What changed in this filing

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Item 9A. Controls and Procedures

2025-03-21 compared with 2024-04-15 · 1937 added, 2391 removed, 535 unchanged (89% of the section changed)

Controls and Procedures.

of Disclosure Controls and Procedures

with the participation of our Chief Executive Officer, evaluated the effectiveness of our disclosure controls and procedures as of December

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act,

means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in

the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods

specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures

designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange

Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate

to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed

and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in

evaluating the cost-benefit relationship of possible controls and procedures.

Our Chief Executive Officer concluded that our disclosure

controls and procedures were not effective at the reasonable assurance level as of December 31, 2023.

Report on Internal Control over Financial Reporting

is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and

15d-15(f) under the Exchange Act.

Under the supervision and with the participation of our management, including our Chief Executive Officer,

we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the

framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on the results of this evaluation, management has concluded that our internal control over financial reporting was not effective

at the reasonable assurance level as of December 31, 2023.

the year ended December 31, 2023, management identified material weaknesses in internal control over financial reporting.

These material

weaknesses related to the accounting for complex financial instruments, inadequate design of the controls over the preparation of the

consolidated financial statements due to the lack of a timeline and process in place to timely close our annual books and records, and

insufficient technical accounting resources and lack of segregation of duties.

These deficiencies could result in misstatements to our

consolidated financial statements that could be material and may not be prevented or detected on a timely basis.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of

any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in

conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm because we are

an “emerging growth company,” and may take advantage of certain exemptions from various reporting requirements that are applicable

to public companies that are not “emerging growth companies” including, but not limited to, not being required to comply

with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.

of Material Weakness in Internal Control over Financial Reporting

of December 31, 2023 and through the date of this filing, we were in varying stages of remediating the current and previously reported

material weaknesses in our internal control over financial reporting.

During the fiscal year ended December 31, 2023, we have improved

our technical accounting resources by hiring outside consultants that have strong technical knowledge in financial reporting and accounting.

However, the finance team has remained weakened, with the departure of our CFO and VP of Finance.

Evaluation of Disclosure Controls and Procedures

Management, with the

participation of our Interim Chief Executive Officer, evaluated the effectiveness of our disclosure controls and procedures as of

December 31, 2024.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the

Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed

by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within

the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation,

controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or

submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal

financial officers, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls

and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and

management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Chief Interim Executive Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance

level as of December 31, 2024.

Management’s Report on Internal Control

over Financial Reporting

Management is responsible

for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under

the Exchange Act.

Under the supervision and with the participation of our management, including our Interim Executive Officer, we conducted

an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the framework in

Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

the results of this evaluation, management has concluded that our internal control over financial reporting was not effective at the reasonable

assurance level as of December 31, 2024.

During the year ended December 31, 2024, management identified material

weaknesses in internal control over financial reporting.

These material weaknesses related to the accounting for complex financial transactions,

inadequate design of the controls over the preparation of the consolidated financial statements, and insufficient technical accounting

resources and lack of segregation of duties.

These deficiencies could result in misstatements to our consolidated financial statements

that could be material and may not be prevented or detected on a timely basis.

Because of its inherent limitations,

internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness

to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of

compliance with the policies or procedures may deteriorate.

This Annual Report on Form

10-K does not include an attestation report of our independent registered public accounting firm because we are an “emerging growth

company,” and may take advantage of certain exemptions from various reporting requirements that are applicable to public companies

that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation

requirements of Section 404 of the Sarbanes-Oxley Act.

Remediation of Material Weakness in Internal

Control over Financial Reporting

As of December 31, 2024 and

through the date of this filing, we were in varying stages of remediating the current and previously reported material weaknesses in our

internal control over financial reporting.

During the fiscal year ended December 31, 2024, we have improved our technical accounting resources

by hiring outside consultants that have strong technical knowledge in financial reporting and accounting.

We are in the process of rebuilding

2 unchanged sentences

of our internal control environment to ensure that these material weaknesses are fully remediated.

material weaknesses identified will not be considered fully remediated until these additional controls and procedures have operated effectively

for a sufficient period of time and management has concluded, through testing, that these controls are effective.

Our management will

monitor the effectiveness of our remediation plans and will make changes management determines to be appropriate.

If not remediated,

these material weaknesses could result in material misstatements to our annual or interim consolidated financial statements that may

not be prevented or detected on a timely basis or result in a delayed filing of required periodic reports.

If we are unable to assert

that our internal control over financial reporting is effective, or when required in the future, if our independent registered public

accounting firm is unable to express an unqualified opinion as to the effectiveness of the internal control over financial reporting,

investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our Common Stock could be

adversely affected, and we could become subject to litigation or investigations by the Nasdaq Capital Market, the SEC, or other regulatory

authorities, which could require additional financial and management resources.

in Internal Control Over Financial Reporting

than the changes to remediate the material weaknesses noted above, there was no change in our internal control over financial reporting

(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal year ended December 31, 2022 that has materially

affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The material weaknesses identified

will not be considered fully remediated until the necessary controls and procedures have operated effectively for a sufficient period

of time and management has concluded, through testing, that internal controls are effective.

Our management will monitor the effectiveness

of our remediation plans and will make changes management determines to be appropriate.

If not remediated, these material weaknesses could

result in material misstatements to our annual or interim consolidated financial statements that may not be prevented or detected on a

timely basis or result in a delayed filing of required periodic reports.

If we are unable to assert that our internal control over financial

reporting is effective, or when required in the future, if our independent registered public accounting firm is unable to express an unqualified

opinion as to the effectiveness of the internal control over financial reporting, investors may lose confidence in the accuracy and completeness

of our financial reports, the market price of our Common Stock could be adversely affected, and we could become subject to litigation

or investigations by the Nasdaq Capital Market, the SEC, or other regulatory authorities, which could require additional financial and

management resources.

Changes in Internal Control Over Financial

Other than the changes to

remediate the material weaknesses noted above, there was no change in our internal control over financial reporting (as defined in Rules

13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal year ended December 31, 2024 that has materially affected, or is reasonably

likely to materially affect, our internal control over financial reporting.

Other Information.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Directors, Executive Officers and Corporate Governance.

information required by this Item 10 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our

2024 Annual Meeting of Stockholders and is incorporated herein by reference.

Disclosure Regarding Foreign Jurisdictions

that Prevent Inspections.

Not applicable.

Directors, Executive Officers, and

Corporate Governance

The information required by this Item

10 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2025 Annual Meeting of Stockholders

and is incorporated herein by reference.

Executive Compensation.

information required by this Item 11 will be included in our Definitive Proxy Statement to be filed

with the SEC with respect to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners, Management and Related Stockholder Matters.

information required by this Item 12 will be included in our Definitive Proxy Statement to be filed

with the SEC with respect to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.

Certain Relationships and Related Transactions, and Director Independence.

information required by this Item 13 will be included in our Definitive Proxy Statement to be filed

with the SEC with respect to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.

The information required

by this Item 11 will be included in our Definitive Proxy Statement to be filed with the SEC with

respect to our 2025 Annual Meeting of Stockholders and is incorporated herein by reference.

Security Ownership of Certain Beneficial

Owners, Management and Related Stockholder Matters.

The information required

by this Item 12 will be included in our Definitive Proxy Statement to be filed with the SEC with

respect to our 2025 Annual Meeting of Stockholders and is incorporated herein by reference.

Certain Relationships and Related Transactions, and Director

Independence.

The information required

by this Item 13 will be included in our Definitive Proxy Statement to be filed with the SEC with

respect to our 2025 Annual Meeting of Stockholders and is incorporated herein by reference.

Principal Accountant Fees and Services.

information required by this Item 14 will be included in our Definitive Proxy Statement to be filed

with the SEC with respect to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.

Exhibits, Financial Statements and Schedules.

(a) Financial

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.

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

Exhibit Index of this report appears below.

The information required

by this Item 14 will be included in our Definitive Proxy Statement to be filed with the SEC with

respect to our 2025 Annual Meeting of Stockholders and is incorporated herein by reference.

Exhibits, Financial Statements and

(a) Financial Statements:

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.

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:

of Merger and Equity Purchase Agreement, dated as of September 29, 2021, among the Registrant, Sinclair Scientific, LLC, Mass2Media,

LLC dba PX2 Holdings, LLC, and each of the equity holders of Sinclair Scientific, LLC named therein (incorporated by reference to

Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5,

Plan of Merger and Equity Purchase Agreement, dated as of September 29, 2021, among the Registrant, Sinclair Scientific, LLC, Mass2Media, LLC dba PX2 Holdings, LLC, and each of the equity holders of Sinclair Scientific, LLC named therein (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2021

Amendment to Plan of Merger and Equity Purchase Agreement, dated as of October 1, 2021, between the Registrant and Sinclair Scientific, LLC (incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 4, 2021

Interest Purchase Agreement, dated as of December 31, 2021, among the Registrant, PurePressure, LLC, Benjamin Britton as Member Representative,

and each of the equity holders of PurePressure, LLC named therein (incorporated by reference to Exhibit 2.1 to the Registrant’s

Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2022)

Agreement, dated as of February 1, 2022, among the Registrant, LS Holdings Corp., Lab Society NewCo, LLC, Michael S.

as Owner Representative, and each of the Owners named therein (incorporated by reference to Exhibit 2.1 to the Registrant’s

Current Report on Form 8-K filed with the Securities and Exchange Commission on February 2, 2022)

of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Amendment No.

Membership Interest Purchase Agreement, dated as of December 31, 2021, among the Registrant, PurePressure, LLC, Benjamin Britton as Member Representative, and each of the equity holders of PurePressure, LLC named therein (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2022)

Merger Agreement, dated as of February 1, 2022, among the Registrant, LS Holdings Corp., Lab Society NewCo, LLC, Michael S.

as Owner Representative, and each of the Owners named therein (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 2, 2022)

Asset Purchase Agreement, dated as of December 12, 2024, among the registrant, Double or North LLC, Joel Gott, and Charles Bieler (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 16, 2024)

Articles of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Amendment No.

1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on January 13, 2021)

of Amendment to the Articles of Incorporation of the Registrant, filed July 11, 2022 (incorporated by reference to Exhibit 3.1 to

the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 14, 2022).

of Amendment to the Articles of Incorporation of the Registrant, filed October 17, 2022 (incorporated by reference to Exhibit 3.1

to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 17, 2022).

of Amendment to the Articles of Incorporation of the Registrant, filed March 1, 2023 (incorporated by reference to Exhibit 3.1 to

the Registrant’s Current Report filed with the Securities and Exchange Commission on March 3, 2023).

of Change to Articles of Incorporation of Agrify Corporation, filed June 30, 2023 (incorporated by reference to Exhibit 3.1 to the

Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 3, 2023).

of Amendment to the Articles of Incorporation of the Registrant, filed January 22, 2024 (incorporated by reference to Exhibit 3.1

to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2024).

and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.3 to the Registrant’s Amendment No.

2 to Registration

Statement on Form S-1 filed with the Securities and Exchange Commission on January 26, 2021)

Amended and Restated Certificate of Designations of the Series A Convertible Preferred Stock of the Registrant (incorporated by reference

to Exhibit 3.2 to the Registrant’s Amendment No.

1 to Registration Statement on Form S-1 filed with the Securities and Exchange

Commission on January 13, 2021)

of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Amendment No.

2 to Registration Statement

on Form S-1 filed with the Securities and Exchange Commission on January 26, 2021)

of Representative’s Warrant dated February 19, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Registration

Statement on Form S-1 filed with the Securities and Exchange Commission on February 11, 2021)

of Representative’s Warrant dated January 27, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Amendment

Certificate of Amendment to the Articles of Incorporation of the Registrant, filed July 11, 2022 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 14, 2022).

Certificate of Amendment to the Articles of Incorporation of the Registrant, filed October 17, 2022 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 17, 2022).

Certificate of Amendment to the Articles of Incorporation of the Registrant, filed March 1, 2023 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report filed with the Securities and Exchange Commission on March 3, 2023).

Certificate of Change to Articles of Incorporation of Agrify Corporation, filed June 30, 2023 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 3, 2023).

Certificate of Amendment to the Articles of Incorporation of the Registrant, filed January 22, 2024 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2024).

Articles of Amendment to Articles of Incorporation of Agrify Corporation, filed October 3, 2024 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 4, 2024).

Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.3 to the Registrant’s Amendment No.

2 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on January 26, 2021)

of Warrant issued to Noteholders (incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on Form

S-1 filed with the Securities and Exchange Commission on December 22, 2020)

of Registrant’s Securities (incorporated by reference to Exhibit 4.5 to the Registrant’s Annual Report on Form 10-K filed

with the Securities and Exchange Commission on April 2, 2021)

of Common Stock Purchase Warrant dated January 28, 2022 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current

Report on Form 8-K filed with the Securities and Exchange Commission on January 26, 2022)

of Senior Secured Note (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with

the Securities and Exchange Commission on August 19, 2022).

of Warrant Exchange Warrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed

with the Securities and Exchange Commission on August 19, 2022).

of Note Exchange Warrant (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed with

the Securities and Exchange Commission on August 19, 2022).

of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the

Securities and Exchange Commission on December 16, 2022)

of Common Warrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the Securities

and Exchange Commission on December 16, 2022)

of Senior Secured Convertible Note (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K

filed with the Securities and Exchange Commission on March 9, 2023)

to Senior Secured Note (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with

the Securities and Exchange Commission on March 9, 2023)

Warrant, dated October 27, 2023 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed

with the Securities and Exchange Commission on October 30, 2023)

Warrant, dated October 27, 2023 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed

with the Securities and Exchange Commission on October 30, 2023)

Stock Purchase Warrant, dated October 27, 2023 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report

on Form 8-K filed with the Securities and Exchange Commission on October 30, 2023)

and Restated Junior Secured Promissory Note (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on

Form 8-K filed with the Securities and Exchange Commission on October 30, 2023)

Secured Promissory Note (incorporated by reference to Exhibit 4.5 to the Registrant’s Current Report on Form 8-K filed with

the Securities and Exchange Commission on October 30, 2023)

to Junior Secured Promissory Note, dated December 4, 2023, between Agrify Corporation and CP Acquisitions, LLC (incorporated by reference

to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December

Secured Amended, Restated and Consolidated Convertible Promissory Note dated January 25, 2024 (incorporated by reference to Exhibit

4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2024).

Amended and Restated Junior Secured Promissory Note dated January 25, 2024 (incorporated by reference to Exhibit 4.2 to the Registrant’s

Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2024).

of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the

Securities and Exchange Commission on February 28, 2024).

of Placement Agent Warrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with

the Securities and Exchange Commission on February 28, 2024).

Agreement of Agrify-Valiant, LLC dated December 8, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration

Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Agreement dated June 7, 2019 between the Registrant and Bluezone Products, Inc.± (incorporated by reference to Exhibit 10.2

to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Agreement dated March 9, 2020 between the Registrant and Enozo Technologies Inc.± (incorporated by reference to Exhibit 10.3

to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Agreement dated as of July 28, 2020 between the Registrant and 4D Bios Inc.± (incorporated by reference to Exhibit 10.4 to

the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Agreement dated as of January 4, 2021 between the Registrant and Raymond Chang (incorporated by reference to Exhibit 10.5 to the

Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 2, 2021)

Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form

S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Property Assignment and Transfer Agreement by and among the Registrant, Agrify Brands, LLC and The Holden Company effective as of

January 1, 2020 (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 filed with

the Securities and Exchange Commission on December 22, 2020)

Agreement by and among the Registrant and Mack Molding Co.

dated December 7, 2020 ± (incorporated by reference to Exhibit

10.15 to the Registrant’s Amendment No.

1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission

on January 13, 2021)

and Restated Operating Agreement of Agrify Brands, LLC effective as of August 12, 2020 (incorporated by reference to Exhibit 10.18

to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

of Indemnification Agreement with directors and executive officers (incorporated by reference to Exhibit 10.18 to the Registrant’s

Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 11, 2021)

Agreement, dated as of November 10, 2021, between the Registrant and Timothy Oakes † (incorporated by reference to Exhibit

10.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 15, 2021)

of Securities Purchase Agreement, dated as of January 25, 2022, between the Registrant and the Purchasers party thereto (incorporated

by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission

on January 26, 2022

of Securities Purchase Agreement, dated as of March 14, 2022, between the Registrant and High Trail Special Situations LLC (incorporated

by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission

on March 18, 2022)

Corporation 2022 Omnibus Equity Incentive Plan (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy

Statement on Schedule 14A filed with the Securities and Exchange Commission on April 29, 2022)

Corporation 2022 Employee Stock Purchase Plan (incorporated by reference to Appendix B to the Registrant’s Definitive Proxy

Statement on Schedule 14A filed with the Securities and Exchange Commission on April 29, 2022)

Agreement of Thomas Massie, dated as of July 8, 2022 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current

Report on Form 8-K filed with the Securities and Exchange Commission on July 14, 2022) .

Agreement, dated as of July 14, 2022, between the Registrant and Stuart Wilcox (incorporated by reference to Exhibit 10.1 to the

Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 14, 2022).

Agreement, dated as of August 18, 2022, between the Registrant and High Trail Special Situations LLC (incorporated by reference to

Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 19,

Distribution Agreement, dated as of October 18, 2022, between the Registrant and Canaccord Genuity LLC (incorporated by reference

to Exhibit 1.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October

Agreement, dated as of July 25, 2022, between the Registrant and Timothy Hayden (incorporated by reference to Exhibit 10.1 to the

Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 24, 2023)

Agreement, dated as of March 8, 2023, between the Registrant and High Trail Special Situations LLC (incorporated by reference to

Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2023)

and Investor Acknowledgment, dated as of October 27, 2023, between the Registrant and CP acquisitions LLC (incorporated by reference

to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October

Agreement, dated as of October 27, 2023, between the Registrant and High Trail Special Situations LLC (incorporated by reference

to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October

Agreement, effective as of October 18, 2023, between the Registrant and Mack Molding Company (incorporated by reference to Exhibit

10.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2023)

of Ethics of Agrify Corporation Applicable To Directors, Officers And Employees (incorporated by reference to Exhibit 14.1 to the

Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Second Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 9, 2024).

Third Amended and Restated Certificate of Designations of the Series A Convertible Preferred Stock of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Amendment No.

1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on January 13, 2021) .

Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Amendment No.

2 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on January 26, 2021)

Form of Representative’s Warrant dated February 19, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 11, 2021)

Form of Representative’s Warrant dated January 27, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Amendment No.

2 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on January 26, 2021)

Form of Warrant issued to Noteholders (incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Description of Registrant’s Securities (incorporated by reference to Exhibit 4.5 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 2, 2021)

Form of Common Stock Purchase Warrant dated January 28, 2022 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 26, 2022)

Form of Senior Secured Note (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 19, 2022).

Form of Warrant Exchange Warrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 19, 2022).

Form of Note Exchange Warrant (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 19, 2022).

Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 16, 2022)

Form of Common Warrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 16, 2022)

Form of Senior Secured Convertible Note (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2023)

Amendment to Senior Secured Note (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2023)

Exchange Warrant, dated October 27, 2023 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2023)

Abeyance Warrant, dated October 27, 2023 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2023)

Common Stock Purchase Warrant, dated October 27, 2023 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2023)

Amended and Restated Junior Secured Promissory Note (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2023)

Junior Secured Promissory Note (incorporated by reference to Exhibit 4.5 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2023)

Amendment to Junior Secured Promissory Note, dated December 4, 2023, between Agrify Corporation and CP Acquisitions, LLC (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 2023).

Senior Secured Amended, Restated and Consolidated Convertible Promissory Note dated January 25, 2024 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2024).

Second Amended and Restated Junior Secured Promissory Note dated January 25, 2024 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2024).

Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 28, 2024).

Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 28, 2024).

Amendment No.

1 to Senior Secured Amended, Restated and Consolidated Convertible Note between Agrify Corporation and CP Acquisitions, LLC (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 22, 2024).

Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 22, 2024).

Third Amended and Restated Junior Secured Convertible Promissory Note dated as of May 21, 2024 (incorporated by reference to Exhibit 4.3 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 22, 2024).

Amendment to Pre-Funded Comon Stock Purchase Warrant between Agrify Corporation and CP Acquisitions, LLC dated as of June 30, 2024 (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 3, 2024).

Amendment to Pre-Funded Comon Stock Purchase Warrant between Agrify Corporation and GIC Acquisitions, LLC dated as of June 30, 2024 (incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 3, 2024).

Junior Secured Convertible Promissory Note dated as of August 14, 2024 (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 14, 2024).

Amendment No.

1 to Junior Secured Convertible Promissory Note, dated as of October 18, 2024 (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 22, 2024).

Secured Amended, Restated and Consolidated Convertible Note (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2024).

Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 21, 2024).

Pre-Funded Warrant dated December 12, 2024 (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 16, 2024).

Operating Agreement of Agrify-Valiant, LLC dated December 8, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Distribution Agreement dated June 7, 2019 between the Registrant and Bluezone Products, Inc.± (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Distribution Agreement dated March 9, 2020 between the Registrant and Enozo Technologies Inc.± (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Purchase Agreement dated as of July 28, 2020 between the Registrant and 4D Bios Inc.± (incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Employment Agreement dated as of January 4, 2021 between the Registrant and Raymond Chang (incorporated by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 2, 2021)

2020 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Intellectual Property Assignment and Transfer Agreement by and among the Registrant, Agrify Brands, LLC and The Holden Company effective as of January 1, 2020 (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Supply Agreement by and among the Registrant and Mack Molding Co.

dated December 7, 2020 ± (incorporated by reference to Exhibit 10.15 to the Registrant’s Amendment No.

1 to Registration Statement on Form S-1 filed with the Securities and Exchange Commission on January 13, 2021)

Amended and Restated Operating Agreement of Agrify Brands, LLC effective as of August 12, 2020 (incorporated by reference to Exhibit 10.18 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Form of Indemnification Agreement with directors and executive officers (incorporated by reference to Exhibit 10.18 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on February 11, 2021)

Employment Agreement, dated as of November 10, 2021, between the Registrant and Timothy Oakes † (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 15, 2021)

Form of Securities Purchase Agreement, dated as of January 25, 2022, between the Registrant and the Purchasers party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 26, 2022

Form of Securities Purchase Agreement, dated as of March 14, 2022, between the Registrant and High Trail Special Situations LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 18, 2022)

Agrify Corporation 2022 Omnibus Equity Incentive Plan (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 29, 2022)

Agrify Corporation 2022 Employee Stock Purchase Plan (incorporated by reference to Appendix B to the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 29, 2022)

Separation Agreement of Thomas Massie, dated as of July 8, 2022 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 14, 2022).

Employment Agreement, dated as of July 14, 2022, between the Registrant and Stuart Wilcox (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 14, 2022).

Exchange Agreement, dated as of August 18, 2022, between the Registrant and High Trail Special Situations LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 19, 2022).

Equity Distribution Agreement, dated as of October 18, 2022, between the Registrant and Canaccord Genuity LLC (incorporated by reference to Exhibit 1.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 18, 2022).

Employment Agreement, dated as of July 25, 2022, between the Registrant and Timothy Hayden (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 24, 2023)

Exchange Agreement, dated as of March 8, 2023, between the Registrant and High Trail Special Situations LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2023)

Company and Investor Acknowledgment, dated as of October 27, 2023, between the Registrant and CP acquisitions LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2023)

Letter Agreement, dated as of October 27, 2023, between the Registrant and High Trail Special Situations LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2023)

Modification Agreement, effective as of October 18, 2023, between the Registrant and Mack Molding Company (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2023)

Purchase Agreement, dated as of August 28, 2024, by and between Agrify Corporation and Ionic Ventures, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 29, 2024)

Registration Rights Agreement, dated as of August 28, 2024, by and between Agrify Corporation and Ionic Ventures, LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 29, 2024)

Amendment to Pre-Funded Common Stock Purchase Warrant, dated as of August 28, 2024, by and between Agrify Corporation and CP Acquisitions, LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 29, 2024)

Amendment to Pre-Funded Common Stock Purchase Warrant, dated as of August 28, 2024, by and between Agrify Corporation and GIC Acquisition LLC (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 29, 2024)

First Amendment to Modification and Settlement Agreement, dated as of August 30, 2024, by and between Agrify Corporation and Mack Molding Company.

