UNITEDSTATES

SECURITIESAND EXCHANGE COMMISSION

Washington,D.C. 20549

FORMS-1

REGISTRATIONSTATEMENT UNDER THE SECURITIES ACT OF 1933

AKERNACORP.

(ExactName of Registrant as Specified in its Charter)

1550Larimer Street #246 

Denver,Colorado 80202

1-888-932-6537

(Address,including zip code, and telephone number,

includingarea code, of principal executive offices)

CorporationService Company

251Little Falls Drive

Wilmington,Delaware 19808

(302)636-5400

(Address,including zip code, and telephone number,

includingarea code, of agent for service)

Copiesto:

Assoon as practicable after the effective date of this Registration Statement.

(Approximatedate of commencement of proposed sale to the public)

Ifany of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under theSecurities Act of 1933 check the following box: ☐

Ifthis Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check thefollowing box and list the Securities Act registration statement number of the earlier registration statement for the same offering.☐

Ifthis Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list theSecurities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Ifthis Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list theSecurities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicateby check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reportingcompany, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

Ifan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complyingwith any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act. ☐

TheRegistrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until theRegistrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effectivein accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effectiveon such date as the Securities and Exchange Commission acting pursuant to said Section 8(a), may determine.

Theinformation in this prospectus is not complete and may be changed. We may not sell the securities until the Registration Statement filedwith the Securities and Exchange Commission, of which this prospectus is a part, is effective. This prospectus is not an offer to sellthese securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

AKERNACORP.

Upto ______________ Units, Each Unit Consisting of One Share of Common Stock and One Warrant to Purchase One Share of Common Stock

Upto _________________ Pre-funded Units, Each Pre-funded Unit Consisting of One Pre-funded Warrant to Purchase One Share of Common Stockand One Warrant to Purchase One Share of Common Stock

Sharesof Common Stock Underlying the Warrants

Sharesof Common Stock Underlying the Pre-Funded Warrants

We are offering up to ________ units, each unitconsisting of one share of common stock and one warrant to purchase one share of common stock. The warrants included in the units havean exercise price of $ ___ per share, will be immediately exercisable and expire ________ years from the date of issuance. The offeringprice of the units is $ ___ per unit.

Weare also offering to those purchasers, if any, whose purchase of units in this offering would otherwise result in such purchaser, togetherwith its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) ofour outstanding shares of common stock immediately following the consummation of this offering, the opportunity to purchase, if any suchpurchaser so chooses, pre-funded units in lieu of units that would otherwise result in such purchaser’s beneficial ownership exceeding4.99% (or, at the election of the purchaser, 9.99%) of our outstanding shares of common stock. Each pre-funded unit consists of one pre-fundedwarrant to purchase one share of common stock and one warrant to purchase one share of common stock. The purchase price of each pre-fundedunit will be equal to the price per unit being sold to the public in this offering, minus $0.0001, and the exercise price of each pre-fundedwarrant included in the pre-funded units will be $0.0001 per share. The pre-funded warrants included in the pre-funded units will beimmediately exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in full. The warrant includedin the pre-funded unit is in the same form as the warrant included in the unit.

Foreach pre-funded unit we sell, the number of units we are offering will be decreased on a one-for-one basis. The units and the pre-fundedunits will not be issued or certificated. The shares of common stock or pre-funded warrants, as the case may be, and the accompanyingwarrants can only be purchased together in this offering, but the securities contained in the units or pre-funded units will be immediatelyseparable upon issuance and will be issued separately. The shares of common stock issuable from time to time upon exercise of the warrantsand the pre-funded warrants are also being offered by this prospectus. The registration statement of which this prospectus forms a partalso registers the common stock purchase warrants to be issued to the underwriter and the shares of common stock issuable upon exercisethereof.

Our common stock is currently listed on the NasdaqCapital Market under the symbol “KERN.” On June 13, 2022, the last reported price for our common stock as reported on theNasdaq Capital Market was $0.3825 per share. In this offering, the actual public offering price per unit or pre-funded unit, as the casemay be, will be determined between us and the underwriter in the offering, and may be at a discount to the current market price of ourcommon stock. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the final offeringprice. There is no established public trading market for the warrants or the pre-funded warrants, and we do not expect such a market todevelop. In addition, we do not intend to apply for a listing of the warrants or the pre-funded warrants on any national securities exchangeor other nationally recognized trading system.

Weare a “smaller reporting company” and an “emerging growth company” as defined under the federal securities lawsand, as such, we may continue to elect to comply with certain reduced public company reporting requirements in future reports.

Investingin our securities involves a high degree of risk. See “Risk Factors” beginning on page 6 of this prospectus.

Neitherthe Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determinedif this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Theoffering is being underwritten on a firm commitment basis. We have granted the underwriter a 45-day option from the date of this prospectusto purchase up to (i) ________ shares of our common stock and/or warrants to purchase up to ________ shares of common stock, in any combinationthereof; and/or (ii) ________ pre-funded units, consisting of ____________ warrants to purchase up to ________ shares of common stockand ____________ pre-funded warrants to purchase up to __________ shares of common stock, from us solely to cover over-allotments, ifany.

Theunderwriters expect to deliver our shares to purchasers in the offering on or about     , 2022.

A.G.P.

June , 2022

TABLEOF CONTENTS

ABOUTTHIS PROSPECTUS

Theregistration statement of which this prospectus forms a part that we have filed with the Securities and Exchange Commission, or SEC,includes and incorporates by reference exhibits that provide more detail of the matters discussed in this prospectus. You should readthis prospectus and the related exhibits filed with the SEC, together with the additional information described under the heading “WhereYou Can Find More Information.”

Youshould rely only on the information contained in this prospectus and in any free writing prospectus prepared by or on behalf ofus. We have not, and the underwriter has not, authorized anyone to provide you with information different from, or in addition to, thatcontained in this prospectus or any related free writing prospectus. This prospectus is an offer to sell only the securities offeredhereby but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectusis current only as of its date. Our business, financial condition, results of operations and prospects may have changed since that date.

Weare not offering to sell or seeking offers to purchase these securities in any jurisdiction where the offer or sale is not permitted.We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction whereaction for that purpose is required, other than in the United States. Persons outside the United States who come into possession of thisprospectus and any free writing prospectus related to this offering in jurisdictions outside the United States are required to informthemselves about and to observe any restrictions relating to this offering and the distribution of this prospectus and any such freewriting prospectus applicable to that jurisdiction.

Unlessotherwise indicated, any reference to Akerna, or as “we”, “us”, or “our” refers to Akerna Corp. andits consolidated subsidiaries (“Akerna” or the “Company”). 

RISK FACTORS

An investment in our common stock involvesa high degree of risk.  You should carefully consider the risks described below, together with all of the other information includedin this prospectus, before making an investment decision with regard to our securities. The statements contained in this prospectus thatare not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differmaterially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business,financial condition or results of operations could suffer.  In that case, the trading price of our common stock could decline, andyou may lose all or part of your investment.

You should carefully consider the followingrisk factors in evaluating our business and us. The factors listed below represent certain important factors that we believe could causeour business results to differ. These factors are not intended to represent a complete list of the general or specific risks that mayaffect us. It should be recognized that other risks may be significant, presently or in the future, and the risks set forth below mayaffect us to a greater extent than indicated. If any of the following risks occur, our business, financial condition or results of operationscould be materially and adversely affected.

Risks Relating toOur Financial Condition and Operating History

There is substantial doubt about our abilityto continue as a going concern.

Our financial statementfootnotes include disclosure regarding the substantial doubt about our ability to continue as a going concern. Our financial statementsdo not include any adjustments that might result from the outcome of the uncertainty regarding our ability to continue as a going concern.This going concern opinion could materially limit our ability to raise additional funds through the issuance of equity or debt securitiesor otherwise. Further reports on our financial statements may include an explanatory paragraph with respect to our ability to continueas a going concern. Our ability to continue as a going concern is uncertain and dependent upon obtaining the financing necessary to meetour financial commitments and to continue our ongoing operations as currently planned. We do not have sufficient funds to meet plannedexpenditures over the next twelve months, and will need to seek additional debt or equity financing to meet our planned expenditures.We will require additional financing in the second quarter of 2022 to meet our ongoing operational working capital requirements and continueto meet the financial covenants of our convertible notes. We plan to meet those requirements in part through the use of our at-the-marketfacility, but there are no guarantees that the facility will permit us to raise sufficient cash to meet our ongoing requirements. Thesefactors raise substantial doubt regarding our ability to continue as a going concern. If we are unable to raise sufficient capital wemay have to reduce operations which could significantly affect our results of operations. If we fail to meet the financial covenants ofour debt and cannot obtain a waiver from such provisions or otherwise come to an agreement with the holders of our debt, such holdersmay declare a default on the debt which could subject our assets to seizure and sale, negatively impacting our business. See “RisksRelating to our Convertible Debt” below.

We have a historyof losses, expect to continue to incur losses in the near term and may not achieve or sustain profitability in the future.

We have incurred significant losses in each fiscal year since our inceptionin 2010. For the quarter ended March 31, 2022, we had a net loss of approximately $22 million. For the year ended December 31, 2021, wehad a net loss of approximately $31.3 million. For the six months ended December 31, 2020 we had a net loss of approximately $16.2 million.For fiscal year ended June 30, 2020, we had a net loss of approximately $14.4 million. These losses have been due to the substantial investmentswe have made to develop our monitoring and compliance platforms and related software, market these products to government regulatory agenciesand commercial businesses and growing our infrastructure to support the increased business. We expect to continue to invest in the furtherdevelopment of our platforms, software, and related product offerings and to grow both our government regulatory and commercial businessclient base. As a result, we expect our operating expenses to increase in the future due to expected increased sales and marketing expenses,operational costs, product development costs, and general and administrative costs and, therefore, our operating losses will continueor even increase at least through the near term. In addition, because we are now a public company, we will incur significant legal, accounting,and other expenses that MJ Freeway, or MJF, did not incur as a non-public company. Furthermore, to the extent that we are successful inincreasing our client base, we will also incur increased expenses because costs associated with generating and supporting client agreementsare generally incurred upfront, while revenue is generally recognized ratably over the term of the agreement. You should not rely uponour recent revenue growth as indicative of future performance. We may not reach profitability in the near future or at any specific timein the future. If and when our operations do become profitable, we may not sustain profitability.

We have a relativelyshort operating history, which makes it difficult to evaluate our business and future prospects.

We have a relativelyshort operating history, which makes it difficult to evaluate our business and future prospects. Our wholly-owned subsidiary, MJF, hasbeen in existence since 2010, and much of our revenue growth has occurred during the past three years. We have encountered, and will continueto encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries, including thoserelated to:

If we do not manage theserisks successfully, our business and financial performance will be adversely affected.

Our long-term resultsof operations are difficult to predict and depend on the commercial success of our clients, the continued growth of the cannabis industrygenerally, and the regulatory environment within which the cannabis industry operates.

Our offers of products and services globally tohelp government regulatory agencies and commercial businesses monitor regulatory compliance and operate efficiently and successfully incompliance with applicable state laws. Our long-term results will directly depend on the continued growth of the legalized cannabis industry(and public acceptance of cannabis-related products) and the ability of our current and future clients to successfully market their ownproducts and services. If the legalized cannabis marketplace does not continue to grow because the public does not increasingly acceptcannabis-related products or government regulators adopt laws, rules, or regulations that terminate or diminish the ability for commercialbusinesses to develop, market, and sell cannabis-related products, our business and financial performance would be materially adverselyaffected. Additionally, even if the cannabis marketplace continues to grow rapidly, and government regulation allows for the free-marketdevelopment of this industry, products, and services competitive with those offered by us may enjoy better market acceptance.

The legalized cannabis industry may not continueto grow, and the regulatory environment may not remain favorable to participants in the industry. More generally, our products and servicesmay not experience growing market acceptance, which would adversely impact our ability to grow revenue.

Direct and indirect consequences of theCOVID-19 pandemic may have material adverse consequences.

The current COVID-19 pandemic is creating extensivedisruptions to the global economy. Governments, businesses, and the public are taking unprecedented actions to contain the spread of COVID-19and to mitigate its effects, including quarantines, travel bans, shelter-in-place orders, closures of businesses, fiscal stimulus, andlegislation designed to deliver monetary aid and other relief. While the scope, duration, and full effects of COVID-19 are rapidly evolvingand not fully known, the pandemic and related efforts to contain it have disrupted global economic activity, adversely affected the functioningof financial markets, impacted interest rates, increased economic and market uncertainty, and disrupted trade and supply chains. If theseeffects continue for a prolonged period or result in sustained economic stress or recession, we may experience adverse effects on ouroperations. Specifically, if our clients are forced to reduce business hours or close their businesses for an extended period of timeor if their customer base experiences financial hardship, our clients may experience a sharp decline in revenue and be unable to meettheir obligations to us under existing agreements or be unwilling to extend their agreements past current terms, which may adversely impactour financial results. Further, we may experience a decrease in new clients due to a lack of financial resources or a decline in new marketsas businesses and financial markets deal with the impact of COVID-19. As governments are focused on relief efforts and fiscal stimulusmeasures, important legislation to expand or clarify certain existing or new markets for our products may be postponed or abandoned, whichmay adversely impact our results. Further, these conditions may impact our ability to access financial markets to obtain the necessaryfunding to operate our business as currently contemplated, which may adversely affect our liquidity and working capital. To the extentthe COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the otherrisks described in this registration statement, such as those relating to our operations and financial condition. Due to the highly uncertainand dynamic nature of events relating to the COVID-19 pandemic, it is not currently possible to estimate the impact of the pandemic onour business. However, these effects could have a material impact on our operations, and we will continue to monitor the COVID-19 situationclosely. Through December 31, 2021, we have experienced delays in our consulting projects and the corresponding delay in revenue recognitionfor such projects, which we believe could be the result of government shutdowns and other regulatory uncertainty surrounding COVID-19.

Risks Related to the Cannabis Industry

As a company whose clients operate in thecannabis industry, we face many unique and evolving risks.

We currently serve government and private clientswith respect to their tracking, monitoring, and compliance needs as they operate in the growing cannabis industry. Any risks related tothe cannabis industry that may adversely affect our clients and potential clients may, in turn, adversely affect demand for our products.Specific risks faced by companies operating in the cannabis industry include, but are not limited to, the following:

Marijuana remains illegalunder United States federal law

Marijuana is a Schedule-I controlled substanceunder the Controlled Substances Act (“CSA”), and is illegal under federal law. It remains illegal under United States federallaw to grow, cultivate, sell or possess marijuana for any purpose or to assist or conspire with those who do so. Additionally, 21 U.S.C.856 a.1. states that it shall be unlawful to “knowingly open, lease, rent, use, or maintain any place, whether permanently or temporarily,for the purpose of manufacturing, distributing, or using any controlled substance.” Even in those states in which the use of marijuanahas been authorized, its use remains a violation of federal law. Since federal law criminalizing the use of marijuana is not preemptedby state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in our clients’ inabilityto proceed with their operations, which would adversely affect demands for our products. 

Uncertainty of federalenforcement

On January 4, 2018, former Attorney General Sessionsrescinded the previously issued memoranda (known as the Cole Memorandum) from the U.S. Department of Justice (“DOJ”) thathad de-prioritized the enforcement of federal law against marijuana users and businesses that comply with state marijuana laws, addinguncertainty to the question of how the federal government will choose to enforce federal laws regarding marijuana. Former Attorney GeneralSessions issued a memorandum to all United States Attorneys in which the DOJ affirmatively rescinded the previous guidance as to marijuanaenforcement, calling such guidance “unnecessary.” This one-page memorandum was vague in nature, stating that federalprosecutors should use established principles in setting their law enforcement priorities. Under previous administrations, the DOJ indicatedthat those users and suppliers of medical marijuana who complied with state laws, which required compliance with certain criteria, wouldnot be prosecuted. On November 7, 2018, Jeff Sessions resigned from his position as Attorney General. The current Attorney General, MerrickGarland, has not indicated any change in enforcement priority for state-compliant marijuana businesses, however, substantial uncertaintyregarding federal enforcement remains. Regardless, the federal government has always reserved the right to enforce federal law regardingthe sale and disbursement of medical or recreational marijuana, even if state law sanctioned such sale and disbursement. Although therescission of the Cole Memorandum does not necessarily indicate that marijuana industry prosecutions are now affirmatively a priorityfor the DOJ, there can be no assurance that the federal government will not enforce such laws in the future. As a result, it is now unclearif the DOJ will seek to enforce the CSA against those users and suppliers who comply with state marijuana laws.

In 2014, Congress passed a spending bill, (the“2015 Appropriations Bill”), containing a provision (the “Appropriations Rider”), blocking federal funds and resourcesallocated under the 2015 Appropriations Bill from being used to “prevent such States from implementing their own State medical marijuanalaw.” The Appropriations Rider provided a budgetary constraint on the federal government from interfering with the ability of statesto administer their medical marijuana laws, although it did not codify federal protections for medical marijuana patients and producers.Moreover, despite the Appropriations Rider, the DOJ maintains that it can still prosecute violations of the federal marijuana ban andcontinue cases already in the courts. However, the Ninth Circuit Court of Appeals and other courts have interpreted the language to meanthat the DOL cannot prosecute medical marijuana operators complying strictly with state medical marijuana laws. Additionally, the AppropriationsRider must be re-enacted every year. The Appropriations Rider was renewed on December 20, 2019 through the signing of the fiscal year2020 omnibus spending bill, effective through September 30, 2020, continued re-authorization of the Appropriations Rider cannot be guaranteed.Subsequently, the Appropriations Rider was extended through a series of stopgap spending bills on October 1, December 11, December 18,December 20 and December 22, 2020. On December 27, 2020 the Appropriations Rider was included in the fiscal year 2021 omnibus spendingbill and will remain in effect through September 30, 2022. If the Appropriation Rider is not extended in the future, the risk of federalenforcement and override of state medical marijuana laws would increase.

Despite the rescission of the Cole Memorandum,the Department of the Treasury, Financial Crimes Enforcement Network, has not rescinded the “FinCEN Memo” dated February 14,2014, which de-prioritizes enforcement of the Bank Secrecy Act against financial institutions and marijuana-related businesses which utilizethem. This memo appears to be a standalone document and is presumptively still in effect. At any time, however, the Department of theTreasury, Financial Crimes Enforcement Network, could elect to rescind the FinCEN Memo. This would make it more difficult for us and ourclients and potential clients to access the U.S. banking systems and conduct financial transactions, which would adversely affect ouroperations.

We could become subjectto racketeering laws

While we do not grow, handle, process or sellcannabis or cannabis-derived products, our receipt of funds from clients that do conduct such operations in violation of federal law exposesus to risks related to federal racketeering laws. The Racketeer Influenced Corrupt Organizations Act (“RICO”) is a federalstatute providing criminal penalties in addition to a civil cause of action for acts performed as part of an ongoing criminal organization.Under RICO, it is unlawful for any person who has received income derived from a pattern of racketeering activity (which includes mostfelonious violations of the CSA), to use or invest any of that income in the acquisition of any interest, or the establishment or operationof, any enterprise which is engaged in interstate commerce. RICO also authorizes private parties whose properties or businesses are harmedby such patterns of racketeering activity to initiate a civil action against the individuals involved. Although RICO suits against thecannabis industry are rare, a few cannabis businesses have been subject to a civil RICO action. Any violation of RICO could result insignificant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conducted by eitherthe federal government or private citizens or criminal charges, including but not limited to, seizure of assets, disgorgement of profits,cessation of our business activities or divestiture. 

Banking regulations couldlimit access to banking services and expose us to risk

Our receipt of payments from clients engaged instate-legal cannabis operations could also subject us to the consequences of a variety of federal laws and regulations that involve moneylaundering, financial record keeping and proceeds of crime, including the Bank Secrecy Act, as amended by Title III of the Uniting andStrengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act) and anyrelated or similar rules, regulations or guidelines, issued, administered or enforced by the federal government. Since we fund from activitiesthat are illegal under the CSA, banks and other financial institutions providing services to us risk violation of federal anti-money launderingstatutes (18 U.S.C. §§ 1956 and 1957), the unlicensed money-remitter statute (18 U.S.C. § 1960) and the Bank Secrecy Act,among other applicable federal statutes. Banks often refuse to provide banking services to businesses involved in the cannabis industrydue to the present state of federal laws and regulations governing financial institutions. The inability to open bank accounts may makeit difficult for us or our clients to operate and our client’s reliance on cash can result in a heightened risk of theft, whichcould harm their businesses and, in turn, harm our business. Additionally, some courts have denied marijuana-related businesses bankruptcyprotection, thus, making it very difficult for lenders to recoup their investments, which may limit the willingness of banks to lend toour clients and to us. The lack of banking and financial services presents unique and significant challenges to businesses in the cannabisindustry and we may experience similar difficulties in obtaining and maintaining regular banking and financial services because of theactivities of our clients.

Dividends and distributionscould be prevented if our receipt of payments from clients is deemed to be proceeds of crime

In the event that any of our operations, or anyproceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such operations were found to bein violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more federalstatutes or any other applicable legislation. This could restrict or otherwise jeopardize our ability to declare or pay dividends or effectother distributions. Furthermore, while there are no current intentions to declare or pay dividends in the foreseeable future, in theevent that a determination was made that our proceeds from operations (or any future operations) could reasonably be shown to constituteproceeds of crime, we may decide or be required to suspend declaring or paying dividends without advance notice and for an indefiniteperiod of time.

Further legislative developmentbeneficial to our operations is not guaranteed

Among other things, our business involves theprovision of an online platform that provides monitoring and tracking of those involved in the cultivation, distribution, manufacture,storage, transportation, and/or sale of medical and adult-use cannabis products in compliance with applicable state law. The success ofour business depends on the continued development of the cannabis industry and the activity of commercial business and government regulatoryagencies within the industry. The continued development of the cannabis industry is dependent upon continued legislative and regulatoryauthorization of cannabis at the state level and a continued laissez-faire approach by federal enforcement agencies. Any number of factorscould slow or halt progress in this area. Further regulatory progress beneficial to the industry cannot be assured. While there may beample public support for legislative action, numerous factors impact the legislative and regulatory process, including election results,scientific findings or general public events. Any one of these factors could slow or halt progressive legislation relating to cannabisand the current tolerance for the use of cannabis by consumers, which could adversely affect the demand for our product and operations.

The cannabis industry couldface strong opposition from other industries

We believe that established businesses in otherindustries may have a strong economic interest in opposing the development of the cannabis industry. Cannabis may be seen by companiesin other industries as an attractive alternative to their products, including recreational marijuana as an alternative to alcohol, andmedical marijuana as an alternative to various commercial pharmaceuticals. Many industries that could view the emerging cannabis industryas an economic threat are well established, with vast economic and federal and state lobbying resources. It is possible that companieswithin these industries could use their resources to attempt to slow or reverse legislation legalizing cannabis. Any inroads these companiesmake in halting or impeding legislative initiatives that would be beneficial to the cannabis industry could have a detrimental impacton our clients and, in turn on our operations.

