Akerna Corp. (Nasdaq: KERN, KERNW), a leading cannabis compliance
technology provider and developer of the cannabis industry’s first
seed-to-sale enterprise resource planning (ERP) software technology
– MJ Platform®, announced financial results for the quarter ended
December 31, 2019.
Second Quarter Fiscal Year 2020 Financial and Business
Metrics Summary:
- Reported revenues of approximately $3.3 million, an increase of
28% compared to the quarter ended December 31, 2018.
- Total MJ Platform revenue increased by 29% compared to the
quarter ended December 31, 2018.
- Gross profit margin increased to approximately 50%, compared to
49% for the quarter ended December 31, 2018.
- Made strategic investment in ZolTrain.
- Entered into transaction to acquire majority interest in solo
sciences inc.
- Entered into transaction worth up to $45M USD to acquire Ample
Organics Inc.
- Named Alex Shah Chief Technology Officer.
- Named John Fowle Chief Financial Officer.
- As of December 31, 2019, Akerna had approximately $18.8 million
in cash.
“Our results for the quarter ended December 31, 2019, continue
to be illustrative of the continued adoption of both MJ Platform
and Leaf Data Systems® by cannabis enterprises and government
entities,” said Akerna Chief Executive Officer, Jessica
Billingsley. “With cannabis legalization continuing to expand and
our recent acquisitions of both solo sciences and Ample Organics,
Akerna is well-positioned to serve the increasing compliance needs
of enterprise cannabis companies, governments, and consumers.
Transparency remains critical, as regulatory requirements will only
grow to ensure public, product, and patient (or consumer)
safety.”
“Having opportunistically executed on a targeted acquisition
strategy aimed at building scale and enhancing our growth
prospects, we now intend to further capitalize on growing market
demand through strong combined organic growth,” said Billingsley.
“We are confident our significantly increased scale and our robust
technology offerings both dramatically strengthen our business
while also positioning us to generate long-term value for our
shareholders.”
Financial Results and Business Metrics
Total revenue for the quarter ended December 31, 2019, was
approximately $3.3 million, a 28% increase compared to $2.6 million
for the quarter ended December 31, 2018. Revenue reflects
continued demand for Akerna’s key commercial software product, MJ
Platform. Total MJ Platform revenue increased from the quarter
ended December 31, 2018, to December 31, 2019, by 29%. The increase
in subscription revenue was primarily caused by volume-driven
increases from new business, which includes new clients as well as
upgrades and additional subscriptions from existing clients.
We continue to invest in a variety of client programs and
initiatives, which, along with increasing adoption, have helped
keep our renewal rate consistent as compared to the prior year.
We believe that demand for our MJ Platform software continues to
be strong, evidenced by new contract bookings totaling
approximately $34 thousand per month on average.
Based on our results, MJ Platform continues to deliver a
compelling value proposition to our customers as both a regulatory
compliance solution, as well as a tool to manage and optimize their
business operations. Our management evaluates the value that we
deliver to our customers based on the ratio of our average customer
Lifetime Value (“LTV”) to our average customer acquisition cost
(“CAC”). Our LTV to CAC ratio reflects how many times the revenue
of a customer covers the cost to obtain that customer, assuming a
customer life of 36 months. We calculate LTV by multiplying
our average new monthly contract bookings by 36 and then divide
that by the number of new customers acquired in a month. We then
divide that result by our average monthly CAC. Our LTV is
approximately four times the costs required to obtain that customer
after 36 months.
Total Software revenue in the quarter ended December 31, 2019,
was $2.5 million, compared to $2.3 million in the same quarter the
prior year, driven by the growth described above from MJ Platform,
offset by roughly flat year over year revenue generated from Leaf
Data Systems as we completed professional services related to
implementation and have reverted to run and maintain mode on our
existing contracts. Consulting revenue increased 202% to $0.7
million for the quarter ended December 31, 2019, compared to $0.2
million for the quarter ended December 31, 2018, driven by a higher
volume of consulting activities and engagements during the period
as we continue to experience strong demand for our consulting
services in emerging states.
