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Akerna Announces Financial Results for the Second Quarter 2021

Akerna (Nasdaq: KERN), an enterprise software, leading compliance technology provider and developer of the cannabis industry's first seed-to-sale enterprise resource planning (ERP) software technology (MJ Platform®), today reported its unaudited financial results for the quarter ended June 30, 2021.

(PRNewsfoto/Akerna)

"Our second quarter results continued the momentum in 2021, with revenue growth of 63% year over year driven by a mix of organic and inorganic software revenue and a rebound in consulting demand," said Jessica Billingsley, CEO of Akerna.  "As consolidation within the industry continues and emerging markets begin to open, we believe our industry leadership position with multi-state, international and emerging enterprises paves the way for Akerna to be one of the largest cannabis technology winners in the years ahead."

Akerna is the technology ecosystem for cannabis. Through its family of software, which includes MJ Platform, Viridian Sciences, Ample Organics, Trellis, Leaf Data Systems, Last Call Analytics, and solo sciences, Akerna provides the only scalable cannabis ERP solution offering compliance, data, taxation, payments, seed-to-sale, track-and-trace, and consulting to operators, governments, and brands. In doing so, Akerna creates one of the world's most transparent and accountable consumer packaged goods supply chains on a global scale.

Cannabis companies looking to scale alongside the rapidly expanding industry must leverage the right tools, and enterprise class software is essential to do so.

Second Quarter 2021 Financial Highlights

  • Software revenue was $4.5 million, up 56% year over year
  • Total revenue was $4.9 million, up 63% year over year
  • Gross profit was $3.0 million, up 153% year over year
  • Net loss was $6.1 million, flat with the same period last year
  • Adjusted EBITDA was negative $1.6 million compared to negative Adjusted EBITDA of $3.6 million for the same quarter prior year, an improvement of 54% year over year
  • Cash was $11.8 million as of June 30, 2021, compared to $15.4 million as of March 31, 2021
    See "Explanation of Non-GAAP Financial Measures" below

Second Quarter 2021 Key Metrics

  • Total SaaS ARR of $17.3 million, up 53% year over year
  • Average new B2B order up 27% year over year
  • B2B transaction volume up 104% year over year
  • New Bookings ARR of approximately $900,000

Second Quarter 2021 Operational Highlights

  • Secures world's first national government cannabis contract with St. Vincent and the Grenadines
  • Closed Viridian Acquisition
  • Added Pharmaceutical and Cannabis Industry Expert Barry Fishman to Board of Directors
  • Completed MJ Retail (POS offering) beta adoption

The foregoing financial results are preliminary in nature. Final financial results and other disclosures will be reported in Akerna's quarterly report on Form 10-Q and may differ materially from the results and disclosures today due to, among other things, the completion of final review procedures, the occurrence of subsequent events or the discovery of additional information. You are encouraged to review the Form 10-Q in detail.

Conference Call Details

Akerna will host a conference call tomorrow, Tuesday, August 10, 2021, at 8:30 a.m. Eastern Time to discuss its financial results and business highlights. A question-and-answer session will follow prepared remarks. Interested parties may listen to the call by dialing:

Toll-Free: 1-877-407-3982
Toll / International: +1-201-493-6780
Conference ID: 13721125

The conference call will also be available via a live, listen-only webcast and can be accessed through the Investor Relations section of Akerna's website, https://ir.akerna.com/

To be included on the Company's email distribution list, please sign up at https://ir.akerna.com/news-events/email-alerts

About Akerna

Akerna (Nasdaq: KERN) is an enterprise software company focused on compliantly serving the cannabis, hemp, and CBD industry. First launched in 2010, Akerna has tracked more than $20 billion in cannabis sales to date and is the first cannabis software company listed on Nasdaq. The company's cornerstone technology, MJ Platform, the world's leading infrastructure as a service platform, powers retailers, manufacturers, brands, distributors, and cultivators.

For more information, visit https://www.akerna.com/.

