Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit such files). Yes ☒ No ☐
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company
or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth
company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ No ☒
The aggregate market
value of the voting and non-voting common stock of Akerna Corp held by non-affiliates of Akerna Corp was approximately
$24.5 million based upon the closing price per share of $8.43 on December 31, 2019.
As of October 28, 2020,
there were 14,685,932 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.
Akerna Corp. (the “Company,”
“we,” “us,” “our,” or “Akerna” ) is filing this Amendment No. 1 on Form 10-K/A
(this “Amendment”) to amend our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 (the “Original
10-K”), as originally filed with the United States Securities and Exchange Commission (the “SEC”) on September
29, 2020. The purpose of this Amendment is to include Part III information which was to be incorporated by reference from our definitive
proxy statement for our 2020 Annual General Meeting of Shareholders. This information was previously omitted from the Original
10-K in reliance on General Instruction G(3) to Form 10-K, which permits the Part III information to be incorporated in our Form
10-K by reference from our definitive proxy statement if such statement is filed no later than 120 days after our fiscal year-end.
We are filing this Amendment to include Part III information in our Form 10-K because a definitive proxy statement containing such
information will not be filed by the Company within 120 days after the end of the fiscal year covered by our Form 10-K. The reference
on the cover to the Form 10-K to the incorporation by reference to portions of our definitive proxy statement into Part III of
the Form 10-K is hereby deleted. This Amendment hereby amends and restates the cover page and Part III, Items 10 through 14 in
their entirety.
In accordance with Rule 12b-15 under the
United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), the cover page to the Form 10-K, Part
III, Items 10 through 14 of our Form 10-K and Part IV of our Form 10-K are hereby amended and restated in their entirety. In addition,
new certifications of our principal executive officer and principal financial officer are attached, each as of the filing date
of this Amendment. This Amendment does not amend or otherwise update any other information in our Original 10-K. Accordingly, this
Amendment should be read in conjunction with our Original 10-K and with our filings with the SEC subsequent to our Original 10-K.
PART III
Item 10. Directors, Executive Officers
and Corporate Governance
Directors and Executive Officers
Name
|
|
Age
|
|
Position
|
Jessica Billingsley
|
|
43
|
|
Chairman of the Board and Chief Executive Officer(3)
|
Scott Sozio
|
|
40
|
|
Director(3)
|
Matthew R. Kane
|
|
40
|
|
Director(1)
|
Tahira Rehmatullah
|
|
38
|
|
Director(1)
|
Mark Iwanowski
|
|
65
|
|
Director(3)
|
John Fowle
|
|
42
|
|
Chief Financial Officer and Secretary
|
Nina Simosko
|
|
52
|
|
Chief Commerical Officer
|
Ray Thompson
|
|
50
|
|
Chief Operating Officer
|
David McCullough
|
|
44
|
|
Chief Technology Officer
|
Jessica Billingsley has served as
Chief Executive Officer and director since the consummation of our merger on June 17, 2019, and Chairman of the Board since July
2019. Ms. Billingsley co-founded MJF, our wholly-owned subsidiary, in 2010 and served as President of MJF from 2010 to April 2018
and Chief Executive Officer since May 2018. An early investor in one of Colorado’s first legal medical cannabis businesses,
Ms. Billingsley created the category of cannabis seed-to-sale technology after seeing the need first-hand. Prior to MJF, Ms. Billingsley
was the founder and chief executive officer of Zoco, a technology services firm with clients across the United States. Ms. Billingsley
has 20 years of technology and systems experience with rapidly scaling businesses and founded her first business at the age of
22. Ms. Billingsley has served on the board of the National Cannabis Industry Association from 2012 to 2019 and has served on the
board of the Cannabis Trade Federation since 2019. Ms. Billingsley was named one of Fortune’s 10 most promising women entrepreneurs
in 2015 and named one of Inc. Magazine’s 100 Female Founders in 2018. Ms. Billingsley holds a dual degree from the University
of Georgia in Computer Science and Communications. Ms. Billingsley was selected to serve on our Board based on her extensive experience
with technology and systems companies, broad experience in the telecommunications industry, and her background as an entrepreneur.
Scott Sozio has served as a director
since October 2018, prior to the consummation of our merger on June 17, 2019. From October 2018 until the consummation of the merger
on June 17, 2019, Mr. Sozio served as President and Secretary of Akerna. From September 2017 and until the merger in June 2019,
Mr. Sozio served as the chief executive officer and a director of MTech Acquisition Corp. Since July 2019, Mr. Sozio has served
as Head of Corporate Development., Mr. Sozio is the co-founder of Hypur Ventures and since June 2016, has served as its managing
director. Since April 2015, Mr. Sozio has served as a director of Hypur Inc., a financial technology firm focused on banking compliance.
Since September 2016, Mr. Sozio has served as a director of Simplifya Holdings, LLC, a cannabis compliance technology business,
both portfolio companies of Hypur Ventures. Since February 2013, Mr. Sozio has served as a partner in Van Dyke Holdings, where
he is responsible for its private investment portfolio. Prior to joining Van Dyke Holdings, Mr. Sozio was a vice president of Bay
Harbour Management L.C., a distressed-debt focused hedge fund. He joined Bay Harbour in 2004 after working in the Financial Restructuring
Advisory Group at CIBC World Markets. Mr. Sozio is the former Chairman of Island One, Inc., a timeshare company based in Florida
(from 2011 to 2012), and acquired by Diamond Resorts as part of Diamond’s initial public offering, and a former director
of Great Destinations, Inc., a timeshare sales business based in California (from 2013 to 2016), and acquired by Interval International
in 2016. Mr. Sozio holds a B.A. in Architecture from Columbia University. Mr. Sozio was selected to serve on our Board based on
his extensive experience in finance and investment management and his broad experience with working with cannabis companies.
Matthew R. Kane has served
as a director since the consummation of our merger on June 17, 2019. Since December 2015, Mr. Kane has served as a director or
MJF. In 2002, Mr. Kane co-founded and served as co-chief executive officer of Green Shades Software, Inc., a human resources, payroll
and tax reporting software company, until 2019 where he has since served as a board member. Additionally, Mr. Kane has served as
chief executive officer of Welltality, a health care technology start-up, from 2014 to 2018, where he has since served as a board
member. He received his bachelor’s degree in Computer Information Systems from Jacksonville University in 2001, an MBA from
the Warrington College of Business at the University of Florida in 2006, and a Masters in Information and Data Service at the University
of California, Berkeley in 2020. He previously served for 11 years on the board of Jacksonville University from 2007 to May 2018
and was reappointed in 2019. Mr. Kane was selected to serve on our Board based on his extensive experience in in the software technology
applications industry.
Tahira Rehmatullah has served as
a director since consummation of our merger on June 17, 2019. Since October 2018, prior to the merger and until consummation of
the merger in June 2019, Ms. Rehmatullah served as Vice President and Treasurer. Since 2016, Ms. Rehmatullah has been president
of T3 Ventures, a strategy and management consulting firm. From September 2017 to June 2019, Ms. Rehmatullah was the chief
financial officer of MTech Acquisitions Inc. From 2016 to 2019, Ms. Rehmatullah was a managing director of Hypur Ventures, where
she was responsible for portfolio company management as well as investment sourcing and execution. From June 2017 to June 2018,
Ms. Rehmatullah served as a director of Dope Media, a cannabis media company and portfolio company of Hypur Ventures. Prior to
joining Hypur Ventures, from 2014 to 2016 Ms. Rehmatullah served as the general manager of Marley Natural, a cannabis brand based
on the life and legacy of Bob Marley, where she was responsible for the brand launch as well as managing its day-to-day operations.
From 2014 to 2016, Ms. Rehmatullah served as an investment manager at Privateer Holdings, a private equity firm with investments
in the legal cannabis industry. Prior to her activities in the cannabis industry, from 2011 to 2012, Ms. Rehmatullah was a portfolio
manager at City First Enterprises where she was responsible for underwriting, structuring and managing deals for their community
development and investment portfolio. From 2007 to 2011, Ms. Rehmatullah was an associate at Perry Capital where she led research
initiatives for the asset-backed securities team. Her career began in Ernst & Young’s Financial Services Advisory practice
in 2005. Ms. Rehmatullah holds an M.B.A. from the Yale School of Management and a B.S. in Finance and minor in Life Sciences
from The Ohio State University. Ms. Rehmatullah was selected to serve on our Board based on her extensive experience in finance
and investment management and her broad experience working with cannabis companies
Mark D. Iwanowski has served as
a director since the consummation of the merger on June 17, 2019. Since May 2019, Mr. Iwanowski has served as a director of MJF.