(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2024)

Amendment to Pre-Funded Common Stock Purchase Warrant, dated as of September 27, 2024, by and between Agrify Corporation and CP Acquisitions, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 1, 2024)

Amendment to Pre-Funded Common Stock Purchase Warrant, dated as of September 27, 2024, by and between Agrify Corporation and GIC Acquisition LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 1, 2024)

Severance Agreement, dated November 5, 2024, between Agrify Corporation and Raymond Chang (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2024)

Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 21, 2024)

Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 21, 2024)

Code of Ethics of Agrify Corporation Applicable To Directors, Officers And Employees (incorporated by reference to Exhibit 14.1 to the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on December 22, 2020)

Letter from MATSUURA regarding change in certifying accountant (incorporated by reference to Exhibit 16.1 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 22, 2024).

Insider Trading Policy

Subsidiaries of the Registrant

3 unchanged sentences

Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Agrify Corporation Clawback policy

XBRL Instance Document

XBRL Taxonomy Extension Schema Document.

XBRL Taxonomy Extension Calculation Linkbase Document.

XBRL Taxonomy Extension Definition Linkbase Document.

XBRL Taxonomy Extension Label Linkbase Document.

XBRL Taxonomy Extension Presentation Linkbase Document.

Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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.

Agrify Corporation Clawback policy (incorporated by reference to Exhibit 97.1 to the Registration’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 4, 2024, as amended on April 29, 2024)

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document.

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Inline XBRL Taxonomy Extension Label Linkbase Document.

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

± 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.

1 unchanged sentence

Form 10-K Summary.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed

on its behalf by the undersigned, thereunto duly authorized.

April 15, 2024

Raymond Chang

Chief Executive Officer

(Principal Executive Officer

and Principal

Financial and Accounting Officer)

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.

Raymond Chang

Chief Executive Officer

April 15, 2024

Raymond Chang

(Principal Executive Officer

and Principal Financial and Accounting Officer)

Krishnan Varier

April 15, 2024

Pursuant to the requirements

of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by

the undersigned, thereunto duly authorized.

AGRIFY CORPORATION

March 21, 2025

/s/ Benjamin Kovler

Benjamin Kovler

Chairman and Interim Chief Executive Officer

(Principal Executive Officer and

Principal Financial and Accounting 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.

/s/ Benjamin Kovler

Chairman and Interim Chief Executive Officer and Director

March 21, 2025

Benjamin Kovler

(Principal Executive Officer and Principal Financial and Accounting Officer)

/s/ Krishnan Varier

March 21, 2025

Krishnan Varier

Timothy Mahoney

April 15, 2024

/s/ Timothy Mahoney

March 21, 2025

Timothy Mahoney

April 15, 2024

Leonard Sokolow

April 15, 2024

Leonard Sokolow

I-Tseng Jenny Chan

April 15, 2024

I-Tseng Jenny Chan

April 15, 2024

/s/ Max Holtzman

March 21, 2025

/s/ Armon Vakili

March 21, 2025

/s/ Peter Shapiro

March 21, 2025

Peter Shapiro

/s/ Sanjay Tolia

March 21, 2025

to Consolidated Financial Statements

4 unchanged sentences

Consolidated Statements of Operations F-5

Consolidated Statements of Stockholders’ Deficit F-5

Consolidated Statements of Cash Flows F-6

Consolidated Statements of Stockholders’ Equity (Deficit) F-6

Statements of Cash Flows F-8

Notes to Consolidated Financial Statements F-9 - F-46

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Shareholders and Board of Directors of

Agrify Corporation and Subsidiaries

the Shareholders and Board of Directors of Agrify Corporation and Subsidiaries

on the Financial Statements

have audited the accompanying consolidated balance sheets of Agrify Corporation and Subsidiaries (the “Company”) as of December

31, 2023 and 2022, the related consolidated statements of operations, stockholders’ deficit and cash flows for each of

the two years in the period ended December 31, 2023, and the related notes (collectively referred to as 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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023,

in conformity with accounting principles generally accepted in the United States of America.

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.

The consolidated financial statements of the Company as of December

31, 2023, before the retrospective adjustments described in Notes 1 and 6, were audited by other auditors whose report, dated April 15,

2024, expressed an unqualified opinion on those statements.

We have audited those retrospective adjustments to the 2023 consolidated financial

statements, as reported in the financial statements as of and for the year ended December 31, 2024, related to discontinued operations

as described in Notes 1 and 6.

In our opinion, such adjustments are appropriate and have been properly applied.

We were not engaged to

audit, review, or apply any procedures related to the Company’s 2023 consolidated financial statements other than with respect to

the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2023 consolidated financial statements

These financial statements are the responsibility of the Company’s

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.

procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

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/ GuzmanGray

have served as the Company’s auditor since 2024.

Mesa, California

March 21, 2025

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Shareholders and Board of Directors of Agrify Corporation and Subsidiaries

on the Financial Statements

We have audited, before the effects of the discontinued

operations discussed in Note 1 and Note 6, 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”).

opinion, before the effects of the discontinued operations discussed in Note 1 and Note 6, 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 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

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

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 consolidated

financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 audits.

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.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits

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.

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.

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.

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.

audits 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 audits 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 audits

provide a reasonable basis for our opinion.

We have served

as the Company’s auditor since 2019.

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

We served as the Company’s auditor from 2019 through 2024.

April 15, 2024

Financial Statements

1 unchanged sentence

thousands, except share and per share data)

As of December 31,

of December 31,

Current assets:

Cash and cash equivalents

Restricted cash

Marketable securities

and cash equivalents

Accounts receivable, net of allowance for credit losses of $ 1,702 and $ 1,766 at December 31, 2024 and 2023, respectively

Inventory, net of reserves of $ 17,599 and $ 32,422 at December 31, 2023 and 2022, respectively

Prepaid expenses and other current assets

Total current assets

Loan receivable, net of allowance for credit losses of $ 19,215 and $ 33,050 at December 31, 2023 and 2022, respectively

Property and equipment, net

Operating lease right-of-use assets

Other non-current assets

Liabilities and Stockholders’ Deficit

expenses and other current assets

assets of discontinued operations

current assets

and equipment, net

lease right-of-use assets

non-current assets

assets of discontinued operations

and Stockholders’ Equity (Deficit)

expenses and other current liabilities

lease liabilities, current

debt, current

party debt, current

liabilities of discontinued operations

current liabilities

Accounts payable

Accrued expenses and other current liabilities

Operating lease liabilities, current

Long-term debt, current

Related party debt, current

Deferred revenue

Total current liabilities

Warrant liabilities

Other non-current liabilities

Operating lease liabilities, net of current

Long-term debt, net of current

Total liabilities

Commitments and contingencies (Note 16)

Stockholders’ deficit:

lease liabilities, net of current

debt, net of current

liabilities of discontinued operations

and contingencies (Note 18)

Stockholders’

equity (deficit):

Common Stock, $ 0.001 par value per share, 35,000,000 and 10,000,000 shares authorized at December 31, 2024 and 2023, respectively, 1,952,032 and 113,416 shares issued and outstanding at December 31, 2024 and 2023, respectively (1)

1 unchanged sentence

Preferred A Stock, $ 0.001 par value per share, 105,000 shares authorized, no shares issued or outstanding

Additional paid-in capital

Accumulated deficit

Total stockholders’ deficit attributable to Agrify

Non-controlling interests

Total liabilities and stockholders’ deficit

(1) Periods presented have been adjusted to reflect the 1-for-20 reverse stock split on July 5, 2023.

paid-in capital

stockholders’ equity (deficit) attributable to Agrify Corporation

Non-controlling

stockholders’ equity (deficit)

liabilities and stockholders’ equity (deficit)

(1) Periods presented have been adjusted to retroactively reflect the 1-for-20 reverse stock split on July 5, 2023, and for the 1-for-15 reverse stock split on October 8, 2024.

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

3 unchanged sentences

Ended December 31,

Revenue (including $ 0 , and $ 2,417 from related parties, respectively)

Cost of goods sold

profit (loss)

of goods sold

general and administrative

Selling and marketing

Research and development

Change in contingent consideration

Gain on disposal on property and equipment

Impairment of property and equipment

Impairment of goodwill

and intangible assets

and development

in contingent consideration

on early termination of lease

on disposal on property and equipment

operating expenses

from operations

Interest expense, net

Change in fair value of warrant liabilities

Loss on extinguishment of long-term debt, net

Other income, net

other income, net

Net loss before income

Income tax expense

Income attributable to non-controlling

loss attributable to Agrify Corporation

$ ( 188,173 )

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

Weighted average common shares outstanding - basic and diluted (1)

(1) Periods presented have been adjusted to reflect the 1-for-20 reverse stock split on July 5, 2023.

loss from continuing operations

in fair value of warrant liabilities

on extinguishment of long-term debt, net

other expense, net

from continuing operations before income taxes

tax (expense) benefit

continuing operations, net of income taxes

from discontinued operations

on disposal of Cultivation business

tax effect on discontinued operations

discontinued operations, net of income taxes

attributable to non-controlling interest

attributable to Agrify Corporation

Net loss per share:

loss per share attributable to Common Stockholders – basic and diluted (1)

average common shares outstanding - basic and diluted (1)

(1) Periods presented have been adjusted to retroactively reflect the 1-for-20 reverse stock split on July 5, 2023, and for the 1-for-15 reverse stock split on October 8, 2024.

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

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

STATEMENTS OF STOCKHOLDERS’ DEFICIT

Stockholders’

Equity (Deficit) attributable to

Stockholders’

at January 1, 2022

of Common Stock, warrants, and prefunded warrants in private placement

Confidentially

marketed public offering

of Common Stock through an “at the market” offering, net of fees

Stock issued for contingent liabilities

of Lab Society

of restricted stock units

at December 31, 2022

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

thousands, except share and per share data)

Stockholders’

attributable to

Equity (Deficit)

Stockholders’

at January 1, 2023

$ ( 247,148 )

of Common Stock through an “at the market” offering, net of fees

10 unchanged sentences

December 31, 2023

$ ( 265,797 )

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

Stockholders’

(Deficit) attributable

Stockholders’

at January 1, 2024

$ ( 265,797 )

of Common Stock and Pre-Funded Warrants through public offering

of held-back shares from Sinclair acquisition

exercise of High Trail Warrants

of vested RSUs, net of shares held back to offset tax

of Pre-Funded Warrants

of common shares (IONIC Stock Subscription Payable)

of liability classified warrants, net of forfeitures

of Placement Agent Warrants

of Common Stock in connection with private placement, net

of vested RSUs

split share adjustment

Contribution from troubled debt restructuring with related party

of equity classified Pre-Funded Warrants

of related party debt and Pre-Funded Warrants conversion

of related party debt into Pre-Funded Warrants

of Convertible Note

December 31, 2024

$ ( 307,543 )

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

STATEMENTS OF CASH FLOWS

Ended December 31,

Year Ended December 31,

Cash flows from operating activities:

Net loss attributable to Agrify

$ ( 188,173 )

Adjustments to reconcile net loss attributable

to Agrify Corporation to net cash used in 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) discount

Interest on investment

Amortization of issuance

Deferred income taxes

Stock based compensation

Change in fair value

of warrant liabilities

Loss on extinguishment

of long-term debt, net

Impairment of goodwill

and intangible assets

(Recovery of) provision

for credit losses

(Recovery of) provision

for slow-moving inventory

(Gain) loss on disposal

of property and equipment

Impairment of property

and equipment

Change in fair value

of contingent consideration

Income attributable

to non-controlling interests

Changes in operating assets and liabilities,

net of acquisitions:

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

Prepaid expenses and

other current assets

Right of use assets,

Prepaid expenses and other current assets

Operating lease right-of-use assets

Other non-current assets

Accounts payable

Accrued expenses and

other current liabilities

Accrued expenses and other current liabilities

Operating lease liabilities

Other non-current liabilities

Deferred revenue

cash and cash equivalents used in operating activities

Cash flows from investing

Purchases of property

and equipment

Proceeds from disposal

of property and equipment

Purchase of marketable

Proceeds from sale of

marketable securities

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

Payments on contingent

Cash received from escrow

account related to Sinclair acquisition

Cash paid for business

combination, net of cash acquired

cash and cash equivalents provided by (used in) investing activities

Cash flows from financing

Proceeds from issuance

of debt and warrants in private placement, net of fees

Proceeds from issuance

of Common Stock and warrants in private placement, net of fees

Proceeds from issuance

of Common Stock through an “at the market” offering, net of fees

Proceeds from Employee

Stock Purchase Plan Shares

Proceeds from exercise of options

Proceeds from confidentially

marketed public offering

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

Payments on insurance

financing loans

Payments of financing

cash and cash equivalents (used in) provided by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents

at the beginning of period

Cash and cash equivalents

at the end of period

Cash, cash equivalents,

and restricted cash at end of period

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents,

and restricted cash at the end of period

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 disclosures

of non-cash flow information

Initial fair value of warrants

Financing of prepaid

Transfer of property

and equipment to inventory

Conversion of convertible

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

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

TO CONSOLIDATED FINANCIAL STATEMENTS

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 — Overview, Basis of Presentation and Significant Accounting Policies

Corporation (“Agrify” or the “Company”) is a leading provider of innovative cultivation and extraction solutions

for the cannabis industry, bringing data, science, and technology to the forefront of the market.

The Company’s proprietary micro-environment-controlled

Agrify Vertical Farming Units (or “VFUs”) enable cultivators to produce the highest quality products with what we believe

to be unmatched consistency, yield, and return investment at scale.

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.

Company believes it is the only company with an automated and fully integrated grow solution in the industry.

The Company’s cultivation

and extraction solutions seamlessly combine its 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 its product offerings and service capabilities forms an unrivaled ecosystem in what has historically

been a highly fragmented market.

As a result, the Company believes it is well-positioned to capture market share and create a dominant

market position in the indoor cannabis sector.

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

states and Canada, with plans for expansion and future availability in premier on-premises destinations.

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.

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.

Company has nine wholly-owned subsidiaries, which are collectively referred to as the “Subsidiaries” and the Company also

has ownership interests in certain companies.

October 18, 2022, the Company effected a 1-for-10 reverse stock split of its 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.

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).

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.

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 Insights TM software solutions (collectively

the “Cultivation Business”).

The sale of the Cultivation Business occurred following signing on December 31, 2024.

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

July 5, 2023, the Company effected a 1-for-20 reverse stock split of its Common Stock.

1 unchanged sentence

adjusted to give effect to the reverse stock split for all periods presented unless otherwise indicated.

October 8, 2024, the Company effected a 1-for-15 reverse stock split of its Common Stock.

All share and per share information has been

retroactively adjusted to give effect to the reverse stock splits for all periods presented unless otherwise indicated.

fractional shares of Common Stock were issued as a result of these reverse stock splits.

9 unchanged sentences

adjusted to reflect the impact of these reverse stock splits.

Confidentially

Marketed Public Offering

December 16, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Canaccord Genuity

LLC as the underwriter, pursuant to which the Company agreed to issue and sell an aggregate of 594,232 shares of its Common Stock, and,

in lieu of Common Stock to certain investors that so chose, pre-funded warrants (the “Pre-Funded 2022 Warrants”) to purchase

75,000 shares of our Common Stock, and accompanying warrants (the “December 2022 Warrants”) to purchase 1,338,462 shares

of the Company’s Common Stock (the “Offering”).

The shares of Common Stock (or Pre-Funded 2022 Warrants) and the accompanying

December 2022 Warrants will be issued separately but can only be purchased together in this Offering.

Additional information regarding

the Company’s December 2022 Warrants may be found in Note 4 – Fair Value Measures and Note 11 – Stockholders’

Equity, included elsewhere in the notes to the consolidated financial statements.

aggregate gross proceeds to the Company from the Offering were approximately $ 8.7 million including offering costs of approximately $ 0.5

million for broker fees and legal expenses, for net proceeds of $ 8.2 million.

The Company has used the net proceeds from the Offering,

together with its existing cash resources, for working capital and general corporate purposes, which may include capital expenditures

and repayment of debt.

TO CONSOLIDATED FINANCIAL STATEMENTS

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deficiency Notice

October 4, 2022, 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 last 30 consecutive business days, the bid price

for the Company’s Common Stock had closed below $ 1.00 per share, which is the minimum closing price required to maintain a continued

listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”).

In accordance

with Nasdaq Listing Rule 5810(c)(3)(A), the Company had 180 calendar days to regain compliance with the Minimum Bid Requirement.

compliance with the Minimum Bid Requirement, the closing bid price of the Company’s Common Stock must be at least $ 1.00 per share

for a minimum of 10 consecutive trading days during this 180-day compliance period, unless the Staff exercised its discretion to extend

the minimum trading day period pursuant to Nasdaq Listing Rule 5810(c)(3)(G).

On October 28, 2022, the Staff notified the Company that

the closing bid price for its Common Stock was more than $ 1.00 for 10 consecutive trading days, and that the Company therefore regained

compliance with the Minimum Bid Requirement.

January 19, 2023, the Company received a new deficiency letter from the Staff of Nasdaq notifying the Company that, for the previous

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

30 consecutive business days, the bid price for its Common Stock had closed below $ 1.00 per share, which is the minimum closing price

1 unchanged sentence

In accordance with Nasdaq Listing

Rule 5810(c)(3)(A), the Company had 180 calendar days to regain compliance with the Minimum Bid Requirement.

To regain compliance with

the Minimum Bid Requirement, the closing bid price of the Company’s Common Stock must be at least $ 1.00 per share for a minimum

of 10 consecutive trading days during this 180-day compliance period, unless the Staff exercises its discretion to extend the minimum

trading day period pursuant to Nasdaq Listing Rule 5810(c)(3)(G).

On July 19, 2023, the Company received a notice from Nasdaq confirming

its compliance with the minimum bid price rule.

disclosed in the Current Report on Form 8-K filed on April 17, 2023, the Company’s audit committee 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.

Rule 5810(c)(3)(A) , the Company had 180 calendar days to regain compliance with the Minimum

Bid Requirement.

To regain compliance with the Minimum Bid Requirement, the closing bid price of the Company’s Common Stock must

be at least $ 1.00 per share for a minimum of 10 consecutive trading days during this 180-day compliance period, unless the Staff exercises

its discretion to extend the minimum trading day period pursuant to Nasdaq Listing Rule 5810(c)(3)(G).

On July 19, 2023, the Company

received a notice from Nasdaq confirming its compliance with the minimum bid price rule.

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.

April 18, 2023, the Company received a notice from Nasdaq (the “April Nasdaq Notice”) that it was noncompliant with Nasdaq

1 unchanged sentence

by the required due date.

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.

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.

August 16, 2023, the Company received a third notice from Nasdaq that it remain noncompliant with Nasdaq Listing Rule 5250(c)(1) as a

6 unchanged sentences

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 (collectively,

the “Delinquent Reports”) in a timely manner.

TO CONSOLIDATED FINANCIAL STATEMENTS

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.

November 16, 2023, the Company received a notice from Nasdaq that the Company remains noncompliant with the Listing Rule as a result

2 unchanged sentences

Nasdaq Notice, the “Nasdaq Notices”).

December 1, 2023, the Company received a notice from The Nasdaq Stock Market LLC (“Nasdaq”) stating that because the Company

reported stockholders’ equity of $( 17.17 ) million in its Form 10-Q for the quarter ended March 30, 2023, the Company was no longer

in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Primary Equity Listing Rule”), which requires that listed companies

maintain a minimum of $ 2.5 million in stockholders’ equity.

In response, the Company timely requested a hearing before a Nasdaq

Hearings Panel (the “Panel”), which stayed any further action by the Listing Qualifications Staff.

The hearing was held on

January 11, 2024.

The Company arrived at the hearing having previously cured any additional grounds for delisting as a result of delinquent

periodic filings during 2023 that were filed prior to the hearing.

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.

could also impair the Company’s ability to raise capital.

Paycheck Protection Program

May 2020, the Company received an unsecured Paycheck Protection Program Loan (“PPP Loan”) from 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

$ 0.8 million from the PPP Loan.

On February 18, 2022, the Company applied for forgiveness of the outstanding balance of the PPP Loan

and the application was denied by the SBA on March 18, 2022.

However, on June 23, 2022, the Company received a letter from Bank of America

agreeing to extend the maturity date to May 7, 2025 and the loan will bear 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 thousand that commenced on August 7, 2022.

December 1, 2023, the Company received a notice from Nasdaq stating that because the Company reported stockholders’ equity of $( 17.17 )

million in its Form 10-Q for the quarter ended March 30, 2023, the Company was no longer in compliance with Nasdaq Listing Rule 5550(b)(1)

(the “Primary Equity Listing Rule”), which requires that listed companies maintain a minimum of $ 2.5 million in stockholders’

In response, the Company timely requested a hearing before a Nasdaq Hearings Panel (the “Panel”), which stayed any

further action by the Listing Qualifications Staff.

The hearing was held on January 11, 2024.

The Company arrived at the hearing having

previously cured any additional grounds for delisting as a result of delinquent periodic filings during 2023 that were filed prior to

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.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $ 1.00 per share, which is the minimum closing price required

to maintain continued listing on the Nasdaq Stock Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”).

The Notice had no immediate effect on the listing of the Company’s Common Stock on Nasdaq.

In accordance with Nasdaq Listing Rule

5810(c)(3)(A), the Company has 180 calendar days to regain compliance with the Minimum Bid Requirement.

The compliance period for the

Company expired on September 3, 2024.

On September 4, 2024, the Staff notified the company in writing that it was eligible for an additional

180-day compliance period, or until March 3, 2025, to regain compliance with the Minimum Bid Requirement.

On October 8, 2024, the Company

completed a 1-for-15 reverse stock split of our Common Stock, in which each fifteen shares of Common Stock issued and outstanding was

combined and converted into one share of Common Stock to regain compliance with the Minimum Bid Requirement.

On October 22, 2024, the

Staff notified the Company that it had regained compliance with the Minimum Bid Requirement.

of Presentation and Principles of Consolidation

2 unchanged sentences

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 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.

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.

for Less Than Wholly-Owned Subsidiaries

the Company’s less than wholly-owned subsidiaries, which include, Agrify-Valiant LLC (“Agrify-Valiant”), and Agrify

Brands, LLC (“Agrify Brands”), the Company first analyzes whether these entities are a variable interest entity (a “VIE”)

in accordance with ASC Topic 810, Consolidation (“ASC 810”), and if so, whether the Company is the primary beneficiary requiring

consolidation.

A VIE is an entity that has (i) insufficient equity to permit it to finance its activities without additional subordinated

financial support or (ii) equity holders that lack the characteristics of a controlling financial interest.

The financial results of

a VIE are consolidated by the primary beneficiary, which is the entity that has both the power to direct the activities that most significantly

impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that

potentially could be significant to the entity.

Variable interests in a VIE are contractual, ownership or other financial interests in

a VIE that change with changes in the fair value of the VIE’s net assets.

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 the joint-venture qualifies

as a VIE and the Company is the primary beneficiary, the Company’s financial interest in the VIE is consolidated.

