What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-12-12 compared with 2023-11-28 · 478 added, 484 removed, 1908 unchanged (34% of the section changed)

7 unchanged sentences

Marketable securities

Accounts receivable, net of allowance for doubtful accounts of $ 4,490 and $ 4,605 at March 31, 2023 and December 31, 2022, respectively

Inventory, net of reserves of $ 32,422 and $ 32,759 at March 31, 2023 and December 31, 2022, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 4,090 and $ 4,605 at June 30, 2023 and December 31, 2022, respectively

Inventory, net of reserves of $ 32,422 and $ 32,422 at June 30, 2023 and December 31, 2022, respectively

Prepaid expenses and other current assets

Total current assets

Loan receivable net of allowance for doubtful accounts of $ 28,562 and $ 33,050 at March 31, 2023 and December 31, 2022, respectively

Loan receivable, net of allowance for doubtful accounts of $ 19,215 and $ 33,050 at June 30, 2023 and December 31, 2022, respectively

Property and equipment, net

Right-of-use assets, net

Operating lease right-of-use assets

Other non-current assets

8 unchanged sentences

Warrant liabilities

Operating lease liabilities, non-current

Long-term debt

Other non-current liabilities

Operating lease liabilities, net of current

Long-term debt, net of current

Total liabilities

Commitments and contingencies (Note 15)

Stockholders’ equity:

Common Stock, $ 0.001 par value per share, 10,000,000 and 5,000,000 shares authorized at March 31, 2023 and December 31, 2022, respectively, 1,364,263 and 1,038,298 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively (1)

Stockholders’ (deficit) equity:

Common Stock, $ 0.001 par value per share, 10,000,000 and 5,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively, 1,622,946 and 1,038,298 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively (1)

Preferred Stock, $ 0.001 par value per share, 2,895,000 shares authorized, no shares issued or outstanding

2 unchanged sentences

Accumulated deficit

Total stockholders’ deficit

Total stockholders’ deficit attributable to Agrify

Non-controlling interests

3 unchanged sentences

Additional information regarding the reverse stock splits may be found in Note

1 – Overview, Basis of Presentation, and Significant Accounting Policies , included in the notes to the consolidated financial statements

1 – Overview, Basis of Presentation, and Significant Accounting Policies , included

in the notes to the consolidated financial statements.

The accompanying notes are an integral part of

3 unchanged sentences

(In thousands, except share and per share data)

Three months ended March 31,

Three months ended June 30,

Six Months Ended June 30,

Revenue (including $ 0 , $ 1,129 , $ 46 , and $ 1,763 from related parties, respectively)

4 unchanged sentences

Change in contingent consideration

Impairment of goodwill and intangible assets

Total operating expenses

Loss from operations

Interest (expense) income, net

Interest expense, net

Change in fair value of warrant liabilities

Other income (expense)

Loss on extinguishment of notes payable

Other income (expense), net

Net (loss) income before income taxes

Gain (loss) on extinguishment of notes payable

Other expense, net

Other (expense) income, net

Net loss before income taxes

Income tax benefit

Net (loss) income

Income attributable to non-controlling interest

Net (loss) income attributable to Agrify Corporation

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

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

Weighted average common shares outstanding - basic (1)

Weighted average common shares outstanding - diluted (1)

(Income) loss attributable to non-controlling interests

Net loss attributable to Agrify Corporation

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

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

(1) Periods presented have been adjusted to reflect the 1-for-20

reverse stock split on July 5, 2023.

Additional information regarding the reverse stock splits may be found in Note

1 – Overview, Basis of Presentation, and Significant Accounting Policies , included in the notes to the consolidated financial statements

Additional information regarding reverse stock splits may be found in Note

1 – Overview, Basis of Presentation, and Significant Accounting Policies , included

in the notes to the consolidated financial statements

The accompanying notes are an integral part of

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(In thousands, except share data)

Preferred A Stock

EQUITY (DEFICIT)

(In thousands)

Stockholders’

attributable to

Stockholders’

Paid-in-Capital

Balance at January 1, 2022

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Balance at March 31, 2022

Preferred A Stock

Stock-based compensation

Exercise of options

Exercise of warrants

Balance at June 30, 2022

$ ( 131,799 )

The accompanying notes are an integral part of

these condensed consolidated financial statements.

AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

(In thousands)

Stockholders’

attributable to

Stockholders’

Balance at January 1, 2023

Stock-based compensation

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

Issuance of Common Stock to Pure Pressure

Vesting of restricted stock units

Proceeds from Employee Stock Purchase Plan Shares

Balance March 31, 2023

Paid-in-Capital

at January 1, 2023

$ ( 247,148 )

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

of Common Stock to Pure Pressure

of restricted stock units

from Employee Stock Purchase Plan Shares

March 31, 2023

of held-back shares to Lab Society

of prefunded warrants in private placement

of Exchange Note

of Convertible Note

June 30, 2023

The accompanying notes are an integral part of

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(In thousands)

For the three months ended March 31,

For the six months ended

Cash flows from operating activities:

Net (loss) income attributable to Agrify Corporation

Net loss attributable to Agrify Corporation

Adjustments to reconcile net loss attributable to Agrify Corporation to net cash used in operating activities:

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Stock based compensation expense

Early termination of lease

Non-cash interest income

Change in fair value of warrant liabilities

Impairment of goodwill and intangible assets

Provision for doubtful accounts

Provision for slow-moving inventory

Loss on disposal of fixed assets

Loss on extinguishment of notes payable, net

Early termination of lease

Income attributable to non-controlling interests

Change in fair value of contingent consideration

(Income) Loss attributable to non-controlling interests

Changes in operating assets and liabilities, net of acquisitions:

1 unchanged sentence

Prepaid expenses and other current assets

Prepaid and refundable taxes

Right of use assets, net

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Deferred revenue

Net cash used in operating activities

Net cash and cash equivalents used in operating activities

Cash flows from investing activities:

Purchases of property and equipment

Proceeds from disposal of property and equipment

Purchase of securities

1 unchanged sentence

Issuance of loan

Proceeds from repayment of loan receivable

Cash paid for business combination, net of cash acquired

Net cash provided by (used in) investing activities

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

Cash flows from financing activities:

Proceeds from issuance of debt and warrants in private placement

Proceeds from issuance of debt and warrants in private placement, net

Proceeds from issuance of Common Stock and warrants in private placement, net of fees

Proceeds from “at the market” Program, net

Proceeds from Employee Stock Option Plan shares

Proceeds from Employee Stock Purchase Plan Shares

Proceeds from exercise of options

Proceeds from exercise of warrants

Repayment of notes payable, other

Repayment of debt in private placement

Payments on insurance financing loan

Repayments of notes payable, other

Payments on other financing loans

Payments on insurance financing loans

Payments of financing leases

Net cash (used in) provided by financing activities

Net (decreased) increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at the beginning of period

Cash, cash equivalents, and restricted cash at the end of period

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

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at the beginning of period

Cash and cash equivalents at the end of period

Cash, cash equivalents, and restricted cash at end of period

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Financing of prepaid insurance

Conversion of private placement debt into Common Stock

Transfer of property and equipment to inventory

The accompanying notes are an integral part of

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subsidiaries, which are collectively referred to as the “Subsidiaries” and the Company also has ownership interests in certain

(Please refer to Exhibit 23.1 for further details)

Reverse Stock Splits

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to reflect the impact of these reverse stock splits.

