What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-10-02 compared with 2023-10-02 · 255 added, 500 removed, 590 unchanged (56% of the section changed)

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and “Agrify” refer to Agrify Corporation, a Nevada corporation.

We are one of the most innovative providers of

advanced cultivation and extraction solutions for the cannabis industry, bringing data, science, and technology to the forefront of the

Our proprietary micro-environment-controlled Agrify Vertical Farming Units (or “VFUs”) enable cultivators to produce

the highest quality products with what we believe to be an unmatched consistency, yield, and Return on Investment (“ROI”)

Our comprehensive extraction product line, which includes hydrocarbon, ethanol, solventless, post-processing, and lab equipment,

empowers producers to maximize the quantity and quality of extract required for premium concentrates.

We believe we are the only company with an automated

and fully integrated grow solution in the industry.

Our cultivation and extraction solutions seamlessly combines our integrated hardware

and software offerings with a broad range of associated services including consulting, engineering, and construction and is designed to

deliver the most complete commercial indoor farming solution available from a single provider.

The totality of our product offerings and

service capabilities forms an unrivaled ecosystem in what has historically been a highly fragmented market.

As a result, we believe we

are well situated to create a dominant market position in the indoor agriculture sector.

We are a developer of proprietary precision hardware

and software grow solutions for the indoor commercial agriculture industry and provides equipment and solutions for cultivation, extraction,

post-processing, and testing for the cannabis and hemp industries.

We believe we are the only company with an automated and fully integrated

grow solution in the industry.

Our Agrify “Precision Elevated™” cultivation solution seamlessly combines our integrated

hardware and software offerings with a broad range of associated services including consulting, engineering, and construction and is designed

to deliver the most complete commercial indoor farming solution available from a single provider.

The totality of our product offerings

and service capabilities forms an unrivaled ecosystem in what has historically been a highly fragmented market.

As a result, we believe

we are well situated to create a dominant market position in the indoor agriculture sector.

Agrify Corporation was incorporated in the state

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amended its articles of incorporation to reflect a name change to Agrify Corporation.

Our corporate headquarters are located in Troy,

Our corporate headquarters are located in Troy, Michigan.

We also lease properties located within various geographic regions in which we conduct business, including Colorado, Georgia,

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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 Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the impact

of these reverse stock splits.

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 Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the impact of these reverse stock splits.

Recent Business Developments

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The combined purchase price for one share of Common Stock (or one

Pre-Funded Warrant) and the accompanying fraction of a Common Warrant was $1,360.00.

Pre-Funded Warrant) and accompanying fraction of a Common Warrant was $1,360.00.

Subject to certain ownership limitations, the

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Raymond Chang, our Chairman and Chief Executive

Officer, and Stuart Wilcox, who is currently our Chief Operating Officer, and at the time was a member of our Board of Directors, participated

in the private placement on essentially the same terms as other investors, except for having a combined purchase price of $1,380.00 per

Officer, and Stuart Wilcox, a member of our Board of Directors, participated in the private placement on essentially the same terms as

other investors, except for having a combined purchase price of $1,380.00 per share.

The gross proceeds to us from the private placement were

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of the Merger Agreement.

Additional information regarding the Company’s contingent consideration arrangements may be found in Note

5 – Fair Value Measures, included elsewhere in the notes to the condensed consolidated financial statements.

The Merger Agreement

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be payable by issuing shares of Common Stock.

Based upon the combined first and second quarter

actual revenue performance, Lab Society’s revenue trend is significantly below the originally estimated revenue trends incorporated

into our original fair value estimates at the time of the acquisition.

We have concluded Lab Society will not achieve any contingent earn-out

consideration in connection with its first earn-out period.

Accordingly, we reversed the current accrued contingent consideration liability

associated with Lab Society’s first earn-out period as of June 30, 2022.

The reversal of this liability of approximately $1.0 million,

as required by ASC 805, was recorded as a reduction in operating expenses during the second quarter of 2022.

The purchase price allocation for the business

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cost of capital to be used as a discount rate.

During the three-month period ended June 30, 2022,

the Company identified a potential impairment triggering event associated with both a sustained decline in the Company’s stock price

and associated market capitalization, as well as a second-quarter slowdown in the cannabis industry as a whole.

Due to these factors,

the Company deemed that there may be an impairment to the carrying value of its long-lived assets and accordingly performed interim testing

to determine the proper fair value of its long-lived assets as of June 30, 2022.

Based on its interim testing, the Company noted that

the entire carrying value of its goodwill and intangible assets should be impaired.

Additional information regarding the Company’s

interim testing on goodwill and intangible assets may be found in Note 8– Intangible Assets, Net and Goodwill, included elsewhere

in the notes to the condensed consolidated financial statements.

We amortize our intangible assets assuming no

residual value over periods in which the economic benefit of these assets is consumed.

Securities Purchase Agreement

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rate per year equal to 15% from the date of a default or event of default.

For the quarter ending June

30, 2022, we defaulted on certain of financial debt covenants associated with our SPA Note.

As a result of this default, the lender would have the ability to call the balance

of the note, along with a 115% penalty, amounting to a

total repayment obligation of approximately $75.0 million ($65.0 million in principal and $9.8 million of default penalty), plus increase

the interest due on the outstanding unpaid balance(s) from 6.75% to 15%.

All amounts due would immediately

become a current liability in the event the lender were to call the note.

If the lender were

to call the debt instrument due to the default, we would not have sufficient cash on hand as of June 30, 2022 to pay off the existing

debt and default penalty amounts.

As of June 30, 2022, cash, restricted cash, cash equivalents, and marketable securities totaled

approximately $ 59.9 million, which would be

insufficient to cover the combined amount of debt liability, including the default penalty amount.

Subsequent to the end of

the second quarter of 2022, we reached an agreement in principle with our institutional lender to amend the existing SPA Note and to modify

certain financial covenants which, once complete, should give us additional flexibility to operate and meet our long-term strategic goals

while also allowing us to responsibly adjust to the many challenges currently facing the cannabis industry.

date the SPA Note is fully repaid, the Investor will, subject to certain exceptions, have the right to participate for up to 30%

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with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying

On an ongoing basis, we evaluate estimate, which include estimates related to accruals, stock-based compensation expense, and reported

amounts of revenues and expenses during the reported period.

On an ongoing basis, we evaluate estimates, which include estimates related to accruals, stock-based compensation expense, and

reported amounts of revenues and expenses during the reported period.

We base our estimates on historical experience and other market-specific

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estimates or assumptions.

