Exhibit 99.1

 

 

 

Akerna Announces Fourth Quarter and Full Year 2021 Financial Results

 

Software revenue up 59%, Total revenue up 49% year-over-year

 

DENVER, March 21, 2022 -- Akerna (Nasdaq: KERN), a leading enterprise software company and developer of one of the most comprehensive technology infrastructures, ecosystems, and compliance engines powering the global cannabis industry, today reported its unaudited financial results for the quarter and year ended December 31, 2021.

 

“Akerna experienced significant growth in 2021, with our enterprise business leading the way forward into 2022,” said Jessica Billingsley, CEO of Akerna. “Our platforms continued to serve our growing clients, and we continued to develop offerings that position Akerna as a differentiated provider of robust technology solutions to the cannabis industry. We acquired two leading enterprise solutions -- 365 Cannabis and Viridian Sciences -- that delivered robust increases in software revenue. We are pleased with the consistent uptake from our clients in a year of consolidation in the industry with limited new markets opening.”

 

“Our clients are both getting larger and individually seeing both unit and sales transactions rise. As more of the industry runs on Akerna, we are well-positioned for expected new market expansion and US federal progress. In the meantime, we continue to grow our CARR, grow the number and amount of transactions running on Akerna, and we continue to enhance our open ecosystem of solutions that can run either independently or in conjunction with our clients’ choice of our leading accounting and tax products including SAP, Microsoft, and Netsuite.”

 

Full Year 2021 Financial Highlights

 

Software revenue was $19.0 million, up 59% year-over-year

     

Total revenue was $20.7 million, up 49% year-over-year

     

Gross profit was $12.6 million, up 67% year-over-year. Gross profit margin was 61% in 2021 compared to 54% in 2020

     

Loss from operations was $33.4 million, up $6.6 million year-over-year

     

Net loss was $31.3 million, up $4.4 million year-over-year

     

Adjusted EBITDA* loss was $7.9 million compared with a loss of $11.7 million in 2020, a 32% improvement year-over-year

     

Cash and Restricted Cash was $14.4 million as of December 31, 2021

 

*See “Explanation of Non-GAAP Financial Measures” below

 

2021 Metrics and Operating Highlights

 

Total SaaS ARR of $20.9 million, up 51% year-over-year

     

Average new business deal size up 15% year-over-year

     

Q4 New Bookings ARR of approximately $1.5 million, representing a quarterly record for Akerna

 

 

 

Transaction volume up 48% year-over-year

     

Retail order spend up 42% year-over-year

     

Acquisition of 365 Cannabis, cannabis business management software built on Microsoft’s Dynamics Office 365 Business Central

     

Acquistion of Viridian, cannabis business management software built on SAP Business One

     

Launched Akerna Connect, enabling cannabis dispensaries to offer online ordering, loyalty programs, and text messaging

     

Secured First Federal Cannabis Regulatory Contract with St. Vincent and the Grenadines

     

Issued $20 million in convertible debt to replace existing convertible debt at more attractive terms

     

Achieved SAP® Certified Integration with SAP NetWeaver® for MJ Platform

 

Fourth Quarter 2021

 

Software revenue was $6.2 million, up 80% year-over-year

     

Total revenue was $6.6 million, up 61% year-over-year

     

Gross profit was $3.8 million, up 42% year-over-year. Gross profit margin was 58% in the fourth quarter compared to 66% in the fourth quarter of 2020.

     

Loss from operations was $20.1 million, up $9.9 million year-over-year

     

Net loss was $17.2 million, up $5.0 million year-over-year

     

Adjusted EBITDA* loss was $2.9 million compared with a loss of $1.9 million in the fourth quarter 2020

 

*See “Explanation of Non-GAAP Financial Measures” below

 

NOTE:

 

The foregoing financial results are preliminary in nature. Final financial results and other disclosures will be reported in Akerna’s annual report on Form 10-K 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-K in detail.

 

Conference Call Details

 

Akerna will host a conference call, tomorrow, Tuesday March 22, 2022 at 8:30 AM ET and will provide prepared remarks to update investors on these results, with a live Q&A Session to follow.

 

Any interested parties who would like to participate in the call by phone are encouraged to dial Toll-Free: 1-877-407-3982, or Toll / International: +1-201-493-6780 at least 5 minutes prior to the start of the call. The Conference ID is 13727329. The conference call will also be available via a live, listen-only webcast and can be accessed over the internet through the Investor Relations section of Akerna’s website, https://ir.akerna.com/.

 

2

 

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 $30 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.

