POSaBIT has reached a deal with Akerna to acquire three cannabis compliance companies in an all-cash deal, broadening the suite of software products it sells to marijuana merchants in the U.S. and Canada.
The Seattle-area financial tech business will pay $4 million to purchase 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, expected to go through in Q2, will grow POSaBIT’s current workforce of 60 to about 100 employees. It will also obtain more than 350 new clients, growing its total customer base to nearly 900.
POSaBIT, headquartered in Kirkland, Wash., debuted on the Canadian Stock Exchange in 2019 through a reverse takeover of publicly traded Foreshore Exploration Partners Corp. Its stock trades on the OTCQX over-the-counter market in the U.S.
POSaBIT’s stock was trading higher Friday on the news, up nearly 30% for the day.
The new software components will integrate alongside POSaBIT’s point-of-sale (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 lifecycle” from being planted to sold as a marijuana product in a dispensary, CEO Ryan Hamlin told Startup.
The goal is to sell an all-in-one product that helps suppliers and distributors adhere to traceability laws around cannabis production and commerce, he said. “It’s a matter of connecting the systems up so you truly have full visibility,” he added.
The acquisition comes at a time when the U.S. 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 retailers because it is still not federally legal. Lawmakers tried to loosen these barriers through the Secure and Fair Banking Act (SAFE), but it failed to pass in Congress last month.
“I think the general thinking was SAFE was going to make it through, particularly [in the] 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 being cracked down on by large ATM companies, to its PIN debit system, which is compliant with local and federal regulations.
The company reported a net loss of about $1.2 million in Q3, with a cash balance of $8.2 million. It forecast revenue of $37-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 for 2022. Hamlin said the newly added companies will add to the company’s overall EBITDA, helping to maintain its goal of being profitable in 2023.
Story updated with stock movement information.