What changed in this filing

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Item 1. Business

2022-03-31 compared with 2021-04-02 · 804 added, 1234 removed, 51 unchanged (98% of the section changed)

otherwise stated or the context otherwise requires, references in this report to “Agrify, “Company,”

“we,”

“us,”

“our,”

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.

are a developer of highly advanced and proprietary precision hardware and software grow solutions for the indoor agriculture marketplace.

We believe we are the only company with an automated and fully integrated grow solution in the indoor agriculture industry.

We also believe

our Agrify “Precision Elevated™”

cultivation solution is vastly differentiated from anything else on the market in

that it combines our seamlessly integrated hardware and software offerings with a wide range of associated services such as consulting,

engineering, and construction to form what we believe is the most complete solution available from a single provider.

The totality of

our product mix and service capabilities form an integrated ecosystem in what has historically been an extremely fragmented market for

the various components needed for indoor agriculture.

As a result, we believe we are well situated to create a dominant market position

in the indoor agriculture sector.

the fact that the indoor agriculture space is rapidly growing, our grower customers face some significant obstacles to their operations

(such as lack of standard operating procedures, poor ventilation and air circulation, disease and pest mitigation and unutilized vertical

space) that pose a serious threat to their long-term profitability.

We believe that our turnkey, fully integrated Agrify “Precision

Elevated ™”

cultivation solution is the key to resolving many of the challenges our customers encounter.

With years of

indoor agriculture industry experience and extensive domain expertise, our team is able to work closely with cultivators across various

commercial segments including fruits, vegetables, hemp and cannabis.

While we do not cultivate, come in contact with, distribute or dispense

cannabis or any cannabis derivatives that are currently prohibited under United States federal law, our cultivation solutions can be

used within indoor grow facilities by cannabis cultivators.

only do we provide our valued customers with the tangible benefit of working with a single provider in what has historically been a decentralized

market full of piecemeal solutions that were not necessarily designed and engineered to work harmoniously with one another, we have also

elevated the entire indoor growing experience.

Through our cutting-edge grow solutions, we believe we give our customers the tools they

need to operate their facilities with more precision, consistency and increased yields while helping them achieve higher returns on investments

in equipment such as ours.

Our goal is always to enable our customers to consistently produce the highest quality products at the lowest

cost possible.

have generated significant momentum in the U.S.

market with our proprietary Agrify “Precision Elevated™”

solution, which is the result of extensive research and development, and we expect to have significant expansion opportunities over time

both domestically and globally.

We have set ourselves apart by bringing to market a technologically savvy, bundled solution of equipment,

software and services that is turnkey, end-to-end, fully integrated and optimized for precision growing.

As we continue to accelerate

our growth, we have started taking pre-orders for the newest version of our flagship hardware product, version 3.5 of the Agrify Vertical

Farming Unit (AVFU), as well as our proprietary Software as a Service (“SaaS”) product Agrify Insights ™.

(also known as subscribeware or rentware) is a software licensing and delivery model wherein software is licensed on a subscription basis

and is centrally hosted.

Agrify Vertical Farming Unit

Insights™

core business model includes substantial equipment sales for the AVFUs as well as recurring SaaS revenues for Agrify Insights™,

as our software is licensed by customers through a subscription that allows us to charge monthly fees for its continued use.

Additionally,

we are able to drive even more revenue and new business through our service offerings and complementary products.

All of our AVFU-related

revenue has come from sales of the first three generations of our AVFU, which has substantially similar functionality as the AVFU version

We have also been selling LED lights, a small amount of environmental threat mitigation products from Bluezone Products, Inc.

Enozo Technologies, Inc.

and other grow and ancillary equipment.

As of December 31, 2020, our backlog, which consists of purchase orders

or purchase commitments, was $58.6 million.

We expect to recognize approximately $40 million from the backlog as revenue in 2021 and

the rest gradually thereafter.

As of December 31, 2020, we have $105 million of carefully vetted potential sales opportunities (which

we refer to as our qualified pipeline).

Of this, $78 million of qualified pipeline was generated through our company directly and $27

million through our Agrify-Valiant Joint-Venture.

We are presently working to convert this pipeline into confirmed bookings over the

next 12 months.

place a heavy emphasis on the qualification process to ensure that all active opportunities in our qualified pipeline have been meticulously

The resulting qualified pipeline is a byproduct of the due diligence investigation we conduct to get to know our potential customers.

We believe our consultative sales process helps us ensure that our prospective buyers would significantly benefit from our solutions,

and that they have all the means (or a concrete plan to acquire the means) necessary to make a purchasing decision within 12 months.

Key vetting criteria in our due diligence analysis includes the potential customer’s financial resources, its ability to identify

and secure a suitable facility site, and the likelihood it will be able to obtain all of the necessary local and state provisional licenses.

Our qualified pipeline is intended to show only the opportunities that we expect to close within a 12-month period.

All other opportunities

are engaged in our sales funnel.

Although we have a high level of confidence that our qualified pipeline will translate into bookings

over the next 12 months, there can be no assurance that we will be successful in such pursuits.

target large scale high-value enterprise sales versus high-volume sales, and we believe that we will be able to significantly scale our

business in the coming years without needing to significantly increase our headcount.

During 2020 we unveiled new capabilities and partnerships

around facility design, engineering, construction, and equipment financing.

Ultimately, we are confident that our ability to support

our customers with a full range of indoor grow solutions and services should position us to be the provider of choice in the market.

also believe that the development of stronger business, operational and compliance practices across indoor agriculture in general is

inevitable as the sector continues to evolve and mature, making our integrated, turnkey solution even more attractive to customers.

have witnessed first-hand that indoor agriculture facilities are becoming more sophisticated business enterprises that seek innovative

technologies like ours, as well as well-honed business and operational processes, to produce, at scale, high-quality products with consistency

that meet the growing demand and needs of end users.

Through our Agrify “Precision Elevated™”

cultivation solution,

our customers gain the ability and huge advantage to create consistent high-quality products with repeatability across all of their operations,

wherever located, similar to any other consumer product company such as branded food or drink product companies.

Competitive Strengths

believe our business has, and our future success will be driven by, the following competitive strengths:

Technology in an Attractive Growing Industry .

Our innovative solutions are aimed

at large and growing U.S.

domestic and global markets.

We believe we are the only provider

of a fully integrated end-to-end hardware and software turnkey solution for indoor cultivation

facilities that allows customers to produce at scale, high-quality products with consistency

that meet the growing demand and needs of end users at a relatively low cost.

believe we have a first mover advantage due to innovating this new type of precision cultivation

solution, which is already designed, manufactured and implemented in a number of commercial

scale deployments across multiple states within the U.S.

Proprietary Components .

We design and create our own hardware, software and standard

operating procedures (SOPs) from the ground up, rather than buying piecemeal from third parties.

We take a systems-engineered integrated approach that we believe has inherent advantages

over other, ad-hoc systems.

on Precision and Consistency Through Our Proprietary Grow Solutions .

able to help our customers increase capacity, yield and consequently revenues holds a tremendous

amount of value, we believe that our biggest differentiator is our ability to impact the

actual quality and consistency of the output by controlling the environment in which the

crops are grown and all of the variables that influence harvests with an unparalleled level

of precision.

The byproduct of our Agrify “Precision Elevated™”

solution is that our customers are able to create consistent high-quality products with repeatability

from anywhere similar to any other consumer product company that provides a branded food

or drink product.

Knowledge and Understanding .

We have extensive experience with controlled agriculture

environments and scale-up manufacturing, as well as industry technical knowledge and relationships.

We are keenly aware of the struggles that indoor cultivators face, and we serve as a credible

and collaborative partner through the entire customer lifecycle.

We believe that our fully

integrated turnkey grow solutions and ancillary services are the key to resolving many of

the challenges our customers face.

● Differentiated

Business Model .

Unlike many of our competitors, we offer a diversified mix of hardware,

software and services, which leads to multiple revenue streams.

Given the nature of our deployments,

we become deeply embedded in our customers’

operations through the sale of our AVFUs,

and this puts us in a position where their success is directly tied to our equipment.

generating substantial AVFU hardware sales, we end up forming a large installed user base

for future high-margin and stable recurring SaaS revenues via our Agrify Insights™

Investment from and Deep Integration with Large Asian Manufacturer .

Our shareholder

base includes Inventronics Inc., which is based in Hangzhou, Zhejiang, China, and the founder

of Inventronics is a member of our board of directors.

Inventronics is currently one of the

largest companies in the world engaged in the design and manufacture of high efficiency,

high reliability and long-life LED drivers, and Inventronics has worked with us to develop

our LED lighting technology.

Although we are not a party to a definitive agreement that governs

our relationship with Inventronics, we believe our long-term relationship with this large

manufacturer will allow us to incorporate the most advanced LED driver technology into our

products and gain research and development support for any custom power supply needs we have.

It also should lead to a reduction in our manufacturing costs by allowing us to procure competitively

priced power electronics, which are critical to the operation of our LED lights and AVFUs.

In addition, Inventronics provides access to component suppliers and contract manufacturing

located in Asia, which we would be unable to reach directly.

Venture with Experienced Consulting and General Contractor of Industrial Facilities .

We formed a joint venture with Valiant-America in December 2019 recognizing that it has a

particular specialization and expertise in the development of indoor farming facilities.

With general contracting, electrical, plumbing and HVAC licenses in Massachusetts, New York,

New Jersey, Connecticut, New Hampshire, Rhode Island and Florida, as well as strategic partners

in California, Nevada, Colorado and Texas, Valiant-America has developed approximately 2.8

million square feet of indoor cultivation space across 78 projects and 43 clients, including

some of the leading multi-state operators.

Valiant’s qualified professionals possess

a deep working knowledge of our grow systems and how to integrate our offerings when developing

cultivation facilities.

We believe being able to provide a full suite of technology products

and services to our customers helps to embed us with these customers and enables us to become

mission critical to their operations.

Our joint venture with Valiant-America generated 60.1%

(or $7,268,000) of our total revenue in 2020.

Equipment Financing Solution .

Limited access to outside capital is a significant

issue for cultivators as it can inhibit growth and cultivation facility expansion.

solve this problem by offering equipment financing plans for select good credit customers,

which we believe further enables us to become a vendor of choice.

Qualified customers pay

approximately 30%-50% upfront and finance the balance through a two-year payment plan.

● Experienced

and Proven Management Team .

Our leadership team has entrepreneurial experience, technical

expertise, and a track record of scaling up businesses and operating public companies.

Additionally,

our team is supported by strong advisors and leading strategic and institutional investors.

Agricultural Industry Overview

demand for indoor agriculture has been growing at a rapid pace throughout the world (particularly in our target market in the U.S.),

and presents significant opportunities for companies like ours that leverage technology, services and experience to accelerate our growth

and capture additional market share.

According to an analysis conducted by Research and Markets, the global indoor farming market (excluding

cannabis) was valued at $114 billion in 2019, and is projected to reach $139 billion by 2025, representing a CAGR of 3.4%.

are a variety of factors that have created this major shift toward indoor farming, including unpredictable climate conditions, increased

urbanization and the use of pesticides.

Additionally, crops grown in indoor facilities generally attract the highest prices in the market

as the ability to control environmental variables typically leads to higher quality production.

Furthermore, technology innovations within

the broader agriculture industry are enabling the indoor sector of the market to expand.

According to MarketsandMarkets™

Farming Technology Report, the indoor farming technology market was valued at $31 billion in 2019, and is projected to reach $53 billion

by 2025, representing a CAGR of 9.65%.

farms grow a wide variety of crops including leafy greens, tomatoes, cannabis, hemp, flowers, microgreens and herbs.

These crops have

historically been good crops to grow indoors because they generate high revenues and/or have quick growth cycles.

These attributes help

offset the fact that it can be costly to operate an indoor facility.

Even with these dynamics, we believe that our products and solutions

mix can significantly push down our customers’

OpEx over time.

One of the biggest advantages of indoor farming is its higher predictability

and yield potential when compared with conventional farming.

By working with enclosed and controlled facilities, farmers no longer need

to contend with harsh environmental conditions, so they can grow a crop from seed to harvest in less time, realize higher yields in each

cycle, and repeat the harvest more times in a given year.

the indoor agriculture space, there has been a big push to leverage the power of vertical farming and technology to further improve production

in novel ways.

Vertical farming is a transformative approach to cultivation that is used to produce various foods and medicinal plants

in vertically stacked layers such as in open warehouses or shipping containers.

Our products are designed specifically to serve the vertical

farming market.

to Allied Market Research, the global vertical farming market size was valued at $2.23 billion in 2018, and is projected to reach $12.77

billion by 2026, representing a CAGR of 24.6% from 2019 to 2026.

Global Market Insights is even more bullish on this sector as they are

expecting the global vertical farming market to experience a massive CAGR of 27.77% between 2019 and 2026, taking the value from $3.16

billion in 2018 to $22.07 billion by 2026.

The demand for vertical farming is expected to increase rapidly due in large part to the rise

in popularity of organic food as well as the lessening of legal and regulatory restrictions around cannabis and hemp.

of the main drivers behind the increased prominence of vertical farming is that the vertically stacked structure of these farms reduces

the need for additional construction activity and land.

However, a high level of initial capital is often required for setting up the

indoor vertical structure with all of the necessary lighting and irrigation systems.

This is something we have been very mindful of when

designing (and as we continue to improve) our products as well as when we launched our new architectural, engineering, consulting and

construction services and our new product financing program.

the ability to use previously untapped vertical space for cultivation offers tremendous upside for an existing facility, the advent of

cutting-edge technological solutions like ours should help indoor growers push the boundaries of what is possible to an even greater

Indoor growers are now relying on technology to help them increase plant yields, generate higher revenues, manage operations

and improve crop quality, and our products and services are geared directly towards satisfying the technology needs of our customers.

to the State of Indoor Farming 2017 report by Agrilyst (now known as Artemis), which incorporated feedback and insights from over 150

indoor growers throughout the world as well as research from Cornell University, small farms (which were defined as less than 10,000

square feet) on average have an annual budget of $7.68 per square foot to invest in technology and large farms (which were defined as

at or above 10,000 square feet) on average spend about $9.34 per square foot on technology to foster an environment where they can produce

more with less.

