We have covered CannaSys Inc (OTCMKTS: MJTK) a few times in the past. The last time here. If you have read that last piece, you would be remembering that we speculated with the possibility of the company being bought out by another group:
“We also believe that Citizen Toke opens up the company to being acquired, especially by a company like MassRoots Inc (OTCMKTS:MSRT) and its $67 million market cap. This makes MJTK a stock that needs to be on every cannabis investor’s radar.” Source
Well, MassRoots Inc did not buy the company, but something else happened. CannaSys announced that it had signed a letter of intent to acquire Alliance Financial Network, Inc.
The most relevant development is the letter of intent signed. Therefore, we will focus on this announcement. The company acquired is Alliance Financial Network, Inc.. It is a fintech company based in Colorado that has developed and provides a electronic exchange portal; a digital transaction and mobile payment solution.
“eXPO™ provides access for consumers and businesses to transfer funds electronically, whether consumer-to-consumer, consumer-to-business, business-to-consumer or business-to-business. eXPO™ delivers electronic payment solutions to multiple industries.” Source
We believe that this technology will truly create a revolution in the financial transactions industry. This new company brings the possibility of paying in the supermarket or transfer money to a friend with your phone. Additionally, Alliance Financial Network is registered with the U.S. Department of the Treasury Financial Crimes Enforcement Network (FinCEN) as a financial institution.
How will be this acquisition financed?
According to the press release, the payment of Alliance Financial Network (“AFN”) will be made issuing shares of CannaSys. Shareholders are not supposed to like this transaction, but if you take a look at the chart, you will see that the stock went up on the day of the announcement. In our opinion, the technology that the acquired company will provide will increase top and bottom line growth. The press release brings more information about the transaction. AFN’s nominees will be part of the Board of Directors of CannaSys, which is great, since these are the people, who know about the products being developed. Keeping this talent is key.
CannaSys CEO, Michael Tew, commented the following about the transaction:
“I could not be more excited about AFN’s core products, its management team, and its exponential growth prospects across multiple industries, eXPO™ was created to meet the demands of a changing landscape within the payments industry, and it demonstrates how the fintech sector continues to introduce revolutionary product offerings.” Source
Alliance Financial Network will also be able to obtain some more shares of the acquiring company if some of the following key milestones are obtained in the following two years:
“1. Executed agreement or contracts that use AFN’s technology and/or platform and result in projected revenue of $5 million in the following 12 months; or
2. Executed agreement or contracts with commercially reasonable terms that result in the deployment of AFN’s technology in more than 250 retailers over the following 12 months.” Source
These terms are very beneficial for both parties, since the interests are aligned. In our opinion, the Cannasys CEO Michael Tew did a good job negotiating the terms of the acquisition contract.
Does this acquisition make sense for CannaSys, Inc. ?
Yes, it does. Not only because the technology being bought seems revolutionary, but since the company is becoming a diversified conglomerate. We said in the beginning and in our previous article that the company may be in danger, since another cannabis firm may acquire it. The current market capitalization of CannaSys is $1.34 million and there are competitors with a market cap. close to $60 million. The company is quite small, which is a problem. This transaction is an interesting move, since it makes the company bigger, as it increases the total outstanding shares, and also diversifies the business.
CannaSys keeps delivering good news to the market. This time the company communicated that it is buying a fintech company, whose technology seems revolutionary. We assessed the terms of the letter of intent and concluded that they were very well negotiated by CannaSys’ executives. Additionally, we believe that this transaction is a move made to defend the company from other bigger players in the cannabis industry. To sum up, something is going on with this company. Investors should certainly have it on their radar.
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Disclosure: We have no position in MJTK and have not been compensated for this article. We have previously been compensated $10k for a two day awareness campaign regarding MJTK.