We have a history of losses, expect to continue to incur losses in

the near term and may not achieve or sustain profitability in the future, and as a result, our management has identified, and our auditors

agreed that there is a substantial doubt about our ability to continue as a going concern.

Our financial statements have been prepared assuming we will continue

as a going concern.

Since inception, we have experienced recurring net losses.

These factors, among others, raise substantial doubt about

our ability to continue as a going concern.

Our financial statements do not include any adjustments that might result from the outcome

of this uncertainty.

Revenue Recognition

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If the SSP is not

observable through past transactions, we estimate the SSP, considering available information such as market conditions, expected margins,

and internally approved pricing guidelines related to the performance obligations.

observable through past transactions, we estimate the SSP, taking into account available information such as market conditions, expected

margins, and internally approved pricing guidelines related to the performance obligations.

We license our software as a SaaS type subscription

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we impute interest on such contracts at an agreed upon interest rate and will present the financing components separately as financial

For the three and six months ended June 30, 2022 and 2021, we did not have any such financial income.

For the three months ended March 31, 2022 and 2021, we did not have any such financial income.

Payment terms with customers typically require

payment 30 days from the invoice date.

payment 30 days from invoice date.

Our agreements with customers do not provide for any refunds for services or products and therefore

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the loss is probable and can be reasonably estimated.

The reserve for warranty returns is included in accrued expenses and other current

liabilities in our condensed consolidated balance sheets.

The reserve for warranty returns is included in accrued expenses and other

current liabilities in our condensed consolidated balance sheets.

Accounting for Business Combinations

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Amortization of acquired intangible assets is

the result of the acquisition of TriGrow, which occurred in 2020, the acquisition of Precision and Cascade which occurred in 2021, the

acquisition of PurePressure, which also occurred in 2021, and the acquisition of Lab Society, which occurred in 2022.

As a result of these

transactions, customer relationships, acquired developed technology, non-compete agreements and trade names were identified as intangible

assets, and are amortized over their estimated useful lives.

the result of the acquisition of TriGrow, which occurred in 2020, the acquisition of Sinclair which occurred in 2021, the acquisition

of PurePressure, which also occurred in 2021, and the acquisition of Lab Society, which occurred in 2022.

As a result of these transactions,

customer relationships, acquired developed technology, non-compete agreements and trade names were identified as intangible assets, and

are amortized over their estimated useful lives.

We recognize the excess of the purchase price

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December 2 or more frequently if events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable.

We have determined it is a single reporting unit for the purpose of conducting the goodwill impairment assessment.

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.

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

decline in our stock price.

During the three-month period ended June 30, 2022,

the Company identified a potential impairment triggering event associated with both a sustained decline in the Company’s stock price

and associated market capitalization, as well as a second-quarter slowdown in the cannabis industry as a whole.

Due to these factors,

the Company deemed that there may be an impairment to the carrying value of its long-lived assets and accordingly performed interim testing

to determine the proper fair value of its long-lived assets as of June 30, 2022.

Based on its interim testing, the Company noted that

the entire carrying value of its goodwill and intangible assets should be impaired.

Additional information regarding the Company’s

interim testing on goodwill and intangible assets may be found in Note 8 – Intangible Assets, Net and Goodwill, included elsewhere

in the notes to the condensed consolidated financial statements.

The Company has determined it is a single reporting unit for the purpose of conducting the goodwill impairment assessment.

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 a decline in the Company’s

market value as a result of a significant decline in the Company’s stock price.

There have been no impairment charges recorded for

three months ended March 31, 2022 and 2021, respectively.

Capitalization of Internal Software Development Costs

We capitalize certain software engineering

efforts related to the continued development of Agrify Insights™ cultivation software under ASC 985-20.

Costs incurred

during the application development phase are only capitalized once technical feasibility has been established and the work

performed will result in new or additional functionality.

The types of costs capitalized during the application development

phase include employee compensation, as well as consulting fees for third-party software developers working on these projects.

related to the research and development are expensed as incurred until technical feasibility is established as well as

post-implementation activities.

Internal-use software is amortized on a straight-line basis over the estimated useful life of the

asset, which ranges from two to five years.

We capitalize certain software engineering efforts

related to the continued development of Agrify Insights software under ASC 985-20.

Costs incurred during the application development

phase are only capitalized once technical feasibility has been established and the work performed will result in new or

additional functionality.

The types of costs capitalized during the application development phase include employee compensation, as well

as consulting fees for third-party software developers working on these projects.

Costs related to the research and development are

expensed as incurred until technical feasibility is established as well as post-implementation activities.

Internal-use software is amortized

on a straight-line basis over the estimated useful life of the asset, which ranges from two to five years.

We account for income taxes pursuant to the provisions

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Results of Operations

We have incurred recurring losses to date.

financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments

relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable

to continue in operation.

We expect we will require additional capital to

meet our long-term operating requirements.

We expect to raise additional capital through, among other things, the sale of equity or debt

Comparison of the Three and Six Months Ended June 30, 2022 and

Comparison of the Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of

operations for the three and six months ended June 30, 2022 and June 30, 2021:

Three Months ended June 30,

Six Months ended June 30,

(As Restated)

operations for the three months ended March 31, 2022 and March 31, 2021:

Three Months ended

(In thousands, except share and per share data)

Cost of goods sold

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General and administrative

Selling and marketing

Research and development

Change in contingent consideration

Impairment of goodwill and intangible assets

Selling and marketing

Total operating expenses

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Interest income (expense), net

Other expenses

Change in fair value of warrant liabilities

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Net income (loss) attributable to Agrify Corporation

Net income (loss) per share attributable to Common Stockholders – basic and diluted

Weighted-average common shares outstanding – basic and diluted

Net income (loss) per share attributable to Common Stockholders – basic (1)

Net income (loss) per share attributable to Common Stockholders – diluted (1)

Weighted-average common shares outstanding – basic (1)

Weighted-average common shares outstanding – diluted (1)

Periods presented have been adjusted to reflect the 1-for-10 reverse stock split on October 18, 2022 and the 1-for-20 reverse stock split on July 5, 2023.

Additional information regarding the reverse stock splits may be found in Note 1 – Overview, Basis of Presentation and Significant Accounting Policies , included elsewhere in the notes to the condensed consolidated financial statements.

Our goal is to provide our customers with a variety

of products to address their entire indoor agriculture needs.

Our core product offering includes our VFUs and Agrify Integrated Grow Racks

with our Agrify Insights™ cultivation software, which are supplemented with environmental control products, grow lights, facility

build-out services and extraction equipment.