Confidentially Marketed Public Offering

Confidentially Marketed

Public Offering

On December 16, 2022, the

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in the notes to the consolidated financial statements.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The aggregate gross proceeds

3 unchanged sentences

cash resources, for working capital and general corporate purposes, which may include capital expenditures and repayment of debt.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Nasdaq Deficiency Notice

48 unchanged sentences

Reports”) in a timely manner.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

On November 16, 2023, the

Company received a notice from Nasdaq that the Company remains noncompliant with the Listing Rule as a result of its failure to file its

Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023 with the SEC by the required filing date (the “November

Nasdaq Notice” and, together with the April Nasdaq Notice, the May Nasdaq Notice, and the August Nasdaq Notice, the “Nasdaq

The Company timely requested

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However, there can be no assurance that the Company will be able to regain compliance by the end of any additional extension

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The Paycheck Protection Program

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transactions and balances are eliminated.

Accounting for Less

Than Wholly-Owned Subsidiaries

Accounting for Less Than Wholly-Owned Subsidiaries

For the Company’s less

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AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Going Concern

5 unchanged sentences

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

The Company has incurred

operating losses since its inception, has negative cash flows from operations and a working capital deficiency.

The Company also has an

accumulated deficit of $ 257 million as of March 31, 2023.

The Company’s primary sources of liquidity are its cash and cash equivalents

and marketable securities, with additional liquidity accessible, subject to market conditions and other factors, including limitations

that may apply to the Company under applicable SEC regulations, from the capital markets, including under its at-the-market continuous

equity offering (“ATM” or “ATM Program”).

As of March 31, 2023, the

Company had $ 1.5 million of cash, cash equivalents, and marketable securities.

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

As of December 31, 2022, the Company’s restricted cash balance of $ 10.0 million was associated with its new senior secured note

(the “Exchange Note”).

Current liabilities were $ 58.0 million as of March 31, 2023.

Additional information regarding the Company’s

Exchange Note may be found in Note 8 – Debt, included elsewhere in the notes to the consolidated financial statements.

The Company has incurred operating losses since its inception and has

negative cash flows from operations and a working capital deficiency.

The Company also has an accumulated deficit of $ 264 million as of

June 30, 2023.

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

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

SEC regulations, from the capital markets, including under its at-the-market continuous equity offering (“ATM” or “ATM

As of June 30, 2023, the Company had $ 312 thousand of cash, cash equivalents,

and marketable securities.

The Company had no restricted cash as of June 30, 2023.

As of December 31, 2022 the Company’s restricted

cash balance of $ 10.0 million was associated with its new senior secured note (the “Exchange Note”).

Current liabilities were

$ 39.8 million as of June 30, 2023.

Additional information regarding the Company’s Exchange Note may be found in Note 8 – Debt,

included elsewhere in the notes to the consolidated financial statements.

On October 18, 2022, the

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Due to the late

filing of this Annual Report on Form 10-K, the Company is no longer eligible to utilize the registration statement on Form S-3 relating

to the ATM Program.

filing of the Company’s 2022 Annual Report on Form 10-K, the Company is no longer eligible to utilize the registration statement on Form

S-3 relating to the ATM Program.

Use of Estimates

14 unchanged sentences

those estimates.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Reclassifications

3 unchanged sentences

consolidated statements of operations as general and administrative expenses and selling and marketing expenses for the three months ended

March 31, 2023 and 2022.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

June 30, 2023 and 2022.

In addition, the Company

7 unchanged sentences

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

Cash, Cash Equivalents, and Restricted Cash

Cash and Cash Equivalents

consist principally of cash and deposits with maturities of three months or less as of March 31, 2023 and December 31, 2022.

equivalents are carried at cost, which approximates fair value.

Restricted cash represents cash required to be held as collateral for

the Company’s Exchange Note.

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

as restricted cash in the consolidated balance sheets.

Additional information relating to the Company’s Exchange Note may be found

in Note 8 – Debt, included elsewhere in the notes to the consolidated financial statements .

Cash and cash equivalents

consist principally of cash and deposits with maturities of three months or less as of June 30, 2023 and December 31, 2022.

All cash equivalents

are carried at cost, which approximates fair value.

Marketable Securities

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institutions and the Company has not experienced any losses on such amounts.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

tables below show customers who account for 10 % or more of the Company’s total revenues and 10 % or more of the Company’s accounts

receivable for the periods presented:

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

For the three months ended

March 31, 2023 and 2022, the Company’s customers that accounted for 10 % or more of the total revenue were as follows:

Three months ended

March 31, 2023

Three months ended

March 31, 2022

For the three and six months

ended June 30, 2023 and 2022, the Company’s customers that accounted for 10 % or more of the total revenue were as follows:

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

(In thousands)

% of Total Revenue

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

Accounts Receivable,

As of March 31, 2023 and

December 31, 2022, the Company’s customers that accounted for 10 % or more of the total accounts receivable, net, were as follows:

As of March 31, 2023

As of June 30, 2023 and December

31, 2022, the Company’s customers that accounted for 10 % or more of the total accounts receivable, net, were as follows:

As of June 30, 2023

As of December 31, 2022

(In thousands)

% of Total Accounts Receivable

Company Customer Number - 10888-1

1 unchanged sentence

Company Customer Number - 16491

Company Customer Number - 10888

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

6 unchanged sentences

at least once annually at all inventory locations.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Property and Equipment

3 unchanged sentences

method over the estimated useful life of each asset, as follows:

Estimated Useful Life (Years)

Estimated Useful Life

Computer and office equipment

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Lower of estimated useful life or remaining lease term

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The estimated useful lives

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frequently if indicators of impairment are present.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The useful lives are as follows:

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

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

During the quarter ended

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event are recognized when the contingency is resolved.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Warrant Liabilities

26 unchanged sentences

elsewhere in the notes to the consolidated financial statements.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Additionally,

o n April 18, 2023, the Company undertook a warrant exercise inducement program, which it later cancelled.

As a result, the warrant

exercise price was reduced from $ 13.00 per share to $ 3.45 per share.

Debt Issuance Costs and Debt Discount

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certain that the Company will exercise such options.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Deferred Revenue

10 unchanged sentences

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

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Stock-Based Compensation

43 unchanged sentences

within the Company’s operating results.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For contingent consideration

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identify performance obligations that are distinct;

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

determine the transaction price;

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Company would charge for a specific piece of equipment or service if it was sold separately in similar circumstances and to similar customers.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Recognize revenue as

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as the related performance obligations are satisfied.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Judgment is required to determine

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for services sales as services are rendered to the

customer and for construction contracts both as services are rendered and when contract is completed.

customer and for construction contracts both as services are rendered and when the contract is completed.

