Note 4 – Change in Control

We effectuated a change in control with the closing of the Sale Transaction and the Merger on February 9, 2024. The following describes the transactions and related corporate actions that facilitated the completion of these transactions.

Sale Transaction

On January 27, 2023, we entered into a securities purchase agreement (the “Initial SPA”) with a third party to sell MJF and Ample for $4.0 million in cash. Subsequently, we received a superior offer from Alleaves Inc. (“Alleaves”), as described below, which was presented to the third party for an opportunity to match or exceed Alleaves’ offer in accordance with the Initial SPA. The third party ultimately declined to present a counter-offer and on April 5, 2023, we terminated the Initial SPA. As a result of the termination, Akerna paid a termination fee and reimbursement for expenses of $0.2 million in June 2023. These costs were included in the line item  “Other expense, net” in our consolidated statements of operations.

On April 28, 2023, we entered into a securities purchase agreement (the “SPA”) with MJ Freeway Acquisition Co (“MJ Acquisition”), an affiliate of Alleaves. Upon the terms and subject to the satisfaction of the conditions described in the SPA, including approval of the transaction by Akerna’s stockholders, Akerna would sell MJF and Ample to MJ Acquisition for a purchase price of $5.0 million, consisting of $4.0 million in cash at closing and a loan by MJ Acquisition to Akerna in the principal amount of $1.0 million evidenced by a note (the “MJA Note”) and security documents with such note to be deemed paid in full upon closing. 

The SPA was amended on October 12, 2023, November 15, 2023 and December 28, 2023 to facilitate the following, among other administrative matters attributable to the Sale Transaction: (i) reduced the cash to be paid at closing to $1.85 million from the original $4.0 million, (ii) required Akerna to sell Ample in an unrelated transaction to an unaffiliated third party (see Note 15) with the sales proceeds from such sale, less an allowance for legal fees, to further reduce the proceeds to be received from MJ Acquisition upon closing of the Sale Transaction, (iii) provided for an additional $0.650 million from MJ Acquisition to Akerna for working capital purposes and (iv) amending the MJA Note (the “Amended and Restated Secured Promissory Note”) to increase the principal to $1.650 million and adjust for its settlement at closing such that in would be converted into a number of shares of Common Stock upon closing equivalent to $1.650 million divided by the 5-day volume weighted average price of Akerna’s Common Stock.

At a special meeting held on January 29, 2024 (the “Special Meeting”), the stockholders of Akerna approved the Sale Transaction.

In order to consummate the Merger and Sale Transaction, pursuant to the terms of the SPA, as amended, the Company also entered into a release and termination agreement dated February 8, 2024 (the “MJA Release and Termination Agreement”) with MJ Acquisition to obtain a release under and termination of the Second Amended and Restated Security and Pledge Agreement dated November 15, 2023 entered into by and among the Company, certain of its subsidiaries, and MJ Acquisition under the Second Amended and Restated Intellectual Property Security Agreement dated November 15, 2023 by and between the Company, certain of its subsidiaries and MJ Acquisition and under the Second Amended and Restated Guaranty dated November 15, 2023, by and between certain subsidiaries of the Company and MJ Acquisition (the “MJA Credit Agreements”). Pursuant to the MJA Release and Termination Agreement, MJ Acquisition released the Company and its subsidiaries from all of the security interests and guarantees set forth in the MJA Credit Agreements and agreed that, upon receipt by MJ Acquisition of the assignment of the membership interests of MJF and the shares of Common Stock to be issued to MJ Acquisition upon conversion of the Amended and Restated Secured Promissory Note held by MJ Acquisition into shares of Common Stock, the MJA Credit Agreements would terminate without any further action by MJ Acquisition.

On February 9, 2024, we closed the Sale Transaction pursuant to the SPA, as amended. Upon the terms and subject to the satisfaction of the conditions described therein, Akerna sold to MJ Acquisition all of the membership interests in MJF for an aggregate purchase price of approximately $1.284 million and conversion of the Amended and Restated Secured Promissory Note in the amount of $1.650 million which principal amount converted into shares of Common Stock of Akerna at closing of the Sale Transaction, with such Amended and Restated Secured Promissory Note deemed paid in full upon closing of the Sale Transaction.