Our core product offering includes our Agrify Vertical Farming Units (or

“VFUs”) and Agrify Integrated Grow Racks with our Agrify Insights software, which are supplemented with environmental control

products, grow lights, facility build-out services and extraction equipment.

We continue to monitor and address COVID-19 pandemic

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We generate revenue from sales of cultivation

solutions, including ancillary products and services, Agrify Insights™ cultivation software, facility build-outs and extraction

equipment and solutions.

We believe that our product mix forms an integrated ecosystem which allows us to be engaged with our potential

customers from the early stages of the grow cycle — first during the facility build-out, to the choice of cultivation solutions,

running the grow business with our Agrify Insights™ cultivation software and finally, our extraction, post-processing and testing

services to transform harvest into a sellable product.

We believe that the delivery of each solution in the various stages in the process

will generate sales of additional solutions and services.

solutions, including ancillary products and services, Agrify Insights software, facility build-outs and extraction equipment and solutions.

We believe that our product mix form an integrated ecosystem which allows us to be engaged with our potential customers from early stages

of the grow cycle — first during the facility build-out, to the choice of cultivation solutions, running the grow business

with our Agrify Insights software and finally, our extraction, post-processing and testing services to transform harvest into a sellable

We believe that delivery of each solution in the various stages in the process will generate sales of additional solutions and

The following table provides a breakdown of our

revenue for the three and six months ended June 30, 2022 and 2021:

revenue for the three months ended March 31, 2022 and 2021:

Three Months ended

Six Months ended

(In thousands)

Cultivation solutions, including ancillary products and services

Agrify Insights™ cultivation software

Agrify Insights software

Facility build-outs

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Revenues increased by $19.0 million, or 271% for

the three months ended June 30, 2022, compared to the same period in 2021.

The comparative increase in revenue was generated primarily

from extraction solutions sales of equipment and services from our acquisition of Lab Society in 2022 and acquisitions of Precision, Cascade

and PurePressure in 2021, which contributed $10.0 million in revenue for the three months ended June 30 2022.

Sales related to cultivation

products decreased by $759 thousand during the three months ended June 30, 2022 primarily due to the variability in the sales cycle associated

with our VFU equipment.

In addition, comparative quarterly facility build-out revenue decreased by $1.7 million as a result of our legacy

facility build-out projects nearing completion.

Revenues increased by $26.5 million, or 141% for

the six months ended June 30, 2022, as compared to the same period in 2021.

the three months ended March 31, 2022 compared to the same period in 2021.

The comparative increase in revenue was generated primarily

from extraction solutions sales of equipment and services from our acquisition of Lab Society in 2022 and acquisitions of Precision, Cascade

and PurePressure in 2021 which contributed $22.4 million in revenue for the six months ended June 30, 2022.

Additionally, facility build-out

and PurePressure in 2021.

Extraction division revenues totaled $12.4 million in the first quarter of 2022.

Additionally, design and build

revenues increased by $6.4 million due to the continued build-out of facilities under our TTK Solutions.

This was partially offset by

a decrease in cultivation product and service sales of $613 thousand.

Cost of Goods Sold

Cost of goods sold represents a combination of

the following:

construction-related costs associated with our facility build-outs, internal and outsourced labor and material costs associated

with the assembly of both cultivation equipment (primarily VFUs) and extraction equipment, as well as labor and parts costs associated

with the sale or provision of other products and services.

Cost of goods sold represents a combination of the following:

construction-related

costs associated with our facility build-outs, internal and outsourced labor and material costs associated with the assembly of both cultivation

equipment (primarily VFUs) and extraction equipment, as well as labor and parts costs associated with the sale or provision of other products

and services.

The following table provides a breakdown of our

cost of goods sold for the three and six months ended June 30, 2022 and 2021:

cost of goods sold for the three months ended March 31, 2022 and 2021:

Three Months ended

Six Months ended

(In thousands)

Cultivation solutions, including ancillary products and services

Agrify Insights™ cultivation software

Agrify Insights software

Facility build-outs

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Cost of goods sold increased by $14.3 million,

or 57%, for the three months ended June 30, 2022 compared to the same period in 2021.

The comparative quarterly increase in the cost of

goods sold is largely associated with the incremental expense associated with the sales of our extraction-related equipment, for which

there was no associated revenue or expense in the prior year quarterly period.

Costs associated with our extraction-related equipment

sales totaled $7.7 million in the three months ended June 30, 2022.

Additionally, our second quarter cost of goods sold amount for the

second quarter of 2022 includes $929 thousand of incremental expense associated with increases to our inventory reserves related to slow-moving

inventory, as well as $181 thousand of the incremental cost associated with increases to our warranty reserves.

Cost of goods sold increased by $20.7 million,

or 110%, for the six months ended June 30, 2022 compared to the same period in 2021.

The comparative quarterly increase in the cost of

goods sold is similarly associated with the introduction of our extraction-related equipment sales in the year-to-date 2022 fiscal period.

Costs associated with extraction equipment-related equipment sales accounted for $16.0 million of the comparative year-to-date fiscal

2022 increase in cost of goods sold.

Additionally, cost of goods sold related to facility build-outs increased by $4.8 million for the

six months ended June 30 2022, directly related to the comparative increase in subcontractor construction

costs associated with active design and build projects during the first half of the 2022 fiscal year.

or 189%, for the three months ended March 31, 2022 compared to the same period in 2021.

The comparative quarterly increase in cost

of goods sold is associated with the increased amount of internal and outsourced labor and materials

costs for the extraction solutions sales, combined with an increase in subcontractor construction

costs related to our facility build-outs, including construction costs associated with design and build projects under our TTK Solutions.

Gross Profit (Loss)

Three Months ended June 30,

Six Months ended

Three Months ended

(In thousands)

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Gross profit totaled $4.2 million, or 16 .0%

of total revenue during the three months ended June 30, 2022 compared to a gross profit of

$527 thousand, or 4.5% of total revenue during

the three months ended June 30, 2021.

The comparative $1.1 million second-quarter year-over-year improvement in gross profit, as well

as the comparative improvement in gross profit margin, is primarily attributable to the introduction of our extraction solutions revenue

in 2022, which contributes to higher gross profit and gross profit margins than those realized on our cultivation-related revenue,

which includes our TTK Solutions build-out revenue.

During the second quarter of 2022, we realized a gross profit margin of 23% associated

with our extraction solutions revenue, while we realized a gross loss of approximately (7)% on our facility build-outs and cultivation-related

Our gross profit and gross profit margins for the three-month period ended June 30, 2022, were negatively impacted as a result

of increases in inventory reserves and warranty reserves, which totaled $929 thousand and $181 thousand, respectively.

