What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-08-14 · 505 added, 332 removed, 425 unchanged (66% of the section changed)

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in this Quarterly Report on Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended

December 31, 2023 filed with the Securities and Exchange Commission on April 15, 2024, as amended on April 29, 2024 (the “Form 10-K”)

and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition

and Results of Operations” and other information contained in such Form 10-K.

The following discussion and analysis also should

be read together with our financial statements and the notes to the financial statements included elsewhere in this Quarterly Report on

December 31, 2023 filed with the Securities And Exchange Commission (the “SEC”) on April 15, 2024, as amended on April 29,

2024 (the “Form 10-K”) and presumes that readers have access to, and will have read, the “Management’s Discussion

and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K.

The following

discussion and analysis also should be read together with our financial statements and the notes to the financial statements included

elsewhere in this Quarterly Report on Form 10-Q.

The following discussion

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herein or as the context otherwise requires, references in this quarterly report to “we,” “us,” “our,”

“Company,” and “Agrify” refer to Agrify Corporation, a Nevada corporation.

“Company,” and “Agrify” refer to Agrify Corporation, a Nevada corporation and its consolidated subsidiaries.

We are a developer of proprietary

precision hardware and software grow solutions for the indoor commercial agriculture industry and provides equipment and solutions for

precision hardware and software grow solutions for the indoor commercial agriculture industry and provide equipment and solutions for

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

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totality of our product offerings and service capabilities forms an unrivaled ecosystem in what has historically been a highly fragmented

As a result, we believe we are well situated to create a dominant market position in the indoor agriculture sector.

Agrify Corporation was incorporated

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Our corporate headquarters

are located in Billerica, Massachusetts.

We also lease properties located within various geographic regions in which we conduct business,

including Colorado, Georgia, Massachusetts, Michigan, and Oregon.

are located in Troy, Michigan.

We also lease properties located within various geographic regions in which we conduct business, including

Colorado, Georgia, and Michigan.

Reverse Stock Split

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

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

Recent Business Developments

On July 5, 2023, we effected

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

On October 8, 2024, we effected a 1-for-15 reverse stock split of our Common Stock.

All share and per share information has been retroactively adjusted to give effect to the reverse stock splits for all periods presented

unless otherwise indicated.

Recent Developments

Business Developments

At the beginning of 2023,

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We have been focused on growing our cultivation business by helping our existing Agrify Total Turn-Key customers to bring their facilities

online and driving additional sales through our RDP.

As a result, we have successfully installed and commenced our Las Vegas customer,

Nevada Holistic Medicine, our Denver Colorado customer, Denver Greens, and signed several new customers such as Golden Lake Business Park

in California, and Harvest Works in New Jersey.

As a testimony to the Vertical Farming Unit’s (“VFU”) ability to produce

high quality flower, Nevada Holistic Medicine is already consistently harvesting 9 pounds of A-grade flower per VFU, or roughly 64 grams

per canopy square foot, and seeing 90%+ A-grade flower produced with exceptional color, trichome, and terpene levels.

Similarly, since we have

online and driving additional sales through our rapid deployment pack program.

As a result, we have successfully installed Agrify total

turn-key solution program (“TTK Solution”) equipment for and commenced our Las Vegas customer, Nevada Holistic Medicine, our

Denver Colorado customer, Denver Greens, and signed several new customers such as Golden Lake Business Park in California, and Harvest

Works in New Jersey.

As a testimony to the Agrify Vertical Farming Unit’s (“VFU”) ability to produce high quality flower,

Nevada Holistic Medicine is already consistently harvesting 9 pounds of A-grade flower per VFU, or roughly 64 grams per canopy square

foot, and seeing 90%+ A-grade flower produced with exceptional color, trichome, and terpene levels.

Similarly, because we have

streamlined our expansive extraction portfolio of technologies, we have successfully supported the deployment of several turnkey solvent-based

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We have also made significant

strides to receive UL Compliance for Precision Extractions’ EXP Explosion Proof Rooms in an effort to continue our commitment to

safety and quality within cannabis extraction facilities.

These industry developments

illustrate the continuous innovation, and commitment to safety within the cannabis sector as our company adapts to evolving market demands.

More importantly, our growing partnership across the Country is a strong testimony to operators’ continued trust in Agrify’s

team and technologies in the most competitive markets.

Recent Developments

strides to receive Underwriters Laboratories Compliance for Precision Extractions’ EXP Explosion Proof Rooms in an effort to continue

our commitment to safety and quality within cannabis extraction facilities.

These developments illustrate

our continuous innovation, and commitment to safety within the cannabis sector as we adapt to evolving market demands.

More importantly,

we believe our growing partnership across the Country is a strong testimony to operators’ continued trust in Agrify’s team

and technologies in the most competitive markets.

Note Amendment, Consolidation and Conversion

On January 25, 2024, following

stockholder approval at an annual meeting of stockholders on January 8, 2024, we and the New Lender consolidated the outstanding principal

and interest due under the Junior Secured Note and the Exchange Note into the Convertible Note and amended and restated the Convertible

Note (as amended and restated, the “Restated Note”), with an outstanding principal amount of approximately $18.9 million at

the time of issuance of the Restated Note.

The Restated Note amended the terms of the Convertible Note by, among other things, (i) reducing

the conversion price to $1.46 per share of common stock, (ii) increasing the beneficial ownership limitation to 49.99% with respect to

any individual or group, provided that the New Lender may assign its right to receive shares upon conversion to Mr.

Chang and/or Ms.

or their affiliates, in which case the 49.99% beneficial ownership limitation will apply to each of them individually, (iii) extending

the maturity date to December 31, 2025, (iv) increasing the interest rate from 9% to 10% per annum, (v) increasing the default interest

from 15% to 18% per annum, and (vi) providing for the payment of interest every six months, or in lieu of cash interest payments, we may

issue shares as payments-in-kind at a conversion price equal to the higher of (i) $1.46 or (ii) a 20% discount to our trailing seven-day

volume weighted average price as of the date of interest payment.

Immediately following the execution of the Restated Note, the New Lender

immediately elected to convert approximately $3.9 million of outstanding principal into an aggregate of 2,671,633 shares of common stock,

and assigned its rights to receive such shares to entities affiliated with Mr.

stockholder approval at an annual meeting of stockholders on January 8, 2024, we and CP Acquisitions LLC (“CP Acquisitions”)

consolidated the outstanding principal and interest due under the junior secured promissory note (the “Junior Secured Note”)

to CP Acquisitions and a promissory note with an original principal amount of $35.0 million (the “Exchange Note”) to High

Trail Special Situations LLC (the “Original Lender”) into a convertible note (the “Convertible Note”) and amended

and restated the Convertible Note (as amended and restated, the “Restated Note”), with an outstanding principal amount of

approximately $18.3 million at the time of issuance of the Restated Note.

