Despite being in financial trouble, cannabis tech firm Akerna Corp. (Nasdaq: KERN) announced the pricing of an underwritten public offering of 29,382,861 units with common stock warrants. The units are being sold at a public offering price of $0.23 per unit and the pre-funded units are being sold at a public offering price of $0.2299 per pre-funded unit. The news sent shares tumbling almost 50% in early trading to lately sell at 14 cents per share. The offering should bring in roughly $6.7 million.
The company said it would use the proceeds for general corporate purposes, including servicing our ongoing debt obligations under our convertible notes, working capital, marketing, product development, and capital expenditures. The company ended the first quarter with $10.2 million in cash.
Just last month Akerna said it would engage in a plan to cut its workforce and operating costs in order to focus its resources, accelerate its path to profitability, and create stakeholder value. These moves won’t be cheap as the company said it expects to report $690,000 in total costs in its second quarter of 2022 to pay for the layoffs, including the following cost elements: $630,000 in severance and associated payroll taxes; $40,000 in legal costs; and $20,000 in employee insurance benefits.
The company has noted when it told investors that it was undergoing a strategic review, that it would need additional funding. Former CFO John Fowle said at the time, “The ability of the company to continue as a going concern is dependent on our ability to secure other sources of financing, reduce debt, and attain profitable operation. Our corporate liquidity requirements primarily include payroll costs, corporate overhead expenses, and debt service costs and our current sources of liquidity include cash on hand, as well as proceeds we anticipate from the access to our ATM programs. The board is addressing the working capital deficiency and considering all options available to the company in the best interest of our shareholders.”
The company’s recent filing spelled out the news more starkly saying, “If we cannot timely raise additional funds, we may also be unable to meet the financial covenants of the Senior Convertible Notes, which could result in an event of default under those instruments which could negatively impact the company.”