 

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

 

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 position for expected new market expansion and US federal progress, our continued growth of CARR and the number and amount of transactions running on Akerna, our continued enhancement of our open ecosystem of solutions 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.

 

3

 

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:

 

Impairment of long-lived assets, as this is a non-cash, non-recurring item, which effects the comparability of results of operations and liquidity;

 

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, including fees incurred as a direct result of electing the fair value option to account for our debt instruments;

 

Restructuring charges, which include costs to terminate a lease and the related write off of leasehold improvements and furniture, as we believe these costs are not representative of operating performance;

 

Gain on forgiveness of PPP loan, as this is a one-time forgiveness of debt that is not recurring across all periods and we believe inclusion of the gain is not representative of operating performance;

 

Equity in 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 recurring across all periods and we believe these costs are not representative of operating performance.

 

Other non-operating expenses which includes a one-time gain on debt extinguishment and a one-time loss on disposal of fixed assets, which effects the comparability of results of operations and liquidity.

 

4

 

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, business combinations and merger related costs, non-recurring financing fees, restructuring charges, impairment of long-lived assets, and equity in 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 December 31, 2021 are presented in the tables below. For comparative purposes, the reconciliation of these non-GAAP financial measures in the prior quarter ended September 30, 2021 are contained in our press release for that quarter dated November 8, 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 November 8, 2021 and available here: https://www.sec.gov/Archives/edgar/data/1755953/000121390021058240/ea150400ex99-1_akernacorp.htm

 

Investor Contacts

IR@akerna.com

 

5

 

AKERNA CORP.

Consolidated Balance Sheets

(unaudited)

 

   December 31,   December 31, 
   2021   2020 
Assets        
Current assets:        
Cash  $13,934,265   $17,840,640 
Restricted cash   508,261    500,000 
Accounts receivable, net   1,403,774    1,753,547 
Prepaid expenses and other current assets   2,383,764    2,458,727 
Total current assets   18,230,064    22,552,914 
           
Fixed assets, net   153,151    1,193,433 
Investment, net   226,101    233,664 
Capitalized software, net   7,311,676    3,925,739 
Intangible assets, net   21,609,794    7,388,795 
Goodwill   46,942,681    41,874,527 
Other noncurrent assets   9,700     
Total assets  $94,483,167   $77,169,072 
           
Liabilities and Equity          
           
Current liabilities:          
Accounts payable, accrued expenses and other current liabilities  $6,063,520   $3,188,576 
Contingent consideration payable   6,300,000     
Deferred revenue   3,543,819    843,900 
Current portion of long-term debt   13,200,000    11,707,363 
Derivative liability   63,178    311,376 
Total current liabilities   29,170,517    16,051,215 
           
Long-term portion of deferred revenue   582,676     
Long-term debt, less current portion   4,105,000    3,895,237 
Deferred tax liabilities   675,291     
           
Total liabilities   34,533,484    19,946,452 
           
Commitments and contingencies (Note 14)          
           
Equity:          
Preferred stock, par value $0.0001; 5,000,000 shares authorized, 1 share special voting preferred stock issued and outstanding at December 31, 2021 and December 31, 2020        
Special voting preferred stock, par value $0.0001; 1 share authorized, issued and outstanding as of December 31, 2021 and December 31, 2020, with $1 preference in liquidation; exchangeable shares, no par value, 309,286 and 2,667,349 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively (See Note 4)   2,366,038    20,405,219 
Common stock, par value $0.0001; 75,000,000 shares authorized, 31,001,884 and 19,901,248, issued and outstanding at December 31, 2021 and December 31, 2020, respectively   3,100    1,990 
Additional paid-in capital   146,027,258    94,086,433 
Accumulated other comprehensive loss   61,523    (91,497)
Accumulated deficit   (88,508,236)   (57,179,525)
Total equity   59,949,683    57,222,620 
Total liabilities and equity  $94,483,167   $77,169,072 

 

6

 

AKERNA CORP.