The Restated Note amended the terms of the Convertible Note

by, among other things, (i) reducing the conversion price to $1.46 per share of Common Stock, (ii) increasing the beneficial ownership

limitation to 49.99% with respect to any individual or group, provided that CP Acquisitions may assign its right to receive shares upon

conversion to Raymond Chang, the former Chairman and Chief Executive Officer of the Company and/or I-Tseng Jenny Chan, a former member

of the board of directors of the Company (the “Board”) or their affiliates, in which case the 49.99% beneficial ownership

limitation will apply to each of them individually, (iii) extending the maturity date to December 31, 2025, (iv) increasing the interest

rate from 9% to 10% per annum, (v) increasing the default interest from 15% to 18% per annum, and (vi) providing for the payment of interest

every six months, or in lieu of cash interest payments, we may issue shares as payments-in-kind at a conversion price equal to the higher

of (i) $1.46 or (ii) a 20% discount to our trailing seven-day volume weighted average price as of the date of interest payment.

following the execution of the Restated Note, CP Acquisitions immediately elected to convert approximately $3.9 million of outstanding

principal into an aggregate of 2,671,633 shares of Common Stock, and assigned its rights to receive such shares to entities affiliated

Chang and Ms.

Following the conversion, there was

$15.0 million in principal amount outstanding under the Restated Note.

Nasdaq Notices and Hearing

On October 17, 2023, we received

a Staff Delisting Determination (the “Staff Determination”) from the Listing Qualifications Department of Nasdaq notifying

us that we were not in compliance with Nasdaq’s continued listing requirements under the Listing Rule as a result of our failure

to file the First Quarter Form 10-Q, the Second Quarter Form 10-Q and the Form 10-K (collectively, the “Delinquent Reports”)

in a timely manner.

We filed each of the Delinquent Reports between November 28, 2023 and January 3, 2024.

On December 1, 2023, we received

a notice Nasdaq stating that because we reported stockholders’ equity of $(17.17) million in our Quarterly Report on Form 10-Q for

the quarter ended March 31, 2023, we were no longer in compliance with Nasdaq Listing Rule 5550(b)(1), which requires that listed companies

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

We timely requested a hearing

before the Nasdaq Hearings Panel (the “Panel”), which hearing was held on January 11, 2024.

At the hearing, we presented a

plan to regain compliance with Nasdaq Listing Rule 5550(b)(1).

On January 30, 2024, we received formal notice that the Panel had granted

our request for an exception through April 15, 2024 to evidence compliance with Rule 5550(b)(1), which was subsequently extended to May

As a result, there can be no assurance that we can regain compliance by the end of the extension period.

Additionally, on March 5,

2024, we received a deficiency letter from the Listing Qualifications Department of Nasdaq notifying us that, for the last 30 consecutive

business days, the bid price for our common stock had closed below $1.00 per share, which is the minimum closing price required to maintain

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

had no immediate effect on the listing of our common stock on Nasdaq.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have 180

calendar days to regain compliance with the Minimum Bid Requirement.

To regain compliance with the Minimum Bid Requirement, the closing

bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive trading days during this 180-day compliance

period, unless the Staff exercises its discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H).

The compliance

period for us will expire on September 3, 2024.

Following the conversion, there was $15.0 million in principal amount outstanding under the Restated Note.

Nasdaq Compliance

On March 5, 2024, we received

a deficiency letter from the staff (“Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying us that, for

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

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

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

The compliance period would have expired on September 3, 2024.

On September 4, 2024, the Staff notified us in writing that we were eligible

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

8, 2024, we completed a 1-for-15 reverse stock split of our Common Stock, in which each fifteen shares of Common Stock issued and outstanding

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

On October 22, 2024,

the Staff notified us that we had regained compliance with the Minimum Bid Requirement.

We can provide no assurances

that the listing of our common stock will be restored or that we otherwise will remain listed on Nasdaq.

If we fail to continue to satisfy

the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement,

Nasdaq will take steps to delist our common stock.

Such a de-listing would likely have a negative effect on the price of our common stock

and would impair stockholders’ ability to sell or purchase our common stock when they wish to do so, as well as adversely affect

our ability to issue additional securities and obtain additional financing in the future.

that we will continue to meet Nasdaq listing requirements and otherwise remain listed on Nasdaq.

If we fail to continue to satisfy the

continued listing requirements of Nasdaq, such as the corporate governance requirements or the Minimum Bid Requirement, Nasdaq will take

steps to delist our Common Stock.

Such a de-listing would likely have a negative effect on the price of our Common Stock and would impair

stockholders’ ability to sell or purchase our Common Stock when they wish to do so, as well as adversely affect our ability to issue

additional securities and obtain additional financing in the future.

Public Offering

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an aggregate of 2,760,000 shares of Common Stock, and, in lieu of Common Stock to certain investors that so chose, Pre-Funded Warrants

to purchase 3,963,684 shares of common stock.

The public offering price for each share of common stock was $0.38, and the offering price

for each pre-funded warrant was $0.379, which equals the public offering price per share of the common stock, less the $0.001 per share

exercise price of each pre-funded warrant.

The Offering was made pursuant to a registration statement on Form S-1 that we filed with the

Securities and Exchange Commission on January 26, 2024 and was declared effective on February 14, 2024.

Raymond Chang, our Chairman and

Chief Executive Officer, participated in the offering on the same terms as other investors.

The net proceeds from the public offering

were approximately $2.2 million, after deducting placement agent fees and commissions and expenses.

The public offering closed on February

(“Pre-Funded Warrants”) to purchase 3,963,684 shares of Common Stock.

The public offering price for each share of Common Stock

was $0.38, and the offering price for each Pre-Funded Warrant was $0.379, which equals the public offering price per share of the Common

Stock, less the $0.001 per share exercise price of each Pre-Funded Warrant.

The Offering was made pursuant to a registration statement

on Form S-1 that we filed with the SEC on January 26, 2024 and was declared effective on February 14, 2024.

Raymond Chang, our former

Chairman and Chief Executive Officer, participated in the offering on the same terms as other investors.

The net proceeds from the public

offering were approximately $2.2 million, after deducting placement agent fees and commissions and expenses.

The public offering closed

on February 28, 2024.

Debt Modification;

Warrant Amendments

On May 21, 2024, we and CP

Acquisitions entered into an amendment to the Convertible Note (the “Consolidated Note Amendment”), pursuant to which CP Acquisitions

may elect, in lieu of shares of Common Stock issuable upon conversion of the Convertible Note, to instead receive Pre-Funded Warrants.

The conversion price applicable to the Pre-Funded Warrants will remain unchanged at $21.90.

Immediately following the execution of the

Consolidated Note Amendment, CP Acquisitions elected to convert $11.5 million of outstanding principal into a Pre-Funded Warrant exercisable

at issuance for up to 525,114shares of Common Stock having a fair value of approximately $2.9 million (the “CP Warrant Conversion”).

On May 21, 2024, we and GIC

Acquisition, LLC (“GIC”), the holder of an unsecured promissory note (the “GIC Note”), amended and restated the

GIC Note (the “Restated GIC Note”) to increase the aggregate principal amount to approximately $2.29 million, extend the maturity

date to December 31, 2025, and provide that the Restated Junior Note may be converted into Common Stock of the Company or, at GIC’s

election, Pre-Funded Warrants, in each case at a conversion price of $4.65.