TO CONSOLIDATED FINANCIAL STATEMENTS

on the Company’s analysis of these entities, the Company has determined that Agrify-Valiant and Agrify Brands are each a VIE, and

that the Company is the primary beneficiary.

While the Company owns 60 % of Agrify-Valiant’s equity interests and 75 % of Agrify

Brand’s equity interests, the remaining equity interests in Agrify-Valiant and Agrify Brands are owned by unrelated third parties,

and the agreement with these third parties provides the Company with greater voting rights.

Accordingly, the Company consolidates its

interest in the financial statements of Agrify-Valiant and Agrify Brands under the VIE rules and reflects the third parties’ interests

in the consolidated financial statements as a non-controlling interest.

The Company records this non-controlling interest at its initial

fair value, adjusting the basis prospectively for the third parties’ share of the respective consolidated investments’ net

income or loss or equity contributions and distributions.

These non-controlling interests are not redeemable by the equity holders and

are presented as part of permanent equity.

Income and losses are allocated to the non-controlling interest holders based on its economic

ownership percentage.

accordance with the FASB Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements - Going

Concern”, the Company’s management evaluated whether there are conditions or events that raise substantial doubt about its

ability to continue as a going concern within one year after the financial statements’ issuance date.

The following matters raise

substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements

The Company has incurred operating losses since its inception and has

negative cash flows from operations and a working capital deficit.

The Company also has an accumulated deficit of $ 265.8 million as of

December 31, 2023.

The Company’s primary sources of liquidity are its cash and cash equivalents and marketable securities, with

additional liquidity accessible, subject to market conditions and other factors, including limitations that may apply to the Company under

applicable SEC regulations, from the capital market.

As of December 31, 2023, the Company had $ 0.4 million of cash, cash equivalents,

and marketable securities.

The Company had no restricted cash as of December 31, 2023.

Current liabilities were $ 41.2 million as of December

consolidated financial statements have been prepared on a going concern basis, which implies the Company believes these conditions raise

substantial doubt about its ability to continue as a going concern within the next twelve-months from the date these consolidated financial

statements are available to be issued.

The Company’s continuation as a going concern is dependent upon its ability to obtain the

necessary debt or equity financing to continue operations until the Company begins generating sufficient cash flows from operations to

meet its obligations.

If the Company is unable raise additional funds, it may be forced to cease operations.

October 27, 2023, the company executed a financial transaction, issuing a junior secured promissory note to CP Acquisitions, LLC (“CP”)

with a maximum principal amount of $ 3.0 million, which was later amended on December 4, 2023 to increase the maximum principal amount

to $ 4.0 million.

Additionally, an unsecured promissory note of $ 0.5 million was issued to GIC Acquisition LLC (“GIC”).

information regarding these transactions is included in Note 9 – Debt, included elsewhere in the notes to the consolidated financial

of February 28, 2024, the company raised net proceeds of $ 2.2 million via an S-1 offering through Alexander Capital.

The company intends

to raise additional capital later this year to support its 2024 and 2025 funding needs.

The company also continues to make additional

adjustments in headcount, salary, travel, sales and marketing spending, but there is no guarantee that these ongoing cost-cutting efforts

or capital raises will be sufficient to maintain operations.

is no assurance that the Company will ever be profitable.

The consolidated financial statements do not include any adjustments to reflect

the potential future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that

may result should the Company be unable to continue as a going concern.

TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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

While the Company owns 75 % of Agrify Brand’s equity interests, the remaining equity interests in Agrify Brands are

owned by unrelated third parties, and the agreement with these third parties provides the Company with greater voting power as the majority

Accordingly, the Company consolidates its interest in the financial statements of Agrify Brands under the VIE rules and reflects

the third parties’ interests in the condensed consolidated financial statements as a non-controlling interest.

The Company records

this non-controlling interest at its initial fair value, adjusting the basis prospectively for the third parties’ share of the

respective consolidated investments’ net income or loss or equity contributions and distributions.

These non-controlling interests

are not redeemable by the equity holders and are presented as part of permanent equity.

Income and losses are allocated to the non-controlling

interest holders based on its economic ownership percentage.

preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and

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of the consolidated financial statements, and the reported amounts of expenses during the reporting period.

Significant estimates include

assumptions about collection of accounts and notes receivable, the valuation and recognition of stock-based compensation expense, valuation

allowance for deferred tax assets, the valuation of inventory, and useful life of fixed assets and intangible assets.

The Company bases

its estimates on historical experience, known trends and other market-specific information, other relevant factors that it believes to

be reasonable under the circumstances, and management’s judgement.

On an ongoing basis, management evaluates its estimates when

there are changes in circumstances, facts, and experience.

Changes in estimates are recorded in the period in which they become known.

Actual financial results could differ from those estimates.

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.

Company regularly evaluates its assets, including asset groups or reporting units, for impairment in accordance with GAAP.

is aware of the impact that prolonged net losses can have on the fair value of underlying assets and the overall 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

Company effected a 1-for-10 reverse stock split of its Common Stock on October 18, 2022 and a 1-for-20 reverse stock split of its Common

Stock on July 5, 2023.

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 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.

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 $ 0.001 per share.

the Stockholders’ deficit section of the consolidated balance sheets reflects the reverse stock split by reclassifying from “Common

Stock” to “Additional paid-in capital” an amount equal to the par value of the decreased shares resulting from the

reverse stock split.

Accordingly, the Stockholders’ equity

(deficit) section of the consolidated balance sheets reflects the reverse stock split by reclassifying from “Common Stock”

to “Additional paid-in capital” an amount equal to the par value of the decreased shares resulting from the reverse stock

amounts in the consolidated financial statements related to the prior years have been reclassified to conform to the current year’s

presentation.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

and Cash Equivalents

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All cash equivalents are carried at cost, which approximates fair value.

Restricted cash represents cash required to be held

as collateral for the Company’s Notes.

Accordingly, these balances contain restrictions as to their availability and usage and

are classified as restricted cash in the consolidated balance sheets.

Additional information relating to the Company’s Notes may

be found in Note 9 - Debt, included elsewhere in the notes to the consolidated financial statements.

Company’s marketable security investments primarily include investments held in mutual funds, municipal bonds, and corporate bonds.

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receivable on long-term bonds.

Accounts Receivable, Net and Loan Receivable,

Accounts receivable, net, primarily consists of amounts for goods and

services that are billed and currently due from customers.

The composition of loan receivable, net is detailed in Note 5.

Accounts receivable

and loan receivable balances are presented net of an allowance for credit losses, which is 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 and loans 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.

Receivable, Net

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

instruments that potentially subject the Company to a concentration of credit risk primarily consist of cash, cash equivalents, restricted

cash, 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.

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, including

restricted cash, 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.

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.

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.

TO CONSOLIDATED FINANCIAL STATEMENTS

the year ended December 31, 2023 and 2022, the Company’s customers that accounted for 10 % or more of the total revenue were as

of Total Revenue

Company Customer

Company Customer Number

* Customer revenue, as a percentage of total revenue, was less than 10 %

Receivable, Net

the years ended December 31, 2024 and 2023 , the Company did not have any customers that accounted

for 10% or more of total revenue.

of December 31, 2024 and 2023, the Company’s customers that accounted for 10% or more of the total accounts receivable, net, were

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of Total Accounts Receivable

Company Customer Number –

Company Customer

Number – 15095

Company Customer Number –

* Customer accounts receivable, as a percentage of total accounts receivable, was less than 10 %

accounts receivable, as a percentage of total accounts receivable, was less than 10%

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company values all its inventories, which consist primarily of significant raw material hardware components, at the lower of cost or

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of potentially slow-moving or damaged inventory are recorded through specific identification of obsolete or damaged material.

takes physical inventory at least once annually at all inventory locations.

TO CONSOLIDATED FINANCIAL STATEMENTS

and Equipment

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using the straight-line method over the estimated useful life of each asset, as follows:

Computer and office equipment

Estimated Useful Life

Computer and office equipment 2 to 3

Furniture and fixtures 2

Research and development of laboratory equipment 5

Machinery and equipment

Leased equipment

Trade show assets

Leasehold improvements

Lower of estimated useful life or remaining lease term

Machinery and equipment 3 to 5

Trade show assets 3 to 5

Leasehold improvements Lower of estimated useful life or remaining lease term

estimated useful lives of the Company’s property and equipment are periodically assessed to determine if changes are appropriate.

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tested for impairment annually, and more frequently if events and circumstances indicate that the asset might be impaired.

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

A goodwill impairment

charge is recorded for the amount by which the Company’s carrying value exceeds its fair value, not to exceed the carrying amount

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 decline in the Company’s stock price.

the quarter ended June 30, 2022, the Company identified an 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

Due to these factors, the Company deemed that there was an impairment to the carrying value of its property and equipment and

accordingly performed interim testing as of June 30, 2022.

on its interim testing, the Company noted that the carrying value of equity exceeded the calculated fair value by an amount greater than

the aggregate value of our goodwill.

Accordingly, the Company concluded that the entire carrying value of its goodwill was impaired,

resulting in a second-quarter impairment charge of $ 54.7 million.

Additional information regarding the Company’s interim testing

on goodwill may be found in Note 7 – Goodwill and Intangible Assets, Net, included elsewhere in the notes to the consolidated financial

Company initially records intangible assets at their estimated fair values and reviews these assets periodically for impairment.

intangible assets, which consist principally of customer-related acquired assets, acquired and/or developed technology, non-compete agreements,

and trade names, are reported net of accumulated amortization, and are being amortized over their estimated useful lives at amortization

rates that are proportional to each asset’s estimated economic benefit.

The Company’s intangible assets are amortized on

a straight-line basis over the estimated useful lives of the assets.

The Company reviews the carrying value of these intangible assets

annually, or more frequently if indicators of impairment are present.

TO CONSOLIDATED FINANCIAL STATEMENTS

useful lives are as follows:

Acquired developed technology

Non-compete agreements

Customer relationships

Capitalized website costs

performing the review of the recoverability of intangible assets, the Company considers several factors, including whether there have

been significant changes in legal factors or the overall business climate that could affect the underlying value of an asset.

also considers whether there is an expectation that the asset will be sold or disposed of before the end of its remaining estimated useful

If, as the result of examining any of these factors, the Company concludes that the carrying value of the intangible asset exceeds

its estimated fair value, the Company recognizes an impairment charge and reduces the carrying value of the asset to its estimated fair

the quarter ended June 30, 2022, the Company identified an 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

Due to these factors, the Company deemed that there was an impairment to the carrying value of its property and equipment and

accordingly performed interim testing as of June 30, 2022.

on its interim testing, the Company noted that the carrying value of equity exceeded the calculated fair value by an amount greater than

the aggregate value of our intangible assets.

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

should be impaired, resulting in a second-quarter impairment charge of $ 15.2 million.

Additional information regarding the Company’s

interim testing on intangible assets may be found in Note 7 – Goodwill and Intangible Assets, Net, included elsewhere in the notes

to the consolidated financial statements.

Notes Payable

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 Topic 815, Derivatives and Hedging (“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 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.

Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

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 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.

TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

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.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

issued or modified warrants that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in

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in the estimated fair value of the warrants to be recognized as an unrealized gain or loss in the consolidated statements of operations.

August 18, 2022, the Company reached an agreement with its institutional lender to amend its existing Securities Purchase Agreement and

entered into a Securities Exchange Agreement (the “August 2022 Exchange Agreement”).

Pursuant to the August 2022 Exchange

Agreement, the Company issued a new warrant to purchase 71,139 shares of Common Stock (the “Note Exchange Warrant”) and modified

an existing warrant (the “SPA Warrant”) to purchase up to an aggregate of 34,406 shares of Common Stock.

The Company exchanged

the SPA Warrant for a new warrant for the same number of underlying shares but with a reduced exercise price (the “Modified Warrants”

and, collectively with the Note Exchange Warrant, the “August 2022 Warrants”).

Additional information regarding the August

2022 Exchange Agreement and August 2022 Warrants may be found in Note 4 – Fair Value Measures and Note 9 – Debt, included

elsewhere in the notes to the consolidated financial statements.

Additionally,

o n April 18, 2023, the Company modified the exercise price of certain

warrants, to reduce this from $ 13.00 per share to $ 3.45 per share.

Notes Payable

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.

Issuance Costs and Debt Discount

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it is reasonably certain that the Company will exercise such options.

TO CONSOLIDATED FINANCIAL STATEMENTS

revenue includes amounts collected or billed in excess of revenue that the Company can recognize.

The Company recognizes deferred revenue

and non-current deferred revenue as revenue as the related performance obligation is satisfied.

The Company records deferred revenue

that will be recognized during the succeeding twelve-month period as a current liability on the consolidated balance sheets.

Liabilities includes amounts collected, billed in excess of revenue or customer deposits that the Company can recognize.

recognizes contract liabilities and non-current contract liabilities as revenue as the related performance obligation is satisfied.

Company records contract liabilities that will be recognized during the succeeding twelve-month period as a current liability on the

consolidated balance sheets.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Value of Financial Instruments

Company’s financial instruments consist of cash, accounts receivable, accounts payable and accrued expenses.

The estimated fair

values of accounts receivable and accounts payable approximate their carrying values due to the short-term nature of these instruments.

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.

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, net of estimated forfeitures, over the requisite service

period, which is generally the vesting period of the respective award.

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

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

Company classifies stock-based compensation expense in its consolidated statements of operations in the same manner in which the award

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Company estimates the fair value of each stock option grant on the date of the grant using the Black-Scholes option-pricing model.

the IPO, the Company was a private company and therefore lacks company-specific historical and implied volatility information.

it estimates its expected stock volatility based on the historical volatility of similar publicly-traded companies and expects to continue

to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price.

The expected term

of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla”

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.

Company accounts for business acquisitions using the purchase method of accounting, in accordance with which assets acquired and liabilities

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

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, including contingent

consideration, 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 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.

Company’s management exercises significant judgments in determining the fair value of assets acquired and liabilities assumed,

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of the measurement period are recorded within the Company’s operating results.

contingent consideration arrangements, the Company recognizes a liability at fair value as of the acquisition date with subsequent fair

value adjustments recorded in the consolidated statements of operations.

Additional information regarding the Company’s contingent

consideration arrangements may be found in Note 4 – Fair Value Measures, included elsewhere in the notes to the consolidated financial

TO CONSOLIDATED FINANCIAL STATEMENTS

Company generates revenue from the following sources:

(1) equipment sales, (2) providing services and (3) construction contracts.

accordance with ASC 606 “Revenue Recognition”, the Company recognizes revenue from contracts with customers using a five-step

model, which is described below:

generate revenue from equipment sales and hemp-derived beverage sales.

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:

the customer contract;

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revenue as the performance obligations are satisfied.

the customer contract

customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights have

been identified, payment terms are identified, the contract has commercial substance and collectability is probable.

Specifically, the

Company obtains written/electronic signatures on contracts and purchase orders, if said purchase orders are issued in the normal course

of business by the customer.

performance obligations that are distinct

performance obligation is a promise by the Company to provide a distinct good or service or a series of distinct goods or services.

good or service that is promised to a customer is distinct if the customer can benefit from the good or service either on its own or

together with other resources that are readily available to the customer, and a company’s promise to transfer the good or service

to the customer is separately identifiable from other promises in the contract.

the transaction price

transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services

to a customer, excluding sales taxes that are collected on behalf of government agencies.

the transaction price to distinct performance obligations

transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of

the goods or services being provided to the customer.

The Company’s contracts typically contain multiple performance obligations,

for which the Company accounts for individual performance obligations separately, if they are distinct.

The standalone selling price

reflects the price the Company would charge for a specific piece of equipment or service if it was sold separately in similar circumstances

and to similar customers.

revenue as the performance obligations are satisfied

is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.

Company enters into contracts that may include various combinations of equipment, services and construction, 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

The Company satisfies its performance obligation upon transferring goods or services to a customer and transfers control upon the customer

taking possession.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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,

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.

TO CONSOLIDATED FINANCIAL STATEMENTS

is required to determine the SSP for each distinct performance obligation.

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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 licenses its SaaS type

subscription license, whereby the customer only has a right to access the software over a specified time period.

The full value of the

contract is recognized ratably over the contractual term of the SaaS subscription, adjusted monthly if tiered pricing is relevant.

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 and for construction contracts both as services are rendered and when the

contract is completed.

Company utilizes the cost-plus margin method to determine the SSP for equipment and build-out 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.

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.

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.

Company determines the SSP for services in time and materials contracts by observable prices in standalone services arrangements.

Company estimates variable consideration in the form of royalties, revenue share, monthly fees, and service credits at contract inception

and updated at the end of each reporting period if additional information becomes available.

Variable consideration is typically not

subject to constraint.

Changes to variable consideration were not material for the periods presented.

a contract has payment terms that differ from the timing of revenue recognition, the Company will assess whether the transaction price

for those contracts include a significant financing component.

The Company has elected the practical expedient that permits an entity

to not adjust for the effects of a significant financing component if the Company expects that at the contract inception, the period

between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service, will

be one year or less.

For those contracts in which the period exceeds the one-year threshold, this assessment, as well as the quantitative

estimate of the financing component and its relative significance, requires judgment.

Accordingly, the Company imputes interest on such

contracts at an agreed-upon interest rate and will present the financing components separately as financial income.

As of December 31,

2023 and 2022, the Company did not have any such financial income.

terms with customers typically require payment 30 days from the invoice date.

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The difference in the opening and closing balances

of the Company’s deferred revenue 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.

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 deferred revenue when consideration has been received or an amount of consideration is due from

the customer, and the Company has a future obligation to transfer certain proprietary products.

TO CONSOLIDATED FINANCIAL STATEMENTS

accordance with ASC 606-10-50-13, the Company is required to include disclosure on its remaining performance obligations as of the end

of the current reporting period.

The Company recognizes a contract liability when consideration has been received and the Company has a future obligation

to transfer certain proprietary products.

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 606-10-50-14 through 606-10-50-14A,

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.

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.

Company generally provides a one-year warranty on its products for materials and workmanship but may provide multiple-year warranties

1 unchanged sentence

one-year period.

In accordance with ASC 450-20-25, the Company accrues for product warranties when the loss is probable and can be reasonably

The Company maintains a reserve for warranty returns of $ 0.4 million and $ 0.6 million as of December 31, 2023 and December

31, 2022, respectively.

The Company’s reserve for warranty returns is included in accrued expenses and other current liabilities

in its consolidated balance sheets.

Additional information regarding the Company’s warranty reserve may be found in Note 3 –

Supplemental Consolidated Balance Sheet Information, included elsewhere in the notes to the consolidated financial statements.

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 $ 47,000

and $ 0.1 million as of December 31, 2024 and December 31, 2023, respectively.

The Company’s reserve for warranty returns is included

in accrued expenses and other current liabilities in its consolidated balance sheets.

Additional information regarding the Company’s

warranty reserve may be found in Note 3 – Supplemental Consolidated Balance Sheet Information, included elsewhere in the notes

to the consolidated financial statements.

and Development Costs

3 unchanged sentences

The Company incurs research and development costs associated with the development

and enhancement of both hardware and software products associated with its cultivation and extraction equipment, as well as its SaaS-based

software offering, Agrify Insights™ cultivation software (“Agrify Insights™”).

Capitalization

of Internal Software Development Costs

Company capitalizes certain software engineering efforts related to the continued development of Agrify Insights™ under ASC Topic

350-40 The costs incurred in the preliminary stages of development are expensed as incurred as research costs.

Once the application has

reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized on

a straight-line basis over the estimated useful life of the software.

Maintenance and enhancement costs, including those costs in the

post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to

the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over

the estimated useful life of the software.

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.

The estimated useful life of capitalized internal-use

software ranges from two to five years.

Company accounts for income taxes pursuant to the provisions of ASC Topic 740, Income Taxes, 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.

and enhancement of both hardware and software products associated with its extraction equipment.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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

In accordance with the guidance of ASC 740-10-25-6, 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.

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.

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.

TO CONSOLIDATED FINANCIAL STATEMENTS

Company recognizes the benefit of a tax position when it is effectively settled.

ASC 740-10-25-10, provides guidance on how an entity

should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits.

740-10-25-10 clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing authority.

tax positions considered effectively settled, the Company recognizes the full amount of the tax benefit.

Company’s quarterly 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.

provision for income taxes represents Federal and state and local income taxes.

The effective rate differs from statutory rates due to

the effect of certain nondeductible expenses.

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.

Company’s provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the period

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.

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

12 unchanged sentences

Loss Per Share

Company presents basic and diluted net loss per share attributable to Common Stockholders in conformity with the two-class method required

for participating securities.

The Company computes basic loss per share by dividing net loss available to Common Stockholders by the

weighted-average number of common shares outstanding.

Net loss available to Common Stockholders represents net loss attributable to Common

Stockholders reduced by the allocation of earnings to participating securities.

Losses are not allocated to participating securities

as the holders of the participating securities do not have a contractual obligation to share in any losses.

Diluted loss per share adjusts

basic loss per share for the potentially dilutive impact of stock options and warrants.

As the Company has reported losses for all periods

presented, all potentially dilutive securities including stock options and warrants, are anti-dilutive, and accordingly, basic net loss

per share equals diluted net loss per share.

loss per share calculations for all periods have been adjusted to reflect the reverse stock splits effected on October 18, 2022 and July

Net loss per share was calculated based on the weighted-average number of Common Stock outstanding.

Company presents basic and diluted net loss per share attributable to holders of the Company’s Common Stock in conformity with the one-class

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.

loss per share calculations for all periods have been adjusted to reflect the reverse stock splits effected on July 5, 2023 and October

Adopted Accounting Pronouncements

August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20), and Derivatives and

Hedging—Contracts in an Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an

Entity’s Own Equity.

The amendments in ASU No.

2020-06 simplify the complexity associated with applying GAAP for certain financial

instruments with characteristics of liabilities and equity.

More specifically, the amendments focus on the guidance for convertible instruments

and derivative scope exceptions for contracts in an entity’s own equity.

ASU 2020-06 is effective for fiscal years beginning after

December 15, 2021, including interim periods within those fiscal years.

The Company adopted this standard as of January 1, 2022.

adoption of this new accounting guidance had no impact on the Company’s consolidated financial position.

June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326), which introduces a new methodology for accounting

for credit losses on financial instruments, including available-for-sale debt securities and accounts receivable.

The guidance establishes

a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by

using all practical and relevant information.

Any expected credit losses are to be reflected as allowances rather than reductions in

the amortized cost of available-for-sale debt securities.

ASU 2016-13 is effective for fiscal years beginning after December 15, 2022.

The Company adopted ASU 2016-13 on January 1, 2023.

The adoption of this standard did not have a material impact on these consolidated

financial statements.

TO CONSOLIDATED FINANCIAL STATEMENTS

October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 606):

Accounting for Contract Assets and Contract Liabilities

from Contracts with Customers, which requires that an entity recognize and measure contract assets and contract liabilities acquired

in a business combination in accordance with Topic 606 as if it had originated the contracts.

Generally, this should result in an acquirer

recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured

in the acquiree’s financial statements, if the acquiree prepared financial statements in accordance with GAAP.

The amendment in

this update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

adoption is permitted, including adoption in an interim period.

The Company adopted ASU 2021-08 on January 1, 2023.

The adoption of this

standard did not have a material impact on these consolidated financial statements.

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.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Announced Accounting Pronouncements

2023-09, Improvements to Income Tax Disclosures ∙ On December 14, 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.

Company is currently in the process of evaluating the effect of this guidance on its financial statements.

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.

November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic

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.

is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

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.

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.

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.

— Revenue and Deferred Revenue

Company sells its equipment and services to customers under a combination of a contract and purchase order.