Absent these periodic

charges, reported gross profit margins would have been approximately 14.1% during the second quarter of 2022.

Gross profit totaled $5.8 million, or 12.7 %

of total revenue during the six months ended June 30, 2022 compared to a gross loss of ($13) thousand, or (0.1)% of total revenue

during the six months ended June 30, 2021.

The comparative $5.8 million year-over-year improvement

in gross profit, as well as the comparative improvement in gross profit margin, is similarly attributable to the introduction of our extraction

solutions revenue during the first six months of 2022.

No extraction solutions-related revenues were recognized during the first six months

Extraction solutions revenue contributes a higher gross profit and gross profit margins than those realized on our cultivation-related

revenue, which includes our TTK Solutions build-out revenue.

During the first six months of 2022, we realized a gross profit margin of

28% associated with our extraction solutions revenue, while we realized a gross loss of approximately (2)% on our cultivation-related

As with our second quarter of 2022, our gross profit and gross profit margin for the six months ended June 30, 2022 is also

adversely impacted by the inventory and warranty reserves described above.

of total revenue during the three months ended March 31, 2022 compared to a gross loss of $(540) thousand, or (7.7)% of total revenue

during the three months ended March 31, 2021.

The comparative $4.7 million first-quarter year over year improvement in gross profit, as

well as the comparative improvement in gross profit margin, is primarily attributable to the introduction of extraction solutions revenue

in the first quarter of 2022, which contributes higher gross margins than those realized on our cultivation-related revenue, which

includes our TTK Solutions design and build revenue.

During the first quarter of 2022, we realized a gross profit margin of 33% associated

with our extraction solutions revenue, while we realized a gross profit margin of approximately 1% on our cultivation-related revenues.

On a forward-looking basis, with the full year

benefit of anticipated margin contribution associated with the extraction-related revenue contributions, the Company anticipates that

gross margin performance, aided by our extraction-related equipment sales, will be in a mid-teens range.

We anticipate that we will be

able to improve upon that expected gross profit margin performance once we are able to generate meaningful software and production fee

revenues from our TTK Solutions, which we currently expect to begin in the late third or early fourth quarter of 2022.

General and Administrative

Three Months ended June 30,

Six Months ended

Three Months ended

(In thousands)

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G&A expense increased by $5.3 million, or

341%, for the three months ended June 30, 2022, compared to the same period in 2021.

The primary driver of the increase in comparative

general and administrative expense in the second quarter of 2022 is largely the result of an $8.6 million increase in trade and loan receivable

allowances recorded during the quarter.

During the second quarter of 2022, the Company increased its trade receivables reserve by approximately

$1.5 million and its loans receivable reserve by approximately $7.1 million, specifically related to Greenstone Holdings (“Greenstone”).

Both reserves were deemed necessary due to the current financial instability within the cannabis industry.

The Company specifically established

the loan reserve related to Greenstone based upon its review of Greenstone’s financial stability, which would impact collectability

and is primarily the result of unfavorable market conditions within the Colorado market.

The Company will continue to monitor the operations

of Greenstone in an effort to collect all outstanding receivables but due to the uncertain nature of Greenstone’s business at this

time the Company has made the decision to place a reserve against the loan receivable amounts.

Additional information regarding recent

developments with Greenstone may be found in Note 6 – Loan Receivable, included elsewhere

in the notes to the condensed consolidated financial statements

Other year-over-year increases in the second quarter

of 2022 general and administrative expenses included $3.9 million of incremental G&A expenses related to our acquisition of Lab Society

in 2022 and acquisitions of Precision, Cascade and PurePressure in 2021, an increase in wage and benefits-related expenses of $1.1 million,

an increase in facility and other related expenses of $936 thousand, an $800 thousand legal settlement accrual, an increase in directors’

and officers’ insurance of $182 thousand, an increase in investor relations of $133 thousand and an increase in depreciation and

amortization of $34 thousand.

G&A expense increased by $20.3 million, or

229%, for the six months ended June 30, 2022, compared to the same period in 2021.

As described above, the primary drivers of the year-over-year

increase in the comparative six-month period G&A expenses are largely attributable to an increase in trade and loan receivable allowances

of $7.8 million and $6.9 million of incremental G&A expenses related to our acquisition of Lab Society in 2022 and acquisitions of

Precision, Cascade and PurePressure in 2021.

Other drivers of the comparative year-over-year increase in G&A expense include an increase

in payroll and related expenses increase of $2.4 million, an increase in acquisition-related expenses of $2.1 million, an increase in

facility and other related expenses of $1.2 million, an increase in investor relations of $339 thousand, an increase in directors’

and officers’ insurance of $310 thousand, and an increase in depreciation and amortization of $152 thousand.

These increases were

partially offset by a reduction in stock compensation expense of $892 thousand.

Selling and Marketing

Three Months ended

Six Months ended

(In thousands)

Selling and marketing

Selling and marketing expenses consist primarily

of salaries and related costs of personnel, travel expenses, trade shows and advertising expenses.

Selling and marketing expenses increased by $1.6

million, or 198%, for the three months ended June 30, 2022, compared to the same period in 2021.

The increase is attributable to our acquisition

of Lab Society in 2022 and acquisitions of Precision, Cascade and PurePressure in 2021 of $802 thousand, an increase in travel and other

expenses of $321 thousand, an increase in payroll and related expenses of $278 thousand and an increase in advertising and trade show

expenses of $149 thousand.

Selling and marketing expenses increased by $3.0

million, or 216%, for the six months ended June 30, 2022, compared to the same period in 2021.

The increase is attributable to our acquisition

of Lab Society in 2022 and acquisitions of Precision, Cascade and PurePressure in 2021 of $2.2 million, an increase in payroll and related

expenses of $513 thousand, an increase in advertising and trade show expenses of $172 thousand and an increase in travel and other expenses

of $97 thousand.

119%, for the three months ended March 31, 2022, compared to the same period in 2021.

The increase is attributable to payroll and

related expenses increase of $2.5 million, an increase in acquisition-related expenses of $1.3 million, an increase in facility and other

related expenses of $964 thousand, an increase in investor relations and directors’ and officers’ insurance of $592 thousand,

an increase in depreciation and amortization of $865 thousand, which primarily reflects an increase in amortization associated with the

identified intangible assets from our acquisition of Lab Society in 2022 and acquisitions of Precision, Cascade and PurePressure in 2021.

These increases were partially offset by a reduction in stock compensation expense of $906 thousand.

