GRYPHON DIGITAL MINING, INC. Unaudited Pro Forma Condensed Consolidated Financial Information
On January 11, 2023, Akerna Corp. (the "Company") completed the sale of its wholly-owned subsidiary The NAV People Inc. d.b.a. 365 Cannabis ("365 Cannabis"), pursuant to a Stock Purchase Agreement (the "SPA"), dated as of January 11, 2023, by and between the Company, 365 Cannabis and 365 Holdco LLC (the "Buyers"), for (i) cash in the amount of $500,000 and (ii) the termination and release of the Company's obligation to the Buyers for contingent consideration in connection with the Company's original acquisition of 365 Cannabis from the Buyers in 2021 (the "Earn-out Obligation"), subject to customary post-closing adjustments, if any. Post-closing adjustments are primarily associated with certain adjustments in accounts payable and indemnification obligations in accordance with the SPA. Upon completion of the sale, $400,000 of the total cash proceeds was placed into restricted accounts held as security for the senior secured convertible notes of the Company while $100,000 was subject to a hold-back by the Buyers to be released to the Company and also placed into restricted accounts after all post-closing adjustments, if any, are resolved. As of September 30, 2022, the Company estimated the Earn-out Obligation at $3.3 million which was reflected on its condensed consolidated balance sheet included in the Company's Form 10-Q for the quarterly period ended September 30, 2022, filed with the Securities and Exchange Commission (the "SEC") on November 14, 2022. In accordance with the SPA, the Company and the Buyers agreed that the value of the Earn-out Obligation was $2,283,806 for purposes of the sale of 365 Cannabis.
The sale of 365 Cannabis is considered a significant disposition for purposes of Item 2.01 of Form 8-K. Accordingly, the Company has prepared the accompanying unaudited pro forma condensed consolidated financial information in accordance with Article 11 of Regulation S-K.
The accompanying unaudited pro forma condensed consolidated balance sheet gives effect to the sale of 365 Cannabis as if it had occurred on September 30, 2022, the date of the Company's most recently filed balance sheet. The accompanying unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2021 and the nine months ended September 30, 2022 gives effect to the sale of 365 Cannabis as if it had occurred on January 1, 2021.
The unaudited pro forma condensed consolidated financial information should be read in conjunction with: (i) the audited consolidated financial statements and notes as of and for the year ended December 31, 2021 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022 and (ii) the Company's unaudited condensed consolidated financial statements and notes as of and for the period ended September 30, 2022 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Form 10-Q for the quarterly period ended September 30, 2022 filed with the SEC.
The unaudited pro forma condensed consolidated financial information is presented based on assumptions, adjustments and currently available information described in the accompanying notes and is intended for informational purposes only. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of what the Company's results of operations or financial condition would have been had the sale of 365 Cannabis occurred on the dates assumed. In addition, it is not necessarily indicative of the Company's future results of operations or financial condition.
AKERNA CORP.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2022
(Unaudited)
| Pro Forma | ||||||||||||
| As Reported | Adjustments | Pro Forma | ||||||||||
| Assets | ||||||||||||
| Current assets | ||||||||||||
| Cash | $ | 2,490,662 | $ | (490,159 | )(b) | $ | 2,000,503 | |||||
| Restricted cash | 7,008,261 | 400,000 | (a)(b) | 7,408,261 | ||||||||
| Accounts receivable, net | 1,371,133 | (492,110 | )(b) | 879,023 | ||||||||
