Item 1. Business
Item 1. Business.
Unless otherwise stated
or the context otherwise requires, references in this report to “Agrify”, the “Company,” “we,” “us,”
“our,” or similar references mean Agrify Corporation and its subsidiaries on a consolidated basis.
Business Overview
Agrify is a developer of branded innovative solutions for the cannabis
and hemp industries. Our Señorita brand offers consumers hemp-derived tetrahydrocannabinol (“THC”) beverages that mirror
well-known cocktails like a margarita – in three flavors – classic Lime Jalapeño Margarita, Mango Margarita, and Paloma.
Known for its clean, fresh taste and commitment to high-quality, natural ingredients, Señorita offers a low-sugar, low-calorie
alternative to alcoholic beverages and is available at top retailers including Total Wine, ABC Fine Wine & Spirits, and Binny’s
in nine U.S. states and Canada, with plans for expansion and future availability in premier on-premises destinations.
In addition to beverages,
Agrify has also historically been a leading provider of innovative cultivation and extraction solutions for the cannabis industry. Our
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.
Corporate Developments
Sale of Cultivation Business
On December 31, 2024, we
entered into and closed an Asset Purchase Agreement (the “Cultivation Purchase Agreement”) with CP Acquisitions, LLC (“CP”),
an entity affiliated with Raymond Chang, our former Chairman and Chief Executive Officer. Under the Cultivation Purchase Agreement, CP
acquired assets from us relating to our VFU business, including the related Agrify total turnkey (“TTK”) solution assets
and Agrify Insights TM software solutions (collectively, the “Cultivation Business”). The aggregate consideration
received by us for the sale of the Cultivation Business consisted of the assumption by CP of (i) all of our obligations pursuant secured
indebtedness then held by CP with an aggregate amount of principal and accrued interest of approximately $7 million, and (ii) certain
other liabilities relating to the Cultivation Business.
February 2025 Changes in Directors
On February 5, 2025 the Company announced that Peter Shapiro and Sanjay
Tolia were appointed to our Board of Directors (the “Board”) effective January 31, 2025. The Company also announced Richard
Drexler’s departure from the Board effective as of January 31, 2025.
Señorita Acquisition
On December 12, 2024, we closed an Asset Purchase Agreement (the “Purchase
Agreement”) for the acquisition of substantially all of the assets of Double or Nothing LLC (“Double or Nothing”) in
connection with its Señorita brand of beverages containing hemp-derived cannabinoids. Under the Purchase Agreement, we acquired
the Señorita brand of beverages and related assets from Double or Nothing relating to the portions of its business operating in
compliance with Canadian law and under the Agricultural Improvement Act of 2018 (the “2018 Farm Bill”) and applicable state
laws.
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Private Placement
On November 20, 2024, we raised gross proceeds of approximately $25.9
million in a private placement following the closing of certain securities purchase agreements with institutional investors and other
accredited investors. In connection with the private placement, we issued (i) 203,988 shares Common Stock and (ii) pre-funded warrants
to purchase up to an aggregate of 949,515 shares of common stock at a purchase price per share of Common Stock of $22.30 and a purchase
price per pre-funded warrant of $22.2999.
Convertible Note
On November 5, 2024, we issued
a Secured Convertible Note (the “Note”) to RSLGH, LLC (the “Investor”), a subsidiary of Green Thumb Industries
Inc. (“Green Thumb”). The Note is a secured obligation and ranks senior to all of our indebtedness except for certain indebtedness
set forth in the Note. The Note will mature on November 5, 2025 (the “Maturity Date”) and contains a 10.0% annualized interest
rate, with interest to be paid on the first calendar day of each September and March while the Note is outstanding, in cash, beginning
January 1, 2025. The principal amount of the Note will be payable on the Maturity Date.
2024 Board and Management Changes
Also on November 5, 2024, immediately following the issuance of the
Note, Raymond Chang, our prior CEO and Chairman, resigned as a member of the Board and any subsidiaries and as President and Chief Executive
Officer of the Company, and I-Tseng Jenny Chan resigned as a member of the Board. Benjamin Kovler, Armon Vakili and Richard Drexler replaced
Raymond Chang and I-Tseng Jenny Chan on the Board and Benjamin Kovler assumed the position of Interim CEO.
Effective May 17, 2024, Leonard
Sokolow resigned as a member of the Board and its committees. Effective December 3, 2024, Brian Towns resigned from his roles as the Company’s
Executive Vice President and General Manager of Extraction Division to pursue other opportunities. On December 31, 2024, in connection
with the Cultivation Purchase Agreement, David Kessler ceased serving as the Company’s Chief Science Officer, Executive Vice President
and General Manager of Cultivation.