Equipment revenue includes

sales from proprietary products designed and engineered by the Company such a VFUs, container farms, integrated grow racks, and LED grow

lights, and non-proprietary products designed, engineered, and manufactured by third parties such as air cleaning systems and pesticide-free

surface protection.

contracts normally provide for payment upon completion of specified work or units of work as identified in the contract.

Although there

is considerable variation in the terms of these contracts, they are primarily structured as time-and-material contracts.

enters into time-and-materials contracts 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 Company uses three main sub-contractors to execute

the construction contracts.

following table provides the Company’s revenue disaggregated by the timing of revenue recognition:

2 — Revenue and Contract Liabilities

We generate revenue from equipment sales and hemp-derived beverage

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.

following table provides the Company’s revenue from continuing operations disaggregated by the timing of revenue recognition:

Ended December 31,

(In thousands)

Transferred at a point in time

Transferred over time

TO CONSOLIDATED FINANCIAL STATEMENTS

following table provides the Company’s revenue disaggregated by revenue type:

Transferred at

a point-in-time

following table provides the Company’s revenue from continuing operations disaggregated by revenue type:

Ended December 31,

(In thousands)

Cultivation solutions, including

ancillary products and services

Agrify Insights™

Facility build-outs

Extraction solutions

accordance with ASC 606-10-50-13, 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 606-10-50-14 through 606-10-50-14A,

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.

in the Company’s current deferred revenue balance for the years ended December 31, 2023 and 2022 were as follows:

products and services

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

in the Company’s current contract liability balance for the years ended December 31, 2024 and 2023 were as follows:

Ended December 31,

(In thousands)

Deferred revenue – beginning of period

Deferred revenue – end of period

revenue balances primarily consist of customer deposits on the Company’s cultivation and extraction solutions equipment.

December 31, 2023 and December 31, 2022, all of the Company’s deferred revenue balances were reported as current liabilities in

the accompanying consolidated balance sheets.

the year ended December 31, 2023, the Company recognized $ 2.5 million of revenue that was deferred during 2022.

And, during the year

ended December 31, 2022, the Company recognized $ 2.7 million of revenue that was deferred during 2021.

liabilities – beginning of period

liabilities – end of period

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.

3 — Supplemental Consolidated Balance Sheet Information

Receivable, Net

receivable consisted of the following as of December 31, 2024 and December 31, 2023:

Ended December 31,

(In thousands)

Accounts receivable, gross

receivable, gross

allowance for credit losses

Accounts receivable, net

TO CONSOLIDATED FINANCIAL STATEMENTS

receivable, net

changes in the allowance for credit losses accounts consisted of the following:

Ended December 31,

(In thousands)

Allowance for credit losses - beginning

(Recovery of) allowance

for credit losses

Write-offs of uncollectible

Allowance for credit losses

- end of period

Company recognized a net recovery of credit losses of $ 1.4 million and a provision credit losses of $ 4.9 million for the years ended

December 31, 2023 and 2022, respectively.

for credit losses - beginning of period

of) allowance for credit losses

of uncollectible accounts

for credit losses - end of period

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Expenses and Other Current Assets

1 unchanged sentence

Ended December 31,

(In thousands)

Prepaid settlement asset

Other receivables, other

Prepaid insurance

Prepaid expenses, other

Prepaid software

Prepaid materials

Deferred issuance costs,

expenses, other

prepaid expenses and other current assets

1 unchanged sentence

and equipment, net consisted of the following as of December 31, 2024 and December 31, 2023:

(In thousands)

Leased equipment

Leasehold improvements

Machinery and equipment

Machinery and

Computer and office equipment

Research and development laboratory equipment

Leasehold improvements

Research and development laboratory

Furniture and fixtures

Trade show assets

Total property and equipment, gross

Accumulated depreciation

Construction in progress

Total property and equipment,

Accumulated depreciation

property and equipment, net

expense for the years ended December 31, 2024 and 2023 was $ 0.3 million and $ 0.7 million, respectively.

TO CONSOLIDATED FINANCIAL STATEMENTS

Depreciation expense is recorded

within selling, general and administrative, and research and development depending on the nature of the related property and equipment.

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.

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.

the year ended December 31, 2024, the Company sold property and equipment with a cost basis of $ 0.02 million in exchange for proceeds

of $ 0.02 million, resulting in a loss of $ 0.003 million.

During the year ended December 31, 2024, the Company disposed certain property

and equipment for a loss of $ 0.02 million, including $ 0.01 million of research and development laboratory equipment recorded as research

and development expense on the statements of operations.

During the year ended December 31, 2024, the Company retired certain fully depreciated

property and equipment which had an original cost of $ 0.5 million, respectively.

the year ended December 31, 2023, the Company sold Cultivation property and equipment in exchange for proceeds of $ 0.07 million, resulting

in a gain of $ 0.1 million.

During the year ended December 31, 2023, the Company retired certain fully depreciated property and equipment

which had an original cost of $ 0.1 million.

Non-Current Assets

non-current assets consisted of the following as of December 31, 2023 and December 31, 2022:

Ended December 31,

(In thousands)

Security deposits

Long-term deferred commissions

other non-current assets

non-current assets consists only of security deposits as of December 31, 2024 and December 31, 2023.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Expenses and Other Current Liabilities

1 unchanged sentence

Ended December 31,

(In thousands)

Sales tax payable (1)

Accrued acquisition liabilities (2)

Accrued construction costs

Accrued interest expense

Compensation related fees

Accrued warranty expenses

Accrued professional fees

Accrued inventory purchases

Accrued consulting fees

Financing lease liabilities

Other current liabilities

professional fees

warranty expenses

interest expense

consulting fees

inventory purchases

acquisition liabilities

accrued expenses and other current liabilities

(1) Sales tax payable primarily represents identified sales and use tax liabilities arising from our acquisition of Precision and Cascade.

These amounts are included as part of our initial purchase price allocations and are the subject matter of an indemnification claim under the Precision and Cascade acquisition agreement.

(2) Accrued acquisition liabilities includes both the contingent consideration and the value of held back Common Stock associated with the 2022 acquisition of Lab Society and the 2021 acquisitions of Precision, Cascade and PurePressure.

Warranty Costs

acquisition liabilities

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.

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

Warranty Expenses

following table summarizes the activity related to the Company’s accrued liability for estimated future warranty costs:

Ended December 31,

(In thousands)

Warranty accrual – beginning of period

Liabilities accrued for

warranties issued during the period

Warranty accrual

– beginning of period

accrued for warranties issued during the period

accruals paid during the period

Warranty accrual – end of period

in Cultivation Sale

accrual – end of period

4 — Fair Value Measures

Values of Assets and Liabilities

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:

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:

Observable inputs such as quoted prices for identical assets or liabilities in active markets.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other inputs that are observable directly or indirectly, such as quoted prices for similar instruments in active markets or for similar

2 unchanged sentences

market participants would price the asset or liability.

TO CONSOLIDATED FINANCIAL STATEMENTS

techniques for assets and liabilities include methodologies such as the market approach, the income approach or the cost approach, and

3 unchanged sentences

December 31, 2024 and December 31, 2023, the Company’s assets and liabilities measured at fair value on a recurring basis were

December 31, 2023

December 31, 2022

Fair Value Measurements Using Input Types

(In thousands)

Mutual funds (included in cash and cash equivalents)

Money market funds

Corporate bonds

Warrant liabilities - January 2022 warrants

Warrant liabilities - March 2022 warrants

Warrant liabilities - August 2022 warrants

Warrant liabilities - December 2022 warrants

Total liabilities

TO CONSOLIDATED FINANCIAL STATEMENTS

of Financial Instruments

Company has certain financial instruments which consist of cash and cash equivalents, marketable securities, warrant liabilities, and

contingent consideration.

Fair value information for each of these instruments as well as other balances of the Company are as follows:

and cash equivalents, accounts receivable, accounts payable, accrued expenses, and deferred

revenue liabilities approximate their fair value based on the short-term nature of these

securities classified as current held-to-maturity securities are recorded at amortized cost,

which at December 31, 2023 and 2022, approximated fair value.

Company’s deferred consideration was recorded in connection with acquisitions during

the year ended December 31, 2023 and fiscal 2022 using an estimated fair value discount at

the time of the transactions.

As of December 31, 2023 and 2022, the carrying value of the

deferred consideration approximated fair value.

Value Measurements Using Input Types

liabilities - January 2022 warrants

liabilities - March 2022 warrants

liabilities - August 2022 warrants

liabilities - December 2022 warrants

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:

and cash equivalents, accounts payable, and accrued expenses approximate their fair value

based on the short-term nature of these instruments.

receivable are presented net of an allowance for estimated credit losses, which approximates

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.

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”).

Company’s warrant liabilities are marked-to-market each reporting period with the changes

3 unchanged sentences

the warrant liabilities are estimated using a Black-Scholes option-pricing model.

of December 31, 2023 and 2022, the Company held investments in municipal bonds and corporate bonds.

The municipal and corporate bonds

are considered held-to-maturity securities and are recorded at amortized cost in the accompanying consolidated balance sheet.

values of these investments were estimated using recently executed transactions and market price quotations.

The Company considers current

assets as those investments which will mature within the next 12 months including, interest receivable on long-term bonds.

composition of the Company’s marketable securities are as follows:

Ended December 31,

(In thousands)

Current marketable securities:

Corporate bonds

Consideration

Company has classified its net liability for contingent earn-out considerations to the sellers relating to one acquisition completed

during the first quarter of 2022 and two acquisitions completed during fiscal 2021.

The fair value for the contingent consideration associated

with these acquisitions is within Level 3 of the fair value hierarchy because the associated fair value is determined using significant

unobservable inputs, which included the key assumptions to model future revenue, costs of goods sold and operating expense projections.

The company recorded no change in contingent consideration for the year ended December 31, 2023.

contingent earn-out payments to the sellers for each acquisition are based on the achievement of certain revenue thresholds.

TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands)

Contingent consideration – beginning of period

Accrued contingent consideration

Accretion of contingent

consideration

Payments made on contingent

in estimated fair value

Contingent consideration – end of

Company included contingent consideration within accrued expenses and other current liabilities on its consolidated balance sheet as

of December 31, 2022.

below for additional information related to each acquisition’s contingent consideration.

Consideration – PurePressure

Company, in its review of actual revenue performance as compared to its originally projected revenue estimates, noted that PurePressure’s

revenue trend is materially below the originally estimated revenue trends incorporated into the Company’s original fair value estimates

at the time of the acquisition.

As a result, the Company has reduced its fair value estimate of achievement for PurePressure’s

first earn-out period.

During the third quarter ended September 30, 2022, the Company reduced the estimated fair value of the contingent

consideration liability associated with PurePressure’s first earn-out period by approximately $ 0.6 million and their second earn-out

by approximately $ 0.2 million.

As required by ASC Topic 805 Business Combination (“ASC 805”), the change in contingent consideration

was recorded as a reduction in operating expenses during the third and fourth quarters of 2022, respectively.

Consideration – Lab Society

Company, in its review of actual revenue performance as compared to its originally projected revenue estimates, noted that Lab Society’s

revenue trend is materially below the originally estimated revenue trends incorporated into the Company’s original fair value estimates

at the time of the acquisition.

As a result, the Company has reduced its fair value estimate of achievement for Lab Society’s first

earn-out period.

During the second quarter ended June 30, 2022, the Company reduced the estimated fair value of the contingent consideration

liability associated with Lab Society’s first earn-out period by approximately $ 1.0 million and their second earn-out by approximately

$ 0.5 million.

As required by ASC 805, the change in contingent consideration was recorded as a reduction in operating expenses during

the second and fourth quarters of 2022, respectively.

Consideration – Precision and Cascade

earn-out period for the potential contingent consideration to be earned by the former members of Precision and Cascade concluded on December

The Company, during the second quarter of 2022, increased the amount of the contingent consideration earned by the former members

of Precision and Cascade by approximately $ 0.1 million, to reflect the final contingent consideration amount due.

This amount was recorded

as an increase in operating expenses during the second quarter of 2022.

During the period ended December 31, 2022, the Company made the

final payment on the contingent consideration of approximately $ 5.6 million to the members of Precision and Cascade.

estimated fair value of the warrant liabilities on December 31, 2023 and 2022 is determined using Level 3 inputs.

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

The warrants will not be marked to fair value on a recurring basis.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

If factors or assumptions change, the estimated fair values could be materially different.

TO CONSOLIDATED FINANCIAL STATEMENTS

2022 Warrants

following table summarizes the Company’s assumptions used in the valuation of December 31, 2023 and December 31, 2022:

Ended December 31,

Exercise price

Expected term (in Years)

Discount rate - treasury yield

following table sets forth a summary of the changes in the fair value of the Level 3 warrant liabilities of December 31, 2023 and December

Ended December 31,

(In thousands)

Warrant liabilities – beginning of period

Initial fair value of warrant

in estimated fair value

Warrant liabilities –end of period

2022 Warrants

following table summarizes the Company’s assumptions used in the valuation of December 31, 2023 and December 31, 2022:

Ended December 31,

Exercise price

Expected term (in Years)

Discount rate - treasury yield

following table sets forth a summary of the changes in the fair value of the Level 3 warrant liabilities of December 31, 2023 and December

Ended December 31,

(In thousands)

Warrant liabilities – beginning of period

Initial fair value of warrant

Change in estimated fair

of loss on debt extinguishment

Warrant liabilities – end of period

TO CONSOLIDATED FINANCIAL STATEMENTS

2022 Warrants

following table summarizes the Company’s assumptions used in the valuation of December 31, 2023 and December 31, 2022:

Ended December 31,

following table summarizes the Company’s assumptions used in the valuations as of December 31, 2024 and 2023:

Exercise price

1 unchanged sentence

Discount rate - treasury yield

following table sets forth a summary for the changes in the fair value of the Level 3 warrant liabilities of December 31, 2023 and December

Ended December 31,

(In thousands)

Warrant liabilities – beginning of period

Initial fair value of warrant

Change in estimated fair

settled in period

Warrant liabilities – end of period

2022 Warrants

following table summarizes the Company’s assumptions used in the valuation of December 31, 2023 and December 31, 2022:

Ended December 31,

Exercise price

1 unchanged sentence

Discount rate - treasury yield

following table sets forth a summary for the changes in the fair value of the Level 3 warrant liabilities of December 31, 2023 and December

Ended December 31,

(In thousands)

Warrant liabilities – beginning of period

Initial fair value of warrant

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:

liabilities - beginning of period

fair value of warrant liabilities

Reclassification

of warrant liabilities to equity

in estimated fair value

Warrant liabilities – end of period

TO CONSOLIDATED FINANCIAL STATEMENTS

5 — Loans Receivable

portion of the capital raised from the Company’s IPO was allocated to launch the Company’s TTK Solution program.

Solution is the industry’s first-of-its-kind program in which the Company engages with qualified cannabis operators in the early

phases of their business plans and provides critical support, typically over a 10 -year period, which includes:

access to capital for

construction costs, the design and build-out of their cultivation and extraction facilities, state-of-the-art cultivation and extraction

equipment, subscription to the Company’s Agrify Insights™, process design, training, implementation, proven grow recipes,

product formulations, data analytics, and consumer branding.

September 15, 2022, the Company provided a notice of default under the term loan agreement between the Company and Bud & Mary’s

(the “Bud & Mary’s TTK Agreement”).

On October 5, 2022, Bud & Mary’s Cultivation, Inc.

& Mary’s”) filed a complaint in the Superior Court of Massachusetts in Suffolk County naming the Company as defendant.

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’s TTK Agreement .

In response, the Company established a reserve

of $ 14.7 million specifically related to Bud & Mary’s.

The Company deemed it necessary to fully reserve the $ 14.7 million outstanding

balance in the third quarter of 2022 due to the current litigation and the uncertainty of the customer’s ability to repay the outstanding

The Company believes that Bud & Mary’s claims have no merit and intends to defend itself vigorously.

The Company is

taking all necessary steps to pursue repayment from Bud & Mary’s and is taking all actions necessary to protect its shareholders’

the year ended December 31, 2022, the Company established a reserve of approximately $ 12.5 million specifically related to Greenstone.

Greenstone is a related party because one of the Company’s former Agrify Brands employees and its VP of Engineering had a minority

The Company established the reserve based upon its review of Greenstone’s financial stability, which would impact collectability,

which 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 receivables.

During the quarter ended June 30, 2023, the Greenstone

loan was fully written off against the reserve as a result of the sale of Greenstone to Denver Greens.

It was agreed that Denver Greens

would not have to pay back Greenstone’s Loan.

breakdown of loans receivable by customer as of December 31, 2023 and December 31, 2022 were as follows:

Ended December 31,

(In thousands)

Customer 24096

Other – Non-TTK Solution (1)

Allowance for credit

losses (2)(3)

loan receivable

(1) The current portion of loan receivable is included in prepaid expenses and other current assets on the balance sheet.

(2) As of December 31, 2023 The TTK Solution project balance was written off due to the cancellation of the project.

(3) The Company established an allowance for credit losses of approximately $ 14.7 million related to Bud & Mary’s ongoing litigation.

Approximately $ 4.5 million relates to Hannah.

TO CONSOLIDATED FINANCIAL STATEMENTS

this time, the Company is not aware of, nor has it identified any risk or potential performance failure associated with any of its TTK

Solution arrangements, other than the noted exceptions of Bud & Mary’s TTK Solution, Hannah, and Greenstone TTK Solution, which

is a related party, as described above.

Company analyzed whether any of the above customers are a VIE in accordance with ASC 810 and if so, whether the Company is the primary

beneficiary requiring consolidation.

Based on the Company’s analysis, the Company has determined that Greenstone, which is a related

party because one of the Company’s former Agrify Brands employees and its VP of Engineering had a minority ownership, is a VIE.

The Company’s loan receivable from Greenstone was written off in full during the quarter ending June 30, 2023.

liabilities end of period

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5 — Inventory

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,

1 unchanged sentence

Such costs include the acquisition cost for raw materials and operating supplies.

The Company’s standard payment

terms with suppliers may require making payments in advance of delivery of the Company’s products.

The Company’s prepaid

inventory is a short-term, non-interest-bearing asset that is applied to the purchase of products once they are delivered.

consisted of the following as of December 31, 2024 and December 31, 2023:

Ended December 31,

(In thousands)

Raw materials

Prepaid inventory

Finished goods

Inventory for resale

Inventory, gross

Inventory reserves

inventory, net

5 unchanged sentences

Ended December 31,

(In thousands)

Inventory reserves – beginning of period

Inventory reserves – beginning

increase in inventory reserves

Inventory reserves – end of period

— Goodwill and Intangible Assets, Net

assets are initially recorded at fair value and tested periodically for impairment.

Goodwill represents the excess of the purchase price

over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed in a business combination and is

tested at least annually for impairment.

The Company performs its goodwill impairment testing annually during the fourth quarter, or

sooner if indicators or circumstances were to occur that would more likely than not reduce the fair value of the Company’s reporting

unit below its carrying amount.

The Company would recognize an impairment charge for the amount by which the carrying amount exceeds

the reporting unit’s fair value, not to exceed the total amount of goodwill.

TO CONSOLIDATED FINANCIAL STATEMENTS

Company has concluded that there was an impairment-triggering event during the quarter ended June 30, 2022 that required the Company

to perform a detailed analysis of the current carrying value of its goodwill and intangible assets.

For goodwill and intangible asset

impairment testing purposes, the Company has one reporting unit.

the quarter ended June 30, 2022, the Company’s market capitalization fell below total net assets.

In addition, financial performance

continued to weaken during the quarter, which was contrary to prior experience.

Management reassessed business performance expectations

following persistent adverse developments in equity markets, deterioration in the environment in which the Company operates, lower-than-expected

sales, and an increase in operating expenses.

These indicators, in the aggregate, required impairment testing for goodwill and intangible

on the results of this testing, the Company determined that the carrying values of the aggregate value of its goodwill and intangible

assets were not recoverable.

The Company recorded impairment charges during the second quarter of 2022, representing a full impairment

of the carrying value of its goodwill and intangible assets.

The Company recorded an impairment charge of approximately $ 69.9 million,

representing the carrying values of goodwill and intangible assets, which totaled $ 54.7 million and $ 15.2 million, respectively.

in goodwill consisted of the following:

(In thousands)

Goodwill - beginning of period

Goodwill acquired during

Goodwill purchase accounting

impairment loss

Goodwill - end of period

assets, net as of December 31, 2022 were as follows:

Intangible Assets, Gross

Accumulated Amortization and Impairment

Intangible Assets, Net

(In thousands)

January 1, 2022

Additions and Retirements, net

December 31, 2022

January 1, 2022

Expense and Retirements, net

Customer relationships

Acquired developed technology

Capitalized website costs

expense recorded in general and administrative expense in the consolidated statements of operations was zero and $ 1.4 million for the

years ended December 31, 2023, and 2022, respectively.

TO CONSOLIDATED FINANCIAL STATEMENTS

8 - Business Combinations

of Lab Society

February 1, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Lab Society, a newly-formed

wholly-owned subsidiary of the Company (“Merger Sub”), Michael S.

Maibach Jr., as the Owner Representative thereunder, and

each of the shareholders of Lab Society (collectively, the “Owners”), pursuant to which the Company agreed to acquire Lab

Concurrently with the execution of the Merger Agreement, the Company consummated the merger of Lab Society with and into Merger

Sub, with Merger Sub surviving such merger as a wholly-owned subsidiary of the Company (the “Lab Society Acquisition”).

aggregate consideration for the Lab Society Acquisition consisted of $ 4.0 million in cash, subject to certain adjustments for working

capital, cash, and indebtedness of Lab Society at closing, 2,128 shares of Common Stock (the “Buyer Shares”), and the Earn-out

Consideration (as defined below), to the extent earned.

Company withheld 638 of the Buyer Shares issuable to the Owners (the “Holdback Lab Buyer Shares”) 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 Merger Agreement.

During the third quarter of 2022, 139 of the Holdback Lab Buyer Shares were forfeited after the finalization

of the net working capital settlement.

The remaining 499 Holdback Lab Buyer Shares were released following the twelve-month anniversary

of the Closing Date in accordance with and subject to the conditions of the Merger Agreement.

Merger Agreement includes customary post-closing adjustments, representations and warranties, and covenants of the parties.

may become entitled to additional consideration with a value of up to $ 3.5 million based on the eligible net revenues achieved by the

Lab Society business during the fiscal years ending December 31, 2022 and December 31, 2023, of which 50 % will be payable in cash and

the remaining 50 % will be payable by issuing shares of Common Stock.

Additional information regarding the Company’s contingent

consideration arrangements may be found in Note 4 - Fair Value Measures, included elsewhere in the notes to the consolidated financial

and related costs, consisting primarily of professional fees, related to the acquisition, totaled approximately $ 0 and $ 66 thousand for

the years ended December 31, 2023, and 2022, respectively.

All transaction and related costs were expensed as incurred and are included

in general and administrative expense.

TO CONSOLIDATED FINANCIAL STATEMENTS

Company has prepared purchase price allocations for the business combination.

The following table sets forth the components and the allocation

of the purchase price for the business combination:

(In thousands)

Purchase price consideration

Closing proceeds

Transaction expenses

Closing buyer shares

Holdback buyer shares

Earn-out consideration

Working capital adjustment

Fair value of total

consideration transferred

Total purchase price,

net of cash acquired

Fair value allocation of purchase price

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current receivables

Right - of-use assets, net

Property and equipment, net

Prepaid and refundable taxes

Accounts payable, accrued expenses, and other

current liabilities

Deferred revenue

Deferred tax liability

Finance lease liabilities, current

Finance lease liabilities, non-current

Operating lease liabilities, current

Operating lease liabilities, non-current

Acquired intangible assets

Total purchase price

intangible assets consist of trade names, technology, and customer relationships.