| Prepaid expenses and other current assets | 2,330,032 | (396,999 | )(a)(b) | 1,933,033 | ||||||||
| Total current assets | 13,200,088 | (979,268 | ) | 12,220,820 | ||||||||
| Fixed assets, net | 124,760 | (70,199 | )(b) | 54,561 | ||||||||
| Investments, net | 226,101 | - | 226,101 | |||||||||
| Capitalized software, net | 6,009,163 | (609,554 | )(b) | 5,399,609 | ||||||||
| Intangible assets, net | 17,005,584 | (13,436,000 | )(b) | 3,569,584 | ||||||||
| Goodwill | 9,025,589 | (3,492,459 | )(b) | 5,533,130 | ||||||||
| Total assets | $ | 45,591,285 | $ | (18,587,480 | ) | $ | 27,003,805 | |||||
| Liabilities and Equity | ||||||||||||
| Current liabilities | ||||||||||||
| Accounts payable, accrued expenses and other accrued liabilities | $ | 4,630,681 | $ | (1,178,430 | )(b) | $ | 3,452,251 | |||||
| Contingent consideration payable | 3,300,000 | (3,300,000 | )(a) | - | ||||||||
| Current portion of deferred revenue | 2,151,235 | (1,690,294 | )(b) | 460,941 | ||||||||
| Current portion of long-term debt | 9,900,000 | - | 9,900,000 | |||||||||
| Derivative liability | 9,025 | - | 9,025 | |||||||||
| Total current liabilities | 19,990,941 | (6,168,724 | ) | 13,822,217 | ||||||||
| Long-term portion of deferred revenue | 499,206 | (316,685 | )(b) | 182,521 | ||||||||
| Long-term debt, less current portion | 4,575,000 | - | 4,575,000 | |||||||||
| Deferred income tax liabilities | 431,453 | (590,082 | )(b) | (158,629 | ) | |||||||
| Total liabilities | 25,496,600 | (7,075,491 | ) | 18,421,109 | ||||||||
| Commitments and contingencies | - | - | - | |||||||||
| Equity | ||||||||||||
| Preferred stock | - | - | - | |||||||||
| Special voting preferred stock | 2,227,619 | - | 2,227,619 | |||||||||
| Common stock | 402 | - | 402 | |||||||||
| Additional paid-in capital | 159,841,800 | - | 159,841,800 | |||||||||
| Accumulated other comprehensive income | 356,028 | - | 356,028 | |||||||||
| Accumulated deficit | (142,331,164 | ) | (11,511,989 | )(b) | (153,843,153 | ) | ||||||
| Total equity | 20,094,685 | (11,511,989 | ) | 8,582,696 | ||||||||
| Total liabilities and equity | $ | 45,591,285 | $ | (18,587,480 | ) | $ | 27,003,805 |
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AKERNA CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 2021
(Unaudited)
| Pro Forma | ||||||||||||
| As Reported | Adjustments (c) | Pro Forma | ||||||||||
| Revenue | ||||||||||||
| Software | $ | 18,998,409 | $ | (2,363,010 | ) | $ | 16,635,399 | |||||
| Consulting | 1,510,413 | - | 1,510,413 | |||||||||
| Other revenue | 176,152 | (43,845 | ) | 132,307 | ||||||||
| Total revenue | 20,684,974 | (2,406,855 | ) | 18,278,119 | ||||||||
| Cost of revenue | 8,119,487 | (604,357 | ) | 7,515,130 | ||||||||
| Gross profit | 12,565,487 | (1,802,498 | ) | 10,762,989 | ||||||||
| Operating expenses | ||||||||||||
| Product and development | 6,271,966 | (269,696 | ) | 6,002,270 | ||||||||
| Sales and marketing | 9,108,173 | (1,195,230 | ) | 7,912,943 | ||||||||
| General and administrative | 10,422,207 | (239,460 | ) | 10,182,747 | ||||||||
| Depreciation and amortization | 5,735,150 | (447,242 | ) | 5,287,908 | ||||||||
| Impairment of long-loved assets | 14,383,310 | - | 14,383,310 | |||||||||
| Change in fair value of contingent consideration | - | - | - | |||||||||
| Total operating expenses | 45,920,806 | (2,151,628 | ) | 43,769,178 | ||||||||
| Loss from operations | (33,355,319 | ) | 349,130 | (33,006,189 | ) | |||||||
| Other (expense) income | ||||||||||||
| Interest (expense) income, net | (1,531,497 | ) | - | (1,531,497 | ) | |||||||
| Change in fair value of convertible notes | (1,365,904 | ) | - | (1,365,904 | ) | |||||||
| Change in fair value of derivative liability | 248,198 | - | 248,198 | |||||||||
| Gain on forgiveness of PPP Loan | 2,234,730 | - | 2,234,730 | |||||||||
| Other (expense) income, net | 186,420 | - | 186,420 | |||||||||