Mr. Iwanowski is the founder of Global Visions-Silicon Valley, Inc., a global consulting group focused on venture, mergers and
acquisitions, and turnarounds, and has served as its president and chief executive officer since August 2011. Mr. Iwanowski advises
and invests in a variety of early stage companies and is an experienced veteran in the international technology sector. Recent
projects including overseeing the selection, mentoring and seed funding of approximately 20 start-up companies in the Republic
of Georgia. Mr. Iwanowski also serves on the Virgin Galactic advisory board, which recently made it first successful commercial
flight into space. Mr. Iwanowski was a managing director with Trident Capital from April 2005 to November 2011. During this time,
Mr. Iwanowski also served as chairman of Neohapsis (KSR INC) a cyber-security firm that was then acquired by Cisco from 2006 to
2010. From 2002 to 2005, Mr. Iwanowski was senior vice president - Global IT and chief information officer for Oracle Corporation (NYSE:
ORCL). Prior to Oracle, Mr. Iwanowski co-managed an outsourcing business at Science Applications International Corp (NASDAQ: SAIC)
and served as its chief operating officer - Telecom and IT Outsourcing Business Unit from 1997 to 2002. Mr. Iwanowski served as
a principal at Quantum Magnetics, an airport explosive detection system company, as a general manager and vice president from 1995
to 1997. Mr. Iwanowski also held executive positions with Raytheon (NASDAQ:RTN) as the vice president of Business Development from
1993 to 1995, and was a principal at Applied Remote Technology, an underwater robotics company that was acquired by Raytheon (NASDAQ:RTN),
serving as its executive vice president - business development from 1991 to 1993. Mr. Iwanowski played professional football from
1978 to 1980 with the New York Jets, Oakland Raiders and Kansas City Chiefs. Mr. Iwanowski received an MBA from National University
in 1989, an MS in Engineering from California Institute of Technology in 1979, and a BS in Engineering from the University of Pennsylvania
in 1977. Mr. Iwanowski was selected to serve on our Board based on his extensive experience in business operation and public companies.
John Fowle has served as Chief Financial
Officer since December 17, 2019. From May 2019 through December 2019, Mr. Fowle served as Chief Financial Officer of Rev360, an
optometry software and business services company. During that time, Mr. Fowle oversaw the company’s financial operations
and risk management functions and supported the company’s strategic divestiture of the software business unit. From July
2015 through December 2019, Mr. Fowle served as Vice President, Corporate Controller and Officer of Welltok, Inc., an emerging-growth,
data-driven, enterprise SaaS company that delivers the healthcare industry’s leading consumer activation platform. From May
2013 through July 2015, Mr. Fowle served as Corporate Controller of Clarient Diagnostic Services, Inc., a NeoGenomics Company,
a specialty molecular biology laboratory focused on cancer diagnostics, testing and research. Prior to that, Mr. Fowle held a variety
of increasingly responsible senior financial management positions in GE Healthcare, Panasonic Avionics and Freedom Communications.
Mr. Fowle holds a Bachelor of Science degree in Business Administration from the University of Southern California, a Master of
Business Administration from the University of California, Irvine, and is a Certified Public Accountant.
Nina Simosko has served as Chief
Revenue Officer/Chief Commercial Officer since September 23, 2019. From Feb 2015 through 2018, Ms. Simosko served as president,
chief executive officer, and chief product officer of NTT Innovation Institute Inc., a Silicon Valley-based innovation center for
NTT Group, one of the world’s largest information and communications technology companies. From Feb 2013 through July 2015,
Ms. Simosko was responsible at Nike, Inc. for leading the creation and execution of the Nike technology strategy, planning and
operations world-wide. Additionally, from February 2013 through February 2015, Ms. Simosko served on the advisory board of Appcelerator.
From August 2012 through August 2014, Ms. Simosko served on the advisory board of Taulia, Inc. and from October 2012 through
October 2014 served on the advisory board of K2Partnering Solutions. From June 2004 through May 2012, Ms. Simosko was the
senior vice president of the Global Premier Customer Network of the SAP America, Inc. (“SAP”). At SAP, she led both
the PCN Center of Excellence and SAP’s Global Executive Advisory Board. During her tenure, she was a part of SAP’s
Global Ecosystem & Partner Group which was charged with continuing to build and enable an open ecosystem of software, service
and technology partners together with SAP’s communities of innovation. Additionally, she served as the global chief operating
officer for the worldwide Customer Education organization, responsible for driving more than half a billion euros in global education
software and services revenue, as well as the senior vice president of the SAP’s Education Sales. From July 2008 through
June 2011, Ms. Simosko served as a director of Reading Partners. From May 2000 through June 2004, Ms. Simosko
served as the executive director of Siebel University and Worldwide Maintenance Renewal Sales, where she was responsible for $100M
in annual revenues. From April 1998 through April 2000, Ms. Simosko served as the senior sales and marketing director of Oracle
Corporation’s, Oracle Education (Americas Division), where she managed a P&L for a $13M annual budget. Ms. Simosko currently
serves on the advisory board of: since January 2018, Silicon Valley in Your Pocket; since January 2015, AppOrchid; since September
2014, Reflection; since May, DeepSense.ai; and since June, 2019 Scanta, Inc. Ms. Simosko holds a Bachelor of Arts degree from
Montclair State University where she graduated cum laude.
Ray Thompson has served as Chief
Operating Officer of MJF and, following the consummation of the merger, Akerna since November 2018. From November 2016 to January
2018, Mr. Thompson worked as the head of customer and sales Operations for Gloo, a people development SaaS company. During that
time, Mr. Thompson reported to the executive team to develop and execute on market strategies, product offerings, financial projections,
and talent management. From October 2008 to October 2016, Mr. Thompson served as corporate senior vice president of VisionLink,
a multiagency humanitarian software platform, managing across all aspects of the business providing enterprise SaaS solutions to
federal and state governments and international humanitarian organizations. From 1996 to 2008, Mr. Thompson served in various executive
sales and marketing roles across multiple technologies companies. Mr. Thompson holds a Masters in Business Administration from
the University of Denver.
David McCullough has served as Chief
Technology Officer of Akerna since July 1, 2020. Mr. McCullough has been with Akerna and MJF since 2015, previously serving as
Akerna's executive vice president of product & engineering. Before joining MJF, Mr. McCullough was the Chief Technology Officer
of StudentPublishing.com, during that time, he actively managed the technical aspects of Student Publishing’s sale to and
system integration with lulu.com. Mr. McCullough has over 16 years of software engineering experience, including extensive government
systems experience. Mr. McCullough has previously served as a profession at New Mexico State University where he taught courses
in data communications and networking. Mr. McCullough holds a master's degree in Computer Science. MCSE, CCNP, A+. N+.
Board Qualifications
Our Board has not formally established
any specific, minimum qualifications that must be met by each of its officers or directors or specific qualities or skills that
are necessary for one or more of its officers or members of the board of directors to possess. However, we expect to generally
evaluate the following qualities: educational background, diversity of professional experience, including whether the person is
a current or was a former chief executive officer or chief financial officer of a public company or the head of a division of a
prominent organization, knowledge of our business, integrity, professional reputation, independence, wisdom, and ability to represent
the best interests of our stockholders.
Our officers and board of directors will
be composed of a diverse group of leaders in their respective fields. Many of these officers or directors have senior leadership
experience at various companies. In these positions, they have also gained experience in core management skills, such as strategic
and financial planning, public company financial reporting, compliance, risk management, and leadership development. Many of our
officers and directors also have experience serving on boards of directors and/or board committees of other public companies and
private companies, and have an understanding of corporate governance practices and trends, which provides an understanding of different
business processes, challenges, and strategies. Further, these officers and directors also have other experience that makes them
valuable, such as managing and investing assets or facilitating the consummation of business investments and combinations.
We, along with our officers and directors,
believe that the above-mentioned attributes, along with the leadership skills and other experiences of our officers and board members
described above, provide us with a diverse range of perspectives and judgment necessary to facilitate our goals of shareholder
value appreciation through organic and acquisition growth.
Number and Terms of Office of Officers
and Directors
Our board of directors are divided into
three classes: Class I; Class II; and Class III. The directors in Class I have a term expiring at the 2022 annual meeting
of stockholders, the directors in Class II have a term expiring at the 2020 annual meeting of stockholders, and the directors
in Class III have a term expiring at the 2021 annual meeting of stockholders. The Class I directors are Matthew R. Kane and Tahira
Rehmatullah, there are currently no Class II directors, and the Class III directors are Jessica Billingsley, Scott Sozio, and Mark
Iwanowski.