The Company utilizes the

9 unchanged sentences

to variable consideration were not material for the periods presented.

If a contract has payment

terms that differ from the timing of revenue recognition, the Company will assess whether the transaction price for those contracts include

a significant financing component.

The Company has elected the practical expedient that permits an entity to not adjust for the effects

of a significant financing component if the Company expects that at the contract inception, the period between when the entity transfers

a promised good or service to a customer and when the customer pays for that good or service, will be one year or less.

For those contracts

in which the period exceeds the one-year threshold, this assessment, as well as the quantitative estimate of the financing component and

its relative significance, requires judgment.

Accordingly, the Company imputes interest on such contracts at an agreed-upon interest rate

and will present the financing components separately as financial income.

For the three months ended March 31, 2023 and 2022, the Company

did not have any such financial income.

If a contract has payment terms that differ from

the timing of revenue recognition, the Company will assess whether the transaction price for those contracts include a significant financing

The Company has elected the practical expedient that permits an entity to not adjust for the effects of a significant financing

component if the Company expects that at the contract inception, the period between when the entity transfers a promised good or service

to a customer and when the customer pays for that good or service, will be one year or less.

For those contracts in which the period exceeds

the one-year threshold, this assessment, as well as the quantitative estimate of the financing component and its relative significance,

requires judgment.

Accordingly, the Company imputes interest on such contracts at an agreed-upon interest rate and will present the financing

components separately as financial income.

For the six months ended June 30, 2023 and 2022, the Company did not have any such financial

Payment terms with customers

12 unchanged sentences

activities are excluded from revenue.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The Company receives payment

5 unchanged sentences

from the customer.

Accounts receivables are recorded when the customer has been billed or the right to consideration is unconditional.

Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional.

The Company recognizes deferred revenue when consideration has been received or an amount of consideration is due from the customer, and

6 unchanged sentences

is part of a contract that has an original expected duration of one year or less and (ii) the right to invoice practical expedient.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The Company generally provides

3 unchanged sentences

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

maintains a reserve for warranty returns of $ 613 thousand and $ 553 thousand for March 31, 2023 and December 31, 2022, respectively.

maintains a reserve for warranty returns of $ 592 thousand and $ 553 thousand for June 30, 2023 and December 31, 2022, respectively.

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

11 unchanged sentences

The Company capitalizes certain

software engineering efforts related to the continued development of Agrify Insights™ under ASC Topic 350-40.

The costs incurred

software engineering efforts related to the continued development of Agrify Insights™ under ASC Topic 350-40 The costs incurred

in the preliminary stages of development are expensed as incurred as research costs.

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the net deferred tax asset will not be realized.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

When tax returns are filed,

16 unchanged sentences

has not recorded a liability for unrecognized tax benefits.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The Company recognizes the

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Net loss per share calculations

for all periods have been adjusted to reflect the reverse stock splits effected on January 12, 2021, October 18, 2022 and July 5, 2023.

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

for all periods have been adjusted to reflect the reverse stock splits effected on October 18, 2022 and July 5, 2023.

Net loss per share

was calculated based on the weighted-average number of Common Stock outstanding.

Recently Adopted Accounting Pronouncements

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financial position.

Pending Accounting Pronouncements

In June 2016, the FASB issued

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

The Company does not expect that the application

2016-13 will have a material impact on the presentation of its results of operations, financial position, or disclosures.

The Company adopted ASU 2016-13 on January

The adoption of this standard did not have a material impact on these condensed consolidated financial statements.

In October 2021, the FASB

11 unchanged sentences

in an interim period.

The Company does not expect that the application of ASU 2021-08 will have a material impact on the presentation

of its results of operations, financial position, or disclosures.

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

The adoption of this standard did not have a material impact

on these condensed consolidated financial statements.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

recent accounting pronouncements did not or are not believed by management to have a material impact on the Company’s present or

future consolidated financial statements.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Note 2 — Revenue and Deferred Revenue

13 unchanged sentences

The Company uses three main sub-contractors to execute the construction contracts.

The following table provides the Company’s

revenue disaggregated by the timing of revenue recognition:

Three months ended March 31,

The following table provides

the Company’s revenue disaggregated by the timing of revenue recognition:

Three months ended

Six months ended

(In thousands)

8 unchanged sentences

Deferred Revenue

Changes in the Company’s current deferred

revenue balance for the three months ended March 31, 2023 and the year ended December 31, 2022 were as follows:

Changes in the Company’s

current deferred revenue balance for the six months ended June 30, 2023 and the year ended December 31, 2022 were as follows:

(In thousands)

Deferred revenue – beginning of period

Interest income on deferred revenue

Deferred revenue – end of period

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Deferred revenue balances

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

As of March 31, 2023 and December

As of June 30, 2023 and December

31, 2022, all of the Company’s deferred revenue balances were reported as current liabilities in the accompanying consolidated balance

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Note 3 — Supplemental Consolidated Balance Sheet Information

1 unchanged sentence

Accounts receivable consisted of the following

as of March 31, 2023 and December 31, 2022:

as of June 30, 2023 and December 31, 2022:

(In thousands)

10 unchanged sentences

Allowance for doubtful accounts - end of period

Bad debt expense was $ 0.2 million and $ 0 for the

three months ended March 31, 2023 and 2022, respectively.

Bad debt expense was $ 362 thousand and $ 1.6 million

for the three months ended June 30, 2023 and 2022, respectively, and $ 542 thousand and $ 1.6 million for the six months ended June 30,

2023 and 2022, respectively.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted

of the following as of March 31, 2023 and December 31, 2022:

of the following as of June 30, 2023 and December 31, 2022:

(In thousands)

March 31, 2023

December 31, 2022

Other receivables, other

5 unchanged sentences

Total prepaid expenses and other current assets

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Property and Equipment, Net

Property and equipment, net consisted of the following

as of March 31, 2023 and December 31, 2022:

as of June 30, 2023 and December 31, 2022:

(In thousands)

10 unchanged sentences

Total property and equipment, net

Depreciation expense for the three months ended March 31, 2023 and

2022 was $ 0.4 million and $ 0.4 million, respectively.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Depreciation expense for the three months ended

June 30, 2023 and 2022 was $ 493 thousand and $ 438 thousand, respectively, and $ 938 thousand and $ 817 thousand for the six months ended

June 30, 2023 and 2022, respectively.

Other Non-Current Assets

Other non-current assets consisted of the following

as of March 31, 2023 and December 31, 2022:

as of June 30, 2023 and December 31, 2022:

(In thousands)

2 unchanged sentences

Total other non-current assets

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities

consisted of the following as of March 31, 2023 and December 31, 2022:

consisted of the following as of June 30, 2023 and December 31, 2022:

(In thousands)

11 unchanged sentences

Total accrued expenses and other current liabilities

(1) Accrued acquisition liabilities

includes both the contingent consideration and the value of held back Common Stock associated with the 2022 acquisition of Lab Society

and the 2021 acquisitions of Precision, Cascade and PurePressure.