The legality of marijuanacould be reversed in one or more states

The voters or legislatures of states in whichmarijuana has already been legalized could potentially repeal applicable laws that permit the operation of both medical and retail marijuanabusinesses. These actions might force businesses, including those that are our clients, to cease operations in one or more states entirely.

Changing legislation andevolving interpretations of the law

Laws and regulations affecting the medical andadult-use marijuana industry are constantly changing, which could detrimentally affect our clients and, in turn, our operations. Local,state, and federal marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require ourclients and thus us to incur substantial costs associated with modification of operations to help ensure such clients’ compliance.In addition, violations of these laws, or allegations of such violations, could disrupt our clients’ business and result in a materialadverse effect on our operations. In addition, it is possible that regulations may be enacted in the future that will limit the amountof cannabis growth or related products that our commercial clients are authorized to produce. We cannot predict the nature of any futurelaws, regulations, interpretations, or applications, nor can we determine what effect additional governmental regulations or administrativepolicies and procedures, when and if promulgated, could have on our operations.

Dependence on client licensing

Our business is dependent on our clients obtainingvarious licenses from various municipalities and state licensing agencies. There can be no assurance that any or all licenses necessaryfor our clients to operate their businesses will be obtained, retained or renewed. If a licensing body were to determine that a clientof ours had violated applicable rules and regulations, there is a risk the license granted to that client could be revoked, which couldadversely affect our operations. There can be no assurance that our existing clients will be able to retain their licenses going forward,or that new licenses will be granted to existing and new market entrants.

Insurance risks

In the U.S, many marijuana-related businessesare subject to a lack of adequate insurance coverage. In addition, many insurance companies may deny claims for any loss relating to marijuanaor marijuana-related operations based on their illegality under federal law, noting that a contract for an illegal transaction is unenforceable.

Bankruptcy risks

Because cannabis is illegal under U.S. federallaw, and bankruptcy is a strictly federal proceeding, many courts have denied cannabis businesses federal bankruptcy protections, thusmaking it very difficult for lenders to recoup their investments in the cannabis industry in the event of a bankruptcy. If we were toseek protection from creditors pursuant to applicable bankruptcy or insolvency laws, even though we are not directly engaged in manufacturing,distributing, selling or otherwise handling cannabis under state cannabis laws, there is no guarantee that U.S. federal bankruptcy protectionswould be available to our United States operations, which would have a material adverse effect on us, our lenders and other stakeholders.While state-level receivership options do exist in some states as an alternative to bankruptcy, the efficacy of these alternatives cannotbe guaranteed.

The cannabis industry is an evolving industryand we must anticipate and respond to changes.

The cannabis industry is not yet well-developed,and many aspects of this industry’s development and evolution cannot be accurately predicted. While we have attempted to identifyany risks specific to the cannabis industry, you should carefully consider that there are other risks that cannot be foreseen or are notdescribed in this prospectus, which could materially and adversely affect our business and financial performance. We expect that the cannabismarket and our business will evolve in ways that are difficult to predict. For example, it is anticipated that over time, we will reacha point in most markets where we have achieved a market penetration level in which new client acquisitions are less productive, and thecontinued growth of our revenue will require more focus on increasing the rate at which existing clients purchase products and servicesacross our platforms. Our long-term success will depend on our ability to successfully adjust our strategy to meet the changing marketdynamics. If we are unable to successfully adapt to changes in the cannabis industry, our operations could be adversely affected.

Risks related to Our Business

A significant portionof our business is and is expected to be, from government contracts, which present certain unique risks.

Contracts for Leaf DataSystems with government agencies in Pennsylvania, Washington, and Utah represented 16%, 25% and 39% of our revenue for the year endedDecember 31, 2021, the six months ended December 31, 2020 and fiscal year ended June 30, 2020, respectively. In order to obtain a governmentcontract for Leaf Data Systems, we are required to follow a competitive bidding process in each state where we seek a contract. Governmentcontracts have very specific compliance requirements that often require contractors to invest material time and money to prepare a bidto ensure that our technology, processes, and staff meet these specific requirements. After expenditures of such time and money, thereis no assurance that the bid will result in an award of a contract. Further, even if a contract is awarded, there are strict proceduresthat government agencies follow when it comes to reimbursement of the costs incurred in the course of fulfilling contracts. Accordingly,it is possible that some or all costs might not be reimbursed under a government contract as contemplated by us.

Government agencies alsotypically audit and investigate government contractors. These agencies review a contractor’s performance under its contracts, itscost structure, its business systems, and compliance with applicable laws, regulations, and standards. If an audit or investigation uncoversimproper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including reductions ofthe value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, penalties, fines, and suspension,or prohibition from doing business with the government. In addition, we could suffer serious reputational harm if allegations of improprietywere made against us. Any such imposition of penalties, or the loss of such government contracts, could materially adversely affect ourbusiness, financial condition, results of operations, and growth prospects.

There also is typicallya longer window of liability under government contracts than private contracts, and the government can seek claims after the contracthas ended and payments under the contract have been made. The terms of government contracts may also require the sharing of proprietaryinformation, processes, software, and product development efforts with the government. Additionally, government employees are requiredto follow certain protocols to ensure there is no appearance of impropriety in the bidding process. As a result, bidders on governmentcontracts must ensure that there is no appearance of favoritism, gift-giving, bribery, or the exertion of other influences in the biddingprocess. Any finding of the same can result in fines to the bidder and cancellation of contracts. The applicable state government generallyhas the ability to terminate our contract, in whole or in part, without prior notice, for convenience or for default based on performance.If a government contract were to be terminated for convenience, we generally would be protected by provisions covering reimbursement forcosts incurred on the contract and profit on those costs, but not the anticipated profit that would have been earned had the contractbeen completed. The state government also has the ability to stop work under a contract for a limited period of time for its convenience.

We cannot assure youthat we will be successful in navigating the government contract bidding process or that we will be able to maintain our existing governmentcontracts or obtain additional government contracts in the future.

Our operations may be adversely affectedby disruptions to our information technology, or IT, systems, including disruptions from cybersecurity breaches of our IT infrastructure.

We rely on information technology networks andsystems, including those of third-party service providers, to process, transmit, and store electronic information. In particular, we dependon our information technology infrastructure for a variety of functions, including financial reporting, data management, project development,and email communications. Any of these systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures,terrorist attacks, sabotage, and similar events. Global cybersecurity threats and incidents can range from uncoordinated individual attemptsto gain unauthorized access to our information technology systems to sophisticated and targeted measures known as advanced persistentthreats. The ever-increasing use and evolution of technology, including cloud-based computing, create opportunities for the unintentionaldissemination or intentional destruction of confidential information stored in our systems or in non-encrypted portable media or storagedevices. We could also experience a business interruption, information theft of confidential information, or reputational damage fromindustrial espionage attacks, malware, or other cyber-attacks, which may compromise our system infrastructure or lead to data leakage,either internally or at our third-party providers. Despite the implementation of network security measures and disaster recovery plans,our systems and those of third parties on which we rely may also be vulnerable to computer viruses, break-ins, and similar disruptions.If we or our vendors are unable (or are perceived as unable) to prevent such outages and breaches, our operations may be disrupted, andour business reputation could be adversely affected.

We expect that risks and exposures related to cybersecurity attackswill remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats.

Privacy regulation is an evolving area andcompliance with applicable privacy regulations may increase our operating costs or adversely impact our ability to service our clientsand market our products and services.

Because we store, processes, and use data, someof which contains personal information, we are subject to complex and evolving federal, state, and foreign laws and regulations (includingCanada’s Cannabis Act and related regulations and the European Union’s general data protection regulation, or GDPR) regardingprivacy, data protection, and other matters. While we believe we are currently in compliance with applicable laws and regulations, manyof these laws and regulations are subject to change and uncertain interpretation, and could result in investigations, claims, changesto our business practices, increased cost of operations, and declines in user growth, retention, or engagement, any of which could seriouslyharm our business.

We rely on third parties for certain servicesmade available to users of our platforms, which could limit our control over the quality of the user experience and our cost of providingservices.

Some of the applications and services availablethrough the Leaf Data System and MJ Platform are provided through relationships with third-party service providers. We do not typicallyhave any direct control over these third-party service providers. These third-party service providers could experience service outages,data loss, privacy breaches, including cyber-attacks, and other events relating to the applications and services they provide that coulddiminish the utility of these services and which could harm users thereof. The MJ Platform itself does not depend on any third-party softwareor applications and is based entirely on open source technologies and custom programming. The MJ Platform, however, is hosted by AmazonWeb Services, a third-party service provider. There are readily available alternative hosting services available should we desire or needto move to a different web host. Certain ancillary services provided by us also uses the services of third-party providers, for which,we believe, there are readily available alternatives on comparable economic terms. Offering integrated platforms, such as the Leaf DataSystem and MJ Platform which rely, in part, on the services of other providers lessens the control that we have over the total clientexperience. Should the third-party service providers we rely upon not deliver at standards we expect and desires, acceptance of our platformscould suffer, which would have an adverse effect on our business and financial performance. Further, we cannot be assured of enteringinto agreements with such third-party service providers on economically favorable terms.

Acquisitions and integration issues mayexpose us to risks.

Our business strategy includes making targetedacquisitions. Any acquisition that we make may be of significant size, may change the scale of our business and operations, and may exposeus to new geographic, political, operating, financial, and geological risks. Our success in our acquisition activities depends on ourability to identify suitable acquisition candidates, negotiate acceptable terms for any such acquisition, and integrate the acquired operationssuccessfully with our own. Any acquisitions would be accompanied by risks. For example, there may be significant changes in our marketvalue after we have committed to complete the transaction and have established the purchase price or exchange ratio; a potential targetedacquisition’s business and prospects may prove to be below expectations; we may have difficulty integrating and assimilating theoperations and personnel of any acquired companies, realizing anticipated synergies and maximizing the financial and strategic positionof the combined enterprise and maintaining uniform standards, policies, and controls across the organization; the integration of the acquiredbusiness or assets may disrupt our ongoing business and our relationships with employees, clients, suppliers, and contractors; and theacquired business or assets may have unknown liabilities that may be significant. If we choose to use equity securities as considerationfor such an acquisition, existing shareholders may suffer dilution. Alternatively, we may choose to finance any such acquisition withour existing resources. There can be no assurance that we would be successful in overcoming these risks or any other problems encounteredin connection with such acquisitions. To grow and be successful, we need to attract and retain qualified personnel.

In any future acquisitions, we may not be ableto successfully integrate acquired personnel, operations, and technologies, or effectively manage the combined business following theacquisition. We also may not achieve the anticipated benefits from future acquisitions due to a number of factors, including: (a) an inabilityto integrate or benefit from acquisitions in a profitable manner; (b) unanticipated costs or liabilities associated with the acquisition;(c) the incurrence of acquisition-related costs; (d) the diversion of management’s attention from other business concerns; (e) theloss of our or the acquired business’ key employees; or (f) the issuance of dilutive equity securities, the incurrence of debt,or the use of cash to fund such acquisitions.

To grow and be successful, we need to attractand retain qualified personnel.

Our growth and success will depend to a significantextent on our ability to identify, attract, hire, train, and retain qualified professional, creative, technical, and managerial personnel.Competition for experienced and qualified talent in the cannabis industry can be intense. We may not be successful in identifying, attracting,hiring, training, and retaining such personnel in the future. If we are unable to hire, assimilate, and retain qualified personnel inthe future, such inability could adversely affect our operations.

We are smaller and less diversified thanmany of our potential competitors.

While we believe we are a leading provider inthe software solutions segment of the cannabis industry, there are general software design and integrated business platform companiesseeking to provide online and software-based business solutions and operations integration to clients in numerous industries. The continuedgrowth of the cannabis industry will likely attract some of these existing companies and incentivize them to produce solutions that arecompetitive with those offered by us. Many of these potential competitors are a part of large diversified corporate groups with a varietyof other operations and expansive resources. We may not be able to successfully compete with larger enterprises devoting significant resourcesto compete in our target market space, which may negatively affect operations.

Our business and stock price may sufferas a result of our limited public company operating experience and if securities or industry analysts do not publish or cease publishingresearch or reports about us, our business, or our market, or if they change their recommendations regarding our common stock in an adversemanner, the price and trading volume of our common stock could decline.

If we are unable to execute our business strategy,either as a result of our inability to manage effectively our business in a public company environment or for any other reason, our business,prospects, financial condition, and operating results may be harmed.

The trading market for our common stock will beinfluenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors.We currently have limited coverage by securities and industry analysts. If no additional securities or industry analysts commence coverageof us, our stock price and trading volume would likely be negatively impacted. If any of the analysts who cover, or who may cover us inthe future, change their recommendation regarding our stock in an adverse manner, or provide more favorable relative recommendations aboutour competitors, the price of our common stock would likely decline. If any analyst who may cover us were to cease coverage of us or failto regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volumeto decline.

Risks related to Intellectual Property

Protecting and defending against intellectualproperty claims may have a material adverse effect on our business.

Our ability to compete depends, in part,upon successful protection of our intellectual property relating to our Leaf Data Systems and MJ Platform, and intellectual propertyacquired in business combinations, such as Solo, Trellis, Ample, Viridian and 365 Cannabis. We seek to protect our proprietary andintellectual property rights through patent applications, available copyright and trademark laws, nondisclosure agreements, andlicensing and distribution arrangements with reputable companies in our target markets. While patent protection for inventionsrelated to cannabis and cannabis-related products is available, there are substantial difficulties faced in the patent process bycannabis-related businesses. Further, patent applications may be rejected for numerous other reasons beyond those related to thecannabis industry, including that the subject matter of the application is found to be non-patentable. Our previous patentapplications were denied and while we are continuing to pursue such applications and believe they are with merit, there can be noassurance that patents will be issued on these applications. The failure to be awarded patents on our technology could weaken ourability to enforce our intellectual property rights. Any such enforcement, whether we have been granted patent protection or not,would be costly, and there can be no assurance that we will have the resources to undertake all necessary action to protect ourintellectual property rights or that we will be successful. Any infringement of our material intellectual property rights couldrequire us to redirect resources to actions necessary to protect the same and could distract management from our underlying businessoperations. The infringement of our material intellectual property rights and resulting actions could adversely affect ouroperations.

Our success depends in part upon our abilityto protect our core technology and intellectual property.

Our success depends in part upon our ability toprotect our core technology and intellectual property. To establish and protect our proprietary rights, we rely on a combination of patentapplications, trade secrets, including know-how, license agreements, confidentiality procedures, non-disclosure agreements with thirdparties, employee disclosure and invention assignment agreements, and other contractual rights. 

We generally control access to and use of ourproprietary technology and other confidential information through the use of internal and external controls, including contractual protectionswith employees, contractors, clients, and partners, and our software is protected by the U.S. and international copyright laws.

Despite efforts to protect our trade secrets andproprietary rights through intellectual property rights, licenses, and confidentiality agreements, unauthorized parties may still copyor otherwise obtain and use our software and technology, as was the case when our source code was compromised in June 2017. We have takensignificant actions to improve security but will be required to regularly modify our systems to combat new hacking approaches as theydevelop. In addition, as our international operations expand, effective intellectual property protection may not be available or may belimited in foreign countries.

Others may assert intellectual propertyinfringement claims against us.

Companies in the software and technology industriesown large numbers of patents, copyrights, trademarks, and trade secrets, and frequently enter into litigation based on allegations ofinfringement, misappropriation, or other violations of intellectual property or other rights. In addition, various “non-practicingentities” that own patents and other intellectual property rights often attempt to aggressively assert their rights in order toextract value from technology companies. It is possible that others may claim from time to time that our products misappropriate or infringethe intellectual property rights of third parties. Irrespective of the validity or the successful assertion of any such claims, we couldincur significant costs and diversion of resources in defending against these claims, which could adversely affect our operations. Wemay receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable finaloutcomes will be obtained in all cases. We may decide to settle such lawsuits and disputes on terms that are unfavorable to us. As a result,we may also be required to develop alternative non-infringing technology or practices or discontinue the practices. The development ofalternative non-infringing technology or practices could require significant effort and expense or may not be feasible.  

Risks related to Our Charter Documents

Anti-takeover provisions contained in ouramended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impaira takeover attempt and limit the price investors might be willing to pay in the future for our common stock and could entrench management.

Our Amended and Restated Certificate of Incorporationcontains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. Weare also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisionsmay make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium overprevailing market prices for our securities.

These provisions:

In addition, we are subject to the provisionsof Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations with stockholders owning 15%or more of our outstanding voting stock. These and other provisions in our Amended and Restated Certificate of Incorporation, our bylaws,and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our Board of Directors or initiateactions that are opposed by our then-current Board of Directors, including to delay or impede a merger, tender offer or proxy contestinvolving us. Any delay or prevention of a change in control transaction or changes in our Board of Directors could cause the market priceof our common stock to decline.

Our corporate opportunity provisions inour Amended and Restated Certificate of Incorporation could enable management to benefit from corporate opportunities that might otherwisebe available to us.

Our Amended and Restated Certificate of Incorporationprovides that the doctrine of corporate opportunity, or any other analogous doctrine, shall not apply with respect to us, or any of ourdirectors or officers in circumstances where the application of such doctrine would conflict with any fiduciary duties or contractualobligations they may otherwise have.

Our management may become aware, from time totime, of certain business opportunities (such as acquisition opportunities) and may direct such opportunities to other businesses in whichthey have invested, in which case we may not become aware of or otherwise have the ability to pursue such opportunity. Further, such businessesmay choose to compete with us for these opportunities, possibly causing these opportunities to not be available to us or causing themto be more expensive for us to pursue. These potential conflicts of interest could adversely impact our business or prospects if attractivebusiness opportunities are procured by such parties for their own benefit rather than for ours.

Our amended and restated certificate ofincorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusiveforum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forumfor disputes with us or our directors, officers, employees or stockholders.

Our amended and restated certificate of incorporationrequires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers, andemployees for breach of fiduciary duty, actions under the Delaware general corporation law or under our amended and restated certificateof incorporation, or actions asserting a claim governed by the internal affairs doctrine may be brought only in the Court of Chanceryin the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to serviceof process on such stockholder’s counsel. This choice of forum provision does not preclude or contract the scope of exclusive federalor concurrent jurisdiction for any actions brought under the Securities Act or the Exchange Act of 1934, as amended, or the Exchange Act.Accordingly, our exclusive forum provision will not relieve us of our duties to comply with the federal securities laws and the rulesand regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.

Any person or entity purchasing or otherwise acquiringany interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended andrestated certificate of incorporation. This choice of forum provision does not exclude stockholders from suing in federal court for claimsunder the federal securities laws but may limit a stockholder’s ability to bring such claims in a judicial forum that it finds favorablefor disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect tosuch claims.

Alternatively, if a court were to find the choiceof forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action,we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating resultsand financial condition.

Risks Relating to our Convertible Debt

The issuance of shares of our common stockpursuant to our Senior Convertible Notes may result in significant dilution to our stockholders.

The conversion of our outstanding Senior Convertible Notes, issuedon October 5, 2021, could result in the issuance of a significant number of shares of our common stock. The original $20 million principalamount of Senior Convertible Notes is convertible at a price of $4.05 per share, which would result in the issuance of 4,938,272 sharesof our common stock upon the conversion of the Senior Convertible Notes in full. At the option of Akerna, assuming all equity conditionsunder the Senior Convertible Notes are met, the installment payments on the Senior Convertible Notes can be converted into shares of commonstock of Akerna at a price per share equal to the lower of (i) the conversion price then in effect, or (ii) the greater of (x) the floorprice of $0.54 and (y) 90% of the lower of (A) the volume-weighted average price of the common stock as of the trading day immediatelypreceding the applicable date of determination and (B) the quotient of (I) the sum of the volume-weighted average price of the commonstock for each of the two (2) trading days with the lowest volume-weighted average price of the common stock during the ten consecutivetrading day period ending on and including the trading day immediately prior to the applicable date of determination, divided by (II)two. If the equity conditions are not satisfied and the holder does not waive the equity conditions, the Senior Convertible Note’sinstallment payments must be made in cash.

Due to the variable nature of the adjustments of installment conversionprices and the formula that sets certain conversion prices of these securities based on a discount to the then-current market price, wecould issue up to 28,685,185 shares of common stock as of June 13, 2022, upon conversion of the Senior Convertible Notes at the floorprice, which may result in significant dilution to our stockholders and could negatively impact the trading price of our common stock.This financing will reset the conversion price of the Senior Convertible Notes, see the risk factors under “Risks Related to thisOffering” below.

Our obligations to the holders of our SeniorConvertible Notes are secured by a security interest in substantially all of our assets, if we default on those obligations, the SeniorConvertible Note holders could foreclose on our assets.

Our obligations under the Senior Convertible Notes,issued on October 5, 2021, and the related transaction documents are secured by a security interest in substantially all of our assets.As a result, if we default on our obligations under such Senior Convertible Notes, the collateral agent on behalf of the holders of theSenior Convertible Notes could foreclose on the security interests and liquidate some or all of our assets, which would harm our business,financial condition and results of operations and could require us to reduce or cease operations and investors may lose all or part ofyour investment.

Events of default under the Senior ConvertibleNotes include: (i) the failure of the registration statement to which this prospectus relates (under the registration rights agreementbetween the Company and the holders) to be filed with the SEC or the failure of the applicable registration statement to be declared effectiveby the SEC by deadlines set forth in the registration rights agreement; (ii) (x) the effectiveness of the applicable registration statementlapses for any reason or such registration statement is unavailable to any holder of registrable securities and Rule 144 (subject to certainconditions) is not unavailable to any holder of the conversion shares; (iii) suspension of trading of the Company’s common stockon a national securities exchange for five days; (iv) uncured conversion failure; (v) failure by the Company to maintain required shareallocations for the conversion of the Senior Convertible Notes; (vi) failure by the Company to pay principal when due; (vii) failure ofthe Company to remove restricted legends from shares issued to a holder upon conversion of the Senior Convertible Notes; (viii) the occurrenceof any default under, redemption of or acceleration prior to maturity of at least an aggregate of $50,000 of indebtedness of the Company;(ix) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be institutedby or against the Company or any subsidiary and not dismissed within 45 days of initiation; (x) the commencement by the Company or anysubsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization orother similar law; (xi) the entry by a court of a decree, order, judgment or other similar document in respect of the Company or any subsidiaryof a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganizationor other similar law; (xii) final judgment for the payment of money aggregating in excess of $50,000 are rendered against the Companyor any subsidiary of the Company and not bonded or discharged within 30 days; (xiii) failure of the Company or any subsidiary to pay whendue any debts in excess of $50,000 due to any third party; (xiv) breaches by the Company or any subsidiary of any representations or warrantiesin the securities purchase agreement for the Senior Convertible Notes or any document contemplated thereby; (xv) a false or inaccuratecertification by the Company that either (A) the “Equity Conditions” (as defined in the Senior Convertible Notes) are satisfied,(B) there has been no “Equity Conditions Failure,” (as defined in the Senior Convertible Notes) or (C) as to whether any Eventof Default has occurred; (xvi) failure of the Company or any subsidiary to comply with certain of the covenants in the Senior ConvertibleNotes; (xvii) the occurrence of (A) at any time after the six month anniversary of the issuance date, any current public information failurethat remains outstanding for a period of twenty (20) trading days or (B) any restatement of any financial statements of the Company filedwith the SEC; (xviii) any material adverse effect occurring; (xix) any provision of any transaction document shall at any time for anyreason cease to be valid and binding or enforceable; (xx) any security document shall for any reason (other than pursuant to the expressterms thereof or due to any failure or omission of the collateral agent) fail or cease to create a separate valid and perfected and, exceptto the extent permitted by the terms hereof or thereof, first priority lien; (xxi) any material damage to, or loss, theft or destructionof, any collateral, that is material to the business of the Company or any subsidiary and is not reimbursed by insurance; or (xxii) anyEvent of Default occurs under any other Senior Convertible Notes.