Forward Looking Statements

Certain statements made in this release are "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this press release, the words "estimates," "projected," "expects," "anticipates," "forecasts," "plans," "intends," "believes," "seeks," "may," "will," "should," "future," "propose" and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. Such forward-looking statements include but are not limited to statements regarding our preliminary financial results which may differ from our final financial results, our belief that our industry leadership position with multi-state, international and emerging enterprises will enable us to be one of the largest cannabis technology winners in the years ahead and the timing for management's conference call in relation to our quarterly results. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of significant known and unknown risks, uncertainties, assumptions, and other important factors, many of which are outside Akerna's control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others that may affect actual results or outcomes, include (i) Akerna's ability to maintain relationships with customers and suppliers and retain its management and key employees, (ii) changes in applicable laws or regulations, (iii) changes in the market place due to the coronavirus pandemic or other market factors, (iv) and other risks and uncertainties disclosed from time to time in Akerna's filings with the U.S. Securities and Exchange Commission, including those under "Risk Factors" therein.  You are cautioned not to place undue reliance on forward-looking statements. All information herein speaks only as of the date hereof, in the case of information about Akerna, or the date of such information, in the case of information from persons other than Akerna. Akerna undertakes no duty to update or revise the information contained herein. Forecasts and estimates regarding Akerna's industry and end markets are based on sources believed to be reliable; however, there can be no assurance these forecasts and estimates will prove accurate in whole or in part.

Explanation of Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. generally accepted accounting principles ("GAAP"), we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.

Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. Other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.  We attempt compensate for these limitations by providing specific information regarding the GAAP items excluded from these non-GAAP financial measures.

Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate our business.

Adjusted EBITDA

We believe that Adjusted EBITDA, when considered with the financial statements determined in accordance with GAAP, is helpful to investors in understanding our performance and allows for comparison of our performance and credit strength to our peers. Adjusted EBITDA should not be considered alternatives to net loss as determined in accordance with GAAP as indicators of our performance or liquidity.

We define EBITDA as net loss before interest expense, provision for income taxes, depreciation and amortization. We calculate Adjusted EBITDA as EBITDA further adjusted to exclude the effects of the following items for the reasons set forth below:

  • Stock-based compensation expense, because this represents a non-cash charge and our mix of cash and share-based compensation may differ from other companies, which effects the comparability of results of operations and liquidity;
  • Cost incurred in connection with business combinations and mergers that are required to be expensed as incurred in accordance with GAAP, because business combination and merger related costs are specific to the complexity and size of the underlying transactions as well as the frequency of our acquisition activity these costs are not reflective of our ongoing operations;
  • Costs incurred in connection with non-recurring financing fees when we elect the fair value option to account for our debt instruments because if we had not elected the fair value option such costs would be recognized as an adjustment to the effective interest and excluded from EBITDA;
  • Restructuring charges because we believe these costs are not representative of operating performance;
  • Equity in earnings (losses) of investees because our share of the operations of investees is not representative of our own operating performance and may not be monetized for a number of years; and
  • Changes in fair value of contingent consideration because these adjustments are not recurrring across all periods and we believe these costs are not representative of operating performance.

Related Non-GAAP Expense Measure

We reference in our earnings call certain non-GAAP expense measures, including non-GAAP Operating Expenses, non-GAAP Product Development Expense, non-GAAP Sales and Marketing Expenses, and non-GAAP General and Administrative Expenses.  We believe that these non-GAAP financial measures, when considered with the financial statements determined in accordance with GAAP, are helpful to management and investors in understanding our performance quarter over quarter and to the comparable quarter in our prior fiscal year by excluding the same items we exclude from EBITDA to derive Adjusted EBITDA, as set forth above (stock-based compensation expense, costs incurred with business combinations and mergers, costs incurred in connection with non-recurring financing fees, restructuring charges, equity in earnings (losses) of investees and changes in fair value of contingent consideration) for the same reasons stated above, principally, that these expenses are not, in management's opinion, easily comparable across reporting periods, are not reflective of ongoing operations and/or are not representative of our operating performance.

We define non-GAAP Operating Expenses, non-GAAP Product Development Expense, non-GAAP Sales and Marketing Expenses and non-GAAP General and Administrative Expenses as, in each case, the corresponding GAAP financial measure (Operating Expenses, Product Development Expense, Sales and Marketing Expenses and General and Administrative Expenses) excluding that portion of depreciation and amortization, stock-based compensation expense, costs incurred with business combinations and mergers, costs incurred in connection with non-recurring financing fees, restructuring charges, equity in earnings (losses) of investees and changes in fair value of contingent consideration that is attributable to that specific GAAP financial measure.

This non-GAAP expense measure should not be considered an alternative to the corresponding GAAP financial measure as determined in accordance with GAAP as an indicator of our performance or liquidity.  Please review the tables provided below, for a reconciliation of this non-GAAP expense measure to the corresponding GAAP financial measure.