Lines of Business
Hemp-Derived Beverages
We acquired the Señorita brand of hemp-derived THC beverages
in December 2024. Señorita was designed and formulated by world-class winemakers Charles Bieler and Joel Gott. Recognizing a growing
generational demand for adult beverage alternatives, Bieler and Gott gave the classic margarita a modern twist—replacing alcohol
with hemp-derived THC to create a delightful, hangover-free beverage alternative. Through the use of all-natural, premium ingredients
like organic Mexican agave, fresh lime juice and sweet, tangy mango, Señorita quickly gained acclaim, taking home the top spot
in The High Times Cannabis Cup just one year after inception. Gott and Bieler continue to collaborate on the brand with Mr. Kovler and
the Agrify team.
Señorita currently offers three award-winning flavors –
classic Lime Jalapeño Margarita, Mango Margarita and Paloma. A fourth flavor, low-calorie Ranch Water, is expected to debut in
2025. Señorita’s hemp-derived beverages comply with the 2018 Farm Bill and are currently available at top retailers including
Total Wine, ABC Fine Wine & Spirits, and Binny’s in nine U.S. states and Canada. Products are also available for direct-to-consumer
purchase where permissible under state law at senoritadrinks.com.
Extraction Solutions
Our extraction equipment and
business solutions can be used within indoor processing facilities by fully licensed cannabis and hemp cultivators and processors or in
some cases, by individual processors for individual use in compliance with applicable law. We sell our proprietary extraction solutions
to independent, licensed cultivators and processing labs.
In light of our increased
focus on hemp-derived beverages following the Señorita acquisition, the Board is exploring a variety of alternatives for the extraction
business while focusing on optimizing shareholder value creation.
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We strategically acquired four of the top brands in the extraction
space in late 2021 and early 2022: in Precision Extraction, PurePressure, Lab Society, and Cascade Sciences. These iconic brands encompass
everything from hydrocarbon, alcohol, and solventless extraction to distillation and post-processing. Combined, these four acquisitions
provided what we believed to be one of the most comprehensive extraction solutions from a single provider. Our extraction brands provide
equipment and solutions for extraction, post-processing, and testing for the cannabis and hemp industries. The extraction, post-processing
and testing services are complementary and highly attractive areas of the supply chain.
Discontinued Operations
Cultivation Solutions
Prior to its sale on December 31, 2024, we sold proprietary cultivation
solutions to independent licensed cultivators. The two primary products we sold were the VFUs and Agrify Insights™ software.
The proprietary VFU technology offered a modular, compartmentalized
micro-climate growing system for indoor vertical farming. The VFU system was designed for craft farmers, single-state operators, and multi-state
operators who were looking to consistently produce higher-quality crops at scale. The VFUs were designed to line up horizontally in rows,
and could be stacked vertically up to three units tall.
The VFUs were designed to
work in conjunction with the Agrify Insights™ software. Each VFU sold included a license for Agrify Insights™ and a monthly
Software-as-a-Service (“SaaS”) subscription fee was charged per VFU. The VFU could not operate successfully without Agrify
Insights™, and we typically charged between $1,500 to $2,400 per VFU sold annually. Agrify Insights™ license agreements were
generally for a multi-year term, with an annual auto-renewal.
TTK Solution
The Company’s TTK solution was the industry’s first-of-its-kind
program in which the Company engaged 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.
While we have not entered into any new TTK solutions during the fiscal year ended December 31, 2024 and will not in the future, we have
previously deployed this program with certain key former customers. The data-driven TTK solution for cultivation solutions enabled our
customers to get to market faster by providing them with seamlessly integrated hardware and software offerings as well as access to capital
and a wide range of associated services from experts including consulting, training, design, engineering, and construction.
Regulatory Landscape Overview
The regulatory landscape for products infused with hemp-derived delta-9
tetrahydrocannabinol and other psychoactive cannabinoids (collectively “hemp-derived THC”) is a source of material risk for
the Company. While the 2018 Farm Bill both defined and legalized hemp under federal law, the subsequent use of hemp to make psychoactive
or intoxicating consumer products created an unexpected new market. This market mirrors the state-legal and federally illegal cannabis
industry, but without the rigid regulations and heavy tax burdens and without the prohibition on interstate shipping. As the industry
expanded, lawmakers at the federal, state, and local levels raised concerns about minors’ easy access to these products, inadequate
testing, and the need for regulations governing the manufacturing, marketing, testing, sale, and transportation of hemp products. As a
result, to date, several states have passed laws regulating, restricting, or banning hemp-derived THC products. In addition, during each
renewal of the 2018 Farm Bill, legislators proposed amendments that would make hemp-derived delta-9 THC products federally illegal. Although
these amendments have not passed, the 2018 Farm Bill is set to expire on September 30, 2025, and additional amendments seeking to curtail
the hemp industry could be introduced. All of this creates significant uncertainty for Agrify’s business of manufacturing, marketing
and selling hemp-derived delta-9 THC products.