 Condensed Consolidated Statements of Operations

(unaudited)

 

   For the Three Months Ended   For the Year Ended 
   December 31,   December 31, 
   2021   2020   2021   2020 
Revenue                
Software  $6,188,569   $3,443,392   $18,998,409   $11,963,028 
Consulting   375,380    583,512    1,510,413    1,739,683 
Other revenue   64,612    83,876    176,152    196,257 
Total revenue   6,628,561    4,110,780    20,684,974    13,898,968 
Cost of revenue   2,779,558    1,401,103    8,119,487    6,355,825 
Gross profit   3,849,003    2,709,677    12,565,487    7,543,143 
                     
Operating expenses                    
Product development   1,754,130    1,407,263    6,271,966    5,129,814 
Sales and marketing   3,543,653    1,830,526    9,108,173    8,085,897 
General and administrative   2,115,790    1,964,880    10,422,207    11,018,356 
Depreciation and amortization   2,129,715    836,215    5,735,150    3,223,844 
Impairment of long-lived assets   14,383,310    6,887,000    14,383,310    6,887,000 
Total operating expenses   23,926,598    12,925,884    45,920,806    34,344,911 
Loss from operations   (20,077,595)   (10,216,207)   (33,355,319)   (26,801,768)
                     
Other (expense) income:                    
Interest (expense) income, net   (355,710)   (189,397)   (1,531,497)   (161,646)
Change in fair value of convertible notes   665,000    (1,739,273)   (1,365,904)   (195,273)
Change in fair value of derivative liability   97,023    (15,794)   248,198    376,811 
Gain on forgiveness of PPP Loan           2,234,730     
Other (expense) income, net   186,177    (59,273)   186,420    (59,397)
Total other (expense) income   592,490    (2,003,737)   (228,053)   (39,505)
                     
Net loss before income taxes and equity in losses of investee   (19,485,105)   (12,219,944)   (33,583,372)   (26,841,273)
Income tax expense (benefit)   2,272,795    (200)   2,262,225    (31,185)
Equity in losses of investee       (11,109)   (7,564)   (16,335)
Net loss   (17,212,310)   (12,231,253)   (31,328,711)   (26,888,793)
Net loss attributable to noncontrolling interest in consolidated subsidiary               858,574 
Net loss attributable to Akerna shareholders  $(17,212,310)  $(12,231,253)  $(31,328,711)  $(26,030,219)
                     
Basic and diluted weighted average common stock outstanding   30,741,422    18,138,921    25,641,950    14,414,503 
Basic and diluted net loss per common share  $(0.56)  $(0.67)  $(1.22)  $(1.81)

 

7

 

AKERNA CORP.

Consolidated Statements of Cash Flows

(unaudited)

 

   Year Ended 
December 31,
   Year Ended 
December 31,
 
   2021   2020 
Cash flows from operating activities        
Net Loss  $(31,328,711)  $(26,888,791)
Adjustment to reconcile net loss to net cash used in operating activities          
Equity in losses of investment   7,564    16,335 
Bad debt expense   556,890    442,986 
Stock-based compensation expense   2,070,359    1,958,173 
Loss on write off of fixed assets   1,045,179     
Gain on forgiveness of PPP loan   (2,234,730)    
Depreciation and amortization   5,735,150    3,223,844 
Amortization of deferred contract costs   492,683    228,766 
Non-cash interest expense   1,009,331    32,727 
Foreign currency gain   (3,312)    
Impairment of long-lived assets   14,383,310    6,887,000 
Gain on debt extinguishment   (186,177)    
Loss on sale of fixed asset       84,835 
Debt issuance costs       1,177,390 
Change in fair value of convertible notes   1,365,904    195,273 
Change in fair value of derivative liability   (248,198)   (376,811)
Change in fair value of contingent consideration       (1,991,000)
Changes in operating assets and liabilities:          
Accounts receivable   849,785    608,524 
Prepaid expenses and other current assets   (8,988)   (810,218)
Other assets       41,925 
Accounts payable, accrued expenses and other current liabilities   1,610,470    (1,523,253)
Deferred tax liabilities   (2,274,295)    
Deferred revenue   (1,010,118)   (601,177)
Net cash used in operating activities   (8,167,904)   (17,293,472)
           
Cash flows from investing activities          
Developed software additions   (5,427,230)   (3,838,294)
Furniture, fixtures, and equipment additions   (39,263)   (168,839)
Cash paid for business combinations, net of cash acquired   (5,018,592)   (5,156,459)
Net cash used by investing activities   (10,485,085)   (9,163,592)
           
Cash flows from financing activities          
Value of shares withheld related to tax withholdings   (520,395)    
Proceeds from stock offering, net   1,828,119     
Proceeds from the issuance of long term debt   18,000,000     
Payments on debt   (4,571,472)   (1,500,000)
Proceeds from the issuance of common stock       29,164,600 
Offering costs from the issuance of common stock       (2,145,010)
Net cash provided by financing activities   14,736,252    25,519,590 
Effect of exchange rate changes on cash and restricted cash   18,621    (2,783)
Net (decrease) increase in cash and restricted cash  $(3,898,114)  $(940,257)
Cash and restricted cash - beginning of period   18,340,640    19,280,897 
           