Our officers are appointed by the Board
and serve at the discretion of the Board, rather than for specific terms of office. Our Board is authorized to appoint persons
to the offices set forth in our Amended and Restated Bylaws as it deems appropriate.
Arrangements between Officers and Directors
To our knowledge, there is no arrangement
or understanding between any of our officers and any other person, including Directors, pursuant to which the officer was selected
to serve as an officer.
Family Relationships
None of our Directors or executive officers
are related by blood, marriage, or adoption to any other Director, executive officer, or other key employees.
Other Directorships
None of the Directors of Akerna are also
directors of issuers with a class of securities registered under Section 12 of the Exchange Act (or which otherwise are required
to file periodic reports under the Exchange Act).
Legal Proceedings
We are not aware of any of our directors
or officers being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy, insolvency, criminal
proceedings (other than traffic and other minor offenses) or being subject to any of the items set forth under Item 401(f) of Regulation
S-K.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires
the Company’s officers and directors, and persons who own more than 10% of the Shares, to file reports of ownership and changes
of ownership of such securities with the SEC.
Based solely on a review of the reports
received by the SEC, the Company believes that, during the fiscal year ended June 30, 2020, the Company’s officers, directors
and greater than 10% owners timely filed all reports they were required to file under Section 16(a), except as set forth below:
Name
|
|
Number of Late Reports
(Transactions)
|
|
Number of Missing Reports
(Transactions)
|
John Fowle
|
|
1 Form 4 (1 Transaction)
|
|
--
|
Matthew Kane
|
|
1 Form 4 (1 Transaction)
|
|
--
|
Tahira Rehmutallah
|
|
1 Form 4 (1 Transaction)
|
|
--
|
Ray Thompson
|
|
1 Form 3
2 Form 4 (3 Transactions)
|
|
--
|
Amy A. Poinsett Revocable Living Trust
|
|
1 Form 3
|
|
Form 5(1)
|
Ashesh Shah
|
|
1 Form 3
|
|
Form 5(1)
|
|
(1)
|
A Form 5 is indicated as not being filed solely because the Company did not receive a written representation
from such stockholder that no Form 5 was required to be filed pursuant to section (b) of Item 405 of Regulation S-K. The Company
does not have any information indicating that a Form 5 was actually required to be filed by the stockholder.
|
During the Company’s review of prior
filings under Section 16(a), the Company determined that two missing reports that were required to be reported in last year’s
annual report for the fiscal year ended June 30, 2019, were not reported as follows: Scott Sozio and Tahira Rehmutallah both had
missing Form 3 reports. Both Mr. Sozio and Ms. Rehmutallah did file Form 3s related to their positions of officers and directors
of our reporting predecessor Mtech Acquisition Corp.
Code of Business Conduct and Ethics
We have a code of business conduct and
ethics, or the Code of Ethics, that applies to all of our employees, officers and directors of Akerna and our affiliated entities.
The Code of Ethics is available on our website at www.akerna.com and we will post any amendments to, or waivers from, including
an implicit waiver, the Code of Ethics on that website.
Director Nominating Process
The policy of our Nominating Committee
is to consider properly submitted recommendations for candidates to the Board from stockholders. Any stockholder recommendations
for consideration by the Nominating Committee should include the candidate’s name, biographical information, information
regarding any relationships between the candidate and the Company within the last three years, a description of all arrangements
between the candidate and the recommending stockholder and any other person pursuant to which the candidate is being recommended,
a written indication of the candidate’s willingness to serve on the Board, any other information required to be provided
under securities laws and regulations, and a written indication to provide such other information as the Nominating Committee may
reasonably request. There are no differences in the manner in which the Nominating Committee evaluates nominees for director based
on whether the nominee is recommended by a stockholder or otherwise. Stockholder recommendations to the Board should be sent to:
Akerna Corp.
1630 Welton St., Floor 4
Denver, CO 80202
Attention: Secretary
In addition, our Amended and Restated Bylaws
permit stockholders to nominate directors for consideration at an annual meeting of stockholders. Stockholders wishing to nominate
a candidate for director at the annual meeting of stockholders must give written notice to Akerna Corp. 1630 Welton St., Floor
4, Denver, CO 80202, Attention: Secretary, either by personal delivery or by United States mail, postage prepaid. The stockholder’s
notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than ninety (90)
days nor more than one hundred twenty (120) days prior to the first anniversary of the date of the immediately preceding year’s
annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced more than thirty (30) days
prior to or delayed by more than sixty (60) days after the anniversary of the preceding year’s annual meeting, to be timely,
notice by the stockholder must be so received not later than the close of business on the tenth (10th) day following
the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting is
first given or made (which for this purpose shall include any and all filings of the Corporation made on the EDGAR system of the
SEC or any similar public database maintained by the SEC), whichever first occurs. To be timely for a special meeting of the stockholders
called for the purpose of electing directors, a stockholder’s written notice to the Secretary of the Corporation must be
delivered to or mailed and received at the principal executive offices of the Corporation not later than thirty (30) days after
the prior meeting of stockholders and no later than one hundred and eighty (180) days before the first anniversary date of the
immediately preceding year’s annual meeting of stockholders. To be in proper form, a stockholder’s notice to the Secretary
shall be in writing and shall set forth (i) the name and record address of such stockholder proposing such nomination and the beneficial
owner, if any, on whose behalf the nomination is made; (ii) the class or series and number of shares of capital stock of the Corporation
which are, directly or indirectly, owned beneficially or of record by such stockholder; (iii) a description of all direct and indirect
compensation and other material monetary agreements, arrangements or understandings during the past three years, and any other
material relationships, between such stockholder and each proposed nominee, including, without limitation, all information that
would be required to be disclosed pursuant to the Regulations of the Securities and Exchange Commission if such stockholder were
the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant;
(iv) any derivative positions held or beneficially held, directly or indirectly, by such stockholder; (v) whether and the
extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other
agreement, arrangement or understanding (including any short position or any borrowing or lending of shares) has been made, the
effect or intent of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease
the voting power of, such stockholder with respect to any share of stock of the Corporation; (v) a representation that such stockholder
intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (vii) any other information
relating to such stockholder that would be required to be disclosed in a proxy statement or other filings of the proposing stockholder
required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange
Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed
nominee to being named or referred to as a nominee and to serve as a director if elected. The Corporation may require any proposed
nominee to furnish such other information (which may include attending meetings to discuss the furnished information) as may reasonably
be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation.
Audit Committee and Audit Committee Financial Expert
We have a separately-designated standing
Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and Nasdaq Listing Rules. In addition, our Board adopted a written charter for the Audit Committee,
which is available on the Company’s website at www.akerna.com, which complies with the requirements of Rule 10A-3
of the Exchange Act.
The Audit Committee consists of Matthew
R. Kane, Tahira Rehmatullah and Mark Iwanowski, each of whom is independent within the meaning of the Nasdaq Listing Rules. In
addition, each Audit Committee member satisfies the Audit Committee independence standards under the Exchange Act. Our Board
has determined that Mr. Iwanowski qualifies as an Audit Committee financial expert, as defined by SEC rules, based on education,
experience and background. Mr. Kane serves as chairperson of the Audit Committee.
The Audit Committee’s duties, include,
but are not limited to: (i) reviewing and discussing with management and the independent auditor the annual audited financial statements,
and recommending to the board whether the audited financial statements should be included in our annual reports; (ii) discussing
with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation
of our financial statements; (iii) discussing with management major risk assessment and risk management policies; (iv) monitoring
the independence of the independent auditor; (v) verifying the rotation of the lead (or coordinating) audit partner having primary
responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; (vi) reviewing
and approving all related-party transactions; (vii) inquiring and discussing with management our compliance with applicable laws
and regulations; (viii) pre-approving all audit services and permitted non-audit services to be performed by our independent auditor,
including the fees and terms of the services to be performed; (ix) appointing or replacing the independent auditor; (x) determining
the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management
and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work;
(xi) establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal
accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and (xii)
approving reimbursement of expenses incurred by our management team in identifying potential target businesses.
Item 11. Executive Compensation
Summary Compensation Table
On October 10, 2018 (as amended on April
17, 2019), Akerna entered into a definitive merger agreement (the “Merger Agreement”) with MTech Acquisition Corp.
