Filing Summary
Registrant and period: The filing is a Form 8-K filed by Akerna Corp. (NASDAQ: KERN; KERNW), dated July 7, 2020 and signed July 8, 2020. The request metadata identifies American Bitcoin Corp., but the filing itself identifies Akerna Corp. as the registrant.
Business Context and Transaction
On July 7, 2020, Akerna completed its court-approved acquisition of Ample Organics Inc. through a plan of arrangement under Ontario law. Ample became an indirect wholly owned subsidiary of Akerna. The filing concerns the completion of the acquisition, related securities issuances, and associated governance arrangements.
- Ample shareholders received 3,294,574 redeemable exchangeable shares of Akerna’s Canadian subsidiary at an exchange ratio of 0.0524 Ample shares for each exchangeable share.
- The exchangeable shares are generally exchangeable for Akerna common stock on a one-for-one basis.
- Based on Akerna’s closing share price on July 7, 2020, aggregate consideration was approximately $30.7 million.
- 658,915 exchangeable shares were issued as closing consideration, while 2,635,659 shares were placed in escrow and scheduled for release over six, nine, and twelve months, subject to unresolved fraud claims.
- Each Ample shareholder also received a contingent value right. Up to CAD$10.0 million of additional exchangeable shares may be issued if Ample achieves specified revenue targets during the twelve months following closing, subject to downward adjustment.
Financial Metrics and Capitalization
The filing does not provide consolidated revenue, profit, cash flow, margins, debt, or liquidity figures in the text supplied. Audited and interim financial statements for Ample and unaudited pro forma financial information for Akerna and Ample were filed as exhibits, but their numerical contents are not included here.
- The issued exchangeable shares represented approximately 20.3% of Akerna’s issued and outstanding common stock on an as-exchanged basis.
- Akerna issued options exercisable for 48,208 shares at a weighted average exercise price of $32.09 to Ample employees.
- Akerna issued additional options exercisable for 202 shares at a weighted average exercise price of $29.53 to former Ample employees.
- Assumed Ample warrants are exercisable for up to 52,349 Akerna shares at a weighted average exercise price of $49.31.
Material Changes and Governance
- The acquisition added Ample as an indirect wholly owned subsidiary and expanded Akerna’s share-linked capitalization.
- A special voting share was issued to a trustee, giving exchangeable-share holders voting rights intended to be economically and voting-equivalent to Akerna common shares.
- A voting and exchange trust agreement and an exchangeable share support agreement govern the exchangeable shares and related voting and exchange rights.
- The securities were issued under exemptions from registration, principally Section 3(a)(10) of the Securities Act for the exchangeable shares and Section 4(a)(2) and applicable Regulation D or Regulation S exemptions for certain options and warrants.
Outlook, Contingencies, and Unusual Items
- Potential additional consideration depends on Ample achieving contractual revenue targets during the twelve months after closing.
- Escrowed consideration may be withheld or affected by unresolved claims relating to fraud under the arrangement agreement.
- Future dilution may result from exchangeable shares, contingent value rights, employee options, and assumed warrants.
- The filing furnished an investor presentation and press release, but the supplied text does not include management’s detailed outlook or operating forecasts.
Investor Verification Items
- Review Ample’s audited and interim financial statements and the combined unaudited pro forma financial information filed as Exhibits 99.2 and 99.3.
- Verify the acquisition accounting, purchase price allocation, goodwill, and pro forma impact on revenue, earnings, cash flow, and liquidity.
- Confirm the release schedule and any claims affecting the 2,635,659 escrowed exchangeable shares.
- Assess the revenue targets, valuation mechanics, and maximum dilution associated with the CVRs.
- Review the voting and exchange agreements for limitations on exchange rights, insolvency provisions, and shareholder voting mechanics.
- Reconcile the filing’s 20.3% as-exchanged ownership figure with the company’s fully diluted capitalization, including options and warrants.