Item 1.01. Entry into a Material Definitive
Agreement.
Securities Purchase Agreement
On January 27, 2023, Akerna Corp., a Delware corporation (“Akerna”),
entered into a securities purchase agreement (the “SPA”) with Akerna Canada Ample Exchange Inc. (“Akerna Exchange”)
and POSaBIT Systems Corporation (“POSaBIT”). Upon the terms and subject to the satisfaction of the conditions described in
the SPA, including approval of the transaction by Akerna’s stockholders, Akerna will sell to POSaBIT (or a subsidiary of POSaBIT)
all of the membership interests in MJ Freeway, LLC (“MJF”) and Akerna Exchange will sell to POSaBIT all of the outstanding
capital stock of Ample Organics Inc. (“Ample”) (jointly, such sales, the “Sale Transaction”) for a purchase price
of $4,000,000 in cash.
The purchase price is subject to adjustment at closing of the Sale
Transaction based on the amount by which estimated closing working capital varies from target working captial (as set forth in the SPA),
reduction for closing indebtedness, reduction closing transaction expenses and reduction for credit referral payments under certain commercial
agreements entered into by and between Akerna and POSaBIT contemporaneously with the signing of the SPA. The purchase price is subject
to further adjustment post-closing upon delivery of the post-closing statement by POSaBIT within 75 days after the closing pursuant to
the same adjustment provisions subject to a $500,000 cap on any post-closing working capital adjustments.
The SPA contains customary representations, warranties
and covenants of Akerna and POSaBIT, including covenants relating to the conduct of the business of MJF and Ample from the date of signing
the SPA through closing of the Sale Transaction and obtaining the requisite approval of the stockholders of Akerna. Under the terms of
the SPA, Akerna has also agreed not to solicit from any person an acquisition proposal (as defined in the SPA) for either MJW and Ample
or for Akerna.
In connection with the Sale Transaction, Akerna has agreed to hold
a meeting of its stockholders to approve the SPA and the Sale Transaction under Delaware law (along with certain matters related to the
merger transaction as described below). The board of directors of Akerna (the “Board”) has agreed to recommend the approval
of the SPA and the Sale Transaction to the stockholders and to solicit proxies in support of the approval of the matters at the meeting
of the stockholders. The SPA contains a limited contractual ability for the Board, in accordance with its fiduciary duties to the stockholders,
to change its recommendation to the stockholders upon receipt of a superior offer subject to certain terms and conditions therein, including
providing POSaBIT notice of the superior offer and time to make a counter-proposal to amend the terms of the SPA.
Under the SPA, Akerna and POSaBIT have agreed to provide limited indemnification
to each other with respect to certain tax matters, in each case capped at a maximum amount of $500,000.
The closing of the Sale Transaction is subject to customary closing
conditions, including, among other things, (i) the required approval of the stockholders of Akerna, (ii) the accuracy of the representations
and warranties of the parties made in the SPA, subject to materiality qualifiers, and (iii) compliance by the parties with their respective
covenants under the SPA. Further, closing of the Sale Transaction is conditioned on the simultaneous closing of the merger transaction,
as described below. The obligation of POSaBIT to close on the Sale Transaction is also subject to satisfaction of certain additional conditions,
including, among other things, (i) retention of certain key employees and 80% of other designated employees, (ii) MJF’s contracts
with the State of Pennsylvania and the State of Utah remaining in effect, (iii) material contracts constituting no more than 50% of MJF
and Ample’s recurring subscription revenue that is up for renewal between the date of the SPA and the closing shall have terminated,
otherwise ceased to be in full force and effect, or been subject to a notice of termination or non-renewal, (iv) the State of Pennsylvania
shall not have issued a change order to provide expanded software access to third parties, and (v) as an additional closing condition
solely with respect to the sale of Ample, completion of certain limited due diligence on Ample.
The parties may terminate the SPA upon mutual consent. POSaBIT may
terminate the SPA for (i) a material breach, inaccuracy in or failure to perform any representations, warranty, covenant or agreement
made by Akerna that would give rise to a failure of the closing conditions, (ii) impossibility of closing conditions, (iii) failure to
obtain the approval of the Akerna stockholders, (iv) a change in the Board’s recommendation of the Sale Transaction to the stockholders
or failure to hold the stockholders meeting, (v) the Board changing its recommendation and accepting a superior offer, and (vi) failure
to close. Akerna may terminate the SPA for (i) a material breach, inaccuracy in or failure to perform any representations, warranty, covenant
or agreement made by POSaBIT that would give rise to a failure of the closing conditions, (ii) impossibility of closing conditions, and
(iii) acceptance of a superior offer.