(“MTech”), MJ Freeway, LLC (“MJF”), MTech Purchaser Merger Sub Inc., a Delaware corporation and a wholly-owned
subsidiary of Akerna (“Purchaser Merger Sub”), MTech Company Merger Sub LLC, a Colorado limited liability company and
a wholly-owned subsidiary of Akerna (“Company Merger Sub”), MTech Sponsor LLC (“MTech Sponsor”), a Florida
limited liability company, in the capacity as the representative for the equity holders of Akerna (other than the sellers) thereunder,
and MJF and Jessica Billingsley, in the capacity as the representative for the sellers thereunder. The Merger Agreement provided
for two mergers: (1) the merger of Purchaser Merger Sub with and into MTech, with MTech continuing as the surviving entity; and
(2) the merger of Company Merger Sub with and into MJF, with MJF continuing as the surviving entity.
Prior to the above mergers, none of MTech
Holdings’ executive officers or directors received any cash (or non-cash) compensation for services rendered to Akerna.
The following table sets forth all information
concerning the compensation earned, for the fiscal years ended June 30, 2020 and 2019 for services rendered to us by persons who
served as our named executive officers at the end of 2019. Individuals we refer to as our “named executive officers”
include our chief executive officer and our most highly compensated executive officers whose salary and bonus for services rendered
in all capacities exceeded $100,000 during the fiscal year ended June 30, 2019.
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(i)
|
|
|
(j)
|
|
Jessica Billingsley
|
|
2020
|
|
|
250,000
|
|
|
|
54,750
|
(1)
|
|
|
153,474
|
(2)
|
|
|
21,780
|
(3)
|
|
|
480,004
|
|
Chief Executive Officer
|
|
2019
|
|
|
8,904
|
(4)
|
|
|
309,659
|
(5)
|
|
|
—
|
|
|
|
—
|
|
|
|
318,563
|
|
Nina Simosko(6)
|
|
2020
|
|
|
154,545
|
|
|
|
—
|
|
|
|
999,996
|
(7)
|
|
|
—
|
|
|
|
1,154,541
|
|
Chief Commercial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Fowle(8)
|
|
2020
|
|
|
106,250
|
|
|
|
—
|
|
|
|
799,997
|
(9)
|
|
|
—
|
|
|
|
906,247
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Pursuant to Ms. Billingsley’s employment agreement
with Akerna, she is eligible for an annual bonus that is determined by the board of directors on the basis of fulfillment of the
objective performance criteria established in its discretion. For the 2020 fiscal year, the annual bonus was determined based
Akerna’s relative performance against budgeted targets, as further described below. The board of directors evaluated the
achievement of these targets and Ms. Billingsley’s 2020 annual bonus amount was $54,750.
|
|
(2)
|
During 2020, Ms. Billingsley was awarded 10,000 restricted
stock units with a grant date fair value of $57,900. These awards vest 25% annually on July 1 with the final vesting occurring
on July 1, 2023. Ms. Billingsley was awarded share-based compensation that was conditioned upon the price of a share of Akerna
common stock achieving a specified total return as of June 30, 2020. This award had a grant date fair value of $12,465. The total
return target was not achieved, as such no shares will be issued pursuant to this award. Ms. Billingsley was also awarded a share
based annual bonus award of 19,694 shares of common stock. This award had a grant date fair value of $83,109.
|
|
(3)
|
In addition to cash and stock awards, Ms. Billingsley
may redeem loyalty awards generated by corporate purchases made on certain credit cards for her personal use. During 2020, Ms.
Billingsley redeemed $21,780 in loyalty awards for her personal use.
|
|
(4)
|
Ms. Billingsley became Chief Executive Officer of Akerna
on June 17, 2019. Ms. Billingsley will be paid an annual salary of $250,000, pursuant to an employment agreement with Akerna,
and was paid $8,904, as a pro rata portion of her salary for year ended June 30, 2019.
|
|
(5)
|
Within ten days consummation of the Merger Agreement,
Akerna paid Ms. Billingsley a single lump sum of $95,000. Additionally, as a result of reaching a certain target, Ms. Billingsley’s
received a bonus of $214,659.
|
|
(6)
|
Ms. Simosko became Chief Revenue Officer of Akerna on
September 23, 2019, her title was subsequently changed to Chief Commercial Officer without any change in duties or compensation.
|
|
(7)
|
During 2020, Ms. Simosko was awarded 125,156 restricted
stock units with a grant date fair value of $999,996, these awards vest 25% annually on the grant date anniversary in each of
the subsequent four years.
|
|
(8)
|
Mr. Fowle became Chief Financial Officer of Akerna on
December 17, 2019.
|
|
(9)
|
During 2020, Mr. Fowle was awarded 72,727 restricted
stock units with a grant date fair value of $799,997, these awards vest 25% annually on the grant date anniversary in each of
the subsequent four years.
|
Employment Agreements
Jessica Billingsley
In connection with the consummation of
the mergers on June 17, 2019, Ms. Billingsley and Akerna entered into an employment agreement, dated June 17, 2019 (the “Billingsley
Employment Agreement”). Under the terms of the Billingsley Employment Agreement, Ms. Billingsley serves at the Chief Executive
Officer of Akerna at will, and must devote substantially all of her working time, skill and attention to her position and to the
business and interests of Akerna (except for customary exclusions).
Akerna pays Ms. Billingsley an annual base
salary in the amount of $250,000. The base salary is subject to (1) review at least annually by the board of directors of
Akerna for increase, but not decrease, and (2) automatic increase by an amount equal to $50,000 from its then current level on
the date upon which Akerna’s aggregate, gross consolidated trailing twelve month (TTM) revenue equals the product of (x)
two multiplied by (y) Akerna’s TTM revenue as of the Closing. Within ten days of the consummation of the Merger Agreement,
Akerna paid Ms. Billingsley a completion award in a single lump sum of $95,000.
Ms. Billingsley will be eligible for an
annual bonus (the “Annual Bonus”) with respect to each fiscal year ending during her employment. Her target annual
cash bonus shall be in the amount of one hundred percent (100%) of her base salary (the “Target Bonus”) with the opportunity
to earn greater than the Target Bonus upon achievement of above target performance. The amount of the Annual Bonus shall be determined
by the board of directors of Akerna on the basis of fulfillment of the objective performance criteria established in its reasonable
discretion. The performance criteria for any particular fiscal year shall be set no later than ninety days after the commencement
of the relevant fiscal year. For the 2020 and 2019 fiscal years, the Annual Bonus was determined based upon the following four
(4) budget components, each of which scales linearly between achieving 75% to 100%, and greater than 100% with respect to the Platform
Recurring Revenue (as defined in Billingsley Employment Agreement) and Government Recurring Revenue (as defined in Billingsley
Employment Agreement) budget components respectively, of the applicable fiscal year’s budget for each such component (with
50% of the Target Bonus payable upon achievement of 75% of budget, 100% of the Target Bonus payable upon achievement of budget
(and, with respect to the Platform Recurring Revenue and Government Recurring Revenue budget components, with 200% of each weighted
portion of the Target Bonus payable upon achievement of 125% of the corresponding component of budget, with linear interpolation
between points)). During fiscal year ended June 30, 2019, due to achieving a target Ms. Billingsley received a bonus of $214,659.
During the fiscal year ended June 30, 2020, due to achieving targets Ms. Billingsley received a bonus of $54,750 and she received
a discretionary share bonus of $90,000 worth of the Company’s shares of common stock based on the 10-day volume weighted
average price as of the date of the award, which resulted in the issuance of 19,694 shares of common stock with a grant date fair
value of $83,109.
Ms. Billingsley is entitled to participate
in annual equity awards and employee benefits. She is indemnified by Akerna to for any and all expenses (including advancement
and payment of attorneys’ fees) and losses arising out of or relating to any of her actual or alleged acts, omissions, negligence
or active or passive wrongdoing, including, the advancement of expenses she incurs. The foregoing indemnification is in addition
to the indemnification provided to her by Akerna pursuant to her Indemnification Agreement.
In the event of Ms. Billingsley’s
termination for cause or without good reason, Akerna will be obligated to pay any accrued but unpaid base salary and any annual
bonus earned and awarded for the fiscal year prior to that in which the termination occurs. In the event of Ms. Billingsley’s
termination without cause or with good reason, Akerna will be obligated to pay any accrued but unpaid base salary, any annual bonus
earned and awarded for the fiscal year prior to that in which the termination occurs, a cash severance payment equal to her base
salary, pro-rated annual bonus for the fiscal year in which the termination occurs through the date of termination, and twelve
months of health benefits.
The Billingsley Employment Agreement also
contains noncompetition and non-solicitation provisions that apply through her employment and for a term of one year thereafter,
and which are in addition to the noncompetition and non-solicitation provisions prescribed under a certain Non-Competition Agreement
between Ms. Billingsley and Akerna. The Billingsley Employment Agreement also contains a non-disparagement provision that apply
through her employment and for a term of two years thereafter.
