UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-39946

AGRIFY CORPORATION

(Exact name of registrant as specified in its charter)

Nevada		30-0943453
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

76 Treble Cove Rd.

Building 3

Billerica, MA 01862

(Address of principal executive offices, including zip code)

(617) 896-5243

(Registrant’s phone 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
Common Stock, par value $0.001 per share		AGFY		NASDAQ Capital Market

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.

YES ☒ 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).

YES ☒ 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	☐
Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding as of May 12, 2022
Common Stock, $0.001 par value		26,591,438

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION	1

ITEM 1.	FINANCIAL STATEMENTS	1

	Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	1

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 (unaudited) and 2021 (unaudited)	2

	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 (unaudited) and 2021 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 (unaudited) and 2021 (unaudited)	4

	Notes to Condensed Consolidated Financial Statements	5

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	46

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	63

ITEM 4.	CONTROLS AND PROCEDURES	63

PART II	OTHER INFORMATION	64

ITEM 1.	LEGAL PROCEEDINGS	64

ITEM 1A.	RISK FACTORS	64

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	64

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	64

ITEM 4.	MINE SAFETY DISCLOSURES	64

ITEM 5.	OTHER INFORMATION	64

ITEM 6.	EXHIBITS	64

SIGNATURES		65

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AGRIFY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	March 31, 2022			December 31, 2021
	(Unaudited)
Assets
Current Assets
Cash and cash equivalents	$	25,205		$	12,014
Restricted cash		30,000			—
Marketable securities		38,211			44,550
Accounts receivable, net of allowance for doubtful accounts of $1,415 and $1,415 at March 31, 2022 and December 31, 2021, respectively		8,571			7,222
Inventory, net of reserves of $942 and $942 at March 31, 2022 and December 31, 2021, respectively		38,989			20,498
Prepaid and refundable taxes		194			—
Prepaid expenses and other current assets		6,373			2,452
Total Current Assets		147,543			86,736

Non-Current Assets
Loan receivable		34,738			22,255
Property and equipment, net		7,055			6,232
Right-of-use, net		1,554			1,479
Goodwill		54,544			50,090
Intangible assets, net		15,861			14,072
Other non-current assets		3,180			1,184
Total Assets	$	264,475		$	182,048

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	3,683		$	9,151
Accrued expenses and other current liabilities		30,112			28,764
Operating lease liabilities, current		911			814
Long-term debt, current		2,970			1,089
Deferred revenue		4,182			3,772
Total Current Liabilities		41,858			43,590

Non-Current Liabilities
Other non-current liabilities		275			318
Operating lease liabilities, non-current		689			704
Deferred tax liabilities, net		62			—
Long-term debt		51,154			12
Total Liabilities		94,038			44,624

Commitments and Contingencies (Note 21)

Stockholders’ Equity
Common Stock, $0.001 par value per share, 50,000,000 shares authorized, 26,542,890 and 22,207,103 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		25			21
Preferred Stock, $0.001 par value per share, 2,895,000 shares authorized, no shares issued or outstanding		—			—
Preferred A Stock, $0.001 par value per share, 105,000 shares authorized, no shares issued or outstanding		—			—
Additional paid-in capital		237,903			196,013
Accumulated deficit		(67,857	)		(58,975	)
Total Stockholders’ Equity		170,071			137,059
Non-Controlling Interests		366			365
Total Liabilities and Stockholders’ Equity	$	264,475		$	182,048

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

	Three Months ended March 31,
	2022			2021
Revenue (including $1,271 and $5,518 from related parties, respectively)	$	26,021		$	7,008
Cost of goods sold		21,851			7,548
Gross profit (loss)		4,170			(540	)

General and administrative		9,759			4,458
Research and development		2,084			882
Selling and marketing		2,090			616
Total operating expenses		13,933			5,956
Loss from operations		(9,763	)		(6,496	)
Interest income (expense), net		682			(32	)
Gain on extinguishment of notes payable		—			2,685
Other income (expense), net		682			2,653
Net loss before income taxes		(9,081	)		(3,843	)
Income tax benefit		(200	)		—
Net loss		(8,881	)		(3,843	)
Income (loss) attributable to non-controlling interest		1			(33	)
Net loss attributable to Agrify Corporation	$	(8,882	)	$	(3,810	)
Net loss per share attributable to Common Stockholders – basic and diluted	$	(0.36	)	$	(0.33	)
Weighted-average common shares outstanding – basic and diluted		24,589,113			11,568,105