In the event that POSaBIT or Akerna terminates
the SPA pursuant to certain of the sections set forth above, Akerna will be required to pay POSaBIT a termination fee of $140,000 and
reimburse POSaBIT for its reasonable fees and expenses up to $60,000.
Merger Agreement
Concurrently with the execution of the SPA, on
January 27, 2023, Akerna entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Gryphon Digital Mining,
Inc. (“Gryphon”) and Akerna Merger Co. (“Akerna Merger”). Upon the terms and subject to the satisfaction of the
conditions described in the Merger Agreement, including approval of the transaction by the stockholders of Akerna and Gryphon, Akerna
Merger will be merged with and into Gryphon (the “Merger”), with Gryphon surviving the Merger as a wholly-owned subsidiary
of Akerna. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.
Subject to the terms and conditions of the Merger
Agreement, at the effective time of the Merger (the “Effective Time”): (i) each share of Gryphon capital stock issued and
outstanding immediately prior to the Effective Time shall automatically be converted into and become the right to receive the applicable
per share portion of the “merger consideration” as set forth in the allocation statement to be delivered pursuant to the Merger
Agreement (“merger consideration” is defined in the Merger Agreement to mean a number of shares of common stock of Akerna
equal to (a) the quotient obtained by dividing (i) the number of shares of Akerna capital stock on a fully diluted basis (the “Akerna
Fully Diluted Share Number”) by (ii) 0.075, minus (b) the Akerna Fully Diluted Share Number minus (c) the number of shares of common
stock of Akerna the warrants of Gryphon will become exercisable for upon closing of the Merger); (ii) each outstanding warrant of Gryphon
will be assumed by Akerna and become a warrant to purchase an adjusted number of shares of common stock of Akerna, at an adjusted exercise
price per share but subject to the same terms and conditions as the warrant of Gryphon.
Following closing of the Merger, the former Gryphon
equityholders immediately before the Merger are expected to own approximately 92.5% of the outstanding capital stock of Akerna on a fully
diluted basis and the equityholders of Akerna immediately before the Merger are expected to own approximately 7.5% of the outstanding
capital stock of Akerna on a fully diluted basis.
Upon closing of the Merger, Akerna will be renamed
Gryphon Digital Mining, Inc., and will be headquartered in Las Vegas, Nevada. Rob Chang will serve as Chief Executive Officer of the combined
company. The Merger Agreement provides that the Board of Directors of the combined company will be comprised of seven members of which
a minimum of five will be filled upon completion of the Merger, one designated by Akerna, being Jessica Billingsley, its current Chief
Executive Officer, and the remaining six positions to be designated by Gryphon.
The Merger Agreement contains customary representations,
warranties and covenants of Akerna and Gryphon, including covenants relating to the conduct of the business of both Akerna and Gryphon
from the date of signing the Merger Agreement through closing of the Merger, obtaining the requisite approval of the stockholders of Akerna
and Gryphon and maintain the listing of the common stock of Akerna on the NASDAQ Capital Market and applying for the continued listing
of Gryphon after the closing of the Merger on the NASDAQ Capital Market. Under the terms of the Merger Agreement, Akerna has also agreed
not to solicit from any person an acquisition proposal (as defined in the Merger Agreement) for Akerna.
In connection with the Merger, Akerna will prepare
and file with the U.S. Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 that will contain
a prospectus and a proxy statement, and will seek the approval of Akerna’s stockholders with respect to certain actions, including
the following (collectively, the “Akerna Stockholder Proposals”):
| (i) | the Sale Transaction and the SPA; |
| (ii) | issuance of the shares of common stock of Akerna comprising
the merger consideration; |
| (iii) | the change of control of Akerna resulting from the transactions
contemplated by this Agreement pursuant to the rules of NASDAQ; |
| (iv) | the post-closing equity plan for Akerna; |
| (v) | the post-closing board composition; |
| (vi) | an amendment to the certificate of incorporation of Akerna
to effect a reverse stock split; |
| (vii) | an amendment to the certificate of incorporation of Akerna
to increase the number of authorized shares of Akerna; and |
| (viii) | an amendment to the certificate of incorporation of Akerna
to change the name of Akerna. |
The Board has agreed to recommend the approval
of the Akerna Stockholder Proposals to the stockholders and to solicit proxies in support of the approval of the Akerna Stockholder Proposals
at a meeting of the stockholders to be held for that purpose.