Immediately following the execution of the Restated GIC Note,

GIC elected to convert all of the outstanding principal under the Restated GIC Note into a Pre-Funded Warrant exercisable at issuance

for up to 492,204 shares of Common Stock having a fair value of approximately $2.7 million (the “GIC Warrant Conversion”,

and, collectively with the CP Warrant Conversion, the “Related Party Warrant Conversions”).

On June 30, 2024, we executed

an amendment to the Pre-Funded Warrants, pursuant to which we revised certain provisions of the Pre-Funded Warrants to (i) remove the

adjustment to the exercise price of the Pre-Funded Warrants when there is a bona fide equity financing with the primary purpose of raising

capital (the “Adjustment Provisions”) and (ii) increase the threshold for a change of control from 50% to greater than 50%.

On August 12, 2024, our stockholders approved a proposal to amend the Pre-Funded Warrants to add the Adjustment Provisions at a future

Pursuant to that approval, on August 28, 2024, we entered into amendments to the Pre-Funded Warrants to insert the Adjustment Provisions.

As a result of the warrant amendments and the subsequent issuance of 189,645 shares of Common Stock to Ionic Ventures, LLC (“Ionic”)

at an effective purchase price of approximately $2.109 per share of Common Stock, the number of shares of Common Stock underlying the

Pre-Funded Warrant held by CP Acquisitions was adjusted to 5,452,288 and the number of shares of Common Stock underlying the Pre-Funded

Warrant held by GIC was adjusted to 1,085,122.

On August 30, 2024, CP Acquisitions partially exercised its Pre-Funded Warrant and entities

affiliated with Mr.

Chang and Ms.

Chan received an aggregate of 383,127 shares of Common Stock upon the exercise.

On September 27, 2024,

we further amended the Pre-Funded Warrants to remove the Adjustment Provisions from each warrant and (ii) preventing the holders from

any additional exercise of either of the Pre-Funded Warrants at any time between September 27, 2024 and October 9, 2024.

Change in Accounting Firm

On June 20, 2024 after an

evaluation process, the audit committee of our Board (the “Audit Committee”) dismissed Marcum LLP as our independent registered

public accounting firm and appointed MATSUURA (“Matsuura”) as our independent registered public accounting firm for the fiscal

year ending December 31, 2024, in each case effective as of June 25, 2024.

On June 30, 2024, the audit practice of Matsuura was combined

in a transaction pursuant to which Matsuura merged its operations with GuzmanGray, a professional corporation (“GuzmanGray”).

On July 19, 2024, Matsuura resigned as our auditors and the Audit Committee appointed GuzmanGray as our independent registered public

accounting firm effective as of the Effective Date.

Equity Line of Credit Facility

On August 28, 2024, we entered

into the Purchase Agreement and a registration rights agreement with Ionic pursuant to which Ionic committed to purchase up to an aggregate

of $15.0 million of our Common Stock, subject to certain limitations, from time to time and at our sole discretion over the 36-month term

of the Purchase Agreement.

From and after the date the

registration statement relating to the resale of the shares sold to Ionic is declared effective, we may from time to time on any business

day, by written notice delivered by us to Ionic, direct Ionic to purchase between $250,000 and $750,000 of shares of Common Stock on such

business day, at a purchase price per share that will be equal to 93% (or 80% if the Common Stock is not then trading on the Nasdaq Capital

Market) of the lowest daily VWAP over a specified measurement period beginning after the delivery of the purchase notice, as described

further in the Purchase Agreement (each, a “Regular Purchase”).

The Purchase Agreement also permitted us to deliver an exemption

purchase notice for $400,000 on the date of signing, with the shares so purchased to be delivered following the Commencement Date, and

we delivered an exemption purchase notice for $400,000 for the purchase by Ionic of 189,645 shares of Common Stock.

We will control the

timing and amount of any sales of Common Stock to Ionic pursuant to the Purchase Agreement.

Ionic has no right to require us to sell any

shares of Common Stock to Ionic, but Ionic is obligated to make purchases as we direct, subject to certain conditions.

Issuance of Junior Note

On August 14, 2024, we issued

the 2024 CP Note to CP Acquisitions.

Pursuant to the 2024 CP Note, CP Acquisitions would lend up to $1,500,000 to the Company.

CP Note bears interest at a rate of 10% per annum, will mature in full on July 1, 2025, and may be prepaid without any fee or penalty.

The 2024 CP Note is secured by our assets and ranks junior to existing secured indebtedness.

The 2024 CP Note may be converted into Common

Stock of the Company or, at CP Acquisitions’ election, Pre-Funded Warrants with an exercise price of $0.001 per share, in each case

at a conversion price of $3.9495.

Mack Molding Modification Agreement

On October 27, 2023, and

effective as of October 18, 2023, we entered into a Modification and Settlement Agreement (the “Modification Agreement”) with

Mack Molding Company (“Mack”) with respect to a dispute with Mack under an existing supply agreement.

On February 29, 2024,

we met our contractual obligations under the terms of the Modification Agreement.

In settlement of the dispute, we made cash payments

of $500,000 and $250,000 to Mack and issued to Mack a warrant to purchase 750,000 shares of Common Stock.

On August 30, 2024, we entered

into an amendment to the Modification Agreement with Mack, which modified the payment terms and VFU purchase requirements under the Modification

Pursuant to the amendment, we agreed to make payments of $1.0 million prior to October 31, 2024 and an additional $1.0 million

prior to December 31, 2024.

We also agreed to purchase at least 25 VFUs prior to October 31, 2024 and a further 25 VFUs between November

1, 2024 and December 31, 2024.

Upon payment in accordance with the terms of the amendment, we will be entitled to certain residual inventory

in the possession of Mack, and the warrant issued to Mack will be terminated.

Convertible Note Amendment

On October 18, 2024, we entered

into an amendment with CP Acquisitions to the 2024 CP Note, pursuant to which the maximum principal sum of the 2024 CP Note was increased

from $1,500,000 to $3,000,000.

The conversion price applicable to the 2024 CP Note will remain unchanged with an exercise price of $0.001

per share, in each case at a conversion price of $3.9495 (as may be adjusted per the 2024 CP Note).

Issuance of Convertible Note;

Board and Management

On November 5, 2024, we issued

a Secured Convertible Note (the “Green Thumb Note”) to RSLGH, LLC (the “Investor”), a subsidiary of Green Thumb

Industries Inc.

(“Green Thumb”).

The Green Thumb Note is a secured obligation and ranks senior to all indebtedness of the

Company except for indebtedness held by CP Acquisitions and Mack.

The Green Thumb Note will mature on November 5, 2025 and has a 10.0%

annualized interest rate, with interest to be paid on the first calendar day of each September and March while the Green Thumb Note is

outstanding, in cash, beginning January 1, 2025.

The principal amount of the Green Thumb Note will be payable on the maturity date.