Our cost of revenue for the quarter ended December 31, 2019, was
approximately $1.6 million, an increase of approximately $0.3
million, or 24%, as compared to cost of revenue for the three
months ended December 31, 2018, of approximately $1.3 million. The
increase was primarily as a result of the costs incurred to service
the new contract with the State of Utah. Software hosting costs
have increased due primarily to higher transaction volumes. The
overall increase in cost of revenue was partially offset by a
decrease of $0.2 million in third-party subcontractor costs.
Our gross profit for the quarter ended December 31, 2019, was
approximately $1.7 million, an increase of approximately $0.4
million, or 33%, as compared to gross profit for the quarter ended
December 31, 2018, of approximately $1.3 million. Gross
profit margin for the quarter ended December 31, 2019, increased to
approximately 50%, up from gross profit margin of 49% for the
quarter ended December 31, 2018. The increase was primarily as a
result of increased software revenue and the minimal marginal cost
to service such revenue.
Operating expenses were $6.1 million for the quarter ended
December 31, 2019, compared to $3.7 million for the quarter ended
December 31, 2018. The increase in operating expense was driven by
higher product development cost, an increase of approximately 17%,
in addition to higher selling, general and administrative expenses,
an increase of approximately 82%. Excluding non-cash stock-based
compensation and one-time acquisition-related costs, selling,
general and administrative expenses would have increased by
41%. We continue our investment in sales and marketing by
expanding our domestic and international sales activities, building
brand awareness and product marketing activities, and we plan to
continue to invest in our infrastructure as a service (IaaS)
enterprise software platform in order to improve and extend our
service offerings and develop new technologies.
Akerna generated a net loss of $4.3 million for the quarter
ended December 31, 2019, compared to a loss of approximately $2.4
million for the quarter ended December 31, 2018.
As of December 31, 2019, Akerna had approximately $18.8 million
in cash.
Conference Call Details The Company will host a
conference call on Wednesday, February 12, 2020, at 4:30 pm ET /
1:30 pm PT. To participate in the conference call, please dial
1-877-407-3982 (domestic) or 1-201-493-6780 (international). The
passcode is 13698281. Please dial into the call at least five
minutes before the scheduled start time.
The conference call will also be available via a live
listen-only webcast and can be accessed through the Investor
Relations section of Akerna’s website, www.akerna.com. For
interested individuals unable to join the live conference call, a
replay of the call will be available through February 26, 2020, at
(844) 512-2921 (domestic) or (412) 317-6671 (international). The
passcode for the call and replay is 13698281.
About Akerna Corp.
Akerna is a regulatory compliance technology company in the
cannabis space. The cornerstones of Akerna’s service offerings are
MJ Platform® and Leaf Data Systems®, which are highly-versatile
platforms that provide clients and government entities with a
central data management system for tracking regulated cannabis
products—from seed to product to shelf to consumer—through the
complete supply chain. Since its establishment in 2010, the company
has tracked more than $17 billion in cannabis sales. As part of its
business strategy, Akerna intends to grow through targeted,
strategic acquisitions that are complementary to its current
business and organically by accelerating its product development
efforts. Akerna is based in Denver. For more information, please
visit: www.akerna.com.