(2) Sales tax payable primarily

represents identified sales and use tax liabilities arising from our acquisition of Precision and Cascade.

These amounts are included

as part of our initial purchase price allocations and are the subject matter of an indemnification claim under the Precision and Cascade

acquisition agreement.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

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

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

Accrued Warranty Costs

5 unchanged sentences

Warranty accrual – end of period

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Note 4 — Fair Value Measures

14 unchanged sentences

utilized to the extent that observable inputs are not available or cost-effective to obtain.

At March 31, 2023 and December

At June 30, 2023 and December

31, 2022, the Company’s assets and liabilities measured at fair value on a recurring basis were as follows:

March 31, 2023

December 31, 2022

Fair Value Measurements Using Input Types

Value Measurements Using Input Types

(In thousands)

1 unchanged sentence

Money market funds

Cash receivables

Corporate bonds

5 unchanged sentences

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Fair Value of Financial Instruments

2 unchanged sentences

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

● Cash and cash equivalents,

accounts receivable, accounts payable, accrued expenses and deferred revenue liabilities approximate their fair values, based on the

short-term nature of these instruments.

● Marketable securities classified

as current held-to-maturity securities are recorded at amortized cost, which at March 31, 2023, approximated fair value.

● The Company’s deferred consideration was recorded in

connection with acquisitions during the three months ended March 31, 2023 and fiscal 2022 using an estimated fair value discount at the

time of the transactions.

As of March 31, 2023 and December 31, 2022, the carrying value of the deferred consideration approximated fair

value, respectively.

● The Company’s warrant

liabilities are marked-to-market each reporting period with the changes in fair value of warrant liabilities recorded in other income

(expense), net in the accompanying consolidated statements of operations until the warrants are exercised.

The fair value of the warrant

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

Cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and deferred revenue liabilities approximate their fair values, based on the short-term nature of these instruments.

Marketable securities classified as current held-to-maturity securities are recorded at amortized cost, which at June 30, 2023, approximated fair value.

The Company’s deferred consideration was recorded in connection with acquisitions during the six months ended June 30, 2023 and fiscal 2022 using an estimated fair value discount at the time of the transactions.

As of June 30, 2023 and December 31, 2022, the carrying value of the deferred consideration approximated fair value.

The Company’s warrant liabilities are marked-to-market each reporting period with the changes in fair value of warrant liabilities recorded in other income (expense), net in the accompanying consolidated statements of operations until the warrants are exercised.

The fair value of the warrant liabilities are estimated using a Black-Scholes option-pricing model.

Marketable Securities

As of March 31, 2023, the

As of June 30, 2023, the

Company held investments in municipal bonds and corporate bonds.

10 unchanged sentences

Money market funds

Cash receivables

Corporate bonds

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Contingent Consideration

6 unchanged sentences

The company recorded no change

in contingent consideration for the three months ended March 31, 2023 The contingent earn-out payments

in contingent consideration for the six months ended June 30, 2023.

The contingent earn-out payments

to the sellers for each acquisition are based on the achievement of certain revenue thresholds.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(In thousands)

ended December 31, 2022

Contingent consideration – beginning of period

4 unchanged sentences

Contingent consideration – end of period

The Company included contingent consideration

within accrued expenses and other current liabilities on its consolidated balance sheets as of March 31, 2023 and December 31, 2022.

See below for additional information related to

each acquisition’s contingent consideration.

Contingent Consideration – PurePressure

Contingent Consideration

– PurePressure

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

8 unchanged sentences

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

Contingent Consideration – Lab Society

Contingent Consideration

– Lab Society

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

18 unchanged sentences

$ 5.6 million to the m embers of Precision and Cascade.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Warrant Liabilities

The estimated fair value

of the warrant liabilities on March 31, 2023 is determined using Level 3 inputs.

Inherent in a Black-Scholes option-pricing model are

assumptions used in calculating the estimated fair values represent the Company’s best estimate.

The volatility rate is determined

utilizing the Company’s own share price and the share price of competitors over time.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

of the warrant liabilities on June 30, 2023 is determined using Level 3 inputs.

Inherent in a Black-Scholes option-pricing model are assumptions

used in calculating the estimated fair values that represent the Company’s best estimate.

The volatility rate is determined utilizing

the Company’s own share price and the share price of competitors over time.

However, inherent uncertainties

are involved.

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

January 2022 Warrants

The following table summarizes

the Company’s assumptions used in the valuation as of March 31, 2023 and for the year ended December 31, 2022:

the Company’s assumptions used in the valuation as of June 30, 2023 and for the year ended December 31, 2022:

Exercise price

1 unchanged sentence

Discount rate - treasury yield

The following table sets forth

a summary of the changes in the fair value of the Level 3 warrant liabilities for the three months ended March 31, 2023:

The following table sets forth a summary of the

changes in the fair value of the Level 3 warrant liabilities for the three and six months ended June 30, 2023:

(In thousands)

Three and Six

Warrant liabilities – beginning of period

Change in estimated fair value

Warrant liabilities – end of period

Warrant liabilities - March 31, 2023

Change in estimated fair value

Warrant liabilities –June 30, 2023

March 2022 Warrants

The following table summarizes

the Company’s assumptions used in the valuation as of March 31, 2023 and for the year ended December 31, 2022:

The following table summarizes the Company’s

assumptions used in the valuation as of June 30, 2023 and for the year ended December 31, 2022:

Exercise price

1 unchanged sentence

Discount rate - treasury yield

The following table sets forth

a summary of the changes in the fair value of the Level 3 warrant liabilities for the three months ended March 31, 2023:

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The following table sets forth a summary of the

changes in the fair value of the Level 3 warrant liabilities for the three and six months ended June 30, 2023:

(In thousands)

Three and Six

Warrant liabilities – beginning of period

Change in estimated fair value

Warrant liabilities – end of period

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Warrant liabilities - March 31, 2023

Change in estimated fair value

Warrant liabilities – June 30, 2023

August 2022 Warrants

The following table summarizes

the Company’s assumptions used in the valuation as of March 31, 2023 and for the year ended December 31, 2022:

The following table summarizes the Company’s

assumptions used in the valuation as of June 30, 2023 and for the year ended December 31, 2022:

Exercise price

1 unchanged sentence

Discount rate - treasury yield

The following table sets forth

a summary of the changes in the fair value of the Level 3 warrant liabilities for the three months ended March 31, 2023:

The following table sets forth a summary of the

changes in the fair value of the Level 3 warrant liabilities for the three and six months ended June 30, 2023:

(In thousands)