| Total other (expense) income | (228,053 | ) | - | (228,053 | ) | |||||||
| Net loss before income taxes and equity in losses of investee | (33,583,372 | ) | 349,130 | (33,234,242 | ) | |||||||
| Income tax (expense) benefit | 2,262,225 | (2,050,611 | ) | 211,614 | ||||||||
| Equity in losses of investee | (7,564 | ) | - | (7,564 | ) | |||||||
| Net loss | $ | (31,328,711 | ) | $ | (1,701,481 | ) | $ | (33,030,192 | ) | |||
| Basic and diluted weighted average common shares outstanding | 1,282,098 | 1,282,098 | ||||||||||
| Basic and diluted net loss per common share | $ | (24.44 | ) | $ | (25.76 | ) |
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AKERNA CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2022
(Unaudited)
| Pro Forma | ||||||||||||
| As Reported | Adjustments (c) | Pro Forma | ||||||||||
| Revenue | ||||||||||||
| Software | $ | 17,756,272 | $ | (7,094,793 | ) | $ | 10,661,479 | |||||
| Consulting | 618,809 | - | 618,809 | |||||||||
| Other revenue | 74,443 | (44,128 | ) | 30,315 | ||||||||
| Total revenue | 18,449,524 | (7,138,921 | ) | 11,310,603 | ||||||||
| Cost of revenue | 6,091,511 | (1,865,715 | ) | 4,225,796 | ||||||||
| Gross profit | 12,358,013 | (5,273,206 | ) | 7,084,807 | ||||||||
| Operating expenses | ||||||||||||
| Product and development | 5,240,922 | (1,220,718 | ) | 4,020,204 | ||||||||
| Sales and marketing | 8,304,411 | (3,140,962 | ) | 5,163,449 | ||||||||
| General and administrative | 6,812,617 | (411,902 | ) | 6,400,715 | ||||||||
| Depreciation and amortization | 6,094,963 | (1,425,869 | ) | 4,669,094 | ||||||||
| Impairment of long-loved assets | 39,600,587 | (8,995,533 | ) | 30,605,054 | ||||||||
| Change in fair value of contingent consideration | (3,000,000 | ) | 3,000,000 | - | ||||||||
| Total operating expenses | 63,053,500 | (12,194,984 | ) | 50,858,516 | ||||||||
| Loss from operations | (50,695,487 | ) | 6,921,778 | (43,773,709 | ) | |||||||
| Other (expense) income | ||||||||||||
| Interest (expense) income, net | (609,746 | ) | 345 | (609,401 | ) | |||||||
| Change in fair value of convertible notes | (2,840,000 | ) | - | (2,840,000 | ) | |||||||
| Change in fair value of derivative liability | 54,153 | - | 54,153 | |||||||||
| Total other (expense) income | (3,395,593 | ) | 345 | (3,395,248 | ) | |||||||
| Net loss before income taxes and equity in losses of investee | (54,091,080 | ) | 6,922,123 | (47,168,957 | ) | |||||||
| Income tax (expense) benefit | 268,152 | - | 268,152 | |||||||||
| Equity in losses of investee | - | - | - | |||||||||
| Net loss | $ | (53,822,928 | ) | $ | 6,922,123 | $ | (46,900,805 | ) | ||||
| Basic and diluted weighted average common shares outstanding | 2,421,262 | 2,421,262 | ||||||||||
| Basic and diluted net loss per common share | $ | (22.23 | ) | $ | (19.37 | ) |
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AKERNA CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following describes the pro forma adjustments reflected in the presentation of the accompanying pro forma condensed consolidated balance sheet and pro forma condensed consolidated statements of operations:
| (a) | - Adjustment reflects the consideration received including restricted cash ($400,000), a hold-back receivable ($100,000) and the termination and release of the Earn-out Obligation at its unadjusted value of $3.3 million as if the closing date of the sale occurred on September 30, 2022. |
| (b) | - Adjustment reflects the disposition of the assets and liabilities of 365 Cannabis and the impact of the sale to equity. |
| (c) | - Adjustments reflect the historical operating results of the 365 Cannabis for the yar ended December 31, 2021 an the nine months ended September 30, 2022. |
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Akerna Corp. published this content on 18 January 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 January 2023 21:09:05 UTC.
