debt was reset from $0.65 and $0.50 per share, respectively, to $0.20. These warrants contain certain anti-dilutive (reset) provisions (See Note 8).

F-30

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Warrants outstanding and exercisable at December 31, 2017 are as follows:

Warrants Outstanding				Warrants Exercisable
			Weighted
			Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Warrants	In Years	Warrants
$	0.20	17,855,500	4.69	17,855,500
	0.40	10,250,000	4.84	10,250,000
	0.50	936,670	2.25	936,670
	0.60	50,000	2.25	50,000
	0.83	100,000	3.10	100,000
	0.90	5,070,002	1.63	5,070,002
	1.00	372,000	0.25	372,000
	1.06	146,200	0.98	146,200
	3.00	407,475	0.86	407,475
		35,187,847		35,187,847

A summary of the warrant activity for the twelve months ended December 31, 2017 is as follows:

						Weighted-Average
				Weighted-Average		Remaining		Aggregate
	Shares			Exercise Price		Contractual Term		Intrinsic Value
Outstanding at January 1, 2016		9,018,609		$	0.42		2.26	$	6,857,509
Grants		13,164,340			0.72		2.51
Exercised		(6,734,893)			0.25
Forfeited/Cancelled		-
Outstanding at December 31, 2016		15,448,056		$	0.81		2.4	$	4,225,936
Grants		28,105,500			0.27		4.2		-
Exercised		(7,728,209	)		0.68
Forfeited/Cancelled		(637,500	)		0.62
Outstanding at December 31, 2017		35,187,847		$	0.41		2.3	$	9,314,959
Vested and expected to vest at December 31, 2017		35,187,847		$	0.41		2.3	$	9,314,959
Exercisable at December 31, 2017		35,187,847		$	0.41		2.3	$	9,314,959

The aggregate intrinsic value outstanding stock warrants was $6,481,984, based on warrants with an exercise price less than the Company’s stock price of $0.601 as of December 31, 2017, which would have been received by the warrant holders had those warrant holders exercised their warrants as of that date.

On July 21, 2017, upon the sale of the Company’s common stock, the Company issued warrants to purchase up to 2,394,000 shares of the Company’s common stock at $0.65 per share, exercisable through July 21, 2022. These warrants contain certain anti-dilutive (reset) provisions (See Note 8).

On August 24, 2017, in connection with the issuance of convertible notes, the Company granted to the same investors five-year warrants to purchase up to 2,090,000 shares of the Company’s common stock at $0.50 per share. These warrants contain certain anti-dilutive (reset) provisions (See Note 8).

F-31

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

NOTE 11 – EMPLOYEE EQUITY INCENTIVE PLANS

The Company’s stockholders approved our 2014 Equity Incentive Plan in June 2014 (the “2014 Plan”), our 2015 Equity Incentive Plan in December 2015 (the “2015 Plan”), our 2016 Equity Incentive Plan (“2016 Plan”) in October 2016 and our 2017 Equity Incentive Plan in December 2016 (“2017 Plan”, and together with the 2014 Plan, 2015 Plan and 2016 Plan, the “Plans”). The Plans are identical, except for number of shares reserved for issuance under each. As of December 31, 2017, the Company had granted an aggregate of 39,500,000 securities under the plans, with 0 available for future issuances.

The Plans provide for the grant of incentive stock options to our employees and our parent and subsidiary corporations’ employees, and for the grant of non-statutory stock options, stock bonus awards, restricted stock awards, performance stock awards and other forms of stock compensation to our employees, including officers, consultants and directors. Our Plans also provide that the grant of performance stock awards may be paid out in cash as determined by the committee administering the Plans.

During the year ended December 31, 2016, the Company granted options to purchase 9,958,031 for ten years. The fair value of $6,450,317, was determined using the Black-Scholes Option Pricing Model, assuming approximately 1.75% to 2.10% risk-free interest, 0% dividend yield, 107.63% to 119.16% volatility, and expected life of five to ten years and will be charged to operations over the vesting terms of the options.

During the year ended December 31, 2017, the Company granted ten-year options to purchase up to 2,854,000 shares of common stock. The fair value of $2,014,591, was determined using the Black-Scholes Option Pricing Model, assuming approximately 1.81% to 2.35% risk-free interest, 0% dividend yield, 103.66% to 110.16% volatility, and expected life of five to ten years and will be charged to operations over the vesting terms of the options.

The summary terms of the issuances are as follows:

Exercise		Number of		Vesting
Price		Options		Terms
$	0.50		80,000	Immediately
	0.50		100,000	Quarterly over one year
	0.50		605,000	Quarterly over two years
	0.81		5,000	Immediately
	0.82		150,000	Quarterly over two years
	0.85		150,000	Quarterly over one year
	0.87		125,000	Immediately
	0.89		425,000	Monthly over one year
	0.89		90,000	Quarterly over two years
	0.95		400,000	Quarterly over two years
	0.98		24,000	Monthly over two years
	1.05		50,000	Immediately
	1.05		95,000	Monthly over two years
	1.05		60,000	Monthly over one year
	1.06		60,000	Monthly over one year
	1.07		110,000	Monthly over one year
	1.07		325,000	Monthly over two years
	0.83		2,854,000

On June 21, 2017, the Company accelerated vesting of 5,000,000 options such that the options vested in full, immediately. As a result, the Company charged $2,544,741 to operations during the twelve months ended December 31, 2017.

F-32

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

Stock options outstanding and exercisable on December 31, 2017 are as follows:

Exercise		Number of		Remaining Life		Number of
Price		Options		In Years		Options Exerciseable
$	0.10		1,056,786		6.43		1,056,786
$	0.50		689,631		7.74		689,631
$	0.51 - 0.75		2,076,779		8.69		1,996,779
$	0.76 - 1.00		9,926,072		8.70		9,233,070
$	1.01 - 2.00		629,164		8.61		629,164
			14,378,432				13,605,430

A summary of the stock option activity for the twelve months ended December 31, 2017 is as follows:

						Weighted-Average
				Weighted-Average		Remaining		Aggregate
	Shares			Exercise Price		Contractual Term		Intrinsic Value
Outstanding at December 31, 2015		5,625,000		$	0.59		9.30
Grants		9,958,031			0.78		9.84
Exercised		(636,780)			0.50		8.80
Forfeiture/Cancelled		(122,093)			0.55		8.80
Outstanding at December 31, 2016		14,824,158		$	0.52		9.37	$	4,566,717
Grants		2,854,000			0.50		9.60		-
Exercised		(436,011	)		0.16		8.80
Forfeiture/Canceled		(2,863,715	)	$	0.73		8.80		-
Outstanding at December 31, 2017		14,378,432		$	0.76		8.48	$	771,359
Exercisable at December 31, 2017		13,605,430		$	0.76		8.50	$	646,109

The aggregate intrinsic value of outstanding stock options was based on options with an exercise price less than the Company’s common stock price of $0.601 as of December 31, 2017, which would have been received by the option holders had those option holders exercised their options as of that date.

Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived historical data. The Company accounts for the expected life of options based on the contractual life of options for non-employees.

The fair value of all options that were vested as of the year ended December 31, 2017 and 2016 was $5,821,631 and $3,112,156, respectively Unrecognized compensation expense of $173,220 at December 31, 2017 will be expensed in future periods.

NOTE 12 – INCOME TAXES

The Tax Cuts and Jobs Acts (the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate income tax rate from 35% to 21%. ASC 740, “Income Taxes”, requires that effects of changes in tax rates to be recognized in the period enacted. Recognizing the late enactment of the Act and complexity of accurately accounting for its impact, the Securities and Exchange Commission in SAB 118 provides guidance that allows registrants to provide a reasonable estimate of the Act in their financial statements and adjust the reported impact in a measurement period not to exceed one year.

F-33

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

As of December 31, 2017, we have not completed our accounting for the tax effects of the Act; however, a reasonable estimate was made to measure most of our deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future as a result of the reduction on the federal tax rate, and we recorded a provisional amount for our one-time transition tax liability. The provisional tax expense recorded of approximately $1,700,000 related to the re-measurement of our deferred tax asset balance and resulted in a reduction of our deferred tax asset and a corresponding increase to our income tax expense.

At December 31, 2017, the Company has available for federal income tax purposes a net operating loss carry forward of approximately $45,000,000, which begin expiring in the year 2033, that may be used to offset future taxable income. The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized. Due to possible significant changes in the Company’s ownership, the future use of its existing net operating losses may be limited. All or portion of the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits.  During the year ended December 31, 2017, the Company has increased the valuation allowance from $4,946,000 to $11,090,000.

The Company has adopted the provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities.

Tax position that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company had no tax positions relating to open income tax returns that were considered to be uncertain.

Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), provide for annual limitations on the utilization of net operating loss and credit carryforwards if the Company were to undergo an ownership change, as defined in Section 382 of the Code. In general, an ownership change occurs whenever the percentage of the shares of a corporation owned, directly or indirectly, by 5-percent shareholders, as defined in Section 382 of the Code, increases by more than 50 percentage points over the lowest percentage of the shares of such corporation owned, directly or indirectly, by such 5-percent shareholders at any time over the preceding three years. In the event such ownership change occurs, the annual limitation may result in the expiration of the net operating losses prior to full utilization.

The Company is required to file income tax returns in the U.S. Federal jurisdiction and in Colorado. The Company is no longer subject to income tax examinations by tax authorities for tax years ending before December 31, 2013.

The Company’s deferred taxes as of December 31, 2017 and 2016 consist of the following:

	2017		2016
Non-Current deferred tax asset:
Net operating loss carry-forwards	11,090,000		4,946,000
Valuation allowance	(11,090,000	)	(4,946,000	)
Net non-current deferred tax asset	—		—

The Company is delinquent in filing its payroll taxes related to stock compensation awards. At December 31, 2017, the Company has, in payroll tax liabilities, including interest and penalties, of approximately $1,599,489, due to federal and state taxing authorities. The actual liability may be higher or lower due to interest or penalties assessed by federal and state taxing authorities. The Company expects to settle these liabilities by June 30, 2018.

F-34

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

NOTE 13 – RELATED PARTY TRANSACTIONS

On August 31, 2016, Isaac Dietrich, the Company’s Chief Executive Officer, participated in the Company’s registered offering that took place beginning August 12, 2016 and continued until October 24, 2016, whereby Mr. Dietrich purchased $5,000 of the Company’s securities consisting of 10,000 shares of the Company’s common stock and warrants to purchase 10,000 shares at $0.90 per share.

On July 21, 2017, Isaac Dietrich, the Company’s Chief Executive Officer, participated in the Company’s private placement that took, whereby Mr. Dietrich purchased $10,000 of the Company’s securities consisting of 20,000 shares of the Company’s common stock and warrants to purchase 20,000 shares at $0.65 per share. As a result of the ratchet provision in the warrants that was triggered by the Company’s December 2017 private placement, the number of warrants increased to 65,000 and the exercise price decreased to $0.20.

NOTE 14 – SUBSEQUENT EVENTS

In January 2018, the Company entered into Simple Agreement for Future Tokens (the “Original SAFT Agreements”) with six investors pursuant to which the Company received an aggregate of $500,000. On February 13, 2018, the Company entered into Amended and Restated Simple Agreement for Future Tokens (the “SAFT Agreements”) with the investors which amended the terms of the Original SAFT Agreements, which totaled $942,500. Pursuant to the SAFT Agreements, the investors will receive tokens in MassRoots Blockchain Technologies, Inc., a Delaware company and wholly-owned subsidiary of the Company (“MassRoots Blockchain”). The tokens are issuable to the investors upon the public sale of tokens of MassRoots Blockchain (the “Qualifying Token Sale”). Investors are entitled receive such number of tokens equal to the amount invested by the investor divided by the Discount Price. “Discount Price” means the price per token sold in the Qualifying Token Sale divided by the Discount Rate. “Discount Rate” means 50%. The SAFT Agreements terminate upon either (i) the issuance of the tokens to the investors or (ii) the payment, or setting aside for payment, of amounts due the investor upon the occurrence of a Dissolution Event. “Dissolution Event” means (i) a voluntary termination of operations of the Company, (ii) a general assignment for the benefit of the Company’s creditors or (iii) any other liquidation, dissolution or winding up of the Company, whether voluntary or involuntary.

From January 1 to January 16, 2018, the Company made payment to the Holders of the August 2017 convertible debt in an aggregate of (i) $510,937.50 in cash and (ii) pursuant to the right of conversion of the Notes, issued an aggregate of 3,742,648 shares of the Company’s common stock. The Company believes that it has completed all of its obligations under the Notes and they are retired.

Effective January 10, 2018, the Board appointed Jesus Quintero as Chief Financial Officer of the Company to replace Isaac Dietrich who was serving as Interim Chief Financial Officer of the Company. On January 10, 2018, the Company entered into a CFO Services Agreement with Jesus Quintero pursuant to which Mr. Quintero will serve as Chief Financial Officer of the Company for a term of one year (the “Initial Term”), which term shall be automatically renewed for successive one year periods thereafter unless Mr. Quintero provides the Company with written notice of his  intention not to renew the agreement at least 90 days prior to the expiration of the Initial Term. The agreement may be terminated by either party upon 90 days prior written notice to the other party. Pursuant to the terms of the agreement, Mr. Quintero shall receive a fee of $4,000 per month and received a onetime issuance of 250,000 shares of the Company’s common stock, all of which vested as of January 10, 2018.

On January 31, 2018, Company entered into separate securities purchase agreements (the “Securities Purchase Agreements”) with certain accredited investors pursuant to which the Company sold an aggregate of $2,740,000 of units (the “Units”) at a purchase price of $0.20 per Unit. Each Unit consists of one share of common stock and a warrant to purchase one share of common stock.

F-35

MASSROOTS, INC.

Notes to Consolidated Financial Statements

December 31, 2017 and 2016

On February 1, 2018, the Compensation Committee of the Board of Directors approved a stock grant of 750,000 and 250,000 shares of common stock, respectively, to Cecil Kyte and Charles Blum. On the same date, the Compensation Committee of the Board of Directors approved an option to purchase up to 750,000 and 250,000 shares of common stock at $0.40 per share, respectively, to Cecil Kyte and Charles Blum.

On February 1, 2018, the Company entered into a Membership Agreement (the “Membership Agreement”) with WeWork pursuant to which the Company leases offices located at 2420 17^th Street, Office 3118, Denver, Colorado 80202 effective as of February 2, 2018. The term of the Membership Agreement is for one month which term shall automatically be renewed for successive one month terms unless terminated by either party. Pursuant to the terms of the Membership Agreement the Company will pay a fee of $1,360 per month for the leased premises. 

On February 2, 2018, the Company entered into a Settlement and Lease Termination Agreement (the “Agreement”) with Market Center Investors, LLC (the “Landlord”) with respect to the Company’s leased premises located at 1624 Market Street, Suite 201, Denver, Colorado 80202 (the “Leased Premises”). In December 2017, the Landlord commenced a legal action to recover possession of the Leased Premises in the District Court for the City and County of Denver, Colorado (the “Lawsuit”) for failure of the Company to make certain payments pursuant to the terms of its lease (the “Lease”) with the Landlord. Pursuant to the terms of the Agreement, the Company paid the Landlord $145,000 and surrendered to the Landlord any and all possessory interests and other rights in or to the Leased Premises. In addition, each party agreed to release and discharge the other party and its affiliated entities together with its directors, officers, members, managers, employees and agents from and against any and all claims, demands, causes of action and other liabilities arising under or relating to the Lease and a Stipulation for Dismissal with Prejudice was filed with respect to the Lawsuit.

Effective February 21, 2018, Nathan Shelton resigned as a member of the Board of Directors of the Company and well as a member of the Audit, Compensation and Nominating and Corporate Governance Committees (collectively, the “Committees”). Mr. Shelton’s resignation was not the result of any disagreement with the Company, any matter related to the Company’s operations, policies or practices, the Company’s management or the Board. Effective February 21, 2018, the Board appointed Graham Farrar as a member of the Board and as a member of the Committees to fill the vacancies created upon the resignation of Mr. Shelton. Mr. Farrar is deemed an “independent” director as such term is defined by the rules of The Nasdaq Stock Market LLC. There are no family relationships between Mr. Farrar and any of our other officers and directors. Mr. Farrar was granted (i) 250,000 shares of the Company’s common stock and (ii) an option to purchase up to 250,000 shares of the Company’s common stock at an exercise price equal to $0.36 per share. The shares and option vested in full as of February 21, 2018.

From January 1 to April 10, 2018, the Company issued an aggregate of 13,962,500 shares of its common stock recorded as to be issued on December 31, 2017.

From January 1 to April 10, 2018, the Company retired an aggregate of 1,790,000 shares of its common stock recorded as to be retired on December 31, 2017.

From January 1 to April 10, 2018, the Company issued an aggregate of 3,394,000 shares of its common stock for services in addition to shares issued to Messers Kyte, Farrar, Blum, and Quintero discussed above.

From January 1 to April 10, 2018, the Company issued an aggregate of 95,134 shares for its common stock upon the cashless exercise of common stock options.

From January 1 to April 10, 2018, the Company issued an aggregate of 7,104,765 shares of its common stock for the cashless exercise of common stock warrants.

From January 1 to April 10, 2018, the Company issued an aggregate of 70,000 shares of its common stock upon the exercise of common stock warrants for net proceeds of $63,000.

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.

F-36

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MASSROOTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2018			2017
	(unaudited)			(audited)
ASSETS
CURRENT ASSETS
Cash	$	674,776		$	1,201,587
Prepaid expenses		551,517			16,556
TOTAL CURRENT ASSETS		1,226,293			1,218,143
Property and equipment - net		46,575			55,146
OTHER ASSETS
Investments		403,249			403,249
Software Cost, net of amortization of $486,324 and $389,059		766,676			863,941
Deposits and other assets		-			33,502
Total Other Assets		1,169,925			1,300,692
TOTAL ASSETS		2,442,793			2,573,981
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable		144,230			1,257,783
Accrued payroll and related		1,601,231			1,601,232
Advances		942,500			800,394
Convertible notes payable, net of debt discount of $0 and $248,009		-			796,991
Derivative liability		-			9,493,307
TOTAL CURRENT LIABILITIES		2,687,961			13,949,707
TOTAL LIABILITIES		2,687,961			13,949,707
STOCKHOLDERS’ DEFICIT
Series A preferred stock, $1.00 par value, 21 shares authorized; 0 shares issued and outstanding		-			-
Common stock, $0.001 par value, 200,000,000 shares authorized; 153,944,886 and 112,165,839 shares issued and outstanding		153,945			112,166
Common stock to be issued, 0 and 12,572,500 shares, respectively		-			12,573
Additional paid in capital		69,843,042			63,315,749
Subscriptions receivable		-			(564,000	)
Accumulated deficit		(70,242,155	)		(74,252,214	)
TOTAL STOCKHOLDERS’ DEFICIT		(245,168	)		(11,375,726	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	2,442,793		$	2,573,981

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-37

MASSROOTS, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

	Three months ended March 31,
	2018			2017
REVENUES	$	1,492		$	134,741
OPERATING EXPENSES
Advertising		64,577			193,431
Payroll and related expense		425,730			851,860
Stock based compensation		3,117,250			5,231,003
Other general and administrative expenses		1,429,722			1,359,522
Amortization of Software costs		97,265			-
Total General and Administrative expenses		5,134,544			7,635,816
(LOSS) FROM OPERATIONS		(5,133,052	)		(7,501,075	)
OTHER INCOME (EXPENSE)
Loss on change in fair value of derivative liabilities		-			53,898
Interest (expense)		(350,196	)		-
Total Other Income (Expense)		(350,196	)		53,898
Net Loss before Income Taxes		(5,483,248	)		(7,447,177	)
Provision for Income taxes (benefit)		-			-
NET (LOSS)	$	(5,483,248	)	$	(7,447,177	)
Net loss per common share-basic and diluted	$	(0.04	)	$	(0.09	)
Weighted average common shares outstanding-basic and diluted		141,834,002			80,267,659

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-38

MASSROOTS , INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2018

	Common Stock						Common Stock to be Issued						Additional Paid			Subscriptions			Accumulated			Total  Stockholders’
	Shares			Amount			Shares			Amount			In Capital			Receivable			Deficit			(Deficit)
Balance as of December 31, 2017		112,165,839		$	112,166			12,572,500		$	12,573		$	63,315,749		$	(564,000	)	$	(74,252,214	)	$	(11,375,726	)
Reclassify fair value of derivative liabilities to retained earnings		-			-			-			-			-			-			9,493,307			9,493,307
Issuance of common stock previously to be issued		14,362,500			14,363			(14,362,500	)		(14,363	)		-			564,000			-			564,000
Common stock shares to be retired in 2018		(1,790,000	)		(1,790	)		1,790,000			1,790			-			-			-			-
Common stock issued upon conversion of debentures		3,742,648			3,743			-			-			632,507			-			-			636,250
Sale of common stock		13,700,000			13,700			-			-			2,726,300			-			-			2,740,000
Common shares issued upon cashless exercise of options		95,134			95			-			-			(95	)		-			-			-
Common shares issued upon cashless exercise of warrants		7,104,765			7,105			-						(7,105	)		-			-			-
Common stock issued upon exercise of warrants for cash		70,000			70			-			-			62,930			-			-			63,000
Common stock issued for services		4,494,000			4,494			-			-			2,425,853			-			-			2,430,347
Share based compensation		-			-			-			-			686,903			-			-			686,903
Net Loss		-			-			-			-			-			-			(5,483,248	)		(5,483,248	)
Balance as of March 31, 2018		153,944,886		$	153,945			-		$	-		$	69,843,042		$	-		$	(70,242,155	)	$	(245,168	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-39

MASSROOTS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	Three months ended  March 31,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)	$	(5,483,248	)	$	(7,447,177	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		105,836			5,776
Stock based compensation		3,117,250			5,231,003
Interest and amortization of debt discount		350,196			-
(Gain) Loss on change in Fair Value of derivative liability		-			(53,898	)
Changes in operating assets and liabilities
Accounts receivables		-			6,889
Prepaid and other		(534,961	)		-
Security deposit		33,502			-
Advanced settlement		(10,394	)		-
Deferred revenue		-			5,823
Accounts payable and other liabilities		(1,113,554	)		(221,846	)
Net Cash used in operating activities		(3,535,373	)		(2,473,430	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Equity investment in High Times Holding Corp		-			(100,002	)
Investment in DDDigital LLC		-			8,672
Purchase of Property and Equipment		-			(30,722	)
Net Cash used in investing activities		-			(122,052	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock sales		3,304,000			-
Proceeds from exercise of warrants		63,000			4,443,196
Payments of advances		(245,000	)		-
Proceeds from advances		397,500			6,504
Repayment of loans		(510,938	)		-
Net cash provided by financing activities		3,008,562			4,449,700
NET INCREASE IN CASH		(526,811	)		1,854,218
Cash, beginning of period		1,201,587			374,490
Cash, end of period	$	674,776		$	2,228,708
Supplemental disclosures of cash flow information:
Cash paid during period for interest	$	-		$	-
Cash paid during period for taxes	$	-		$	-
Non cash investing and financing activities:
Common stock issued in settlement of debt	$	636,250		$	108,100
Proceeds received from subscriptions receivable	$	564,000			-
Common stock issued to acquire DDDigtal LLC	$	-		$	2,883,220
Net assets acquired from acquisition of DDDigtal LLC	$	-		$	15,588
Derivative liability reclassed to retained earnings	$	9,493,307			-
Reclassification of derivative liability to equity upon warrant exercise(s)	$	-		$	610,967

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-40

MASSROOTS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2018

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

MassRoots, Inc. (“MassRoots” or the “Company”) has created a technology platform for the cannabis industry focused on enabling users to share their cannabis content, follow their favorite dispensaries, and stay connected with the legalization movement. The Company was incorporated in the State of Delaware on April 26, 2013.

The accompanying unaudited condensed, consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Our unaudited condensed, consolidated financial statements include the accounts of DDDigtal, Inc., Odava, Inc., and MassRoots Blockchain Technologies, Inc. All intercompany transactions were eliminated during consolidation.

NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

As of March 31, 2018, the Company had cash of $674,776 and working capital deficit (current liabilities in excess of current assets) of $1,461,669. During the three months ended March 31, 2018, the Company used net cash in operating activities of $3,535,373. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements.

During the three months ended March 31, 2018, the Company received approximately $63,000, $3,304,000 and $397,500 from the exercise of common stock warrants, sale of common stock and proceeds from advances, respectively. The Company does not have cash sufficient to fund operations for the next fiscal year. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements.

The Company’s primary source of operating funds since inception has been cash proceeds from private placements of common stock, proceeds from the exercise of warrants and options and issuance of notes payable. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. The Company will require additional financing to fund future operations.

Management’s plans with regard to these matters encompass the following actions: 1) obtain funding from new and current investors to alleviate the Company’s working capital deficiency; and 2) implement a plan to generate sales. The Company’s continued existence is dependent upon its ability to translate its user base into sales. However, the outcome of management’s plans cannot be ascertained with any degree of certainty.

Accordingly, the accompanying condensed, consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed, consolidated financial statements do not necessarily purport to represent realizable or settlement values. The condensed, consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying interim unaudited condensed, consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to SEC Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1933, as amended, and reflect the accounts and operations of the Company and those of our subsidiaries.

