What changed in this filing

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Item 1. Financial Statements

2024-01-03 compared with 2023-12-12 · 594 added, 554 removed, 1832 unchanged (39% of the section changed)

Financial Statements

AGRIFY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

CONSOLIDATED BALANCE SHEETS

thousands, except share and per share data)

September 30,

Current assets:

2 unchanged sentences

Marketable securities

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

Accounts receivable, net of allowance for credit losses of $ 2,535 and $ 4,605 at September 30, 2023 and December 31, 2022, respectively

Inventory, net of reserves of $ 29,845 and $ 32,759 at September 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 $ 19,215 and $ 33,050 at June 30, 2023 and December 31, 2022, respectively

Loan receivable, net of allowance for credit losses of $ 19,215 and $ 33,050 at September 30, 2023 and December 31, 2022, respectively

Property and equipment, net

7 unchanged sentences

Long-term debt, current

Related party debt, current

Deferred revenue

7 unchanged sentences

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)

Common Stock, $ 0.001 par value per share, 10,000,000 and 5,000,000 shares authorized at September 30, 2023 and December 31, 2022, respectively, 1,651,281 and 1,038,298 shares issued and outstanding at September 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

5 unchanged sentences

Total liabilities and stockholders’ equity

(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.

The accompanying notes are an integral part of

these condensed consolidated financial statements.

AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

Three months ended June 30,

Six Months Ended June 30,

(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

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

CONSOLIDATED STATEMENTS OF OPERATIONS

thousands, except share and per share data)

Three months ended

September 30,

Nine months ended

September 30,

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

Cost of goods sold

Gross profit (loss)

General and administrative

2 unchanged sentences

Change in contingent consideration

Gain on disposal

Impairment of goodwill and intangible assets

3 unchanged sentences

Change in fair value of warrant liabilities

Gain (loss) on extinguishment of notes payable

Loss on extinguishment of notes payable

Other expense, net

2 unchanged sentences

Income tax benefit

(Income) loss attributable to non-controlling interests

(Loss) income attributable to non-controlling interest

Net loss attributable to Agrify Corporation

$ ( 130,235 )

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

$ ( 1,003.10 )

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 reverse stock splits may be found in Note

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

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

Additional information regarding reverse

stock splits may be found in Note 1 – Overview, Basis of Presentation, and Significant Accounting Policies, included elsewhere

in the notes to the consolidated financial statements

The accompanying notes are an integral part of

these condensed consolidated financial statements.

AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

(In thousands)

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred A Stock

Stockholders’

attributable to

Non-Controlling

Stockholders’

6 unchanged sentences

Exercise of warrants

Balance at March 31, 2022

Balance at June 30, 2022

Stock-based compensation

Exercise of options

Issuance of Common Stock in connection with acquisition

Reclass of warrant liability

Exercise of warrants

Balance at June 30, 2022

Issuance of restricted stock

Balance at September 30, 2022

$ ( 189,212 )

The accompanying notes are an integral part of

these condensed consolidated financial statements.

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

AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

Preferred A Stock

Stockholders’

attributable to

Non-Controlling

Stockholders’

Paid-in-Capital

at January 1, 2023

Balance 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

these condensed consolidated financial statements.

AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the six months ended

Stock-based compensation

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

Issuance of held-back shares to Lab Society

Issuance of Common Stock to Pure Pressure

Vesting of restricted stock units

Exercise of prefunded warrants in private placement

Conversion of Exchange Note

Conversion of Convertible Note

Proceeds from Employee Stock Purchase Plan Shares

Balance June 30, 2023

Stock-based compensation

Reverse stock split fractional share settlement

Balance September 30, 2023

$ ( 266,374 )

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended

September 30,

Cash flows from operating activities:

Net loss attributable to Agrify Corporation

$ ( 130,235 )

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

1 unchanged sentence

Amortization of premium on investment securities

Amortization of debt discount

Amortization of debt (premium) discount

Interest on investment securities

1 unchanged sentence

Deferred income taxes

Prepaid and refundable taxes

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

Impairment of goodwill and intangible assets

(Recovery of) provision for credit losses

(Recovery of) provision for slow-moving inventory

(Gain) loss on disposal of fixed assets

Change in fair value of contingent consideration

3 unchanged sentences

Prepaid expenses and other current assets

Prepaid and refundable taxes

Right of use assets, net

10 unchanged sentences

Proceeds from sale of securities

Issuance of loan

Issuance of loans receivable

Proceeds from repayment of loan receivable

8 unchanged sentences

Proceeds from exercise of warrants

Proceeds from issuance of related party note

Repayment of debt in private placement

3 unchanged sentences

Payments of financing leases

Impact of reverse stock split

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

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at the beginning of period

7 unchanged sentences

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

these condensed consolidated financial statements.

Conversion of convertible notes

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

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Overview, Basis of Presentation

31 unchanged sentences

On July 5, 2023, the Company

effected a 1-for-20 reverse stock split of its Common Stock, All share and per share information has been retroactively adjusted to give

effected a 1-for-20 reverse stock split of its Common Stock.

All share and per share information has been retroactively adjusted to give

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

25 unchanged sentences

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

10 unchanged sentences

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

3 unchanged sentences

Small Business Administration (the “SBA”).

The Company received total loan proceeds of approximately $ 779 thousand

The Company received total loan proceeds of approximately $ 0.8 million

from the PPP Loan.

45 unchanged sentences

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

AGRIFY CORPORATION

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 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.

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 $ 266 million as of September 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 Program”).

As of September 30, 2023,

the Company had $ 0.2 million of cash, cash equivalents, and marketable securities.

The Company had no restricted cash as of September

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 $ 41.4 million as of September 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.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On October 18, 2022, the

6 unchanged sentences

Common Stock under the ATM at an average price of $ 50.85 , resulting in gross proceeds of $ 15.6 million and net proceeds $ 15.1 million

after commissions and fees to the Agent totaling $ 468 thousand and legal fees totaling $ 75 thousand.

As of April 1, 2023, after which

time the ATM program was discontinued, the Company sold an additional 323,082 shares of Common Stock under the ATM at an average price

of $ 4.93 , resulting in gross proceeds of $ 1.6 million and net proceeds of $ 1.6 million after commissions and fees to the Agent totaling

$ 48 thousand.

$ 3.0 million of the proceeds under the ATM Program were used to repay amounts due to the Investor under the Exchange Note.

The Company used the net proceeds generated from the ATM Program for working capital and general corporate purposes, including repayment

of indebtedness, funding its transformation initiatives and product category expansion efforts and capital expenditures.

