POSaBIT has reached an agreement with Akerna to acquire three cannabis compliance companies in an all-cash deal, expanding the suite of software products it sells to marijuana dealers in the US and Canada.
The Seattle-area financial technology business will pay $4 million to acquire MJ Platform, Leaf Data Systems and Ample Organics. As part of the transaction, POSaBIT raised $11 million through a mix of debt and equity financing from Perga Capital.
The acquisition, which is expected to be completed in Q2, will increase POSaBIT’s current workforce of 60 to around 100 employees. It will also gain more than 350 new customers, increasing its total customer base to nearly 900.
POSaBIT debuted on the Canadian stock exchange in 2019 through a reverse takeover of publicly traded Foreshore Exploration Partners Corp.
The new software components will be integrated with POSaBIT’s POS systems, bringing so-called “seed-to-sale” data to the company’s customers. The new system will be able to track a cannabis seed’s “entire life cycle” from being planted to being sold as a marijuana product in a dispensary, CEO Ryan Hamlin told GeekWire.
The goal is to sell an all-in-one product that helps suppliers and distributors comply with the traceability laws surrounding cannabis production and trade, he said. “It’s a matter of connecting the systems so that you really have full visibility,” he added.
The acquisition comes at a time when the US cannabis payments market is in a state of turmoil due to ongoing regulatory hurdles. Many credit card companies and national banks refuse to work with cannabis dealers because it is still not federally legal. Lawmakers tried to loosen those barriers through the Secure and Fair Banking Act (SAFE), but it failed to pass Congress last month.
“I think the general mindset was SAFE was going to be fine, especially this lame duck session,” Hamlin said. “And given that it didn’t, I think we as an industry probably took a step back.”
In 2019, POSaBIT first emerged with its blockchain-based POS terminal, raising $2.1 million to help cannabis companies accept non-cash payments. It has moved most of its customers away from a point-of-banking model, which is frowned upon by major ATM companies, to the PIN debit system, which complies with local and federal regulations.
The company reported a net loss of about $1.2 million in the third quarter, with a cash balance of $8.2 million. It forecast revenues of $37 million to $40 million for 2022.
POSaBIT expects its three new companies to have generated $11 million in revenue and $6.8 million in gross profit by 2022. Hamlin said the newly added companies will increase the company’s overall EBITDA, helping to maintain its goal of being profitable in 2023.