F-41

MASSROOTS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2018

All intercompany accounts and transactions have been eliminated in consolidation. Accordingly, the accompanying interim unaudited condensed, consolidated financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial position of the Company as of March 31, 2018, the unaudited condensed, consolidated results of operations for the three months ended March 31, 2018 and 2017, and the unaudited condensed, consolidated results of cash flows for the three months ended March 31, 2018 and 2017 have been included. These interim unaudited condensed, consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s most recent Annual Report on Form 10-K filed with the SEC on April 17, 2018, as amended on April 30, 2018. The December 31, 2017 balances reported herein are derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on April 17, 2018, as amended on April 30, 2018. The results for the interim periods are not necessarily indicative of results to be expected for the full year.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include stock-based compensation, fair values relating to derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk.

The Company follows ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value.

Cash and Cash Equivalents

For purposes of the Statement of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. Repair and maintenance costs are expensed as incurred. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

Acquisitions and Subsidiaries

Subsidiaries are all entities over which MassRoots has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether MassRoots’ controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to MassRoots.  

F-42

MASSROOTS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2018

The purchase method of accounting is used to account for the acquisition of subsidiaries by MassRoots. The cost of an acquisition is measured as the fair value of the assets transferred in consideration, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the MassRoots’ share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.

Intercompany transactions, balances and unrealized gains on transactions between MassRoots’ companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred. The Company charged to operations $64,577 and $193,431, as advertising expenses for the three months ended March 31, 2018 and 2017, respectively.

Stock Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period.

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Intangible assets are stated at cost and reviewed annually to examine any impairments, usually assuming an estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the purchase acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.

F-43

MASSROOTS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2018

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Chief Executive Officer, or decision-making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company’s core business.

Net Earnings (Loss) Per Common Share

The Company computes earnings (loss) per share under ASC subtopic 260-10, Earnings Per Share. Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.

The computation of basic and diluted income (loss) per share as of March 31, 2018 and 2017 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:

	March 31, 2018		March 31,  2017
Common stock issuable upon conversion of convertible debentures		-		-
Options to purchase common stock		15,371,765		16,688,942
Warrants to purchase common stock		37,119,049		8,243,847
Totals		52,490,814		24,932,789

Reclassification  

Certain reclassifications have been made to the prior years’ data to conform to the current year presentation. These reclassifications had no effect on reported income (losses).

Recent Accounting Pronouncements

Financial Accounting Standards Board (“FASB”) Accounting Standards Updates (“ASU”) 2017-04 (Topic 350), “Intangibles - Goodwill and Others” – Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company is currently evaluating the effect that ASU 2017-04 will have on our consolidated financial statements and related disclosures.

FASB ASU 2017-01 (Topic 805), “Business Combinations: Clarifying the Definition of a Business” – Issued in January 2017, ASU 2017-01 revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance became effective for the Company on January 1, 2018. The Company believes the standard did not have a material impact on its consolidated financial statements and related disclosures.

FASB ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” – Issued in August 2016, the amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, “Statement of Cash Flows”. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company believes the standard did not have a material impact on our condensed, consolidated financial statements and related disclosures.

F-44

MASSROOTS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2018

FASB ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers” – Issued in May 2014, ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers using a five-step model that requires entities to exercise judgment when considering the terms of the contracts. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”. This amendment defers the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Gross versus Net)”, which amends the principal versus agent guidance and clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer. In addition, the FASB issued ASU Nos. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” and 2016-12, “Narrow-Scope Improvements and Practical Expedients”, both of which provide additional clarification of certain provisions in Topic 606. These ASC updates are effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. Early adoption is permitted only as of annual reporting periods after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method.

The Company applied the guidance using the modified retrospective transition method. The Company believes the adoption of ASU 2014-09 did not have a material impact on the Company’s financial position or results of operations but resulted in additional disclosures regarding the Company’s revenue recognition policies. Additionally, the Company has expanded its revenue recognition inquiries and update its questionnaires primarily to identify matters that would signal variable consideration implications under the new guidance. The Company also does not believe the adoption of ASU 2014-09 required material or significant changes to its internal controls over financial reporting.

FASB ASU No. 2014-15, “Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern, which is included in Accounting Standards Codification (ASC) 205, Presentation of Financial Statements” - Issued August 2014, this update provides an explicit requirement for management to assess an entity's ability to continue as an ongoing concern, and to provide related footnote disclosures in certain circumstances.

The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. The Company has adopted this standard, included the necessary disclosures in the footnotes to its financial statements, and does not believe such adoption has had a material impact on its financial statements.

FASB ASU 2016-02, Leases (Topic 842) - ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.

FASB ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” - The amendment is part of the FASB’s simplification initiative and is intended to simplify the accounting around share-based payment award transactions. The amendments include changing the recording of excess tax benefits from being recognized as a part of surplus capital to being charged directly to the income statement, changing the classification of excess tax benefits within the statement of cash flows, and allowing companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this standard has not had a material impact on the Company’s financial position and results of operations.

F-45

MASSROOTS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2018

FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) – Adopted in November 2016, this ASU requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include cash and restricted cash equivalents. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s financial position and results of operations.

FASB Issued ASU No. 2014-09, (“ASU 606”), Revenue from Contracts with Customers – In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. The FASB also issued subsequent amendments to ASU 2014-09 to provide clarification on the guidance. ASU 2014-09 will be effective for annual periods beginning after December 15, 2017, which for us will be in the period beginning January 1, 2018. We have performed our detailed evaluation, using a five-step model specified in the guidance, to assess the impacts of the new standard.

● Under the new standard, revenue will be recognized when the Company satisfies its performance obligation by transferring promised products or services to its customer. The standard allows for application of the guidance to a portfolio of contracts or performance obligations with similar characteristics.

● The Company’s revenue recognition will be achieved upon delivery of advertising and listing services as there are no other promised services as part of the Company’s contracts with customers.

● To determine the amount of consideration which the Company expects to be entitled in exchange for transferring promised services, the Company has considered if variable consideration exists. The Company has reviewed its standard terms and conditions and its customary business practices to determine the transaction price. The Company has reviewed its pricing policies and strategies including marketing, loyalty and incentive programs for determining whether the Company has any variable or non-cash consideration. No material items were noted.

● The Company’s sales transactions do not require any additional performance obligation after delivery. Therefore, the Company does not have multiple performance obligations for which the Company will have to allocate the transaction price.

● The Company expects to recognize revenue upon delivery to the customer as its performance obligation will be satisfied at that point in time.

The Company expects to apply the guidance using the modified retrospective transition method. Based on the Company’s analysis performed to date, the Company does not expect the adoption of ASU 2014-09 will have a material impact on its financial position or results of operations but will result in additional disclosures regarding its revenue recognition policies. Additionally, the Company has expanded its revenue recognition inquiries and updated its questionnaires primarily to identify matters that would signal variable consideration implications and performance obligations under the new guidance. The Company also does not expect the adoption will require material or significant changes to its internal controls over financial reporting.

FASB issued ASU 2017-11, Earnings Per Share (“ASC 260”), Distinguishing Liabilities from Equity (“ASC 480”), and Derivatives and Hedging (“ASC 815”) - Adopted in July 2017, ASU No. 2017-11 is intended to simplify the accounting for financial instruments with characteristics of liabilities and equity. Among the issues addressed are: (i) determining whether an instrument (or embedded feature) is indexed to an entity’s own stock; (ii) distinguishing liabilities from equity for mandatorily redeemable financial instruments of certain nonpublic entities; and (iii) identifying mandatorily redeemable non-controlling interests. The Company adopted ASU No. 2017-11 as of January 1, 2018. The adoption of ASU No. 2017-11 has eliminated the derivative liabilities from the Company’s financial statements.

There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows. The Company implemented these standards using the modified retrospective transition method.

NOTE 4 – INVESTMENTS

As of March 31, 2018, the carrying value of our investments in privately held companies totaled $403,249. These investments are accounted for as cost method investments, as we own less than 20% of the voting securities and do not have the ability to exercise significant influence over operating and financial policies of the entities.

During the twelve months ended December 31, 2017, the Company acquired 23,810 shares of Class A common stock of Hightimes Holding Corp. (“Hightimes”) for $100,002, or $4.20 per share. As a result of a forward stock split which became effective on January 15, 2018, each one share of common stock was exchanged for 1.93 shares of common stock. As a result of such forward stock split, MassRoots currently owns 45,974 shares of Class A common stock of Hightimes. The shares of Class A common stock are considered non-marketable securities.

On July 13, 2017, the Company purchased an unsecured convertible promissory note in the principal amount of $300,000 from Cannaregs, Ltd, a Colorado limited liability company (“Cannaregs”). The note bears interest at a rate of 5% per annum and matures on December 19, 2019. In the event Cannaregs consummates an equity financing in excess of $2,000,000 prior to the maturity date of the note, the outstanding principal and any accrued and unpaid interest thereon automatically converts into equity securities of the same class or series issued by Cannaregs in the equity financing at the lesser of: a) 90% of the price paid per equity security or b) a price reflecting a valuation cap of $4,500,000. On July 17, 2017, MassRoots converted this note into 430,622 shares of CannaRegs’ common stock, or approximately 4.31% of CannaRegs’ issued and outstanding shares of March 31, 2018.

F-46

MASSROOTS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2018

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment as of March 31, 2018 and December 31, 2017 is summarized as follows:

	March 31, 2018			December 31, 2017
Computers	$	56,900		$	55,244
Office equipment		43,590			43,590
Subtotal		100,490			98,834
Less accumulated depreciation		(53,915	)		(43,688	)
Property and equipment, net	$	46,575		$	55,146

Depreciation expense for the three months ended March 31, 2018 and 2017 was $10,226 and $5,776, respectively.

NOTE 6 – SOFTWARE COSTS

On December 15, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Whaxy Inc., a wholly-owned subsidiary of the Company (“Merger Subsidiary”), DDDigtal Inc., a Colorado corporation (“DDDigtal”), Zachary Marburger, an individual acting solely in his capacity as stockholder representative, and all of the stockholders of DDDigtal. Pursuant to the Merger Agreement, the parties agreed to merge Merger Subsidiary with and into DDDigtal, whereby DDDigtal survived as a wholly-owned subsidiary of MassRoots (the “Merger”).

On January 25, 2017 (the “Effective Date”), the Merger was completed and became effective upon the filing of certificates of merger with the respective Secretary of State of the States of Delaware and Colorado, in such forms as required by, and executed in accordance with, the relevant provisions of the Delaware General Corporation Law and the Colorado Business Corporation Act.

Pursuant to the terms of the Merger Agreement, each share of DDDigtal’s common stock was exchanged for such number of shares of the Company’s common stock (or a fraction thereof), based upon an exchange ratio equal to approximately 5.273-for-1, such that 1 share of the Company’s common stock was issued for every 5.273 shares of DDDigtal’s common stock.

On the Effective Date, the Company issued an aggregate of 2,926,830 shares of the Company’s common stock pro rata to all stockholders of DDDigtal in exchange for all of their shares of DDDigtal’s common stock. At the same time, each share of common stock of Merger Subsidiary was converted into and exchanged for one share of common stock of DDDigtal held by the Company, and all shares of DDDigtal common stock outstanding immediately prior to the Effective Date were automatically cancelled and retired. DDDigtal continued as a surviving wholly-owned subsidiary of the Company, and Merger Subsidiary ceased to exist.

In addition, pursuant to the terms of the Merger Agreement, in December 2016, the Company paid cash consideration in the amount of $40,000 to Zachary Marburger and $20,000 to Micah Davidson, as repayment of outstanding debts owed by DDDigtal to such individuals.

F-47

MASSROOTS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2018

As a condition to the closing of the Merger, the Company hired Zachary Marburger as its Vice President of Strategy, and engaged Micah Davidson as a Senior Software Engineer. As a condition of Mr. Marburger’s employment and pursuant to the terms of the Merger Agreement, the Company paid Mr. Marburger an additional $40,000 following the one-year anniversary of his constant employment with the Company.

Cash (paid in December 2016)	$	60,000
2,926,830 shares of the Company’s common stock		2,883,220
Liabilities assumed		40,140
Total purchase price	$	2,983,360
Cash	$	8,672
Accounts receivable		3,583
Property and equipment		3,333
Software		1,253,000	(1)
Goodwill		1,714,772
Assets acquired	$	2,983,360

(1) The estimated useful life for software development is assumed at 3 years. The acquisition was completed in January 2017, however the allocation of proceeds to identifiable assets was recognized during fourth quarter of 2017.

NOTE 7 – CONVERTIBLE NOTES PAYABLE

On August 17, 2017, the Company issued secured convertible notes to certain accredited investors in the aggregate principal amount of $1,045,000. The notes mature on February 18, 2018 and accrue no interest. The Company received net proceeds received of approximately $942,500 after deducting legal and other fees. If the Company exercises its right to prepay the notes, the Company shall make payment to the investors in an amount equal to the sum of the then outstanding principal amount of the notes that the Company desires to prepay, multiplied by (a) 1.1, during the first ninety days after the issuance of the note, or (b) 1.25, at any point thereafter. The notes are convertible into shares of the Company’s common stock at a price per share equal to the lower of (i) $0.75 or (ii) a 25% discount to the price at which the Company next conducts an offering after the issuance date of the notes; provided, however, if any part of the principal amount of the notes remains unpaid at its maturity date, the conversion price will be equal to 65% of the average of the three trading days with the lowest daily weighted average prices of the Company’s common stock occurring during the fifteen days prior to the notes’ maturity date.

In connection with the issuance of the notes, the Company and the investors also entered into a security agreement pursuant to which the notes are secured by all of the assets of the Company currently held or thereafter acquired.

In connection with the issuance of the notes, the Company issued five-year warrants to purchase an aggregate of 2,090,000 shares of Company’s common stock with an initial exercise price of $0.50. The warrants contain certain anti-dilutive (reset) provisions.

From January 1 to January 16, 2018, the Company made payments to the holders of the August 2017 notes as follows (i) an aggregate of $510,937.50 in cash and (ii) an aggregate of 3,742,648 shares of the Company’s common stock pursuant to the conversion features of the notes. The Company believes that it has satisfied all of its obligations under the notes and all of the notes are retired as of March 31, 2018.

NOTE 8 – CAPITAL STOCK

Preferred Stock

The Company is authorized to issue 21 shares of Series A Preferred Stock, par value $1.00 per share. Each share of Series A Preferred Stock is convertible into one share of common stock and may vote with holders of common stock on an as converted basis. As of March 31, 2018, there were no shares of Series A Preferred Stock issued and outstanding.

Common Stock

The Company is authorized to issue 200,000,000 shares of common stock, par value $0.001 per share. As of March 31, 2018, there were 153,944,886 shares of common stock issued and outstanding and 0 shares of common stock to be issued.

F-48

MASSROOTS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2018

The following common stock transactions were recorded during the three months ended March 31, 2018:

The Company issued an aggregate of 14,362,500 shares of its common stock recorded as to be issued on December 31, 2017.

The Company retired an aggregate of 1,790,000 shares of its common stock recorded as to be retired on December 31, 2017.

The Company issued an aggregate of 4,494,000 shares of its common stock for services rendered.

The Company issued an aggregate of 95,134 shares for its common stock upon the cashless exercise of options.

The Company issued an aggregate of 7,104,765 shares of its common stock upon the cashless exercise of warrants.

The Company issued an aggregate of 3,742,648 shares of its common stock for the settlement of convertible debt.

The Company issued an aggregate of 70,000 shares of its common stock upon the exercise of warrants for net proceeds of $63,000.

The Company issued an aggregate of 13,700,000 shares of its common stock for cash proceeds of $2,740,000.

The Company received $564,000 recorded as subscription receivable as of December 31, 2017.

NOTE 9 – WARRANTS

In January 2018, the Company issued warrants to purchase up to 250,000 shares of common stock at an exercise price of $0.20 per share to a service provider of the Company. The estimated fair value of $86,483 was charged to current period operations. The fair market value was calculated using the Black Scholes Option Pricing Model, assuming approximately 2.49% risk-free interest, 0% dividend yield, 112.14% volatility, and expected life of 5 years.

In January 2018, in conjunction with the sale of the Company’s common stock, the Company granted warrants to purchase up to 13,700,000 shares of the Company’s common stock at an exercise price of $0.40 per share, exercisable through January 31, 2023.

Warrants outstanding and exercisable at March 31, 2018 are as follows:

		Warrants Outstanding			Warrants  Exercisable
$	0.20		12,275,370	4.51		12,275,370
	0.40		18,700,000	4.81		18,700,000
	0.50		440,002	2.01		440,002
	0.60		50,000	2.01		50,000
	0.83		100,000	2.80		100,000
	0.90		5,000,002	1.50		5,000,002
	1.06		146,200	0.73		146,200
	3.00		407,475	0.61		407,475
			37,119,049			37,119,049

F-49

MASSROOTS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2018

A summary of the warrant activity for the three months ended March 31, 2018 is as follows:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2017		35,187,847		$	0.41		2.3	$	9,314,959
Grants		13,950,000		$	0.40		4.8
Exercised		(11,646,798	)
Forfeited/Cancelled		(372,000	)	$
Vested and expected to vest at March 31, 2018		37,119,049		$	0.43		4.17
Exercisable at March 31, 2018		37,119,049		$	0.43		4.17	$	576,015

The aggregate intrinsic value outstanding stock warrants was $576,015, based on warrants with an exercise price less than the Company’s stock price of $0.25 as of March 31, 2018, which would have been received by the warrant holders had those warrant holders exercised their warrants as of that date.

NOTE 10 –STOCK OPTIONS

Our stockholders approved our 2014 Equity Incentive Plan in June 2014 (the “2014 Plan”), our 2015 Equity Incentive Plan in December 2015 (the “2015 Plan”), our 2016 Equity Incentive Plan in October 2016 (“2016 Plan”) and our 2017 Equity Incentive Plan in December 2016 (“2017 Plan”, and together with the 2014 Plan, 2015 Plan and 2016 Plan, the “Plans”). The Plans are identical, except for number of shares reserved for issuance under each Plan. As of March 31, 2018, the Company had granted an aggregate of 39,500,000 securities under the plans, with 0 available for future issuances.

The Plans provide for the grant of incentive stock options to our employees and our parent and subsidiary corporations’ employees, and for the grant of non-statutory stock options, stock bonus awards, restricted stock awards, performance stock awards and other forms of stock compensation to our employees, including officers, consultants and directors. Our Plans also provide that the grant of performance stock awards may be paid out in cash as determined by the committee administering the Plans.

F-50

MASSROOTS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2018

During the three months ended March 31, 2018, the Company granted ten-year options outside of our Plans to purchase up to 1,250,000 shares of common stock. The fair value of $459,834, was determined using the Black-Scholes Option Pricing Model, assuming approximately 2.78% risk-free interest, 0% dividend yield, 116.08% volatility, and expected life of five to ten years and will be charged to operations over the vesting terms of the options.

The summary terms of the issuances are as follows:

Exercise Price		Number of Options		Vesting Terms
$	0.36		250,000	Immediately
	0.40		1,000,000	Immediately
	0.39		1,250,000	Immediately

Stock options outstanding and exercisable on March 31, 2018 are as follows:

Exercise Price		Number of Options		Remaining Life In Years		Number of Options Exercisable
$	0 – 0.25		1,056,786		6.18		1,056,786
$	0.26 - 0.50		1,939,631		9.02		1,939,631
$	0.51 – 0.75		1,820,112		8.43		1,820,112
$	0.76 - 1.00		9,926,072		8.46		9,926,072
$	1.01 - 2.00		629,164		8.36		629,164
			15,371,765				15,371,765

A summary of the stock option activity for the three months ended March 31, 2018 is as follows:

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2017		14,378,432		$	0.76		8.48	$	771,359
Grants		1,250,000			0.39		9.80
Exercised		(256,667	)
Forfeiture/Canceled		--
Outstanding at March 31, 2018		15,371,765			0.73		8.37
Exercisable at March 31, 2018		15,371,765		$	0.73		8.37	$	156,299

The aggregate intrinsic value outstanding stock options was $156,299, based on options with an exercise price less than the Company’s stock price of $0.25 as of March 31, 2018, which would have been received by the option holders had those option holders exercised their options as of that date.

F-51

MASSROOTS, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2018

Due to a clerical error, MassRoots’ Annual Report on Form 10-K filed on April 17, 2018, as amended on April 30, 2018, stated that 2,454,761 options were canceled/expired for the twelve months ending December 31, 2017 and the options outstanding as of December 31, 2017 were 14,377,570. It should have stated that 2,863,715 options were canceled/expired for the twelve months ending December 31, 2017 and the options outstanding as of December 31, 2017 were 14,378,432. While we are correcting this error in this Quarterly Report on Form 10-Q and subsequent filings, we do not believe it has a material impact on our fiscal 2017 financial statements.

Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived historical data. The Company accounts for the expected life of options based on the contractual life of options for non-employees.

NOTE 11 – RELATED PARTY TRANSACTIONS

None.

NOTE 12 – SUBSEQUENT EVENTS

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.

From April 1 to May 16, 2018, the Company issued an aggregate of 542,648 shares of common stock upon the cashless exercise of warrants. 

F-52

PART II- INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses payable by MassRoots, Inc.. (the “Registrant”, the Company”, “we” or “us”) in connection with the issuance and distribution of the securities being registered hereunder. All amounts are estimates except the SEC registration fee.

SEC registration fees	$	2,625.41
Printing expenses	$	10,000
Accounting fees and expenses	$	5,000
Legal fees and expenses	$	100,000
Blue sky fees	$	10,000
Miscellaneous	$	14,374.59
Total	$	142,000

Item 14. Indemnification of Directors and Officers.

The Amended and Restated Certificate of Incorporation of the Company provides that:

● The Company shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an “Indemnified Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that such person, or a person for whom such person is the legal representative, is or was a director or officer of the Company or, while a director or officer of the Company, is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys” fees) reasonably incurred by such Indemnified Person in such Proceeding. Notwithstanding the preceding sentence, the Company shall be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) commenced by such Indemnified Person only if the commencement of such Proceeding (or part thereof) by the Indemnified Person was authorized in advance by the Board of Directors.

● The Company shall pay the expenses (including attorneys’ fees) incurred by an Indemnified Person in defending any Proceeding in advance of its final disposition; provided, however that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Indemnified Person to repay all amounts advanced if it should be ultimately determined that the Indemnified Person is not entitled to be indemnified.

Any indemnification as outlined above is not exclusive of any other rights to indemnification afforded by Delaware law.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable

Item 15. Recent Sales of Unregistered Securities.

Each of the below transactions were exempt from the registration requirements of the Securities Act in reliance upon Rule 701

● From September 15, 2014 to March 11, 2015, we issued an aggregate of 1,722,000 shares of our Common Stock at $0.50 per share together with warrants to purchase an aggregate of 861,000 shares at $1.00 per share for gross proceeds of $861,000. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and Regulation D thereunder, as a transaction by an issuer not involving a public offering.

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● From April 1, 2015 through April 17, 2015, we sold an aggregate of 960,337 shares of Common Stock for gross proceeds of $576,200. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and Regulation D thereunder, as a transaction by an issuer not involving a public offering.

● From June 10, 2015 through July 13, 2015, we sold an aggregate of 1,540,672 shares of Common Stock for gross proceeds of $1,140,502. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and Regulation D thereunder, as a transaction by an issuer not involving a public offering.

● In February 2016, we issued to a service provider a 12-month convertible debentures in the principal amount of $35,000 which debenture bears interest at a rate of 15% per annum together with three year warrants to purchase up to 35,000 shares of the Company’s Common Stock at a price of $1.00 per share.

● In March 2016, we issued six month secured convertible notes with an aggregate principal amount of $1,514,669 together with five year warrants to purchase an amount of shares of Common Stock equal to the number of shares of Common Stock issuable upon the conversion of the notes in full and having an exercise price of $1.00 per share for gross proceeds of $1,420,000. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and Regulation D thereunder, as a transaction by an issuer not involving a public offering.

● In July 2017, we sold an aggregate of 2,394,000 shares of Common Stock together with warrants to purchase 2,394,000 shares at $0.65 per share for gross proceeds of $1,217,000. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and Regulation D thereunder, as a transaction by an issuer not involving a public offering.

● In August 2017, we issued six month secured convertible notes with an aggregate principal amount of $1,045,000 together with five year warrants to purchase an amount of shares of Common Stock equal to the number of shares of Common Stock issuable upon the conversion of the notes in full and having an exercise price of $0.50 per share for gross proceeds of $950,000. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and Regulation D thereunder, as a transaction by an issuer not involving a public offering.

● From September 2017 until January 2018, we entered into Simple Agreement for Future Tokens, as amended and restated on February 13, 2018 (the “Amended and Restated Agreements”) with ten investors pursuant to which the Company received an aggregate of $942,500. Pursuant to the Amended and Restated Agreements, the investors will receive digital instruments in MassRoots Blockchain Technologies, Inc., a Delaware company and wholly-owned subsidiary of the Company (“MassRoots Blockchain”). The digital instruments will be issuable to the investors upon the public sale of digital instruments of MassRoots Blockchain (the “Qualifying Sale”), if and when such event occurs. Upon occurrence of such event, investors will be entitled to receive such number of digital instruments equal to the amount invested by the investor divided by the Discount Price. “Discount Price” means the price per digital instruments sold in the Qualifying Sale divided by the Discount Rate. “Discount Rate” means 50%. The Amended and Restated Agreements terminate upon either (i) the issuance of the digital instruments to the investors or (ii) the payment, or setting aside for payment, of amounts due the investor upon the occurrence of a Dissolution Event. “Dissolution Event” means (i) a voluntary termination of operations of the Company, (ii) a general assignment for the benefit of the Company’s creditors or (iii) any other liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. As disclosed in “Risk Factors - Risks Relating to Digital Instruments,” the development and use of digital instruments, such as those issuable upon a Qualifying Sale, is uncertain and novel, and the application of U.S. federal and state securities laws is unclear in many respects. Accordingly, no assurance can be given as to when, if ever, such digital instruments will be developed or issued. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and Regulation D thereunder, as a transaction by an issuer not involving a public offering.