Due to the late

filing of 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.

after commissions and fees to the Agent totaling $ 0.5 million and legal fees totaling $ 0.1 million.

As of April 1, 2023, after which time

the ATM program was discontinued, the Company sold an additional 323,082 shares of Common Stock under the ATM at an average price of $ 4.93 ,

resulting in gross proceeds of $ 1.6 million and net proceeds of $ 1.6 million after commissions and fees to the Agent totaling $ 48 thousand.

$ 3.0 million of the proceeds under the ATM Program were used to repay amounts due to High Trail Special Situations LLC (the “Investor”) under the Exchange Note.

used the net proceeds generated from the ATM Program for working capital and general corporate purposes, including repayment of indebtedness,

funding its transformation initiatives and product category expansion efforts and capital expenditures.

Due to the late filing of the

Company’s 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

June 30, 2023 and 2022.

September 30, 2023 and 2022.

In addition, the Company

9 unchanged sentences

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.

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

equivalents are carried at cost, which approximates fair value.

Marketable Securities

21 unchanged sentences

consolidated statements of operations.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Concentration of Credit Risk and Significant

8 unchanged sentences

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:

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

For the three and nine months

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

Three months ended

September 30, 2023

Three months ended

September 30, 2022

Nine months ended

September 30, 2023

Nine months ended

September 30, 2022

(In thousands)

Company Customer Number - 136

Company Customer Number - 125

Company Customer Number - 139

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

Accounts Receivable,

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 September 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 September 30, 2023

As of December 31, 2022

10 unchanged sentences

or damaged inventory are recorded through specific identification of obsolete or damaged material.

The Company takes physical inventory

at least once annually at all inventory locations.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

3 unchanged sentences

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

Estimated Useful Life

Estimated Useful Life (Years)

Computer and office equipment

36 unchanged sentences

testing as of June 30, 2022.

Based on its interim testing,

the Company noted that the carrying value of equity exceeded the calculated fair value by an amount greater than the aggregate value of

our goodwill.

Accordingly, the Company concluded that the entire carrying value of its goodwill was impaired, resulting in a second-quarter

impairment charge of $ 54.7 million.

Additional information regarding the Company’s interim testing on goodwill may be found in Note

7 – Goodwill and Intangible Assets, Net, included elsewhere in the notes to the consolidated financial statements.

Based on its interim

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

aggregate value of our goodwill.

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

resulting in a second-quarter impairment charge of $ 54.7 million in 2022.

Additional information regarding the Company’s interim

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

consolidated financial statements.

Intangible Assets

10 unchanged sentences

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The useful lives are as follows:

17 unchanged sentences

testing as of June 30, 2022.

Based on its interim testing,

the Company noted that the carrying value of equity exceeded the calculated fair value by an amount greater than the aggregate value of

our intangible assets.

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

resulting in a second-quarter impairment charge of $ 15.2 million.

Additional information regarding the Company’s interim testing

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

financial statements.

Based on its interim

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

aggregate value of our intangible assets.

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

should be impaired, resulting in a second-quarter impairment charge of $ 15.2 million in 2022.

Additional information regarding the

Company’s interim testing on intangible assets may be found in Note 7 – Goodwill and Intangible Assets, Net, included

elsewhere in the notes to the consolidated financial statements.

Convertible Notes Payable

13 unchanged sentences

discount to the host instrument which is amortized to interest expense over the life of the respective note using the effective interest

If the Company determines

that an instrument is not a derivative liability, it then evaluates whether there is a BCF, by comparing the commitment date fair value

to the effective current conversion price of the instrument.

The Company records a BCF as a debt discount which is amortized to interest

expense over the life of the respective note using the effective interest method.

BCFs that are contingent upon the occurrence of a future

event are recognized when the contingency is resolved.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Warrant Liabilities

15 unchanged sentences

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

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

10 unchanged sentences

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.

o n April 18, 2023, the Company modified the exercise price of certain warrants, to reduce this from $ 13.00 per share to $ 3.45 per

Debt Issuance Costs and Debt Discount

37 unchanged sentences

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

20 unchanged sentences

signatures on contracts and purchase orders, if said purchase orders are issued in the normal course of business by the customer.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Identify performance

19 unchanged sentences

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

41 unchanged sentences

to variable consideration were not material for the periods presented.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

If a contract has payment terms that differ from

8 unchanged sentences

components separately as financial income.

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

For the nine months ended September 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

19 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 $ 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

maintains a reserve for warranty returns of $ 0.6 million and $ 0.6 million for September 30, 2023 and December 31, 2022, respectively.

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

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

22 unchanged sentences

two to five years.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company accounts for

5 unchanged sentences

the net deferred tax asset will not be realized.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

When tax returns are filed,

24 unchanged sentences

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

The Company’s quarterly

provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the period presented.

determine the annual effective tax rate, the Company estimates both the total income (loss) before income taxes for the full year and

the jurisdictions in which that income (loss) is subject to tax.

The actual effective tax rate for the full year may differ from these

estimates if income (loss) before income taxes is greater than or less than what was estimated or if the allocation of income (loss) to

jurisdictions in which it is taxed is different from the estimated allocations.

The provision for income

taxes represents Federal and state and local income taxes.

The effective rate differs from statutory rates due to the effect of certain

nondeductible expenses.

Our effective tax rate will change from quarter to quarter based on recurring and non-recurring factors including,

but not limited to, the geographical mix of earnings, enacted tax legislation, and state and local income taxes.

In addition, changes

in judgment from the evaluation of new information resulting in the recognition de-recognition or re-measurement of a tax position taken

in a prior annual period is recognized separately in the quarter of the change.

Tax contingencies are recorded,

if needed, to address potential exposure involving tax positions the Company has taken that could be challenged by tax authorities.

potential exposures could result from applications of various statutes, rules, regulations and interpretations.

Any estimates of tax contingencies

contain assumptions and judgments about potential actions by taxing jurisdictions.

Any interest and penalties related to uncertain tax

positions would be included as part of the income tax provision.

The Company’s conclusions regarding uncertain tax positions may

be subject to review and adjustment at a later date based upon ongoing analysis of or changes in tax laws, regulations and interpretations

thereof as well as other factors.

Net Loss Per Share

16 unchanged sentences

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

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recently Adopted Accounting Pronouncements

11 unchanged sentences

interim periods within those fiscal years.

The adoption of this new accounting guidance had no impact on the Company’s consolidated

financial position.

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

The adoption of this new accounting

guidance had no impact on the Company’s consolidated financial position.

