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Akerna (KERN) - 2023 Q4 - Annual Results
KERNAkerna (KERN)2024-04-01 21:02

Merger and Acquisition Details - The merger between Akerna Corp. and Gryphon Digital Mining, Inc. will be accounted for as a reverse acquisition, with Gryphon as the accounting acquirer[1]. - Gryphon will retain a majority voting and equity interest in the combined company, and its executive management team will lead the new organization[2]. - The merger is expected to create synergies that could lead to improved operational efficiencies and market expansion opportunities[4]. - The merger with Gryphon Digital Mining is expected to result in Akerna stockholders owning approximately 7.5% of the combined company[12]. - The estimated purchase price for the merger with Gryphon is approximately 16.3million,basedonAkerna′sequitytobeacquired,utilizingaclosingstockpriceof16.3 million, based on Akerna's equity to be acquired, utilizing a closing stock price of 0.2855 per share as of February 9, 2024[27]. - The merger is expected to be accounted for as a "reverse acquisition," with Gryphon considered the accounting acquirer[25]. Financial Performance - Revenue reported at 6.836billion,withagrossprofitof6.836 billion, with a gross profit of 3.435 billion, resulting in a gross margin of approximately 50.3%[10]. - Operating expenses totaled 10.334billion,leadingtoalossfromoperationsof10.334 billion, leading to a loss from operations of 6.899 billion[10]. - Net loss from continuing operations was 8.603billion,withadilutednetlosspershareof8.603 billion, with a diluted net loss per share of 1.56[10]. - The total operating expenses included 5.677billioningeneralandadministrativecosts,significantlyimpactingoverallprofitability[10].AssetandLiabilityOverview−TheunauditedproformacondensedcombinedbalancesheetasofDecember31,2023,reflectstotalassetsof5.677 billion in general and administrative costs, significantly impacting overall profitability[10]. Asset and Liability Overview - The unaudited pro forma condensed combined balance sheet as of December 31, 2023, reflects total assets of 18,834,000 and total liabilities of 19,482,000[6].−Totalcurrentassetsforthecombinedentityareprojectedtobe19,482,000[6]. - Total current assets for the combined entity are projected to be 4,983,000, while total current liabilities are estimated at 19,933,000[7].−Thecombinedentity′sfinancialinformationisforillustrativepurposesandmaynotreflectactualfutureperformance[4].AccountingandFinancialAdjustments−Thecombinedcompanyanticipatesasignificantadjustmentinaccountingpoliciespost−merger,whichmaymateriallyaffectfinancialstatements[5].−ManagementwillconductafinalreviewofAkerna′saccountingpoliciestoensureconformitywithGryphon′sstandardspost−acquisition[5].−TheproformastatementofoperationsfortheyearendedDecember31,2023,isbeingpreparedtoillustratethefinancialimpactofthemerger[9].−TheproformaadjustmentsfortheyearendedDecember31,2023includetheconversionof19,933,000[7]. - The combined entity's financial information is for illustrative purposes and may not reflect actual future performance[4]. Accounting and Financial Adjustments - The combined company anticipates a significant adjustment in accounting policies post-merger, which may materially affect financial statements[5]. - Management will conduct a final review of Akerna's accounting policies to ensure conformity with Gryphon's standards post-acquisition[5]. - The pro forma statement of operations for the year ended December 31, 2023, is being prepared to illustrate the financial impact of the merger[9]. - The pro forma adjustments for the year ended December 31, 2023 include the conversion of 3.1 million in Senior Convertible Notes and 3.4millioninSeriesCPreferredStockinto16,499,513and15,134,896sharesofcommonstock,respectively[28].−Thecompanyanticipatesrecognizinggoodwillof3.4 million in Series C Preferred Stock into 16,499,513 and 15,134,896 shares of common stock, respectively[28]. - The company anticipates recognizing goodwill of 20.2 million in connection with the merger, classified as a business combination[28]. - The pro forma adjustments reflect an estimated transaction cost of 2.0millionforadvisory,legal,andaccountingfeesincurredbyAkernapriortothemerger[28].BusinessUnitSalesandTransactions−ThesaleofMJFreewayLLCandAmpleOrganicsInc.toMJAcquisitionfor2.0 million for advisory, legal, and accounting fees incurred by Akerna prior to the merger[28]. Business Unit Sales and Transactions - The sale of MJ Freeway LLC and Ample Organics Inc. to MJ Acquisition for 5 million is contingent upon the closing of the merger[15]. - The additional cash payment in the sale transaction was reduced from 4millionto4 million to 1.85 million[16]. - Akerna completed the sale of 365 Cannabis for 0.5million,withanearn−outobligationvaluedat0.5 million, with an earn-out obligation valued at 2.3 million[18]. - The sale of Last Call Analytics was completed for 0.1million,withresultsclassifiedasdiscontinuedoperations[19].−Thecompanyhascompletedthewinddownofitsremainingbusinessunits,includingVeridian,Trellis,andSolo,inthefourthquarterof2023,followingtheabandonmentofsoftwareserviceandsupportfortheseunits[20].−TheconversionpriceofSeniorConvertibleNoteswasreducedto0.1 million, with results classified as discontinued operations[19]. - The company has completed the wind down of its remaining business units, including Veridian, Trellis, and Solo, in the fourth quarter of 2023, following the abandonment of software service and support for these units[20]. - The conversion price of Senior Convertible Notes was reduced to 0.50 per share to facilitate the merger[17]. Shareholder Information - Akerna's common shares outstanding as of December 31, 2023, total 10,352,069, with an estimated total of 57,172,921 shares outstanding immediately prior to the merger[29]. - The weighted average shares outstanding for the year ended December 31, 2023, have been calculated as if the merger occurred on January 1, 2023, reflecting various conversions and issuances[30]. - The company has eliminated revenues and direct expenses associated with MJ Freeway, which will not continue as a result of the sale transaction[30]. - The historical financial information of Akerna has been adjusted to eliminate results from abandoned business units and certain corporate activities that will not continue post-merger[21].