● From December 15 to December 29, 2017, we sold an aggregate of 10,250,000 shares of Common Stock together with five year warrants to purchase 10,250,000 shares of Common Stock for gross proceeds of $2,050,000. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a) (2) thereof and Regulation D thereunder, as a transaction by an issuer not involving a public offering.

● On January 31, 2018, we sold an aggregate of 2,740,000 of units at a purchase price of $0.20 per unit. Each unit consists of one share of Common Stock and a five year warrant to purchase one share of Common Stock. The issuance of the units was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and Regulation D thereunder, as a transaction by an issuer not involving a public offering.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits

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The exhibit index attached hereto is incorporated herein by reference.

(b) Financial Statement Schedule

All schedules have been omitted because the information required to be set forth in the schedules is either not applicable or is shown in the financial statements or notes thereto.

Item 17. Undertakings.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

(i)                      To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii)                    To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii)                   To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or

any material change to such information in the registration statement.

(1) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(2) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

(i) If the registrant is relying on Rule 430B (§230.430B of this chapter):

(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (§230.424(b)(3) of this chapter) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

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(B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (§230.424(b)(2), (b)(5), or (b)(7) of this chapter) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) (§230.415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or

(ii) If the registrant is subject to Rule 430C (§230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424 of this chapter);

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, on May 23, 2018.

	MASSROOTS, INC.
By:	/s/ Isaac Dietrich
	Isaac Dietrich Chief Executive Officer (Principal Executive Officer)

By:	/s/ Jesus Quintero
	Jesus Quintero Chief Financial Officer (Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ Isaac Dietrich	Chief Executive Officer (Principal Executive Officer), Chairman of the Board of Directors	May 23, 2018
Isaac Dietrich
/s/ Jesus Quintero	Chief Financial Officer (Principal Financial and Accounting Officer)	May 23, 2018
Jesus Quintero
*	Director	May 23, 2018
Charles R. Blum
*	Director	May 23, 2018
Cecil Kyte
*		May 23, 2018
Graham Farrar	Director

By:	/s/ Isaac Dietrich
	Isaac Dietrich, Attorney-In-Fact

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	EXHIBIT INDEX
No.	Description
2.1	Plan of Reorganization, dated March 18, 2014 (Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on June 13, 2014)
2.2	Agreement and Plan of Merger between MassRoots, Inc. and Whaxy Inc. and DDDigtal Inc. and Zachary Marburger and the Stockholders of DDDigtal Inc., dated December 15, 2016 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 16, 2016)
2.3	Agreement and Plan of Merger between MassRoots, Inc. and MassRoots Compliance Technology, Inc. and Odava, Inc. and Scott Kveton and the Stockholders of Odava, Inc. (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 5, 2017)
3.1	Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on June 13, 2014)
3.2	Amendment to Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on June 13, 2014)
3.3	Bylaws of the Company (Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on June 13, 2014)
3.4	State of Delaware Certificate of Merger of Domestic Corporation Into Domestic Corporation, for MassRoots Compliance Technology, Inc. and Odava Inc., effective as of July 13, 2017 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 14, 2017)
4.1	Form of Common Stock Certificate (Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on June 13, 2014)
5.1**	Opinion of Sheppard Mullin Richter & Hampton LLP as to the legality of securities being registered
10.1+	2014 Equity Incentive Plan and forms of stock option agreement and stock award agreement thereunder (Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on June 13, 2014)
10.2+	2015 Equity Incentive Plan and forms of stock option agreement and stock award agreement thereunder (Incorporated by reference to our Annual Report on Form 10-K filed with the SEC on March 30, 2016)
10.3	Form of Warrant dated March 2014 (Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on June 13, 2014)
10.4	Form of Convertible Debenture Agreement dated March 2014 (Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on June 13, 2014)
10.5	Form of Debenture Registration Rights Agreement dated March 2014 (Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on June 13, 2014)
10.6	Form of Warrant dated March 2014 (Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on June 13, 2014)
10.7	Form of Subscription Agreement from September 15, 2014 to the March 11, 2015 Private Placement (Incorporated by reference to our Annual Report on Form 10-K filed with the SEC on March 30, 2016)
10.8	Form of Warrant in September 15, 2014 to March 11, 2015 Private Placement (Incorporated by reference to our Annual Report on Form 10-K filed with the SEC on March 30, 2016)

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10.9	Form of Subscription Agreement from April 1, 2015 through April 17, 2015 Private Placement (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on April 17, 2015)
10.10	Form of Subscription Agreement from June 10, 2015 through July 13, 2015 Private Placement (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 14, 2015)
10.11	Form of Warrant utilized by Service Providers (Incorporated by reference our Registration Statement on Form S-1 filed with the SEC on April 11, 2016)
10.12	Form of Subscription Agreement dated November 2015 (Incorporated by reference to Amendment No. 1 to our Registration Statement on Form S-1/A filed with the SEC on October 7, 2015)
10.13	Form of Warrant dated November 2015 (Incorporated by reference to Amendment No. 1 to our Registration Statement on Form S-1/A filed with the SEC on October 7, 2015)
10.14	Form of Note in dated March 2016 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on March 18, 2016)
10.15	Form of Warrant dated March 2016 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on March 18, 2016)
10.16	Form of Security Agreement dated March 2016 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on March 18, 2016)
10.17	Form of Securities Purchase Agreement dated March 2016 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on March 18, 2016)
10.18+	2016 Equity Incentive Plan and forms of stock option agreement and stock award agreement thereunder. (Incorporated by reference to our Current Report on Form 8-K filed on September 23, 2016)

10.19	2017 Equity Incentive Plan and forms of stock option agreement and stock award agreement thereunder (Incorporated by reference to our Definitive Schedule 14C Information Statement filed with the SEC on December 9, 2016)
10.20	Form of Joinder Agreement to Agreement and Plan of Merger made by each stockholder of Odava, Inc. and agreed to and acknowledged by MassRoots, Inc. and MassRoots Compliance Technology, Inc. (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 5, 2017)
10.21	Form of Subscription Agreement dated July 2017 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 24, 2017)
10.22	Form of Warrant dated July 2017  (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 24, 2017)
10.23	Form of Note dated August 2017 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on August 18, 2017)
10.24	Form of Warrant dated August 2017 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on August 18, 2017)
10.25	Form of Securities Purchase Agreement dated August 2017 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on August 18, 2017)
10.26	Form of Security Agreement dated August 2017 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on August 18, 2017)
10.27**	Form of Amended and Restated Simple Agreement for Future Tokens
10.28	Form of Director Separation Agreement (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 14, 2017)

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10.29	Form of Warrant dated December 2017  (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 14, 2017)
10.30	Form of Mutual Release and Non-Disparagement Agreement  (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 14, 2017)
10.31	Form of Separation Agreement  (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 14, 2017)
10.32	Employment Agreement by and between the Company and Isaac Dietrich  (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 14, 2017)
10.33	Form of Warrant dated December 2017 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 29, 2017)
10.34	Form of Subscription Agreement dated December 2017 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 29, 2017)
10.35	CFO Services Agreement by and between the Company and Jesus Quintero (Incorporated by reference to our Current Report on Form 8-K/A filed with the SEC on January 22, 2018)
10.36	Form of Securities Purchase Agreement dated January 31, 2018 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on January 31, 2018)
10.37	Form of Warrant dated January 31, 2018 (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on January 31, 2018)
10.38	Membership Agreement between the Company and WeWork (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on February 5, 2018)
10.39	Settlement and Lease Termination Agreement between the Company and Market Center Investors, LLC (Incorporated by reference to our Current Report on Form 8-K filed with the SEC on February 5, 2018)
14.1	Code of Ethics of the Company (Incorporated by reference to our Annual Report on Form 10-K filed with the SEC on March 31, 2015)
22.1**	List of Subsidiaries
23.1*	Consent of Liggett & Webb P.A.
23.2*	Consent of RBSM LLP
23.2**	Consent of Sheppard Mullin Richter & Hampton LLP (included as part of Exhibit 5.1)
24.1	Power of Attorney (included in the signature page of this Form S-1)

* Filed herewith. 

** Previously filed.

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EX-23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to use in this Amendment No. 2 to Form S-1 Registration Statement (File No. 333-223038) of our report dated March 31, 2017, relating to the financial statements of MassRoots, Inc. which appear in this Registration Statement. Our report includes an explanatory paragraph expressing substantial doubt regarding the Company’s ability to continue as a going concern

We also consent to the references to us under the heading “Experts” in such Registration Statement.

/s/ Liggett & Webb, P.A.

New York, New York

May 23, 2018

EX-23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the reference to our firm under the caption “Experts” and the use of our report dated April 17, 2018, which includes an explanatory paragraph regarding the substantial doubt about the Company’s ability to continue as a going concern, on the financial statements of MassRoots Inc. which appears in this Registration Statement on Form S-1 Amendment No. 2.

/s/ RBSM LLP

RBSM LLP

Henderson, Nevada

May 23, 2018

XML

Document and Entity Information

3 Months Ended

Mar. 31, 2018

Document And Entity Information

Entity Registrant Name

MassRoots, Inc.

Entity Central Index Key

0001589149

Document Type

S-1/A

Document Period End Date

Mar. 31, 2018

Amendment Flag

true

Amendment Description

CALCULATION OF REGISTRATION FEE 

Title of Each Class of Securities to be Registered (1)	Amount to be Registered		Proposed Maximum Offering Price Per Share (2)		Proposed Maximum Aggregate Offering Price (2)		Amount of Registration Fee
Common Stock, par value $0.001 per share		28,083,290	$	0.40	$	11,233,316	$	1,398.55
Common Stock, par value $0.001 per share (3)		24,635,750	$	0.40	$	9,854,300	$	1,226.86
Total		52,719,040	$	0.40	$	21,087,616	$	2,625.41	*

(1) The shares of our common stock being registered hereunder are being registered for sale by the selling security holders named in the prospectus. Under Rule 416 of the Securities Act of 1933, as amended, the shares being registered include such indeterminate number of shares of common stock as may be issuable with respect to the shares being registered in this registration statement as a result of any stock splits, stock dividends or other similar event.

(2) The proposed maximum offering price per share and the proposed maximum aggregate offering price have been estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended using the average of the high and low prices as reported on the OTCQB on February 13, 2018.

(3) Represents shares of common stock issuable upon exercise of outstanding warrants to purchase shares of common stock offered by the selling stockholders.

* Previously paid.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

Current Fiscal Year End Date

--12-31

Entity a Well-known Seasoned Issuer

No

Entity a Voluntary Filer

No

Entity's Reporting Status Current

Yes

Entity Filer Category

Smaller Reporting Company

XML

Condensed Consolidated Balance Sheets - USD ($)	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
CURRENT ASSETS
Cash	$ 674,776	$ 1,201,587	$ 374,490
Accounts receivable			3,306
Prepaid expense	551,517	16,556
TOTAL CURRENT ASSETS	1,226,293	1,218,143	377,796
Property and equipment - net	46,575	55,146	77,322
OTHER ASSETS
Investments	403,249	403,249	235,000
Software Cost, net of amortization of $389,059 and $0	766,676	863,941
Deposits and other assets		33,502	33,502
Total Other Assets	1,169,925	1,300,692	268,502
TOTAL ASSETS	2,442,793	2,573,981	723,620
CURRENT LIABILITIES
Accounts Payable	144,230	1,257,783	382,550
Accrued payroll and related	1,601,231	1,601,232
Advances	942,500	800,394
Deferred revenue			27,010
Convertible notes payable, net of debt discount of $248,009		796,991
Derivative Liabilities		9,493,307	1,301,138
Total current liabilities	2,687,961	13,949,707	1,710,698
LONG-TERM LIABILITY
Convertible notes payable, long term			108,100
Total Liabilities	2,687,961	13,949,707	1,818,798
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock, $0.001par value, 200,000,000 shares authorized; 112,165,839 and 71,908,370 shares issued and outstanding	153,945	112,166	71,908
Common stock to be issued, 12,572,500 and 1,740,000 shares, respectively		12,573	1,740
Additional paid in capital	69,843,042	63,315,749	28,693,819
Subscriptions receivable		564,000
Accumulated deficit	(70,242,155)	(74,252,214)	(29,862,645)
Total stockholders' (deficit) equity	(245,168)	(11,375,726)	(1,095,178)
Total liabilities and stockholders' (deficit) equity	$ 2,442,793	$ 2,573,981	$ 723,620

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Software Cost, amortization	$ 486,324	$ 389,059
Debt discount	$ 0	$ 248,009
Series A preferred stock, par value	$ 1.00	$ 1.00
Series A preferred stock, shares authorized	21	21
Series A preferred stock, shares issued	0	0
Series A preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000	200,000,000
Common stock, shares issued	153,944,886	112,165,839	71,908,370
Common stock, shares outstanding	$ 153,944,886	$ 112,165,839	$ 71,908,370
Common stock to be issued	0	12,572,500

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Condensed Consolidated Statement of Operations - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Dec. 31, 2016
Statements Of Operations
REVENUES	$ 1,492	$ 134,741	$ 319,242	$ 701,581
OPERATING EXPENSES
Cost of revenues			630	180,427
Advertising	64,577	193,431	960,239	985,342
Impairment expense			3,796,991	0
Payroll and related expense	425,730	851,860	3,104,407	2,112,879
Payroll taxes related to stockbased compensation			1,599,489	0
Stock based compensation	3,117,250	5,231,003	22,107,949	7,380,431
Other general and administrative expenses	1,429,722	1,359,522	5,164,438	3,644,881
Amortization of Software costs	97,265		(389,059)	0
Total General and Administrative expenses	5,134,544	7,635,816	37,123,202	14,303,960
(LOSS) FROM OPERATIONS	(5,133,052)	(7,501,075)	(36,803,960)	(13,602,379)
OTHER INCOME (EXPENSE)
Loss on change in fair value of derivative liabilities		53,898	(7,000,835)	(581,912)
Gain on Sale of Securites			75,000	0
Interest (expense)	(350,196)		(659,774)	(3,845,833)
Total Other Income (Expense)	(350,196)	53,898	(7,585,609)	(4,427,745)
Net Loss before Income Taxes	(5,483,248)	(7,447,177)	(44,389,569)	(18,030,124)
NET (LOSS)	$ (5,483,248)	$ (7,447,177)	$ (44,389,569)	$ (18,030,124)
Net loss per common share-basic and diluted	$ (0.04)	$ (0.09)	$ (0.46)	$ (0.34)
Weighted average common shares outstanding-basic and diluted	141,834,002	80,267,659	97,213,230	53,151,429

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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) (Unaudited) - USD ($)	Common Stock	Common Stock to be Issued	Additional Paid-In Capital	Subscriptions Receivable	Accumulated Deficit	Total
Balance at Dec. 31, 2015	$ 46,939,965	$ 624,000
Balance, shares at Dec. 31, 2015	46,940	624	12,101,784		(11,832,521)	316,827
Common stock issued, Shares	624,000	(624,000)
Common stock issued, Amount	$ 624	$ (624)
Common stock issued upon conversion of debentures, shares						1,081,000
Common shares issued upon cashless exercise of options, shares						6,734,893
Exercise of options, Shares						6,734,893
Common stock issued for services, Shares	4,225,675	1,740,000
Common stock issued for services, Amount	$ 4,226	$ 1,740	$ 4,193,940			$ 4,199,906
Common stock issued upon exercise of warrants for cash, Shares	5,242,393
Common stock issued upon exercise of warrants for cash, Amount	$ 5,242		1,128,252			1,133,494
Common stock to be issued from exercise of options, Shares	210,000
Common stock to be issued from exercise of options, Amount	$ 210		24,790			25,000
Common shares issued upon cashless exercise of warrants, Shares	639,051
Common shares issued upon cashless exercise of warrants, Amount	$ 639		(639)
Common stock issued upon cashless exercise of options, Shares	264,158
Common stock issued upon cashless exercise of options, Amount	$ 264		(264)
Sale of Common Stock, Shares	10,350,376
Sale of Common Stock, Amount	$ 10,350		4,989,925			5,000,275
Common stock issued in settlement of convertible notes, Shares	3,108,229
Common stock issued in settlement of convertible notes, Amount	$ 3,108		1,356,783			1,359,891
Common stock issued for penalties related to convertible notes, Shares	304,523
Common stock issued for penalties related to convertible notes, Amount	$ 305		163,316			163,621
Fair value of warrants issued for services			68,369			68,369
Reclassify fair value of derivative liability to equity upon warrant exercise(s)			1,555,407			1,555,407
Fair value of stock options issued for services			$ 3,112,156			3,112,156
Net Loss					$ (18,030,124)	(18,030,124)
Balance at Dec. 31, 2016	$ 71,908,370	$ 1,740,000				$ (1,095,178)
Balance, shares at Dec. 31, 2016	71,908	1,740	28,693,819		(29,862,645)	(1,095,178)
Common stock issued, Shares	1,740,000	(1,740,000)
Common stock issued, Amount	$ 1,740	$ (1,740,000)
Common stock issued upon conversion of debentures, shares						6,147,059
Common stock issued for services, Shares	21,000,898	4,100,000
Common stock issued for services, Amount	$ 21,001	$ 4,100	$ 15,449,229			$ 15,474,330
Common stock issued upon exercise of warrants for cash, Shares	7,033,041	12,500
Common stock issued upon exercise of warrants for cash, Amount	$ 7,033	$ 13	4,752,716			4,759,762
Common shares issued upon cashless exercise of warrants, Shares	355,689
Common shares issued upon cashless exercise of warrants, Amount	$ 356		(356)
Common stock issued upon cashless exercise of options, Shares	436,011
Common stock issued upon cashless exercise of options, Amount	$ 436		(436)
Sale of Common Stock, Shares	14,362,500	10,210,000
Sale of Common Stock, Amount	$ 2,434	$ 10,210	2,224,130	$ (564,000)		1,672,774
Common stock issued in settlement of convertible notes, Shares	1,081,000
Common stock issued in settlement of convertible notes, Amount	$ 1,081		107,019			108,100
Common stock issued to acquire Odava Inc., Shares	3,250,000
Common stock issued to acquire Odava Inc., Amount	$ 3,250		1,963,000			1,966,250
Common stock issued to acquire DDDigital Inc., Shares	2,926,830
Common stock issued to acquire DDDigital Inc., Amount	$ 2,927		2,880,293			2,883,220
Common stock received from former Board members in exchange for warrants, Shares		(1,750,000)
Common stock received from former Board members in exchange for warrants, Amount		$ (1,750)	813,738			811,988
Reclassify fair value of derivative liability to equity upon warrant exercise(s)			610,966			610,966
Fair value of repriced and vesting options			5,821,631			5,821,631
Net Loss					$ (44,389,569)	(44,389,569)
Balance at Dec. 31, 2017	$ 112,166	$ 12,573	63,315,749	(564,000)	(74,252,214)	(11,375,726)
Balance, shares at Dec. 31, 2017	112,165,839	12,572,500
Reclassify fair value of derivative liabilities to retained earnings					9,493,307	9,493,307
Issuance of common stock previously to be issued	$ 14,363	$ (14,363)		$ 564,000		564,000
Issuance of common stock previously to be issued, shares	14,362,500	(14,362,500)
Common stock shares to be retired	$ (1,790)	$ 1,790
Common stock shares to be retired, shares	(1,790,000)	1,790,000
Common stock issued upon conversion of debentures	$ 3,743		632,507			636,250
Common stock issued upon conversion of debentures, shares	3,742,648
Sale of common stock	$ 13,700		2,726,300			2,740,000
Sale of common stock, shares	13,700,000
Common shares issued upon cashless exercise of options	$ 95		(95)
Common shares issued upon cashless exercise of options, shares	95,134
Common shares issued upon cashless exercise of warrants	$ 7,105		(7,105)
Common stock issued upon exercise of warrants for cash	$ 70		62,930			63,000
Share based compensation			686,903			686,903
Exercise of options, Shares	95,134
Exercise of options, Amount	$ 95		(95)
Common stock issued for cash, Shares	13,700,000
Common stock issued for cash, Amount	$ 2,740,000
Common stock issued upon exercise of warrants for cash, Amount	$ 63,000
Stock issued for repayment of short term borrowing and services, Shares	7,104,765
Net Loss					(5,483,248)	(5,483,248)
Balance at Mar. 31, 2018	$ 153,945		$ 69,843,042		$ (70,242,155)	$ (245,168)
Balance, shares at Mar. 31, 2018	153,944,886

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Condensed Consolidated Statement of Cash Flows - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Dec. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)	$ (5,483,248)	$ (7,447,177)	$ (44,389,569)	$ (18,030,124)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	10,226	5,776	416,253	19,451
Amortization of debt discounts			3,796,991
Amortization of software cost			22,107,949	7,380,431
Impairment expense			652,921	1,549,669
Depreciation and amortization	105,836	5,776
Payroll tax expense related to stock based compensation			(75,000)
Stock based compensation	3,117,250	5,231,003	22,107,949	7,380,431
Interest and amortization of debt discount	350,196
Gain on sale of securities			1,599,489
(Gain) Loss on change in Fair Value of derivative liability		(53,898)	7,000,835	581,912
Non cash interest				1,265,376
Penalties related to note maturity				763,872
Changes in operating assets and liabilities
Accounts receivables		6,889	6,889	36,194
Prepaid and other	(534,961)		(19,803)	12,938
Security deposit	33,502
Advanced settlement	(10,394)
Deferred revenue		5,823	876,741	210,455
Accounts payable and other liabilities	(1,113,554)	(221,846)	(27,010)	27,010
Net Cash used in operating activities	(3,535,373)	(2,473,430)	(7,997,465)	(6,182,816)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired from acquisition of DDDigtal LLC			8,672
Cash acquired from acquition of Odava, LLC			2,601
Proceeds from sale of securities			250,000
Cash paid related to acquisition of Odava LLC			(40,570)
Purchase of equity investment			(100,002)	(23,750)
Purchase of convertible promissory note			(300,000)
Equity investment in High Times Holding Corp		(100,002)
Investment in DDDigital LLC		8,672	78,000	60,000
Purchase of Property and Equipment		(30,722)	(57,534)
Net Cash used in investing activities		(122,052)	(314,833)	(83,750)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible note			942,500	1,420,000
Proceeds from common stock sales	3,304,000		2,676,644	5,000,275
Proceeds from exercise of warrants	63,000	4,443,196	4,759,762	1,133,494
Proceeds from exercise of options				25,000
Payments of advances	(245,000)		770,000
Proceeds from advances	397,500	6,504
Repayment of loans	(510,938)		(9,511)
Repayments of convertible notes				(1,324,029)
Net cash provided by financing activities	3,008,562	4,449,700	9,139,395	6,254,740
NET INCREASE IN CASH	(526,811)	1,854,218	827,097	(11,826)
Cash, beginning of period	1,201,587	374,490	374,490	386,316
Cash, end of period	674,776	2,228,708	1,201,587	374,490
Non cash investing and financing activities:
Common stock issued in settlement of debt	636,250	108,100	108,100	1,359,891
Proceeds received from subscriptions receivable	564,000
Common stock issued in payment of penalties related to notes payable				163,621
Common stock issued to acquire DDDigtal LLC		2,883,220	2,883,220
Net assets acquired from acquisition of DDDigtal LLC		15,588	15,448
Derivative liability reclassed to retained earnings	$ 9,493,307
Common stock issued to acquire Odava, LLC			1,966,250
Net assets acquired from acquisition of Odava, LLC			2,601
Reclassification of liability warrants from equity in connection with the sale of common stock			1,003,870
Reclassification of derivative liability to equity upon note prepayment(s)				1,555,407
Reclassification of derivative liability to equity upon warrant exercise(s)		$ 610,967	$ 610,966
Beneficial conversion feature relating to convertible note payable				$ 945,596

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Nature of Operations and Basis of Presentation

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

MassRoots, Inc. (“MassRoots” or the “Company”) has created a technology platform for the cannabis industry focused on enabling users to share their cannabis content, follow their favorite dispensaries, and stay connected with the legalization movement. The Company was incorporated in the State of Delaware on April 26, 2013.

The accompanying unaudited condensed, consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Our unaudited condensed, consolidated financial statements include the accounts of DDDigtal, Inc., Odava, Inc., and MassRoots Blockchain Technologies, Inc. All intercompany transactions were eliminated during consolidation.

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

MassRoots, Inc. (“MassRoots” or the “Company”) has created a technology platform for the cannabis industry focused on enabling users to share their cannabis content, follow their favorite dispensaries, and stay connected with the legalization movement. The Company was incorporated in the State of Delaware on April 26, 2013.

The accompanying audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Our consolidated financial statements include the accounts of DDDigtal, Inc., Odava, Inc., and MassRoots Blockchain Technologies, Inc. All intercompany transactions were eliminated during consolidation.

Acquisitions

DDDigtal Inc.

On December 15, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Whaxy Inc., a wholly-owned subsidiary of the Company (“Merger Subsidiary”), DDDigtal Inc., a Colorado corporation (“DDDigtal”), Zachary Marburger, an individual acting solely in his capacity as stockholder representative of DDDigtal, and all of the stockholders of DDDigtal. Pursuant to the Merger Agreement, the parties agreed to merge Merger Subsidiary with and into DDDigtal, whereby DDDigtal survived as a wholly-owned subsidiary of MassRoots (the “Merger”). The primary reason for this combination was the acquisition of DDDigtal’s menu management software, which has been integrated with MassRoots’ business portal to expand the services provided to our clients.