In June 2016, the FASB issued

25 unchanged sentences

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

18 unchanged sentences

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

7 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

Deferred Revenue

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:

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

(In thousands)

Three months ended

September 30,

Deferred revenue – beginning of period

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 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

As of September 30, 2023

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

balance sheets.

Note 3 — Supplemental Consolidated Balance Sheet Information

1 unchanged sentence

Accounts receivable consisted of the following

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

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

(In thousands)

September 30,

Accounts receivable, gross

Less allowance for doubtful accounts

Less allowance for credit losses

Accounts receivable, net

The changes in the allowance for doubtful accounts

consisted of the following:

The changes in the allowance for credit losses

accounts consisted of the following:

(In thousands)

Allowance for doubtful accounts - beginning of period

(Recovery of) Provision for doubtful accounts

Nine months ended

September 30,

Allowance for credit losses - beginning of period

(Recovery of) allowance for credit losses

Write-offs of uncollectible accounts

Other adjustments

Allowance for doubtful accounts - end of period

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.

Allowance for credit losses - end of period

The Company recognized a

net recovery of bad debt income of $ 0.4 million, relative to a bad debt expense of $ 0.4 million, for the three months ended September

30, 2023 and 2022, respectively, and a net recovery of bad debt of $ 1.0 million, relative to a bad debt expense of $ 1.9 million, for the

nine months ended September 30, 2023 and 2022, respectively.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted

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

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

(In thousands)

Other receivables, other

Prepaid expenses, other

September 30,

Legal settlement receivables

Prepaid insurance

Deferred issuance costs, net

Prepaid expenses, other

Prepaid software

Prepaid materials

Deferred issuance costs, net

Other receivables, other

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 June 30, 2023 and December 31, 2022:

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

(In thousands)

September 30,

Leased equipment

Leasehold improvements

1 unchanged sentence

Computer and office equipment

Leased equipment

Furniture and fixtures

Research and development laboratory equipment

Furniture and fixtures

Trade show assets

4 unchanged sentences

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.

September 30, 2023 and 2022 was $ 0.5 million and $ 0.4 million, respectively, and $ 1.5 million and $ 1.2 million for the nine months ended

September 30, 2023 and 2022, respectively.

Depreciation expense is recorded within general and administrative expenses, research and development

expenses, and selling and marketing expenses depending on the nature of the property and equipment depreciated.

Other Non-Current Assets

Other non-current assets consisted of the following

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

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

(In thousands)

September 30,

Security deposits

2 unchanged sentences

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities

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

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

(In thousands)

Accrued acquisition liabilities (1)

September 30,

Sales tax payable (1)

Accrued acquisition liabilities (2)

Accrued construction costs

Accrued interest expense

Compensation related fees

Accrued professional fees

Accrued warranty expenses

Accrued consulting fees

Accrued professional fees

Accrued inventory purchases

Accrued interest expense

Accrued consulting fees

Financing lease liabilities

1 unchanged sentence

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.

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

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

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

Accrued Warranty Costs

2 unchanged sentences

(In thousands)

September 30,

Warranty accrual – beginning of period

Liabilities accrued for warranties issued during the period

Warranty accruals paid during the during

Warranty accrual – end of period

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Note 4 — Fair Value Measures

9 unchanged sentences

Unobservable inputs for which there is little or no market data which require the Company to develop its own assumptions about how market participants would price the asset or liability.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Valuation techniques for

3 unchanged sentences

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

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:

Value Measurements Using Input Types

At September 30, 2023 and

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

September 30, 2023

December 31, 2022

Fair Value Measurements Using Input Types

(In thousands)

7 unchanged sentences

Total liabilities

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Fair Value of Financial Instruments

3 unchanged sentences

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.

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

The Company’s deferred consideration was recorded in connection

with acquisitions during the six months ended September 30, 2023 and fiscal 2022 using an estimated fair value discount at the time of

the transactions.

As of September 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.

1 unchanged sentence

Marketable Securities

As of June 30, 2023, the

Company held investments in municipal bonds and corporate bonds.

The municipal and corporate bonds are considered held-to-maturity securities

and are recorded at amortized cost in the accompanying consolidated balance sheet.

The fair values of these investments were estimated

using recently executed transactions and market price quotations.

The Company considers current assets as those investments which will

mature within the next 12 months including, interest receivable on long-term bonds.

As of September 30, 2023,

the Company held investments in municipal bonds and corporate bonds.

The municipal and corporate bonds are considered held-to-maturity

securities and are recorded at amortized cost in the accompanying consolidated balance sheet.

The fair values of these investments were

estimated using recently executed transactions and market price quotations.

The Company considers current assets as those investments

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

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The composition of the Company’s marketable

1 unchanged sentence

(In thousands)

September 30,

Current marketable securities:

1 unchanged sentence

Corporate bonds

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Contingent Consideration

6 unchanged sentences

The company recorded no change

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.

in contingent consideration for the nine months ended September 30, 2023.

The contingent earn-out

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

(In thousands)

5 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 September 30, 2023 and December 31, 2022.

See below for additional information related to

8 unchanged sentences

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

consideration liability associated with PurePressure’s first earn-out period by approximately $ 602 thousand and their second earn-out

by approximately $ 170 thousand.

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

by approximately $ 0.2 million.

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

9 unchanged sentences

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

by approximately $ 484 thousand.

by approximately $ 0.5 million.

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

expenses during the second and fourth quarters of 2022, respectively.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Consideration – Precision and Cascade

3 unchanged sentences

The Company, during the second quarter of 2022, increased the amount

of the contingent consideration earned by the former members of Precision and Cascade by approximately $ 121 thousand, to reflect the final

of the contingent consideration earned by the former members of Precision and Cascade by approximately $ 0.1 million, to reflect the final

contingent consideration amount due.

