AKERNA CORP. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

The following discussion and analysis should be read in conjunction with our
unaudited condensed consolidated financial statements for the three months ended
March 31, 2022, and the related notes thereto, which have been prepared in
accordance with generally accepted accounting principles in the United States

Akerna Corp., herein referred to as "we", "us", "our" or "Akerna", through our
wholly-owned subsidiaries MJ Freeway, LLC, Trellis Solutions, Inc., Ample
Organics, Inc., solo sciences, inc., Viridian Sciences Inc., and The NAV People,
Inc. d.b.a. 365 Cannabis.

Forward-Looking Statements

This Quarterly Report on Form 10-Q including all exhibits hereto
contain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, including statements regarding future
events or our future results of operations, financial condition, business,
strategies, financial needs, and the 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 similar expressions and the
negatives of those terms. Forward-looking statements are based on information
available to our management as of the date of this Quarterly Report and our
management's good faith belief as of such date with respect to future events and
are subject to a number of risks, uncertainties, and assumptions that could
cause actual performance or results to differ materially from those expressed in
or suggested by the forward-looking statements, in particular the substantial
risks and uncertainties related to the ongoing COVID-19 pandemic. Important
factors that could cause such differences include, but are not limited to:

  ? our ability to sustain our revenue growth rate, to achieve or maintain
    profitability, and to effectively manage our anticipated growth;

? our dependence on the commercial success of our clients, the continued growth

of the cannabis industry and the regulatory environment in which the cannabis

industry operates

? our ability to attract new clients on a cost-effective basis and the extent to

    which existing clients renew and upgrade their subscriptions;
  ? the timing of our introduction of new solutions or updates to existing
  ? our ability to successfully diversify our solutions by developing or

introducing new solutions or acquiring and integrating additional businesses,

products, services, or content;

? our ability to respond to changes within the cannabis industry;

? the effects of adverse changes in, or the enforcement of, federal laws

regarding our clients’ cannabis operations or our receipt of proceeds from

such operations;

? our ability to manage unique risks and uncertainties related to government


? our ability to manage and protect our information technology systems;

? our ability to maintain and expand our strategic relationships with third


? our ability to deliver our solutions to clients without disruption or delay;

? our exposure to liability from errors, delays, fraud, or system failures,

which may not be covered by insurance;

? our ability to expand our international reach;

? our ability to retain or recruit officers, key employees, and directors;

? our ability to raise additional capital or obtain financing in the future;

? our ability to successfully integrate acquired businesses with Akerna’s

business within anticipated timelines and at their expected costs;

? our ability to complete planned acquisitions on time or at all due to failure

to obtain stockholder approval or governmental or regulatory clearances, or

the failure to satisfy other conditions to completion, or the failure of

completion for any other reason;

? our response to adverse developments in the general market, business,

economic, labor, regulatory, and political conditions, including worldwide

    demand for cannabis and the spot price and long-term contract price of
  ? our response to competitive risks;
  ? our ability to protect our intellectual property;
  ? the market reaction to negative publicity regarding cannabis;
  ? our ability to manage the requirements of being a public company;
  ? our ability to service our convertible debt;
  ? our accounting treatment of certain of our private warrants;

? our ability to effectively manage any disruptions to our business and/or any

negative impact to our financial performance caused by the economic and social

effects of the COVID-19 pandemic and measures taken in response; and

? other factors discussed in other sections of this Quarterly Report on Form

10-Q, including the sections of this report titled “Management’s Discussion

and Analysis of Financial Condition and Results of Operations” and under Part

II, Item 1A. “Risk Factors” and in our Annual Report on Form 10-K as filed

with the Securities and Exchange Commission, or the SEC, on March 31, 2022,

    under Part I, Item 1A, "Risk Factors."



Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, believed, estimated, or 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 of
such statements or to reflect the occurrence of anticipated or unanticipated
events. We qualify all the forward-looking statements contained in this
Quarterly Report by the foregoing cautionary statements.