The holders of the Senior Convertible Noteshave certain additional rights upon an event of default under such Senior Convertible Notes, which could harm our business, financialcondition, and results of operations and could require us to reduce or cease our operations.

Under the Senior Convertible Notes, the holdershave certain rights upon an event of default. Such rights include (i) the remaining principal amount of the Senior Convertible Notes bearinginterest at a rate of 15% per annum, (ii) during the event of default the holders of the Senior Convertible Notes will be entitled toconvert all or any portion of the Senior Convertible Notes at an alternate conversion price equal to the lower of (i) the conversion pricethen in effect, and (ii) 80% of the lower of (x) the volume weighted average price of the common stock as of the trading day immediatelypreceding the applicable date of determination and (y) the quotient of (A) the sum of the volume weighted average price of the commonstock for each of the two (2) trading days with the lowest volume weighted average price of the common stock during the ten consecutivetrading day period ending and including the trading day immediately prior to the applicable date of determination, divided by (B) two,but not less than the floor price, and (iii) the holder having the right to demand redemption of all or a portion of the Senior ConvertibleNotes, as described below. At any time after certain notice requirements for an event of default are triggered, a holder of Senior ConvertibleNotes may require us to redeem all or any portion of the convertible note by delivering written notice. The redemption price will equalthe greater of (i) 115% of the outstanding principal of the convertible note to be redeemed and accrued and unpaid interest and unpaidlate charges thereon, and (ii) an amount equal to the market value of the shares of the common stock underlying the Senior ConvertibleNotes, as determined in accordance with the Senior Convertible Notes. Upon the occurrence of certain events of default relating to thebankruptcy of Akerna, whether occurring prior to or following the maturity date, Akerna will be required to immediately redeem the SeniorConvertible Notes, in cash, for an amount equal to 115% of the outstanding principal of the Senior Convertible Notes, and accrued andunpaid interest and unpaid late charges thereon, without the requirement for any notice or demand or other action by any holder or anyother person or entity. We may not have sufficient funds to settle the redemption price and, as described above, this could trigger rightsunder the security interest granted to the holders and result in the foreclosure of their security interests and liquidation of some orall of our assets.

The exercise of any of these rights upon an eventof default could substantially harm our financial condition, substantially dilute our other shareholders and force us to reduce or ceaseoperations and investors may lose all or part of their investment.

Risks Relating to Our Common Stock

We may seek to raise additional funds, financeacquisitions, or develop strategic relationships by issuing securities that would dilute investors’ ownership. Depending on the termsavailable to us, if these activities result in significant dilution, it may negatively impact the trading price of our shares of commonstock.

Any additional financing that we secure, may requirethe granting of rights, preferences, or privileges senior to, or pari passu with, those of our common stock. Any issuances by us of equitysecurities may be at or below the prevailing market price of our common stock and in any event, may have a dilutive impact on stockholders’ownership interest, which could cause the market price of our common stock to decline. We may also raise additional funds through theincurrence of debt, subject to the limitations imposed by our current outstanding Senior Convertible Notes, or the issuance or sale ofother securities or instruments senior to our shares of common stock. We cannot be certain how the repayment of our Senior ConvertibleNotes will be funded and we may issue further equity or debt in order to raise funds to repay the promissory notes, including fundingthat may be highly dilutive. The holders of any securities or instruments we may issue may have rights superior to the rights of our commonstockholders. If we experience dilution from the issuance of additional securities and we grant superior rights to new securities overholders of our common stock, it may negatively impact the trading price of our shares of common stock and stockholders may lose all orpart of their investment.

Warrants are exercisablefor our common stock, which could increase the number of shares eligible for future resale in the public market and result in dilutionto our stockholders.

Currently, before this offering, there are warrantsto purchase 5,813,804 shares of our common stock, and each one of those warrants is exercisable for one share of common stock at $11.50per share. To the extent such warrants are exercised, additional shares of common stock will be issued, which will result in dilutionto the then-existing holders of common stock and increase the number of shares eligible for resale in the public market. Sales of substantialnumbers of such shares in the public market could adversely affect the market price of our common stock.

Certain of our warrants are accounted foras a warrant liability and are recorded at fair value upon issuance with any changes in fair value each period reported in our statementof operations, which may have an adverse effect on the market price of our securities.

We had 225,635 warrants that were issued in privateplacements that occurred concurrently with the initial public offering of MTech, our successor (the “private warrants”). Theseprivate warrants and the shares of Company common stock issuable upon the exercise of the private warrants are exercisable for cash oron a cashless basis, at the holder’s option, and are non-redeemable so long as they are held by the initial purchasers or their permittedtransferees. If the private warrants are held by someone other than the initial purchasers or their permitted transferees, the privatewarrants will be redeemable by the Company and exercisable by such holders on the same basis as the warrants included in the units soldin the initial public offering, in which case the 225,635 private warrants could be redeemed by the Company for $2,256.35. Under generallyaccepted accounting principles in the United States (“GAAP”), the Company is required to evaluate contingent exercise provisionsof these warrants and then their settlement provisions to determine whether they should be accounted for as a warrant liability or asequity. As a result of the provision that the private warrants, when held by someone other than the initial purchasers or their permittedtransferees, will be redeemable by the Company, the requirements for accounting for these warrants as equity are not satisfied. Therefore,the Company is required to account for these private warrants as a warrant liability and record (a) that liability at fair value and (b)any subsequent changes in fair value as of the end of each period for which earnings are reported. The impact of changes in fair valueon earnings may have an adverse effect on the market price of our common stock. 

We may face additional risks, includingregulatory, litigation, stockholder or other actions and negative impacts on our stock price, as a result of the material weakness inour internal control over financial reporting and revisions to our financial statements.

As a result of our material weaknesses in internalcontrol over financial reporting, the change in accounting for certain warrants, and the related revisions to our prior financial statementsor that may in the future be raised by the SEC, we face potential additional risks, including regulatory, litigation, stockholder or otheractions and negative impacts on our stock price, which may include, among others, claims invoking the federal and state securities laws,contractual claims or other claims arising from the material weakness in our internal control over financial reporting and the preparationof our financial statements. As of the date of this report, we have no knowledge of any such litigation or dispute. However, we can provideno assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not,could have a material adverse effect on our business, results of operations and financial condition.

The market price of our shares of commonstock is particularly volatile given our status as a relatively new public company with a generally small and thinly traded public float,which could lead to wide fluctuations in our share price. You may be unable to sell your shares of common stock at or above your purchaseprice, which may result in substantial losses to you.

The market for our shares of common stock is characterizedby significant price volatility when compared to the shares of larger, more established companies that trade on a national securitiesexchange and have large public floats, and we expect that our share price will continue to be more volatile than the shares of such larger,more established companies for the indefinite future. The volatility in our share price is attributable to a number of factors, includingthe fact that our shares are thinly traded relative to larger, more established companies. The price for our shares of common stock could,for example, decline precipitously in the event that a large number of our shares of common stock are sold on the market without commensuratedemand. As of March 31, 2022, there are public warrants to purchase 5,813,804 shares of our common stock at $11.50 per share and $16.7million in principal amount of Senior Convertible Notes at a price of $4.05 per share (subject to being reset to the price at whichshares of common stock are offered in this offering), which if exercised or converted and sold into the open market could cause our stockprice to decline. In addition, because we may be considered a speculative or “risky” investment due to our lack of profitsto date, certain investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress,be more inclined to sell their shares of common stock on the market more quickly and at greater discounts, thus resulting in a rapid downwarddecline in the price of our common stock. Many of these factors are beyond our control and may decrease the market price of our sharesof common stock, regardless of our operating performance.

The market price of our common stock isstill likely to be highly volatile and subject to wide fluctuations, and you may be unable to resell your shares of common stock at orabove the price at which you acquired them.

The market price of our common stock is likelyto be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including,but not limited to:

The trading price of our shares of common stockmight also decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us.In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies.Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources,which could materially and adversely affect our business, operating results, and financial condition.

We have not paid dividends in the past anddo not expect to pay dividends for the foreseeable future, and any return on investment may be limited to potential future appreciationin the value of our common stock.

We currently intend to retain any future earningsto support the development and expansion of our business and do not anticipate paying cash dividends on our shares of common stock inthe foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into accountvarious factors, including without limitation, our financial condition, operating results, cash needs, growth plans, and the terms ofany credit agreements that we may be a party to at the time. To the extent we do not pay dividends, our shares of common stock may beless valuable because a return on investment will only occur if and to the extent our stock price appreciates, which may never occur.In addition, investors must rely on sales of their common stock after price appreciation as the only way to realize their investment,and if the price of our common stock does not appreciate, then there will be no return on investment. Investors seeking cash dividendsshould not purchase our common stock.

Risks Relating to This Offering

Funds raised in this offering may not be sufficient to eliminatethe substantial doubt about our ability to continue as a going concern.

Our ability to continue as a going concern is uncertain and dependentupon obtaining the financing necessary to meet our financial commitments and to continue our ongoing operations as currently planned.Even with the funds raised in this offering, we may not have sufficient funds to meet planned expenditures over the next twelve months,we may require additional financing in the near future to meet our ongoing operational working capital requirements and continue to meetthe financial covenants of our convertible notes and may need to seek additional debt or equity financing to meet our planned expenditures.If we are unable to raise sufficient capital we may have to reduce operations which could significantly affect our results of operations. If we fail to meet the financial covenants of our debt and cannot obtain a waiver from such provisions or otherwise come to an agreementwith the holders of our debt, such holders may declare a default on the debt which could subject our assets to seizure and sale, negativelyimpacting our business. See “Risks Relating to Our Financial Condition and Operating History” above.

Due to this offering, the conversion pricepursuant to our Senior Convertible Notes will need to be adjusted, which will result in the potential issuance of higher number of sharesof our common stock pursuant to the conversion than previously anticipated, thereby resulting in significant dilution to our stockholders.

The conversion of our outstanding Senior ConvertibleNotes, issued on October 5, 2021 (the “Senior Convertible Notes”), could result in the issuance of a significant number ofshares of our common stock. The currently outstanding $15.5 million principal amount of Senior Convertible Notes is convertible at a priceof $4.05 per share, which would result in the issuance of 3,824,691 shares of our common stock upon the conversion of the Senior ConvertibleNotes in full. At the option of Akerna, the installment payments on the Senior Convertible Notes can be converted into shares of commonstock of Akerna at a price per share equal to the lower of (i) the conversion price then in effect, or (ii) the greater of (x) the floorprice of $0.54 and (y) 90% of the lower of (A) the volume-weighted average price of the common stock as of the trading day immediatelypreceding the applicable date of determination and (B) the quotient of (I) the sum of the volume-weighted average price of the commonstock for each of the two (2) trading days with the lowest volume-weighted average price of the common stock during the ten consecutivetrading day period ending on and including the trading day immediately prior to the applicable date of determination, divided by (II)two.

Pursuant to the terms of the Convertible Notes,if on or after the issue date of the Convertible Notes the Company issues or sells shares of common stock or certain other securitiesexercisable or convertible into shares of common stock for a deemed issue price less than the then current conversion price of the ConvertibleNotes, then the conversion price of the Convertible Notes will be adjusted to the deemed issue price per share of the shares of commonstock or other securities issued. Therefore, if we issue the Units under this offering at a deemed issue price of ______ per share, theconversion price of the Convertible Notes will be reset to $______ per share and the $15.5 million principal amount of Senior ConvertibleNotes would be convertible into ______ shares of our common stock potentially resulting in significant dilution to our stockholders andthe purchasers of securities in this offering.

If our common stock is delisted from Nasdaq, the liquidity andprice of our common stock could decrease and our ability to obtain financing could be impaired.

On May 24, 2022, we received a notification letterfrom The Nasdaq Stock Market stating that we are not in compliance with the Minimum Bid Price Requirement, which requires ourlisted securities to maintain a minimum bid price of $1.00 per share. The notification stated that we have a compliance period of 180calendar days, or until November 21, 2022, to regain compliance with the Minimum Bid Price Requirement. If at any time during this 180-daycompliance period the closing bid price of our common stock is at least $1.00 per share for a minimum of ten consecutive business days,then the Nasdaq Stock Market will provide us with written confirmation of compliance and the matter will be closed.

If compliance cannot be demonstrated by November21, 2022, we may be eligible for additional time. To qualify, we will be required to meet the continued listing requirement for marketvalue of publicly held shares and all other initial listing standards on the Nasdaq Capital Market (except the bid price requirement).In addition, we would be required to provide written notice of our intention to cure the minimum bid price deficiency during this second180-day compliance period by effecting a reverse stock split, if necessary. If we are not granted an additional 180-day compliance period,then Nasdaq will provide written notification that our securities will be subject to delisting. At that time, we may appeal the determinationto delist our securities to a Nasdaq hearings panel. There can be no assurance that we will regain compliance with the Minimum Bid PriceRequirement or otherwise maintain compliance with the other listing requirements.

Management will have broad discretion asto the use of the net proceeds from this offering, and we may not use the proceeds effectively.

Our management will have broad discretion asto the application of the net proceeds and could use them for purposes other than those contemplated at the time of this offering. Ourstockholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds. Moreover, our managementmay use the net proceeds for corporate purposes that may not increase our results of operations or the market value of our common stock.Our failure to apply these funds effectively could have a material adverse effect on our business, delay the development and approvalof our products and cause the price of our common stock to decline.

If you purchase shares of our common stockin this offering, you will experience immediate dilution as a result of this offering.

Because the price per share being offered maybe higher than net tangible book value per share of our common stock, you will experience dilution to the extent of the difference betweenthe offering price per share of common stock you pay in this offering and the net tangible book value per share of our common stock immediatelyafter this offering. Our net tangible book value as of March 31, 2022 was approximately $(17.9 million), or $(0.52) per share of commonstock. Net tangible book value per share is equal to our total tangible assets minus total liabilities, all divided by the number ofshares of common stock outstanding. See “Dilution” on page 30 of this prospectus for a more detailed illustrationof the dilution you may incur if you participate in this offering. Because the sales of the shares offered hereby will be made directlyinto the market or in negotiated transactions, the prices at which we sell these shares will vary and these variations may be significant.Purchasers of the shares we sell, as well as our existing stockholders, will experience significant dilution if we sell shares at pricessignificantly below the price at which they invested.

If you purchase shares of our common stockin this offering, you may experience future dilution as a result of future equity offerings or other equity issuances.

In order to raise additional capital, we mayin the future offer and issue additional shares of our common stock or other securities convertible into or exchangeable for our commonstock. We cannot assure you that we will be able to sell shares or other securities in any offering at a price per share that is equalto or greater than the price per share paid by investors in previous offerings, and investors purchasing shares or other securities inthe future could have rights superior to existing stockholders. The price per share at which we sell additional shares of our commonstock or other securities convertible into or exchangeable for our common stock in future transactions may be higher or lower than theprice per share in previous offerings. Further, we may choose to raise additional capital due to market conditions or strategic considerations,even if we believe we have sufficient funds for our current or future operating plans. In addition, the exercise of outstanding stockoptions and warrants or the settlement of outstanding restricted stock units would result in further dilution of your investment.

This offering may cause the trading priceof our common stock to decrease.

The price per share, together with the numberof shares of common stock we propose to issue and ultimately will issue if this offering is completed, may result in an immediate decreasein the market price of our common stock. This decrease may continue after the completion of this offering.

A significant portion of our total outstandingshares are eligible to be sold into the market, which could cause the market price of our common stock to drop significantly, even ifour business is doing well.

Sales of a substantial number of shares of ourcommon stock in the public market, either by us or by our current stockholders, or the perception that these sales could occur, couldcause a decline in the market price of our securities. Such sales, along with any other market transactions, could adversely affect themarket price of our common stock.

Upon completion of this offering, based on ourshares outstanding as of ______, 2022, we will have ______ shares of common stock outstanding based on the issuance and sale of ______units in this offering, assuming no sale of any pre-funded units. Of these shares, ______ are subject to a contractual lock-up with theunderwriter for this offering for a period of ____ days following this offering. These shares can be sold, subject to any applicable volumelimitations under federal securities laws, after the earlier of the expiration of, or release from, the ____-day lock-up period. The balanceof our outstanding shares of common stock, including any shares of common stock included in units or issuable upon the exercise of thewarrants and pre-funded warrants purchased in this offering other than shares acquired by our current stockholders who are also subjectto the contractual lock-up, may be resold into the public market immediately without restriction, unless owned or purchased by our affiliates.

As of March 31, 2022, there were an aggregateof 5,813,804 shares subject to outstanding warrants, many of which shares we have registered under the Securities Act of 1933, as amended(the “Securities Act”). These shares can be freely sold in the public market upon issuance, subject to volume limitationsapplicable to affiliates to the extent applicable.

As of March 31, 2022, there were 1,071,205 sharessubject to outstanding options and restricted stock units that are issuable under our equity incentive plan, all of which shares we haveregistered under the Securities Act on a registration statement on Form S-8. These shares can be freely sold in the public market uponissuance, subject to volume limitations applicable to affiliates, to the extent applicable.

We do not intend to pay dividends in theforeseeable future.

We have never paid cash dividends on our commonstock. We currently intend to retain our future earnings, if any, to finance the operation and growth of our business and currently donot plan to pay any cash dividends in the foreseeable future.

There is no public market for the units,pre-funded units, or warrants being offered in this offering.

There is no established public trading marketfor the units, pre-funded units, or warrants being offered in this offering, and we do not expect a market to develop. In addition, wedo not intend to apply to list the units, pre-funded units, or warrants on any securities exchange or nationally recognized trading system.Without an active market, the liquidity of the units, pre-funded units, or warrants will be limited.

Holders of our warrants and pre-fundedwarrants will have no rights as a common stockholder until they acquire our common stock.

Until you acquire shares of our common stockupon exercise of your warrants or pre-funded warrants, you will have no rights with respect to shares of our common stock issuable uponexercise of your warrants or pre-funded warrants. Upon exercise of your warrants or pre-funded warrants, you will be entitled to exercisethe rights of a common stockholder only as to matters for which the record date occurs after the exercise date.

If we do not maintain a current and effectiveprospectus relating to the common stock issuable upon exercise of the warrants or pre-funded warrants, public holders will only be ableto exercise such warrants or pre-funded warrants on a “cashless basis.”

If we do not maintain a current and effectiveprospectus relating to the shares of common stock issuable upon exercise of the warrants or the pre-funded warrants at the time thatholders wish to exercise such warrants or pre-funded warrants, they will only be able to exercise them on a “cashless basis,”and under no circumstances would we be required to make any cash payments or net cash settle such warrants to the holders. As a result,the number of shares of common stock that holders will receive upon exercise of the warrants or pre-funded warrants will be fewer thanit would have been had such holders exercised their warrants or pre-funded warrants for cash. Under the terms of the warrants and pre-fundedwarrants, we have agreed to use our best efforts to maintain a current and effective prospectus relating to the shares of common stockissuable upon exercise of such warrants and pre-funded warrants until the expiration of such warrants and pre-funded warrants. However,we cannot assure you that we will be able to do so. If we are unable to do so, the potential “upside” of the holder’sinvestment in our company may be reduced.

The pre-funded warrants are speculativein nature.

The pre-funded warrants offered hereby do notconfer any rights of common stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merelyrepresent the right to acquire shares of common stock at a fixed price. Specifically, commencing on the date of issuance, holders ofthe pre-funded warrants may acquire the common stock issuable upon exercise of such warrants at an exercise price of $0.0001 per shareof common stock. Moreover, following this offering, the market value of the pre-funded warrants is uncertain and there can be no assurancethat the market value of the pre-funded warrants will equal or exceed their public offering price. There can be no assurance that themarket price of the common stock will ever equal or exceed the exercise price of the pre-funded warrants, and consequently, whether itwill ever be profitable for holders of the pre-funded warrants to exercise the pre-funded warrants.

The warrants may not have any value.

Each warrant has an exercise price per share of$______, are immediately exercisable after their issuance and will expire ______ years from the initial issuance date. In the event ourcommon stock price does not exceed the exercise price of the warrants during the period when the warrants are exercisable, the warrantsmay not have any value.

Provisions of the warrants and pre-fundedwarrants offered by this prospectus could discourage an acquisition of us by a third party.

Certain provisions of the warrants and pre-fundedwarrants offered by this prospectus could make it more difficult or expensive for a third party to acquire us. The warrants and pre-fundedwarrants prohibit us from engaging in certain transactions constituting “fundamental transactions” unless, among other things,the surviving entity assumes our obligations under the warrants and pre-funded warrants. Further, the warrants and pre-funded warrantsprovide that, in the event of certain transactions constituting “fundamental transactions,” with some exception, holdersof such warrants and pre-funded warrants will have the right, at their option, to require us to repurchase such warrants and pre-fundedwarrants at a price described therein. These and other provisions of the warrants and pre-funded warrants offered by this prospectuscould prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.

Proposed legislation in the U.S. Congress,including changes in U.S. tax law, may adversely impact the Company and the value of the units, pre-funded units, shares of common stock,pre-funded warrants, and warrants.

Changes to U.S. tax laws (which changes may haveretroactive application) could adversely affect the Company or holders of the units, pre-funded units, shares of common stock, pre-fundedwarrants or warrants. In recent years, many changes to U.S. federal income tax laws have been proposed and made, and additional changesto U.S. federal income tax laws are likely to continue to occur in the future.

The U.S. Congress is currently considering numerousitems of legislation which may be enacted prospectively or with retroactive effect, which legislation could adversely impact the Company’sfinancial performance and the value of the units, pre-funded units, shares of common stock, pre-funded warrants and warrants. In particular,new proposed legislation known as the “Build Back Better Act” is under consideration within both houses of U.S. Congress.The proposed legislation includes, without limitation, new corporate minimum income taxes. If enacted, most of the proposals would beeffective for 2022 or later years. The proposed legislation remains subject to change, and its impact on the Company and investors whopurchase the units, pre-funded units, shares of common stock, pre-funded warrants or warrants is uncertain.

General Risk Factors

We may not be able to timely and effectivelyimplement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002.