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

	Common Stock				Preferred A Stock					Additional Paid-In			Accumulated			Total Stockholders’ Equity attributable to			Non- Controlling			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital			Deficit			Agrify			Interests			Equity
Balance at January 1, 2021		4,211,677	$	4		100,000		$	—	$	19,827		$	(26,510	)	$	(6,679	)	$	225		$	(6,454	)
Stock-based compensation		—		—		—			—		2,135			—			2,135			—			2,135
Beneficial conversion feature associated with amended Convertible Promissory Notes		—		—		—			—		3,869			—			3,869			—			3,869
Conversion of Convertible Notes		1,697,075		2		—			—		13,098			—			13,100			—			13,100
Issuance of Common Stock – Initial Public Offering (“IPO”), net of fees		6,210,000		6		—			—		56,955			—			56,961			—			56,961
Issuance of Common Stock – Secondary public offering, net of fees		6,388,888		6		—			—		79,833			—			79,839						79,839
Conversion of Preferred A Stock		1,373,038		1		(100,000	)		—		(1	)		—			—			—			—
Exercise of options		174,223		—		—			—		439			—			439			—			439
Exercise of warrants		240,233		—		—			—		5			—			5			—			5
Net loss		—		—		—			—		—			(3,810	)		(3,810	)		(33	)		(3,843	)
Balance at March 31, 2021		20,295,134	$	19		—		$	—	$	176,160		$	(30,320	)	$	145,859		$	192		$	146,051

	Common Stock				Preferred A Stock				Additional Paid-In-			Accumulated			Total Stockholders’ Equity attributable to			Non- Controlling		Total Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Agrify			Interests		Equity
Balance at January 1, 2022		22,207,103	$	21		—	$	—	$	196,013		$	(58,975	)	$	137,059		$	365	$	137,424
Stock-based compensation		—		—		—		—		953			—			953			—		953
Issuance of Common Stock and warrants in private placement		2,450,350		2		—		—		25,795			—			25,797			—		25,797
Issuance of debt and warrants in private placement		—		—		—		—		13,230			—			13,230			—		13,230
Acquisition of Lab Society		297,929		—		—		—		1,903			—			1,903			—		1,903
Exercise of options		4,220		—		—		—		10			—			10			—		10
Exercise of warrants		1,583,288		2		—		—		(1	)		—			1			—		1
Net loss		—		—		—		—		—			(8,882	)		(8,882	)		1		(8,881	)
Balance at March 31, 2022		26,542,890	$	25		—	$	—	$	237,903		$	(67,857	)	$	170,071		$	366	$	170,437

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months ended March 31,
	2022			2021
Cash flows from operating activities
Net loss attributable to Agrify Corporation	$	(8,882	)	$	(3,810	)
Adjustments to reconcile net loss attributable to Agrify Corporation to net cash used in operating activities:
Depreciation and amortization		1,052			147
Amortization of premium on investment securities		224			—
Amortization of debt discount		20			—
Interest on investment securities		(248	)		—
Debt issuance costs		2,700			—
Deferred income taxes		(200	)		—
Compensation in connection with the issuance of stock options		953			2,135
Non-cash interest (income) expense		(406	)		33
Gain on extinguishment of notes payable, net		—			(2,685	)
Early termination of lease		26			—
Income (loss) attributable to non-controlling interests		1			(33	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(838	)		(5,218	)
Inventory		(16,361	)		(3,330	)
Prepaid expenses and other current assets		(3,033	)		(2,155	)
Right of use assets, net		(20	)		—
Other non-current assets		(1,867	)		—
Accounts payable		(2,765	)		181
Accrued expenses and other current liabilities		(2,120	)		7,360
Deferred (expense) revenue, net		(2,407	)		96
Net cash used in operating activities		(34,171	)		(7,279	)

Cash flows from investing activities
Purchases of property and equipment		(3,728	)		(142	)
Purchase of securities		(76,097	)		—
Proceeds from the sale of securities		82,460			—
Issuance of loan receivable		(12,487	)		—
Cash paid for business combination, net of cash acquired		(3,513	)		—
Net cash used in investing activities		(13,365	)		(142	)

Cash flows from financing activities
Proceeds from issuance of Common Stock and warrants in private placement		65,000			—
Proceeds from issuance of debt and warrants in private placement, net of fees		25,797			—
Proceeds from IPO, net of fees		—			56,961
Proceeds from Secondary public offering, net of fees		—			79,839
Proceeds from exercise of options		10			439
Proceeds from exercise of warrants		1			5
Payments of financing leases		(81	)		(47	)
Net cash provided by financing activities		90,727			137,197
Net increase in cash, cash equivalents, and restricted cash		43,191			129,776
Cash, cash equivalents, and restricted cash at the beginning of period		12,014			8,111
Cash, cash equivalents, and restricted cash at the end of period	$	55,205		$	137,887
Cash, cash equivalents, and restricted cash at end of period
Cash and cash equivalents	$	25,205		$	137,887
Restricted cash		30,000			—
Total cash, cash equivalents, and restricted cash at the end of period	$	55,205		$	137,887

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Nature of Business and Basis of Presentation

Description of Business

Agrify Corporation (“Agrify” or the “Company”) is a developer of proprietary precision hardware and software grow solutions for the commercial indoor agriculture industry and provides equipment and solutions for cultivation, extraction, post-processing, and testing for the cannabis and hemp industries. 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 nine wholly-owned subsidiaries, which are collectively referred to as the “Subsidiaries”:

●

AGM Service Corp LLC (formerly AGM Service Corp Inc.);

