RYM 10-K/A
RYTHM, Inc. (RYM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
For the fiscal year ended
or
For the transition period from _________ to _________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities Registered Pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, 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.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
YES ☐ NO
The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant, computed by reference to the price at which the common equity was last sold, or
the average bid and asked price of such common equity, as of June 30, 2024, was approximately $
There were a total of
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A in connection with the registrant’s 2025 Annual Meeting of Stockholders, to be filed subsequent to the date hereof, are incorporated by reference into Part III of this Report. Such Definitive Proxy Statement will be filed with the SEC not later than 120 days after the conclusion of the registrant’s fiscal year ended December 31, 2024. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part of this Form 10-K.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends the Annual Report on Form 10-K of Agrify Corporation (“the Company”) for the year ended December 31, 2024, initially filed with the Securities and Exchange Commission on March 21, 2025 (the “Original Filing”).
The financial statement values and related footnotes have not changed from the Original Filing.
This Amendment No. 1 is being filed solely to update the audit reports and consents provided by the registrant’s current and former independent registered public accounting firms, as it relates to the 2023 retroactive application of the reverse stock split the Company completed on October 8, 2024 . The Company engaged GuzmanGray subsequent to the Original Filing to audit the 2023 retroactive application of this reverse stock split. Upon the completion of the work, GuzmanGray dual dated their audit opinion to cover the additional scope of work, which remains unqualified.
This Amendment does not reflect events occurring after the filing of the Original Filing, does not update disclosures contained in the Original Filing and does not modify or amend the Original Filing except as specifically described above.
Pursuant to Rule 12b-15 of the Securities Exchange Act of 1934, as amended, this Amendment contains the complete text of Item 15. Exhibits, Financial Statements and Schedules, and certifications of the Company’s principal executive officer and principal financial officer required under Items 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, dated as of the date of this Amendment, as well as updated inline XBRL exhibits.
TABLE OF CONTENTS
| Page | ||
| PART IV | ||
| Item 15. | Exhibits and Financial Statement Schedules | 1 |
| Signatures | 6 | |
i
PART IV
Item 15. Exhibits, Financial Statements and Schedules.
| (a) | Financial Statements: |
(1) The consolidated financial statements required to be included in this report appear after the signature page to this report as a separate section beginning on page F-1.
(2) All supplemental schedules have been omitted since the information is either included in the consolidated financial statements or the notes thereto or they are not required or are not applicable.
(3) The Exhibit Index of this report appears below.
| (b) | Exhibits: |
1
2
3
4
| ± | Certain information has been omitted from this exhibit in reliance upon Item 601(a)(5) of Regulation S-K. |
| † | Indicates a management contract, compensatory plan, or arrangement. |
| # | Certain confidential portions of this exhibit were omitted pursuant to Item 601(b)(2)(ii) of Regulation S-K because the identified confidential portions (i) are not material and (ii) are customarily and actually treated as private or confidential by the Company. |
| * | Filed herewith. |
| ** | Furnished herewith. |
5
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized.
| AGRIFY CORPORATION | ||
| Date: March 27, 2025 | By: | /s/ Benjamin Kovler |
| Benjamin Kovler | ||
| Chairman and Interim Chief Executive Officer | ||
| (Principal Executive Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following person on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Benjamin Kovler | Chairman and Interim Chief Executive Officer and Director | March 27, 2025 | ||
| Benjamin Kovler | (Principal Executive Officer) | |||
| /s/ Brad Asher | Chief Financial Officer | March 27, 2025 | ||
| Brad Asher | (Principal Financial and Accounting Officer) | |||
| /s/ Krishnan Varier | Director | March 27, 2025 | ||
| Krishnan Varier | ||||
| /s/ Timothy Mahoney | Director | March 27, 2025 | ||
| Timothy Mahoney | ||||
| /s/ Max Holtzman | Director | March 27, 2025 | ||
| Max Holtzman | ||||
| /s/ Armon Vakili | Director | March 27, 2025 | ||
| Armon Vakili | ||||
| /s/ Peter Shapiro | Director | March 27, 2025 | ||
| Peter Shapiro | ||||
| /s/ Sanjay Tolia | Director | March 27, 2025 | ||
| Sanjay Tolia |
6
AGRIFY CORPORATION
Index to Consolidated Financial Statements
| Fiscal Years Ended December 31, 2024 and 2023: | ||
| Independent Auditors’ Report (PCAOB ID # | F-2 | |
| Independent Auditors’ Report (PCAOB ID # 688) | F-3 | |
| Consolidated Financial Statements | ||
| Consolidated Balance Sheets | F-4 | |
| Consolidated Statements of Operations | F-5 | |
| Consolidated Statements of Stockholders’ Equity (Deficit) | F-6 | |
| Consolidated Statements of Cash Flows | F-8 | |
| Notes to Consolidated Financial Statements | F-9 - F-46 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Agrify Corporation and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Agrify Corporation (the “Company”) as of December 31, 2024, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
| /s/ |
We have served as the Company’s auditor since 2024.
March 21, 2025, except for the retroactive adjustments of the reverse stock split referenced above, which is dated March 27, 2025
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Agrify Corporation and Subsidiaries
Opinion on the Financial Statements
We have audited, before the effects of the discontinued operations discussed in Note 1 and Note 6 and a reverse stock split discussed in Note 1, the accompanying consolidated balance sheet of Agrify Corporation and Subsidiaries (the “Company”) as of December 31, 2023 and the related consolidated statements of operations, stockholders’ (deficit) equity and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, before the effects of the discontinued operations discussed in Note 1 and Note 6 and a reverse stock split discussed in Note 1, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We were not engaged to audit, review, or apply any procedures to the effects of the discontinued operations discussed in Note 1 and Note 6 or the reverse stock split discussed in Note 1 to the consolidated financial statements, and accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Marcum llp
Marcum llp
We have served as the Company’s auditor from 2019 to 2024.
Melville, NY
April 15, 2024
F-3
Item 1. Financial Statements
AGRIFY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| As of December 31, | ||||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowance for credit losses of $ | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Goodwill | ||||||||
| Intangible assets | ||||||||
| Other non-current assets | ||||||||
| Non-current assets of discontinued operations | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Operating lease liabilities, current | ||||||||
| Long-term debt, current | ||||||||
| Related party debt, current | ||||||||
| Contract liabilities | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Warrant liabilities | ||||||||
| Operating lease liabilities, net of current | ||||||||
| Long-term debt, net of current | ||||||||
| Non-current liabilities of discontinued operations | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 18) | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Common Stock, $ | ||||||||
| Preferred Stock, $ | ||||||||
| Preferred A Stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) attributable to Agrify Corporation | ( | ) | ||||||
| Non-controlling interests | ||||||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
AGRIFY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Selling, general and administrative | ||||||||
| Research and development | ||||||||
| Change in contingent consideration | ( | ) | ( | ) | ||||
| Gain on early termination of lease | ( | ) | ||||||
| Loss on disposal on property and equipment | ||||||||
| Total operating expenses | ||||||||
| Operating loss from continuing operations | ( | ) | ( | ) | ||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Loss on extinguishment of long-term debt, net | ( | ) | ||||||
| Other income, net | ||||||||
| Total other expense, net | ( | ) | ( | ) | ||||
| Loss from continuing operations before income taxes | ( | ) | ( | ) | ||||
| Income tax (expense) benefit | ( | ) | ||||||
| Loss from continuing operations, net of income taxes | ( | ) | ( | ) | ||||
| Loss from discontinued operations | ( | ) | ( | ) | ||||
| Loss on disposal of Cultivation business | ( | ) | ||||||
| Income tax effect on discontinued operations | ||||||||
| Loss from discontinued operations, net of income taxes | ( | ) | ( | ) | ||||
| Net loss | ( | ) | ( | ) | ||||
| Income attributable to non-controlling interest | ||||||||
| Net loss attributable to Agrify Corporation | $ | ( | ) | $ | ( | ) | ||
| Net loss per share: | ||||||||
| Basic and diluted | ||||||||
| Continuing operations | $ | ( | ) | $ | ( | ) | ||
| Discontinued operations | $ | ( | ) | $ | ( | ) | ||
| Net loss per share attributable to Common Stockholders – basic and diluted (1) | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding - basic and diluted (1) | ||||||||
| (1) |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
AGRIFY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except share and per share data)
| Common Stock | Preferred Stock | Preferred
A Stock | Additional Paid-In- | Accumulated | Total
Stockholders’ Equity (Deficit) attributable | Non- Controlling | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | to Agrify | Interests | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of Common Stock through an “at the market” offering, net of fees | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of held-back shares to Lab Society | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Common Stock to Pure Pressure | ||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of prefunded warrants in private placement | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of equity classified warrants | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Exchange of private placement debt into equity classified warrants | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Conversion of Exchange Note | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Convertible Note | ||||||||||||||||||||||||||||||||||||||||||||
| Proceeds from Employee Stock Purchase Plan Shares | ||||||||||||||||||||||||||||||||||||||||||||
| Reverse stock split fractional share settlement | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance December 31, 2023 | $ | — | $ | — | $ | $ | $ | ( | ) | $ | ( | ) | $ | | $ | ( | ) | |||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
| Common Stock | Preferred Stock | Preferred A Stock | Additional Paid-in- | Accumulated | Total
Stockholders’ Equity (Deficit) attributable | Non- Controlling | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | to Agrify | Interests | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of Common Stock and Pre-Funded Warrants through public offering | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of held-back shares from Sinclair acquisition | ||||||||||||||||||||||||||||||||||||||||||||
| Cashless exercise of High Trail Warrants | — | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of vested RSUs, net of shares held back to offset tax | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Exercise of Pre-Funded Warrants | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares (IONIC Stock Subscription Payable) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Exercise of liability classified warrants, net of forfeitures | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Exercise of Placement Agent Warrants | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Issuance of Common Stock in connection with private placement, net | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Senorita Acquisition | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Issuance of vested RSUs | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock split share adjustment | ( | ) | — | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Deemed Contribution from troubled debt restructuring with related party | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of equity classified Pre-Funded Warrants | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Excess of related party debt and Pre-Funded Warrants conversion | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Conversion of related party debt into Pre-Funded Warrants | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Conversion of Convertible Note | — | |||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balance December 31, 2024 | $ | — | $ | — | $ | $ | $ | ( | ) | $ | $ | | $ | |||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
AGRIFY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss attributable to Agrify Corporation | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss attributable to Agrify Corporation to net cash and cash equivalents used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of debt premium | ( | ) | ( | ) | ||||
| Amortization of debt issuance costs | ||||||||
| Stock-based compensation expense | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Loss on extinguishment of long-term debt, net | ||||||||
| Change in provision for credit losses, net | ( | ) | ( | ) | ||||
| Change in provision for inventory | ( | ) | ( | ) | ||||
| Loss on abandonment of CIP projects | ||||||||
| (Gain) loss on disposal of property and equipment | ( | ) | ||||||
| Gain on early termination of lease | ( | ) | ||||||
| Gain on settlement of contingent liability | ( | ) | ||||||
| Loss on disposal of Cultivation business | ||||||||
| Change in contingent consideration | ( | ) | ||||||
| Income attributable to non-controlling interests | ( | ) | ||||||
| Changes in operating assets and liabilities, net of acquisitions: | ||||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Operating lease right-of-use assets | ||||||||
| Other non-current assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Net cash and cash equivalents used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposal of property and equipment | ||||||||
| Proceeds from sale of marketable securities | ||||||||
| Issuance of loans receivable | ( | ) | ( | ) | ||||
| Proceeds from repayment of loan receivable | ||||||||
| Net cash and cash equivalents (used in) provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of Common Stock through an S-1 and Pre-Funded Warrants offering | ||||||||
| Proceeds from issuance of Common Stock through an “at the market” offering, net of fees | ||||||||
| Proceeds from issuance of Common Stock through IONIC Stock Subscription | ||||||||
| Proceeds from the issuance of Common Stock in connection with private placement, net | ||||||||
| Proceeds from Employee Stock Purchase Plan Shares | ||||||||
| Proceeds from exercise of Pre-Funded Warrants | ||||||||
| Proceeds from issuance of warrants in settlement agreement | ||||||||
| Proceeds from issuance of related party notes | ||||||||
| Repayments of notes payable, other | ( | ) | ||||||
| Repayment of debt in private placement | ( | ) | ||||||
| Payments on other financing loans | ( | ) | ||||||
| Payments on insurance financing loans | ( | ) | ( | ) | ||||
| Payments of financing leases | ( | ) | ||||||
| Net cash and cash equivalents provided by (used in) financing activities continuing operations | ( | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at the beginning of period | ||||||||
| Cash and cash equivalents of discontinued operations, beginning of period | ||||||||
| Cash and cash equivalents of discontinued operations, end of period | ||||||||
| Cash and cash equivalents at the end of period | $ | $ | ||||||
| Supplemental disclosures | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Fair value of warrants in connection with reclassification and issuance | $ | $ | ||||||
| Financing of prepaid insurance | $ | $ | ||||||
| Cashless exercise of liability classified warrants | $ | $ | ||||||
| Conversion of related party debt to equity | $ | $ | ||||||
| Transfer of property and equipment to inventory | $ | $ | ||||||
| Conversion of liability classified pre-funded warrants to equity | $ | $ | ||||||
| Deemed contribution from troubled debt restructuring with related party | $ | $ | ||||||
| Stock and warrants issued in connection with business combination | $ | $ | ||||||
| Conversion of convertible notes into equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-8
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Overview, Basis of Presentation and Significant Accounting Policies
Description of Business
Agrify is a developer of branded innovative solutions for the cannabis and hemp industries. Our Señorita brand offers consumers hemp-derived tetrahydrocannabinol (“THC”) beverages that mirror well-known cocktails like a margarita – in three flavors – classic Lime Jalapeño Margarita, Mango Margarita, and Paloma. Known for its clean, fresh taste and commitment to high-quality, natural ingredients, Señorita offers a low-sugar, low-calorie alternative to alcoholic beverages and is available at top retailers including Total Wine, ABC Fine Wine & Spirits, and Binny’s in nine U.S. states and Canada, with plans for expansion and future availability in premier on-premises destinations.