The standards required for a public company underSection 404 of the Sarbanes-Oxley Act of 2002 are significantly more stringent than those required of MJF as a privately held company.Management may not be able to effectively and timely implement controls and procedures that adequately respond to the regulatory complianceand reporting requirements that are applicable to us. If we are not able to implement the additional requirements of Section 404 in atimely manner or with adequate compliance, we may not be able to conclude that our internal controls over financial reporting are effective,which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our common stock.

Failure to remediate material weaknessesin internal controls over financial reporting could result in material misstatements in our financial statements.

Our management has identified material weaknessesin our internal controls over financial reporting and has concluded that due to such material weaknesses, our internal controls overfinancial reporting (including disclosure controls and procedures) were not effective as of December 31, 2021. If not remediated, ourfailure to establish and maintain effective disclosure controls and procedures over financial reporting could result in material misstatementsin our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverseeffect on our financial condition and the trading price of our common stock.

The requirements of being a public companymay strain our resources and divert management’s attention.

As a public company, we are subject to the reportingrequirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of NASDAQ, and other applicablesecurities rules and regulations. Compliance with these rules and regulations increase our legal and financial compliance costs, makesome activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we areno longer an “emerging growth company.” The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosurecontrols and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosurecontrols and procedures and internal control over financial reporting to meet this standard, significant resources and management oversightmay be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affectour business and operating results. We may need to hire more employees in the future or engage outside consultants to comply with theserequirements, which will increase our costs and expenses.

In addition, changing laws, regulations, andstandards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal andfinancial compliance costs and making some activities more time-consuming. These laws, regulations, and standards are subject to varyinginterpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over timeas new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance mattersand higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply withevolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversionof management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with newlaws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related totheir application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.

We are an “emerging growth company”and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our shares of commonstock less attractive to investors.

We are an “emerging growth company,”as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable toother public companies that are not “emerging growth companies” including, but not limited to, not being required to complywith the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executivecompensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory voteon executive compensation and shareholder approval of any golden parachute payments not previously approved. Additionally, as an emerginggrowth company, we have elected to delay the adoption of new or revised accounting standards that have different effective dates forpublic and private companies until those standards apply to private companies. As such, our financial statements may not be comparableto companies that comply with public company effective dates. It cannot be predicted if investors will find our common stock less attractivebecause we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less activetrading market for our common stock and our share price may be more volatile.

Our ability to utilize our net operatingloss carryforwards and certain other tax attributes may be limited.

Under Section 382 and related provisions of theInternal Revenue Code of 1986, as amended (the “Internal Revenue Code”), if a corporation undergoes an “ownership change”(generally defined as a greater than 50% change (by value) in its equity ownership over a three year period), the corporation’sability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income maybe limited. We may, in the future, as a result of subsequent shifts in our stock ownership, experience, an “ownership change.”Thus, our ability to utilize carryforwards of our net operating losses and other tax attributes to reduce future tax liabilities maybe substantially restricted. At this time, we have not completed a study to assess whether an ownership change under Section 382 of theInternal Revenue Code has occurred at any time in the past or may occur in the foreseeable future, due to the costs and complexitiesassociated with completing such a study. Therefore, we may not be able to take full advantage of these carryforwards for federal or statetax purposes.

Our operations could be adversely affectedby events outside of our control, such as natural disasters, wars, or health epidemics.

We may be impacted by business interruptionsresulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods, and fires.An outbreak of any of the foregoing or fear of any of the foregoing could adversely impact us by disrupting the operations of our clients,which could result in delayed payments, non-renewal of contracts, and other adverse effects on the market for our products or by causingproduct development and implementation delays and disruptions (including as a result of government regulation and prevention measures).We may incur expenses or delays relating to such events outside of our control, which could have a material adverse impact on our business,operating results, and financial condition.

FORWARD-LOOKING STATEMENTS

This prospectus and the exhibits attached heretocontain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, includingstatements regarding future events or our future results of operations, financial condition, business, strategies, financial needs, andthe plans and objectives of management. In some cases forward-looking statements can be identified because they contain words such as“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”“intend,” “may,” “might,” “likely,” “plan,” “potential,” “predict,”“project,” “seek,” “should,” “target,” “will,” “would,” or similarexpressions and the negatives of those terms. Forward-looking statements are based on information available to our management as of thedate of this prospectus and our management’s good faith belief as of such date with respect to future events and are subject toa number of risks, uncertainties, and assumptions that could cause actual performance or results to differ materially from those expressedin or suggested by the forward-looking statements, in particular the substantial risks and uncertainties related to the ongoing COVID-19pandemic. Important factors that could cause such differences include, but are not limited to:

Should one or more of these risks or uncertaintiesmaterialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimatedor expected. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.We disclaim any obligation to revise subsequently any forward-looking statements to reflect events or circumstances after the date ofsuch statements or to reflect the occurrence of anticipated or unanticipated events. We qualify all the forward-looking statements containedin this prospectus by the foregoing cautionary statements.

RECENT DEVELOPMENTS

On May 27, 2022, theCompany announced its implementation of certain expense reduction measures, approved by the Company’s board of directors on May24, 2022, including a reduction of the Company’s workforce by 59 full-time employees, or approximately 33% of the Company. Thecorporate restructuring follows the Company’s recent decision to address liquidity concerns in part by focusing its initiativeson its enterprise business and new market expansion of the SMB business.

As a result of the corporaterestructuring, the company anticipates reporting $690,000 in total costs in its second quarter of 2022 to implement the reduction inforce, including the following cost elements: $630,000 in severance and associated payroll taxes; $40,000 in legal costs; and $20,000in employee insurance benefits. Of the total cost, $440,000 in salaries, payroll taxes and benefits costs would have been reported inits second quarter if the reduction in force had not been implemented. The corporate restructuring is expected to be substantially completedby the end of the second quarter of 2022. The estimates of costs that the Company expects to incur and the timing thereof are subjectto a number of assumptions and actual results may differ. The Company may also incur other charges or cash expenditures not currentlycontemplated in connection with the corporate restructuring. This estimate may change due to future changes in the Company’s stockprice. If the Company subsequently determines that it will incur additional material restructuring costs or charges or there are materialdifferences from the ranges provided, the Company will file an amendment to this Current Report on Form 8-K (this “Current Report”)to disclose any such material costs, charges or differences.

On May 27, 2022, inrelation the Company’s corporate restructuring, the Company’s executive leadership team agreed to 25% reduction in salary.As a result, the salaries of Jessica Billingsley, Chief Executive Officer, David McCullough, Chief Technology Officer, and Raymond Thompson,Special Advisor to the Chief Executive Officer, have been reduced by 25%.

On May 27, 2022, theCompany filed an amendment to its Amended and Restated Certificate of Incorporation to amend Article 4 thereof to increase the numberof authorized shares of common stock, par value $0.001, from 75,000,000 shares to 150,000,000 shares.

On May 25, 2022, thestockholders of the Company approved an amendment to the Company’s Amended and Restated 2019 Long Term Incentive Plan (the “IncentivePlan”) to increase the number of shares available under the Incentive Plan by 2,934,962 shares of common stock of the Company.

On May 24, 2022, theCompany received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that,based upon the closing bid price of the Company’s common stock, par value $0.0001 per share (“Common Stock”), for thelast 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of$1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Notice”).

The Notice has no immediateeffect on the continued listing status of the Company’s Common Stock on The Nasdaq Capital Market, and, therefore, the Company’slisting remains fully effective.

The Company is provideda compliance period of 180 calendar days from the date of the Notice, or until November 21, 2022, to regain compliance with the minimumclosing bid requirement, pursuant to Nasdaq Listing Rule 5810(c)(3)(A). If at any time before November 21, 2022, the closing bid priceof the Company’s Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, subject to Nasdaq’sdiscretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(G) to 20 consecutive business days, Nasdaq will provide writtennotification that the Company has achieved compliance with the minimum bid price requirement, and the matter would be resolved. If theCompany does not regain compliance during the compliance period ending November 21, 2022, then Nasdaq may grant the Company a second180 calendar day period to regain compliance, provided the Company meets the continued listing requirement for market value of publicly-heldshares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, andnotifies Nasdaq of its intent to cure the deficiency.

On May 23, 2022, weentered into an amending agreement (the “Amendment”) to the Amended and Restated Stock Purchase Agreement, dated as of October1, 2021 (the “Original Agreement”), by and among the Company, The Nav People, Inc., a Delaware corporation d/b/a “365Cannabis”) (the “365 Cannabis”) and Matthew Dredge, Ian Humphries, Jeff Kiehn, David Walker and Quartermain InvestmentHoldings Ltd. (collectively, the “Sellers”).

Pursuant to the Amendment,Section 2.04(a) of the Original Agreement was amended to provide that the Sellers could elect to have the potential earn-out paymentdescribed therein paid in cash or in shares of the Company or in any combination thereof. The Original Agreement previously had providedthat the Company could elect whether to pay the earn-out payment in cash or in shares of the Company. Under the Amendment, if a Sellerelects to have any portion of the earn-out payment paid in cash such amount payable will be reduced by 25%. Further, Section 2.04(b)of the Original Agreement was amendment to reflect the administrative handling of the earn-out payment to the Sellers in cash or sharesof the Company.

Pursuant to the Amendment,Section 2.06 of the Original Agreement was amended to require that $100,000 the Second Post-Closing Payment (as defined in the OriginalAgreement) will be made at the end of June 2022 on the same day on which the Buyer’s end-of-month payroll is run and on each ofthe next four months thereafter, in each such month on the same day on which the Buyer’s end-of-month payroll is run.

On May 16, 2022, the Company and Ray Thompson,the Company’s then-President and Chief Operating Officer, agreed to a transition, effective immediately, by which Mr. Thompsonmoved from his role as President and Chief Operating Officer to Special Advisor to the Chief Executive Officer. In this new role, Mr.Thompson will continue to assist the Chief Executive Officer with certain of the day-to-day operations of the Company and advise theCompany on various aspects of corporate strategy. In relation to the Company’s enterprise business, Jeff Kiehn, the Company’scurrent President of Akerna Enterprise will report to the Chief Executive Officer. Additionally, the Company intends for the functionsof strategic communications, compliance, technology, and human resources to report directly to the Company’s Chief Executive Officer.

On May 11, 2022, theCompany and and John Fowle the Company’s Chief Financial Officer and Secretary agreed to a mutual separation effective as of May17, 2022. Mr. Fowle is leaving to pursue other opportunities.

On May 11, 2022, the Board of Directors of theCompany appointed Larry Dean Ditto, Jr. as Interim Chief Financial Officer (“Interim CFO”) of the Company effective May 17,2022.

USE OF PROCEEDS

We estimate that our net proceeds from this offeringwill be approximately $______ million (or $______ if the underwriter exercises the over-allotment option in full), assuming a public offeringprice of $______ per unit, which represents approximately a ______% discount to $______, the last reported sale price for the shares ofour common stock on ______, 2022, as reported by the Nasdaq Capital Market, after deducting estimated underwriting discounts and commissionsand estimated offering expenses payable by us and assuming none of the warrants issued in this offering are exercised.

We intend to use thenet proceeds from this offering for general corporate purposes, including servicing our ongoing debt obligations under our convertiblenotes, working capital, marketing, product development and capital expenditures. As of the date of this prospectus, we cannot predictwith certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the amounts thatwe will actually spend on the uses set forth above. The amounts and timing of our actual use of proceeds will vary depending on numerousfactors, including the factors described under the heading “Risk Factors” and elsewhere in this prospectus. As a result,management will retain broad discretion over the allocation of the net proceeds from this offering, and investors will be relying onthe judgment of our management regarding the application of the net proceeds.

DILUTION

If you invest in the securities being offeredby this prospectus, your interest will be diluted immediately to the extent of the difference between the public offering price per unitand the as adjusted, net tangible book value per share of our common stock immediately after this offering.

The net tangible book value of our common stockas of March 31, 2022 was approximately $17.9 million, or approximately $(0.52) per share based on approximately 34.2 million sharesof our common stock issued and outstanding. Net tangible book value per share represents the amount of our total tangible assets, excludinggoodwill and intangible assets, less total liabilities, divided by the total number of shares of our common stock outstanding.

After giving further effect to the assumed saleof __________ shares of our common stock and warrants to purchase __________ shares of our common stock for __________ per share at thepublic offering price of $ __________ per share and related warrant, the closing sale price per share of our common stock on the NasdaqCapital Market on ______, 2022, assuming no sale of pre-funded warrants in this offering and no exercise of the warrants being offeredin this offering and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us,our as adjusted pro forma net tangible book value per share as of March 31, 2022, would have been approximately $__________ million, orapproximately $__________ per share. This represents an immediate increase in net tangible book value per share of $__________ to existingstockholders and an immediate dilution of approximately $__________ per share to new investors purchasing shares of our common stock inthis offering.

Dilution per share to new investors is determinedby subtracting the pro forma, as adjusted, net tangible book value per share after this offering from the public offering price per shareand related warrant paid by new investors.

The following table illustrates this dilutionon a per share basis:

The number of shares of common stock used in thetable above is based on 34,175,088 shares of common stock outstanding as of March 31, 2022 and ______ shares on an as adjusted basis aftergiving effect to the issuance of ______ shares of common stock offered by this prospectus. Except as otherwise indicated herein, all informationin this prospectus assumes (i) no sale of pre-funded warrants, which, if sold, would reduce the number of shares of common stock thatwe are offering on a one-for-one basis, and (ii) no exercise of the underwriter’s over-allotment option, (iii) no exercise of theunderwriter’s warrants to be issued in connection with this offering.

The number of shares of common stock outstandingexcludes:

To the extent that outstanding options or warrantsare exercised, you will experience further dilution. In addition, we may choose to raise additional capital due to market conditionsor strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent thatadditional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could resultin further dilution to our stockholders.

DIVIDEND POLICY

We do not intend to pay dividends for the foreseeablefuture. In addition, our ability to pay dividends is restricted by agreements governing Akerna’s and its subsidiaries’ debt,including the Company’s senior secured convertible notes. See “Risk Factors” above.

DESCRIPTION OF COMPANY CAPITAL STOCK

As of June 3, 2022, our authorized share capitalconsists of 150,000,000 shares of Common Stock, $0.0001 par value per share, of which 36,574,158 shares of common stock are issued andoutstanding, 5,000,000 shares of preferred stock, $0.0001 par value per share, of which one share of special voting preferred stock isissued and outstanding with a voting equivalent of 291,192 shares of common stock. We are a Delaware corporation and our affairs are governedby our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws. The following are summaries of material provisionsof our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws insofar as they relate to the material termsof our common stock. Complete copies of our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws are filedas exhibits to our public filings.

Common Stock

All outstanding shares of common stock are ofthe same class and have equal rights and attributes. The holders of common stock are entitled to one vote per share on all matters submittedto a vote of our stockholders. Subject to the prior rights of all classes or series of stock at the time outstanding having prior rightsas to dividends or other distributions, all stockholders are entitled to share equally in dividends, if any, as may be declared fromtime to time by the Board of Directors out of funds legally available. Subject to the prior rights of creditors of Akerna and the holdersof all classes or series of stock at the time outstanding having prior rights as to distributions upon liquidation, dissolution or windingup of Akerna, in the event of liquidation, the holders of common stock are entitled to share ratably in all assets remaining after paymentof all liabilities. The stockholders do not have cumulative, preemptive rights, or subscription rights.

Preferred Stock

The board of directors is authorized, subjectto any limitations prescribed by law, without further vote or action by the stockholders, to issue from time to time shares of PreferredStock in one or more series. Each such series of Preferred Stock shall have such number of shares, designations, preferences, votingpowers, qualifications, and special or relative rights or privileges as shall be determined by the board of directors, which may include,among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights. Issuance of PreferredStock by our board of directors may result in such shares having dividend and/or liquidation preferences senior to the rights of theholders of our common stock and could dilute the voting rights of the holders of our common stock.

Prior to the issuance of shares of each seriesof Preferred Stock, the board of directors is required by the Delaware General Corporation Law, and our certificate of incorporationto adopt resolutions and file a certificate of designation with the Secretary of State of the State of Delaware. The certificate of designationfixes for each class or series the designations, powers, preferences, rights, qualifications, limitations and restrictions, including,but not limited to, some or all of the following:

Once designated by our board of directors, eachseries of Preferred Stock may have specific financial and other terms that will be described in a prospectus. The description of thePreferred Stock that is set forth in any prospectus is not complete without reference to the documents that govern the Preferred Stock.These include our certificate of incorporation and any certificates of designation that our board of directors may adopt.

All shares of Preferred Stock offered herebywill, when issued, be fully paid and nonassessable, including shares of Preferred Stock issued upon the exercise of Preferred Stock Warrantsor subscription rights, if any.

Although our board of directors has no intentionat the present time of doing so, it could authorize the issuance of a series of Preferred Stock that could, depending on the terms ofsuch series, impede the completion of a merger, tender offer or other takeover attempt.

Special Voting Share

The special voting share has a par value of $0.0001per share. The special voting share entitles the holder thereof to an aggregate number of votes equal to the number of the ExchangeableShares issued and outstanding from time to time and that are not owned by us or our subsidiaries. Except as otherwise provided hereinor by law, the holder of the special voting share and the holders of our common stock will vote together as a single class on all matterssubmitted to a vote of Akerna’s shareholders. With respect to all meetings of shareholders of Akerna at which holders of Akernashares are entitled to vote, each registered holder of Exchangeable Shares shall be entitled to instruct the trustee holding the specialvoting share to cast and exercise, in the manner instructed, that number of votes equal to the “Equivalent Vote Amount” foreach Exchangeable Share owned of record by such holder of Exchangeable Shares at the close of business on the record date establishedby Akerna or by applicable law for such meeting, in respect of each matter, question, proposal or proposition to be voted on at suchmeeting. At such time as the special voting share has no votes attached to it, the special voting share shall be automatically cancelled.

Exchangeable Shares

The Exchangeable Shares of Exchangeco are intendedto be substantially economically equivalent to shares of our common stock. The rights, privileges, restrictions and conditions attachingto the Exchangeable Shares of Exchangeco include the following:

Of the 3,294,574 Exchangeable Shares that were issued to former Ampleshareholders in connection with the consummation of the Arrangement, an aggregate of 658,915 Exchangeable Shares were issued as “ClosingConsideration” and an aggregate of 2,635,659 Exchangeable Shares, constituting part of the “Escrowed Consideration”were issued into escrow pursuant to an escrow agreement (the “Escrow Agreement”), entered into on July 7, 2020 by and amongthe Company, Exchangeco, John Prentice, as Shareholder Representative, and Odyssey Trust Company. Under the Escrow Agreement, subjectto unresolved claims by the Company under the Arrangement Agreement in respect of fraud, the Escrowed Consideration shall be releasedto former Ample shareholders upon the six-, nine-, and twelve-month anniversaries of the Closing Date in accordance with the followingschedule -- 988,372 shares on the six-month anniversary, 823,643 shares on the nine-month anniversary, and 823,644 shares on the twelve-monthanniversary. As of the date hereof, 3,003,382 shares of common stock of Akerna have been issued on conversion of Exchangeable Shares.

Registration Rights

We have granted registration rights under theSecurities Act to certain holders of our common stock in relation to our acquisitions of Ample and 365 Cannabis and in relation to ourissuance of the Senior Convertible Notes. In relation to Ample, we agreed to file and maintain, until no Exchangeable Shares remain outstanding,a registration statement regarding the exchange of the Exchangeable Shares into shares of our common stock pursuant to their terms. Inrelation thereto, we filed a registration statement on Form S-1 on July 9, 2020 (333-239783) which was brought effective on August 14,2020, as amended on January 8, 2021 and as amended on Form S-3 on May 24, 2021. In relation to the acquisition transaction of 365 Cannabis,we have agreed to register the shares of common stock issuable upon initial closing of the transaction and upon settlement of the earn-outprovision, if any. In relation to our issuance of the Senior Convertible Notes, we have agreed to file the registration statement ofwhich this prospectus forms a part. We are also obligated to maintain such registration statement until the earlier of (i) the date asof which all of the holders may sell all of the conversion shares required to be covered by such registration statement without restrictionpursuant to Rule 144 (including, without limitation, volume restrictions) and without the need for current public information requiredby Rule 144(c)(1) (or Rule 144(i)(2), if applicable), (ii) the date on which the holders shall have sold all of the registrable securitiescovered by such registration statement or (iii) the later of (x) ninety (90) calendar days after the date no Senior Convertible Notesremain outstanding and (y) the first anniversary of the maturity date of the Senior Convertible Notes. We may also be required in thefuture to file amendments to these registration statements to maintain effectiveness. 

Election of Directors

Our Class I Directors hold office until the 2025annual meeting of stockholders and are eligible for reelection at such meeting. Our Class II Directors held office until the 2023 annualmeeting of stockholders and are eligible for reelection at such meeting. Our Class III Directors hold office until the 2024 annual meetingof stockholders and are eligible for reelection at such meeting. Directors are elected by a plurality of the votes cast at the annualmeeting by the holders of common stock present in person or represented by proxy and entitled to vote at such meeting. There is no cumulativevoting for directors.

Anti-Takeover Provisions

Our Amended and RestatedCertificate of Incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider tobe in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a changeof control. Together these provisions may make more difficult the removal of management and may discourage transactions that otherwisecould involve payment of a premium over prevailing market prices for our securities.

Theseprovisions:

DESCRIPTION OF THE BUSINESS

Business Overview

Akerna is a leading provider of enterprise softwaresolutions within the cannabis industry. Cannabis businesses face significant complexity due to the stringent regulations and restrictionsthat shift based on regional, state, and national governing bodies. As the first to market more than ten years ago, Akerna’s familyof software platforms help to enable regulatory compliance and inventory management across the entire supply chain. When the legal cannabismarket started to grow, we identified a need for organic material tracking and regulatory compliance software as a service (SaaS) solutioncustomized specifically for the unique needs of the industry. By providing an integrated ecosystem of applications and services thathelp our clients enable compliance, regulation, consumer safety and taxation, Akerna is building the technology backbone of the cannabisindustry. While designed specifically for the unique needs of the cannabis market, our solutions are adaptable for other industries requiringgovernment regulatory oversight, or where the tracking of organic materials from seed or plant to end products is desired.

Executing upon our expansion strategy, we acquirecomplementary cannabis brands to grow the scope of Akerna’s cannabis ecosystem. Since 2019, we have integrated six new brands intothe Akerna product and service offering. Our first acquisition, Solo Sciences (“Solo”), was initiated in the fall of 2019,with the full acquisition completed in July 2020. We added Trellis Solutions (“Trellis”) to our portfolio on April 10, 2020and finalized the acquisition of Ample Organics (“Ample”) and Last Call Analytics (“Last Call”) on July 7, 2020.More recently, on April 1, 2021 we completed our acquisition of Viridian Sciences Inc. (“Viridian”), a cannabis business managementsoftware system built on SAP Business One, followed by the acquisition of The NAV People, Inc. d.b.a 365 Cannabis (“365 Cannabis”),a cannabis business management software system built on Microsoft Business Central, on October 1, 2021. Through our growing family ofcompanies, Akerna provides highly versatile platforms that equip our clients with a central data management system for tracking regulatedproducts. Our solutions also provide clients with integrated security, transparency, and scalability capabilities, all while helpingmaintaining compliance with their governing regulations.