The fair value of intangible assets and the determination

of their respective useful lives were made in accordance with ASC 805 and are outlined in the table below:

(In thousands)

Identified intangible assets

Acquired developed technology

Customer relationships

Total identified intangible

Company’s initial fair value estimates related to the various identified intangible assets of Lab Society were determined under

various valuation approaches including the Income Approach, Relief-from-Royalty Method, and Discounted Cash Flow Method.

These valuation

methods require management to project revenues, operating expenses, working capital investment, capital spending, and cash flows for

the reporting unit over a multiyear period, as well as determine the weighted-average cost of capital to be used as a discount rate.

TO CONSOLIDATED FINANCIAL STATEMENTS

the quarter ended June 30, 2022, the Company identified an 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

Due to these factors, the Company deemed that there was an impairment to the carrying value of its property and equipment and

accordingly performed interim testing as of June 30, 2022.

Based on its interim testing, the Company noted that the entire carrying value

of its goodwill and intangible assets were impaired.

Additional information regarding the Company’s interim testing on goodwill

and intangible assets may be found in Note 7 - Intangible Assets, Net and Goodwill included elsewhere in the notes to the consolidated

financial statements.

amount of revenue of Lab Society included in the consolidated statements of operations from the acquisition date of February 1, 2022

to December 31, 2022 was $ 4.5 million.

of Precision and Cascade

September 29, 2021 (the “Execution Date”), the Company entered into a Plan of Merger and Equity Purchase Agreement, as amended

by an amendment dated October 1, 2021 (as amended, the “Purchase Agreement”), with Sinclair Scientific, LLC, a Delaware limited

liability company (“Sinclair”), Mass2Media, LLC, Precision, a Michigan limited liability company;

and each of the equity

holders of Sinclair named therein (collectively, the “Sinclair Members”).

On October 1, 2021, the Company consummated the

transactions contemplated by the Purchase Agreement.

to the terms and conditions set forth in the Purchase Agreement, Sinclair transferred to the Company, and the Company purchased (the

“Interest Purchase”) from Sinclair, 100 % of the equity interests of Cascade, a Delaware limited liability company, such that

immediately after the consummation of such Interest Purchase, Cascade became a wholly-owned subsidiary of the Company, and Precision

merged (the “Merger”) with and into a newly-formed wholly-owned subsidiary of the Company, Precision Extraction NewCo, LLC.

aggregate consideration for the Interest Purchase and the Merger consisted of the sum of $ 30 million in cash, plus consideration payable

to holders of outstanding Sinclair equity awards, subject to certain adjustments for working capital, cash, and indebtedness, payable

in connection with the Interest Purchase;

the number of shares of Common Stock, subject to adjustment, equal to the quotient of $ 20.0

million divided by the volume weighted average price per share of Common Stock on The Nasdaq Capital Market for the 30 consecutive trading

days ending on the Execution Date (the “VWAP Price”), issuable in connection with the Merger;

Holdback Buyer Shares;

the True-Up Buyer Shares, issuable in connection with the Merger.

Company withheld 588 shares issuable to certain members (the “Holdback Buyer Shares”) 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.

These shares were not released as of December 31, 2023.

Purchase Agreement included customary post-closing adjustments, representations and warranties, and covenants of the parties.

Members became entitled to additional shares of Common Stock (the “True-Up Buyer Shares”) and cash (together with the True-Up

Buyer Shares, the “Aggregate True-Up Payment”) based on the eligible net revenues (as defined in the Purchase Agreement)

achieved by the Cascade and Precision businesses during the fiscal year ending December 31, 2021.

August 10, 2022, the Company entered into a post-closing adjustment settlement agreement (“Agreement”) with Sinclair.

Agreement was entered into in connection with the Purchase Agreement.

According to the Purchase Agreement, $ 2.5 million was held by the

escrow agent as the Adjustment Escrow Amount, $ 4.5 million was held by the escrow agent as the Indemnity Escrow Amount.

On August 17,

2022, the Company made the final Aggregate True-up Payment of approximately $ 5.6 million, of which $ 3.3 million was paid in cash and

435 True-Up Buyer Shares were released to the Sinclair Members, and the Company received $ 1.4 million from the Adjustment Escrow Amount,

and the remaining $ 1.1 million balance of the Adjustment Escrow Amount became part of the Indemnity Escrow Amount.

TO CONSOLIDATED FINANCIAL STATEMENTS

and related costs, consisting primarily of professional fees, related to the acquisition, totaled approximately $ 0 and $ 63 thousand for

the years ended December 31, 2023, and 2022, respectively.

All transaction and related costs were expensed as incurred and are included

in general and administrative expense.

following table sets forth the components and the allocation of the purchase price for the business combination:

(In thousands)

Purchase price consideration

Sinclair Members at the close

Cash contributed to escrow

accounts at the close

Cash paid for excess net

working capital

Stock issued at the close

value of contingent consideration to be achieved

value of total consideration transferred

purchase price, net of cash acquired

Fair value allocation of purchase price

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other

current receivables

Inventory reserves –

end of period

6 — Discontinued Operations

Business Discontinued Operations

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 $ 7 million, as

well as certain other liabilities related to the Cultivation Business.

The sale represents efforts to strategically shift the Company’s

direction to focus on its hemp-related business operations.

As a result, the Cultivation Business has been presented as discontinued

operations in the consolidated financial statements for all periods presented.

The disposition resulted in a loss on sale of $ 11.9 million along with

a loss from discontinued operations of $ 1.5 million for a total loss of $ 13.4 million, which was recorded in net loss from discontinued

operations in the consolidated statement of operations for the period ended December 31, 2024.

The operating results of the Cultivation

Business were reported as a net loss from discontinued operations in the consolidated statements of operations through December 31, 2024,

the date of disposition, and were considered material.

The net loss from discontinued operations for the period ended December 31, 2023

represents the Cultivation Business’ operating results from the prior year.

The assets and liabilities related to the Cultivation

Business have been separately classified in the accompanying consolidated balance sheet as of December 31, 2023.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:

Current assets:

receivable, net

expenses and other current assets

assets of discontinued operations

receivable, net

lease right-of-use assets

and equipment, net

non-current assets

assets of discontinued operations

amounts of liabilities associated with Cultivation Business included as part of discontinued operations:

expenses and other current liabilities

lease liabilities, current

liabilities of discontinued operations

lease liabilities, net of current

liabilities of discontinued operations

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

following table summarizes the Company’s loss from discontinued operations for the years ended December 31, 2024 and 2023, respectively:

the year ended

Income and expense line

items related to Cultivation Business:

of goods sold

profit (loss)

general and administrative

on settlement of contingent liabilities

on disposal on property and equipment

operating expenses

loss from discontinued operations

Income (Expense)

on disposal of Cultivation business

other income (expense)

loss from discontinued operations

tax effect on discontinued operations

from discontinued operations, net of income taxes

consolidated statements of cash flows includes continuing operations and discontinued operations.

The following table summarizes the

depreciation of long-lived assets, amortization of long-lived assets, provisions for credit losses and adjustments to net realizable

value of inventories, and capital expenditures and disposals of discontinued operations for the years ended December 31:

Depreciation and

(Recovery of) provision for

credit losses

(Recovery of) provision for

slow-moving inventory

Proceeds from disposal of

property and equipment

Right-of-use assets, net

Capitalized web costs, net

Accounts payable and accrued

Deferred revenue

Long-term debt

Operating lease liabilities,

Acquired intangible assets

Total purchase price

intangible assets consist of trade names, technology, non-compete agreements, and customer relationships.

The fair value of intangible

assets and the determination of their respective useful lives were made in accordance with ASC 805 and are outlined in the table below:

(In thousands)

Identified intangible assets

Acquired developed technology

Non-compete agreements

7 — Business Combinations

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

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 97,300 in Common Stock of Agrify as well as 432,700 pre-funded warrants (collectively the “Shares”) for

total non-cash consideration of approximately $ 18.8 million.

In addition, Agrify forgave $ 0.4 million of debt as part of the consideration

The fair value of the Shares was based upon the closing price of Agrify’s Common Stock as traded on Nasdaq on the date

of the transaction.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

The following

table summarizes the initial accounting estimates:

of Purchase Price (in thousands)

Customer Relationships

Total identified intangible assets

Company’s initial fair value estimates related to the various identified intangible assets were determined under various valuation

approaches including the Income Approach, Relief-from-Royalty Method, and Discounted Cash Flow Method.

These valuation methods require

management to project revenues, operating expenses, working capital investment, capital spending, and cash flows for the reporting unit

over a multiyear period, as well as determine the weighted-average cost of capital to be used as a discount rate.

TO CONSOLIDATED FINANCIAL STATEMENTS

the quarter ended June 30, 2022, the Company identified an 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

Due to these factors, the Company deemed that there was an impairment to the carrying value of its property and equipment and

accordingly performed interim testing as of June 30, 2022.

Based on its interim testing, the Company noted that the entire carrying value

of its goodwill and intangible assets were impaired.

Additional information regarding the Company’s interim testing on goodwill

and intangible assets may be found in Note 7 - Intangible Assets, Net and Goodwill, included elsewhere in the notes to the consolidated

financial statements.

of PurePressure

December 31, 2021, the Company entered into a Membership Interest Purchase Agreement (the “Pure Purchase Agreement”) with

PurePressure, LLC, a Colorado Limited liability company (“PurePressure”), and the members of PurePressure (collectively,

the “Members”), Benjamin Britton as the Member Representative thereunder, and each of the Members.

Concurrently with the

execution of the Pure Purchase Agreement, the Company consummated the acquisition of all the outstanding equity interests of PurePressure,

such that immediately after the consummation of such purchase, PurePressure became a wholly-owned subsidiary of the Company (the “Acquisition”).

aggregate consideration for the Acquisition consisted of $ 4.0 million in cash, subject to certain adjustments for working capital, cash,

and indebtedness of PurePressure at closing;

1,646 shares of Common Stock (the “Buyer Shares”);

and the Earn-out Consideration

(as defined below), to the extent earned.

Company withheld 444 of the Buyer Shares issuable to certain Members (the “Holdback Buyer Shares”) 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 Pure Purchase Agreement.

During the third quarter of 2022, 72 of the Holdback Buyer Shares were forfeited after the finalization

of the net working capital settlement.

On January 31, 2023, the remaining 372 Holdback Buyer Shares were released, including 6 Holdback

Buyer Shares that were withheld to cover a tax indemnification claim in accordance with the Purchase Agreement.

Pure Purchase Agreement includes customary post-closing adjustments, representations and warranties, and covenants of the parties.

Members may become entitled to additional consideration with a value of up to $ 3.0 million based on the eligible net revenues achieved

by the PurePressure business during the fiscal years ending December 31, 2022 and December 31, 2023, of which 40 % will be payable in

cash and the remaining 60 % will be payable by issuing shares of Common Stock (collectively, the “Earn-out Consideration”).

Additional information regarding the Company’s contingent consideration arrangements may be found in Note 4 - Fair Value Measures,

included elsewhere in the notes to the consolidated financial statements.

to certain customary limitations, the Members will indemnify the Company and its affiliates, officers, directors, and other agents against

certain losses related to, among other things, breaches of the Members’ and PurePressure’s representations and warranties,

indebtedness, transaction expenses, pre-closing taxes, and the failure to perform covenants or obligations under the Pure Purchase Agreement,

and the Company will indemnify the Members and their respective affiliates, officers, directors, and other agents against certain losses

related to, among other things, breaches of the Company’s representations and warranties and the failure to perform covenants or

obligations under the Pure Purchase Agreement.

and related costs, consisting primarily of professional fees, related to the acquisition, totaled approximately $ 0 and $ 563 thousand

for the years ended December 31, 2023, and 2022, respectively.

All transaction and related costs were expensed as incurred and are included

in general and administrative expense.

TO CONSOLIDATED FINANCIAL STATEMENTS

Company has prepared purchase price allocations for the business combination.

The following table sets forth the components and the allocation

of the purchase price for the business combination:

(In thousands)

Purchase price consideration

Closing proceeds

Indebtedness paid

Transaction expenses

Closing buyer shares

Holdback buyer shares

Earn-out consideration

Working capital adjustment

Fair value of total

consideration transferred

Total purchase price

net of cash acquired

Fair value allocation of purchase price

Cash and cash equivalents

Accounts receivable, net

Property and equipment, net

Right-of-use assets, net

Prepaid expenses and other current receivables

Other non-current assets

Accounts payable and accrued expenses

Deferred revenue

Operating lease liabilities, current

Operating lease liabilities, non-current

Finance lease liabilities, current

Finance lease liabilities, non-current

Notes payable, current

Notes payable, non-current

Acquired intangible assets

Total purchase price

intangible assets consist of trade names, technology, and customer relationships.

The fair value of intangible assets and the determination

of their respective useful lives were made in accordance with ASC 805 and are outlined in the table below:

(In thousands)

Identified intangible assets

Acquired developed technology

As part of the preliminary

purchase accounting, the Company recorded intangible assets of $ 8.9 million.

The preliminary estimates for useful lives of the identified

intangibles are 7 years for Tradenames and 10 years for Customer Relationships with a weighted average useful life of 7.94 years.

Company recorded $ 18,000 of revenue within the Company’s Consolidated Statements of Operations for the period December 12, 2024,

the date of acquisition, through December 31, 2024.

and related costs, consisting primarily of professional fees, related to the acquisition, totaled approximately $ 0.3 million for the

year ended December 31, 2024.

All transaction and related costs were expensed as incurred and are included in general and administrative

8 — Intangible Assets

of December 31, 2024, intangible assets were comprised of the following:

in Years Net Book

Customer Relationships 10 $ 2,800

Total identified intangible

the quarter ended June 30, 2022, the Company identified an 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

Due to these factors, the Company deemed that there was an impairment to the carrying value of its property and equipment and

accordingly performed interim testing as of June 30, 2022.

Based on its interim testing, the Company noted that the entire carrying value

of its goodwill and intangible assets were impaired.

Additional information regarding the Company’s interim testing on goodwill

and intangible assets may be found in Note 7 - Intangible Assets, Net and Goodwill, included elsewhere in the notes to the consolidated

financial statements.

TO CONSOLIDATED FINANCIAL STATEMENTS

Tradenames 7 6,100

of December 31, 2023, the Company did not have any intangible assets.

estimated future amortization expense for the next five years and thereafter based on the preliminary purchase price allocation is as

Years ending December 31 (In thousands)

expense recorded in general and administrative expense in the consolidated statements of operations was immaterial for the years ended

December 31, 2024, and 2023.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $ 9,713 thousand was recognized as

following is a roll forward of goodwill based upon the preliminary purchase price allocations ($ in thousands):

- beginning of period

acquired during period (Note 7)

- end of period

Company’s debt consisted of:

Year Ended December 31,

(In thousands)

Note payable – Exchange Note and Convertible Note

Acquisitions Junior Secured Note

Acquisition Note

Green Thumb Note

related party debt

Other notes payable (1)

Unamortized debt premium (discount)

Total debt, net of debt discount

current portion, net of current unamortized debt discount

Long-term debt, net of current

(1) Other notes payable relates to a one-year insurance premium that was

financed over nine-months and incurred interest expense of approximately $ 85 thousand.

Purchase Agreement

March 14, 2022, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with the Investor,

pursuant to which the Company agreed to issue and sell to the Investor, in a private placement transaction, in exchange for the payment

by the Investor of $ 65.0 million, less applicable expenses, as set forth in the Securities Purchase Agreement, a senior secured promissory

note in an aggregate principal amount of $ 65.0 million (the “SPA Note”), and a SPA Warrant to purchase up to an aggregate

of 34,406 shares of Common Stock.

2022 Securities Exchange Agreement

August 18, 2022, the Company reached an agreement with the Investor to amend its existing senior SPA Note and entered into the August

2022 Exchange Agreement.

Pursuant to the August 2022 Exchange Agreement, the Company partially paid $ 35.2 million along with approximately

$ 0.3 million in repayments for other fees under the SPA Note and exchanged the remaining balance of the SPA Note for an Exchange Note

with an aggregate original principal amount of $ 35.0 million and a new Note Exchange Warrant to purchase 71,139 shares of Common Stock

and modified an existing SPA Warrants to purchase up to an aggregate of 34,406 shares of Common Stock.

The Company exchanged the SPA

Warrant for new August 2022 Warrants.

Exchange Note is a senior secured obligation of the Company and ranks senior to all indebtedness of the Company.

The Exchange Note will

mature on the three-year anniversary of its issuance (the “Maturity Date”) and contains a 9.0 % annualized interest rate,

current portion

party debt, net of current

Notes Payable - Current

short-term debt

notes payable

long-term debt

current portion

debt, net of current

On August 18, 2022, the Company issued a promissory note with an original

principal amount of $ 35.0 million (the “Exchange Note”) to High Trail Special Situations LLC (the “Original Lender”).

The Exchange Note was a senior secured obligation of the Company and ranked senior to all indebtedness of the Company.

The Exchange Note

had an original maturity date of August 18, 2025 (the “Original Maturity Date”) and contained a 9.0 % annualized interest rate,

with interest to be paid monthly, in cash, beginning September 1, 2022.

The principal amount of the Exchange Note will be payable on

the Maturity Date, provided that the Investor will be entitled to a cash sweep of 20 % of the proceeds received by the Company in connection

with any equity financing, which will reduce the outstanding principal amount under the Exchange Note.

any time, the Company may prepay all of the Exchange Note by redemption at a price equal to 102.5 % of the then-outstanding principal

amount under the Note plus accrued but unpaid interest.

The Investor will also have the option of requiring the Company to redeem the

Exchange Note on the one-year or two-year anniversaries of issuance at a price equal to the then-outstanding principal amount under the

Exchange Note plus accrued but unpaid interest, or if the Company undergoes a fundamental change at a price equal to 102.5 % of the then-outstanding

principal amount under the Exchange Note plus accrued but unpaid interest.

Exchange Note imposes certain customary affirmative and negative covenants upon the Company, as well as covenants that restrict the Company

and its subsidiaries from incurring any additional indebtedness or suffering any liens, subject to specified exceptions, restrict the

ability of the Company and its subsidiaries from making certain investments, subject to specified exceptions, restrict the declaration

of any dividends or other distributions, subject to specified exceptions, require the Company not to exceed maximum levels of allowable

cash spend while the Exchange Note is outstanding, and require the Company to maintain minimum amounts of cash on hand.

If an event of

default under the Exchange Note occurs, the Investor can elect to redeem the Exchange Note for cash equal to 115 % of the then-outstanding

principal amount of the Note (or such lesser principal amount accelerated by the Investor), plus accrued and unpaid interest, including

default interest, which accrues at a rate per year equal to 15 % from the date of a default or event of default.

TO CONSOLIDATED FINANCIAL STATEMENTS

the date the Exchange Note is fully repaid, the Investor has, subject to certain exceptions, the right to participate for up to 30 % of

any offering of debt, equity (other than an offering of solely Common Stock), or equity-linked securities, including without limitation

any debt, preferred stock or other instrument or security, of the Company or its subsidiaries.

Modified Warrant has an exercise price of $ 430.00 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends

and similar transactions, will be exercisable on and after the six-month anniversary of issuance, have a term of five and one-half years

from the date of issuance and will be exercisable on a cash basis, unless there is not an effective registration statement covering the

resale of the shares issuable upon exercise of the Modified Warrant (the “Modified Warrant Shares”) or if shareholder approval

for the full exercise of the Modified Warrant is not received, in which case the Modified Warrant will also be exercisable on a cashless

exercise basis at the Investor’s election.

Note Exchange Warrant has an exercise price of $ 246.00 per share, subject to adjustment for stock splits, reverse stock splits, stock

dividends, and similar transactions, were exercisable upon issuance, and have a term of five and one-half years from the date of issuance

and will be exercisable on a cash basis, unless there is not an effective registration statement covering the resale of the shares issuable

upon exercise of the Warrant (the “Note Exchange Warrant Shares” and, together with the Modified Warrant Shares, the “Exchange

Warrant Shares”) or if shareholder approval for the full exercise of the Note Exchange Warrant is not received, in which case the

Note Exchange Warrant will also be exercisable on a cashless exercise basis at the Investor’s election.

Until the Company completed

a qualified equity financing of at least $ 15.0 million, which requirement was satisfied with sales under the ATM Program, the Note Exchange

Warrant’s exercise price would have been reduced to the extent the Company issued securities, subject to certain exceptions, for

a lower purchase price.

The Note Exchange Warrant also prohibited the Company, until following the completion of such qualified equity

financing, from issuing warrants with more favorable or preferential terms and/or provisions.

August 2022 Warrants will each provide that in no event will the number of shares of Common Stock issued upon exercise of such warrant

result in the Investor’s beneficial ownership exceeding 4.99 % of the Company’s shares of Common Stock outstanding at the

time of exercise (which percentage may be decreased or increased by the Investor, but to no greater than 9.99 %, and provided that any

increase above 4.99 % will not be effective until the sixty-first day after notice of such request by the Investor to increase its beneficial

ownership limit has been delivered to the Company).

of Notes Payable

March 8, 2023, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement” or “Second Amendment”)

with the High Trail Special Situations LLC.

Pursuant to the Exchange Agreement, at closing the Company will prepay approximately $ 10.3

million in principal amount under the August 2022 Note and exchange $ 10.0 in principal amount of the remaining balance of the August

2022 Note for a new senior secured convertible note (the “Convertible Note”) with an original principal amount of $ 10.0 million.

After the closing of the Exchange Agreement, the August 2022 Note will remain outstanding with a remaining balance of $ 11.7 million (the

“Modified August 2022 Note” and, collectively with the Convertible Note, the “Notes”).

exchange was deemed to be an extinguishment under ASC 470, as the modified debt added a substantive conversion option that was not inherent

in the August 2022 Note.

As a result, the Company recognized a loss on the extinguishment of debt of approximately $ 4.6 million.

March 8, 2023, as a result of the Exchange Agreement, the Company issued a Convertible Note to High Trail

Special Situations LLC (the “Lender”) with a principal balance of $ 10 million.

The Convertible Note bears a 9.0 % annualized

interest rate, with interest to be paid monthly, in cash, beginning April 1, 2023.

The principal amount of the Convertible Note will

be payable on the Maturity Date, provided that the Lender will be entitled to a cash sweep of 30 % of the proceeds of any at-the-market

equity offering and 20 % of the proceeds received by the Company in connection with any other equity financing, which will reduce the

outstanding principal amount under the August 2022 Note or the Convertible Note.

TO CONSOLIDATED FINANCIAL STATEMENTS

any time, the Company may prepay all of the Convertible Note by redemption at a price equal to 102.5 % of the then-outstanding principal

The principal amount of the Exchange Note would be payable on

the Original Maturity Date, provided that the Original Lender was entitled to a cash sweep of 20 % of the proceeds received by the Company

in connection with any equity financing, which will reduce the outstanding principal amount under the Exchange Note.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $ 10.3 million in principal amount under the Exchange

Note and exchanged $ 10.0 million of the remaining principal balance of the Exchange Note for a new senior secured convertible note (the

“Convertible Note”) with an original principal amount of $ 10.0 million.

After the closing of the Exchange Agreement, the

August 18, 2022 Exchange Note had a remaining balance of $ 11.7 million.

Refer to “Consolidated CP Acquisitions Note” below

for subsequent activity related to the balance originating from this note.

The following amendments have all been included in the sale

of the Cultivation Business.

Refer to Note 6 - Discontinued Operations below for subsequent activity related to these amendments.

connection with the Exchange Agreement the Company issued the Convertible Note, which bore a 9.0 % annualized interest rate, with interest

to be paid monthly, in cash, beginning April 1, 2023.