As a result, we believe there is clearly a demonstrated willingness to spend on integrating technological solutions into

the way indoor farms are structured both now and in the future to help those operators achieve many of their financial-related goals

around increasing revenues and decreasing costs.

polling a wide variety of indoor cultivators, Artemis discovered that “automation tops the list of technologies growers are most

excited about.

Second to automation is HVAC (heating, venting, and air conditioning) equipment.

Third was a tie between data analytics,

LED lighting, and sensors.”

With the high cost of labor, it is no surprise that automation, which is a big part of our value proposition,

ranked number one in this poll as most progressive growers are thinking strategically about what aspects of their business can be delegated

to technological solutions instead of expensive personnel.

Technology is driving significant change in the agriculture industry and will

enable growers to enhance margin and institutionalize the process in which they grow.

of the ancillary benefits of this increased emphasis on technology is that it is giving indoor cultivators the confidence to expand their

In fact, 84% of the farms that participated in the Artemis study reported that they are planning to expand their facilities

in the five years spanning 2018 to 2022.

More importantly, their growth plans were quite ambitious as they indicated they will be adding

22.3 million square feet of growing area.

A lot of this expansion is being spearheaded by leafy greens growers as they expect to augment

their existing operations with 15 million square feet in new growing area.

believe our team, strategy and “Precision Elevated™”

cultivation solution have all evolved to meet the needs of indoor

growers and capitalize on all of the growth that is expected throughout our total addressable market over the next decade.

Well-Established

Crop Market Opportunities

the right equipment, setup and configuration, cultivators can grow almost anything within an indoor vertical farm.

With so many options

at their fingertips, farmers face a huge opportunity cost when deciding what to grow and how to grow it.

Even if a certain crop is biologically

viable in an indoor setting, it may not be commercially viable.

Consequently, there are a number of important factors including equipment,

processes and economics that drive cultivators to narrow their focus to a small subset of crops that are the most conducive to long-term

profitability.

that it is expensive to operate an indoor facility, the crops that generally get the most grow space are those that generate high revenues

and/or have quick grow cycles.

The result, as reported in the State of Indoor Farming 2017 report by Agrilyst (now known as Artemis),

is a distribution of output and activity heavily skewed toward leafy greens, tomatoes, herbs, flowers and microgreens, which easily represented

the majority of crops grown indoors at that time.

findings were largely reinforced in the 2019 Global CEA (Controlled Environment Agriculture) Census.

As part of this joint project spearheaded

by Agritecture LLC and Autogrow, 316 indoor farms in more than 50 countries responded to a wide variety of questions to uncover insights

and trends across several key areas of the indoor agriculture industry including what crops are being grown most frequently.

majority of indoor farms that took part in the 2019 Global CEA Census stated that they are still focusing the bulk of their efforts on

leafy greens (herbs, salad greens and microgreens) due to their quick crop cycles and high percentage of harvestable biomass.

at the numbers, 65% of all respondents indicated that they grow salad greens and microgreens including 61% in indoor vertical farms.

bagged salad market is a perfect example of a booming industry and also one that illustrates society’s increasing preference for

healthy and clean foods.

According to Grand View Research, the global packaged salad market is currently a $5.24 billion market.

CAGR is projected to be 10.2% between 2020 and 2027, which would bring the value of this market to $10.23 billion by 2027.

following chart shows all of the crops grown across the indoor vertical farms that participated in the 2019 Global CEA Census:

Grown By Operation —

Indoor Vertical Farming (2019 Global CEA Census)

many new ventures entering this market and a large portion of the well-established entities in expansion mode, it is clear that indoor

farming is here to stay and will be a big part of the future of food production both in the U.S.

and throughout the rest of the world.

Despite its rise in popularity, the indoor farming industry is not without its challenges, many of which are financial and operational

While indoor farmers are generally progressive and well-intentioned, there is still a lot of work to be done before their

facilities morph into truly optimized production and profit centers.

This represents a sizeable opportunity for outside vendors to bring

fresh perspectives and further innovation into the mix.

believe that our technology is a key missing ingredient that can help indoor growers of salad greens, microgreens, herbs, other leafy

greens, vine vegetables and berries maximize yields, improve crop quality and consistency, and decrease production costs over time.

Market Opportunity

we do not cultivate, come in contact with, distribute or dispense cannabis or any cannabis derivatives that are currently prohibited

federal law, our cultivation solutions can be used within indoor grow facilities by cannabis cultivators if they choose to

the U.S., the development and growth of the regulated medical and recreational (adult use) cannabis industry has generally been driven

by state law and regulation, and accordingly, the market varies on a state-by-state basis.

State laws that legalize and regulate cannabis

for medicinal reasons allow patients to consume cannabis with a designated healthcare provider’s recommendation, subject to various

requirements and limitations.

As of the date of this report, 33 states, plus the District of Columbia, have passed laws allowing their

citizens to use medical cannabis.

On top of this medical condition growth trend, there has been a slower but steady increase in the number

of states that have chosen to legalize cannabis for recreational use.

As of the date of this report, 11 states, plus the District of

Columbia, have passed laws allowing adult recreational use cannabis.

Furthermore, every single cannabis initiative on the ballot during

the 2020 election passed, which resulted in five more states choosing to legalize cannabis in some capacity.

Three of those states decided

to begin allowing recreational use, one state voted to legalize medicinal cannabis, and the last state became the first state to legalize

both medicinal and recreational cannabis during the same election.

Shifting public attitudes and state law and legislative activity are

driving this change as indicated by a 2019 poll by Quinnipiac University that found that 93% of Americans support patient access to medical-use

cannabis, if recommended by a doctor, which was the same level of support from a similar poll conducted by Quinnipiac University in 2018.

Similarly, the trend toward further legalization and regulation of cannabis sales is spreading globally.

As of the date of this report,

over 20 countries outside the U.S.

currently have medicinal cannabis regulation in force, and that number is expected to significantly

increase over time.

that the market size of legal cannabis in the U.S.

in 2020 is expected to be $17 billion according to New Frontier, and 53% of cannabis

volume is currently grown indoors according to New Leaf Data Services, we estimate that the indoor segment of the legal U.S.

sector is a $9 billion market with the expectation that there will be even more growth on the horizon.

In fact, according to a report

from April 2020, BDSA, the leading provider of cannabis industry market research, in conjunction with Arcview Market Research, forecasted

legal cannabis sales will approach $34 billion by 2025, which represents 72% of their projection for total global sales of

$47 billion in 2025.

different cultivation environments for cannabis each have advantages and disadvantages, and this leads to a variance in price points

based on quality, actual and perceived, and process.

According to New Leaf Data Services’

July 10, 2020 U.S.

cannabis spot index,

the average wholesale price per pound of outdoor grown flower was $904 per pound ($896 per pound the prior week), greenhouse flower averaged

$1,216 per pound ($1,215 per pound the prior week), while indoor grown flower averaged $1,778 per pound ($1,777 per pound the prior week)

and the total market on average was $1,441 per pound ($1,435 per pound the prior week).

Based on the breakdown of production by cultivation

environment, indoor grown flower represents 53% of total volume by type while greenhouse and outdoor represent 23% and 24%, respectively.

Additionally, based on the breakdown of percentage of observed transactions, indoor grown flower represents 64% of total volume by type

while greenhouse and outdoor represent 18% and 18%, respectively.

cannabis has the lowest initial capital expenditures required to start cultivation.

According to Marijuana Business Daily (MBD), the

average startup cost per square foot of outdoor cultivation is $10.

The expansive size of outdoor grows and their reliance on natural

soil, lighting and weather conditions means cultivators have relatively few infrastructure needs.

They can get their business off the

ground quickly and with minimal upfront expenditures trading quality for lower cost production.

grown cannabis commands a higher price per pound than field grown cannabis as the more protected environment produces higher quality

According to MBD, the average startup cost per square foot for greenhouse cultivation is $50, but the true costs tend to be all

over the map with an executive from Ohio-based Rough Brothers, an 84-year-old greenhouse company that started taking on cannabis clients

in 2013, opining that such costs can vary greatly, going so far as to say “I could build you a cannabis greenhouse for $20 a square

foot or $200 a square foot.”

grown cannabis commands the highest price per pound as it produces the highest quality flower due to the fact that growers have the most

control over the environment.

Indoor cultivation facilities vary significantly in sophistication and technology with the build-out costs

reflecting that fact.

While MBD states that the average startup cost per square foot for indoor cultivation is $75, anything close to

that cost would inevitably yield a primitive and arguably insufficient setup.

In contrast, Jennifer Martin, a prominent cannabis cultivation

consultant, indicated on MarijuanaPropagation.com that a far more advanced and scalable configuration would likely cost between $400

to $500 per square foot.

In general, the more a company invests up front, the higher the upside will be in the future.

However, beyond

initial build-out costs, it has historically been very expensive to grow cannabis in an indoor facility.

The industry norm for direct

production-related operating costs ranges from approximately $436 per pound according to a competitive cost analysis conducted by MJardin

to $516 per pound, which is based on another examination of cultivation costs by the website CannaBusinessPlans.com.

the Agrify “Precision Elevated™”

Cultivation Solution

the significant shortcomings associated with traditional indoor grow methods across all commercial agriculture segments, it was apparent

that a new paradigm in indoor cultivation was desperately needed, which is precisely why we are bringing a more modern, manufacturing

style approach that is process driven through technology and measured via data and analytics.

Overall, our holistic approach to addressing

our customers’

cultivation needs treats their production facilities as an end-to-end ecosystem whose success depends on all of

its components working together optimally.

looking at our product mix, our core offering and the focus of our sales efforts involves bundling our AVFUs with our Agrify Insights™

Our integrated hardware and software solution was specifically designed to form a unified system.

It is through this synergistic

framework that we are able to offer customers the benefits of increased automation, control, precision, and transparency, which are all

things they value.

our core bundled and integrated offering, we have several other products we are actively marketing, such as Agrify Integrated Grow Racks,

environmental threat mitigation solutions from Bluezone and Enozo, as well as LED lights specifically designed for horticulture applications.

Additionally, we offer various facility build-out, design, engineering and consulting services through our joint venture with Valiant-America,

and we have an equipment financing vehicle that assists customers with the buying process.

All of these ancillary products and services

can be utilized on their own, offering valuable touchpoints to potentially seed relationships and convert them into more lucrative land-and-expand

engagements in the future, or they can serve as complements to our core offering to form a novel, fully integrated approach for indoor

individual offerings, which are described in more detail below, are compelling on their own.

However, we believe what really sets us

apart is our ability to bring to the market a tech-forward, bundled solution of equipment, software and services that is turnkey, end-to-end,

fully integrated and optimized for precision growing.

Bundled Solution

Vertical Farming Unit (AVFU)

believe our proprietary Agrify Vertical Farming Unit (AVFU) technology is the only product in the market that offers a modular, compartmentalized

micro-climate growing system for indoor vertical farming.

Our AVFU system is designed for large-state and multi-state operators who are

looking to produce higher-quality crops consistently at scale, and the ideal facility size that we target in our sales process ranges

from 20,000 square feet to 50,000 square feet.

AVFU is an 8 ft.

wide x 9.25 ft.

tall integrated hardware and software growing system.

These units are designed to line

up horizontally in rows, and they can be stacked vertically up to 3 units tall, taking advantage of unused indoor vertical space with

the below advantages:

Floor Space Utilization .

Each AVFU provides two grow rows.

We are a rapidly growing developer of proprietary

hardware and software cultivation and extraction solutions for the cannabis and hemp industry.

We believe we are passionately transforming

cannabis cultivation and extraction methods through innovation.

Our mission is to become the world’s most vertically integrated

solution provider for the cannabis and hemp industry globally, while driving superior quality, consistency, and Return on Investment

(“ROI”) for our valued customers.

We currently have three primary areas of business focus:

Cultivation Solutions

Extraction Solutions

Facility Design & Building Services

Cultivation Solutions

While we do not cultivate, come in contact

with, distribute, process, or dispense cannabis or hemp or any cannabis or hemp derivatives that are currently prohibited under

United States federal law, our equipment and business solutions can be used within indoor grow and 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 cultivation solutions to independent licensed cultivators.

The two primary products we

sell are the Agrify Vertical Farming Unit and Agrify Insights SaaS (“Software-as-a-Service”) software.

Agrify Vertical Farming Unit (“VFU”)

We believe our proprietary VFU technology is the

only product in the market that offers a modular, compartmentalized micro-climate growing system for indoor vertical farming.

system is designed for large-state and multi-state operators who are looking to consistently produce higher-quality crops at scale.

ideal facility size that we target in our sales process ranges from 20,000 square feet to 50,000 square feet.

The VFU is an integrated

hardware and software growing system.

These units are designed to line up horizontally in rows, and they can be stacked vertically up

to 3 units tall, taking advantage of unused indoor vertical space with the below advantages:

Superior Floor Space Utilization .

Each VFU provides two growing rows.

Our design introduces

an open-room facility design approach to maximize available cultivation floor print while

offering superior risk mitigation via individual compartmentalized cultivation chambers.

Environmental Controls .

Each AVFU has an environmental control unit (ECU) that is

integrated with our proprietary cultivation software, Agrify Insights™.

This integration

allows for precise control and automation over light photoperiod and intensity, temperature,

humidity, vapor pressure deficit (VPD), carbon dioxide, fertigation and irrigation throughout

the life cycle of the plants.

Scalability .

The AVFU is designed with proper loading to stack up to 3 units tall,

sextupling production volume over the same footprint.

Each unit is designed to easily integrate

with a mezzanine catwalk system.

● Biosecurity

and Risk Mitigation .

The AVFU has a motorized curtain on both sides of the unit that

enclose the grow area to prevent light-leak and spread of disease that would typically lead

to facility-wide crop failure.

Contamination can be controlled and limited to the affected

units, which are designed with sanitation in mind.

From the aluminum frame to the selection

of antimicrobial plastics and down to the IP65 electronics and polycarbonate-lensed LED lights,

the entire AVFU can be easily sanitized.

The AVFU’s working area is 8 feet tall, allowing easy access to both

rows of plants within the unit.