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Competitive Landscape Overview
The U.S. cannabis and cannabis-related industries are, and are expected
to continue to be, competitive. A number of other companies engage in, and may in the future engage in, cannabis-related businesses, operate
businesses in competition with us and purchase businesses and assets or make investments that we will also seek to purchase or make. We
face and expect to continue to face competition from state-licensed medical and adult-use dispensaries.
Large chain stores, manufacturers,
retailers, beverage and other consumer products companies that also recognize the potential for financial success through acquisitions
and investment in the hemp-derived beverage industry could strategically acquire competitors or invest in creating their own brands. In
doing so, these larger competitors could produce and sell competing products at a lower price and establish a larger brand presence. We
may not have the personnel, products, marketing and distribution capabilities, and/or financial resources to compete effectively against
such larger competitors.
We also face competition from
the illicit market and illegal dispensaries and cultivation operations that are unlicensed, not regulated and that are selling cannabis
or hemp products. Any inability or unwillingness of law enforcement authorities to enforce existing laws prohibiting the unlicensed production
and sale of cannabis or hemp products could result in increased competition for us.
Intellectual Property
We rely on a combination
of patent, trademark, copyright, and trade secret, including federal, state and common law rights in the U.S. and other countries, nondisclosure
agreements, and other measures to protect our intellectual property. We require our employees, consultants, and advisors to execute confidentiality
agreements and to agree to disclose and assign to us all inventions conceived under their respective employment, consultant, or advisor
agreement, using our property, or which relate to our business. Despite any measures taken to protect our intellectual property, unauthorized
parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Our business is affected
by our ability to protect against misappropriation and infringement of our intellectual property, including our trademarks, service marks,
patents, domain names, copyrights and other proprietary rights.
Human Capital Resources
As of March 15, 2025, we had a total of 11 employees, all of whom were
employed full-time. None of our employees are subject to collective bargaining agreements. In addition, we rely on a shared services agreement
with Green Thumb to provide much of our human capital needs.
Environmental Regulations
We are not aware of any environmental
laws that have been enacted, nor are we aware of any such laws being contemplated for the future, that directly impact our business.
Implications of Being an Emerging Growth Company
and Smaller Reporting Company
We qualify as an “emerging
growth company” as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act. As a result, we
are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other companies that are
not emerging growth companies. Accordingly, for so long as we are an “emerging growth company,” we will not be required to:
● engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b)
of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;
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● comply with any requirement that may be adopted by the Public Company Accounting Oversight Board, or the
PCAOB, regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the
audit and the financial statements (i.e., an auditor discussion and analysis);
● submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,”
“say-on-frequency,” and “say-on-golden parachutes;” or
● disclose certain executive compensation-related items such as the correlation between executive compensation
and performance and the comparison of the chief executive officer’s compensation to median employee compensation.
In addition, the JOBS Act
provides that an “emerging growth company” can use the extended transition period for complying with new or revised accounting
standards.
We will remain an “emerging
growth company” until the earliest to occur of:
● our reporting $1 billion or more in annual gross revenues;
● our issuance, in a three-year period, of more than $1 billion in non-convertible debt;
● the end of the fiscal year in which the market value of our Common Stock held by non-affiliates exceeds
$700 million on the last business day of our second fiscal quarter; and
● December 31, 2026.
We cannot predict if investors
will find our securities less attractive because we may rely on these exemptions, which could result in a less active trading market for
our securities and increased volatility in the price of our securities.
Additionally, we are a “smaller
reporting company” (and may continue to qualify as such even after we no longer qualify as an emerging growth company) and accordingly
may provide less public disclosure than larger public companies, including the inclusion of only two years of audited financial statements
and only two years of management’s discussion and analysis of financial condition and results of operations disclosure. As a result,
the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which
you hold equity interests.
Corporate Information
Our executive offices are
located at 2468 Industrial Row, Dr., Troy, Michigan 48084. Our telephone number at our executive offices is (855) 420-0020.
Agrify Corporation was incorporated
in the state of Nevada on June 6, 2016, originally incorporated as Agrinamics, Inc. (“Agrinamics”). On September 16, 2019, Agrinamics
amended its articles of incorporation to reflect a name change to Agrify Corporation.
Available Information
Our Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the SEC. We are subject to the informational
requirements of the Exchange Act and file or furnish reports, proxy statements and other information with the SEC. Such reports and other
information filed by us with the SEC are available free of charge at https://ir.agrify.com/financials-and-filings/sec-filings when such
reports are available on the SEC’s website. The SEC maintains an Internet site that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC at www.sec.gov. We periodically provide other information
for investors on our corporate website, www.agrify.com, and our investor relations website, investor.gnln.com. This includes press releases
and other information about financial performance, information on corporate governance and details related to our annual meeting of shareholders.
The information contained on the websites referenced in this Form 10-K is not incorporated by reference into this filing. Further, our
references to website URLs are intended to be inactive textual references only.
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