John Fowle
On December 17, 2019, Mr. Fowle entered
into a letter agreement with Akerna. Mr. Fowle serves as the Chief Financial Officer of Akerna at will. Akerna pays Mr. Fowle an
annual base salary of $200,000. At the Board’s discretion, Mr. Fowle may be eligible for a bonus. Mr. Fowle received a grant
of approximately $800,000 of restricted stock units, which will vest as to 25% on the first anniversary of the grant date, as to
the next 25% on the second anniversary of the grant date, as to the next 25% on the third anniversary of the grant date and as
to the remaining 25% on the fourth anniversary of the grant date. Mr. Fowle is entitled to participate in employee benefits.
Akerna entered into an Employee Covenant
Agreement with Mr. Fowle, which obligates Mr. Fowle from disclosing any confidential information, including without limitation,
trade secrets. The agreement also prohibits Mr. Fowle during the term of his employment and for a period of two years after his
employment from soliciting any customer, client, employee, supplier or vendor of Akerna, and rendering any services or giving advice
to any competitor or affiliate of a competitor. The agreement also requires Mr. Fowle to return all Akerna property and disclose
all work product to Akerna.
Nina Simosko
On September 23, 2019, Ms. Simosko entered
into a letter agreement with Akerna. Ms. Simosko serves as the Chief Commercial Officer of Akerna at will. Akerna pays Ms. Simosko
an annual base salary of $200,000. At the Board’s discretion, Ms. Simosko may be eligible for a bonus. Ms. Simosko will receive
an approximate grant of $1,000,000 of restricted stock units, which will vest as to 25% on the first anniversary of the grant date,
as to the next 25% on the second anniversary of the grant date, as to the next 25% on the third anniversary of the grant date and
as to the remaining 25% on the fourth anniversary of the grant date. Upon a change of control transaction, Ms. Simosko’s
unvested restricted stock units or any other equity interests that she may be granted, will immediately vest. If Ms. Simosko’s
employment is terminated by Akerna without cause or by her with good reason, she is entitled to her base salary through the date
of termination and the immediate vesting of 33% of the restricted stock units that are unvested on the date of termination. Ms.
Simosko is entitled to reimbursement of reasonable expense incurred with her relocation to Denver, Colorado, in amount not to exceed
$5,000. Ms. Simosko is entitled to participate in employee benefits.
Akerna entered into an Employee Covenant
Agreement with Ms. Simosko, which obligates Ms. Simosko from disclosing any confidential information, including without limitation,
trade secrets. The agreement also prohibits Ms. Simosko during the term of her employment and for a period of two years after her
employment from soliciting any customer, client, employee, supplier or vendor of Akerna, and rendering any services or giving advice
to any competitor or affiliate of a competitor. The agreement also requires Ms. Simosko to return all Akerna property and disclose
all work product to Akerna.
Outstanding Equity Awards at Fiscal
Year-End
A summary of the number and the value of
the outstanding equity awards as of June 30, 2020 held by the named executive officers is set out in the table below.
|
|
Stock Awards(1)
|
|
Name
|
|
Number of Shares or Units of Stock That Have Not Vested (#)
|
|
|
Market Value of Shares or Units of Stock That Have Not Vested ($)
|
|
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested(#)
|
|
|
Equity
Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares,
Units or
Other Rights That
Have Not Vested ($)
|
|
(a)
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
Jessica Billingsley
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
(2)
|
|
|
88,000
|
|
Chief Executive Officer
|
|
|
—
|
|
|
|
—
|
|
|
|
19,694
|
(3)
|
|
|
83,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nina Simosko
|
|
|
—
|
|
|
|
—
|
|
|
|
125,156
|
(4)
|
|
|
1,101,373
|
|
Chief Commercial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Fowle
|
|
|
—
|
|
|
|
—
|
|
|
|
72,727
|
(5)
|
|
|
639,998
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Each RSU represents a contingent right to receive one
share of common stock of the Company.
|
|
(2)
|
Represents 10,000 RSUs, which vest as follows: 2,500
units shall vest on July 1, 2020, 2,500 units shall vest on July 1, 2021, 2,500 units shall vest on July 1 2022, and 2,500 units
shall vest on July 1, 2023.
|
|
(3)
|
Represents 19,694 shares awarded at the discretion of
the board of directors for performance for fiscal year 2020, with a fair market value of $83,109. Does not include 26,023 RSUs
granted during 2020, the vesting of which was contingent upon Akerna achieving a specified total shareholder return, measured
at the end of the fiscal year. This target was not achieved and as such the RSUs will not vest.
|
|
(4)
|
Represents 125,156 RSUs, which vest as follows; 31,289
units shall vest on October 7, 2020, 31,289 units shall vest on October 7, 2021, 31,289 units shall of October 7, 2022, and 31,289
units shall on October 7, 2023; however, there is immediate vesting in the event of a Change in Control (as defined in the award)
and there is immediate vesting of 33% of the restricted stock units that are unvested on the date that she is terminated without
cause or by her with good reason..
|
|
(5)
|
Represents 72,727 RSUs, which vest as follows; 18,181
shares shall vest on December 17, 2020, 18,182 shares shall vest on December 17, 2021, 18,182 shares shall vest on December 17,
2022 and 18,182 shares shall vest on December 17, 2023.
|
Options
There were no options granted in the fiscal
year ended June 30, 2020.
Pension Benefits
None of our employees participate in or
have account balances in qualified or non-qualified defined benefit plans sponsored by us. Our Compensation Committee may elect
to adopt qualified or non-qualified benefit plans in the future if it determines that doing so is in our company’s best interest.
Non-qualified Deferred Compensation
None of our employees participate in or
have account balances in non-qualified defined contribution plans or other non-qualified deferred compensation plans maintained
by us. Our Compensation Committee may elect to provide our officers and other employees with non-qualified defined contribution
or other non-qualified compensation benefits in the future if it determines that doing so is in our company’s best interest.
Director Compensation
The following table sets forth the compensation
granted to our directors who are not also executive officers during the fiscal year ended June 30, 2020. Compensation to directors
that are also executive officers is detailed above and is not included on this table.
Name
|
|
Fees
earned or paid in cash
($)
|
|
|
Stock
awards
($)
|
|
|
Option
award(1)
($)
|
|
|
Non-equity
incentive plan
compensation
($)
|
|
|
Nonqualified
deferred
compensation
earnings
($)
|
|
|
All other
compensation
($)
|
|
|
Total
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
Matthew Kane
|
|
|
20,250
|
|
|
|
15,196
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35,446
|
|
Mark Iwanowski
|
|
|
20,575
|
|
|
|
15,936
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
36,511
|
|
Tahira Rehmatullah
|
|
|
21,750
|
|
|
|
16,325
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,075
|
|
Scott Sozio(1)
|
|
|
234,271
|
|
|
|
11,132
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
245,403
|
|
|
(1)
|
Mr. Sozio receives compensation
pursuant to his role as Head of Corporate Development and is not compensated as an independent director.
|
Narrative Disclosure to Director Compensation
Table
Compensation granted to our directors who
are not also executive officers in fiscal year 2020 included an annual fee of $30,000 and additional fees for service on committees
of the board of directors, paid in a mix of cash and stock awards. Stock awards were granted on October 7, 2019 and January 28,
2020 and vest 25% at the end of each fiscal quarter. Directors did not receive meeting fees in 2020.
Compensation Policies and Practices
and Risk Management
The Compensation Committee has reviewed
the design and operation of Akerna’s compensation policies and practices for all employees, including executives, as they
relate to risk management practices and risk-taking incentives. The Compensation Committee believes that Akerna’s compensation
policies and practices do not encourage unnecessary or excessive risk taking and that any risks arising from Akerna’s compensation
policies and practices for its employees are not reasonably likely to have a material adverse effect on Akerna.
Compensation Committee Interlocks and
Insider Participation
No member of the Compensation Committee
has ever been an officer or employee of Akerna. None of Akerna’s executive officers serve, or have served during the last
fiscal year, as a member of the board of directors, compensation committee, or other board committee performing equivalent functions
of any other entity that has one or more executive officers serving as one of Akerna’s directors or on the Compensation Committee.
Item 12. Security Ownership of Certain
Beneficial Owners and Management, and Related Stockholder Matters
The following table sets forth information
concerning beneficial ownership of Akerna’s capital stock outstanding as of the date of this prospectus, by: (1) each stockholder
known to be the beneficial owner of more than five percent of any class of Akerna’s voting stock then outstanding; (2) each
of Akerna’s directors and nominees to serve as director; (3) each of Akerna’s named executive officers; and (4) Akerna’s
current directors and executive officers as a group.