The reconciliation of the above non-GAAP financial measures for the quarter ended June 30, 2021 are presented in the tables below.  For comparative purposes, the reconciliation of these non-GAAP financial measures in the prior quarter ended March 31, 2021 are contained in our press release for that quarter dated May 10, 2021 and available on our website at www.akerna.com or in our current report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2021 and available here: https://www.sec.gov/Archives/edgar/data/0001755953/000121390021025543/ea140650ex99-1_akernacorp.htm

AKERNA CORP.

Condensed Consolidated Balance Sheets

(unaudited)

 
 

June 30,

  

December 31,

 
 

2021

  

2020

 

Assets

     

Current assets: 

     

Cash

$

11,778,601

  

$

17,840,640

 

Restricted cash

 

508,261

   

500,000

 

Accounts receivable, net

 

1,442,714

   

1,753,547

 

Prepaid expenses and other current assets

 

2,395,346

   

2,458,727

 

Total current assets

 

16,124,922

   

22,552,914

 
        

Fixed assets, net

 

53,354

   

1,193,433

 

Investment, net

 

226,101

   

233,664

 

Capitalized software, net

 

5,213,267

   

3,925,739

 

Intangible assets, net

 

7,772,289

   

7,388,795

 

Goodwill 

 

46,790,018

   

41,874,527

 

Total Assets

$

76,179,951

  

$

77,169,072

 
        

Liabilities and Equity

       
        

Current liabilities

       

Accounts payable, accrued expenses and other accrued liabilities 

$

4,681,554

  

$

3,188,576

 

Deferred revenue 

 

825,187

   

843,900

 

Current portion of long-term debt

 

7,155,953

   

11,707,363

 

Derivative liability

 

354,247

   

311,376

 

Total current liabilities

 

13,016,941

   

16,051,215

 
        

Long-term debt, less current portion

 

1,200,647

   

3,895,237

 
        

Total liabilities

 

14,217,588

   

19,946,452

 
        

Commitments and contingencies

       
        

Equity:

       

Preferred stock, par value $0.0001; 5,000,000 shares authorized, 1 share special voting preferred stock issued and outstanding at June 30, 2021 and December 31, 2020

 

   

 

Special voting preferred stock, par value $0.0001; 1 share authorized, issued and outstanding as of June 30, 2021 and December 31, 2020, with $1 preference in liquidation; exchangeable shares, no par value, 1,039,373 and 2,667,349 shares issued and outstanding as of June 30, 2021 and December 31, 2020 respectively

 

7,951,203

   

20,405,219

 

Common stock, par value $0.0001; 75,000,000 shares authorized, 25,332,439 and 19,901,248 issued and outstanding at June 30, 2021 and December 31, 2020, respectively

 

2,533

   

1,990

 

Additional paid-in capital

 

123,856,649

   

94,086,433

 

Accumulated other comprehensive loss

 

(105,544)

   

(91,497)

 

Accumulated deficit

 

(69,742,478)

   

(57,179,525)

 

Total equity

$

61,962,363

  

$

57,222,620

 

Total liabilities and equity 

$

76,179,951

  

$

77,169,072

 

AKERNA CORP.

Condensed Consolidated Statements of Operations

(unaudited)

 
 

For the Three Months Ended

 

For the Six Months Ended

 
 

June 30,

 

June 30,

 
 

2021

  

2020

 

2021

  

2020

 

Revenues

          

      Software

$

4,456,728

  

$

2,849,734

 

$

8,251,881

  

$

5,196,043

 

      Consulting

 

410,884

   

131,000

  

583,631

   

823,584

 

      Other

 

39,275

   

22,904

  

85,399

   

54,557

 

     Total revenues

 

4,906,887

   

3,003,638

  

8,920,911

   

6,074,184

 

Cost of revenues

 

1,914,380

   

1,818,565

  

3,368,547

   

3,214,784

 
               

Gross profit

 

2,992,507

   

1,185,073

  

5,552,364

   

2,859,400

 
               

Operating expenses

              

      Product development

 

1,527,258

   

1,088,938

  

2,951,358

   

1,963,725

 

      Sales and marketing

 

1,826,143

   

2,117,118

  

3,562,058

   

4,157,869

 

      General and administrative

 

4,375,981

   

3,126,027

  

6,228,943

   

6,583,289

 

      Depreciation and amortization

 

1,314,132

   

1,036,378

  

2,367,015

   

1,216,607

 

     Total operating expenses

 

9,043,514

   

7,368,461

  

15,109,374

   

13,921,490

 
               