2 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 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.

of the warrant liabilities on September 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

3 unchanged sentences

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:

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

September 30,

Exercise price

2 unchanged sentences

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:

changes in the fair value of the Level 3 warrant liabilities for the nine months ended September 30, 2023:

(In thousands)

Three and Six

September 30,

Warrant liabilities – beginning of period

3 unchanged sentences

Warrant liabilities –June 30, 2023

Change in estimated fair value

Warrant liabilities –September 30, 2023

March 2022 Warrants

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:

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

September 30,

Exercise price

2 unchanged sentences

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

changes in the fair value of the Level 3 warrant liabilities for the nine months ended September 30, 2023:

(In thousands) Nine Months

September 30,

Warrant liabilities – beginning of period $ 34

3 unchanged sentences

Warrant liabilities – June 30, 2023 32

Change in estimated fair value ( 17 )

Warrant liabilities –September 30, 2023 $ 15

August 2022 Warrants

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:

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

September 30,

Exercise price

2 unchanged sentences

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:

changes in the fair value of the Level 3 warrant liabilities for the nine months ended September 30, 2023:

(In thousands)

Three and Six

September 30,

Warrant liabilities – beginning of period

3 unchanged sentences

Warrant liabilities – June 30, 2023

Change in estimated fair value

Warrant liabilities –September 30, 2023

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 2022 Warrants

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:

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

September 30,

Exercise price

1 unchanged sentence

Discount rate - treasury yield

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:

changes in the fair value of the Level 3 warrant liabilities for the nine months ended September 30, 2023:

(In thousands)

Three and Six

September 30,

Warrant liabilities – beginning of period

3 unchanged sentences

Warrant liabilities – June 30, 2023

Change in estimated fair value

Warrant liabilities –September 30, 2023

Note 5 — Loans Receivable

23 unchanged sentences

steps to pursue repayment from Bud & Mary’s and is taking all actions necessary to protect its shareholders’ interests.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December

11 unchanged sentences

to pay back Greenstone’s Loan.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The breakdown of loans receivable by customer

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

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

(In thousands)

September 30,

Customer 24096

Other – Non-TTK Solution (1)

Allowance for doubtful accounts (2)(3)

Allowance for credit losses (2)(3)

Total loan receivable

1 unchanged sentence

(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.

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

Approximately $ 4.5 million relates to Hannah.

At this time, the Company

5 unchanged sentences

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

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.

The Company’s loan receivable from

Greenstone was written off in full during the quarter ending June 30, 2023.

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 June

Inventory consisted of the following as of September

30, 2023 and December 31, 2022:

(In thousands)

September 30,

Raw materials

5 unchanged sentences

Total inventory, net

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Inventory Reserves

5 unchanged sentences

management’s expected method of disposition.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Changes in the Company’s inventory reserve

1 unchanged sentence

(In thousands)

September 30,

Inventory reserves – beginning of period

(Decrease) increase in inventory reserves

(Decrease) increase

in inventory reserves

Inventory reserves – end of period

35 unchanged sentences

Goodwill - end of period

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Intangible assets, net as of December 31, 2022

1 unchanged sentence

Intangible Assets, Gross

Accumulated Amortization and

Accumulated Amortization

Intangible Assets, Net

Additions and

(In thousands)

Additions and

Customer relationships

1 unchanged sentence

Capitalized website costs

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 8 – Debt

1 unchanged sentence

(In thousands)

September 30,

Note payable – Exchange Note

Related party debt

Other notes payable (1)

unamortized debt discount

Unamortized debt premium (discount)

Total debt, net of debt discount

8 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

1 unchanged sentence

reached an agreement with the Investor to amend its existing senior SPA Note and entered into the August 2022 Exchange Agreement.

to the August 2022 Exchange Agreement, the Company partially paid $ 35.2 million along with approximately $ 300 thousand in repayments for

to the August 2022 Exchange Agreement, the Company partially paid $ 35.2 million along with approximately $ 0.3 million in repayments for

other fees under the SPA Note and exchanged the remaining balance of the SPA Note for an Exchange Note with an aggregate original principal

8 unchanged sentences

The principal amount of the Exchange Note will be payable on the Maturity Date, provided that the

Investor will be entitled to a cash sweep of 20 % of the proceeds received by the Company in connection with any equity financing, which

holder will be entitled to a cash sweep of 20 % of the proceeds received by the Company in connection with any equity financing, which

will reduce the outstanding principal amount under the Exchange Note.

At any time, the Company

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

At any time, the Company may

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

accrued but unpaid interest.

The Investor will also have the option of requiring the Company to redeem the Exchange Note on the one-year

The holder will also have the option of requiring the Company to redeem the Exchange Note on the one-year

or two-year anniversaries of issuance at a price equal to the then-outstanding principal amount under the Exchange Note plus accrued but

1 unchanged sentence

under the Exchange Note plus accrued but unpaid interest.

The Exchange Note imposes

certain customary affirmative and negative covenants upon the Company, as well as covenants that restrict the Company and its subsidiaries

from incurring any additional indebtedness or suffering any liens, subject to specified exceptions, restrict the ability of the Company

and its subsidiaries from making certain investments, subject to specified exceptions, restrict the declaration of any dividends or other

The Exchange Note imposes certain

customary affirmative and negative covenants upon the Company, as well as covenants that restrict the Company and its subsidiaries from

incurring any additional indebtedness or suffering any liens, subject to specified exceptions, restrict the ability of the Company and

its subsidiaries from making certain investments, subject to specified exceptions, restrict the declaration of any dividends or other

distributions, subject to specified exceptions, require the Company not to exceed maximum levels of allowable cash spend while the Exchange

1 unchanged sentence

If an event of default under the Exchange Note

occurs, the Investor can elect to redeem the Exchange Note for cash equal to 115 % of the then-outstanding principal amount of the Note

(or such lesser principal amount accelerated by the Investor), plus accrued and unpaid interest, including default interest, which accrues

occurs, the holder can elect to redeem the Exchange Note for cash equal to 115 % of the then-outstanding principal amount of the Note (or

such lesser principal amount accelerated by the Investor), plus accrued and unpaid interest, including default interest, which accrues

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

Until the date the Exchange

Note is fully repaid, the Investor has, subject to certain exceptions, the right to participate for up to 30 % of any offering of debt,

equity (other than an offering of solely Common Stock), or equity-linked securities, including without limitation any debt, preferred

stock or other instrument or security, of the Company or its subsidiaries.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Until the date the Exchange Note

is fully repaid, the holder has, subject to certain exceptions, the right to participate for up to 30 % of any offering of debt, equity

(other than an offering of solely Common Stock), or equity-linked securities, including without limitation any debt, preferred stock or

other instrument or security, of the Company or its subsidiaries.

The Modified Warrant has

17 unchanged sentences

issuing warrants with more favorable or preferential terms and/or provisions.

The August 2022 Warrants

will each provide that in no event will the number of shares of Common Stock issued upon exercise of such warrant result in the Investor’s

The August 2022 Warrants each

provide that in no event will the number of shares of Common Stock issued upon exercise of such warrant result in the Investor’s

beneficial ownership exceeding 4.99% of the Company’s shares of Common Stock outstanding at the time of exercise (which percentage

2 unchanged sentences

the Company).

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Modification of Notes Payable

On March 8, 2023, the Company

entered into a Securities Exchange Agreement (the “Exchange Agreement” or “Second Amendment”) with the High Trail

Special Situations LLC.