As the motorized curtains can be lifted on either side, this

also allows efficient ergonomics at arm’s length.

Similarly, our Interlight LED technology

is dimmed or turned-off when the curtains are raised for a more ambient working environment.

AVFU is a premium indoor grow solution with an MSRP starting at $20,000, and our most recent AVFU deals have been for between 60 and

535 units as our new customers become satisfied that our grow solutions will be an instrumental part of their operations moving forward.

We are targeting large scale projects that range in size from $1 million to over $10 million in AVFU hardware sales before any additional

revenue from our Agrify Insights™

software and ancillary products and services are realized.

further illustrate the benefit of going with the AVFU infrastructure versus a more traditional indoor cultivation setup with conventional

LED lights or conventional HPS lights, we have conducted a comparative analysis internally on an actual 45,082 square foot facility.

first image below is a concept drawing we did showing 752 double stacked AVFUs in this facility.

The second image is a concept drawing

showing a traditional grow room setup in the exact same facility.

The AVFU framework in this particular facility leads to approximately

3x more canopy square footage, which then translates into approximately 4x more estimated annual yield and significantly enhanced revenue

opportunities.

with AVFU Setup

with Traditional Grow Room

forth below are the illustrative costs and revenue potential for cultivators of three different

approaches in our conservative

and defensible model:

Conventional LED System

Conventional HPS System

Build-Out Cost

Estimated Facility Infrastructure & Equipment

Cultivation Equipment

Estimated Total Build-Out Cost

Economic Analysis

Total Canopy Sq.

Estimated Annual Yield / Sq.

Estimated Total Annual Yield

Estimated Price per lb.

Estimated Annual Revenue

Estimated Annual OpEx

Annual Estimated EBITDA

NPV (10 years, 15% discount rate)

$ 365,728,679

Payback Period

the upfront cost is more for the facility that is outfitted in AVFUs, that is quickly offset by the fact that an AVFU outfitted facility

has the capacity to generate about 4x the amount of estimated annual revenue and over 4x the annual estimated EBITDA.

In looking at the

numerical values in the model, it becomes even more compelling when comparing the AVFU facility to a facility with a traditional grow

Assuming an initial investment of approximately $27.7 million for the AVFU facility build-out, our model indicates that the facility

owner would recoup their initial investment and produce significant free cash flow in the first year of operation assuming the facility

should be able to achieve almost $88 million of estimated annual revenue and roughly $78.4 million in annual estimated EBITDA.

the traditional indoor facilities would cost approximately $8.8 million or a little less than $16.5 million to build out depending on

which lights are used and would generate approximately $20.4 million or $22.5 million in estimated annual revenue and right around $16

million or just under $19 million in annual estimated EBITDA.

When comparing the different facility types on a side-by-side analysis,

we believe the AVFU facility is far more attractive than either type of traditional facility given the financial upside is significantly

higher, and also the precision elevated approach is a far more sophisticated way to grow crops.

have also modeled out another scenario in which a prospective customer has a license that stipulates that they are permitted to operate

with at most 16,200 square feet of canopy space in their facility (which is the exact same amount of canopy square footage displayed

in the above model for the traditional setup in the 45,082 square foot facility).

However, given the modular and stackable nature of

the AVFUs, we are able to help the customer achieve the same canopy square footage with 253 AVFUs in a facility that is only 20,000 square

feet, which is less than half the size of the traditional facility.

We have included concept drawings for both facilities below.

canopy square footage is basically identical for all of the different cultivation approaches we looked at in this particular simulation,

the AVFU setup requires a much smaller and theoretically much less expensive facility, and because the AVFUs are more productive, the

estimated annual yield is about 31% higher than in the facility with the traditional grow room setup and conventional LED lights and

an open-room facility design approach to maximize available cultivation floor print while offering superior risk mitigation via individual

compartmentalized cultivation chambers.

Precise Environmental Controls .

Each VFU has an environmental control unit that is

integrated with our proprietary cultivation software, Agrify Insights software.

This integration allows for precise control

and automation over light photoperiod and intensity, temperature, humidity, vapor pressure deficit (“VPD”), carbon dioxide,

fertigation, and irrigation throughout the life cycle of the plants.

Modular Scalability .

The VFU is designed with proper loading to stack up to 3 units

tall, sextupling production volume over the same footprint.

Each unit is designed to easily integrate with a mezzanine catwalk system.

Biosecurity and Risk Mitigation .

The VFU has a motorized curtain on both sides of

the unit that enclose the grow area to prevent light-leak and spread of disease that would typically lead to facility-wide crop failure.

Contamination can be controlled and limited to the affected units, which are designed with sanitation in mind.

From the aluminum

frame to the selection of antimicrobial plastics and down to the IP65 electronics and polycarbonate-lensed LED lights, the entire

VFU can be easily sanitized.

Worker Safety .

The VFU’s working area is 8 feet tall, allowing easy access

to both rows of plants within the unit.

As the motorized curtains can be lifted on either side, this also allows efficient ergonomics

at arm’s length.

Similarly, our Interlight LED technology is dimmed or turned-off when the curtains are raised for a more ambient

working environment.

of VFU infrastructure verse traditional grows

To further illustrate the benefit of going with

the VFU infrastructure versus a more traditional indoor cultivation setup with conventional LED lights or conventional HPS lights, we

have conducted a comparative analysis internally on an approximately 45,000 square foot facility.

While the upfront cost is more for the facility

that is outfitted in VFUs, that is quickly offset by the fact that a VFU outfitted facility has the capacity to generate about 4x the

amount of estimated annual revenue and over 4x the annual estimated EBITDA.

In looking at the numerical values in the model, it becomes

even more compelling when comparing the VFU facility to a facility with a traditional grow room.

Assuming an initial investment of approximately

$27.7 million for the VFU facility build-out, our model indicates that the facility owner would recoup their initial investment and produce

significant free cash flow in the first year of operation assuming the facility should be able to achieve almost $88 million of estimated

annual revenue and roughly $78.4 million in annual estimated EBITDA.

In contrast, the traditional indoor facilities would cost approximately

$8.8 million or a little less than $16.5 million to build out depending on which lights are used and would generate approximately $20.4

million or $22.5 million in estimated annual revenue and right around $16 million or just under $19 million in annual estimated EBITDA.

When comparing the different facility types on a side-by-side analysis, we believe the VFU facility is far more attractive than either

type of traditional facility given the financial upside is significantly higher and is a far more sophisticated way to grow crops.

We have also modelled out another scenario in

which a prospective customer has a license that stipulates that they are permitted to operate with at most 16,200 square feet of canopy

space in their facility (which is the exact same amount of canopy square footage displayed in the above model for the traditional setup

in the 45,000 square foot facility).

However, given the modular and stackable nature of the VFUs, we are able to help the customer achieve

the same canopy square footage with 253 VFUs in a facility that is only 20,000 square feet, which is less than half the size of the traditional

While canopy square footage is basically identical for all of the different cultivation approaches we looked at in this particular

simulation, the VFU setup requires a much smaller and theoretically much less expensive facility, and because the VFUs are more productive,

the estimated annual yield is about 31% higher than in the facility with the traditional grow room setup and conventional LED lights and

45% higher than in the facility with the traditional grow room setup and conventional HPS lights.

Square Foot Facility with AVFUs

Square Foot Facility with Traditional Grow Room

forth below are the illustrative costs and revenue potential for cultivators of three different approaches in our conservative and defensible

Conventional LED System

Conventional HPS System

Build-Out Cost

Estimated Facility Infrastructure & Equipment

Cultivation Equipment

Estimated Total Build-Out Cost

Economic Analysis

Total Canopy Sq.

Estimated Annual Yield /Sq.

Estimated Total Annual Yield

Estimated Price per lb.

Estimated Annual Revenue

Estimated Annual OpEx

Annual Estimated EBITDA

NPV (10 years, 15% discount rate)

$ 121,084,229

Payback Period

this case, the estimated total build-out cost for the AVFU facility is approximately $5 million less than the facility with conventional

LED lights, but approximately $2.6 million more than the facility with conventional HPS lights.

Compared to the facility with conventional

LED lights, the AVFU facility is less expensive to build and expected to drive considerably more yield, revenue and EBITDA.

Even considering

the roughly $2.6 million initial cost savings to build the facility with the conventional HPS lights compared to the AVFU facility, the

overall economics still favor the AVFU facility as it should generate over $9 million more in estimated annual revenue and over $10 million

more in annual estimated EBITDA, with a slightly faster payback period.

with AVFU Setup

Additionally,

our LED lights, have shown promising results on their own within a 50,000 square foot facility for one of our leafy green customers.

This customer reported that our LED lights allowed them to increase their sellable output for romaine lettuce from approximately 92 pounds

per grow board to over 210 pounds per grow board, and the amount of their sellable butter lettuce went from 105 pounds per grow board

to over 128 pounds per grow board.

We believe this result is typical and can be replicated because the increased crop output was the

direct result of increased light output and superior light uniformity.

Per watt of electricity in, our LEDs produce more usable photons

to drive photosynthesis than incandescent, fluorescent, HID or most LED lights on the market.

this customer experienced a roughly 28% increase in revenue after only 7 weeks of using our lights.

They have also reported a noticeable

improvement in the appearance of their end products with their chopped romaine looking fuller and greener when grown under our lights

versus the lights of another vendor.

Lastly, this customer indicated that they are benefiting from a 1-2 day extension in average shelf

premium indoor grow solutions, whether it’s our AVFUs or our LED lights, are designed, engineered and calibrated to drive significant

improvements for our customers, who trust us to deliver the type of productivity and quality that was previously unattainable.

Integrated Grow Racks (AIGR)

currently offer 2 ft.

indoor agricultural integrated grow racks to supplement the growing process that is occurring within the

These racks are differentiated based on the number of integrated shelving tiers within the grow rack system:

2-tier, 4-tier, and

5-tier grow racks.

Each shelving tier consists of:

Two Agrify Model W 2 ft.

LED grow lights, hydroponic plumbing, and a drainable

Our grow racks have been designed to optimize working conditions, allowing a farm hand/grower to plant, inspect and harvest crops

with increased ease.

The manufacturer’s suggested retail price on these units ranges from $5,000 to $7,500.

Agrify Integrated Grow Rack

difference between an AIGR and an AVFU is an AIGR is designed as a propagation unit with the intended purpose to support the ongoing

need in a facility for new plant stock (i.e.

plants to grow).

The AIGR will support clones or seedlings for 2-4 weeks while they build

a root system and grow into “teenage”

(more mature) plants.

Once that occurs, the plants will be repotted into a larger container

and then transferred to an AVFU where the plants will grow to maturity through their vegetative and flowering phases until the flowers

produced are ripe and can be harvested.

Insights™

key component of our cultivation solution is our proprietary software, Agrify Insights™, which has been developed in-house.

A cloud-based

software as a service that interfaces with a microservices middleware and relational database that integrates with our hardware and provides

our managers, facility owners, facility managers, and growers real-time control and monitoring of facilities, growing conditions, and

insights into both production and profit optimization.

The combination of precise environmental control and automation with data collection

and actionable insights empowers our customers to be more efficient, more productive, and more intelligent about how they run their businesses.

We believe that the robust data analytics capabilities from our Agrify Insights™

platform coupled with our AVFU system is enabling

Agrify Insights SaaS Software Solution

Each individual VFU sold includes a license for

Agrify Insights SaaS Software (“Agrify Insights software”), and a monthly SaaS subscription fee is charged, per VFU.

cannot operate successfully without the use of Agrify Insights software, and we typically charge between $2,400 to $3,600 per VFU sold,

On average Agrify Insights SaaS Software license agreement is for a multi-year term, with an annual auto renewal.

Agrify Insights software is cloud-based software

as a service that interfaces with a microservices middleware and relational database that integrates with our hardware and provides our

managers, facility owners, facility managers, and growers real-time control and monitoring of facilities, growing conditions, and insights

into both production and profit optimization.

The combination of precise environmental control and automation with data collection and

actionable insights empowers our customers to be more efficient, more productive, and more intelligent about how they run their businesses.

We believe that the robust data analytics capabilities from our Agrify Insights software platform coupled with our VFU system is enabling

our customers to transform their businesses and quality of the product they are cultivating.

business model includes charging customers a monthly recurring SaaS subscription fee per deployed AVFU for access to Agrify Insights™,

which ranges from $75 to $200 per AVFU per month depending on the level of functionality and support purchased.

This provides us with

a predictable recurring revenue stream that has high expected customer retention due to the fact that our Agrify Insights™

is required to operate our AVFUs, and our customers are deeply committed to using our AVFUs.

We believe that most customers will opt

for our more robust levels of functionality and support.

Consequently, we expect our annual SaaS revenue will be between 8% to 10% of

total AVFU order value.

Agrify Insights™

software is focused around optimizing four key components:

● Optimization

at the plant level;

● Optimization

at the AVFU unit level;

● Optimization

at the facility level;

● Optimization

at the business level.

these key components are combined, they encompass the cultivation operations of an Agrify customer.

By reducing human error and providing

insights through data collection and analysis, Agrify Insights™

minimizes risk and increases operational efficiencies.

our customers are seeking to produce the same consistent end product no matter where they are located.

Through our technology grow platform,

we enable our customers to have the ability to create brands that are identifiable by taste, look and smell no different than any other

consumer product company that provides a branded food or drink product.

to our solution is granular control of the cultivation environment.

The end-product of a crop is determined by both the plant’s

genetics and the environment in which the plants are grown.

Control over the growing environment is accomplished through the Agrify Insights™

By recoding over 1.5 million data points per AVFU per year and being able to reproduce specific environments based on the data,

cultivators are effectively able to minimize the variation in their crops and dial-in the maximum quality.

Further individual plant varietals

can be optimized by tailoring the grow plan (recipe for cultivation) to enhance particular genetic traits;

increasing the temperature

can speed chemical processes and growth rates, adjusting the ratio of blue to red light can enhance the production of certain aromatic

chemical compounds, and adjusting the length of different phases of a plant’s lifecycle can maximize the crop’s yield.

The Agrify Insights software is focused around

optimizing four key components:

Optimization at the plant level;

Optimization at the VFU unit level;

Optimization at the facility level;

Optimization at the business level.