On January 25, 2017 (the “Effective Date”), the Merger became effective upon the filing of certificates of merger with the respective Secretary of State of the States of Delaware and Colorado, in such forms as required by, and executed in accordance with, the relevant provisions of the Delaware General Corporation Law and the Colorado Business Corporation Act.

Pursuant to the terms of the Merger Agreement, each share of DDDigtal’s common stock was exchanged such number of shares of the Company’s common stock (or a fraction thereof), based on an exchange ratio equal to approximately 5.273-for-1, such that 1 share of the Company’s common stock was issued for every 5.273 shares of DDDigtal’s common stock.

On the Effective Date, the Company issued an aggregate of 2,926,830 shares of the Company’s common stock on a pro rata basis to all stockholders of DDDigtal (the “Share Consideration”) in exchange for all of the outstanding shares of common stock of DDDigtal’s. In addition, on the Effective Date, each share of the common stock of Merger Subsidiary was exchanged for one share of common stock of DDDigtal, and all shares of DDDigtal common stock outstanding immediately prior to the Effective Date were automatically cancelled and retired. As of the Effective Date, DDDigtal continued as a surviving wholly-owned subsidiary of the Company, and the Merger Subsidiary ceased to exist.

Pursuant to the terms of the Merger Agreement, in December 2016, the Company paid each of Zachary Marburger and Micah Davidson $40,000 and $20,000, respectively, as repayment for outstanding debts owed by DDDigtal to such individuals.

As a condition to the closing of the Merger, the Company hired Zachary Marburger as its Vice President of Strategy, and engaged Micah Davidson as a Senior Software Engineer. As a condition of Mr. Marburger’s employment and pursuant to the terms of the Merger Agreement, the Company paid Mr. Marburger an additional $40,000 following the one-year anniversary of his employment with the Company.

A summary of consideration is as follows:

Cash (paid in December 2016)	$	60,000
2,926,830 shares of the Company’s common stock		2,883,220
Liabilities assumed		40,140
Total purchase price	$	2,983,360

The following summarizes the current estimates of fair value of assets acquired and liabilities assumed:

Cash	$	8,672
Accounts receivable		3,583
Property and equipment		3,333
Goodwill		2,967,772
Assets acquired	$	2,983,360

During management’s annual review of these assets, it was determined that the fair-market value of DDDigtal’s menu management software was $1,253,000 based upon projected cash-flows and valuations of comparable software services. This value will be amortized over an expected three-year useful life. The remaining $1,714,772 in goodwill was impaired and written-off in December 2017.

Pro forma Results

The following tables set forth the unaudited pro forma results of the Company as if the acquisition of DDDigtal had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of the first day of the periods presented.

	Twelve months ended December 31, 2017			Twelve months ended December 31, 2016
Total revenues	$	319,242		$	701,581
Net loss		(44,389,569	)		(18,030,668	)
Basic and diluted net loss per common share	$	(0.46	)	$	(0.34	)

Odava, Inc.

On July 5, 2017, the Company entered into an Agreement and Plan of Merger (the “July 2017 Merger Agreement”) with MassRoots Compliance Technology, Inc., a wholly-owned subsidiary of the Company (“MCT”), Odava, Inc., a Delaware corporation (“Odava”), and Scott Kveton, an individual acting solely in his capacity as a stockholder representative of Odava. Pursuant to the July 2017 Merger Agreement, the parties agreed to merge MCT with and into Odava, whereby Odava survived as a wholly-owned subsidiary of MassRoots (the “Odava Merger”). The primary reason for this combination was the acquisition of Whaxy’s point-of-sale software for dispensaries, which MassRoots planned to offer as an additional service to its clients.

On July 13, 2017 (the “Odava Merger Effective Date”), the Odava Merger became effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware, in the form as required by and executed in accordance with the relevant provisions of the Delaware General Corporation Law.\\

Pursuant to the terms of the July 2017 Merger Agreement, each share of Odava’s common stock was exchanged for such number of shares of MassRoots’ common stock (or a fraction thereof), based on an exchange ratio equal to approximately 4.069-for-1, such that one share of MassRoots’ common stock was issued for approximately every 4.069 shares of Odava’s common stock.

On the Odava Merger Effective Date, the Company issued an aggregate of 3,250,000 shares of common stock pro rata to all stockholders of Odava (the “Share Consideration”) in exchange for all of their shares of Odava’s common stock. In addition, on the Odava Merge Effective Date, shares of the common stock of MCT were converted into and exchanged for one share of common stock of Odava, and all shares of Odava common stock outstanding immediately prior to the Odava Merger Effective Date were automatically cancelled and retired. As of the Odava Merger Effective Date Odava continued as a surviving wholly-owned subsidiary of Massroots, and MCT ceased to exist. In addition, the Company issued an aggregate of 2,600,000 shares of its common stock to the founders of Odava in connection with the Odava Merger. Furthermore, pursuant to the terms of the Odava Merger Agreement, the Company paid each of Scott Kveton and Steven Osborn $30,000 and $5,000, respectively, as repayment for outstanding debts owed by Odava to such individuals.

As a condition to the closing of the Odava Merger, the Company hired Scott Kveton as its new Director of Business Development, and Steven Osborn as its Principal Architect.

A summary of consideration is as follows:

Cash and costs incurred	$	40,570
3,250,000 shares of the Company’s common stock		1,966,250
Total purchase price	$	2,006,820

The following summarizes the current estimates of fair value of assets acquired and liabilities assumed:

Cash	$	2,601
Goodwill		2,004,219
Assets acquired	$	2,006,820

The above estimated fair value of the intangible assets is based on a preliminary purchase price allocation prepared by management. As this software has never been monetized and market conditions have changed significantly since the acquisition, the value of this of this asset is significantly impaired and we have written off the $2,006,820 in goodwill associated with Odava.

Pro forma results

The following tables set forth the unaudited pro forma results of the Company as if the acquisition of Odava had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of the first day of the periods presented. 

	Twelve months ended December 31, 2017			Twelve months ended December 31, 2016
Total revenues	$	319,242		$	701,581
Net loss		(44,405,275	)		(18,243,978	)
Basic and diluted net loss per common share	$	(0.46	)	$	(0.34	)

The Company accounts for acquisitions in accordance with the provisions of Accounting Standards Codification (“ASC”) 805 Business Combinations (“ASC 805”). The Company assigns to all identifiable assets acquired a portion of the cost of the acquired company equal to the estimated fair value of such assets at the date of acquisition. The Company records the excess of the cost of the acquired company over the sum of the amounts assigned to identifiable assets acquired as goodwill.

The Company recorded goodwill in the aggregate amount of $0 as a result of the acquisitions of DDDigital and Odava during the year ended December 31, 2017.

The Company accounts for and reports acquired goodwill under ASC subtopic 350-10, Intangibles-Goodwill and Other (“ASC 350”). In accordance with ASC 350-10, at least annually, the Company tests its intangible assets for impairment or more often if events and circumstances warrant. Any write-downs will be included in results from operations. As this software has never been monetized and market conditions have changed significantly, the value of the Odava acquisition was deemed fully impaired and fully written-off as of December 31, 2017.

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Going Concern and Management's Liquidity Plans

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Going Concern And Managements Liquidity Plans

GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS

NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

As of March 31, 2018, the Company had cash of $674,776 and working capital deficit (current liabilities in excess of current assets) of $1,461,669. During the three months ended March 31, 2018, the Company used net cash in operating activities of $3,535,373. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements.

During the three months ended March 31, 2018, the Company received approximately $63,000, $3,304,000 and $397,500 from the exercise of common stock warrants, sale of common stock and proceeds from advances, respectively. The Company does not have cash sufficient to fund operations for the next fiscal year. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements.

The Company’s primary source of operating funds since inception has been cash proceeds from private placements of common stock, proceeds from the exercise of warrants and options and issuance of notes payable. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. The Company will require additional financing to fund future operations.

Management’s plans with regard to these matters encompass the following actions: 1) obtain funding from new and current investors to alleviate the Company’s working capital deficiency; and 2) implement a plan to generate sales. The Company’s continued existence is dependent upon its ability to translate its user base into sales. However, the outcome of management’s plans cannot be ascertained with any degree of certainty.

Accordingly, the accompanying condensed, consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed, consolidated financial statements do not necessarily purport to represent realizable or settlement values. The condensed, consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 2 –GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

As of December 31, 2017, the Company had cash of $1,201,587 and working capital deficit (current liabilities in excess of current assets) of $12,731,564. During the twelve months ended December 31, 2017, the Company used net cash in operating activities of $7,997,465. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements.

During the twelve months of 2017, the Company received $4,753,196, $950,000, $3,248,000 and $442,500 from the exercise of common stock warrants, proceeds from issuance of convertible notes, sale of common stock and proceeds from simple agreements for future tokens, respectively. The Company does not have cash sufficient to fund operations.

The Company’s primary source of operating funds since inception has been cash proceeds from private placements of common stock, proceeds from the exercise of warrants and options and issuance of notes payable. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. The Company will require additional financing to fund future operations.

Management’s plans with regard to these matters encompass the following actions: 1) obtain funding from new and potentially current investors to alleviate the Company’s working capital deficiency, and 2) implement a plan to generate sales. The Company’s continued existence is dependent upon its ability to translate its user base into sales. However, the outcome of management’s plans cannot be ascertained with any degree of certainty.

Accordingly, the accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Summary of Significant Accounting Policies

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying interim unaudited condensed, consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to SEC Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1933, as amended, and reflect the accounts and operations of the Company and those of our subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation. Accordingly, the accompanying interim unaudited condensed, consolidated financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial position of the Company as of March 31, 2018, the unaudited condensed, consolidated results of operations for the three months ended March 31, 2018 and 2017, and the unaudited condensed, consolidated results of cash flows for the three months ended March 31, 2018 and 2017 have been included. These interim unaudited condensed, consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s most recent Annual Report on Form 10-K filed with the SEC on April 17, 2018, as amended on April 30, 2018. The December 31, 2017 balances reported herein are derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on April 17, 2018, as amended on April 30, 2018. The results for the interim periods are not necessarily indicative of results to be expected for the full year.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include stock-based compensation, fair values relating to derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk.

The Company follows ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value.

Cash and Cash Equivalents

For purposes of the Statement of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. Repair and maintenance costs are expensed as incurred. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

Acquisitions and Subsidiaries

Subsidiaries are all entities over which MassRoots has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether MassRoots’ controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to MassRoots.  

The purchase method of accounting is used to account for the acquisition of subsidiaries by MassRoots. The cost of an acquisition is measured as the fair value of the assets transferred in consideration, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the MassRoots’ share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.

Intercompany transactions, balances and unrealized gains on transactions between MassRoots’ companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred. The Company charged to operations $64,577 and $193,431, as advertising expenses for the three months ended March 31, 2018 and 2017, respectively.

Stock Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period.

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Intangible assets are stated at cost and reviewed annually to examine any impairments, usually assuming an estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the purchase acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Chief Executive Officer, or decision-making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company’s core business.

Net Earnings (Loss) Per Common Share

The Company computes earnings (loss) per share under ASC subtopic 260-10, Earnings Per Share. Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.

The computation of basic and diluted income (loss) per share as of March 31, 2018 and 2017 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:

	March 31, 2018		March 31, 2017
Common stock issuable upon conversion of convertible debentures		-		-
Options to purchase common stock		15,371,765		16,688,942
Warrants to purchase common stock		37,119,049		8,243,847
Totals		52,490,814		24,932,789

Reclassification

Certain reclassifications have been made to the prior years’ data to conform to the current year presentation. These reclassifications had no effect on reported income (losses).

Recent Accounting Pronouncements

Financial Accounting Standards Board (“FASB”) Accounting Standards Updates (“ASU”) 2017-04 (Topic 350), “Intangibles - Goodwill and Others” – Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company is currently evaluating the effect that ASU 2017-04 will have on our consolidated financial statements and related disclosures.

FASB ASU 2017-01 (Topic 805), “Business Combinations: Clarifying the Definition of a Business” – Issued in January 2017, ASU 2017-01 revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance became effective for the Company on January 1, 2018. The Company believes the standard did not have a material impact on its consolidated financial statements and related disclosures.

FASB ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” – Issued in August 2016, the amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, “Statement of Cash Flows”. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company believes the standard did not have a material impact on our condensed, consolidated financial statements and related disclosures.

FASB ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers” – Issued in May 2014, ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers using a five-step model that requires entities to exercise judgment when considering the terms of the contracts. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”. This amendment defers the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Gross versus Net)”, which amends the principal versus agent guidance and clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer. In addition, the FASB issued ASU Nos. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” and 2016-12, “Narrow-Scope Improvements and Practical Expedients”, both of which provide additional clarification of certain provisions in Topic 606. These ASC updates are effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. Early adoption is permitted only as of annual reporting periods after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method.

The Company applied the guidance using the modified retrospective transition method. The Company believes the adoption of ASU 2014-09 did not have a material impact on the Company’s financial position or results of operations but resulted in additional disclosures regarding the Company’s revenue recognition policies. Additionally, the Company has expanded its revenue recognition inquiries and update its questionnaires primarily to identify matters that would signal variable consideration implications under the new guidance. The Company also does not believe the adoption of ASU 2014-09 required material or significant changes to its internal controls over financial reporting.

FASB ASU No. 2014-15, “Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern, which is included in Accounting Standards Codification (ASC) 205, Presentation of Financial Statements” - Issued August 2014, this update provides an explicit requirement for management to assess an entity's ability to continue as an ongoing concern, and to provide related footnote disclosures in certain circumstances.

The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. The Company has adopted this standard, included the necessary disclosures in the footnotes to its financial statements, and does not believe such adoption has had a material impact on its financial statements.

FASB ASU 2016-02, Leases (Topic 842) - ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.

FASB ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” - The amendment is part of the FASB’s simplification initiative and is intended to simplify the accounting around share-based payment award transactions. The amendments include changing the recording of excess tax benefits from being recognized as a part of surplus capital to being charged directly to the income statement, changing the classification of excess tax benefits within the statement of cash flows, and allowing companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this standard has not had a material impact on the Company’s financial position and results of operations.

FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) – Adopted in November 2016, this ASU requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include cash and restricted cash equivalents. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s financial position and results of operations.

FASB Issued ASU No. 2014-09, (“ASU 606”), Revenue from Contracts with Customers – In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. The FASB also issued subsequent amendments to ASU 2014-09 to provide clarification on the guidance. ASU 2014-09 will be effective for annual periods beginning after December 15, 2017, which for us will be in the period beginning January 1, 2018. We have performed our detailed evaluation, using a five-step model specified in the guidance, to assess the impacts of the new standard.

● Under the new standard, revenue will be recognized when the Company satisfies its performance obligation by transferring promised products or services to its customer. The standard allows for application of the guidance to a portfolio of contracts or performance obligations with similar characteristics.

● The Company’s revenue recognition will be achieved upon delivery of advertising and listing services as there are no other promised services as part of the Company’s contracts with customers.

● To determine the amount of consideration which the Company expects to be entitled in exchange for transferring promised services, the Company has considered if variable consideration exists. The Company has reviewed its standard terms and conditions and its customary business practices to determine the transaction price. The Company has reviewed its pricing policies and strategies including marketing, loyalty and incentive programs for determining whether the Company has any variable or non-cash consideration. No material items were noted.

● The Company’s sales transactions do not require any additional performance obligation after delivery. Therefore, the Company does not have multiple performance obligations for which the Company will have to allocate the transaction price.

● The Company expects to recognize revenue upon delivery to the customer as its performance obligation will be satisfied at that point in time.

The Company expects to apply the guidance using the modified retrospective transition method. Based on the Company’s analysis performed to date, the Company does not expect the adoption of ASU 2014-09 will have a material impact on its financial position or results of operations but will result in additional disclosures regarding its revenue recognition policies. Additionally, the Company has expanded its revenue recognition inquiries and updated its questionnaires primarily to identify matters that would signal variable consideration implications and performance obligations under the new guidance. The Company also does not expect the adoption will require material or significant changes to its internal controls over financial reporting.

FASB issued ASU 2017-11, Earnings Per Share (“ASC 260”), Distinguishing Liabilities from Equity (“ASC 480”), and Derivatives and Hedging (“ASC 815”) - Adopted in July 2017, ASU No. 2017-11 is intended to simplify the accounting for financial instruments with characteristics of liabilities and equity. Among the issues addressed are: (i) determining whether an instrument (or embedded feature) is indexed to an entity’s own stock; (ii) distinguishing liabilities from equity for mandatorily redeemable financial instruments of certain nonpublic entities; and (iii) identifying mandatorily redeemable non-controlling interests. The Company adopted ASU No. 2017-11 as of January 1, 2018. The adoption of ASU No. 2017-11 has eliminated the derivative liabilities from the Company’s financial statements.

There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows. The Company implemented these standards using the modified retrospective transition method.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of MassRoots, Inc. and its wholly-owned operating subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include stock-based compensation, fair values relating to derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

Fair Value of Financial Instruments

ASC subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk.

The Company follows ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value.

Cash and Cash Equivalents

For purposes of the Statement of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. As of December 31, 2017, MassRoots was indebted to four debtor in secured convertible notes. The concentration of credit amongst these debtors make it likely they would wield significant influence over MassRoots and the disposition of assets in the event of a default.

Property and Equipment

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. Repair and maintenance costs are expensed as occurred. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

Accounts Receivable and Allowance for Doubtful Accounts

The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. As of December 31, 2017 and December 31, 2016, based upon the review of the outstanding accounts receivable, the Company has determined that an allowance for doubtful accounts is not required.

Revenue Recognition

The Company recognizes revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met:

(i) persuasive evidence of an arrangement exists;

(ii) the services have been rendered and all required milestones achieved;

(iii) the sales price is fixed and determinable; and

(iv) collectability is reasonably assured.

The Company primarily generates revenue by charging businesses to advertise on the network. The Company has the ability to target advertisements directly to a clients’ target audience, based on their location, on their mobile devices. In cases where clients sign advertising contracts for an extended period of time, the Company only realizes revenue for services provided during that quarter and defers all other revenue to future periods .

Acquisitions and Subsidiaries

Subsidiaries are all entities over which MassRoots has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether MassRoots controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to MassRoots.

The purchase method of accounting is used to account for the acquisition of subsidiaries by MassRoots. The cost of an acquisition is measured as the fair value of the assets transferred in consideration, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the MassRoots’ share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.

Inter-company transactions, balances and unrealized gains on transactions between MassRoots’ companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred. The company charged to operations $960,239 and $985,342, as advertising for the year ended December 31, 2017 and 2016, respectively.

Stock Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period.

Income Taxes

The Company follows ASC subtopic 740-10, Income Taxes- (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period.

If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

Convertible Instruments

U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under ASC 480.

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

Derivative Financial Instruments

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company’s own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

The Company’s free-standing derivatives consisted of warrants to purchase common stock that were issued in connection with the issuance of debt and sale of common stock, and of embedded conversion options with convertible debentures. The Company evaluated these derivatives to assess their proper classification in the balance sheet as of December 31, 2017 using the applicable classification criteria enumerated under ASC 815 Derivatives and Hedging. The Company determined that certain embedded conversion and/or exercise features do not contain fixed settlement provisions. The convertible debentures contain a conversion feature such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands.

As such, the Company was required to record the derivatives which do not have fixed settlement provisions as liabilities and mark to market all such derivatives to fair value at the end of each reporting period.

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Intangible assets are stated at cost and reviewed annually to examine any impairments, usually assuming an estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Chief Executive Officer, or decision-making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company’s core business.

Net Earnings (Loss) Per Common Share

The Company computes earnings (loss) per share under ASC subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.

The computation of basic and diluted income (loss) per share as of December 31, 2017 and 2016 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:

	December 31, 2017		December 31, 2016
Common stock issuable upon conversion of convertible debentures		6,147,059		1,081,000
Options to purchase common stock		14,377,570		14,824,158
Warrants to purchase common stock		35,187,847		15,488,056
Totals		55,712,476		31,393,214

Reclassification

Certain reclassifications have been made to the prior years’ data to conform to the current year presentation. These reclassifications had no effect on reported income (losses).

Recent Accounting Pronouncements

There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows.

Financial Accounting Standards Board (“FASB”) Accounting Standards Updates (“ASU”) 2017-04 (Topic 350), “Intangibles - Goodwill and Others” – Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company is currently evaluating the effect that ASU 2017-04 will have on our consolidated financial statements and related disclosures.

FASB ASU 2017-01 (Topic 805), “Business Combinations: Clarifying the Definition of a Business” – Issued in January 2017, ASU 2017-01 revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance will be effective for the Company in the first fiscal quarter of 2018 on a prospective basis, and early adoption is permitted. The Company does not expect the standard to have a material impact on our consolidated financial statements and related disclosures.

FASB ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” – Issued in August 2016, the amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, “Statement of Cash Flows”. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. The Company has not yet completed the analysis of how adopting this guidance will affect its consolidated financial statements and related disclosures.

FASB ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers” – Issued in May 2014, ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers using a five-step model that requires entities to exercise judgment when considering the terms of the contracts. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”. This amendment defers the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Gross versus Net)”, which amends the principal versus agent guidance and clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer. In addition, the FASB issued ASU Nos. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” and 2016-12, “Narrow-Scope Improvements and Practical Expedients”, both of which provide additional clarification of certain provisions in Topic 606. These ASC updates are effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. Early adoption is permitted only as of annual reporting periods after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method.

The Company expects to apply the guidance using the modified retrospective transition method. The Company does not expect the adoption of ASU 2014-09 to have a material impact on the Company’s financial position or results of operations but will result in additional disclosures regarding the Company’s revenue recognition policies. The Company also does not expect the adoption of ASU 2014-09 will require material or significant changes to its internal controls over financial reporting. In connection with the application of that guidance and the adoption of ASU 2014-09, the Company expects that it will expand its revenue recognition inquiries and update its questionnaires primarily to identify matters that would signal variable consideration implications under the new guidance.

FASB ASU No. 2014-15, “Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern, which is included in Accounting Standards Codification (ASC) 205, Presentation of Financial Statements” - Issued August 2014,this update provides an explicit requirement for management to assess an entity's ability to continue as an ongoing concern, and to provide related footnote disclosures in certain circumstances.

The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company has adopted this standard and included the necessary disclosures in the footnotes to our financial

FASB ASU 2016-02, Leases (Topic 842) - ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.

FASB ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” - The amendment is part of the FASB’s simplification initiative and is intended to simplify the accounting around share-based payment award transactions. The amendments include changing the recording of excess tax benefits from being recognized as a part of surplus capital to being charged directly to the income statement, changing the classification of excess tax benefits within the statement of cash flows, and allowing companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this standard has not had a material impact on the Company’s financial position and results of operations.

FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) – Adopted in November 2016, this ASU requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include cash and restricted cash equivalents. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.

There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows.

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Investments

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Investments, All Other Investments [Abstract]

INVESTMENTS

NOTE 4 – INVESTMENTS

As of March 31, 2018, the carrying value of our investments in privately held companies totaled $403,249. These investments are accounted for as cost method investments, as we own less than 20% of the voting securities and do not have the ability to exercise significant influence over operating and financial policies of the entities.

During the twelve months ended December 31, 2017, the Company acquired 23,810 shares of Class A common stock of Hightimes Holding Corp. (“Hightimes”) for $100,002, or $4.20 per share. As a result of a forward stock split which became effective on January 15, 2018, each one share of common stock was exchanged for 1.93 shares of common stock. As a result of such forward stock split, MassRoots currently owns 45,974 shares of Class A common stock of Hightimes. The shares of Class A common stock are considered non-marketable securities.

On July 13, 2017, the Company purchased an unsecured convertible promissory note in the principal amount of $300,000 from Cannaregs, Ltd, a Colorado limited liability company (“Cannaregs”). The note bears interest at a rate of 5% per annum and matures on December 19, 2019. In the event Cannaregs consummates an equity financing in excess of $2,000,000 prior to the maturity date of the note, the outstanding principal and any accrued and unpaid interest thereon automatically converts into equity securities of the same class or series issued by Cannaregs in the equity financing at the lesser of: a) 90% of the price paid per equity security or b) a price reflecting a valuation cap of $4,500,000. On July 17, 2017, MassRoots converted this note into 430,622 shares of CannaRegs’ common stock, or approximately 4.31% of CannaRegs’ issued and outstanding shares of March 31, 2018.

NOTE 4 – INVESTMENTS

In 2016, the Company paid a $60,000 acquisition deposit to acquire DDDigital, LLC.  

As of December 31, 2017 and 2016, the carrying value of our investments in privately held companies totaled $403,249 and $235,000, respectively. These investments are accounted for as cost method investments, as we own less than 20% of the voting securities and do not have the ability to exercise significant influence over operating and financial policies of the entities.

To facilitate the integration with dispensary point of sale systems, in 2015, the Company invested $175,000 in exchange for preferred shares of Flowhub LLC (“Flowhub”), a seed-to-sale system, equal to 8.95% of the then outstanding equity of Flowhub. The preferred shares are considered non-marketable securities. On May 12, 2017, the Company sold its preferred shares in Flowhub for net proceeds of $250,000. The gain on sale of securities of $75,000 was recorded in current period operations.

