Akerna Announces Financial Results for the First Quarter 2021

11.5 min readPublished On: May 12th, 2021By
DENVER– Akerna (Nasdaq: KERN), an enterprise software, and compliance technology provider, today reported its unaudited financial results for the quarter ended March 31, 2021.
“Our first quarter was a strong start to 2021, with increasing demand for our platform driving 62% year over year software growth,” said Jessica Billingsley, CEO of Akerna.  “With the leadership position we have in our core business and capabilities we have integrated to take advantage of new opportunities such as payments with the passage of the Safe Banking Act, new state initiatives, and ultimately U.S. federal legalization, we believe we are well positioned to capitalize on the approaching inflection point in industry growth.”

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.

First Quarter 2021 Financial Highlights

  • Software revenue was $3.8 million, up 62% year over year
  • Total revenue was $4.0 million, up 31% year over year
  • Gross profit was $2.6 million, up 53% year over year
  • Net loss was $6.3 million compared to a net loss of $4.8 million in the same period last year
  • Adjusted EBITDA was negative $1.8 million compared to negative Adjusted EBITDA of $3.2 million for the same quarter
  • Cash was $15.4 million as of March 31, 2021, compared to $17.8 million as of December 31, 2020See “Explanation of Non-GAAP Financial Measures” below

First Quarter 2021 Key Metrics

  • Total SaaS ARR of $15.7 million, up 73% year over year
  • Average new MJ Platform order up 29% year over year
  • MJ Platform transaction volume up 51% year over year
  • Retail order volume up 51% year over year
  • Retail order value up 29% year over year
  • New Bookings ARR of approximately $1M

First Quarter 2021 Operational Highlights

  • Akerna’s MJ Platform achieves SAP certified integration with SAP NetWeaver
  • Announced acquisition of Viridian Sciences, SAP Business One software for cannabis, with positive cash flow contribution
  • Nominated new board member, Barry Fishman

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.

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 preparation for a potential post-legalization landscape, our believe enterprise capabilities, including comprehensive compliance solutions and financial reporting integrations, will become increasingly important to the future leaders of the cannabis industry 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:

  • Impairment of long-lived assets, because it’s 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 that are required to be expensed as incurred in accordance with GAAP, because business combination 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 debt issuance when we elect the fair value option to account for the debt instrument 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 costs 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
  • Other non-operating expenses which includes a one-time gain on asset sale, which effects the comparability of results of operations and liquidity;

Related Non-GAAP Expense Measure

We reference in our earnings call non-GAAP Operating Expenses. We believe that this non-GAAP financial measure, when considered with the financial statements determined in accordance with GAAP, is 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 that are included in GAAP operating expenses, as set forth above (impairment of long-lived assets, stock-based compensation expense, costs incurred with business combinations, costs incurred in connection with debt issuance, restructuring costs and certain other non-operating expenses, as described above) 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, as GAAP Operating Expenses, excluding impairment of long-lived assets, stock-based compensation expense, costs incurred with business combinations, costs incurred in connection with debt issuance and restructuring costs.

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 March 31, 2021 are presented in the tables below.  For comparative purposes, the reconciliation of these non-GAAP financial measures in the prior quarter ended December 31, 2020 are contained in our press release for that quarter dated March 22, 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 March 22, 2021 and available here: https://www.sec.gov/Archives/edgar/data/1755953/000121390021016988/ea138212ex99-1_akerna.htm

Akerna Corp.

Condensed Consolidated Balance Sheets

March 31,

December 31,

2021

2020

Assets

  (unaudited)

Current assets: 

Cash

$

15,426,759

$

17,840,640

Restricted cash

500,000

500,000

Accounts receivable, net

1,887,093

1,753,547

Prepaid expenses and other current assets

2,095,614

2,458,727

Total current assets

19,909,466

22,552,914

Fixed assets, net

1,139,689

1,193,433

Investment, net

229,883

233,664

Capitalized software, net

4,201,065

3,925,739

Intangible assets, net

6,974,546

7,388,795

Goodwill

41,874,527

41,874,527

Total Assets

$

74,329,176

$

77,169,072

Liabilities and Equity

Current liabilities

Accounts payable, accrued expenses and other accrued liabilities 

$

3,060,746

$

3,188,576

Deferred revenue 

1,105,869

843,900

Current portion of long-term debt

8,781,302

11,707,363

Total current liabilities

12,947,917

15,739,839

Long-term debt, less current portion

1,127,843

3,895,237

Total liabilities

14,075,760

19,635,076

Commitments and contingencies

Equity:

Preferred stock, par value $0.0001; 5,000,000 shares authorized, none are issued and outstanding at March 31, 2021 and December 31, 2020

Special voting preferred stock, par value $0.0001; 1 share authorized, issued and outstanding as of March 31, 2021 and December 31, 2020, with $1.00 preference in liquidation; exchangeable shares, no par value, 1,647,287 and 2,667,349 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively (See Note 4)

12,601,744

20,405,219

Common stock, par value $0.0001; 75,000,000 shares authorized, 23,067,517 and 19,901,248 issued and outstanding at March 31, 2021 and December 31, 2020, respectively

2,306

1,990

Additional paid-in capital

111,908,399

95,090,883

Accumulated other comprehensive loss

(104,727)

(91,497)

Accumulated deficit

(64,154,306)

(57,872,599)

Total equity

$

60,253,416

$

57,533,996

Total liabilities and equity 

$

74,329,176

$

77,169,072

Akerna Corp.