Research and Development

Three Months ended

Six Months ended

(In thousands)

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Research and development (“R&D”)

expenses consisted primarily of costs incurred for the development of our Agrify Insights™ cultivation software and next-generation

generation VFUs, which includes:

expenses consisted primarily of costs incurred for the development of our Agrify Insights software and next generation VFUs, which includes:

employee-related expenses, including salaries, benefits, and travel;

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R&D expense increased by $1.2 million, or

215%, for the three months ended June 30, 2022, compared to the same period in 2021.

The increase in comparative period R&D expenses

is attributable to increases in wage and benefits-related expenses of $574 thousand, third-party consulting services of $529 thousand,

$467 thousand of incremental R&D expense related to the acquisition of Lab Society in 2022 and acquisitions of Precision, Cascade

and PurePressure in 2021, and material and other costs of $94 thousand.

As a percentage of net revenue, R&D expenses were 12.6% of

total revenue for the three months ended June 30, 2022, compared to 6.6% for the three months ended June 30, 2021.

R&D expense increased by $2.9 million, or

173%, for the six months ended June 30, 2022, compared to the same period in 2021.

The comparative periodic increase in R&D expense

is attributable to third-party consulting services of $988 thousand, increases in wage and benefits-related expenses of $801 thousand,

$777 thousand of incremental R&D expense related to the acquisition of Lab Society in 2022 and acquisitions of Precision, Cascade

and PurePressure in 2021 and material and other costs of $302.

As a percentage of net revenue, R&D expenses were 10% of total revenue

for the six months ended June 30, 2022, compared to 8.8% for the six months ended June 30, 2021.

136%, for the three months ended March 31, 2022, compared to the same period in 2021.

The increase is attributable to the personnel

and facility costs associated with the continued development of our VFUs, specifically related to improving the individual unit cooling

and humidity environments.

We expect to continue to invest in future developments

of our VFUs, Agrify Insights™ cultivation software and our extraction products.

Although we continue to increase our investment

in R&D activities, we expect R&D expenses to decrease as a percentage of revenue due to our revenue growth.

Change in contingent consideration

Three Months ended

Six Months ended

(In thousands)

Change in contingent consideration

Change in contingent consideration decreased by

$(907) thousand, or 100%, for the three months and six months ended June 30, 2022, compared to the same periods in 2021.

The change in

contingent consideration expense, which was recognized by us during the second quarter of 2022, primarily relates to the reduction in

the projected earn-out achievement associated with Lab Society’s first twelve-month earn-out period, for which current revenue projections

are trending below our original earn-out achievement fair value estimates.

During the second quarter of 2022, the Company reduced the

current fair value estimate of contingent consideration to be earned by the former members of Lab Society by approximately $(1.0) million.

This was partially offset by an increase of $121 thousand to the final contingent consideration amount earned by the former members of

Precision and Cascade.

As per the guidelines of ASC 805, we are required to record subsequent changes to our original fair value estimates

related to contingent consideration as an operating expense in the period of change and not as an increase to goodwill.

Impairment of Goodwill and intangible assets

of our VFUs, Agrify Insights software and our extraction products.

As a percentage of net revenue, R&D expenses were 8.0% of total

revenue for the three months ended March 31, 2022, compared to 12.6% for the three months ended March 31, 2021.

Although we continue to

increase our investment in R&D activities, we expect R&D expense to decrease as a percentage of revenue due to our revenue growth.

Selling and Marketing

Three Months ended

Six Months ended

(In thousands)

Impairment of Goodwill and intangible assets

During the three months period ended June 30,

2022, the Company identified a potential impairment triggering event associated with both a sustained decline in our stock price and associated

market capitalization, as well as a second-quarter slowdown in the cannabis industry as a whole.

Due to these factors, we deemed that

there was a need to perform a detailed analysis necessary to support the current carrying value of our long-lived assets, including our

goodwill and intangible assets, as of June 30, 2022.

Based on its interim testing, the Company noted

that the current carrying value of equity significantly exceeded the calculated fair value of equity, by an amount greater than the aggregate

value of our goodwill and intangible assets.

Accordingly, the Company concluded that the entire carrying value of its goodwill and intangible

assets should be impaired, resulting in a second-quarter impairment charge of $69.9 million.

Additional information regarding the Company’s

interim testing on goodwill may be found in Note 8 – Intangible Assets, Net and Goodwill, included elsewhere in the notes to the

condensed consolidated financial statements.

Selling and marketing

Selling and marketing expenses consist primarily

of salaries and related costs of personnel, travel expenses, trade shows and advertising expenses.

Selling and marketing expenses increased by $1.5

million, or 239%, for the three months ended March 31, 2022, compared to the same period in 2021.

The increase is attributable to payroll

and related expenses increase of $1.2 million and an increase in advertising and trade show expenses of $152 thousand and an increase

in travel and other expenses of $155 thousand.

Other Income (Expense), Net

Three Months ended

Six Months ended

Three Months ended March 31,

(In thousands)

Interest (expense) income, net

Other expenses

(As Restated)

Interest income (expense), net

Change in fair value of warrant liabilities

Gain on extinguishment of notes payable

Total other (expense) income, net

Interest (expense) income, net decreased by $(3.4)

million, or 6,120%, for the three months ended June 30, 2022 compared to the same period in 2021.

The decrease in interest (expense) income,

net primarily is attributable to an increase in interest expense, including the amortization of debt discount costs of $(2.7) million

related to our SPA Note.

This partially was offset by interest income of $654 thousand from our TTK Solutions.

Interest (expense) income, net decreased by $(2.8)

million, or 12,065%, for the six months ended June 30, 2022 compared to the same period in 2021.

The decrease in interest (expense) income,

net primarily is attributable to an increase in interest expense, including the amortization of debt discount costs, of $(2.9) million

related to our SPA Note.

This partially was offset by interest income of $1.1 million from our TTK Solutions.

Other expenses of $0 for the three and six months

ended June 30, 2022, compared to $(63) thousand for the three and six months ended June 30, 2021 are attributable to the amortization

of premiums related to the held to maturity securities.

Total other income, net

Interest income (expense), net increased by $591

thousand, or 1,847%, for the three months ended March 31, 2022 compared to the same period in 2021.

The increase in interest income

is attributable mainly to interest from marketable securities and interest income from TTK Solutions.

The change in fair value of warrant liabilities

during the three and six months ended June 30, 2022 is related to the fair value remeasurement of warrants issued during the six months

during the three months ended March 31, 2022 is related to the fair value remeasurement of warrants issued during the three months ended

Gain on extinguishment of notes payable decreased

by $(2.7) million, or 100%, for the six months ended June 30, 2022 compared to the same period in 2021.