When these key components are combined, they encompass

the cultivation operations of an Agrify customer.

By reducing human error and providing insights through data collection and analysis,

Agrify Insights software minimizes risk and increases operational efficiencies.

Ultimately, our customers are seeking to produce the same

consistent end product no matter where they are located.

Plant-Level Optimization

Central to our solution is granular control of

the cultivation environment.

The end-product of a crop is determined by both the plant’s genetics and the environment in which the

plants are grown.

Control over the growing environment is accomplished through the Agrify Insights software.

By recording over 1.5 million

data points per VFU per year and being able to reproduce specific environments based on the data, cultivators are effectively able to

minimize the variation in their crops and dial-in the maximum quality.

Further individual plant varietals can be optimized by tailoring

the grow plan (recipe for cultivation) to enhance particular genetic traits;

increasing the temperature can speed chemical processes and

growth rates and adjusting the length of different phases of a plant’s lifecycle can maximize the crop’s yield.

Additionally,

1 unchanged sentence

which offer real insight into how new varieties are best cultivated.

For example, you can grow a new variety in 5 different AVFUs that

For example, you can grow a new variety in 5 different VFUs that

are set to mimic the climate of different geographies to see where the varieties are suited to grow.

“Grow Plans”

are the templates or recipes that define the parameters for each lifecycle.

Grow Plans define the environmental

settings (light - photoperiod and intensity/ temp / humidity / VPD / CO2 / irrigation / fertilization) for each crop variety and cultivator

as well as the schedule for completing, as applicable, “plant-touching”

tasks such as bottoming, pruning, and harvest.

Insights™

ships to the customer with many pre-developed Grow Plans and customers can create their own particular Grow Plans, electing

to share them with other customers or not.

AVFU Level Optimization

AVFU hardware provides cultivation environmental control within the growth chamber.

This hardware and its component valves, motors and

sensors are directed and controlled by Agrify Insights™.

and Control Agrify Hardware .

Agrify Insights™

can either automatically or manually

control our hardware.

For example, the water-chilled fan coil can keep temperature in a range

accurate to 1.5 degrees Fahrenheit.

● Cultivation

Environmental Control .

Using Agrify Insights™, users can view environmental

charts that plot temperature, humidity, carbon dioxide and vapor pressure deficit (or VPD)

It also shows when the plants were irrigated and whether the unit is in cooling,

circulating, or dehumidifying mode.

Our “Grow Plans” are the templates

or recipes that define the parameters for each lifecycle.

Grow Plans define the environmental settings (light - photoperiod and intensity/

temperature / humidity / VPD / CO2 / irrigation / fertilization) for each crop variety and cultivator as well as the schedule for completing,

as applicable, “plant-hands-on” tasks such as bottoming, pruning, and harvest.

Agrify Insights software ships to the customer

with many pre-developed Grow Plans and customers can create their own Grow Plans, electing to share them with other customers or not.

Individual VFU Level Optimization

Our VFU hardware provides cultivation environmental

control within the growth chamber.

This hardware and its component valves, motors and sensors are directed and controlled by Agrify

Insights software.

Monitor and Control Agrify Hardware .

Agrify Insights software can either automatically

or manually control our hardware.

For example, the water-chilled fan coil can keep temperature in a range accurate to 1.5 degrees

Cultivation Environmental Control .

Using Agrify Insights software, users can

view environmental charts that plot temperature, humidity, carbon dioxide over time.

It also shows when the plants were irrigated

and whether the unit is in cooling, circulating, or dehumidifying mode.

We sample these values every minute and report them back

to the cloud every 15 minutes, or more often if there have been significant changes.

growing chamber reports approximately one million data points annually, enabling our clients

to perform in-depth analysis of grow performance.

The manual control screen visualizes the

current state of the grow chamber and enables our technicians to take direct control for

troubleshooting, if necessary.

The device log shows us what decisions were made by the onboard

Agrify Insights™

Level Optimization

modular AVFUs are deployed in scale at a customer’s facility with the smallest deployment to date being 63 AVFUs.

Agrify Insights™

is designed to operate these individual AVFUs as a combined facility.

Agrify Insights™

features at the facility level include:

The production planning feature is designed to maximize a facility’s

utilization by executing a “best-fit”

scheduling algorithm to selected Grow Plans

across the growing units that have been deployed at a customer facility.

Since grow plans

typically have a different number of growing days that start on staggered schedules, this

module is a critical component for optimizing the planting and moving schedules, significantly

increasing plant production and reducing the cost per pound of harvest.

Agrify Insights™

includes a workforce planning feature to assign

tasks to staff.

These tasks can be automatically assigned based on user role or their knowledge,

skills, and abilities.

The calendar displays the estimated amount of time required to complete

plant-touching tasks on any given day.

Notification System .

Users can select to subscribe to anomalous events, and users

are notified in the order in which they are listed.

If a user does not acknowledge the notification

within the specified time frame, the next user in the list is notified, providing the business

with 24/7 monitoring and notifications.

● Preventative

Maintenance .

Our equipment and facility preventative maintenance schedules and related

tasks are contained, tracked and monitored within Agrify Insights™.

Infrastructure Controls .

Agrify Insights™

controls the irrigation on a facility

level as well as connects with the water chilled HVAC system and ambient lighting system,

providing our customers a central piece of software for facility management.

at the Business Level

Insights™

analysis features enable customers to understand how cultivation decisions impact their overall business.

Understanding

the data from the cultivation facility can help our customers better plan and make informed decisions that impact downstream parts of

their business.

● Consumables

Procurement Integration .

Each task can also be assigned a set of consumables whose

inventory will be reduced when the task is started.

This feature can help customers manage

supply levels and can automatically create and submit purchase orders so that they never

run out of required supplies.

SOPs and Safety Datasheets .

Agrify Insights™

hosts digital copies of our included

Standard Operating Procedures and datasheets, or users can upload their own via our content

management system, ensuring that the most recent version of SOPs and forms are available

● Roles-Based

Ability to obtain access to information specifically suited to your workforce’s

various needs.

Facility owners have access to high-level information about crop yields and

equipment usage in an easy to understand scorecard.

Farm managers receive a worksheet and

calendar that lets them manage their workforce and automatically assign plant-touching tasks.

This also provides facility managers with an ongoing window into consumables and lets them

set inventory levels.

Agrify Insights™

is a centralized repository for all data relating

to the cultivation aspects of our clients’

business, including research and development

testing data, and the ability to capture and compare test results.

By doing so, Agrify Insights™

becomes a customers’

cultivation statement of record.

Reporting Integration .

We have integrated our software with Metrc, a leading seed-to-harvest

compliance management and tracking solution, which will enable our customers to handle most

regulatory reporting directly through Agrify Insights™.

Product Offerings

Model 420 —

Air Cleaning System

impact from pathogens is a major issue for our customers and their industry.

The Bluezone Model 420 is a U.S.

military tested and fielded

air purification system that kills and removes airborne pathogens such as powdery mildew, botrytis, and other highly infectious bacteria

from indoor grow rooms and produce storage.

Such interferences can drastically interrupt businesses’

supply chains, leading to

lost time and revenue.

unit covers 15,000 cubic feet or air volume.

The unit draws air into a self-contained reaction chamber and kills contaminants with ultraviolet-enhanced

oxidation, and chemicals are broken down so that the air circulating through the Bluezone comes out clean and safe.

Bluezone is California

Air Resources Board (CARB) Certified for ozone emissions, as ozone is kept inside the Bluezone reaction chamber.

Bluezone is also ETL

Safety Certified and NSF Sanitation Certified.

The MSRP for the Bluezone Model 420 is $4,500.

are the exclusive distributor for the Bluezone Model 420 for the indoor agriculture market worldwide.

Under our distribution agreement

with Bluezone Products, Inc., we are obligated to order $480,000 of Bluezone products in the first contract year and $600,000 of Bluezone

products in the second contract year.

The distribution agreement is for an initial term through May 31, 2021 and is automatically renewed

for successive one year periods unless earlier terminated.

Guichao Hua, a member of our board of directors, has an ownership interest

in Bluezone of approximately 3%.

Raymond Chang, our Chairman of the Board and Chief Executive Officer, has an ownership interest in Bluezone

of approximately 8%.

Chang is also a director of Bluezone.

To date, we have generated limited revenue from sales of Bluezone products.

Pesticide-Free Surface Protection

Enozo spray bottle offers a water-based alternative to traditional cleaners, deodorizers, and sanitizers.

This surface cleaning solution

uses ozonated water to kill 99.9% of bacteria like E.

coli and Salmonella in only 30 seconds.

Aqueous ozone (AO) is a very powerful sanitizer

produced in controlled concentrations (below OSHA PEL and STEL requirements) and contains no harsh chemicals, fragrances or dyes.

technology is designed to help reduce workplace illnesses and hazards like irritated skin and allergic reactions, while protecting indoor

air quality and physical surfaces.

dispenses at least 10 full reservoirs (one gallon) of aqueous ozone sanitizing solution per charge, lasting 5,000 refills over the unit’s

battery life.

This eliminates the need to buy hundreds of plastic, one-time use bottles of cleaners.

Enozo is registered by the U.S.

Environmental Protection Agency for public health use.

The manufactuerer’s suggested retail price for the Enozo spray bottle is

have rights to sell Enozo products pursuant to a distribution agreement between us and Enozo Technologies Inc.

The distribution agreement

is for an initial term of five years with auto renewal for successive one year periods unless earlier terminated.

The agreement requires

us to make the following minimum purchases to retain distributor status for one of the products:

$375,000 for the period from the contract

date until December 31, 2021;

$750,000 for the year ended December 31, 2022;

$1,125,000 for the year ended December 31, 2023, subject

to increases by 3% for subsequent years.

Guichao Hua, a member of our board of directors, and Raymond Chang, our Chairman of the Board

and Chief Executive Officer, each have ownership interests and are board members of Enozo.

To date, we have not generated meaningful

revenue from sales of Enozo products.

Horticultural

believe our LEDs are the most advanced horticulture grow lights on the market offering advanced cultivators maximum spectrum adjustment

with dimming of light intensity that are essential to custom craft a harvest.

By partnering with us, growers will experience industry-leading

LED grow lighting technology, outperforming traditional cultivators using other lighting alternatives.

Our LED technology has helped

our customers qualify for substantial energy rebates from their utility providers, with one customer receiving nearly a half a million-dollar

rebate using our LED solutions.

horticulture lighting is a high-performance, adjustable spectrum LED grow lighting solution for commercial horticulture cultivation,

with the flexibility and lighting intensity to scale from vegetative growth phase to higher light needs in bloom phase.

Full independent

spectrum dimming offers growers increased level of control and experimentation to perfect their grow recipes.

Our LED grow lights have

passed the most stringent third-party accredited testing.

These lights retail for between $249 and $999 depending on the model and specs.

Agrify-Valiant

Joint Venture

December 2019, we established Agrify-Valiant, LLC as a joint venture with Valiant-America.

Valiant-America is experienced in consulting

and general contracting of a wide range of industrial facilities, but it has a particular specialization and expertise in the development

of indoor farming facilities.

Valiant’s qualified professionals possess a deep working knowledge of our grow systems and how to

integrate our offerings when developing cultivation facilities.

that many of our customers are either new entrants to the market or companies in expansion mode, it became obvious to us that the majority

of them need many services other than just equipment and software, including architectural, engineering, construction and installation

services, which we are able to now offer through our joint venture with Valiant-America.

The Agrify-Valiant joint venture complements

our offering and provides our clients with an end-to-end turnkey solution.

We believe being able to provide a full suite of technology

products and services to these customers helps to embed us with these customers and enables us to become mission critical to their operations.

Through this strategic and synergistic partnership,

we are able to offer our customers relevant value-added services related to architectural, engineering, construction and installation

needs, and we are also able to derive significant revenues from the indoor agriculture deals that close under the auspices of this joint

Given that we are a majority 60% owner of, and control, the Agrify-Valiant, LLC, we consolidate 100% of the revenues that go

through the joint venture, and we recognize 60% of all net profits.

Revenue from Agrify-Valiant is recognized after the agreed upon work

has been completed.

Pursuant to the operating agreement of Agrify-Valiant, at any time between the second and fifth anniversary of our

initial public offering, we have the right to “call”

Valiant’s 40% equity interest from Valiant, and Valiant has the

right to “put”

its 40% equity interest to us.

The consideration for the equity purchased pursuant to this right shall be

paid in shares of our common stock based on a formula taking into account at the time of exercise the fair market value of our common

stock, as well as our gross sales and net earnings.

recognize that many new cultivators face particular capital and time constraints, and we also recognize that the initial cost of our

equipment can be a deterrent for some.

We solve this problem by offering equipment financing plans for select good credit customers,

which we believe further enables us to become a vendor of choice.

While we proactively show our prospects that the strong and immediate

return on investment derived from Agrify solutions will more than make up for associated start-up costs, we wanted to do even more to

support our prospective customers, which is why we unveiled an equipment financing program to help remove this final barrier to entry

for otherwise excited cultivators.

This requires participating credit-worthy customers to pay a substantial down payment, typically between

30% and 50% of the purchase price, with the balance financed over two years, with interest, under commercially reasonable terms.

believe our full suite of product offerings form an unmatched ecosystem for indoor growing.

At this time, our Agrify Vertical Farming

Unit, our overall bundled solution and our engineering/installation services are highly differentiated from anything else on the market

so in one sense we do not have any direct competitors who offer the same type of comprehensive value proposition and single-source benefit.

the same time, our customers are actively being approached by a variety of companies who do offer compelling standalone products and

services so we recognize that our customers do have choices and alternatives, and they also need to factor in opportunity cost whenever

they make purchasing decisions.

Consequently, we more broadly define our competition as any other company going after the same finite

budget dollars as us in the indoor agriculture space.

We have highlighted below the most notable players that operate across some of

the same functional highly fragmented areas of agriculture technology that we operate.