In addition to beverages, Agrify has also historically been a leading provider of innovative cultivation and extraction solutions for the cannabis industry. The Company’s comprehensive extraction product line, which includes hydrocarbon, alcohol, solventless, post-processing, and lab equipment, empowers producers to maximize the quantity and quality of extract required for premium concentrates. Additionally, prior to its sale on December 31, 2024, our proprietary micro-environment-controlled Agrify Vertical Farming Units (“VFUs”) enabled cultivators to produce high quality products for the cannabis industry.
The Company was formed in the State of Nevada on June 6, 2016 as Agrinamics, Inc., and subsequently changed its name to Agrify Corporation. The Company is sometimes referred to herein by the words “we,” “us,” “our,” and similar terminology.
The Company has ten wholly-owned consolidated subsidiaries, which are collectively referred to as the “Subsidiaries” and the Company also has ownership interests in certain companies.
On December 12, 2024, the Company acquired certain assets from Double or Nothing, LLC (“Double or Nothing”), the owner and creator of the Señorita brand of hemp-derived drinks as part of the Company’s strategic plan to reposition itself as a distributor of hemp-derived beverages (and similar products).
On December 31, 2024, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with CP Acquisitions, LLC (“CP”), an entity affiliated with Raymond Chang, the Company’s former Chairman and Chief Executive Officer. Under the Purchase Agreement, CP acquired assets from the Company relating to the Company’s Vertical Farming Units (“VFUs”), including the related Agrify total-turnkey (“TTK”) solution assets and Agrify InsightsTM software solutions (collectively the “Cultivation Business”). The sale of the Cultivation Business occurred following signing on December 31, 2024. The results of the Cultivation Business is presented as discontinued operations in the Consolidated Statements of Operations and, as such, have been excluded from continuing operations. Further, the Company reclassified the assets and liabilities of the Cultivation Business to discontinued operations in the Consolidated Balance Sheet as of December 31, 2023. For further discussion on the discontinued operations, refer to Note 6.
Reverse Stock Splits
On
July 5, 2023, the Company effected a
On
October 8, 2024, the Company effected a
No fractional shares of Common Stock were issued as a result of these reverse stock splits. Any fractional shares in connection with these reverse stock splits were rounded up to the nearest whole share and no stockholders received cash in lieu of fractional shares. The reverse stock splits had no impact on the number of shares of Common Stock that the Company is authorized to issue pursuant to its articles of incorporation or on the par value per share of the Common Stock. Proportional adjustments were made to the number of shares of Common Stock issuable upon exercise or conversion of the Company’s outstanding stock options and warrants, the exercise price or conversion price (as applicable) of the Company’s outstanding stock options and warrants, and the number of shares reserved for issuance under the Company’s equity incentive plan. All share and per share information included in this Annual Report on Form 10-K has been retroactively adjusted to reflect the impact of these reverse stock splits.
F-9
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nasdaq Deficiency Notice
On
January 19, 2023, the Company received a deficiency letter from the Listing Qualifications Department
(the “Staff”) of The Nasdaq Stock Market, LLC (“Nasdaq”) notifying the Company that, for the previous
As disclosed in the Current Report on Form 8-K filed on April 17, 2023, the audit committee (the “Audit Committee”) of the Company’s Board of Directors (the “Board”) concluded that, as a result of inadvertent errors in the accounting for warrants previously issued by the Company, it was appropriate to restate the Company’s previously issued unaudited consolidated interim financial statements as of and for the quarterly periods ended March 31, 2022, June 30, 2022 and September 30, 2022 included in the Company’s Quarterly Reports on Form 10-Q for such periods in amended quarterly reports for the affected periods. As a result of such restatements, the Company was unable to timely file the 2022 Form 10-K, the First Quarter 2023 Form 10-Q and the Second Quarter 2023 Form 10-Q without unreasonable effort or expense.
On April 18, 2023, the Company received a notice from Nasdaq (the “April Nasdaq Notice”) that it was noncompliant with Nasdaq Listing Rule 5250(c)(1) as a result of its failure to file its Annual Report on Form 10-K (the “Form 10-K”) with the SEC by the required due date.
On May 17, 2023, the Company received a second notice from Nasdaq (the “May Nasdaq Notice”) that it remained noncompliant with Nasdaq Listing Rule 5250(c)(1) as a result of its failure to file its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “First Quarter Form 10-Q”) with the SEC by the required due date.
On August 16, 2023, the Company received a third notice from Nasdaq that it remain noncompliant with Nasdaq Listing Rule 5250(c)(1) as a result of its failure to file its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023 (the “Second Quarter Form 10-Q”) with the SEC by the required filing date (the “August Nasdaq Notice” and, together with the April Nasdaq Notice and the May Nasdaq Notice, the “Nasdaq Notices”).
The Nasdaq granted the Company an exception until October 16, 2023, to file its 2022 Form 10-K and First and Second Quarter 2023 Forms 10-Q. The Nasdaq Notice had no immediate effect on the listing of the Company’s Common Stock on The Nasdaq Stock Market LLC.
On October 17, 2023, the Company received a Staff Delisting Determination (the “Staff Determination”) from the Listing Qualifications Department of Nasdaq notifying the Company that it was not in compliance with Nasdaq’s continued listing requirements under the Listing Rule as a result of its failure to file the First Quarter Form 10-Q, the Second Quarter Form 10-Q and the Form 10-K for 2023 (collectively, the “Delinquent Reports”) in a timely manner.
On November 16, 2023, the Company received a notice from Nasdaq that the Company remains noncompliant with the Listing Rule as a result of its failure to file its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023 with the SEC by the required filing date (the “November Nasdaq Notice” and, together with the April Nasdaq Notice, the May Nasdaq Notice, and the August Nasdaq Notice, the “Nasdaq Notices”).
On
December 1, 2023, the Company received a notice from Nasdaq stating that because the Company reported stockholders’ equity of $(
On January 30, 2024, the Company received formal notice that the Panel had granted the Company’s request for an exception through April 15, 2024 to evidence compliance with the Listing Rule. The compliance date of April 15, 2024 represents the full extent of the Panel’s discretion to grant continued listing while the Company is non-compliant with Nasdaq Listing Rules. Accordingly, there can be no assurance that the Company will be able to regain compliance with the Nasdaq listing rules or maintain its listing on the Nasdaq Capital Market. If the Company’s Common Stock is delisted, it could be more difficult to buy or sell the Company’s Common Stock or to obtain accurate quotations, and the price of the Company’s Common Stock could suffer a material decline. Delisting could also impair the Company’s ability to raise capital.
F-10
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On
March 5, 2024, the Company received a deficiency letter from the Staff notifying the Company that, for the last 30 consecutive business
days, the bid price for the Company’s Common Stock had closed below $
Basis of Presentation and Principles of Consolidation
Accounting for Wholly-Owned Subsidiaries
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of Agrify Corporation and its wholly-owned subsidiaries, as described above, in accordance with the provisions required by the Consolidation Topic 810 (“ASC 810”) of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The Company includes results of operations of acquired companies from the date of acquisition. All significant intercompany transactions and balances are eliminated.
Accounting for Less Than Wholly-Owned Subsidiaries
For the Company’s less than wholly-owned subsidiary, Agrify Brands, LLC (“Agrify Brands”), the Company first analyzes whether this entity is a variable interest entity (a “VIE”) in accordance with ASC 810, and if so, whether the Company is the primary beneficiary requiring consolidation. The Company continuously re-assesses (i) whether the joint-venture is a VIE, and (ii) if the Company is the primary beneficiary of the VIE. If it is determined that Agrify Brands qualifies as a VIE and the Company is the primary beneficiary, the Company’s financial interest in the VIE is consolidated.
Based
on the Company’s analysis of this entity, the Company has determined that Agrify Brands is a VIE, and that the Company is the primary
beneficiary. While the Company owns
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting period. On an ongoing basis, the Company evaluates estimates, which include estimates related to accruals, stock-based compensation expense, reported amounts of revenues during the reported period, fair value of warrant liabilities, sales tax liabilities, valuation of deferred tax assets, net realizable value of inventory and collectability of trade accounts, intangible assets, goodwill, and litigation. The Company bases their estimates on historical experience and other market-specific or other relevant assumptions that they believe to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions.
The Company regularly evaluates its assets, including asset groups or reporting units, for impairment in accordance with GAAP. The Company is aware of the impact that prolonged net losses can have on the fair value of underlying assets and the overall company. The Company is committed to ensuring that the carrying amounts of its assets are appropriately assessed and adjusted for any impairment, reflecting a true and fair view of its financial position.
Reclassifications
The Company effected a 1-for-20
reverse stock split of its Common Stock on July 5, 2023 and a 1-for-15 reverse stock split of its Common Stock on October 8, 2024. All
share and per share information has been retroactively adjusted to give effect to the reverse stock split for all periods presented unless
otherwise indicated. The shares of Common Stock retained a par value of $
Certain amounts in the consolidated financial statements related to the prior years have been reclassified to conform to the current year’s presentation.
F-11
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Discontinued Operations
On December 31, 2024, the Company entered into and closed a Purchase Agreement with CP. Under the Purchase Agreement, CP acquired assets from the Company relating to the Cultivation Business.
