Akerna Corp. (Nasdaq: KERN) said on Friday afternoon that it will merge with a bitcoin mining company and offload its software business to POSaBIT Systems Corporation (CSE: PBIT) (OTC: POSAF) for stock and cash, respectively.
Akerna will sell its MJ Freeway business units, including MJ Platform and Leaf Data System brands, and Ample Organics to POSaBIT for $4 million in cash. T
he company said it plans to use the proceeds of the transaction, after expenses, to pay its remaining outstanding accounts payable and pay down any remaining principal balance on its outstanding senior secured convertible notes, in addition to net cash requirements associated with the proposed merger between Akerna and Gryphon.
“This transaction provides POSaBIT with an opportunity to combine complementary offerings to scale its business and expand its footprint with established platforms,” the company said in a statement. “These complementary products are likely to be mutually beneficial, as together they are expected to provide a comprehensive retail solution for cannabis operators, complete with supply chain compliance.”
“In addition to retail operators, these products are anticipated to continue to serve all verticals of the cannabis industry. Akerna and POSaBIT do not anticipate any interruption to clients as a result of the transactions.”
In an all-stock deal, the merger with Gryphon Digital Mining, Inc. will “create a leading, ESG-committed, carbon-neutral bitcoin miner,” the company said in a statement.
Akerna will change its name to Gryphon Digital Mining, Inc. when the deal is done.
The Wind Down
The company expects current Gryphon equity holders to own approximately 92.5% of the combined company and current Akerna equity holders are expected to own approximately 7.5% of the combined company – which will still be publicly traded on Nasdaq.
Rob Chang will serve as CEO of the company. The merger agreement provides that the board of directors of the combined company will comprise of seven members of which a minimum of five will be filled upon completion of the merger – with one designated by Akerna, set to be current CEO Jessica Billingsley, and the remaining six positions to be designated by Gryphon.
Both transactions are conditioned on the other transaction closing and both transactions are subject to the approval of the stockholders of Akerna. Approval of the merger transaction depends on the approval of the stockholders of Gryphon and approval of the combined company for listing on the Nasdaq exchange.
The transaction brings to an end the short life of MJ Freeway – part of a group of original cannabis tech companies.
MJ Freeway was one of the first seed-to-sale tracking software companies for cannabis. It went public in 2019 in one of the early SPAC (special purpose acquisition corp.) deals and was listed on NASDAQ in 2019 with the new name Akerna.
It was especially ground-breaking as the NASDAQ had been resistant to listing cannabis-related companies. It was also dubbed an accomplishment by Billingsley as she became one of the few female CEOs in cannabis leading a company on a major stock exchange. The stock shot up in those first few days of trading but then continued to trade lower.
Akerna went on to acquire several companies with the goal to become a one-stop shop for cannabis tech. However, customer complaints about the tracking software caused a loss of business in its main product and the uptake of the acquired businesses never seemed to build.
The company continued to rack up losses as it sought to then divest those acquisitions and right the ship. Last year, Akerna said it was seeking alternatives and began to make plans to restructure the company.