Mr. Ryan Hamlin reports

POSABIT REPORTS THIRD QUARTER 2023 FINANCIAL RESULTS

Posabit Systems Corp. today released its financial results for the three and nine months ended Sept. 30, 2023.

"Since our inception, Posabit has remained steadfast in our dedication to delivering unparallelled payment and point-of-sale solutions to the cannabis industry. This commitment was once again demonstrated as we swiftly navigated through industry service interruptions, achieving a return to 75 per cent of processed volume with an additional 100 locations expected to commence processing in the coming weeks. While our primary focus was on supporting our existing merchant partners, it is gratifying to note that we continued to attract new business during this period, underscoring our position as the payments leader in the cannabis industry," said Ryan Hamlin, co-founder and chief executive officer of Posabit.

Mr. Hamlin continued: "In alignment with our commitment to operational excellence, we recently initiated a comprehensive cost reduction program aimed at driving efficiencies across our business, with the ultimate goal of achieving profitability. Additionally, we announced our intention to apply to list on the TSX-V in order to facilitate ownership of our shares and improve trading liquidity. As we approach 2024, I am genuinely excited about the strategic initiatives and opportunities that lie ahead for Posabit."

Update on pin debit processing

On Oct. 11, 2023, the company announced a decline in its pin debit processing acceptance rate. This impact was not unique to Posabit and impacted the entire industry. The company is pleased to announce that as of today, the company is processing 75 per cent of prior transaction volumes with an additional 100 locations expected to commence processing shortly. While the company's initial focus was on existing Posabit merchants, the company has continued to sign up new merchants, increasing its market share.

"The one constant in this industry is change. We are preparing to launch the first cannabis payments device capable of processing multiple payment methods. Our focus remains to provide our customers with a best-in-class payment solution, which includes multiple points of redundancy," said Mr. Hamlin.

Implementation of cost reduction plan

In early October, the company initiated a cost reduction plan aimed at optimizing operational efficiency and the company's path to profitability. The company has identified strategic areas for streamlining processes, renegotiating vendor contracts and implementing targeted resource reallocation. This initiative is designed to drive immediate and measurable savings while preserving the company's commitment to delivering best-in-class service to its customers. The company expects annualized savings of approximately $4-million.

Intention to apply to list common shares on the TSX Venture Exchange

Posabit today announced that it intends to apply to list the company's common shares on the TSX-V. The listing of the common shares on the TSX-V remains subject to the submission by the company of a formal listing application, the review of the TSX-V, and the satisfaction of all listing and regulatory requirements. There is no assurance that the company will submit a listing application and that the TSX-V will subsequently approve the listing of the common shares or that the company will complete the listing on the TSX-V.

Recent operational highlights

• Restored transaction processing levels to 75 per cent of predisruption levels;
• Implemented cost reduction program with approximate $4-million of annual savings;
• Intends to apply to list the common shares on the TSX-V;
• Ranked 132nd on the Deloitte Technology Fast 500, a ranking of the fastest-growing technology, media, telecommunications, life sciences, fintech and energy tech companies in North America.

Third quarter 2023 financial highlights

• Transactional sales for payment services totalled $157.9-million, up 11 per cent compared with $142-million in the third quarter of 2022.
• Total revenue was $13.6-million, up 32 per cent compared with $10.3-million in the third quarter of 2022.
• Gross profit was $3.2-million, or 23 per cent of revenue, up 10 per cent on a dollar basis compared with $2.9-million, or 28 per cent of revenue, in the third quarter of 2022.
• Operating loss was $(260,000), inclusive of a $250,000 non-cash change in the fair value of foreign currencies, compared with an operating loss of $(7,300), inclusive of a $(900,000) non-cash change in the fair value of foreign currencies, in the third quarter of 2022.
• Net loss was $(7.5)-million, inclusive of a $400,000 non-cash change in fair value of derivative liabilities and $(5.2)-million of non-cash impairment of intangible assets, compared with a net loss of $(1.2)-million, inclusive of a $(1.0)-million non-cash change in fair value of derivative liabilities in the third quarter of 2022.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $(33,000), or 0 per cent of revenue, compared with $(290,000), or (3) per cent of revenue, in the third quarter of 2022.

Balance sheet

As of Sept. 30, 2023, the company had cash and cash equivalents of $3.2-million compared with $3.1-million as of Dec. 31, 2022.

On Nov. 29, 2023, Posabit amended its previously announced credit agreement with Perga Capital Partners LP. The term was extended from three years to five years with no other material changes. Posabit also agreed to extend the expiry date of all outstanding warrants held by Perga by two years.

Earnings guidance

As a result of industry wide activity tied to the company's payment processing operations, Posabit is withdrawing its revenue, gross profit dollar and adjusted EBITDA guidance for 2023. The company is mitigating processing disruptions by moving merchants to alternative Posabit payment options.

Conference call information

Date:   Nov. 30, 2023

Time:   4:30 p.m. Eastern Time

Toll-free:  888-506-0062

International:  973-528-0011

Participant access code:  438543

Conference call replay information

The replay will be available approximately one hour after the completion of the live event.

Toll-free:   877-481-4010

International:  919-882-2331

Replay pass code:  49500

Financial reports

Full details of the financial and operating results are described in the company's consolidated financial statements for the three- and nine-month periods ended Sept. 30, 2023, with accompanying notes. The consolidated financial statements and additional information about Posabit are available on the company's website or on SEDAR+.

About Posabit Systems Corp.

Posabit is a financial technology company, working exclusively within the cannabis industry. Posabit provides a best-in-class point-of-sale solution and is the leading cashless payment provider for cannabis retailers. Posabit works tirelessly to build better financial services and transaction methods for merchants. The company brings cutting-edge software and technology to the cannabis industry so that all merchants can have a safe and compliant set of services to solve the problems of a cash-only industry.

We seek Safe Harbor.