On the commercial side, our products help state-licensedbusinesses operate in compliance with applicable regional laws. Our integrated ecosystem provides integrations with third-party vendorsand add-ons that enhance the capabilities of our commercial software platforms. On the regulatory side, we provide track and trace solutionsthat allow state governments to monitor compliance of licensed cannabis businesses. To date, our software has helped monitor the complianceof more than $30 billion in legal cannabis. While our software facilitates the success of legal cannabis businesses, we do not handleany cannabis-related material, do not process cannabis sales transactions within the United States (“U.S.”), and our revenueis generated from a fixed-fee based subscription and professional services model and is not related to the type or amount of sales madeby our clients.

We drive revenue growth through the developmentof our product line, our acquisitions and from continued expansion of the cannabis, hemp, and CBD industry. Businesses across the regulatedcannabis industry use our solutions. The brand recognition of our existing products, our ability to provide services in all areas ofthe seed-to-sale life cycle, and our wealth of relevant experience attracts cultivation, manufacturing, and dispensary clients who areseeking comprehensive business optimization solutions. Our software solutions are designed to be scalable, and while mid-market and smallercustomers have historically been our primary target segment, we are focused on extending our customer reach to address the needs of theemerging enterprise level operator. We believe these larger multi-state/multi-vertical operations represent significant long-term futuregrowth opportunities as the cannabis industry continues to consolidate at a rapid rate. The sophistication of our platform accommodatesthe complexities of both multi-vertical and multi-state business needs, making us critical partners and allowing us to cultivate long-term,successful relationships with our clients.

Our platforms provide licensed businesses witha true enterprise solution for managing their inventory and compliance and allow government regulators to engage in accurate and real-timecompliance monitoring. Key capabilities of our technology infrastructure include:

Seed-to-Sale Trackingallows the tracking of products from cultivation, through harvest and processing and manufacturing, to the monitoring of the finalsale to the patient or consumer. Our traceability technology captures every step in an individual plant’s life, providing visibilityinto the supply chain from any measurement of finished product dispensed to a patient or customer, back to the plant it came from, andall activity, transportation, and transactions that happen in between. While we do not provide payment processing, and never take, own,or handle any product or cash transaction, our platform records all sales as part of state and jurisdictional compliance Track-and-Traceprocesses. The data gathered throughout all of these processes is captured, and provides the insights and information needed to run anefficient and streamlined cannabis business. Seed-to-Sale software operates in a complementary relationship with state-mandated Track-and-Tracesystems, replicating the reporting functionality and eliminating the need for operators to duplicate their compliance data into two disparatesystems. Track-and-Trace systems are designed solely for government regulators to maintain compliance and do not have the sophisticationor functionality to provide cannabis business owners with the insights and tools for effective business management. Our seed-to-saleplatforms integrate with the state Track-and-Trace compliance system, reporting in the mandated data along the supply chain while alsoproviding business owners with the capabilities to make informed business decisions based on the fully overview of their operations.

Track-and-Trace isthe compliance reporting system used by regulatory bodies in most states. In order to adhere to their state-specific compliance regulations,cannabis operators are required to enter specific data points along the supply chain into the state-mandated track-and-trace system.By doing so, regulators can track the movement of cannabis inventory through the full supply chain, even when it moves between facilitiesor operators. The aggregated view that Track-and-Trace software seeks to ensure that the end product being sold has been grown, harvested,processed, transferred and sold compliantly, and provides assurance of safety to consumers.

Single System Integrationallows state-licensed clients to manage inventory, customer records, and staff in one tracking system. MJ Platform and Leaf DataSystems platforms can be fully integrated with one another to create a streamlined Seed-to-Sale/Track-and-Trace solution. Additionally,our platforms can also be integrated with systems of numerous third-party suppliers. We have certified integrations with world classaccounting solutions, including Sage, SAP, Microsoft and Netsuite.

Anti-Counterfeiting Technology.Solo sciences provides next-generation anti-counterfeiting technology fused with a direct communication system between brands and consumers.The solo sciences mission is to build confidence and establish trust among consumers, while enabling retailers and distributors to closethe loop with creators and producers.

Cannabis Market Insightsare curated using the anonymized data aggregated through our Seed-to-Sale platform for key industry intelligence. With over $30 billionin cannabis sales tracked over the past twelve years, we have cultivated a substantial legal cannabis dataset across 30+ states and multiplecountries. This data provides a detailed overview of key industry trends, giving us the ability to provide banks, investors, researchers,cannabis businesses, and non-cannabis businesses with cannabis market intelligence and comparison data.

Enterprise Resource Planning(ERP) software is a business process management software that manages and integrates a company’s financials, manufacturing,inventory, supply chain, operations, commerce, and reporting activities. ERP systems improve an operator’s efficiency and effectivenessby eliminating disparate systems, consolidating business critical information in a single location, reducing double entry data, and streamliningoperations. ERP software solutions built for cannabis operators combine traditional accounting, manufacturing, inventory, and supplychain management with cannabis-specific track and trace and compliance functionality.

Using our years of experience, proprietary databases,and resources to identify trends and predict changes in the cannabis industry we evolve our products and better assist our clients inoperating in compliance with the applicable laws of their jurisdictions and capitalizing on commercial opportunities within the applicableregulatory framework, with accuracy, efficiency, and geographic specificity. We have worked with clients and governments across the globeto create customized solutions that fit their specific regulatory and commercially compliant needs. While the majority of our clientsare in the U.S. and Canada, our solutions allow cannabis businesses to operate efficiently in this fast-changing industry and complywith state, local, and federal (in countries such as Canada, Italy, Macedonia, and Colombia). Akerna and our family of companies is well-positionedto provide compliance solutions for the expanding national and international legal cannabis market.

Industry & Competition

We believe the growing cannabis industry in numerousU.S. states and other countries represents a significant market opportunity for our technology, as legally licensed operating companiesneed to ensure they operate within applicable laws and carefully track inventory. With democratic leadership and the new legislationpassed during the 2020 election improving the outlook of the industry and a congress that is committed to push forward cannabis policy,the industry’s growth potential has large near-term upside. Since state governments require supply chain transparency to ensurecompliance and the maintenance of the seed-to-sale life cycle within their jurisdictions, each new regulated jurisdiction offers an expandedmarket opportunity for Akerna. 

The regulated cannabis industry (medicinal andadult-use) is experiencing rapid growth. According to BDSA’s 2021 Essential Cannabis Insights, December 2021 Vol 4, Issue 10, legal cannabissales in the U.S. passed $25 billion in 2021, growth of 40% over 2020’s $18 billion. BDSA’s Cannabis Market Forecast update fromSeptember 2021 noted sales are forecasted to rise to $46 billion in 2026, a CAGR of 14% from 2021. Global cannabis sales reached nearly$29 billion in 2021, an increase of 45% over 2020 sales of $20 billion. BDSA forecasts global cannabis sales will grow from $29 billionin 2021 to $61 billion in 2026, a compound annual growth rate (CAGR) of more than 16%.

The COVID-19 pandemic has had a positive effecton the growth and acceptance of the cannabis industry. Fitting into a non-cyclical, vice product category has worked to the industry’sadvantage overall based on the 2020 sales data. Although many cannabis companies felt extremely adverse circumstances, and some wereeven forced to close or sell their businesses, this has accelerated a predictable M&A marketplace in which licenses are being acquiredfor a fraction of what they cost only 1 year ago. The largest Multi-State Operators (MSOs) are growing and financing faster than everbefore. For example, Curaleaf, one of the largest MSOs, opened their 100th retail location in February 2021. As a result of the currentM&A marketplace, the landscape is beginning to position itself in a similar way that the alcohol industry has, with major companiescontrolling a vast majority of market share. Akerna is positioned as an enterprise-level offering to address the needs of these largeMSOs that continue to grow through consolidation. The addition of the MJ Analytics seed-to-sale reporting engine, built on the architectureof leading business intelligence platform, Domo, further positions Akerna as an enterprise-level solution.

Further to our current addressable market, theregulatory changes in the 2018 Farm Bill in the U.S. have created an opportunity for hemp-based CBD in general retail and pharmaceuticalchannels. Additionally, multiple countries across the world have legalized hemp for growth and export including Canada, China, Italy,Australia, and South Korea. In the U.S., hemp-derived CBD is available broadly across retailers (not solely licensed cannabis dispensaries),including online, drug and convenience stores, natural product, beauty, grocery, and pet stores. According to Grand View Research, IndustrialHemp Market Analysis, The global cannabidiol market size was valued at USD 2.8 billion in 2020 and is expected to expand at a compoundannual growth rate (CAGR) of 21.2% from 2021 to 2028.

The unfortunate events of the 2019 vape scarein the U.S. prompted regulatory changes and additional requirements, including anti-counterfeiting tags and codes. With major investmentand partnership with Solo, Akerna has provided a solution to address the issue for both regulators and operators. The combined supplychain transparency solution was chosen by the State of Utah, requiring all medical dispensary products to be validated. Markets and Marketsprojects that the anti-counterfeit packaging market size will grow from $105.9 billion in 2018 to $182.2 billion by 2023, at a CAGR of11.5%. The anti-counterfeit packaging market is projected to witness high growth due to the increasing focus of manufacturers on brandprotection to reduce counterfeiting. By leveraging this investment, we strengthen our current addressable market with an essential compliancetool.

The cannabis industry is a fast-growing, increasinglycomplex, and rapidly changing landscape. Arcview Market Research and BDS Analytics note that the range of regulatory schemes is wide,and fines for non-compliance are steep. Proper, safe, and profitable operation of a cannabis business requires a full understanding ofapplicable laws, the ability to track plants and products to ensure compliance with these laws, and the ability to operate at scale ina competitive environment.

Competitive Landscape

The competitive set within the cannabis technologyand consulting space has traditionally been comprised of several smaller and specialized companies with limited access to capital. Aspart of our growth strategy, we may seek to acquire assets or companies that are synergistic with our business. We have built a scalableinfrastructure to support both rapid organic growth and targeted acquisitions. By providing the full seed-to-sale solution, we believewe are well-positioned to be an acquirer of cannabis technology solutions throughout the supply chain. We compete with numerous technologyand consulting companies that offer services that are similar to some of our services including, but not limited to, Acumatica, BDS Analytics,BioTrackTHC, Canna Advisors, Cova Cannabis, Dutchie, Flowhub, Headset, Jane, Metrc, New Frontier Data, Nextec, 3C, Treez, and TILT Holdings.

We face competition in each of the revenue segmentsin which we operate. We believe, however, that we possess relative strengths in each segment that provide us with competitive advantages,including:

Range of Services

We believe we possess a unique viewpoint intothe industry because we offer solutions to, and work with, both commercial businesses and government regulatory agencies towards thecommon goal of ensuring regulatory compliance and real-time monitoring of inventory and sales. We offer a complete range of both softwareand services to meet these needs for both state governments and commercial businesses. While we do not face competition from firms focusingon specific subsets of our markets, there are a very limited number of competitors providing products or services that compete with ourcomplete range of products and services. We compete with software companies offering a product to businesses only in a certain geographicregion or of a certain business type. We also compete with consulting firms serving a specific phase of the cannabis plant life cycle.

Industry Knowledge andExperience

Our management personnel have extensive technicaland business operations knowledge and experience within the cannabis and technology industries, which has been developed through numerousyears of service in key roles with a broad range of both cannabis and technology companies, both in terms of product and service typeand size. We leverage this knowledge and experience to guide our product and service development and delivery. Our management team possessessignificant compliance expertise, allowing us to continually monitor changes in legislation and regulation within the markets we andour clients operate. We face competition from companies that have teams with technical expertise or cannabis industry experience, butthere are a limited number of competitors who have both and who understand the interplay between software and technology developmentand the application of the same to the evolving cannabis compliance landscape.

Proprietary Databases

Twelveyears of operations have provided us with a statistically significant dataset of cannabis transaction information that we believe cannotbe readily duplicated by new entrants into the marketplace. This growing database includes proprietary sales, market trends, customerpreferences, pricing, and regulatory data. We use this dataset to predict trends more accurately in the marketplace and make this datasetavailable to users of our platforms, providing greater utility to clients in this regard than can be provided by competing platforms.

Products and Solutions

Software

SMB Market:

Akerna’s suite of small and medium business(“SMB” or “Non-Enterprise”) products including MJ Platform, Ample Organics, and Trellis provide SaaS offeringsfor legal cannabis, hemp and CBD businesses. We provide government-licensed cultivators, manufacturers, distributors, and retail dispensarieswith a data-driven seed-to-sale tracking platform that provides clients with an enterprise resource planning solution for managing theirinventory and regulatory compliance. Akerna’s products and ecosystem of connections are used by clients to compliantly track inventorythrough all phases of the seed-to-sale cycle - from cultivation to extraction and infusion to packaging, distribution and retail sales.Data points are collected at every stage of the product life cycle and about multiple aspects of the plant’s growing environment,manufacturing processes, and ingredients, as well as retail pricing and purchase data. In Canada, the first G7 country with a federallylegal market, we have a pharmacy portal and insurance adjudication.

We service licensed operators in all verticals of the industry, including cultivation, manufacturing, distribution, and retail dispensaries.We have significant client presence for our commercial software solutions in mature cannabis markets such as Arizona, California, Michigan,Pennsylvania, Colorado, Utah, Illinois, Oklahoma, and Puerto Rico, as well as Canada.

We have exclusivity in the Pennsylvania and Utahmarkets due to our government contracts, which require operators in the states to use MJ Platform.

Solo Sciences - Anti-counterfeiting Technology

Solo is a technology provider for legal cannabisbusinesses with a focus on providing a cannabis tracking technology that provides seed-to-sale-to-self data throughout a product’slife cycle and empowers consumers with the ability to confirm the quality and authenticity of a product they have purchased.

Solo uses proprietary technology to place a uniqueencrypted arrangement of patterns, the solo*TAG^TM or solo*CODE^TM, onto individual packaging labels. Solo technologyis significantly lower cost and more secure than traditional tagging technologies like radio-frequency identification. The technologyincludes a free consumer mobile application, granting end-users and regulatory agencies the ability to track products in the supply chain,verify their authenticity, and learn more detailed information about the product such as its origins and ingredients.

The Solo technology platform also enables brandsto connect directly with consumers. Through it, product creators can provide end-users with push notifications, targeted news, productinsights, loyalty points, etc. Brands embrace the platform as it enables them to increase their revenues and create a more tailored marketingexperience. Clients benefit from product incentives while gaining trust in the products they are buying and consuming.

Solo has developed several key partnerships includingthe Utah Department of Health and Department of Agriculture, through Akerna’s Leaf Data Systems contract including solo*TAG^TM,,a key tagging and technology component in a closed-loop system used by all Utah cannabis licensees as the state’s primary trackingsystem at the retail, wholesale, cultivation, and manufacturing levels.

Enterprise Market:

Akerna’s Enterprise product suite providesa comprehensive vertically integrated cannabis ERP and business management software system with a choice of being built on the MicrosoftDynamics 365 Business Central platform or the SAP Business One platform. Our enterprise products were built by cannabis experts withcannabis-specific functionality built into the core of the solution and are designed to meet present and future needs of growing businesses.The software solutions allow business clients to manage their entire operations from cultivation to retail and incorporates Cultivation,Production, Global Compliance, QC, Finance, Dispensing & Retail, CRM, Warehousing, Distribution, Multi-Facility, Multi-Company, Multi-Entity,Language, Currency and more with a client base comprised of leading U.S.-based MSOs and single-state operators, and Canadian LPs, inaddition to global cannabis clients outside North America. Our enterprise offerings leverage shared Akerna infrastructure for accessto Akerna’s broad ecosystem of offerings and to facilitate compliance with our up-to-date regulatory integrations, unparalleledstate and country reporting knowledge, and dedicated team of compliance experts.

Government Market:

Leaf Data Systems - Government RegulatorySoftware

Leaf Data Systems is our SaaS product for governmentagencies. Leaf Data Systems provides regulatory authorities with visibility into the operations of licensed medical and recreationalcannabis businesses. Government regulators desire visibility at critical junctures within the seed-to-sale chain of custody in orderto ensure public safety, monitor sales data for the purposes of taxation, and perform physical inspections of cannabis industry facilities.Leaf Data Systems allows for specific data points captured during these workflows to be compiled into the state and regional view retrievableby regulatory officials.

Licensed cannabis facilities within a state cantrack plant and product movement and waste across their organization, which is processed into reporting tailored to the government agenciesthat regulate and enforce the rules of the industry. This gives regulators a tool for transparency and accountability across the cannabissupply chain to ensure public and product safety as well as to monitor sales and inventory within the industry. Leaf Data Systems iscustomized to the regulations of the state in which it is contracted and tailored to capture the relevant data points desired by regulatoryofficials.

As of the date of this report, Leaf Data Systemsserves two state clients, the Commonwealth of Pennsylvania and the State of Utah. The State of Utah mandates the use of our proprietarysolo*TAG^TM the world’s first cryptographically-secure, cannabis product authentication system, exclusively for governmentsas an alternative to radio-frequency identification tracking. This customized system includes an electronic verification and inventorycontrol system to track plants and products throughout the compliance supply chain.

Business Intelligence and Data Analytics Products

We have four data products: MJ Analytics (“MJA”);and Akerna Acumen Big Data, which both leverage the extensive data captured in each of MJ Platform’s cultivation, E&I, distribution,and retail modules; AmpleData, which leverages data obtained through Canadian regulated retail channels; and Last Call Analytics, whichprovides retail sales analytics for alcohol brands.

MJ Analytics

MJA gives MJ Platform clients access to aggregatedata across their organization to keep track of emerging legal and commercial trends, allowing for informed actionable insights at variouslevels within the organization, including room, location, state, brand, and administration. MJ Platform allows users to align their operationaldata from three vantage points: in real-time, past trends, and predictive future. This proprietary database assists the user in makingimportant decisions in real-time with respect to product monitoring, tracking, planning, and pricing.

Built in partnership with Domo and Snowflake,MJA is monetized through the provision of Data Analytics subscriptions to clients. We typically grant a limited, non-exclusive, non-sublicensablelicense to use our industry data for internal management, reporting, and business optimization purposes. The information typically suppliedto clients is aggregated and anonymized information regarding products, which may or may not be those of the client, sold through salesgenerated through our online service platforms.

Akerna Acumen Business Intelligence 

We have cultivated a substantial legal cannabisdataset with over $30 billion in sales tracked and twelve years of data across 30+ states and multiple countries. With the contractualability to aggregate and anonymize this data, we have launched the Akerna Acumen product to provide banks, investors, researchers, cannabisbusinesses, and non-cannabis businesses with cannabis market intelligence and valuable market comparison data. The data is availablein various formats and is available with updates as frequently as daily.

Last Call Analytics & Ample Data

Ample’s wholly owned subsidiary, Last CallAnalytics (“LCA”), is a retail analytics platform designed for the beverage alcohol industry, with a focus on allowing ourclients to use data to empower retail operations and generate revenue growth. The platform ingests sales and product data from a widevariety of sources, normalizes and homogenizes the dataset, and displays the resultant analysis in a proprietary application. 

With the underlying technologies built by LCA,Ample has created AmpleData, a retail analytics platform for the cannabis industry that applies the same proven solution to data streamsingested from various points within the regulated supply chain. Ample Data is designed to provide key insights for Canadian cannabislicense holders, cannabis agencies and government regulators.

Cannabis Business Consulting

We provide project-focused consulting servicesto clients that are initiating or expanding their cannabis businesses or are interested in data consulting engagements regarding thelegal cannabis industry. We typically provide our consulting services to clients in emerging markets that are seeking consultation onnewly introduced licensing regimes and assistance with the regulatory compliant build-out of operations in newly opened states.

Entering the cannabis industry is a significantundertaking. We work with clients to efficiently comply with state requirements in connection with the launch and operations of theircannabis businesses. Our management and key personnel bring deep cannabis industry experience to us. Our management team and key personnelhave broad experience gained from working with numerous cannabis businesses, with operational experience across every vertical (e.g.,cultivation, processing, and retail). Our team members have previously managed projects, including cultivation facilities exceeding 100,000 squarefeet, retail operations with locations in multiple states, and online businesses serving an entire country.

Competitive Advantage

Partner API. We host an open API ecosystemand are continually developing and maintaining an extensive collection of integrations that are designed to connect our solutions toover 80 partners, provide full-service solutions at all points in the cannabis business life cycle, including compliance, hardware, banking,accounting, online ordering, payment solutions, CRM and loyalty, delivery, and business analytics. We believe these integrations providea competitive advantage as they reduce implementation time, effort, and cost while providing a holistic cannabis solution; We have certifiedAPI integration with tier one ERP software providers supplying sophisticated accounting solutions that collect and store business transactionsto satisfy external reporting requirements. Additionally, we leverage revenue sharing agreements and referral programs with our strategicpartners to further grow our business and our revenue.

Technology. As the inventors of Seed-To-Saletechnology, our proprietary platform is an AWS cloud-based software solution. We offer specialized cannabis workflows specific to theneeds of the industry. We serve all verticals of the cannabis supply chain (cultivation, manufacturing, distribution, retail and delivery).We are one of the few true, single-platform Seed-To-Sale solutions in the cannabis space, and the sophistication of our technology allowsus to uniquely scale across legal markets. Our platform has processed over $30 billion in legal cannabis sales, with speed, reliability,and security capabilities designed to serve the needs of even the largest of enterprise customers. Compliance with state regulationsis built into our platform infrastructure, assisting clients in their efforts to operate within the regulation parameters of their individualmarkets. The business insights provided by the data collection throughout the supply chain enables businesses to optimize their operationsand make crucial data-driven decisions for their business. These insights are easily analyzed and made actionable by our MJ Analyticsmodule, built in partnership with Domo, a leading BI platform.

Learning Management System. Through ourlicense with ZolTrain, we are able to provide our Akerna clients with training modules to educate and on-board their staff and improvethe patient /consumer experience by pairing education with product information both in person and through digital channels. The Zoltrainplatform allows cannabis employees to self-direct their own learning and certification through an Akerna specific curriculum, and theiremployers are able to monitor and track their progress, assisting clients in ensuring that their staff is fully trained and knowledgeableabout the software they are required to use within their job functions. This is one of the only LMS platforms specifically designed bothfor the industry and for our software. It provides detailed notes, takeaways, scored exams and certificates of completion, ensuring staffknows their Seed-To-Sale software inside and out. Zoltrain modules are dynamic, and can be easily updated to accommodate new contentor education on new product offerings. The AmpleLearn platform is a similar onboarding and education tool developed for Ample Organicsclients to assist with building their proficiency using the software in Canada. Similar to Zoltrain, AmpleLearn is built on industrytested content within a dynamic learning environment. There are assessments, progress reports and certifications that are all availableto both the employee and their supervisor. The AmpleLearn product is maintained by the internal team at Ample Organics, ensuring thatthe content is always up-to-date with the most recent software upgrades and functionality.