As the sale of the Cultivation Business represented a strategic shift that will have a major effect on the Company’s operations and financial results, they have been presented in discontinued operations in accordance with ASC 205, Presentation of Financial Statements, separate from continuing operations for the years ended December 31, 2024 and 2023, as applicable. For further discussion, refer to Note 6.
Cash and Cash Equivalents
Cash and cash equivalents consist principally of cash and deposits with maturities of three months or less as of December 31, 2024 and December 31, 2023. All cash equivalents are carried at cost, which approximates fair value.
Marketable Securities
The Company’s marketable security investments primarily include investments held in mutual funds, municipal bonds, and corporate bonds. The mutual funds are recorded at fair value in the accompanying consolidated balance sheets as part of cash and cash equivalents. The municipal and corporate bonds are considered to be held-to-maturity securities and are recorded at amortized cost in the accompanying consolidated balance sheets. The fair value of these investments was estimated using recently executed transactions and market price quotations. The Company considers current assets to be those investments that will mature within the next 12 months, including interest receivable on long-term bonds.
Accounts Receivable, Net
Accounts receivable, net, primarily consists of amounts for goods and services that are billed and currently due from customers. In accordance with the current expect credited loss (“CECL”) impairment model under ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), accounts receivable balances are presented net of an allowance for credit losses, which are an estimate of billed or borrowed amounts that may not be collectible. In determining the amount of the allowance at each reporting date, management makes judgments about general economic conditions, historical write-off experience, and any specific risks identified in customer or borrower collection matters, including the aging of unpaid accounts receivable and changes in customer or borrower financial conditions. Accounts receivable balances are written off after all means of collection are exhausted and the potential for non-recovery is determined to be probable. Adjustments to the allowance for credit losses are recorded as general and administrative expenses in the consolidated statements of operations.
Concentration of Credit Risk and Significant Customer
Financial instruments that potentially subject the Company to a concentration of credit risk primarily consist of cash, cash equivalents, marketable securities, and accounts receivable. Cash equivalents primarily consist of money market funds with original maturities of three months or less, which are invested primarily with U.S. financial institutions. Cash deposits with financial institutions generally exceed federally insured limits. Management believes minimal credit risk exists with respect to these financial institutions and the Company has not experienced any losses on such amounts.
The tables below show customers who account for 10% or more of the Company’s total revenues and 10% or more of the Company’s accounts receivable for the periods presented.
For the years ended December 31, 2024 and 2023, the Company did not have any customers that accounted for 10% or more of total revenue.
As of December 31, 2024 and 2023, the Company’s customers that accounted for 10% or more of the total accounts receivable, net, were as follows:
| 2024 | 2023 | |||||||||||||||
| (In thousands) | Amount | % of Total Accounts Receivable | Amount | % of Total Accounts Receivable | ||||||||||||
| Company Customer Number – 15095 | $ | % | ||||||||||||||
| Company Customer Number – 10888 | $ | % | $ | % | ||||||||||||
| Company Customer Number – 9142 | $ | % | ||||||||||||||
| * |
F-12
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inventories
The Company values all its inventories, which consist primarily of significant raw material hardware components, at the lower of cost or net realizable value, with cost principally determined by the weighted-average cost method on a first-in, first-out basis. Write-offs of potentially slow-moving or damaged inventory are recorded through specific identification of obsolete or damaged material.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expenses are recognized using the straight-line method over the estimated useful life of each asset, as follows:
| Estimated Useful Life (Years) | ||||
| Computer and office equipment | ||||
| Furniture and fixtures | ||||
| Software | ||||
| Vehicles | ||||
| Research and development of laboratory equipment | ||||
| Machinery and equipment | ||||
| Trade show assets | ||||
| Leasehold improvements | ||||
The estimated useful lives of the Company’s property and equipment are periodically assessed to determine if changes are appropriate. The Company charges maintenance and repairs to expense as incurred. When the Company retires or disposes of assets, the carrying cost of these assets and related accumulated depreciation or amortization are eliminated from the consolidated balance sheets and any resulting gain or loss is included in the consolidated statements of operations in the period of retirement or disposal.
Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated once placed into service. During construction, costs are accumulated in a construction-in-progress account, with no depreciation. Upon completion, costs are transferred to the appropriate asset account, and depreciation begins when the asset is placed into service.
Goodwill
Goodwill is defined as the excess of cost over the fair value of assets acquired and liabilities assumed in a business combination. Goodwill is tested for impairment annually, and more frequently if events and circumstances indicate that the asset might be impaired. A goodwill impairment charge is recorded if the amount by which the Company’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Factors that could lead to a future impairment include material uncertainties such as a significant reduction in projected revenues, a deterioration of projected financial performance, future acquisitions and/or mergers, and/or a decline in the Company’s market value as a result of a significant sustained decline in the Company’s stock price.
Goodwill is not subject to amortization and is tested annually for impairment, or more frequently if events or changes in circumstances indicate there might be an impairment. An impaired asset is written down to its estimated fair value based upon the most recent information.
During the year ended December 31, 2024, the Company performed a qualitative analysis for its goodwill impairment test. The Company applies the guidance in ASU 2011-08 Intangibles-Goodwill and Other-Testing Goodwill for Impairment, which provides entities with an option to perform a qualitative assessment (commonly referred to as “Step Zero”) to determine whether further quantitative analysis for impairment of goodwill is necessary. A goodwill impairment charge is recorded if the amount by which our carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Factors that could lead to a future impairment include material uncertainties such as a significant reduction in projected revenues, a deterioration of projected financial performance, future acquisitions and/or mergers, and a decline in our market value as a result of a significant sustained decline in our stock price. As a result of the Company’s Step Zero analysis, no further quantitative impairment test was deemed necessary.
Warrant Liabilities
The Company evaluates all its financial instruments, including issued private placement stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815. Management’s assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Common Stock among other conditions for equity classification.
F-13
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For issued or modified warrants that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that are precluded from equity classification, they are recorded as a liability at their initial fair value on the date of issuance and subject to remeasurement on each balance sheet date with changes in the estimated fair value of the warrants to be recognized as an unrealized gain or loss in the consolidated statements of operations.
Convertible Notes Payable
The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with ASC 815. The accounting treatment of derivative financial instruments requires that the Company identify and record certain embedded conversion options (“ECOs”), certain variable-share settlement features, and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as an unrealized non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. Bifurcated embedded conversion options, variable-share settlement features, and any related freestanding instruments are recorded as a discount to the host instrument which is amortized to interest expense over the life of the respective note using the effective interest method.
Debt Issuance Costs and Debt Discount
The Company may record debt issuance costs and/or debt discounts in connection with the issuance of debt. The Company may cover these costs by paying cash or issuing warrants. These costs are amortized to interest expense over the expected life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Original Issue Discount
Certain convertible debt issued by the Company, may provide the debt holder with an original issue discount. The Company would record the original issue discount to debt discount, reducing the face amount of the note, and is then amortized to interest expense over the life of the debt.
Leases
The Company determines at the inception of an asset contract if such arrangement is or contains a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company classifies leases at the lease commencement date as operating or finance leases and records a right-of-use asset and a lease liability on its consolidated balance sheet for all leases with an initial lease term of greater than 12 months. A lease with an initial term of 12 months or less is not recorded on the balance sheet, but related payments are recognized as an expense on a straight-line basis over the lease term.
The Company’s asset contracts may contain both lease and non-lease components. Non-lease components may include maintenance, utilities, and other operating costs. The Company combines the lease and non-lease components of fixed costs in its lease arrangements as a single lease component. Variable costs, such as utilities or maintenance costs, are not included in the measurement of right-of-use assets and lease liabilities, but rather are expensed when the event determining the amount of variable consideration to be paid occurs.
Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of future lease payments over the expected lease term. The Company determines the present value of future lease payments by using its estimated secured incremental borrowing rate for that lease term as the interest rate implicit in the lease is not readily determinable. The Company estimates its secured incremental borrowing rate for each lease based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term.
Certain of the Company’s leases include options to extend or terminate the lease. The amounts determined for the Company’s right-of-use assets and lease liabilities generally do not assume that renewal options or early-termination provisions, if any, are exercised unless it is reasonably certain that the Company will exercise such options.
Contract Liabilities
Contract Liabilities includes amounts collected, billed in excess of revenue or customer deposits that the Company can recognize. The Company recognizes contract liabilities and non-current contract liabilities as revenue as the related performance obligation is satisfied. The Company records contract liabilities that will be recognized during the succeeding twelve-month period as a current liability on the consolidated balance sheets.
F-14
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, contingent considerations, long-term debt, related party debt, and warrant liabilities. Refer to Note 4 - Fair Value Measures, included elsewhere in the notes to the consolidated financial statements for details of the Company’s financial instruments.
Stock-Based Compensation
The Company measures all stock options and other stock-based awards granted to employees, directors and consultants based on the fair value on the date of the grant and recognizes compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. Forfeitures are recognized as incurred. Historically, the Company has issued stock options to employees, directors and consultants with only service-based vesting conditions and records the expense for these awards using the straight-line method.
The Company classifies stock-based compensation expense in its consolidated statements of operations in the same manner in which the award recipient’s payroll costs are classified.
The Company estimates the fair value of each stock option grant on the date of the grant using the Black-Scholes option-pricing model. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
Business Combinations
The Company accounts for business acquisitions using the acquisition method of accounting, in accordance with which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. The fair value of the consideration paid is assigned to the assets acquired and liabilities assumed based on their respective fair values. Goodwill represents the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed.
The Company’s management exercises significant judgments in determining the fair value of assets acquired and liabilities assumed, as well as intangibles and their estimated useful lives. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash flows, royalty cost savings and appropriate discount rates used in computing present values. These judgments may materially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s current and future operating results. Actual results may vary from these estimates which may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first. Adjustments to the fair value of assets and liabilities made after the end of the measurement period are recorded within the Company’s operating results.
Revenue Recognition
Overview
We generate revenue from equipment sales and hemp-derived beverage sales.
In accordance with ASC Topic 606, Revenue Recognition (“ASC 606”), we recognize revenue from contracts with customers using a five-step model, which is described below:
| ● | identify the customer contract; |
| ● | identify performance obligations that are distinct; |
| ● | determine the transaction price; |
| ● | allocate the transaction price to the distinct performance obligations; and |
| ● | recognize revenue as the performance obligations are satisfied. |
Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer. The Company satisfies its performance obligation upon transferring goods or services to a customer and transfers control upon the customer taking possession.
F-15
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Significant Judgments
The Company enters into contracts that may include various combinations of equipment and, services which are generally capable of being distinct and accounted for as separate performance obligations. Contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once the Company determines the performance obligations, it determines the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. The Company then allocates the transaction price to each performance obligation in the contract based on the standalone selling price (“SSP”). The corresponding revenue is recognized as the related performance obligations are satisfied.
Judgment is required to determine the SSP for each distinct performance obligation. The Company determines SSP based on the price at which the performance obligation is sold separately and the methods of estimating SSP under the guidance of ASC 606. If the SSP is not observable through past transactions, the Company estimates the SSP, taking into account available information such as market conditions, expected margins, and internally approved pricing guidelines related to the performance obligations. The Company typically satisfies its performance obligations for equipment sales when equipment is made available for shipment to the customer; for services sales as services are rendered to the customer.
The Company utilizes the cost-plus margin method to determine the SSP for equipment and services. This method is based on the cost of the services from third parties, plus a reasonable markup that the Company believes is reflective of a market-based reseller margin.
The Company determines the SSP for services in time and materials contracts by observable prices in standalone services arrangements.