During the twelve months ended December 31, 2017, the Company acquired 23,810 shares of Class A common stock of Hightimes Holding Corp. for $100,002, or $4.20 per share. The acquired Class A common stock are considered non-marketable securities.

On July 13, 2017, the Company purchased an unsecured convertible promissory note in the principal amount of $300,000 from Cannaregs, Ltd, a Colorado limited liability company (“Cannaregs”). The note bears interest at a rate of 5% per annum and matures on at December 19, 2019. In the event Cannaregs consummates an equity financing in excess of $2,000,000 prior to the maturity date of the note, the outstanding principal and any accrued and unpaid interest automatically converts to equity securities of the same class or series issued by Cannaregs at the lesser of: a) 90% of the price paid per equity security or b) a price reflecting a valuation cap of $4,500,000.

On July 17, 2017, MassRoots converted this the note 430,622 shares of CannaRegs’ common stock, approximately 4.31% of CannaRegs’ issued and outstanding shares of December 31, 2017.

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Property and Equipment

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment as of March 31, 2018 and December 31, 2017 is summarized as follows:

	March 31, 2018			December 31, 2017
Computers	$	56,900		$	55,244
Office equipment		43,590			43,590
Subtotal		100,490			98,834
Less accumulated depreciation		(53,915	)		(43,688	)
Property and equipment, net	$	46,575		$	55,146

Depreciation expense for the three months ended March 31, 2018 and 2017 was $10,226 and $5,776, respectively.

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2017 and December 31, 2016 is summarized as follows:

	December 31, 2017			December 31, 2016
Computers	$	55,244		$	72,124
Office equipment		43,590			36,850
Subtotal		98,834			108,974
Less accumulated depreciation		(43,688	)		(31,652	)
Property and equipment, net	$	55,146		$	77,322

Depreciation expense for the fiscal years ended December 31, 2017 and 2016 was $27,194 and $19,451, respectively. The company incurred a loss on disposal of property and equipment of $55,848 and $0 for fiscal years December 31, 2017 and 2016, respectively.

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Software Costs

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Software Costs

SOFTWARE COSTS

NOTE 6 – SOFTWARE COSTS

On December 15, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Whaxy Inc., a wholly-owned subsidiary of the Company (“Merger Subsidiary”), DDDigtal Inc., a Colorado corporation (“DDDigtal”), Zachary Marburger, an individual acting solely in his capacity as stockholder representative, and all of the stockholders of DDDigtal. Pursuant to the Merger Agreement, the parties agreed to merge Merger Subsidiary with and into DDDigtal, whereby DDDigtal survived as a wholly-owned subsidiary of MassRoots (the “Merger”).

On January 25, 2017 (the “Effective Date”), the Merger was completed and became effective upon the filing of certificates of merger with the respective Secretary of State of the States of Delaware and Colorado, in such forms as required by, and executed in accordance with, the relevant provisions of the Delaware General Corporation Law and the Colorado Business Corporation Act.

Pursuant to the terms of the Merger Agreement, each share of DDDigtal’s common stock was exchanged for such number of shares of the Company’s common stock (or a fraction thereof), based upon an exchange ratio equal to approximately 5.273-for-1, such that 1 share of the Company’s common stock was issued for every 5.273 shares of DDDigtal’s common stock.

On the Effective Date, the Company issued an aggregate of 2,926,830 shares of the Company’s common stock pro rata to all stockholders of DDDigtal in exchange for all of their shares of DDDigtal’s common stock. At the same time, each share of common stock of Merger Subsidiary was converted into and exchanged for one share of common stock of DDDigtal held by the Company, and all shares of DDDigtal common stock outstanding immediately prior to the Effective Date were automatically cancelled and retired. DDDigtal continued as a surviving wholly-owned subsidiary of the Company, and Merger Subsidiary ceased to exist.

In addition, pursuant to the terms of the Merger Agreement, in December 2016, the Company paid cash consideration in the amount of $40,000 to Zachary Marburger and $20,000 to Micah Davidson, as repayment of outstanding debts owed by DDDigtal to such individuals.

As a condition to the closing of the Merger, the Company hired Zachary Marburger as its Vice President of Strategy, and engaged Micah Davidson as a Senior Software Engineer. As a condition of Mr. Marburger’s employment and pursuant to the terms of the Merger Agreement, the Company paid Mr. Marburger an additional $40,000 following the one-year anniversary of his constant employment with the Company.

Cash (paid in December 2016)	$	60,000
2,926,830 shares of the Company’s common stock		2,883,220
Liabilities assumed		40,140
Total purchase price	$	2,983,360
Cash	$	8,672
Accounts receivable		3,583
Property and equipment		3,333
Software		1,253,000	(1)
Goodwill		1,714,772
Assets acquired	$	2,983,360

(1) The estimated useful life for software development is assumed at 3 years. The acquisition was completed in January 2017, however the allocation of proceeds to identifiable assets was recognized during fourth quarter of 2017.

NOTE 6 – SOFTWARE COSTS

On December 15, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Whaxy Inc., a wholly-owned subsidiary of the Company (“Merger Subsidiary”), DDDigtal Inc., a Colorado corporation (“DDDigtal”), Zachary Marburger, an individual acting solely in his capacity as Stockholder Representative, and all of the stockholders of DDDigtal. Pursuant to the Merger Agreement, the parties agreed to merge Merger Subsidiary with and into DDDigtal, whereby DDDigtal survived as a wholly-owned subsidiary of MassRoots (the “Merger”).

On January 25, 2017 (the “Effective Date”), the Merger was completed and became effective upon the filing of certificates of merger with the respective Secretary of State of the States of Delaware and Colorado, in such forms as required by, and executed in accordance with, the relevant provisions of the Delaware General Corporation Law and the Colorado Business Corporation Act.

Pursuant to the terms of the Merger Agreement, each share of DDDigtal’s common stock was to be exchanged for a number of shares of the Company’s common stock (or a fraction thereof), based on an exchange ratio, as ultimately calculated, equal to approximately 5.273-for-1, such that 1 share of the Company’s’ common stock was issued for every 5.273 shares of DDDigtal’s common stock.

On the Effective Date, the Company issued 2,926,830 shares of the Company’s common stock pro rata to all stockholders of DDDigtal (the “Share Consideration”) in exchange for all of their shares of DDDigtal’s common stock. At the same time, each share of the common stock of Merger Subsidiary was converted into and exchanged for one share of common stock of DDDigtal held by the Company, and all shares of DDDigtal common stock outstanding immediately prior to the Effective Date automatically cancelled and retired. DDDigtal continued as a surviving wholly-owned subsidiary of the Company, and Merger Subsidiary ceased to exist.

Also pursuant to the terms of the Merger Agreement, the Company paid cash consideration, in December 2016, of $40,000 to Zachary Marburger and $20,000 to Micah Davidson, as repayment of outstanding debts owed by DDDigtal to the individuals.

As a condition to the closing of the Merger, the Company hired Zachary Marburger as its Vice President of Strategy, and engaged Micah Davidson as a Senior Software Engineer. As a condition of Mr. Marburger’s employment and pursuant to the Merger Agreement, the Company will pay Mr. Marburger an additional $40,000 following the one-year anniversary of his constant employment with the Company.

Cash (paid in December 2016)	$	60,000
2,926,830 shares of the Company’s common stock		2,883,220
Liabilities assumed		40,140
Total purchase price	$	2,983,360

Cash	$	8,672
Accounts receivable		3,583
Property and equipment		3,333
Software		1,253,000	(1)
Goodwill		1,714,772
Assets acquired	$	2,983,360

(1) The estimated useful life for Software development is assumed at 3 years. The acquisition was completed in January 2017, however the allocation of proceeds to identifiable assets was recognized during fourth quarter. Initially the recording of acquisition was as disclosed in Note 1.

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Convertible Notes Payable

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Debt Disclosure [Abstract]

CONVERTIBLE NOTES PAYABLE

NOTE 7 – CONVERTIBLE NOTES PAYABLE

On August 17, 2017, the Company issued secured convertible notes to certain accredited investors in the aggregate principal amount of $1,045,000. The notes mature on February 18, 2018 and accrue no interest. The Company received net proceeds received of approximately $942,500 after deducting legal and other fees. If the Company exercises its right to prepay the notes, the Company shall make payment to the investors in an amount equal to the sum of the then outstanding principal amount of the notes that the Company desires to prepay, multiplied by (a) 1.1, during the first ninety days after the issuance of the note, or (b) 1.25, at any point thereafter. The notes are convertible into shares of the Company’s common stock at a price per share equal to the lower of (i) $0.75 or (ii) a 25% discount to the price at which the Company next conducts an offering after the issuance date of the notes; provided, however, if any part of the principal amount of the notes remains unpaid at its maturity date, the conversion price will be equal to 65% of the average of the three trading days with the lowest daily weighted average prices of the Company’s common stock occurring during the fifteen days prior to the notes’ maturity date.

In connection with the issuance of the notes, the Company and the investors also entered into a security agreement pursuant to which the notes are secured by all of the assets of the Company currently held or thereafter acquired.

In connection with the issuance of the notes, the Company issued five-year warrants to purchase an aggregate of 2,090,000 shares of Company’s common stock with an initial exercise price of $0.50. The warrants contain certain anti-dilutive (reset) provisions.

From January 1 to January 16, 2018, the Company made payments to the holders of the August 2017 notes as follows (i) an aggregate of $510,937.50 in cash and (ii) an aggregate of 3,742,648 shares of the Company’s common stock pursuant to the conversion features of the notes. The Company believes that it has satisfied all of its obligations under the notes and all of the notes are retired as of March 31, 2018.

NOTE 7 – CONVERTIBLE NOTES PAYABLE

On March 24, 2014, the Company issued convertible debentures to certain accredited investors in the aggregate principal amount of $269,100. The debentures originally matured on March 24, 2016 and accrue no interest. The debentures are convertible into shares of the Company’s common stock at $0.10 per share. In March 2016, the debentures were amended to extend the maturity date to March 24, 2018. In 2016, the Company issued an aggregate of 1,010,000 shares of its common stock in settlement of $101,000 of outstanding debentures and during the twelve months ended December 31, 2017, the Company issued an aggregate of 1,081,000 shares of its common stock in settlement of $108,100 of outstanding debentures. As of December 31, 2017 and December 31, 2016, the aggregate carrying value of the debentures was $0 and $108,100, net of debt discounts of $0, respectively.

In February 2016, the Company issued to a service provider a 12 month convertible debenture at 15% interest with a principal amount of $35,000 along with 35,000 3-year warrants to purchase shares of common stock at $1.00 per share. The convertible debenture is payable at maturity, and convertible at the investor’s determination at a price equal to 90% of the price of a subsequent public underwritten offering if one occurs over $5 million, or, if no such subsequent offering occurs, at $0.75 per share. During the year ended December 31, 2016, the Company issued an aggregate of 343,767 shares in full settlement of the debenture obligation.

On March 14, 2016, the Company sold to investors six (6) month secured convertible original issue discount notes with a principal amount in the aggregate of $1,514,669, together with five-year warrants to purchase an amount of shares of the Company’s common stock equal to the number of shares of common stock issuable upon the conversion of the notes in full and having an exercise price of $1.00 per share with reset provisions. If the Company exercises its right to prepay the note, the Company must make payment to the investor of an amount in cash equal to the sum of the then outstanding principal amount of the note that it desires to prepay, multiplied by (a) 1.2, during the first ninety (90) days after the execution of the note, or (b) 1.35, at any point thereafter. The notes are convertible into shares of the Company’s common stock at a price per share equal to the lower of (i) $1.00, and (ii) a 25% discount to the price at which the Company next conducts an offering after the issuance date of the note; provided, however, for any part of the principal amount of the note that is not paid at its maturity date, September 14, 2016, the conversion price for such amount is equal to 65% of the average of the three trading days with the lowest daily weighted average prices of the Company’s common stock occurring during the fifteen days prior to the notes’ maturity date, September 14, 2016. The notes require that any net proceeds received in subsequent offerings made by the Company first be used to repay the notes’ outstanding principal amount. Because the note was not repaid by the maturity date, the investors became entitled to receive, in aggregate, but calculated pro rata to the principal amounts remaining outstanding at the time of maturity, up to five hundred thousand (500,000) shares of the Company’s common stock. Gross proceeds received by the Company for the notes and warrants in this offering were $1,420,000, while net proceeds were $1,271,600 (excluding any legal fees). On September 14, 2016, upon maturity of the notes, the Company was unable to make the required payment of the then outstanding aggregate principal amount of $966,384 and was in default under the notes. Penalties in aggregate of $584,735 were added to the carrying amount of the notes and were charged to current period interest.

During the year ended December 31, 2016, the Company paid an aggregate of $1,479,498 cash and issued 1,754,462 shares of its common stock upon conversion of $619,906 of the debenture obligation and accrued interest. In addition, the Company issued an aggregate of 304,523 shares of its common stock as penalty shares valued at $163,621 and was charged to current period interest. As of December 31, 2016, the debentures were paid in full.

On August 17, 2017, the Company issued secured convertible notes to certain accredited investors in the aggregate principal amount of $1,045,000. The notes mature on February 18, 2018 and accrue no interest. Net proceeds received were $942,500 after deduction of legal and other fees. If the Company exercises its right to prepay the notes, the Company shall make payment to the investors in an amount equal to the sum of the then outstanding principal amount of the notes that the Company desires to prepay, multiplied by (a) 1.1, during the first ninety (90) days after the execution of the note, or (b) 1.25, at any point thereafter. The notes are convertible into shares of the Company’s common stock at a price per share equal to the lower of (i) $0.75 and (ii) a 25% discount to the price at which the Company next conducts an offering after the issuance date of the notes; provided, however, if any part of the principal amount of the notes remains unpaid at its maturity date, the conversion price will be equal to 65% of the average of the three trading days with the lowest daily weighted average prices of the Company’s common stock occurring during the fifteen days prior to the notes’ maturity date.

In connection with the issuance of the notes, the Company and the investors also entered into a security agreement pursuant to which the notes are secured by all of the assets of the Company currently held or thereafter acquired.

In connection with the issuance of the notes, the Company issued five-year warrants to purchase an aggregate of 2,090,000 shares of Company’s common stock with an initial exercise price of $0.50. The warrants contain certain anti-dilutive (reset) provisions.

On August 17, 2017, upon issuance of the secured convertible notes and warrants, the Company determined that the features associated with the embedded conversion option and reset provisions embedded in the issued warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions.

During the twelve months ended December 31, 2017, the Company amortized $654,774 of debt discounts to current period interest.

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DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS

NOTE 8 – DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS

The Company identified conversion features embedded within convertible debt and certain warrants outstanding during the twelve months ended December 31, 2017 and December 31, 2016. The Company has determined that the features associated with the embedded conversion option and exercise prices, in the form of ratchet provisions, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions.

On March 17, 2016, upon issuance of the secured convertible debentures, the Company determined that the features associated with the embedded conversion option and reset provisions embedded in the issued warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. At the date of inception, the Company estimated the fair value of the embedded derivatives of $1,769,121 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 112.29%, (3) weighted average risk-free interest rate of 0.47% to 1.04% (4) expected life of 0.05 to 5.00 years, and (5) estimated fair value of the Company’s common stock of $1.04 per share. The estimated fair value of the embedded derivative of $1,769,121 was charged to debt discount up to the net proceeds of $1,420,000 and amortized over the term of the debenture with the excess charged to current period interest.

On September 14, 2016, upon the maturity of certain secured convertible debentures (see Note 7), the embedded conversion terms changed. As such, the Company estimated the fair value of the change in the embedded derivative of $951,254 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 106.24%, (3) weighted average risk-free interest rate of 0.30%, (4) expected life of three months, and (5) estimated fair value of the Company’s common stock of $0.51 per share. The estimated fair value of the embedded derivative of $951,254 was charged to current period interest.

On December 31, 2016, the Company estimated the fair value of the embedded derivatives of $1,301,138 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 110.39%, (3) weighted average risk-free interest rate of 1.47%, (4) expected life of 4.21 years, and (5) estimated fair value of the Company’s common stock of $1.03 per share.

On January 4, 2017, warrant holders exercised outstanding warrants to purchase an aggregate of 682,668 shares of the Company’s common stock, and as such the Company transferred to estimated fair value of the embedded derivatives $610,967 from liability to equity. The Company estimated the fair value at the time of exercise using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 110.13%, (3) weighted average risk-free interest rate of 1.94%, (4) expected life of 4.20 years, and (5) estimated fair value of the Company’s common stock of $1.07 per share.

On July 21, 2017, upon issuance of the warrants in connection with the sale of common stock, the Company determined that the features associated with the reset provisions embedded in the issued warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. The Company estimated the fair value of the embedded derivatives of $1,003,870 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 103.46%, (3) weighted average risk-free interest rate of 1.81% (4) expected life of 5.00 years, and (5) estimated fair value of the Company’s common stock of $0.5687 per share. The estimated fair value of the embedded derivative of $1,003,870 was reclassified from equity at the date of issuance.

On August 17, 2017, upon issuance of the secured convertible notes and warrants, the Company determined that the features associated with the embedded conversion option and reset provisions embedded in the issued notes and warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions.

The Company estimated the fair value of the embedded derivatives of $798,429 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 102.73%, (3) weighted average risk-free interest rate of 1.11% to 1.78% (4) expected life of 0.49 to 5.00 years, and (5) estimated fair value of the Company’s common stock of $0.457 per share. The estimated fair value of the embedded derivative of $798,429 together with the issuance costs of $102,500 (aggregate of $900,929) was charged to debt discount and amortized over the term of the debenture with the excess charged to current period interest.

On December 31, 2017, the Company estimated the fair value of the embedded derivatives of $9,493,307 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 108.44%, (3) weighted average risk-free interest rate of 1.28% to 2.20%, (4) expected life of 0.13 to 4.65 years, and (5) estimated fair value of the Company’s common stock of $0.601 per share.

The Company adopted the provisions of ASC 825-10, Financial Instruments (“ASC 825-10”). ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

· Level 1 – Quoted prices in active markets for identical assets or liabilities.

· Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

All items required to be recorded or measured on a recurring basis are based upon Level 3 inputs.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

The Company recognizes its derivative liabilities as Level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed are that of volatility and market price of the underlying common stock of the Company.

As of December 31, 2017 and December 31, 2016, the Company did not have any derivative instruments that were designated as hedges.

Items recorded or measured at fair value on a recurring basis in the accompanying financial statements consisted of the following items as of December 31, 2017 and December 31, 2016:

	December 31, 2017			Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative liability	$	9,493,307	$	-		$                -		$	9,493,307

	December 31, 2016			Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative liability	$	1,301,138	$	-		$                -		$	1,301,138

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the two years ended December 31, 2017:

Balance, January 1, 2016		—
Transfers in to Level 3:		2,720,375
Transfers out due to conversions and payoffs		(2,001,149	)
Mark to market to December 31, 2016		581,912
Balance, December 31, 2016	$	1,301,138
Loss on change in warrant and derivative liabilities for the year ended December 31, 2016	$	(581,912	)

Balance, January 1, 2017	$	1,301,138
Transfers in due to issuance of liability warrants in connection with sale of common stock		1,003,870
Transfers in due to issuance of convertible notes and warrants with embedded conversion and
reset options		798,431
Transfers out due to warrant exercise		(610,967)
Mark to market to December 31, 2017		7,000,835
Balance, December 31, 2017	$	9,493,307
Loss on change in warrant liabilities for the twelve months ended December 31, 2017	$	(7,000,835	)

Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the Company’s expected volatility. Increases in expected volatility would generally result in higher fair value measurement. A 10% change in pricing inputs and changes in volatilities and correlation factors would not result in a material change in our Level 3 fair value.

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Capital Stock

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Equity [Abstract]

Capital Stock

NOTE 8 – CAPITAL STOCK

Preferred Stock

The Company is authorized to issue 21 shares of Series A Preferred Stock, par value $1.00 per share. Each share of Series A Preferred Stock is convertible into one share of common stock and may vote with holders of common stock on an as converted basis. As of March 31, 2018, there were no shares of Series A Preferred Stock issued and outstanding.

Common Stock

The Company is authorized to issue 200,000,000 shares of common stock, par value $0.001 per share. As of March 31, 2018, there were 153,944,886 shares of common stock issued and outstanding and 0 shares of common stock to be issued.

The following common stock transactions were recorded during the three months ended March 31, 2018:

The Company issued an aggregate of 14,362,500 shares of its common stock recorded as to be issued on December 31, 2017.

The Company retired an aggregate of 1,790,000 shares of its common stock recorded as to be retired on December 31, 2017.

The Company issued an aggregate of 4,494,000 shares of its common stock for services rendered.

The Company issued an aggregate of 95,134 shares for its common stock upon the cashless exercise of options.

The Company issued an aggregate of 7,104,765 shares of its common stock upon the cashless exercise of warrants.

The Company issued an aggregate of 3,742,648 shares of its common stock for the settlement of convertible debt.

The Company issued an aggregate of 70,000 shares of its common stock upon the exercise of warrants for net proceeds of $63,000.

The Company issued an aggregate of 13,700,000 shares of its common stock for cash proceeds of $2,740,000.

The Company received $564,000 recorded as subscription receivable as of December 31, 2017.

NOTE 9 – CAPITAL STOCK

Preferred Stock

The Company is authorized to issue 21 shares of Series A Preferred Stock, par value $1.00 per share. Each share of Series A Preferred Stock is convertible into one share of common stock and may vote with holders of common stock on an as converted basis. As of December 31, 2017 and December 31, 2016, there were no shares of Series A Preferred Stock issued and outstanding.

Common Stock

The Company is authorized to issue 200,000,000 shares of common stock, par value $0.001 per share. As of December 31, 2017, there were 112,165,839 shares of common stock issued and outstanding and 12,572,500 shares of common stock to be issued under the Company’s 2017 Employee Stock Option Plan. As of December 31, 2016, there were 71,908,370 shares of common stock issued and outstanding and 1,740,000 shares of common stock to be issued under the Company’s 2015 Employee Stock Option Plan.

The following common stock transactions were recorded during the years ended December 31, 2017 and 2016:

During the year ended December 31, 2016, the Company issued an aggregate of 624,000 shares of its common stock which was previously classified as shares to be issued as of December 31, 2015.

During the year ended December 31, 2016, the Company issued an aggregate of 4,225,675 shares of its common stock for services rendered and recorded another 1,740,000 shares to be issued for services rendered at an average stock price of $0.70 per share.

During the year ended December 31, 2016, the Company issued an aggregate of 639,051 shares of its common stock for the cashless exercise of stock warrants.

During the year ended December 31, 2016, the Company issued an aggregate of 5,242,393 shares of its common stock for the cash exercise of stock warrants.

During the year ended December 31, 2016, the Company issued an aggregate of 264,158 shares of its common stock for the cashless exercises of stock options.

During the year ended December 31, 2016, the Company issued an aggregate of 210,000 shares of its common stock for the cash exercise of stock options.

During the year ended December 31, 2016, the Company issued an aggregate of 10,350,376 shares of its common stock for net sales proceeds of $5,000,275.

During the year ended December 31, 2016, the Company issued an aggregate of 3,108,229 shares of its common stock in settlement of $1,359,891 secured convertible debentures (see Note 7).

During the year ended December 31, 2016, the Company issued an aggregate of 304,523 shares of its common stock in payment of penalties relating to secured convertible debentures of $163,621 (see Note 7).

During the year ended December 31, 2017, the Company issued an aggregate of 22,740,898 shares of its common stock for services valued at $15,474,330.

During the year ended December 31, 2017, the Company sold an aggregate of 2,434,000 shares of its common stock and warrants to purchase shares of common stock for net proceeds of $2,676,444.

During the year ended December 31, 2017, the Company issued an aggregate of 436,011 shares for its common stock upon the cashless exercise of common stock options.

During the year ended December 31, 2017, the Company issued an aggregate of 355,689 shares of its common stock for the cashless exercise of common stock warrants.

During the year ended December 31, 2017, the Company issued an aggregate of 1,081,000 shares of its common stock in settlement of $108,100 of convertible debt.

During the year ended December 31, 2017, the Company issued an aggregate of 7,033,041 shares of its common stock upon the exercise of common stock warrants for net proceeds of $4,759,762.

During the year ended December 31, 2017, the Company issued an aggregate of 2,926,830 shares of its common stock to acquire DDDigtal (Note 1).

During the year ended December 31, 2017, the Company issued an aggregate of 3,250,000 shares of its common stock to acquire Odava (Note 1).

During the year ended December 31, 2017, three former board members agreed to surrender an aggregate of 1,750,000 shares of the Company’s common stock in exchange for five-year warrants to purchase up to 4,850,000 shares of the Company’s common stock at an exercise price of $0.20 per share. As a result of the exchange in equity, the Company recorded stock-based compensation of $811,988.

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Warrants

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Warrants Abstract

WARRANTS

NOTE 9 – WARRANTS

In January 2018, the Company issued warrants to purchase up to 250,000 shares of common stock at an exercise price of $0.20 per share to a service provider of the Company. The estimated fair value of $86,483 was charged to current period operations. The fair market value was calculated using the Black Scholes Option Pricing Model, assuming approximately 2.49% risk-free interest, 0% dividend yield, 112.14% volatility, and expected life of 5 years.

In January 2018, in conjunction with the sale of the Company’s common stock, the Company granted warrants to purchase up to 13,700,000 shares of the Company’s common stock at an exercise price of $0.40 per share, exercisable through January 31, 2023.