Pursuant to the Exchange Agreement, at closing the Company will prepay approximately $ 10.3 million in principal

amount under the August 2022 Note and exchange $ 10.0 in principal amount of the remaining balance of the August 2022 Note for a new senior

secured convertible note (the “Convertible Note”) with an original principal amount of $ 10.0 million.

After the closing of

the Exchange Agreement, the August 2022 Note will remain outstanding with a remaining balance of $ 11.7 million (the “Modified August

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

On March 8, 2023, the Company entered into a Securities Exchange Agreement

(the “Exchange Agreement” or “Second Amendment”) with the Investor.

Pursuant to the Exchange Agreement, at closing

the Company prepaid approximately $ 10.3 million in principal amount under the August 2022 Note and exchange $ 10.0 in principal amount

of the remaining balance of the August 2022 Note for a new senior secured convertible note (the “Convertible Note”) with an

original principal amount of $ 10.0 million.

After the closing of the Exchange Agreement, the August 2022 Note remained outstanding with

a remaining balance of $ 11.7 million.

This exchange was deemed to

2 unchanged sentences

Convertible Notes

On March 8, 2023, as a result

of the Exchange Agreement, the Company issued a Convertible Note to High Trail Special Situations

LLC (the “Lender”) with a principal balance of $ 10 million.

On March 8, 2023, as a result of the Exchange Agreement, the Company issued

a Convertible Note to the Investor with a principal balance of $ 10 million.

The Convertible Note bears a 9.0 % annualized interest rate,

1 unchanged sentence

The principal amount of the Convertible Note will be payable on the

Maturity Date, provided that the Lender will be entitled to a cash sweep of 30 % of the proceeds of any at-the-market equity offering and

Maturity Date, provided that the holder will be entitled to a cash sweep of 30 % of the proceeds of any at-the-market equity offering and

20 % of the proceeds received by the Company in connection with any other equity financing, which will reduce the outstanding principal

amount under the August 2022 Note or the Convertible Note.

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.

The Lender will also have the option of requiring the Company to redeem the Convertible Note (i)

on August 19, 2023 or August 19, 2024 at a price equal to the then-outstanding principal amount under the Convertible Note plus accrued

but unpaid interest, provided that the redemption right on August 19, 2023 will not be exercisable if the Company raises at least $ 8.0

million in gross proceeds from equity offerings prior to such date, or (ii) if the Company undergoes a fundamental change (as defined

below) at a price equal to 102.5 % of the then-outstanding principal amount under the Convertible Note plus accrued but unpaid interest.

The Convertible Note will

impose certain customary affirmative and negative covenants upon the Company, as well as covenants that will (i) restrict the Company

and its subsidiaries from incurring any additional indebtedness or suffering any liens, subject to specified exceptions, (ii) restrict

the ability of the Company and its subsidiaries from making certain investments, subject to specified exceptions, and (iii) restrict the

declaration of any dividends or other distributions, subject to specified exceptions.

If an event of default under the Convertible Note

occurs, the Lender can elect to redeem the Convertible Note for cash equal to (A) 115 % of the then-outstanding principal amount of the

Convertible Note (or such lesser principal amount accelerated by the Investor), plus accrued and unpaid interest, including default interest,

which accrues at a rate per annum equal to 15 % from the date of a default or event of default, or, only in connection with certain events

of default, (B) the greater of the amount under clause (A) or the sum of (i) 115 % of the product of (a) the conversion rate in effect

as of the trading day immediately preceding the date that the Lender delivers a notice of acceleration;

(b) the total then outstanding

principal amount under the Convertible Note (in thousands);

and (c) the greater of (1) the highest daily volume weighted average price

(“VWAP”) per share of Common Stock occurring during the fifteen consecutive trading days ending on, and including, the trading

day immediately before the date the Lender delivers such notice and (2) the highest daily VWAP per share of Common Stock occurring during

the fifteen consecutive trading days ending on, and including, the trading immediately before the date the applicable event of default

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

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.

will also have the option of requiring the Company to redeem the Convertible Note (i) on August 19, 2023 or August 19, 2024 at a price

equal to the then-outstanding principal amount under the Convertible Note plus accrued but unpaid interest, provided that the redemption

right on August 19, 2023 will not be exercisable if the Company raises at least $ 8.0 million in gross proceeds from equity offerings prior

to such date, or (ii) if the Company undergoes a fundamental change (as defined below) at a price equal to 102.5 % of the then-outstanding

principal amount under the Convertible Note plus accrued but unpaid interest.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Convertible Note will impose

certain customary affirmative and negative covenants upon the Company, as well as covenants that will (i) restrict the Company and its

subsidiaries from incurring any additional indebtedness or suffering any liens, subject to specified exceptions, (ii) restrict the ability

of the Company and its subsidiaries from making certain investments, subject to specified exceptions, and (iii) restrict the declaration

of any dividends or other distributions, subject to specified exceptions.

If an event of default under the Convertible Note occurs, the

holder can elect to redeem the Convertible Note for cash equal to (A) 115 % of the then-outstanding principal amount of the Convertible

Note (or such lesser principal amount accelerated by the Investor), plus accrued and unpaid interest, including default interest, which

accrues at a rate per annum equal to 15 % from the date of a default or event of default, or, only in connection with certain events of

default, (B) the greater of the amount under clause (A) or the sum of (i) 115 % of the product of (a) the conversion rate in effect as

of the trading day immediately preceding the date that the holder delivers a notice of acceleration;

(b) the total then outstanding principal

amount under the Convertible Note (in thousands);

and (c) the greater of (1) the highest daily volume weighted average price (“VWAP”)

per share of Common Stock occurring during the fifteen consecutive trading days ending on, and including, the trading day immediately

before the date the holder delivers such notice and (2) the highest daily VWAP per share of Common Stock occurring during the fifteen

consecutive trading days ending on, and including, the trading immediately before the date the applicable event of default occurred and

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

Until the date the Convertible

Note is fully repaid, the Lender will have, subject to certain exceptions, the right to participate for up to 30 % of any offering of debt,

Note is fully repaid, the holder will have, subject to certain exceptions, the right to participate for up to 30 % of any offering of debt,

equity (other than an offering of solely Common Stock), or equity-linked securities, including without limitation any debt, preferred

stock or other instrument or security, of the Company or its subsidiaries.

If the Lender elects to convert

If the holder elects to convert

the Convertible Note, the conversion price per share will be $ 7.64 , subject to customary adjustments for certain corporate events.