The principal amount of the Convertible Note would be payable on the Original Maturity

Date, provided that the Original Lender was entitled to a cash sweep of 30 % of the proceeds of any at-the-market equity offering and

20 % of the proceeds received by the Company in connection with any other equity financing, which would reduce the outstanding principal

amount under the Exchange Note or the Convertible Note.

any time, the Company would prepay all of the Convertible Note by redemption at a price equal to 102.5 % of the then-outstanding principal

amount under the Convertible Note plus accrued but unpaid interest.

The Lender will also have the option of requiring the Company to

redeem the Convertible Note (i) on August 19, 2023 or August 19, 2024 at a price equal to the then-outstanding principal amount under

the Convertible Note plus accrued but unpaid interest, provided that the redemption right on August 19, 2023 will not be exercisable

if the Company raises at least $ 8.0 million in gross proceeds from equity offerings prior to such date, or (ii) if the Company undergoes

a fundamental change (as defined below) at a price equal to 102.5 % of the then-outstanding principal amount under the Convertible Note

plus accrued but unpaid interest.

Convertible Note will impose certain customary affirmative and negative covenants upon the Company, as well as covenants that will (i)

restrict the Company and its subsidiaries from incurring any additional indebtedness or suffering any liens, subject to specified exceptions,

The Original Lender had the option of requiring the Company to redeem

the Convertible Note (i) on August 19, 2023 or August 19, 2024 at a price equal to the then-outstanding principal amount under the Convertible

Note plus accrued but unpaid interest, provided that the redemption right on August 19, 2023 would not be exercisable if the Company

raised at least $ 8.0 million in gross proceeds from equity offerings prior to such date, or (ii) if the Company undergoes a fundamental

change (as defined below) at a price equal to 102.5 % of the then-outstanding principal amount under the Convertible Note plus accrued

but unpaid interest.

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)

1 unchanged sentence

If an event of default under the Convertible

Note occurs, the Lender can elect to redeem the Convertible Note for cash equal to (A) 115 % of the then-outstanding principal amount

of the Convertible 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 15 % from the date of a default or event of default, or, only in connection with

certain events of default, (B) the greater of the amount under clause (A) or the sum of (i) 115 % of the product of (a) the conversion

rate in effect as of the trading day immediately preceding the date that the Lender delivers a notice of acceleration;

(b) the total

then outstanding principal amount under the Convertible Note (in thousands);

and (c) the greater of (1) the highest daily volume weighted

average price (“VWAP”) per share of Common Stock occurring during the fifteen consecutive trading days ending on, and including,

the trading day immediately before the date the Lender delivers such notice and (2) the highest daily VWAP per share of Common Stock

occurring during the fifteen consecutive trading days ending on, and including, the trading immediately before the date the applicable

event of default occurred and (ii) the accrued and unpaid interest on the Convertible Note.

the date the Convertible Note is fully repaid, the Lender will have, subject to certain exceptions, the right to participate for up to

30 % of any offering of debt, equity (other than an offering of solely Common Stock), or equity-linked securities, including without limitation

any debt, preferred stock or other instrument or security, of the Company or its subsidiaries.

the Lender elects to convert the Convertible Note, the conversion price per share will be $ 0.3820 , subject to customary adjustments for

certain corporate events.

The conversion of the Convertible Note will be subject to certain customary conditions.

The Convertible Note

may not be converted into shares of Common Stock if such conversion would result in the Lender and its affiliates owning an aggregate

of in excess of 4.99 % of the then-outstanding shares of Common Stock, provided that upon 61 days’ notice, such ownership limitation

may be adjusted by the Lender, but in any case, to no greater than 9.99 %.

Company evaluated the embedded features in accordance with ASC 815-15-25 and the determined embedded features are not required to be

bifurcated and separately measured at fair value.

interest expense related to the Convertible Note and Exchange Note described above was $ 1,840,300 as of December 31, 2023.

to the Exchange Agreement the Company entered into with High Trail Special Situations LLC on March 8, 2023, the Lender elected, on April

26, 2023, to convert $ 1.6 million of the remaining outstanding principal amount on the Convertible Note for 153,617 shares of Common

Stock of the Company.

May 1, 2023, the Company entered into a letter agreement with the above referenced accredited Lender (the “Letter Agreement”),

pursuant to which the Company and the Lender agreed to exchange or redeem $ 2.0 million of the remaining outstanding principal amount

under the Exchange Note for a total of 445,196 shares of Common Stock of the Company, subject to a Beneficial Ownership Limitation of

4.99 % of the Company’s Common Stock.

Due to the Beneficial Ownership Limitation of 4.99 %, a total of 69,568 shares of Common Stock

of the Company were issued to the Lender, with the remaining 375,629 shares held in abeyance until the balance (or portion thereof) may

be issued in compliance with such limitations.

Note occurred, the Original Lender can elect to redeem the Convertible Note for cash equal to (A) 115 % of the then-outstanding principal

amount of the Convertible Note (or such lesser principal amount accelerated by the Original Lender), plus accrued and unpaid interest,

including default interest, which accrues at a rate per annum equal to 15 % from the date of a default or event of default, or, only in

connection with certain events of default, (B) the greater of the amount under clause (A) or the sum of (i) 115 % of the product of (a)

the conversion rate in effect as of the trading day immediately preceding the date that the Original Lender delivers a notice of acceleration;

(b) the total then outstanding principal amount under the Convertible Note (in thousands);

and (c) the greater of (1) the highest daily

volume weighted average price (“VWAP”) per share of Common Stock occurring during the fifteen consecutive trading days ending

on, and including, the trading day immediately before the date the Original Lender delivers such notice and (2) the highest daily VWAP

per share of Common Stock occurring during the fifteen consecutive trading days ending on, and including, the trading immediately before

the date the applicable event of default occurred and (ii) the accrued and unpaid interest on the Convertible Note.

the date the Convertible Note was fully repaid, the Original Lender had, subject to certain exceptions, the right to participate for

up to 30 % of any offering of debt, equity (other than an offering of solely Common Stock), or equity-linked securities, including without

limitation any debt, preferred stock or other instrument or security, of the Company or its subsidiaries.

the Original Lender elected to convert the Convertible Note, the conversion price per share would be $ 114.60 , subject to customary adjustments

for certain corporate events.

The conversion of the Convertible Note would be subject to certain customary conditions.

The Convertible

Note could not be converted into shares of Common Stock if such conversion would result in the Original Lender and its affiliates owning

an aggregate of in excess of 4.99 % of the then-outstanding shares of Common Stock, provided that upon 61 days’ notice, such ownership

limitation may be adjusted by the Original Lender, but in any case, no greater than 9.99 %.

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.

April 26, 2023, the Original Lender elected to convert $ 1.6 million of the remaining outstanding principal amount on the Convertible

Note for 10,241 shares of Common Stock of the Company.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $ 2.0 million of the remaining outstanding principal amount under the Exchange Note for a total of 29,679

shares of Common Stock of the Company, subject to a Beneficial Ownership Limitation of 4.99 % of the Company’s Common Stock.

to the Beneficial Ownership Limitation of 4.99 %, a total of 4,638 shares of Common Stock of the Company were issued to the Original Lender,

with the remaining 25,042 shares held in abeyance until the balance (or portion thereof) may be issued in compliance with such limitations.

As a result, the Company recognized a loss on the redemption of approximately $ 12 thousand.

TO CONSOLIDATED FINANCIAL STATEMENTS

The total aggregated Exchange

Note and Convertible Note is classified as long-term as of December 31, 2023:

Refer to “Consolidated CP Acquisitions

Note” below for subsequent activity related to the balance originating from this note.

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 $ 3.0 million to the Company.

The Junior Secured Note bore interest at a rate of 10 % per annum, would mature in full on December 31,

2023 , and could be prepaid without any fee or penalty.

On December 4, 2023, CP and the Company amended and restated the Junior Secured

Note agreement.

Pursuant to the terms of the amendment, the maximum principal amount that may be loaned by CP to the Company was increased

to $ 4.0 million and extended the maturity date thereon to December 31, 2024 .

Refer to “Consolidated CP Acquisitions Note”

below for subsequent activity related to the balance originating from this note.

Note Forgiveness

On November 30, 2023, the New Lender (defined below) agreed to forgive

$ 1.0 million of the principal amount outstanding on the Convertible Note (the “Principal Forgiveness”).

The Principal Forgiveness

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 Principal Forgiveness was deemed a concession by the New Lender.

Per ASC 470-60-35-5, a debtor in a

troubled debt restructuring involving only modification of terms of a payable (i.e., not involving a transfer of assets or grant of an

equity interest) shall account for the effects of the restructuring prospectively from the time of restructuring and shall not change

the carrying amount of the payable at the time of the restructuring unless the carrying amount exceeds the total future cash payments

specified by the new terms.

As the future undiscounted cash flows were greater than or equal to the net carrying value of the original

debt, the carrying amount of the debt at the time of the restructuring was not changed.

July 12, 2023, the Board of Directors of the Company approved the issuance of an unsecured promissory note (the “Related Party

Note”) in favor of GIC Acquisition, LLC (“GIC”), an entity that is owned and managed by the Company’s Chairman

and Chief Executive Officer.

Pursuant to the Related Party Note, GIC is obligated to lend up to $ 0.5 million to the Company, $ 0.3 million

of which was delivered at issuance and the remaining $ 0.2 million delivered on July 31, 2023.

The Related Party Note bears interest at

a rate of 10 % per annum, will mature in full on August 6, 2023, and may be prepaid without any fee or penalty.

The Related Party Note

ranks junior to all existing secured indebtedness of the Company.

On October 27, 2023, the maturity date of the Related Party Note was

subsequently amended to December 31, 2024 at which point principal and accrued interest will be repaid in full.

Interest expense incurred

on the Related Party Note amounted to approximately $ 25 thousand for the year ended December 31, 2023.

As of December 31, 2023, the Company

has borrowed approximately $ 645 thousand under the Related Party Note agreement.

October 27, 2023, CP Acquisitions LLC (the “New Lender” or “CP”), an entity affiliated with and controlled by

the Company’s Chief Executive Officer, purchased the Exchange Note and the Convertible Note from their holder (the “Note

In connection with the Note Purchase, the New Lender has 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 the New Lender.

Pursuant to the Junior Secured Note, the New Lender will lend up to $ 3.0 million to the Company.

Junior Secured Note bears interest at a rate of 10 % per annum, will mature in full on December 31, 2023, and may be prepaid without any

fee or penalty.

On December 4, 2023, the New Lender and the Company amended and restated the Junior Secured Note agreement.

to the terms of the amendment, the maximum principal amount that may be loaned by CP to the Company was increased to $ 4.0 million and

extended the maturity date thereon to December 31, 2024.

As of December 31, 2023, the Company has borrowed $ 3.8 million and incurred

interest expense of approximately $ 253 thousand.

TO CONSOLIDATED FINANCIAL STATEMENTS

Protection Program Loan

Protection Program Loans under the Coronavirus Aid, Relief, and Economic Security Act

May 2020, the Company entered into a PPP Loan with Bank of America pursuant to the PPP under the CARES Act administered by the SBA.

Company received total proceeds of approximately $ 0.8 million from the unsecured PPP Loan, which was originally scheduled to mature on

May 7, 2022 .

The Company applied for forgiveness on the $ 0.8 million of PPP loan, but forgiveness was denied by the SBA due to failure

to comply with the application deadline.

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

maturity date to May 7, 2025 and the loan 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 thousand that commenced on August 7, 2022.

breakdown of PPP Loan balances by current and non-current as of December 31, 2023 and December 31, 2022 were as follows:

(In thousands)

Sheet Location

PPP Loan, current

Long-term debt, current

PPP Loan, non-current

Long-term debt

PPP Loan outstanding

of December 31, 2023, future minimum payments on all debt positions were as follows:

(In thousands)

Years Ended December 31,

Total future payments

interest totaled approximately $ 321 and $ 240 thousand as of December 31, 2023 and December 31, 2022, respectively.

November 30, 2023, CP agreed to forgive $ 1.0 million of the principal amount outstanding on the Convertible Note (the “Principal

Forgiveness”).

The Principal Forgiveness 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 Principal Forgiveness was deemed a concession

Per ASC 470, a debtor in a troubled debt restructuring involving only modification of terms of a payable (i.e., not involving

a transfer of assets or grant of an equity interest) shall account for the effects of the restructuring prospectively from the time of

restructuring and shall not change the carrying amount of the payable at the time of the restructuring unless the carrying amount exceeds

the total future cash payments specified by the new terms.

As the future undiscounted cash flows were greater than or equal to the net

carrying value of the original debt, the carrying amount of the debt at the time of the restructuring was not changed.

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 $ 18.3 million (the “New Lender Debt Consolidation”).

The Restated Note

bore interest at a rate of 10 % per annum and would mature in full on December 31, 2025 .

The Company could redeem all or a portion not

less than $ 5.0 million of principal at any time at a price equal to 102.5 % of the redeemed principal amount plus accrued but unpaid interest.

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.

CP elected to convert the Restated Note, the conversion price per share would be $ 21.90 , subject to customary adjustments for certain

corporate events.

The conversion of the Restated Note would be subject to certain customary conditions.

The Restated Note could not be

converted into shares of Common Stock if such conversion would result in CP and its affiliates owning an aggregate of in excess of 49.99 %

of the then-outstanding shares of Common Stock.

following the execution of the Restated Note, CP elected to convert approximately $ 3.9 million of outstanding principal into an aggregate

of 178,108 shares of Common Stock (the “January Conversion”) having a fair value of approximately $ 1.7 million.

As the January

Conversion was exercised by the CP in conjunction and in connection with the New Lender Debt Consolidation, the two transactions combined

were considered a modification of the total debt outstanding with CP (the “CP Debt Restructuring”).

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.

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 $ 0.7 million (the “CP Debt Restructuring Excess Carrying Value”).

Note was thus written down to the amount of the undiscounted future cash flows on the Restated Note from the CP Restructuring date to

Further, as CP was a related party of the Company, the CP Debt Restructuring Excess Carrying Value was accounted for as a capital

transaction and no gain or loss was recognized related to the restructuring.

Aggregate interest expense related to the CP Acquisitions Note described

above was $ .1 million for the year ended December 31, 2024.

Refer to Note 6 - Discontinued Operations below for subsequent activity as

this Note relates to the sale of the Cultivation Business.

Acquisition Note

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 $ 0.5 million to the Company, $ 0.3 million of which was delivered at issuance and the remaining $ 0.2 million delivered

on July 31, 2023.

The GIC Note bore interest at a rate of 10 % per annum, would mature in full on August 6, 2023, and could be prepaid

without any fee or penalty.

The GIC Note ranked junior to all existing secured indebtedness of the Company.

On October 27, 2023, the

maturity date of the GIC Note was subsequently amended to December 31, 2024 at which point principal and accrued interest will be repaid

Interest expense incurred on the GIC Note amounted to $ 47.7 thousand for the year ended December 31, 2024.

Refer to “Amendment

of Related Party Notes” below for subsequent activity related to the balance originating from this note.

of Related Party Notes

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

following the execution of the Consolidated Note Amendment, CP elected to convert $ 11.5 million of outstanding principal into a Pre-Funded

Warrant exercisable at issuance for up to 525,114 shares of Common Stock having a fair value of approximately $ 2.9 million (the “CP

Warrant Conversion”).

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 $ 2.3 million, extend the

maturity date to December 31, 2025, and provide that the Restated Junior Note could be converted into Common Stock of the Company or,

at GIC’s election, Pre-Funded Warrants, in each case at a conversion price of $ 4.65 .

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 492,204 shares of Common Stock having a fair value of approximately $ 2.7

million (the “GIC Warrant Conversion”, and, collectively with the CP Warrant Conversion, the “Related Party Warrant

Conversions”).

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”).

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 $ 10 million was determined to exceed

the undiscounted future cash flows of the Related Party Notes as modified by the Related Party Debt Restructuring by approximately $ 10

million (the “Related Party Debt Restructuring Excess Carrying Value”).

The aggregate carrying value of the Related Party

Notes was thus written down to the amount of the undiscounted future cash flows on the Related Party Notes from the Related Party Debt

Restructuring date to maturity (the “Restructured Related Party Debt”).

Further, as the Related Party Lenders are related

parties of the Company, the Related Party Debt Restructuring Excess Carrying Value was accounted for as a capital transaction and no

gain or loss was recognized related to the restructuring.

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 $ 0 at December 31, 2024.

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 $ 1.5 million to the Company.

The 2024 CP Note bore interest at a rate of 10 % per annum, would mature in full on July 1, 2025, and could be prepaid without any fee

The note was subsequently amended to lend up to $ 3.0 million to the Company.

The 2024 CP Note was secured by the Company’s

assets and ranked junior to existing secured indebtedness of the Company.

The 2024 CP Note could be converted into Common Stock of the

Company or, at CP Acquisitions’ election, Pre-Funded Warrants with an exercise price of $ 0.001 per share, in each case at a conversion

price of $ 3.9495 .

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 $0 at December 31, 2024.

Green Thumb Convertible Note

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 10.0 % annualized interest rate, with interest to be paid on the first calendar day of each September

and March while the Green Thumb Note is outstanding, in cash, beginning January 1, 2025.

The principal amount of the Green Thumb Note

will be payable on the maturity date.

The Green Thumb Note provides for advances of up to $ 20 million in the aggregate, of which $ 10

million was advanced upon issuance.

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 14 % from the date of a default or event of default, or, only in connection with

certain events of default.

the Investor elects to convert the Green Thumb Note, the conversion price per share will be $ 3.158 , subject to customary adjustments

for certain corporate events.

The conversion of the Green Thumb Note will be subject to certain customary conditions and the receipt

of stockholder approval to the extent necessary under Nasdaq listing rules.

under the Green Thumb Note during the year ended December 31, 2024 totaled $ 10 million which are recorded on the Company’s consolidated

balance sheets in related party debt.

Interest expense incurred on the Green Thumb Note amounted to approximately $ 156 thousand for the

year ended December 31, 2024.

of December 31, 2024, future minimum principal payments on all debt positions, excluding accrued interest amounts, were as follows:

ending December 31 (In thousands)

future payments

determination if any arrangement contained a lease at its inception was done based on whether or not the Company has the right to control

1 unchanged sentence

The lease term was determined assuming the exercise of options that were reasonably certain to

Leases with a lease term of 12 months or less at inception were not reflected in the Company’s 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.

the implicit interest rate in its leases was generally not known, the Company’s used its incremental borrowing rate as the discount

rate for purposes of determining the present value of its lease liabilities.

At December 31, 2023 and 2022, the Company’s weighted-average

discount rate utilized for its leases was 7.51 % and 7.29 %, respectively.

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

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 9.67 % and 7.51 %,

respectively.

Company had several non-cancelable finance leases for machinery and equipment, all of which ended or were terminated during 2023.

of December 31, 2024, the Company had no active finance leases.

a contract contained lease and non-lease elements, both were accounted for as a single lease component.

Company had several non-cancelable finance leases for machinery and equipment.

As of December 31, 2023 the Company had no active finance

Company had 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 one year to five years, some of which include options to extend.

Some leases include payment for communal area maintenance associated with the property.

TO CONSOLIDATED FINANCIAL STATEMENTS

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 one year to four years , some of which include options to extend.

Some leases include payment for communal

area maintenance associated with the property.

Cash paid for operating leases during the years ended December 31, 2024 and 2023 were $ 0.5

million and $ 1.0 million, respectively.

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 $ 50 thousand in the period, calculated as the difference between the remaining right-of-use asset and lease liability

at the time of termination.

information on the Company’s operating and financing lease activity was as follows:

Ended December 31,

(In thousands)

Operating lease cost

Finance lease cost:

Amortization of right-of-use

of right-of-use assets

on lease liabilities

Total lease cost

Ended December 31,

Year Ended December 31,

(In thousands) 2024 2023

Weighted-average remaining lease term –

operating leases

Weighted-average remaining lease term –

finance leases

Weighted-average discount rate

– operating leases

Weighted-average discount rate – finance

Right-of-use, net

Property and equipment, net

Operating lease liabilities,

Weighted-average remaining lease term – operating leases 2.15 years 3.09 years

Weighted-average discount rate – operating leases 9.67 % 7.51 %

Sheet Location

lease right-of-use assets

Operating lease right-of-use assets

lease liabilities, current

Operating lease liabilities, current

2 unchanged sentences

operating lease liabilities

Finance lease liabilities,

Accrued expenses and other current liabilities

lease liabilities, non-current

Other non-current liabilities

finance lease liabilities

of operating and finance lease liabilities as of December 31, 2023 are as follows:

December 31 (In thousands),

Total minimum lease

Less imputed interest

Total lease liabilities

TO CONSOLIDATED FINANCIAL STATEMENTS

11 — Stockholders’ Equity

July 11, 2022, the Company increased its authorized number of shares to 8,000,000 , consisting of:

5,000,000 shares of Common Stock, par

value $ 0.001 per share and 3,000,000 shares of preferred stock, par value $ 0.001 per share.

On January 9, 2020, the Company designated

105,000 shares of the 3,000,000 authorized shares of Preferred Stock, as Series A Convertible Preferred Stock (“Series A Preferred

March 1, 2023, the Company further increased its authorized number of shares to 13,000,000 , consisting of:

10,000,000 shares of Common

Stock, par value $ 0.001 per share and 3,000,000 shares of preferred stock, par value $ 0.001 per share.

January 25, 2022, the Company entered into a Securities Purchase Agreement (the “Securities Agreement”) with an institutional

investor and other accredited investors for the sale by the Company of 12,253 shares (the “SA Shares”) of Common Stock, pre-funded

warrants (the “Pre-Funded Warrants”) to purchase up to an aggregate of 7,853 shares of Common Stock and warrants to purchase

up to an aggregate of 15,079 shares of Common Stock (the “Common Warrants” and, collectively with the Pre-Funded Warrants,

the “SA Warrants”), in a private placement offering.

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 per share.

to certain ownership limitations, the SA Warrants are exercisable six months from issuance.

Each Pre-Funded Warrant was exercisable into

one share of Common Stock (as adjusted from time to time in accordance with the terms thereof).

Each Common Warrant is exercisable into

one share of Common Stock at a price per share of $ 1,496.00 (as adjusted from time to time in accordance with the terms thereof) and

will expire on the fifth anniversary of the initial exercise date.

The institutional investor that received the Pre-Funded Warrants fully

exercised such warrants in March 2022.

Chang, Chairman and Chief Executive Officer (“CEO”) of the Company, and Stuart Wilcox, who formerly served as our Chief Operating

Officer, and at the time he was a member of the Company’s 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.

12 — Stockholders’ Equity (Deficit)

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 184,000 shares of its Common Stock, and, in lieu

of Common Stock to certain investors that so chose, Pre-Funded Warrants to purchase 264,246 shares of its Common Stock (the “S-1

The public offering price for each share of Common Stock was $ 5.70 , and the offering price for each Pre-Funded Warrant

is $ 5.685 , which equals the public offering price per share of the Common Stock, less the $ 0.015 per share exercise price of each Pre-Funded

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company issued 4,482 warrants to purchase Common Stock to Alexander Capital (the “Placement Agents Warrants”).

The Placement

Agents Warrants were classified as equity and recorded under additional paid-in capital in the consolidated balance sheets.

The Placement

Agents Warrants have a five-year term and exercise price of 100 % of the offering price, and are subject to adjustment for stock splits,

reverse stock splits, stock dividends, and similar transactions.

The Placement Agents Warrants will be exercisable on a cash basis, unless

there is not an effective registration statement covering the issuance of the shares issuable upon exercise of the Placement Agents Warrants

or if shareholder approval for the full exercise of the Placement Agents Warrants are not received, in which case the Placement Agents

Warrants will also be exercisable on a cashless exercise basis at Alexander Capital’s election.

