Business
Tech firm Akerna sells software business, exits marijuana industry to join crypto venture
Akerna Corp., the parent company of pioneering cannabis technology company MJ Freeway, said Friday it’s exiting the marijuana industry based on headwinds much of the market is facing.
Denver-based Akerna is merging with cryptocurrency business Gryphon Digital Mining in an all-stock deal that will allow the latter company to go public on the Nasdaq.
Akerna also is selling its software business to POSaBIT Systems Corp., which offers payment solutions to the cannabis industry, for $4 million in cash.
Akerna CEO Jessica Billingsley told MJBizDaily via email that the moves were influenced by federal marijuana legalization happening “slower than anticipated” and “a changing macroeconomic climate that is unfavorable toward our financial obligations.”
“This decision was not taken lightly,” Billingsley added in a separate LinkedIn post.
“After much consideration and evaluation, we believe it provides the best outcome for all of our stakeholders, including our team members and our valued clients.”
Akerna will sell to POSaBIT:
- MJ Freeway, a marijuana point-of-sale platform. In the LinkedIn post, Billingsley said the company invented seed-to-sale tracking more than 14 years ago.
- Leaf Data Systems, a seed-to-sale tracking software for U.S. cannabis markets.
- Ample Organics, a seed-to-sale tracking software for the Canadian market.
The software business combined with POSaBIT is expected to generate roughly $11 million in revenue and $6.8 million in gross profit during 2023.
The deal nearly doubles the number of merchant locations served by Kirkland, Washington-based POSaBIT.
“At a purchase price of 0.4 times 2022 estimated revenue, we are acquiring high-quality software assets at an attractive valuation,” Ryan Hamlin, CEO and co-founder of POSaBIT, said in a release.
“Despite the challenges facing our industry, our business is growing at a steady rate.
“We are adding new team members and our pipeline of both organic and strategic opportunities is expanding.”
The reverse merger with Gryphon Digital Mining will allow Akerna shareholders to access the bitcoin mining industry, according to a release, and the company will continue to be publicly traded.
If the deal goes through, Gryphon will become a wholly owned subsidiary of Akerna.
Gryphon equity holders are expected to own approximately 92.5% of the combined company, and current Akerna equity holders will own approximately 7.5%.
Akerna Corp. will be renamed Gryphon Digital Mining and headquartered in Las Vegas.
Rob Chang will serve as CEO of the combined company; Billingsley will retain a seat on the company’s board.
Akerna trades as KERN on the Nasdaq.
Earlier this month, Akerna sold enterprise resource planning software 365 Cannabis back to some of 365’s previous investors in a deal worth roughly $2.8 million, significantly less than what Akerna paid to acquire the company in 2021.
The company also restructured and cut jobs in 2022 and raised new capital.
MJ Freeway was one of the first major POS systems in the cannabis industry, with marijuana retail clients across the country.
Business
New Mexico cannabis operator fined, loses license for alleged BioTrack fraud
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Business
Marijuana companies suing US attorney general in federal prohibition challenge
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Business
Alabama to make another attempt Dec. 1 to award medical cannabis licenses
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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