We recognized a gain on extinguishment

of $2.7 million in connection with the derecognition of the net carrying amount of the extinguished debt of $19.6 million (inclusive of

$13.1 million of principal, $7.1 million of derivative liabilities, less $587 thousand of debt discount) and the recognition of the $16.9

million fair value of the new convertible notes (including the same principal amount of $13.1 million plus the $3.8 million fair value

of the beneficial conversion feature).

Additional information relating to the Company’s Gain on extinguishment of notes payable

may be found in Note 12 – Convertible Promissory Notes, included elsewhere in the notes to

the condensed consolidated financial statements.

Income Tax Benefit

by $2.7 million, or 100%, for the three months ended March 31, 2022 compared to the same period in 2021.

Provision for (benefit from) Income Taxes

Three Months ended

Six Months ended

(In thousands)

Income tax benefit

Provision for (benefit from) income taxes

Effective tax rate

The change in the income tax benefit for the three

months ended June 30, 2022 compared to the three months ended June 30, 2021 was primarily due to a goodwill impairment charge recorded

during the second quarter of 2022 which resulted in a $(62) thousand benefit related to the reversal of our deferred tax liability on

indefinite-lived assets.

The change in the income tax benefit for the six

months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to a discrete income tax benefit of $(200)

thousand recorded during the first quarter of 2022, which is attributable to a non-recurring partial release of our U.S.

valuation allowance

as a result of the Lab Society acquisition.

The change in the provision for (benefit from)

income taxes for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily due to a discrete

income tax benefit of $(200) thousand recorded during the first quarter of 2022, which is attributable to a non-recurring partial release

valuation allowance as a result of the Lab Society acquisition.

Income (Loss) Attributable to Non-Controlling Interest

We consolidate the results of operations of two

less than wholly-owned entities into our consolidated results of operations.

On December 8, 2019, we formed Agrify Valiant LLC, a joint-venture

limited liability company in which we are 60% majority owner and Valiant-America, LLC owns 40%.

Agrify Valiant LLC started its operations

during the second quarter of 2020.

On January 22, 2020, as part of the acquisition of TriGrow, we received TriGrow’s 75% interest

in Agrify Brands, LLC (formerly TriGrow Brands, LLC), a licensor of an established portfolio of consumer brands that utilize our grow

The license of these brands is ancillary to the sale of our VFUs and provides a means to differentiate customers’ products

in the marketplace.

less than wholly-owned entities into our condensed consolidated results of operations.

On December 8, 2019, we formed Agrify Valiant LLC,

a joint-venture limited liability company in which we are 60% majority owner and Valiant-America, LLC owns 40%.

Agrify Valiant LLC started

its operations during the second quarter of 2020.

On January 22, 2020, as part of the acquisition of TriGrow, we received TriGrow’s

75% interest in Agrify Brands, LLC (formerly TriGrow Brands, LLC), a licensor of an established portfolio of consumer brands that utilize

our grow technology.

The license of these brands is ancillary to the sale of our VFUs and provides a means to differentiate customers’

products in the marketplace.

It is not a material aspect of our business and we have not realized any royalty income.

Accordingly, we are currently

evaluating whether to continue this legacy business from an operational standpoint, as well as from a legal and regulatory perspective.

Income (loss) attributable to non-controlling

interest represents the portion of profit (or loss) that are attributable to non-controlling interest calculated as a product of the net

income of the entity multiplied by the percentage of ownership held by the non-controlling interest.

Going Concern

We have incurred operating losses since our inception

and have negative cash flows from operations.

We also have an accumulated deficit of $131.8 million as of June 30, 2022.

for the quarter ending June 30, 2022, we will recognize significant impairment charges to the carrying value of its goodwill and intangible

assets and will be in default of certain financial debt covenants associated with its $65 million senior secured promissory note (“the

As a result of its default, we are actively working to restructure our existing SPA Note in order to avoid having the note

called by the lender.

If the lender were to call the debt instrument due to the default, we would not have sufficient cash on hand as

of June 30, 2022 to pay off the existing debt and default penalty amounts.

Cash on hand is approximately $59.9 million, while the debt

liability, including the potential default penalty, would be approximately $75.0 million as of June 30, 2022.

Subsequent to the end of the second quarter of

2022, we reached an agreement in principle with our institutional lender to amend our existing SPA Note and to modify certain financial

covenants which, once complete, should give us additional flexibility to operate and meet our long-term strategic goals while also allowing

us to responsibly adjust to the many challenges currently facing the cannabis industry.

These financial statements have been prepared

on a going concern basis, which implies we believe these conditions raise substantial doubt about our ability to continue as a going

concern within the next twelve-months from the date these financial statements are available to be issued.

The Company’s continuation

as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until the Company

begins generating sufficient cash flows from operations to meet its obligations.

There is no assurance that we will ever be profitable.

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification

of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.

Accordingly, we

are currently evaluating whether to continue this legacy business from an operational standpoint, as well as from a legal and regulatory

Loss attributable to non-controlling interest

represents the portion of profit (or loss) that are attributable to non-controlling interest calculated as a product of the net income

of the entity multiplied by the percentage of ownership held by the non-controlling interest.

Liquidity and Capital Resources

As of June 30, 2022, our principal sources of

liquidity were cash and cash equivalents and marketable securities totaling $29.9 million and $30 million in restricted cash and restricted

marketable securities.

Prior to consideration of any debt restructuring, we believe we have sufficient cash on hand to continue operations

for the next six to nine months.

We have, in each of the past two quarters, used a total of approximately $30.0 million to support our

activities in each quarter.

Our current working capital needs are to support revenue growth, fund construction and equipment financing

commitments associated with our TTK Solutions, manage inventory to meet demand forecasts and support operational growth.

Our long-term

financial needs primarily include working capital requirements and capital expenditures.

We anticipate that we will allocate a significant

portion of our current balance of working capital to satisfy the financing requirements of our current and future TTK arrangements.

arrangements require a significant amount of upfront capital necessary to fund construction, associated with facility build-outs, and

There are many factors that may negatively impact our available sources of funds in the future, including the ability to generate

cash from operations, raise debt capital and raise cash from the issuance of our securities.

The amount of cash generated from operations

is dependent upon factors such as the successful execution of our business strategy and general economic conditions.