Business Overview

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

Executing upon our expansion strategy, we acquire complementary software brands
that service the cannabis industry to grow the scope of Akerna's cannabis
ecosystem. Since 2019, we have integrated six new brands into the 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, 2020
and finalized the acquisition of Ample Organics ("Ample") and Last Call
Analytics ("Last Call") on July 7, 2020. On April 1, 2021 we completed our
acquisition of Viridian Sciences Inc. ("Viridian"), a cannabis business
management software 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 of
companies, Akerna provides highly versatile platforms that equip our clients
with a central data management system for tracking regulated products. Our
solutions also provide clients with integrated security, transparency, and
scalability capabilities, all while helping maintaining compliance with their
governing regulations.

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

We drive revenue growth through the development of our product line, our
acquisitions and from continued expansion of our software and consulting
offerings within the cannabis, hemp, and cannabidiol ("CBD") industry.
Businesses across the regulated cannabis industry use our solutions. The brand
recognition of our existing products, our ability to provide services in all
areas of the seed-to-sale life cycle, and our wealth of relevant experience
attracts cultivation, manufacturing, and dispensary clients who are seeking
comprehensive business optimization solutions. Our software solutions are
designed to be scalable, and while mid-market and smaller customers have
historically been our primary target segment, we are focused on extending our
customer reach to address the needs of the emerging enterprise level operator.
We believe these larger multi-state/multi-vertical operations represent
significant long-term future growth opportunities as the cannabis industry
continues to consolidate at a rapid rate. The sophistication of our platform
accommodates the 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 with a true enterprise solution for
managing their inventory and compliance and allow government regulators to
engage in accurate and real-time compliance monitoring. Key capabilities of our
technology infrastructure include:



Seed-to-Sale Tracking allows the tracking of products from cultivation, through
harvest and processing and manufacturing, to the monitoring of the final sale to
the patient or consumer. Our traceability technology captures every step in an
individual plant's life, providing visibility into the supply chain from any
measurement of finished product dispensed to a patient or customer, back to the
plant it came from, and all 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-Trace processes. The
data gathered throughout all of these processes is captured, and provides the
insights and information needed to run an efficient and streamlined cannabis
business. Seed-to-Sale software operates in a complementary relationship with
state-mandated Track-and-Trace systems, replicating the reporting functionality
and eliminating the need for operators to duplicate their compliance data into
two disparate systems. Track-and-Trace systems are designed solely for
government regulators to maintain compliance and do not have the sophistication
or functionality to provide cannabis business owners with the insights and tools
for effective business management. Our seed-to-sale platforms integrate with the
state Track-and-Trace compliance system, reporting in the mandated data along
the supply chain while also providing business owners with the capabilities to
make informed business decisions based on the fully overview of their

Track-and-Trace is the 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 facilities or 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 Integration allows state-licensed clients to manage inventory,
customer records, and staff in one tracking system. MJ Platform and Leaf Data
Systems 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 class accounting 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
close the loop with creators and producers.

Cannabis Market Insights are curated using the anonymized data aggregated
through our Seed-to-Sale platform for key industry intelligence. With over $30
billion in cannabis sales tracked over the past twelve years, we have cultivated
a substantial legal cannabis dataset across 30+ states and multiple countries.
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 effectiveness by eliminating
disparate systems, consolidating business critical information in a single
location, reducing double entry data, and streamlining operations. ERP software
solutions built for cannabis operators combine traditional accounting,
manufacturing, inventory, and supply chain 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 in operating in compliance with the applicable laws of
their jurisdictions and capitalizing on commercial opportunities within the
applicable regulatory framework, with accuracy, efficiency, and geographic
specificity. We have worked with clients and governments across the globe to
create customized solutions that fit their specific regulatory and commercially
compliant needs. While the majority of our clients are in the U.S. and Canada,
our solutions allow cannabis businesses to operate efficiently in this
fast-changing industry and comply with state, local, and federal (in countries
such as Canada, Italy, Macedonia, and Colombia). Akerna and our family of
companies is well-positioned to provide compliance solutions for the expanding
national and international legal cannabis market.