Three and Six

Warrant liabilities – beginning of period

Change in estimated fair value

Warrant liabilities – end of period

Warrant liabilities - March 31, 2023

Change in estimated fair value

Warrant liabilities – June 30, 2023

December 2022 Warrants

The following table summarizes

the Company’s assumptions used in the valuation as of March 31, 2023 and for the year ended December 31, 2022:

The following table summarizes the Company’s

assumptions used in the valuation as of June 30, 2023 and for the year ended December 31, 2022:

Exercise price

1 unchanged sentence

Discount rate - treasury yield

The following table sets forth

a summary of the changes in the fair value of the Level 3 warrant liabilities for the three months ended March 31, 2023:

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The following table sets forth a summary of the

changes in the fair value of the Level 3 warrant liabilities for the three and six months ended June 30, 2023:

(In thousands)

Three and Six

Warrant liabilities – beginning of period

Change in estimated fair value

Warrant liabilities – end of period

Warrant liabilities - March 31, 2023

Change in estimated fair value

Warrant liabilities – June 30, 2023

Note 5 — Loans Receivable

7 unchanged sentences

Agrify Insights™, process design, training, implementation, proven grow recipes, product formulations, data analytics, and consumer

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

On September 15, 2022, the

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has made the decision to place a reserve against the receivables.

During the quarter ended March 31, 2023 the Greenstone loan was fully

During the quarter ended June 30, 2023 the Greenstone loan was fully

written off against the reserve as a result of the sale of Greenstone to Denver Greens.

1 unchanged sentence

to pay back Greenstone’s Loan.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The breakdown of loans receivable by customer

as of March 31, 2023 and December 31, 2022 were as follows:

as of June 30, 2023 and December 31, 2022 were as follows:

(In thousands)

Bud & Mary’s – TTK Solution

Greenstone – TTK Solution – Related Party

Company Customer Number 136 – TTK Solution

Company Customer Number 125 – TTK Solution

Company Customer Number 71 – Non-TTK Solution (1)

Customer 24096

Other – Non-TTK Solution (1)

Allowance for doubtful accounts (2)(3)

Total loan receivable

(1) The current portion of loan

receivable is included within Note 3 – Supplemental Consolidated Balance Sheet Information, included elsewhere in the notes to

the consolidated financial statements.

(2) The balance was written off

at December 31, 2022 due to the cancellation of this TTK Solution project.

(3) The Company established an

allowance for doubtful accounts of approximately $ 14.7 million related to Bud & Mary’s ongoing litigation.

Approximately $ 12.5

million relates to Greenstone, which is a related party because one of the Company’s former Agrify Brands employees and its VP

of Engineering had a minority ownership, consisting of capital advances, accrued interest, and VFUs sales.

Approximately $ 4.5 million

relates to Hannah, and $ 1.4 million relates to WhiteCloud.

(1) The current portion of loan receivable is included within Note 3 – Supplemental Consolidated Balance Sheet Information, included elsewhere in the notes to the consolidated financial statements.

(2) The balance was written off at December 31, 2022 due to the cancellation of this TTK Solution project.

(3) The Company established an allowance for doubtful accounts of approximately $ 14.7 million related to Bud & Mary’s ongoing litigation.

Approximately $ 12.5 million relates to Greenstone, which is a related party because one of the Company’s former Agrify Brands employees and its VP of Engineering had a minority ownership, consisting of capital advances, accrued interest, and VFUs sales.

Approximately $ 4.5 million relates to Hannah, and $ 1.4 million relates to WhiteCloud.

At this time, the Company

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former Agrify Brands employees and its VP of Engineering had a minority ownership, is a VIE.

As of March 31, 2023, two of the Company’s

As of June 30, 2023, two of the Company’s

employees own approximately 36.6 % of the equity of Greenstone, however, since the Company is not the primary beneficiary and does not

hold significant influence over Greenstone business decisions, the Company is not required to consolidate Greenstone.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Note 6 — Inventory

6 unchanged sentences

a short-term, non-interest-bearing asset that is applied to the purchase of products once they are delivered.

Inventory consisted of the following as of March

Inventory consisted of the following as of June

30, 2023 and December 31, 2022:

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management’s expected method of disposition.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Changes in the Company’s inventory reserve

15 unchanged sentences

The Company has concluded

that there was an impairment-triggering event during the three months ended June 30, 2022 that required the Company to perform a detailed

analysis of the current carrying value of its goodwill and intangible assets.

For goodwill and intangible asset impairment testing purposes,

the Company has one reporting unit.

During the three-month ended

that there was an impairment-triggering event during the quarter ended June 30, 2022 that required the Company to perform a detailed analysis

of the current carrying value of its goodwill and intangible assets.

For goodwill and intangible asset impairment testing purposes, the

Company has one reporting unit.

During the quarter ended

June 30, 2022, the Company’s market capitalization fell below total net assets.

1 unchanged sentence

weaken during the quarter, which was contrary to prior experience.

Management reassessed business performance expectations, following

persistent adverse developments in equity markets, deterioration in the environment in which the Company operates, lower-than-expected

sales, and an increase in operating expenses.

These indicators, in the aggregate, required impairment testing for goodwill and intangible

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Management reassessed business performance expectations following persistent

adverse developments in equity markets, deterioration in the environment in which the Company operates, lower-than-expected sales, and

an increase in operating expenses.

These indicators, in the aggregate, required impairment testing for goodwill and intangible assets.

Based on the results of this

11 unchanged sentences

Goodwill - end of period

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Intangible assets, net as of December 31, 2022

were as follows:

Assets, Gross

and Impairment

Additions and Retirements, net

and Retirements, net

Intangible Assets, Gross

Accumulated Amortization and

Intangible Assets, Net

Additions and

(In thousands)

Customer relationships

Acquired developed technology

website costs

Capitalized website costs

Note 8 — Debt

The Company’s debt

consisted of:

The Company’s debt consisted of:

(In thousands)

1 unchanged sentence

Other notes payable (1)

unamortized debt premium (discount)

unamortized debt discount

Total debt, net of debt discount

current portion, net of current unamortized debt discount

Long-term debt

(1) Other notes payable relates

to a one-year insurance premium that was financed over nine-months.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Long-term debt, net of current

(1) Other notes payable relates to a one-year insurance premium that was financed over nine-months.

Securities Purchase Agreement

4 unchanged sentences

principal amount of $ 65.0 million (the “SPA Note”), and a SPA Warrant to purchase up to an aggregate of 34,406 shares of Common

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

August 2022 Securities Exchange Agreement

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Investor’s election.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The Note Exchange Warrant

16 unchanged sentences

the Company).

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Modification of Notes Payable

8 unchanged sentences

2022 Note” and, collectively with the Convertible Note, the “Notes”).

This exchange was deemed

to be an extinguishment under ASC 470, as the modified debt added a substantive conversion option that was not inherent in the August

This exchange was deemed to

be an extinguishment under ASC 470, as the modified debt added a substantive conversion option that was not inherent in the August 2022

As a result, the Company recognized a loss on the extinguishment of debt of $ 4,619,846 .