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 $ 7.80 , exercise price of $ 5.70 , term of five years , volatility of 128 %, risk-free rate

of 4.32 %, and expected dividend rate of 0 %).

The grant date fair value of these Placement Agents Warrants was estimated to be $ 31 thousand

on February 27, 2024, and is reflected within additional paid-in capital as of December 31, 2024.

Line of Credit Facility

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 $ 15.0 million of

the Company’s Common Stock, subject to certain limitations, from time to time and at our sole discretion over the 36-month term

of the Ionic Agreement.

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 $ 250,000 and $ 750,000 of shares of Common Stock on such business day, at a purchase price per share that will be equal to 93 %

(or 80 % if the Common Stock is not then trading on the Nasdaq Capital Market) of the lowest daily VWAP over a specified measurement period

beginning after the delivery of the purchase notice, as described further in the Purchase Agreement (each, a “Regular Purchase”).

The Ionic Agreement also permitted the Company to deliver an exemption purchase notice for $ 400,000 on the date of signing, with the

shares so purchased to be delivered following the Commencement Date, and the Company delivered an exemption purchase notice for $ 400,000

for the purchase by Ionic of 189,645 shares of Common Stock.

On November 5, 2024, the Company issued 189,645 shares of Common Stock to

The Company will control the timing and amount of any sales of Common Stock to Ionic pursuant to the Ionic Agreement.

no right to require the Company to sell any shares of Common Stock to Ionic, but Ionic is obligated to make purchases as the Company

directs, subject to certain conditions.

Party Warrant Issuance

May 21, 2024, in connection with the Consolidated Note Amendment, the Company issued 492,204 and 525,114 Pre-Funded Warrants to GIC Acquisitions

and CP (the “Related Party Pre-Funded Warrants”), respectively, in exchange of notes payable amounting approximately to $ 2.29

million and $ 11.5 million, respectively.

The Related Party Pre-Funded Warrants can be used to purchase Company’s Common Stock with

par value of $ 0.001 at an exercise price of $ 0.015 .

The Related Party Pre-Funded Warrants have been identified as freestanding financial

instruments and were determined not to be indexed to the Company’s own stock.

Accordingly, the Warrants are precluded from being

classified within equity and classified as a liability with subsequent changes in fair value recognized each reporting period in earnings.

The fair value of the Related Party Pre-Funded Warrants on the issuance date was $ 5,600,334 determined as the intrinsic value.

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 50 % to greater than 50 %.

The classification of the Related Party Pre-Funded

Warrants was reassessed upon the modification and the Related Party Pre-Funded Warrants were determined to meet all of the additional

requirements for equity classification.

Accordingly, as of June 30, 2024, the Company remeasured the Related Party Pre-Funded Warrants

to its fair value immediately prior to the modification and recognized the change in fair value of approximately $ 1.2 million in earnings.

The Company then reclassified the Pre-Funded Warrant liability to stockholders’ equity at its post-modification fair value of $ 6.8

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $ 3.1 million.

The fair value, as of August 28, 2024,

of $ 3,723,383 was reclassified to a warrant liability.

As a result of the warrant amendments and the subsequent issuance of 189,645 shares

of Common Stock to Ionic at an effective purchase price of $ 2.109 per share of Common Stock, the number of shares of Common Stock underlying

the Related Party Pre-Funded Warrant held by CP was adjusted to 5,452,288 and the number of shares of Common Stock underlying the Related

Party Pre-Funded Warrant held by GIC Acquisition was adjusted to 1,085,122 .

On August 30, 2024, CP partially exercised its Pre-Funded

Warrant and entities affiliated with Raymond Chang and I-Tseng Jenny Chan received an aggregate of 383,127 shares of Common Stock upon

the exercise.

September 27, 2024, the Company executed an amendment to the Related Party Pre-Funded Warrants to remove the Adjustment Provisions.

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 $ 18,392,143 .

The fair value as of September 27, 2024 of $ 20,770,707 was reclassified to equity.

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

203,988 shares (the “Shares”) of Common Stock, and pre-funded warrants (the “November 2024 Warrants”) to purchase

up to an aggregate of 949,515 shares of Common Stock, in a private placement offering.

The purchase price for one share of Common Stock

is $ 22.30 and the purchase price for one November 2024 Warrant is $ 22.2999 .

Each Pre-Funded Warrant is exercisable

into one share of Common Stock at a price per share of $ 0.0001 (as adjusted from time to time in accordance with the terms thereof) and

will expire when such November 2024 Warrant is fully exercised.

Benjamin Kovler, Chairman and

Interim Chief Executive Officer of the Company, participated in the private placement to purchase 10,000 shares of Common Stock on the

same terms as other investors except for a purchase price of $ 38.76 .

gross proceeds to the Company from the private placement were approximately $ 25.9 million, before deducting the placement agent’s

fees and other offering expenses, and excluding the proceeds, if any, from the exercise of the SA Warrants.

of Common Stock in Connection with Acquisitions

October 1, 2021, the Company issued an aggregate of 3,332 shares of its Common Stock to the Precision and Cascade shareholders in connection

with the Company’s acquisition of Precision and Cascade.

On August 17, 2022, the Company issued an additional 435 shares of its

Common Stock to the Precision and Cascade shareholders for contingent liabilities.

December 31, 2021, the Company issued an aggregate of 1,202 shares of its Common Stock to the PurePressure shareholders in connection

with the Company’s acquisition of PurePressure.

On January 31, 2023, the remaining 372 Holdback Buyer Shares were released, including

6 Holdback Buyer Shares that were withheld to cover a tax indemnification claim in accordance with the Purchase Agreement.

February 1, 2022, the Company issued an aggregate of 1,491 shares of its Common Stock to the Lab Society shareholders in connection with

the Company’s acquisition of Lab Society.

On April 28, 2023, the Company issued the remaining 499 Holdback Buyer Shares to the

Lab Society Owners in accordance with the Lab Society Merger Agreement.

The Marketing Offering

October 18, 2022, the Company entered into the ATM Program with the Agent pursuant to which it may issue and sell, from time to time,

shares of its Common Stock having an aggregate offering price of up to $ 50 million, depending on market demand, with the Agent acting

as an agent for sales.

The ATM Program allowed the Company to sell shares of Common Stock pursuant to specific parameters defined by

the Company as well as those defined by the SEC and the ATM Program agreement.

As of December 31, 2022, the Company sold 306,628 shares

of Common Stock, under the ATM at an average price of $ 50.85 per share, resulting in gross proceeds of $ 15.6 million, and net proceeds

of $ 15.0 million after commissions and fees to the Agent totaling $ 0.5 million and legal fees totaling $ 0.1 million.

$ 3.0 million of

the proceeds under the ATM Program were used to repay amounts due to the Investor under the Exchange Note.

The Company used net proceeds

generated from the ATM Program for working capital and general corporate purposes, including repayment of indebtedness, funding its transformation

initiatives and product category expansion efforts and capital expenditures.

Due to the late filing of this Annual Report on Form 10-K,

the Company is no longer eligible to utilize the registration statement on Form S-3 relating to the ATM Program, and does not anticipate

any further sales under the ATM Program in the foreseeable future.

TO CONSOLIDATED FINANCIAL STATEMENTS

Confidentially

Marketed Public Offering

December 16, 2022, the Company issued 594,232 shares of its Common Stock, Pre-Funded 2022 Warrants to purchase 75,000 shares of its Common

Stock and accompanying December 2022 Warrants to purchase 1,338,471 shares of the Company’s Common Stock.

The Company received

net proceeds from the Offering of approximately $ 8.2 million, after deducting underwriting discounts and commissions and estimated expenses.

The Company intends to use the net proceeds from the Offering, together with its existing cash resources, for working capital and general

corporate purposes, which may include capital expenditures and repayment of debt.

Pre-Funded 2022 Warrants were exercisable immediately upon issuance at an exercise price of $ 0.001 per share and do not have an expiration

The December 2022 Warrants were exercisable immediately and have a term of exercise equal to five years from the initial exercise

date at an exercise price of $ 13.00 per share.

The offering price for the securities was $ 13.00 per share (or $ 12.98 for each Pre-Funded

2022 Warrant).

December 2022 Warrants may not be exercised by the holder to the extent that the holder, together with its affiliates, would beneficially

own, after such exercise more than 4.99 % of the shares of the Company’s Common Stock then outstanding (subject to the right of

the holder to increase or decrease such beneficial ownership limitation upon notice to the Company, provided that such limitation cannot

exceed 9.99 %) and provided that any increase in the beneficial ownership limitation shall not be effective until the sixty-first day

after such notice is delivered.

Pre-Funded 2022 Warrants were classified as a component of permanent equity and the December 2022 Warrants were liability-classified

and were recorded at the issuance date using a relative fair value allocation method.

The Pre-Funded 2022 Warrants are equity-classified

because they are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments,

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.

The December 2022 Warrants are liability-classified as there is a volatility

floor and these warrants are not indexed to the Company’s own stock.

of December 31, 2023 and 2022, the Company valued the December Warrants using the Black-Scholes option-pricing model and determined the

fair value at $ 1.3 million and $ 5.9 million, respectively.

The key inputs to the valuation model included the annualized volatility of

98.0 % and the expected term of about 5 years.

Chang, Chairman and CEO, participated in the Offering and purchased 115,385 shares of Common Stock and 230,769 December 2022 Warrants

for an aggregate purchase price of approximately $ 1.5 million.

information regarding the Company’s December 2022 Warrants may be found in Note 1 –

Overview, Basis of Presentation, and Significant Accounting Policies and Note 4 –

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

fees and other offering expenses of approximately $ 0.1 million.

The November 2024 Warrants were classified as a component of stockholders’

They are immediately exercisable and permit the holders to receive a fixed number of shares of Common Stock upon exercise.

addition, such warrants do not provide any guarantee of value or return.

October 2023, the Company issued 50,000 warrants to Mack Molding Co.

3 unchanged sentences

for stock splits, reverse stock splits, stock dividends, and similar transactions.

The warrants will

be exercisable on a cash basis, unless there is not an effective registration statement covering the resale of the shares issuable upon

exercise of the warrants or if shareholder approval for the full exercise of the warrants are not received, in which case the Modified

Warrant will also be exercisable on a cashless exercise basis at the Investor’s election.

The Mack Warrants will be exercisable on a cash basis,

unless there is not an effective registration statement covering the resale of the shares issuable upon exercise of the warrants or if

shareholder approval for the full exercise of the warrants are not received, in which case the Mack Warrant will also be exercisable

on a cashless exercise basis at the Investor’s election.

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 (i.e., share price of $ 2.79 , exercise price of $ 4.00 , term of three years , volatility of 138 %, risk-free rate

of 5.03 %, and expected dividend rate of 0 %).

The grant date fair value of these Investor Warrants was estimated to be $ 1.6 million on

October 18, 2023 and is reflected within additional paid-in capital as of December

TO CONSOLIDATED FINANCIAL STATEMENTS

October 27, 2023, as a condition precedent to the Note Purchase, the Company entered into a letter agreement (the “October Letter

Agreement”) with the holder of the Exchange Note and the Convertible Note.

Pursuant to the agreement, the Company agreed to exchange

$ 3.0 million in principal, approximately $ 95,000 in unamortized debt premium, and approximately $ 1.1 million in accrued but unpaid interest

outstanding under the Exchange Note for a warrant to purchase 2,809,669 shares of common stock (the “Exchange Warrant”).

Additionally, the Company agreed to exchange the 375,629 shares of common stock held in abeyance for the Investor under the terms of

the Letter Agreement for a warrant to purchase 375,629 shares of common stock (the “Abeyance Warrant”).

The Company concluded

that the Exchange Warrant and the Abeyance Warrant are both equity classified at issuance and recorded within additional paid-in capital

in the accompanying consolidated balance sheet.

The Company recognized the Exchange Warrant and Abeyance Warrant at fair value at issuance

in the amounts of $ 3.9 million and $ 0.4 million, respectively.

Resulting from the exchange within the October Letter Agreement, the Company

recognized a gain on debt extinguishment of $ 320,125 included within the accompanying consolidated statement of operations for the year

ended December 31, 2023.

warrant has an exercise price of $ 0.001 per share, was exercisable upon issuance, has a term of five years from the date of issuance

and is exercisable on a cash basis or on a cashless exercise basis at the holder’s election.

Exchange Warrant provides that in the event that Raymond Chang or his affiliates acquire securities from the Company, exercise convertible

securities or amend the terms of convertible securities at a purchase or conversion price lower than $ 1.46 , then the number of shares

of common stock underlying Exchange Warrant will be increased to an amount equal to $ 3.0 million divided by such purchase or conversion

price, subject to proportional adjustment in the event the Exchange Warrant has been partially exercised.

Additionally, in the event

that the Company has not issued equity securities in exchange for gross proceeds of at least $ 3.0 million to Mr.

Chang or his affiliates

(subject to certain offsets) by the third calendar day after the date when the Company receives stockholder approval, then on December

26, 2023, the number of shares of common stock underlying Exchange Warrant will be increased to an amount equal to $ 3.0 million divided

by the Minimum Price as defined under Nasdaq listing rules, subject to proportional adjustment in the event the Exchange Warrant has

been partially exercised.

Letter Agreement requires that the Company issue equity securities to Mr.

Chang or his affiliates for aggregate gross proceeds of at

least $ 3.0 million, minus any funds advanced by Mr.

Chang to the Company since July 1, 2023.

at the date of issuance.

The grant date fair value of these Investor Warrants was estimated to be $ 1.6 million on October 18, 2023 and

is reflected within additional paid-in capital as of December 31, 2023.

These warrants were terminated a part of the December 16, 2024

13 — Stock-Based Compensation and Employee Benefit Plans

Equity Incentive Plan

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 replaced the 2020 Stock Option Plan (the “2020 Plan”).

The 2022 Plan 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 26,483 shares, which includes the 10,000 shares authorized under

the 2022 Plan, plus the rollover of 16,483 issued and outstanding awards under the 2020 Plan.

Shares will be deemed to have been issued

under the 2022 Plan solely to the extent actually issued and delivered pursuant to an award.

If any award granted under the 2020 Plan

or the 2022 Plan expires, is canceled, terminates unexercised or is forfeited, the number of shares subject thereto is again available

for grant under the 2022 Plan.

The 2022 Plan shall continue in effect, unless sooner terminated, until the tenth anniversary of the date

on which it is adopted by the Board of Directors.

As of December 31, 2023, there were 10,310 shares of Common Stock available to be granted

under the Company’s 2022 Plan.

Company’s stock compensation expense was $ 2.7 million an d $ 4.3 million for the year ended

December 31, 2023 and 2022 , respectively.

TO CONSOLIDATED FINANCIAL STATEMENTS

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 1,765 shares and 16,667 additional shares issued upon approval by the Board

of Directors on January 8, 2024.

On August 12, 2024, the Company’s stockholders approved an amendment to the 2022 Plan to increase

the number of shares issuable thereunder by 166,667 .

Shares will be deemed to have been issued under the 2022 Plan solely to the extent

actually issued and delivered pursuant to an award.

The 2022 Plan shall continue in effect, unless sooner terminated, until the tenth

anniversary of the date on which it was adopted by the Board of Directors.

As of December 31, 2024, there were 56,324 shares of Common

Stock available to be granted under the Company’s 2022 Plan.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company’s stock compensation expense from continuing operations was $ 1.2 million an d $ 2.7

million for the years ended December 31, 2024 and 2023 ,

respectively.

Company’s stock compensation expense from discontinued operations was $ 132 thousand an d $ 262

thousand for the years ended December 31, 2024 and

2023 , respectively.

the year ended December 31, 2024, there were no options granted or exercised under the Company’s stock option plans.

period, there were 23 options expired with a weighted average exercise price of $ 10,710.00 .

There were 216 and 688 options outstanding

with a weighted average exercise price of $ 18,610.56 and $ 23,938.80 as of December 31, 2024 and 2023, respectively.

There were 210 options

vested and exercisable with a weighted average exercise price of $ 18,725.71 as of December 31, 2024.

There were 216 options vested and

expected to vest with a weighted average exercise price of $ 18,610.56 as of December 31, 2024.

of December 31, 2024, total unrecognized compensation expense related to unvested options was $ 6,302 , which is expected to be recognized

over a weighted average period of 0.27 years.

options granted under the Company’s 2022 Plan are generally non-qualified and are granted with an exercise price equal to the market

19 unchanged sentences

The expected lives for such grants were based on the simplified method for employees and

arriving at stock-based compensation expense, the Company estimates the number of stock-based awards that will be forfeited due to employee

The Company’s forfeiture assumption is based primarily on its employee turnover historical experience.

If the actual

forfeiture rate is higher than the estimated forfeiture rate, then an adjustment will be made to increase the estimated forfeiture rate,

which will result in a decrease to the expense recognized in the Company’s consolidated financial statements.

If the actual forfeiture

rate is lower than the estimated forfeiture rate, then an adjustment will be made to lower the estimated forfeiture rate, which will

result in an increase to expense recognized in the Company’s consolidated financial statements.

The expense the Company recognizes

in future periods will be affected by changes in the estimated forfeiture rate and may differ significantly from amounts recognized in

the current period.

Forfeitures are accounted for when they occur.

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)

Weighted-Average

Exercise Price

(In thousands, except share and per share data)

Options outstanding at January 1, 2023

Options outstanding at December 31, 2023

Options outstanding at

December 31, 2023

Options vested and exercisable

as of December 31, 2023

Options vested and expected

to vest as of December 31, 2023

of December 31, 2023, total unrecognized compensation expense related to unvested options under the Company’s 2022 Plan was $ 0.4

million, which is expected to be recognized over a weighted average period of 0.2 years.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

following table summarizes information about options vested and exercisable at December 31, 2024:

Vested and Exercisable

Weighted-Average

Remaining Contractual Life

Weighted-Average

Options Vested and Exercisable

Price ($) Number of Options Weighted-Average

Remaining Contractual

Life (Years) Weighted-Average

Exercise Price

$ 14,580.00 84 3.08 $ 14,580.00

$ 6,840.00 73 0.97 $ 6,840.00

$ 41,520.00 49 4.39 $ 41,520.00

$ 43,470.00 4 6.22 $ 43,470.00

following table summarizes information about options expected to vest after December 31, 2024:

Vested and Expected to Vest

Weighted-Average

Remaining Contractual Life

Weighted-Average

Options Vested and Expected to Vest

Price ($) Number of Options Weighted-Average

Remaining Contractual

Life (Years) Weighted-Average

Exercise Price

$ 14,580.00 90 2.61 $ 14,580.00

$ 6,840.00 73 0.97 $ 6,840.00

$ 41,520.00 49 4.39 $ 41,520.00

$ 43,470.00 4 6.22 $ 43,470.00

the 2022 Plan, the Company may grant restricted stock units to employees, directors and officers.

5 unchanged sentences

units is recognized using a straight-line attribution method over the vesting period.

November 28, 2023, the Company granted an aggregate of 1,774,409 restricted stock units pursuant to its 2022 Plan to its officers, directors

and employees.

The vesting of the RSUs is subject to future shareholder approval of an amendment to the Plan to increase the shares available

for issuance thereunder by an amount that is sufficient for issuance of the underlying shares.

following table presents restricted stock unit activity under the 2022 Plan for the year ended December 31, 2024:

Number of Shares

Unvested at December 31, 2021

Unvested at December 31, 2022

Unvested at January

Unvested at December 31, 2023

at December 31, 2024

of December 31, 2024, total unrecognized compensation expense related to unvested restricted stock units was $ 1.4 million, which is expected

to be recognized over a weighted average period of 0.74 years.

TO CONSOLIDATED FINANCIAL STATEMENTS

Employee Stock Purchase Plan

1 unchanged sentence

2022 Employee Stock Purchase Plan (“ESPP”).

The Company has initially reserved 2,500 shares of Common Stock for issuance

under the ESPP.

On December 31, 2023, 2,500 shares were available for future issuance.

The Company initially reserved 167 shares of Common Stock for issuance under

On December 31, 2024 and 2023, no shares were available for future issuance.

the ESPP, eligible employees are granted options to purchase shares of Common Stock at the lower of 85 % of the fair market value of the

3 unchanged sentences

No participant may purchase more than $ 25,000 worth of Common Stock annually.

No Common Stock was granted under the 2022 ESPP during

the year ended December 31, 2023.

During the years ended December 31, 2024 and 2023, 0 and

167 of Common Stock was granted under the 2022 ESPP.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company maintains an employee’s savings and retirement plan under Section 401(k) of the Internal Revenue Code (the “401(k)

6 unchanged sentences

following tables present all warrant activity of the Company for the year ended December

31, 2023 and 2022:

Weighted-Average

31, 2024 and December 31, 2023:

Exercise Price

Warrants outstanding at December 31, 2021

Warrants outstanding at December 31, 2022

Warrants outstanding

at January 1, 2023

Warrants outstanding at December

Company received proceeds from the exercise of cashless warrants of $ 0 and $ 2 thousand for the for the years ended December 31, 2023,

and 2022, respectively.

outstanding at December 31, 2024

Company received proceeds from the exercise of Placement Agent Warrants of $ 26,000 and Pre-Funded Warrants of $ 10,000 for the year ended

December 31, 2024.

15 — Income Taxes

financial reporting purposes, the net pre-tax book income and/or loss for the U.S.

and foreign entities, in the aggregate, was:

(In thousands)

financial reporting purposes, the net pre-tax book income and/or loss from continuing and discontinued operations for the U.S.

entities, in the aggregate, was:

United States

TO CONSOLIDATED FINANCIAL STATEMENTS

tax expense consisted of the following for the years ended December 31, 2023 and December 31, 2022:

(In thousands)

reconciliation between the Company’s effective tax rate on income from continuing operations and the statutory tax rate for the

years ended December 31, 2023 and December 31, 2022 is as follows:

(In thousands)

Current tax at U.S.

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:

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:

Current tax at

statutory rate

Nondeductible/nontaxable items

Foreign operations

True-up and other

Valuation allowance

Income tax expense

tax expense (benefit)

income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting

2 unchanged sentences

the timing and amount of which are uncertain.

TO CONSOLIDATED FINANCIAL STATEMENTS

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

following items comprise the Company’s net deferred tax assets and liabilities as of December 31, 2024 and December 31, 2023:

(In thousands)

Deferred tax assets :

Net operating loss carryforward

Accruals, reserves, and other

Stock-based compensation

Research and development tax credit carryforward

Lease liability

Intangible assets

Capitalized sec.

Total Deferred Tax Asset

Valuation allowance

Deferred income tax assets, net of VA

Deferred tax liabilities:

Prepaid Expenses

Right-of-Use Asset

operating loss carryforward

reserves, and other

and development tax credit carryforward

tax positions

Deferred Tax Asset

income tax assets, net of Valuation Allowance

tax liabilities:

Deferred Tax Liability

Net Deferred Tax Asset/(Liability)

Deferred Tax Asset/(Liability)

Company continually evaluates the likelihood of the realization of deferred tax assets and adjusts the carrying amount of the deferred

7 unchanged sentences

allowance has been applied to deferred tax assets.

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 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 US must be amortized

over a 5-year period if incurred, and R&E expenses incurred outside the US 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).

the year ended December 31, 2023, the Company performed an analysis based on available guidance and determined that it will not impact

(increase) taxable income.

The Company will continue to monitor this issue for future developments and its impact on taxable income.

of the year ended December 31, 2023, the Company has federal and state net operating loss carryforwards of approximately $ 144.2 million

and $ 87.7 million respectively.

Federal net operating loss carryforwards in the amount of $ 0.7 million begin expiring in 2036 and approximately

$ 143.5 million have an indefinite life.