As of October 28, 2020, there were 14,685,932
shares of common stock issued and outstanding. Each share entitles the holder thereof to one vote.
The information regarding beneficial ownership
of shares of common stock has been presented in accordance with the rules of the SEC. Under these rules, a person may be deemed
to beneficially own any shares of capital stock as to which such person, directly or indirectly, has or shares voting power or
investment power, and as to which such person has the right to acquire voting or investment power within 60 days through the exercise
of any stock option or other right. The percentage of beneficial ownership as to any person as of a particular date is calculated
by dividing (1) (i) the number of shares beneficially owned by such person plus (ii) the number of shares as to which such person
has the right to acquire voting or investment power within 60 days by (2) the total number of shares outstanding as of such date,
plus any shares that such person has the right to acquire from Akerna within 60 days. Including those shares in the tables does
not, however, constitute an admission that the named stockholder is a direct or indirect beneficial owner of those shares. Unless
otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares that power
with that person’s spouse) with respect to all shares of capital stock listed as owned by that person or entity.
|
|
Beneficial Ownership
|
|
Name and Address of Beneficial Owner(1)
|
|
Number of
Akerna
Shares of
Common Stock
|
|
|
Percentage2)
|
|
DIRECTORS AND OFFICERS
|
|
|
|
|
|
|
Jessica Billingsley(3)
|
|
|
1,177,996
|
|
|
|
8.0
|
%
|
Matthew Kane(4)
|
|
|
263,254
|
|
|
|
1.8
|
%
|
Scott Sozio(5)
|
|
|
273,672
|
|
|
|
1.9
|
%
|
Tahira Rehmatullah(6)
|
|
|
51,307
|
|
|
|
*
|
|
Mark Iwanowski
|
|
|
3,988
|
|
|
|
*
|
|
David McCullough(7)
|
|
|
50,089
|
|
|
|
*
|
|
Ray Thompson(8)
|
|
|
42,145
|
|
|
|
*
|
|
Nina Simosko(9)
|
|
|
—
|
|
|
|
*
|
|
John Fowle(10)
|
|
|
—
|
|
|
|
*
|
|
All directors and officers as a group (nine persons)
|
|
|
1,862,451
|
|
|
|
12.6
|
%
|
|
|
|
|
|
|
|
|
|
5% STOCKHOLDERS
|
|
|
|
|
|
|
|
|
Amy A. Poinsett Revocable Living Trust(11)
|
|
|
1,325,802
|
|
|
|
9.0
|
%
|
Ashesh Shah(12)
|
|
|
1,218,005
|
|
|
|
8.3
|
%
|
John X. Prentice(13)
|
|
|
1,000,657
|
|
|
|
6.4
|
%
|
M&J Special Investments LLC(14)
|
|
|
917,253
|
|
|
|
6.2
|
%
|
Osmington, Inc(15)
|
|
|
801,291
|
|
|
|
5.3
|
%
|
(1)
|
Unless otherwise noted, the business address of each of the persons and entities listed above is 1630 Welton Street, Denver, Colorado 80202.
|
(2)
|
The percentage is based on 14,685,932 shares of common stock issued and outstanding as of October 28, 2020.
|
(3)
|
Represents 1,155,802 shares held by Jessica Billingsley Living Trust and 22,194 vested restricted stock units held by Ms. Billingsley. Ms. Billingsley, the trustee of the Jessica Billingsley Living Trust, has sole and dispositive power over the shares held by the Jessica Billingsley Living Trust. Does not reflect 27,500 restricted stock units issued pursuant to Akerna’s Incentive Plan, which vest as follows: 7,500 units shall vest on July 1, 2021, 7,500 units shall vest on July 1 2022, 7,500 units shall vest on July 1, 2023, and 5,000 units shall vest on July 1, 2024.
|
(4)
|
Includes 263,254 shares held by Seam Capital, LLC. Mr. Kane is a manager of Seam Capital, LLC, and as such, Mr. Kane has sole and dispositive power of the shares held by Seam Capital, LLC. Does not reflect 1,854 restricted stock units issued pursuant to Akerna’s Incentive Plan, which vest on December 31, 2020.
|
(5)
|
Represents 241,362 shares and warrants to acquire 32,310 common shares held by Mr. Sozio. Does not reflect 102,166 restricted stock units issued pursuant to Akerna’s Incentive Plan, which vest as follows: 25,541 units shall vest on July 1, 2021, 25,541 units shall vest on July 1, 2022, 25,541 units shall vest on July 1, 2023 and 25,543 units shall vest on July 1, 2024.
|
(6)
|
Represents 46,180 shares and warrants to acquire 5,127 common shares held by Ms. Rehmatullah. Does not reflect 1,992 restricted stock units issued pursuant to Akerna’s Incentive Plan, which vest on December 31, 2020.
|
(7)
|
Does not reflect 26,000 restricted stock units issued pursuant to Akerna’s Incentive Plan, which vest as follows; 7,000 units shall vest on July 1, 2021, 7,000 units shall vest on July 1, 2022, 7,000 units shall on July 1, 2023 and 5,000 units shall vest on July 1, 2024.
|
(8)
|
Of the 42,145 shares issued to Mr. Thompson: 20,037 are subject to the terms of a restricted stock agreement and vest as follows: 6,679 shares shall vest on January 1, 2021, 6,679 shares shall vest on January 1, 2022 and 6,679 shares shall vest on January 1, 2023. Does not include 66,287 restricted stock units issued pursuant to Akerna’s Incentive Plan, which vest as follows: 12,929 units shall vest on January 1, 2021, 7,500 units shall vest on July 1, 2021, 12,929 units shall vest on January 1, 2022, 7,500 units shall vest on July 1, 2022, 12,929 units shall vest on January 1, 2023, 7,500 units shall vest on July 1, 2023 and 5,000 units shall vest on July 1, 2024.
|
(9)
|
Does not reflect 125,156 restricted stock units issued pursuant to Akerna’s Incentive Plan, which vest as follows; 31,289 units shall vest on October 7, 2020, 31,289 units shall vest on October 7, 2021, 31,289 units shall of October 7, 2022, and 31,289 units shall on October 7, 2023; however, there is immediate vesting in the event of a Change in Control (as defined in the award) and there is immediate vesting of 33% of the restricted stock units that are unvested on the date that Ms. Simosko is terminated without cause or by Ms. Simosko with good reason.
|
(10)
|
Does not reflect 72,727 restricted stock units issued pursuant to Akerna’s Incentive Plan, which vest as follows; 18,181 shares shall vest on December 17, 2020, 18,182 shares shall vest on December 17, 2021, 18,182 shares shall vest on December 17, 2022 and 18,182 shares shall vest on December 17, 2023.
|
(11)
|
Based solely on the Form 4 filed jointly by Amy A. Poinsett Revocable Living Trust and Amy Poinsett on May 27, 2020. Amy Poinsett, the trustee of Amy A. Poinsett Revocable Living Trust, has sole and dispositive power over the shares held by the Amy A. Poinsett Revocable Living Trust.
|
(12)
|
Includes 676,186 shares held by ACS Pedersen LLC (d/b/a The London Fund SPV 10, LLC) and 97,639 shares held by Heath Hill Syndicate SPV 2, LLC. Of these shares, 76,294 are subject to the terms of an escrow agreement. Ashesh C. Shah and Palle Pedersen are the managing members of ACS Pedersen LLC and as such, Messrs. Shah and Pedersen have shared voting and dispositive power over the shares held by ACS Pedersen LLC.
|
(13)
|
Includes 998,037 Exchangeable Shares issued by Akerna’s wholly owned subsidiary, Akerna Canada Ample Exchange, Inc. The Exchangeable Shares may be exchanged on a one-for-one basis into shares of Akerna common stock. These shares are subject to the terms of an escrow agreement that may result in an increase or decrease in the number of Exchangeable Shares ultimately issued to Mr. Prentice. Also, includes options to acquire 2,620 shares of Akerna common stock issued pursuant to Akerna’s Incentive Plan.
|
(14)
|
Based solely on the Schedule 13G/A filed jointly by M&J Special Investments LLC, Nicholas J. Pritzker, and Joseph I. Perkovich on February 14, 2020. Each of Nicholas J. Pritzker and Joseph I. Perkovich, the managers of M&J Special Investments LLC, has shared voting and dispositive power over the shares held by M&J Special Investments LLC. The address of M&J Special Investments LLC is c/o Tao Capital Partners LLC, 1 Letterman Drive, Suite C4-420, San Francisco, CA 94129.
|
(15)
|
Represents 450,601 shares of Akerna common stock and 316,683 Exchangeable Shares issued by Akerna’s wholly owned subsidiary, Akerna Canada Ample Exchange, Inc., held by Osmington, Inc and 19,971 shares of Akerna common stock and 14,036 Exchangeable Shares held by Osmington Capital Corporation. The Exchangeable Shares may be exchanged on a one-for-one basis into shares of Akerna common stock. Exchangeable Shares are subject to the terms of an escrow agreement that may result in an increase or decrease in the number of Exchangeable Shares ultimately issued to Osmington, Inc.
|
Change in Control
We are not aware of any arrangement that
might result in a change in control in the future. We have no knowledge of any arrangements, including any pledge by any person
of our securities, the operation of which may at a subsequent date result in a change in the Company’s control.