The Merger Agreement contains a limited contractual
ability for the Board, in accordance with its fiduciary duties to the stockholders, to change its recommendation to the stockholders upon
receipt of a superior proposal subject to certain terms and conditions therein, including providing Gryphon notice of the superior proposal
and time to make a counter-proposal to amend the terms of the Merger Agreement.
Under the Merger Agreement, Akerna has agreed
to maintain certain indemnity rights (including advancing expenses) of the current officers and directors of Akerna as they exist in the
governing documents of Akerna and maintain director and officers insurance for a period of 6 years following the closing of the Merger.
The closing of the Merger is subject to customary
closing conditions, including, among other things, (i) the required approval of the stockholders of Akerna and Gryphon, (ii) the accuracy
of the representations and warranties of the parties made in the Merger Agreement, subject to materiality qualifiers, (iii) compliance
by the parties with their respective covenants under the Merger Agreement, and (iv) the approval of NASDAQ of the continued listing of
Gryphon after the closing of the Merger. Further, closing of the Merger is conditioned on the simultaneous closing of the Sale Transaction.
The obligation of Gryphon to close the Merger is also subject to satisfaction of certain additional conditions, including, among other
things, (i) no Akerna material adverse effect, (ii) the exchanges contemplated in the exchange agreement (as dsecribed below) being completed,
(iii) all redemptions of Akerna preferred stock being completed, (iv) all other exchanges being completed, (v) the winding down of Akerna’s
legacy business, and (vi) Akerna having $500,000 in cash on hand.
The parties may terminate the Merger Agreement
upon mutual consent. Either party may terminate the Merger Agreement (i) if any of the representations or warranties of the other party
set forth in the Merger Agreement shall not be true and correct or if the other party has failed to perform any covenant or agreement
on the part of such party set forth in the Merger Agreement, (ii) the Merger is not consummated by the outside date (July 15, 2023), (iii)
there is a governmental order prohibiting the Merger, and (iv) failure to obtain the stockholder vote. Gryphon may terminate the Merger
Agreement if (i) the Board changes its recommendation to stockholders with respect to the Merger, (ii) the Board fails to reaffirm its
recommendation to stockholders with respect to the Merger following a tender offer for Akerna, (iii) the Board fails to reaffirm its recommendation
to stockholders with respect to the merger following a publicly announced acquisition proposal for Akerna, (iv) Akerna breaches its non-solicitation
provisions, or (v) the Board resolves to do any of the above. Akerna may terminate the Merger Agreement for acceptance of a superior proposal.
In the event that Gryphon or Akerna terminates
the Merger Agreement pursuant to certain of the sections set forth above, Akerna will be required to pay Gryphon a termination fee of
$275,000, less any reimbursed expenses.
Exchange Agreement
Concurrently with the signing of the Merger Agreement,
Akerna entered into exchange agreements (the “Exchange Agreements”) with each of the holders (each, a “Holder”)
of its senior secured convertible notes (the “Notes”) issued pursuant to a securities purchase agreement dated October 5,
2021 (the “Purchase Agreement”).
Pursuant to the Exchange Agreements, each Holder
has agreed to exchange a certain aggregate conversion amount of the Notes no greater than the lesser of (i) the aggregate amount then
outstanding under the Notes and (ii) such portion of the maximum note amount set forth in the Exchange Agreement for such Holder that
is convertible into 19.9% of the common stock of Akerna then outstanding into such number of shares of newly designated Series C Preferred
Stock of Akerna, which will have an aggregate voting power and economic value equal to the aggregate number of shares of common stock
then issuable upon conversion of such amount of Note.
The Series C Preferred Stock will have the terms
and conditions set forth in the Certificate of Designation of the Series C Preferred Stock which is attached to the Exchange Agreement.
The Series C Preferred Stock is non-convertible, voting preferred stock. Upon the closing of a change of control transaction, the Series
C Preferred Stock will be automatically redeemed pursuant to its terms for consideration of a share equivalent basis equal to the same
consideration held after the consummation of the change of control transaction by a stockholder that held one share of common stock prior
to the consummation of the change of control transaction. The Series C Preferred Stock can also be redeemed for cash at the option of
Akerna and in limited circumstances redeemed for cash at the option of the holder.