Merger

On January 27, 2023, we entered into the Merger Agreement with Gryphon. Concurrent with the signing and in support of  the Merger, we and each of the holders of the Senior Convertible Notes entered into exchange agreements (the “Exchange Agreements”) whereby the holders would ultimately convert the principal amounts of each of their note holdings to a level that would represent 19.9 percent of the outstanding shares of Common Stock prior to the closing of the Sale Transaction and the Merger. Prior to the stockholder vote required for the closing of those transaction, the remaining Senior Convertible Notes outstanding would be converted into a special class of exchangeable preferred stock to facilitate the required stockholder vote and then be converted into shares of our Common Stock subject to the Merger. For a limited period, the conversion price of the Senior Convertible Notes was lowered to $24.00 per share from $95.00 per share. In accordance with the Exchange Agreements and upon the occurrence of an any additional capital raising transaction, the conversion price would be adjusted accordingly. In connection with an equity offering in June 2023 (see Note 11), the conversion price was further reduced to $10.00 per share. Through December 6, 2023, a total of $3.187 million in principal amount of the Senior Convertible Notes were exchanged for 237,213 shares of Common Stock in connection with the Exchange Agreements.

On December 14, 2023, we designated and authorized 3,244 shares of Series C Preferred Stock with a par value of $1,000 per share (“Series C Preferred Stock”). Each share of the Series C Preferred Stock would have voting power equivalent to 100 shares of Common Stock. On December 20, 2023, Akerna and the holders of the Senior Convertible Notes that were parties to the Exchange Agreements entered into an amendment no. 1 to each of their respective the Exchange Agreements (the “Amended Exchange Agreements”) to establish the initial closing at which time each of the holders of the Senior Convertible Notes received 1,711 shares of Series C Preferred Stock (3,422 shares in total) in exchange for $1.711 million in principal amount of the Senior Convertible Notes ($3.422 million on a combined basis).

At the Special Meeting, the stockholders of Akerna approved the Merger concurrent with approval by Gryphon’s stockholders. In addition, the stockholders of Akerna approved: (i) an amendment to the Company’s amended and restated certificate of incorporation, as amended, to effect a reverse stock split of the Company’s Common Stock, at a ratio of one (1) new share for every fifteen (15) to one hundred (100) shares of outstanding Common Stock, with the exact ratio and effective time of the reverse stock split of Akerna Common Stock to be determined by the Akerna board of directors, agreed to by Gryphon and publicly announced by press release, (ii) an increase to the number of authorized shares of Common Stock to facilitate the closing of the Merger, (iii) approval of an amendment to the amended and restated certificate of incorporation to change the corporate name from “Akerna Corp.” to “Gryphon Digital Mining, Inc.,” (iv) approval of the Akerna 2024 Omnibus Incentive Plan and (v)  approval of the issuance of Common Stock upon the conversion of $1.650 million in principal amount of the Amended and Restated Secured Promissory Note held by MJ Acquisition.

On February 8, 2024, we entered into amendment no. 2 (“Amendment No. 2”) to the Exchange Agreements. Pursuant to Amendment No. 2, the Company and the holders of the Senior Convertible Notes amended the terms of the Exchange Agreements to (i) set the “Final Closing Date” under the Exchange Agreement to conduct the “Final Exchange” to take place immediately following the Effective Date of the Merger, (ii) agree that the “Company Optional Redemption Price” of the Senior Convertible Notes in relation to the “Cash Sweep” was $nil, (iii) agree as to the principal amount of the Senior Convertible Note remaining outstanding held by each holder following the payment of portion of the Senior Convertible Note pursuant to the Cash Sweep and that such Senior Convertible Note will be exchanged at the Final Closing into shares of Common Stock based on a per share price of $4.60 (being $0.23, as adjusted to reflect the 1-for-20 reverse stock split to be effected immediately prior to the Final Closing), (iv) agree that such number of shares of Common Stock will not exceed the “Maximum Percentage” and therefore there will be no “Abeyance Shares”, and (v) the Final Exchange shall be consummated pursuant to Section 3(a)(9) of the Securities Act and the terms set forth in Amendment No. 2. Pursuant to the terms of Amendment No. 2, on February 9, 2024, the remaining principal amount of Senior Convertible Notes was exchanged for 824,977 shares of Common Stock. 

On February 8, 2024, we entered into certain exchange agreements under Section 3(a)(9) of the United States Securities Act of 1933, as amended (the “Securities Act”), in relation to the exchange of the Company’s issued and outstanding shares of Series C Preferred Stock  for shares of Common Stock (the “3(a)(9) Exchange Agreements”). Pursuant to the Section 3(a)(9) Exchange Agreements, on February 9, 2024, all 3,244 Series C Shares with a face value of $1,000 per share were exchanged for 756,746 shares of Common Stock. 

