American Bitcoin Corp. current report, 09 June 2023

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Business Context and Reporting Period

This Form 8-K was filed by Akerna Corp. (Nasdaq: KERN; KERNW), not American Bitcoin Corp. The report is dated June 15, 2023, and primarily describes events occurring on June 14, 2023, with executive compensation decisions made on June 9, 2023. The filing relates to Akerna’s proposed merger with Gryphon Digital Mining Inc. and related transactions involving MJ Acquisition Co.

Key Financial and Capital Markets Metrics

  • Private placement: Akerna issued 1,000,000 common shares at $0.50 per share for gross proceeds of $500,000.
  • Liquidity and cash flow: The filing does not provide financial statements, cash-flow figures, cash balances, margins, revenue, profitability, or a clear debt balance.
  • Debt and securities adjustments: The conversion price of the senior secured convertible notes was reduced from $1.20 to $0.50 per share. The exercise price of certain July 2022 warrants was reduced from $0.88 to $0.37 per share; the warrants could only then be exercised on a cashless basis.
  • Potential dilution: The investor may receive additional “True-Up Shares” if Akerna sells non-excluded shares at a price below $0.50 before the registration statement becomes effective. Issuances are capped at 19.99% of outstanding common stock absent Nasdaq stockholder approval.
  • Potential cash payment: If the 19.99% issuance limit prevents issuance of all True-Up Shares, Akerna may owe a cash True-Up Payment based on the price difference and excess shares.

Material Changes Versus the Prior Comparable Period

  • Akerna entered into a $500,000 equity financing and agreed to register the issued shares and any True-Up Shares for resale.
  • The merger consideration under the Gryphon agreement was amended to be the greater of the previously calculated share amount or shares having an aggregate value of $115.625 million based on the closing Akerna share price.
  • Closing of the Gryphon transaction became conditioned on SEC effectiveness of the registration statement covering the private-placement securities.
  • Holders of the senior secured convertible notes waived, for this offering, the right to require redemption using 50% of the offering proceeds and extended the deadline for completing the required $500,000 equity financing to June 15, 2023.

Guidance, Outlook, Risks, and Unusual Items

  • Executive bonuses: For 2022, the Compensation Committee approved cash bonuses of $157,800 for the CEO, $18,230 for the CFO, $41,930 for the CTO, and $40,380 for the special advisor. The filing states that total 2022 compensation increased to $462,303, $161,180, $282,362, and $274,234, respectively.
  • 2023 bonus targets: Executive bonuses are tied to maintaining liquidity and working capital through the Gryphon closing and achieving a final closing price with MJ Acquisition Co. that is not materially below the original $5 million offer. The stated payout scale ranges from 0% below $4.25 million to 100% at $4.75 million to $5.00 million.
  • Registration obligations: Akerna must seek SEC effectiveness of the resale registration statement by the Gryphon closing, maintain its effectiveness, and satisfy applicable public-information requirements. Liquidated damages equal to 1% of the purchase price for each 30-day default period may apply.
  • Transaction risks: The filing identifies risks involving failure to obtain stockholder or regulatory approvals, delays or failure to close, operating-expense and transaction-cost management, changes in the exchange ratio, stock-price volatility, insufficient capital, unexpected costs, and failure to realize anticipated transaction benefits.
  • Unusual item: The filing contains an apparent timing inconsistency: the cover page states an earliest reported event date of June 9, 2023, while the principal agreements and share issuance occurred on June 14, 2023, and the report was signed June 15, 2023.

Important Facts for Investors to Verify

  1. Confirm that the filing and securities relate to Akerna Corp., despite the request metadata identifying American Bitcoin Corp.
  2. Review the executed Securities Purchase Agreement, Registration Rights Agreement, merger amendment, and noteholder waiver for complete terms and potential dilution.
  3. Verify whether any True-Up Shares or True-Up Payments became due before the Gryphon transaction closing.
  4. Track SEC effectiveness of the resale registration statement and whether related liquidated damages were triggered.
  5. Confirm the final Gryphon merger consideration, closing share price, required approvals, and whether the transaction ultimately closed.
  6. Review Akerna’s latest periodic filings for actual liquidity, debt, operating losses, cash burn, and going-concern or financing risks, which are not quantified in this Form 8-K.