SEC Filing Summary
Entity note: The supplied filing is Akerna Corp.’s Form 10-Q, not a filing for American Bitcoin Corp. It covers the quarter ended September 30, 2023, and was signed November 14, 2023. Akerna reported cannabis-industry compliance and inventory-management software operations and was pursuing a full exit from SaaS.
Financial results
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $2.08 million | $3.06 million | $6.97 million | $10.80 million |
| Gross profit / margin | $1.11 million / 53% | $1.59 million / 52% | $3.98 million / 57% | $6.62 million / 61% |
| Operating loss | $2.58 million | $3.71 million | $6.27 million | $43.76 million |
| Net loss | $2.59 million | $2.30 million | $8.15 million | $53.82 million |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $(5.21) million | $(10.45) million |
Q3 revenue fell 32% year over year, primarily from customer churn and the planned wind-down of Solo, Trellis and Viridian. Nine-month revenue fell 35%; software revenue declined 32% and consulting revenue 93%. Nine-month gross margin decreased to 57% from 61%, though Q3 margin edged up to 53% from 52%. Lower operating expenses and much smaller impairment charges than in 2022 reduced the reported operating loss. Q3 2023 included a $892,103 goodwill impairment; the nine-month 2022 comparison included $30.6 million of long-lived asset impairment.
Financial position and liquidity
- At September 30, 2023, cash was $209,577, total current assets were $1.24 million and current liabilities were $12.53 million. Management reported an $11.2 million working-capital deficit and substantial doubt about the company’s ability to continue as a going concern.
- Total debt carrying value was approximately $8.58 million, including $7.73 million classified as current and $849,729 as long-term. The senior convertible notes were reported at a fair value of $7.58 million; the filing states they are secured and mature in October 2024.
- For the first nine months, investing activities provided $600,000, primarily from asset-sale proceeds, while financing activities used $3.42 million. Cash and restricted cash declined by approximately $7.97 million.
- Stockholders’ deficit was $9.20 million at quarter-end. Common shares outstanding were 10,002,018 at September 30 and 10,252,018 as of November 14.
Strategic changes, outlook and risks
- Akerna sold 365 Cannabis and Last Call Analytics in January 2023 and terminated operations for Viridian, Solo and Trellis during Q3. MJF and Ample were its remaining core software businesses, but Akerna had agreed to sell them as part of its planned exit from SaaS.
- The amended sale agreement extended the outside date to December 31, 2023 and reduced cash payable at closing from $4 million to $2 million. The buyer also agreed to provide an additional $500,000 working-capital loan; the related secured convertible note was increased to $1.5 million and is to convert at closing, subject to stated share-issuance limits and required stockholder approval.
- Akerna’s proposed merger with Gryphon Digital Mining and the sale of MJF and Ample were interdependent and subject to stockholder and other conditions. The merger agreement set a $115.6 million floor for value attributed to Gryphon in determining post-merger ownership; former Gryphon holders were expected to own approximately 92.5% on a fully diluted basis. The filing provided no assurance either transaction would close.
- Management stated that the company’s ability to continue as a going concern depended on completing the transactions and obtaining any needed funding. Failure could require further curtailments or liquidation. Senior-note covenant default could expose assets to seizure and sale.
- Nasdaq had notified Akerna of bid-price and stockholders’-equity deficiencies. Akerna appealed the delisting determination, staying suspension pending a hearing scheduled for November 9, 2023. Nasdaq staff indicated that the post-merger entity might meet initial listing requirements if the transaction closed; continued listing was not assured.
- Disclosure controls and procedures were deemed ineffective due to a material weakness in the design and/or operation of financial-reporting controls. Management described remediation efforts but said the weakness was not yet fully remediated.
- Reported contingencies included a $200,000 reserve in the TreCom dispute, an unresolved lease-termination matter estimated at $500,000, and potential transaction-related advisor fees and employee payments. Dutchie’s amended complaint was pending after an earlier dismissal; two shareholder suits concerning transaction disclosures had been dismissed without prejudice.
No formal financial guidance was provided. Management expected to pursue the merger and sale, but completion, timing and funding remained uncertain.
Investor verification priorities
- Confirm the filing’s registrant: it is Akerna Corp. (ticker KERN), not American Bitcoin Corp.
- Check subsequent filings for the status and final terms of the Gryphon merger, MJF/Ample sale, $1.5 million note conversion and any additional financing.
- Verify post-quarter cash, debt maturities, covenant compliance and the company’s going-concern assessment.
- Check the Nasdaq hearing outcome and current listing status.
- Review the remediation status of the material weakness and developments in the remaining legal and lease contingencies.