Green Thumb Note provides for advances of up to $20.0 million in the aggregate, of which $10.0 million was advanced upon issuance.

the Investor elects to convert the Green Thumb Note, the conversion price per share will be $3.158, subject to customary adjustments for

certain corporate events.

The conversion of the Green Thumb Note will be subject to certain customary conditions and the receipt of stockholder

approval to the extent necessary under Nasdaq listing rules.

Immediately prior to the issuance of the Green

Thumb Note, Raymond Chang, I-Tseng Jenny Chan and entities affiliated with each of them sold shares of Common Stock and Pre-Funded Warrants

to the Investor.

Immediately following the issuance of the Green Thumb Note, Mr.

Chang resigned as our Chairman and Chief Executive Officer,

Chan resigned as a member of our Board of Directors.

The Board of Directors appointed Benjamin Kovler as our Chairman and Interim

Chief Executive Officer and Armon Vakili and Richard Drexler as members of the Board of Directors to fill the vacancies resulting from

Chang’s and Ms.

Chan’s resignations.

Plans to Acquire the

Señorita Brand of THC Beverages

On November 12, 2024, we

announced that we signed a non-binding letter of intent to acquire certain assets from Double or Nothing LLC, the owner and creator

of the Señorita brand of hemp-derived legal THC (“HDLT”) drinks, in exchange for 530,000 shares of Agrify common

stock or common stock equivalents (the “Transaction”).

The Transaction would involve the acquisition of assets involved in

the operation of Señorita’s HDLT business.

There can be no assurances that we will reach a binding agreement and

if we do, the terms could differ from those stated above.

Use of Estimates

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warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms

and applicable authoritative guidance in ASC 480 and ASC 815.

Management’s assessment considers whether the warrants are freestanding

financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants

meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s

own Common Stock among other conditions for equity classification.

and applicable authoritative guidance in Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities

from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”).

Management’s assessment

considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability

pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether

the warrants are indexed to the Company’s own Common Stock among other conditions for equity classification.

For issued or modified warrants

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

In accordance with ASC 606

“Revenue Recognition”, we recognize revenue from contracts with customers using a five-step model, which is described below:

In accordance with ASC Topic

606, Revenue Recognition (“ASC 606”), we recognize revenue from contracts with customers using a five-step model, which

is described below:

● identify the customer contract;

identify performance obligations that are distinct;

● identify performance obligations

that are distinct;

● determine the transaction price;

allocate the transaction price to the distinct performance obligations;

recognize revenue as the performance obligations are satisfied.

● allocate the transaction price

to the distinct performance obligations;

● recognize revenue as the performance

obligations are satisfied.

Identify the customer

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versus together may require significant judgment.

Once we determine the performance obligations, it determines the transaction price,

Once we determine the performance obligations, the transaction price is determined,

which includes estimating the amount of variable consideration to be included in the transaction price, if any.

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We determine SSP based on the price at which the performance obligation is sold separately

and the methods of estimating SSP under the guidance of Accounting Standards Codification (“ASC”) 606-10-32-33.

is not observable through past transactions, we estimate the SSP, taking into account available information such as market conditions,

expected margins, and internally approved pricing guidelines related to the performance obligations.

We license our software as a SaaS

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

The full value of

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

We typically satisfy our performance obligations for equipment sales when equipment is made available for shipment to the customer;

services sales as services are rendered to the customer and for construction contracts both as services are rendered and when contract

is completed.

and the methods of estimating SSP under the guidance of ASC 606-10-32-33.

If the SSP is not observable through past transactions, we estimate

the SSP, taking into account available information such as market conditions, expected margins, and internally approved pricing guidelines

related to the performance obligations.

We license our software as a SaaS type subscription license, whereby the customer only has a right

to access the software over a specified time period.

The full value of the contract is recognized ratably over the contractual term of

the SaaS subscription, adjusted monthly if tiered pricing is relevant.

We typically satisfy our performance obligations for equipment

sales when equipment is made available for shipment to the customer;

for services sales as services are rendered to the customer and for

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

We utilize the cost-plus

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as financial income.

For the six months ended June 30, 2024 and 2023, we did not have any such financial income.

For the nine months ended September 30, 2024 and 2023, we did not have any such financial income.

Payment terms with customers

typically require payment 30 days from invoice date.

Our agreements with customers do not provide for any refunds for services or products

and therefore no specific reserve for such is maintained.

In the infrequent instances where customers raise a concern over delivered products

or services, we have endeavored to remedy the concern and all costs related to such matters have been insignificant in all periods presented.

typically require payment in advance or payment 30 days from invoice date.

Our agreements with customers do not provide for any refunds

for services or products and therefore no specific reserve for such is maintained.

In the infrequent instances where customers raise a

concern over delivered products or services, we have endeavored to remedy the concern and all costs related to such matters have been

insignificant in all periods presented.

We have elected to treat

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In accordance with ASC 606-10-50-13,

we are required to include disclosure on its remaining performance obligations as of the end of the current reporting period.

we are required to include disclosure on our remaining performance obligations as of the end of the current reporting period.

nature of our contracts, these reporting requirements are not applicable.

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We account for income taxes

pursuant to the provisions of ASC Topic 740, “Income Taxes,” which requires, among other things, an asset and liability approach

to calculating deferred income taxes.

The asset and liability approach requires the recognition of deferred tax assets and liabilities

for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.

A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that

the net deferred asset will not be realized.

pursuant to the provisions of ASC Topic 740, Income Taxes , (“ASC 740”) which requires, among other things, an asset

and liability approach to calculating deferred income taxes.

The asset and liability approach requires the recognition of deferred tax

assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases

of assets and liabilities.

A valuation allowance is provided to offset any net deferred tax assets for which management believes it is

more likely than not that the net deferred asset will not be realized.

We follow the provisions

24 unchanged sentences

We follow the provisions

of ASC Topic 718, “Compensation — Stock Compensation.” ASC Topic 718 establishes standards surrounding the accounting

of ASC Topic 718, Compensation — Stock Compensation ,(“ASC 718”) establishes standards surrounding the accounting

for transactions in which an entity exchanges its equity instruments for goods or services.

37 unchanged sentences

Results of Operations

Comparison of the Three and Six Months Ended

June 30, 2024 and 2023

Comparison of the Three and Nine Months

Ended September 30, 2024 and 2023

The following table summarizes

our results of operations for the three and six months ended June 30, 2024 and 2023:

our results of operations for the three and nine months ended September 30, 2024 and 2023:

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

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

3 unchanged sentences

Research and development

Gain on settlement of contingent liabilities

(Gain) loss on settlement of contingent liabilities

Gain on early termination of lease

11 unchanged sentences

Net (loss) income attributable to Agrify Corporation

Net (loss) income per share

attributable to Common Stockholders – basic (1)

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

Weighted average common shares outstanding – basic

Our goal is to provide our

customers with a variety of products to address their entire indoor agriculture needs.

Our core product offering includes our Agrify Vertical

Farming Units (or “VFUs”) and Agrify Integrated Grow Racks with our Agrify Insights software, which are supplemented with

environmental control products, grow lights, facility build-out services and extraction equipment.