Under the Exchange Agreements, Akerna has agreed that 50% of the gross
proceeds from any subsequent placement will be used to repay the aggregate amounts then outstanding under the Notes, allocated pro rata
to the holders of Notes then outstanding based on the aggregate principal amount of Notes outstanding as of the time of such applicable
subsequent placement (“Subsequent Placement Redemption”).
Further, Akerna has agreed that on or prior to
the closing of the Merger, if any Notes are then outstanding, Akerna will consummate one or more Company Optional Redemptions (as defined
in the Notes) pursuant to Section 9(a) of the Notes (as amended under the Exchange Agreements), using the lesser of (A) the difference
of (I) the sum of (x) all cash then held by Akerna (or any of its subsidiaries) and (y) any cash to be paid, directly or indirectly, to
Akerna (or any of its subsidiaries) in connection with the transactions contemplated by the Merger Agreement and/or the SPA, as applicable,
less (II) $500,000 and (B) an aggregate amount of cash equal to the Company Optional Redemption Price of the aggregate Conversion Amount
(as defined in the Notes) of the Notes then outstanding (with each such Company Optional Redemption allocated pro rata to the holders
of Notes then outstanding based upon the aggregate principal amount of Notes then outstanding) (the “Cash Sweep”).
Upon closing of the Merger, the Exchange Agreements
provide that if any portion of the Notes remain outstanding other than such portion of the applicable Company Optional Redemption Price
of the Notes to be paid in cash pursuant to the Cash Sweep, to exchange the remaining Conversion Amount of the Notes into such aggregate
number of shares of common stock (the “New Note Exchange Shares”) equal to the quotient of (A) the applicable Company Optional
Redemption Price of the remaining Conversion Amount of the Notes then outstanding divided by (B) the lower of (x) the lowest volume weighted
average price of the Common Stock during the five (5) Trading Day period ending, and including, the Trading Day immediately prior to the
closing and (y) the Conversion Price (as defined in the Notes) in effect as of the closing; and (ii) in accordance with the terms of the
Series C Certificate of Designations, the Series C Preferred Stock shall be exchanged into the Change of Control Redemption/Exchange Consideration
(as defined in the Series C Certificate of Designations) (with any shares of common stock included in such applicable Change of Control
Redemption/Exchange Consideration, if any, the “New Preferred Exchange Shares”, and together with the New Note Exchange Shares,
the “Final Closing Exchange Shares”); provided, however, that to the extent that any issuances of Final Closing Exchange Shares
to a Holder at the closing in accordance herewith or pursuant to the Series C Certificate of Designations, as applicable would result
in such Holder and its other Attribution Parties (as defined in the Note) exceeding the Maximum Percentage (as defined in the Note) (as
calculated in accordance with Section 3(d)(i) of the Note) (a “Maximum Percentage Event”), then such Holder shall not be entitled
to receive such aggregate number of Final Closing Exchange Shares in excess of the Maximum Percentage (and shall not have beneficial ownership
of such Final Closing Exchange Shares (or other equivalent security) as a result of the closing (and beneficial ownership) to such extent
of any such excess), such remaining portion of such Final Closing Exchange Shares that would have otherwise been issued to the Holder
at the Final Closing (such remaining portion of Final Closing Exchange Shares, the “Abeyance Shares”), such portion of the
Note and/or shares of Series C Preferred Stock, as applicable, shall alternatively be exchanged for the right to receive such Abeyance
Shares (with a beneficial ownership and issuance limitation substantially in the form of Section 3(d) of the Note, mutatis mutandis),
at such time or times as its right thereto would not result in such Holder and the other Attribution Parties exceeding the Maximum Percentage,
at which time or times, if any, such Holder shall be granted such remaining portion of such Abeyance Shares in accordance herewith and/or
pursuant to the Series C Certificate of Designations, as applicable.
Akerna and each of the Holders waived, in part, the terms and conditions
of Section 9(a) of the Notes such that, in connection with any Subsequent Placement Redemption and/or the Cash Sweep, as applicable, the
Note shall be subject to a Company Optional Redemption (as defined in the Note) (for the avoidance off doubt, at the applicable Company
Optional Redemption Price (as defined in the Note) of the Conversion Amount subject to such Company Optional Redemption) without the requirement
to satisfy any Equity Conditions (as defined in the Note) and a Company Optional Redemption Date (as defined in the Note) as of the date
of consummation of such subsequent placement and/or the Cash Sweep, as applicable. Further, unless and until the Merger Agreement terminates
prior to the consummation of the transactions contemplated thereunder, each Holder waived, in part, the Available Cash Test (as defined
in the Note) in Section 14(r)(i) of the Note and the Daily Available Cash Test (as defined in Section 4(ff) of the Purchase Agreement),
such that the Available Cash Test and the Daily Available Cash Test shall be deemed satisfied for the Holder if at least a certain amount
set forth in the Exchange Agreement is held in the Master Restricted Account of such Holder.