9 unchanged sentences

amount under the August 2022 Note or the Convertible Note.

At any time, the Company

may prepay all of the Convertible Note by redemption at a price equal to 102.5 % of the then-outstanding principal amount under the Convertible

At any time, the Company may

prepay all of the Convertible Note by redemption at a price equal to 102.5 % of the then-outstanding principal amount under the Convertible

Note plus accrued but unpaid interest.

22 unchanged sentences

occurred and (ii) the accrued and unpaid interest on the Convertible Note.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Until the date the Convertible

9 unchanged sentences

case, to no greater than 9.99%.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

evaluated the embedded features in accordance with ASC 815-15-25 and the determined embedded features are not required to be bifurcated

and separately measured at fair value.

Interest expense related

to the Convertible Notes described above was $ 170,974 for the three months ended March 31, 2023.

Accrued interest totaled $ 170,974 as

of March 31, 2023.

The following table summarizes

the short-term and long-term portions of the Exchange Note as of March 31, 2023:

Interest expense related to

the Convertible Notes described above was $ 609,001 for the six months ended June 30, 2023.

Accrued interest totaled $ 136,913 as of June

Notes Conversion

Pursuant to the Exchange Agreement

the Company entered into with High Trail Special Situations LLC on March 8, 2023, the Lender elected on April 26, 2023, to convert $ 1.6

million of the remaining outstanding principal amount on the Convertible Note for 153,617 shares of Common Stock of the Company.

On May 1, 2023, the

Company entered into a letter agreement with the above referenced accredited Lender (the “Letter Agreement”), pursuant

to which the Company and the Lender agreed to exchange or redeem $ 2.0 million of the remaining outstanding principal amount under

the Exchange Note for a total of 445,196 shares of Common Stock of the Company, subject to a Beneficial Ownership Limitation of

4.99 % of the Company’s Common Stock.

Due to the Beneficial Ownership Limitation of 4.99 %, a total of 69,568 shares of Common

Stock of the Company were issued to the Lender, with the remaining 375,629 shares held in abeyance until the balance (or portion

thereof) may be issued in compliance with such limitations.

As a result, the Company recognized a

loss on the of $ 11,609 .

The following table summarizes the short-term

and long-term portions of the Exchange Note as of June 30, 2023:

(In thousands)

Notes payable, net

Unamortized premium

Unamortized discount

Net carrying amount

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

As of March 31, 2023, future

minimum payments were as follows:

As of June 30, 2023, future minimum payments were

Years ending December 31 (In thousands),

2 unchanged sentences

Paycheck Protection Program Loan

Paycheck Protection Program Loans under

the Coronavirus Aid, Relief, and Economic Security Act

In May 2020, the Company

entered into a PPP Loan with Bank of America pursuant to the PPP under the CARES Act administered by the SBA.

Paycheck Protection Program Loans under the Coronavirus Aid,

Relief, and Economic Security Act

In May 2020, the Company entered into a PPP Loan

with Bank of America pursuant to the PPP under the CARES Act administered by the SBA.

The Company received total

4 unchanged sentences

The PPP loan is payable in 34 equal combined monthly principal and interest payments of approximately $ 24 thousand that commenced on August

The breakdown of PPP Loan

balances by current and non-current as of March 31, 2023 and December 31, 2022 were as follows:

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The breakdown of PPP Loan balances by current and

non-current as of June 30, 2023 and December 31, 2022 were as follows:

(In thousands)

17 unchanged sentences

of determining the present value of its lease liabilities.

At March 31, 2023, the Company’s weighted-average discount rate utilized

At June 30, 2023, the Company’s weighted-average discount rate utilized

for its leases was 7.33 %.

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area maintenance associated with the property.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The Company had several non-cancellable

4 unchanged sentences

area maintenance associated with the property.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Additional information on the Company’s

1 unchanged sentence

Three months ended

Six months ended

(In thousands)

3 unchanged sentences

Interest on lease liabilities

Short-term lease cost

Total lease cost

20 unchanged sentences

Maturities of operating and finance lease liabilities

as of March 31, 2023 are as follows:

as of June 30, 2023 are as follows:

Years ending December 31 (In thousands),

15 unchanged sentences

authorized shares of Preferred Stock, as Series A Convertible Preferred Stock (“Series A Preferred Stock”).

On March 1, 2023, the Company further increased its authorized number

of shares to 13,000,000 , consisting of:

10,000,000 shares of Common Stock, par value $ 0.001 per share and 3,000,000 shares of preferred

stock, par value $ 0.001 per share.

On March 1, 2023, the Company further increased

its authorized number of shares to 13,000,000 , consisting of:

10,000,000 shares of Common Stock, par value $ 0.001 per share and 3,000,000

shares of preferred stock, par value $ 0.001 per share.

Private Placement

23 unchanged sentences

expenses, and excluding the proceeds, if any, from the exercise of the SA Warrants.

Issuance of Common Stock in

Connection with Acquisitions

of Common Stock in Connection with Acquisitions

On October 1, 2021, the Company

11 unchanged sentences

financial statements.

On February 1, 2022, the

Company issued an aggregate of 1,491 shares of its Common Stock to the Lab Society shareholders in connection with the Company’s

acquisition of Lab Society.

On April 28, 2023, the Company issued the remaining 499 Holdback Buyer Shares to the Lab Society Owners in

accordance with the Lab Society Merger Agreement.

On February 1, 2022, the Company issued an aggregate

of 1,491 shares of its Common Stock to the Lab Society shareholders in connection with the Company’s acquisition of Lab Society.

On April 28, 2023, the Company issued the remaining 499 Holdback Buyer Shares to the Lab Society Owners in accordance with the Lab Society

Merger Agreement.

AGRIFY CORPORATION

78 unchanged sentences

Plan shall continue in effect, unless sooner terminated, until the tenth anniversary of the date on which it is adopted by the Board of

As of March 31, 2023, there were 13,123 shares of Common Stock available to be granted under the Company’s 2022 Plan.

Company’s stock compensation expense was $ 0.9 million and $ 4.3 million for the three months ended March 31, 2023 and

As of June 30, 2023, there were 13,008 shares of Common Stock available to be granted under the Company’s 2022 Plan.

Company’s stock compensation expense was $ 0.8 million and $ 0.9 million for the three months ended June 30, 2023 and

2022, respectively.

The Company’s stock compensation expense was $ 1.6 million and $ 1.9 million for the six months ended June

30, 2023 and 2022, respectively.

Stock Options

6 unchanged sentences

yield of the underlying Common Stock, expected option life, and expected volatility in the market value of the underlying Common Stock.

No stock options were granted during the three months ended March 31, 2023.

No stock options were granted during the three and six months ended June 30, 2023 and 2022.

