Item 1.01 Entry into a Material Definitive Agreement.
On January 11, 2023, Akerna Corp., a Delaware corporation (the "Company") and
The NAV People, Inc. d/b/a "365 Cannabis", a Delaware corporation and a
wholly-owned subsidiary of the Company ("365"), entered into a Stock Purchase
Agreement (the "Purchase Agreement") with 365 Holdco LLC, a Delaware limited
liability company ("Buyer"; together with the Company and 365, the "Parties";
each, a "Party"), pursuant to which the Company agreed to sell all of the issued
and outstanding capital stock of 365 owned by the Company ("365 Shares") to
Buyer for an aggregate purchase price consisting of $500,000 of cash (the "Cash
Purchase Price"), subject to adjustment pursuant to the Purchase Agreement, plus
the deemed value of $2,283,806.42 in consideration of the Termination and
Release (as defined below) (the "Earn-out Consideration" and together with the
Cash Purchase Price collectively referred to as the "Purchase Price") and on the
terms and subject to the conditions set forth in the Purchase Agreement (the
"Transaction"). $100,000 of the Cash Purchase Price is subject to a hold-back by
the Buyer in satisfaction of certain adjustments in accounts payable and
indemnification obligations as described below (the "Accounts Payable Holdback
Amount").
The Transaction was completed on January 11, 2023 (the "Closing Date").
The Purchase Agreement contains customary representations, warranties and
covenants by each party that are subject, in some cases, to specified exceptions
and qualifications contained in the Purchase Agreement.
The Company agreed to indemnify Buyer for losses arising out of or relating to
(i) any inaccuracy in or breach of certain representations and warranties made
by the Company or 365, (ii) any indebtedness of 365 or its subsidiary incurred
after the Lookback Date (as defined by the Purchase Agreement) and before the
Closing Date, (iii) any Pre-Closing Taxes (as defined by the Purchase
Agreement); and (iv) any claims or liabilities with respect to the Lease
Agreement dated January 29, 2019 (as amended, the "Lease") between 701 Bridger,
LLC and 365 or failure to obtain prior to April 30, 2023 an assumption or
assignment of such Lease by the Company, in form and substance reasonably
acceptable to Buyer, in either case which results in no continuing liability or
obligation to 365. Buyer agreed to indemnify the Company for liabilities arising
out of or relating to any inaccuracy in or breach of certain representations and
warranties made by Buyer.
Certain representations and warranties made by each Party will survive until
11:59 p.m. Denver time on April 30, 2023 or the termination of the Purchase
Agreement. To the extent that, as of 11:59 p.m. Denver time on April 30, 2023,
(a) any Accounts Payable Holdback Amount has not been paid by Buyer to the
Company or retained by Buyer (subject to certain adjustment set forth in the
Purchase Agreement), and (b) Buyer has not delivered, by 11:59 p.m. Denver time
on April 30, 2023, to the Company a written notice of a claim for
indemnification, Buyer shall release and pay to the Company all of the remaining
Accounts Payable Holdback Amount that was not paid or retained pursuant to the
adjustment provisions set forth in the Purchase Agreement. To the extent that,
by 11:59 p.m. Denver time on April 30, 2023, Buyer has delivered to the company
a written notice of a claim for indemnification, pending resolution of such
claim, Buyer may retain all of the remaining Accounts Payable Holdback Amount
that was not paid or retained pursuant to the adjustment provisions of the
Purchase Agreement, provided that after final, non-appealable disposition of
such claim (whether through adjudication, arbitration, or mutual written
agreement of the parties), Buyer shall promptly pay to the Company any amounts
of such Accounts Payable Holdback Amount available and not owing to Buyer
pursuant to Section 10.03(d) of the Purchase Agreement. Each of the Company's
and Buyer's indemnification obligations are subject to limitations set forth in
the Purchase Agreement.
The Purchase Agreement includes certain termination rights for each of the
Company and Buyer, including the right of either the Company or Buyer to
terminate the Purchase Agreement if the closing of the Transaction has not
occurred by February 15, 2023.
1
In connection to the closing of the Transaction, the Company and the owners of
the Buyer (the "Buyer Owners") entered into an Acknowledgement, Termination and
Release, pursuant to which, the Buyer Owners released certain earn-out payment
obligations of Seller under the Amended and Restated Stock Purchase Agreement
entered into by and among the Company, 365, and the Buyer Owners, dated October
1, 2021 and amended on June 10, 2022, which the parties agreed was equal to
$2,283,806.42 (the "Termination and Release"). In addition, the Company and
Buyer entered into a certain Shared Services Agreement, whereby the Company and
Buyer will provide each other with certain transition services for January and
February of 2023.