Warrants outstanding and exercisable at March 31, 2018 are as follows:

		Warrants Outstanding			Warrants Exercisable
$	0.20		12,275,370	4.51		12,275,370
	0.40		18,700,000	4.81		18,700,000
	0.50		440,002	2.01		440,002
	0.60		50,000	2.01		50,000
	0.83		100,000	2.80		100,000
	0.90		5,000,002	1.50		5,000,002
	1.06		146,200	0.73		146,200
	3.00		407,475	0.61		407,475
			37,119,049			37,119,049

A summary of the warrant activity for the three months ended March 31, 2018 is as follows:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2017		35,187,847		$	0.41		2.3	$	9,314,959
Grants		13,950,000		$	0.40		4.8
Exercised		(11,646,798	)
Forfeited/Cancelled		(372,000	)	$
Vested and expected to vest at March 31, 2018		37,119,049		$	0.43		4.17
Exercisable at March 31, 2018		37,119,049		$	0.43		4.17	$	576,015

The aggregate intrinsic value outstanding stock warrants was $576,015, based on warrants with an exercise price less than the Company’s stock price of $0.25 as of March 31, 2018, which would have been received by the warrant holders had those warrant holders exercised their warrants as of that date.

NOTE 10 WARRANTS

In January 2016, the Company issued warrants to purchase 100,000 shares of common stock at $0.83 per share to certain service providers. The estimated fair value of $68,369 was charged to current period operations. The fair market value was calculated using the Black Scholes Option Pricing Model, assuming approximately 1.46% risk-free interest, 0% dividend yield, 119.14% volatility, and expected life of five years.

In February 2016, the Company issued warrants to purchase 35,000 shares of common stock at $1.00 per share to a service provider. The estimated fair value of $24,301was charged to current period operations. The fair market value was calculated using the Black Scholes Option Pricing Model, assuming approximately 0.71% risk-free interest, 0% dividend yield, 117.43% volatility, and expected life of 3 years.

On March 24, 2016, in connection with the issuance of convertible notes, the Company granted to the same investors five-year warrants to purchase an aggregate of 1,514,669 shares of the Company’s common stock at $1.00 per share. The warrants may be exercised any time after the issuance through and including the fifth (5th) anniversary of its original issuance. The warrants have a fair market value of $910,596. The fair market value was calculated using the Binomial Option Pricing Model, assuming approximately 0.47% risk-free interest, 0% dividend yield, 112.3% volatility, and expected life of five years. In August 2016, upon the sale of the Company’s common stock, the Company issued an additional 1,514,669 warrants to purchase the Company’s common stock at $0.50 per share, exercisable through March 14, 2021. The exercise price of the previously issued 1,514,669 warrants issued in connection with the debt was reset from $1.00 per share to $0.50. As of December 31, 2017, the price protection provision in the warrants had expired and there were 836,670 outstanding.

In August and September 2016, the Company issued an aggregate of 3,385,002 warrants to purchase the Company’s common stock at $0.90 per share, exercisable for three years in connection with the sale of common stock.

In August 2016, upon the sale of the Company’s common stock, the Company issued an additional 1,514,669 warrants to purchase the Company’s common stock at $0.50 per share, exercisable through March 14, 2021. The exercise price of the previously issued 1,514,669 warrants issued in connection with the debt was reset from $1.00 per share to $0.50.

In October 2016, upon the sale of the Company’s common stock, the Company issued an additional 6,659,000 warrants to purchase the Company’s common stock at $0.90 per share, exercisable through October 26, 2019.

In July 2017, upon the sale of the Company’s common stock, the Company issue an additional 2,394,000 to purchase the Company’s common stock at $0.65 per share, exercisable through July 24, 2022. These warrants contain certain anti-dilutive (reset) provisions (See Note 8).

In August and September 2017, in connection with the issuance of convertible notes, the Company granted to the same investors five-year warrants to purchase an aggregate of 2,090,000 shares of the Company’s common stock at $0.50 per share. The warrants may be exercised any time after the issuance through and including the fifth (5th) anniversary of its original issuance. The warrants have a fair market value of $715,432. The fair market value was calculated using the Binomial Option Pricing Model, assuming approximately 0.47% risk-free interest, 0% dividend yield, 102.73% volatility, and expected life of five years. These warrants contain certain anti-dilutive (reset) provisions (See Note 8).

In December 2017, the Company issued warrants to purchase 4,850,000 shares of common stock at $0.20 per share to former Directors of the Company. The estimated fair value of $1,450,737 was charged to current period operations. The fair market value was calculated using the Black Scholes Option Pricing Model, assuming approximately 2.18% risk-free interest, 0% dividend yield, 223,02% volatility, and expected life of 5 years.

In December 2017, upon the sale of the Company’s common stock, the Company issue an additional 10,250,000 to purchase the Company’s common stock at $0.40 per share, exercisable through December 31, 2022.

In December 2017, upon the sale of the Company’s common stock, the Company issued an additional 8,521,000 warrants to purchase the Company’s common stock at $0.20 per share, exercisable through December 31, 2022. The exercise price of the previously issued 4,484,000 warrants issued in connection with the July 2017 common stock sale and August and September convertible debt was reset from $0.65 and $0.50 per share, respectively, to $0.20. These warrants contain certain anti-dilutive (reset) provisions (See Note 8).

Warrants outstanding and exercisable at December 31, 2017 are as follows:

Warrants Outstanding				Warrants Exercisable
			Weighted
			Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Warrants	In Years	Warrants
$	0.20	17,855,500	4.69	17,855,500
	0.40	10,250,000	4.84	10,250,000
	0.50	936,670	2.25	936,670
	0.60	50,000	2.25	50,000
	0.83	100,000	3.10	100,000
	0.90	5,070,002	1.63	5,070,002
	1.00	372,000	0.25	372,000
	1.06	146,200	0.98	146,200
	3.00	407,475	0.86	407,475
		35,187,847		35,187,847

A summary of the warrant activity for the twelve months ended December 31, 2017 is as follows:

						Weighted-Average
				Weighted-Average		Remaining		Aggregate
	Shares			Exercise Price		Contractual Term		Intrinsic Value
Outstanding at January 1, 2016		9,018,609		$	0.42		2.26	$	6,857,509
Grants		13,164,340			0.72		2.51
Exercised		(6,734,893)			0.25
Forfeited/Cancelled		-
Outstanding at December 31, 2016		15,448,056		$	0.81		2.4	$	4,225,936
Grants		28,105,500			0.27		4.2		-
Exercised		(7,728,209	)		0.68
Forfeited/Cancelled		(637,520	)		0.62
Outstanding at December 31, 2017		35,187,847		$	0.41		2.3	$	9,314,959
Vested and expected to vest at December 31, 2017		35,187,847		$	0.41		2.3	$	9,314,959
Exercisable at December 31, 2017		35,187,847		$	0.41		2.3	$	9,314,959

The aggregate intrinsic value outstanding stock warrants was $6,481,984, based on warrants with an exercise price less than the Company’s stock price of $0.601 as of December 31, 2017, which would have been received by the warrant holders had those warrant holders exercised their warrants as of that date.

On July 21, 2017, upon the sale of the Company’s common stock, the Company issued warrants to purchase up to 2,394,000 shares of the Company’s common stock at $0.65 per share, exercisable through July 21, 2022. These warrants contain certain anti-dilutive (reset) provisions (See Note 8).

On August 24, 2017, in connection with the issuance of convertible notes, the Company granted to the same investors five-year warrants to purchase up to 2,090,000 shares of the Company’s common stock at $0.50 per share. These warrants contain certain anti-dilutive (reset) provisions (See Note 8).

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Stock Options

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Employee Equity Incentive Plan

STOCK OPTIONS

NOTE 10 –STOCK OPTIONS

Our stockholders approved our 2014 Equity Incentive Plan in June 2014 (the “2014 Plan”), our 2015 Equity Incentive Plan in December 2015 (the “2015 Plan”), our 2016 Equity Incentive Plan in October 2016 (“2016 Plan”) and our 2017 Equity Incentive Plan in December 2016 (“2017 Plan”, and together with the 2014 Plan, 2015 Plan and 2016 Plan, the “Plans”). The Plans are identical, except for number of shares reserved for issuance under each Plan. As of March 31, 2018, the Company had granted an aggregate of 39,500,000 securities under the plans, with 0 available for future issuances.

The Plans provide for the grant of incentive stock options to our employees and our parent and subsidiary corporations’ employees, and for the grant of non-statutory stock options, stock bonus awards, restricted stock awards, performance stock awards and other forms of stock compensation to our employees, including officers, consultants and directors. Our Plans also provide that the grant of performance stock awards may be paid out in cash as determined by the committee administering the Plans.

During the three months ended March 31, 2018, the Company granted ten-year options outside of our Plans to purchase up to 1,250,000 shares of common stock. The fair value of $459,834, was determined using the Black-Scholes Option Pricing Model, assuming approximately 2.78% risk-free interest, 0% dividend yield, 116.08% volatility, and expected life of five to ten years and will be charged to operations over the vesting terms of the options.

The summary terms of the issuances are as follows:

Exercise Price		Number of Options		Vesting Terms
$	0.36		250,000	Immediately
	0.40		1,000,000	Immediately
	0.39		1,250,000	Immediately

Stock options outstanding and exercisable on March 31, 2018 are as follows:

Exercise Price		Number of Options		Remaining Life In Years		Number of Options Exercisable
$	0 – 0.25		1,056,786		6.18		1,056,786
$	0.26 - 0.50		1,939,631		9.02		1,939,631
$	0.51 – 0.75		1,820,112		8.43		1,820,112
$	0.76 - 1.00		9,926,072		8.46		9,926,072
$	1.01 - 2.00		629,164		8.36		629,164
			15,371,765				15,371,765

A summary of the stock option activity for the three months ended March 31, 2018 is as follows:

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2017		14,378,432		$	0.76		8.48	$	771,359
Grants		1,250,000			0.39		9.80
Exercised		(256,667	)
Forfeiture/Canceled		--
Outstanding at March 31, 2018		15,371,765			0.73		8.37
Exercisable at March 31, 2018		15,371,765		$	0.73		8.37	$	156,299

The aggregate intrinsic value outstanding stock options was $156,299, based on options with an exercise price less than the Company’s stock price of $0.25 as of March 31, 2018, which would have been received by the option holders had those option holders exercised their options as of that date.

Due to a clerical error, MassRoots’ Annual Report on Form 10-K filed on April 17, 2018, as amended on April 30, 2018, stated that 2,454,761 options were canceled/expired for the twelve months ending December 31, 2017 and the options outstanding as of December 31, 2017 were 14,377,570. It should have stated that 2,863,715 options were canceled/expired for the twelve months ending December 31, 2017 and the options outstanding as of December 31, 2017 were 14,378,432. While we are correcting this error in this Quarterly Report on Form 10-Q and subsequent filings, we do not believe it has a material impact on our fiscal 2017 financial statements.

Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived historical data. The Company accounts for the expected life of options based on the contractual life of options for non-employees.

NOTE 11 – EMPLOYEE EQUITY INCENTIVE PLANS

The Company’s stockholders approved our 2014 Equity Incentive Plan in June 2014 (the “2014 Plan”), our 2015 Equity Incentive Plan in December 2015 (the “2015 Plan”), our 2016 Equity Incentive Plan (“2016 Plan”) in October 2016 and our 2017 Equity Incentive Plan in December 2016 (“2017 Plan”, and together with the 2014 Plan, 2015 Plan and 2016 Plan, the “Plans”). The Plans are identical, except for number of shares reserved for issuance under each. As of December 31, 2017, the Company had granted an aggregate of 39,500,000 securities under the plans, with 0 available for future issuances.

The Plans provide for the grant of incentive stock options to our employees and our parent and subsidiary corporations’ employees, and for the grant of non-statutory stock options, stock bonus awards, restricted stock awards, performance stock awards and other forms of stock compensation to our employees, including officers, consultants and directors. Our Plans also provide that the grant of performance stock awards may be paid out in cash as determined by the committee administering the Plans.

During the year ended December 31, 2016, the Company granted options to purchase 9,958,031 for ten years. The fair value of $6,450,317, was determined using the Black-Scholes Option Pricing Model, assuming approximately 1.75% to 2.10% risk-free interest, 0% dividend yield, 107.63% to 119.16% volatility, and expected life of five to ten years and will be charged to operations over the vesting terms of the options.

During the year ended December 31, 2017, the Company granted ten-year options to purchase up to 2,854,000 shares of common stock. The fair value of $2,014,591, was determined using the Black-Scholes Option Pricing Model, assuming approximately 1.81% to 2.35% risk-free interest, 0% dividend yield, 103.66% to 110.16% volatility, and expected life of five to ten years and will be charged to operations over the vesting terms of the options.

The summary terms of the issuances are as follows:

Exercise		Number of		Vesting
Price		Options		Terms
$	0.50		80,000	Immediately
	0.50		100,000	Quarterly over one year
	0.50		605,000	Quarterly over two years
	0.81		5,000	Immediately
	0.82		150,000	Quarterly over two years
	0.85		150,000	Quarterly over one year
	0.87		125,000	Immediately
	0.89		425,000	Monthly over one year
	0.89		90,000	Quarterly over two years
	0.95		400,000	Quarterly over two years
	0.98		24,000	Monthly over two years
	1.05		50,000	Immediately
	1.05		95,000	Monthly over two years
	1.05		60,000	Monthly over one year
	1.06		60,000	Monthly over one year
	1.07		110,000	Monthly over one year
	1.07		325,000	Monthly over two years
	0.83		2,854,000

On June 21, 2017, the Company accelerated vesting of 5,000,000 options such that the options vested in full, immediately. As a result, the Company charged $2,544,741 to operations during the twelve months ended December 31, 2017.

Stock options outstanding and exercisable on December 31, 2017 are as follows:

Exercise		Number of		Remaining Life		Number of
Price		Options		In Years		Options Exerciseable
$	0.10		1,056,786		6.43		1,056,786
$	0.50		689,631		7.74		689,631
$	0.51 - 0.75		2,076,779		8.69		1,996,779
$	0.76 - 1.00		9,926,072		8.70		9,233,070
$	1.01 - 2.00		629,164		8.61		629,164
			14,378,432				13,605,430

A summary of the stock option activity for the twelve months ended December 31, 2017 is as follows:

						Weighted-Average
				Weighted-Average		Remaining		Aggregate
	Shares			Exercise Price		Contractual Term		Intrinsic Value
Outstanding at December 31, 2015		5,625,000		$	0.59		9.30	$	61,875
Grants		9,958,031			0.78		9.84
Exercised		(636,780)			0.50		8.80
Forfeiture/Cancelled		(122,093)			0.55		8.80
Outstanding at December 31, 2016		14,824,158		$	0.52		9.37	$	4,566,717
Grants		2,854,000			0.50		9.60		-
Exercised		(436,011	)		0.16		8.80
Forfeiture/Canceled		(2,863,715	)	$	0.73		8.80		-
Outstanding at December 31, 2017		14,378,432		$	0.76		8.48	$	771,359
Exercisable at December 31, 2017		13,605,430		$	0.76		8.50	$	646,109

The aggregate intrinsic value of outstanding stock options was based on options with an exercise price less than the Company’s common stock price of $0.601 as of December 31, 2017, which would have been received by the option holders had those option holders exercised their options as of that date.

Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived historical data. The Company accounts for the expected life of options based on the contractual life of options for non-employees.

The fair value of all options that were vested as of the year ended December 31, 2017 and 2016 was $5,821,631 and $3,112,156, respectively Unrecognized compensation expense of $173,220 at December 31, 2017 will be expensed in future periods.

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INCOME TAXES

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 12 – INCOME TAXES

The Tax Cuts and Jobs Acts (the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate income tax rate from 35% to 21%. ASC 740, “Income Taxes”, requires that effects of changes in tax rates to be recognized in the period enacted. Recognizing the late enactment of the Act and complexity of accurately accounting for its impact, the Securities and Exchange Commission in SAB 118 provides guidance that allows registrants to provide a reasonable estimate of the Act in their financial statements and adjust the reported impact in a measurement period not to exceed one year.

As of December 31, 2017, we have not completed our accounting for the tax effects of the Act; however, a reasonable estimate was made to measure most of our deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future as a result of the reduction on the federal tax rate, and we recorded a provisional amount for our one-time transition tax liability. The provisional tax expense recorded of approximately $1,700,000 related to the re-measurement of our deferred tax asset balance and resulted in a reduction of our deferred tax asset and a corresponding increase to our income tax expense.

At December 31, 2017, the Company has available for federal income tax purposes a net operating loss carry forward of approximately $45,000,000, which begin expiring in the year 2033, that may be used to offset future taxable income. The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized. Due to possible significant changes in the Company’s ownership, the future use of its existing net operating losses may be limited. All or portion of the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits.  During the year ended December 31, 2016, the Company has increased the valuation allowance from $4,946,000 to $11,090,000.

The Company has adopted the provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities.

Tax position that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company had no tax positions relating to open income tax returns that were considered to be uncertain.

Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), provide for annual limitations on the utilization of net operating loss and credit carryforwards if the Company were to undergo an ownership change, as defined in Section 382 of the Code. In general, an ownership change occurs whenever the percentage of the shares of a corporation owned, directly or indirectly, by 5-percent shareholders, as defined in Section 382 of the Code, increases by more than 50 percentage points over the lowest percentage of the shares of such corporation owned, directly or indirectly, by such 5-percent shareholders at any time over the preceding three years. In the event such ownership change occurs, the annual limitation may result in the expiration of the net operating losses prior to full utilization.

The Company is required to file income tax returns in the U.S. Federal jurisdiction and in Colorado. The Company is no longer subject to income tax examinations by tax authorities for tax years ending before December 31, 2013.

The Company’s deferred taxes as of December 31, 2017 and 2016 consist of the following:

	207		2016
Non-Current deferred tax asset:
Net operating loss carry-forwards	11,090,000		4,946,000
Valuation allowance	(11,090,000	)	(4,946,000	)
Net non-current deferred tax asset	—		—

The Company is delinquent in filing its payroll taxes related to stock compensation awards. At December 31, 2017, the Company has, in payroll tax liabilities, including interest and penalties, of approximately $1,599,489, due to federal and state taxing authorities. The actual liability may be higher or lower due to interest or penalties assessed by federal and state taxing authorities. The Company expects to settle these liabilities by June 30, 2018.

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Related Party Transactions

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 11 – RELATED PARTY TRANSACTIONS

None.

NOTE 13 – RELATED PARTY TRANSACTIONS

On August 31, 2016, Isaac Dietrich, the Company’s Chief Executive Officer, participated in the Company’s registered offering that took place beginning August 12, 2016 and continued until October 24, 2016, whereby Mr. Dietrich purchased $5,000 of the Company’s securities consisting of 10,000 shares of the Company’s common stock and warrants to purchase 10,000 shares at $0.90 per share.

On July 21, 2017, Isaac Dietrich, the Company’s Chief Executive Officer, participated in the Company’s private placement that took, whereby Mr. Dietrich purchased $10,000 of the Company’s securities consisting of 20,000 shares of the Company’s common stock and warrants to purchase 20,000 shares at $0.65 per share. As a result of the ratchet provision in the warrants that was triggered by the Company’s December 2017 private placement, the number of warrants increased to 65,000 and the exercise price decreased to $0.20.

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Subsequent Events

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 12 – SUBSEQUENT EVENTS

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.

From April 1 to May 16, 2018, the Company issued an aggregate of 542,648 shares of common stock upon the cashless exercise of warrants.

 NOTE 14 – SUBSEQUENT EVENTS

In January 2018, the Company entered into Simple Agreement for Future Tokens (the “Original SAFT Agreements”) with six investors pursuant to which the Company received an aggregate of $500,000. On February 13, 2018, the Company entered into Amended and Restated Simple Agreement for Future Tokens (the “SAFT Agreements”) with the investors which amended the terms of the Original SAFT Agreements, which totaled $942,500. Pursuant to the SAFT Agreements, the investors will receive tokens in MassRoots Blockchain Technologies, Inc., a Delaware company and wholly-owned subsidiary of the Company (“MassRoots Blockchain”). The tokens are issuable to the investors upon the public sale of tokens of MassRoots Blockchain (the “Qualifying Token Sale”). Investors are entitled receive such number of tokens equal to the amount invested by the investor divided by the Discount Price. “Discount Price” means the price per token sold in the Qualifying Token Sale divided by the Discount Rate. “Discount Rate” means 50%. The SAFT Agreements terminate upon either (i) the issuance of the tokens to the investors or (ii) the payment, or setting aside for payment, of amounts due the investor upon the occurrence of a Dissolution Event. “Dissolution Event” means (i) a voluntary termination of operations of the Company, (ii) a general assignment for the benefit of the Company’s creditors or (iii) any other liquidation, dissolution or winding up of the Company, whether voluntary or involuntary.

From January 1 to January 16, 2018, the Company made payment to the Holders of the August 2017 convertible debt in an aggregate of (i) $510,937.50 in cash and (ii) pursuant to the right of conversion of the Notes, issued an aggregate of 3,742,648 shares of the Company’s common stock. The Company believes that it has completed all of its obligations under the Notes and they are retired.

Effective January 10, 2018, the Board appointed Jesus Quintero as Chief Financial Officer of the Company to replace Isaac Dietrich who was serving as Interim Chief Financial Officer of the Company. On January 10, 2018, the Company entered into a CFO Services Agreement with Jesus Quintero pursuant to which Mr. Quintero will serve as Chief Financial Officer of the Company for a term of one year (the “Initial Term”), which term shall be automatically renewed for successive one year periods thereafter unless Mr. Quintero provides the Company with written notice of his  intention not to renew the agreement at least 90 days prior to the expiration of the Initial Term. The agreement may be terminated by either party upon 90 days prior written notice to the other party. Pursuant to the terms of the agreement, Mr. Quintero shall receive a fee of $4,000 per month and received a onetime issuance of 250,000 shares of the Company’s common stock, all of which vested as of January 10, 2018.

On January 31, 2018, Company entered into separate securities purchase agreements (the “Securities Purchase Agreements”) with certain accredited investors pursuant to which the Company sold an aggregate of $2,740,000 of units (the “Units”) at a purchase price of $0.20 per Unit. Each Unit consists of one share of common stock and a warrant to purchase one share of common stock.

On February 1, 2018, the Compensation Committee of the Board of Directors approved a stock grant of 750,000 and 250,000 shares of common stock, respectively, to Cecil Kyte and Charles Blum. On the same date, the Compensation Committee of the Board of Directors approved an option to purchase up to 750,000 and 250,000 shares of common stock at $0.40 per share, respectively, to Cecil Kyte and Charles Blum.

On February 1, 2018, the Company entered into a Membership Agreement (the “Membership Agreement”) with WeWork pursuant to which the Company leases offices located at 2420 17^th Street, Office 3118, Denver, Colorado 80202 effective as of February 2, 2018. The term of the Membership Agreement is for one month which term shall automatically be renewed for successive one month terms unless terminated by either party. Pursuant to the terms of the Membership Agreement the Company will pay a fee of $1,360 per month for the leased premises. 

On February 2, 2018, the Company entered into a Settlement and Lease Termination Agreement (the “Agreement”) with Market Center Investors, LLC (the “Landlord”) with respect to the Company’s leased premises located at 1624 Market Street, Suite 201, Denver, Colorado 80202 (the “Leased Premises”). In December 2017, the Landlord commenced a legal action to recover possession of the Leased Premises in the District Court for the City and County of Denver, Colorado (the “Lawsuit”) for failure of the Company to make certain payments pursuant to the terms of its lease (the “Lease”) with the Landlord. Pursuant to the terms of the Agreement, the Company paid the Landlord $145,000 and surrendered to the Landlord any and all possessory interests and other rights in or to the Leased Premises. In addition, each party agreed to release and discharge the other party and its affiliated entities together with its directors, officers, members, managers, employees and agents from and against any and all claims, demands, causes of action and other liabilities arising under or relating to the Lease and a Stipulation for Dismissal with Prejudice was filed with respect to the Lawsuit.

Effective February 21, 2018, Nathan Shelton resigned as a member of the Board of Directors of the Company and well as a member of the Audit, Compensation and Nominating and Corporate Governance Committees (collectively, the “Committees”). Mr. Shelton’s resignation was not the result of any disagreement with the Company, any matter related to the Company’s operations, policies or practices, the Company’s management or the Board. Effective February 21, 2018, the Board appointed Graham Farrar as a member of the Board and as a member of the Committees to fill the vacancies created upon the resignation of Mr. Shelton. Mr. Farrar is deemed an “independent” director as such term is defined by the rules of The Nasdaq Stock Market LLC. There are no family relationships between Mr. Farrar and any of our other officers and directors. Mr. Farrar was granted (i) 250,000 shares of the Company’s common stock and (ii) an option to purchase up to 250,000 shares of the Company’s common stock at an exercise price equal to $0.36 per share. The shares and option vested in full as of February 21, 2018.

From January 1 to April 10, 2018, the Company issued an aggregate of 13,962,500 shares of its common stock recorded as to be issued on December 31, 2017.

From January 1 to April 10, 2018, the Company retired an aggregate of 1,790,000 shares of its common stock recorded as to be retired on December 31, 2017.

From January 1 to April 10, 2018, the Company issued an aggregate of 3,742,648 shares of its common stock for the conversion of its August 2017 convertible debt.

From January 1 to April 10, 2018, the Company issued an aggregate of 4,894,000 shares of its common stock for services.

From January 1 to April 10, 2018, the Company sold an aggregate of 13,700,000 shares of its common stock and warrants to purchase shares of common stock for net proceeds of $2,740,000.

From January 1 to April 10, 2018, the Company issued an aggregate of 95,134 shares for its common stock upon the cashless exercise of common stock options.