1 unchanged sentence

The Convertible Note may not be converted into shares

of Common Stock if such conversion would result in the Lender and its affiliates owning an aggregate of in excess of 4.99 % of the then-outstanding

shares of Common Stock, provided that upon 61 days’ notice, such ownership limitation may be adjusted by the Lender, but in any

of Common Stock if such conversion would result in the holder and its affiliates owning an aggregate of in excess of 4.99 % of the then-outstanding

shares of Common Stock, provided that upon 61 days’ notice, such ownership limitation may be adjusted by the holder, but in any

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

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

and separately measured at fair value.

Interest expense related to

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

Accrued interest totaled $ 136,913 as of June

Notes Conversion

the Convertible Notes described above was $ 1,757,931 for the nine months ended September 30, 2023.

Accrued interest totaled $ 1,041,388

as of September 30, 2023.

Note 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

the Company entered into with High Trail Special Situations LLC on March 8, 2023, the Investor 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 .

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 Investor 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

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

Investor, with the remaining 375,629 shares held in abeyance until the balance (or portion thereof) may be issued in compliance with such

As a result, the Company recognized a loss on the redemption of $ 11,609 .

The following table summarizes the short-term

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

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

(In thousands)

Unamortized discount

Unamortized premium

Net carrying amount

As of June 30, 2023, future minimum payments were

As of September 30, 2023, future minimum payments

were as follows:

Years ending December 31 (In thousands),

1 unchanged sentence

Total future payments

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Related party debt

On July 12, 2023, the Board

of Directors of the Company approved the issuance of an unsecured promissory note (the “Related Party Note”) in favor of GIC

Acquisition, LLC (“GIC”), an entity that is owned and managed by the Company’s Chairman and Chief Executive Officer.

Pursuant to the Related Party Note, GIC is obligated to lend up to $ 500,000 to the Company, $ 300,000 of which was delivered at issuance

and the remaining $ 200,000 delivered on July 31, 2023.

The Related Party Note bears interest at a rate of 10 % per annum, will mature in

full on August 6, 2023, and may be prepaid without any fee or penalty.

The Related Party Note ranks junior to all existing secured indebtedness

of the Company.

The maturity date of the Related Party Note was subsequently amended to December 31, 2023 at which point principal and

accrued interest will be repaid in full.

Paycheck Protection Program Loan

4 unchanged sentences

The Company received total

proceeds of approximately $ 779 thousand from the unsecured PPP Loan, which was originally scheduled to mature on May 7, 2022 .

applied for forgiveness on the $ 779 thousand of PPP loan, but forgiveness was denied by the SBA.

proceeds of approximately $ 0.8 million from the unsecured PPP Loan, which was originally scheduled to mature on May 7, 2022 .

applied for forgiveness on the $ 0.8 million of PPP loan, but forgiveness was denied by the SBA.

On June 23, 2022, the Company received

1 unchanged sentence

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

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:

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

(In thousands)

Balance Sheet

September 30,

PPP Loan, current

15 unchanged sentences

of determining the present value of its lease liabilities.

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

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

for its leases was 7.39 %.

17 unchanged sentences

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Additional information on the Company’s

1 unchanged sentence

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

4 unchanged sentences

Total lease cost

September 30,

Weighted-average remaining lease term – operating leases

4 unchanged sentences

Balance Sheet Location

September 30,

Right-of-use assets, net

13 unchanged sentences

Maturities of operating and finance lease liabilities

as of June 30, 2023 are as follows:

as of September 30, 2023 are as follows:

Years ending December 31 (In thousands),

Operating lease

Finance lease

Remaining 2023

3 unchanged sentences

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 10 — Stockholders’ Equity

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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

34 unchanged sentences

that were withheld to cover a tax indemnification claim in accordance with the Purchase Agreement.

Additional information regarding the

PurePressure Holdback Buyer Shares may be found in Note 8 – Business Combinations, included elsewhere in the notes to the consolidated

financial statements.

On February 1, 2022, the Company issued an aggregate

2 unchanged sentences

Merger Agreement.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

At The Marketing Offering

6 unchanged sentences

ATM at an average price of $ 50.85 per share, resulting in gross proceeds of $ 15.6 million, and net proceeds of $ 15.0 million after commissions

and fees to the Agent totaling $ 468 thousand and legal fees totaling $ 75 thousand.

$ 3.0 million of the proceeds under the ATM Program

were used to repay amounts due to the Investor under the Exchange Note.

The Company used net proceeds generated from the ATM Program for

working capital and general corporate purposes, including repayment of indebtedness, funding its transformation initiatives and product

category expansion efforts and capital expenditures.

Due to the late filing of this Annual Report on Form 10-K, the Company is no longer

eligible to utilize the registration statement on Form S-3 relating to the ATM Program, and does not anticipate any further sales under

the ATM Program in the foreseeable future.

and fees to the Agent totaling $ 0.5 million and legal fees totaling $ 0.1 million.

$ 3.0 million of the proceeds under the ATM Program were

used to repay amounts due to the Investor under the Exchange Note.

The Company used net proceeds generated from the ATM Program for working

capital and general corporate purposes, including repayment of indebtedness, funding its transformation initiatives and product category

expansion efforts and capital expenditures.

Due to the late filing of this Annual Report on Form 10-K, the Company is no longer eligible

to utilize the registration statement on Form S-3 relating to the ATM Program, and does not anticipate any further sales under the ATM

Program in the foreseeable future.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Confidentially Marketed Public Offering

38 unchanged sentences

elsewhere in the notes to the consolidated financial statements.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Note 11 — Stock-Based

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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 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

As of September 30, 2023, there were 13,198 shares of Common Stock available to be granted under the Company’s 2022 Plan.

Company’s stock compensation expense was $ 0.5 million and $ 1.6 million for the three months ended September 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.

The Company’s stock compensation expense was $ 2.1 million and $ 3.5 million for the nine months ended

September 30, 2023 and 2022 , respectively.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 and six months ended June 30, 2023 and 2022.

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

The Black-Scholes option-pricing

19 unchanged sentences

in the estimated forfeiture rate and may differ significantly from amounts recognized in the current period.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The following table presents option activity under

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

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

(In thousands, except share and per share data)

2 unchanged sentences

Options outstanding at January 1, 2023

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

Options outstanding at September 30, 2023

Options vested and exercisable as of September 30, 2023

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

As of September 30, 2023,

total unrecognized compensation expense related to unvested options under the Company’s 2022 Plan was $ 1.3 million, which is expected

to be recognized over a weighted average period of 0.46 years.