● Semi-Integrated

Vertical Cultivation Systems —

Systems —

AEssenceGrows and Thrive Growing

● Horticultural

Lighting —

Gavita, Fluence, VividGro, and Heliospectra

● Environmental

Threat Mitigation Solutions —

Element Air and Tersano

Software —

Grownetics and Trym

● Cultivation

Software —

Quantum Leaf and Flourish

Cultivation Racking Systems —

Pipp Horticulture and Montel

the presence of some well-funded and well-established competitors who offer pieces of what we do, we are able to compete on the basis

of several defensible factors including our industry experience, our technical expertise, the differentiated value proposition of our

individual offerings, and our positioning as a single-source provider.

However, we believe above all else, it’s our ability to

offer an unrivaled level of precision through a total end-to-end turnkey solution that sets us apart from existing competitors and potential

new market entrants.

primarily market and sell our products to newly licensed, well-funded producers in a single market as well as multi-state operators.

Our customers choose us for a number of reasons, including the breadth and availability of the products we offer, our extensive expertise,

and the quality of our customer service.

For large multi-state operators, our solutions allow operators to produce consistent high-quality

products regardless of the geographic locations where they are licensed to operate.

Our system removes the variations of local grow environment,

and also provides consistent standard operating procedures across different facilities, helping every facility to achieve the highest

GMP standards.

Our ability to provide a “one-stop shop”

experience allows us to be the preferred vendor to many of these

customers by streamlining their entry into or expansion of their cultivation capabilities.

In addition, we believe our customers find

great value in the advice and recommendations provided by our knowledgeable sales and service associates, which further increases demand

for our products.

believe the nature of our solutions and our high-touch customer service model strengthens relationships, builds loyalty and drives repeat

business as our customers’

businesses expand.

In addition, we feel as if our premium product lines and comprehensive product portfolio

position us well to meet our customers’

Furthermore, we fully anticipate that we will be able to leverage all of the data

that we are collecting from our existing customer base to make continuous improvements to our offerings and better serve our current

and new customers in the future.

date, we have customers in the following states:

Nevada, Colorado, Washington, Michigan, Minnesota, Rhode Island, Massachusetts and Illinois.

We also have a customer in Oman.

for our enterprise-level business, we currently have 386 AVFUs deployed and 1,140 AVFUs in the backlog, and all of them will be powered

by Agrify Insights™.

Our existing active deployments cover approximately 75,000 square feet of facility space, and that number

is expected to grow significantly once we go live with some of our newer customers and once we are able to close more deals from our

$105 million qualified pipeline.

Growth Strategy

have developed a multi-pronged growth strategy as described below to help us capitalize on the sizable opportunity at hand.

Through methodical

sales and marketing efforts, our joint venture with Valiant-America, scale-up manufacturing, and equipment financing, we believe we have

implemented several key initiatives we can use to grow our business more effectively.

We also intend to opportunistically pursue the

strategies described below to continue our upward trajectory and enhance shareholder value.

We believe we have made significant progress

in 2020 in the form of $66.8 million in new bookings, and we expect this amount to increase based on the strength of the opportunities

in our qualified pipeline.

We believe our revenues will be enhanced by the many improvements we have made and the growth strategy we

have started to implement since Raymond Chang (our Chairman of the Board and Chief Executive Officer) and Guichao Hua (a member of our

board of directors) purchased a controlling interest in our company in 2019 and rebranded us as Agrify.

Specifically, we have made it

a priority to develop our core bundled hardware and software indoor cultivation solution, and we have augmented that with some strategic

acquisitions, partnerships, joint ventures and distribution arrangements that we believe will enable us to scale our business as a highly

differentiated leader in the indoor agriculture marketplace.

and Marketing

Sales Process and Strong Infrastructure in Place to Enable Revenue Growth

utilize a rigorous Sandler Training sales process to evaluate potential new opportunities and then advance vetted prospects through the

different phases of our qualified pipeline.

The Sandler Training sales process is a sales process that was originally developed in 1967

by David Sandler as a conscious departure from more traditional sales methods that often relied on pushy and aggressive tactics.

Sandler Training sales process, which is based on the psychology of human behavior, is consistent with the values and culture we have

chosen to implement at Agrify, and consequently our salespeople spend most of their time building relationships and qualifying opportunities

in order to make closing new business more streamlined, collaborative and organic in nature.

There are specific requirements, milestones,

and events that we have identified along the sales process that must be met to move prospects through the different parts of the buyer

journey in order to convert them from vetted opportunities into committed sales orders within a 12-month period.

At each phase of the

pipeline, a prospect opportunity is assigned a probability value for closing, providing management production forecast ability.

diligent in making sure that we are engaging in conversations with well-funded entities that are in good standing with any licensing

requirements that they face (or entities that are at least on the cusp of being viable candidates for our grow solutions).

into account infrastructure, facility readiness and the presence of key personnel.

date, the results of our sales process have been encouraging as there has been a high level of alignment, accountability and achievement

amongst our sales team.

As of December 31 2020, our backlog, which consists of purchase orders or purchase commitments, is $58.6 million.

We expect to recognize approximately $40 million from the backlog as revenue in 2021 and the rest gradually thereafter.

Each growing chamber reports approximately 1.5

million data points annually, enabling our clients to perform in-depth analysis of grow performance.

The manual control screen visualizes

the current state of the grow chamber and enables our technicians to take direct control for troubleshooting, if necessary.

log shows us what decisions were made by the onboard Agrify Insights software and why.

Facility Level Optimization

Our modular VFUs are deployed in scale at a customer’s facility

with the smallest commercial operation deployment to date being 63 VFUs.

Agrify Insights software is designed to operate these individual

VFUs as a combined facility.

Agrify Insights software features at the facility level include:

Production Planning .

The production planning feature is designed to maximize a facility’s

utilization by executing a “best-fit” scheduling algorithm to selected Grow Plans across the growing units that have

been deployed at a customer facility.

Since grow plans typically have a different number of growing days that start on staggered

schedules, this module is a critical component for optimizing the planting and moving schedules, significantly increasing plant production,

and reducing the cost per pound of harvest.

Workforce Management .

Agrify Insights software includes a workforce planning

feature to assign tasks to staff.

These tasks can be automatically assigned based on user role or their knowledge, skills, and abilities.

The calendar displays the estimated amount of time required to complete plant-touching tasks on any given day.

Automatic Notification System .

Users can select to subscribe to anomalous events,

and users are notified in the order in which they are listed.

If a user does not acknowledge the notification within the specified

time frame, the next user in the list is notified, providing the business with 24/7 monitoring and notifications.

Preventative Maintenance .

Our equipment and facility preventative maintenance schedules

and related tasks are contained, tracked and monitored within Agrify Insights software.

Facility Infrastructure Controls .

Agrify Insights software controls the irrigation

on a facility level as well as connects with the water chilled HVAC system and ambient lighting system, providing our customers a

central piece of software for facility management.

Optimization at the Business Level

Agrify Insights software analysis features

enable customers to understand how cultivation decisions impact their overall business.

Understanding the data from the cultivation facility

can help our customers better plan and make informed decisions that impact downstream parts of their business.

Consumables Procurement Integration .

Each task can also be assigned a set of consumables

whose inventory will be reduced when the task is started.

This feature can help customers manage supply levels and can automatically

create purchase orders so that they never run out of required supplies.

Online Standard Operating Procedures (“SOPs’’) and Safety Datasheets .

Agrify Insights software hosts digital copies of our included Standard Operating Procedures and datasheets, or users can upload their own via our content management system, ensuring that the most recent version of SOPs and forms are available to users.

Roles-Based Dashboards .

Ability to obtain access to information specifically suited to your workforce’s various needs.

Facility owners have access to high-level information about crop yields and equipment usage in an easy-to-understand scorecard.

Farm managers receive a worksheet and calendar that lets them manage their workforce and automatically assign plant-touching tasks.

This also provides facility managers with an ongoing window into consumables and lets them set inventory levels.

Data Collection .

Agrify Insights software is a centralized repository for

all data relating to the cultivation aspects of our clients’ business, including research and development testing data, and

the ability to capture and compare test results.

By doing so, Agrify Insights software becomes a customers’ cultivation

statement of record.

Financial Simulator / What If Scenarios .

Our operating expenses (“OpEx”)

calculator enables users to evaluate impacts to profitability by changing hundreds of attributes including, but not limited to, changes

to costs in labor, electric, water, CO2, and growing media as well as potential volatility in yields and pricing.

Regulatory Reporting Integration.

We have integrated our software with Metrc, a leading

seed-to-harvest compliance management and tracking solution, which will enable our customers to handle most regulatory reporting

directly through Agrify Insights software.

Extraction Solutions

While we do not extract,

come in contact with, distribute, process, or dispense cannabis or hemp or any cannabis or hemp derivatives that are currently

prohibited under United States federal law, 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.

Cannabis represents a potential cornucopia of

medicinal and pharmaceutical advancement.

Cannabis produces over 550 different phytochemicals, over 120 of which are cannabinoids like

tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”).

Other cannabinoids like varins, cannabigerivarin (“CBGV”),

tetrahydrocannabivarin (“THCV”), and cannabidivarin (“CBDV”) are less well known and potentially offer significant

As we continue to learn more about the complex chemical composition of cannabis, the need for distillation solutions is clear.

enables the identification, isolation, and separation of valuable cannabis metabolites.

The ability to take cannabis compounds distilled

into their pure forms, and then recombine them into specific, purposeful end-products could have significant potential for the pharmaceutical

industry in the future.

Since October 2021, we have been strategically

focused on establishing ourselves as a global leader in the cannabis and hemp extraction equipment industry, complementing our cutting-edge

cannabis and hemp cultivation solutions.

Over a 5-month period, we acquired four of the top brand names in the industry:

Mass2Media, LLC, d/b/a PX2 Holdings, LLC, d/b/a Precision Extraction Solutions (“Precision”)

- Market leader in developing and producing high-quality hydrocarbon extraction solutions was acquired by Agrify on October

Cascade Sciences, LLC (“Cascade”)- Market leader in developing and producing high-quality vacuum

purge ovens and decarboxylation ovens was acquired by Agrify on October 1, 2021.

PurePressure, LLC (“PurePressure”) - Market leader in developing and producing high-quality solventless

extraction solutions was acquired by Agrify on December 31, 2021.

LS Holdings Corp.

(“Lab Society”) - Market leader in developing and producing

high-quality distillation and solvent separation extraction solutions was acquired by Agrify on February 1, 2022.

Combined, the four acquisitions listed above provide

what we believe to be the most comprehensive extraction solutions from a single provider, with over 7,000 customers, including over 30

Multi-State-Operators, and some of the best extraction labs in the industry.

Our leading extraction brands provide equipment and solutions

for extraction, post-processing, and testing for the cannabis and hemp industry.

The extraction, post-processing and testing services

are complementary and highly attractive areas of the supply chain.

Our extraction division now offers cutting-edge

technologies and end-to-end service solutions.

Solutions from the extraction division include equipment, technology, facility and lab

design, and extensive research and development capabilities.

By providing new hardware-as-a-service we intend to capture higher margin

recurring revenue and supply chain optimization through streamlined product sourcing, purchasing, manufacturing, and warehousing.

These acquisitions have greatly expanded our product

and service offerings in the post-harvest segment of the supply chain, and believe we are positioning the Company as the most vertically

integrated total solutions provider for our cannabis and hemp customers.

The global cannabis extraction market is expected to potentially

grow to $24 billion by 2028, and as the cannabis industry continues to experience rapid growth globally, we expect the sales of our extraction

solutions to follow a similar growth trajectory.

Facility Design & Building Services

Agrify provides fully integrated architectural,

engineering, and project management oversight of qualified General Contractors for its customers commercial cannabis facilities buildouts.

Each custom commercial cannabis facility is specifically designed to maximize the production output of Agrify’s proprietary VFU’s

and cannabis extraction product solutions.

Cannabis Market Opportunity

While we do not cultivate, come in contact with,

distribute or dispense cannabis or any cannabis derivatives that are currently prohibited under U.S.

federal law, our cultivation solutions

can be used within indoor grow facilities by cannabis cultivators if they choose to do so.

In the U.S., the development and growth of the

regulated medical and recreational (adult use) cannabis industry has generally been driven by state law and regulation, and accordingly,

the market varies on a state-by-state basis.

State laws that legalize and regulate cannabis for medicinal reasons allow patients to consume

cannabis with a designated healthcare provider’s recommendation, subject to various requirements and limitations.

As of December

31, 2020, we have $105 million of carefully vetted potential sales opportunities (which we refer to as our qualified pipeline).

$78 million of qualified pipeline was generated through our company directly and $27 million through our Agrify-Valiant Joint-Venture.

We are presently working to convert this pipeline into confirmed bookings over the next 12 months.

Given our emphasis on large scale

high-value enterprise sales versus high-volume sales, we believe that we will be able to significantly scale our business in the coming

years without needing to drastically increase our headcount.

For us, it is all about having the right well-trained, knowledgeable sales

team instead of the largest sales team.

ahead, our sales team is responsible for overseeing nationwide sales and support, and they will drive our expansion into future international

Our territory managers work in tandem with our in-house technology solutions and horticultural experts to provide customers

a turnkey indoor facility integrated system proposal.

Agreements include the equipment being purchased and multi-year SaaS commitments

that bring in substantial trailing revenues.

Team Aligned with Sales Force to Maximize Our Industry Visibility to Drive Revenue

marketing department works in tandem with our sales and business development representatives to best represent and sell our Agrify “Precision

Elevated™”

cultivation solution to the indoor agriculture industry.

The sales and business development representatives push

prospects through a sales funnel, also known as a “buyer’s journey”.

A strategic sales model has been developed to

create a seamless transition from the initial communication with a prospect through targeted messaging and eventually moving all the

way through the funnel.

The movement through this funnel is referred to as TOFU/MOFU/BOFU (Top of the Funnel/Middle of the Funnel/Bottom

of the Funnel), which is focused on attention, consideration and decision-making, keeping the messaging consistent, the potential buyer

engaged, and ultimately leads the prospect to close on a deal.

sales funnel duties are completed using a customer relationship management (CRM) system, which allows us to track, qualify, and report

on the ROI of our marketing initiatives.