Payment terms with customers typically require payment 30 days from the invoice date. The Company’s agreements with its customers do not provide for any refunds for services or products and therefore no specific reserve for such is maintained. In the infrequent instances where customers raise concern over delivered products or services, the Company has endeavored to remedy the concern and all costs related to such matters have been insignificant in all periods presented.
The Company has elected to treat shipping and handling activities after the customer obtains control of the goods as a fulfillment cost and not as a promised good or service. Accordingly, the Company will accrue all fulfillment costs related to the shipping and handling of consumer goods at the time of shipment. The Company has payment terms with its customers of one year or less and has elected the practical expedient applicable to such contracts not to consider the time value of money. Sales, value add, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue.
The Company receives payment from customers based on specified terms that are generally less than 30 days from the satisfaction of performance obligations. There are no contract assets related to performance under the contract. The difference in the opening and closing balances of the Company’s contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. The Company fulfills obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. The Company recognizes a contract liability when consideration has been received and the Company has a future obligation to transfer certain proprietary products.
In accordance with ASC 606, the Company is required to include disclosure on its remaining performance obligations as of the end of the current reporting period. Due to the nature of the Company’s contracts, these reporting requirements are not applicable. The majority of the Company’s remaining contracts meet certain exemptions as defined in ASC 606, including (i) performance obligation is part of a contract that has an original expected duration of one year or less and (ii) the right to invoice practical expedient.
The
Company generally provides a one-year warranty on its products for materials and workmanship but may provide multiple-year warranties
as negotiated, and generally transfers to its customers the warranties it receives from its vendors, if any, which generally cover this
one-year period. In accordance with ASC Topic 450, Accounting for Contingencies, (“ASC 450”) the Company accrues for product
warranties when the loss is probable and can be reasonably estimated. The Company maintained a reserve for warranty returns of $
Research and Development Costs
The Company expenses research and development costs as incurred. Research and development expenses include payroll, employee benefits and other expenses associated with product development. The Company incurs research and development costs associated with the development and enhancement of both hardware and software products associated with its extraction equipment.
F-16
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
The Company accounts for income taxes pursuant to the provisions of ASC Topic 740, Income Taxes (“ASC 740”), which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred tax asset will not be realized.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740, the benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits.
The Company recognizes the benefit of a tax position when it is effectively settled. ASC 740, provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. ASC 740 clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing authority. For tax positions considered effectively settled, the Company recognizes the full amount of the tax benefit.
The Company’s provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the period presented. To determine the annual effective tax rate, the Company estimates both the total income (loss) before income taxes for the full year and the jurisdictions in which that income (loss) is subject to tax. The actual effective tax rate for the full year may differ from these estimates if income (loss) before income taxes is greater than or less than what was estimated or if the allocation of income (loss) to jurisdictions in which it is taxed is different from the estimated allocations.
The provision for income taxes represents Federal, state and local income taxes. The effective rate differs from statutory rates due to the effect of certain nondeductible expenses. Our effective tax rate will change from quarter to quarter based on recurring and non-recurring factors including, but not limited to, the geographical mix of earnings, enacted tax legislation, and state and local income taxes. In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition or re-measurement of a tax position taken in a prior annual period is recognized separately in the quarter of the change.
Tax contingencies are recorded, if needed, to address potential exposure involving tax positions the Company has taken that could be challenged by tax authorities. These potential exposures could result from applications of various statutes, rules, regulations and interpretations. Any estimates of tax contingencies contain assumptions and judgments about potential actions by taxing jurisdictions. Any interest and penalties related to uncertain tax positions would be included as part of the income tax provision. The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analysis of or changes in tax laws, regulations and interpretations thereof as well as other factors.
Net Loss Per Share
The Company presents basic and diluted net loss per share attributable to holders of the Company’s Common Stock in conformity with the one-class method. The Company computes basic loss per share by dividing net loss available to Common Stockholders by the weighted-average number of Common Stock outstanding. Diluted loss/income per share adjusts basic loss per share for the potentially dilutive impact of convertible notes, stock options, restricted stock units and warrants. As the Company has reported losses for the years ended December 31, 2024 and 2023, all potentially dilutive securities including convertible notes, stock options, restricted stock units and warrants, are anti-dilutive, and accordingly, basic net loss per share equals diluted net loss per share for those periods.
Net loss per share calculations for all periods have been adjusted to reflect the reverse stock splits effected on July 5, 2023 and October 8, 2024.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures, to provide enhanced segment disclosures. The standard will require disclosures about significant segment expense categories and amounts for each reportable segment, for all periods presented. Additionally, the standard requires public entities to disclose the title and position of the Chief Operating Decision Maker (“CODM”) in the consolidated financial statements. These enhanced disclosures are required for all entities on an interim and annual basis, effective for fiscal years beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
F-17
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recently Announced Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, a final standard on improvements to income tax disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard applies to all entities subject to income taxes and is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. For public business entities (PBEs), the new requirements will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is currently in the process of evaluating the effect of this guidance on its financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. This guidance requires additional disclosure of certain amounts included in the expense captions presented on the Statement of Operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (“ASU 2024-04”), which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. Adoption can be on a prospective or retrospective basis. The Company is currently evaluating the disclosure impact that ASU 2024-04 may have on its financial statement presentation and disclosures.
Other recent accounting pronouncements did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
Note 2 — Revenue and Contract Liabilities
Revenue
We generate revenue from equipment sales and hemp-derived beverage sales. The Company enters into time-and-materials contracts for equipment sales under which the Company is paid for labor and equipment at negotiated hourly billing rates and other expenses, including materials, as incurred at rates agreed to in the contract.
The following table provides the Company’s revenue from continuing operations disaggregated by the timing of revenue recognition:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Transferred at a point-in-time | $ | $ | ||||||
| Transferred over-time | ||||||||
| Total revenue | $ | $ | ||||||
The following table provides the Company’s revenue from continuing operations disaggregated by revenue type:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Ancillary products and services | $ | $ | ||||||
| Extraction solutions | $ | $ | ||||||
| Hemp-derived beverages | — | |||||||
| Total revenue | $ | $ | ||||||
F-18
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In accordance with ASC 606, the Company is required to include disclosure on its remaining performance obligations as of the end of the current reporting period. Due to the nature of the Company’s contracts, these reporting requirements are not applicable because the majority of the Company’s remaining contracts meet certain exemptions as defined in ASC 606 through 606, including (i) performance obligation is part of a contract that has an original expected duration of one year or less and (ii) the right to invoice practical expedient.
Contract Liabilities
Changes in the Company’s current contract liability balance for the years ended December 31, 2024 and 2023 were as follows:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Contract liabilities – beginning of period | $ | $ | ||||||
| Additions | ||||||||
| Recognized | ( | ) | ( | ) | ||||
| Contract liabilities – end of period | $ | $ | ||||||
Contract liabilities balances primarily consist of customer deposits on the Company’s extraction solutions equipment. As of December 31, 2024 and December 31, 2023, all of the Company’s contract liabilities balances were reported as current liabilities in the accompanying consolidated balance sheets.
Note 3 — Supplemental Consolidated Balance Sheet Information
Accounts Receivable, Net
Accounts receivable consisted of the following as of December 31, 2024 and December 31, 2023:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Accounts receivable, gross | $ | $ | ||||||
| Less allowance for credit losses | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
The changes in the allowance for credit losses accounts consisted of the following:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Allowance for credit losses - beginning of period | $ | $ | ||||||
| (Recovery of) allowance for credit losses | ( | ) | ||||||
| Write-offs of uncollectible accounts | ( | ) | ( | ) | ||||
| Allowance for credit losses - end of period | $ | $ | ||||||
F-19
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following as of December 31, 2024 and December 31, 2023:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Prepaid insurance | $ | $ | ||||||
| Prepaid expenses, other | ||||||||
| Prepaid software | ||||||||
| Other receivables | ||||||||
| Prepaid materials | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
Property and Equipment, Net
Property and equipment, net consisted of the following as of December 31, 2024 and December 31, 2023:
(In thousands) | December
31, 2024 | December
31, 2023 | ||||||
| Machinery and equipment | $ | $ | ||||||
| Software | ||||||||
| Computer and office equipment | ||||||||
| Leasehold improvements | ||||||||
| Research and development laboratory equipment | ||||||||
| Furniture and fixtures | ||||||||
| Trade show assets | ||||||||
| Vehicles | ||||||||
| Total property and equipment, gross | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Construction in progress | ||||||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation
expense for the years ended December 31, 2024 and 2023 was $
Construction in Progress (“CIP”) includes all direct and indirect costs related to the construction, development, or acquisition of tangible property and equipment that is not yet ready for use. All costs incurred during the construction phase are accumulated in the CIP account. Costs remain in the CIP account until the asset is substantially complete and ready for its intended use. Once the asset is ready for use, the total accumulated costs are transferred from the CIP account to the appropriate property and equipment account. The asset is then depreciated over its estimated useful life from the date it is placed into service. CIP is reviewed regularly to ensure that all costs are accurate and that the project is progressing as planned. Any indication of impairment is assessed, and if the carrying amount exceeds the recoverable amount, an impairment loss is recognized.
During
the year ended December 31, 2024, the Company sold property and equipment with a cost basis of $
During
the year ended December 31, 2023, the Company sold Cultivation property and equipment in exchange for proceeds of $
Other Non-Current Assets
Other non-current assets consists only of security deposits as of December 31, 2024 and December 31, 2023.
F-20
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following as of December 31, 2024 and December 31, 2023:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Sales tax payable | $ | $ | ||||||
| Litigation reserve | ||||||||
| Accrued professional fees | ||||||||
| Compensation related fees | ||||||||
| Accrued warranty expenses | ||||||||
| Accrued interest expense | ||||||||
| Accrued consulting fees | ||||||||
| Accrued inventory purchases | ||||||||
| Accrued acquisition liabilities | ||||||||
| Total accrued expenses and other current liabilities | $ | $ | ||||||
Accrued acquisition liabilities
Resulting from the 2021 acquisitions of Precision and Cascade from Sinclair (“Precision and Cascade”), the Company withheld from the transaction shares issuable to Precision and Cascade for the purpose of securing any post-closing adjustment owed to the Company and any claim for indemnification or payment of damages to which the Company may be entitled under the purchase agreement. The accrued acquisition liabilities as of December 31, 2023 represent the value of this held back Common Stock at the price per share at the time of the transaction.
On June 15, 2023, the Company and its wholly-owned subsidiary, Precision, filed an Amended Verified Complaint in the Court of Chancery of the State of Delaware against Sinclair and certain individual defendants (the “Delaware Action”). The claims filed in the Delaware Action concern various breaches of the plan of merger and equity purchase agreement dated September 29, 2021, by and between the Company, Sinclair, Mass2Media, LLC, and certain of their members (the “Merger Agreement”). In response to the Delaware Action, certain of the defendants filed counterclaims for breach of contract and declaratory judgment against the Company and Precision alleging breach of the Merger Agreement. Pursuant to a Settlement and Release Agreement, dated December 14, 2023, the Company and Sinclair dismissed all legal claims and entered into a settlement for an undisclosed amount. As a result of this settlement, the Company derecognized the accrued acquisition liability and issued the held back Common Stock in the first quarter of 2024 at Agrify’s price per share at the time of issuance. The difference between the value of the shares at issuance and the derecognized liabilities was recorded as a gain within change in contingent consideration within the Company’s consolidated statement of operations for the year ended December 31, 2024.