Strategy

We intend to leverage our scale and capital marketsaccess to pursue additional growth through organic initiatives and to pursue our ecosystem strategy which leverages integrations, partnerships,and inorganic growth. We believe having a scaled ecosystem gives us more opportunities to leverage our footprint and increase walletshare by providing more value to our clients through having what we believe is the most robust cannabis technology suite available. Weintend to pursue additional growth through organic initiatives, including increased marketing personnel and resources, acquisitions,and strategic relationships.

Customers 

Businesses across the cannabis and hemp industriesand of all sizes, ranging from small, single location/ single vertical businesses to multi-state enterprise operations, use the Akernafamily of solutions. The cannabis industry is still very much in its infancy compared to more established markets, and as it matures,we are seeing a shift in the typical business model. In the beginning, most operators only managed a single location, or a single verticaloperation, and therefore many of our longer-standing clients fall into the small to mid-market size business. Over the past few years,and significantly expedited by the COVID-19 pandemic, we are witnessing large-scale, rapid consolidation within the industry. Many ofthe original small licensees are being purchased and assumed into larger, multi-state, enterprise level organizations. Our software solutionsare designed to be scalable, and as we see this shift in the market, we are focused on extending our customer reach to address the needsof the emerging enterprise level operator. We believe these larger multi-state/multi-vertical operations represent significant long-termfuture growth opportunities as the cannabis industry continues to consolidate. As more states legalize, these operators are identifyingfuture growth opportunities into these expanded legal markets and need a software solution that can grow with them.

Sales and Marketing 

We sell our solutions primarily on a subscriptionbasis with module-based and user-seat pricing, allowing businesses to customize their solution based on their specific business modelor vertical. With our integrations to major accounting solutions and cannabis service providers, we are able to customize solutions forall sizes and types of businesses. To gain market share and expand beyond the small to mid- size market, Akerna invests in specializedgo-to-market strategies for sales and marketing unique to each state and customer segment.

Our omnichannel marketing program, which includespaid and unpaid digital advertising, event marketing, account-based marketing, content marketing, prospect database nurturing, and otherdigital marketing activities, is designed to capture inbound marketing leads. We also leverage our expertise and industry intelligenceto identify and engage directly with our prospective customers, especially at the enterprise level. Additionally, we have a broadecosystem of partners across the cannabis industry and have selectively implemented referral and revenue sharing opportunities with thekey players.

We reach each market segment, from emerging smallbusiness to enterprise, through channels and tactics that match their expectations for content, outreach, timeliness, and service level.This can require high touch service for some enterprise customers, with more a traditional purchase path for the smallest companies.We hire and train both sales and marketing professionals specialized for the market and the customer segment.

For growth in the regulatory and consulting side,we stay current on emerging legal markets, both nationally and globally to actively conduct outreach and education programs to engagewith state regulators and business owners. This strategy strongly supports the growth of our consulting client bases, as we provide licenseapplication assistance in new markets, and require in-depth understanding of the regulatory guidelines to be able to successfully winlicenses for our customers. We leverage our expertise to provide thought-leadership and industry guidance in order to gain recognitionas a leader in the space.

Government Regulation 

Cannabis and Cannabis-derived Products

We do not grow, handle, process, or sell cannabisor cannabis-derived products, nor do we ever possess any such material or process any transactions related to the sale of the same. Weonly provide a technology platform for our clients to assist them with their compliance with state law and to monitor and control theirinventory in compliance with state regulatory environments. We do not receive any commissions from sale by our clients and our revenuegeneration is not based on the sales of cannabis products by our clients, but rather we generate revenues through a fixed-fee based subscriptionand professional services revenue model. We are not directly subject to state or federal government drug regulation and our productsare only intended to be used to assist with compliance with applicable state laws, under which our clients operate.

Our clients are subject to state and federallaw as it relates to cannabis growth, processing, and sale. 37 U.S. states have legalized cannabis in some form. The federal governmentregulates drugs through the Controlled Substances Act (CSA) (21 U.S.C. § 811), which does not recognize the difference between medicaland recreational use of cannabis. State laws regulating cannabis are in direct conflict with the CSA, which prohibits cannabis use andpossession. Although certain states and territories authorize medical or recreational cannabis cultivation, manufacturing, production,distribution, and sales by licensed or registered entities, under federal law, the cultivation, manufacture, distribution, possession,use, and transfer of cannabis and any related drug paraphernalia, unless specifically exempt, is illegal and any such acts are criminalacts under the CSA.

While the U.S. Department of Justice has usedprosecutorial discretion to not prioritize enforcement actions against state-legal cannabis businesses that are compliant with state,county, municipal and other local laws and regulations and which do not trigger any other federal enforcement priorities, the Departmentof Justice reserves the right to enforce federal law and there can be no assurance that the federal government will not enforce the CSAand related federal laws in the future. Any shift in enforcement priority at the Department of Justice or with the individual U.S.Attorneys with jurisdiction over our clients, could have a drastic and adverse impact upon our clients and our business.  

While we do not grow, handle, process or sellcannabis or cannabis-derived products, our receipt of funds from clients that do conduct such operations in violation of federal lawexposes us to risks related to federal racketeering laws. The Racketeer Influenced Corrupt Organizations Act (“RICO”) isa federal statute providing criminal penalties in addition to a civil cause of action for acts performed as part of an ongoing criminalorganization. Under RICO, it is unlawful for any person who has received income derived from a pattern of racketeering activity (whichincludes most felonious violations of the CSA), to use or invest any of that income in the acquisition of any interest, or the establishmentor operation of, any enterprise which is engaged in interstate commerce. RICO also authorizes private parties whose properties or businessesare harmed by such patterns of racketeering activity to initiate a civil action against the individuals involved. Although RICO suitsagainst the cannabis industry are rare, a few cannabis businesses have been subject to a civil RICO action.

Our receipt of payments from clients engagedin state-legal cannabis operations could also subject us to the consequences of a variety of federal laws and regulations that involvemoney laundering, financial record keeping and proceeds of crime, including the Bank Secrecy Act, as amended by Title III of the Unitingand Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act) andany related or similar rules, regulations or guidelines, issued, administered or enforced by the federal government. Because the fundsfrom activities that are illegal under the CSA, banks and other financial institutions providing services to us risk violation of federalanti-money laundering statutes (18 U.S.C. §§ 1956 and 1957), the unlicensed money-remitter statute (18 U.S.C. § 1960)and the Bank Secrecy Act, among other applicable federal statutes. Banks often refuse to provide banking services to businesses involvedin the cannabis industry due to the present state of federal laws and regulations governing financial institutions. The lack of bankingand financial services presents unique and significant challenges to businesses in the cannabis industry and we may experience similardifficulties in obtaining and maintaining regular banking and financial services because of the activities of our clients.

Any violations of federal laws and regulationscould result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conductedby either the federal government or private citizens or criminal charges, including but not limited to, seizure of assets, disgorgementof profits, cessation of business activities or divestiture. In the event that any of our operations, or any proceeds thereof, anydividends or distributions therefrom, or any profits or revenues accruing from such operations were found to be in violation of moneylaundering legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more of the statutes noted aboveor any other applicable legislation. This could restrict or otherwise jeopardize our ability to declare or pay dividends or effect otherdistributions. Furthermore, while there are no current intentions to declare or pay dividends in the foreseeable future, in the eventthat a determination was made that our proceeds from operations (or any future operations) could reasonably be shown to constitute proceedsof crime, we may decide or be required to suspend declaring or paying dividends without advance notice and for an indefinite period oftime.

Privacy & Customer Data

Regulation related to the provision of servicesover the Internet is evolving, as federal, state, and foreign governments continue to adopt new, or modify existing, laws and regulationsaddressing data privacy and the collection, processing, storage, transfer, and use of data. In some cases, data privacy laws and regulations,such as the European Union’s (“EU”) General Data Protection Regulation (“GDPR”) that took effect in May2018, impose new obligations directly on us as both a data controller and a data processor, as well as on many of our clients. In addition,domestic data privacy laws, such as the California Consumer Privacy Act (“CCPA”), which took effect in January 2020, continueto evolve and could expose us to further regulatory burdens. Further, laws such as the EU’s proposed e-Privacy Regulation are increasinglyaimed at the use of personal information for marketing purposes and the tracking of individuals’ online activities.

Although we monitor the regulatory environmentand have invested in addressing these developments, such as GDPR and CCPA readiness, these laws may require us to make additional changesto our services to enable us or our clients to meet the new legal requirements, and may also increase our potential liability exposurethrough higher potential penalties for non-compliance. These new or proposed laws and regulations are subject to differing interpretationsand may be inconsistent among jurisdictions. These and other requirements could reduce demand for our services, require us to take onmore onerous obligations in our contracts, restrict our ability to store, transfer, and process data or, in some cases, impact our abilityor our clients’ ability to offer our services in certain locations, to deploy our solutions, to reach current and prospective customers,or to derive insights from customer data globally. The costs of compliance with, and other burdens imposed by, privacy laws, regulations,and standards may limit the use and adoption of our services, reduce overall demand for our services, make it more difficult to meetexpectations from or commitments to clients, lead to significant fines, penalties or liabilities for non-compliance, impact our reputation,or slow the pace at which we close sales transactions, any of which could harm our business.

Furthermore, the uncertain and shifting regulatoryenvironment and trust climate may cause concerns regarding data privacy and may cause our clients or our clients’ customers toresist providing the data necessary to allow our clients to use our services effectively. Even the perception that the privacy of personalinformation is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our products or servicesand could limit the adoption of our cloud-based solutions.

Patents and Trademarks

We primarily rely upon a combination of confidentialityprocedures, contractual provisions, copyright, trademark, patent, and trade secret laws, and other similar measures to protect our proprietaryinformation and intellectual property. 

We hold 2 patents in the U.S., through Solo,related to its Solo*ID proprietary technology. One patent has an issue date of December 1, 2009 and is set to expire on December1, 2029. The other patent has an issue date of May 31, 2011 and is set to expire on July 11, 2025. We also have 2 patent applicationsthat are currently pending action by the U.S. Patent Office. One was filed on April 22, 2011 by MJF and the other was filed on January22, 2022 related to Solo blockchain technology.

We and our wholly-owned subsidiaries hold 19trademarks in the U.S., principally related to Akerna, MJ Freeway, Leaf Data Systems, our Daily Dose mailer, Solo*ID and our logos anddesigns, 7 in Canada, principally related to Ample, AmpleCentral, AmpleData, AmpleExchange and Ample’s logos and designs and 1in Colombia, 1 in Jamaica and 1 on EUIPO related to Ample’s logo and designs. 

Employees

As of December 31, 2021, we had 204 full time employees. Of these employees,157 were based in the U.S. and 47 were based in Canada. Our workforce is highly educated, with most of our employees working in engineering,technical, or professional roles. None of our employees are a member of a union or a party to any collective bargaining agreement. Webelieve our employee relations are good. On May 27, 2022, the Company announced its implementation of certain expense reduction measures,approved by the Company’s board of directors on May 24, 2022, including a reduction of the Company’s workforce by 59 full-timeemployees, or approximately 33% of the Company. See “Recent Developments” above for more information.

Company Information

Emerging Growth Company

We are an “emerging growth company”as defined in the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”) because we went public in the U.S. in January2018 and meet the criteria outlined in the JOBS Act. We will remain an emerging growth company until up to the last day of the fiscalyear following the fifth anniversary of our initial public offering, or until the earliest of  (i) the last day of the first fiscalyear in which our annual gross revenue exceeds $1.07 billion, (ii) the date that we become a “large accelerated filer” asdefined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliatesexceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we haveissued more than $1 billion in non-convertible debt during the preceding three-year period. As allowed by the JOBS Act, we have electedto utilize the extended transition period provided to non-public companies for complying with new or revised accounting standards.

DESCRIPTION OF PROPERTY

Our corporate headquarters are located in Denver,Colorado, although we do not lease or own any real property associated with our corporate headquarters as our workforce is primarilyremote. We have one facility that we lease in Las Vegas, Nevada which serves as office space for our Las Vegas based employees. We believethat our existing facilities are adequate for our current needs and that suitable additional or alternative space would be availableto us to lease on commercially reasonable terms if and when we need it.  

LEGAL PROCEEDINGS

We are not a party to any material pending legalproceedings, and no such proceedings are known to be contemplated.

From time to time, we may become involved inother legal proceedings or be subject to claims arising in the ordinary course of our business. Regardless of the outcome of any existingor future litigation, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources,and other factors.

MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDERMATTERS

Market Information

Ourcommon stock is listed on the Nasdaq Capital Market under the trading symbol “KERN”. As of June 3, 2022, we had 36,574,158 shares of common stock issued and outstanding and approximately238  registered shareholders. Because many of our shares of commonstock are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholdersrepresented by these record holders.

Purchases of Equity Securities by the Companyand Affiliates

None.

2019 Long Term Incentive Plan Summary

The purpose of the Incentive Plan is to enableAkerna to offer its employees, officers, directors and consultants whose past, present and/or potential future contributions to Akernahave been, are, or will be important to its success, an opportunity to acquire a proprietary interest in Akerna. The various types ofincentive 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 compensationcommittee of the Akerna Board (the “Compensation Committee”) or by the full Akerna Board, which may determine, among otherthings, (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 sharesof common stock to be covered by, or with respect to what payments, rights, or other matters are to be calculated in connection withthe awards, (4) the terms and conditions of any awards, (5) whether, to what extent, and under what circumstances awards may be settledor exercised in cash, shares of common stock, other securities, other awards or other property, or cancelled, forfeited, or suspendedand 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 otheramounts payable with respect to an award, and (7) make any other determination and take any other action that the Compensation Committeedeems necessary or desirable for the administration of the Incentive Plan.

Stock Options

Stock options granted under the Incentive Planmay be of two types: (i) Incentive Stock Options (as defined in the Incentive Plan) and (ii) Non-qualified Stock Options (as definedin the Incentive Plan). Any stock option granted under the Incentive Plan shall contain such terms, as the Compensation Committee mayfrom time to time approve.

The term of each stock option shall be fixedby the Compensation Committee; provided, however, that no stock option may be exercisable after the expiration of ten years from thedate of grant; provided, further, that no Incentive Stock Option granted to a person who, at the time of grant, owns stock possessingmore than 10% of the total combined voting power of all classes of voting stock of Akerna (“10% Shareholder”) may be exercisableafter the expiration of five years from the date of grant.

The exercise price per share purchasable undera stock option shall be determined by the Compensation Committee at the time of grant; provided, however, that the exercise price ofa stock option may not be less than 100% of the fair market value on the date of grant; provided, further, that the exercise price ofan 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 AppreciationRights in tandem with a stock option or alone and unrelated to a stock option. The Compensation Committee may grant stock appreciationrights to participants who have been or are being granted stock options under the Incentive Plan as a means of allowing such participantsto exercise their stock options without the need to pay the exercise price in cash. In the case of a Non-qualified Stock Option, a stockappreciation right may be granted either at or after the time of the grant of such Non-qualified Stock Option. In the case of an IncentiveStock Option, a stock appreciation right may be granted only at the time of the grant of such Incentive Stock Option. Stock appreciationrights shall be exercisable as shall be determined by the Compensation Committee. All or a portion of a stock appreciation right grantedin tandem with a stock option shall terminate and shall no longer be exercisable upon the termination or after the exercise of the applicableportion of the related stock option.

Restricted Stock and Restricted Stock Units

Shares of restricted stock may be awarded eitheralone or in addition to other awards granted under the Incentive Plan. The Compensation Committee shall determine the eligible personsto whom, and the time or times at which, grants of restricted stock will be awarded, the number of shares to be awarded, the price (ifany) to be paid by the holder, any restriction period, the vesting schedule and rights to acceleration thereof, and all other terms andconditions of the awards. In addition, the Compensation Committee may award restricted stock units, which may be subject to vesting andforfeiture conditions during the applicable restriction period, as set forth in an agreement.

Restricted stock constitutes issued and outstandingshares of common stock for all corporate purposes. The holder will have the right to vote such restricted stock and to exercise all otherrights, 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 applicablerestrictions, 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 tosuch restricted stock.

The Compensation Committee may provide that settlementof restricted stock units will occur upon or as soon as reasonably practicable after the restricted stock units vest or will insteadbe deferred, on a mandatory basis or at the holder’s election, in a manner intended to comply with tax laws. A Holder will haveno rights of a holder of common stock with respect to shares subject to any restricted stock unit unless and until the shares are deliveredin settlement of the restricted stock unit. If the Committee provides, a grant of restricted stock units may provide a holder with theright to receive dividend equivalents.

Other Stock-Based Awards

Other Stock-Based Awards may be awarded, subjectto limitations under applicable law, that are denominated or payable in, valued in whole or in part by reference to, or otherwise basedon or related to, shares of common stock, as deemed by the Compensation Committee to be consistent with the purposes of the IncentivePlan, 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 thevalue of securities of or the performance of specified subsidiaries.

Change of Control Provisions

The Incentive Plan provides that in the eventof a change of control event, (1) all of the then outstanding options and stock appreciation rights granted pursuant to the IncentivePlan will immediately vest and become immediately exercisable as of a time prior to the change in control and (2) any performance goalrestrictions related to an award will be deemed achieved at 100% of target levels and all other conditions met as of a time prior tothe change in control. In the event of the sale of all of Akerna’s assets or a change of control event, then the Compensation Committeemay (1) accelerate the vesting of any and all Stock Options and other awards granted and outstanding under the Incentive Plan; (2) requirea 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 respectof awards in effect on the date the acquisition occurs, determine the extent to which performance goals have been met based upon suchinformation then available as it deems relevant and cause to be paid to the holder all or the applicable portion of the award based uponthe Compensation Committee’s determination of the degree of attainment of performance goals, or on such other basis determinedby the Compensation Committee.

The Akerna Board may at any time, and from timeto time, amend alter, suspend or discontinue any of the provisions of the Incentive Plan, but no amendment, alteration, suspension ordiscontinuance shall be made that would impair the rights of a holder under any agreement theretofore entered into hereunder, withoutthe 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 stockholderapproval is necessary to satisfy any provision of the Ethics Code or other applicable law or the listing requirements of any nationalsecurities exchange on which Akerna’s securities are listed.

Equity Compensation Plans

Thefollowing table  provides information as of December 31, 2021, withrespect to the shares of our common stock that may be issued under our existing equity compensation plans:

MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion andanalysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewherein this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors,including, but not limited to, those set forth under “Risk Factors” and “Note Regarding Forward-Looking Statements”above.

Akerna is the leading provider of enterprisesoftware solutions within the cannabis industry. By providing an integrated ecosystem of applications and services that enables compliance,regulation, consumer safety and taxation, Akerna is building the technology backbone of the cannabis industry. Our solutions provideclients with integrated security, transparency, and scalability capabilities, all while maintaining compliance with their governing regulations.

We intend to leverage our scale and capital marketsaccess to pursue additional growth through organic initiatives and to pursue our ecosystem strategy which leverages integrations, partnerships,and inorganic growth. We believe having a scaled ecosystem gives us more opportunities to leverage our footprint and increase walletshare by providing more value to our clients through having what we believe is the most robust cannabis technology suite available. Weintend to pursue additional growth through organic initiatives, including increased marketing personnel and resources, acquisitions,and strategic relationships. We will continue scaling our platform for continued growth, adding new features and functionality, supportingnew products and content types, and improving the user experience.

We offer our software solutions to our customersas a subscription-based service. Subscription fees are based upon the chosen package which includes differentiated platform capabilities,support and user accounts. As customers recognize the value of our platform, we increasingly engage with them to facilitate broad adoptionacross other parts of their business.

We believe having a scaled ecosystem gives usmore opportunities to leverage our footprint and increase wallet share by providing more value to our clients through having what webelieve is the most robust cannabis technology suite available. In order to accelerate customer growth, we intend to pursue additionalinitiatives, including increased marketing personnel and resources, acquisitions, and strategic relationships. We believe we are underpenetratedin the overall market and have significant opportunity to expand our customer base over time.

We have invested in professional services, customersupport and customer success functions to support our sales force by helping customers successfully deploy our platform. We activelyengage with our customers to assess whether they are satisfied and fully realizing the benefits of our platform. While these effortsoften require a substantial commitment and upfront costs, we believe our investment in product, customer support, customer success andprofessional services will create opportunities to expand our customer relationships over time.

We plan to continue to make investments in areasof our business to continue to expand our platform functionality to enhance current offerings and build new features.

On April 1, 2021 and October 1, 2021, we completedour acquisitions of Viridian and 365 Cannabis which is reflected in the consolidated financial statements for the fiscal year ended December31, 2021. The impact of the acquisition is discussed in our results of operations below.

Key Business Metrics

In addition to our results determined in accordancewith U.S. Generally Accepted Accounting Principles, or GAAP, we believe earnings before interest, taxes, depreciation and amortization,or EBITDA, and Adjusted EBITDA are useful in evaluating our operating performance. We use EBITDA and Adjusted EBITDA, to evaluate ourongoing operations and for internal planning and forecasting purposes. Please see the heading Non-GAAP Financial Measures for additionaldiscussion and a reconciliation of GAAP net loss to these non-GAAP measures.

Impact of COVID-19

In December 2019, COVID-19 was first reported.After ongoing assessment of the rapid spread, number of cases and countries affected, on March 11, 2020, the World Health Organizationcharacterized COVID-19 as a pandemic. The COVID-19 pandemic has created significant global economic uncertainty, impacted the businessof our clients, impacted our consulting business and our results of operations and could further impact our results of operations, andour cash flows in the future.

The COVID-19 pandemic impacted our clients’business and the industry. Nearly every state and country where medical and adult use cannabis was legal declared access essential, whichwe believe is a significant shift in sentiment. Our clients also have experienced increased consumer demand throughout the year, includingduring the pandemic. We believe COVID-19 has accelerated consolidation in the cannabis industry. At the peak of the crisis, cannabiscompanies lost on average 75% to 90% of their value, however, industry sales in 2021 increased 40% over 2020. As we move towards economicrecovery from the pandemic, more state governments are looking to cannabis legalization to generate tax revenue and create jobs. Duringthe November 2020 election, a total of 7 initiatives in 5 states passed with overwhelming majority support, showing increased bi-partisansupport. These initiatives bring the total number of states with legal, medical markets to 36 and adult-use markets to 17, plus Washington,DC. Various additional states have pending legislation aimed at expanding or adding legalization to their markets. In terms of job creation,over 107,059 jobs were added to the cannabis workforce in 2021, raising the total number of full-time equivalent jobs in the industryto 428,059.

The ultimate extent of the impact of the COVID-19pandemic on our operational and financial performance will depend on certain developments, including the duration of the outbreak, theseverity of the disease, responsive actions taken by public health officials, the impacts on our clients and our sales cycles, our abilityto generate new business, the impacts on our clients, employee and industry events, and the effects on our vendors, all of which areuncertain and currently cannot be predicted. As a result, the extent to which the COVID-19 pandemic will continue to impact our financialcondition or results of operations is uncertain. Due to our subscription-based business model, the effect of the COVID-19 pandemic maynot be fully reflected in our results of operations until future periods. If the COVID-19 pandemic has a substantial impact on our employees’,partners’ or clients’ productivity, our results of operations and overall financial performance may be harmed.