Equity Compensation Plans
The following summary information is presented
as of June 30, 2020
|
|
Number of
securities to be
issued upon
exercise of
outstanding options,
warrants,
and rights
(a)
|
|
|
Weighted-average
exercise
price of
outstanding
options,
warrants, and
rights
(b)
|
|
|
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))
(c)
|
|
Equity compensation plans approved by security holders(1)
|
|
|
525,278
|
(1)
|
|
$
|
0
|
|
|
|
1,039,760
|
|
Equity compensation plans not approved by security holders
|
|
|
Not Applicable
|
|
|
|
Not Applicable
|
|
|
|
Not Applicable
|
|
TOTAL
|
|
|
525,278
|
(1)
|
|
$
|
0
|
|
|
|
1,039,760
|
|
2019 Long Term Incentive Plan
Summary
The purpose of the Incentive Plan is to
enable Akerna to offer its employees, officers, directors and consultants whose past, present and/or potential future contributions
to Akerna have been, are, or will be important to its success, an opportunity to acquire a proprietary interest in Akerna. The
various types of incentive awards that may be provided under the Incentive Plan are intended to enable Akerna to respond to changes
in compensation practices, tax laws, accounting regulations and the size and diversity of its business.
Plan Administration
The Incentive Plan is administered by the
compensation committee of the Akerna Board (the “Compensation Committee”) or by the full Akerna Board, which may determine,
among other things, (1) the persons who are to receive awards, (2) the type or types of awards to be granted to such persons, (3)
the number of shares of common stock to be covered by, or with respect to what payments, rights, or other matters are to be calculated
in connection with the awards, (4) the terms and conditions of any awards, (5) whether, to what extent, and under what circumstances
awards may be settled or exercised in cash, shares of common stock, other securities, other awards or other property, or cancelled,
forfeited, or suspended and the method or methods by which awards may be settled, exercised, cancelled, forfeited, or suspended,
(6) whether, to what extent, and under what circumstances the delivery of cash, shares of common stock, other securities, other
awards or other property and other amounts payable with respect to an award, and (7) make any other determination and take any
other action that the Compensation Committee deems necessary or desirable for the administration of the Incentive Plan.
Stock Options
Stock options granted under the Incentive
Plan may be of two types: (i) Incentive Stock Options (as defined in the Incentive Plan) and (ii) Non-qualified Stock Options (as
defined in the Incentive Plan). Any stock option granted under the Incentive Plan shall contain such terms, as the Compensation
Committee may from time to time approve.
The term of each stock option shall be
fixed by the Compensation Committee; provided, however, that no stock option may be exercisable after the expiration of ten years
from the date of grant; provided, further, that no Incentive Stock Option granted to a person who, at the time of grant, owns stock
possessing more than 10% of the total combined voting power of all classes of voting stock of Akerna (“10% Shareholder”)
may be exercisable after the expiration of five years from the date of grant.
The exercise price per share purchasable
under a stock option shall be determined by the Compensation Committee at the time of grant; provided, however, that the exercise
price of a stock option may not be less than 100% of the fair market value on the date of grant; provided, further, that the exercise
price of an Incentive Stock Option granted to a 10% Shareholder may not be less than 110% of the fair market value on the date
of grant.
Stock Appreciation Rights
The Compensation Committee may grant Stock
Appreciation Rights in tandem with a stock option or alone and unrelated to a stock option. The Compensation Committee may grant
stock appreciation rights to participants who have been or are being granted stock options under the Incentive Plan as a means
of allowing such participants to exercise their stock options without the need to pay the exercise price in cash. In the case of
a Non-qualified Stock Option, a stock appreciation right may be granted either at or after the time of the grant of such Non-qualified
Stock Option. In the case of an Incentive Stock Option, a stock appreciation right may be granted only at the time of the grant
of such Incentive Stock Option. Stock appreciation rights shall be exercisable as shall be determined by the Compensation Committee.
All or a portion of a stock appreciation right granted in tandem with a stock option shall terminate and shall no longer be exercisable
upon the termination or after the exercise of the applicable portion of the related stock option.
Restricted Stock and Restricted Stock
Units
Shares of restricted stock may be awarded
either alone or in addition to other awards granted under the Incentive Plan. The Compensation Committee shall determine the eligible
persons to whom, and the time or times at which, grants of restricted stock will be awarded, the number of shares to be awarded,
the price (if any) to be paid by the holder, any restriction period, the vesting schedule and rights to acceleration thereof, and
all other terms and conditions of the awards. In addition, the Compensation Committee may award restricted stock units, which may
be subject to vesting and forfeiture conditions during the applicable restriction period, as set forth in an agreement.
Restricted stock constitutes issued and
outstanding shares of common stock for all corporate purposes. The holder will have the right to vote such restricted stock and
to exercise all other rights, powers and privileges of a holder of common stock with respect to such restricted stock, subject
to certain limited exceptions. Upon the expiration of the restriction period with respect to each award of restricted stock and
the satisfaction of any other applicable restrictions, terms and conditions, all or part of such restricted stock shall become
vested in accordance with the terms of the agreement. Any restricted stock that do not vest shall be forfeited to Akerna and the
holder shall not thereafter have any rights with respect to such restricted stock.
The Compensation Committee may provide
that settlement of restricted stock units will occur upon or as soon as reasonably practicable after the restricted stock units
vest or will instead be deferred, on a mandatory basis or at the holder’s election, in a manner intended to comply with tax
laws. A Holder will have no rights of a holder of common stock with respect to shares subject to any restricted stock unit unless
and until the shares are delivered in settlement of the restricted stock unit. If the Committee provides, a grant of restricted
stock units may provide a holder with the right to receive dividend equivalents.
Other Stock-Based Awards
Other Stock-Based Awards may be awarded,
subject to limitations under applicable law, that are denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, shares of common stock, as deemed by the Compensation Committee to be consistent with the purposes
of the Incentive Plan, including, without limitation, purchase rights, shares of common stock awarded that are not subject to any
restrictions or conditions, convertible or exchangeable debentures, or other rights convertible into shares of common stock and
awards valued by reference to the value of securities of or the performance of specified subsidiaries.
Change of Control Provisions
The Incentive Plan provides that in the
event of a change of control event, (1) all of the then outstanding options and stock appreciation rights granted pursuant to the
Incentive Plan will immediately vest and become immediately exercisable as of a time prior to the change in control and (2) any
performance goal restrictions related to an award will be deemed achieved at 100% of target levels and all other conditions met
as of a time prior to the change in control. In the event of the sale of all of Akerna’s assets or a change of control event,
then the Compensation Committee may (1) accelerate the vesting of any and all Stock Options and other awards granted and outstanding
under the Incentive Plan; (2) require a holder of outstanding options to relinquish such award to Akerna upon the tender by Akerna
to holder of cash, stock or other property, or any combination thereof pursuant to the terms of the Incentive Plan and (3) terminate
all incomplete performance periods in respect of awards in effect on the date the acquisition occurs, determine the extent to which
performance goals have been met based upon such information then available as it deems relevant and cause to be paid to the holder
all or the applicable portion of the award based upon the Compensation Committee’s determination of the degree of attainment
of performance goals, or on such other basis determined by the Compensation Committee.
The Akerna Board may at any time, and from
time to time, amend alter, suspend or discontinue any of the provisions of the Incentive Plan, but no amendment, alteration, suspension
or discontinuance shall be made that would impair the rights of a holder under any agreement theretofore entered into hereunder,
without the holder’s consent, except as set forth in this Incentive Plan or the agreement. Notwithstanding anything to the
contrary herein, no amendment to the provisions of the Incentive Plan shall be effective unless approved by the stockholders of
Akerna to the extent stockholder approval is necessary to satisfy any provision of the Ethics Code or other applicable law or the
listing requirements of any national securities exchange on which Akerna’s securities are listed.