The Black-Scholes option-pricing

22 unchanged sentences

FINANCIAL STATEMENTS

The following table presents

option activity under the Company’s stock option plans for the three months ended March 31, 2023 and 2022:

The following table presents option activity under

the Company’s stock option plans for the three and six months ended June 30, 2023:

(In thousands, except share and per share data)

Weighted-Average

Exercise Price

Aggregate Intrinsic Value

Intrinsic Value

Options outstanding at January 1, 2023

Options outstanding at March 31, 2023

Options vested and exercisable as of March 31, 2023

Options vested and expected to vest as of March 31, 2023

As of March 31, 2023, total

Options outstanding at June 30, 2023

Options vested and exercisable as of June 30, 2023

Options vested and expected to vest as of June 30, 2023

As of June 30, 2023, total

unrecognized compensation expense related to unvested options under the Company’s 2022 Plan was $ 1.9 million, which is expected

1 unchanged sentence

The following table summarizes information about

options vested and exercisable at March 31, 2023:

options vested and exercisable at June 30, 2023:

Options Vested and Exercisable

Number of Options

Weighted-Average Remaining Contractual Life (Years)

Weighted-Average

Remaining Contractual Life

Weighted-Average

Exercise Price

The following table summarizes information about

options expected to vest after March 31, 2023:

options expected to vest after June 30, 2023:

Options Vested and Expected to Vest

Number of Options

Weighted-Average Remaining Contractual Life (Years)

Weighted-Average

Remaining Contractual Life

Weighted-Average

Exercise Price

3 unchanged sentences

Restricted Stock Units

Under the 2022 Plan, the Company may grant restricted

stock units to employees, directors and officers.

The restricted stock units granted generally vest equally over periods ranging from

one to three years.

The fair value of restricted stock units is determined based on the closing market price of the Company’s Common

Stock on the date of grant.

Compensation expense related to the restricted stock units is recognized using a straight-line attribution

method over the vesting period.

Number of Shares

Weighted-Average

Grant Date Fair Value

Under the 2022 Plan, the

Company may grant restricted stock units to employees, directors and officers.

The restricted stock units granted generally vest equally

over periods ranging from one to three years.

The fair value of restricted stock units is determined based on the closing market price

of the Company’s Common Stock on the date of grant.

Compensation expense related to the restricted stock units is recognized using

a straight-line attribution method over the vesting period.

Grant Date Fair

Unvested at December 31, 2022

Unvested at March 31, 2023

As of March 31, 2023, total

Unvested at June 30, 2023

As of June 30, 2023, total

unrecognized compensation expense related to unvested restricted stock units was $ 1.0 million, which is expected to be recognized over

4 unchanged sentences

The Company has initially reserved 2,500 shares of Common Stock for issuance under the ESPP.

On March 31, 2023,

On June 30, 2023, 2,500

shares were available for future issuance.

6 unchanged sentences

purchase more than $ 25 thousand worth of Common Stock annually.

No Common Stock was granted under the 2022 ESPP during the three months

ended March 31, 2023.

No Common Stock was granted under the 2022 ESPP during the three and six

months ended June 30, 2023.

Employee Benefit Plan

4 unchanged sentences

The Company’s contribution to the 401(k) Plan is discretionary.

During the three months ended March 31, 2023, the Company did not contribute to the 401(k) Plan.

During the three months and six months ended June 30, 2023, the Company did not contribute to the 401(k) Plan.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Note 12 — Stock Warrants

The following tables present all warrant activity

of the Company for the three months ended March 31, 2023 and 2022:

Weighted-Average

of the Company for the six months ended June 30, 2023 and 2022:

Exercise Price

Warrants outstanding at December 31, 2022

Warrants outstanding at March 31, 2023

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Weighted-Average

Warrants outstanding at June 30, 2023

Exercise Price

Warrants outstanding at December 31, 2021

Warrants outstanding at March 31, 2022

The Company received proceeds from the exercise

of warrants of $ 0 and $ 1 thousand for the three months ended March 31, 2023 and 2022, respectively.

Warrants outstanding at June 30, 2022

The Company received proceeds

from the exercise of warrants of $ 0 for the three and six months ended June 30, 2023, and $ 1 thousand and $ 2 thousand for the three and

six months ended June 30, 2022, respectively.

Modification to December 2022 Warrants

On April 19, 2023, the Company

entered into an agreement to reduce the exercise price for its December 2022 Warrants from approximately $ 13 to approximately $ 3.4 and

had entered into agreements with certain holders of the December 2022 Warrants to exercise such warrants for gross proceeds of up to $ 1.84

million (the “Warrant Inducement”).

On April 24, 2023, the Company

announced that it would not consummate the Warrant Inducement, however the reduction of the exercise price remained effective.

Note 13 — Income Taxes

25 unchanged sentences

thereof as well as other factors.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Note 14 — Net Loss Per Share

11 unchanged sentences

is anti-dilutive.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The components of basic and diluted net loss per

share were as follows:

Three months ended

Three months ended June 30,

Six months ended June 30,

(In thousands, except share and per share data)

Net income (loss) attributable to Agrify Corporation

Net income (loss) available for common shareholders

Net loss attributable to Agrify Corporation

Weighted-average common shares outstanding – basic

Weighted-average common shares outstanding – diluted

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

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

The Company’s potential

dilutive securities, which include stock options, restricted stock units, and warrants, have been excluded from the computation of diluted

net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted-average number of Common Shares outstanding

used to calculate both basic and diluted net loss per share attributable to Common Stockholders is the same.

The Company excluded

the following potential Common Stock equivalents presented based on amounts outstanding at each period end, from the computation of diluted

net loss per share attributable to Common Stockholders for the periods indicated because including them would have had an anti-dilutive

Three months ended

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

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Company’s potential dilutive securities, which include stock options, restricted stock units, and warrants, have been excluded from

the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted-average

number of Common Shares outstanding used to calculate both basic and diluted net loss per share attributable to Common Stockholders is

The Company excluded the following potential Common Stock equivalents presented based on amounts outstanding at each period

end, from the computation of diluted net loss per share attributable to Common Stockholders for the periods indicated because including

them would have had an anti-dilutive effect:

Shares subject to outstanding stock options

14 unchanged sentences

Mary’s allegations, litigation is inherently unpredictable and there can be no assurance that the Company will prevail in this matter.

During the third quarter

of 2022, the Company deemed it necessary to fully reserve for the outstanding $ 14.7 million note receivable balance due to the current

litigation and the uncertainty of the customer’s ability to repay the balance.

The $ 14.7 million represents the amount of the contingent

loss that the Company has determined to be reasonably possible and estimable.

The actual cost of resolving this matter may be higher or

lower than the amount the Company has reserved.

During the third quarter of

2022, the Company deemed it necessary to fully reserve for the outstanding $ 14.7 million note receivable balance due to the current litigation

and the uncertainty of the customer’s ability to repay the balance.

The $ 14.7 million represents the amount of the contingent loss

that the Company has determined to be reasonably possible and estimable.

The actual cost of resolving this matter may be higher or lower

than the amount the Company has reserved.

If the Company is unable

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October 2023, and Agrify will be permitted to make responsive filings, which may include an answer and counterclaim.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Bowdoin Construction Corp.

