Akerna's Losses Causes Company To Seek Alternatives

After several lackluster quarters, cannabis software company Akerna (Nasdaq: KERN) announced that it has hired JMP Securities to assist in evaluating strategic alternatives as the company and the board seeks to maximize stakeholder value. Akerna also reported that CFO John Fowle is leaving to pursue other interests, effective May 17. The Board has appointed Dean Ditto as Akerna’s interim CFO

“Our goal is to ensure we are taking every possible step to maximize value for our stakeholders,” said Jessica Billingsley, CEO and Board Chair of Akerna. “We are actively involved in strategic discussions and are happy to have JMP assist us in evaluating our opportunities, given their deep experience in the technology sector. We are confident in our ability to capitalize on the strength of our business, and we remain intensely committed to our clients, our team members and all other stakeholders.”

Fowle recently said on the company’s earnings call, “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 expense, 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.”

Akerna President and COO Ray Thompson will become a Special Advisor to CEO. In this role, Ray will continue to oversee the legacy business, assist the CEO with special projects and advise on various aspects of corporate strategy.

“It’s been a privilege to serve as President & COO for Akerna, and I look forward to continuing to advise the organization on its business strategies in my new role as Special Advisor to the CEO,” said Ray Thompson.

Akerna’s Losses

Last week, Akerna reported that its software revenue was $6.5 million in the first quarter, up 71% year-over-year and total revenue was $7.0 million, up 73% year-over-year. However, the loss from operations was $20.6 million, up $17.1 million year-over-year and the net loss was $22.0 million, up $15.5 million year-over-year.

Akerna recently reported its 2021 earnings with total revenue of $20.7 million, up 49% year-over-year. The loss from operations though were $33.4 million, up $6.6 million year over year and the net loss was $33.6 million, up $6.7 million year-over-year.

Going Concern

In the company’s latest filing it noted, “Since our inception, we have incurred recurring operating losses, used cash from operations, and relied on capital raising transactions to continue ongoing operations. During the three months ended March 31, 2022, and March 31, 2021, we incurred a loss from operations of $20.6 million and $3.5 million, respectively, and used cash in operations of $3.6 million and $1.4 million, respectively. As of March 31, 2022, a working capital deficit of $15.1 million with $9.7 million in cash available to fund future operations. We will require additional financing in the second quarter of 2022 to meet our ongoing operational working capital requirements and continue to meet the financial covenants of the Senior Convertible Notes.”

 

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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