In order to consummate the Merger and the Sale Transaction, pursuant to the terms of the Exchange Agreements, we entered into a release and termination agreement dated February 8, 2024 (“Release and Termination Agreement”), to obtain a release under, and termination of, the Amended and Restated Security and Pledge Agreement dated October 5, 2021 entered into by and among the Company, certain of its subsidiaries, and the collateral agent named therein, the Amended and Restated Intellectual Property Security Agreement dated October 5, 2021 by and between the Company, certain of its subsidiaries and the collateral agent named therein, and the Amended and Restated Guaranty dated October 5, 2021 by and between certain subsidiaries of the Company and the collateral agent named therein (collectively, the “Credit Agreements”). Pursuant to the Release and Termination Agreement, the collateral agent released the Company and its subsidiaries from all of the security interests and guarantees set forth in the Credit Agreements and agreed that, upon receipt by the holders of the Senior Convertible Notes of (i) the shares of Common Stock to be issued pursuant to Amendment No. 2 and (ii) evidence of the receipt of assignment of a stated monetary interest in the Company’s Employee Retention Tax Credit (“ERTC”) to the holders of the Senior Convertible Notes (who were also holders of the Series C Shares), the Credit Agreements would terminate without any further action by the collateral agent or the holders of the Senior Convertible Notes. Further, we entered into a separate consent and agreement dated February 8, 2024 with each of the two institutions that hold the Senior Convertible Notes, pursuant to which each such holder separately consented to the Release and Termination Agreement (the “Noteholder Consents”).

On February 8, 2024, we entered into a ERTC & Liability Assignment Agreement (the “ERTC Agreement”) with Distributionco LLC, a Colorado limited liability company (“Distributionco”). Pursuant to the ERTC Agreement, in order to (i) induce the holders of the Senior Convertible Notes and Series C Shares to agree to the closing of the Merger and Sale Transaction, (ii) settle certain accounts payable to a third party service provider and (iii) settle certain amounts of compensation due and payable to officers of the Company, the Company agreed to the assignment of the Company ERTC credit anticipated to be approximately $2.1 million to Distributionco in exchange for Distributionco assuming the above liabilities of the Company totaling in the aggregate, $2.1 million of liabilities.

On February 8, 2024, we entered into share settlement agreements (the “Share Settlement Agreements”) with certain former officers of the Company (the “Purchasers”), pursuant to which the Purchasers were issued shares of Common Stock as satisfaction for outstanding compensation balances owed to the Purchasers. On February 9, 2024, an aggregate of 446,611 shares of Common Stock (the “Settlement Shares”) were issued to the Purchasers pursuant to the terms of the Share Settlement Agreements. 

In order to induce the Purchasers to execute and deliver the Share Settlement Agreements, we agreed to provide certain registration rights under the Securities Act and applicable state securities laws with respect to the Settlement Shares, pursuant to registration rights agreements (the “Registration Rights Agreements”), dated February 8, 2024, between the Company and each of the Purchasers.

In connection with the consummation of the Merger, all of Akerna’s special voting preferred stock and exchangeable shares and common stock warrants (see Note 11) as well as all unvested restricted stock awards (see Note 12) that remained outstanding immediately prior to the Merger were converted to Common Stock.

On February 9, 2024, the Company completed the transactions contemplated by the Merger Agreement, as amended. Under the terms of the Merger Agreement, Merger Sub merged with and into Gryphon, with Gryphon surviving as a wholly-owned subsidiary of Akerna. On the Effective Date of the Merger, each share of Gryphon’s common stock, par value $0.0001 per share (the “Gryphon Common Stock”), and Gryphon’s preferred stock, par value $0.0001 per share (the “Gryphon Preferred Stock,” collectively referred to herein with the Gryphon Common Stock as the “Gryphon Shares”), outstanding immediately prior to the Effective Date was converted into the right to receive approximately 1.7273744 shares of Gryphon Common Stock.  Each warrant to purchase common stock of Gryphon that was issued and outstanding at the Effective Date will remain issued and outstanding, and was assumed by the Company and is exercisable for shares of Common Stock pursuant to its existing terms and conditions as adjusted to reflect the ratio of exchange of Gryphon Shares for shares of Common Stock.  Immediately after giving effect to the Merger, the Company had 38,733,554 shares of Common Stock outstanding and warrants to purchase Common Stock outstanding and exercisable to acquire shares of Common Stock. On February 9, 2024, the Common Stock began trading on the Nasdaq under the symbol “GRYP.”