Financial Results of Operations


We generate revenue from two primary sources: (1) software and (2) consulting
services. Revenue from software comprised approximately 94% and 95% of our
revenue for the three months ended March 31, 2022 and 2021,
respectively. Revenue from consulting services comprised approximately 6% and 4%
of our revenue for three months ended March 31, 2022 and 2021, respectively.

Software. Our software is solutioned for our key markets, small and medium-sized
("SMB") and enterprise customers. Our SMB customers become a natural funnel for
our larger, more robust enterprise offerings built on SAP and Microsoft. In
either market, software revenue is generated from subscriptions and services
related to the use of our commercial software platforms, MJ Platform, Ample,
Trellis, Viridian, and 365 Cannabis, our government regulatory platform, Leaf
Data Systems, and the sale of business intelligence, data analytics and other
software related services. Software contracts are generally quarterly, annual,
or three-year long 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 payable annually or quarterly in advance of
service. Commercial software and Leaf Data Systems contracts generally may only
be terminated early for breach of contract as defined in the respective
agreements. Amounts that have been invoiced are initially recorded as deferred
revenue or contract liabilities. Subscription revenue is recognized on a
straight-line basis over the service term of the arrangement beginning on the
date that our solution is made available to the customer and ending at the
expiration of the subscription term.



Consulting. Consulting services revenue 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 during the
pre-application phase generally solidify us as the software vendor of choice for
subsequent operational phases once the operator is granted the license. As a
result, our consulting revenue is driven as new emerging states pass
legislation, and as our client-operators gain licenses. Accordingly, we expect
our consulting services to grow over time as more states emerge with
legalization reforms.

Other Revenue. Our other revenue is derived primarily from point-of-sale

Cost of Revenue and Operating Expenses

Cost of Revenue

Our cost of revenue is derived from direct costs associated with operating our
commercial and government regulatory software platforms and providing consulting
services. The cost of revenue for our commercial and government regulatory
platforms relates primarily to hosting and infrastructure costs
and subcontractor expenses 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 salaries and benefits, nearshore
contractor expenses, technology expenses, and other overhead related to the
ongoing maintenance of our commercial and government regulatory software
platforms and planning for new software development. Product development costs,
other than software development expenses qualifying for capitalization, are
expensed as incurred. Capitalized software development costs consist primarily
of employee-related costs. We devote substantial resources to enhancing and
maintaining our technology infrastructure, developing new and enhancing existing
solutions, conducting quality assurance testing, and improving our core

Sales and Marketing Expenses

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

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

General and Administrative Expenses

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

Total Other (Expense) Income, Net

 Total other (expense) income, net consists of interest income on cash and cash
equivalents, interest expense on our debt, quarterly remeasurement of the fair
value of our convertible notes and derivative liability, foreign currency gains
and losses, and other non-operating gains and losses.

Critical Accounting Policies and Estimates

Our critical accounting policies are disclosed in our Annual Report on Form 10-K
for the year ended December 31, 2021. Since the date of the Annual Report, there
have been no material changes to our critical accounting policies.



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

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

                                          Three Months Ended March 31,                 Change
                                              2022               2021            Period over Period
         Software                       $      6,508,513$  3,795,153$    2,713,360           71 %
         Consulting                              427,009          172,747           254,262          147 %
         Other                                    15,319           46,124           (30,805 )        (67 )%
Total revenue                                  6,950,841        4,014,024         2,936,817           73 %

Cost of revenues                               2,203,671        1,454,167           749,504           52 %
Gross profit                                   4,747,170        2,559,857         2,187,313           85 %
      Gross profit margin                             68 %             64 %

Operating expenses:

         Product development:                  2,105,361        1,424,100           681,261           48 %
         Sales and marketing                   3,236,113        1,735,915         1,500,198           86 %
         General and administrative            2,570,432        1,852,962           717,470           39 %
         Depreciation and amortization         1,993,391        1,052,883           940,508           89 %
Impairment of long-lived assets               15,478,521                -        15,478,521           nm
Total operating expenses                      25,383,818        6,065,860        19,317,958          318 %