Federal NOL carryforwards generated after tax year 2021 are subject to an 80 % limitation on taxable

income, do not expire and will carryforward indefinitely.

State net operating loss carryforwards in the amount of $ 82.3 million begin

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.

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 $ 197.6 million and $ 128.7 million respectively.

Federal net operating loss carryforwards in the amount of $ 0.7 million begin

expiring in 2036 and approximately $ 196.9 million have an indefinite life.

TO CONSOLIDATED FINANCIAL STATEMENTS

utilization of the Company’s net operating losses may be subject to a U.S.

federal limitation due to the “change in ownership

provisions” under Section 382 of the Internal Revenue Code and other similar limitations in various state jurisdictions.

Such limitations

may result in a reduction of the amount of net operating loss carryforwards in future years and possibly the expiration of certain net

operating loss carryforwards before their utilization.

(In thousands)

NOL Available

Federal - Indefinite

Subtotal - Federal

State - Indefinite

Federal net operating loss (“NOL”) carryforwards

generated after tax year 2021 are subject to an 80 % limitation on taxable income, do not expire and will carryforward indefinitely.

net operating loss carryforwards in the amount of $ 115.8 million begin expiring in 2039 and approximately $ 12.8 million have an indefinite

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Such limitations may result in a reduction

of the amount of net operating loss carryforwards in future years and possibly the expiration of certain net operating loss carryforwards

before their utilization.

Subtotal - Federal

Foreign - Indefinite

Subtotal - State

Subtotal - Foreign

6 unchanged sentences

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 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.

Company is also subject to certain non-income taxes such as value added taxes, sales taxes, and property taxes.

The Company has taken

certain positions that management feels, although not free from doubt, should not result in a successful challenge by certain tax authorities.

required by the uncertain tax position guidance in ASC No.

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 No.

740, Accounting for Income to all tax positions for which the statute of limitations remained

Any estimates of tax contingencies contain assumptions and judgments about potential actions by taxing jurisdictions.

and penalties related to uncertain tax positions would be included as part of the income tax provision.

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.

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.

August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted and signed into law.

Regarded as the reduced

version of the proposed Build Back Better Act, the IRS contains two main corporate income tax provisions, including a 15 % minimum tax

on the average annual adjusted financial statement income of corporations with profits over $ 1 billion over a three-year period, as well

as a 1 % excise tax on the corporate stock buybacks by domestic publicly traded corporations.

The Company is currently evaluating the

impact of the IRA on its financial statements for tax year 2023 but does not expect a material impact to the Company’s tax position.

TO CONSOLIDATED FINANCIAL STATEMENTS

— Net Loss Per Share

Tax Positions

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 $ 1.2 million.

If recognized, none of the unrecognized tax benefits would impact our effective tax

The following table summarizes the activity related to our unrecognized tax benefits (in thousands):

Unrecognized benefit – beginning of period

Prior period tax

position increases

period tax position increases

Unrecognized benefit –

end of period

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.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 16 — Net

Loss Per Share

loss per share calculations for all periods have been adjusted to reflect the Company’s reverse stock splits.

1 unchanged sentence

was calculated based on the weighted-average number of the Company’s Common Stock outstanding.

net loss per share is calculated using the weighted-average number 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 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 because the effect of dilutive securities outstanding during the periods, including options and warrants computed using

the treasury stock method, is anti-dilutive.

net loss per share is calculated using the weighted-average number of shares of Common Stock outstanding during the periods.

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.

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.

components of basic and diluted net loss per share were as follows:

Ended December 31,

(In thousands,

except share and per share data)

Net loss available

for common shareholders

$ ( 188,173 )

Weighted-average common shares outstanding – basic and diluted

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

thousands, except share and per share data)

loss attributable to Agrify Corporation from continuing operations

loss attributable to Agrify Corporation from discontinued operations

loss available for common shareholders

Weighted-average

common shares outstanding – basic and diluted

loss per share attributable to Common Stockholders – basic and diluted

Company’s potential dilutive securities, which include stock options, restricted stock units, and warrants, have been excluded

1 unchanged sentence

Therefore, the weighted-average

number of Common Shares outstanding used to calculate both basic and diluted net loss per share attributable to Common Stockholders is

The Company excluded the following potential Common Stock equivalents presented based on amounts outstanding at each period

end, from the computation of diluted net loss per share attributable to Common Stockholders for the periods indicated because including

them would have had an anti-dilutive effect:

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.

The Company excluded the following potential Common Stock equivalents presented based on amounts

outstanding at each period end, from the computation of diluted net loss per share attributable to Common Stockholders for the periods

indicated because including them would have had an anti-dilutive effect:

Ended December 31,

Shares subject to outstanding stock

Shares subject to unvested restricted stock

Shares subject to outstanding

Shares subject

to outstanding stock options

Shares subject to unvested

restricted stock units

subject to outstanding warrants

17 — Segment Reporting

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.

18 — Commitments and Contingencies

time to time, we 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.

TO CONSOLIDATED FINANCIAL STATEMENTS

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.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

& Mary’s Litigation

September 15, 2022, the Company provided a notice of default to Bud & Mary’s and certain related parties notifying such parties

that Bud & Mary’s was in default of its obligations under 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.

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”).

is seeking, among other relief, monetary damages in connection with alleged unfair or deceptive trade practices, breach of contract and

conversion arising from the 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.

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

$ 14.7 million note receivable balance due to the current litigation and the uncertainty of the customer’s ability to repay the balance.

The $ 14.7 million represents the amount of the contingent loss that the Company has determined to be reasonably possible and estimable.

The actual cost of resolving this matter may be higher or lower than the amount the Company has reserved.

If the Company is unable to

realize revenue from its TTK Solution offerings on a timely basis or at all, or if it incurs an additional loss as a result of the Bud

& Mary’s claim, the Company’s business and financial performance will be adversely affected.

On November 14, 2022, the

Company filed its answers and affirmative defenses to the Bud & Mary’s complaint and counterclaims.

The Company is seeking,

among other relief, monetary damages in connection with the breach of contract, breach of the implied covenant of good faith and fair

dealing, unjust enrichment, and enforcement of the guarantees.

Bud & Mary’s is permitted to file an amended complaint, and

Agrify will be permitted to make responsive filings, which may include an answer and counterclaim.

As of December 31, 2024, the allowance related to Bud & Mary’s was reduced to $ 14.4 million, reflecting a recovery of allowance

for credit losses resulting from a loan repayment of $ 330 thousand that was previously included in the allowance.

The $ 14.4 million represents

the amount of the contingent loss that the Company has determined to be reasonably possible and estimable.

The actual cost of resolving

this matter may be higher or lower than the amount the Company has reserved.

If the Company is unable to realize revenue from its TTK

Solution offerings on a timely basis or at all, or if it incurs an additional loss as a result of the Bud & Mary’s claim, the

Company’s business and financial performance will be adversely affected.

On November 14, 2022, the Company filed its answers and

affirmative defenses to the Bud & Mary Complaint and counterclaims.

The Company is seeking, among other relief, monetary damages in

connection with the breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and enforcement

of the guarantees.

This matter is still actively ongoing.

The parties are required to report on status to the court on March 21, 2025.

This matter is subject to the Cultivation sale escrow litigation reserve agreement where the Company was required to fund $ 1.5 million

in January 2025 into escrow for the benefit of settling this and other claims.

Construction Corp.

February 22, 2023, Bowdoin Construction Corp.

(“Bowdoin”) filed a complaint (the “Bowdoin Complaint”) in the

Superior Court of Massachusetts in Norfolk County naming the Company, Bud & Mary’s and certain related parties as defendants,

captioned 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.

Agrify Corporation, Bud & Mary’s Cultivation, Inc.

and BMLC2, LLC, case no.

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 $ 6.3 million due under the contract and related indemnification claims and mechanics’ liens.

The Company is entitled

to indemnification by Bud & Mary’s and intends to vigorously defend this claim .

BMLC2, LLC, case no.

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 $ 7.0 million due under the contract and related indemnification

claims and mechanics’ liens.

$ 6.3 million is included in accounts payable and $ 700 thousand is included in accrued expenses

and other current liabilities in the consolidated balance sheet.

Two of Bowdoin’s subcontractors, Hannon Electric, Inc.

Electric Supply Center Corp, have filed separate suits against Agrify in the amount of $ 1.498 million and $ 93 thousand,

respectively.

These amounts are part of the $ 7.0 million claimed in Bowdoin’s Complaint.

The Bowdoin suit and the

subcontractor suits have been consolidated.

The Company has denied liability in all such suits.

Bowdoin and Agrify are attempting to

work cooperatively to settle the subcontractor disputes.

The parties are otherwise in the discovery phase which concludes in June

This matter is subject to the sale of the Cultivation Business escrow litigation reserve agreement where the Company was

required to fund $ 1.5 million in January 2025 into escrow for the benefit of settling this and other claims.

December 2020, the Company entered into a five-year supply agreement with Mack Molding Co.

(“Mack”) pursuant to which Mack

will become a key supplier of VFUs.

became a key supplier of VFUs.

In February 2021, the Company placed a purchase order with Mack amounting to approximately $ 5.2 million

4 unchanged sentences

Company with increased scaling capabilities and the ability to meet the potential future demand of its customers more efficiently.

supply agreement contemplates that, following an introductory period, the Company will negotiate a minimum percentage of the VFU requirements

that the Company will purchase from Mack each year based on the agreed-upon pricing formula.

The introductory period is not time-based

but rather refers to the production of an initial number of units after which the parties have rights to adjust pricing and negotiate

a certain minimum requirements percentage.

supply agreement contemplated that, following an introductory period, the Company negotiated a minimum percentage of the VFU requirements

that the Company purchase from Mack each year based on the agreed-upon pricing formula.

The introductory period was not time-based but

rather referred to the production of an initial number of units after which the parties have rights to adjust pricing and negotiate a

certain minimum requirements percentage.

The Company believed this approach would result in both parties making a more informed decision

4 unchanged sentences

agreement, Mack had the contractual right to bill the Company for any inventory that had aged greater than nine months.

Due to the slowdown

Due to a slowdown

in the demand for the VFUs and the lack of a demand forecast that the Company could provide to the vendor, Mack exercised the right to

invoice the Company for the slow-moving inventory.

As of December 31, 2022, the Company owed Mack $ 8.4 million for purchased inventory

on behalf of the Company to produce VFUs, which is included in accounts payable in the consolidated balance sheet.

On March 2, 2023,

Mack filed an arbitration action seeking the amounts owed to Mack for purchased inventory.

On October 27, 2023, and effective as of October

18, 2023, Mack and the Company entered into a Modification and Settlement Agreement (the “Modification Agreement”)with respect

to the dispute.

Modification Agreement requires the Company to make payments of $ 500,000 and $ 250,000 to Mack on or before November 1, 2023 and February

15, 2024, respectively.

The Company has made the first of these two payments in the amount of $ 500,000 .

Following the November 1, 2023

payment, the Company is entitled to take possession of certain VFUs that were assembled under the Supply Agreement.

The Modification

Agreement also requires the Company to purchase from Mack 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.

The Company is required to pay a storage fee of

$ 25,000 per month for VFUs subject to the Modification Agreement.

TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022, the Company recognized a contingent liability in the amount

of $ 8.4 million, representing an estimate of the amount payable to Mack with respect to the original Mack purchase agreement, and which

was included in accounts payable in the consolidated balance sheet.

On March 2, 2023, Mack filed an arbitration action seeking the amounts

owed to Mack for purchased inventory.

On October 27, 2023, and effective as of October 18, 2023, Mack and the Company entered into a

Modification and Settlement Agreement (the “Modification Agreement”) with respect to the dispute rather than engaging in

litigation through the courts.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $ 500,000 and $ 250,000 to Mack and issued to Mack a warrant to purchase 750,000 shares of the Company’s

Common Stock.

In the first quarter of 2024, management derecognized the previously recognized contingent liability, resulting in a credit

of approximately $ 5.9 million, recorded within gain on settlement of contingent liabilities, on the consolidated statement of operations.

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 $ 1.0 million

prior to October 31, 2024 (the “October Payment”) and an additional $ 1.0 million prior to December 31, 2024.

has not made the October Payment as of the date hereof, however the Company is working with Mack to extend the date of the October Payment.

The Company also agreed to purchase at least 25 VFUs prior to October 31, 2024 and a further 25 VFUs between November 1, 2024 and December

Upon payment in accordance with the terms of the amendment, the Company will be entitled to certain residual inventory in the

possession of Mack, and the warrant issued to Mack will be terminated.

This matter was settled on December 16, 2024 as a precursor to

the Cultivation sale agreement and the corresponding warrants were terminated.

Electronics Litigation

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.

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:

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 seeks damages in the amount of $ 565,210 , plus attorneys’

fees, costs, and post-judgment interest.

The Company has filed an answer denying liability on TRC’s claims and is proceeding with

Scientific Litigation

June 15, 2023, the Company and its wholly-owned subsidiary Precision Extraction Newco, LLC (“Precision”), filed an Amended

Verified Complaint in the Court of Chancery of the State of Delaware against Sinclair Scientific, LLC (“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.

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.

September 2023, the Company settled a legal dispute with a specific customer which resulted in the recognition of a gain of approximately

(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 $ 0.5 million, plus attorneys’ fees, costs, and

post-judgment interest.

This matter was settled in January 2025 for no cost to the Company.

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

The Company terminated Valiant as the general contractor for, among other allegations, breach of contract and unjust

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 $ 1.4 million alleging overbilling, breach of the Valiant Agreement,

and violation of Chapter 18.27 and 19.86 of the Revised Code of Washington.

On March 5, 2024, McCutchan filed a complaint in the Superior

Court of Washington for King County naming the Company, Valiant, and certain related parties as defendants.

In the complaint, McCutchan

asserts two causes of action against the Company:

(1) breach of contract, (2) voidable contract, (3) interference with business or economic

expectancy, (4) unjust enrichment, and (5) defamation.

McCutchan’s claims are based on allegations of misrepresentations made by

the Company to pay McCutchan for work completed on the Project as well as a failure to pay under the Valiant Agreement.

In the alternative,

McCutchan is alleging the Assignment is void and not a valid contract.

McCutchan is seeking to collect no less than $ 3 million against

the Company and all other named defendants.

The parties are currently in the discovery process, initial discovery responses were due

on November 7, 2024.

This matter is subject to the Cultivation sale escrow litigation reserve agreement

where the Company was required to fund $ 1.5 million in January 2025 into escrow for the benefit of settling this and other claims.

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 $ 4.5 million for the Treehouse project

and $ 10.0 million in Washington for the Hannah Project.

Agrify has domesticated those judgments in Massachusetts and is seeking to enforce

them against Valiant, its successor in interest, Intrepid Investments LLC, and the principals of Valiant.

Agrify filed an action for

supplementary proceedings to collect on the judgments.

The action is in the early stages and there is no guarantee that the court would

award the full amount and no guarantee that Agrify would be able to successfully collect the full amount.

matter is subject to the Cultivation sale escrow litigation reserve agreement where the Company was required to fund $ 1.5 million in

January 2025 into escrow for the benefit of settling this and other claims.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 2023, the Company settled a legal dispute with a specific customer that resulted in the recognition of a gain of approximately

$ 0.9 million, of which $ 0.3 million was paid in October 2023, with the remaining approximate $ 0.6 million to be paid in equal monthly

5 unchanged sentences

to the Company in October 2023.

addition to the above, the Company entered into several additional vendor settlement agreements during the year ended December 31, 2023,

which resulted in an aggregate gain being recognized for the year ended December 31, 2023, and a corresponding reduction in accounts

payable owing by the Company, as of December 31, 2023, of approximately $ 1 million.

Purchase Agreement with Related Party – Ora Pharm

June 2022, the Company entered into an agreement with Ora Pharm (“Ora”) pursuant to which Ora will purchase approximately

$ 1.6 million in equipment from the Company, and Ora may purchase software services from the Company in the future.

Stuart Wilcox, the

Company’s former Chief Operating Officer, is the Chairman of Ora.

Company is currently pursuing 10 separate legal proceedings in attempting to collect approximately $ 1.8 million outstanding receivables.

The Company is not confident that all legal proceedings and collection efforts will yield in positive results or return of equipment.

On April 25, 2024, Medical

Investor Holdings, LLC dba Vertical Companies (“MIH”) filed a complaint against Agrify demanding $ 0.3 million.

MIH purchased

an XMU hydrocarbon extraction system from Precision in October 2021.

MIH chose not to include installation and training in the original

purchase but is now having problems with this equipment resulting in the claims against Precision, now owned by the Company.

was dismissed without prejudice by opposing counsel on August 1, 2024.

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 $ 150 thousand to $ 300 thousand.

Given the Company has determined

these losses are probable of occurring and reasonably estimable, an accrual was recorded in the amount of $ 150 thousand within general

and administrative expenses within the consolidated statement of operations.

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.

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.

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 $ 14,000 .

The Company made payment

and took collection of 25 VFUs in the second quarter of 2024.

The Company also granted Mack a second lien position on all Agrify assets.

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 $ 1.0 million and an additional $ 1.0 million prior to December 31, 2024.

The Company has not made the October Payment as of the date

hereof, however the Company is working with Mack to extend the date of the October Payment.

The Company also agreed to purchase at least

25 VFUs prior to October 31, 2024 and a further 25 VFUs between November 1, 2024 and December 31, 2024.

This commitment was satisfied

on December 16, 2024 as a precursor to the Purchase Agreement with CP.

Commitments and Contingencies

3 unchanged sentences

taxing authorities successfully pursue these claims, the Company could be subject to additional tax liabilities.

to Note 9 – Debt, included elsewhere in the notes to the consolidated financial statements for details of the Company’s future

minimum debt payments.

Refer to Note 10 – 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 14 –

Income Taxes, included elsewhere in the notes to the consolidated financial statements for information regarding income tax contingencies.

TO CONSOLIDATED FINANCIAL STATEMENTS

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.

AGRIFY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19 — Related Parties

3 unchanged sentences

Ended December 31,

(In thousands)

Cannae Policy Group

Topline Performance Group

Greenstone Holdings

Valiant Americas, LLC (1)

(1) On October 27, 2022, the Company provided notice to Valiant-America, LLC of its intention to begin winding up of Agrify-Valiant.

following table summarizes net related party (payable) receivable as of December 31, 2023 and December 31, 2022:

Green Thumb Industries

following table summarizes net related party payable as of December 31, 2024 and 2023:

Ended December 31,

(In thousands)

Valiant Americas, LLC (1)

Topline Performance Group

October 27, 2022, the Company provided notice to Valiant-America, LLC of its intention to

begin winding up of Agrify-Valiant.

July 12, 2023, the Company issued an unsecured promissory note in favor of GIC Acquisition, LLC, an entity that is owned and managed

by the Company’s Chairman and Chief Executive Officer.

Refer to Note 9 - Debt for further disclosure related to this Related Party

October 27, 2023, CP Acquisitions LLC, an entity affiliated with and controlled by Company’s

Chairman and Chief Executive Officer , purchased the Exchange Note and the Convertible Note .

Green Thumb Industries

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.

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 9 - Debt for further disclosure related to this Related Party

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

Thumb Convertible Note

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 $ 10,487 balance.

20 — Subsequent Events

Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements

Equity Incentive Plan Amendment

January 8, 2024, the shareholders of the Company approved an amendment to the Company’s 2022 Omnibus Equity Incentive Plan to increase

the number of shares of Common Stock available for issuance thereunder by 250,000 shares and to revise the minimum vesting provision

(the “Plan Amendment”).

TO CONSOLIDATED FINANCIAL STATEMENTS

and Restatement of Convertible and Junior Secured Promissory Note

January 25, 2024, the Company and the New Lender consolidated the outstanding principal and interest due under the Junior Secured Note

and the Exchange Note into the Convertible Note and amended and restated the Convertible Note consistent with the Note Restatement Proposal

(the “Restated Note”), with an outstanding principal amount of approximately $ 18.9 million at the time of issuance of the

Restated Note.

The Restated Note reduced the conversion price to $ 1.46 per share of common stock, increased the beneficial ownership

limitation to 49.99 % with respect to any individual or group, provided that the New Lender may assign its right to receive shares upon

conversion to Mr.

Chang and/or Ms.

Chan or their affiliates, in which case the 49.99 % beneficial ownership limitation will apply to each

of them individually, extended the maturity date to December 31, 2025 , increased the interest rate from 9 % to 10 % per annum, increased

the default interest from 15 % to 18 % per annum, and provided for the payment of interest every six months, or in lieu of cash interest

payments, the Company may issue shares as payments-in-kind at a conversion price equal to the higher of $ 1.46 or a 20 % discount to its

trailing seven-day volume weighted average price as of the date of interest payment.

Following the execution of the Restated Note, the

New Lender immediately elected to convert approximately $ 3.9 million of outstanding principal into an aggregate of 2,671,633 shares of

common stock, and assigned its rights to receive such shares to entities affiliated with Mr.

Chang and Ms.

Following the conversion,

there was $ 15.0 million in principal amount outstanding under the Restated Note.

January 25, 2024, GIC Acquisition, LLC (“GIC”) and the Company amended and restated the Junior Note to increase the principal

amount thereunder to $ 1.0 million and to extend the maturity date until June 30, 2024 (as amended and restated, the “Restated Junior

Deficiency Notices

January 30, 2024, the Company received formal notice that the Nasdaq Hearing 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.

on March 5, 2024, the Company received a deficiency letter from the Listing Qualifications Department of Nasdaq notifying the Company

that, for the last 30 consecutive business days, the bid price for the Company’s common stock had closed below $ 1.00 per share,

which is the minimum closing price required to maintain continued listing on the Nasdaq Stock Market under Nasdaq Listing Rule 5550(a)(2)

(the “Minimum Bid Requirement”).

The Notice has no immediate effect on the listing of the Company’s common stock on

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days to regain compliance with the Minimum

Bid Requirement.

To regain compliance with the Minimum Bid Requirement, the closing bid price of the Company’s common stock must

be at least $ 1.00 per share for a minimum of 10 consecutive trading days during this 180-day compliance period, unless the Staff exercises

its discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H).

The compliance period for the Company will expire

on September 3, 2024.

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.

could also impair the Company’s ability to raise capital.

November 28, 2023, the Company granted an aggregate of 1,774,409 restricted stock units pursuant to its 2022 Plan to its officers, directors

and employees.

Of the total shares granted, 860,486 restricted stock units were approved by the shareholder committee on January 8, 2024.

The vesting of the remaining RSUs is subject to future shareholder approval of an amendment to the Plan to increase the shares available

for issuance thereunder by an amount that is sufficient for issuance of the underlying shares.

February 27, 2024, the Company entered into a placement agency agreement (the “Agency Agreement”) with Alexander Capital,

LP as placement agent (the “Placement Agent”), pursuant to which the Company agreed to issue and sell an aggregate of 2,760,000

shares of its common stock, and, in lieu of common stock to certain investors that so chose, pre-funded warrants (the “Pre-Funded

Warrants”) to purchase 3,963,684 shares of its common stock (the “Offering”).

The public offering price for each share

of common stock was $ 0.38 , and the offering price for each Pre-Funded Warrant is $ 0.379 , which equals the public offering price per share

of the common stock, less the $ 0.001 per share exercise price of each Pre-Funded Warrant.

The Pre-Funded Warrants are exercisable at

A holder of Pre-Funded Warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially

own more than 4.99 % (or such other percentage, up to 9.99 %, as may be required by the investor) of the number of shares of common stock

outstanding immediately after giving effect to such exercise.

A holder of Pre-Funded Warrants may increase or decrease this percentage,

but not in excess of 9.99 %, by providing at least 61 days’ prior notice to the Company.

Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated

financial statements were issued.

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-K

Item 9A. Controls and Procedures