Leads are added into our pipeline funnel predominantly through our digital marketing efforts,

including direct marketing, organic social media growth, thought leadership, and demand generation via paid advertisements and press

capitalize on our direct marketing efforts by utilizing our internal CRM database, as well as the external help of trusted industry databases

to target the right audience.

Additionally, by taking advantage of our partners’

networks, such as those of Valiant-America, Bluezone,

and Enozo, we are able to reach an extensive and reliable list of cultivators and industry professionals.

Emails go out on a weekly basis

and are subdivided by product focus and state, depending on the campaign.

We use A/B testing in our email campaign strategy in order

to harness meaningful messages that result in 40% engagement and above average open and click through rates.

We are turning impressions

into contacts at a rapid rate and have managed to grow our contact list by over 100% in one quarter.

We are seeing 20% of these leads

become sales qualified and 10% result in an opportunity.

Media and Thought Leadership

the creation and promotion of engaging content that positions us as a thought leader, we continue to organically grow our social media

We share original video, photography, industry-related articles, and blog content on a consistent basis.

By developing strategic

partnerships with well-known and respected brands, we are working to better position ourselves with marketing and branding efforts on

Furthermore, we promote our social media in our communication via email and on our website.

We also keep our finger on the pulse

of trends and competitors in the market, remaining in-the-know.

We have successfully more than doubled our social media presence across

all platforms in the first half of 2020 and continue to show improvement in transitioning our social media audience into prospects.

digital marketing has been a consistent driver of leads and visibility for Agrify, trade shows related to various indoor agriculture

topics have also proven to be highly effective.

When attending trade shows, we typically position ourselves front and center, with high-level

sponsorships and outstanding booth placement and presentation.

Our product and subject matter experts take advantage of speaking opportunities,

positioning Agrify as industry thought leaders.

We expect to continue to grow our industry presence by generating leads using conferences

as a platform.

The trade show plan has been carefully vetted to ensure that these shows are reputable, have a strong business to business

focus, high foot-traffic rates, as well as hosted in a desirable market.

In 2019, we were able to capture

over 800 leads at our biggest event and over 200 leads per show at smaller regional conferences.

More than 75% have become marketing

qualified leads, of which 50% later became sales qualified.

Many of these leads are now customers or in the process of becoming customers.

We are seeing the largest amount of marketing qualified leads come through our trade show attendance.

Given the proven success of these

conferences, their reputation, their audiences and their industry magnitude, we expect to continue to seek headline and sponsorship roles.

As a result of the COVID-19 pandemic, only three trade shows have been completed so far in 2020, with several others have been postponed.

Accordingly, during the pandemic we have reallocated our resources to focus more heavily on our other means of generating leads, particularly

through expanding our direct sales force.

31, 2021, 38 states have passed laws allowing their citizens to use medical cannabis.

On top of this medical condition growth trend, there

has been a slower but steady increase in the number of states that have chosen to legalize cannabis for recreational use.

As of December

31, 2021, 18 states have passed laws allowing their citizens to use recreational cannabis.

Shifting public attitudes and state law and

legislative activity are driving this change as indicated by a 2019 poll by Quinnipiac University that found that 93% of Americans support

patient access to medical-use cannabis, if recommended by a doctor, which was the same level of support from a similar poll conducted

by Quinnipiac University in 2018.

Similarly, the trend toward further legalization and regulation of cannabis sales is spreading globally.

As of the date of this report, over 28 countries outside the U.S.

currently have medicinal cannabis regulation in force, and that number

is expected to significantly increase over time.

Given that the market size of legal cannabis in

in 2020 was expected to be $17 billion according to New Frontier, and 53% of cannabis volume is currently grown indoors according

to New Leaf Data Services, we estimate that the indoor segment of the legal U.S.

cannabis sector is a $9 billion market with the expectation

that there will be even more growth on the horizon.

In fact, according to a report from April 2020, BDSA, the leading provider of cannabis

industry market research, in conjunction with Arcview Market Research, forecasted that U.S.

legal cannabis sales will approach $34 billion

by 2025, which represents 72% of their projection for total global sales of $47 billion in 2025.

The different cultivation environments for cannabis

each have advantages and disadvantages, and this leads to a variance in price points based on quality, actual and perceived, and process.

According to New Leaf Data Services’ March 25, 2022 U.S.

cannabis spot index, the average wholesale price per pound of outdoor grown

flower was $502 per pound, greenhouse flower averaged $840 per pound, while indoor grown flower averaged $1,651 per pound and the total

market on average was $1,242 per pound.

Based on the breakdown of production by cultivation environment, indoor grown flower represents

53% of total volume by type while greenhouse and outdoor represent 23% and 24%, respectively.

Additionally, based on the breakdown of

percentage of observed transactions, indoor grown flower represents 64% of total volume by type while greenhouse and outdoor represent

18% and 18%, respectively.

Outdoor cannabis has the lowest initial capital

expenditures required to start cultivation.

According to Marijuana Business Daily (“MBD”), the average start-up cost per

square foot of outdoor cultivation is $10.

The expansive size of outdoor grows and their reliance on natural soil, lighting and weather

conditions means cultivators have relatively few infrastructure needs.

They can get their business off the ground quickly and with minimal

upfront expenditures trading quality for lower cost production.

Greenhouse grown cannabis commands a higher price

per pound than field grown cannabis as the more protected environment produces higher quality flower.

According to MBD, the average start-up

cost per square foot for greenhouse cultivation is $50, but the true costs tend to be all over the map with an executive from Ohio-based

Rough Brothers, an 84-year-old greenhouse company that started taking on cannabis clients in 2013, opining that such costs can vary greatly,

going so far as to say “I could build you a cannabis greenhouse for $20 a square foot or $200 a square foot.”

Indoor grown cannabis commands the highest price

per pound as it produces the highest quality flower due to the fact that growers have the most control over the environment.

Indoor cultivation

facilities vary significantly in sophistication and technology with the build-out costs reflecting that fact.

While MBD states that the

average start-up cost per square foot for indoor cultivation is $75, anything close to that cost would inevitably yield a primitive and

arguably insufficient setup.

In contrast, Jennifer Martin, a prominent cannabis cultivation consultant, indicated on MarijuanaPropagation.com

that a far more advanced and scalable configuration would likely cost between $400 to $500 per square foot.

In general, the more a company

invests up front, the higher the upside will be in the future.

However, beyond initial build-out costs, it has historically been very

expensive to grow cannabis in an indoor facility.

The industry norm for direct production-related operating costs ranges from approximately

$436 per pound according to a competitive cost analysis conducted by MJardin to $516 per pound, which is based on another examination

of cultivation costs by the website CannaBusinessPlans.com.

Our premium indoor grow solutions, whether it’s

our VFUs or our LED lights, are designed, engineered, and calibrated to drive significant improvements for our customers, who trust us

to deliver the type of productivity and quality that was previously unattainable.

Competitive Landscape

We believe our full suite of product offerings

form an unmatched ecosystem for indoor growing and extraction.

At this time, our Agrify Vertical Farming Unit, Agrify Insights

software, Extraction solutions, our facility design and build services, and our engineering/installation services are highly differentiated

from anything else on the market.

At the same time, our customers are actively being

approached by a variety of companies who do offer compelling standalone products and services, so we recognize that our customers do have

choices and alternatives, and they also need to factor in opportunity cost whenever they make purchasing decisions.

Consequently, we more

broadly define our competition as any other company going after the same finite budget dollars as us in the indoor agriculture space.

We have highlighted below the most notable players that operate across some of the same functional, highly fragmented areas of agriculture

technology that we operate.

Semi-Integrated Vertical Cultivation Systems — Sprout AI

Aeroponic Systems — AEssenceGrows and Thrive Growing

Horticultural Lighting — Gavita, Fluence, VividGro, Hydrofarm, GrowGeneration, Hawthorne and Heliospectra

Extraction Solutions — Extraction Tech Solutions, Galenja

Monitoring Software — Grownetics and Trym

Cultivation Software — Quantum Leaf, Flourish, and Grow Link

Vertical Cultivation Racking Systems — Pipp Horticulture and Montel

Despite the presence of some well-funded and

well-established competitors who offer pieces of what we do, we are able to compete on the basis of several defensible factors including

our industry experience, our technical expertise, the differentiated value proposition of our individual offerings, and our positioning

as a single-source provider.

However, we believe above all else, it is our ability to offer an unrivaled level of precision through a

total end-to-end turnkey solution that sets us apart from existing competitors and potential new market entrants.

Our Competitive Strengths

We believe our business has, and our future success

will be driven by, the following competitive strengths:

Innovative Technology in an Attractive Growing Industry .

Our innovative solutions

are aimed at large and growing U.S.

domestic and global markets.

We believe we are the only provider of a fully integrated end-to-end

hardware and software turnkey solution for indoor cultivation and extraction facilities that allows customers to produce at scale,

high-quality products with consistency that meet the growing demand and needs of end users at a relatively low cost.

believe we have a first mover advantage due to innovating this new type of smart cannabis and hemp cultivation and processing solution,

which is already designed, manufactured, and implemented in a number of commercial scale deployments across multiple states within

Integrated Proprietary Components .

We design and create our own hardware, software and SOPs from the ground up, rather than buying piecemeal from third parties.

We take a systems-engineered integrated approach that we believe has inherent advantages over other, ad-hoc systems.

Emphasis on Precision and Consistency Through Our Proprietary Grow Solutions .

being able to help our customers increase capacity, yield and consequently revenues hold a tremendous amount of value, we believe

that our biggest differentiator is our ability to impact the actual quality and consistency of the output by controlling the environment

in which the crops are grown and all of the variables that influence harvests with an unparalleled level of precision.

The by-product

of our Agrify total turn-key solution (“TTK Solution”) is that our customers are able to create consistent high-quality

products with repeatability from anywhere similar to any other consumer product company that provides a branded food or drink product.

Emphasis on Precision and Consistency Through Our Extraction Division.

to our premium grow solutions, we have begun offering our customers industry leading cannabis and hemp extraction equipment, design

and training solutions.

By acquiring leading brands earlier this year, we are immediately able to offer our customers premium solutions

to meet their processing needs in this rapidly expanding sector.

Market Knowledge and Understanding .

We have extensive experience with controlled

agriculture environments, extraction, post-processing and scale-up manufacturing, as well as industry technical knowledge and relationships.

We are keenly aware of the struggles that indoor cultivators and extractors face, and we serve as a credible and collaborative partner

through the entire customer lifecycle.

We believe that our fully integrated TTK Solution, extraction equipment and ancillary services

are the key to resolving many of the challenges our customers face.

Differentiated Business Model .

Unlike many of our competitors, we offer a diversified

mix of hardware, software and services, which leads to multiple revenue streams.

Given the nature of our deployments, we become deeply

embedded in our customers’ operations through our numerous product offerings, which include our TTK Solutions and the direct sale

of our VFUs, and various extraction and processing equipment and this puts us in a position where their success is directly tied to our

Our ability to differentiate our business model, through both our TTK Solutions, as well as through our direct VFU hardware

sales, provides us with multiple opportunities to expand our installed user base, which we believe will lead to future high-margin and

stable recurring SaaS revenues, via our Agrify Insights software, and production fee revenues.

Novel Equipment Financing Solution .

Limited access to outside capital is a significant

issue for cultivators as it can inhibit growth and cultivation facility expansion.

We help solve this problem by offering equipment

financing plans for select good credit customers, which we believe further enables us to become a vendor of choice.

Qualified customers

pay approximately 30%-50% upfront and finance the balance through a two-year payment plan.

Experienced and Proven Management Team .

Our leadership team has entrepreneurial experience,

technical expertise, and a track record of scaling up businesses and operating public companies.

Additionally, our team is supported

by strong advisors and leading strategic and institutional investors.

Our Customers

We primarily market and sell our products to

newly licensed, well-funded producers in a single market as well as multi-state operators.

Our customers choose us for a number of reasons,

including the breadth and availability of the products we offer, our extensive expertise, and the quality of our customer service.

large multi-state operators, our solutions allow operators to produce consistent high-quality products regardless of the geographic locations

where they are licensed to operate.

Our system removes the variations of local grow environment, and also provides consistent standard

operating procedures across different facilities, helping every facility to achieve the highest Good Manufacturing Processes standards.

Our ability to provide a “one-stop shop” experience allows us to be the preferred vendor to many of these customers by streamlining

their entry into or expansion of their cultivation capabilities.

In addition, we believe our customers find great value in the advice

and recommendations provided by our knowledgeable sales and service associates, which further increases demand for our products.

We believe the nature of our solutions and our

high-touch customer service model strengthens relationships, builds loyalty and drives repeat business as our customers’ businesses

In addition, we feel as if our premium product lines and comprehensive product portfolio position us well to meet our customers’

Furthermore, we fully anticipate that we will be able to leverage all of the data that we are collecting from our existing customer

base to make continuous improvements to our offerings and better serve our current and new customers in the future.

To date, we have customers across the U.S.

internationally in the cannabis and hemp industry and are of all sizes, ranging from small, single location/ single vertical businesses

to multi-state enterprise operations who use Agrify family of solutions.

In 2021, we had two customers that represented

more than 10% of total revenues and accounts receivable.

In 2020, we had three customers that represented more than 10% of total revenues

and accounts receivable.

Our Growth Strategy

We have developed a multi-pronged growth strategy

as described below to help us capitalize on the sizable opportunity at hand.

Through methodical sales and marketing efforts, cultivation

and extraction solutions, facility design and building services, scale-up manufacturing, and equipment financing, we believe we have implemented

several key initiatives we can use to grow our business more effectively.

We also intend to opportunistically pursue the strategies described

below to continue our upward trajectory and enhance shareholder value.

In 2021 we believe we have significantly improved our new bookings

and qualified pipeline.

With our expanded product line to included quality extraction solutions, we become more attractive to our prospects

and customers, enhancing our value-add and improved wallet share opportunities.

We expect our qualified pipeline and new bookings of opportunities

to continue to grow.

Sales and Marketing

Rigorous Sales Process and Strong Infrastructure

in Place to Drive Revenue Growth

We embrace and utilize a rigorous Sandler sales

process to evaluate potential new opportunities and then advance vetted prospects through the different phases of our qualified pipeline.