From January 1 to April 10, 2018, the Company issued an aggregate of 7,104,765 shares of its common stock for the cashless exercise of common stock warrants.

From January 1 to April 10, 2018, the Company issued an aggregate of 70,000 shares of its common stock upon the exercise of common stock warrants for net proceeds of $63,000.

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying interim unaudited condensed, consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to SEC Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1933, as amended, and reflect the accounts and operations of the Company and those of our subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation. Accordingly, the accompanying interim unaudited condensed, consolidated financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial position of the Company as of March 31, 2018, the unaudited condensed, consolidated results of operations for the three months ended March 31, 2018 and 2017, and the unaudited condensed, consolidated results of cash flows for the three months ended March 31, 2018 and 2017 have been included. These interim unaudited condensed, consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s most recent Annual Report on Form 10-K filed with the SEC on April 17, 2018, as amended on April 30, 2018. The December 31, 2017 balances reported herein are derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on April 17, 2018, as amended on April 30, 2018. The results for the interim periods are not necessarily indicative of results to be expected for the full year.

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of MassRoots, Inc. and its wholly-owned operating subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include stock-based compensation, fair values relating to derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include stock-based compensation, fair values relating to derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk.

The Company follows ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value.

Fair Value of Financial Instruments

ASC subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk.

The Company follows ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value.

Cash and Cash Equivalents

Cash and Cash Equivalents

For purposes of the Statement of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents.

Cash and Cash Equivalents

For purposes of the Statement of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. As of December 31, 2017, MassRoots was indebted to four debtor in secured convertible notes. The concentration of credit amongst these debtors make it likely they would wield significant influence over MassRoots and the disposition of assets in the event of a default.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. Repair and maintenance costs are expensed as incurred. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

Property and Equipment

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. Repair and maintenance costs are expensed as occurred. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. As of December 31, 2017 and December 31, 2016, based upon the review of the outstanding accounts receivable, the Company has determined that an allowance for doubtful accounts is not required.

Acquisitions and Subsidiaries

Acquisitions and Subsidiaries

Subsidiaries are all entities over which MassRoots has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether MassRoots’ controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to MassRoots.  

The purchase method of accounting is used to account for the acquisition of subsidiaries by MassRoots. The cost of an acquisition is measured as the fair value of the assets transferred in consideration, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the MassRoots’ share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.

Intercompany transactions, balances and unrealized gains on transactions between MassRoots’ companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Acquisitions and Subsidiaries

Subsidiaries are all entities over which MassRoots has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether MassRoots controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to MassRoots.  

The purchase method of accounting is used to account for the acquisition of subsidiaries by MassRoots. The cost of an acquisition is measured as the fair value of the assets transferred in consideration, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the MassRoots’ share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.

Inter-company transactions, balances and unrealized gains on transactions between MassRoots’ companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Advertising

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred. The Company charged to operations $64,577 and $193,431, as advertising expenses for the three months ended March 31, 2018 and 2017, respectively.

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred. The company charged to operations $960,239 and $985,342, as advertising for the year ended December 31, 2017 and 2016, respectively.

Stock Based Compensation

Stock Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period.

Stock Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period.

Income Taxes

Income Taxes

The Company follows ASC subtopic 740-10, Income Taxes- (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period.

If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

Convertible Instruments

Convertible Instruments

U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under ASC 480.

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

Derivative Financial Instruments

Derivative Financial Instruments

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company’s own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

The Company’s free-standing derivatives consisted of warrants to purchase common stock that were issued in connection with the issuance of debt and sale of common stock, and of embedded conversion options with convertible debentures. The Company evaluated these derivatives to assess their proper classification in the balance sheet as of December 31, 2017 using the applicable classification criteria enumerated under ASC 815 Derivatives and Hedging. The Company determined that certain embedded conversion and/or exercise features do not contain fixed settlement provisions. The convertible debentures contain a conversion feature such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands.

As such, the Company was required to record the derivatives which do not have fixed settlement provisions as liabilities and mark to market all such derivatives to fair value at the end of each reporting period.

Long-Lived Assets

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Intangible assets are stated at cost and reviewed annually to examine any impairments, usually assuming an estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Intangible assets are stated at cost and reviewed annually to examine any impairments, usually assuming an estimated useful lives of 3 to 5 years.When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.

Indefinite Lived Intangibles and Goodwill Assets

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the purchase acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.

Segment Reporting

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Chief Executive Officer, or decision-making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company’s core business.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Chief Executive Officer, or decision-making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company’s core business.

Net Earnings (Loss) Per Common Share

Net Earnings (Loss) Per Common Share

The Company computes earnings (loss) per share under ASC subtopic 260-10, Earnings Per Share. Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.

The computation of basic and diluted income (loss) per share as of March 31, 2018 and 2017 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:

	March 31, 2018		March 31, 2017
Common stock issuable upon conversion of convertible debentures		-		-
Options to purchase common stock		15,371,765		16,688,942
Warrants to purchase common stock		37,119,049		8,243,847
Totals		52,490,814		24,932,789

Net Earnings (Loss) Per Common Share

The Company computes earnings (loss) per share under ASC subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.

The computation of basic and diluted income (loss) per share as of December 31, 2017 and 2016 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows: 

	December 31, 2017		December 31, 2016
Common stock issuable upon conversion of convertible debentures		6,147,059		1,081,000
Options to purchase common stock		14,377,570		14,824,158
Warrants to purchase common stock		35,187,847		15,488,056
Totals		55,712,476		31,393,214

Reclassification

Reclassification

Certain reclassifications have been made to the prior years’ data to conform to the current year presentation. These reclassifications had no effect on reported income (losses).

Reclassification

Certain reclassifications have been made to the prior years’ data to conform to the current year presentation. These reclassifications had no effect on reported income (losses).

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Financial Accounting Standards Board (“FASB”) Accounting Standards Updates (“ASU”) 2017-04 (Topic 350), “Intangibles - Goodwill and Others” – Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company is currently evaluating the effect that ASU 2017-04 will have on our consolidated financial statements and related disclosures.

FASB ASU 2017-01 (Topic 805), “Business Combinations: Clarifying the Definition of a Business” – Issued in January 2017, ASU 2017-01 revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance became effective for the Company on January 1, 2018. The Company believes the standard did not have a material impact on its consolidated financial statements and related disclosures.

FASB ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” – Issued in August 2016, the amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, “Statement of Cash Flows”. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company believes the standard did not have a material impact on our condensed, consolidated financial statements and related disclosures.

FASB ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers” – Issued in May 2014, ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers using a five-step model that requires entities to exercise judgment when considering the terms of the contracts. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”. This amendment defers the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Gross versus Net)”, which amends the principal versus agent guidance and clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer. In addition, the FASB issued ASU Nos. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” and 2016-12, “Narrow-Scope Improvements and Practical Expedients”, both of which provide additional clarification of certain provisions in Topic 606. These ASC updates are effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. Early adoption is permitted only as of annual reporting periods after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method.

The Company applied the guidance using the modified retrospective transition method. The Company believes the adoption of ASU 2014-09 did not have a material impact on the Company’s financial position or results of operations but resulted in additional disclosures regarding the Company’s revenue recognition policies. Additionally, the Company has expanded its revenue recognition inquiries and update its questionnaires primarily to identify matters that would signal variable consideration implications under the new guidance. The Company also does not believe the adoption of ASU 2014-09 required material or significant changes to its internal controls over financial reporting.

FASB ASU No. 2014-15, “Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern, which is included in Accounting Standards Codification (ASC) 205, Presentation of Financial Statements” - Issued August 2014, this update provides an explicit requirement for management to assess an entity's ability to continue as an ongoing concern, and to provide related footnote disclosures in certain circumstances.

The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. The Company has adopted this standard, included the necessary disclosures in the footnotes to its financial statements, and does not believe such adoption has had a material impact on its financial statements.

FASB ASU 2016-02, Leases (Topic 842) - ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.

FASB ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” - The amendment is part of the FASB’s simplification initiative and is intended to simplify the accounting around share-based payment award transactions. The amendments include changing the recording of excess tax benefits from being recognized as a part of surplus capital to being charged directly to the income statement, changing the classification of excess tax benefits within the statement of cash flows, and allowing companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this standard has not had a material impact on the Company’s financial position and results of operations.

FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) – Adopted in November 2016, this ASU requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include cash and restricted cash equivalents. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s financial position and results of operations.

FASB Issued ASU No. 2014-09, (“ASU 606”), Revenue from Contracts with Customers – In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. The FASB also issued subsequent amendments to ASU 2014-09 to provide clarification on the guidance. ASU 2014-09 will be effective for annual periods beginning after December 15, 2017, which for us will be in the period beginning January 1, 2018. We have performed our detailed evaluation, using a five-step model specified in the guidance, to assess the impacts of the new standard.

● Under the new standard, revenue will be recognized when the Company satisfies its performance obligation by transferring promised products or services to its customer. The standard allows for application of the guidance to a portfolio of contracts or performance obligations with similar characteristics.

● The Company’s revenue recognition will be achieved upon delivery of advertising and listing services as there are no other promised services as part of the Company’s contracts with customers.

● To determine the amount of consideration which the Company expects to be entitled in exchange for transferring promised services, the Company has considered if variable consideration exists. The Company has reviewed its standard terms and conditions and its customary business practices to determine the transaction price. The Company has reviewed its pricing policies and strategies including marketing, loyalty and incentive programs for determining whether the Company has any variable or non-cash consideration. No material items were noted.

● The Company’s sales transactions do not require any additional performance obligation after delivery. Therefore, the Company does not have multiple performance obligations for which the Company will have to allocate the transaction price.

● The Company expects to recognize revenue upon delivery to the customer as its performance obligation will be satisfied at that point in time.

The Company expects to apply the guidance using the modified retrospective transition method. Based on the Company’s analysis performed to date, the Company does not expect the adoption of ASU 2014-09 will have a material impact on its financial position or results of operations but will result in additional disclosures regarding its revenue recognition policies. Additionally, the Company has expanded its revenue recognition inquiries and updated its questionnaires primarily to identify matters that would signal variable consideration implications and performance obligations under the new guidance. The Company also does not expect the adoption will require material or significant changes to its internal controls over financial reporting.

FASB issued ASU 2017-11, Earnings Per Share (“ASC 260”), Distinguishing Liabilities from Equity (“ASC 480”), and Derivatives and Hedging (“ASC 815”) - Adopted in July 2017, ASU No. 2017-11 is intended to simplify the accounting for financial instruments with characteristics of liabilities and equity. Among the issues addressed are: (i) determining whether an instrument (or embedded feature) is indexed to an entity’s own stock; (ii) distinguishing liabilities from equity for mandatorily redeemable financial instruments of certain nonpublic entities; and (iii) identifying mandatorily redeemable non-controlling interests. The Company adopted ASU No. 2017-11 as of January 1, 2018. The adoption of ASU No. 2017-11 has eliminated the derivative liabilities from the Company’s financial statements.

There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows. The Company implemented these standards using the modified retrospective transition method.

Recent Accounting Pronouncements

There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows.

Financial Accounting Standards Board (“FASB”) Accounting Standards Updates (“ASU”) 2017-04 (Topic 350), “Intangibles - Goodwill and Others” – Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company is currently evaluating the effect that ASU 2017-04 will have on our consolidated financial statements and related disclosures.

FASB ASU 2017-01 (Topic 805), “Business Combinations: Clarifying the Definition of a Business” – Issued in January 2017, ASU 2017-01 revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance will be effective for the Company in the first fiscal quarter of 2018 on a prospective basis, and early adoption is permitted. The Company does not expect the standard to have a material impact on our consolidated financial statements and related disclosures.

FASB ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” – Issued in August 2016, the amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, “Statement of Cash Flows”. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. The Company has not yet completed the analysis of how adopting this guidance will affect its consolidated financial statements and related disclosures.

FASB ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers” – Issued in May 2014, ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers using a five-step model that requires entities to exercise judgment when considering the terms of the contracts. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”. This amendment defers the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Gross versus Net)”, which amends the principal versus agent guidance and clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer. In addition, the FASB issued ASU Nos. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” and 2016-12, “Narrow-Scope Improvements and Practical Expedients”, both of which provide additional clarification of certain provisions in Topic 606. These ASC updates are effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. Early adoption is permitted only as of annual reporting periods after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method.

The Company expects to apply the guidance using the modified retrospective transition method. The Company does not expect the adoption of ASU 2014-09 to have a material impact on the Company’s financial position or results of operations but will result in additional disclosures regarding the Company’s revenue recognition policies. The Company also does not expect the adoption of ASU 2014-09 will require material or significant changes to its internal controls over financial reporting. In connection with the application of that guidance and the adoption of ASU 2014-09, the Company expects that it will expand its revenue recognition inquiries and update its questionnaires primarily to identify matters that would signal variable consideration implications under the new guidance.

FASB ASU No. 2014-15, “Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern, which is included in Accounting Standards Codification (ASC) 205, Presentation of Financial Statements” - Issued August 2014,this update provides an explicit requirement for management to assess an entity's ability to continue as an ongoing concern, and to provide related footnote disclosures in certain circumstances.

The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company has adopted this standard and included the necessary disclosures in the footnotes to our financial

FASB ASU 2016-02, Leases (Topic 842) - ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.

FASB ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” - The amendment is part of the FASB’s simplification initiative and is intended to simplify the accounting around share-based payment award transactions. The amendments include changing the recording of excess tax benefits from being recognized as a part of surplus capital to being charged directly to the income statement, changing the classification of excess tax benefits within the statement of cash flows, and allowing companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this standard has not had a material impact on the Company’s financial position and results of operations.

FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) – Adopted in November 2016, this ASU requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include cash and restricted cash equivalents. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.

There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows.

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NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Tables)

12 Months Ended

Dec. 31, 2017

Odava

Schedule of Business Acquisitions, by Acquisition

Cash (paid in December 2016)	$	60,000
3,250,000 shares of the Company’s common stock		2,883,220
Liabilities assumed		40,140
Total purchase price	$	2,983,360

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

Cash	$	2,601
Goodwill		2,004,219
Assets acquired	$	2,006,820

Business Acquisition, Pro Forma Information

	Twelve months ended December 31, 2017			Twelve months ended December 31, 2016
Total revenues	$	319,242		$	701,581
Net loss		(44,405,275	)		(18,030,668	)
Basic and diluted net loss per common share	$	(0.46	)	$	(0.34	)

DDDigital Inc.

Schedule of Business Acquisitions, by Acquisition

Cash (paid in December 2016)	$	60,000
2,926,830 shares of the Company’s common stock		2,883,220
Liabilities assumed		40,140
Total purchase price	$	2,983,360

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

Cash	$	8,672
Accounts receivable		3,583
Property and equipment		3,333
Goodwill		2,967,772
Assets acquired	$	2,983,360

Business Acquisition, Pro Forma Information

	Twelve months ended December 31, 2017			Twelve months ended December 31, 2016
Total revenues	$	319,242		$	740,264
Net loss		(44,389,569	)		(18,193,082	)
Basic and diluted net loss per common share	$	(0.46	)	$	(0.34	)

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Accounting Policies [Abstract]

Schedule of antidilutive securities excluded from computation of earnings per share

	March 31, 2018		March 31, 2017
Common stock issuable upon conversion of convertible debentures		-		-
Options to purchase common stock		15,371,765		16,688,942
Warrants to purchase common stock		37,119,049		8,243,847
Totals		52,490,814		24,932,789

	December 31, 2017		December 31, 2016
Common stock issuable upon conversion of convertible debentures		6,147,059		1,081,000
Options to purchase common stock		14,377,570		14,824,158
Warrants to purchase common stock		35,187,847		15,488,056
Totals		55,712,476		31,393,214

XML

Property and Equipment (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

	March 31, 2018			December 31, 2017
Computers	$	56,900		$	55,244
Office equipment		43,590			43,590
Subtotal		100,490			98,834
Less accumulated depreciation		(53,915	)		(43,688	)
Property and equipment, net	$	46,575		$	55,146

	December 31, 2017			December 31, 2016
Computers	$	55,244		$	72,124
Office equipment		43,590			36,850
Subtotal		98,834			108,974
Less accumulated depreciation		(43,688	)		(31,652	)
Property and equipment, net	$	55,146		$	77,322

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Software Costs (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Software Costs

Schedule of Software costs

Cash (paid in December 2016)	$	60,000
2,926,830 shares of the Company’s common stock		2,883,220
Liabilities assumed		40,140
Total purchase price	$	2,983,360
Cash	$	8,672
Accounts receivable		3,583
Property and equipment		3,333
Software		1,253,000	(1)
Goodwill		1,714,772
Assets acquired	$	2,983,360

(1) The estimated useful life for software development is assumed at 3 years. The acquisition was completed in January 2017, however the allocation of proceeds to identifiable assets was recognized during fourth quarter of 2017.

Cash (paid in December 2016)	$	60,000
2,926,830 shares of the Company’s common stock		2,883,220
Liabilities assumed		40,140
Total purchase price	$	2,983,360

Cash	$	8,672
Accounts receivable		3,583
Property and equipment		3,333
Software		1,253,000	(1)
Goodwill		1,714,772
Assets acquired	$	2,983,360

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DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Fair value of financial liabilities

	December 31, 2017			Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative liability	$	9,493,307	$	-		$                -		$	9,493,307

	December 31, 2016			Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative liability	$	1,301,138	$	-		$                -		$	1,301,138

Derivative Liabilities Assumptions Used

Balance, January 1, 2016		—
Transfers in to Level 3:		2,720,375
Transfers out due to conversions and payoffs		(2,001,149	)
Mark to market to December 31, 2016		581,912
Balance, December 31, 2016	$	1,301,138
Loss on change in warrant and derivative liabilities for the year ended December 31, 2016	$	(581,912	)

Balance, January 1, 2017	$	1,301,138
Transfers in due to issuance of liability warrants in connection with sale of common stock		1,003,870
Transfers in due to issuance of convertible notes and warrants with embedded conversion and
reset options		798,431
Transfers out due to warrant exercise		(610,967)
Mark to market to December 31, 2017		7,000,835
Balance, December 31, 2017	$	9,493,307
Loss on change in warrant liabilities for the twelve months ended December 31, 2017	$	(7,000,835	)

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Warrants (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Summary of Investments, Other than Investments in Related Parties [Abstract]

Schedule of stock warrants

		Warrants Outstanding			Warrants Exercisable
$	0.20		12,275,370	4.51		12,275,370
	0.40		18,700,000	4.81		18,700,000
	0.50		440,002	2.01		440,002
	0.60		50,000	2.01		50,000
	0.83		100,000	2.80		100,000
	0.90		5,000,002	1.50		5,000,002
	1.06		146,200	0.73		146,200
	3.00		407,475	0.61		407,475
			37,119,049			37,119,049

Warrants Outstanding				Warrants Exercisable
			Weighted
			Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Warrants	In Years	Warrants
$	0.20	17,855,500	4.69	17,855,500
	0.40	10,250,000	4.84	10,250,000
	0.50	936,670	2.25	936,670
	0.60	50,000	2.25	50,000
	0.83	100,000	3.10	100,000
	0.90	5,070,002	1.63	5,070,002
	1.00	372,000	0.25	372,000
	1.06	146,200	0.98	146,200
	3.00	407,475	0.86	407,475
		35,187,847		35,187,847

Schedule of stock warrant activity

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2017		35,187,847		$	0.41		2.3	$	9,314,959
Grants		13,950,000		$	0.40		4.8
Exercised		(11,646,798	)
Forfeited/Cancelled		(372,000	)	$
Vested and expected to vest at March 31, 2018		37,119,049		$	0.43		4.17
Exercisable at March 31, 2018		37,119,049		$	0.43		4.17	$	576,015

						Weighted-Average
				Weighted-Average		Remaining		Aggregate
	Shares			Exercise Price		Contractual Term		Intrinsic Value
Outstanding at January 1, 2016		9,018,609		$	0.42		2.26	$	6,857,509
Grants		13,164,340			0.72		2.51
Exercised		(6,734,893)			0.25
Forfeited/Cancelled		-
Outstanding at December 31, 2016		15,448,056		$	0.81		2.4	$	4,225,936
Grants		28,105,500			0.27		4.2		-
Exercised		(7,728,209	)		0.68
Forfeited/Cancelled		(637,520	)		0.62
Outstanding at December 31, 2017		35,187,847		$	0.41		2.3	$	9,314,959
Vested and expected to vest at December 31, 2017		35,187,847		$	0.41		2.3	$	9,314,959
Exercisable at December 31, 2017		35,187,847		$	0.41		2.3	$	9,314,959

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Stock Options (Tables)

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Employee Equity Incentive Plan Tables

Summary of terms issuances

Exercise Price		Number of Options		Vesting Terms
$	0.36		250,000	Immediately
	0.40		1,000,000	Immediately
	0.39		1,250,000	Immediately

Summary of stock options outstanding and exercisable

Exercise Price		Number of Options		Remaining Life In Years		Number of Options Exercisable
$	0 – 0.25		1,056,786		6.18		1,056,786
$	0.26 - 0.50		1,939,631		9.02		1,939,631
$	0.51 – 0.75		1,820,112		8.43		1,820,112
$	0.76 - 1.00		9,926,072		8.46		9,926,072
$	1.01 - 2.00		629,164		8.36		629,164
			15,371,765				15,371,765

Summary of stock option activity

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2017		14,378,432		$	0.76		8.48	$	771,359
Grants		1,250,000			0.39		9.80
Exercised		(256,667	)
Forfeiture/Canceled		--
Outstanding at March 31, 2018		15,371,765			0.73		8.37
Exercisable at March 31, 2018		15,371,765		$	0.73		8.37	$	156,299

Employee Equity Incentive Plan

Exercise		Number of		Vesting
Price		Options		Terms
$	0.50		80,000	Immediately
	0.50		100,000	Quarterly over one year
	0.50		605,000	Quarterly over two years
	0.81		5,000	Immediately
	0.82		150,000	Quarterly over two years
	0.85		150,000	Quarterly over one year
	0.87		125,000	Immediately
	0.89		425,000	Monthly over one year
	0.89		90,000	Quarterly over two years
	0.95		400,000	Quarterly over two years
	0.98		24,000	Monthly over two years
	1.05		50,000	Immediately
	1.05		95,000	Monthly over two years
	1.05		60,000	Monthly over one year
	1.06		60,000	Monthly over one year
	1.07		110,000	Monthly over one year
	1.07		325,000	Monthly over two years
	0.83		2,854,000

Employee stock option activity

Exercise		Number of		Remaining Life		Number of
Price		Options		In Years		Options Exerciseable
$	0.10		1,056,786		6.43		1,056,786
$	0.50		689,631		7.74		689,631
$	0.51 - 0.75		2,076,779		8.69		1,996,779
$	0.76 - 1.00		9,926,072		8.70		9,233,070
$	1.01 - 2.00		629,164		8.61		629,164
			14,378,432				13,605,430

Fair value of granted options

						Weighted-Average
				Weighted-Average		Remaining		Aggregate
	Shares			Exercise Price		Contractual Term		Intrinsic Value
Outstanding at December 31, 2015		5,625,000		$	0.59		9.30	$	61,875
Grants		9,958,031			0.78		9.84
Exercised		(636,780)			0.50		8.80
Forfeiture/Cancelled		(122,093)			0.55		8.80
Outstanding at December 31, 2016		14,824,158		$	0.52		9.37	$	4,566,717
Grants		2,854,000			0.50		9.60		-
Exercised		(436,011	)		0.16		8.80
Forfeiture/Canceled		(2,863,715	)	$	0.73		8.80		-
Outstanding at December 31, 2017		14,378,432		$	0.76		8.48	$	771,359
Exercisable at December 31, 2017		13,605,430		$	0.76		8.50	$	646,109

XML

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2017

Income Taxes Tables

Income Taxes

	207		2016
Non-Current deferred tax asset:
Net operating loss carry-forwards	11,090,000		4,946,000
Valuation allowance	(11,090,000	)	(4,946,000	)
Net non-current deferred tax asset	—		—

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NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Details) - Schedule of Business Acquisitions, by Acquisition - USD ($)		12 Months Ended
	Dec. 15, 2016	Dec. 31, 2017
Cash (paid in December 2016)	$ 60,000
Shares of the Company’s common stock	2,883,220
Liabilities assumed	40,140
Total purchase price	$ 2,983,360
Odava
Cash (paid in December 2016)		$ 40,570
Shares of the Company’s common stock		1,966,250
Total purchase price		2,006,820
DDDigital Inc.
Cash (paid in December 2016)		60,000
Shares of the Company’s common stock		2,883,220
Liabilities assumed		40,140
Total purchase price		$ 2,983,360

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NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Details) - Schedule of Recognized Identified Assets Acquired and Liabilities - USD ($)	Dec. 31, 2017	Dec. 15, 2016
Cash		$ 8,672
Accounts receivable		3,583
Property and equipment		3,333
Goodwill		$ 1,714,772
Odava
Cash	$ 2,601
Goodwill	2,004,219
Assets acquired	2,006,820
DDDigital Inc.
Cash	8,672
Accounts receivable	3,583
Property and equipment	3,333
Goodwill	2,967,772
Assets acquired	$ 2,983,360

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NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Details) - Business Acquisition, Pro Forma Information - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Odava
Total revenues	$ 319,242	$ 701,581
Net loss	$ (44,405,275)	$ (18,030,668)
Basic and diluted net loss per common share (in Dollars per share)	$ (0.46)	$ (0.34)
DDDigital Inc.
Total revenues	$ 319,242	$ 740,264
Net loss	$ (44,389,569)	$ (18,193,082)
Basic and diluted net loss per common share (in Dollars per share)	$ (0.46)	$ (0.34)

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Going Concern and Management's Liquidity Plans (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Going Concern and Management's Liquidity Plans (Textual)
Cash	$ 674,776	$ 2,228,708	$ 1,201,587	$ 374,490	$ 386,316
Working capital deficit	1,461,669
Net cash in operating activities	(3,535,373)	(2,473,430)	(7,997,465)	(6,182,816)
Proceeds from exercise of common stock warrants	63,000
Proceeds from sale of common stock	3,304,000		$ 2,676,644	$ 5,000,275
Proceeds from advances	$ 397,500	$ 6,504

XML

Summary of Significant Accounting Policies (Details) - shares	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Dec. 31, 2016
Summary Of Significant Accounting Policies Details
Common stock issuable upon conversion of convertible debentures			6,147,059	1,081,000
Options to purchase common stock	15,371,765	16,688,942	14,377,570	14,824,158
Warrants to purchase common stock	37,119,049	8,243,847	35,187,847	15,488,056
Totals	52,490,814	24,932,789	55,712,476	31,393,214

XML

Summary of Significant Accounting Policies (DetailsTextual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Dec. 31, 2016
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful lifes	3 years
Advertising	$ 64,577	$ 193,431	$ 960,239	$ 985,342
Property and Equipment [Member] | Maximum [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful lifes	5 years
Property and Equipment [Member] | Minimum [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful lifes	3 years
Long-Lived Assets [Member] | Maximum [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful lifes	5 years
Long-Lived Assets [Member] | Minimum [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful lifes	3 years

XML

Investments (Details) - USD ($)

3 Months Ended

12 Months Ended

Jan. 15, 2018

Jul. 17, 2017

Jul. 13, 2017

Mar. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Investments (Textual)

Investments

$ 403,248

Percentage of voting cost method investment

20.00%

Shares issued of common stock, value

$ 1,672,774

$ 5,000,275

Class A common stock [Member ]

Investments (Textual)

Shares issued of common stock

45,974

23,810

Shares issued of common stock, value

$ 100,002

Share price

$ 4.20

Stock split of mass roots

Each one share of common stock was exchanged for 1.93 shares of common stock.