Jeff Kiehn, the Company's President of Akerna Enterprise, who joined the Company
as part of its acquisition of 365 in October 2021, was one of the principals of
the Buyer. Concurrent with the completion of the Transaction, the Company
terminated the Employment Offer Letter entered into by the Company and Jeff
Kiehn dated September 29, 2021.
The Purchase Price was determined in arms-length negotiations between the
Company's senior management and the Buyer and approved by the Company's Board of
Directors following consideration of the fairness of the Purchase Price to the
Company and with knowledge of Jeff Kiehn's relationship to the Company.
In order to consummate the Transaction, the Company and 365 entered into a
release and agreement dated January 11, 2023 to obtain a release under the
Amended and Restated Security and Pledge Agreement dated October 5, 2021 entered
into by and among the Company, certain of its subsidiaries (including 365), and
the collateral agent named therein, under the Amended and Restated Guaranty
dated October 5, 2021 entered into by and among certain of the Company's
subsidiaries (including 365) and the collateral agent named therein, and under
the Amended and Restated Intellectual Property Security Agreement dated October
5, 2021 by and between the Company, certain of its subsidiaries (including 365)
and the collateral agent named therein (the "Release"). Pursuant to the Release,
the collateral agent released the Company and 365 from the Company's pledge of
the 365 Shares, 365's pledge of 65% of the issued and outstanding shares of its
wholly-owned subsidiary 365 Dynamics People Software Ltd., 365's grant of a
security interest in all its assets (including its intellectual property assets)
and 365's guarantee of the Company's obligations under the Company's senior
secured convertible notes. Further, the Company and 365 entered into a separate
consent and agreement dated January 11, 2023 with each of the two institutions
that hold its senior secured convertible notes, pursuant to which each such
holder separately consented to the Release (the "Consents"). In order to induce
each holder to enter into the Consents, the Company agreed to deposit the gross
aggregate cash proceeds from the Transaction in the amount of $400,000 and up to
an additional $100,000 following release of the Accounts Payable Holdback Amount
into certain controlled bank accounts of the Company held as security for the
senior secured convertible notes of the Company.
The above descriptions of the Purchase Agreement, the Acknowledgement,
Termination and Release, the Release and the Consents are a summary of the
material terms of such agreements only and are qualified in their entirety by
reference to the full text of the Purchase Agreement, the Acknowledgement,
Termination and Release, the Release and the Consents, which are filed as
Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, to this Current Report on Form
8-K and are incorporated herein by reference. The representations, warranties
and covenants contained in the Purchase Agreement, the Acknowledgement,
Termination and Release, the Release and the Consents were made only for
purposes of such agreements and as of specified dates, were solely for the
benefit of the parties to such agreements and may be subject to limitations
agreed upon by the contracting parties, including being qualified by
confidential disclosures exchanged between the parties in connection with the
execution of such agreements. The representations and warranties have been made
for the purpose of allocating contractual risk between the parties to the
agreements instead of establishing these matters as facts and may be subject to
a contractual standard of materiality different from what might be viewed as
material to investors. Investors should not rely on the representations,
warranties and covenants or any description thereof as characterizations of the
actual state of facts or condition of the Company, 365 or Buyer. Moreover,
information concerning the subject matter of the representations, warranties and
covenants may change after the date of such agreements, which subsequent
information may or may not be fully reflected in public disclosures.
Item 2.01 Completion of Acquisition or Disposition of Assets.
The information set forth under Item 1.01 of this Current Report is hereby
incorporated by reference into this Item 2.01.
2
Item 9.01 Financial Statements and Exhibits.
(b) Pro forma financial information
The unaudited pro forma condensed consolidated financial information of the
Company giving effect to the Transaction is filed as Exhibit 99.1 to this Form
8-K and incorporated herein by reference.
(d) Exhibits
Exhibit
Number Description
10.1 Stock Purchase Agreement
10.2 Acknowledgement, Termination and Release
10.3 Release and Agreement
10.4 Consent and Agreement
99.1 Unaudited Pro Forma Condensed Consolidated Financial Statements
104.1 Cover Page Interactive Data File (embedded within the Inline XBRL Document).
3
© Edgar Online, source Glimpses