The following table summarizes information about

options vested and exercisable at June 30, 2023:

options vested and exercisable at September 30, 2023:

Options Vested and Exercisable

1 unchanged sentence

Weighted-Average

Remaining Contractual Life

Remaining Contractual

Weighted-Average

Exercise Price

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about

options expected to vest after June 30, 2023:

options expected to vest after September 30, 2023:

Options Vested and Expected to Vest

1 unchanged sentence

Weighted-Average

Remaining Contractual Life

Remaining Contractual

Weighted-Average

Exercise Price

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Restricted Stock Units

7 unchanged sentences

a straight-line attribution method over the vesting period.

Grant Date Fair

Unvested at December 31, 2022

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

a weighted average period of 2.11 years.

Unvested at September 30, 2023

As of September 30, 2023,

total unrecognized compensation expense related to unvested restricted stock units was $ 0.7 million, which is expected to be recognized

over a weighted average period of 2.10 years.

2022 Employee Stock Purchase Plan

2 unchanged sentences

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

On June 30, 2023, 2,500

On September 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 and six

months ended June 30, 2023.

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

months ended September 30, 2023.

Employee Benefit Plan

4 unchanged sentences

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

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

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

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 12 — Stock Warrants

The following tables present all warrant activity

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

of the Company for the nine months ended September 30, 2023 and 2022:

Exercise Price

Warrants outstanding at December 31, 2022

Warrants outstanding at June 30, 2023

Warrants outstanding at September 30, 2023

Exercise Price

Warrants outstanding at December 31, 2021

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.

Warrants outstanding at September 30, 2022

The Company received proceeds from the exercise

of cashless warrants of $ 0 for the three and nine months ended September 30, 2023, and $ 1 thousand and $ 2 thousand for the three and nine

months ended September 30, 2022, respectively.

Note 13 — Income Taxes

The Company’s quarterly

provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the period presented.

determine the annual effective tax rate, the Company estimates both the total income (loss) before income taxes for the full year and

the jurisdictions in which that income (loss) is subject to tax.

The actual effective tax rate for the full year may differ from these

estimates if income (loss) before income taxes is greater than or less than what was estimated or if the allocation of income (loss) to

jurisdictions in which it is taxed is different from the estimated allocations.

The provision for income

taxes represents Federal and state and local income taxes.

The effective rate differs from statutory rates due to the effect of certain

nondeductible expenses.

Our effective tax rate will change from quarter to quarter based on recurring and non-recurring factors including,

but not limited to, the geographical mix of earnings, enacted tax legislation, and state and local income taxes.

In addition, changes

in judgment from the evaluation of new information resulting in the recognition de-recognition or re-measurement of a tax position taken

in a prior annual period is recognized separately in the quarter of the change.

Tax contingencies are recorded,

if needed, to address potential exposure involving tax positions the Company has taken that could be challenged by tax authorities.

potential exposures could result from applications of various statutes, rules, regulations and interpretations.

Any estimates of tax contingencies

contain assumptions and judgments about potential actions by taxing jurisdictions.

Any interest and penalties related to uncertain tax

positions would be included as part of the income tax provision.

The Company’s conclusions regarding uncertain tax positions may

be subject to review and adjustment at a later date based upon ongoing analysis of or changes in tax laws, regulations and interpretations

thereof as well as other factors.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The Company’s effective

income tax rate was 0.0 % and 0.2 % for the nine months ended September 30, 2023 and 2022, respectively.

The provision for (benefit

from) income taxes was $ 0 and $ 0.2 million for the nine months ended September 30, 2023 and 2022, respectively.

The difference between

the Company’s effective tax rates for the 2023 and 2022 periods and the U.S.

statutory tax rate of 21 % was primarily due a valuation

allowance recorded against certain deferred tax assets.

The change in the provision for (benefit from) income taxes for the nine months

ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily due to a recording of a valuation allowance

on the company’s net deferred tax assets.

Note 14 — Net Loss Per Share

13 unchanged sentences

share were as follows:

Three months ended June 30,

Six months ended June 30,

Three months ended

September 30,

Nine months ended

September 30,

(In thousands, except share and per share data)

Net loss attributable to Agrify Corporation

Weighted-average common shares outstanding – basic

Weighted-average common shares outstanding –

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

$ ( 1,003.10 )

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

5 unchanged sentences

them would have had an anti-dilutive effect:

Nine months ended

September 30,

Nine months ended

September 30,

Shares subject to outstanding stock options

42 unchanged sentences

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

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Mack Molding Co.

55 unchanged sentences

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

Other Litigation

In September 2023, the Company settled a legal

dispute with a specific customer which resulted in the recognition of a gain of approximately $ 0.9 million, of which $ 0.3 million was

paid in October 2023, with the remaining approximate $ 0.6 million to be paid in equal monthly installments, beginning in January, 2024.

This gain was recognized as part of Other expense, net per the Condensed Consolidated Statement of Operations for the quarter ended September

30, 2023, with the approximate $ 0.9 million receivable balance recognized as part of Prepaid expenses and other current assets, per the

Condensed Consolidated Balance Sheet, as of September 30, 2023.

The settlement also resulted in the return of equipment to the Company,

in October 2023.

In addition to the above, the Company entered

into several additional vendor settlement agreements during the quarter ended September 30, 2023, which resulted in an aggregate gain

being recognized for the quarter ended September 30, 2023, and a corresponding reduction in accounts payable owing by the Company, as

of September 30, 2023, of approximately $ 1 million.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supply Agreement with Mack Molding Co.

15 unchanged sentences

terms of the supply agreement with Mack.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

On October 11, 2022, the

16 unchanged sentences

products with certain exclusivity rights.

The agreement requires minimum purchases amounting to $ 480 thousand and $ 600 thousand for the

The agreement requires minimum purchases amounting to $ 0.5 million and $ 0.6 million for the

first and second contract anniversary years.

2 unchanged sentences

The Company exceeded the

minimum purchase amount for the first year and purchased approximately $ 309 thousand of the committed $ 660 thousand second-year purchases

minimum purchase amount for the first year and purchased approximately $ 0.3 million of the committed $ 0.7 million second-year purchases

through December 31, 2021.

6 unchanged sentences

The original agreement required minimum purchases of between $ 577 dollars and $ 607 dollars per unit of 4D products until December 31,

The amended agreement requires minimum purchases of $ 582 dollars per unit with a final payment of approximately $ 864 thousand paid

The amended agreement requires minimum purchases of $ 582 dollars per unit with a final payment of approximately $ 0.9 million paid

4D is a related party to the Company.