Cannaregs [Member]

Investments (Textual)

Principal amount of note

$ 300,000

Note bears interest rate

5.00%

Maturity date of note

Dec. 19, 2019

Financing excess of notes

$ 2,000,000

Description of debt conversion

a) 90% of the price paid per equity security or b) a price reflecting a valuation cap of $4,500,000.

Debt conversion shares issued

430,622

Debt conversion instrument, rate

4.31%

DDDigtal [Member]

Investments (Textual)

Stock split of mass roots

The Company’s common stock (or a fraction thereof), based upon an exchange ratio equal to approximately 5.273-for-1, such that 1 share of the Company’s common stock was issued for every 5.273 shares of DDDigtal’s common stock.

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Property and Equipment (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Property and equipment, gross	$ 100,490	$ 98,834	$ 108,974
Less accumulated depreciation	(53,915)	(43,688)	31,652
Property and equipment, net	46,575	55,146	77,322
Office Equipment
Property and equipment, gross	43,590	43,590	36,850
Computers
Property and equipment, gross	$ 56,900	$ 55,244	$ 72,124

XML

Property and Equipment (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Dec. 31, 2016
Property and Equipment (Textual)
Depreciation expense	$ 10,226	$ 5,776	$ 416,253	$ 19,451

XML

Software Costs (Details)	Dec. 15, 2016 USD ($)
Software Costs
Cash (paid in December 2016)	$ 60,000
2,926,830 shares of the Company's common stock	2,883,220
Liabilities assumed	40,140
Total purchase price	2,983,360
Cash	8,672
Accounts receivable	3,583
Property and equipment	3,333
Software	1,253,000	[1]
Goodwill	1,714,772
Assets acquired	$ 2,983,360

[1] The estimated useful life for software development is assumed at 3 years. The acquisition was completed in January 2017, however the allocation of proceeds to identifiable assets was recognized during fourth quarter of 2017.

XML

Software Costs (Details Textual) - USD ($)

3 Months Ended

Dec. 15, 2016

Mar. 31, 2018

Software Costs (Textual)

Company paid cash consideration

$ 2,983,360

Estimated useful life for software development

3 years

Additional amount paid one-year anniversary of his constant employment

40,140

Software development useful life

3 years

Micah Davidson[Member]

Software Costs (Textual)

Company paid cash consideration

20,000

Zachary Marburger [Member]

Software Costs (Textual)

Company paid cash consideration

40,000

Additional amount paid one-year anniversary of his constant employment

$ 40,000

DDDigtal [Member]

Software Costs (Textual)

Stock split of common stock

The Company’s common stock (or a fraction thereof), based upon an exchange ratio equal to approximately 5.273-for-1, such that 1 share of the Company’s common stock was issued for every 5.273 shares of DDDigtal’s common stock.

Shares issued of common stock

2,926,830

XML

Convertible Notes Payable (Details) - USD ($)

1 Months Ended

3 Months Ended

Jan. 16, 2018

Aug. 17, 2017

Mar. 31, 2018

Convertible Notes Payable (Textual)

Warrants issued to purchase shares of common stock

2,090,000

Warrants term

5 years

Warrants exercise price

$ 0.50

Holderss [Member]

Convertible Notes Payable (Textual)

Description of debt conversion

(i) an aggregate of $510,937.50 in cash and (ii) an aggregate of 3,742,648 shares of the Company’s common stock pursuant to the conversion features of the notes.

Accredited investors Member

Convertible Notes Payable (Textual)

Aggregate principal amount

$ 1,045,000

Notes mature date

Feb. 18, 2018

Net proceeds received amount

$ 942,500

Description of debt conversion

The Company desires to prepay, multiplied by (a) 1.1, during the first ninety days after the issuance of the note, or (b) 1.25, at any point thereafter. The notes are convertible into shares of the Company’s common stock at a price per share equal to the lower of (i) $0.75 or (ii) a 25% discount to the price at which the Company next conducts an offering after the issuance date of the notes; provided, however, if any part of the principal amount of the notes remains unpaid at its maturity date, the conversion price will be equal to 65% of the average of the three trading days with the lowest daily weighted average prices of the Company’s common stock occurring during the fifteen days prior to the notes’ maturity date.

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Capital Stock (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Capital Stock (Textual)
Series A preferred stock, shares authorized	21	21
Series A preferred stock, par value	$ 1.00	$ 1.00
Series A preferred stock, shares issued	0	0
Series A preferred Stock, shares outstanding	0	0
Common stock, Par value	$ 0.001	$ 0.001	$ 0.001
Common stock, Shares authorized	200,000,000	200,000,000	200,000,000
Common stock, Shares issued	153,944,886	112,165,839	71,908,370
Common stock, Shares outstanding	153,944,886
Common stock issued in settlement of convertible notes, shares		6,147,059	1,081,000
Common stock issued upon exercise of warrants for cash, amount		$ 4,759,762	$ 1,133,494
Subscription receivable		$ 564,000
Common Stock
Capital Stock (Textual)
Shares of common stock issued		14,362,500	10,350,376
Shares of common stock recorded as retired		1,790,000
Shares of common stock for services		21,000,898	4,225,675
Common stock issued upon cashless exercise of options, shares	$ 95
Common shares issued upon cashless exercise of warrants, shares	7,104,765
Common stock issued in settlement of convertible notes, shares	3,742,648
Common stock issued upon exercise of warrants, shares		7,033,041	5,242,393
Common stock issued upon exercise of warrants for cash, amount	$ 63,000	$ 7,033	$ 5,242
Common stock issued for cash, shares	13,700,000
Common stock issued for cash, amount	$ 2,740,000

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DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Derivative liability	$ 9,493,307	$ 1,301,138
Fair Value, Inputs, Level 3 [Member]
Derivative liability	9,493,307	1,301,138
Fair Value, Inputs, Level 2 [Member]
Derivative liability
Fair Value, Inputs, Level 1 [Member]
Derivative liability

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DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS (Details 1) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Notes to Financial Statements
Beginning Balance	$ 1,301,138
Transfers	1,191,334	$ 719,226
Mark-to-market	7,000,835	581,912
Ending Balance	$ 9,493,307	$ 1,301,138

XML

Warrants (Details) - $ / shares	1 Months Ended	3 Months Ended	12 Months Ended
	Jan. 31, 2018	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Warrants Outstanding		37,119,049		15,448,056	9,018,609
Number of Warrant, Outstanding			35,187,847
Warrants Exercisable		37,119,049	35,187,847
Remaining Life In Years				2 years 3 months 19 days
Warrant 1 [Member]
Exercise Price per share, Outstanding			$ 0.2
Number of Warrant, Outstanding			17,855,500
Remaining Life in Years, Outstanding			4 years 8 months 9 days
Warrants Exercisable			17,855,500
Warrant 2 [Member]
Exercise Price per share, Outstanding			$ 0.4
Number of Warrant, Outstanding			10,250,000
Remaining Life in Years, Outstanding			4 years 10 months 3 days
Warrants Exercisable			10,250,000
Warrant 3 [Member]
Exercise Price per share, Outstanding			$ 0.5
Number of Warrant, Outstanding			936,670
Remaining Life in Years, Outstanding			2 years 2 months 30 days
Warrants Exercisable			936,670
Warrant 8 [Member]
Exercise Price per share, Outstanding			$ 1.06
Number of Warrant, Outstanding			146,200
Remaining Life in Years, Outstanding			11 months 23 days
Warrants Exercisable			146,200
Warrant 9 [Member]
Number of Warrant, Outstanding			407,475
Remaining Life in Years, Outstanding			10 months 10 days
Warrants Exercisable			407,475
Warrant 4 [Member]
Exercise Price per share, Outstanding			$ 0.6
Number of Warrant, Outstanding			50,000
Warrants Exercisable			50,000
Warrant 4 [Member]
Remaining Life in Years, Outstanding			2 years 2 months 30 days
Warrant 5 [Member]
Exercise Price per share, Outstanding			$ 0.83
Number of Warrant, Outstanding			100,000
Remaining Life in Years, Outstanding			3 years 1 month 6 days
Warrants Exercisable			100,000
Warrant 6 [Member]
Exercise Price per share, Outstanding			$ 0.9
Number of Warrant, Outstanding			5,070,002
Remaining Life in Years, Outstanding			1 year 7 months 17 days
Warrants Exercisable			5,070,002
Warrant 7 [Member]
Exercise Price per share, Outstanding			$ 1
Number of Warrant, Outstanding			372,000
Remaining Life in Years, Outstanding			2 months 30 days
Warrants Exercisable			372,000
Warran [Member]
Remaining Life in Years, Outstanding	5 years
Warrants Exercisable		37,119,049	35,187,847
Warrants Outstanding, Execrise Price	$ 0.20
Remaining Life In Years		2 years 3 months 19 days
Warran [Member] | 4.51 [Member]
Warrants Exercisable		12,275,370
Remaining Life In Years		4 years 6 months 3 days
Warran [Member] | 4.81 [Member]
Warrants Exercisable		18,700,000
Remaining Life In Years		4 years 9 months 22 days
Warran [Member] | 2.01 [Member]
Warrants Exercisable		440,002
Remaining Life In Years		2 years 4 days
Warran [Member] | TwoPointOnesMember
Warrants Exercisable		50,000
Remaining Life In Years		2 years 4 days
Warran [Member] | 2.80 [Member]
Warrants Exercisable		100,000
Remaining Life In Years		2 years 9 months 18 days
Warran [Member] | 1.50 [Member]
Warrants Exercisable		5,000,002
Remaining Life In Years		1 year 6 months
Warran [Member] | 0.73 [Member]
Warrants Exercisable		146,200
Remaining Life In Years		8 months 23 days
Warran [Member] | 0.61 [Member]
Warrants Exercisable		407,475
Remaining Life In Years		7 months 10 days
Warran [Member] | 0.20 [Member]
Warrants Outstanding		12,275,370
Warrants Outstanding, Execrise Price		$ 0.20
Warran [Member] | 0.40 [Member]
Warrants Outstanding		18,700,000
Warrants Outstanding, Execrise Price		$ 0.40
Warran [Member] | ZeroPointFiveZeroMember
Warrants Outstanding		440,002
Warrants Outstanding, Execrise Price		$ 0.50
Warran [Member] | 0.60 [Member]
Warrants Outstanding		50,000
Warrants Outstanding, Execrise Price		$ 0.60
Warran [Member] | 0.83 [Member]
Warrants Outstanding		100,000
Warrants Outstanding, Execrise Price		$ 0.83
Warran [Member] | 0.90 [Member]
Warrants Outstanding		5,000,002
Warrants Outstanding, Execrise Price		$ 0.90
Warran [Member] | 1.06 [Member]
Warrants Outstanding		146,200
Warrants Outstanding, Execrise Price		$ 1.06
Warran [Member] | 3.00 [Member]
Warrants Outstanding		407,475
Warrants Outstanding, Execrise Price		$ 3.00

XML

Warrants (Details 1) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Shares, Outstanding at December 31, 2017	35,187,847
Shares, Granted			13,164,340
Shares, Exercised			(6,734,893)
Shares, Exercisable at March 31, 2018	37,119,049	35,187,847
Balance at beginning		$ 0.27	$ 0.72
Weighted-Average Exercise Price, Granted			0.25
Weighted-Average Exercise Price, Cancelled			$ 0.81
Weighted-Average Remaining Contractual Term, Outstanding at December 31, 2017			2 years 3 months 19 days
Common Stock
Shares, Exercised	(95,134)
Warran [Member]
Shares, Outstanding at December 31, 2017	35,187,847
Shares, Granted	13,950,000
Shares, Exercised	(11,646,798)
Shares, Forfeited/Cancelled	(372,000)
Shares, Vested and expected to vest at March 31, 2018	37,119,049
Shares, Exercisable at March 31, 2018	37,119,049	35,187,847
Weighted-Average Exercise Price, Granted	$ 0.40
Weighted-Average Remaining Contractual Term, Outstanding at December 31, 2017	2 years 3 months 19 days
Weighted-Average Remaining Contractual Term, Grants	4 years 9 months 18 days
Weighted-Average Remaining Contractual Term, Vested and expected to vest at March 31, 2018	4 years 2 months 1 day
Weighted-Average Remaining Contractual Term, Exercisable at March 31, 2018	4 years 2 months 1 day

XML

Warrants (Details Textual) - USD ($)

1 Months Ended

3 Months Ended

Jan. 31, 2018

Mar. 31, 2018

Warrants (Textual)

Warrants, description

The aggregate intrinsic value outstanding stock warrants was $576,015, based on warrants with an exercise price less than the Company’s stock price of $0.25 as of March 31, 2018.

Warran [Member]

Warrants (Textual)

Warrants to purchase shares of common stock

250,000

Warrants to purchase per share

$ 0.20

Estimated fair value of operations

$ 86,483

Risk-free interest

2.49%

Dividend yield

0.00%

Volatility

112.14%

Expected life

5 years

Warrants, description

In conjunction with the sale of the Company’s common stock, the Company granted warrants to purchase up to 13,700,000 shares of the Company’s common stock at an exercise price of $0.40 per share, exercisable through January 31, 2023.

XML

STOCK WARRANTS (Details 1) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Warrants-Number of Shares
Balance at beginning		15,448,056	9,018,609
Granted			13,164,340
Exercised			(6,734,893)
Cancelled
Balance at end	37,119,049		15,448,056
Warrants Outstanding-Weighted Average Exercise Price
Balance at beginning		$ 0.27	$ 0.72
Granted			0.25
Cancelled			0.81
Balance at end			$ 0.27
Exercisable December 31, Shares			0.68
Exercisable December 31, Exercise Price			$ 0.62
Weighted Average Remaining Contractual Term			2 years 3 months 19 days
Warrants
Warrants-Number of Shares
Balance at beginning	35,187,847	15,448,056
Granted		28,105,500
Exercised		(7,388,730)
Cancelled		(976,999)
Balance at end		35,187,847	15,448,056
Warrants Outstanding-Weighted Average Exercise Price
Balance at beginning	$ 0.41	$ 0.81
Granted		0.27
Exercised		0.68
Cancelled		0.62
Balance at end		$ 0.41	$ 0.81
Exercisable December 31, Shares		35,187,847
Exercisable December 31, Exercise Price		$ 0.41
Weighted Average Remaining Contractual Term		2 years 3 months 19 days

XML

Stock Options (Details) - $ / shares

3 Months Ended

Mar. 31, 2018

Dec. 31, 2016

Dec. 31, 2015

Exercise Price

$ 0.27

$ 0.72

Number of Options

37,119,049

15,448,056

9,018,609

Stock Options [Member] | ZeroPointFourZroMember | Issuances [Member]

Exercise Price

$ 0.40

Number of Options

1,000,000

Vesting Terms

Immediately

Stock Options [Member] | 0.39 [Member] | Issuances [Member]

Exercise Price

$ 0.39

Number of Options

1,250,000

Vesting Terms

Immediately

Stock Options [Member] | 0.36 [Member] | Issuances [Member]

Exercise Price

$ 0.36

Number of Options

1,000,000

Vesting Terms

Immediately

XML

Stock Options (Details 1) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Number of Options	37,119,049		15,448,056	9,018,609
Remaining Life In Years			2 years 3 months 19 days
Number of Options Exercisable	37,119,049	35,187,847
Stock Options [Member]
Number of Options	15,371,765	14,378,432
Remaining Life In Years	8 years 4 months 13 days	8 years 5 months 23 days
Number of Options Exercisable	15,371,765
Stock Options [Member] | 0 - 0.25 [Member]
Number of Options	1,056,786
Remaining Life In Years	6 years 2 months 5 days
Number of Options Exercisable	1,056,786
Stock Options [Member] | 0.26 - 0.50 [Member]
Number of Options	1,939,631
Remaining Life In Years	9 years 7 days
Number of Options Exercisable	1,939,631
Stock Options [Member] | 0.50 [Member]
Number of Options	1,820,112
Remaining Life In Years	8 years 5 months 5 days
Number of Options Exercisable	1,820,112
Stock Options [Member] | 0.76 - 1.00 [Member]
Number of Options	629,164
Remaining Life In Years	8 years 4 months 9 days
Number of Options Exercisable	629,164
Stock Options [Member] | 1.01 - 2.00 [Member]
Number of Options	9,926,072
Remaining Life In Years	8 years 5 months 16 days
Number of Options Exercisable	9,926,072
Stock Options [Member] | Maximum [Member] | 0 - 0.25 [Member]
Exercise Price	$ 0.25
Stock Options [Member] | Maximum [Member] | 0.26 - 0.50 [Member]
Exercise Price	0.50
Stock Options [Member] | Maximum [Member] | 0.50 [Member]
Exercise Price	0.75
Stock Options [Member] | Maximum [Member] | 0.76 - 1.00 [Member]
Exercise Price	2.00
Stock Options [Member] | Maximum [Member] | 1.01 - 2.00 [Member]
Exercise Price	1.00
Stock Options [Member] | Minimum [Member] | 0 - 0.25 [Member]
Exercise Price	0
Stock Options [Member] | Minimum [Member] | 0.26 - 0.50 [Member]
Exercise Price	0.26
Stock Options [Member] | Minimum [Member] | 0.50 [Member]
Exercise Price	0.51
Stock Options [Member] | Minimum [Member] | 0.76 - 1.00 [Member]
Exercise Price	1.01
Stock Options [Member] | Minimum [Member] | 1.01 - 2.00 [Member]
Exercise Price	$ 0.76

XML

Stock Options (Details 2) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Balance at beginning		15,448,056	9,018,609
Shares, Granted			13,164,340
Shares, Exercised			(6,734,893)
Balance at end	37,119,049		15,448,056
Shares, Exercisable at March 31, 2018	37,119,049	35,187,847
Balance at beginning		$ 0.27	$ 0.72
Weighted-Average Exercise Price, Granted			0.25
Weighted-Average Exercise Price, Forfeiture/Canceled			0.81
Balance at end			$ 0.27
Remaining Life In Years			2 years 3 months 19 days
Stock Options [Member]
Balance at beginning	14,378,432
Shares, Granted	1,250,000
Shares, Exercised	(256,667)
Balance at end	15,371,765	14,378,432
Shares, Exercisable at March 31, 2018	15,371,765
Balance at beginning	$ 0.76
Weighted-Average Exercise Price, Granted	0.39
Balance at end	0.73	$ 0.76
Weighted-Average Exercise Price, Exercisable at March 31, 2018	$ 0.73
Remaining Life In Years	8 years 4 months 13 days	8 years 5 months 23 days
Weighted-Average Remaining Contractual Term, Grants	9 years 9 months 18 days
Weighted-Average Remaining Contractual Term, Exercisable at March 31, 2018	8 years 4 months 13 days
Aggregate Intrinsic Value, Outstanding at December 31, 2017	$ 771,359
Aggregate Intrinsic Value, Exercisable at March 31, 2018	156,299
Plan
Aggregate Intrinsic Value, Outstanding at December 31, 2017	$ 156,299

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Stock Options (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Number of shares reserved for issuance, description	The Company had granted an aggregate of 39,500,000 securities under the plans, with 0 available for future issuances.
Options to purchase of common stock	15,371,765	16,688,942	14,377,570	14,824,158
Options outstanding	37,119,049			15,448,056	9,018,609
Plan
Risk-free interest	2.78%
Dividend yield	0.00%
Volatility	116.08%
Options to purchase of common stock	1,250,000
Fair value options to purchase of common stock	$ 459,834
Aggregate intrinsic value outstanding stock options	$ 156,299
Stock price	$ 0.25
Corrections of prior year errors in current year, description	Due to a clerical error, MassRoots’ Annual Report on Form 10-K filed on April 17, 2018, as amended on April 30, 2018, stated that 2,454,761 options were canceled/expired for the twelve months ending December 31, 2017 and the options outstanding as of December 31, 2017 were 14,377,570. It should have stated that 2,863,715 options were canceled/expired for the twelve months ending December 31, 2017 and the options outstanding as of December 31, 2017 were 14,378,432. While we are correcting this error in this Quarterly Report on Form 10-Q and subsequent filings, we do not believe it has a material impact on our fiscal 2017 financial statements.
Plan | Minimum [Member]
Expected life	5 years
Plan | Maximum [Member]
Expected life	10 years
Stock Options [Member]
Aggregate intrinsic value outstanding stock options	$ 771,359
Options outstanding	15,371,765		14,378,432

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EMPLOYEE EQUITY INCENTIVE PLAN (Details) - $ / shares	12 Months Ended
	Dec. 31, 2017	Mar. 31, 2018
Number of Options, Outstanding	35,187,847
Warrants Exercisable	35,187,847	37,119,049
Option 2
Exercise Price per Option, Outstanding	$ 0.5
Number of Options, Outstanding	689,631
Remaining Life in Years, Outstanding	8 years
Warrants Exercisable	689,631
Option 3
Exercise Price per Option, Outstanding	$ 0.75
Number of Options, Outstanding	2,076,779
Remaining Life in Years, Outstanding	9 years
Warrants Exercisable	1,996,779
Option 4
Exercise Price per Option, Outstanding	$ 1.0
Number of Options, Outstanding	9,926,072
Remaining Life in Years, Outstanding	9 years
Warrants Exercisable	9,233,070
Option 5
Exercise Price per Option, Outstanding	$ 2.0
Number of Options, Outstanding	629,164
Remaining Life in Years, Outstanding	9 years
Warrants Exercisable	629,164
Option 1
Exercise Price per Option, Outstanding	$ 0.1
Number of Options, Outstanding	1,056,786
Remaining Life in Years, Outstanding	6 years 5 months 5 days
Warrants Exercisable	1,056,786
Stock Options
Number of Options, Outstanding	14,378,432
Warrants Exercisable	13,605,430

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EMPLOYEE EQUITY INCENTIVE PLAN (Details 1) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Options Outstanding-Number of Shares
Balance at beginning		15,448,056	9,018,609
Granted			13,164,340
Exercised			6,734,893
Cancelled
Balance at end	37,119,049		15,448,056
Options Outstanding-Weighted Average Exercise Price
Balance at beginning		$ 0.27	$ 0.72
Granted			0.25
Cancelled			0.81
Balance at end			$ 0.27
Remaining Life In Years			2 years 3 months 19 days
Employee Stock Options
Options Outstanding-Number of Shares
Balance at beginning	14,378,432	14,824,158	5,625,000
Granted		2,854,000	9,958,031
Exercised		(436,011)	(636,780)
Cancelled		(2,863,715)	(122,093)
Balance at end		14,378,432	14,824,158
Options Outstanding-Weighted Average Exercise Price
Balance at beginning	$ 0.76	$ 0.52	$ 0.59
Granted		0.5	0.78
Exercised		0.16	0.5
Cancelled		0.73	0.55
Balance at end		$ 0.76	$ 0.52
Remaining Life In Years		8 years 5 months 23 days	8 years 6 months
Exercisable at December 31		8 years 6 months	8 years 6 months

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INCOME TAXES (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Non-Current deferred tax asset:
Net operating loss carry-forwards	$ 11,090,000	$ 4,946,000
Valuation allowance	(11,090,000)	(4,946,000)
Net non-current deferred tax asset

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Subsequent Events (Details)	2 Months Ended
	May 16, 2018 shares
Subsequent Events [Member]
Subsequent Events (Textual)
Shares of common stock upon cashless exercise of warrants	542,648