Loss from operations

 

(6,051,007)

   

(6,183,388)

  

(9,557,010)

   

(11,062,090)

 
               

Other (expense) income:

              

      Interest (expense) income , net

 

(163,125)

   

(2,084)

  

(937,504)

   

31,438

 

      Change in fair value of convertible notes

 

(16,405)

   

766,000

  

(2,007,667)

   

766,000

 

      Change in fair value of derivative liability  

 

133,125

   

(606,958)

  

(42,871)

   

(370,041)

 

      Other expense, net

 

243

   

  

243

   

(124)

 

     Total other (expense) income

 

(46,162)

   

156,958

  

(2,987,799)

   

427,273

 
               

Net loss before income taxes and equity in losses of investee

 

(6,097,169)

   

(6,026,430)

  

(12,544,809)

   

(10,634,817)

 

         Income tax expense

 

(4,300)

   

(30,985)

  

(10,570)

   

(30,985)

 

Equity in losses of investee

 

(3,782)

   

(3,692)

  

(7,564)

   

(3,692)

 
               

Net loss

 

(6,105,251)

   

(6,061,107)

  

(12,562,943)

   

(10,669,494)

 

Net loss attributable to noncontrolling interest in consolidated subsidiary  

 

   

748,584

  

   

849,759

 

Net loss attributable to Akerna shareholders

$

(6,105,251)

  

$

(5,312,523)

 

$

(12,562,943)

  

$

(9,819,735)

 
               

Basic and diluted weighted average common stock outstanding

 

24,530,837

   

13,166,444

  

22,879,131

   

12,871,648

 

Basic and diluted net loss per common share

$

(0.25)

  

$

(0.46)

 

$

(0.55)

  

$

(0.83)

 

AKERNA CORP.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 
 

For the Six Months Ended

 
 

June 30,

 
 

2021

  

2020

 

Cash flows from operating activities

     

Net loss

$

(12,562,943)

  

$

(10,669,494)

 

Adjustment to reconcile net loss to net cash used in operating activities:

       

Equity in losses of investment

 

7,564

   

3,692

 

Bad debt

 

150,294

   

370,154

 

Stock-based compensation expense

 

1,074,621

   

760,584

 

Loss on write off of fixed assets

 

1,045,180

   

 

Amortization of deferred contract cost

 

242,110

   

 

Non-cash interest expense

 

926,968

   

 

Depreciation and amortization

 

2,367,014

   

1,216,607

 

Debt issuance costs

 

   

1,177,390

 

Foreign currency loss

 

(17,344)

   

 

Change in fair value of convertible notes

 

2,007,677

   

(766,000)

 

Change in fair value of derivative liability

 

42,871

   

370,041

 

Change in fair value of contingent consideration

 

   

(998,000)

 

Changes in operating assets and liabilities:

       

       Accounts receivable

 

641,111

   

(400,251)

 

       Prepaid expenses and other current assets

 

(115,934)

   

(120,489)

 

       Other assets

 

   

 

       Accounts payable and accrued liabilities

 

1,463,669

   

975,121

 

       Deferred revenue

 

(988,046)

   

(507,089)

 

Net cash used in operating activities

 

(3,715,198)

   

(8,587,734)

 
        

Cash flows from investing activities

       

Developed software additions

 

(2,004,609)

   

(1,990,584)

 

Furniture, fixtures, and equipment additions

 

   

(156,636)

 

Cash paid for business combination, net of cash acquired

 

   

122,675

 

Net cash used in investing activities

 

(2,004,609)

   

(2,024,545)

 
        

Cash flows from financing activities

       

Value of shares withheld for related to tax withholdings

 

(333,847)

   

 

Proceeds from issuance of long term debt

 

   

17,164,600

 

Cash paid for debt issuance costs

 

   

(1,177,390)

 

Net cash (used in) provided by financing activities

 

(333,847)

   

15,987,210

 

    Effect of exchange rate changes on cash and restricted cash

 

(124)

   

 

Net change in cash and restricted cash

 

(6,053,778)

   

5,375,207

 

Cash and restricted cash - beginning of period

 

18,340,640

   

19,280,897

 

Cash and restricted cash - end of period

$

12,286,862

  

$

24,655,829

 

Cash paid for interest

 

50,854

   

 

Cash paid for taxes

 

64,963

   

51,472

 

Supplemental Disclosure of non-cash investing and financing activity:

       

Settlement of convertible notes in common stock

 

10,196,382

   

 

Conversion of exchangeable shares to common stock

 

12,453,853

   

 

Settlement of other liabilities in common stock

 

377,325

   

 

Akerna Corp.