We generate revenue from

sales of cultivation solutions, including ancillary products and services, Agrify Insights software, facility build-outs and extraction

equipment and solutions.

We believe that our product mix form an integrated ecosystem which allows us to be engaged with our potential

customers from early stages of the grow cycle — first during the facility build-out, to the choice of cultivation solutions, running

the grow business with our Agrify Insights software and finally, our extraction, post-processing and testing services to transform harvest

into a sellable product.

We believe that delivery of each solution in the various stages in the process will generate sales of additional

solutions and services.

goal is to provide our customers with a variety of products to address their entire indoor agriculture needs.

Our core product offering

includes our VFUs and Agrify Integrated Grow Racks with our Agrify Insights ™ software,

which are supplemented with environmental control products, grow lights, facility build-out services and extraction equipment.

generate revenue from sales of cultivation solutions, including ancillary products and services, Agrify Insights ™ software,

facility build-outs and extraction equipment and solutions.

We believe that our product mix form an integrated ecosystem which allows

us to be engaged with our potential customers from early stages of the grow cycle — first during the facility build-out;

choice of cultivation solutions, running the grow business with our Agrify Insights ™ software

and finally, our extraction, post-processing and testing services to transform harvest into a sellable product.

We believe that delivery

of each solution in the various stages in the process will generate sales of additional solutions and services.

The following table provides

a breakdown of our revenue for the three and six months ended June 30, 2024 and 2023:

a breakdown of our revenue for the three and nine months ended September 30, 2024 and 2023:

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

6 unchanged sentences

Revenues decreased by $1.2

million, or 41%, for the three months ended June 30, 2024 compared to the same period in 2023.

Revenues decreased by $5.3 million, or

49%, for the six months ended June 30, 2024 compared to the same period in 2023.

The comparative decrease in revenue was generated primarily

from decreases in revenue from facility build-outs and extraction solutions.

Extraction division revenues decreased by $1.3 million and

$3.9 million for the three and six months ended June 30, 2024, respectively, primarily due to changes in contract terms with customers

which expedited cash flows but reduced overall demand.

Additionally, design and build revenues decreased by $0.3 million and $0.9 million

for the three and six months ended June 30, 2024, respectively due to the discontinued build-out of facilities under our TTK Solutions.

million, or 38%, for the three months ended September 30, 2024 compared to the same period in 2023.

Revenues decreased by $6.4 million,

or 46%, for the nine months ended September 30, 2024 compared to the same period in 2023.

The comparative decrease in revenue was generated

primarily from decreases in revenue from facility build-outs and extraction solutions.

Extraction division revenues decreased by $1.2

million and $5.8 million for the three and nine months ended September 30, 2024, respectively, primarily due to changes in contract terms

with customers which expedited cash flows but reduced overall demand.

Additionally, design and build revenues decreased by $0 and $0.9

million for the three and nine months ended September 30, 2024, respectively due to the discontinued build-out of facilities under our

TTK Solutions.

Cost of Goods Sold

5 unchanged sentences

The following table provides

a breakdown of our cost of goods sold for the three and six months ended June 30, 2024 and 2023:

a breakdown of our cost of goods sold for the three and nine months ended September 30, 2024 and 2023:

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

4 unchanged sentences

Cost of goods sold decreased

by $2.6 million, or 58%, for the three months ended June 30, 2024 compared to the same period in 2023.

Cost of goods sold decreased by

$5.0 million, or 54%, for the six months ended June 30, 2024 compared to the same period in 2023.

The comparative quarterly decrease in

cost of goods sold is associated with decreases in cost of goods sold related to facility build-outs and extraction solutions which aligns

with the reduction in revenue over the same period for each of these revenue streams.

by $0.5 million, or 21%, for the three months ended September 30, 2024 compared to the same period in 2023.

Cost of goods sold decreased

by $5.4 million, or 48%, for the nine months ended September 30, 2024 compared to the same period in 2023.

The comparative quarterly decrease

in cost of goods sold is associated with decreases in cost of goods sold related to facility build-outs and extraction solutions which

aligns with the reduction in revenue over the same period for each of these revenue streams.

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

Gross profit totaled $0.2

million, or 37.6%, of total revenue during the three months ended June 30, 2024 compared to $0.6 million, or 11.8%, of total revenue during

the three months ended June 30, 2023.

Gross profit totaled $1.3 million, or 23.1% of total revenue during the six months ended June 30,

2024 compared to a gross profit of $1.6 million, or 14.6% of total revenue during the six months ended June 30, 2023.

The comparative

$0.3 million second-quarter year over year increase in gross profit, as well as the comparative increase in gross profit margin, is primarily

attributable to a bigger decrease in costs of goods sold relative to the decrease in revenue for the period.

During the second quarter

of 2024, we realized a gross profit margin of 65% associated with our extraction solutions revenue, while we realized a gross profit margin

of approximately (44)% on our cultivation-related revenues.

a forward-looking basis, with the full year benefit of anticipated margin contribution associated with the extraction-related revenue

contributions, the Company anticipates that gross margin performance, aided by our extraction-related equipment sales, will be in a mid-teens

We anticipate that we will be able to improve upon that expected gross profit margin performance once we are able to generate meaningful

software and production fee revenues from our TTK Solutions, which we currently expect to begin in the late third or early fourth quarter

million, or 11.6%, of total revenue during the three months ended September 30, 2024 compared to $1.0 million, or 31.0%, of total revenue

during the three months ended September 30, 2023.

Gross profit totaled $1.5 million, or 20.2% of total revenue during the nine months

ended September 30, 2024 compared to a gross profit of $2.6 million, or 18.3% of total revenue during the nine months ended September

The comparative $0.8 million third-quarter year over year decrease in gross profit, as well as the comparative decrease in gross

profit margin, is primarily attributable to a smaller decrease in costs of goods sold relative to the decrease in revenue for the period.

During the third quarter of 2024, we realized a gross profit margin of 32% associated with our extraction solutions revenue, while we

realized a gross profit margin of 45% on our extraction solution revenues for the third quarter of 2023.

General and Administrative

Three months ended June 30,

Six months ended June 30,

Three months ended

September 30,

Nine months ended

September 30,

(In thousands)

5 unchanged sentences

professional fees for legal, consulting, depreciation and amortization and accounting services, as well as facility-related costs.

G&A expense decreased by $2.6 million, or 53%, for the three months

ended June 30, 2024, compared to the same period in 2023.

G&A expense decreased by $5.4 million, or 46%, for the six months ended

June 30, 2024, compared to the same period in 2023.

The decrease for the six months ended is primarily attributable to a decrease in stock

based compensation of 1.0 million, a decrease in payroll expense of 1.8 million, a decrease in insurance and other employee benefits of

1.3 million, and a decrease in sales tax expense of 0.5 million.

G&A expense decreased

by $1.0 million, or 22%, for the three months ended September 30, 2024, compared to the same period in 2023.

G&A expense decreased

by $6.3 million, or 39%, for the nine months ended September 30, 2024, compared to the same period in 2023.