Condensed Consolidated Statements of Operations

(unaudited)

For the Three Months

Ended

March 31,

2021

2020

Revenues

Software

$

3,795,153

$

2,346,310

Consulting

172,747

692,584

Other

46,124

31,652

Total revenues

4,014,024

3,070,546

Cost of revenues

1,454,167

1,396,219

Gross profit

2,559,857

1,674,327

Operating expenses:

Product development

1,424,100

874,787

Sales and marketing

1,735,915

2,040,751

General and administrative

1,852,962

3,457,262

Depreciation and amortization

1,052,883

180,229

Total operating expenses

6,065,860

6,553,029

Loss from operations

(3,506,003)

(4,878,702)

Other (expense) income:

Interest expense

(776,181)

Interest income

1,801

33,522

Change in fair value of convertible notes

(1,991,272)

Other expense, net

(124)

Total other (expense) income

(2,765,652)

33,398

Net loss before income taxes and equity in losses of investee

(6,271,655)

(4,845,304)

Income tax expense

(6,270)

Equity in losses of investee

(3,782)

Net loss

(6,281,707)

(4,845,304)

Net loss attributable to noncontrolling interest in consolidated subsidiary 

101,175

Net loss attributable to Akerna shareholders

$

(6,281,707)

$

(4,744,129)

Basic and diluted weighted average common stock outstanding

22,209,072

12,469,737

Basic and diluted net loss per common share

$

(0.28)

$

(0.38)

Akerna Corp.

Condensed Consolidated Statements of Cash Flows

(unaudited)

For the Three Months Ended

March 31,

2021

2020

Cash flows from operating activities

Net loss

$

(6,281,707)

$

(4,845,304)

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

Equity in losses of investment

3,782

Bad debt

(10,516)

208,729

Stock-based compensation expense

503,379

301,948

Amortization of deferred contract cost

118,519

Non-cash interest expense

769,773

Depreciation and amortization

1,052,882

2,824

Foreign currency loss

(18,801)

Change in fair value of convertible notes

1,991,272

Change in fair value of contingent consideration 

Changes in operating assets and liabilities:

       Accounts receivable

(177,832)

234,203

       Prepaid expenses and other current assets

236,339

(631,319)

      Other assets

(58,925)

      Accounts payable and accrued liabilities

152,455

975,312

      Deferred revenue

286,637

(101,237)

  Net cash used in operating activities

(1,373,818)

(3,913,769)

Cash flows from investing activities

Developed software additions

(704,637)

Furniture, fixtures, and equipment additions

(53,621)

Cash paid for business combination, net of cash acquired

101,340

  Net cash used in investing activities

(704,637)

47,719

Cash flows from financing activities

 Value of shares withheld for related to tax withholdings

(333,847)

  Net cash (used in) provided by financing activities

(333,847)

  Effect of exchange rate changes on cash and restricted cash

(1,579)

Net change in cash and restricted cash

(2,413,881)

(3,866,050)

Cash and restricted cash – beginning of period

18,340,640

19,280,897

Cash and restricted cash – end of period

$

15,926,759

$

15,414,847

Cash paid for interest

Cash paid for taxes

Supplemental Disclosure of non-cash investing and financing activity:

Settlement of convertible notes in common stock

8,467,292

Conversion of exchangeable shares to common stock

7,803,475

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 March 31,

2021

2020

Net loss

$         (6,281,707)

$         (4,845,305)

Interest income

(1,801)

(33,522)

Interest expense

776,181

Change in fair value of convertible notes

1,991,272

Depreciation and amortization

1,052,883

180,229

Income tax expense

6,270

EBITDA

$         (2,456,902)

$         (4,698,598)

Stock compensation

503,379

301,949

Acquisition related expense

43,991

1,218,432

Financing related expense

17,834

Restructuring

47,187

Equity in losses of investee

3,782

Other expense (income)

124

Adjusted EBITDA

$         (1,840,729)

$         (3,178,093)

Akerna Corp.

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

(unaudited)

Three Months Ended March 31,

2021

2020

Operating expenses

$          6,065,860

$          6,553,029

Adjustments:

   Depreciation and amortization

1,052,883

180,229

   Stock-based compensation expense

503,379

301,949

   Business combination and merger related costs

43,991

1,218,432

   Financing related expense

17,834

   Restructuring charges

47,187

Non-GAAP operating expenses

$          4,400,586

$          4,852,420

(This information is primarily sourced from Akerna.  Highly Capitalized has neither approved nor disapproved the contents of this news release. Read our Disclaimer here).

About the Author: News Team

Newsteam at Highly Capitalized are some of the most experienced writers in cannabis and psychedelics business & finance. We cover capital markets, finance, branding, marketing and everything important in between. Most of all, we follow the money.

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