Earnings Before Interest, Taxes, Depreciation and Amortization, and Adjusted EBITDA

The reconciliation of net loss to EBITDA and Adjusted EBITDA is as follows:

(unaudited)

 
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Net loss

$   (6,105,251)

 

$   (6,061,107)

 

$   (12,562,943)

 

$    (10,669,494)

Adjustments:

       

    Interest expense (income)

163,124

 

2,084

 

937,504

 

(31,438)

    Change in fair value of convertible notes 

16,405

 

(766,000)

 

2,007,677

 

(766,000)

    Change in fair value of derivative  liability

(133,125)

 

606,958

 

42,871

 

370,041

    Income tax expense

4,300

 

30,985

 

10,570

 

30,985

Depreciation and amortization

1,314,132

 

1,036,378

 

2,367,015

 

1,216,607

EBITDA

$   (4,740,415)

 

$   (5,150,702)

 

$     (7,197,306)

 

$      (9,849,299)

Stock-based compensation expense

521,335

 

371,532

 

1,024,715

 

673,480

Business combination and merger related  costs

63,735

 

1,026,929

 

107,726

 

2,245,361

Non-recurring financing fees

111,761

 

1,177,390

 

129,594

 

1,177,390

Restructuring charges

2,406,589

 

 

2,453,776

 

Changes in fair value of contingent consideration

 

(998,000)

 

 

(998,000)

Equity in losses of investee

3,782

 

3,692

 

7,564

 

3,692

 Adjusted EBITDA

$   (1,633,213)

 

$   (3,569,159)

 

$     (3,473,931)

 

$      (6,747,376)

Akerna Corp.

The reconciliation of operating expenses to non-GAAP operating expenses is as follows:

(unaudited)

 
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Operating Expenses

$    9,043,514

 

$    7,368,461

 

$     15,109,374

 

$      13,921,490

Adjustments:

       

Depreciation and amortization

1,314,132

 

1,036,378

 

2,367,015

 

1,216,607

Stock-based compensation expense

480,917

 

351,620

 

955,213

 

646,628

Business combination and merger related costs 

63,735

 

1,026,929

 

107,726

 

2,245,361

Non-recurring financing fees

111,761

 

1,177,390

 

129,594

 

1,177,390

Restructuring charges

2,406,589

 

-

 

2,453,776

 

-

Changes in fair value of contingent consideration

-

 

(998,000)

 

-

 

(998,000)

Non-GAAP Operating Expenses

$    4,666,380

 

$    4,774,144

 

$       9,096,050

 

$        9,633,504

Akerna Corp.

The reconciliation of product development expense to non-GAAP product development expense is as follows:

(unaudited)

 
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Product development expense

$    1,527,258

 

$    1,088,938

 

$       2,951,358

 

$        1,963,725

Stock-based compensation expense

186,013

 

93,520

 

407,907

 

109,295

Non-GAAP product development expense

$    1,341,245

 

$       995,418

 

$       2,543,452

 

$        1,854,430

Akerna Corp.

The reconciliation of sales and marketing expense to non-GAAP sales and marketing expenses is as follows:

(unaudited)

 
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Sales and marketing expense

$    1,826,143

 

$    2,117,118

 

$       3,562,058

 

$        4,157,869

Stock-based compensation expense

125,387

 

120,033

 

243,587

 

143,085

Non-GAAP sales and marketing expense

$    1,700,756

 

$    1,997,085

 

$       3,318,472

 

$        4,014,784

Akerna Corp.

The reconciliation of general and administrative expense to non-GAAP general and administrative expenses is as follows:

(unaudited)

 
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

General and administrative expense

$   4,375,981

 

$ 3,126,027

 

$    6,228,943

 

$        6,583,289

Adjustments:

       

Stock-based compensation expense

169,516

 

138,067

 

303,720

 

394,248

Business combination and merger related costs 

63,735

 

1,026,929

 

107,726

 

2,245,361

Non-recurring financing fees

111,761

 

1,177,390

 

129,594

 

1,177,390

Restructuring charges

2,406,589

 

-

 

2,453,776

 

-

Changes in fair value of contingent consideration

-

 

(998,000)

 

-

 

(998,000)

Non-GAAP general and administrative expense

$   1,624,379

 

$ 1,781,641

 

$     3,234,127

 

$        3,764,290

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