The Sandler sales process is the leading enterprise sales process globally, which is based on the psychology of human behavior, is consistent

with the values and culture we have chosen to implement at Agrify, and consequently our salespeople spend most of their time building

relationships and qualifying opportunities in order to make closing new business more streamlined, collaborative and organic in nature.

There are specific requirements, milestones, and events that we have identified along the sales process that must be met to move prospects

through and convert them from vetted opportunities into committed sales orders within a 12-month period.

At each phase of the pipeline,

a prospect opportunity is assigned a probability value for closing, providing management production forecast ability.

Our professional proactive sales team works to

convert our qualified pipeline of opportunities into confirmed contractual bookings.

Given our emphasis on enterprise sales opportunities

we believe we are able to significantly scale our business in the coming year without significant increases our headcount.

of this report, our sales team was made up of Sales Operations Specialist, Order Management Representatives, Solution Architects, Account

Managers, Director of Business Development, and Director of Channel Partners totaled 19 full-time employees.

We believe our business has, and our future success

will be driven by, the following sales and marketing strategy:

Marketing Team Aligned

with Sales Force to Maximize Our Industry Visibility to Drive Revenue .

Our marketing department works in tandem with our sales

and business development representatives to best represent and sell our cultivation and extraction solutions to the cannabis industry.

The sales and business development representatives advance prospects

through our sales funnel, also known as a “buyer’s journey”.

Our sales funnel duties are completed using a customer relationship management (“CRM”) system, which allows us to track,

qualify, and report on the pipeline velocity and ROI of our marketing

Leads are added into our funnel predominantly through our digital marketing efforts, including direct marketing, organic

social media growth, thought leadership, events, and demand generation

via paid advertisements.

Direct Marketing .

We capitalize on our direct marketing

efforts by utilizing our internal CRM database, as well as the external help of trusted industry databases to target the right audience.

Emails go out on a weekly basis and are subdivided by product focus and state, depending on the campaign.

We use A/B testing in our email

campaign strategy to harness meaningful messages that result around 35%-40% engagement for open and click rates.

The average open and

click rates for all industries is 21.33%.

Social Media and Thought Leadership.

Through the creation

and promotion of engaging content that positions us as a thought leader, we continue to organically grow our social media audience.

share original video, photography, industry-related articles, and blog content on a consistent basis.

By developing strategic partnerships

with well-known and respected brands, we are working to better position ourselves with marketing and branding efforts on social.

we promote our social media in our communication via email and on our website.

We also keep our finger on the pulse of trends and competitors

in the market, remaining in-the-know.

Trade shows and events related to the cannabis

industry have proven to be highly effective.

When attending trade shows and events, we typically position ourselves front and center,

with high-level sponsorships, outstanding booth placement, and speaking opportunities.

Our product and subject matter experts take advantage

of speaking opportunities, positioning Agrify as industry thought leaders.

We expect to continue to grow our industry presence by generating

leads using conferences as a platform.

The trade show plan has been carefully vetted to ensure that these shows are reputable, have a

strong business to business focus, high foot-traffic rates, as well as hosted in a desirable market.

Paid Advertising .

We utilize paid advertising

such as banner ads on high-trafficked media sites that largely focus on agricultural technology and other relevant topics.

We utilize paid

advertising such as banner ads on high-trafficked media sites that largely focus on cannabis and other relevant topics.

content offers and other downloadable materials in order to capture these leads.

As we gain experience through these different marketing

initiatives, we will make appropriate spending adjustments with our most effective outlets.

We seek to expand our business both nationally

and internationally, and will do so when we have proven, viable marketing options available to us.

As we gain experience through these different

marketing initiatives, we will make appropriate spending adjustments with our most effective outlets.

We seek to expand our business

both nationally and internationally, and will do so when we have proven, viable marketing options available to us.

Public Relations Campaigns.

We have successfully gained

the interest of press from networks such as CNN, CFN, industry trade journals, and more.

With our industry positioning using thought-leadership

and on-going participation in industry conferences, we have been highlighted every month through the Newswire and featured in a variety

of media outlets.

We will continue to sponsor and keynote in industry-related events including;

tech and agriculture conferences, podcasts,

radio shows and more to continue to gain press and ultimately more exposure.

Through our digital marketing

efforts, we promote our solutions to customers who stand to benefit most from our products and services, which spans a wide range of

indoor agriculture verticals.

We aim to bring in at least twenty new qualified leads a week by driving traffic to our website, keeping

impression numbers high, while also keeping our cost-per-lead low.

As we receive more data, we plan on continuing to monitor the digital

efforts that garner the most leads and make adjustments accordingly.

Our Joint Venture with Valiant-America

In December 2019, we established

Agrify-Valiant, LLC as a joint venture with Valiant-America.

From a growth perspective, we believe our joint venture with Valiant-America

gives us a credible and complementary channel partner with extensive industry relationships to help us gain additional market share by

making our solution a prominent part of their discussions involving future projects in this space.

We believe this joint venture

positions us as the only fully integrated grow solution in the industry as we are now able to provide services around facility design,

mechanical and engineering planning, general contracting, hardware and equipment installation, and commissioning for all indoor agriculture

We believe our turnkey offerings

are highly differentiated from anything else on the market in that they combine our seamlessly integrated hardware and software offerings

with a wide range of associated services such as consulting, engineering, and construction to form what we believe is the most complete

We have successfully gained the interest of press from networks such as CFN and a number of other cannabis media outlets.

With our industry positioning using thought-leadership and on-going participation in industry conferences, we have been highlighted through the Newswire and featured in a variety of media outlets.

We will continue to sponsor and keynote in industry-related events including technology and agriculture conferences, podcasts, radio shows and more to continue to gain press and ultimately more exposure.

Agrify Total Turn-key Solutions

We also believe that our data-driven TTK Solution

for cultivation solutions is unlike any other customer solution being offered and enables our customers to get to market faster

by providing them with our 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 to form what we believe is the most complete

solution available from a single provider.

The totality of our product mix and service capabilities form an unrivaled ecosystem in what

has historically been an extremely fragmented market.

As a result, we believe we are well situated to create a dominant market position

in the indoor agriculture segment.

Scale-Up Manufacturing Capabilities in Order

to Meet the Increasing Demand for Our Grow Solutions

We currently use contract manufacturers

(CMs) in the U.S.

Agrify’s TTK Solution provides our valued

customers with the benefit of working with a single, highly qualified provider in what has historically been a decentralized market full

of piecemeal solutions that were not necessarily designed and engineered to work harmoniously with one another.

Given the significant

shortcomings associated with traditional indoor grow methods across all commercial agriculture segments, it was apparent that a new paradigm

in indoor cultivation was desperately needed, which is precisely why we are bringing a more modern, manufacturing style approach that

is process driven through technology and measured via data and analytics.

Overall, our holistic approach to addressing our customers’

cultivation needs treats their production facilities as an end-to-end ecosystem whose success depends on all of its components working

together optimally.

Despite the rapidly growing cannabis and hemp industry, many grower and processor customers face some significant

obstacles to their operations that pose a serious threat to their long-term viability.

We believe Agrify proprietary TTK Solution is

the key to resolving many of the challenges our customers encounter.

Since launching our TTK Solution in June of 2021, we have generated

significant momentum in the United States market and over time, we expect to have significant future TTK Solution opportunities both

domestically and abroad.

We have set ourselves apart by bringing to market a horticulturist expertise, bundled solution of state-of-the-art

equipment, software and services that is turn-key, end-to-end, fully integrated and optimized for precision growing and extraction.

TTK Solution provides customers with the following bundled equipment and services:

Facility design, lab design, and engineering services

Facility and lab buildout project management

Agrify state of the art VFUs

Agrify data driven Insights SaaS software

Agrify state of the art extraction products

Expert horticulturist training and ongoing support

Agrify’s TTK Solution agreement terms are typically for ten years.

If facility design and building services are provided, on average the customer pays Agrify an annual interest rate ranging from 12% to

18% per annum and the money owed for the design and build services are completely repaid withing 24 months of facility occupancy certification.

During the remaining term of the agreement the Agrify receives monthly recurring SaaS fees and for a production success fee based on the

amount of each harvest.

For extraction equipment and products, Agrify TTK Solution agreements range from five years to ten years and the

Company receives a production success fee based on the amount produced.

Equipment Financing

We recognize that many new cultivators face particular

capital and time constraints, and we also recognize that the initial cost of our equipment can be a deterrent for some.

We solve this

problem by offering equipment financing plans for select good credit customers, which we believe further enables us to become a vendor

While we proactively show our prospects that the strong and immediate return on investment derived from Agrify solutions will

more than make up for associated start-up costs, we wanted to do even more to support our prospective customers, which is why we unveiled

an equipment financing program to help remove this final barrier to entry for otherwise excited cultivators.

This requires participating

credit-worthy customers to pay a substantial down payment, typically between 30% and 50% of the purchase price, with the balance financed

over two years, with interest, under commercially reasonable terms.

Our individual offerings, which are described

in more detail below, are compelling on their own.

However, we believe what really sets us apart is our ability to bring to the market

a tech-forward, bundled solution of equipment, software and services that is turn-key, end-to-end, fully integrated and optimized for

precision growing.

Scale-Up Manufacturing Capabilities in Order to Meet the Increasing

Demand for Our Grow Solutions

We currently use contract manufacturers (“CMs”)

and in Asia for prototyping and volume manufacturing, and we plan to expand our capabilities in order to meet the increasing

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The designs are documented at a level that allows us to have our products manufactured at multiple CMs, both in the U.S.

Additionally, we work with

domestic suppliers on a wide range of metal fabrication to allow for rapid prototyping and product development.

One such CM and metal

fabrication shop that we have worked with extensively in the past is Harbor Mountain Holdings, LLC (“HMH”), which is based

in the Atlanta, GA area.

HMH has been producing and assembling many of our products for over three years, and they have served our needs

well as a versatile and valued partner.

On July 21, 2020, we acquired HMH, including the acquisition of HMH’s research and development,

testing, and flexible manufacturing plant located just outside Atlanta, GA, along with key personnel and equipment.

We believe this acquisition

fits in nicely with our overall scale-up manufacturing strategy.

For the remainder of 2020, HMH will be asked to support our AVFU sales

and production goals as a primary manufacturing location.

In 2021 and beyond, we expect HMH to evolve into more of a service, engineering

development and prototyping, and test facility.

On December 7, 2020, we entered

into a five year supply agreement with Mack Molding Co., a Vermont corporation (“Mack”), pursuant to which Mack will become

a key supplier of Company’s AVFUs.

Mack is a leading supplier of molded plastic parts, fabricated metal parts and high-level assemblies

to the medical, industrial, transportation, energy/environment, computer and business equipment, defense/aerospace and consumer markets.

Founded in 1920, Mack is a wholly-owned subsidiary of the privately-held Mack Group corporation, which also includes Mack Technologies

and Mack Prototype.

The supply agreement contemplates that, following an introductory period, we will negotiate a minimum percentage

of our AVFU requirements that we 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.

We believe this approach will result in both parties making a more informed

decision with respect to the pricing and other terms of the supply agreement with Mack.

In the event we are unable to agree with Mack

on pricing or a minimum requirements percentage, either party may terminate the agreement upon notice without further consequence or

We believe the supply agreement

with Mack provides us with several key benefits, including:

We can scale to customer orders, as Mack has agreed to maintain a minimum safety

stock of AVFUs in inventory and allow us to store additional inventory pending customer deliveries;

Efficiencies :

Under a strategic partner governance structure, we intend to meet with

Mack at least quarterly in efforts to improve components acquisition and logistics, to lower

production costs over time, provide additional alternatives for third party component vendors

and allow us to provide input as to Mack’s overall production process and operational

effectiveness.

We anticipate that this key

strategic relationship with Mack will grow with our continued and expanding need for additional AVFUs.

Overall, our approach to manufacturing

is to use CMs to prototype, iterate, and begin initial production, then transition to volume production including in lower cost geographies,

Additionally, we work with domestic suppliers

on a wide range of metal fabrication to allow for rapid prototyping and product development.

One such CM and metal fabrication shop that

we have worked with extensively in the past is Harbor Mountain Holdings, LLC (“HMH”), which is based in the Atlanta, GA area.

HMH has been producing and assembling many of our products for over three years, and they have served our needs well as a versatile and

valued partner.

On July 21, 2020, we acquired HMH, including the acquisition of HMH’s research and development, testing, and flexible

manufacturing plant located just outside Atlanta, GA, along with key personnel and equipment.

We believe this acquisition fits in nicely

with our overall scale-up manufacturing strategy.

We expect HMH to evolve into more of a service, engineering development and prototyping,

and test facility.

On December 7, 2020, we entered into a five-year

supply agreement with Mack Molding Co., a Vermont corporation (“Mack”), pursuant to which Mack will become a key supplier

of Company’s VFUs.

Mack is a leading supplier of molded plastic parts, fabricated metal parts and high-level assemblies to the medical,

industrial, transportation, energy/environment, computer and business equipment, defense, aerospace and consumer markets.

Founded in 1920,

Mack is a wholly owned subsidiary of the privately held Mack Group corporation, which also includes Mack Technologies and Mack Prototype.

The supply agreement contemplates that, following an introductory period, we will negotiate a minimum percentage of our VFU requirements

that we 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.

We believe this approach will result in both parties making a more informed decision with respect to the pricing

and other terms of the supply agreement with Mack.

In the event we are unable to agree with Mack on pricing or a minimum requirements

percentage, either party may terminate the agreement upon notice without further consequence or obligation.

We believe the supply agreement with Mack provides

us with several key benefits, including:

Rapid Scaling :

We can scale to customer orders, as Mack has agreed to maintain a minimum

safety stock of VFUs in inventory and allow us to store additional inventory pending customer deliveries;

Long-Term Efficiencies :

Under a strategic partner governance structure, we intend to meet

with Mack at least quarterly in efforts to improve components acquisition and logistics, to lower production costs over time, provide

additional alternatives for third party component vendors and allow us to provide input as to Mack’s overall production process

and operational effectiveness.

We anticipate that this key strategic relationship

with Mack will grow with our continued and expanding need for additional VFUs.