The decrease for the nine

months ended September 30, 2024 is primarily attributable to a decrease in payroll expense of $2.9 million, a decrease in insurance of

$1.5 million, a decrease in stock based compensation of $1.3 million, and a decrease in sales tax expense of $0.5 million.

Research and Development

Three months ended

Six months ended

Three months ended September 30,

Nine months ended September 30,

(In thousands)

Research and development

(“R&D”) expenses consisted primarily of costs incurred for the development of our Agrify Insights software, next generation

VFUs, and new extraction technology and methodology, which includes:

and development (“R&D”) expenses consisted primarily of costs incurred for the development of our Agrify Insights ™

software, next generation VFUs, and new extraction technology and methodology,

which includes:

employee-related expenses, including salaries, benefits, and travel;

2 unchanged sentences

R&D expense decreased

by $0.5 million, or 71% for the three months ended June 30, 2024, compared to the same period in 2023.

R&D expense decreased by $0.9

million, or 67%, for the six months ended June 30, 2024, compared to the same period in 2023.

The decrease is attributable to the reduction

in personnel, outsourced consulting and materials purchased.

We expect to continue to

invest in future developments of our VFUs, Agrify Insights software and our extraction products.

As a percentage of net revenue, R&D

expenses were 15% of total revenue for the six months ended June 30, 2024, compared to 27% for the six months ended June 30, 2023.

by $0.3 million, or 65% for the three months ended September 30, 2024, compared to the same period in 2023.

R&D expense decreased

by $1.2 million, or 66%, for the nine months ended September 30, 2024, compared to the same period in 2023.

The decrease is attributable

to the reduction in personnel, outsourced consulting and materials purchased.

Selling and Marketing

Three months ended

Six months ended

Three months ended September 30,

Nine months ended September 30,

(In thousands)

3 unchanged sentences

Selling and marketing expenses

decreased by $0.7 million, or 65%, for the three months ended June 30, 2024, compared to the same period in 2023.

decreased by $0.5 million, or 57%, for the three months ended September 30, 2024, compared to the same period in 2023.

Selling and marketing

expenses decreased by $1.9 million, or 68%, for the six months ended June 30, 2024, compared to the same period in 2023.

is attributable to a decrease in payroll, advertising, and trade show expenses.

expenses decreased by $2.3 million, or 66%, for the nine months ended September 30, 2024, compared to the same period in 2023.

is attributable to a decrease in payroll, consulting services, and travel expenses.

Gain on settlement of contingent liabilities

Three months ended June 30,

Six months ended June 30,

Three months ended

September 30,

Nine months ended

September 30,

(In thousands)

1 unchanged sentence

Gain on settlement of contingent

liabilities relates to the legal settlement effected with Mack Molding Co.

as described in Note 14 - Commitments and Contingencies within

the unaudited condensed consolidated financial statements for the period ended June 30, 2024.

On February 29, 2024, the Company met its

performance obligations in terms of the Modification Agreement with Mack Molding Co.

In the second quarter of 2024, management derecognized

the previously recognized contingent liability, resulting in a credit of approximately $5.9 million, increasing the total gain for the

six months ended June 30, 2024 to approximately $5.9 million.

The gain was recorded within gain on settlement of contingent liabilities,

on the unaudited condensed consolidated statement of operations.

liabilities relates to the legal settlement effected with Mack as described in Note 14 - Commitments and Contingencies within the unaudited

condensed consolidated financial statements for the period ended September 30, 2024.

On February 29, 2024, we met our performance obligations

in terms of the Modification Agreement with Mack.

In the second quarter of 2024, management derecognized the previously recognized contingent

liability, resulting in a credit of approximately $5.9 million, increasing the total gain for the nine months ended September 30, 2024

to approximately $5.9 million.

The gain was recorded within gain on settlement of contingent liabilities, on the unaudited condensed consolidated

statement of operations.

Other Income, Net

Three months ended June 30,

Six months ended June 30,

Three months ended

September 30,

Nine months ended

September 30,

(In thousands)

4 unchanged sentences

Total other expense, net

Interest expense decreased by $0.4 million, or 93%, for the three

months ended June 30, 2024, compared to the same period in 2023.

Interest expense decreased by $1.1 million, or 89%, for the six months

ended June 30, 2024, compared to the same period in 2023.

The decrease in interest expense is attributable mainly to the decrease in principal

balance on outstanding loans.

The change in fair value

of warrant liabilities decreased by $0.2 million, or 22% during the three months ended June 30, 2024, compared to the same period in 2023.

The change in fair value of warrant liabilities decreased by $2.0 million, or 125%, during the six months ended June 30, 2024, compared

to the same period in 2023.

The decrease is related to the fair value remeasurement of warrants issued during March, August, and December,

Interest expense decreased

by $0.3 million, or 90%, for the three months ended September 30, 2024, compared to the same period in 2023.

Interest expense decreased

by $1.4 million, or 89%, for the nine months ended September 30, 2024, compared to the same period in 2023.

The decrease in interest expense

is attributable mainly to the decrease in principal balance on outstanding loans.

The change in fair value of warrant liabilities decreased by $17.1

million, or 864% during the three months ended September 30, 2024, compared to the same period in 2023.

The change in fair value of warrant

liabilities decreased by $19.1 million, or 531%, during the nine months ended September 30, 2024, compared to the same period in 2023.

The decrease is primarily related to the fair value remeasurement of warrants as a result of amendments to warrant agreements during the

third quarter of 2024.

Income (Loss) Attributable to Non-Controlling

13 unchanged sentences

as from a legal and regulatory perspective.

Loss attributable to non-controlling

interest represents the portion of profit (or loss) that are attributable to non-controlling interest calculated as a product of the net

income of the entity multiplied by the percentage of ownership held by the non-controlling interest.

Income (Loss) attributable

to non-controlling interest represents the portion of profit (or loss) that are attributable to non-controlling interest calculated as

a product of the net income of the entity multiplied by the percentage of ownership held by the non-controlling interest.

2024 the profit (or loss) attributable to non-controlling interest is immaterial.

See the Condensed Consolidated Statements of Operations

for the impact on results.

Liquidity and Capital Resources

As of June 30, 2024, our principal sources of liquidity were cash and

cash equivalents and marketable securities totaling $57 thousand.

Our current working capital needs are to support revenue growth, to

fund construction and equipment financing commitments associated with our TTK Solutions, manage inventory to meet demand forecasts and

support operational growth.

Our long-term financial needs primarily include working capital requirements and capital expenditures.

anticipate that we will allocate a significant portion of our current balance of working capital to satisfy the financing requirements

of our current and future TTK arrangements.

These arrangements require a significant amount of upfront capital necessary to fund construction,

associated with facility build-outs, and equipment.

There are many factors that may negatively impact our available sources of funds in

the future, including the ability to generate cash from operations, raise debt capital and raise cash from the issuance of our securities.

The amount of cash generated from operations is dependent upon factors such as the successful execution of our business strategy and general

economic conditions.

As of September 30, 2024,

our principal sources of liquidity were cash and cash equivalents and marketable securities totaling $267 thousand.