Cash and restricted cash - end of period  $14,442,526   $18,340,640 
Cash paid for taxes  $10,570   $ 
Cash paid for interest  $507,941   $150,000 

 

8

 

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

December 31,

  

Year Ended

December 31,

 
   2021   2020   2021   2020 
Net loss  $(17,212,310)  $(12,231,252)  $(31,328,711)  $(26,888,791)
Adjustments:                    
Interest expense (income)   355,710    189,397    1,531,497    161,646 
 Change in fair value of convertible notes   (665,000)   1,739,273    1,365,904    195,273 
Change in fair value of derivative liability   (97,023)   15,794    (248,198)   (376,811)
Income tax expense (benefit)   (2,272,795)   200    (2,262,225)   31,185 
Depreciation and amortization   2,129,715    836,215    5,735,150    3,223,844 
EBITDA  $(17,761,703)  $(9,450,373)  $(25,206,583)  $(23,653,654)
Impairment of long-lived assets   14,383,310    6,887,000    14,383,310    6,887,000 
Stock-based compensation expense   465,476    516,169    1,967,817    1,871,069 
Business combination and merger related costs   159,583    142,639    449,940    3,339,864 
Non-recurring financing fees   48,328    96,427    458,691    1,316,984 
Restructuring charges   (33,868)   421,957    2,419,908    490,146 
Changes in fair value of contingent consideration       (604,000)       (1,991,000)
Gain on forgiveness of PPP loan           (2,234,730)    
Equity in losses of investee       11,109    7,564    16,335 
Other non-operating expenses   (186,177)   59,273    (186,177)   59,397 
 Adjusted EBITDA  $(2,925,051)  $(1,919,799)  $(7,940,260)  $(11,663,859)

 

Akerna Corp.

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

(unaudited)

 

  

Three Months Ended

December 31,

  

Year Ended

December 31,

 
   2021   2020   2021   2020 
Operating Expenses  $23,926,599   $12,925,883   $45,920,806   $34,344,910 
Adjustments:                    
Depreciation and amortization   2,129,715    836,215    5,735,150    3,223,844 
Stock-based compensation expense   440,772    474,196    1,832,692    1,784,532 
Business combination and merger related costs   159,583    142,639    449,940    3,339,864 
Non-recurring financing fees   48,328    96,427    458,691    1,316,984 
Restructuring charges   (33,868)   421,957    2,420,151    490,146 
Impairment of long-lived assets   14,383,310    6,887,000    14,383,310    6,887,000 
Changes in fair value of contingent consideration       (604,000)       (1,991,000)
Non-GAAP Operating Expenses  $6,798,759   $4,671,449   $20,640,872   $19,293,540 

 

9

 

Akerna Corp.

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

(unaudited)

 

  

Three Months Ended

December 31,

  

Year Ended

December 31,

 
   2021   2020   2021   2020 
Product development expense  $1,754,130   $1,407,263   $6,271,966   $5,129,814 
Stock-based compensation expense   258,415    229,650    833,079    548,233 
Non-GAAP product development expense  $1,495,715   $1,177,613   $5,438,887   $4,581,581 

 

Akerna Corp.

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

(unaudited)

 

  

Three Months Ended

December 31,

  

Year Ended

December 31,

 
   2021   2020   2021   2020 
Sales and marketing expense  $3,543,653   $1,830,526   $9,108,173   $8,085,897 
Stock-based compensation expense   149,960    91,521    516,751    390,810 
Non-GAAP sales and marketing expense  $3,393,693   $1,739,005   $8,591,422   $7,695,087 

 

Akerna Corp.

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

(unaudited)

 

  

Three Months Ended

December 31,

  

Year Ended

December 31,

 
   2021   2020   2021   2020 
General and administrative expense  $2,115,790   $1,964,880   $10,422,207   $11,018,356 
Adjustments:                    
Stock-based compensation expense   32,397    153,026    482,862    845,492 
Business combination and merger related costs   159,583    142,639    449,940    3,339,864 
Non-recurring financing fees   48,328    96,427    458,691    1,316,984 
Restructuring charges   (33,868)   421,957    2,420,151    490,146 
Changes in fair value of contingent consideration       (604,000)       (1,991,000)
Non-GAAP general and administrative expense  $1,909,350   $1,754,831   $6,610,563   $7,016,870 

 

 

10