Overall, our approach to manufacturing is to

use CMs to prototype, iterate, and begin initial production, then transition to volume production including in lower cost geographies,

which results in both rapid time-to-market and low production costs.

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capabilities to best meet our customer needs while always focusing on ways to maximize operating margins.

Equipment Financing Program

Our equipment financing program,

which we believe is novel in the indoor agriculture space, is instrumental in removing certain points of friction from the sales cycle

and it can be a major factor that tips the scales in our favor with certain prospects.

When any of our credit-worthy customers take advantage

of this opportunity, they are able expedite their speed to market as a result of not having to finance their purchase with 100% equity.

As a result, we are able to collect between 30% and 50% of the purchase order immediately, with the balance typically being repaid over

a two-year period, with interest, under commercially reasonable terms.

By offering this equipment financing option, we have effectively

broadened our prospect pool, and we believe that this will lead to more deals closing over time.

Intellectual Property

We rely on a combination of

patent, trademark, copyright, trade secret, including federal, state and common law rights in the United States 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.

We filed United States provisional

patent application 62/830,770 on April 8, 2019 titled “Device for Light Limiting Current”

that serves as the priority document

for our April 6, 2020 filing of PCT application PCT/US2020/026878 and for our April 6, 2020 filing of U.S.

non-provisional application

This application is directed to, among other things, a current limiting device coupled with a light emitting diode driver.

We rely on a combination of patent, trademark,

copyright, trade secret, including federal, state and common law rights in the United States 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.

We hold 17 patents in the United States and 3

international patents.

We also have nine pending patent applications.

These patents and patents applications are directed to, among other

things, extraction and processing of botanicals and particular compounds.

Trademarks and Copyrights

We, or our subsidiaries, have

two pending United States trademark applications for AGRIFY, Ser.

90/341,939 and 88/610,595, a pending application for TRIGROW,

88/192,358, and a pending application for the Leaf Design, Ser.

In addition, we recognize common-law trademark

rights AGRIFY INSIGHTS and AGRINAMICS for different software as a service products.

Our subsidiary, Agrify Brands,

LLC is the owner of certain common-law trademarks that it licenses to third parties.

Marks covered by the license include, DAWG STAR

(including multiple logo designs), WESTERN CULTURED (including multiple logo designs), TWISTED LEGION (logo), WAXTRONAUT (including multiple

logo designs) and WAXTRONAUT COSMICALLY CURATED EXTRACTS.

Although we have not sought

copyright registration for our technology or works to date, we rely on common law copyright and trade secret protections in relation

to our TechOps/Agrify Insights™

computer program for indoor agriculture management.

We have registered our Internet domain names

related to our business.

We own or have applications for numerous national

and state trademarks which are essential to our businesses, including Agrify, Precision, PurePressure, PressWare, Lab Society and Elitelab,

among others.

In addition, we recognize common-law trademark rights AGRIFY INSIGHTS and AGRINAMICS for different software as a service

Our subsidiary, Agrify Brands, LLC is the owner

of certain common-law trademarks that it licenses to third parties.

Marks covered by the license include, DAWG STAR (including multiple

logo designs), WESTERN CULTURED (including multiple logo designs), TWISTED LEGION (logo), WAXTRONAUT (including multiple logo designs)

and WAXTRONAUT COSMICALLY CURATED EXTRACTS.

Although we have not sought copyright registration

for our technology or works to date, we rely on common law copyright and trade secret protections in relation to our TechOps/ Agrify

Insights software computer program for indoor agriculture management.

We have registered our Internet domain names related to our business.

We license software from third parties and utilize open-source software for integration into our applications.

In addition, while we know

that our current product and service capabilities are highly novel and compelling, we do not intend to be complacent.

We will continue

to learn from our customers and from the market, and if there is an opportunity to deploy a new and improved version of one of our offerings

or if we decide there is room in the market for a new type of solution, we fully intend to diligently explore those possibilities to

augment our existing business and grow our reach.

In addition, while we know that our current product

and service capabilities are highly novel and compelling, we do not intend to be complacent.

We will continue to learn from our customers

and from the market, and if there is an opportunity to deploy a new and improved version of one of our offerings or if we decide there

is room in the market for a new type of solution, we fully intend to diligently explore those possibilities to augment our existing business

and grow our reach.

Employees and Human Capital Resources

As of March 29, 2021, we had a total of 74 employees,

of which 57 are full-time employees, with 20 located in the New England area, 21 in Georgia and 16 in other states.

None of our employees

are subject to collective bargaining agreements.

We consider our relationship with our employees to be good.

Our human capital resources

objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees,

advisors and consultants.

The principal purposes of our equity incentive plan is to attract, retain and reward personnel through the

granting of stock-based compensation awards, in order to increase stockholder value and the success of our company by motivating such

individuals to perform to the best of their abilities and achieve our objectives.

As of December 31, 2021, we had a total of 141

employees, of which 136 are full-time employees, with 36 located in the New England area, 35 in Georgia, 31 in Michigan, 17 in Oregon

and 22 in other states.

None of our employees are subject to collective bargaining agreements.

We consider our relationship with our

employees to be good.

Our human capital resources objectives include,

as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing and new employees, advisors, and consultants.

The principal purposes of our equity incentive plan are to attract, retain and reward personnel through the granting of stock-based compensation

awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of

their abilities and achieve our objectives.

Legal Proceedings

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letter from Nicholas Cooper and Richard Weinstein, two of our former employees (and one of Mr.

Cooper’s affiliated entities), asserting

that such individuals were entitled to compensation arising out of their employment by us, as well as their partial ownership of TriGrow

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is seeking rescission of Mr.

Weinstein’s Release of Claims Agreement.

On March 10, 2021, we moved to dismiss all of Cooper and

Weinstein’s claims, asserting that the claims failed to allege legal grounds for relief.

A decision on our motion is expected in

the summer of 2021.

We do not believe these claims have any merit and intend to vigorously defend against these claims (see note 19,

Commitments and Contingencies, to our audited consolidated financial statements as of December 31, 2020).

Weinstein’s Release of Claims Agreement.

On March 10, 2021, we moved to dismiss all of Cooper and Weinstein’s

claims, asserting that the claims failed to allege legal grounds for relief.

A decision on our motion is expected in the summer of 2021.

On May 12, 2021, a Magistrate issued a preliminary Report and Recommendation, which recommended dismissal of certain of Cooper and Weinstein’s

claims, and recommended others for additional factual discovery.

On July 27, 2021, a District Judge entered an order partially adopting

the Report and Recommendation, dismissing one claim with prejudice, dismissing a second claim with leave to amend, and permitting the

remaining claims to proceed.

Additionally, on July 29, 2021, the Company

filed a separate arbitration in Boston, Massachusetts against Cooper and Weinstein, in which the Company alleges that Cooper and

Weinstein were liable for certain conduct during the time they were TriGrow employees, including breach of fiduciary duty, unjust

enrichment, usurpation of corporate opportunity, conversion, fraudulent concealment, and false representation.

29, 2021, the Company submitted a claim for indemnification to certain legacy TriGrow Systems, LLC.

shareholders.

for indemnification relates to conduct by Cooper and Weinstein during the time they were TriGrow employees.

We do not believe these

claims have any merit and intend to vigorously defend against them (see Note 21, Commitments and Contingencies, in the notes to our

audited consolidated financial statements as of December 31, 2021).

Corporate History

Agrify Corporation was incorporated

in the state of Nevada on June 6, 2016, originally incorporated as Agrinamics, Inc.

Agrify Corporation was incorporated in the state

of Nevada on June 6, 2016, originally incorporated as Agrinamics, Inc.

(or Agrinamics).

On September 16, 2019, Agrinamics

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

On January 22, 2020, we and

Agrify Merger Sub, Inc., our newly formed wholly-owned subsidiary (or Merger Sub), entered into an Agreement of Merger with TriGrow Systems,

Inc., a Nevada corporation (or TriGrow), pursuant to which TriGrow was merged with and into Merger Sub, with Merger Sub as the surviving

corporation, resulting in our indirect acquisition of TriGrow.

On December 8, 2019, we formed

Agrify-Valiant, LLC, a 60/40 joint-venture limited liability company, in which we are the 60% majority owner with Valiant-America, LLC,

one of the largest premium integrated consulting and general contracting firms in North America with more than 10 years of facility general

contracting experience across many states.

On July 21, 2020, we acquired

Harbor Mountain Holdings, LLC (“HMH”), who we have had a close working relationship with for over three years, including

the acquisition of HMH’s research and development, testing, and flexible manufacturing plant located just outside Atlanta, GA,

along with key personnel and equipment.

We believe this acquisition will give us increased, and in some respects, new in-house resources

and capabilities around engineering, prototyping, manufacturing, testing, warehousing and installation services.

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.

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, we have included detailed compensation information for only our three most highly compensated

executive officers and have not included a compensation discussion and analysis, or CD&A, of our executive compensation programs

in this report.

In addition, 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;

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);

certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,”

“say-on-frequency,”

and “say-on-golden parachutes;”

certain executive compensation related items such as the correlation between executive compensation

and performance and 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”

On September 16, 2019, Agrinamics amended its

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

On December 8, 2019, we formed Agrify-Valiant, LLC, a 60/40 joint-venture

limited liability company, in which we are the 60% majority owner with Valiant-America, LLC, one of the largest premium integrated consulting

and general contracting firms in North America with more than ten years of facility general contracting experience across many states.

On January 22, 2020, we and Agrify Merger

Sub, Inc., our newly formed wholly owned subsidiary (or “Merger Sub”), entered into an Agreement of Merger with TriGrow

Systems, Inc., a Nevada corporation (or “TriGrow”), pursuant to which TriGrow was merged with and into Merger Sub, with

Merger Sub as the surviving corporation, resulting in our indirect acquisition of TriGrow.

On July 21, 2020, we acquired HMH, who we have

had a close working relationship with for over three years, including the acquisition of HMH’s research and development, testing,

and flexible manufacturing plant located just outside Atlanta, GA, along with key personnel and equipment.

We believe this acquisition

will give us increased, and in some respects, new in-house resources and capabilities around engineering, prototyping, manufacturing,

testing, warehousing, and installation services.

On October 1, 2021, we acquired Mass2Media, LLC, d/b/a PX2 Holdings, LLC, d/b/a

Precision Extraction Solutions (“Precision”) and Cascade Sciences, LLC (“Cascade”).

As part of the acquisition

of Precision, Precision merged with and into a wholly owned subsidiary of the Company, Precision Extraction NewCo, LLC.

On December 31, 2021, we acquired PurePressure,

LLC (“PurePressure”), a leader in solventless extraction and advanced ice water hash processing equipment in the cannabis

and hemp industry.

Subsequent to December 31, 2021, on February 1, 2022, we acquired

LS Holdings Corp.

(“Lab Society”), a leader in distillation and solvent separation for the cannabis and hemp industry.

part of the acquisition of Lab Society, Lab Society merged with and into a wholly owned subsidiary of the Company, Lab Society NewCo,

Regulatory Implications of Providing Equipment and Services in

the Cannabis and Hemp Industry

We sell products and services that end users

may purchase for use in industries or segments, including the growing of cannabis and hemp, which are subject to varying, inconsistent,

and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions.

For example, certain countries and 36 U.S.

states have adopted frameworks that authorize, regulate, and tax the cultivation, processing,

sale, and use of cannabis for medicinal and/or non-medicinal use, while the U.S.

Controlled Substances Act and the laws of other U.S.

states prohibit growing cannabis.

In addition, with the passage of the Farm Bill in December 2018, hemp cultivation is now broadly permitted.

The Farm Bill explicitly allows the transfer of hemp-derived products across state lines for commercial or other purposes.

It also removes

restrictions on the sale, transport, or possession of hemp-derived products, so long as those items are produced in a manner consistent

with the law.

Our products are multi-purpose products and may be used on a wide range of plants and are purchased by cultivators who

may grow any variety of plants, including cannabis and hemp.

Despite well over a majority of state laws decriminalizing

varying types of its use, marijuana remains a Schedule I drug under the Controlled Substances Act, making it illegal under federal law

in the United States to, among other things, cultivate, distribute or possess cannabis in the United States.

In those states in which

the use of marijuana has been legalized, its use remains a violation of federal law pursuant to the Controlled Substances Act.

The Controlled

Substances Act classifies marijuana as a Schedule I controlled substance, and as such, medical and adult cannabis use is illegal under

Unless and until the U.S.

Congress amends the Controlled Substances Act with respect to marijuana (and the President

approves such amendment), there is a risk that federal authorities may enforce current federal law.

Financial transactions involving

proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution

under applicable U.S.

federal money laundering legislation.

The approach to enforcement of such laws by the federal government in the

United States has trended toward non-enforcement against individuals and businesses that comply with medical or adult-use cannabis regulatory

programs in states where such programs are legal, strict compliance with state laws with respect to cannabis.

In most states that have legalized medical- and

recreational-use cannabis in some form, the growing, processing and/or dispensing of cannabis generally requires that the operator obtain

one or more licenses in accordance with applicable state requirements.

In addition, many states regulate various aspects of the growing,

processing and/or dispensing of cannabis and hemp.

Local governments in some cases also impose rules and regulations on the manner of

operating cannabis and hemp businesses.

As a result, applicable state and local laws and regulations vary widely, including, but not

limited to, regulations governing the medical cannabis program, product testing, the level of enforcement by state and local authorities

on non-licensed cannabis operators, state and local taxation of regulated cannabis products, local municipality bans on operations and

operator licensing processes and renewals.

As part of its rigorous due diligence policy

on all potential customers, the Company carefully reviews the appropriate licensure of each potential customers in the cannabis and hemp

industry for compliance with applicable local, state, and federal laws.

The Company is not involved in the cultivation, processing or

retail of cannabis products and never takes a controlling interest in any of the operations of its cannabis customers as a matter of

Implications of Being an Emerging Growth Company and Smaller Reporting

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;

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 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:

reporting $1 billion or more in annual gross revenues;

issuance, in a three-year period, of more than $1 billion in non-convertible debt;

end of the fiscal year in which the market value of our common stock held by non-affiliates

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;

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.

Finally, 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.

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.

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.

Finally, 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

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 1. Business