Forward-Looking Statements
Certain statements made in this release and in any accompanying
statements by management 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 Akerna’s future
business plans, projected product sales, and customer retention,
future product development, Akerna’s potential business strengths
in the market, completion of the acquisition of the remaining
ownership interests of solo sciences, completion of the acquisition
of Ample Organics, identifying and completing future strategic
acquisitions and any other statements expressing the views of
Akerna’s management on future business results or strategy. 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 (including,
without limitation, the results of Akerna’s contracts, strategic
initiatives, and business plans as described herein) 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 recognize the anticipated
benefits of being a public company, (ii) competition, (iii)
Akerna’s ability to grow and manage growth profitably, (iv)
Akerna’s ability to maintain relationships with customers and
suppliers and retain its management and key employees, (v) costs
related to being a public company, (vi) changes in applicable laws
or regulations, (vii) Akerna’s ability to identify and integrate
acquisitions and achieve expected synergies and operating
efficiencies in connection with acquired businesses, (viii)
Akerna’s ability to complete acquisitions, including obtaining
shareholder approval when necessary, (ix) 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. Actual results, performance or
achievements may differ materially, and potentially adversely, from
any projections and forward-looking statements and the assumptions
on which those vary from forward-looking statements are based.
There can be no assurance that the data contained herein is
reflective of future performance to any degree. You are cautioned
not to place undue reliance on forward-looking statements as a
predictor of future performance as projected financial and other
information, are based on estimates and assumptions that are
inherently subject to various significant risks, uncertainties and
other factors, many of which are beyond Akerna’s control. 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.
Akerna Media ContactD. Nikki
Wheeler303-514-2012Nikki.Wheeler@Akerna.Com
Investor RelationsJason
Assad678-570-6791jassad@akerna.com
|
|
AKERNA CORP. |
|
Condensed Consolidated Balance Sheets |
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2019 |
|
|
2019 |
|
|
|
(unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash |
|
$ |
18,780,897 |
|
|
$ |
21,867,289 |
|
Restricted cash |
|
|
500,000 |
|
|
|
500,000 |
|
Accounts receivable, net |
|
|
1,753,935 |
|
|
|
1,257,274 |
|
Prepaid expenses and other assets |
|
|
1,108,917 |
|
|
|
577,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
22,143,749 |
|
|
|
24,202,237 |
|
|
|
|
|
|
|
|
|
Investment |
|
|
250,000 |
|
|
|
- |
|
Total assets |
|
$ |
22,393,749 |
|
|
$ |
24,202,237 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
1,670,005 |
|
|
$ |
1,317,566 |
|
Accrued liabilities |
|
|
564,348 |
|
|
|
500,550 |
|
Deferred revenue |
|
|
844,554 |
|
|
|
624,387 |
|
Total current liabilities |
|
|
3,078,907 |
|
|
|
2,442,503 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, par value $0.0001; 5,000,000 shares authorized,
none are |
|
|
|
|
|
|
|
|
issued and outstanding at December 31, 2019 and June 30, 2019 |
|
|
- |
|
|
|
- |
|
Common stock, par value $0.0001; 75,000,000 shares authorized,
10,921,485 |
|
|
|
|
|
|
|
|
issued and outstanding at December 31, 2019, and 10,589,746
shares |
|
|
|
|
|
|
|
|
authorized, issued and outstanding at June 30, 2019 |
|
|
1,093 |
|
|
|
1,059 |
|
Additional paid-in capital |
|
|
52,065,102 |
|
|
|
47,325,421 |
|
Accumulated deficit |
|
|
(32,751,353 |
) |
|
|
(25,566,746 |
) |
Total stockholders’ equity |
|
|
19,314,842 |
|
|