As of March 31, 2022, our principal sources of

liquidity were cash and cash equivalents and marketable securities totaling $63.4 million and $30 million in restricted cash.

such amount, together with the proceeds from the private placement that closed on January 28, 2022 and the senior secured debt facility

that closed on March 24, 2022, will be sufficient to support our planned operations for at least the next 12 months.

Our current working

capital needs are to support revenue growth, to fund construction and equipment financing commitments associated with our TTK Solutions,

manage inventory to meet demand forecasts and support operational growth.

Our long-term financial needs primarily include working capital

requirements and capital expenditures.

We anticipate that we will allocate a significant portion of our current balance of working capital

to satisfy the financing requirements of our current and future TTK arrangements.

These arrangements require a significant amount of upfront

capital necessary to fund construction, associated with facility build-outs, and equipment.

There are many factors that may negatively

impact our available sources of funds in the future, including the ability to generate cash from operations, raise debt capital and raise

cash from the issuance of our securities.

The amount of cash generated from operations is dependent upon factors such as the successful

execution of our business strategy and general economic conditions.

We may opportunistically raise debt capital, subject

11 unchanged sentences

We received total proceeds of approximately

$779 thousand from the unsecured PPP Loan which was originally scheduled to mature in May 2022.

We applied for forgiveness on the $779

thousand of our PPP Loan however was denied by the SBA.

On June 23, 2022, we received a letter from Bank of America agreeing to extend

the maturity date to May 7, 2025 and bears interest at a rate of 1.00% per year.

The PPP loan is payable in 34 equal combined monthly

principal and interest payments of approximately $24.0 thousand commencing August 7, 2022.

$779 thousand from the unsecured PPP Loan which is scheduled to mature in May 2022.

Subject to certain conditions, the PPP Loan may be

forgiven in whole or in part by applying for forgiveness pursuant to the CARES Act and the PPP.

If the remaining principal amount is not

forgiven in full, we would be obligated to repay any principal amount not forgiven and interest accrued thereon.

On March 14, 2022, we

entered into a Securities Purchase Agreement with an institutional investor.

The Purchase Agreement provides for the issuance of a senior

secured note (the “SPA Note”) in the aggregate amount of $65 million and a warrant exercisable 34,406 shares of Common Stock,

with the potential for two potential subsequent closings for notes with an original principal amount of $35 million each.

The Purchase Agreement provides for of the issuance of a

senior secured note (the “SPA Note”) in the aggregate amount of $65 million and a warrant exercisable 34,406 shares of Common

Stock, with the potential for two potential subsequent closings for notes with an original principal amount of $35 million each.

closing pursuant to this debt facility occurred on March 24, 2022.

16 unchanged sentences

principal amount under the SPA Note plus any accrued interest.

For the quarter ending

June 30, 2022, we will be in default of certain of financial debt covenants associated with its SPA Note.

As a result of this default,

the lender would have the ability to call the balance of the note, along with a 115% penalty, amounting to a total repayment obligation

of approximately $75.0 million ($65.0 million in principal and $9.8 million of default penalty), plus increase the interest due on the

outstanding unpaid balance(s) from 6.75% to 15%.

All amounts due would immediately become a current liability in the event the lender

were to call the note.

If the lender were to call the debt instrument due to the default, we would not have sufficient cash on hand as

of June 30, 2022 to pay off the existing debt and default penalty amounts.

As of June 30, 2022, cash, restricted cash, cash equivalents,

and marketable securities totaled approximately $59.9 million, which would be insufficient to cover the combined amount of debt liability,

including the default penalty amount.

Subsequent to the end of the second quarter of

2022, we reached an agreement in principle with its institutional lender to amend its existing SPA Note and to modify certain financial

covenants which, once complete, should give us additional flexibility to operate and meet its long-term strategic goals while also allowing

it to responsibly adjust to the many challenges currently facing the cannabis industry.

Summary Statement of Cash Flows

The following table presents the major components

of net cash flows from and used in operating, investing, and financing activities for the six months ended June 30, 2022, and 2021:

of net cash flows from and used in operating, investing, and financing activities for the three months ended March 31, 2022, and 2021:

(In thousands)

3 unchanged sentences

Financing activities

Net increase in cash and cash equivalents

Net increase in cash, cash equivalents, and restricted cash

Cash Flow from Operating Activities

For the six months ended June 30, 2022, we incurred

a net loss of $(72.8) million, which included a non-cash gain related to the remeasurement of warrant liabilities of $31.0 million, non-cash

expenses of impairment of goodwill and intangible assets of $69.9 million, a provision of $8.6 million to accounts receivable allowance

for doubtful accounts ($7.1 million for doubtful accounts related to Greenstone TTK Solution), amortization of issuance costs and amortization

of debt discount related to the SPA Note of $3.1 million, $2.2 million related to depreciation and amortization, $1.9 million in connection

with the issuance and acceleration of stock options, non-cash interest income of $1.0 million related to TTK Solutions, a provision of

slow-moving inventory of $929 thousand, a $(907) thousand change in fair value of contingent consideration associated with the acquisition

of Precision, Cascade and Lab Society and a gain attributed to non-controlling interest in the amount of $4 thousand.

Net cash was reduced

by a $20.2 million increase in inventory due to demand forecast, a $2.3 million decrease in accounts payable, a $4.3 million increase

in accounts receivable, a $4.0 million decrease in accrued expenses and other current liabilities, a $0.8 million decrease in prepaid

expenses and other current assets, and a $1.0 million decrease in deferred revenue.

six months ended June 30, 2021, we incurred a net loss of $(9.4) million, which included non-cash expenses of $313 thousand related to

depreciation and amortization, $3.1 million in connection with the issuance and acceleration of stock options, non-cash interest expenses

of $46 thousand related to leases, and gain attributed to non-controlling interest in the amount of $167 thousand.

Net cash was reduced

by an $11.1 million increase in accounts receivable, a $4.5 million increase in prepaid inventory due to demand forecast and a $2.7 million

increase in prepaid expenses, partially offset by a $12.8 million increase in accrued expenses ($11.1 million related to construction

For the three months ended March 31, 2022, we incurred a net income

of $1.8 million, which included a non-cash gain related to the remeasurement of warrant liabilities of $10.8 million, non-cash expenses

of $1.1 million related to depreciation and amortization, $1.0 million in connection with the issuance and acceleration of stock options,

non-cash interest income of $0.4 million related to TTK Solutions, and gain attributed to non-controlling interest in the amount of $1

Net cash was reduced by a $0.8 million increase in accounts receivable, a $0.6 million decrease in deferred revenue, a $16.4

million increase in inventory due to demand forecast, and a $0.9 million increase in prepaid expenses, a $2.1 million decrease in accrued

expenses and other current liabilities and $2.8 million decrease in accounts payable.