Our current working

capital needs are to support revenue growth, to fund construction and equipment financing commitments associated with our TTK Solutions,

manage inventory to meet demand forecasts and support operational growth.

Our long-term financial needs primarily include working capital

requirements and capital expenditures.

We anticipate that we will allocate a significant portion of our current balance of working capital

to satisfy the financing requirements of our current and future TTK arrangements.

These arrangements require a significant amount of upfront

capital necessary to fund construction, associated with facility build-outs, and equipment.

There are many factors that may negatively

impact our available sources of funds in the future, including the ability to generate cash from operations, raise debt capital and raise

cash from the issuance of our securities.

The amount of cash generated from operations is dependent upon factors such as the successful

execution of our business strategy and general economic conditions.

We may opportunistically

6 unchanged sentences

results and financial condition may be adversely affected.

We entered into one Loan

Agreement and Promissory Note with Bank of America pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus

Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S.

Small Business Administration.

We received total

proceeds of approximately $779,000 from the unsecured PPP Loan which was originally scheduled to mature in May 2022.

We applied for forgiveness

on the $779,000 of our PPP Loan however was denied by the SBA.

On June 23, 2022, we received a letter from Bank of America agreeing to

extend the maturity date to May 7, 2025 and bears interest at a rate of 1.00% per year.

The PPP loan is payable in 34 equal combined monthly

principal and interest payments of approximately $24,000 that commenced on August 7, 2022.

On March 14, 2022, we entered

into a Securities Purchase Agreement with the Former Lender.

The Purchase Agreement provides for the issuance of the SPA Note in the aggregate

amount of $65.0 million and a SPA Warrant to purchase up to an aggregate of 34,406 shares of Common Stock, with the potential for two

potential subsequent closings for notes with an original principal amount of $35.0 million each.

On August 18, 2022, we entered

into a Securities Exchange Agreement.

Pursuant to the August 2022 Exchange Agreement, we partially paid $35.2 million along with approximately

$300,000 in repayments for other fees under the SPA Note and exchanged the remaining balance of the SPA Note for an Exchange Note with

an aggregate original principal amount of $35.0 million and a Note Exchange Warrant to purchase 71,139 shares of Common Stock.

Additionally,

we exchanged the SPA Warrant for a Modified Warrant for the same number of underlying shares but with a reduced exercise price.

On March 8, 2023, we entered

into a new Securities Exchange Agreement.

Pursuant to the March 2023 Exchange Agreement, we prepaid approximately $10.3 million in principal

amount under the Exchange Note and exchanged $10.0 million in principal amount of the remaining balance of the Exchange Note for a new

senior secured convertible note (the “Convertible Note”).

The Convertible Note is a

senior secured obligation and will rank senior to all of our indebtedness.

The Convertible Note will mature on August 19, 2025 (the “Maturity

Date”) and has a 9.0% annualized interest rate, with interest to be paid monthly, in cash.

The principal amount of the Convertible

Note will be payable on the maturity date, provided that the lender will be entitled to a cash sweep of 30% of the proceeds of any at-the-market

equity offering and 20% of the proceeds received by us in connection with any other equity financing, which will reduce the outstanding

principal amount under the Exchange Note.

On October 27, 2023, CP Acquisitions LLC, and entity affiliated with and controlled by Raymond

Chang, acquired the Exchange Note and the Convertible Note.

As of October 30, 2023, there was approximately $6.7 million outstanding under

the Exchange Note and $8.8 million outstanding under the Convertible Note.

At any time, we 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 holder will also have the option of requiring us to redeem the Exchange Note on the one-year or two-year anniversaries

of issuance at a price equal to the then-outstanding principal amount under the Exchange Note plus accrued but unpaid interest, or if

we undergo a fundamental change at a price equal to 102.5% of the then-outstanding principal amount under the Exchange Note plus accrued

but unpaid interest.

CP Acquisitions Junior Secured Note

On October 27, 2023, CP Acquisitions,

an entity affiliated with and controlled by our former Chief Executive Officer and former member of our Board of Directors, purchased

the Exchange Note and the Convertible Note from CP Acquisitions (the “Note Purchase”).

As part of the same transaction, we

issued the Junior Secured Note to CP Acquisitions.

Pursuant to the Junior Secured Note, CP Acquisitions would lend up to $3.0 million

The Junior Secured Note bears interest at a rate of 10% per annum, would mature in full on December 31, 2023, and may be prepaid

without any fee or penalty.

On December 4, 2023, CP Acquisitions and the Company amended and restated the Junior Secured Note agreement.

Pursuant to the terms of the amendment, the maximum principal amount that may be loaned by CP Acquisitions to us was increased to $4.0

million and extended the maturity date thereon to December 31, 2024.

On November 30, 2023, CP Acquisitions agreed to forgive $1.0 million

of the principal amount outstanding on the Convertible Note.

Consolidated CP Acquisitions Note

On January 25, 2024, we and

CP Acquisitions consolidated the outstanding principal and interest due under the Junior Secured Note and the Exchange Note as well as

the interest due under the Convertible Note into the Convertible Note (collectively, with the Junior Secured Note and the Exchange Note,

the “Consolidated Notes”), and amended and restated the Convertible Note with the Restated Note having a total outstanding

principal of $18,308,021.

The Restated Note bears interest at a rate of 10% per annum and will mature in full on December 31, 2025.

may redeem all or a portion not less than $5.0 million of principal at any time at a price equal to 102.5% of the redeemed principal amount

plus accrued but unpaid interest.

If CP Acquisitions elects to convert the Restated Note, the conversion price per share will be $21.90,

subject to customary adjustments for certain corporate events.

The conversion of the Restated Note will be subject to certain customary

The Restated Note may not be converted into shares of Common Stock if such conversion would result in CP Acquisitions and

its affiliates owning an aggregate of in excess of 49.99% of the then-outstanding shares of Common Stock.

Immediately following the execution

of the Restated Note, CP Acquisitions elected to convert approximately $3.9 million of outstanding principal into an aggregate of 178,109

shares of Common Stock.

On May 21, 2024, we and CP

Acquisitions entered into the Consolidated Note Amendment, pursuant to which CP Acquisitions may elect, in lieu of shares of Common Stock

issuable upon conversion of the Restated Note, to instead receive Pre-Funded Warrants.

The conversion price applicable to the Pre-Funded

Warrants will remain unchanged at $21.90.

Immediately following the execution of the Consolidated Note Amendment, CP Acquisitions elected

to convert $11.5 million of outstanding principal into the CP Warrant Conversion, exercisable at issuance for up to 525,114 shares of

Common Stock having a fair value of approximately $2.9 million.

GIC Acquisition Note

On July 12, 2023, our Board

of Directors approved the issuance of the GIC Note to GIC, an entity that is owned and managed by our former Chairman and Chief Executive

Pursuant to the GIC Note, GIC was obligated to lend us up to $0.5 million, $0.3 million of which was delivered at issuance and

the remaining $0.2 million delivered on July 31, 2023.

The GIC Note bore interest at a rate of 10% per annum, would mature in full on

August 6, 2023, and could be prepaid without any fee or penalty.