Accrued Warranty Expenses
The following table summarizes the activity related to the Company’s accrued liability for estimated future warranty costs:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Warranty accrual – beginning of period | $ | $ | ||||||
| Liabilities accrued for warranties issued during the period | ||||||||
| Warranty accruals paid during the period | ( | ) | ||||||
| Assumed in Cultivation Sale | ( | ) | ||||||
| Warranty accrual – end of period | $ | $ | ||||||
Note 4 — Fair Value Measures
Fair Values of Assets and Liabilities
In accordance with ASC Topic 820, Fair Value Measurement, the Company measures fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset or liability (the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:
Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.
F-21
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar instruments in active markets or for similar markets that are not active.
Level 3: Unobservable inputs for which there is little or no market data which require the Company to develop its own assumptions about how market participants would price the asset or liability.
Valuation techniques for assets and liabilities include methodologies such as the market approach, the income approach or the cost approach, and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are only utilized to the extent that observable inputs are not available or cost-effective to obtain.
At December 31, 2024 and December 31, 2023, the Company’s assets and liabilities measured at fair value on a recurring basis were as follows:
| December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||
| Fair Value Measurements Using Input Types | Fair Value Measurements Using Input Types | |||||||||||||||||||||||||||||||
| (In thousands) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Warrant liabilities - January 2022 warrants | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Warrant liabilities - March 2022 warrants | ||||||||||||||||||||||||||||||||
| Warrant liabilities - August 2022 warrants | ||||||||||||||||||||||||||||||||
| Warrant liabilities - December 2022 warrants | ||||||||||||||||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Fair Value of Financial Instruments
The Company has certain financial instruments which consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, contingent consideration, operating lease liabilities, long-term debt, related party debt, and warrant liabilities. Fair value information for each of these instruments as well as other balances of the Company are as follows:
| ● | Cash and cash equivalents, accounts payable, and accrued expenses approximate their fair value based on the short-term nature of these instruments. |
| ● | Accounts receivable are presented net of an allowance for estimated credit losses, which approximates fair value. |
| ● | The carrying value of lease liabilities approximates fair value due to the implicit discount rates used in the determination of the lease liabilities being consistent with the Company’s incremental borrowing rates at the time of lease inception and accounting for the duration of the leases. |
| ● | Long-term debt and related party debt, including the debt that has undergone troubled debt restructuring, is carried at amortized cost, dictated by the prevailing market interest rates at the time of each transaction in accordance with ASC Topic 470, Debt (“ASC 470”). |
| ● | The Company’s warrant liabilities are marked-to-market each reporting period with the changes in fair value of warrant liabilities recorded in other income (expense), net in the accompanying consolidated statements of operations until the warrants are exercised. The fair value of the warrant liabilities are estimated using a Black-Scholes option-pricing model. |
| ● | As detailed in Note 12 - Stockholders’ Equity (Deficit), during the year ended December 31, 2024, the Company amended Pre-Funded Warrants that had been issued to a related party such that they again became liability classified. These warrants were marked to fair value upon the execution of this amendment in August 2024. Through an additional amendment executed as of December 31, 2024, the warrants again met the requirements for equity classification and were marked to fair value at the moment of the amendment and then reclassified from liability to equity. The warrants will not be marked to fair value on a recurring basis. |
F-22
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Warrant Liabilities
The estimated fair value of the warrant liabilities as of December 31, 2024 and 2023 is determined using Level 3 inputs. Inherent in a Black-Scholes option-pricing model are assumptions used in calculating the estimated fair values that represent the Company’s best estimate. The volatility rate is determined utilizing the Company’s own share price and the share price of competitors over time.
However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.
The following table summarizes the Company’s assumptions used in the valuations as of December 31, 2024 and 2023:
| January
2022 Warrants | March
2022 Warrants | August
2022 Warrants | December
2022 Warrants | |||||||||||||
| December 31, 2024 | ||||||||||||||||
| Stock price | $ | $ | $ | $ | ||||||||||||
| Exercise price | $ | $ | $ | $ | ||||||||||||
| Expected term (in Years) | ||||||||||||||||
| Volatility | % | % | % | % | ||||||||||||
| Discount rate - treasury yield | % | % | % | % | ||||||||||||
| January
2022 Warrants | March
2022 Warrants | August
2022 Warrants | December
2022 Warrants | |||||||||||||
| December 31, 2023 | ||||||||||||||||
| Stock price | $ | $ | $ | $ | ||||||||||||
| Exercise price | $ | $ | $ | $ | ||||||||||||
| Expected term (in Years) | ||||||||||||||||
| Volatility | % | % | % | % | ||||||||||||
| Discount rate - treasury yield | % | % | % | % | ||||||||||||
The following table sets forth a summary of the changes in the fair value of the Level 3 warrant liabilities for the years ended December 31, 2024 and 2023:
| 2024 | 2023 | |||||||
| Warrant liabilities - beginning of period | $ | $ | ||||||
| Initial fair value of warrant liabilities | ||||||||
| Exercise of warrants | ( | ) | ||||||
| Reclassification of warrant liabilities to equity | ( | ) | ||||||
| Change in estimated fair value | ( | ) | ||||||
| Warrant liabilities end of period | $ | $ | ||||||
F-23
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 — Inventory
Inventories are stated at the lower of cost or net realizable value, with cost principally determined by the weighted-average cost method on a first-in, first-out basis. Such costs include the acquisition cost for raw materials and operating supplies.
Inventory consisted of the following as of December 31, 2024 and December 31, 2023:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Finished goods | $ | $ | ||||||
| Inventory for resale | ||||||||
| Raw materials | ||||||||
| Inventory, gross | ||||||||
| Inventory reserves | ( | ) | ( | ) | ||||
| Total inventory, net | $ | $ | ||||||
Inventory Reserves
The Company establishes an inventory reserve for obsolete, slow moving, and defective inventory. The Company calculates inventory reserves for obsolete, slow moving, or defective items as the difference between the cost of inventory and its estimated net realizable value. The reserves are based upon management’s expected method of disposition.
Changes in the Company’s inventory reserve are as follows:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Inventory reserves – beginning of period | $ | $ | ||||||
| (Decrease) increase in inventory reserves | ( | ) | ||||||
| Inventory reserves – end of period | $ | $ | ||||||
Note 6 — Discontinued Operations
Cultivation Business Discontinued Operations
On
December 31, 2024, the Company executed and closed the Purchase Agreement with CP for the sale of assets relating to the Company’s
Cultivation Business. The consideration for the sale of the Cultivation Business consisted of the assumption by CP of all the Company’s
secured indebtedness currently held by CP with an aggregate amount of principal and accrued interest of approximately $
The disposition resulted in a loss on sale of $
F-24
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The assets and liabilities associated with discontinued operations consisted of the following as of December 31, 2024 and 2023, respectively:
Carrying amounts of assets and liabilities associated with Cultivation Business included as part of discontinued operations:
| December 31, 2024 | December 31, 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Accounts receivable, net | $ | $ | ||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Loan receivable, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Property and equipment, net | ||||||||
| Other non-current assets | ||||||||
| Non-current assets of discontinued operations | ||||||||
| Total assets of discontinued operations | $ | $ | ||||||
| Carrying amounts of liabilities associated with Cultivation Business included as part of discontinued operations: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Operating lease liabilities, current | ||||||||
| Contract liabilities | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Operating lease liabilities, net of current | ||||||||
| Non-current liabilities of discontinued operations | ||||||||
| Total liabilities | $ | $ | ||||||
F-25
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the Company’s loss from discontinued operations for the years ended December 31, 2024 and 2023, respectively:
| For
the year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Income and expense line items related to Cultivation Business: | ||||||||
| Revenue | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit (loss) | ( | ) | ||||||
| Selling, general and administrative | ||||||||
| Gain on settlement of contingent liabilities | ( | ) | ||||||
| Gain on disposal on property and equipment | ( | ) | ||||||
| Total operating expenses | ( | ) | ||||||
| Operating loss from discontinued operations | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest income, net | ||||||||
| Loss on disposal of Cultivation business | ( | ) | ||||||
| Other income, net | ||||||||
| Total other income (expense) | ( | ) | ||||||
| Net loss from discontinued operations | ( | ) | ( | ) | ||||
| Income tax effect on discontinued operations | ||||||||
| Loss from discontinued operations, net of income taxes | $ | ( | ) | $ | ( | ) | ||
The
consolidated statements of cash flows includes continuing operations and discontinued operations.
| 2024 | 2023 | |||||||
| Depreciation and amortization | $ | $ | ||||||
| (Recovery of) provision for credit losses | ( | ) | ||||||
| (Recovery of) provision for slow-moving inventory | ( | ) | ||||||
| Proceeds from disposal of property and equipment | ||||||||
Note 7 — Business Combinations
The Company has determined that the below acquisition is a business combination under ASC 805, Business Combinations. It is accounted for by applying the acquisition method, whereby the assets acquired, and the liabilities assumed are recorded at their fair values with any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill. Operating results have been included in these consolidated financial statements from the date of the acquisition, December 12, 2024. The resulting goodwill recorded primarily includes the expected synergies resulting from combining the operations of the acquired entity with those of the Company. Supplemental pro forma financial information has not been presented as the impact was not material to the Company’s consolidated financial statements.
Acquisition of Señorita
On December 12, 2024, the Company acquired certain assets from Double
or Nothing, the owner and creator of the Señorita brand of hemp-derived THC drinks as part of the Company’s strategic plan
to reposition itself as a distributor of hemp-derived THC beverages and similar products. The aggregate consideration exchanged for those
assets consisted of
F-26
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company prepared a preliminary purchase price allocation for the business combination. The preliminary valuation was based on management’s
estimates and assumptions which are subject to change within the purchase price allocation period (generally not more than one year from
the acquisition date). The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the intangible
assets acquired and the residual goodwill. Due to the acquisition occurring within close proximity to year-end, access to GAAP financial
data and future forecasts were not able to be obtained to complete a final valuation analysis. As such, the intangible and goodwill values
are subject to change once additional data becomes available as the values were based on preliminary financial information.
Allocation of Purchase Price (in thousands) | ||||
| Tradenames | $ | |||
| Customer Relationships | ||||
| Deposits | ||||
| Inventory | ||||
| Goodwill | ||||
| Total purchase price | $ | |||
As part of the preliminary
purchase accounting, the Company recorded intangible assets of $
The
Company recorded $
Transaction
and related costs, consisting primarily of professional fees, related to the acquisition, totaled approximately $
Note 8 — Intangible Assets
As of December 31, 2024, intangible assets were comprised of the following:
| Estimated Useful Life in Years | Net Book Value at December 31, 2024 | ||||||
| Customer Relationships | $ | | |||||
| Tradenames | |||||||
| $ | |||||||
As of December 31, 2023, the Company did not have any intangible assets.
The estimated future amortization expense for the next five years and thereafter based on the preliminary purchase price allocation is as follows:
Years ending December 31 (In thousands) | Future Amortization Expense | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
Amortization expense recorded in general and administrative expense in the consolidated statements of operations was immaterial for the years ended December 31, 2024, and 2023.
F-27
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 — Goodwill
In connection with the acquisition of certain assets from Double or
Nothing, the excess of the purchase price over the estimated fair value of the net assets assumed of $
The following is a roll forward of goodwill based upon the preliminary purchase price allocations ($ in thousands):
| Year
Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Goodwill - beginning of period | $ | $ | ||||||
| Goodwill acquired during period (Note 7) | ||||||||
| Goodwill - end of period | $ | $ | ||||||
Note 10 — Debt
The Company’s debt consisted of:
| December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Related party debt: | ||||||||
| CP Acquisitions Junior Secured Note | $ | $ | ||||||
| GIC Acquisition Note | ||||||||
| Green Thumb Note | ||||||||
| Total related party debt | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Related party debt, net of current | $ | $ | ||||||
| Short-term debt: | ||||||||
| PPP Loan | ||||||||
| Other Notes Payable - Current | ||||||||
| Total short-term debt | $ | $ | ||||||
| Long-term debt: | ||||||||
| PPP Loan | $ | $ | ||||||
| Other notes payable | ||||||||
| Exchange Note | ||||||||
| Convertible Note | ||||||||
| Unamortized debt premium | ||||||||
| Total long-term debt | ||||||||
| Less: current portion | ( | ) | ||||||
| Long-term debt, net of current | $ | $ | ||||||
Exchange Note
On August 18, 2022, the Company issued a promissory note with an original
principal amount of $
F-28
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On
March 8, 2023, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement”) with the Original Lender.