For the three months ended March 31, 2021, we

incurred a net loss of $(3.8) million, which includes non-cash expenses of $147 thousand related to depreciation and amortization, $2.1

million in connection with the issuance and acceleration of stock options, non-cash interest expenses of $33 thousand related to leases

and the issuance of notes payable, partially offset by a gain of $2.7 million related to extinguishment of notes payable, loss attributed

to non-controlling interest in the amount of $(33) thousand.

Net cash was reduced by a $5.2 million increase in accounts receivable, a

$3.3 million increase in prepaid inventory due to demand forecast, a $2.2 million increase in prepaid expenses, and a $96 thousand increase

in deferred revenue, partially offset by a $7.4 million increase in accrued expenses ($6 million related to construction cots), and a

$181 thousand increase in accounts payable.

Cash Flow from Investing Activities

Net cash used in investing activities primarily

relates to net purchases of marketable securities, cash paid associated with our 2022 acquisition of Lab Society, the issuance of loans

receivable in connection with our financing of construction and equipment under its TTK Solutions offering, and purchases of property

and equipment, expenditures, and purchase of marketable securities.

The capital expenditures support growth and investment in property

and equipment, to expand research, development, and testing capabilities and, to a lesser extent, the replacement of existing equipment.

For the six months ended June 30, 2022, net cash

used in investing activities was $(29.6) million, which included cash outflows of $20.4 million

related to the issuance of TTK-related loans receivable, $9.1 million of expenditures for property and equipment, $3.5 million paid in

connection with our 2022 acquisitions of Lab Society and $3.4 million in net purchases of marketable securities.

six months ended June 30, 2021, net cash used in investing activities was $(51.9) million, which included cash outflows of $1.1 million

of leasehold improvements, purchasing computer equipment and small machinery, a $483 thousand issuance of loan receivable and $50.3 million

purchases of held to maturity securities.

relates to net purchases of marketable securities, cash paid associated with the Company’s 2022 acquisition of Lab Society, the

issuance of loans receivable in connection with the Company’s financing of construction and equipment under its TTK Solutions offering,

and for purchases of property and equipment, expenditures, and purchase of marketable securities.

The capital expenditures support growth

and investment in property and equipment, to expand research, development, and testing capabilities and, to a lesser extent, the replacement

of existing equipment.

For the three months ended March 31, 2022, net

cash used in investing activities was $(13.4) million, which included cash outflows of $6.4 million

in net purchases of marketable securities, $3.5 million paid in connection with our 2022 acquisitions of Lab Society, $12.5 million related

to the issuance of TTK-related loans receivable, and $3.7 million of expenditures for property and equipment.

For the three months ended March 31, 2021, net

cash used in investing activities was $(142) thousand for leasehold improvements, purchasing computer equipment and small machinery.

Cash Flow from Financing Activities

For the six months ended June 30, 2022, net cash

provided by financing activities was $86.7million.

Net cash provided by financing activities was

primarily driven by our two private placements during 2022.

We received $25.8 million in net proceeds from our issuance of Common Stock

and warrants in a private placement, and $62.4 million in net proceeds from our issuance of debt and warrants in a private placement.

Additionally, we received $21 thousand in proceeds from the exercise of stock options and warrants.

Each of the above inflows of cash

was offset by $1.5 million in payments relating to financing loans and financing leases.

six months ended June 30, 2021, net cash provided by financing activities was $137.4 million.

For the three months ended March 31, 2022, net

cash provided by financing activities was $87.4 million.

Net cash provided by financing activities

was attributable to $57.0 million proceeds from our initial IPO, $80.0 million from our secondary public offering, both net of fees, and

proceeds from the exercise of options and warrants of $726 thousand, offset by $94 thousand payments of financing leases.

was primarily driven by the Company’s two private placements during 2022.

The Company received $62.4 million in net proceeds from

our issuance of debt and warrants in a private placement, and $25.8 million in net proceeds from our issuance of Common Stock and warrants

in a private placement.

Additionally, the Company received $11 thousand in proceeds from the exercise of stock options and warrants.

of the above inflows of cash was offset by $782 thousand in payments relating to financing loans and financing leases.

For the three months ended March 31, 2021, net

cash provided by financing activities was $137 million, attributable to $57 million proceeds from our initial IPO, $80 million from our

secondary public offering, both net of fees, and proceeds from the exercise of options and warrants of $444 thousand, slightly offset

by $47 thousand payments relating to financing leases.

Off-Balance Sheet Arrangements

24 unchanged sentences

The significant accounting policies and estimates

that have been adopted and followed in the preparation of our condensed consolidated financial statements are detailed in Note 2 - Summary

of Significant Accounting Policies included in our 2021 Annual Report and Note 1 - Overview, Basis of Presentation and Significant Accounting

Policies to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

There have been no

changes in these policies and estimates that had a significant impact on the financial condition and results of operations for the periods

covered in this Quarterly Report.

that have been adopted and followed in the preparation of our condensed consolidated financial statements are detailed in Note 3

- Summary of Significant Accounting Policies included in our 2021 Annual Report and Note 3 - Summary

of Significant Accounting Policies to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form

There have been no changes in these policies and estimates that had a significant impact on the financial condition and results

of operations for the periods covered in this Quarterly Report.

Recently Issued Accounting Pronouncements Adopted

For more information

on recently issued accounting pronouncements are included within Note 2 - Overview, Basis of Presentation

and Significant Accounting Policies, included elsewhere in the notes to condensed consolidated financial statements covered under

Part I, Item 1 of this Quarterly Report on Form 10-Q.

on recently issued accounting pronouncements are included within Note 4 – Recent Accounting

Pronouncements, included elsewhere in the notes to condensed consolidated financial statements covered under Part I, Item 1 of

this Quarterly Report on Form 10-Q.

New Accounting Pronouncements Not Yet Adopted

For more information

on new accounting pronouncements not yet adopted are included within Note 2 - Overview, Basis of

Presentation and Significant Accounting Policies, included elsewhere in the notes to condensed consolidated financial statements

covered under Part I, Item 1 of this Quarterly Report on Form 10-Q.

on new accounting pronouncements not yet adopted are included within Note 4 – Recent Accounting

Pronouncements, included elsewhere in the notes to condensed consolidated financial statements covered under Part I, Item 1 in

this Quarterly Report on Form 10-Q.

Quantitative and Qualitative Disclosures

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q/A

Item 2. Management’s Discussion and Analysis