The GIC Note ranked junior to all existing secured indebtedness.

27, 2023, the maturity date of the GIC Note was subsequently amended to December 31, 2024, at which point principal and accrued interest

will be repaid in full.

On May 21, 2024, GIC and

the Company entered into the Restated GIC Note, (the Restated GIC Note collectively with the Consolidated Note Amendment, the “Related

Party Debt Amendments”) to increase the aggregate principal amount to approximately $2.29 million, extend the maturity date to December

31, 2025, and provide that the Restated Junior Note may be converted into Common Stock of the Company or, at GIC’s election, Pre-Funded

Warrants, in each case at a conversion price of $4.65.

Immediately following the execution of the Restated GIC Note, GIC elected to convert

all of the outstanding principal under the Restated GIC Note into a Pre-Funded Warrant exercisable at issuance for up to 492,203 shares

of Common Stock.

CP Acquisitions Promissory Note

On August 14, 2024, we issued

a junior secured promissory note (the “2024 CP Note”) to CP Acquisitions.

Pursuant to the 2024 CP Note, CP Acquisitions would

lend us up to $1,500,000.

The 2024 CP Note bears interest at a rate of 10% per annum, will mature in full on July 1, 2025, and may be

prepaid without any fee or penalty.

The 2024 CP Note is secured by the Company’s assets and ranks junior to existing secured indebtedness

of the Company.

The 2024 CP Note may be converted into Common Stock or, at CP Acquisition’s election, Pre-Funded Warrants with an

exercise price of $0.001 per share, in each case at a conversion price of $3.9495.

Green Thumb Convertible Note

On November 5, 2024, we issued

the Green Thumb Note to the Investor.

The Green Thumb Note is a secured obligation and ranks senior to all indebtedness of the Company

except for indebtedness held by CP Acquisitions and Mack.

The Green Thumb Note will mature on November 5, 2025 and has a 10.0% annualized

interest rate, with interest to be paid on the first calendar day of each September and March while the Green Thumb Note is outstanding,

in cash, beginning January 1, 2025.

The principal amount of the Green Thumb Note will be payable on its maturity date.

The Green Thumb

Note provides for advances of up to $20.0 million in the aggregate, of which $10.0 million was advanced upon issuance.

If the Investor

elects to convert the Green Thumb Note, the conversion price per share will be $3.158, subject to customary adjustments for certain corporate

The conversion of the Green Thumb Note will be subject to certain customary conditions and the receipt of stockholder approval

to the extent necessary under Nasdaq listing rules.

The following table presents

the major components of net cash flows from and used in operating, investing, and financing activities for the six months ended June 30,

the major components of net cash flows from and used in operating, investing, and financing activities for the nine months ended September

30, 2024, and 2023:

(In thousands)

September 30,

Net cash (used in) provided by:

4 unchanged sentences

Cash Flow from Operating Activities

For the six months ended June 30, 2024, we incurred a net loss of $1.3

million, which included a 2.8 million decrease related to accounts payable, 2.2 million decrease related to accrued acquisition liabilities

due to issuance of held-back-shares, $1.1 million decrease related to recovery of provision for slow-moving inventory, 5.9 gain on a supply

agreement $0.8 million related to depreciation and amortization, $0.6 million of stock based compensation expense, and $0.4 million increase

related to the change in fair value of warrant liabilities.

Net cash was reduced by changes in operating assets and liabilities of $0.8

For the six months ended

June 30, 2023, we incurred a net loss of $17.1 million, which included $12.9 million loss from operations, a $4.6 million loss on extinguishment

of notes payable, and $1.2 million of interest expense, partially offset by a $1.6 million credit related to the change in fair value

of warrant liabilities.

Net cash used in operating activities for six months ended June 30, 2023 was 11.6 million.

For the nine months ended

September 30, 2024, our operating cash flows included a net loss of $17.4 million, a $15.5 million change in the fair value of warrant

liabilities, $2.2 million decrease related to accrued acquisition liabilities due to issuance of held-back-shares, $1.8 million decrease

related to recovery of provision for slow-moving inventory, $7.1 gain on a supply agreement $1.1 million related to depreciation and amortization,

and $0.9 million of stock based compensation expense.

Net cash was increased by changes in operating assets and liabilities of $3.3 million.

For the nine months ended

September 30, 2023, our operating cash flows included a net loss of $19.2 million, a change in the provision for credit losses of $14.8

million, a $4.6 million loss on extinguishment of notes payable, and $1.4 million of depreciation and amortization expense, $2.1 million

in stock based compensation expense, a $2.9 million decrease to inventory reserves, and a $3.6 million credit related to the change in

fair value of warrant liabilities.

Net cash increased by changes in operating assets and liabilities of $6.2 million.

Cash Flow from Investing Activities

For the six months ended

June 30, 2024, net cash provided in investing activities was $0.3 million, which resulted from cash inflows of $0.3 million in proceeds

from the repayment of a loan receivable, partially offset by cash outflows of $4,000 for purchases of property and equipment.

For the six months ended

June 30, 2023, net cash provided by investing activities was $11.4 million, which included cash inflows of $10.5 million in proceeds from

the sale of securities and $1.5 million in proceeds from the repayment of a loan receivable, partially offset by cash outflows of $0.6

million in costs related to the issuance of loans.

For the nine months ended

September 30, 2024, net cash provided in investing activities was $0.3 million, which primarily resulted from cash inflows of $0.3 million

in proceeds from the repayment of a loan receivable.

For the nine months ended

September 30, 2023, net cash provided by investing activities was $25.3 million, which primarily included cash inflows of $10.5 million

in proceeds from the sale of securities and $15.3 million in proceeds from the repayment of a loan receivable, partially offset by cash

outflows of $0.6 million in costs related to the issuance of loans.

Cash Flow from Financing Activities

For the six months ended

June 30, 2024, net cash provided by financing activities was $4.1 million.

Net cash provided by financing activities was primarily driven

by proceeds from issuance of related party notes of $2.3 million and proceeds from an issuance of common stock through an S-1 and Prefunded

Warrants offering of $2.1 million, offset by $0.3 million in payments on insurance financing loans.

For the six months ended

June 30, 2023, net cash used in financing activities was $9.9 million, which was primarily driven by repayment of debt in a private placement

of $10.3 million and payments on insurance financing loans of $1.0 million, partially offset by proceeds from the ATM Program of $1.5

For the nine months ended

September 30, 2024, net cash provided by financing activities was $5.7 million.

Net cash provided by financing activities was primarily

driven by proceeds from issuance of related party notes of $4.0 million and proceeds from an issuance of Common Stock through an S-1 and

Pre-Funded Warrants offering of $2.1 million, offset by $0.4 million in payments on insurance financing loans.

For the nine months ended

September 30, 2023, net cash used in financing activities was $9.6 million, which was primarily driven by repayment of debt in a private

placement of $10.3 million and payments on insurance financing loans of $1.2 million, partially offset by proceeds from the ATM Program

of $1.5 million.

Off-Balance Sheet Arrangements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis