Kirkland-based cannabis payments company POSaBIT Inc. is raising almost $3.8 million through a private placement.
The company announced on Tuesday it is selling over 5.86 million units of the company through private placement for a total of $3.63 million. POSaBIT said existing investors will also exercise 600,063 previously issued common share purchase warrants, giving the company an additional amount of more than $154,000.
“The completion of this financing will strengthen our balance sheet and reflects our strong position in the market,” co-founder and CEO Ryan Hamlin said in a news release. “A majority of the funding is from existing institutional investors that understand the growth prospects and trajectory of the company. These investors have made a strong commitment to management and believe that we will continue to execute on our plan."
POSaBIT, which was founded in 2015, had raised less than $10 million before the private placement, Hamlin said. As of April, the company was operating in 18 states, including Washington, Oregon and California. In the release, Hamlin said the company plans to launch in eight states by the end of the year. POSaBIT's revenue guidance for the year is between $37 million and $40 million.
In 2019, POSaBIT went public on the Canadian Securities Exchange under the ticker symbol PBIT. The company's stock is down more than 70% since early November.
POSaBIT's technology allows cannabis dispensaries to accept debit card and ACH payments, a challenging proposition since cannabis is still federally illegal and a difficult target for traditional financial institutions to serve. The company also offers a mobile point-of-sale solution so cannabis customers don't have to pay at the counter, and its software system helps dispensaries manage their stores.
In the company's first quarter earnings call in May, Hamlin said the company was considering uplisting on the Nasdaq, but uncertainty around cannabis's federal status has put conversations at a standstill. The Secure and Fair Enforcement (SAFE) Banking Act, a move to allow lenders to work with legitimate cannabis businesses, was initially put into the annual U.S. military spending bill before getting removed in December. Supporters wanted some kind of reform now, while opponents wanted more comprehensive reform like full federal legalization.
"It's a very unique situation when you take a company like ours and you go to Nasdaq to get uplisted," Hamlin said on the call. "We've engaged. We've had multiple conversations. We continue to do so. But in the meantime, we have to kind of wait to see how it plays out. And we think the combination of SAFE Banking and of course legalization changes it, and makes it almost immediate for us to be able to do so."