|
21,759,734 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
22,393,749 |
|
|
$ |
24,202,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AKERNA CORP. |
|
Condensed Statements of Operations
(unaudited) |
|
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Software |
|
$ |
2,498,174 |
|
$ |
2,269,924 |
|
$ |
4,802,654 |
|
$ |
4,149,186 |
Consulting |
|
|
725,000 |
|
|
239,797 |
|
|
1,556,363 |
|
|
609,880 |
Other |
|
|
83,029 |
|
|
64,191 |
|
|
140,076 |
|
|
114,245 |
Total revenues |
|
|
3,306,203 |
|
|
2,573,912 |
|
|
6,499,093 |
|
|
4,873,311 |
Cost of revenues |
|
|
1,638,840 |
|
|
1,320,995 |
|
|
3,036,201 |
|
|
2,384,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
1,667,363 |
|
|
1,252,917 |
|
|
3,462,892 |
|
|
2,489,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Product development |
|
|
1,261,509 |
|
|
1,075,003 |
|
|
2,392,389 |
|
|
1,876,475 |
Selling, general, and administrative |
|
|
4,796,404 |
|
|
2,629,452 |
|
|
8,380,219 |
|
|
4,776,944 |
Total operating expenses |
|
|
6,057,913 |
|
|
3,704,455 |
|
|
10,772,608 |
|
|
6,653,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(4,390,550) |
|
|
(2,451,538) |
|
|
(7,309,716) |
|
|
(4,164,238) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
51,857 |
|
|
30,723 |
|
|
125,239 |
|
|
48,351 |
Other |
|
|
157 |
|
|
26,444 |
|
|
(130) |
|
|
25,833 |
Total other income |
|
|
52,014 |
|
|
57,167 |
|
|
125,109 |
|
|
74,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(4,338,536) |
|
$ |
(2,394,371) |
|
$ |
(7,184,607) |
|
$ |
(4,090,054) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted
average common stock outstanding |
|
|
10,958,772 |
|
|
6,022,026 |
|
|
10,918,942 |
|
|
5,755,931 |
Basic and diluted net loss per common share |
|
$ |
(0.40) |
|
$ |
(0.40) |
|
$ |
(0.66) |
|
$ |
(0.71) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AKERNA CORP. |
|
Condensed Consolidated Statements of Cash Flows
(unaudited) |
|
|
|
For the six months
ended |
|
|
December 31, |
|
|
2019 |
|
2018 |
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(7,184,607 |
) |
|
$ |
(4,090,054 |
) |
Adjustment to reconcile net loss to net cash used in operating
activities |
|
|
|
|
|
|
|
|
Bad debt expense |
|
|
724,350 |
|
|
|
101,446 |
|
Stock-based compensation expense |
|
|
492,650 |
|
|
|
- |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(1,221,011 |
) |
|
|
(240,351 |
) |
Prepaid expenses and other current assets |
|
|
(531,243 |
) |
|
|
(72,063 |
) |
Accounts payable |
|
|
352,439 |
|
|
|
603,652 |
|
Accrued liabilities |
|
|
63,798 |
|
|
|
336,758 |
|
Deferred revenue |
|
|
220,167 |
|
|
|
(128,577 |
) |
Net cash used in operating activities |
|
|
(7,083,457 |
) |
|
|
(3,489,189 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities |
|
|
|
|
|
|
|
|
Investment acquired in Zol Solutions |
|
|
(250,000 |
) |
|
|
- |
|
Net cash used in investing activities |
|
|
(250,000 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
|
|
|
|
Cash received in connection with exercise of warrants |
|
|
4,247,065 |
|
|
|
- |
|
Cash received in connection with issuance of shares |
|
|
- |
|
|
|
10,000,000 |
|
Net cash provided by financing activities |
|
|
4,247,065 |
|
|
|
10,000,000 |
|
|
|
|
|
|
|
|
|
|
Net change in cash and
restricted cash |
|
|
(3,086,392 |
) |
|
|
6,510,811 |
|
|
|
|
|
|
|
|
|
|
Cash and restricted cash -
beginning of period |
|
|
22,367,289 |
|
|
|
2,572,401 |
|
|
|
|
|
|
|
|
|
|
Cash and restricted cash - end
of period |
|
$ |
19,280,897 |
|
|
$ |
9,083,212 |
|
|
|
|
|
|
|
|
|
|
Cash paid for taxes |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
2,355 |
|
|
$ |
987 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of
non-cash investing and financing activity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeiture of Restricted Shares included
in outstanding common stock |
|
$ |
(3 |
) |
|
$ |
- |
|
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