In addition, subject to certain conditions, each
Holder agreed to grant to Akerna certain releases from the security documents securing the Notes to permit Akerna to consummate the Sale
Transaction and the Merger.
The closing of the exchange of a certain portion of the Notes into
the Series C Preferred Stock and the exchange of any remaining Notes and the Series C Preferred Stock into shares of common stock at the
Closing of the Merger is subject to certain customary conditions and, in relation to the exchange into Series C Preferred Stock, subject
to Akerna completing a subsequent placement for gross aggregate proceeds of at least $500,000.
The Exchange Agreements contain customary representations,
warranties and covenants made by Akerna and the Holders party thereto.
Akerna and Lender Support Agreements
In connection and concurrently with the execution
of the SPA and the Merger Agreement, the executive officers and directors of Akerna who hold shares of Akerna’s common stock entered
into support agreements with POSaBIT and Gryphon, respectively, relating to the Sales Transaction and the Merger, respectively (the “Akerna
Support Agreements”). The Akerna Support Agreements provide, among other things, that the stockholders who are parties thereto will
vote all of the shares of Akerna capital stock held by them in favor of the Akerna Stockholder Proposals and against any competing acquisition
proposals. The Akerna Support Agreements also place certain customary restrictions on the transfer of shares of Akerna held by the respective
signatories thereto prior to the closing of the Sale Transaction or Merger, respectively.
Additionally, each of the Holders of the Notes entered into support
agreement with Akerna relating to the Sale Transaction and the Merger, respectively (the “Lender Support Agreements”). The
Lender Support Agreements provide, among other things, that the Holders will vote all of the shares of Akerna capital stock held by them
in favor of the Akerna Stockholder Proposals and against any competing acquisition proposals. The Lender Support Agreements also place
certain customary restrictions on the transfer of shares of Akerna held by the respective signatories thereto prior to the closing of
the Sale Transaction or Merger, respectively.
Note Repricing Letter
On January 27, 2023, pursuant to Section 7(f)
of the Notes, Akerna provided notice (the “Note Repricing Letter”) to the Holders of the Notes seeking the consent of such
Holders under Section 7(f) of the Notes to lower the conversion price of the Notes to $1.20. Akerna may terminate the alternative conversion
price at any time on or following the date that is the later of (i) 14 calendar days from the effective time of the lower conversion price
and (ii) the date on which the Company closes on a subsequent equity offering for a minimum of $500,000 in gross aggregate proceeds, which
subsequent offering will not include the offering of Excluded Securities (as defined in the Notes).
The foregoing descriptions of the SPA, the
Merger Agreement, the Exchange Agreements, the Akerna Support Agreements, the Lender Support Agreements and the Note Repricing Letter
(collectively, the “Transaction Documents”) do not purport to be complete and are qualified in their entirety by reference
to the full text of the Transaction Documents, which are filed as Exhibits 2.1 through 2.6, 10.1 and 10.2 to this Current Report on Form 8-K and
are incorporated herein by reference.
The Transaction Documents have been attached to this Current Report
on Form 8-K to provide investors with information regarding their terms. The Transaction Documents are not intended to provide
any other factual information about any party thereto or any of their respective subsidiaries or affiliates. The representations, warranties
and covenants contained in the Transaction Documents were made only for purposes of the Transaction Documents as of the specific dates
set forth therein, were solely for the benefit of the parties thereto, may be subject to important qualifications and limitations agreed
upon by the parties for the purposes of allocating contractual risk among such parties of establishing these matters as facts, and may
be subject to standards of materiality applicable to such contracting parties that differ from those applicable to investors. Investors
should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state
of facts or condition of the parties to the Transaction Documents or any of their respective subsidiaries or affiliates. Moreover, information
concerning the subject matter of representations and warranties may change after the date of the Transaction Documents, which subsequent
information may or may not be fully reflected in Akerna’s public disclosures.