Technology company Forian said it is selling cannabis software provider BioTrack for $30 million in cash to Alleaves and exiting the marijuana industry to focus on health care.
The transaction is the second in just over two weeks in which a notable tech company has decided to leave the cannabis industry in the face of stiff competition, widespread layoffs and falling wholesale prices for marijuana products.
Akerna Corp., the parent company of pioneering seed-to-sale tracking provider MJ Freeway, on Jan. 27 announced a $4 million cash deal to sell its cannabis software business to POSaBIT Systems Corp. and exit the marijuana industry.
At the same time, Denver-based Akerna said it was merging with cryptocurrency business Gryphon Digital Mining in an all-stock deal allowing the latter company to go public on the Nasdaq.
BioTrack was recently chosen by New York regulators to provide seed-to-sale tracking software for that state’s new adult-use marijuana market.
The company’s cannabis software is used in more than three dozen states.
Forian, which trades as FORA on the Nasdaq, said in a news release it will focus on its “healthcare information business and will no longer provide software solutions to the cannabis industry.”
It will retain a license for certain “cannabinoid-based data” to enhance its health care-information offerings, according to the Newtown, Pennsylvania-based company.
“This transaction allows us to focus our efforts on our healthcare information business, which has been the key driver of our growth to date and will further accelerate our path to positive Adjusted EBITDA,” Forian Executive Chair Max Wygod said in the news release.
The sales comes after Alleaves – a cannabis software provider based in Deerfield Beach, Florida – closed a $40 million Series A funding round last year to accelerate a multistate commercial rollout.
The company signaled it was interested in purchasing cannabis-focused tech companies that provide seed-to-sale and point-of-sale (POS) software.
In a news release last July announcing the funding, Alleaves laid out plans to acquire cannabis tech platforms to expand its customer base and create a “seamless, real-time seed-to-sale software, transaction, and compliance platform.”
Forian was established in March 2021 through a combination of BioTrackTHC, Cannalytics producer Helix Technologies and Medical Outcomes Research Analytics.
“The addition of BioTrack and Cannalytics will accelerate our mission to provide top-of-the-line ERP solutions to the cannabis industry,” Mike Beedles, the founder of Alleaves, said in the release announcing the BioTrack acquisition.
Cannabis tech headwinds
The BioTrack sale underscores the headwinds facing providers of cannabis business software – including POS market share leader Dutchie.
The Oregon-based company, which owns two of the largest POS providers, ousted its co-founders in late November, which prompted the two to sue the marijuana e-commerce platform.
“The biggest companies at the top of the leaderboard … have all been under tumult,” said Ed Keating, chief data officer and co-founder at Connecticut-based Cannabiz Media, which has published a proprietary, annual report on cannabis POS providers since 2018.
“This is perhaps a winnowing that’s just really starting.”
The BioTrack purchase catapults Alleaves to the leaderboard of a POS and traceability software segment dominated by a handful of companies.
In December, New York regulators selected BioTrack as the state’s seed-to-sale marijuana tracing software, requiring all licensed adult-use and medical marijuana licensees to integrate their own inventory and/or sale tracking systems with it.
BioTrack is used in 38 states and 13 countries, the company said in a news release.
Keating expects more consolidation within the cannabis software space, particularly as smaller competitors fail to gain significant customer traction and eager investors seek exits.
“When you have over 70 points-of-sale software competing in the U.S. for 10,000 or so stores, they’re not all going to be standing forever.”
BioTrack – itself an offspring of a 2018 merger with Colorado-based Helix TCS – entered 2023 as the No. 2 cannabis POS provider with its software installed at 531 medical and adult-use retailers, controlling 13.4% market share, according to Cannabiz Media’s 2022 industry report obtained by MJBizDaily.
Greenbits, acquired by Dutchie in 2021 on undisclosed terms, is No. 1 with installs at 652 stores, or roughly 16.4% market share.
The BioTrack transaction included a $20 million cash payment when the deal closed Friday, with the remaining $10 million paid over 12 monthly installments, according to terms of the deal.
Forian on Monday also announced that CEO and President Daniel Barton stepped down. He was replaced by Wygod, who will serve on an interim basis.
News of the BioTrack sale boosted Forian shares up 24% to $4.08 and a market cap of nearly $133 million in afternoon trading.
Chris Casacchia can be reached at email@example.com.