Pursuant to the Exchange Agreement, at closing the Company prepaid approximately $
Convertible Note
In
connection with the Exchange Agreement the Company issued the Convertible Note, which bore a
At
any time, the Company would prepay all of the Convertible Note by redemption at a price equal to
The
Convertible Note imposed certain customary affirmative and negative covenants upon the Company, as well as covenants that would (i) restrict
the Company and its subsidiaries from incurring any additional indebtedness or suffering any liens, subject to specified exceptions,
(ii) restrict the ability of the Company and its subsidiaries from making certain investments, subject to specified exceptions, and (iii)
restrict the declaration of any dividends or other distributions, subject to specified exceptions. If an event of default under the Convertible
Note occurred, the Original Lender can elect to redeem the Convertible Note for cash equal to (A)
Until
the date the Convertible Note was fully repaid, the Original Lender had, subject to certain exceptions, the right to participate for
up to
If
the Original Lender elected to convert the Convertible Note, the conversion price per share would be $
The Company evaluated the embedded features in accordance with ASC 815 and determined that the embedded features are not required to be bifurcated and separately measured at fair value.
On
April 26, 2023, the Original Lender elected to convert $
F-29
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On
May 1, 2023, the Company entered into a letter agreement with the Original Lender, pursuant to which the Company and the Original Lender
agreed to exchange or redeem $
CP Acquisitions Junior Secured Note
On October 27, 2023, CP, an entity affiliated with and controlled by
the Company’s former chairman and Chief Executive Officer and a former member of the Company’s Board, purchased the Exchange
Note and the Convertible Note from the Original Lender (the “Note Purchase”). In connection with the Note Purchase, CP agreed
to waive any events of default under the acquired notes through December 31, 2023. As part of the same transaction, the Company issued
a junior secured promissory note (the “Junior Secured Note”) to CP. Pursuant to the Junior Secured Note, CP would lend up
to $
Convertible Note Forgiveness
On
November 30, 2023, CP agreed to forgive $
Consolidated CP Acquisitions Note
On January 25, 2024, the Company and CP consolidated the outstanding
principal and interest due under the Junior Secured Note and the Exchange Note as well as the interest due under the Convertible Note
into the Convertible Note (collectively, with the Junior Secured Note and the Exchange Note, the “Consolidated Notes”), and
amended and restated the Convertible Note under a Senior Secured Amended, Restated, and Consolidated Convertible Note agreement (the “Restated
Note”) having a total outstanding principal of $
The Restated Note imposed certain customary affirmative and negative covenants upon the Company, as well as covenants that (i) restricted the Company and its subsidiaries from incurring any additional indebtedness or suffering any liens, subject to specified exceptions, (ii) restricted the ability of the Company and its subsidiaries from making certain investments, subject to specified exceptions, and (iii) restricted the declaration of any dividends or other distributions, subject to specified exceptions. If an event of default under the Restricted Note had occurred, then the then outstanding principal and all accrued and unpaid interest on the Restated Note would immediately become due and payable.
If
CP elected to convert the Restated Note, the conversion price per share would be $
Immediately
following the execution of the Restated Note, CP elected to convert approximately $
F-30
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The CP Debt Restructuring was accounted for as a troubled debt restructuring
under ASC 470, as 1) the Company was determined to be experiencing financial difficulties as defined by the ASC, and 2) the CP Debt Restructuring
was deemed to result in a concession by CP. The Company performed a comparison of the undiscounted cash flows associated with the Restated
Note subsequent to the CP Debt Restructuring to the carrying value of the Consolidated Notes as of the CP Debt Restructuring date. The
net carrying value of the Consolidated Notes was determined to exceed the undiscounted future cash flows of the Restated Note after consideration
of the January Conversion by approximately $
Aggregate interest expense related to the CP Acquisitions Note described
above was $
GIC Acquisition Note
On
July 12, 2023, the Board of Directors of the Company approved the issuance of an unsecured promissory note (the “GIC Note”,
and, collectively with the Consolidated Note, the “Related Party Notes”) to GIC Acquisition, LLC (“GIC”), an
entity that is owned and managed by the Company’s former Chairman and Chief Executive Officer. Pursuant to the GIC Note, GIC was
obligated to lend up to $
Amendment of Related Party Notes
On
May 21, 2024, the Company and CP entered into an amendment to the Restated Note (the “Consolidated Note Amendment”), pursuant
to which CP Acquisitions could elect, in lieu of shares of Common Stock issuable upon conversion of the Restated Note, to instead receive
Pre-Funded Warrants (“Pre-Funded Warrants”). The conversion price applicable to the Pre-Funded Warrants remained unchanged
at $
Immediately
following the execution of the Consolidated Note Amendment, CP elected to convert $
On May 21, 2024, GIC and the
Company amended and restated the GIC Note (the “Restated GIC Note”, and, collectively with the Consolidated Note Amendment,
the “Related Party Debt Amendments”) to increase the aggregate principal amount to approximately $
Immediately
following the execution of the Restated GIC Note, GIC elected to convert all of the outstanding principal under the Restated GIC Note
into a Pre-Funded Warrant exercisable at issuance for up to
As the Related Party Warrant Conversions were exercised in connection with the Related Party Debt Amendments by CP and GIC, related party lenders under common control (the “Related Party Lenders”), the transactions combined were considered a modification of the total debt outstanding with the related parties (the “Related Party Debt Restructuring”).
The
Related Party Debt Restructuring was accounted for as a troubled debt restructuring under ASC 470, as i) the Company was determined to
be experiencing financial difficulties as defined by the ASC, and ii) the Related Party Debt Restructuring was deemed to result in a
concession by the Related Party Lenders. The Company performed a comparison of the aggregated undiscounted cash flows associated with
the Related Party Notes subsequent to the Related Party Debt Restructuring to the aggregate carrying value of the Related Party Notes
as of the Related Party Debt Restructuring date. The net carrying value of the Related Party Notes of $
F-31
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consideration for the sale of the Cultivation Business included
the assumption by CP of the Company’s secured indebtedness currently held by CP and included the Consolidated CP Acquisitions Note.
The carrying value of the Consolidated CP Acquisitions Note was $
CP Acquisitions Promissory Note
On August 14, 2024, the Company issued a junior secured promissory
note (the “2024 CP Note”) to CP. Pursuant to the 2024 CP Note, CP Acquisitions would lend up to $
The
consideration for the sale of the Cultivation Business included the assumption by CP of the Company’s secured indebtedness currently
held by CP and included the 2024 CP Note. The carrying value of the 2024 CP Note was
Green Thumb Convertible Note
On
November 5, 2024, the Company issued a Secured Convertible Note (the “Green Thumb Note”) to RSLGH, LLC (the “Investor”),
a subsidiary of Green Thumb Industries Inc. (“Green Thumb”). The Green Thumb Note is a secured obligation of the Company
and ranks senior to all indebtedness of the Company except for indebtedness held by CP Acquisitions and Mack. The Green Thumb Note will
mature on November 5, 2025 and has a
The
Green Thumb Note imposes certain customary affirmative and negative covenants upon the Company, including covenants relating to corporate
existence, indebtedness, liens, distributions, affiliate transactions, and issuance of other notes. If an event of default under the
Green Thumb Note occurs, the Investor can elect to redeem the Green Thumb Note for cash equal to the then-outstanding principal amount
of the Green Thumb Note (or such lesser principal amount accelerated by the Investor), plus accrued and unpaid interest, including default
interest, which accrues at a rate per annum equal to
If
the Investor elects to convert the Green Thumb Note, the conversion price per share will be $
Borrowings
under the Green Thumb Note during the year ended December 31, 2024 totaled $
As of December 31, 2024, future minimum principal payments on all debt positions, excluding accrued interest amounts, were as follows:
Years ending December 31 (In thousands) | ||||
| 2025 | $ | |||
| Total future payments | $ | |||
Note 11 — Leases
The determination if any arrangement contained a lease at its inception was done based on whether or not the Company has the right to control the asset during the contract period. The lease term was determined assuming the exercise of options that were reasonably certain to occur. Leases with an original lease term of 12 months or less at inception were not reflected in the Company’s consolidated balance sheet and those lease costs are expensed on a straight-line basis over the respective term. Leases with a term greater than 12 months were reflected as non-current right-of-use assets and current and non-current lease liabilities in the Company’s consolidated balance sheets.
F-32
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As
the implicit interest rate in its leases was generally not known, the Company used its incremental borrowing rate as the discount rate
for purposes of determining the present value of its lease liabilities. The Company’s incremental borrowing rate was determined
using the interest rate on a long-term debt position entered into at approximately the same time and for the same duration as the lease.
At December 31, 2024 and December 31, 2023 the Company’s weighted-average discount rate utilized for its leases was
The Company had several non-cancelable finance leases for machinery and equipment, all of which ended or were terminated during 2023. As of December 31, 2024, the Company had no active finance leases.
When a contract contained lease and non-lease elements, both were accounted for as a single lease component.