22 unchanged sentences

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 16 — Related Parties

4 unchanged sentences

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

4 unchanged sentences

The following table summarizes net related party

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

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

(In thousands)

September 30,

Valiant Americas, LLC

Living Greens Farm

Topline Performance Group

On July 12, 2023, the Company

issued an unsecured promissory note in favor of GIC Acquisition, LLC, an entity that is owned and managed by the Company’s Chairman

and Chief Executive Officer.

Refer to footnote 8 for further disclosure related to this Related Party Note.

Note 17 — Subsequent Events

2 unchanged sentences

Nasdaq Deficiency Notices

On August 16, 2023, the Company

received a third notice from Nasdaq that it remain 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 fiscal quarter ended June 30, 2023 (the “Second Quarter Form 10-Q”) with the SEC

by the required filing date (the “August Nasdaq Notice” and, together with the April Nasdaq Notice and the May Nasdaq Notice,

the “Nasdaq Notices”).

Nasdaq granted the Company an exception until October 16, 2023, to file its 2022 Form 10-K and First and Second Quarter 2023 Forms 10-Q

2 unchanged sentences

Nasdaq Stock Market LLC.

The Company filed its 2022 Form 10-K, First Quarter 2023 Form 10-Q and Second Quarter 2023 Form 10-Q,

on November 28, 2023, November 28, 2023 and December 12, 2023, respectively.

On October 17, 2023, the

4 unchanged sentences

Panel scheduled a hearing for January 11, 2024.

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

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.

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.

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.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Additionally, as part of

the Modification Agreement, the Company agreed to issue to Mack a warrant to purchase 750,000 shares of Common Stock.

warrant has an exercise price of $ 4.00 per share, was exercisable upon issuance, has a term of three years from the date of issuance,

and is exercisable on a cash basis unless at the time of exercise there is no effective registration statement for the resale of the underlying

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

The warrant has

an exercise price of $ 4.00 per share, was exercisable upon issuance, has a term of three years from the date of issuance, and is exercisable

on a cash basis unless at the time of exercise there is no effective registration statement for the resale of the underlying shares, in

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

October 27, 2023, CP Acquisitions LLC (the “New Lender”), an entity affiliated with and controlled by Raymond Chang, the Company’s

Chief Executive Officer, purchased the Exchange Note and the Convertible Note from their holder (the “Note Purchase”) .

In connection with the Note Purchase, the New Lender has agreed to waive any events of default under the acquired notes through December

31, 2023 and to enter into an agreement with the Company to extend the maturity date thereon to December 31, 2025.

Warrant Issuance

On October 27, 2023, the

Company entered into a letter agreement with the holder of the Exchange Note and the Convertible Note.

Pursuant to the agreement, the

Company agreed to exchange $ 3.0 million in principal and approximately $ 1.1 million in accrued but unpaid interest outstanding under the

Exchange Note to purchase 2,809,669 shares of Common Stock (the “Exchange Warrant”).

Additionally, the Company agreed to exchange

the 375,629 shares of Common Stock held in abeyance for the lender under the terms of the Letter Agreement for a warrant to purchase 375,629

shares of Common Stock (the “Abeyance Warrant”).

On October 27, 2023, as a

condition precedent to the Note Purchase, the Company entered into a letter agreement (the “Letter Agreement”) with the holder

of the Exchange Note and the Convertible Note.

Pursuant to the agreement, the Company agreed to exchange $ 3.0 million in principal and

approximately $ 1.1 million in accrued but unpaid interest outstanding under the Exchange Note to purchase 2,809,669 shares of common stock

(the “Exchange Warrant”).

Additionally, the Company agreed to exchange the 375,629 shares of common stock held in abeyance

for the Investor under the terms of the Letter Agreement for a warrant to purchase 375,629 shares of common stock (the “Abeyance Warrant”).

warrant has an exercise price of $ 0.001 per share, was exercisable upon issuance, has a term of five years from the date of issuance and

10 unchanged sentences

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.

2 unchanged sentences

Chang to the Company since July 1, 2023.

October 27, 2023, CP Acquisitions LLC (the “New Lender”), an entity affiliated with and controlled by Raymond Chang, the Company’s

Chief Executive Officer, purchased the Exchange Note and the Convertible Note from their holder .

In connection with the Note Purchase, the New Lender has agreed to waive any events of default under the acquired notes through December

31, 2023 and to enter into an agreement with the Company to extend the maturity date thereon to December 31, 2025.

Amendment and Secured Promissory Note

July 12, 2023, the Company issued an unsecured promissory note (the “Note”) in favor of GIC Acquisition, LLC (“GIC”),

an entity that is managed by Raymond Chang, the Company’s Chairman and Chief Executive Officer, with an original principal amount

of up to $ 500,000 .

On October 27, 2023, GIC and the Company amended and restated the Note (the “Restated Note”).

to the terms of the Restated Note, the Maturity Date was extended until December 31, 2023 and the Company granted a security interest

in the Company’s assets that ranks junior to the Exchange Note and the Convertible Note.

with the Restated Note, the Company issued a junior secured promissory note (the “Junior Secured Note”) to the New Lender.

Pursuant to the Junior Secured Note, the New Lender will lend up to $ 3,000,000 to the Company.

The Junior Secured Note bears interest

at a rate of 10 % per annum, will mature in full on December 31, 2023 , and may be prepaid without any fee or penalty.

Note Amendment and Secured Promissory Note

On October 27, 2023, GIC

and the Company amended and restated the Related Party Note (the “Restated Related Party Note”).

Pursuant to the terms of

the Restated Related Party Note, the Maturity Date was extended until December 31, 2023 and the Company granted a security interest in

the Company’s assets that ranks junior to the Exchange Note and the Convertible Note.

Concurrent with the Restated

Related Party Note, the Company issued a junior secured promissory note (the “Junior Secured Note”) to the New Lender.

to the Junior Secured Note, the New Lender will lend up to $ 3,000,000 to the Company, of which $ 2,000,000 was drawn.

The Junior Secured

Note is a secured obligation of the Company that ranks junior to the Exchange Note and the Convertible Note.

Note bears interest at a rate of 10 % per annum, will mature in full on December 31, 2023 , and may be prepaid without any fee or penalty.

The Junior Secured Note is a secured obligation of the Company that ranks junior to the notes acquired in the Note Purchase

On December 4, 2023, the

New Lender and the Company amended and restated the Junior Secured Note (the “Junior Secured Note Amendment”).

the terms of the Junior Secured Note Amendment, the maximum principal amount that may be loaned by CP to the Company was increased to

$ 4,000,000 .

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