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The Company is entitled to indemnification by Bud & Mary’s and intends to vigorously defend this claim.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Mack Molding Co.

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The Company has filed an answer denying liability on TRC’s claims and is proceeding with discovery.

Sinclair Scientific

Sinclair Scientific Litigation

On June 15, 2023, the Company

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answer to the counterclaims denying all liability on the claims and discovery in the Delaware Action has recently commenced.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Supply Agreement with Mack Molding Co.

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terms of the supply agreement with Mack.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

On October 11, 2022, the

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vendor, Mack exercised the right to invoice the Company for the slow-moving inventory.

As of March 31, 2023, the Company owed Mack $ 8.4

As of June 30, 2023, the Company owed Mack $ 8.4

million for purchased inventory on behalf of the Company to produce VFUs, which is included in accounts payable in the consolidated balance

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Operating Officer, is the Chairman of Ora.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Other Commitments and Contingencies

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to the consolidated financial statements for information regarding income tax contingencies

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Note 16 — Related Parties

Some of the officers and

directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities

that become available.

Some of the officers and directors of the Company

are involved in other business activities and may, in the future, become involved in other business opportunities that become available.

The following table describes the net purchasing

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Three months ended

Six months ended

(In thousands)

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The following table summarizes net related party

(payable) receivable as of March 31, 2023 and December 31, 2022:

(payable) receivable as of June 30, 2023 and December 31, 2022:

(In thousands)

Valiant Americas, LLC

Living Greens Farm

Topline Performance Group

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Nasdaq Deficiency Notices

On April 18, 2023, the Company

received a notice from Nasdaq (the “April Nasdaq Notice”) that it was noncompliant with Nasdaq Listing Rule 5250(c)(1) as

a result of its failure to file its Annual Report on Form 10-K with the SEC by the required due date.

May 17, 2023, the Company received a second notice from Nasdaq (the “May Nasdaq Notice”)

that it remained noncompliant with Nasdaq Listing Rule 5250(c)(1) as a result of its failure to file its Quarterly Report on Form 10-Q

for the quarter ended March 31, 2023 (the “First Quarter Form 10-Q”) with the SEC by the required due date.

On August 16, 2023, the Company

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(the “Delayed Reports”).

The Nasdaq Notice had no immediate effect on the listing of the Company’s common stock on

The Nasdaq Stock Market LLC.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Nasdaq Stock Market LLC.

On October 17, 2023, the

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Panel scheduled a hearing for January 11, 2024.

Securities Exchange Agreement

On April 26, 2023, the Company

entered into a letter agreement with the above referenced accredited lender (the “Letter Agreement”), pursuant to which the

Company and the lender agreed to exchange $ 2.0 million of the remaining outstanding principal amount under the Exchange Note for 445,197

shares of common stock of the Company, subject to a Beneficial Ownership Limitation of 4.99 % of the Company’s Common Stock.

Discontinuance of the ATM Program

The ATM Program was discontinued

after April 1, 2023.

Repricing of Common Stock Warrants

The Company issued 1,338,462

common stock warrants in conjunction with the Company’s public offering from December, 2022.

On April 18, 2023, the Company undertook

a warrant exercise inducement program, which it later cancelled.

As a result, the warrant exercise price was reduced from $ 13.00 per share

to $ 3.45 per share.

of May 23, 2023, the Company extended its lease by three years until July 31, 2026, for the premises located at 2625 S.

Santa Fe Dr.,

1, Units 1H and 1IJ.

Issuance of Unsecured Promissory Note

On July 12, 2023, the Board

of Directors of the Company approved the issuance of a secured promissory note (the “GIC Note”) in favor of GIC Acquisition,

LLC (the “GIC Investor”), an entity that is managed by Raymond Chang, the Company’s Chairman and Chief Executive Officer,

and on October 3, 2023, the Board of Directors of the Company approved the amendment and restatement of the GIC Note as well as the issuance

of a new secured promissory note (the “CP Note” and together with the GIC Note, the “Promissory Notes”) in favor

of CP Acquisitions, LLC (the “CP Investor”), an entity that is partially managed by Mr.

Pursuant to the GIC Note, the

GIC Investor has lent $500,000 to the Company.

Pursuant to the CP Note, the CP Investor may lend up to $3,000,000 to the Company.

Promissory Notes bear interest at a rate of 10% per annum, will mature in full on December 31, 2023, and may be prepaid without any fee

The Promissory Notes rank junior to all existing secured indebtedness of the Company.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Mack Molding Modification Agreement

On October 27, 2023, and

with an effective date as of October 18, 2023, the Company entered into a Modification and Settlement Agreement (the “Modification

Agreement”) with Mack Molding Company (“Mack”).

Pursuant to the Modification Agreement, the Company and Mack agreed

to settle an outstanding dispute under the Supply Agreement between the parties dated December 7, 2020 (the “Supply Agreement”).

The Modification Agreement requires the Company to make payments of $ 500,000 and $ 250,000 to Mack on or before November 1, 2023 and February

15, 2024, respectively.

Following the November 1, 2023 payment, the Company will be entitled to take possession of certain Vertical Farming

Units (“VFUs”) that were assembled under the Supply Agreement.

The Modification Agreement also requires the Company to purchase

from Mack a minimum of 25 VFUs per quarter for each quarter during 2024 and a minimum of 50 VFUs per quarter for the six quarters beginning

with the first quarter of 2025.

The Company is required to pay a storage fee of $ 25,000 per month for VFUs subject to the Modification

On October 27, 2023, and with an effective date as of October 18, 2023,

the Company entered into a Modification and Settlement Agreement (the “Modification Agreement”) with Mack Molding Company

Pursuant to the Modification Agreement, the Company and Mack agreed to settle an outstanding dispute under the Supply

Agreement between the parties dated December 7, 2020 (the “Supply Agreement”).

The Modification Agreement requires the Company

to make payments of $ 500,000 and $ 250,000 to Mack on or before November 1, 2023 and February 15, 2024, respectively.

The Company has made

the first of these two payments in the amount of $ 500,000 .

Following the November 1, 2023 payment, the Company is entitled to take possession

of certain Vertical Farming Units (“VFUs”) that were assembled under the Supply Agreement.

The Modification Agreement also

requires the Company to purchase from Mack a minimum of 25 VFUs per quarter for each quarter during 2024 and a minimum of 50 VFUs per

quarter for the six quarters beginning with the first quarter of 2025.

The Company is required to pay a storage fee of $ 25,000 per month

for VFUs subject to the Modification Agreement.

Additionally, as part of

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shares, in which case the warrant may be exercised on a cashless exercise basis at Mack’s election.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Warrant Issuance

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Price as defined under Nasdaq listing rules, subject to proportional adjustment in the event the Exchange Warrant has been partially exercised.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Letter Agreement requires that the Company issue equity securities to Mr.

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

What changed 10-Q

Item 1. Financial Statements