The Company has several non-cancellable
operating leases for corporate offices, warehouses, showrooms, research and development facilities and vehicles. The Company’s leases
have remaining lease terms of
During the year ended December
31, 2024, one of the Company’s leased assets was sold by the lessor to another counterparty, effectively cancelling the remainder
of the lease with the Company. There were no penalties arising from the cancellation. The Company recognized a gain on early termination
in the amount of $
Additional information on the Company’s operating and financing lease activity was as follows:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Operating lease cost | $ | $ | ||||||
| Finance lease cost: | ||||||||
| Amortization of right-of-use assets | ||||||||
| Interest on lease liabilities | ||||||||
| Total lease cost | $ | $ | ||||||
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Weighted-average remaining lease term – operating leases | ||||||||
| Weighted-average discount rate – operating leases | % | % | ||||||
| (In thousands) | Balance Sheet Location | December 31, 2024 | December 31, 2023 | |||||||
| Assets | ||||||||||
| Operating lease right-of-use assets | $ | $ | ||||||||
| Total lease assets | $ | $ | ||||||||
| Liabilities | ||||||||||
| Operating lease liabilities, current | $ | $ | ||||||||
| Operating lease liabilities, non-current | ||||||||||
| Total operating lease liabilities | $ | $ | ||||||||
Note 12 — Stockholders’ Equity (Deficit)
Public Offerings
On February 27, 2024, the Company entered into a placement agency agreement
(the “Agency Agreement”) with Alexander Capital, LP (“Alexander Capital”) as placement agent (the “Placement
Agent”), pursuant to which the Company agreed to issue and sell an aggregate of
F-33
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company issued
The
measurement of fair value of the Placement Agents Warrants were determined utilizing a Black-Scholes model considering all relevant assumptions
as of the date of issuance (i.e., share price of $
Equity Line of Credit Facility
On
August 28, 2024, the Company entered into a purchase agreement (the “Ionic Agreement”) and a registration rights agreement
with Ionic Ventures, LLC (“Ionic”), pursuant to which Ionic committed to purchase up to an aggregate of $
From
and after the date the registration statement relating to the resale of the shares sold to Ionic was declared effective, November 5,
2024, the Company may from time to time on any business day, by written notice delivered by the Company to Ionic, direct Ionic to purchase
between $
Related Party Warrant Issuance
On
May 21, 2024, in connection with the Consolidated Note Amendment, the Company issued
On
June 30, 2024, the Company executed an amendment to the Related Party Pre-Funded Warrants, pursuant to which the Company revised certain
provisions of the Related Party Pre-Funded Warrants to (i) remove the adjustment to the exercise price of the Related Party Pre-Funded
Warrants when there is a bona fide equity financing with the primary purpose of raising capital (the “Adjustment Provisions”)
and (ii) increase the threshold for a change of control from
F-34
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On
August 12, 2024, the stockholders of the Company approved a proposal to amend the Related Party Pre-Funded Warrants to add the Adjustment
Provisions at a future date. Pursuant to that approval, on August 28, 2024, the Company entered into amendments to the Related Party
Pre-Funded Warrants to insert the Adjustment Provisions. This resulted in a reassessment of the Related Party Pre-Funded Warrants such
that they no longer met the requirements for equity classification and became classified as liabilities. They were remeasured to their
fair value upon modification, resulting in a reduction in value of approximately $
On
September 27, 2024, the Company executed an amendment to the Related Party Pre-Funded Warrants to remove the Adjustment Provisions. Accordingly,
the Related Party Pre-Funded Warrants met the requirements for equity classification. The amendment also included a provision preventing
the holders from any additional exercise of either of the Related Party Pre-Funded Warrants at any time between September 27, 2024 and
October 9, 2024. They were remeasured to their fair value upon modification resulting in an increase to the fair value of $
PIPE
On November 20, 2024, the Company
entered into Securities Purchase Agreements with institutional investors and other accredited investors for the sale by the Company of
Each Pre-Funded Warrant is exercisable
into one share of Common Stock at a price per share of $
Benjamin Kovler, Chairman and
Interim Chief Executive Officer of the Company, participated in the private placement to purchase
The
gross proceeds to the Company from the private placement were approximately $
The November 2024 Warrants were classified as a component of stockholders’ equity. They are immediately exercisable and permit the holders to receive a fixed number of shares of Common Stock upon exercise. In addition, such warrants do not provide any guarantee of value or return.
Mack Warrants
In
October 2023, the Company issued
The
measurement of fair value of the Mack Warrants were determined utilizing a Black-Scholes model considering all relevant assumptions current
at the date of issuance. The grant date fair value of these Investor Warrants was estimated to be $
Note 13 — Stock-Based Compensation and Employee Benefit Plans
2022 Omnibus Equity Incentive Plan
On April 29, 2022, the Company’s Board of Directors, and on June
8, 2022, the Company’s stockholders, adopted and approved the 2022 Omnibus Equity Incentive Plan (the “2022 Plan”),
which provides for the grant of stock options, stock appreciation right awards, performance share awards, restricted stock awards, restricted
stock unit awards, other stock-based awards and cash-based awards. The aggregate number of shares of Common Stock that may be reserved
and available for grant and issuance under the 2022 Plan is
F-35
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company’s stock compensation expense from continuing operations was $
The
Company’s stock compensation expense from discontinued operations was $
Stock Options
For
the year ended December 31, 2024, there were no options granted or exercised under the Company’s stock option plans. For the same
period, there were 23 options expired with a weighted average exercise price of $
As
of December 31, 2024, total unrecognized compensation expense related to unvested options was $
Stock options granted under the Company’s 2022 Plan are generally non-qualified and are granted with an exercise price equal to the market price of the Company’s Common Stock on the date of grant. The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model. This model incorporates certain assumptions for inputs including a risk-free market interest rate, expected dividend yield of the underlying Common Stock, expected option life, and expected volatility in the market value of the underlying Common Stock. No stock options were granted during the years ended December 31, 2024 and 2023.
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The risk-free interest rate is based upon quoted market yields for United States Treasury debt securities with a term similar to the expected term. The expected dividend yield is based upon the Company’s history of having never issued a dividend and management’s current expectation of future action surrounding dividends. The Company calculates the expected volatility of the stock price based on the corresponding volatility of the Company’s peer group stock price for a period consistent with the underlying instrument’s expected term. The expected lives for such grants were based on the simplified method for employees and directors. Forfeitures are accounted for when they occur.
The following table presents option activity under the Company’s stock option plans for the years ended December 31, 2024 and 2023:
(In thousands, except share and per share data) | Number of Options | Weighted- Average Exercise Price | Aggregate Intrinsic Value | |||||||||
| Options outstanding at January 1, 2023 | $ | $ | ||||||||||
| Forfeited | ( | ) | ||||||||||
| Expired | ( | ) | ||||||||||
| Options outstanding at December 31, 2023 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited | ( | ) | ||||||||||
| Expired | ( | ) | ||||||||||
| Options outstanding at December 31, 2024 | $ | $ | ||||||||||
| Options vested and exercisable as of December 31, 2024 | $ | |||||||||||
| Options vested and expected to vest as of December 31, 2024 | $ | |||||||||||
F-36
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information about options vested and exercisable at December 31, 2024:
| Options Vested and Exercisable | ||||||||||||||
| Price ($) | Number of Options | Weighted-Average Remaining Contractual Life (Years) | Weighted-Average Exercise Price | |||||||||||
| $ | 14,580.00 | $ | ||||||||||||
| $ | 6,840.00 | $ | ||||||||||||
| $ | 41,520.00 | $ | ||||||||||||
| $ | 43,470.00 | $ | ||||||||||||
The following table summarizes information about options expected to vest after December 31, 2024:
| Options Vested and Expected to Vest | ||||||||||||||
| Price ($) | Number of Options | Weighted-Average Remaining Contractual Life (Years) | Weighted-Average Exercise Price | |||||||||||
| $ | 14,580.00 | $ | ||||||||||||
| $ | 6,840.00 | $ | ||||||||||||
| $ | 41,520.00 | $ | ||||||||||||
| $ | 43,470.00 | $ | ||||||||||||
Restricted Stock Units
Under
the 2022 Plan, the Company may grant restricted stock units to employees, directors and officers. The restricted stock units granted
generally vest equally over periods ranging from
The following table presents restricted stock unit activity under the 2022 Plan for the year ended December 31, 2024:
| Number
of Shares | Weighted- Grant
Date | |||||||
| Unvested at January 1, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Unvested at December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Unvested at December 31, 2024 | $ | |||||||
As
of December 31, 2024, total unrecognized compensation expense related to unvested restricted stock units was $
2022 Employee Stock Purchase Plan
On
April 29, 2022, the Company’s Board of Directors, and on June 8, 2022, the Company’s stockholders, adopted and approved the
2022 Employee Stock Purchase Plan (“ESPP”). The Company initially reserved
Under
the ESPP, eligible employees are granted options to purchase shares of Common Stock at the lower of
F-37
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Employee Benefit Plan
The Company maintains an employee’s savings and retirement plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). All full-time U.S. employees become eligible to participate in the 401(k) Plan. The Company’s contribution to the 401(k) Plan is discretionary. During the year ended December 31, 2024 and 2023, the Company did not contribute to the 401(k) Plan.
Note 14 — Stock Warrants
The following tables present all warrant activity of the Company for the year ended December 31, 2024 and December 31, 2023:
| Number
of Warrants | Weighted- Exercise Price | |||||||
| Warrants outstanding at January 1, 2023 | $ | |||||||
| Issued | ||||||||
| Exercised | ( | ) | ||||||
| Canceled | ( | ) | ||||||
| Warrants outstanding at December 31, 2023 | $ | |||||||
| Issued | ||||||||
| Exercised | ( | ) | ||||||
| Canceled | ( | ) | ||||||
| Warrants outstanding at December 31, 2024 | $ | |||||||
The
Company received proceeds from the exercise of Placement Agent Warrants of $
Note 15 — Income Taxes
For financial reporting purposes, the net pre-tax book income and/or loss from continuing and discontinued operations for the U.S. and foreign entities, in the aggregate, was:
(In thousands) | December
31, 2024 | December
31, 2023 | ||||||
| United States | $ | ( | ) | $ | ( | ) | ||
| Foreign | ||||||||
| Total | $ | ( | ) | $ | ( | ) | ||
F-38
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income tax expense (benefit) from continuing and discontinued operations consisted of the following for the years ended December 31, 2024 and December 31, 2023:
(In thousands) | December 31, 2024 | December 31, 2023 | ||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State | ( | ) | ||||||
| Foreign | ||||||||
| Subtotal | ( | ) | ||||||
| Deferred: | ||||||||
| Federal | ||||||||
| State | ||||||||
| Foreign | ||||||||
| Subtotal | ||||||||
| Total | $ | ( | ) | $ | | |||
The reconciliation between the Company’s effective tax rate on income from continuing operations discontinued operations and the statutory tax rate for the years ended December 31, 2024 and December 31, 2023 is as follows:
(In thousands) | December 31, 2024 | December 31, 2023 | ||||||
| Current tax at U.S. statutory rate | $ | ( | ) | $ | ( | ) | ||
| Nondeductible/nontaxable items | ( | ) | ||||||
| State taxes | ( | ) | ( | ) | ||||
| Rate change | ( | ) | ||||||
| True-up and other | ||||||||
| Valuation allowance | ||||||||
| Income tax expense (benefit) | $ | ( | ) | $ | ||||
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of net deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.
F-39
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following items comprise the Company’s net deferred tax assets and liabilities as of December 31, 2024 and December 31, 2023:
(In thousands) | December 31, 2024 | December 31, 2023 | ||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforward | $ | $ | ||||||
| Accruals, reserves, and other | ||||||||
| Stock-based compensation | ||||||||
| Research and development tax credit carryforward | ||||||||
| Lease liability | ||||||||
| Fixed assets | ||||||||
| Intangible assets | ||||||||
| Capitalized sec. 174 R&E | ||||||||
| Credits | ||||||||
| Uncertain tax positions | ( | ) | ||||||
| Total Deferred Tax Asset | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Deferred income tax assets, net of Valuation Allowance | ||||||||
| Deferred tax liabilities: | ||||||||
| Right-of-Use Asset | ( | ) | ( | ) | ||||
| Total Deferred Tax Liability | ( | ) | ( | ) | ||||
| Net Deferred Tax Asset/(Liability) | $ | $ | ||||||
The Company continually evaluates the likelihood of the realization of deferred tax assets and adjusts the carrying amount of the deferred tax assets by the valuation allowance to the extent the future realization of the deferred tax assets is more likely than not. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectation of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors.
As of December 31, 2024, based on the Company’s history of earnings and its assessment of future earnings, management believes that it is more likely than not that future taxable income will not be sufficient to realize the deferred tax assets. Therefore full valuation allowance has been applied to deferred tax assets.
Effective for tax years beginning after December 31, 2021, taxpayers are required to capitalize any expenses incurred that are considered incidental to research and experimentation (“R&E”) activities under U.S. Internal Revenue Code (“IRC”) Section 174. While taxpayers historically had the option of deducting these expenses under IRC Section 174, the December 2017 Tax Cuts and Jobs Act mandates capitalization and amortization of R&E expenses for tax years beginning after December 31, 2021. Expenses incurred in connection with R&E activities in the U.S. must be amortized over a 5-year period if incurred, and R&E expenses incurred outside the U.S. must be amortized over a 15-year period. R&E activities are broader in scope than qualified research activities that are considered under IRC Section 41 (relating to the research tax credit).
As of the year ended December 31, 2024, the Company has federal and state net operating loss carryforwards of
approximately $
F-40
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The
utilization of the Company’s NOLs may be subject to a U.S. federal limitation due to the “change in ownership provisions”
under Section 382 of the IRC and other similar limitations in various state jurisdictions.
