Item
2.01
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Completion
of Acquisition or Disposition of Assets.
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On
January 15, 2020, Akerna Corp., a Delaware corporation (the “Company”) closed on a Stock Purchase Agreement (the “Agreement”)
previously entered into with substantially all of the shareholders of Solo Sciences, Inc., a Delaware corporation (“Solo”),
pursuant to which the Company acquired all right, title and interest in 80.40% of the issued and outstanding capital stock of
Solo (calculated on a fully diluted basis), free and clear of all liens. The Agreement was previously described in and filed with
the Company’s Current Report on Form 8-K, filed with the Commission on November 26, 2019.
The
initial consideration amount under the Agreement was 1,950,000 shares of the common stock of Akerna, less 570,000 shares of the
common stock of Akerna to be held in escrow as follows: (a) 375,000 are to be held and sold to cover costs of the Solo shareholders
under a related intellectual property purchase agreement, to be completed within 12 months of the closing date, with any remaining
shares to be released to the Solo shareholders; and (b) 195,000 shares to be held to cover any indemnity payment to certain Akerna
parties under the indemnity provisions in the Agreement. This initial consideration may be subject to an adjustment for final
working capital acquired no later than 120 days following the closing date. The Akerna shares were issued in exchange for the
shares of Solo held by the Solo shareholders pursuant to the exemption from the registration requirements of the Securities Act
of 1933, as amended (the “Securities Act”) provided by Rule 506(b) of Regulation D thereunder, such exemption being
available based on the representations of the Solo shareholders.
The
Company has an option to acquire the remaining minority stake in Solo during the 12 months following the close in either cash
or shares (the “Company Option”) in an amount equal to either (a) if Akerna shares are trading at an amount less than
or equal to $16.00 per share, the greater of (i) 800,000 Akerna shares or (ii) the difference between the number of Akerna shares
worth $20,000,000 valued at market price and 1,950,000 Akerna shares, or (b) if Akerna shares are trading at more than $16.00
per share, the number of Akerna shares equal to the (A) difference between (i) the product of the market price and 1,950,000 Akerna
shares and (ii) $44,000,000, divided by (B) the market price.
If
the Company Option expires unexercised, Solo has a three-month option to acquire between 40% and 55% of Solo back from the Company
in cash.
The
Company also agreed to pay fees to the legacy Solo shareholders equal to the lesser of (i) $0.01 per Solo Tag and Solo Code sold
or (ii) 7% of net revenue. The fees will be paid annually until the earlier of: (1) the Company’s shares trading above $12
per share for consecutive 20 days in a 30-day period; (b) the Company no longer owning a majority stake in Solo; or (c) the expiration
of the patents related to Solo Tag and Solo Code, which is December 1, 2029.
Ashesh
C. Shah, one of the shareholder representatives of the Solo shareholders in the transaction, is a former director of Akerna. Mr.
Shah resigned as a director of Akerna on November 24, 2019, prior to the approval of the transactions in the Agreement by the
board of Akerna on November 25, 2019.
The
description of the Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to
the complete text of the Agreement. A copy of the Agreement is incorporated herein by reference. Pursuant to the Agreement, each
of the Company, Solo and the Shareholder Representatives made customary representations, warranties and covenants. The representations,
warranties and covenants were made by the parties to, and solely for the benefit of, each other and any expressly intended third
party beneficiaries in the context of all of the terms and conditions of the Agreement and in the context of the specific relationship
between the parties. Accordingly, investors and shareholders should not rely on such representations, warranties and covenants.