Filing Overview
This Form 8-K was filed by Akerna Corp., not American Bitcoin Corp., and reports the completion of its acquisition of The NAV People Inc., doing business as 365 Cannabis, on October 1, 2021. The filing was signed on October 4, 2021.
Transaction and Key Financial Terms
- Akerna acquired 100% of 365 Cannabis’s issued and outstanding capital stock.
- Total purchase price was $17 million.
- Akerna paid $4.5 million in cash at closing, funded from cash on hand. Approximately $500,000 of cash consideration was deferred for 12 months.
- Akerna issued 3,571,429 common shares, valued at approximately $12 million, based on a $3.36 per-share valuation.
- Of the issued shares, 357,143 shares were placed in escrow for 12 months, subject to certain indemnity claims.
- The shares are subject to a lock-up: 50% releases after six months, 25% after nine months, and the remaining 25% after one year.
- The sellers received registration rights, and Akerna agreed to file a resale registration statement within 60 days after closing and maintain its effectiveness as required by the agreement.
Earn-Out and Other Obligations
Akerna agreed to potential earn-out payments during the 12-month earn-out period. The earn-out is generally calculated as three times specified recurring revenue generated by 365 Cannabis and certain Viridian Sciences sales, less the $17 million purchase price. Payment may be made in cash or Akerna common stock, subject to Nasdaq issuance limitations. Early payment may be triggered if certain key employees are terminated without cause and specified revenue targets are met.
Akerna may owe penalties if it fails to meet its registration statement filing, effectiveness, or maintenance obligations.
Financial Reporting and Outlook
- The filing does not provide 365 Cannabis revenue, profit, cash flow, margins, debt, liquidity, or other operating metrics.
- Audited or required financial statements for 365 Cannabis and pro forma financial information were not included in this filing. Akerna stated that it intended to file them by amendment within the applicable 71-day period.
- No formal guidance or quantified outlook was provided.
Material Changes and Unusual Items
- The acquisition converted a substantial portion of the purchase price into equity consideration and created potential future earn-out obligations.
- The transaction resulted in approximately $4.5 million of immediate cash usage, with approximately $500,000 deferred for 12 months.
- The issuance of 3,571,429 shares creates potential dilution for existing Akerna shareholders, although resale is restricted by escrow and lock-up provisions.
- The securities were issued without registration under Section 4(a)(2) and Rule 506(b) of Regulation D.
Key Investor Verification Items
- Confirm that the filing relates to Akerna Corp. rather than American Bitcoin Corp.
- Review the acquisition agreement and subsequent amendments for the final purchase-price, indemnity, escrow, and earn-out provisions.
- Verify the filing of 365 Cannabis financial statements and pro forma information in a subsequent Form 8-K amendment.
- Assess the potential dilution from the issued shares and any additional shares issuable under the earn-out.
- Monitor compliance with the resale registration timetable and any related penalties.
- Evaluate the acquired business’s reported revenue, profitability, cash flows, and recurring-revenue performance once the required financial information is filed.