Quarterly report pursuant to Section 13 or 15(d)

Revisions of Previously Issued Financial Statements

v3.21.1
Revisions of Previously Issued Financial Statements
 3 Months Ended
Mar. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Revisions of Previously Issued Financial Statements

Note 9 – Revisions of Previously Issued Financial Statements

On June 17, 2019, we completed the Mergers with MTech. Prior to the Mergers, MTech was a special purpose acquisition company and had completed an initial public offering in October 2018, which included the issuances of the MTech Private Warrants in a simultaneous private placement transaction. The MTech Private Warrants were exchanged for our Private Warrants as part of the Mergers and our Private Warrants remain outstanding as of March 31, 2021. We previously accounted for these outstanding Private Warrants as components of equity rather than as derivative liabilities. In light of the Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) issued by the staff of the SEC on April 12, 2021 (the “SEC Staff Statement”), the Company’s management further evaluated our outstanding warrants under Accounting Standards Codification 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”), which addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock.

 

Based on management’s evaluation and in consultation with the Audit Committee, we concluded that the Company’s Private Warrants are not indexed to the Company’s common stock in the manner contemplated by ASC Section 815-40. As a result, these warrants are precluded from equity classification and should be recorded as derivative liabilities remeasured to fair value at each reporting period. We assessed the materiality of these errors on prior periods’ financial statements and concluded that the errors were not material to any prior annual or interim periods. However, we are revising the prior periods’ financial statements when they are next issued in these condensed consolidated financial statements and we are reclassifying the Private Warrants as derivative liabilities measured at their estimated fair values at the end of each reporting period and recognizing changes in the estimated fair value of the derivative instruments from the prior period in the Company’s operating results for the current period.  See Item. 4 of Part I, Controls, and Procedures.

 

The Company's change in accounting for the Private Warrants from components of equity to derivative liabilities has no impact on the Company's current or previously reported cash position.

 

The tables below disclose the effects on the financial statements included in this Quarterly Report on Form 10-Q and the financial statements yet to be reissued: 


 

 

Year Ended June 30, 2019

 

 

 

As reported

 

Adjustment

 

As revised

  

Consolidated Statements of Operations 

 

 

 

 

 

 

  

Change in fair value of derivative liability

 

$

—

$

(2,015,812

)

$

(2,015,812

)

Net loss

 

 

(12,403,215

)

 

(2,015,812

)  

 

(14,419,027

)

Net loss per share

 

 

(2.05

)

 

—

 

 

(2.39

)


 

 

Three Months Ended March 31, 2020

 

 

 

As reported

 

Adjustment

 

As revised

  

Condensed Consolidated Statements of Operations 

 

 

 

 

 

 

  

Change in fair value of derivative liability

 

$

—

$

236,917

$

236,917

Net loss

 

 

(4,744,129

)

 

236,917

 

 

(4,507,212

)

Net loss per share

 

 

(0.38

)

 

—

 

 

(0.36

)


 

 

Year Ended June 30, 2020

 

 

 

As reported

 

Adjustment

 

As revised

  

Consolidated Statements of Operations 

 

 

 

 

 

 

  

Change in fair value of derivative liability

 

$

—

$

1,962,034


$

1,962,034

Net loss attributable to Akerna shareholders

 

 

(15,534,345

)

 

1,962,034

 

 

(13,572,311

)

Net loss per share

 

 

(1.31

)

 

—

 

 

(1.14

)


 

 

Three Months Ended September 30, 2020

 

 

 

As reported

 

Adjustment

 

As revised

  

Condensed Consolidated Statements of Operations 

 

 

 

 

 

 

  

Change in fair value of derivative liability

 

$

—

$

762,646


$

762,646

Net loss attributable to Akerna shareholders

 

 

(4,741,876

)

 

762,646

 

 

(3,979,230

)

Net loss per share

 

 

(0.34

)

 

—

 

 

(0.28

)


 

 

Six Months Ended December 31, 2020

 

 

 

As reported

 

Adjustment

 

As revised

  

Consolidated Statements of Operations 

 

 

 

 

 

 

  

Change in fair value of derivative liability

 

$

—

$

746,852


$

746,852

Net loss attributable to Akerna shareholders

 

 

(16,957,334

)

 

746,852

 

 

(16,210,482

)

Net loss per share

 

 

(1.06

)

 

—

 

 

(1.01

)


 

 

As of June 30, 2019

 

 

 

As reported

 

Adjustment

 

As revised

  

Consolidated Balance Sheet

 

 

 

 

 

 

  

Derivative liability

 

$

—

$

(3,042,000

)

$

(3,042,000

)

Total liabilities

 

 

(2,442,503

)

 

(3,042,000

)  

 

(5,484,503

)

Additional paid-in capital

 

 

47,325,421


 

(1,026,188

)  

 

46,299,233


Accumulated deficit

(25,566,746 )
(2,015,812 )
(27,582,558 )

 

 

As of June 30, 2020

 

 

 

As reported

 

Adjustment

 

As revised

  

Consolidated Balance Sheet  

 

 

 

 

 

 

  

Derivative liability

 

$

—

$

(1,058,228

)

$

(1,058,228

)

Total liabilities

 

 

(21,955,213

)

 

(1,058,228

)  

 

(23,013,441

)

Additional paid-in capital

 

 

72,906,924


 

(1,004,450

)  

 

71,902,474


Accumulated deficit

(41,101,091 )
(53,778 )
(41,154,869 )


 

 

As of December 31, 2020

 

 

 

As reported

 

Adjustment

 

As revised

  

Consolidated Balance Sheet

 

 

 

 

 

 

  

Derivative liability

 

$

—

$

(311,376

)

$

(311,376

)

Total liabilities

 

 

(19,635,076

)

 

(311,376

)  

 

(19,946,452

)

Additional paid-in capital

 

 

95,090,883


 

(1,004,450

)  

 

94,086,433


Accumulated deficit

(57,872,599 )
693,074

(57,179,525 )