Loss from operations                    $    (20,636,648 )$ (3,506,003 )$  (17,130,645 )        489 %

nm – percentage change not meaningful


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 revenue related to our non-enterprise offerings, which include MJ
Platform, Ample, Trellis, Solo, and Leaf Data Systems, were $3.2 million for the
three months ended March 31, 2022 compared to $3.4 million for the three months
ended March 31, 2021. There was also a slight decrease in partnership and data
revenue which was $0.2 million for the three months ended March 31, 2022
compared to $0.4 million during the same period 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
months ended March 31, 2021 was attributable to revenue generated from our
enterprise offerings.

Consulting Revenue

Consulting revenue includes revenue generated from consulting services delivered
to prospective and current cannabis, hemp and CBD businesses and business
operators. Our consulting revenue was $0.4 million for the three months ended
March 31, 2022 compared to $0.2 million for the three months ended March 31,
2021, an increase of $0.2 million, or 147%. Consulting revenue was 6% and 4% of
total revenue for the three months ended March 31, 2022 and 2021, respectively.
Due to the nature of consulting revenue, our dependence on emerging market
activity and the ongoing pandemic as a driver of demand, the percentage of
consulting revenue over total revenue has varied from period to period depending
on 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 and 2021, respectively.



  Table of Contents

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, an
increase of $0.7 million, or 52%. Total cost of revenue increased primarily as a
result of an increase in hosting expenses of $0.3 million and 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 $4.7 million for the three months ended March 31, 2022 compared
to $2.6 million for the three months ended March 31, 2021, an increase of $2.2
million or 86%. Gross profit margin also increased from 64% for the three months
ended March 31, 2021 to 68% for the three months ended March 31, 2022. This
improvement in gross margin was primarily due to operating synergies realized
from our acquired assets, our ongoing initiatives to drive operating
effectiveness, and acquiring additional business-to-business customers, that
have a higher gross margin.

Operating Expenses

Product Development

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

Sales and Marketing

Sales and marketing expense was $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 Viridian and 365 Cannabis
which resulted in an increase of $1.6 million in salary-related and contractor
expenses for the three months ended March 31, 2022 compared to the three months
ended March 31, 2021.

General and Administrative

General and administrative expense was $2.6 million for the three months ended
March 31, 2022, compared to $1.9 million for the three months ended March
31, 2021, an increase of 0.7 million, or 39%. The increase in general and
administrative expense is primarily related to the termination of our Las Vegas
office space during the three months ended March 31, 2022, which resulted in a
restructuring charge of $0.5 million. There was also an increase of $0.1
million in salary-related and contractor expenses as well as bad debt expense of
$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 amortization expense 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 assets from our
Viridian and 365 Cannabis acquisitions in the amount of $0.6 million, which both
occurred after March 31, 2021, as well as an increase in capitalized software in
the amount of $0.4 million.

Impairment of long-lived assets

Due to a continued decline in market conditions from December 31, 2021 to March
31, 2022, we recorded an impairment charge of $15.5 million on our
non-enterprise reporting 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 consolidated financial
statements for further discussion on the impairments recorded).



Non-GAAP Financial Measures

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

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

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

EBITDA and Adjusted EBITDA

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

We define EBITDA as net loss before interest income and 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 items for the reasons set forth below:

? impairment of long-lived assets, as this is a non-cash, non-recurring item,

which effects the comparability of results of operations and liquidity;

? stock-based compensation expense, because this represents a non-cash charge

and our mix of cash and share-based compensation may differ from other

companies, which effects the comparability of results of operations and


? cost incurred in connection with business combinations and mergers that are

required to be expensed as incurred in accordance with GAAP, because

business combination and merger related costs are specific to the complexity

and size of the underlying transactions as well as the frequency of our

acquisition activity these costs are not reflective of our ongoing


? costs incurred in connection with non-recurring financing, including fees

incurred as a direct result of electing the fair value option to account for

our debt instruments;

? restructuring charges, which includes costs to terminate a lease and the

related write-off of leasehold improvements and furniture, as we believe

these costs are not representative of operating performance;

? gain on forgiveness of PPP loan, as this is a one-time forgiveness of debt

that is not recurring across all periods and we believe inclusion of the

gain is not representative of operating performance;

? equity in losses of investees because our share of the operations

of investees is not representative of our own operating performance and may

not be monetized for a number of years;

? changes in the fair value of contingent consideration because these

adjustments are not recurring across all periods and we believe these costs

are not representative of operating performance; and

? other non-operating expenses which includes items such as a one-time gain on

debt extinguishment and one-time loss on disposal of fixed assets, which

    effects the comparability of results of operations and liquidity.



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

                                                                Three Months Ended March 31,
                                                                  2022                 2021
Net loss                                                     $   (21,952,893 )$ (6,457,703 )
      Interest expense (income)                                          740            774,380
      Change in fair value of convertible notes                    

1,433,000 1,991,272

      Change in fair value of derivative liability                   

(18,051 ) 175,996

      Income tax expense                                            (99,444)              6,270
Depreciation and amortization                                      1,993,391          1,052,883
EBITDA                                                       $   

(18,643,257 ) $ (2,456,902 )

      Impairment of long-lived assets                             15,478,521                  -
Stock-based compensation expense                                     312,925            503,379
Business combination and merger related costs (income)                  (637 )           43,991
Non-recurring financing fees                                          27,954             17,884
Restructuring charges                                                564,234             47,187
Equity in losses of investee                                               -              3,782
 Adjusted EBITDA                                             $  
(2,260,260)       $ (1,840,679 )

Going Concern and Management’s Liquidity Plans

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

The accompanying consolidated financial statements have been prepared on the
basis that we will continue as a going concern, which contemplates realization
of assets and the satisfaction of liabilities in the normal course of business.
However, since our inception we have incurred recurring operating losses, used
cash from operations, and relied on capital raising transactions to continue
ongoing 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 deficit of $15.1 million
with $9.7 million in cash available to fund future operations.



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

The ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain profitable
operations. We will require additional financing in the second quarter
of 2022 to meet our ongoing operational working capital requirements and
continue to meet the financial covenants of the Senior Convertible Notes. As
noted above, we plan to meet those requirements in part through the use of our
ATM Facility, but there are no guarantees that the ATM Facility will permit us
to raise sufficient cash to meet our ongoing requirements. We also assume that
we will be able to pay our convertible debt 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), the debt holders may request the payments in cash rather than
stock. These factors raise substantial doubt about the Company's ability to
continue as a going concern for one year from the issuance of the consolidated
financial statements. 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 the Senior Convertible Notes and
cannot obtain a waiver from such provisions or otherwise come to an agreement
with the holders of our debt, such holders may declare a default on the debt
which could subject our assets to seizure and sale, negatively impacting our
business. The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability and classification of assets and
liabilities that might be necessary if the Company is unable to continue as a
going concern.



Cash Flows

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

                                                                      Three Months Ended
                                                                           March 31,
                                                                     2022             2021
Cash (used in) provided by:
Operating activities                                             $ (3,585,394 )$ (1,373,818 )
Investing activities                                                 (647,022 )       (704,637 )
Financing activities                                                   (5,615 )       (333,847 )
Effect of change in exchange rates on cash and restricted cash         (8,544 )         (1,579 )
Net decrease in cash and restricted cash                         $ (4,246,575 )$ (2,413,881 )

Operating Activities

Our largest source of operating cash is cash collections from 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 certain non-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 increased to $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 net loss 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 three months 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
and a net change in assets and liabilities of $0.5 million.

Investing Activities

Our primary investing activities have consisted of capitalization of
internal-use software necessary to deliver significant new features and
functionality in our platform which provides value to our customers. As our
business grows, we expect our capital expenditures to continue to increase.
Other investing activities include 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 $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
software development.

Financing Activities

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

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

Contractual Obligations

For information concerning our contingent consideration, convertible debt, and
operating lease obligations, see Notes 4, 6, and 7, respectively, to our
condensed consolidated financial statements.

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