See the section entitled “Risk Factors”for further discussion of the impact and possible future impacts of the COVID-19 pandemic on our business.

Strategic Acquisitions

We have pursued and expect to continue to pursueacquisitions that align with our strategic objectives to build relevant content, technology, and expertise to best serve our currentand future customers. Accordingly, the comparability of periods covered by our consolidated financial statements are, and in the futuremay be, affected by the impact of these acquisitions.

Components of Results of Operations

Revenue

We generate revenue from two primary sources:(1) software and (2) consulting services. Revenue from software comprised approximately 92%, 86% and 79% of our revenue for the yearended December 31, 2021, six months ended December 31, 2020, and year ended June 30, 2020, respectively. Revenue from consultingservices comprised approximately 7%, 12% and 19% of our revenue for the year ended December 31, 2021, six months ended December 31, 2020,and year ended June 30, 2020, respectively. Revenue from software comprised approximately 94% and 95% of our revenue for the three monthsended March 31, 2022 and 2021, respectively. Revenue from consulting services comprised approximately 6% and 4% of our revenue for threemonths ended March 31, 2022 and 2021, respectively.

Software. Our software is solutioned forour key markets, SMB and enterprise customers. Our SMB customers become a natural funnel for our larger, more robust enterprise offeringsbuilt on SAP and Microsoft. In either market, software revenue is generated from subscriptions and services related to the use of ourcommercial software platforms, MJ Platform, Ample, Trellis, Viridian, and 365 Cannabis, our government regulatory platform, Leaf DataSystems, and the sale of business intelligence, data analytics and other software related services. Software contracts are generallyquarterly or annual contracts paid monthly, quarterly, or annually in advance of service and cancellable upon 30 or 90 days’ notice,although we do have many multi-year commercial software contracts. Leaf Data Systems contracts are generally multi-year contracts payableannually or quarterly in advance of service. Commercial software and Leaf Data Systems contracts generally may only be terminated earlyfor breach of contract as defined in the respective agreements. Amounts that have been invoiced are initially recorded as deferred revenueor contract liabilities. Subscription revenue is recognized on a straight-line basis over the service term of the arrangement beginningon the date that our solution is made available to the customer and ending at the expiration of the subscription term.

Consulting Services. Consulting servicesrevenue is generated by providing solutions for operators in the pre-application of licensures and pre-operational phases of development.These services include application and business plan preparation as they seek licenses to be granted. Consulting projects completed duringthe pre-application phase generally solidify us as the software vendor of choice for subsequent operational phases once the operatoris granted the license. As a result, our consulting revenue is driven as new emerging states pass legislation, and as our client-operatorsgain licenses. Accordingly, we expect our consulting services to grow over time as more states emerge with legalization reforms.

Other Revenue. Our other revenue is derivedprimarily from point-of-sale hardware and other non-recurring revenue.

Cost of Revenue and Operating Expenses

Cost of Revenue

Our cost of revenue is derived from direct costsassociated with operating our commercial and government regulatory software platforms and providing consulting services. The cost ofrevenue for our commercial and government regulatory platforms relates primarily to hosting and infrastructure costs and subcontractorexpenses incurred in connection with certain government contracts. Consulting cost of revenue relates primarily to our employees’and consultants’ salaries and other related compensation expenses. We record the cost of revenue using the direct cost method.This method requires the allocation of direct costs including support services and materials to the cost of revenue. 

Product Development Expenses

Our product development expenses include salariesand benefits, nearshore contractor expenses, technology expenses, and other overhead related to the ongoing maintenance of our commercialand government regulatory software platforms and planning for new software development. Product development costs, other than softwaredevelopment expenses qualifying for capitalization, are expensed as incurred. Capitalized software development costs consist primarilyof employee-related costs. We devote substantial resources to enhancing and maintaining our technology infrastructure, developing newand enhancing existing solutions, conducting quality assurance testing, and improving our core technology.

Sales and Marketing Expenses

Sales and marketing expense is primarily salariesand related expenses, including commissions, for our sales, marketing, and client service staff. We also categorize payments to partnersand marketing programs as sales and marketing expenses. Marketing programs consist of advertising, events, such as trade shows, corporatecommunications, brand building, and product marketing activities. We plan to continue to invest in marketing and sales by expanding ourdomestic and international selling and marketing activities, building brand awareness, attracting new clients, and sponsoring additionalmarketing events. The timing of these marketing events will affect our marketing costs in a particular quarter.  

We defer the portion of sales commissions thatis considered a cost of obtaining a new contract with a customer in accordance with the revenue recognition standard and amortize thesedeferred costs over the period of benefit, currently one year. We expense the remaining sales commissions as incurred. The rates at whichsales commissions are earned varies depending on a variety of factors, including the nature of the sale (new, renewal, or add-on serviceoffering), the type of service or solution sold, and the sales channel.

General and Administrative Expenses

Our general and administrative expenses includesalaries and benefits and other costs of departments serving administrative functions, such as executives, finance and accounting, humanresources, public relations and investor relations. In addition, general and administrative expense includes non-personnel costs, suchas professional fees and other supporting corporate expenses not allocated to cost of revenue, product and development or sales and marketing.

Total Other (Income) Expense, Net

Total other (income) expense, net consists ofinterest income on cash and cash equivalents, interest expense on our debt, quarterly remeasurement of the fair value of our convertiblenotes and derivative liability, foreign currency gains and losses, and other nonoperating gains and losses.

Resultsof Operations for the Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021 

The following table highlights the various sourcesof revenues and expenses for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021:

nm - percentage change not meaningful

Revenue

Software Revenue

Total software revenue increased to$6.5 million for the three months ended March 31, 2022 from $3.8 million for the three months ended March 31, 2021,for an increase of $2.7 million, or 71%. Software revenue related to our enterprise offerings, Viridian and 365 Cannabis,for the three months ended March 31, 2022 were $3.0 million, compared to $0 for the three months ended March 31, 2021 and software revenuerelated to our non-enterprise offerings, which include MJ Platform, Ample, Trellis, Solo, and Leaf Data Systems, were $3.2 million forthe three months ended March 31, 2022 compared to $3.4 million for the three months ended March 31, 2021. There was also a slight decreasein partnership and data revenue which was $0.2 million for the three months ended March 31, 2022 compared to $0.4 million during the sameperiod in the prior year. Software revenue accounted for 94% and 95% of total revenue for the three months ended March 31, 2022 and 2021,respectively. As indicated above, increase in software revenue during the three months ended March 31, 2022 as compared to the three monthsended March 31, 2021 was attributable to revenue generated from our enterprise offerings.

Consulting Revenue

Consulting revenue includes revenue generatedfrom consulting services delivered to prospective and current cannabis, hemp and CBD businesses and business operators. Our consultingrevenue was $0.4 million for the three months ended March 31, 2022 compared to $0.2 million for the three months endedMarch 31, 2021, an increase of $0.2 million, or 147%. Consulting revenue was 6% and 4% of total revenue for the three months ended March31, 2022 and 2021, respectively. Due to the nature of consulting revenue, our dependence on emerging market activity and theongoing pandemic as a driver of demand, the percentage of consulting revenue over total revenue has varied from period to period dependingon whether state legislation has expanded to allow new market entrants or growth of existing market participant operations. 

Other Revenue

Other revenue includes retail/resale revenue,which is generated from point-of-sale hardware. Other revenue was less than $0.1 million for the three months ended March 31, 2022 and2021, respectively.

Cost of Revenue

Our cost of revenue was$2.2 million for the three months ended March 31, 2022 compared to $1.5 million for the three months ended March 31, 2021, anincrease of $0.7 million, or 52%. Total cost of revenue increased primarily as a result of an increase in hosting expenses of $0.3 millionand fees for SAP and Microsoft licenses in the amount of $0.5 million related to our acquisitions of Viridian and 365 Cannabis.

Gross Profit

Gross profit was $4.7million for the three months ended March 31, 2022 compared to $2.6 million for the three months ended March 31, 2021, an increase of $2.2million or 86%. Gross profit margin also increased from 64% for the three months ended March 31, 2021 to 68% for the three months endedMarch 31, 2022. This improvement in gross margin was primarily due to operating synergies realized from our acquired assets, our ongoinginitiatives to drive operating effectiveness, and acquiring additional business-to-business customers, that have a higher gross margin.

Operating Expenses

Product Development

Product development expensewas $2.1 million for the three months ended March 31, 2022, compared to $1.4 million for the three months endedMarch 31, 2021, an increase of $0.7 million, or 48%. Product development expense increased primarily due theViridian and 365 Cannabis acquisitions, which resulted in a $0.6 million increase in salary-related and contractor expenses for the threemonths ended March 31, 2022 compared to the same period in the prior year.

Sales and Marketing

Sales and marketing expensewas $3.2 million for the three months ended March 31, 2022, compared to $1.7 million for the three months ended March 31, 2021,an increase of $1.5 million, or 86%. The increase in sales and marketing expense is primarily related to the acquisitions of Viridianand 365 Cannabis which resulted in an increase of $1.6 million in salary-related and contractor expenses for the three months ended March31, 2022 compared to the three months ended March 31, 2021.

General and Administrative

General and administrativeexpense was $2.6 million for the three months ended March 31, 2022, compared to $1.9 million for the threemonths ended March 31, 2021, an increase of 0.7 million, or 39%. The increase in general and administrative expense is primarilyrelated to the termination of our Las Vegas office space during the three months ended March 31, 2022, which resulted in a restructuringcharge of $0.5 million. There was also an increase of $0.1 million in salary-related and contractor expenses as well as bad debt expenseof $0.2 million for the three months ended March 31, 2022 compared to the same period in the prior year.

Depreciation and Amortization

Depreciation and amortizationexpense increased to $2.0 million for the three months ended March 31, 2022 from $1.1 million for the three months ended March 31, 2021,an increase of $0.9 million, or 89%. The increase in amortization expense is primarily attributable to the acquired intangible assetsfrom our Viridian and 365 Cannabis acquisitions in the amount of $0.6 million, which both occurred after March 31, 2021, as well as anincrease in capitalized software in the amount of $0.4 million.

Impairment of long-livedassets

Due to a continued declinein market conditions from December 31, 2021 to March 31, 2022, we recorded an impairment charge of $15.5 million on our non-enterprisereporting unit during the three months ended March 31, 2022, compared to no impairment charge for the three months ended March 31, 2021(see Note 9 - Goodwill and Intangible Assets, Net to the unaudited consolidated financial statements for the period ended March 31, 2022for further discussion on the impairments recorded).

Resultsof Operations for the Year Ended December 31, 2021 (audited) compared with the Year Ended December 31, 2020 (unaudited) 

The following table highlights the various sourcesof revenues and operating expenses for the year ended December 31, 2021 as compared to the year ended December 31, 2020 (unaudited). Theresults for the year ended December 31, 2020 were derived by combining the audited six-month transition period ended December 31, 2020with Akerna’s three-month period ended March 31, 2020 and three-month period ended June 30, 2020:

nm - percentage change not meaningful

Total Revenue

Total revenue increased to $20.7 million for theyear ended December 31, 2021 from $13.9 million for the year ended December 31, 2020, an increase of $6.8 million, or 49%. The increasein total revenue was driven primarily by growth in our software business of $7.0 million, or 59% compared to the prior period. Thegrowth in software was offset by a decline in consulting revenue of $0.2 million, or 13%, primarily a result of government shut-down relatedto COVID-19 as discussed below.

Software Revenue

Total software revenue increased to $19.0 millionfor the year ended December 31, 2021 from $12.0 million for the year ended December 31, 2020, for an increase of $7.0 million, or 59%.Software revenue related to our enterprise offering, Viridian and 365 Cannabis, during the year ended December 31, 2021, were $4.8 millioncompared to $0 in the prior year and software revenue related to our non-enterprise offerings, which include MJ Platform, Ample, Trellis,Solo, and Leaf Data Systems, for the year ended December 31, 2021, were $12.8 million compared to $11.6 million in the prior year. Therewas also in an increase in partnership and data revenue which was $1.4 million for the year ended December 31, 2021, compared to $0.4million for the same period in the prior year. Software revenue accounted for 92% and 86% of total revenue in 2021 and 2020, respectively.As indicated above, the increase in software revenue for the year ended December 31, 2021 was primarily attributable to our acquisitionsof Ample, Viridian, and 365 Cannabis. 

Consulting Revenue

Consulting revenue includes revenue generatedfrom consulting services delivered to prospective and current cannabis, hemp and CBD businesses and business operators. Our consultingrevenue was $1.5 million for the year ended December 31, 2021 compared to $1.7 million for the year ended December 31, 2020, a decreaseof $0.2 million, or 13%. Consulting revenue was 7% and 13% of total revenue for 2021 and 2020, respectively. Due to the nature of consultingrevenue, our dependence on emerging market activity as well as the ongoing pandemic as a driver of demand, the percentage of consultingrevenue over total revenue has varied from period to period depending on whether state legislation has expanded to allow new market entrantsor growth of existing market participant operations.

Other Revenue

Other revenue includes retail/resale revenue,which was generated from point-of-sale hardware. Other revenue was $0.2 million for the years ended December 31, 2021 and 2020 and wasapproximately 1% of total revenue for the years ended December 31, 2021 and 2020.

Cost of Revenue

Cost of revenue increased to $8.1 million forthe year ended December 31, 2021 from $6.3 million for the year ended December 31, 2020, for an increase of $1.8 million, or 28%. Totalcost of revenue increased primarily as a result of our acquisitions of Ample, Viridian, and 365 Cannabis, the specific drivers being anincrease in hosting expenses by $1.6 million and fees for SAP and Microsoft licenses in the amount of $0.5 million. These increases fromacquisitions were partially offset by net savings of $0.6 million in Leaf Data Systems contractor costs during the year ended December31, 2021 compared to the year ended December 31, 2020.

Gross Profit

Gross profit increased to $12.6 million for theyear ended December 31, 2021 from $7.5 million for the year ended December 31, 2020, for an increase of $5.0 million, or 67%. Gross marginincreased to 61% for the year ended December 31, 2021 from 54% for the year ended December 31, 2020. This improvement in gross marginwas primarily due to operating synergies realized from our acquired assets, our ongoing initiatives to drive operating effectiveness andacquiring additional B2B customers, which have a higher gross margin.

Operating Expenses

Product Development 

Product development expense increased to $6.3million for the year ended December 31, 2021 from $5.1 million for the year ended December 31, 2020, for an increase of $1.2 million,or 22%. Product development expense increased primarily due the acquisitions of Ample, Viridian, and 365 Cannabis which resulted in a$1.4 million increase in salary-related expenses and a $0.3 million increase in stock compensation expense for the year ended December31, 2021 compared to year ended December 31, 2020. These increases were partially offset by savings on contractor expenses in the amountof $0.7 million.

Sales and Marketing

Sales and marketing expense increased to $9.1million for the year ended December 31, 2021 from $8.1 million for the year ended December 31, 2020, for an increase of $1.0 million or13%. The increase in sales and marketing expense is primarily related to the acquisitions of Ample, Viridian, and 365 Cannabis which resultedin an increase of $1.0 million in salary-related expenses and a $0.1 million increase in stock compensation expense for the year endedDecember 31, 2021 compared to year ended December 31, 2020. These increases were slightly offset by a reduction in external marketingconsulting costs as we moved more of our marketing initiatives in house.

General and Administrative

General and administrative expense decreased to$10.4 million for the year ended December 31, 2021 from $11.0 million for the year ended December 31, 2020, for a decrease of $0.6 million,or 5%. This decrease was primarily related to a reduction in acquisition-related expenses of $2.9 million, as we completed two acquisitions,Viridian and 365 Cannabis, during the year ended December 31, 2021 compared to three acquisitions, Solo, Trellis, and Ample, during 2020.There was also a decrease of $0.6 million in rental expenses related to the termination of our office spaces in Denver in December 2020and Toronto in June 2021, a decrease in financing fees of $0.9 million, and a decrease of $0.3 million in salary-related expenses as adirect result of cost-saving measures placed into service during 2020. Partially offsetting these decreases is a $1.9 million increasein restructuring charges during 2021 attributable to a lease settlement agreement for relinquishing office space in Toronto and the relatedwrite off of leasehold improvements associated with the lease termination, as well as an increase of $0.6 million for legal, audit, taxand other professional service fees as our business has continued to grow. We also had a $2.0 million change in fair value of contingentconsideration during the year ended December 31, 2020 related to the 2020 acquisitions.

Depreciation and Amortization

Depreciation and amortization expense increasedto $5.7 million for the year ended December 31, 2021 from $3.2 million for the year ended December 31, 2020. The increase in amortizationexpense is entirely related to the acquired intangible assets from our acquisitions completed in calendar year 2021 and 2020.

Impairment of long-lived assets

Due to a continued decline in market conditionsand declines in the operating results of our non-enterprise reporting unit, we recorded an impairment charge of $14.4 million during theyear ended December 31, 2021. During the year ended December 31, 2020, we recorded a $6.9 million impairment charges (see Note 6 - Goodwilland Intangible Assets, Net to the audited consolidated financial statements for the year ended December 31, 2021 for further discussionon the impairments recorded).

Results of Operations for the Six Months EndedDecember 31, 2020 (audited) compared with the Six Months Ended December 31, 2019 (unaudited)

The following table highlights the various sourcesof revenues and operating expenses for the six months ended December 31, 2020 as compared to the six months ended December 31, 2019:

nm - percentage change not meaningful

Total Revenue

Total revenue increased to $7.8 million for thesix months ended December 31, 2020 from $6.5 million for the six months ended December 31, 2019, an increase of $1.3 million, or 20%.The increase in total revenue was driven primarily by growth in our software business of $2.0 million, or 41% compared to the prior period.The growth in software was offset by a decline in consulting revenue of $0.6 million, or 41%, primarily a result of government shut-downrelated to COVID-19 as discussed below.

Software Revenue

Total software revenue increased to $6.8 millionfor the six months ended December 31, 2020 from $4.8 million for the six months ended December 31, 2019, for an increase of $2.0 million,or 41%. Total software revenue increased $2.8 million primarily as a result of the acquisition of Ample, Trellis and Solo, offset by adecline in government revenue of $0.4 million, primarily as a result of these contracts maturing to a run-and-maintain mode, and a declinein other software revenue of $0.4 million. Total software revenue accounted for 86% and 74% of total revenue for the six months endedDecember 31, 2020, and 2019, respectively.

Consulting Revenue

Consulting revenue includes revenue generatedfrom consulting services delivered to prospective and current cannabis, hemp and CBD businesses and business operators. Our consultingrevenue was $0.9 million for the six months ended December 31, 2020 compared to $1.6 million for the six months ended December 31, 2019,a decrease of $0.6 million, or 41%. This decrease is mainly due to the impact of COVID-19. Consulting services are also correlated tostate legalizations and other regulatory expansion activity. As a result, individual year-over-year comparisons may experience variabilitydepending on the timing of recent legislative changes. During the COVID-19 pandemic and resulting shut-down, state legislatures have turnedtheir focus to the pandemic and tabled work on cannabis legislation, which resulted in delays in our providing consulting services duringthe six months ended December 31, 2020. However, many state ballot initiatives were passed in the November 2020 election that providesfor new medical or adult-use marijuana. We expect, despite the slowing of our consulting activity experienced during the pandemic, wewill see increased demand for our services following the November 2020 election. As a sign consulting revenue is starting to rebound fromthe impacts of the COVID-19 pandemic, consulting revenue increased to $0.6 million for the three months ended December 31, 2020 from $0.3million for the three months ended September 30, 2020, an increase of $0.3 million, or 100%.

Consulting revenue was 12% and 24% of total revenuefor the six months ended December 31, 2020 and 2019, respectively. Due to the nature of consulting revenue and our dependence on emergingmarket activity as well as the ongoing pandemic as a driver of demand, the quarters in which we recognize consulting revenue has variedfrom year to year depending on whether state legislation has expanded to allow new market entrants or growth of existing market participantoperations.

Other Revenue

Other revenue includes retail/resale revenue,which was generated from point-of-sale hardware. Other revenue was $0.1 million for the six months ended December 31, 2020 and $0.1 millionfor the six months ended December 31, 2019. Other revenue was 2.0% and 2% of total revenue for the six months ended December 31, 2020and 2019.

Cost of Revenue

Cost of revenue increased to $3.1 million forthe six months ended December 31, 2020 from $3 million for the six months ended December 31, 2019, for an increase of $0.1 million, or5%. Total cost of revenue increased $0.4 million as a result of the acquisition of Ample, Trellis and Solo, offset by a decline in professionalservices costs of $0.3 million due to declining use of third-party consulting firms for our government solution as a result of these contractsmaturing to a run-and-maintain mode.

Gross Profit

Gross profit increased to $4.7 million for thesix months ended December 31, 2020 from $3.5 million for the six months ended December 31, 2019, for an increase of $1.2 million, or 34%.Gross margin increased to 60% for the six months ended December 31, 2020 from 54% for the six months ended December 31, 2019. Total grossprofit increased $2.6 million as a result of the acquisition of Ample, Trellis and Solo, offset by the decline in consulting revenue of$0.6 million, a decline government revenue of $0.4 million, primarily as a result of these contracts maturing to a run-and-maintain modeand a decline in other software revenue of $0.4 million.

Operating Expenses

Product Development

Product development expense increased to $3.2million for the six months ended December 31, 2020 from $1.2 million for the six months ended December 31, 2019, for an increase of $1.9million, or 156%. The increase was due primarily to $1.3 million in employee-related costs from higher headcount and other operating costrelated to acquisitions. Stock compensation expense increased $0.4 million compared to the prior period. Software costs increased $0.3million primarily a result of additional investment in information technology security and reporting tools and software hosting costs,including data infrastructure.

Sales and Marketing

Sales and marketing expense increased to $3.9million for the six months ended December 31, 2020 from $3.7 million for the six months ended December 31, 2019, for an increase of $0.2million or 5%. Total sales and marketing expense increased $0.8 million as a result of the acquisition of Ample, Trellis and Solo, offsetby a decline other sales and marketing expense of $0.6 million primarily a result of decreased travel costs and a reduction in customerevent spend due primarily to cancelling all in-person customer activities and events as a result of the COVID-19 pandemic.