●

TriGrow Systems, LLC (“TriGrow”, which acted as the Company’s exclusive distributor and which was acquired in January 2020 as TriGrow Systems, Inc. and converted to TriGrow Systems, LLC in May 2020);

●

Ariafy Finance, LLC;

●

Agxiom, LLC;

●

Harbor Mountain Holdings, LLC (“HMH”) (acquired in July 2020);

●

Cascade Sciences, LLC (“Cascade”) (which was acquired by the Company on October 1, 2021);

●

Precision Extraction NewCo, LLC (“Precision”) (which was a newly formed subsidiary in connection with October 1, 2021 acquisition of Mass2Media, LLC, d/b/a PX2 Holdings, LLC, d/b/a Precision Extraction Solutions and Cascade); and

●

PurePressure, LLC (“PurePressure”) (which was acquired by the Company on December 31, 2021); and

●

Lab Society NewCo, LLC (“Lab Society”) (which was a newly formed subsidiary in connection with February 1, 2022 acquisition of LS Holdings Corp).

The Company also has ownership interests in the following companies:

●

Teejan Podoponics International LLC (“TPI”) (the Company has owned 50% of TPI since December 2018);

●

Agrify-Valiant, LLC (“Agrify-Valiant”) (the Company owns 60% of Agrify-Valient, which was formed in December 2019); and

●

Agrify Brands, LLC (“Agrify Brands”) (formerly TriGrow Brands, LLC) (the Company owns 75% of Agrify Brands, which ownership position was created as part of the January 2020 acquisition of TriGrow).

Reverse Stock Split

On January 12, 2021, the Company effected a 1-for-1.581804 reverse stock split (“Reverse Stock Split”) of its Common Stock, $0.001 par value per share (“Common Stock”). 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.

Initial Public Offering and Secondary Public Offering

On February 1, 2021, the Company closed its initial public offering, or (“IPO”), of 6,210,000 shares of its Common Stock (inclusive of 810,000 shares of Common Stock from the full exercise of the over-allotment option of shares granted to the underwriters). The offer and sale of all of the shares in the IPO were registered under the Securities Act of 1933, as amended, pursuant to a registration statement on Form S-1 (File Nos. 333- 251616 and 333-252490), which was declared effective by the SEC on January 27, 2021. In the IPO, Maxim Group LLC and Roth Capital Partners acted as the underwriters. The IPO price for shares of Common Stock was $10.00 per share. The total gross proceeds from the IPO were $62.1 million.

After deducting underwriting discounts and commissions of $4 million and offering expenses paid or payable by us of approximately $1 million, the net proceeds from the IPO were approximately $57 million. The Company used the net proceeds from the IPO for its current working capital needs, to support revenue growth, to increase inventory to meet customer demand forecasts, and to support operational growth.

On February 19, 2021, the Company consummated a secondary public offering (the “February Offering”) of 5,555,555 shares of its Common Stock for a price of $13.50 per share, less certain underwriting discounts and commissions. On March 22, 2021, the Company closed on the sale of an additional 833,333 shares of Common Stock on the same terms and conditions pursuant to the exercise of the underwriters’ over-allotment option. The exercise of the over-allotment option brought the total number of shares of Common Stock sold by the Company in connection with the February Offering to 6,388,888 shares and the total net proceeds received in connection with the February Offering to approximately $80 million, after deducting underwriting discounts and estimated offering expenses. The Company used the net proceeds from the IPO for its current working capital needs, to support revenue growth, to increase inventory, to meet customer demand forecasts, and to support operational growth.

Coronavirus (“COVID-19”) Pandemic

The spread of COVID-19 beginning in the first quarter of 2020 has caused significant volatility in U.S. markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. economy. To date, there has not been a material impact on the Company’s business operations and financial performance. The extent of the impact of COVID-19 on the Company’s operational and financial performance, if any, will depend, in part, on the length and severity of these restrictions and on the Company’s ability to conduct business in the ordinary course.

The Paycheck Protection Program

In May 2020, the Company received an unsecured Paycheck Protection Program Loan (“PPP Loan”) from the Bank of America pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), administered by the U.S. Small Business Administration (the “SBA”). The Company received total loan proceeds of approximately $779 thousand from the PPP Loan. The Company’s application for the forgiveness of the outstanding balance of PPP Loan is currently under review by the SBA.

Note 2 — Summary of Significant Accounting Policies

Preparation of Condensed Consolidated Financial Statements

The condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and on the same basis as the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and filed with the SEC (“Form 10-K”), except for the recently adopted accounting pronouncements described below.

The condensed consolidated financial statements included herein reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the Company’s condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021, condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2022 and 2021, and the condensed consolidated cash flows for the three months ended March 31, 2022 and 2021.

The condensed consolidated balance sheet as of December 31, 2021 is derived from the audited consolidated financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Certain information and disclosures normally included in annual consolidated financial statements have been omitted pursuant to the rules and regulations of the SEC. Because the condensed consolidated interim financial statements do not include all of the information and disclosures required by GAAP for a complete set of financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022. The results for interim periods are not necessarily indicative of a full year’s results.

SEC Form 10-Q filed by Agrify Corporation