Item 13. Certain Relationships and Related
Transactions, and Director Independence
Employment of Scott Sozio
In July 2019, we hired Mr. Scott Sozio,
at will, to serve as our Head of Corporate Development. Mr. Sozio receives an annual base salary of $150,000, which is to be credited
against certain variable bonus compensation to be paid in a combination of cash and equity pursuant to the Incentive Plan once
every twelve-month period. The terms of such bonus payment include the payment of 1% of the transaction value of acquisition transactions
completed by Akerna, payable one-half as cash compensation and one-half in restricted stock units of Akerna.
In April 2020, Mr. Sozio was granted 1,230
restricted stock units of the Akerna under our 2019 Equity Incentive Plan in relation to the closing of our acquisition of Trellis,
which vested immediately. In August of 2020, Mr. Sozio’s compensation was restructured and he was granted 92,166 restricted
stock units, which vest one quarter each year beginning on July 1, 2021. In September 2020, Mr. Sozio was granted 10,000 restricted
stock units as part of our annual employee grants, which vest one quarter each year beginning on July 1, 2021 and 38,527 restricted
stock units in connection with the closing of our acquisition of Ample, which vested immediately.
TechMagic
During the fiscal year ended June 30, 2020,
we have been invoiced through our wholly-owned subsidiary Solo by TechMagic USA LLC, a Massachusetts limited liability, in an amount
of approximately $657,000. When we acquired Solo in January 2020, there was an open balance payable to TechMagic of approximately
$265,000. Subsequently, during the remainder of our fiscal year ended June 30, 2020, we received invoices totaling an aggregate
additional amount of approximately $392,000. After our year ended June 30, 2020, through to the date hereof, we have received invoices
totaling an aggregate amount of approximately $291,000 The invoices set forth services that TechMagic USA LLC purports to have
provided to Solo regarding development of mobile software applications for MJF and Solo between March and September 2020. Mr. Ashesh
Shah, formerly the president of Solo and currently the holder of 8.3% of our issued and outstanding shares of common stock is,
to our knowledge, the founder and one of the principal managers of TechMagic USA LLC. The invoices state that the services were
rendered pursuant to the terms of an agreement regarding the development of mobile software products for Solo, entered into between
Solo and TechMagic at a time when Mr. Shah was a principal at both entities.
Indemnification
Akerna’s amended and restated certificate
of incorporation contains provisions limiting the liability of directors, and its amended and restated bylaws provides that it
will indemnify the directors and executive officers to the fullest extent permitted under Delaware law. Akerna’s amended
and restated certificate of incorporation and bylaws also provides the board of directors with discretion to indemnify the other
officers, employees, and agents when determined appropriate by the board of directors. In addition, Akerna entered into an indemnification
agreement with each of its directors and executive officers, which requires it to indemnify them.
Related Person Transactions Policy and
Procedure
Akerna’s Code of Ethics requires
it to avoid, wherever possible, all related party transactions that could result in actual or potential conflicts of interests,
except under guidelines approved by the Board (or the audit committee). Related-party transactions are defined as transactions
in which (1) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, (2) Akerna or any of
its subsidiaries is a participant, and (3) any (a) executive officer, director or nominee for election as a director, (b) greater
than 5% beneficial owner of Akerna’s shares of common stock, or (c) immediate family member, of the persons referred to in
clauses (a) and (b), has or will have a direct or indirect material interest (other than solely as a result of being a director
or a less than 10% beneficial owner of another entity). A conflict of interest situation can arise when a person takes actions
or has interests that may make it difficult to perform his or her work objectively and effectively. Conflicts of interest may also
arise if a person, or a member of his or her family, receives improper personal benefits as a result of his or her position.
Ours audit committee, pursuant to its written
charter, is responsible for reviewing and approving related-party transactions to the extent we enter into such transactions. The
audit committee will consider all relevant factors when determining whether to approve a related party transaction, including whether
the related party transaction is on terms no less favorable to us than terms generally available from an unaffiliated third-party
under the same or similar circumstances and the extent of the related party’s interest in the transaction.
Director Independence
The Board evaluates the independence of
each nominee for election as a director of our Company in accordance with the Listing Rules (the “Nasdaq Listing Rules”)
of the Nasdaq Stock Market LLC (“Nasdaq”). Pursuant to these rules, a majority of our Board must be “independent
directors” within the meaning of the Nasdaq Listing Rules, and all directors who sit on our Audit Committee, Nominating Committee
and Compensation Committee must also be independent directors.
The Nasdaq definition of “independence”
includes a series of objective tests, such as the director or director nominee is not, and was not during the last three years,
an employee of Akerna or our subsidiaries and has not received certain payments from, or engaged in various types of business dealings
with us. In addition, as further required by the Nasdaq Listing Rules, the Board has made a subjective determination as to
each independent director that no relationships exist, which, in the opinion of the Board, would interfere with such individual’s
exercise of independent judgment in carrying out his or her responsibilities as a director. In making these determinations,
the Board reviewed and discussed information provided by the directors with regard to each director’s business and personal
activities as they may relate to Company and its management.
As a result, the Board has affirmatively
determined that each of Matthew R. Kane, Tahira Rehmatullah, and Mark Iwanowski are independent in accordance with the Nasdaq listing
rules. The Board has also affirmatively determined that all members of our Audit Committee, Nominating Committee and Compensation
Committee are independent directors.
Item 14. Principal Accounting Fees and
Services
Marcum LLP was the Company’s independent
registered public accounting firm for the fiscal year ended June 30, 2020. Marcum LLP was initially appointed by the Audit Committee
as the Company’s independent registered public accounting firm on September 26, 2019.
As discussed in greater detail below, the following
table shows the fees paid or accrued by us to Marcum and during the fiscal years ended June 30, 2020 and June 30, 2019:
Type of Service
|
|
2020
|
|
|
2019(4)
|
|
Audit Fees(1)
|
|
$
|
321,209
|
|
|
|
508,921
|
|
Audit-Related Fees(2)
|
|
|
136,700
|
|
|
|
24,720
|
|
Tax Fees(3)
|
|
|
—
|
|
|
|
—
|
|
Other Fees
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
457,909
|
|
|
|
533,641
|
|
|
(1)
|
Comprised of fees associated with the audit of Akerna Corp.’s and its predecessor, MJ Freeway, LLC annual financial statements, interim reviews of financial statements registration statements, comfort letters and consents.
|
|
(2)
|
Comprised of services rendered in connection with the audits of acquired businesses.
|
|
(3)
|
Comprised of services for tax compliance and tax return preparation.
|
|
(4)
|
These amounts have been revised from the prior year presentation to conform to the 2020 presentation and include the audits of MJ Freeway, LLC in audit fees and MTech Acquisition in audit-related fees.
|
“Audit Fees” relate to fees and
expenses billed by Marcum for the annual audits, including the audit of our financial statements, review of our quarterly financial
statements and for comfort letters and consents related to stock issuances.
“Audit-Related Fees” relate to
fees for assurance and related services that traditionally are performed by independent auditors that are reasonably related to
the performance of the audit or review of the financial statements, such as due diligence related to acquisitions and dispositions,
attestation services that are not required by statute or regulation, internal control reviews and consultation concerning financial
accounting and reporting standards.
“Tax Fees” relate to fees for all
professional services performed by professional staff in our independent auditor’s tax division, except those services related
to the audit of our financial statements. These include fees for tax compliance, tax planning and tax advice, including federal,
state and local issues. Services may also include assistance with tax audits and appeals before the Internal Revenue Service and
similar state and local agencies, as well as federal, state and local tax issues related to due diligence.
“All Other Fees” relate to fees
for any services not included in the above-described categories.
Pre-Approval Policies and Procedures
The Audit Committee charter provides that
the Audit Committee will pre-approve all audit services and non-audit services to be provided by our independent auditors before
the accountant is engaged to render these services. The Audit Committee may delegate its authority to pre-approve services to one
or more committee members, provided that the designees present the pre-approvals to the full committee at the next committee meeting.
Akerna’s Audit Committee was formed upon consummation of the Business Combination. As a result, the Audit Committee did not
pre-approve any of the foregoing services performed by Marcum. Since the formation of our Audit Committee, and on a going-forward
basis, the Audit Committee has and will pre-approve all auditing services and permitted non-audit services to be performed for
us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described
in the Exchange Act which are approved by the audit committee prior to the completion of the audit).