(In thousands) | December
31, 2024 | December
31, 2023 | ||||||
| Jurisdiction | NOL Available | NOL Available | ||||||
| Federal | $ | $ | ||||||
| Federal - Indefinite | ||||||||
| Subtotal - Federal | ||||||||
| State | ||||||||
| State - Indefinite | ||||||||
| Subtotal - State | ||||||||
| Foreign | ||||||||
| Foreign - Indefinite | ||||||||
| Subtotal - Foreign | $ | $ | ||||||
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examinations by federal, foreign, and state and local jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years are still open under statute from 2019 to the present in the U.S. and from 2019 to present in the Company’s foreign operations. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state and local tax authorities to the extent utilized in a future period.
As required by the uncertain tax position guidance in ASC Topic 740 (“ASC 740”), Income Tax the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applied the uncertain tax position guidance in ASC 740, Accounting for Income to all tax positions for which the statute of limitations remained open. Any estimates of tax contingencies contain assumptions and judgments about potential actions by taxing jurisdictions. Any interest and penalties related to uncertain tax positions would be included as part of the income tax provision.
The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analysis of or changes in tax laws, regulations and interpretations thereof as well as other factors.
Uncertain Tax Positions
Our
unrecognized tax benefits at December 31, 2024 relate entirely to research and development tax credits. The total amount of unrecognized
tax benefits at December 31, 2024 is $
(In thousands) | Year
ended December 31, 2024 | |||
| Unrecognized benefit – beginning of period | $ | |||
| Prior period tax position increases | ||||
| Current period tax position increases | ||||
| Unrecognized benefit – end of period | $ | |||
Our policy is to recognize interest and penalties related to income taxes as components of interest expense and other expense, respectively. We incurred no interest or penalties related to unrecognized tax benefits in the years ended December 31, 2024 or 2023. We do not anticipate any significant changes in our uncertain tax positions within twelve months of this reporting date.
F-41
AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16 — Net Loss Per Share
Net loss per share calculations for all periods have been adjusted to reflect the Company’s reverse stock splits. Net loss per share was calculated based on the weighted-average number of the Company’s Common Stock outstanding.
Basic net loss per share is calculated using the weighted-average number of shares of Common Stock outstanding during the periods. Diluted net loss per share is computed by giving effect to all potential shares of Common Stock, including convertible notes, outstanding stock options, stock related to unvested restricted stock units, and outstanding warrants to the extent dilutive. Net loss per share, assuming dilution, is equal to basic net loss per share for the years ended December 31, 2024 and 2023 because the effect of dilutive securities outstanding during the periods, including convertible notes, options, restricted stock units and warrants computed using the treasury stock method, is anti-dilutive.
The components of basic and diluted net loss per share were as follows:
| Year Ended December 31, | ||||||||
| (In thousands, except share and per share data) | 2024 | 2023 | ||||||
| Numerator: | ||||||||
| Net loss attributable to Agrify Corporation from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Net loss attributable to Agrify Corporation from discontinued operations | $ | ( | ) | $ | ( | ) | ||
| Net loss available for common shareholders | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted-average common shares outstanding – basic and diluted | ||||||||
| Net loss per share attributable to Common Stockholders – basic and diluted | $ | ( | ) | $ | ( | ) | ||
The
Company’s potential dilutive securities, which include stock options, restricted stock units, and warrants, have been excluded
from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average
number of shares of Common Stock outstanding used to calculate both basic and diluted net loss per share attributable to holders of the
Company’s Common Stock is the same.
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Shares subject to outstanding stock options | ||||||||
| Shares subject to unvested restricted stock units | ||||||||
| Shares subject to outstanding warrants | ||||||||
Note 17 — Segment Reporting
The Company operates in one consolidated segment. The Company’s Chief Operating Decision Maker, Benjamin Kovler, Chairman and Interim Chief Executive Officer of the Company reviews net income (loss) of the Company when making resource allocation decisions. Such information is presented in the consolidated statements of operations.
Note 18 — Commitments and Contingencies
Legal Matters
From time to time, the Company may become involved in material legal proceedings or be subject to claims arising in the ordinary course of our business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
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AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bud & Mary’s Litigation
On September 15, 2022, the Company
provided a notice of default to Bud & Mary’s Cultivation, Inc. (“Bud & Mary’s) and certain related parties notifying
such parties that Bud & Mary’s was in default of its obligations under the TTK solution between the Company and Bud & Mary
(the “Bud & Mary TTK Agreement”). On October 5, 2022, Bud & Mary’s filed a complaint in the Superior Court of
Massachusetts in Suffolk County, naming the Company as the defendant (the “Bud & Mary Complaint”). Bud & Mary’s
is seeking, among other relief, monetary damages in connection with alleged unfair or deceptive trade practices, breach of contract and
conversion arising from the Bud & Mary TTK Agreement. While the Company believes the claim is without merit and will continue to vigorously
defend itself against Bud & Mary’s allegations, litigation is inherently unpredictable and there can be no assurance that the
Company will prevail in this matter. During the third quarter of 2022, the Company deemed it necessary to fully reserve for the outstanding
$
Bowdoin Construction Corp. Litigation
On
February 22, 2023, Bowdoin Construction Corp. (“Bowdoin”) filed a complaint in the Superior Court of Massachusetts in
Norfolk County, Massachusetts, naming the Company (the “Bowdoin Complaint”), Bud & Mary’s and certain related
parties as defendants, captioned Bowdoin Construction Corp. v. Agrify Corporation, Bud & Mary’s Cultivation, Inc. and
BMLC2, LLC, case no. 2382CV00173. The Bowdoin Complaint relates to a construction contract between Bowdoin and the Company relating
to the property that is the subject of the Bud & Mary’s Complaint, and alleges breach of contract by Bud &
Mary’s and by the Company due to nonpayment of approximately $
Mack Molding Co.
In
December 2020, the Company entered into a five-year supply agreement with Mack Molding Co. (“Mack”) pursuant to which Mack
became a key supplier of VFUs. In February 2021, the Company placed a purchase order with Mack amounting to approximately $
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AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On
February 29, 2024, the Company met its contractual obligations under the terms of the Modification Agreement. In settlement of the dispute,
the Company made cash payments of $
On
August 30, 2024, the Company and Mack entered into an amendment to the Modification Agreement, which modified the payment terms and VFU
purchase requirements under the Modification Agreement. Pursuant to the amendment, the Company agreed to make payments of $
TRC Electronics Litigation
The Company was named as
a defendant in a complaint filed by TRC Electronics, Inc. (“TRC”) on April 13, 2023 in the United States District Court for
the Eastern District of Pennsylvania. In the complaint, TRC asserts two causes of action against the Company: (1) breach of contract,
and (2) promissory estoppel. TRC’s claims are based on allegations that the Company failed to make payments due under three purchase
orders for commercial electronics parts. TRC was seeking damages in the amount of $
McCutchan, Inc.
In
December 2021, the Company entered into a standard form of agreement between Owner and Contractor whereby Valiant Group LLC (“Valiant”)
is the general contractor for tenant improvements on certain real property located in Bellevue, Washington (the “Project”).
McCutchan, Inc. (“McCutchan”) agreed to be a subcontractor on the Project and engaged various other subcontractors (the “Valiant
Agreement”). The Company terminated Valiant as the general contractor for, among other allegations, breach of contract and unjust
enrichment. Following the termination of Valiant, in October 2022, the Valiant Agreement was assigned and accepted (the “Assignment”)
to Agxion, LLC, a wholly owned subsidiary of the Company. The Assignment contemplates that, as a subcontractor to the Valiant Agreement,
McCutchan is still bound to the subcontract agreement and will continue construction operations on the Project. The Company is pursuing
Valiant in a separate litigation to collect no less than approximately $
Valiant Group LLC
The
Company filed two separate complaints against Valiant for overbilling, misrepresentation, and breach of contract for the Treehouse project
in Nevada and Hannah Project in Washington. Agrify obtained judgments against Valiant in Nevada for $
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AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other Litigation
In
September 2023, the Company settled a legal dispute with a specific customer that resulted in the recognition of a gain of approximately
$
The
Company is currently pursuing 10 separate legal proceedings in attempting to collect approximately $
On April 25, 2024, Medical
Investor Holdings, LLC dba Vertical Companies (“MIH”) filed a complaint against Agrify demanding $
The Company is also a defendant
or plaintiff in a variety of other litigation matters that are individually insignificant. The timing and amount of any settlements, including
potential payments made or received, is uncertain. Nonetheless, management currently estimates that the Company’s aggregate net
loss exposure with respect to these cases is within the range of approximately $
On February 9, 2022, a former sales Vice President of the Company filed suit against the Company claiming he is owed back wages, commission and is entitled to equity in the company, under theories of liability under Massachusetts labor laws including retaliation, breach of contract, breach of covenant of good faith and fair dealing, fraudulent inducement, tortious interference and unjust enrichment. The Company filed its answer to the initial complaint in January 2023. The Company believes this is a meritless claim and has responded to various discovery requests. Discovery is ongoing and a final pretrial conference is presently scheduled for April 10, 2025.
Commitments
Mack Molding Co.
The
Modification Agreement with Mack referenced above resulted in the Company entering a purchase commitment with Mack pursuant to which
the Company was contractually obligated to purchase a minimum of 25 VFUs per quarter for each quarter during 2024 and a minimum of 50
VFUs per quarter for the six quarters beginning with the first quarter of 2025, at a per VFU price of $
On
August 30, 2024, the Company entered into an amendment to the Modification Agreement with Mack, which modified the payment terms and
VFU purchase requirements under the Modification Agreement. Pursuant to the amendment, the Company agreed to make the October Payment
of $
Other Commitments and Contingencies
The Company is potentially subject to claims related to various non-income taxes (such as sales, value-added, consumption, and similar taxes) from various tax authorities, including in jurisdictions in which the Company already collects and remits such taxes. If the relevant taxing authorities successfully pursue these claims, the Company could be subject to additional tax liabilities.
Refer to Note 10 – Debt, included elsewhere in the notes to the consolidated financial statements for details of the Company’s future minimum debt payments. Refer to Note 11 – Leases, included elsewhere in the notes to the consolidated financial statements for details of the Company’s future minimum lease payments under operating and financing lease liabilities. Refer to Note 15 – Income Taxes, included elsewhere in the notes to the consolidated financial statements for information regarding income tax contingencies.
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AGRIFY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 19 — Related Parties
Some of the officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available.
The following table describes the net purchasing (sales) activity with entities identified as related parties to the Company:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Green Thumb Industries | $ | $ | ||||||
The following table summarizes net related party payable as of December 31, 2024 and 2023:
| Year Ended December 31, | ||||||||
| (In thousands) | 2024 | 2023 | ||||||
| Green Thumb Industries | $ | ( | ) | $ | ||||
On July 12, 2023, the Company issued an unsecured promissory note in favor of GIC, an entity that is owned and managed by the Company’s former Chairman and Chief Executive Officer.
On October 27, 2023, CP, an entity affiliated with and controlled by former Company’s Chairman and Chief Executive Officer, purchased the Exchange Note and the Convertible Note. In addition, the Company issued to CP a Junior Secured Note. Refer to Note 10 - Debt for further disclosure related to this Related Party Note including related transactions occurring during the years ended December 31, 2024 and 2023.
Green Thumb Convertible Note
On November 5, 2024, the Company issued the Green Thumb Note to Investor. For further discussion on the note, refer to Note 10.
In addition to the Note, the
related party shared services agreement charges are included in the $
Note 20 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated financial statements were issued.
F-46