General and Administrative

General and administrative expense decreased to$4.4 million for the six months ended December 31, 2020 from $4.7 million for the six months ended December 31, 2019, for a decrease of$0.2 million, or 5%. Total general and administrative expense increased $0.6 million as a result of the acquisition of Ample, Trellisand Solo. Bad debt expense decreased $0.6 million during the six months ended December 31, 2020, as compared to the six months ended December31, 2019, due to our improvement in the overall quality of our revenue and client portfolio, and the enhancement of our sales and marketingteam which has resulted in a steady decline in the number and amount of delinquent accounts. We recorded a benefit of $1.0 million toreflect the estimated fair value of contingent consideration paid for our acquisition of Trellis and Ample. During 2020, we vacated certainleased offices in the U.S. following the dislocation of our workforce because of the COVID-19 pandemic. As a result, we recorded a restructuringcharge of $0.4 million, which was recorded in general and administrative expenses. Stock compensation expenses increased $0.3 millionfor the six months ended December 31, 2020, as compared to the six months ended December 31, 2019

Depreciation and Amortization

Depreciation and amortization expense increasedto $2.0 million for the six months ended December 31, 2020 from $0.1 million for the six months ended December 31, 2019. Amortizationexpense increased entirely as a result of acquired intangible assets from our acquisitions completed in calendar 2020.

Impairment of long-lived assets

As a result of delays in executing on strategicinitiatives related to acquisitions completed in calendar 2020 we recorded a $6.9 million impairment adjustment during the six monthsended December 31, 2020. There were no similar charges during the six months ended December 31, 2019. A goodwill impairment charge of$4.2 million was recorded related to our Ample reporting unit and an intangible asset charge of $2.7 million was recorded for intangibleassets acquired from our Solo transaction (see Note 6 - Goodwill and Intangible Assets, Net to the audited consolidated financial statementsfor the six months ended December 31, 2019 for further discussion on the impairments recorded).

Non-GAAP Financial Measures

In addition to our results determined in accordancewith GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAPfinancial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAPfinancial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with pastfinancial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitationsas an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordancewith GAAP.

Investors are cautioned that there are materiallimitations associated with the use of non-GAAP financial measures as an analytical tool. Other companies, including companies in ourindustry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all ofwhich could reduce the usefulness of our non-GAAP financial measures as tools for comparison. We attempt to compensate for theselimitations by providing specific information regarding the GAAP items excluded from these non-GAAP financial measures.

Investors are encouraged to review the relatedGAAP financial measures and the reconciliation of these non-GAAP financial measures with their most directly comparable GAAP financialmeasures and not rely on any single financial measure to evaluate our business.

EBITDA and Adjusted EBITDA

We believe that EBITDA and Adjusted EBITDA, whenconsidered with the consolidated financial statements determined in accordance with GAAP, are helpful to investors in understanding ourperformance and allows for comparison of our performance and credit strength to our peers. EBITDA and Adjusted EBITDA should not be consideredalternatives to net loss as determined in accordance with GAAP as indicators of our performance or liquidity.

We define EBITDA as net loss before interest incomeand expense, changes in fair value of convertible notes, changes in fair value of derivative liabilities, provision for income taxes,and depreciation and amortization. We calculate Adjusted EBITDA as EBITDA further adjusted to exclude the effects of the following itemsfor the reasons set forth below:

The reconciliation of net loss to EBITDA and AdjustedEBITDA is as follows:

Going Concern and Management's LiquidityPlans

In accordance with the Financial Accounting StandardsBoard’s (“FASB”) standard on going concern, Accounting Standard Update, or ASU No. 2014-15, The Company assesses goingconcern uncertainty in its consolidated financial statements to determine if it has sufficient cash, cash equivalents and working capitalon hand, including marketable equity securities, and any available borrowings on loans, to operate for a period of at least one year fromthe date the consolidated financial statements are issued, which is referred to as the “look-forward period” as defined byASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to The Company, it will considervarious scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projectedcash expenditures or programs, and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Basedon this assessment, as necessary or applicable, The Company makes certain assumptions around implementing curtailments or delays in thenature and timing of programs and expenditures to the extent The Company deems probable those implementations can be achieved and it hasthe proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15.

The accompanying consolidated financial statementshave been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfactionof liabilities in the normal course of business. However, since our inception we have incurred recurring operating losses, used cash fromoperations, and relied on capital raising transactions to continue ongoing operations. During the year ended December 31, 2021, sixmonths ended December 31, 2020, and year ended June 30, 2020, we incurred a loss from operations of $33.4 million, $15.7 million,and $17.3 million, respectively, and used cash in operations of $8.2 million, $8.7 million, and $14.3 million, respectively. At December31, 2021, the Company had a working capital deficit of $10.9 million with $13.9 million in cash available to fund future operations.During the three months ended March 31, 2022 and March 31, 2021, we incurred a loss from operations of $20.6 million and $3.5 million,respectively, and used cash in operations of $3.6 million and $1.4 million, respectively. As of March 31, 2022, a working capital deficitof $15.1 million with $9.7 million in cash available to fund future operations. These factors raise substantial doubt, as defined by GAAP,about the ability of the Company to continue to operate as a going concern for the twelve months following the issuance of theseconsolidated financial statements. These consolidated financial statements do not include any adjustments related to the recoverabilityand classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable tocontinue as a going concern.

On July 23, 2021, we entered into an Equity DistributionAgreement with Oppenheimer & Co. Inc. and A.G.P./Alliance Global Partners ("ATM Program"). Pursuant to the terms ofthe ATM Program, we may offer and sell from time to time, up to $25 million of shares of our common stock. As of December 31, 2021,we have raised gross proceeds of $1.9 million through the issuance of 556,388 shares through the ATM program. While noassurance can be provided that we will be able to raise further capital under the program, we intend to use the net proceeds from thesale of our shares of common stock, if any, for general corporate purposes, including working capital, marketing, product development,capital expenditures and merger and acquisition activities.

On October 5, 2021, we entered into a securitiespurchase agreement with the two institutional investors that held the Company's convertible notes issued in June of 2020 (the"2020 Notes") to sell senior secured notes in a private placement (the "Senior Convertible Notes"). The SeniorConvertible Notes have an aggregate principal amount of $20 million, an aggregate original issue discount of 10%, and rank seniorto all our other outstanding and future indebtedness. Approximately $3.3 million of the proceeds from the Senior Convertible Noteswere used to payoff the 2020 Notes, which were then to be cancelled. The net proceeds from the issuance of the Senior ConvertibleNotes was approximately $14.6 million, following the original issue discount and deductions for expenses and paydown ofthe 2020 Notes. These net proceeds will be used to support Akerna's ongoing growth initiatives and continued investmentin current and future technology infrastructure. The Senior Convertible Notes are convertible into shares of common stock of Akerna ata conversion price of $4.05 per share. The Senior Convertible Notes mature on October 5, 2024 and are to be repaid in monthlyinstallments beginning on January 1, 2022. The Senior Convertible Notes can be repaid in common shares or cash.

Management’s plan for the Company to continueas a going concern includes raising additional capital from our ATM program, subject to certain effects on the Senior Convertible Notesshould we utilize the program, including resetting the conversion price of the Senior Convertible Notes should we raise more than $5 millionunder the ATM program and an increase of 10% in the amount payable on the monthly installment payments if they are paid in cash and wehave used the ATM program in the 12 months prior to the installment date, settling our contingent consideration and Senior ConvertibleNotes in common stock rather than cash as it comes due, to the extent that this is permissible, and implementing certain cost cuttingstrategies throughout the organization, while continuing to seek to grow our customer base and realize synergies as we continue to integrateour recent acquisitions. If the Company is unable to raise sufficient additional funds through the ATM Program and make it's convertibledebt payments in stock, it will have to develop and implement a plan to extend payables, reduce expenditures (including by laying offemployees and reducing or eliminating the funding of certain business units and initiatives of the Company), or scale back our businessplan until sufficient additional capital is raised through other equity or debt offerings to support further operations and satisfactionof the debt, and the Company may be subject to additional risks, including retention of key employees. Such offerings may include theissuance of shares of common stock, warrants to purchase common stock, preferred stock, convertible debt or other instruments that maydilute our current stockholders. If we are required to raise additional capital as discussed above and if we cannot timely raise additionalfunds, we may also be unable to meet the financial covenants of the Senior Convertible Notes, which could result in an event of defaultunder those instruments which could negatively impact the Company. See the risks detailed in our Form 10-K under “Item 1A. RiskFactors - Risks Relating to our Convertible Debt”.

The ability of the Company to continue as a goingconcern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secureother sources of financing and attain profitable operations. We will require additional financing in the second quarter of 2022 to meetour ongoing operational working capital requirements and continue to meet the financial covenants of the Senior Convertible Notes. Asnoted above, we plan to meet those requirements in part through the use of our ATM Facility, but there are no guarantees that the ATMFacility will permit us to raise sufficient cash to meet our ongoing requirements. We also assume that we will be able to pay our convertibledebt in common stock rather than cash, however if at any point our stock price is below $2.00 (which it is as of the date hereof), thedebt holders may request the payments in cash rather than stock. These factors raise substantial doubt about the Company’s abilityto continue as a going concern for one year from the issuance of the consolidated financial statements. If we are unable to raise sufficientcapital we may have to reduce operations which could significantly affect our results of operations. If we fail to meet the financialcovenants of the Senior Convertible Notes and cannot obtain a waiver from such provisions or otherwise come to an agreement with the holdersof our debt, such holders may declare a default on the debt which could subject our assets to seizure and sale, negatively impacting ourbusiness. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classificationof assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

Our corporate liquidity requirements primarilyinclude payroll costs and corporate general and administrative expenses and our current sources of corporate liquidity include the cashon hand from our Senior Convertible Notes as well as the proceeds we anticipate from the access to our ATM Program.  

Cash Flows

Our cash and restricted cash balance was $14.4million and $18.3 million as of December 31, 2021 and 2020, respectively. Cash flow information are as follows:

Our cash and restricted cash balance was $10.2million as of March 31, 2022. Cash flow information is as follows:

Operating Activities

Our largest source of operating cash is cash collectionsfrom our customers for subscriptions to our products. Our primary uses of cash in operating activities are for employee-related expenditures,marketing expenses and third-party hosting costs. Net cash used in operating activities is impacted by our net loss adjusted for certainnon-cash items, including depreciation and amortization expenses, change in fair value of convertible notes and derivative liabilities,stock-based compensation, deferred income taxes, as well as the effect of changes in operating assets and liabilities.

Net cash used in operating activities totaled$8.2 million during the year ended December 31, 2021 and $8.7 million during the six months ended December 31, 2020. For the year endedDecember 31, 2021, cash was consumed from operations by a net loss of $31.3 million, less non-cash items of $24.0 million and a net changein assets and liabilities of $0.8 million. For the six months ended December 31, 2020, cash was consumed from operations by a net lossof $16.2 million, less non-cash items of $9.7 million and a net change in assets and liabilities of $2.2 million.

Net cash used in operating activities increasedto $3.6 million during the three months ended March 31, 2022, from $1.4 million during the three months ended March 31,2021, an increase of $2.2 million. For the three months ended March 31, 2022, cash was consumed from operations by a netloss of $22.0 million, less non-cash items of $19.5 million and a net change in assets and liabilities of $1.1 million. For the threemonths ended March 31, 2021, cash was consumed from operations by a net loss of $6.5 million, less non-cash items of $4.6 million anda net change in assets and liabilities of $0.5 million.

Investing Activities

Our primary investing activities have consistedof capitalization of internal-use software necessary to deliver significant new features and functionality in our platform which providesvalue to our customers. As our business grows, we expect our capital expenditures to continue to increase. Other investing activitiesinclude cash outflows related to purchases of property and equipment, and from time-to-time, the cash paid for asset and business acquisitions.

Net cash used in investing activities totaled$10.5 million during the year ended December 31, 2021, as a result of net cash paid as consideration for the 365 Cannabis acquisitionand amounts invested in the development of our software products. Net cash used by investing activities during the six months ended December31, 2020 was $7.1 million as a result of amounts invested in the development of our software products and the net cash paid as considerationfor the acquisition of Ample.

Net cash used in investing activities totaled$0.6 million during the three months ended March 31, 2022, as a result of cash outflows for the development of our software products.Net cash used by investing activities during the three months ended March 31, 2021, was $0.7 million which was also related to our softwaredevelopment.

Financing Activities

Our financing activities have consisted primarilyof proceeds from issuance of our common stock, issuances of convertible debt and proceeds from the exercise of warrants.

Net cash provided by financing activities totaled$14.7 million during the year ended December 31, 2021 and represents cash proceeds of $18.0 million from the issuance of convertible debtin October 2021, proceeds from our ATM program in the amount of $1.8 million partially offset by the value of shares withhold for taxwithholdings and payments on our convertible debt in the amount of $0.5 million and $4.6 million, respectively. Net cash provided by financingactivities was $9.5 million for the six months ended December 31, 2020, of which $12 million was related to the common stock offeringthat closed on October 30, 2020, partially offset by $1.5 million in payments on our financing obligations and $1.0 million of offeringcosts from issuing common stock.

Net cash used in financing activities totaledless than $0.1 million during the three months ended March 31, 2022 and $0.3 million for the three months ended March 31, 2021. Duringboth periods the cash used in financing activities was related to the value of shares withhold for tax withholdings.

ATM Program

On July 23, 2021, we entered into an Equity DistributionAgreement with Oppenheimer & Co. Inc. and A.G.P./Alliance Global Partners (the "ATM Program"). Pursuant to the terms ofthe Agreement, we may offer and sell from time to time, up to $25 million of shares of our common stock. As of December 31, 2021, we haveraised gross proceeds of $1.9 million through the issuance of 556,388 shares through the ATM program.

Senior Secured Convertible Notes Issuance

On October 5, 2021, we entered into a SecuritiesPurchase Agreement ("SPA") with the two institutional investors that held the Company's convertible notes issued on June 8,2020 (the "2020 Notes") to sell a new series of senior secured notes in a private placement (the "Senior Convertible Notes").The Senior Convertible Notes have an aggregate principal amount of $20,000,000, an aggregate original issue discount of 10%, and ranksenior to all our other outstanding and future indebtedness. Approximately $3.3 million of the proceeds from the Senior Convertible Noteswere used to payoff the 2020 Notes, which were then to be cancelled. The net proceeds from the issuance of the Senior Convertible Noteswas approximately $14.6 million, following the original issue discount and deductions for expenses and paydown of the 2020 Notes. Thesenet proceeds will be used to support Akerna's ongoing growth initiatives and continued investment in current and future technology infrastructure.The Senior Convertible Notes are convertible into shares of common stock of Akerna at a conversion price of $4.05 per share. The SeniorConvertible Notes can be repaid in common shares or cash.

Maturity and Repayment Dates

The Senior Convertible Notes mature on October5, 2024, or the Maturity Date. The principal amount is payable in monthly installments beginning on January 1, 2022. Unless deferred bythe holder, on installment dates from January 1, 2022 through, and including, June 1, 2023, $1.1 million in principal amount will be payableand on installment date July 1, 2023, $0.2 million in principal amount will be payable. With respect to installment dates from August1, 2023 through and including the maturity date of October 5, 2024, any deferred payments from prior installment dates will be payable.We may not prepay any portion of the principal amount nor interest, if any.

Interest

The Senior Convertible Notes are being sold withan original issue discount and do not bear interest except upon the occurrence of an Event of Default (described below), in which eventthe applicable rate will be 15.0% per annum.

Conversion

The Senior Convertible Notes are convertible atany time in whole or in part, at the option of the Note Holders, into shares of the common stock at a rate equal to the amount of principal,interest (if any) and unpaid late charges (if any), divided by a conversion price of $4.05, or the Conversion Price. The Conversion Priceis subject to standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similartransaction.

In connection with the occurrence of Events ofDefault, the Note Holders will be entitled to convert all or any portion of the Senior Convertible Notes at an alternate conversion priceequal to the lower of (i) the conversion price then in effect, and (ii) 80% of the lower of (x) the volume-weighted average price, orVWAP, of the common stock as of the trading day immediately preceding the applicable date of determination and (y) the quotient of (A)the sum of the VWAP of the common stock for each of the two trading days with the lowest VWAP of the common stock during the ten consecutivetrading day period ending on and including the trading day immediately prior to the applicable date of determination, divided by (B) two,but not less than the floor price of $0.54.

Events of Default

The Senior Convertible Notes are subject to certaincustomary events of default, see Item 1A. “Risk Factors - Risks Related to our Convertible Debt” for a short discussion ofevents of default under the Senior Convertible Notes.

Contractual Obligations

For information concerning our contingent consideration,convertible debt, and operating lease obligations, see Notes 4, 6, and 7, respectively, to our unaudited condensed consolidated financialstatements for the period ended March 31, 2022, which appear below.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies and SignificantJudgments and Estimates

Our consolidated financial statements and therelated notes included in this prospectus are prepared in accordance with GAAP. The preparation of these consolidated financial statementsrequires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, andrelated disclosures. To the extent that there are material differences between these estimates and actual results, our financial conditionor results of operations would be affected. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based onhistorical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results coulddiffer from these estimates.

Critical accounting policies and estimates arethose that we consider critical to understanding our historical and future performance, as these policies relate to the more significantareas involving management's judgments and estimates.

Revenue Recognition

We generate revenue through the sale of our cloud-basedsoftware and the delivery of consulting services. Revenues are recognized when control of these services is transferred to our customersin an amount that reflects the consideration we expect to be entitled to in exchange for those services. We determine revenue recognitionthrough the following steps:

We recognize subscription on a ratable basis overthe contract term beginning on the date that our service is made available to the customer. Our subscription contracts range from twelvemonths to thirty-six months in duration, are billed in advance and are non-cancelable. We consider the access to our platform and relatedsupport services in a customer contract to be a series of distinct services which comprise a single performance obligation because theyare substantially the same and have the same pattern of transfer. Amounts that have been invoiced are recorded in accounts receivableand in deferred revenue or revenue, depending on whether transfer of control to customers has occurred. We record contract liabilitiesto deferred revenue when cash payments are received or due. Deferred revenue consists of the unearned portion of customer billings.

Consulting revenue contracts have an initial setof proprietary deliverables that are provided to clients upfront, which is considered a separate performance obligation. As such, 30%of the contract value is recognized upfront when deliverables are provided, with the remaining recognized over the life of the contractas the consulting services are performed.

Capitalized Software Development Costs

We capitalize software development costs incurredto develop functionality for our commercial software platforms and government regulatory software platform, as well as certain upgradesand enhancements that are expected to result in enhanced functionality. These costs include personnel and related expenses for employees,costs of third-party contractors and other services directly associated with the development projects. We capitalize certain softwaredevelopment costs for new offerings as well as upgrades to our existing software platforms. We amortize these development costs over theestimated useful life of two to five years on a straight-line basis. We believe there are two key estimates within the capitalized softwarebalance, which are the determination of the amounts to be capitalized and the determination of the useful life of the software.

We determine the amount of software developmentcosts to be capitalized based on the amount of time spent by our developers on projects in the application stage of development. Costsassociated with building or significantly enhancing our commercial software platform and our government regulatory platform are capitalized,while costs associated with planning new developments and maintaining our software platforms are expensed as incurred. There is judgmentinvolved in estimating the time allocated to a particular project in the application stage as well as the determination of whether theproject is an enhancement to the existing software or maintenance thereof. A significant change in the time spent on each project or thedetermination of the nature of projects involving existing software platforms could have a material impact on the amount capitalized andrelated amortization expense in subsequent periods.

We determined that a two-to-five-year life isappropriate for our capitalized software based on our best estimate of the useful life of the software after considering factors suchas continuous developments in the technology, obsolescence and anticipated life of the service offering before significant upgrades. Basedon our prior experience, software will generally remain in use for a minimum of two to five years before being significantly replacedor modified to keep up with evolving client needs. While we do not anticipate any significant changes to this two-to-five-year estimate,a change in this estimate could produce a material impact on our consolidated financial statements. For example, if we received informationthat indicated the useful life of all software was one year rather than two to five, our capitalized software balance would materiallydecrease, and our expense would materially increase.

Stock-Based Compensation

Stock-based compensation for all employee andnon-employee stock-based awards, including restricted stock units and restricted stock, is measured at fair value on the date of grantand recognized over the service period. The fair value of restricted stock units and restricted stock are calculated based on the fairvalue of our common stock on the date of grant.

Stock-based compensation expense is recognizedover the requisite service periods of awards, which is typically one to four years for restricted stock units and restricted stock. Theestimated forfeiture rate applied to employee awards is based on historical forfeiture rates. The estimated number of stock-based awardsthat will ultimately vest requires judgment, and to the extent actual results, or updated estimates, differ from our current estimates,such amounts will be recorded as a cumulative adjustment in the period actual results are realized or estimates are revised. A higherforfeiture rate will result in an adjustment that will decrease stock-based compensation expense, whereas a lower forfeiture rate willresult in an adjustment that will increase stock-based compensation expense. We do not apply a forfeiture rate assumption to value non-employeeawards, given the nature of the services provided.

Business Combinations

We account for business acquisitions using thepurchase method of accounting, in accordance with which assets acquired and liabilities assumed are recorded at their respective fairvalues at the acquisition date. Goodwill represents the excess of the purchase price over the estimated fair values of the assets acquiredand liabilities assumed.

Significant judgment is used in determining fairvalues of assets acquired and liabilities assumed, as well as intangible assets and their estimated useful lives. Fair value and usefullife determinations are based on, among other factors, estimates of future expected cash flows attributable to the acquired intangibleassets and appropriate discount rates used in computing present values. Management applied significant judgement in estimating the fairvalue of the acquired developed technology intangible asset, which involved significant estimates and assumptions with respect to forecastedrevenue growth rates, the revenue attributable to the acquired intangible asset over its estimated economic life and the discount rate.These judgments may materially impact the estimates used in allocating the purchase price consideration to the fair value of assets acquiredand liabilities assumed, as well as our current and future operating results. Actual results may vary from these estimates that may resultin adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determinationof asset and liability fair values, whichever occurs first. Adjustments to the fair value of assets acquired and liabilities assumed madeafter the end of the measurement period are recorded within our operating results.

Contingent Consideration Liabilities

ASC 805 requires that contingent considerationbe estimated and recorded at fair value as of the acquisition date as part of the total consideration transferred. Contingent considerationis an obligation of the acquirer to transfer additional assets or equity interests to the selling shareholders in the future if certainfuture events occur or conditions are met, such as the attainment of product development milestones. Contingent consideration also includesadditional future payments to selling shareholders based on achievement of components of earnings, such as “earn-out” provisionsor percentage of future revenues, including royalties paid to the selling shareholders based on a percentage of revenues generated fromCHI and Sera Labs over the contractual period.

The fair value of milestone-based contingent considerationwas determined using a scenario analysis valuation method which incorporates our assumptions with respect to the likelihood of achievementof revenue and gross margin percentage milestones, as defined in the Sera Labs Merger Agreement, credit risk, timing of the contingentconsideration payments and a risk-adjusted discount rate to estimate the present value of the expected payments, all of which requiresignificant management judgment and assumptions. Since the contingent consideration payments are based on nonfinancial, binary events,management believes the use of the scenario analysis method is appropriate.

The fair value of all contingent considerationafter the Sera Labs Merger Date is reassessed by us as changes in circumstances and conditions occur, with the subsequent change in fairvalue recorded in our consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair valueof contingent consideration liabilities and, accordingly, the resulting gain or loss that we record in our consolidated financial statements.See Note 17 to our consolidated financial statements included elsewhere in this Report.

Impairment of Goodwill and Acquired IntangibleAssets